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Keep Inc.Keep Inc.
Sole Sponsor, Sole Overall Coordinator, Sole Global Coordinator, Joint Bookrunner and Joint Lead Manager
Joint Bookrunners and Joint Lead Managers
(A company incorporated in the Cayman Islands with limited liability)
Stock Code: 3650
Global Offering
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IMPORTANT
If you are in any doubt about any of the contents in this document, you should obtain independent professional advice.
Keep Inc.
(A company incorporated in the Cayman Islands with limited liability)
GLOBAL OFFERING
Number of Offer Shares under the Global Offering : 10,838,600 Offer Shares (subject to the Over-allotment
Option)
Number of Hong Kong Offer Shares : 1,083,900 Offer Shares (subject to reallocation)
Number of International Offer Shares : 9,754,700 Offer Shares (subject to reallocation and the
Over-allotment Option)
Maximum Offer Price : HK$61.46 per Offer Share plus brokerage of 1%, SFC
transaction levy of 0.0027%, Stock Exchange trading
fee of 0.00565% and AFRC transaction levy of
0.00015% (payable in full on application in Hong
Kong dollars, subject to refund)
Nominal value : US$0.00005 per Share
Stock code : 3650
Sole Sponsor, Sole Overall Coordinator, Sole Global Coordinator, Joint Bookrunner and Joint Lead Manager
Joint Bookrunners and Joint Lead Managers
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no
responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability wha tsoever for any
loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.
A copy of this document, having attached thereto the documents specified in “Documents delivered to the Registrar of Companies and available on
display” in Appendix V, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Ho ng
Kong take no responsibility for the contents of this document or any other document referred to above.
The Offer Price is expected to be fixed by agreement between the Sole Overall Coordinator (for itself and on behalf of the Underwriters) and us on or
around Wednesday, July 5, 2023. If, for any reason, the Offer Price is not agreed by Tuesday, July 11, 2023, the Global Offering will not proceed and will lapse.
The Offer Price will be no more than HK$61.46 per Offer Share and is currently expected to be no less than HK$28.92 per Offer Share unless otherwise
announced.
The Sole Overall Coordinator may, with our consent, reduce the number of Offer Shares being offered under the Global Offering and/or the indicative
Offer Price range below that stated in this document at any time on or prior to the morning of the last day for lodging applications under the Hong Kong Pub lic
Offering. See “Structure of the Global Offering” and “How to Apply for Hong Kong Offer Shares” for further details.
The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement are subject to termination by the Sole Overall Coordinator
(for itself and on behalf of the Hong Kong Underwriters) if certain grounds arise prior to 8:00 a.m. on the Listing Date. See “Underwriting—Underwriti ng
Arrangements and Expenses—Hong Kong Public Offering—Grounds for termination” for further details.
Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this document, including t he risk
factors set out in “Risk factors”.
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities laws of the United States and may not be
offered or sold within or to the United States, or for the account or benefit of U.S. persons (as defined in Regulation S) except in transactions exempt f rom, or not
subject to, the registration requirements of the U.S. Securities Act. The Offer Shares are being offered and sold (i) solely to QIBs pursuant to an exem ption from
registration under Rule 144A of the U.S. Securities Act and (ii) outside the United States in offshore transactions in accordance with Regulation S.
ATTENTION
We have adopted a fully electronic application process for the Hong Kong Public Offering. We will not provide printed copies of this document or printe d copies of any application forms to
the public in relation to the Hong Kong Public Offering.
This document is available at the website of the Stock Exchange at www.hkexnews.hk and our website at https://keep.com/. If you require a printed copy of this document, you may
download and print from the website addresses above.
June 30, 2023


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IMPORTANT
IMPORTANT NOTICE TO INVESTORS:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong Public
Offering. We will not provide printed copies of this Prospectus or printed copies of any
application forms to the public in relation to the Hong Kong Public Offering.
This Prospectus is available at the website of the Hong Kong Stock Exchange at
www.hkexnews.hk under the “ HKEXnews > New Listings > New Listing Information ” section,
and our website at http://keep.com/. If you require a printed copy of this Prospectus, you may
download and print from the website addresses above.
To apply for the Hong Kong Offer Shares, you may:
(1) apply online through the White Form eIPO service at www.eipo.com.hk;o r
(2) apply through CCASS EIPO service to electronically cause HKSCC Nominees to apply
on your behalf, including by:
(i) instructing your broker or custodian who is a CCASS Clearing Participant or a
CCASS Custodian Participant to give electronic application instructions via
CCASS terminals to apply for the Hong Kong Offer Shares on your behalf; or
(ii) (if you are an existing CCASS Investor Participant ) giving electronic
application instructions through the CCASS Internet System
(https://ip.ccass.com) or through the CCASS Phone System by calling +852 2979
7888 (using the procedures in HKSCC’s “An Operating Guide for Investor
Participants” in effect from time to time). HKSCC can also input electronic
application instructions for CCASS Investor Participants through HKSCC’s
Customer Service Centre at 1/F, One & Two Exchange Square, 8 Connaught Place,
Central, Hong Kong by completing an input request.
We will not provide any physical channels to accept any application for the Hong Kong Offer
Shares by the public. The contents of the electronic version of this Prospectus are identical to the
printed document as registered with the Registrar of Companies in Hong Kong pursuant to Section
342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance.
If you are an intermediary, broker or agent, please remind your customers, clients or
principals, as applicable, that this Prospectus is available online at the website addresses above.
Please refer to “How to Apply for Hong Kong Offer Shares” for further details on the
procedures through which you can apply for the Hong Kong Offer Shares electronically.


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IMPORTANT
Your application through White Form eIPO service or the CCASS EIPO service must be for
a minimum of 100 Hong Kong Offer Shares and in one of the numbers set out in the table below. You
are required to pay the amount next to the number you select.
Keep Inc.
(HK$61.46 per Hong Kong Offer Share)
NUMBER OF HONG KONG OFFER SHARES THAT MAY BE APPLIED FOR AND
PAYMENTS
No. of Hong
Kong Offer
Shares applied
for
Amount
payable on
application
No. of Hong
Kong Offer
Shares applied
for
Amount payable
on application
No. of Hong
Kong Offer
Shares applied
for
Amount payable
on application
No. of Hong
Kong Offer
Shares applied
for
Amount payable
on application
HK$ HK$ HK$ HK$
100 6,207.99 1,500 93,119.74 8,000 496,638.60 90,000 5,587,184.17
200 12,415.96 2,000 124,159.64 9,000 558,718.41 100,000 6,207,982.41
300 18,623.95 2,500 155,199.56 10,000 620,798.23 150,000 9,311,973.61
400 24,831.93 3,000 186,239.48 20,000 1,241,596.48 200,000 12,415,964.82
500 31,039.92 3,500 217,279.38 30,000 1,862,394.72 250,000 15,519,956.03
600 37,247.90 4,000 248,319.30 40,000 2,483,192.97 300,000 18,623,947.24
700 43,455.87 4,500 279,359.21 50,000 3,103,991.20 350,000 21,727,938.44
800 49,663.86 5,000 310,399.12 60,000 3,724,789.45 400,000 24,831,929.65
900 55,871.84 6,000 372,478.94 70,000 4,345,587.68 450,000 27,935,920.85
1,000 62,079.82 7,000 434,558.78 80,000 4,966,385.93 541,900
(1) 33,641,056.68
(1) Maximum number of Hong Kong Offer Share you may apply for.
No application for any other number of the Hong Kong Offer Shares will be considered and any
such application is liable to be rejected.


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EXPECTED TIMETABLE
If there is any change in the following expected timetable of the Hong Kong Public Offering,
we will issue an announcement in Hong Kong to be published on our website https://keep.com/ and
the website of the Hong Kong Stock Exchange at www.hkexnews.hk.
Hong Kong Public Offering commences .................. 9:00 a.m. on Friday, June 30, 2023
Latest time to complete electronic applications under the
White Form eIPO service through the designated website
at www.eipo.com.hk(2) ..............................
11:30 a.m. on Wednesday, July 5,
2023
Application lists open (3) ............................... 11:45 a.m. on Wednesday, July 5,
2023
Latest time to (a) lodge completing payment of White Form
eIPO applications by effecting internet banking transfer(s)
or PPS payment transfer(s) and (b) giving electronic
application instructions to HKSCC(4) .................
12:00 noon on Wednesday, July 5,
2023
If you are instructing your broker or custodian who is a CCASS Clearing Participant or a CCASS
Custodian Participant to give electronic application instructions via CCASS terminals to apply for
the Hong Kong Offer Shares on your behalf, you are advised to contact your broker or custodian for
the latest time for giving such instructions which may be different from the latest time as stated above.
Application lists of the Hong Kong Public Offering close (3) . . . 12:00 noon on Wednesday, July 5,
2023
Expected Price Determination Date (5) .................... Wednesday, July 5, 2023
Announcement of the final Offer Price, the results of the
applications in the Hong Kong Public Offering, the level of
indications of interest in the International Offering and the
basis of allocation of the Hong Kong Offer Shares under the
Hong Kong Public Offering to be published on the websites
of the Stock Exchange at www.hkexnews.hk and our
website at https://keep.com/(6) on or around ............. Tuesday, July 11, 2023
The results of allocations in the Hong Kong Public Offering
(with successful applicants’ identification document numbers,
where appropriate) to be available through a variety of
channels, including:
Š in the announcement to be posted on our website at
https://keep.com/(6) and the website of the Stock
Exchange at www.hkexnews.hk .................. Tuesday, July 11, 2023
Š from the designated results of allocations website at
www.iporesults.com.hk (alternatively: English
https://www.eipo.com.hk/en/Allotment; Chinese
https://www.eipo.com.hk/zh-hk/Allotment) with a
“search by ID” function from .....................
8:00 a.m. on Tuesday, July 11, 2023
to
12:00 midnight on Monday, July 17,
2023
Š from the allocation results telephone enquiry by calling
+852 2862 8555 between 9:00 a.m. and 6:00 p.m.
o n ..........................................
Tuesday, July 11, 2023,
Wednesday, July 12, 2023
Thursday, July 13, 2023 and
Friday, July 14, 2023
i


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EXPECTED TIMETABLE
Share certificates in respect of wholly or partially successful
applications to be dispatched/collected or deposited into
CCASS on or before
(7)(9) ............................ Tuesday, July 11, 2023
White Form e-Refund payment instructions/refund checks in
respect of wholly or partially successful applications if the
final Offer Price is less than the maximum Offer Price per
Offer Share initially paid on application (if applicable) or
wholly or partially unsuccessful applications to be
dispatched/collected on or before
(8)(9) .................. Tuesday, July 11, 2023
Dealings in the Shares on the Stock Exchange expected to
commence at 9:00 a.m. on ........................... Wednesday, July 12, 2023
Notes:
(1) Unless otherwise stated, all times and dates refer to Hong Kong local times and dates.
(2)
You will not be permitted to submit your application through the designated website at www.eipo.com.hk after 11:30 a.m. on the last
day for submitting applications. If you have already submitted your application and obtained an application reference number from the
designated website prior to 11:30 a.m., you will be permitted to continue the application process (by completing payment of application
monies) until 12:00 noon on the last day for submitting applications, when the application lists close.
(3) If there is a “black” rainstorm warning or a tropical cyclone warning signal number 8 or above and/or Extreme Conditions in force in
Hong Kong at any time between 9:00 a.m. and 12:00 noon on Wednesday, July 5, 2023, the application lists will not open and will close
on that day. Further information is set out in “How to apply for Hong Kong Offer Shares—C. Effect of bad weather on the opening and
closing of the application lists” in this document.
(4) Applicants who apply for Hong Kong Offer Shares by giving electronic application instructions to HKSCC via CCASS or instructing
your broker or custodian to apply on your behalf via CCASS should refer to “How to apply for Hong Kong Offer Shares—A.
Applications for the Hong Kong Offer Shares—6. Applying through CCASS EIPO service” in this document.
(5) The Price Determination Date is expected to be on or about Wednesday, July 5, 2023, and in any event, not later than Tuesday, July 11,
2023. If, for any reason, the Offer Price is not agreed between the Sole Global Coordinator and the Sole Overall Coordinator (for
themselves and on behalf of the Underwriters) and us on or before Tuesday, July 11, 2023, the Global Offering will not proceed and will
lapse.
(6) None of the websites or any of the information contained on the websites forms part of this document.
(7) Share certificates will only become valid at 8:00 a.m. on the Listing Date provided that the Global Offering has become unconditional
and the right of termination described in “Underwriting—Underwriting arrangements and expenses—Hong Kong Public Offering—
Grounds for termination” has not been exercised. Investors who trade Shares on the basis of publicly available allocation details or prior
to the receipt of Share certificates or the Share certificates becoming valid do so entirely at their own risk.
(8) e-Refund payment instructions/refund checks will be issued in respect of wholly or partially unsuccessful applications pursuant to the
Hong Kong Public Offering and also in respect of wholly or partially successful applications in the event that the final Public Offer Price
is less than the price payable per Offer Share on application. Part of the applicant’s Hong Kong identity card number or passport number,
or, if the application is made by joint applicants, part of the Hong Kong identity card number or passport number of the first-named
applicant, provided by the applicant(s) may be printed on the refund check, if any. Such data would also be transferred to a third party for
refund purposes. Banks may require verification of an applicant’s Hong Kong identity card number or passport number before
encashment of the refund check. Inaccurate completion of an applicant’s Hong Kong identity card number or passport number may
invalidate or delay encashment of the refund check.
(9) Applicants who have applied on White Form eIPO for 300,000 or more Hong Kong Offer Shares may collect any refund checks (where
applicable) and/or Share certificates in person from our Hong Kong Share Registrar, Computershare Hong Kong Investor Services
Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, from 9:00 a.m. to 1:00 p.m.
on Tuesday, July 11, 2023 or such other date as notified by us as the date of dispatch/collection of Share certificates/e-Refund payment
instructions/refund checks. Applicants being individuals who are eligible for personal collection may not authorize any other person to
collect on their behalf. Individuals must produce evidence of identity acceptable to our Hong Kong Share Registrar at the time of
collection.
Applicants who have applied for Hong Kong Offer Shares through CCASS EIPO service should refer to “How to apply for Hong Kong
Offer Shares—G. Dispatch/collection of share certificates/e-refund payment instructions/refund checks—personal collection—(ii) If you
apply through CCASS EIPO service” for details.
Applicants who have applied through the White Form eIPO service and paid their applications monies through single bank accounts
may have refund monies (if any) dispatched to the bank account in the form of e-Refund payment instructions. Applicants who have
applied through the White Form eIPO service and paid their application monies through multiple bank accounts may have refund
monies (if any) dispatched to the address as specified in their application instructions in the form of refund checks by ordinary post at
their own risk.
Share certificates (if applicable) and/or refund checks for applicants who have applied for less than 300,000 Hong Kong Offer Shares and
any uncollected Share certificates (if applicable) and/or refund checks will be dispatched by ordinary post, at the applicants’ risk, to the
addresses specified in the relevant applications.
ii


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EXPECTED TIMETABLE
Further information is set out in “How to apply for Hong Kong Offer Shares—F. Refund of application monies” and “How to apply for
Hong Kong Offer Shares—G. Dispatch/collection of share certificates/e-refund payment instructions/refund checks” in this document.
The above expected timetable is a summary only. For details of the structure of the Global
Offering, including its conditions, and the procedures for applications for Hong Kong Offer Shares,
please refer to “Structure of the Global Offering” and “How to apply for Hong Kong Offer Shares” in
this document, respectively.
If the Global Offering does not become unconditional or is terminated in accordance with its
terms, the Global Offering will not proceed. In such a case, we will make an announcement as soon as
practicable thereafter.
iii


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CONTENTS
IMPORTANT NOTICE TO PROSPECTIVE INVESTORS
This document is issued by us solely in connection with the Hong Kong Public Offering
and the Hong Kong Offer Shares and does not constitute an offer to sell or a solicitation of an
offer to buy any security other than the Hong Kong Offer Shares offered by this document
pursuant to the Hong Kong Public Offering. This document may not be used for the purpose of
making, and does not constitute, an offer or invitation in any other jurisdiction or in any other
circumstance. No action has been taken to permit a public offering of the Hong Kong Offer
Shares in any jurisdiction other than Hong Kong and no action has been taken to permit the
distribution of this document in any jurisdiction other than Hong Kong. The distribution of this
document for purposes of a public offering and the offering and sale of the Hong Kong Offer
Shares in other jurisdictions are subject to restrictions and may not be made except as permitted
under the applicable securities laws of such jurisdictions pursuant to registration with or
authorization by the relevant securities regulatory authorities or an exemption therefrom.
You should rely only on the information contained in this document to make your
investment decision. The Hong Kong Public Offering is made solely on the basis of the
information contained and the representations made in this document. We have not authorized
anyone to provide you with information that is different from what is contained in this document.
Any information or representations not contained or made in this document must not be relied on
by you as having been authorized by us, the Sole Sponsor, the Sole Overall Coordinator, the Sole
Global Coordinator, the Joint Bookrunners, the Joint Lead Managers, any of the Underwriters,
any of our or their respective directors, officers, employees, agents or representatives, or any other
parties involved in the Global Offering. Information contained in our website, located at
https://keep.com/ does not form part of this document.
Page
Expected timetable ...................................................................... i
Contents .............................................................................. i v
Summary .............................................................................. 1
Definitions ............................................................................ 2 3
Glossary of technical terms ............................................................... 3 6
Forward-looking statements ............................................................... 3 9
Risk factors ............................................................................ 4 0
Waivers and exemptions .................................................................. 9 9
Information about this document and the Global Offering ....................................... 1 0 5
Directors and parties involved in the Global Offering ........................................... 1 0 9
Corporate information ................................................................... 1 1 2
Industry overview ....................................................................... 1 1 4
History, reorganization, and corporate structure ............................................... 1 2 5
Business .............................................................................. 1 4 1
Contractual arrangements ................................................................. 2 1 3
Regulations ............................................................................ 2 2 6
Relationship with our Single Largest Shareholder .............................................. 2 5 3
Connected transactions ................................................................... 2 5 7
Directors and senior management .......................................................... 2 6 1
iv


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CONTENTS
Page
Substantial Shareholders ................................................................. 2 6 9
Cornerstone Investors ................................................................... 2 7 1
Share capital ........................................................................... 2 7 5
Financial information ................................................................... 2 7 8
Future plans and use of proceeds ........................................................... 3 2 9
Underwriting .......................................................................... 3 3 3
Structure of the Global Offering ........................................................... 3 4 4
How to apply for Hong Kong Offer Shares ................................................... 3 5 4
Appendix I Accountant’s Report ........................................................... I - 1
Appendix II Unaudited pro forma financial information ........................................ I I - 1
Appendix III Summary of the constitution of our Company and Cayman Islands company law .......... III-1
Appendix IV Statutory and general information ............................................... I V - 1
Appendix V Documents delivered to the Registrar of Companies and available on display ............. V - 1
v


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SUMMARY
This summary aims to give you an overview of the information contained in this document. As this
is a summary, it does not contain all the information that may be important to you and is qualified in its
entirety by, and should be in conjunction with, the full text of this document. You should read the entire
document before you decide to invest in the Offer Shares.
There are risks associated with any investment. Some of the particular risks in investing in the Offer
Shares are set out in “Risk Factors”. You should read that section carefully before you decide to invest in
the Offer Shares.
OVERVIEW
Who We Are
We are a growing and result-oriented platform that provides users with a comprehensive fitness solution to help
them achieve their fitness goals. We generated a majority of our revenue from the sales of our self-branded fitness
products during the Track Record Period. We offer extensive and professional fitness content with AI-assisted
personalized curriculums, encompassing interactive live streaming classes and recorded fitness courses, that
dynamically adjust course content and workout intensity based on users’ athletic levels, fitness goals, daily workout
patterns and diet. Our content is complemented by a variety of smart fitness devices, fitness gear, apparel and food,
which enables us to seamlessly connect the physical and digital realms to create an immersive one-stop fitness
experience.
Our Keep brand is highly influential and has become synonymous with passion for fitness. Keep is the
largest fitness platform in China in terms of MAUs, and number of workout sessions completed by users in 2022.
77.5% of fitness population in China knew of the Keep mobile app. We have made efforts to make fitness more
accessible to a larger population, encourage tens of millions to become our users, or Keepers, and inspire them to
develop a sense of belonging in our community. In 2019, 2020, 2021 and 2022, our platform recorded average
MAUs of 21.8 million, 29.7 million, 34.4 million and 36.4 million, respectively. In 2022, our MAUs collectively
recorded approximately 2.1 billion workout sessions on our platform. Supported by our compelling offerings and
powerful brand, we have been able to quickly expand our user base and solidify our market leading position.
Our Market Opportunity
China has a large yet under-developed and under-served fitness market, previously relying on a traditional
model of offline gyms, which typically results in lower access and participation compared to online fitness. The
traditional fitness model sets high entry barriers for beginners, as offline gyms and fitness classes are often costly,
have time and location limitations, deliver inconsistent quality and user experience, and are less accessible in lower-
tier cities in China. We believe that both the size of the fitness population and the annual spending of the fitness
population in China present significant growth potential. According to the CIC Report, China had the world’s
largest fitness population of 374.0 million in 2022, which is expected to reach 463.5 million by 2027. At the same
time, the average annual spending of the fitness population in 2022 was RMB2,518.3 per person in China, which
was much lower than that of RMB16,425.2 in the United States, demonstrating significant growth potential.
With our online fitness solution, we have effectively addressed major pain points in China’s fitness
market and fundamentally redefined people’s relationship with fitness. Our platform not only enables people to
exercise anytime and anywhere, but also creates a personalized, interactive and immersive fitness experience that
enables people to train with greater efficiency at a lower cost. These value propositions make us popular among
fitness population, and attract many newcomers to our community.
Our Comprehensive Fitness Solution
We have developed a comprehensive fitness solution that covers users’ entire fitness life cycle, from
planning fitness goals and accessing fitness courses, to choosing fitness gear and healthy food and tracking
1


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SUMMARY
measurements such as weight and heart rate. Our offerings consist of online fitness content, smart fitness devices,
and complementary fitness products, as illustrated below.
Our offerings reinforce one another to address diversified fitness needs
Online
Fitness
Content
Smart
Fitness
Devices
Complementary
Fitness
Products
Recorded
Course
Live-
streaming
Class
Fitness
Food
Fitness
Apparel
Keep
Bike Fitness
Gear
Cover users’
entire fitness lifecycle
Smart
Scale
Keep
Wristband
Treadmill
Smart
Skipping
Rope
Online Fitness Content . Our content mainly includes recorded courses and live streaming classes, both of
which are developed in-house or created by third parties such as influencers and other fitness content providers.
Leveraging AI algorithms, we also provide personalized fitness curriculums that dynamically adjust course
content and workout intensity based on users’ athletic level, fitness goals, daily workout patterns and diet,
thereby optimizing the training results for our users. We constantly refine our content based on user insights that
enable us to create new courses with better efficiency and effect. We also offer our users the opportunity to
engage with more customized premium content by subscribing to our membership services. Our platform has
experienced a steady increase in our membership penetration rate, from 3.5% in 2019 to 6.4% in 2020, 9.5% in
2021, and further increased to 10.0% in 2022, demonstrating the success of our membership solution.
We require reputable certifications and recognitions in relevant fitness fields for our influencers. We had
fitness influencers and third-party content providers of 30, 248, 321 and 642 that published fitness content in
2019, 2020, 2021 and 2022, respectively. We recorded content related fees paid to fitness influencers and third-
party content providers of RMB1.3 million, RMB3.0 million, RMB9.0 million and RMB17.7 million in 2019,
2020, 2021 and 2022, respectively. We closely review and evaluate the fitness content produced by fitness
influencers and licensed from third-party content providers to ensure its quality before publishing it on our
platform. Our operating team supports the production of content by influencers and other content providers and
our content development team monitors and screens the content submitted to our platform. We review and ensure
that the content does not violate fitness principals and is safe for users to follow and practice. For more details
related to how we require reputable certifications and recognitions such as various certificates for fitness training,
running and yoga and how we prevent inappropriate behaviors of influencers, see “Business—Professional
Course Development,” and “Business—Interactive Live Streaming Classes.”
Smart Fitness Devices. Enabled by an array of innovative features such as AI, automation and social
interaction, our smart fitness devices, including smart bikes, wristbands, scales, and treadmills, increase the value
2


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SUMMARY
of our platform to users by working synergistically with our online fitness content. These devices track and
analyze fitness activities, so that our platform is able to automatically adjust workout difficulty level and content
recommendations to improve the overall fitness experience. In addition, our smart fitness devices can connect
with one another to capture fitness activities across multiple application scenarios, which results in more
comprehensive user profiles that we may leverage to offer more relevant recommendations and dynamically
adjust fitness curriculums to maximize results. For example:
Š Keep Bike. Our Keep Bike supports dynamic and automatic adjustment of resistance levels in real
time based on users’ athletic levels and course targets. When combined with live streaming classes,
it simulates a group cycling environment with thematic lighting and music. We were ranked the first
in smart bikes as of December 31, 2022 in China in terms of the accumulative GMV of bikes sold.
Š Keep Wristband. Our Keep Wristband monitors various fitness measurements such as heart rate,
sleep, and blood oxygen level. Through analyzing these information, our platform can adjust
AI-assisted personalized curriculums. Our Keep Wristband also enables users to interact with
instructors and among themselves during live streaming classes.
Š Keep Smart Skipping Rope . Our Keep Smart Skipping Rope is linked to the Keep app to record the
number of jumps, heart rate and calories burned. Users can track progress to build workout routines
and improve fitness performance.
Complementary Fitness Products . Leveraging the insights accumulated through growing user base and
positive feedback loop, we identified users’ unmet needs in different scenarios. To that end, we offer a wide
range of fitness products under the Keep brand that are designed with quality and style, thereby complementing
our online fitness content and smart fitness devices, elevating the overall fitness experience for our users, and
promoting our brand and spirit. Our fitness products include yoga mats, dumbbells, gym wear, protective gear,
and other fitness accessories. We are China’s largest yoga mat brand in terms of GMV in 2022, with a 18.3%
market share. We also offer a broad range of fitness food products, such as meal replacements, fitness snacks,
and nutrition supplements, providing a comprehensive solution combining workout and diet to users. Based on
users’ fitness goals, our platform is able to recommend customized diet plans, with detailed information such as
suggested total calorie intake, macronutrient analysis and other health tips.
Our three business lines complement one another to create a synergistic business model that covers users’
entire fitness lifecycle. By motivating users to complete regular workout sessions, we improve user engagement
and guide them on their fitness journey using our comprehensive content offerings. This enables us to convert
these users into subscribing members, while also driving sales of our self-branded fitness products, as users tend
to purchase smart fitness devices and complementary fitness products, such as fitness gear, apparel and food, to
enhance their performance and experience during workouts. At the same time, our self-branded products redirect
traffic to our online fitness content. Our fitness product customer subscribing rate was 41.3%, 41.2%, 51.8% and
45.1% in 2019, 2020, 2021 and 2022, respectively. Offline fitness centers also provide opportunities for users to
participate in fitness courses and try out our fitness devices, further enhancing engagement with our content and
products. In addition, technology empowers the integration of different segments, enables the efficient and
reliable operation of our platform, and ultimately drives the effectiveness of our business model. As a result, we
have become the one-stop destination providing a comprehensive fitness solution for fitness population in China.
International Operation
In June 2022, we strategically ceased the operation of two international mobile apps, Keep Trainer and
Keep Yoga, as a part of our business strategy to streamline and consolidate our offerings to provide better user
experience as our Keep app offers similar content and features previously offered by Keep Trainer and Keep
Yoga. Keep Trainer and Keep Yoga contributed immaterial MAU historically. The revenue contribution of our
overseas operations was also immaterial during the Track Record Period. We currently do not have concrete and
detailed expansion plan regarding our business and operations overseas.
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Key Operating Data
The following table sets forth certain of our key operating data for the periods indicated:
For the Three Months Ended
March
31,
June
30,
September
30,
December
31,
March
31,
June
30,
September
30,
December
31,
March
31,
June
30,
September
30,
December
31,
March
31,
June
30,
September
30,
December
31,
March
31,
2019 2020 2021 2022 2023
(in thousands, except for revenue)
Average
MAUs(1) . . . 15,535 22,436 29,245 19,875 27,103 33,251 32,750 25,833 31,032 35,709 41,751 28,939 34,275 41,080 38,558 31,638 26,263
Average
monthly
subscribing
members . . . 375 752 1,039 915 1,473 1,981 2,149 2,035 2,539 3,235 4,154 3,193 3,470 3,860 3,885 3,269 2,782
Average
monthly
fitness
product
customers . . 110 197 232 197 236 353 329 251 280 430 423 397 454 580 642 524 364
Average
quarterly
revenue per
MAU (in
RMB) ..... 5.9 7.1 7.4 9.8 7.4 9.2 9.5 11.1 9.8 11.5 10.7 15.9 12.2 14.5 16.1 18.4 17.0
Note:
(1) We recorded lower average MAUs for the fourth quarter of each year as people generally have lower willingness to work out during
winter seasons.
Year Ended
December 31,
2019 2020 2021 2022
Average MAUs (in thousands) ......................................................... 21,773 29,734 34,358 36,388
Average monthly subscribing members (in thousands) ...................................... 7 7 0 1,910 3,280 3,621
Average monthly fitness product customers (in thousands) ................................... 1 8 4 2 9 2 3 8 3 5 5 0
Average monthly membership retention rate .............................................. 70.8% 73.3% 71.7% 65.3%
Membership penetration rate .......................................................... 3.5% 6.4% 9.5% 10.0%
Revenue per MAU (in RMB) .......................................................... 30.5 37.2 47.1 60.8
For further information, see “Business—Seasonality” and “Financial Information”.
Our Monetization and Results
We have a diverse set of monetization channels including membership and online paid content, self-
branded products, and advertising and other services, which are complementary to one another. Our membership
allows subscribing members to access premium services such as exclusive fitness courses, live streaming classes,
AI-assisted personalized fitness curriculums, and discounts on our self-branded products. We also offer an
extensive range of self-branded products including smart fitness devices, fitness gear, apparel and food, which
are available in our own online store and on third-party e-commerce platforms. In addition, with China’s largest
online fitness user base, we have attracted brands and merchants to our advertising services.
Driven by our comprehensive suite of offerings and the ability to create a personalized and integrated
solution characterized by professional fitness content and fitness products that are customized for individuals’
athletic levels, we have achieved continued growth during the Track Record Period. We generated a majority of our
revenue from the sales of self-branded fitness products and invested significantly in the research and development
of platform design and fitness content during the Track Record Period. We experienced losses during the Track
Record Period as we prioritized strategic path formulation and business model optimization. Our loss for the year
increased from RMB735.0 million in 2019 to RMB2.2 billion in 2020 primarily as a result of the fair value changes
of preferred shares. Our loss for the year increased from RMB2.2 billion in 2020 to RMB2.9 billion in 2021 as we
strategically increased spending in traffic acquisition and branding to further acquire, activate and retain users, such
as attracting new users through advertisements on various third-party apps. We recorded loss for the year of
RMB104.6 million in 2022 compared to loss for the period of RMB2.9 billion in 2021. The change was primarily a
result of the decrease in the fair value changes of preferred shares. We recorded adjusted net loss (non-IFRS
measure) of RMB366.5 million in 2019, RMB106.4 million in 2020, RMB826.5 million in 2021 and RMB666.9
million in 2022.
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The following table breaks down our revenue, Cost of revenues and gross profit by amounts and as
percentages of our total revenue for the periods presented:
For the Year Ended December 31,
2019 2020 2021 2022
RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
Self-branded fitness products
Revenue ......................................... 396,034 59.7 636,709 57.5 872,452 53.9 1,136,971 51.4
Cost of revenues .................................. (256,354) (38.7) (405,806) (36.7) (629,147) (38.8) (816,883) (36.9)
Gross profit ...................................... 139,680 21.0 230,903 20.8 243,305 15.1 320,088 14.5
Membership and online paid content
Revenue ......................................... 151,322 22.8 338,024 30.5 557,581 34.4 894,167 40.4
Cost of revenues .................................. (55,086) (8.3) (119,135) (10.8) (233,098) (14.4) (409,082) (18.5)
Gross profit ...................................... 96,236 14.5 218,889 19.7 324,483 20.0 485,085 21.9
Advertising and others
Revenue ......................................... 115,763 17.5 132,044 12.0 189,505 11.7 180,413 8.2
Cost of revenues .................................. (79,053) (11.9) (82,409) (7.4) (80,665) (5.0) (85,206) (3.9)
Gross profit ...................................... 36,710 5.6 49,635 4.6 108,840 6.7 95,207 4.3
Total
Revenue ......................................... 663,119 100.0 1,106,777 100.0 1,619,538 100.0 2,211,551 100.0
Cost of revenues .................................. (390,493) (58.9) (607,350) (54.9) (942,910) (58.2) (1,311,171) (59.3)
Gross profit ...................................... 272,626 41.1 499,427 45.1 676,628 41.8 900,380 40.7
The following table breaks down our revenue by types of services or products for the periods
presented:
For the Year Ended December 31,
2019 2020 2021 2022
RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
Revenue:
Self-branded fitness products ..................... 396,034 59.7 636,709 57.5 872,452 53.9 1,136,971 51.4
—Smart fitness devices ......................... 135,061 20.4 220,830 20.0 286,516 17.7 438,875 19.8
—Complementary fitness products ................ 260,973 39.3 415,879 37.5 585,936 36.2 698,096 31.6
Membership and online paid content ............... 151,322 22.8 338,024 30.5 557,581 34.4 894,167 40.4
—Membership subscription ...................... 136,680 20.6 305,199 27.6 487,881 30.1 563,064 25.4
—Online paid content .......................... 14,642 2.2 32,825 2.9 69,700 4.3 331,103 15.0
Advertising and others .......................... 115,763 17.5 132,044 12.0 189,505 11.7 180,413 8.2
—Offline centers .............................. 30,019 4.5 20,839 1.9 30,888 1.9 19,540 0.9
—Advertising and others (excluding offline centers) . . 85,744 13.0 111,205 10.1 158,617 9.8 160,873 7.3
Total ........................................... 663,119 100.0 1,106,777 100.0 1,619,538 100.0 2,211,551 100.0
BUSINESS SUSTAINABILITY
We are founded in 2014 to provide a comprehensive, accessible and affordable online fitness solution.
Prior to the adoption of our monetization strategies in 2018, we devoted resources to build a massive and ever-
growing content library, expand our user base and improve our technology capabilities to optimize user
experience. Our average MAUs increased at a CAGR of approximately 26% from 2016 to 2018. In 2018, we
embarked on our journey towards monetization. Through user behavior analysis and surveys, we discovered that
users had a common desire for affordable and high-quality fitness products that could enhance their workout
experience. However, the online fitness product market in China was underdeveloped, with a lack of trusted
brands and products with satisfactory designs. Therefore, in March 2018, we expanded our offerings by
introducing self-branded smart fitness devices and complementary fitness products. In September 2018, we
launched our membership subscription program to provide more high quality content and complementary
offerings. Leveraging our large user base, we also expanded our advertising businesses and collaborated with
more advertising customers. During the Track Record Period, we incurred net losses as we strategically focused
on growing our user base via investing in our brand as well as high quality fitness content and product offerings
to pave the way for long term profitability.
We constantly develop and launch new products and services to cover people’s entire fitness lifecycle,
including membership services, smart fitness devices and complementary fitness products. By thoughtfully weaving
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our offerings together, we have developed an integrated business model with synergies across different segments.
During the Track Record Period, we experienced growth in our business operation and financial condition. In 2019,
2020, 2021 and 2022, our platform recorded average MAUs, which included both paying and non-paying users, of
21.8 million, 29.7 million, 34.4 million and 36.4 million, respectively. In 2022, our MAUs collectively recorded
approximately 2.1 billion workout sessions on our platform. Our revenue grew by 66.9% from RMB663.1 million
in 2019 to RMB1.1 billion in 2020, increased by 46.3% to RMB1.6 billion in 2021 and further increased by 36.6%
from RMB1.6 billion in 2021 to RMB2.2 billion in 2022, mainly attributable to the increased revenue from self-
branded fitness products and membership and online paid content. Our revenue from self-branded fitness products
increased during the Track Record Period due to an increase in our fitness product customers and increased revenue
generated from non-DTC channels. Our revenue from membership and online paid content increased during the
Track Record Period as a result of an increase in our average monthly subscribing members and growing
membership penetration rate. We expect to continue incurring net loss and net operating cash outflow in the near
future as we continue to invest in user growth and the skills to capture the substantial opportunities in various
specialized aspects of the industry and strengthen competitive moats. For further information, see “Business—
Business Sustainability”.
To grow our revenue and achieve profitability, we plan to further (i) grow our user base and deepen our
user engagement; (ii) enhance our monetization capabilities leveraging multiple growth levers; and (iii) improve
our gross margin and operating leverage.
Grow User Base and Deepen User Engagement
Driven by our focus on mass population and compelling content offerings, we have built a user base on
our platform. We plan to further expand our addressable market by appealing to users across different ages, areas
of interest, and locations by strategically launching more offerings at different price levels. In addition, we have
been continuously diversifying our content offerings to include content captivating to the mass population. For
example, we started to offer extensive content in martial arts and dancing in 2021 and ball game content in 2022.
We will also introduce a wider variety of content and product offerings at different price levels to cater to the
diversified needs of the mass population. For example, for each type of the smart fitness devices, we have rolled
out multiple models at different price points. In the meantime, we will continue to refine our content and user
interface to make it easier for users to follow fitness instructions. Leveraging our deep insights on users’
preferences and market trends, we will also dynamically shape our content development strategy and produce
more diversified content that can attract targeted user groups. We also plan to further improve user engagement
and experience by making our fitness solution more personalized and interactive, such as introducing new
gamified features to our online fitness content through integration with smart fitness devices and enriching the
library of live-streaming classes and AI-assisted curriculums.
As we continuously enhance user engagement and stickiness, we believe users’ general willingness to
subscribe to memberships and purchase our self-branded products will grow over time, resulting in improved
monetization potential. Our average monthly membership retention rate was 70.8%, 73.3%, 71.7% and 65.3% in
2019, 2020, 2021 and 2022, respectively. We experienced a higher average monthly membership retention rate in
2020 as the outbreak of COVID-19 increased users’ willingness to workout at home. The slight decrease in the
average monthly membership retention rate in 2021 and 2022 was also due to the expansion of our user base,
including subscribing members for our virtual sport events. In 2019, 2020, 2021 and 2022, our monthly average
workout sessions per MAU was 4.3, 5.0, 4.1 and 4.8, respectively, and our monthly average workout sessions per
subscribing member was 13.5, 10.9, 7.2 and 7.8, respectively.
Enhance Monetization Capabilities Leveraging Multiple Growth Levers
We have developed a diversified monetization model and currently generate revenue primarily from (i)
membership and online paid content, (ii) self-branded fitness products, and (iii) advertising and others, which
reinforce one another.
Š Membership and Online Paid Content . For membership and online paid content, we plan to (i)
expand into more fitness categories, such as dancing, martial art, jump rope workout and outdoor
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SUMMARY
activities to further diversify our expansive offerings; (ii) introduce more PUGC content on our
platform to increase user engagement and stickiness, by establishing partnerships with more fitness
content providers and strengthening the relationships with existing partners; (iii) introduce new
features in our online courses, such as features that improve the connectivity between our content
offerings and smart fitness devices and features that enhance the interactivity between users and
content; and (iv) bring more creative formats to enhance paying user penetration amid the latest
macro and industry trends, such as virtual sports events.
Š Self-branded Fitness Products. For self-branded fitness products, we will continuously improve our
self-branded fitness products based on user feedback and industry developments. For example, we
will upgrade our products and introduce more models to cater to different user preferences and use
case scenarios. We will also research and develop new fitness products and enrich our product
portfolio leveraging our deep industry insights and understanding of fitness demand, including new
categories of smart fitness devices and complementary fitness products. In addition, we plan to
further diversify our distribution channels to maximize touch points to reach our target end users,
and boost revenue generated from non-DTC channels. We will continue to assess and expand sales
and distribution channels based on our business objectives, product offerings and channel efficiency.
Š Advertising and Others. For advertising and others, we have introduced new format of offline fitness
classes. In addition to operating self-owned Keepland fitness centers, since 2021, we launched Keep
selected fitness classes in collaboration with third-party offline gyms. We target to collaborate with
more offline gyms in Beijing and other first-tier cities leveraging our online traffic and offer fitness
classes covering more fitness categories, such as ballet and boxing. We will also enhance our
advertising customer base. For example, we will focus on strengthening our relationship with
advertising agents to reach clients in bulk. We will also communicate with more sports associations
to jointly promote services and locate more suitable advertising opportunities for our business. In
addition, we plan to proactively reach out to suitable companies that place advertisements on other
media and convert them to our advertising customers. In particular, we plan to increase the
penetration rate of advertisements in health-related industries and industries promoting low-carbon
society. Leveraging our vertical integration capabilities and deep insights accumulated from our
large user base, we believe we will be able to further enhance our current monetization avenues and
create new monetization channels to maximize touch points to reach our target end users, and boost
revenue generated from non-DTC channels. We will continue to assess and expand sales and
distribution channels based on our business objectives, product offerings and channel efficiency.
Improve Gross Margin and Operating Leverage
We believe our gross margins demonstrate the effectiveness of our innovative business model and lay a
solid foundation for future profitability. We expect to experience an increase in gross margin as we intend to
efficiently manage costs and expenses as a percentage of total revenue and further benefit from operating
leverage.
Š Selling and marketing expenses. During the Track Record Period, selling and marketing expenses
accounted for the largest portion of our operating expenses. Our selling and marketing expenses as a
percentage of our total revenue decreased from 44.6% in 2019 to 27.3% in 2020. In early 2021, we
strategically decided to increase spending in user acquisition and branding to increase mindshare,
enhance brand awareness, further expand user base and solidify our market leading position. As a
result, our selling and marketing expenses as a percentage of total revenue reached 59.0%. Our
selling and marketing expenses as a percentage of our total revenue decreased from 59.0% in 2021 to
29.2% in 2022. Despite the decrease in selling and marketing expenses as percentages of total
revenue, our average MAUs increased by 5.9% year-over-year to 36.4 million in 2022. In addition,
membership penetration rate reached 10.0% in 2022. Going forward, we expect to continuously
evaluate and monitor the effectiveness and efficiency of our promotional campaigns and marketing
spending. We expect selling and marketing expenses as a percentage of revenue to decrease in the
future as we achieve greater sales and marketing efficiency.
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Š Administrative expenses. Our administrative expenses as a percentage of revenue were 18.4% in
2019 higher than that of 6.2% in 2020, primarily due to rental fees incurred in 2019 when we
furnished our office space and professional fee (including auditor’s remuneration) incurred in 2019
in connection with our financing activities in the same year. Our administrative expenses as a
percentage of revenue increased from 6.2% in 2020 to 13.6% in 2021, which was primarily due to
the expansion of general and administrative personnel and increased professional fees associated
with listing, and decreased to 11.1% in 2022 as we enhance the efficiency of our general and
administrative team. We expect administrative expenses as a percentage of revenue to decrease in
the future as we achieve greater economies of scale.
Š Research and development expenses. Our research and development expenses as a percentage of
revenue was 29.3%, 15.2%, 22.0% and 24.3% in 2019, 2020, 2021 and 2022, respectively. Our
research and development expenses as a percentage of revenue decreased in 2020 primarily due to a
decrease in social insurance contribution as a result of the relief policies promulgated by the
government in response to the COVID-19 pandemic and as we optimized staffing efficiency. The
increase of research and development expenses as a percentage of revenue in 2021 and 2022 was
primarily due to the expansion of our research and development team and continuous investment to
strengthen our technological capabilities. Going forward, we expect to continue to invest in research
and development to improve our technology infrastructure and innovate our offerings. We also plan
to further improve our research and development efficiency. We expect research and development
expenses as a percentage of revenue to decrease in the future due to the return from our upfront
research and development investments and the improved operating leverage. In particular, we expect
our research and development team to grow at a slower pace than in previous years as we optimize
our headcount planning to improve research and development efficiency. We expect that, by
operating more efficiently and effectively, our research and development spending as a percentage of
total revenue will further decrease.
Š Fulfillment expenses. Our fulfillment expenses accounted for 8.3%, 8.3%, 7.9%, and 9.1% of total
revenue in 2019, 2020, 2021 and 2022, respectively. We expect fulfillment expenses as a percentage
of revenue to decrease in the long run, primarily due to (i) our increased bargaining power and better
pricing terms with logistics suppliers, which we have achieved through our scale advantage; and (ii)
our optimized and streamlined logistics distribution system, which enables direct delivery from
suppliers to consumers, eliminating the need for intermediary distributors.
In addition, we expect to enjoy greater economies of scale on our platform as we continue to improve our
one-stop, integrate fitness solution to unlock synergies across segments and increase flexibility in managing
expenses. We have established an integrated business model. Our integrated business model is not a simple
combination of different segments. Leveraging our integrated business model and cross-selling opportunities, we
have achieved continued and balanced revenue growth.
In summary, we experienced losses during the Track Record Period as we prioritized strategic path
formulation and business model optimization over immediate breakeven. As we continue to scale up our business,
invest in marketing and branding to grow user base, expand content and product offerings to enhance monetization
capabilities, as well as optimize cost structure and improve operating leverage, we expect to grow revenue and
narrow our adjusted net loss (non-IFRS measure). Upon the successful implementation of the aforementioned
measures, our Directors believe that we are effectively paving the way for long-term sustainable profitability. Based
on the independent due diligence conducted, nothing material has come to the attention of the Sole Sponsor that
would cast doubt on the Company’s conclusion in respect of the sustainability of the Company’s business.
Working Capital Sufficiency
Taking into account the financial resources available to us, including our cash and cash equivalents on
hand, short-term time deposits, financial assets at fair value through profit or loss, and the estimated net proceeds
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from the Global Offering, our Directors are of the view that we have sufficient working capital to meet our
present needs and for the next twelve months from the date of this document. We also proactively review and
adjust our cash management policy and working capital needs according to general economic conditions and our
short-term business plans. In addition, in view of our net cash outflows, net liabilities position and net losses
during the Track Record Period, we plan to ensure our working capital sufficiency by taking advantage of above-
mentioned measures to narrow down our net loss and improve our profitability. Further, as evidenced by our
historical equity financing activities, we are able to obtain investment from well-known institutions. This also
signifies the confidence of prominent investors in our Company. We currently do not have plans to issue new
shares to raise funds shortly after the Listing and in the near future. We believe that potential external financing
sources, including those to which we will gain access after the Global Offering, will provide additional funding
to fuel our business operation and expansion until we achieve positive profitability. Taking into account the
above, and based on the written confirmation from the Company in respect of working capital sufficiency, review
of the accountants’ report, the financial due diligence conducted on the historical financial information of the
Group during the Track Record Period and the discussion with the Directors, nothing material has come to the
attention of the Sole Sponsor that would cast doubt on the Company’s conclusion that the Company has
sufficient working capital to meet its present needs, that is for the next twelve months from the date of this
document. See “Business—Business Sustainability.”
OUR STRENGTHS
We believe the following strengths have contributed to our success:
Š largest and innovative platform for online fitness;
Š extensive, professional, personalized and dynamic content offerings;
Š superior user experience underpinned by our smart, interactive and immersive fitness solution;
Š next generation brand supported by a vibrant community;
Š proprietary platform driven by insights and technology;
Š diversified monetization model driven by multiple growth levers; and
Š experienced management team.
OUR BUSINESS STRATEGIES
We plan to achieve our purpose to make the world move through the following key business strategies:
Š keep on expanding our addressable market and user base;
Š keep on innovating and diversifying our content;
Š keep on creating an open platform for greater engagement among platform participants;
Š keep on investing in technology capabilities;
Š keep on increasing our brand value; and
Š keep on enhancing our monetization capabilities.
COMPETITIVE LANDSCAPE
Key constituents in China’s online fitness market include fitness apps, video apps, livestreaming apps,
fitness vloggers, smart fitness device brands and manufacturers, and fitness product brands. Online fitness
platforms may compete with other market players such as video apps and live streaming apps for users,
advertising revenue and fitness product brands and smart fitness device brands and manufacturers for product
sales. Benefiting from the ability to integrate online contents with offline experience and develop an active
fitness community, online fitness platforms enjoy a favorable competitive advantage over other types of players
in the online fitness industry.
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Our recorded courses are more advantageous to fitness users compared to influencer videos on free video
platforms, which are typically generated at will as a type of “content creation” by individual users who may not
possess professional knowledge and training. The content on free video platforms is generally not organized in a
systematic way and lacks the quality and consistency in terms of content development and presentation. Though
watching videos on free video platforms can spark an interest in fitness for many people, to maintain a stable
fitness routine, they often turn to Keep for systematic training, professional guidance and continued support.
Meanwhile, our fitness content caters into users’ strong exercise intent for an interactive and focused workout
session, and we aim to encourage users to actually participate in and complete workout sessions rather than
browsing fitness videos casually. We have also developed comprehensive fitness related data insights which is
crucial in assisting users with understanding their fitness levels, managing their workout plans, and achieving
their fitness goals.
OUR CUSTOMERS AND SUPPLIERS
Our customers include users who purchase our fitness content and products and participate in our Keep
offline fitness classes, advertisers who post advertisements of their content, products and services on our online
platform and wholesale channels that we use for selling our self-branded fitness products. Sales to our five
largest customers in each year during the Track Record Period accounted for 12.7%, 12.0%, 16.2% and 11.2% of
our total sales in each year ended December 31, 2019, 2020, 2021 and 2022, respectively, and sales to our largest
customer accounted for 5.5%, 5.8%, 10.1% and 6.4% of our total sales in each year ended December 31, 2019,
2020, 2021 and 2022, respectively. The top five customers are primarily wholesale channels that purchased our
self-branded products and advertising companies who purchased our online advertising service, while our largest
customer in each year during the Track Record Period was wholesale channel that purchased our self-branded
products. See “Business—Customers” for more details. For specific types of advertisements such as
advertisements relating to pharmaceuticals, medical instruments, agrochemicals, and veterinary pharmaceutical,
we implement internal procedure to check or verify that the advertisers have fulfilled requisite government
requirements, including the advertiser’s operating qualifications, proof of quality inspection of the advertised
products and services, and, with respect to certain industries, government approvals of the content of the
advertisement and filings with the local authorities. See “Risk Factors—Risks Related to Our Business and
Industry—Advertisements in our app may subject us to penalties and other administrative actions”.
Our suppliers primarily consist of raw materials, components and finished goods suppliers, advertising
and marketing service providers, warehousing, packaging and delivery suppliers, third-party application stores
and other payment channels, third-party platform suppliers, data storage, server hosting, and bandwidth providers
and fitness content providers. Purchases from our five largest suppliers in each year during the Track Record
Period accounted for 15.3%, 21.7%, 16.0% and 15.8% of our total purchases in each year ended December 31,
2019, 2020, 2021 and 2022, respectively, and purchases from our largest supplier accounted for 3.4%, 5.5%,
4.9% and 3.8% of our total purchases in each year ended December 31, 2019, 2020, 2021 and 2022, respectively.
See “Business—Suppliers” for more details.
RISK FACTORS
There are certain risks involved in our business and industries, our corporate structure, our business
operations in China, investing in our Shares, the Listing and the Global Offering, many of which are beyond our
control. For example, these risks include, among others, the following risks related to our business:
Š We have a limited operating history under our evolving platform business model, and our historical
growth and performance may not be indicative of our future growth and financial results.
Š If we are unable to carry out our business strategies and manage our growth effectively, our brand,
company culture, and financial performance may suffer.
Š If we are unable to attract and retain users on our platform, or if user engagement and/or user
spending decline, our business and results of operations may be materially and adversely affected.
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Š If we are unable to adapt the fitness content and related products and services offered on our
platform to changes in user preferences and evolving industry trends in a timely manner, the demand
for our fitness content and related products and services may decline, which could have an adverse
effect on our business and rate of growth.
Š The fitness industry in China is still in the early stages of growth and if it does not continue to grow,
grows more slowly than we expect, or fails to reach the scale that we expect, our business, financial
condition, and operating results may be adversely affected.
Š Maintaining and enhancing our brand and corporate reputation is critical to our success. Negative
publicity about us, our employees and third parties associated with our platform, including our
fitness instructors and our content providers, may materially and adversely affect our brand,
reputation, business and growth prospects.
Š We cannot guarantee that our monetization strategies will be successfully implemented or generate
sustainable revenue and profit.
Š We incurred net losses and had net cash outflow in the past, and we may continue to incur losses and
have net cash outflow in the future.
Š Our business generates, processes, collects and stores a large amount of data, and the unauthorized
access, improper use or disclosure of such data could subject us to significant reputational, financial,
legal and operational consequences, and deter current and potential users from using our services.
Š Misbehavior or unsatisfactory performance of the fitness influencers we collaborated with could
harm our reputation and potentially our operation results and financial performance.
Š We operate in a fast-evolving industry and may not be able to compete effectively.
CONTRACTUAL ARRANGEMENTS
Due to foreign investment restrictions under PRC Laws, our Company is unable to own or hold any direct
equity interest in our Consolidated Affiliated Entities conducting our businesses. This is because our Group
operates, within China, (a) businesses that are prohibited from any foreign investment; and (b) businesses that are
subject to foreign investments restrictions, but because these restricted businesses form part of, and cannot be
separated from, the entities/platforms that operate prohibited businesses and/or the operation of prohibited
businesses themselves, the Company must keep these business operations under its variable interest entity
structure and cannot hold any equity interest in the entities operating these businesses under current applicable
PRC laws. Accordingly, due to these foreign investment prohibitions and restrictions, we control these entities
(and their business operations) through Contractual Arrangements, through which we are able to derive
substantially all economic benefits enjoyed by the Registered Shareholders from our Consolidated Affiliated
Entities. See “Contractual Arrangements” for details. See also “Risk Factors—Risks Related to Our Corporate
Structure”.
The following table summarizes the prohibited and restricted businesses operated by our Group:
Prohibited/restricted
category Our business activities
Foreign
investment
prohibited
Transmission of audio-visual programs Recorded fitness video courses business
Live streaming business
Internet culture business
Recorded fitness video courses business
Live streaming business
Keeper community
Radio and television program production Recorded fitness video courses business
Foreign
investment
restricted
Value-added telecommunication services
Operation of the Keep app is a restricted business
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SUMMARY
The following simplified diagram illustrates the key aspects of the Contractual Arrangements:
Calorie HK
Beijing Calorie Information
Technology Co., Ltd.
(WFOE)Onshore Holdco(1)
100%
100%
100%
denotes legal and beneficial ownership
denotes contractual relationship
Our Company
Registered Shareholders(2)
Subsidiaries of Onshore
Holdco(1)
100%
granting control over Onshore
Holdco to WFOE
service fees
services
Notes:
(1) These constitute our Consolidated Affiliated Entities.
(2) The Registered Shareholders are four individuals. Mr. Wang Ning, Mr. Peng Wei, Mr. Wen Chunpeng and Mr. Liu Dong, who each
holds 85.4%, 8.1%, 4.8% and 1.7% equity interest in Onshore Holdco, respectively. Mr. Wang is our founder and serves as the chairman
of our Board and executive officer of our Company. Mr. Peng and Mr. Liu are our co-founders, Directors and part of senior management
of our Company. Mr. Wen is our co-founder, an employee and a director of certain subsidiaries that operate our Keepland business.
VOTING PROXY AGREEMENTS
Mr. Wang (through his controlled corporation Persistent Courage Holdings Limited), as proxyholder on
the one hand, and Metropolis Olympia Holdings Limited (ultimately beneficially owned by Mr. Peng Wei),
Bulldog Group Ltd (ultimately beneficially owned by Mr. Liu Dong) and Impressive Appearance Holdings
Limited (ultimately beneficially owned by Mr. Wen Chunpeng) (as proxy granters on the other hand), entered
into the Voting Proxy Agreements dated June 14, 2022, pursuant to which the proxy granters granted voting
proxies in favor of the proxyholder, to vote all of the Shares held by the proxy granter (or their controlled
affiliates) upon Listing and from time to time thereafter, in accordance with the instructions of the proxyholder
on matters within the proxy scope (being all matters put forth at a general meeting or for a vote by members,
except for matters on which the proxyholder and its associates are required to abstain from voting under the
Listing Rules and applicable laws and regulations). Immediately upon Listing (assuming the Presumptions), the
aggregate subject shares under the Voting Proxy Agreements constitutes 4.12% of our Company’s total voting
rights. See “History, reorganization, and corporate structure—Voting Proxy Agreements” for further details.
SINGLE LARGEST SHAREHOLDER
As at the date of this document, Mr. Wang controls more than 30% of the total voting rights of our
Company as a result of his controlled corporations holding super-voting rights in our Company. Upon Listing, our
Company will unwind our weighted voting rights structure and under the Articles of Association, which takes effect
upon Listing, all issued Shares (including Shares held by Mr. Wang through his controlled corporations) will be
entitled to one vote each at a general meeting of our Company. Accordingly, upon Listing, Mr. Wang (through his
controlled corporations) will be interested in 16.62% of our issued Shares and voting rights, and will additionally be
able to exercise the voting rights attached to 4.12% of our issued Shares held by certain proxy granters pursuant to
the Voting Proxy Agreements. Based on the above, prior to and upon Listing, Mr. Wang will continue to be our
Single Largest Shareholder. See “Relationship with our Single Largest Shareholder” for further details.
PRE-IPO INVESTORS
We received multiple series of equity financing from our Pre-IPO Investors to support our expanding
business operations from 2015 to 2021. Our broad and diverse base of Pre-IPO Investors consists of, among
others, GGV Capital, SVF II Calorie, 5Y Capital, Morespark, JenCap, BAI GmbH and GS Capital. See “History,
Reorganization, and Corporate Structure—Pre-IPO Investments” for details.
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SUMMARY
SUMMARY OF HISTORICAL FINANCIAL INFORMATION
The following tables set forth summary financial data from our consolidated financial information for the
Track Record Period, derived from the Accountant’s Report set out in Appendix I. The summary consolidated
financial data set forth below should be read together with, the consolidated financial statements in this
document, including the related notes. Our consolidated financial information was prepared in accordance with
IFRS.
Selected Consolidated Income Statements Items
The following table sets forth our consolidated income statements with line items in absolute amounts
and as percentages of our revenue for the periods indicated:
For the Year Ended December 31,
2019 2020 2021 2022
RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
Revenue ......................................... 663,119 100.0 1,106,777 100.0 1,619,538 100.0 2,211,551 100.0
Cost of revenues ................................... (390,493) (58.9) (607,350) (54.9) (942,910) (58.2) (1,311,171) (59.3)
Gross profit ...................................... 272,626 41.1 499,427 45.1 676,628 41.8 900,380 40.7
Fulfillment expenses ................................ (55,128) (8.3) (92,411) (8.3) (127,872) (7.9) (201,586) (9.1)
Selling and marketing expenses ....................... (295,785) (44.6) (301,693) (27.3) (956,220) (59.0) (646,177) (29.2)
Administrative expenses ............................. (122,199) (18.4) (68,977) (6.2) (218,276) (13.6) (245,614) (11.1)
Research and development expenses ................... (194,170) (29.3) (167,920) (15.2) (355,582) (22.0) (536,877) (24.3)
Other income ..................................... 12,602 1.9 4,195 0.4 4,258 0.3 6,509 0.3
Other gains/(losses), net ............................. 9,520 1.4 (984) (0.1) 8,981 0.6 (65,375) (3.0)
Operating loss .................................... (372,534) (56.2) (128,363) (11.6) (968,083) (59.8) (788,740) (35.7)
Loss before income tax ............................. (735,045) (110.8) (2,243,750) (202.7) (2,908,237) (179.6) (103,548) (4.7)
Income tax expense ................................. — — — — — — (1,003) (0.0)
Loss for the year .................................. (735,045) (110.8) (2,243,750) (202.7) (2,908,237) (179.6) (104,551) (4.7)
Loss for the year attributable to:
Owners of the Company ......................... (728,979) (109.9) (2,239,609) (202.4) (2,908,237) (179.6) (104,551) (4.7)
Non-controlling interests ........................ (6,066) (0.9) (4,141) (0.3) — — — —
Non-IFRS Measure: Adjusted Net Loss
To supplement our consolidated financial statements, which are presented in accordance with IFRSs, we
also use adjusted net loss as an additional financial measure, which is not required by, or presented in accordance
with, IFRSs.
We believe adjusted net loss provides useful information to investors and others in understanding and
evaluating our consolidated results of operations in the same manner as they help our management. However, our
presentation of adjusted net loss may not be comparable to similarly titled measures presented by other
companies. The use of adjusted net loss has limitations as an analytical tool, and you should not consider it in
isolation from, or as a substitute for an analysis of, our results of operations or financial condition as reported
under IFRSs.
We define adjusted net loss as loss for the year, excluding share-based compensation expenses and fair
value changes of convertible redeemable preferred shares. We exclude these items because they do not involve
any cash outflow:
Š Share-based compensation expenses primarily represent the non-cash employee benefit expenses
incurred in connection with our 2016 Plan and 2021 Plan. Such expenses in any specific period are
not expected to result in future cash payments.
Š Fair value changes of convertible redeemable preferred shares mainly represent changes in the fair
value of the convertible redeemable preferred shares issued by us and relate to changes in our
valuation. We do not expect to record any further fair value changes of the convertible redeemable
preferred shares after Listing as preferred shares liabilities will be redesignated and reclassified from
liabilities to equity after automatically converting into ordinary shares upon Listing.
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SUMMARY
The following table reconciles our adjusted net loss for the periods presented to the most directly
comparable financial measure calculated and presented in accordance with IFRSs, which is loss for the year:
For the Year Ended December 31,
2019 2020 2021 2022
RMB RMB RMB RMB
(in thousands)
Reconciliation of loss to adjusted net loss (Non-IFRS measure):
Loss for the year .......................................................... (735,045) (2,243,750) (2,908,237) (104,551)
Add:
Share-based compensation expenses ........................................... 12,292 22,423 135,505 102,613
Fair value changes of convertible redeemable preferred shares ...................... 356,303 2,114,943 1,946,205 (664,969)
Adjusted net loss for the year (Non-IFRS measure) ............................. (366,450) (106,384) (826,527) (666,907)
Our fair value loss of convertible redeemable preferred shares led to the increases in our losses
during the Track Record Period. Our convertible redeemable preferred shares will be redesignated and
reclassified from liabilities to equity as a result of the automatic conversion into ordinary shares upon
the Listing. Changes in fair value of convertible redeemable preferred shares affected our performance
significantly during the Track Record Period and may continue to have adverse effect on our results of
operations when our valuation continues to increase until conversion into ordinary shares, after which
we do not expect to recognize any further loss or gain on fair value changes from convertible
redeemable preferred shares and will return to a net assets position.
Our loss for the year was RMB735.0 million in 2019, RMB2.2 billion in 2020, RMB2.9 billion
in 2021 and RMB104.6 million in 2022. We incurred net loss during the Track Record Period as a
result of our investment in our brand, innovative, high quality fitness content and product offerings to
grow our user base and pave the way for long term profitability.
Selected Consolidated Balance Sheet Items
The following table sets forth selected information from our consolidated balance sheet as of the dates
indicated:
As at
December 31,
2019 2020 2021 2022
(RMB in thousands)
Total non-current assets ................................................. 181,270 138,719 160,159 204,341
Total current assets ..................................................... 810,332 3,148,412 2,960,379 2,429,200
Total assets ........................................................... 991,602 3,287,131 3,120,538 2,633,541
Total non-current liabilities ............................................... 2,920,506 6,998,620 9,274,323 9,476,589
Total current liabilities .................................................. 216,738 330,179 606,866 667,115
Total liabilities ........................................................ 3,137,244 7,328,799 9,881,189 10,143,704
Net current assets ..................................................... 593,594 2,818,233 2,353,513 1,762,085
Deficit in equity attributable to owners of the Company ..................... (2,150,512) (4,041,668) (6,760,651) (7,510,163)
Non-Controlling interests ............................................... 4,870 — — —
Total deficit in equity .................................................. (2,145,642) (4,041,668) (6,760,651) (7,510,163)
Total deficit in equity and liabilities ...................................... 991,602 3,287,131 3,120,538 2,633,541
We had net current assets positions as of December 31, 2019, 2020, 2021 and 2022. Our net current assets
positions as of each of these dates were primarily attributable to our large balance of inventories, accounts
receivables, prepayments and other current assets, financial assets at fair value through profit or loss, short-term
time deposits and cash and cash equivalents, partially offset by our accounts payables, accrued expenses, contract
liabilities and borrowings. Cash and cash equivalents account for a substantial portion of our current assets. As of
December 31, 2022, we recorded net current assets of RMB1.8 billion.
Our net current assets increased from RMB593.6 million as of December 31, 2019 to RMB2.8 billion as
of December 31, 2020, primarily due to an increase of RMB1.8 billion in cash and cash equivalents and an
14


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SUMMARY
increase of RMB429.3 million in financial assets at fair value through profit or loss. The increase in cash and
cash equivalents was primarily due to proceeds we received from our Series E and F financing completed in
2020. The increase of financial assets at fair value through profit or loss was primarily due to the purchase of
certain wealth management products. The wealth management product we purchased mainly represents deposits
with variable interest rates indexed to the performance of underlying assets or principal that are not-guaranteed
by certain financial institutions. Our net current assets decreased from RMB2.8 billion as of December 31, 2020
to RMB2.4 billion as of December 31, 2021, primarily due to (i) a decrease of RMB689.2 million in cash and
cash equivalents, and (ii) a decrease of RMB173.4 million in financial assets at fair value through profit or loss,
partially offset by an increase of RMB455.0 million in short-term time deposit. The decrease in cash and cash
equivalent was primarily due to our increased selling and marketing spending in the first half of 2021 as we
strategically invested in brand awareness and traffic acquisition to capture the substantial opportunities in the
industry, and build a broader user base. For example, we collaborated with variety shows to enhance our brand
awareness and increased our traffic acquisition spending in short video platforms. We redeemed certain wealth
management products to short-term time deposit, resulting in the decrease of financial assets at fair value through
profit or loss and an increase in short-term time deposit. Our net current assets decreased from RMB2.4 billion as
of December 31, 2021 to RMB1.8 billion as of December 31, 2022, primarily due to (i) a decrease of RMB116.1
million in financial assets at fair value through profit or loss, (ii) a decrease of RMB386.2 million in short-term
deposits and (iii) a decrease of RMB58.7 million in accounts receivables, partially offset by an increase of
RMB58.1 million in accrued expenses. We redeemed certain wealth management products and short-term
deposits to cash and cash equivalents, resulting in the decrease of financial assets at fair value through profit or
loss and short-term deposits and an increase in cash and cash equivalents.
We recorded net liabilities of RMB2.1 billion, RMB4.0 billion, RMB6.8 billion and RMB7.5 billion, as
of December 31, 2019, 2020, 2021 and 2022, respectively. The increase in net liabilities was primarily due to the
increase in convertible redeemable preferred shares. Our convertible redeemable preferred shares increased from
RMB2.8 billion as of December 31, 2019 to RMB6.9 billion as of December 31, 2020, RMB9.2 billion as of
December 31, 2021 and RMB9.4 billion as of December 31, 2022, respectively. The increase in convertible
redeemable preferred shares was primarily due to the issuance of convertible redeemable preferred shares during
the Track Record Period and the increased valuation of our Company. See “History, Reorganization, and
Corporate Structure” of this document and Note 34 to the Accountant’s Report in Appendix I to this document
for details of the convertible redeemable preferred shares. The convertible redeemable preferred shares will be
redesignated from liabilities to equity as a result of automatic conversion into ordinary shares upon the Listing
such that the net liabilities position would turn into a net asset position. The net losses we incurred during the
Track Record Period also contributed to our net liability positions. We incurred losses of RMB735.0 million,
RMB2.2 billion, RMB2.9 billion and RMB104.6 million for the year ended December 31, 2019, 2020, 2021 and
2022, respectively. In particular, we recorded share-based compensation expenses of RMB12.3 million,
RMB22.4 million, RMB135.5 million and RMB102.6 million in 2019, 2020, 2021 and 2022, respectively. The
fluctuation in net liabilities during the Track Record Period was also affected by currency translation differences
and fair value changes on convertible redeemable preferred shares due to own credit risk. We recorded currency
translation loss of RMB35.4 million in 2019 and currency translation gain of RMB269.2 million in 2020,
RMB151.0 million in 2021 and translation loss of RMB700.8 million in 2022. We recorded fair value gain on
convertible redeemable preferred shares due to own credit risk of RMB28.0 million in 2019, RMB86.1 million in
2020, and fair value loss on convertible redeemable preferred shares due to own credit risk of RMB97.2 million
in 2021 and RMB46.7 million in 2022, respectively.
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SUMMARY
Selected Consolidated Statements of Cash Flows Items
The following table sets forth a summary of our consolidated statements of cash flows for the periods indicated:
For the Year Ended December 31,
2019 2020 2021 2022
(RMB in thousands)
Selected Consolidated Cash Flow Data:
Net cash outflow from operating activities before movements in working capital ........ (270,534) (55,477) (785,636) (561,590)
Change in working capital ................................................... (6,455) (15,345) (82,866) 106,610
Income tax paid ........................................................... — — — ( 1 ,003)
Net cash outflow from operating activities ....................................... (276,989) (70,822) (868,502) (455,983)
Net cash inflow/(outflow) from investing activities ................................ 345,364 (447,757) (296,803) 459,691
Bank borrowings interests paid ............................................... — — (2,181) (2,312)
Net cash inflow/(outflow) from financing activities ................................ 408,281 2,307,841 497,328 (66,830)
Net increase/(decrease) in cash and cash equivalents ............................... 476,656 1,789,262 (667,977) (63,122)
Cash and cash equivalents at the beginning of the year ............................. 88,834 563,914 2,342,713 1,653,517
Effects of exchange rate changes on cash and cash equivalents ...................... (1,576) (10,463) (21,219) 81,822
Cash and cash equivalents at the end of the year ............................... 563,914 2,342,713 1,653,517 1,672,217
We recorded negative cash flows from operating activities during the Track Record Period due to losses
incurred during our daily operations. In particular, we incurred cost of revenues of RMB390.5 million,
RMB607.4 million, RMB942.9 million and RMB1.3 billion in 2019, 2020, 2021 and 2022, respectively. Cost of
revenues primarily represent costs directly attributable to the production of fitness products and content, costs of
medals for virtual sports events and channel fees paid to third-party application stores and other payment
channels. We have also incurred substantial selling and marketing expenses, including spending in traffic
acquisition and branding to further acquire, activate and retain users. We incurred selling and marketing expenses
of RMB295.8 million, RMB301.7 million, RMB956.2 million and RMB646.2 million in 2019, 2020, 2021 and
2022, respectively. In 2021, we experienced an increase in operating cash outflows primarily due to an increase
in selling and marketing expenses in 2021 as we enhanced our marketing and promotion efforts to increase
mindshare, enhance brand awareness, further expand user base and solidify our market leading position. We also
heavily invested in research and development activities to improve our technology infrastructure and innovate
our offerings. We recorded research and development expenses of RMB194.2 million, RMB167.9 million,
RMB355.6 million and RMB536.9 million in 2019, 2020, 2021 and 2022, respectively.
RECENT DEVELOPMENT
Our average MAUs, average monthly subscribing members and average monthly fitness product
customers were 26.3 million, 2.8 million and 0.4 million in the three months ended March 31, 2023, respectively,
compared to 34.3 million, 3.5 million and 0.5 million in the same period in 2022, respectively. The surge in
COVID-19 cases across China at the end of 2022 and the beginning of 2023 made it unsuitable for people to
conduct fitness activities in early 2023 due to health conditions. We encouraged people recovering from the
COVID-19 to take rest through pop-up surveys in Keep mobile app and articles published on our social media
accounts. Influencers on our platform also expressed similar view in our community. In contrast, in March and
April 2022, the number of COVID-19 cases was much lower compared to that of the end of 2022 and the
beginning of 2023. Travel restrictions imposed at the time limited people’s options at leisure times and led to
more indoor exercises, which drove the increase in our MAUs and boosted the consumption of indoor fitness
content and related products during that period. As a result, we recorded exceptionally high operating data in
early 2022. COVID-19 cases gradually decreased from March 2023, and we joined the e-commerce shopping
festival for International Women’s Day, which, along with our general seasonal factors such as reduced activity
during Chinese New Year and increased willingness to exercise as spring comes, led to increased business
performance in March 2023. See also “Business–Seasonality”. We have also launched more member-exclusive
courses in collaboration with well-known influencers. At the same time, we released several new fitness products
in 2023, such as Keep Station and Keep Rowing Machine, both currently at marketing stage. Overall, we have
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SUMMARY
seen the improvement of average MAUs and average monthly subscribing members in April 2023 as compared
to those in March 2023. In April and May 2023, most of our operating metrics have reached similar levels as
those in the beginning of 2022 but still haven’t returned to the level of full year 2022. Our average MAUs,
average monthly subscribing members and average monthly fitness product customers were 32.1 million, 3.1
million and 0.4 million in April 2023, respectively, and remained stable at 32.1 million, 3.1 million and 0.4
million in May 2023, respectively.
We expect to continue to incur net losses in the foreseeable future due to continued investments in user
growth and the skills to capture the substantial opportunities in various specialized aspects of the industry and
strengthen competitive moats. In particular, we expect a significant increase in the forecast loss for 2023
primarily due to the loss arising from the fair value change of our convertible redeemable preferred shares.
Unaudited Financial Information for the Three Months Ended March 31, 2022 and 2023
Based on our unaudited management accounts, our revenue increased by 7.2% from RMB417.3 million in the
three months ended March 31, 2022 to RMB447.4 million in the three months ended March 31, 2023, which was
mainly attributable to the revenue increase in our virtual sports events recorded under our membership and online paid
content business segment. We launched virtual sports events in 2018 and our virtual sports events business started to
ramp up in late 2021. Users can register and participate in virtual sports events by completing fitness goals such as
running, cycling or jumping rope within a specified time frame. The revenue for these events comes from event entry
fees. If a user successfully completes the fitness goals set for the virtual sports event, they can receive memorabilia of
the event, such as medals, badges and virtual badges. This motivates users to actively participate in fitness activities on
our platform and provides a sense of achievement. We expect to continue to increase revenue generation from virtual
sports events. We also joined the e-commerce shopping festival for International Women’s Day, which contributed to
the increased revenue in March 2023. Our adjusted net loss (non-IFRS measure) was RMB154.8 million and
RMB117.5 million for the three months ended March 31, 2022 and 2023, respectively. The decrease was primarily due
to the decrease in our branding and marketing promotion expenses and other related expenses and increase in our gross
profit. We optimized our marketing strategies to acquire users more efficiently, resulting in the decrease in branding
and marketing expenses. For example, we strategically reduced spending for general branding activities in
collaboration with variety shows and user acquisition on short video platforms and focused on brand promotion and
user acquisition efforts in app stores and expanded our presence on social media. Our adjusted net margin (non-IFRS
measure) was negative 37.1% and negative 26.3% for the three months ended March 31, 2022 and 2023, respectively.
The increase was primarily due to our improved marketing efficiency and the increased gross margin. We have
observed a slight decrease in revenue in April 2023 and a slight increase in revenue in May 2023. Our adjusted net loss
(non-IFRS measure) as a percentage of revenue further narrowed in these two months.
The foregoing unaudited financial information for the three months ended March 31, 2023 is derived
from our unaudited interim condensed consolidated financial information for the three months ended March 31,
2023. We are responsible for the preparation of our unaudited interim condensed consolidated financial
information for the three months ended March 31, 2023 in accordance with International Accounting Standard 34
“Interim Financial Reporting.” Our unaudited interim condensed consolidated financial information for the three
months ended March 31, 2023 has been reviewed by our Reporting Accountant in accordance with International
Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent
Auditor of the Entity” issued by the International Auditing and Assurance Standards Board.
Recent Regulatory Development
Anti-Monopoly
On August 17, 2021, the SAMR issued the Provisions on Preventing Unfair Online Competition (Drafts
for Public Comments) (
֛(ʮකᅄӋจԈᇃ)), or the Draft Provisions on
Preventing Unfair Online Competition which has not been formally adopted as of the Latest Practicable Date. On
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SUMMARY
February 7, 2021, the Anti-Monopoly Commission of the State Council published Anti-Monopoly Guidelines for
the Internet Platform Economy Sector (). On June 24, 2022, the SCNPC
issued the latest amendment of Anti-Monopoly Law (), effective from August 1, 2022. See “Risk
Factors—Risks Related to Doing Business in China—Certain PRC regulations may make it more difficult for us
to pursue growth through acquisitions” and “Regulations—Regulations Related to Anti-Monopoly” for details”.
As of the Latest Practicable Date, based on the facts that, (i) the markets that the Company operates in are
rapidly evolving and increasingly competitive and constantly attracting new participants which mitigate the risk
of the Company being deemed as a dominant position in the relevant markets, (ii) the Company had not engaged
and did not plan to engage in any merger or acquisition transactions that may constitute concentration of
operators and trigger merger control filing under PRC anti-monopoly regulations, and (iii) the Company would
make a declaration to the relevant anti-monopoly enforcement agency in advance in accordance with the relevant
PRC laws and regulations in the event of a future merger or acquisition transaction that may be deemed as
concentration of operators, and save for the uncertainties regarding the interpretation and implementation of such
laws and regulations, our PRC Legal Adviser is of the view that, the anti-monopoly regulations will not have a
material adverse effect on the Company’s operations. As of the Latest Practicable Date, the Company had not
been subject to any investigations, regulatory fines or legal actions under the anti-monopoly regulations.
Cybersecurity and Internet Data Security
Recently, the PRC governmental authorities have promulgated, among others, the Regulations on Security
Protection of Critical Information Infrastructure (
ᚐૢԷ), or the CII Regulations, and
the Personal Information Protection Law of the People’s Republic of China (),
or the Personal Information Protection Law. See “Regulations —Regulations Related to Internet Information
Security and Privacy Protection” for details. As advised by our PRC legal adviser in respect of PRC data
compliance law, the risk of us being identified as an operator of critical information infrastructure, or CIIO, is
relatively low, on the basis that: (i) we have not been informed as a CIIO by any governmental authorities; and (ii)
the nature of our business and the type of personal information we collected, subject to further interpretations, are of
relatively low national security significance. Our PRC legal adviser in respect of PRC data compliance law is of the
view that we are in compliance with the Personal Information Protection Law in all material aspects as of the date of
this document. On November 14, 2021, the CAC publicly solicited opinions on the Regulations on the
Administration of Cyber Data Security (Draft for Comments) (
ၣഖᅰኽτΌ၍ଣૢԷ (ᅄӋจԈᇃ)), or the
Draft Data Security Regulations. As of the Latest Practicable Date, the Draft Data Security Regulations have not
been formally adopted and therefore, substantial uncertainties with respect to our obligations regarding data security
still exist. We have taken several measures to comply with the Draft Data Security Regulations though it has not
been formally adopted and our PRC legal adviser in respect of PRC data compliance law is of the view that the
Company would be able to comply with the Draft Data Security Regulations in all material respects assuming the
Draft Data Security Regulations are implemented in their current forms. See “Regulations—Regulations Related to
Internet Information Security and Privacy Protection” for details.
On December 28, 2021, the CAC together with other regulatory authorities jointly announced the
Cybersecurity Review Measures (
), or the Cybersecurity Review Measures, effective from
February 15, 2022, which further restates and expands the applicable scope of the cybersecurity review. See
“Regulations—Regulations Related to Internet Information Security and Privacy Protection” and “Risk Factors—
Risks Related to Our Business and Industry—Our business generates, processes, collects and stores a large
amount of data, and the unauthorized access, improper use or disclosure of such data could subject us to
significant reputational, financial, legal and operational consequences, and deter current and potential users from
using our services” for details.
Our PRC legal adviser in respect of PRC data compliance law is of the view that: (i) the risk of us being
required to undertake cybersecurity review under the Cybersecurity Review Measures as an network platform
operator who masters personal information of over one million users is relatively low because listing in Hong
Kong does not fall within the scope of “listing abroad” (
਷̮ɪ̹) pursuant to the Cybersecurity Review
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SUMMARY
Measures; and (ii) subject to further interpretation, the risk of us being considered as affecting or may affect
national security and thus being required to undertake cybersecurity review for the Listing under the Draft Data
Security Regulations is also relatively low, because the type and nature of the personal information we gathered
related to the fitness of Keep’s users or fitness market is of relatively low national security significance.
Our PRC legal adviser in respect of PRC data compliance law and Directors are of the view that: (i) we
are in compliance with the existing PRC laws and regulations in respect of data compliance, including the
Personal Information Protection Law and the cybersecurity and data protection laws and regulations in all
material aspects; (ii) the risk of us being required to undertake cybersecurity review under the Cybersecurity
Review Measures is relatively low; and (iii) we would be able to comply with the Draft Data Security
Regulations (if implemented in its current forms) in all material respects. Our Directors are of the view that the
existing laws and regulations in respect of data compliance will not have material adverse impacts on our
business operations and financial performance, and will not affect our compliance with applicable laws and
regulations in any material aspects as of the date of this document. As there might be newly issued explanations
or implementation rules, we will actively monitor future regulatory and policy changes to ensure strict
compliance with all applicable laws and regulations. Based on the foregoing, having taken into account the view
and analysis of the Directors and the Company’s PRC legal adviser in respect of PRC data compliance law on the
aforementioned recent regulatory developments as well as the due diligence conducted, and having discussed
with the Company’s PRC legal adviser in respect of PRC data compliance law in relation to the compliance
status of the Company with the existing laws and regulations in respect of data compliance, including Personal
Information Protection Law and cybersecurity and data protection laws and regulations, nothing material has
come to the attention of the Sole Sponsor as non-legal expert which would cause them to cast doubt on the
reasonableness of the Directors’ view on the impact of the Draft Data Security Regulations on the Company.
Overseas Listing
On February 17, 2023, the CSRC promulgated Trial Administrative Measures of the Overseas Securities
Offering and Listing by Domestic Companies (
) (the “ Overseas
Listing Trial Measures ”) and five related guidelines, which became effective on March 31, 2023. Pursuant to
the Overseas Listing Trial Measures, PRC domestic companies that seek to offer and list securities in overseas
markets, either through direct or indirect means, are required to go through the filing procedure with the CSRC
and report relevant information.
On the same day, the CSRC also held a press conference for the release of the Trial Measures and issued
the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies (
ྤ
), which, among others, clarifies that (i) on or prior to the effective
date of the Overseas Listing Trial Measures, domestic companies that have already submitted valid applications
for overseas securities offering and listing but have not obtained approval from overseas regulatory authorities or
stock exchanges may arrange the timing for submitting their filing applications with the CSRC in a reasonable
manner, and must complete the filing before the completion of their overseas securities offering and listing; (ii) a
six-month transition period will be granted to domestic companies which, prior to the effective date of the
Overseas Listing Trial Measures, have already obtained the approval from overseas regulatory authorities or
stock exchanges (such as companies that passed the Stock Exchange listing hearing), but have not completed the
indirect overseas listing; if domestic companies fail to complete the overseas listing within such six-month
transition period, they shall file with the CSRC according to the requirements.
We have passed hearing prior to March 31, 2023. Based on the foregoing, our PRC Legal Adviser is of
the view that we will not be required to complete the filing procedures with the CSRC for the Listing, if we are
not required to conduct another hearing with the Stock Exchange and we can complete the Listing on or before
September 30, 2023. See “Risk Factors—We may be required to obtain prior approval or subject to filings or
other requirements from the CSRC or other PRC regulatory authorities for the Listing.”
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SUMMARY
IMPACT OF COVID-19 ON OUR OPERATIONS
The overall impact of the COVID-19 pandemic on our business operation and financial performance up to
the Latest Practicable Date had been positive. The negative impact of the COVID-19 pandemic on our business and
operations include that a few of our fitness food suppliers suspended operations from April or May to June 2022. In
addition, we experienced logistics disruptions, especially in Shanghai, in the first half of 2022. All of the Keepland
fitness centers located in Beijing suspended operation in May 2022. The decline in economic activities during
COVID-19 resurgence also caused our advertising customers to tighten their advertising budget. The surge in
COVID-19 cases across China at the end of 2022 and the beginning of 2023 also made it unsuitable for people to
conduct fitness activities in early 2023 due to health conditions, which impacted our operational performance.
Nevertheless, the COVID-19 pandemic also led to an increase in people’s willingness to work out at home
and an increase in online traffic to our platform. We recorded higher average MAUs, average monthly subscribing
members and average monthly fitness product customers in the first and second quarter of 2020 as a result of the
COVID-19 pandemic. In addition, more users tend to follow our fitness content and complete workout sessions in
2020 as a result of the outbreak of COVID-19 pandemic. As the outbreak of COVID-19 increased users’
willingness to workout at home, we also witnessed a higher average monthly membership retention rate in 2020.
Please refer to “Business—Our users - ‘ Keepers’.” In addition, we reduced our branding and marketing promotion
expenses and other related expenses in 2020 due to the increased engagement of our users as a result of the COVID-
19 pandemic. We believe the COVID-19 pandemic only accelerated the process of bringing in users who would
sooner or later become our users rather than creating a temporary user inflow. We believe our MAUs will continue
to grow as we continue to upgrade our fitness content, expand and deepen the services provided to subscribing
members, and further invest in marketing and user acquisition.
Most of the travel restrictions and quarantine requirements were lifted in December 2022. The extent to
which the pandemic impacts our results of operations going forward will depend on future developments which are
uncertain and unpredictable, including the frequency, duration and extent of outbreaks of COVID-19, the
appearance of new variants with different characteristics, the effectiveness of efforts to contain or treat cases, and
future actions that may be taken in response to these developments. See “Financial Information—Impact of
COVID-19 on our operations and financial performance,” “Risk Factors—Risks Related to Our Business and
Industry—The COVID-19 outbreak has impacted our business, operating results and financial condition,” and “Risk
Factors—Risks Related to Our Business and Industry—The COVID-19 pandemic has increased people’s
willingness to work out at home. If we are unable to rely on such trend in the future, our business could be adversely
affected.”
NO MATERIAL ADVERSE CHANGE
Our Directors have confirmed that, up to the date of this Document, there has been no material adverse
change in our financial or trading position or prospects since December 31, 2022, being the latest period reported
on in the Accountant’s Report, and there has been no event since December 31, 2022 that would materially affect
the information shown in the Accountant’s Report set out in Appendix I.
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We have applied to the Listing Committee for the listing of, and permission to deal in: (a) the Shares in
issue and to be issued pursuant to the Global Offering (including any Shares which may be issued pursuant to the
exercise of the Over-allotment Option) and (b) the Shares to be issued under the Share Incentive Plans. Our
listing application is made on the basis that, among other things, we satisfy the market capitalization/revenue test
under Rule 8.05(3) of the Listing Rules with reference to: (i) our revenue for the year ended December 31, 2022,
being approximately RMB2.2 billion (equivalent to HK$2,414.1 million), which is over HK$500 million; and (ii)
our expected market capitalization at the time of Listing, which, based on the low-end of the indicative Offer
Price range, exceeds HK$4 billion.
We are a holding company incorporated under the laws of the Cayman Islands. As a result, the payment
and amount of any future dividends will also depend on the availability of dividends received from our
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SUMMARY
subsidiaries. PRC laws require that dividends be paid only out of the profit for the year determined according to
PRC accounting principles, which differ in many aspects from the generally accepted accounting principles in
other jurisdictions, including IFRSs. PRC laws also require foreign-invested enterprises to set aside at least 10%
of its after-tax profits, if any, to fund its statutory reserves until the aggregate amount of such fund reaches 50%
or more of its registered capital, which are not available for distribution as cash dividends. Dividend distribution
to our shareholders is recognized as a liability in the period in which the dividends are approved by our
shareholders or Directors, where appropriate. During the Track Record Period, no dividends have been paid or
declared by us.
Any future determination to pay dividends will be made at the discretion of our Directors and may be
based on a number of factors, including our future operations and earnings, capital requirements and surplus,
general financial condition, contractual restrictions and other factors that our Directors may deem relevant. As
advised by our Cayman Islands counsel, under Cayman Islands law, a Cayman Islands company may pay a
dividend out of either profits or share premium account, provided that in no circumstances may a dividend be
declared or paid if this would result in our Company being unable to pay its debts as they fall due in the ordinary
course of business. Investors should not purchase our shares with the expectation of receiving cash dividends.
We did not declare or pay any dividends on our shares during the Track Record Period and we do not anticipate
paying any cash dividends in the foreseeable future.
GLOBAL OFFERING
This document is published in connection with the Hong Kong Public Offering as part of the Global
Offering. The Global Offering comprises of:
(a) the Hong Kong Public Offering of initially 1,083,900 Offer Shares (subject to reallocation) in Hong
Kong as described in “Structure of the Global Offering—The Hong Kong Public Offering”; and
(b) the International Offering of initially 9,754,700 Offer Shares (subject to reallocation and the Over-
allotment Option) (i) in the United States solely to QIBs in reliance on Rule 144A or another
exemption from, or in a transaction not subject to, the registration requirements of the U.S.
Securities Act and (ii) outside the United States (including to professional and institutional investors
within Hong Kong) in offshore transactions in reliance on Regulation S, as described in “Structure of
the Global Offering—The International Offering”.
The Offer Shares will represent approximately 2.06% of the total Shares in issue immediately following
the completion of the Global Offering, assuming the Over-allotment Option is not exercised and no Shares are
issued under the Share Incentive Plans. If the Over-allotment Option is exercised in full, the Offer Shares will
represent approximately 2.36% of the total Shares in issue immediately following the completion of the Global
Offering, assuming no Shares are issued under the Share Incentive Plans.
OFFERING STATISTICS
Based on an Offer Price of
HK$28.92 per Offer Shares
Based on an Offer Price of
HK$61.46 per Offer Shares
Market capitalization of our Shares (1) .................. H K $ 15,202.4 million HK$32,307.8 million
Unaudited pro forma adjusted consolidated net tangible
assets per Share (2) ............................... H K $ 4.98 HK$5.71
Notes:
(1) The calculation of market capitalization is based on 525,671,987 Shares expected to be in issue immediately upon completion of the
Global Offering, assuming the Over-allotment Option is not exercised and no additional Shares are issued pursuant to the Share Incentive
Plans.
(2) The unaudited pro forma adjusted net tangible assets per Share as of December 31, 2022 is calculated after making the adjustments
referred to in Appendix II and on the basis that 525,671,987 Shares are in issue assuming that the Global Offering and the conversion of
the Series Preferred Shares had been completed on December 31, 2022, excluding the 60,635,300 restricted shares that were accounted
for as treasury shares, and without taking into account any allotment and issuance of Shares upon exercise of the Over-allotment Option
or any Shares which may be issued or repurchased by the Company.
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SUMMARY
LISTING EXPENSES
Based on the mid-point Offer Price of HK$45.19 per share, the total estimated listing expenses in relation
to the Global Offering is approximately RMB113.3 million, assuming the Over-allotment Option is not exercised
and no additional Shares are issued pursuant to the Share Incentive Plans, among which (a) underwriting-related
expenses, including underwriting commission and other expenses, are expected to be approximately RMB21.7
million and (b) non-underwriting-related expenses are expected to be approximately RMB91.6 million,
comprising (1) fees and expenses of legal advisers and the Reporting Accountant of approximately RMB72.3
million and (2) other fees and expenses of approximately RMB19.3 million, representing approximately 25.3%
of the gross proceeds from the Global Offering (assuming the mid-point of the indicative Offer Price range and
no exercise of the Over-allotment Option), of which approximately RMB16.9 million is directly attributable to
the issue of our Shares to the public and will be deducted from equity, and approximately RMB96.4 million is
expected to be expensed upon the Listing.
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately HK$366.2 million after deducting the
estimated underwriting fees and the estimated offering expenses payable by us in the Global Offering, and
assuming an Offer Price of HK$45.19 per Share (being the mid-point of the Offer Price range of between
HK$28.92 and HK$61.46 per Share) and assuming the Over-allotment Option is not exercised, or HK$437.2
million if the Over-allotment Option is exercised in full. We intend to use the net proceeds we will receive from
this offering for the following purposes:
(a) Approximately 35% of net proceeds, or approximately HK$128.2 million, assuming the Over-
allotment Option is not exercised, is expected to be used over the next three years for research and
development to advance our technological capabilities and drive product innovation.
(b) Approximately 30% of net proceeds, or approximately HK$109.8 million, assuming the Over-
allotment Option is not exercised, is expected to be used over the next three years for the
development and diversification of our fitness content.
(c) Approximately 25% of net proceeds, or approximately HK$91.5 million, assuming the Over-
allotment Option is not exercised, is expected to be used over the next three years for the investment
in branding and promotion.
(d) Approximately 10% of net proceeds, or approximately HK$36.6 million, assuming the Over-
allotment Option is not exercised, is expected to be used for general corporate purposes and working
capital needs.
See “Future Plans and Use of Proceeds” for further details.
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DEFINITIONS
In this document, unless the context otherwise requires, the following terms shall have the
following meanings. Certain technical terms are explained in “Glossary of technical terms”.
“2016 Plan” the Amended and Restated 2016 Employee’s Stock Option
Plan adopted in June 2021, the principal terms of which are
set out in “Statutory and general information—Pre-IPO
Share Incentive Plans” in Appendix IV
“2021 Plan” the Amended and Restated 2021 Employee’s Stock Option
Plan adopted in June 2021, the principal terms of which are
set out in “Statutory and general information—Pre-IPO
Share Incentive Plans” in Appendix IV
“2023 Plan” or “Post-IPO Share
Incentive Plan”
the post-IPO share incentive plan adopted by our Company
immediately before Listing, the principal terms of which
are set out in “Statutory and general information—Post-
IPO Share Incentive Plan” in Appendix IV
“5Y Capital” collectively, Morningside China TMT Fund IV, L.P.,
Morningside China TMT Fund IV Co-Investment, L.P.,
Morningside China TMT Special Opportunity Fund II,
L.P., Evolution Special Opportunity Fund I, L.P., and
Evolution Fund I Co-investment, L.P., each of which is one
of the Pre-IPO Investors of our Company; further details of
their shareholding and relationship are set out in
“Substantial Shareholders”
“Accountant’s Report” the accountant report of the Company, the text of which is
set out in Appendix I of this document
“affiliate(s)” with respect to any specified person, any other person,
directly or indirectly, controlling or controlled by or under
direct or indirect common control with such specified
person
“AFRC” Accounting and Financial Reporting Council (
ʿৌਕි
జ҅)
“Amended Chapter 17” amended Chapter 17 of the Listing Rules that took effect
on January 1, 2023
“Articles” or “Articles of
Association”
the articles of association of our Company conditionally
adopted on June 12, 2023 with effect from the Listing Date,
a summary of which is set out in “Summary of the
constitution of our Company and Cayman Islands company
law” in Appendix III
“associate(s)” has the meaning ascribed to it under the Listing Rules
23


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DEFINITIONS
“BAI GmbH” BAI GmbH, one of the Pre-IPO Investors of our Company
“Beijing Sports” Beijing Calorie Sports Co., Ltd. (ʮ̡),
a limited liability company established under the laws of
the PRC on November 7, 2017 and a Consolidated
Affiliated Entity of our Company
“Board” the board of Directors of our Company
“business day” any day (other than a Saturday, Sunday or public holiday in
Hong Kong) on which banks in Hong Kong are generally
open for normal banking business
“BVI” the British Virgin Islands
“CAC” the Cyberspace Administration of the PRC (
ʕശɛ͏΍ձ
܃)
Cayman Companies Act” the Companies Act, Cap. 22 (Law 3 of 1961, as
consolidated and revised) of the Cayman Islands, as
amended, supplemented or otherwise modified from time to
time
“Calorie HK” Calorie Technology HK Company Limited (
࠰
ʮ̡), a limited liability company incorporated under
the laws of Hong Kong on May 7, 2015 and a wholly-
owned subsidiary of our Company
“Calorie Technology”, “Onshore
Holdco”
Beijing Calorie Technology Co., Ltd. (
ࠢ
ʮ̡), a limited liability company established under the
laws of the PRC on September 26, 2014 and a Consolidated
Affiliated Entity of our Company
“CCASS” the Central Clearing and Settlement System established and
operated by HKSCC
“CCASS Clearing Participant” a person admitted to participate in CCASS as a direct
clearing participant or a general clearing participant
“CCASS Custodian Participant” a person admitted to participate in CCASS as a custodian
participant
“CCASS EIPO” the application for the Hong Kong Offer Shares to be
issued in the name of HKSCC Nominees and deposited
directly into CCASS to be credited to your or a designated
CCASS Participant’s stock account through causing
HKSCC Nominees to apply on your behalf, including by
(i) instructing your broker or custodian who is a CCASS
Clearing Participant or a CCASS Custodian Participant to
24


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DEFINITIONS
give electronic application instructions via CCASS
terminals to apply for the Hong Kong Offer Shares on your
behalf, or (ii) if you are an existing CCASS Investor
Participant, giving electronic application instructions
through the CCASS Internet System ( https://ip.ccass.com)
or through the CCASS Phone System (using the procedures
in HKSCC’s “An Operating Guide for Investor
Participants” in effect from time to time). HKSCC can also
input electronic application instructions for CCASS
Investor Participants through HKSCC’s Customer Service
Center by completing an input request
“CCASS Investor Participant” a person admitted to participate in CCASS as an investor
participant who may be an individual or joint individuals or
a corporation
“CCASS Participant” a CCASS Clearing Participant, a CCASS Custodian
Participant or a CCASS Investor Participant
“China” or “PRC” the People’s Republic of China, and for the purposes of this
document only, except where the context requires
otherwise, references to China or the PRC exclude
Hong Kong, the Macao Special Administrative Region of
the People’s Republic of China and Taiwan
“CIC” China Insights Industry Consultancy Limited (
ӧᗆΆุ၍
ଣፔ༔(ɪऎ)ʮ̡), a market research and consulting
company, an Independent Third Party
“CIC Report” the report prepared by CIC
“CIC Survey” The survey prepared by CIC. The survey was conducted in
March 2023 with 1,000 randomly sampled individuals from
the fitness population in China, which refers to people who
engage in fitness activities more than twice per week, and
the survey included comparison among Keep app and 16
other fitness apps in China
“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of
Hong Kong), as amended, supplemented or otherwise
modified from time to time
“Companies (Winding Up and
Miscellaneous Provisions)
Ordinance”
the Companies (Winding Up and Miscellaneous
Provisions) Ordinance (Chapter 32 of the Laws of
Hong Kong), as amended, supplemented or otherwise
modified from time to time
“Company”, “our Company”, “the
Company”, “we”, “us”, “our”,
or “Keep”
Keep Inc., an exempted company with limited liability
incorporated in the Cayman Islands on April 21, 2015, its
subsidiaries and its Consolidated Affiliated Entities
25


--- page 35 ---
DEFINITIONS
“connected person(s)” has the meaning ascribed to it under the Listing Rules
“connected transaction(s)” has the meaning ascribed to it under the Listing Rules
“Consolidated Affiliated Entities” Calorie Technology and its subsidiaries and affiliated
entities, the financial accounts of which have been
consolidated and accounted for as if they were subsidiaries
of our Company by virtue of the Contractual Arrangements
or other contractual arrangements entered into from time to
time that achieve materially the same effect and have
materially the same substance as the Contractual
Arrangements
“Contractual Arrangement(s)” the series of contractual arrangements entered into
between, among others, the WFOE, the Onshore Holdco
and the Registered Shareholders, as detailed in
“Contractual Arrangements”
“CSRC” the China Securities Regulatory Commission
“Director(s)” the director(s) of our Company
“Extreme Conditions” extreme conditions caused by a super typhoon as
announced by the government of Hong Kong
“GAAP” generally accepted accounting principles
“GGV Capital” collectively, GGV Capital Select L.P., GGV Capital V
L.P., GGV Capital V Entrepreneurs Fund L.P. and GGV
VII Investments Pte. Ltd., each of which is one of the
Pre-IPO Investors of our Company; further details of their
shareholding and relationship are set out in “Substantial
Shareholders”
“Global Offering” the Hong Kong Public Offering and the International
Offering
“Governmental Authority” any governmental, regulatory, or administrative
commission, board, body, authority, or agency, or any
stock exchange, self-regulatory organization, or other
non-governmental regulatory authority, or any court,
judicial body, tribunal, or arbitrator, in each case whether
national, central, federal, provincial, state, regional,
municipal, local, domestic, foreign, or supranational
“GREEN Application Form(s)” the application form(s) to be completed by the White
Form eIPO Service Provider, Computershare Hong Kong
Investor Services Limited
26


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DEFINITIONS
“Group”, “our Group”, “the
Group”, “we”, “us”, or “our”
the Company, its subsidiaries and the Consolidated
Affiliated Entities (the financial results of which have been
consolidated and accounted for as subsidiaries of our
Company by virtue of the Contractual Arrangements) from
time to time, and where the context requires, in respect of
the period prior to our Company becoming the holding
company of its present subsidiaries and Consolidated
Affiliated Entities, such subsidiaries and Consolidated
Affiliated Entities as if they were subsidiaries and
Consolidated Affiliated Entities of our Company at the
relevant time
“GS Capital” Goldman Sachs Capital Holdings II Pte. Ltd., one of the
Pre-IPO Investors of our Company
“HK” or “Hong Kong” the Hong Kong Special Administrative Region of the
People’s Republic of China
“HK$”, “HK dollars” or “Hong
Kong dollars”
Hong Kong dollars, the lawful currency of Hong Kong
“HKSCC” Hong Kong Securities Clearing Company Limited, a
wholly-owned subsidiary of Hong Kong Exchanges and
Clearing Limited
“HKSCC Nominees” HKSCC Nominees Limited, a wholly-owned subsidiary of
HKSCC
“Hong Kong Offer Shares” Shares being initially offered for subscription in the Hong
Kong Public Offering (subject to reallocation as described
in “Structure of the Global Offering”)
“Hong Kong Public Offering” the offer of the Hong Kong Offer Shares for subscription
by the public in Hong Kong at the Offer Price (plus
brokerage of 1%, SFC transaction levy of 0.0027%, Stock
Exchange trading fee of 0.00565% and AFRC transaction
levy of 0.00015%) on the terms and subject to the
conditions described in this document, as further described
in “Structure of the Global Offering—The Hong Kong
Public Offering”
“Hong Kong Share Registrar” Computershare Hong Kong Investor Services Limited
“Hong Kong Takeovers Code” or
“Takeovers Code”
Codes on Takeovers and Mergers and Share Buy-backs
issued by the SFC, as amended, supplemented or otherwise
modified from time to time
“Hong Kong Underwriters” the underwriters of the Hong Kong Public Offering as
listed in “Underwriting—Hong Kong Underwriters”
27


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DEFINITIONS
“Hong Kong Underwriting
Agreement”
the underwriting agreement, dated June 29, 2023, relating
to the Hong Kong Public Offering, entered into by, among
others, our Company, Mr. Wang Ning, the Sole Sponsor,
the Sole Overall Coordinator, the Sole Global Coordinator
and the Hong Kong Underwriters, as further described in
“Underwriting—Underwriting arrangements and
expenses—Hong Kong Public Offering—Hong Kong
Underwriting Agreement”
“ICP License” the value-added telecommunications business operating
license (
ุਕ຾ᐄ஢̙ᗇ) for internet information
service
“IFRS” International Financial Reporting Standards, as issued from
time to time by the International Accounting Standards
Board
“Independent Third Party(ies)” any entity or person, to the best of our Directors’
knowledge, information and belief having made all
reasonable enquiries, who is not a connected person of our
Company within the meaning ascribed to it under the
Listing Rules
“International Offer Shares” Shares being initially offered for subscription under the
International Offering together, where relevant, with any
additional Shares that may be sold pursuant to any exercise
of the Over-allotment Option (subject to reallocation as
described in “Structure of the Global Offering”)
“International Offering” the conditional placing of the International Offer Shares at
the Offer Price outside the United States in offshore
transactions in accordance with Regulation S and in the
United States to QIBs only in reliance on Rule 144A or any
other available exemption from the registration
requirements under the U.S. Securities Act, as further
described in “Structure of the Global Offering”
“International Underwriters” the underwriters of the International Offering
“International Underwriting
Agreement”
the international underwriting agreement, expected to
be entered into on or about July 5, 2023, relating to the
International Offering, expected to be entered into by,
among others, our Company, the Sole Sponsor, the Sole
Overall Coordinator, the Sole Global Coordinator and
the International Underwriters, as further described in
“Underwriting—International Offering—International
Underwriting Agreement”
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DEFINITIONS
“JenCap” collectively, JenCap Squad and JenCap Squad I L.P., each
of which is one of the Pre-IPO Investors of our Company;
further details of their shareholding and relationship are set
out in “Substantial Shareholders”
“Joint Bookrunners” and “Joint
Lead Managers”
the joint bookrunners and the joint lead managers as named
in “Directors and parties involved in the Global Offering”
“Latest Practicable Date” June 20, 2023, being the Latest Practicable Date for
ascertaining certain information in this document before its
publication
“Laws” all laws, statutes, legislation, ordinances, rules, regulations,
guidelines, opinions, notices, circulars, directives, requests,
orders, judgments, decrees, or rulings of any Governmental
Authority (including the Stock Exchange and the SFC) of
all relevant jurisdictions
“Listing” the listing of the Shares on the Main Board
“Listing Committee” the Listing Committee of the Stock Exchange
“Listing Date” the date, expected to be on or about Wednesday, July 12,
2023, on which the Shares are to be listed and on which
dealings in the Shares are to be first permitted to take place
on the Stock Exchange
“Listing Rules” the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited, as amended,
supplemented or otherwise modified from time to time
“M&A Rules” the Regulations on Mergers and Acquisitions of Domestic
Enterprises by Foreign Investors (
Իᒅྤ
)
“Main Board” the stock exchange (excluding the option market) operated
by the Stock Exchange which is independent from and
operates in parallel with the GEM of the Stock Exchange
“MCT” Ministry of Culture and Tourism of the PRC (
ʕശɛ͏΍ձ
༷௅)
“Memorandum” or
“Memorandum of Association”
the memorandum of association of our Company
conditionally adopted on June 12, 2023, with effect from
the Listing Date, as amended from time to time, a summary
of which is set out in “Summary of the constitution of our
Company and Cayman Islands company law” in
Appendix III
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DEFINITIONS
“MIIT” Ministry of Industry and Information Technology of the
PRC (ʷ௅) (formerly known as
the Ministry of Information Industry of the PRC ( ʕശɛ͏
ପุ௅))
“MOFCOM” the Ministry of Commerce of the PRC ( ʕശɛ͏΍ձ਷ਠ
ਕ௅) (formerly known as the Ministry of Foreign Trade
and Economic Cooperation of the PRC ( ʕശɛ͏΍ձ਷࿁
௅))
“Morespark” Morespark Limited, one of the Pre-IPO Investors of our
Company
“Mr. Wang” or “Single Largest
Shareholder”
Mr. Wang Ning ( ˮྐྵ), our founder, chairman of the board
of Directors, chief executive officer and a substantial
shareholder of our Company; prior to the Listing and as at
the date of this document, Mr. Wang (through his
controlled corporations) controlled more than 30% of the
total voting rights in our Company, and upon Listing, Mr.
Wang will continue to remain our Company’s single largest
ultimate shareholder
“NDRC” National Development and Reform Commission of the
PRC (
ึ)
“NHC” National Health Commission of the PRC ( ʕശɛ͏΍ձ਷
ึ)
“NPC” National People’s Congress of the PRC ( ʕശɛ͏΍ձ਷Ό
ɽึ)
“NRTA” National Radio and Television Administration of the PRC
(ᄿᅧཥൖᐼ҅)
“Offer Price” the final offer price per Offer Share (exclusive of
brokerage, SFC transaction levy, AFRC transaction levy
and Stock Exchange trading fee), expressed in Hong Kong
dollars, at which Hong Kong Offer Shares are to be
subscribed for pursuant to the Hong Kong Public Offering
and International Offer Shares are to be offered pursuant to
the International Offering, to be determined as described in
“Structure of the Global Offering—Pricing and allocation”
“Offer Share(s)” the Hong Kong Offer Shares and the International Offer
Shares, together, where relevant, with any additional
Shares to be issued by our Company pursuant to the
exercise of the Over-allotment Option
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DEFINITIONS
“Over-allotment Option” the option expected to be granted by our Company to the
International Underwriters, exercisable by the Stabilization
Manager on behalf of the International Underwriters, to
require our Company to allot and issue additional Shares to
the International Underwriters to, among other things,
cover over-allocations in the International Offering, if any,
details of which are described in “Structure of the Global
Offering—Over-allotment Option”
“PBOC” People’s Bank of China (
ʕ਷ɛ͏ვБ)
“PRC Legal Adviser” Commerce & Finance Law Offices, our legal adviser on
PRC laws
“Preferred Shares” the Series A Preferred Shares, the Series B Preferred
Shares, the Series C Preferred Shares, the Series C-1
Preferred Shares, the Series D Preferred Shares, the
Series E Preferred Shares, the Series F Preferred Shares and
the Series F-1 Preferred Shares
“Pre-IPO Investment(s)” the investment(s) in our Company undertaken by the
Pre-IPO Investors prior to this initial public offering, the
details of which are set out in “History, reorganization, and
corporate structure”
“Pre-IPO Investor(s)” the investors in our Company prior to our Listing, as set out
in “History, reorganization, and corporate structure”
“Pre-IPO Share Incentive Plans” collectively, the 2016 Plan and the 2021 Plan
“Presumptions” assuming no new Shares are issued under the Over-
allotment Options and the Share Incentive Plans, each
preferred share of the Company is converted to Shares of
the Company on a 1:1 basis immediately prior to Listing,
our Company’s weighted voting rights will be unwound
upon Listing such that each issued Share (including any
with super-voting rights prior to Listing) would equally
entitle its holder to one vote at a general meeting of our
Company, and no other changes are made to the issued
share capital of the Company between the Latest
Practicable Date and Listing
“Price Determination Agreement” the agreement to be entered into between our Company and
the Sole Overall Coordinator (for itself and on behalf of the
Underwriters) at or about the Price Determination Date to
record and fix the Offer Price
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DEFINITIONS
“Price Determination Date” the date, expected to be on or about Wednesday, July 5,
2023 and in any event no later than Tuesday, July 11, 2023
on which the Offer Price is to be fixed for the purposes of
the Global Offering
“QIB” a qualified institutional buyer within the meaning of
Rule 144A
“Registered Shareholders” the registered shareholders of the Onshore Holdco from
time to time; the current registered shareholders are
identified in “Contractual Arrangements”
“Regulation S” Regulation S under the U.S. Securities Act
“RMB” or “Renminbi” Renminbi, the lawful currency of China
“RSUs” Restricted Share Units
“Rule 144A” Rule 144A under the U.S. Securities Act
“SAFE” the State Administration of Foreign Exchange of the PRC
(
̮ි၍ଣ҅)
“SAIC” the State Administration of Industry and Commerce of the
PRC (၍ଣᐼ҅), which has
now been merged into the SAMR
“SAMR” the State Administration for Market Regulation of the PRC
(̹ఙ္ຖ၍ଣᐼ҅)
“SAT” the State Administration of Taxation of the PRC ( ʕശɛ͏
೼ਕᐼ҅)
“SCNPC” the Standing Committee of the National People’s Congress
of the PRC (ึ)
“Series A Preferred Share(s)” the series A convertible redeemable preferred share(s) of
our Company, with a par value of US$0.00005 each
“Series B Preferred Share(s)” the series B convertible redeemable preferred share(s) of
our Company, with a par value of US$0.00005 each
“Series C Preferred Share(s)” the series C convertible redeemable preferred share(s) of
our Company, with a par value of US$0.00005 each
“Series C-1 Preferred Share(s)” the series C-1 convertible redeemable preferred share(s) of
our Company, with a par value of US$0.00005 each
“Series D Preferred Share(s)” the series D convertible redeemable preferred share(s) of
our Company, with a par value of US$0.00005 each
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DEFINITIONS
“Series E Preferred Share(s)” the series E convertible redeemable preferred share(s) of
our Company, with a par value of US$0.00005 each
“Series F Preferred Share(s)” the series F convertible redeemable preferred share(s) of
our Company, with a par value of US$0.00005 each
“Series F-1 Preferred Share(s)” the series F-1 convertible redeemable preferred share(s) of
our Company, with a par value of US$0.00005 each
“SFC” Securities and Futures Commission of Hong Kong
“SFO” or “Securities and Futures
Ordinance”
Securities and Futures Ordinance (Chapter 571 of the Laws
of Hong Kong), as amended, supplemented or otherwise
modified from time to time
“Shanghai Calorie” Shanghai Calorie Sports Co., Ltd. (
ʮ
̡), a limited liability company established under the laws
of the PRC on November 28, 2018 and a Consolidated
Affiliated Entity of our Company
“Share(s)” the shares in the share capital of our Company with a par
value of US$0.00005 each, as the context so requires
“Shareholder(s)” holder(s) of our Share(s)
“Share Incentive Plans” the 2016 Plan, 2021 Plan and 2023 Plan
“Shenzhen Calorie” Shenzhen Calorie Technology Co., Ltd. (
ҦϞ
ʮ̡), a limited liability company established under the
laws of the PRC on August 29, 2017 and a Consolidated
Affiliated Entity of our Company
“Sole Sponsor”, “Sole Overall
Coordinator” and “Sole Global
Coordinator”
the sole sponsor, the sole overall coordinator and the sole
global coordinator of the Listing as named in “Directors
and parties involved in the Global Offering”
“Sports Management BJ” Calorie Sports Management (Beijing) Co., Ltd. (
̔༩Ԣ᜗ԃ
ʮ̡), a limited liability company
established under the laws of the PRC on June 29, 2018
and a Consolidated Affiliated Entity of our Company
“Stabilization Manager” China International Capital Corporation Hong Kong
Securities Limited
“Stock Borrowing Agreement” the stock borrowing agreement expected to be entered into
on or around the Price Determination Date between
Persistent Courage Holdings Limited and the Stabilization
Manager (or its affiliates, or any person acting for it),
pursuant to which the Stabilization Manager (or its
affiliates, or any person acting for it) may, request
Persistent Courage Holdings Limited to make available to
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DEFINITIONS
the Stabilization Manager (or its affiliates, or any person
acting for it) up to a total of 1,625,700 Shares to cover
over-allocations in the International Offering
“Stock Exchange” or “Hong Kong
Stock Exchange”
The Stock Exchange of Hong Kong Limited
“subsidiary” or “subsidiaries” has the meaning ascribed to it in section 15 of the
Companies Ordinance
“substantial shareholder(s)” has the meaning ascribed to it in the Listing Rules
“SVF II Calorie” SVF II Calorie Subco (DE) LLC, one of the Pre-IPO
Investors of our Company
“Track Record Period” the years ended December 31, 2019, 2020, 2021 and 2022
“U.S.”, “US” or “United States” the United States of America, its territories, its possessions
and all areas subject to its jurisdictions
“U.S. dollars”, “US dollars” or
“US$”
United States dollars, the lawful currency of the
United States
“U.S. Securities Act” the United States Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder
“Underwriters” the Hong Kong Underwriters and the International
Underwriters
“Underwriting Agreements” the Hong Kong Underwriting Agreement and the
International Underwriting Agreement
“VAT” value-added tax
“Voting Proxy Agreements” the voting proxy agreements dated June 14, 2022 entered
into between Mr. Wang (through his controlled corporation
Persistent Courage Holdings Limited), as proxyholder on
the one hand, and Metropolis Olympia Holdings Limited
(ultimately beneficially owned by Mr. Peng Wei), Bulldog
Group Ltd (ultimately beneficially owned by Mr. Liu
Dong) and Impressive Appearance Holdings Limited
(ultimately beneficially owned by Mr. Wen Chunpeng), as
proxy granters on the other hand, the details of which are
set out in “History, reorganization, and corporate
structure—Voting Proxy Agreements”
“WFOE” Beijing Calorie Information Technology Co., Ltd. (
̏ԯ̔
ʮ̡), a limited liability company
established under the laws of the PRC on July 7, 2015 and
a wholly-owned subsidiary of our Company
“White Form eIPO” the application for Hong Kong Offer Shares to be issued in
the applicant’s own name, submitted online through the
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DEFINITIONS
designated website of the White Form eIPO Service
Provider at www.eipo.com.hk
“White Form eIPO Service
Provider”
Computershare Hong Kong Investor Services Limited
“%” per cent
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GLOSSARY OF TECHNICAL TERMS
This glossary contains definitions of certain technical terms used in this document in
connection with us and our business. These may not correspond to standard industry definitions,
and may not be comparable to similarly terms adopted by other companies.
“AI” artificial intelligence
“big data” large and diverse data sets able to uncover hidden patterns,
unknown correlations, market trends, customer preferences
and other useful information assets under new processing
model for greater decision-making power, insight and
processing optimization capabilities
“CAGR” compound annual growth rate
“fitness product customer
subscribing rate”
the number of users that have purchased our self-branded
fitness products on Keep platform in a given month and are
subscribing members as at the last day of the month as
percentage of the total number of users that have purchased
our self-branded fitness products on Keep platform in the
given month
“DTC channels” direct-to-consumer channels, including our self-operated
online stores on Keep platform, Tmall, and JD, among
others, but excluding third-party wholesale channels, such
as JD self-owned stores, and excluding a few direct-to-
consumer channels where the Company does not have
access to statistics on end fitness product customers
“fitness product customers” customers who purchase our self-branded fitness products
through DTC channels. A customer who makes payments
across different DTC channels is counted as multiple
fitness product customers
“fitness population” people who engage in fitness activities more than twice per
week
“gross merchandise volume” or
“GMV”
the total sales for fitness products, excluding costs involved
and returns of self-branded fitness products
“IP” intellectual property
“membership penetration rate” the average number of monthly subscribing members as a
percentage of the average MAUs of a given period
“monthly active users” or “MAUs” our users, including paying and non-paying users, who
logged in their user accounts on our platform through our
mobile app (including through smart TV and other smart
devices) at least once in a given month. Same user account
on different devices are treated as one user and each
account as a distinctive user when calculating our MAUs
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GLOSSARY OF TECHNICAL TERMS
“monthly membership retention
rate”
calculated by dividing the number of monthly subscribing
members in a specified month that continue to be counted
as monthly subscribing members in the following month by
the total number of monthly subscribing members in the
specified month
“monthly subscribing members” the individuals who have subscribed to our monthly,
quarterly or annual membership packages, excluding
individuals with free trial membership, and had an active
membership subscription as of the last day of a given
month, whether or not the individuals cancel their future
membership renewals
“paying users” include subscribing members, non-subscribing users who
pay for our content, fitness product customers, and other
customers who purchase our products through non-DTC
channels
“professionally generated content”
or “PGC”
content developed and produced in-house, consisting of
recorded structured courses, recorded video courses and
curriculums, as well as live streaming classes
“professional user-generated
content” or “PUGC”
content produced by fitness influencers or licensed from
third parties, mainly consisting of recorded video courses
and curriculums. Live streaming classes produced in-house
but demonstrated by influencers are also classified as
PUGC
“SPU” acronym for minimum standard product unit, with a unique
identifier for each product with distinct standardized
characteristics. For example, each distinct product with
different color is considered as the same SPU
“subscribing members” users who have subscribed to our monthly, quarterly or
annual membership packages. Subscribing members do not
include (i) individuals who purchase our fitness courses or
curriculums only on an a la carte basis, and (ii) individuals
who have user accounts and free-trials on our platform but
did not contribute revenue to the Group
“users” the individuals who have user accounts on our platform
“workout sessions” users’ workout sessions on our platform meeting certain
length and completion status criteria: (a) for pre-recorded
courses, at least 60% completion status; (b) for live
streaming classes, at least two-minute in-class training
time; (c) for running, walking or cycling sessions, over
twenty seconds and 100 meters of each session recorded
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GLOSSARY OF TECHNICAL TERMS
with our app, or over 400 meters of recorded walking
sessions that users choose to upload to our platform.
“Workout sessions” and the use of “workout sessions” to
substantiate user stickiness are in line with the industry
practice
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FORWARD-LOOKING STATEMENTS
Certain statements in this document are forward-looking statements that are, by their nature,
subject to significant risks and uncertainties. Any statements that express, or involve discussions as to,
expectations, beliefs, plans, objectives, assumptions, future events, or performance (often, but not
always, through the use of words or phrases such as ‘will’, ‘expect’, ‘anticipate’, ‘estimate’, ‘believe’,
‘going forward’, ‘ought to’, ‘may’, ‘seek’, ‘should’, ‘intend’, ‘plan’, ‘projection’, ‘could’, ‘vision’,
‘goals’, ‘aim’, ‘aspire’, ‘objective’, ‘target’, ‘schedules’, and ‘outlook’) are not historical facts, are
forward-looking and may involve estimates and assumptions and are subject to risks (including but not
limited to the risk factors detailed in this document), uncertainties and other factors some of which are
beyond our Company’s control and which are difficult to predict. Accordingly, these factors could
cause actual results or outcomes to differ materially from those expressed in the forward-looking
statements.
Our forward-looking statements have been based on assumptions and factors concerning future
events that may prove to be inaccurate. Those assumptions and factors are based on information
currently available to us about the businesses that we operate. The risks, uncertainties and other
factors, many of which are beyond our control, that could influence actual results include, but are not
limited to:
Š our operations and business prospects;
Š our business and operating strategies and our ability to implement such strategies;
Š our ability to develop and manage our operations and business;
Š our ability to control costs and expenses;
Š our ability to identify and satisfy user demands and preferences;
Š our ability to maintain good relationships with business partners;
Š the actions and developments of our competitors;
Š our dividend policy;
Š changes to regulatory and operating conditions in the industry and geographical markets in
which we operate;
Š our proposed use of proceeds; and
Š all other risks and uncertainties described in “Risk factors”.
Since actual results or outcomes could differ materially from those expressed in any forward-
looking statements, we strongly caution investors against placing undue reliance on any such forward-
looking statements. Any forward-looking statement speaks only as of the date on which such statement
is made, and, except as required by the Listing Rules, we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after the date on which such statement is
made or to reflect the occurrence of unanticipated events. Statements of, or references to, our intentions
or those of any of our Directors are made as of the date of this document. Any such intentions may
change in light of future developments.
All forward-looking statements in this document are expressly qualified by reference to this
cautionary statement.
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RISK FACTORS
You should carefully consider all of the information set out in this document before
making an investment in the Shares, including the risks and uncertainties described below in
respect of our business and our industry and the Global Offering. You should pay particular
attention to the fact that we are a company incorporated and registered in the Cayman Islands
and that our principal operations are conducted in China and are governed by a legal and
regulatory environment that in some respects differs from what prevails in other countries. Our
business could be affected materially and adversely by any of these risks.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
We have a limited operating history under our evolving platform business model, and our historical
growth and performance may not be indicative of our future growth and financial results.
We have experienced continued growth in terms of revenue and user base since we launched
our app in 2015. As we grow our user base, increase the level of user engagement, broaden our mix of
services and products, renew our product and service portfolios and explore new monetization
opportunities, we may incur increasing costs and fail to effectively manage our growth.
As we have a limited operating history and limited operating experience at our current scale of
operations, it is difficult to assess our future prospects or forecast our future results of operations, in
particular, we may not maintain our historic growth. You should consider our business and prospects in
light of the risks and challenges we encounter or may encounter in this developing and rapidly
evolving market, some of which are beyond our control. These risks and challenges include, among
other things:
Š our ability to attract and retain users and drive user engagement and spending with us;
Š our ability to further create, source and deploy professional, comprehensive and engaging
content, services and products for our users, especially AI-assisted personalized
curriculums, proprietary structured courses and interactive live streaming classes;
Š our ability to adapt to increasing competition and growth trends within our overall market
or industries;
Š our ability to expand into new geographic markets that are amenable to our business
model;
Š our ability to develop a reliable, scalable, secure, high-performance technology
infrastructure that can efficiently handle increased usage, user interaction and an enlarged
user base;
Š our ability to develop or implement strategic initiatives to monetize our platform;
Š an increase in competition and expenses as we expand our business;
Š our ability to attract, cultivate and retain fitness influencers and instructors and maintain
our relationship suppliers, contract manufacturers or logistics service providers;
Š our ability to hire, retain and motivate talented employees and attract management talent
that is compatible with our business expansion both domestically and internationally; and
Š our ability to ensure our operations are carried out in full compliance with relevant laws
and regulations and defend ourselves against litigation and/or claims relating to product
liability, intellectual property, privacy, personal injury or other matters.
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RISK FACTORS
We cannot be sure that we will be successful in addressing these and other challenges we may
face in the future, and our business may be adversely affected if we do not manage these risks
successfully. In addition, we may not achieve sufficient revenue or maintain positive cash flows from
operations or profitability in any given period, or at all.
If we are unable to carry out our business strategies and manage our growth effectively, our brand,
company culture, and financial performance may suffer.
Our future growth, brand, company culture and financial performance depend upon our ability
to successfully carry out our business strategy, which, in turn, is dependent upon a number of factors,
including our ability to:
Š continue to use innovation to drive sales, improve technological and operational
efficiencies and improve profit margin;
Š effectively manage the quality and efficiency of supply, manufacturing and logistics
service providers and other third-party service providers’ performance;
Š continue to broaden and diversify our marketing channels;
Š pursue strategic investments and collaborations to complement our existing capabilities
and expand our content, product and service portfolio and geographic reach; and
Š leverage our high performance and innovation excellence team culture to drive margins.
Our future growth, brand, company culture and financial performance also depend on our
ability to effectively manage our growth. Growing our business rapidly will place a strain on our
management team, financial and information systems, supply chain and distribution capacity and other
resources. To manage growth effectively, we must continue to enhance our operational, financial and
management systems; maintain and improve our internal controls and disclosure controls and
procedures; maintain and improve our information technology systems and procedures; and expand,
train and manage our employee base. We may not be able to effectively manage this expansion in any
one or more of these areas, and any failure to do so could significantly harm our business, financial
condition and results of operations. Growing our business rapidly may make it difficult for us to
adequately predict the expenditures we will need to make in the future. If we do not make the
necessary overhead expenditures to accommodate our future growth, we may not be successful in
executing our growth strategy, and our results of operations would suffer.
Additionally, we plan to expand our addressable market by appealing to users across different
geographies. In particular, we intend to ramp up our efforts to expand our presence into lower-tier
cities in China and explore overseas markets by offering more customized content. As we increase our
penetration rate in lower-tier cities in China and expand our presence in international markets, we face
new challenges in attracting and retaining users that we may not successfully address. As a result of
these factors, we cannot be sure that our user levels will be adequate to maintain or permit the
expansion of our operations. A decline in user levels could have an adverse effect on our business,
financial condition, and operating results.
If we are unable to attract and retain users on our platform, or if user engagement and/or user
spending decline, our business and results of operations may be materially and adversely affected.
We have experienced significant user growth since our inception. Our continued business and
revenue growth and the further development of our brand image is dependent on our ability to
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RISK FACTORS
continuously attract and retain our users, and we cannot be sure that we will be successful in these
efforts, or that user retention levels will not materially decline. For example, we launched more optimal
mix of marketing channels and strategies, including advertisements on app stores and short-video
platforms, fitness influencers’ marketing and other marketing campaigns on social media platforms,
among others, to reach target user groups, increase paying user conversion. These strategies and user
growth efforts may turn out to be ineffective, and we may not be able to acquire more users effectively
or may experience a decline in our user base. In addition, we have incurred substantial selling and
marketing expenses, including spending in traffic acquisition and branding to further acquire, activate
and retain users. We recorded selling and marketing expenses of RMB295.8 million, RMB301.7
million, RMB956.2 million, and RMB646.2 million in 2019, 2020, 2021, and 2022, respectively. In
particular, we incurred traffic acquisition cost of RMB103.0 million, RMB93.3 million, RMB335.3
million and RMB159.3 million in 2019, 2020, 2021 and 2022, respectively. The traffic acquisition cost
is generally incurred to divert traffic to our mobile app, and help facilitate the acquisition of both
subscribing members and a la carte content purchases. Our traffic acquisition spending per online
paying user, the sum of our subscribing members and a la carte online content buyers with duplications
eliminated, fluctuated during the Track Record Period. In 2021, we strategically increased our traffic
acquisition spending to further acquire, activate and retain users, resulting in higher traffic acquisition
cost per online paying user. We generally lower our traffic acquisition spending in the fourth quarter of
each year as users are less willingness to exercise during the winter seasons. Our traffic acquisition
spending may continue to fluctuate in the future due to seasonality and as we adjust our user
acquisition strategy. If some of our efforts to increase user traffic are found to be ineffective, such
efforts may not justify the associated costs. There are a number of factors that could lead to a decline in
users or that could prevent us from increasing our users, including:
Š a decline in the public’s interest in at-home fitness content, indoor cycling or running,
smart fitness hardware, fitness gear and apparel, fitness food or other fitness disciplines
that we invest most heavily in;
Š our failure to introduce content, products, or services that users find engaging;
Š our failure to maintain extensive and professional fitness content and an extensive fitness
product portfolio;
Š harm to our brand and reputation;
Š pricing and perceived value of our content, product and service offerings;
Š our inability to deliver quality content, products, and services;
Š our users engaging with competitive content, products and services;
Š technical or other problems preventing users from accessing our content and services in a
rapid and reliable manner or otherwise affecting the user experience;
Š unsatisfactory experiences with the delivery, installation, or service of our products; and
Š deteriorating general economic conditions or a change in consumer spending preferences
or buying trends.
In addition, the industry in which we operate is characterized by rapidly changing technologies.
We depend on our technological capabilities and infrastructure to analyze our users’ preferences and
needs and to generate valuable user insights. Active users of our content, products and services
generate a large amount of data that lay the foundation for us to build our user profiles and deliver and
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RISK FACTORS
develop more tailored content and better products and services. If we fail to respond to or adopt
evolving technologies for our content, product and service development on a timely and cost-effective
basis, or our new content, products, services or technologies are not accepted by our users, our
business, financial performance and prospects could be materially and adversely affected.
By analyzing such user data with our big data analytics, AI and other relevant technologies, we
aim to understand our users’ interests and needs for content in order to develop products that deliver
relevant content catering to their interests and needs. Therefore, the effectiveness of our product
development and monetization strategies is dependent on our ability to obtain and process data and to
refine the algorithms used in processing such data. If we fail to maintain and expand the user base of
our products to continually generate large amounts of user data, or if we fail to keep up with the rapid
development and upgrade of big data analytics, AI and other relevant technologies on a timely and
cost-effective basis, we may not be able to effectively grow and monetize our products, and our
business and operating results may be materially and adversely affected.
If we are unable to adapt the fitness content and related products and services offered on our
platform to changes in user preferences and evolving industry trends in a timely manner, the
demand for our fitness content and related products and services may decline, which could have an
adverse effect on our business and rate of growth.
Our success in maintaining and increasing our user base depends on our ability to identify and
originate trends as well as to anticipate and react to changing user demands in a timely manner. Our
content, products and services are subject to changing user preferences that cannot be predicted with
certainty. If we are unable to introduce new or enhanced offerings in a timely manner, or our new or
enhanced offerings are not accepted by our users, our competitors may introduce similar offerings
faster than us, which could negatively affect our rate of growth.
Our new offerings may not receive user acceptance as preferences could shift rapidly to
different types of fitness offerings or away from these types of offerings altogether, and our future
success depends in part on our ability to anticipate and respond to these changes. Failure to anticipate
and respond in a timely manner to changing user preferences could lead to, among other things, lower
subscription rates, low user retention rates, lower sales, pricing pressure, lower gross margins,
discounting of our existing fitness products, and excess inventory levels. Even if we are successful in
anticipating user preferences, our ability to adequately react to and address them will partially depend
upon our continued ability to develop and introduce innovative, high-quality offerings, especially our
ability to continue to create a large volume of comprehensive and quality self-developed fitness
content. Development of new or enhanced content, products and services may require significant time
and financial investment, which could result in increased costs and a reduction in our profit margins.
Moreover, we must successfully manage introductions of new or enhanced content, products
and services, which could adversely impact the sales of our existing content, products and services. For
instance, users may decide to purchase new or enhanced content, products and services instead of our
existing products and services, which could lead to excess product inventory, lower purchase rates for
our existing content and discounting of our existing products and services.
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RISK FACTORS
The fitness industry in China is still in the early stages of growth and if it does not continue to grow,
grows more slowly than we expect, or fails to reach the scale that we expect, our business, financial
condition, and operating results may be adversely affected.
The online fitness market is relatively new, rapidly growing, largely unproven, and it is
uncertain whether it will sustain high levels of demand and achieve wide market acceptance. Our
success depends substantially on the willingness of users to conduct at-home workouts and widely
adopt our content, products and services. To be successful, we will have to cultivate users’ interests in
at-home workouts, educate users about our content, products and services through significant
investment, and provide quality content that is superior to the content and experiences provided by our
competitors.
Although the online fitness market at large is under penetrated, the market is under-developed
and the demand for and market acceptance of the online fitness and the at-home workout concept, new
products and services in the market is uncertain. It is difficult to predict the future growth rates, if any,
and the size of our market. We cannot assure you that our market will develop, that the public’s interest
in online fitness will continue, or that our content, products and services will be widely adopted. If our
market does not develop, develops more slowly than expected, or becomes saturated with competitors,
or if our content, products and services do not achieve market acceptance, our business, financial
condition, and operating results could be adversely affected.
There are no well-established and widely accepted online fitness platforms that provide an
integrated fitness solution covering comprehensive fitness content, products and services. Since the
launch of our mobile app in 2015, we have also been trying out different business strategies to explore
the most effective business model for our operations. We believe that our business model is novel, and
we have a limited operating history on which investors can evaluate our business and prospects. There
is no guarantee that our business model will continue to be successful or achieve wide acceptance as
quickly or in a magnitude as we anticipated. We cannot learn from the experience of similar
companies, and as a result we have to explore different business practices, formulate pricing strategies,
set up procedures and standards by ourselves and learn from our own experience. Given that we have a
very short operating history, we have very limited insight into trends and uncertainties that may emerge
and affect our business. A potential investor in our Shares should carefully consider the risks and
difficulties frequently encountered by companies in an early stage of development, as well as the risks
we face due to our participation in a new and rapidly evolving market, and our attempt to execute a
new and untested business model. Our business model may not be successful, or we may not
successfully overcome the risks associated with this business model.
Maintaining and enhancing our brand and corporate reputation is critical to our success. Negative
publicity about us, our employees and third parties associated with our platform, including our
fitness instructors and our content providers, may materially and adversely affect our brand,
reputation, business and growth prospects.
We believe that our brand is important to attracting and retaining users and our success depends
on our ability to maintain and enhance our brand image and reputation. Maintaining, promoting and
growing our brands depend largely on the success of our marketing efforts, ability to provide
consistent, high-quality content, products and services, and our ability to successfully secure, maintain,
and defend our rights to use our brands and tradenames.
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Our brand could be harmed if we fail to achieve these objectives. Our brand value also depends
on our ability to maintain a positive user perception of our corporate integrity, purpose and brand
culture. Negative claims or publicity, regulatory investigations or administrative penalties, and
litigation involving us, our culture and values, our content, products, services and experiences,
consumer data, any of our key employees, or third parties associated with our platform, including
fitness instructors, content providers, endorsers, sponsors or suppliers could seriously damage our
reputation and brand image, regardless of whether such claims are accurate. In addition, our brand and
corporate reputation could also be harmed by our inability to address user complaints. Failure to
maintain and enhance our brand and corporate reputation could have an adverse effect on the size,
engagement and loyalty of our user base and result in decreased revenue, which could have an adverse
effect on our business, financial condition, and operating results.
We cannot guarantee that our monetization strategies will be successfully implemented or generate
sustainable revenue and profit.
We are in the early stage of our business, and our monetization model is evolving. We provide
our users with an online fitness solution and we monetize mainly through membership and online paid
content, self-branded fitness products and advertising. We cannot assure you that we can successfully
implement the existing monetization strategies to generate sustainable revenue, or that we will be able
to develop new monetization strategies to grow our revenue. If our strategic initiatives do not enhance
our ability to monetize or enable us to develop new monetization approaches, we may not be able to
maintain or increase our revenue or recover any associated costs.
We monitor market developments and may adjust our monetization strategies accordingly from
time to time, which may result in decreases of our overall revenue or revenue contributions from some
monetization channels. In addition, we may have limited or no experience with the new revenue
streams that we may introduce in the future. If these new revenue streams fail to engage our users or
business partners, we may fail to retain or attract users or generate sufficient revenue to justify our
investment, and our business and results of operations may suffer as a result.
We incurred net losses and had net cash outflow in the past, and we may continue to incur losses
and have net cash outflow in the future.
We incurred net losses in the past. In 2019, 2020, 2021 and 2022, we had loss for the year of
RMB735.0 million, RMB2.2 billion, RMB2.9 billion and RMB104.6 million, respectively. We also
had net cash outflow from operating activities of RMB277.0 million in 2019, RMB70.8 million in
2020, RMB868.5 million in 2021 and RMB456.0 million in 2022. We cannot assure you that we will
be able to generate profits or positive cash flow from operating activities in the future. Our ability to
achieve profitability depends in large part on our ability to attract new users, scale our platform, further
monetize our user base, convert non-paying users into paying users and retain paying users. We cannot
assure you that our user base will continue to maintain the growth momentum. In addition, we intend
to manage and control our costs and expenses as a proportion of our total revenue, but there can be no
assurance that we will achieve this goal. In addition, our ability to achieve and sustain profitability is
affected by various factors, some of which are beyond our control, such as changes in user preferences,
macroeconomic and regulatory environments or competitive dynamics in the industry. Accordingly,
you should not rely on our financial results of any prior period as an indication of our future
performance.
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Our business generates, processes, collects and stores a large amount of data, and the unauthorized
access, improper use or disclosure of such data could subject us to significant reputational,
financial, legal and operational consequences, and deter current and potential users from using our
services.
We process, including but not limited to collect, store, process, use, transfer, provide, disclose
and delete, personal data from our users in order to better understand our users and their needs for the
purpose of our content feeds recommendation. Concerns or claims about our practices with regard to
the processing of personal information or other privacy-related matters, even if unfounded, could
damage our reputation and results of operations. In the PRC, governmental authorities have enacted a
series of laws and regulations to enhance the protection of privacy and data. The PRC Constitution, the
PRC Criminal Law, the Civil Code of the PRC, the Cybersecurity Law of the PRC and relevant
regulations require network operators, which may include us, to ensure the security and stability of the
services provided via network and protect individual privacy and the security of personal data in
general by requiring the consent of internet users prior to the processing of their personal data. Under
the Cybersecurity Law, the owners and administrators of networks and network service providers are
subject to various personal information security protection obligations, including restrictions on the
collection and use of personal information of users, and they are required to take steps to prevent
personal data from being divulged, stolen, or tampered with. See also “Regulations—Regulations
Related to Internet Information Security and Privacy Protection”. Regulatory requirements regarding
the protection of personal information are constantly evolving and can be subject to differing
interpretations or significant changes, making the extent of our responsibilities in that regard uncertain.
For example, on June 10, 2021, the Standing Committee of the National People’s Congress, or
SCNPC, promulgated the Data Security Law of the People’s Republic of China (
ʕശɛ͏΍ձ਷ᅰኽ
), or the Data Security Law, effective from September 1, 2021. The Data Security Law
provides that data processing activities that affects or may affect national security shall be subject to a
state security review procedure. On July 6, 2021, the General Office of the CPC Central Committee
and the General Office of the State Council jointly promulgated the Opinions on Strictly Combatting
Illegal Securities Activities (
จԈ), or the July 6 Opinion, which
called for a heightened scrutiny over overseas-listed China-based companies of their compliance with
the laws and regulations regarding data security, cross-border data flow and management of
confidential information, and such laws and regulations are expected to undergo further changes,
which may require increased information security responsibilities and stronger cross-border
information management mechanism and process. We may need to adjust our business to comply with
data security requirements and other laws and regulations from time to time.
On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law of the
People’s Republic of China (
), or the Personal Information
Protection Law, which integrates the scattered rules with respect to personal information rights and
privacy protection and took effect on November 1, 2021. Although the Personal Information Protection
Law raises the protection requirements for processing personal information, many specific
requirements of the Personal Information Protection Law remain to be clarified by the CAC, other
regulatory authorities, and courts in practice. We may be required to make further adjustments to our
business practices to comply with the personal information protection laws and regulations. In
particular, on August 22, 2019, the CAC issued the Rules on Cyber Protection of Children’s Personal
Information (
) effective on October 1, 2019. Internet operators who
collect, store, use, transfer and disclose personal information of children under the age of 14 shall
establish special rules and user agreements for the protection of children’s personal information,
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inform the children’s guardians in a noticeable and clear manner and obtain the consent of the
children’s guardians. See also “Regulations – Regulations Related to Internet Information Security and
Privacy Protection”.
On November 14, 2021, the CAC publicly solicited opinions on the Draft Data Security
Regulations. According to the Draft Data Security Regulations, data processors shall, in accordance
with relevant state provisions, apply for cybersecurity review if its intended listing in Hong Kong
affects or may affect national security. Furthermore, the Draft Data Security Regulations stipulate that
data processors processing personal information of more than one million users shall be subject to the
various requirements that apply to important data processors, including but not limited to: (a) important
data processors shall specify the person in charge of data security and establish a data security
management organization; (b) important data processors shall file with competent authorities within 15
working days after the identification of important data; (c) important data processors shall develop a
data security training program for its employees; (d) important data processors shall carry out annual
data security assessment and file such report with competent authorities annually. As of the Latest
Practicable Date, the Draft Data Security Regulations had not been formally adopted. Substantial
uncertainties exist with respect to its enactment timetable, final content, interpretation and
implementation, especially the detailed interpretation of the standard for determining whether a listing
in Hong Kong “affects or may affect national security”. We cannot assure you that relevant
governmental authorities will not interpret the laws and regulations in ways that may negatively affect
us. At this stage, we are unable to predict the possible consequences of these drafts, if any, and we are
monitoring and assessing the rulemaking process closely. Any failure, or perceived failure to maintain
the security of our user data or to comply with applicable PRC or foreign privacy, data security and
personal information protection laws and obligations may result in civil or regulatory liability,
including governmental or data protection authority enforcement actions and investigations, fines,
penalties, enforcement orders requiring us to cease operating in a certain way, litigation, or adverse
publicity, and may require us to expend significant resources in responding to and defending
allegations and claims.
On December 31, 2021, the CAC, together with other regulatory authorities, published
Administrative Provisions on Algorithm Recommendation for Internet Information Services (
ʝᑌ
) (the “Administrative Provisions on Algorithm Recommendation ”),
effective on March 1, 2022. Pursuant to the Administrative Provisions on Algorithm Recommendation,
users should be given an option to easily turn off algorithm recommendation services, and service
providers shall, among others, establish and improve the management systems and technical measures
for algorithm driven recommendation mechanism and regularly review, evaluate and verify the
principle, models, data and application results of algorithms.
Pursuant to the National Security Law (
) issued by SCNPC on
July 1, 2015, the state shall establish a national security review and supervision system to review, among
other things, foreign investment, key technologies, internet and information technology products and
services, and other important activities that are likely to impact national security of China.
On December 28, 2021, the CAC together with other regulatory authorities officially
announced the Cybersecurity Review Measures (
), which is consistent with the
Cybersecurity Review Measures (Revision Draft for Comment) announced by the CAC on July 10,
2021. Pursuant to the Cybersecurity Review Measures, the procurement of network products and
services by critical information infrastructure operators and the data processing activities conducted by
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network platform operators which affects or may affect national security shall be subject to
cybersecurity review. Network platform operators mastering personal information of more than one
million users must apply to the Cybersecurity Review Office for cybersecurity review when listing
abroad (
਷̮ɪ̹).
On July 30, 2021, the State Council promulgated the Regulations on Security Protection of
Critical Information Infrastructure (ᚐૢԷ), or the CII Regulations, which
became effective on September 1, 2021. Pursuant to the CII Regulations, critical information
infrastructure refers to any important network facilities or information systems of an important industry
or field specified. In addition, relevant administration departments of each critical industry and sector
are responsible for formulating eligibility criteria and determining the critical information
infrastructure in the respective industry or sector. The operators will be informed about the final
determination as to whether they are categorized as critical information infrastructure operators, or
CIIOs. As of the Latest Practicable Date, no detailed rules or interpretations have been issued and we
have not been informed as a CIIO by any governmental authorities. Furthermore, the exact scope of
CIIOs, under the current regulatory regime remains unclear, and the PRC governmental authorities
may have discretion in the interpretation and enforcement of these laws and regulations. Therefore, it is
uncertain whether we would be deemed as a CIIO under PRC law. If we are identified as CIIO, we will
be subject to stricter requirements on business operations and cybersecurity compliance, and we may
need to follow cybersecurity review procedure and apply with Cybersecurity Review Office before
making certain purchases of network products and services, and if a cybersecurity review is applicable,
we may be required to suspend providing any existing or new services to our users, and we may
experience other disruptions of our operations.
In connection with the promulgation of laws and regulations related to cybersecurity and data
protection, relevant authorities such as the MIIT and the CAC imposed various measures on mobile
apps frequently in recent years, including issuing the order of rectification and temporary removal of
apps from app stores for encroaching the rights and interests of users in violation of applicable laws
and regulations. Improper collection of personal information, forced, frequent and excessive access,
technical issues and improper use of personal information are the top reasons for rectification orders
and suspension of apps. As of the Latest Practicable Date, we made efforts to comply with the
aforementioned requirements, including any rectification requirements made by relevant authorities
such as the MIIT and CAC at the national or provincial levels, to ensure that we will not be inquired by
regulators regarding the aforementioned issues.
On July 7, 2022, the CAC promulgated the Measures of Security Assessment for Cross-Border
Data Transfer (
) (the “ Cross-Border Data Transfer Measures ”), which
came into effect on September 1, 2022. The Cross-Border Data Transfer Measures requires that four
types of cross-border transfer of critical data or personal data generated or collected in China be subject
to a security assessment. See Regulations—Regulations Related to Internet Information Security and
Privacy Protection for details.
In addition, the PRC regulatory authorities have recently taken steps to strengthen the
regulations on data protection and conducted several rounds of relevant inspections. For example, the
CAC, issued a notice on June 11, 2021, or the CAC Notice, requiring 129 named apps, including our
app, to rectify the non-compliance with the necessity principle in the collection of personal information
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and the Rules on the Scope of Necessary Personal Information for Common Types of Mobile Internet
Applications (), which came into effect on
May 1, 2021, or the Necessary Personal Information Rules. Please refer to “Business—Risk
Management and Internal Control—Data and Technology System Risk Management”. As laws and
regulations in China on the protection of privacy and data are constantly evolving, complying with new
laws and regulations could cause us to incur substantial costs or require us to change our business
practices in a manner materially adverse to our business.
Regulatory requirements regarding the protection of data are constantly evolving and can be
subject to significant changes of interpretations, making the extent of our responsibilities in that regard
uncertain. Despite our efforts to comply with applicable laws, regulations and other obligations relating
to privacy, data protection and information security, it is possible that our practices, offerings or
platform could fail to meet all of the requirements imposed on us by such laws, regulations or
obligations. Any failure on our part to comply with applicable laws or regulations or any other
obligations relating to privacy, data protection or information security, or any compromise of security
that results in unauthorized access, collection, transfer, use or release of personally identifiable
information or other data, or the perception or allegation that any of the foregoing types of failure or
compromise has occurred, could damage our reputation, discourage new and existing users from using
our platform or result in investigations, fines, suspension of one or more of our apps, or other penalties
by government authorities and private claims or litigation, any of which could materially adversely
affect our business, financial condition and results of operations. In addition, the interpretation and
application of the aforementioned laws and regulations are often uncertain and in flux. Our practice
may become inconsistent with these laws and regulations. See also “—Risks Related to Doing
Business in China—Uncertainties with respect to the PRC legal system and changes in laws and
regulations in China could adversely affect us”.
In particular, if we fail to secure our users’ identity and protect their identity-specific data,
including, but not limited to name, height, weight, bust/waist/hip measurements and other health and
fitness data, our users may be vulnerable to insults, harassment, blackmail or physical injuries, and
their family, property and other assets may also be put at risk. As a result, we may be held liable for
these incidents, and our users may feel insecure and cease to use our online platform. Our reputation
may be seriously harmed and we may be unable to retain and attract users, which would in turn have a
material adverse effect on our business and results of operations. We have experienced a one-time
leakage of non-sensitive and non-personally identifiable data before, and we were able to rectify
without significant impact to the integrity of our user data. However, we cannot assure you that
improper use or disclosure of data would not occur in the future despite our continuous efforts to
upgrade our system and guard against any data breach or data leakage.
Our platform and internal systems depend on the ability of software and hardware developed
and maintained internally and/or by third parties to store, retrieve, process and manage immense
amounts of data, including personal information or other privacy-related matters. The software and
hardware on which we rely may now or in the future contain, undetected programming errors, bugs, or
vulnerabilities which may result in errors or compromise our ability to protect the data of our users and
in turn adversely affect our business, financial condition and operation results. Any systems failure or
compromise of security that results in the unauthorized access to or release of the data, photo or
messaging history of our users could significantly limit the adoption of our services, as well as harm
our reputation and brand, result in litigation against us, liquidation and other damages, regulatory
investigations and penalties, and we could be subject to material liability. Additionally, we connect our
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platform with software development kit provided by third parties who may also process users’ data.
The integrity of our user data also depends on their ability to secure and protect the data they process.
The risk that these types of events could seriously harm our business is likely to increase as we expand
the scope of services we offer and as we increase the size of our user base.
We may also become subject to laws and regulations affecting data protection, data privacy
and/or information security in other jurisdictions by virtue of having users who reside in these
jurisdictions, even if we do not have a physical presence there. Many jurisdictions have in the past
adopted, and may in the future adopt, new laws and regulations, or amendments to existing laws and
regulations, affecting data protection, data privacy and/or information security, such as the General
Data Protection Regulation, or the GDPR, adopted by the European Union that became fully effective
on May 25, 2018. The interpretation and application of these laws or regulations are often uncertain
and in flux. We cannot guarantee you that our practice is consistent with these laws and regulations
and our practice may become inconsistent with these laws and regulations, if so, we could be subject to
fines and orders requiring that we change our practices, which could have an adverse effect on our
business and results of operations. Complying with new data laws and regulations could cause us to
incur substantial costs or require us to change our business practices in a manner materially adverse to
our business.
Misbehavior or unsatisfactory performance of the fitness influencers we collaborated with could
harm our reputation and potentially our operation results and financial performance.
We collaborate with fitness influencers to develop fitness content to further enrich our content
offerings and attract users to our platform. Fitness influencers are critical to the quality of our offerings
and our reputation. However, we cannot assure you that such review and evaluation are effective to
ensure the content produced by the fitness influencers are appropriate and professional. Any alleged
misbehavior or unsatisfactory performance of the fitness influencers, negative claims or publicity
arising from the content the fitness influencers produced or otherwise, could seriously damage our
reputation and brand image, regardless of whether such allegations or claims are accurate. In addition,
our brand and corporate reputation could also be harmed by our inability to address such allegations or
complaints. Failure to maintain and enhance our brand and corporate reputation could have an adverse
effect on the size, engagement and loyalty of our user base and result in decreased revenue, which
could have an adverse effect on our business, financial condition, and operating results.
We recorded net liabilities as of December 31, 2019, 2020, 2021 and 2022.
We recorded net liabilities of RMB2.1 billion, RMB4.0 billion, RMB6.8 billion and
RMB7.5 billion, as of December 31, 2019, 2020, 2021 and 2022, respectively, primarily due to the
significant amounts of convertible redeemable preferred shares recorded as liabilities. Net losses we
incurred during the Track Record Period also contributed to our net liability positions.
Our convertible redeemable preferred shares will be re-designated from liabilities to equity as a
result of the automatic conversion into ordinary shares upon the Listing, after which we do not expect
to recognize any further loss or gain on changes in fair value of convertible redeemable preferred
shares and will return to a net assets position from a net liabilities position. However, there can be no
assurance that we will not experience liquidity problems in the future.
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We are subject to credit risk associated with our accounts receivables.
Our accounts receivables primarily represent amounts due from customers and joint
membership arrangements under which our membership subscriptions were sold in bundle with the
membership package of our joint membership partners at both platforms. We generally allow a credit
period of three months to our customers. We had gross accounts receivables of RMB80.9 million,
RMB183.0 million, RMB312.7 million and RMB258.6 million as of December 31, 2019, 2020, 2021
and 2022, respectively. We also recorded credit loss allowances of RMB953 thousand, RMB2.2
million, RMB2.3 million and RMB6.9 million as of December 31, 2019, 2020, 2021 and 2022,
respectively. We apply the IFRS 9 simplified approach to measure expected credit losses for all
accounts receivables are estimated. To measure the expected credit losses, accounts receivables have
been grouped based on shared credit risk characteristics and credit rating. The expected loss rates are
based on the historical payment profiles, historical loss rates and data published by external credit
rating institution, adjusted to reflect current and forward-looking information on macroeconomic
factors affecting the ability of the customers to settle the receivables. The historical loss rates are
adjusted to reflect current and forward-looking information on macroeconomic factors affecting the
ability of our customers to settle the receivables. Details of the loss allowance for accounts receivables
are disclosed in Note 3.1 to the Accountant’s Report in Appendix I to this document. We cannot assure
you that our customers and agents will not default on their obligation to us in the future, despite our
efforts to conduct credit assessment on them. Such defaults may expose us to significant credit risk and
result in material losses, which may adversely affect our results of operations, liquidity and financial
position.
We could be subject to claims related to health or safety arising from the use of our fitness content
or products, consumption of our fitness food and exercising on our premises.
As an inherent risk in the fitness market, we may face disputes or legal actions for injuries or
other health or safety related issues suffered by our users or even death under extreme circumstances
while exercising following our content or utilizing our fitness products due to improper usage or an
individual’s health conditions, among other reasons. We may also face disputes or legal actions for
injuries or other incidents that may happen to our users while they are on our premises. Such claims
may result from, but are not limited to, us hiring or collaborating with unqualified fitness influencers
and instructors; fitness influencers and instructors failing to provide proper instruction for the fitness
courses and curriculums they teach or warnings for the use of equipment; offering fitness course and
curriculum recommendations that are unsuitable for users’ athletic levels and unprofessional fitness
course and curriculum design. See “Business—Our Environmental, Social and Governance (ESG)
Initiatives—Identification, Assessment and Mitigation of our ESG Risks—Safety Issues related to
Fitness Activities and Food Quality.” Such claims may also result from reasons beyond our control or
even through the fault or negligence of our users. For example, users may have pre-existing medical
conditions making them unsuitable to perform certain exercises following our content or utilizing our
products or they may exercise in areas inappropriate for physical exertion. Disputes or legal actions of
this nature, with or without merit, may be expensive and time-consuming, result in significant
diversion of resources and management attention from our operations, and adversely affect our brand
image and reputation.
We may also face disputes or legal actions for injuries or other health or safety related issues
related to our sale of fitness food. Selling food for human consumption involves inherent legal and
other risks, and there is increasing governmental scrutiny of and public awareness regarding food
safety. Unexpected side effects, illness, injury or death related to allergens, food-borne illnesses or
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other food safety incidents (including food tampering or contamination) caused by products we sell, or
involving suppliers that supply us with ingredients and other products, could expose us to product
liability, negligence or other lawsuits. Any claims brought against us may exceed or be outside the
scope of our existing or future insurance policy coverage or limits. Any judgment against us that is in
excess of our policy limits or not covered by our insurance policies or not subject to insurance would
have to be paid from our cash reserves, which would reduce our capital resources. In addition, the
negative publicity arising from such incidents could have an adverse effect on the size, engagement
and loyalty of our user base and the sale of our products. This would result in decreased revenue and
have an adverse effect on our business, financial condition, and operating results.
Our fitness products may carry design and manufacturing defects that could adversely affect our
business and result in harm to our reputation.
We offer products that can be affected by design and manufacturing defects. We may be
exposed to potential personal injury liabilities and product liabilities as a result of misuse of our
products, or defects associated with the design or manufacturing of the products. There can be no
assurance that we will not experience material product liability losses in the future, or that we will be
able to defend such claims at a contained level of cost. We cannot assure you that our insurance
coverage will be sufficient or that we will be able to obtain sufficient coverage at an acceptable cost in
the future. A successful claim brought against us in excess of our available insurance coverage may
have a material adverse effect on our business.
In addition, due to the nature of our fitness apparel and some of our fitness devices, users may
experience skin irritations or other biocompatibility issues not uncommon with clothing or other
products that stay in contact with skin for extended periods of time. Should our users ever experience
such problems, the sale of our products could be harmed and we may be subject to personal injury
litigations and/or administrative penalties.
We also rely on the accuracy of sensors and our algorithms to ensure that our products can offer
high measurement accuracy. Additionally, usages of our products in different physical environments or
by different types of users may require delicate modification of our sensors and algorithms. There is,
however, no assurance that the functionality of sensors from our suppliers or our algorithms can
progress as much and as quickly as necessary to meet the demands of our users. Claims regarding the
inaccuracy of measurements by our products may occur from time to time. Such claims may further
prompt warranty claims, regulatory investigations and litigation. In that case, our business could be
adversely affected and our brand may suffer from negative publicity, which may then result in loss of
user confidence and reduction of sales in our products.
We face uncertainties with respect to the enactment, interpretation and implementation of the
Circular on Strengthening the Administration of the Online Show Live Streaming and E-commerce
Live Streaming.
In November 2020, the NRTA promulgated the Circular on Strengthening the Administration
of the Online Show Live Streaming and E-commerce Live Streaming (
ᅧձཥਠ
), or Circular 78. According to Circular 78, platforms providing online show live
streaming or e-commerce live streaming services shall, among other things, register their information
and business operations by November 30, 2020 on the National Internet Audio-visual Platforms
Information System (
೮া၍ଣӻ୕), ensure real-name registration for all live
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streaming hosts and virtual gifting users, prohibit users that are minors or without real-name
registration from virtual gifting, and set a limit on the maximum amount of virtual gifting per time, per
day, and per month.
As advised by our PRC Legal Adviser, there is currently no explicit provisions as to how and to
what degree any limits on virtual gifting would be imposed on different platforms. See “Business—
Interactive Live Streaming Classes” for details on the limitations of virtual gifting set by us. Any such
limits ultimately imposed may negatively impact our revenue derived from virtual gifting and our
results of operations.
As of the Latest Practicable Date, we had been registered in the National Internet Audio-visual
Platforms Information Management System (
೮া၍ଣӻ୕). Circular 78 also
sets forth requirements for certain live streaming businesses with respect to live streaming review
personnel requirements, content tagging requirements, and other requirements. For more information
on Circular 78, see “Regulations—Regulations Related to Online Live Streaming Services”.
We are still in the process of getting further guidance from regulatory authorities and evaluating
the applicability and effect of the various requirements under Circular 78 on our business. Any further
rulemaking under Circular 78 or other intensified regulation with respect to live streaming may
increase our compliance burden in the live streaming business, and may have an adverse impact on our
business and results of operations.
We may be subject to warranty claims towards our fitness products, or we could experience greater
returns than expected, either of which could have an adverse effect on our business, financial
condition, and operating results.
We provide warranty programs for our smart fitness devices. We generally offer one-year
product warranties to users. Users can generally request free replacement or free repair of defective
products if the product malfunctions within one year of purchase. We also abide by the seven-day
return policy for our fitness products. Users can return the products within seven days of delivery
subject to certain terms and conditions. Users are generally not allowed to return our products after the
warranty period expires and may suffer a loss as a result of product defects. The occurrence of any
material defects in our products could subject us to damages and warranty claims which could
adversely affect our business and operating results. In addition, we could incur significant costs to
correct any defects, warranty claims or other problems, including costs related to product recalls. Any
negative publicity related to the perceived quality of our products could also affect our brand image
and user demand, and adversely affect our operating results and financial condition.
We may fail to attract, cultivate and retain popular fitness influencers and instructors on our
platform, which may negatively affect our user retention and our business and results of operations.
Our popular fitness influencers and instructors tend to have large followings and audience bases
who regularly browse the fitness content they upload or attend their live streaming classes. Their
charisma and the high-quality content that they create are primary contributors to user stickiness and
are hard to replicate.
We enter into cooperation agreements or revenue sharing agreements with some of our fitness
influencers or their talent agencies. Despite the agreements we enter into with fitness influencers and
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talent agencies, popular fitness influencers we collaborate with may still choose to breach the
agreement or depart our platform when their contract period ends, and their departure may cause a
corresponding decline in our user base. In addition, we enter into employment agreements with our
in-house fitness instructors. However, they may breach or terminate the employment agreements or
depart our platform after their employment periods end. Any deterioration in our in-house content
production capability, inability to attract creative talents at reasonable costs or losses in personnel may
materially and adversely affect our business and operating results.
We must continue to attract, cultivate and retain talented fitness influencers and instructors in
order to maintain and increase the amount and quality of content on our platform. To attract and retain
popular fitness influencers and instructors, we must devise better compensation schemes, improve our
monetization capabilities, help popular fitness influencers and instructors reach a wider audience and
maintain stable relationships with talent agencies. We cannot guarantee that our fitness influencers and
instructors will not leave us even if we do our best to retain them.
We rely on a limited number of third-party outsourcing partners, suppliers and logistics service
providers for the production and delivery of certain products. A loss of any of these partners could
negatively affect our business.
We rely on a limited number of third-party outsourcing partners, suppliers and logistics service
providers to manufacture and transport certain fitness products. In the event of interruption from any of
these key parties, we may not be able to increase capacity from other sources or develop alternate or
secondary sources without incurring material additional costs and substantial delays.
If we experience a significant increase in demand for our fitness products, or if we need to
replace an existing third-party outsourcing partners, suppliers or logistics service provider, we may be
unable to supplement or replace them on terms that are acceptable to us, which may undermine our
ability to deliver our products to users in a timely manner. For example, it may take a significant
amount of time to identify a manufacturer that has the capability and resources to build our products to
our specifications in sufficient volume. Identifying suitable third-party outsourcing partners, suppliers,
and logistics service providers is an extensive process that requires us to become satisfied with their
quality control, technical capabilities, responsiveness, service, financial stability and regulatory
compliance. Accordingly, a loss of any of our significant third-party outsourcing partners, suppliers or
logistics service providers could have an adverse effect on our business, financial condition and
operating results.
We have limited control over our third-party outsourcing partners, suppliers, and logistics service
providers, which may subject us to significant risks, including the potential inability to produce or
obtain quality products on a timely basis or in sufficient quantity.
The raw materials and components used in our products are sourced either directly by us or on
our behalf by third-party outsourcing partners from a number of suppliers. We do not maintain our own
manufacturing capabilities and rely on our outsourcing partners to produce our products. We also rely
on our logistics service providers, including warehouse and delivery partners, to complete our
deliveries to users. We have limited control over our outsourcing partners, suppliers and logistics
service providers, including warehouse and delivery partners. If we are unable to select quality third-
party outsourcing manufacturers and suppliers, or monitor, audit and manage different parties in the
supply chain may expose us to risks of suppliers’ non-compliance with applicable laws and regulations
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and unethical practices, which could diminish our competitiveness and harm our reputation. Risks we
are subject to include:
Š inability to satisfy demand for our fitness products;
Š reduced control over delivery timing and product reliability;
Š reduced ability to monitor the manufacturing process and components used in our fitness
products;
Š failure to stick to production standards, including production standards related to
environmental protection;
Š limited ability to develop comprehensive manufacturing specifications that take into
account any materials shortages or substitutions;
Š variance in the manufacturing capability;
Š failure of a significant outsourcing partners, suppliers or logistics service provider to
perform its obligations to us for technical, market, or other reasons;
Š variance in the quality of services provided by our logistics service providers;
Š difficulties in establishing additional outsourcing partners, suppliers or logistics service
provider relationships if we experience difficulties with our existing outsourcing partners,
suppliers or logistics service providers;
Š shortages of materials or components and price increases;
Š misappropriation of our intellectual property; and
Š insufficient warranties and indemnities on components supplied to our outsourcing
partners.
The occurrence of any of these risks, especially during seasons of peak demand, could cause us
to experience a significant disruption in our ability to produce and deliver our products to our users.
See also “Business—Our Environmental, Social and Governance (ESG) Initiatives—Identification,
Assessment and Mitigation of our ESG Risks—Supply Chain Management.”
Increases in component costs, long lead times, supply shortages, and supply changes could disrupt
our supply chain and have an adverse effect on our business, financial condition, and operating
results.
All of the components and raw materials used to produce our products are sourced from third-
party suppliers, and some of these components are sourced from a limited number of or a single
supplier. Therefore, we are subject to risks of increases in component costs, long lead times, supply
shortages, and supply changes given the limited sources of suppliers. In addition, some of our suppliers
may have more established relationships with our competitors, and as a result of such relationships,
such suppliers may choose to limit or terminate their relationship with us or prioritize our competitors’
orders in the case of supply shortages. We have in the past experienced and may in the future
experience increase in component costs. For example, we experienced increase in component costs
such as chips and longer lead time for components such as LCD (liquid-crystal display) in 2020, due to
COVID-19’s adverse impact on the semiconductor and manufacturing sectors. We have cooperated
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with several additional chips and LCD suppliers and increased our chips and LCD inventory aiming to
meet the needs of our production.
In the event of a component shortage or supply interruption from suppliers of key components,
we will need to identify alternate sources of supply, which can be time-consuming, difficult and costly.
We may not be able to source these components on terms that are acceptable to us, or at all, which may
undermine our ability to meet our production requirements or to fill our orders in a timely manner. This
could cause delays in shipment of our products, harm our relationships with our users, corporate clients
or sales channels, and adversely affect our business, financial condition, and operating results.
Our operating results could be adversely affected if we are unable to accurately forecast user
demand for our products and adequately manage our inventory.
To ensure adequate inventory supply, we must forecast user demand, inventory needs and
expenses and place orders sufficiently in advance with our suppliers and contract manufacturers, based
on our estimates of future demand for particular products and services. Failure to accurately forecast
our needs may result in manufacturing delays or increased costs. Our ability to accurately forecast
demand could be affected by many factors, including changes in user demand for our content, products
and services, changes in demand for the content, products and services of our competitors,
unanticipated changes in general market conditions, and the weakening of economic conditions or user
confidence in future economic conditions. This risk may be exacerbated by the fact that we may not
carry a significant amount of inventory and may not be able to satisfy short-term demand increases. If
we fail to accurately forecast user demand, we may experience excess inventory levels or a shortage of
products available for sale.
The carrying amount of our inventories was RMB94.6 million, RMB117.9 million, RMB198.8
million and RMB167.7 million as of December 31, 2019, 2020, 2021 and 2022, respectively. Inventory
levels in excess of store demand may result in inventory write-downs, expiration of products or an
increase in inventory holding costs and a potential negative effect on our liquidity. If we fail to manage
our inventory effectively, we may be subject to heightened risk of inventory obsolescence, a decline in
inventory values, and significant inventory write-downs or write-offs. In addition, we may be required
to lower sale prices in order to reduce inventory level, which may lead to lower gross margins and
could impair the strength and premium nature of our brand. High inventory levels may also require us
to commit substantial capital resources, preventing us from using that capital for other important
purposes. Any of the above may materially and adversely affect our results of operations and financial
condition. Further, lower than forecasted demand could also result in excess manufacturing capacity or
reduced manufacturing efficiencies, which could result in lower margins. Conversely, if we
underestimate user demand, our suppliers and manufacturers may not be able to deliver products to
meet our requirements or we may be subject to higher costs in order to secure the necessary production
capacity. An inability to meet user demand and delays in the delivery of our products to our users
could result in reputational harm and damaged user relationships and have an adverse effect on our
business, financial condition, and operating results.
If we are unable to accurately set pricing levels for our self-branded fitness products, membership
and online paid content and advertising, our business could be adversely affected.
If we are unable to accurately set pricing levels for our self-branded fitness products,
membership and online paid content and advertising, whether due to competitive pressure or otherwise,
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our gross margins could be significantly reduced. Further, our decisions around the development of
new content, products and services are grounded in assumptions about eventual pricing levels. If there
is price compression in the market after these decisions are made, it could have a negative effect on our
business.
We operate in a fast-evolving industry and may not be able to compete effectively.
The online fitness industry in China is rapidly evolving and increasingly competitive. We face
competition in every aspect of our business, including at-home fitness content and equipment, gyms,
fitness clubs, in-studio fitness classes, and health and wellness apps. Moreover, we expect the
competition in our market to intensify in the future as new and existing competitors, including well-
established companies expand into our market and introduce new or enhanced content, products and
services that compete with ours.
Our competitors may develop, or have already developed, content, products, services, or
technologies that are similar to ours or that achieve greater acceptance, may produce more engaging
and professional content, undertake more successful product development efforts, create more
compelling employment opportunities, or marketing campaigns, or may adopt more aggressive pricing
policies. Our competitors may develop or acquire, or have already developed or acquired, intellectual
property rights that significantly limit or prevent our ability to compete effectively in the public
marketplace. In addition, our competitors may have significantly greater resources than us, allowing
them to identify and capitalize more efficiently upon opportunities in new markets and user preferences
and trends, quickly transition and adapt their content, products and services, devote greater resources to
marketing and advertising, or be better positioned to withstand substantial price competition. If we are
not able to compete effectively against our competitors, they may acquire and engage users or generate
revenue at the expense of our efforts, which could have an adverse effect on our business, financial
condition, and operating results.
The COVID-19 outbreak has impacted our business, operating results and financial condition.
The overall impact of the COVID-19 pandemic on our business operation and financial
performance up to the Latest Practicable Date had been positive. The negative impact of the COVID-
19 pandemic on our business and operations include that a few of our fitness food suppliers suspended
operations from April or May to June 2022. In addition, we experienced logistics disruptions,
especially in Shanghai, in the first half of 2022. All of the Keepland fitness centers located in Beijing
suspended operation in May 2022. The decline in economic activities during COVID-19 resurgence
also caused our advertising customers to tighten their advertising budget. The surge in COVID-19
cases across China at the end of 2022 and the beginning of 2023 also made it unsuitable for people to
conduct fitness activities in early 2023 due to health conditions, which impacted our operational
performance.
Nevertheless, the COVID-19 pandemic also led to an increase in people’s willingness to work
out at home and an increase in online traffic to our platform. We recorded higher average MAUs,
average monthly subscribing members and average monthly fitness product customers as a result of the
COVID-19 pandemic. In addition, more users tend to follow our fitness content and complete workout
sessions as a result of the outbreak of COVID-19 pandemic. As the outbreak of COVID-19 increased
users’ willingness to workout at home, we also witnessed a higher average monthly membership
retention rate. Please refer to “Business—Our users - ‘ Keepers’.” We also reduced our branding and
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marketing promotion expenses and other related expenses in 2020 due to the increased engagement of
our users as a result of the COVID-19 pandemic. There is, however, no guarantee that we can rely on
such trend in the future. If we are unable to rely on such trend in the future, our business could be
adversely affected.
Most of the travel restrictions and quarantine requirements were lifted in December 2022. The
extent to which the pandemic impacts our results of operations going forward will depend on future
developments which are uncertain and unpredictable, including the frequency, duration and extent of
outbreaks of COVID-19, the appearance of new variants with different characteristics, the
effectiveness of efforts to contain or treat cases, and future actions that may be taken in response to
these developments.
We generate a portion of our revenue from advertising. If we fail to attract more advertisers to our
platform or if advertisers are less willing to advertise with us, our revenue may be adversely affected.
Although we currently primarily rely on revenue generated from self-branded fitness products
and membership and online paid content, we also generate a portion of our revenue from advertising.
In 2019, 2020, 2021 and 2022, we generated revenue of RMB115.8 million, RMB132.0 million,
RMB189.5 million and RMB180.4 million from advertising and others, respectively, representing
17.5%, 12.0%, 11.7% and 8.2% of our total revenue for the same period. Our ability to generate and
maintain our advertising revenue depends on a number of factors, including the maintenance and
enhancement of our brand, the scale, engagement and loyalty of our users, the quality of our content,
product and service offerings and the market competition on advertising prices. We cannot assure you
that we will be able to retain existing advertisers or attract new ones. If we fail to retain and enhance
our relationships with advertisers, our business, results of operations, and prospects may be adversely
affected.
Furthermore, our core and long-term priority of optimizing user experience and satisfaction
may limit our ability to generate revenue from advertising. For example, in order to provide our users
with an uninterrupted user experience, we have limited the amount of advertising placement and aim to
collaborate with advertisers that share our brand philosophy. Our commitment of putting our users first
may not be in line with the interest of our advertisers, and may not result in the long-term benefits that
we expect, in which case the success of our business and results of operations could be harmed.
Advertisements in our app may subject us to penalties and other administrative actions.
We monitor the advertising content to ensure compliance with applicable laws and regulations.
In addition, where advertisers are required to obtain special government approvals or registrations for
specific types of advertisements prior to delivering such advertisements on the internet, such as
advertisements relating to pharmaceuticals, medical instruments, agrochemicals, and veterinary
pharmaceuticals, we take steps to check or verify that the advertisers have fulfilled requisite
government requirements. Non-compliance with these laws and regulations may subject us to
penalties, including imposition of fines, confiscation of our advertising income, orders to cease
dissemination of the advertisements, and orders to publish an announcement correcting the misleading
information. In circumstances involving serious violations by us, PRC governmental authorities may
force us to terminate our advertising services or revoke our licenses, and we and responsible persons
may incur criminal liability. During the Track Record Period, we were ordered by the competent
authorities to stop publishing certain advertisements and imposed a fine of RMB30,000 by using
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dictions on the product sales page on both Keep mobile app and third-party platforms without
identifying the source of data. Further, we were given an administrative punishment of warning,
confiscation of illegal income of RMB596.48 and a fine of RMB1,192.96 by the competent authorities
for selling fitness food with misleading ingredient descriptions.
We cannot assure you that all content contained in the advertisements shown on our platform is
in compliance with applicable advertising laws and regulations. If we are found to be in violation of
applicable PRC advertising laws and regulations, we may be subject to penalties and our reputation
may be harmed, which may materially and adversely affect our business, financial condition, results of
operations, and prospects.
If we fail to offer high-quality user support and service, our business and reputation will suffer.
Our users rely on our high-touch delivery and set up service to deliver and install certain smart
fitness devices in a professional and efficient manner. Our users also rely on our support services to
resolve any issues related to the use or consumption of our other fitness products. Providing a high-
quality user experience is vital to our success in generating word-of-mouth referrals to drive sales and
retain existing users. The importance of high-quality support will increase as we expand our business
and introduce new content, products and services. If we do not help our users quickly resolve issues
and provide effective ongoing support, our reputation may suffer and our ability to retain and attract
users, or to sell additional content, products and services to existing users, could be harmed.
Computer and mobile malware, viruses, hacking and phishing attacks, spamming and improper or
illegal use of our platform may affect user experience, which could reduce our ability to attract
users and advertisers and materially and adversely affect our business, financial condition and
results of operations.
Computer and mobile malware, viruses, hacking and phishing attacks have become more
prevalent in our industries, have occurred on our platform in the past, and may occur again in the
future. We have experienced certain insignificant cyber-attack incidents in the past, and we have been
able to rectify attacks without significant impact to our operations. However, it is difficult to determine
what, if any, harm may result from a future interruption or attack, any failure to maintain performance,
reliability, security and availability of our content, products, services and technical infrastructure to the
satisfaction of our users may affect user experience, which could reduce our ability to attract users and
advertisers and materially and adversely affect our business, financial condition and results of
operations.
In addition, spammers may use our platform to send targeted and untargeted spam messages to
users, which may affect user experience. In spamming activities, spammers typically create multiple
user accounts for the purpose of sending spam messages. We may not be able to effectively eliminate
all spam messages from our platform in a timely fashion. Our actions to combat spam may also require
diversion of significant time and focus of our engineering team from improving our products. As a
result, our users may use our products less or stop using them altogether, and result in continuing
operational costs to us.
We and our content providers have been and may be subject to intellectual property infringement
claims or allegations, which may be expensive to defend and may disrupt our business.
We and our content providers have been and may in the future be subject to intellectual
property infringement claims or other allegations by third-party owners or right holders of technology
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patents, copyrights, trademarks, trade secrets and website content for our fitness products, services we
provide or for information or content displayed on, retrieved from or linked to, recorded, stored or
made accessible on our platform, or otherwise distributed to our users, including in connection with the
images, music and videos displayed, played, recorded, stored or made accessible on our platform
during our recorded classes, live streaming classes, other content presented in our mobile app or public
accounts or advertisement display, which may materially and adversely affect our business, financial
condition and operating results.
Companies in the internet-related industries are frequently involved in disputes or litigations
based on allegations of infringement of intellectual property rights, unfair competition, invasion of
privacy, defamation and other violations of other parties’ rights. The validity, enforceability and scope
of protection of intellectual property rights in internet-related industries, particularly in China, are
uncertain and still evolving. As we face increasing competition and as litigation and arbitration become
more common methods for resolving commercial disputes in China, we face a higher risk of being the
subject of intellectual property infringement claims or other legal proceedings.
We allow users and content providers to upload text, pictures, video and other content to our
platform and users to download, share, link to and otherwise access other content on our platform.
Under relevant PRC laws and regulations, online service providers, which provide storage space for
users to upload works or links to other services or content, could be held liable for copyright
infringement under various circumstances, including situations where the online service provider
knows or should reasonably have known that the relevant content uploaded or linked to on its platform
infringes upon the copyright of others and the online service provider failed to take necessary actions
to prevent such infringement. We have procedures implemented to reduce the likelihood that content
might be used without proper licenses or third-party consents. However, these procedures may not be
effective in preventing the unauthorized posting or distribution of copyrighted content and we may be
considered failing to take necessary actions against such infringement. Therefore, we may face liability
for copyright or trademark infringement, defamation, unfair competition, libel, negligence, and other
claims based on the nature and content of the materials that are delivered, shared or otherwise accessed
through our platform.
We may also be subject to intellectual property infringement claims or allegations related to
other aspects of our business, including, but not limited to the functional features we provide to our
users through our mobile apps and the design and manufacturing of our fitness products.
In addition, we cannot assure you that we will not become subject to copyright laws or legal
proceedings initiated by third parties in other jurisdictions, such as the United States, as a result of the
ability of users to access our content in the United States and other jurisdictions, the ownership of our
Shares by investors in the United States and other jurisdictions and the extraterritorial application of
foreign law by foreign courts. In addition, as a publicly listed company, we may be exposed to
increased risk of litigation. If a claim of infringement brought against us in the United States or other
jurisdictions is successful, we may be required to, upon enforcement, (i) pay substantial statutory or
other damages and fines, (ii) remove relevant content from our platform or (iii) enter into royalty or
license agreements which may not be available on commercially reasonable terms or at all.
We expect that the occurrence of infringement claims is likely to grow as the market for fitness
content, products and services grows. Accordingly, our exposure to damages resulting from
infringement claims could increase and this could further exhaust our financial and management
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resources. Even if intellectual property claims do not result in litigation or are resolved in our favor,
these claims, and the time and resources necessary to resolve them, could divert the resources of our
management and require significant expenditures. Any of the foregoing could prevent us from
competing effectively and could have an adverse effect on our business, financial condition, and
operating results.
We may not be able to prevent others from unauthorized use of our intellectual property, which
could harm our business and competitive position.
We believe that our copyrights, trademarks and other intellectual property are essential to our
success. See also “Business—Intellectual Property”. We have devoted considerable time and energy to
the development and improvement of our online platform and our technology system infrastructure.
We rely on a combination of copyright and trademarks laws, trade secrets protection and other
contractual restrictions for the protection of the intellectual property used in our business. Effective
intellectual property protection may not be available or may not be sought, and contractual disputes
may affect the use of the intellectual property governed by private contract. Although our contracts
with users and some of our platform participants typically prohibit the unauthorized use of our brands,
images and other intellectual property rights, there can be no assurance that they will always comply
with these terms. These agreements may not effectively prevent disclosure of confidential information
and may not provide an adequate remedy in the event of unauthorized disclosure of confidential
information. Although we enter into confidentiality and intellectual property ownership agreements
with our employees, and we also have in place various relevant internal rules and polices that require
compliance from our employees, these agreements could be breached, the internal rules and policies
could be violated, we may be involved in disputes in respect of these agreements and internal rules and
policies for which we may not have adequate remedies, and our proprietary technology, know-how or
other intellectual property could otherwise become known to third parties. In addition, third parties
may independently discover trade secrets and proprietary information, limiting our ability to assert any
trade secret rights against such parties.
While we actively take steps to protect our proprietary rights, such steps may not be adequate to
prevent the infringement or misappropriation of our intellectual property. We cannot assure our
registered trademarks have covered an adequate scope of our existing and future business operations
and as of the Latest Practicable Date, we are in the process of registering certain trademarks that are
necessary based on the current scope of our business. However, there can be no assurance that any of
our trademark applications will ultimately proceed to registration or will result in registration with
adequate scope for our business, particularly if such requested trademarks are found to conflict with the
registered trademarks owned by third parties, including our competitors. Some of our pending
applications or registrations may be successfully challenged or invalidated by others. If our trademark
applications are not successful, we may have to use different marks for affected services, or seek to
enter into arrangements with any third parties who may have prior registrations, applications or rights,
which might not be available on commercially reasonable terms, if at all.
Implementation of intellectual property laws in China has historically been lacking, primarily
because of ambiguities in the laws and difficulties in enforcement. Accordingly, intellectual property
right protection in China may not be as effective as in other jurisdictions that have a more developed
legal framework regulating intellectual property rights. Policing unauthorized use of our proprietary
technology, trademarks and other intellectual property is difficult and expensive, and litigation may be
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necessary in the future to enforce our intellectual property rights. Future litigation could result in
substantial costs and diversion of our resources, and could disrupt our business, as well as materially
adversely affect our financial condition and results of operations.
We are exposed to the impairment on prepayments and other current assets, which could adversely
affect our results of operations and financial condition.
As of December 31, 2019, 2020, 2021 and 2022, we had prepayments and other current assets
of RMB71.9 million, RMB77.7 million, RMB86.8 million and RMB129.0 million, respectively. Our
prepayments and other current assets primarily consist of prepayments for deductible value added
taxes, prepayments for promotion fees and deferred payment channel fees. If our suppliers fail to
provide relevant products or services to us in a timely manner or at all, we may be exposed to
prepayment default risk and impairment loss risk in relation to the prepayments, which may in turn
materially and adversely affect our business and financial position. Although our management’s
estimation and the related assumptions have been made in accordance with the information currently
available to us, such estimation or assumptions may need to be adjusted if new information becomes
known. In the event that the actual recovery is lower than expected, or that our past provision for
impairment of prepayments and other current assets becomes insufficient in light of the new
information, we may need to make more provision for impairment, which may in turn materially and
adversely affect our business, financial condition and results of operations.
The daily use of our mobile app depends upon the effective operation under and compatibility with
mobile operating systems, networks, and standards that we do not control.
A significant and growing portion of our users access our platform through our mobile app
Keep and there is no guarantee that popular mobile devices will continue to support our mobile app or
that mobile device users will use our mobile app rather than competing products. We are dependent on
the interoperability of our mobile app with popular mobile operating systems that we do not control,
such as Android and iOS, and any changes in such systems that degrade the functionality of our digital
offering or give preferential treatment to competitors could adversely affect our platform’s usage on
mobile devices. Additionally, in order to deliver high-quality mobile content, it is important that our
digital offering is designed effectively and works well with a range of mobile technologies, systems,
networks, and standards that we do not control. We may not be successful in developing relationships
with key participants in the mobile industry or in developing products that operate effectively with
these technologies, systems, networks, or standards. In the event that it is more difficult for our users to
access and use our platform on their mobile devices or users find our mobile offerings do not
effectively meet their needs, our competitors develop content, products and services that are perceived
to operate more effectively on mobile devices, or if our users choose not to access or use our platform
on their mobile devices or use mobile products that do not offer access to our platform, our user growth
and user engagement could be adversely impacted.
Our operations depend on the performance of the internet infrastructure and fixed
telecommunications networks in China.
Almost all access to the internet in China is maintained through state-owned
telecommunication operators under the administrative control and regulatory supervision of the
Ministry of Industry and Information Technology, or the MIIT. Moreover, we primarily rely on a
limited number of telecommunication service providers to provide us with data communications
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capacity through local telecommunications lines and internet data centers to host our servers. We have
limited access to alternative networks or services in the event of disruptions, failures or other problems
with China’s internet infrastructure or the fixed telecommunications networks provided by
telecommunication service providers. Web traffic in China has experienced significant growth during
the past few years. Effective bandwidth and server storage at internet data centers in large cities such
as Beijing are scarce. With the expansion of our business, we may be required to upgrade our
technology and infrastructure to keep up with the increasing traffic on our platform. We cannot assure
you that the internet infrastructure and the fixed telecommunications networks in China can support the
demands associated with the continued growth in internet usage. If we cannot increase our capacity to
deliver our online services, we may not be able to adapt to the increases in traffic we anticipate from
our expanding user base, and the adoption of our services may be hindered, which could adversely
impact our business and profitability.
In addition, we have no control over the costs of the services provided by telecommunication
service providers. If the prices we pay for telecommunications and internet services rise significantly,
our results of operations may be materially and adversely affected. Furthermore, if internet access fees
or other charges to internet users increase, some users may be prevented from accessing the mobile
internet and thus cause the growth of mobile internet users to decelerate. Such deceleration may
adversely affect our ability to continue to expand our user base.
We use third-party services and technologies in connection with our business, and any disruption to
the provision of these services and technologies could materially and adversely affect our business,
financial condition and results of operations.
We use third-party services and technologies in connection with our business. For example, we
partially rely on third-party service and technology providers to host and stream our content and
services. We are therefore vulnerable to service interruptions experienced by these providers and we
may experience interruptions, delays, or outages in service availability in the future due to a variety of
factors, including infrastructure changes, human, hardware or software errors, hosting disruptions, and
capacity constraints. Outages and capacity constraints could arise from a number of causes such as
technical failures, natural disasters, fraud, or security attacks. The level of service provided by these
providers, or regular or prolonged interruptions in that service, could also affect the use of, and our
users’ satisfaction with, our content, products and services and could harm our business and reputation.
In addition, hosting costs will increase as user engagement grows, which could harm our business if we
are unable to grow our revenue faster than the cost of using these services or the services of similar
providers.
Furthermore, our providers have broad discretion to change and interpret the terms of service
and other policies with respect to us, and those actions may be unfavorable to our business operations.
Our providers may also take actions beyond our control that could seriously harm our business,
including discontinuing or limiting our access to one or more services, increasing pricing terms,
terminating or seeking to terminate our contractual relationship altogether, or altering how we are able
to process data in a way that is unfavorable or costly to us. If our arrangements with our current
providers were terminated, we could experience interruptions on our platform and in our ability to
make our content available to users, as well as delays and additional expenses in arranging for
alternative services and technologies.
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Any of these factors could further reduce our revenue, subject us to liability, and cause our
users to decline to renew their subscriptions, any of which could have an adverse effect on our
business, financial condition, and operating results.
The proper functioning of our technology platform is essential to our business. Any failure to
maintain the satisfactory performance of our platform could materially and adversely affect our
business and reputation.
The proper functioning of our platform is essential to our business. The satisfactory
performance, reliability and availability of our IT systems are critical to our success and our ability to
provide content to attract and retain users.
Our technology or infrastructure may not function properly at all times. Any system
interruptions caused by telecommunications failures, computer viruses, hacking or other attempts to
harm our systems could result in the unavailability or slowdown of our platform and the attractiveness
of content provided on our platform. Our servers may also be vulnerable to computer viruses, physical
or electronic break-ins and similar disruptions, which could lead to system interruptions, website or
mobile app slowdown or unavailability or loss of data. Any of such occurrences could cause severe
disruption to our daily operations. As a result, our reputation may be materially and adversely affected,
our market share could decline and we could be subject to liability claims.
Some of our products and services contain open-source software, which may pose particular risk to
our proprietary software, products and services in a manner that negatively affect our business.
We use open-source software, including software development kit, in some of our products and
services and will continue to use open-source software in the future. There is a risk that open-source
software licenses could be construed in a manner that imposes unanticipated conditions or restrictions
on our ability to provide or distribute our products or services. Additionally, we may face claims from
third parties claiming ownership of, or demanding release of, the open-source software or derivative
works that we developed using such software. These claims could result in litigation and could require
us to make our software source code freely available, purchase a costly license or cease offering the
implicated products or services unless and until we can re-engineer them to avoid infringement. This
re-engineering process could require significant additional research and development resources, and
we may not be able to complete it successfully.
We are subject to risks relating to third-party online payment platforms.
Currently, we sell a significant portion of our products and services to our users through third-
party online payment systems. In all these online payment transactions, secured transmission of
confidential information such as paying users’ credit card numbers and personal information over
public networks is essential to maintaining users’ trust and confidence on our platform.
We do not have control over the security measures of our third-party online payment vendors.
Any security breaches of the online payment systems that we use could expose us to litigation and
possible liability for failing to secure confidential user information and could, among other things,
damage our reputation and the perceived security of all of the online payment systems that we use. If a
well-publicized internet or mobile network security breach were to occur, users may become reluctant
to purchase our content, products and services even if the publicized breach did not involve payment
systems or methods used by us. In addition, there may be billing software errors that would damage
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user confidence in these online payment systems. If any of the above were to occur and damage our
reputation or the perceived security of the online payment systems we use, we may lose paying users
and users may be discouraged from purchasing our products and services, which may have a material
adverse effect on our business.
In addition, there are currently only a limited number of reputable third-party online payment
systems in China and certain other countries where we operate. If any of these major payment systems
decides to cease to provide services to us, or significantly increase the percentage they charge us for
using their payment systems for our products and services, our results of operations may be materially
and adversely affected.
We may be subject to risks associated with the availability of our services in overseas markets.
As certain versions of our mobile apps can be downloaded and used overseas, we may be
subject to various local legal requirements and market conditions. Our international exposures and
operational efforts may result in increased costs and are subject to various risks, including content
control from local authorities, uncertain enforcement of intellectual property rights and infringements,
the complexity of compliance with foreign laws and regulations and cultural differences. Compliance
with applicable foreign laws and regulations related to matters that are central to our business,
including those related to content restrictions, data privacy, anticorruption laws, anti-money laundry
and minors protection, increases the costs and risk exposure of doing business in foreign jurisdictions.
In some cases, compliance with the laws and regulations of one country could violate the laws and
regulations of another country. Due to the complexity involved, we cannot assure you that we are in
compliance with all local laws or regulations, including data privacy requirements, license
requirements, or that our existing licenses will be successfully renewed or expanded to cover all of our
areas of operations. As we enter into overseas markets, we cannot assure you that we are able to fully
comply with the legal requirements of each foreign jurisdiction and successfully adapt our business
models to local market conditions.
In addition, cultural differences may also impose additional challenges to our efforts in content
control. Therefore, such different and possibly more stringent regulatory and cultural environments
may increase the risk exposure to our daily operations in foreign jurisdictions. Our failure to comply
with other foreign laws, regulations and rules could materially and adversely affect our business,
results of operations, global reputation and global growth efforts. In additional, each of foreign
jurisdictions may have different regulatory framework, implementation and enforcement for online
audio platforms, which may substantially increase our compliance costs to obtain, maintain or renew
requisite licenses and permits or fulfill any required administrative procedures.
In addition, foreign and international laws, regulations, standards, and other obligations, and
changes in the interpretation of such laws, regulations, standards, and other obligations could result in
increased regulation, increased costs of compliance and penalties for non-compliance, and limitations
on data collection, use, disclosure, and transfer for us and our users. We cannot assure you that we are
currently in compliance with these laws and regulations. And our practice may become inconsistent
with these laws and regulations. If we are unable to manage these risks, we could become subject to
penalties, including fines, suspension of business and revocation of required licenses, and our
reputation and results of operations could be materially and adversely affected.
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We depend upon third-party licenses for the use of certain content on our platform. An adverse
change to, loss of, or claim that we do not hold necessary licenses may have an adverse effect on our
business, operating results, and financial condition.
We maintain a large fitness content library including PGC and PUGC fitness videos and other
licensed content. We obtain licenses to display recorded fitness lessons generated by fitness instructors
with whom we maintain a collaborative relationship. In addition, under typical agreements with fitness
instructors we work with, we are the owner of the intellectual property arising out of live streaming
activities on our platform. An adverse change to, loss of, or claim that we do not hold necessary
licenses to these content may have an adverse effect on our business, operating results, and financial
condition.
We use our licensed music for our PGC and PUGC which include recorded structured courses,
recorded video courses and curriculums and live streaming classes. For PGC, which refers to recorded
structured courses, recorded video courses and curriculums and live streaming classes that are
developed and produced in-house, we enter into agreements to obtain licenses from rights holders to
secure the right to use music in our content. For PUGC, which refers to recorded courses and
pre-planned curriculums produced by our fitness influencers or licensed third parties, we require them
to use licensed music for the content they provide through our cooperation agreements. We cannot
guarantee that we currently hold, or will always hold, every necessary right to use all of the music that
is used in our content, especially for music used in content provided by our fitness influencers or
licensed third parties. We cannot assure you that we are not infringing or violating any third-party
intellectual property rights, or that we will not do so in the future.
Contractual disputes with our content providers may harm our reputation and subject us to
contractual liabilities and may be costly or time-consuming to resolve.
We enter into contracts with some content providers on our platform either directly or through
talent agencies, the terms of which are generally negotiated on a case-by-case basis. The contractual
terms between us, our content providers and talent agencies may vary depending on factors such as the
professionality, popularity and the revenue-generating potential of the content providers. Some of our
contracted content providers enjoy fixed base fees while others do not, and some of our content
providers are bound by exclusivity clauses while others are not. From time to time, there may be
contractual disputes between content providers, talent agencies and us or between us and other third
parties relating to our content providers. Any such disputes may not only be costly and time-consuming
to solve, but may also be detrimental to the quality of the content produced by our content providers,
causing our content providers to leave our platform, decrease user engagement on our platform or
otherwise adversely affect our business, financial condition and operation results.
Our business depends substantially on the continuing efforts of our executive officers and other key
employees. If we lose their services, our business operations and growth prospects may be materially
and adversely affected.
Our future success depends heavily on the continuing services of our executive officers and
other key employees. In particular, we rely on the expertise, experience and vision of our founder,
chairman of the board of Directors and chief executive officer, Mr. Wang Ning, as well as other
members of our senior management team. If one or more of our executive officers or other key
employees were unable or unwilling to continue their services with us or are otherwise subject to any
legal or regulatory liabilities in their personal capacity or otherwise, we might not be able to replace
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them easily, in a timely manner, or at all. Competition for qualified talent is intense, there can be no
assurance that we will be able to attract or retain qualified employees. As a result, our business may be
materially and adversely affected, our financial condition and results of operations may be severely
affected, and we may incur additional expenses to recruit, train and retain key personnel.
Moreover, if any of our executive officers or other key employees joins a competitor or forms a
competing company, we may lose know-how, trade secrets, business partners, user base and market
share. Each of our executive officers and key employees has entered into an employment agreement, a
confidentiality and intellectual property ownership agreement and a non-compete agreement. However,
these agreements may be deemed invalid or unenforceable under PRC laws and other applicable laws
and regulations in other jurisdictions. If any dispute arises between our executive officers or key
employees and us, there can be no assurance that we would be able to enforce these agreements in
China and other jurisdictions, where these executive officers and key employees reside.
We have in the past been subject to legal and regulatory proceedings and may continue to be subject
to these proceedings from time to time in the ordinary course of our business.
From time to time, we may be subject to claims, lawsuits, government investigations, and other
proceedings involving products liability, competition and antitrust, intellectual property, privacy,
consumer protection, securities, tax, labor and employment, commercial disputes, disputes with our
shareholders and other matters that could adversely affect our business operations and financial
condition. Certain of these matters may include speculative claims for substantial or indeterminate
amounts of damages and include claims for injunctive relief. Additionally, our litigation costs could be
significant. We have been subject to regulatory fines related to product advertising and consumer
protection regulations. Adverse outcomes with respect to litigation or legal proceedings may result in
significant settlement costs or judgments, penalties and fines, or require us to modify our products or
services, make content unavailable, or require us to stop offering certain features, all of which could
negatively affect our revenue. And even if these matters are resolved in our favor or without significant
cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could
harm our business, financial condition, and operating results.
We face risks associated with the misconduct of our employees, business partners and their
employees and other related personnel.
We rely on our employees to maintain and operate our business and have implemented an
internal code of conduct to guide the actions of our employees. However, we do not have control over
the actions of our employees, and any misbehavior of our employees could materially and adversely
affect our reputation and business. We also rely on our business partners, including fitness influencers,
talent agencies, suppliers, contract manufacturers and logistics service providers to provide content,
products and services to users. Although we have implemented measures to select business partners,
we may not be able to successfully monitor, maintain and improve the quality of their services. In the
event of any unsatisfactory performance by our business partners and/or their employees, our business,
reputation and results of operations may be materially and adversely affected.
Our results of operations are subject to fluctuations due to seasonality.
We experience seasonality which affects our results of operations. For example, the first quarter
of each calendar year generally contributes to the smallest portion of our annual revenue, primarily due
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to a decrease in users’ willingness to exercise during the winter season and reduced sales of our self-
branded fitness products during the Chinese New Year holiday period in the quarter. We usually
observe an increase in revenue in the second and third quarters of each year, mainly because we
experience relatively higher average MAUs in the second and third quarters as people are more willing
to exercise during spring and summer, and upticks in the sales of our self-branded fitness products after
the Chinese New Year. Furthermore, when e-commerce platforms hold special promotional campaigns
during China’s online shopping festivals on June 18, November 11, and December 12, we typically
observe an increase in sales of our fitness products immediately following these campaigns. Due to
these factors, our revenue may vary from quarter to quarter and quarterly results may not be
comparable to the corresponding periods of prior years. Such uncertainty makes it difficult for us to
predict revenue for a particular quarter. Therefore, actual results may differ significantly from our
targets or estimated quarterly results, which could cause the price of our Shares to fall.
Compliance with the laws or regulations governing virtual currency may result in us having to
obtain additional approvals or licenses or change our current business model.
Due to the limited history of virtual currency in China, the regulatory framework governing
such industry is still under development. The issuance and use of “virtual currency” in the PRC have
been regulated since 2007 in response to the growth of the online games industry in China. In 2009, the
Circular on Strengthening the Administration of Online Game Virtual Currency (
̋੶ၣഖ༷Ꮥ
), or the Virtual Currency Circular, jointly issued by the Ministry of Culture
and the MOFCOM, broadly defined online game virtual currency as a type of virtual exchange
instrument issued by internet game operation enterprises, purchased directly or indirectly by the game
users by exchanging legal currency at a certain exchange rate, saved outside the game programs, stored
in servers provided by the internet game operation enterprises in electronic record format and
represented by specific numeric units. In 2012, the Administrative Measures for Single Purpose
Commercial Prepaid Cards (
༊Б) was issued by the MOFCOM,
which further requires enterprise that engages in the retail, accommodation, catering or resident service
industries shall go through record-filing procedures within 30 days after they start single-purpose
commercial prepaid card business. Although our PRC Legal Adviser is of the view that, our issuance
of virtual items to users to purchase gifts to be used on our platform does not constitute online game
virtual currency transaction services or single-purpose commercial prepaid card because our virtual
items are not issued by internet game operation enterprises, users cannot transfer or trade these items
among themselves and our virtual items are not used in for the retail, accommodation, catering or
resident service, we cannot assure you that the PRC regulatory authorities will not take a view contrary
to ours. If our business operations involving virtual items are subject to the PRC regulatory regime on
online games or single-purpose commercial prepaid card, we may be required to obtain additional
approvals or licenses or filings or change our current business model and may be subject to a fine
ranging from RMB10,000 to RMB30,000 where correction is not made within the stipulated period or
other penalties which could adversely affect our business. Furthermore, due to the uncertainty of the
evolving regulatory regime in PRC, we cannot assure you that we will not be found in violation of any
laws and regulations currently in effect or in the future due to changes in relevant authorities’
interpretation of these laws and regulations, as well as the view or interpretation taken by such
authorities on the nature and operation of our virtual items and relevant business activities.
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Regulation and censorship of information disseminated over the mobile and internet in China may
adversely affect our business and subject us to liability for content posted on our platform.
Internet companies in China are subject to a variety of existing and new rules, regulations,
policies, and license and permit requirements on the distribution of information over the mobile and
internet. Under these rules and regulations, content service providers are prohibited from posting or
displaying over the mobile or internet content that, among others, violates PRC laws and regulations,
impairs the national dignity of China or the public interest, is obscene, superstitious, fraudulent or
defamatory, or may be deemed by relevant government authorities as “socially destabilizing” or
leaking “state secrets” of China. For more information, see “Regulations—Regulations Related to
Internet Information Security and Privacy Protection”. In connection with enforcing these rules,
regulations, policies and requirements, relevant government authorities may suspend services by, or
revoke licenses of, any internet or mobile content service provider that is deemed to provide illicit
content online or on mobile devices, and such activities may be intensified in connection with any
ongoing government campaigns to eliminate prohibited content online.
Although we employ certain methods to filter the content posted on our platform, we cannot be
sure that our internal content control efforts will be sufficient to remove all content that may be viewed
as indecent or otherwise noncompliant with PRC law and regulations.
We have granted and expect to continue to grant share-based awards in the future under our share
incentive plan, which may result in increased share-based compensation expenses and dilute the
ownership interests of our shareholders.
In order to attract and retain qualified employees, provide incentives to our directors, officers,
employees and consultants, and promote the success of our business, we adopted the Share Incentive
Plans. We recognize expenses in our consolidated financial statements in accordance with IFRS.
Expenses associated with share-based compensation will affect our financial performance, and any
securities issued pursuant to our share incentive plans will dilute the ownership interests of our
shareholders. The maximum aggregate number of ordinary shares that may be issued under the 2016
Plan and the 2021 Plan is 35,536,640 and 25,108,660, respectively. The maximum number of new
Shares issuable under the 2023 Plan and all other share schemes of the Company in effect after Listing,
is 10% of our Company’s total issued share number on the Listing Date; the 2023 Plan will come into
effect upon Listing. As of the Latest Practicable Date, 23,002,575 options to purchase our ordinary
shares have been granted and are outstanding, excluding options that were forfeited or canceled after
the relevant grant dates. For the years ended December 31, 2019, 2020, 2021 and 2022, we recorded
RMB12.3 million, RMB22.4 million, RMB135.5 million and RMB102.6 million in share-based
compensation expenses, respectively.
We believe the granting of share-based awards is of significant importance to our ability to
attract and retain key personnel and employees, and we may continue to grant share-based awards to
employees in the future subject to compliance with the Listing Rules. As a result, our expenses
associated with share-based compensation expenses may increase, which may have an adverse effect
on our results of operations.
We may need additional capital, and we may be unable to obtain such capital in a timely manner or
on acceptable terms, or at all.
To pursue our business objectives and respond to business opportunities, challenges or
unforeseen circumstances, including to improve our brand awareness, broaden our content, product and
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service offerings or further improve our existing content, product and service offerings, expand into
new markets and acquire complementary businesses and technologies, we may require additional
capital from time to time. However, additional funds may not be available when we need them on
reasonable terms, or at all. Our ability to obtain additional capital is subject to a variety of
uncertainties, including:
Š our market position and competitiveness in the industry where we operate;
Š our future profitability, overall financial condition, results of operations and cash flows;
Š general market conditions for capital raising activities by online fitness companies in
China; and
Š economic, political and other conditions in China and internationally.
If we are unable to obtain additional capital in a timely manner or on acceptable terms, or at all,
our ability to continue to pursue our business objectives and respond to business opportunities,
challenges or unforeseen circumstances could be significantly limited, and our business, results of
operations, financial condition and prospects could be materially and adversely affected. In addition,
our future capital needs and other business reasons could require us to sell additional equity or debt
securities or obtain a credit facility. The sale of additional equity or equity-linked securities could
dilute our shareholders. The incurrence of indebtedness would result in increased debt service
obligations and could result in operating and financing covenants that would restrict our operations or
our ability to pay dividends to our shareholders.
A severe or prolonged downturn in the Chinese or global economy could materially and adversely
affect our business and financial condition.
COVID-19 has had a severe and negative impact on the Chinese and the global economy, and
whether this will lead to a prolonged downturn in the economy is still unknown. The growth of the
Chinese economy has slowed in recent years. Even before the outbreak of COVID-19, the global
macroeconomic environment was facing challenges, including the end of quantitative easing by the
U.S. Federal Reserve, the economic slowdown in the Eurozone since 2014, uncertainties over the
impact of Brexit and the ongoing global trade disputes and tariffs. The growth of China’s economy has
slowed down since 2012 compared to the previous decade and the trend may continue. There is
considerable uncertainty over the long-term effects of the monetary and fiscal policies adopted by the
central banks and financial authorities of some of the world’s leading economies, including the United
States and China. In addition, there have also been concerns about the relationship between China and
the United States, resulting from the current trade tension between the two countries. There have been
further uncertainties related to the drastic drop in oil prices and the U.S. Federal Reserve’s progressive
policies to strengthen the market in early 2020. It is unclear whether these challenges and uncertainties
will be contained or resolved and what effects they may have on the global political and economic
conditions in the long term.
Economic conditions in China are sensitive to global economic conditions, as well as changes
in domestic economic and political policies and the expected or perceived overall economic growth
rate in China. Any severe or prolonged slowdown in the global or Chinese economy may materially
and adversely affect our business, results of operations and financial condition.
Substantially all of our operations are conducted in China, and the vast majority of our revenue
are generated from providing content, products and services to users in China. Any prolonged
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slowdown in the global or Chinese economy may have a negative impact on our business, results of
operations and financial condition, and continued turbulence in the international markets may
adversely affect our ability to access the capital markets to meet liquidity needs. Our users and
business partners may reduce or delay spending with us, while we may have difficulty expanding our
user base and cooperative network fast enough, or at all, or to offset the impact of decreased spending
by our existing users and business partners.
Our results of operations, financial conditions and prospects have been adversely affected by fair
value changes of preferred shares and valuation uncertainty of preferred shares due to the use of
unobservable inputs.
During the Track Record Period, we had outstanding convertible redeemable preferred shares,
which were designated as financial liabilities at fair value through profits or losses. The preferred
shares issued by us are not traded in an active market and the respective fair value is determined by
using valuation techniques. The discounted cash flow method was used to determine the total equity
value of our Company and the equity allocation model was adopted to determine the fair value of the
financial instruments. Please refer to Note 3.3 to the Accountant’s Report included in Appendix I to
this document for the key assumptions in determining the fair value of the convertible redeemable
preferred shares. These valuation methodologies that we use involve a significant degree of
management judgment and are inherently uncertain, as a result of the use of unobservable inputs,
differences in evaluation criteria and the corresponding differences in assumptions and judgments.
Changes in these unobservable inputs and other estimates and judgments could materially affect the
fair value of our convertible redeemable preferred shares, which in turn may adversely affect our
results of operations. In 2019, 2020, 2021 and 2022, we recognized net fair value changes in preferred
shares of RMB356.3 million, RMB2.1 billion, RMB1.9 billion and negative RMB0.7 billion,
respectively. We expect continued fluctuation of the fair value of our preferred shares after December
31, 2022 till the completion of the Global Offering, upon which all the preferred shares will
automatically convert into our Shares. Upon the completion of the Global Offering, we do not expect
to recognize any further loss or gain on fair value changes from the preferred shares in the future.
Fluctuation of financial assets at fair value through profit or loss may affect our results of
operations, financial and conditions.
We made investments in certain financial assets during the Track Record Period and recorded
financial assets at fair value through profit or loss of nil, RMB429.3 million, RMB255.9 million and
RMB139.9 million as of December 31, 2019, 2020, 2021 and 2022, respectively. Our financial assets
at fair value through profit or loss mainly consist of wealth management products we purchased to
improve returns on our excess liquidity. Wealth management products mainly represent deposits with
variable interest rates indexed to the performance of underlying assets or principal that are not-
guaranteed by certain financial institutions. We recorded wealth management product of nil,
RMB429.3 million, RMB255.0 million and RMB139.9 million as of December 31, 2019, 2020, 2021
and 2022, respectively. Going forward, we may continue to invest in financial products. We plan to
make investment decisions related to the purchase of such products on a case-by-case basis. We cannot
assure you that market conditions and regulatory environment will result in fair value gains on the
financial products we invest in or we will not incur any fair value losses on our investments in the
financial products in the future. If we incur such fair value losses, our results of operations, financial
condition and prospects may be adversely affected. These investments may earn yields substantially
lower than anticipated, and the fair values of these financial assets may fluctuate significantly, which
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contribute to the uncertainties in valuation. Any failure to realize the benefits we expected from these
financial assets may materially and adversely affect our business and financial results.
We may not be able to fulfill our obligations in respect of contract liabilities, which may have a
material and adverse impact on our results of operations and financial condition.
Our contract liabilities mainly represent customer advances for self-branded fitness products,
membership subscription and online paid content services. As of December 31, 2019, 2020, 2021 and
2022, our contract liabilities were RMB38.9 million, RMB80.2 million, RMB87.0 million and
RMB84.1 million, respectively. If we fail to fulfill our obligations under our contracts with customers,
we may not be able to convert such contract liabilities into revenue, and our customers may require us
to refund the advance payments we have received, which may adversely affect our cash flow and
liquidity condition. In addition, it may adversely affect our relationship with such customers, damage
our reputation and brand image, which may also affect our results of operations and financial
condition.
We are subject to anti-corruption, anti-bribery, sanctions and similar laws, and non-compliance
with such laws can subject us to administrative, civil and criminal fines and penalties, collateral
consequences, remedial measures and legal expenses.
We are subject to anti-corruption, anti-bribery, sanctions and similar laws and regulations in
various jurisdictions in which we conduct activities. We have direct or indirect interactions with
officials and employees of government agencies and state-owned affiliated entities in the ordinary
course of business. These interactions subject us to an increased level of compliance-related concerns.
Our policies and procedures in place to ensure compliance may not be sufficient and our Directors,
officers, employees, representatives, consultants, agents and business partners could engage in
improper conduct for which we may be held responsible, subject us to financial loss and sanctions or
penalties imposed by governmental authorities, or adversely affect our business operation and
reputation.
Non-compliance with anti-corruption or anti-bribery laws and regulations could subject us to
whistle-blower complaints, adverse media coverage, investigations and severe administrative, civil and
criminal sanctions, collateral consequences, remedial measures and legal expenses. If we or any of our
associates fail to comply with economic sanctions or trade restrictions imposed by national or
international authorities that are applicable to us or them, we may be exposed to potential legal liability
and the costs associated with investigating potential misconduct, as well as potential reputational
damage.
Any export controls or any economic or trade restrictions applicable to our businesses could be
complex and may change frequently. The interpretation and enforcement of such laws and regulations
involve uncertainties, which may be driven by political or other factors out of our control or heightened
by national security concerns. Any potential restrictions imposed on us or our business partners, as
well as any associated inquiries or investigations or any other government actions, may be difficult or
costly to comply with and may cause disruptions to our service offerings and business operations,
result in negative publicity, require significant management time and attention and subject us to fines,
penalties or orders. Any of the foregoing events may have a material and adverse effect on our
business, financial condition and results of operations.
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The current tensions in international trade and rising political tensions may adversely impact our
business, financial condition, and results of operations.
Although cross-border business may not be an area of our focus, if we plan to sell our products
internationally in the future, any unfavorable government policies on international trade, such as
capital controls or tariffs, may affect the demand for our products and services, impact the competitive
position of our products, or prevent us from being able to sell products in certain countries. If any new
tariffs, legislation, or regulations are implemented, or if existing trade agreements are renegotiated,
such changes could adversely affect our business, financial condition, and results of operations.
Recently there have been heightened tensions in international economic relations, such as the one
between the United States and China. The U.S. government has recently imposed, and has recently
proposed to impose additional, new, or higher tariffs on certain products imported from China to
penalize China for what it characterizes as unfair trade practices. China has responded by imposing,
and proposing to impose additional, new, or higher tariffs on certain products imported from the
United States. Following mutual retaliatory actions for months, on January 15, 2020, the United States
and China entered into the Economic and Trade Agreement Between the United States of America and
the People’s Republic of China as a phase one trade deal, effective on February 14, 2020.
In addition, political tensions between the United States and China have escalated due to,
among other things, trade disputes, the COVID-19 outbreak, sanctions imposed by the U.S.
Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the
PRC central government and the executive orders issued by former U.S. President in August 2020 that
prohibit certain transactions with certain Chinese companies and their applications, the Clean Network
project initiated by the U.S. Department of State in August 2020 and new authorities granted to the
Department of Commerce to prohibit or restrict the use of information and communications technology
and services (“ ICTS”). While a substantial majority of our business is conducted in China, policies
like these may deter U.S. users from accessing and/or using our apps and other products in the United
States, which could adversely impact our user experience and reputation. Similarly, India has banned a
large number of apps in 2020 out of national security concerns, many of which are China-based apps,
escalating regional political and trade tensions.
Rising political tensions could reduce levels of trades, investments, technological exchanges,
and other economic activities between the two major economies, which would have a material adverse
effect on global economic conditions and the stability of global financial markets. Any of these factors
could have a material adverse effect on our business, prospects, financial condition, and results of
operations.
As we depend on parts and components from suppliers, some of which are overseas, tariffs by
the PRC government or any other trade tensions may affect the costs of our products. Demand for our
content, products and services depends to a large extent on general, economic, political, and social
conditions in China. The current international trade tensions and political tensions between China and
other countries, especially the United States, and any escalation of such tensions, may have a negative
impact on such general, economic, political, and social conditions and accordingly demands for our
vehicles, adversely impacting our business, financial condition, and results of operations.
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Enforcement of stricter labor laws and regulations and increases in labor costs in the PRC may
adversely affect our business and our profitability.
China’s overall economy and the average wage in China have increased in recent years and are
expected to continue to grow. The average wage level for our employees has also increased in recent
years. We expect that our labor costs, including wages and employee benefits, will continue to
increase. Unless we are able to pass on these increased labor costs to those who pay for our services
and products, our profitability and results of operations may be materially and adversely affected.
In addition, we have been subject to stricter regulatory requirements in terms of entering into
labor contracts with our employees and paying various statutory employee benefits, including
pensions, housing funds, medical insurance, work-related injury insurance, unemployment insurance
and maternity insurance to designated government agencies for the benefit of our employees. In the
event that we decide to terminate some of our employees or otherwise change our employment or labor
practices, the PRC Labor Contract Law and its implementation rules may limit our ability to effect
those changes in a desirable or cost-effective manner, which could adversely affect our business and
results of operations.
During the Track Record Period, we used third-party service providers to apply for social
insurance registration and housing funds deposit registration and to pay social insurance and housing
fund for some of our employees, which may be inconsistent with relevant laws and regulations and as
of the Latest Practicable Date, we had rectified the non-compliance. See “Regulations—Regulations
Related to Employment, Social Insurance and Housing Provident Fund” for details. In addition, certain
of our subsidiaries in China did not make such registrations historically as those subsidiaries did not
hire any employees, and as of the Latest Practicable Date, we had rectified the non-compliance. Under
the agreements between the third-party service providers and us, the third-party service providers have
the obligations to pay social insurance premium and housing provident funds for our relevant
employees. As of the Latest Practicable Date, none of the third-party service providers that our
Company cooperates with had failed to pay, or delayed in paying, any social insurance premiums or
housing provident fund contributions for our employees. We have not received any inquiry from
relevant government authorities in this regard. As promulgated in the PRC Social Insurance Law, if we
fail to comply with the requirement within a specified timeframe, we may be liable for a fine not
exceeding three times of social insurance contribution. And according to the Regulation on the
Administration of Housing Provident Funds, if we fail to complete the process of registering housing
provident fund payment and deposit or open housing provident fund accounts for our employees within
a specified timeframe, we may be subject to a fine of not less than RMB10,000 but not more than
RMB50,000. Please refer to “Business—Employees” for further details.
We cannot assure you that our employment practices do not and will not violate labor-related
laws and regulations in China, which may subject us to labor disputes or government investigations. If
we are deemed to have violated relevant labor laws and regulations, we could be required to provide
additional compensation to our employees and our business, financial condition and results of
operations will be adversely affected.
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We may not have sufficient insurance to cover our business risks, so that any uninsured occurrence
of business disruption may result in substantial costs to us and the diversion of our resources, which
could have an adverse effect on our results of operations and financial condition.
We provide social security insurance for our employees as required by PRC law, and we also
provide supplemental commercial medical insurance for our employees. We do not maintain business
interruption insurance. We consider this practice to be reasonable in light of the nature of our business,
which is in line with the practices of other companies of similar size in the same industry in China. In
addition, insurance companies in China currently offer limited business-related insurance products.
Any uninsured occurrence of business disruption, litigation or natural disaster, or significant damages
to our uninsured equipment or facilities could disrupt our business operations, requiring us to incur
substantial costs and divert our resources, which could have a material and adverse effect on our
business, financial condition and results of operations.
We face risks related to natural disasters, health epidemics and other outbreaks, which could
significantly disrupt our operations.
In addition to the impact of COVID-19, natural disasters, such as fires, earthquakes, hurricanes,
floods, tornadoes, unusual weather conditions, power outages, other health epidemics, terrorist acts or
disruptive global political events, or similar disruptions/and other outbreaks could materially adversely
affect our business, financial condition and results of operations. These events could result in server
interruptions, breakdowns, system failures, technology platform failures or internet failures, which
could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely
affect our ability to operate our platforms and sell our products. These events could also affect the
normal operation of our Keepland fitness centers and our collaboration with third-party offline gyms in
connection with the Keep selected fitness classes, the temporary lack of an adequate work force in a
market, the temporary or long-term disruption in the supply of products, components and raw materials
from some domestic and overseas suppliers, the temporary disruption in the transport of goods, delay
or increased transportation costs in the delivery of goods to our warehouses or stores, the inability of
users to conduct at-home or outdoor trainings utilizing our content or products, the temporary
reduction in the availability of our content or product offerings to users and disruption of our utility
services or to our information systems. These events also can have indirect consequences such as
increases in the costs of insurance if they result in significant loss of property or other insurable
damage. To the extent any of these risks materialized, our business, financial condition and results of
operations could be materially and adversely affected.
Our headquarters is located in Beijing, China, where most of our directors and management and
the majority of our employees currently reside. Most of our system hardware and the back-up systems
supplied by third-party cloud service providers are hosted in facilities located in China. Consequently,
if any natural disasters, health epidemics or other public safety concerns were to affect China, and
Beijing in particular, our operation may experience material disruptions, which may materially and
adversely affect our business, financial condition and results of operations.
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RISKS RELATED TO OUR CORPORATE STRUCTURE
If the PRC government finds that the agreements that establish the structure for operating some of
our operations in China do not comply with PRC regulations relating to the relevant industries, or if
these regulations or the interpretation of existing regulations change in the future, we could be
subject to severe penalties or be forced to relinquish our interests in those operations.
Foreign ownership in entities that provide internet and other related businesses, including the
value-added telecommunication services, internet culture business and internet audio-visual program,
is subject to restrictions under current PRC laws and regulations, unless certain exceptions are
available.
We are a Cayman Islands exempted company and each of our indirect wholly-owned PRC
subsidiary, our WFOE, is considered a foreign-invested enterprise. To ensure compliance with the PRC
laws and regulations, we conduct some of our foreign investment-restricted business in China through
our VIE, and our VIE currently holds the value-added telecommunication business license and other
licenses necessary for our operation of such restricted business, based on a series of contractual
arrangements by and among our WFOE, our VIE and its shareholders. These contractual agreements
enable us to (i) exercise effective control over our VIE, (ii) receive substantially all of the economic
benefits of our VIE, and (iii) have an exclusive call option to purchase all or part of the equity interests
in our VIE when and to the extent permitted by PRC law. As a result of these contractual
arrangements, we exert control over our VIE and consolidate financial results of our VIE in our
financial statements under IFRS. See “History, Reorganization, and Corporate Structure” for further
details.
We have been advised by our PRC Legal Adviser that there are substantial uncertainties
regarding the interpretation and application of current or future PRC laws and regulations and the PRC
government may ultimately take a view contrary to the opinion of our PRC Legal Adviser. If the PRC
government otherwise finds that we are in violation of any existing or future PRC laws or regulations
or lack the necessary permits or licenses to operate our business, the relevant governmental authorities
with jurisdiction over the operation of our business would have broad discretion in dealing with such
violation, including, without limitation:
Š revoking the business licenses and/or operating licenses of our PRC entities;
Š imposing fines on us;
Š confiscating any of our income that they deem to be obtained through illegal operations, or
imposing other requirements with which we or our VIE may not be able to comply;
Š discontinuing or placing restrictions or onerous conditions on our operations;
Š placing restrictions on our right to collect revenue;
Š shutting down our servers or blocking our platform;
Š requiring us to restructure our ownership structure or operations, including terminating the
contractual arrangements with our VIE and deregistering the equity pledges of our VIE,
which in turn would affect our ability to consolidate, derive economic interests from, or
exert effective control over our VIE;
Š restricting or prohibiting our use of the proceeds from the Global Offering or other of our
financing activities to finance the business and operations of our VIE;
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Š imposing additional conditions or requirements with which we may not be able to comply;
or
Š taking other regulatory or enforcement actions that could be harmful to our business.
Any of these events could cause significant disruption to our business operations and severely
damage our reputation, which would in turn have a material adverse effect on our business, financial
condition and results of operations. If occurrences of any of these events results in our inability to
direct the activities of our VIE that most significantly impact their economic performance, and/or our
failure to receive the economic benefits and residual returns from our VIE, and we are not able to
restructure our ownership structure and operations in a satisfactory manner, we may not be able to
consolidate the financial results of our VIE in our consolidated financial statements in accordance with
IFRS.
The contractual arrangements with our VIE and its shareholders may not be as effective as direct
ownership in providing operational control.
We have to rely on the contractual arrangements with our VIE and its shareholders to operate
the business in areas where foreign ownership is restricted, including provision of certain value-added
telecommunication services. These contractual arrangements, however, may not be as effective as
direct ownership in providing us with control over our VIE. For example, our VIE and its shareholders
could breach their contractual arrangements with us by, among other things, failing to conduct the
operations of our VIE in an acceptable manner or taking other actions that are detrimental to our
interests.
If we had direct ownership of our VIE in China, we would be able to exercise our rights as a
shareholder to effect changes in the board of directors of our VIE, which in turn could implement
changes, subject to any applicable fiduciary obligations, at the management and operational level.
However, under the current contractual arrangements, we rely on the performance by our VIE and its
shareholders of their obligations under the contracts to exercise control over our VIE. The shareholders
of our VIE may not act in the best interests of our company or may not perform their obligations under
these contracts. If any dispute relating to these contracts remains unresolved, we will have to enforce
our rights under these contracts through the operations of PRC law and arbitration, litigation and other
legal proceedings and therefore will be subject to uncertainties in the PRC legal system. See “—Risks
Related to Our Corporate Structure—Any failure by our VIE or its shareholders to perform their
obligations under our contractual arrangements with them would have a material and adverse effect on
our business”.
Any failure by our VIE or its shareholders to perform their obligations under our contractual
arrangements with them would have a material and adverse effect on our business.
If our VIE or its shareholders fail to perform their respective obligations under the contractual
arrangements, we may have to incur substantial costs and expend additional resources to enforce such
arrangements. We may also have to rely on legal remedies under PRC law, including seeking specific
performance or injunctive relief, and contractual remedies, which we cannot assure you will be
sufficient or effective under PRC law. For example, if the shareholders of our VIE were to refuse to
transfer their equity interests in our VIE to us or our designee if we exercise the purchase option
pursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us, then
we may have to take legal actions to compel them to perform their contractual obligations. In addition,
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if any third parties claim any interest in such shareholders’ equity interests in our VIE, our ability to
exercise shareholders’ rights or foreclose the share pledge according to the contractual arrangements
may be impaired. If these or other disputes between the shareholders of our VIE and third parties were
to impair our control over our VIE, our ability to consolidate the financial results of our VIE would be
affected, which would in turn result in a material adverse effect on our business, operations and
financial condition.
All the agreements under our contractual arrangements are governed by PRC law and provide
for the resolution of disputes through arbitration in China. Accordingly, these contracts would be
interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC
legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such
as the United States, which resulted in uncertainties in the PRC legal system that could limit our ability
to enforce these contractual arrangements. See “—Risks Related to Doing Business in China—
Uncertainties with respect to the PRC legal system and changes in laws and regulations in China could
adversely affect us”. Meanwhile, there are very few precedents and little formal guidance as to how
contractual arrangements in the context of a consolidated VIE should be interpreted or enforced under
PRC law. There remain significant uncertainties regarding the ultimate outcome of such arbitration
should legal action become necessary. In addition, under PRC law, rulings by arbitrators are final,
parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the
arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration
awards in PRC courts through arbitration award recognition proceedings, which would require
additional expenses and delay. In the event we are unable to enforce these contractual arrangements, or
if we suffer significant delay or other obstacles in the process of enforcing these contractual
arrangements, we may not be able to exert effective control over our VIE, and our ability to conduct
our business may be negatively affected.
The shareholders of our VIE may have actual or potential conflicts of interest with us.
The shareholders of our VIE may have actual or potential conflicts of interest with us.
Mr. Wang Ning, Mr. Peng Wei, Mr. Wen Chunpeng and Mr. Liu Dong jointly hold the equity interests
in our VIE, respectively. Mr. Wang Ning is our founder and serves as the chairman of the board of
Directors and the chief executive officer of our company. Mr. Peng Wei is our co-founder, executive
Director and vice president of online operations. Mr. Wen Chunpeng is our co-founder, an employee
and a director of certain subsidiaries that operate our Keepland business. Mr. Liu Dong is our
co-founder, executive Director and vice president of consumer fitness products. Although these
individuals are contractually obligated, or obligated as a result of their fiduciary duty to our company,
to act in good faith and in our best interest, they still have potential conflicts of interest with us. For
example, occasions may arise when the fiduciary duties these individuals owe to us under Cayman
Islands law conflict with the fiduciary duties they owe to our PRC entities under PRC law. Under
Cayman Islands law, a director is not released from his or her fiduciary duties owed to us as a director
of our company, and his or her obligation to discharge such duties is not affected by any other duties
that such director owes or interests which such director may have, including as a director or
shareholder of another company, such as our consolidated affiliated entities. In addition, these
shareholders may breach, or cause our VIE to breach, or refuse to renew, the existing contractual
arrangements we have with them and our VIE, which would have a material and adverse effect on our
ability to effectively control our VIE and receive economic benefits from it. For example, the
shareholders may be able to cause our agreements with our VIE to be performed in a manner adverse
to us by, among other things, failing to remit payments due under the contractual arrangements to us on
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a timely basis. We cannot assure you that when conflicts of interest arise any or all of these
shareholders will act in the best interests of our company or such conflicts will be resolved in our
favor.
Currently, we do not have any arrangements to address potential conflicts of interest between
these shareholders and our company, except that we could exercise our purchase option under the
exclusive call option agreements with these shareholders to request them to transfer all of their equity
interests in the VIE to a PRC entity or individual designated by us, to the extent permitted by PRC law.
We count on Mr. Wang Ning, our founder, chairman of the board of Directors and chief executive
officer of our company and a major shareholder of our VIE, to abide by the laws of the Cayman
Islands, which provide that directors and officers owe a fiduciary duty to the company that requires
them to act in good faith and in what they believe to be the best interests of the company and not to use
their position for personal gains. The shareholders of our VIE have executed powers of attorney to
appoint our WFOE to vote on their behalf and exercise voting rights as shareholders of our VIE. If we
cannot resolve any conflict of interest or dispute between us and the shareholders of our VIE, we
would have to rely on legal proceedings, which could result in disruption of our business and subject
us to substantial uncertainty as to the outcome of any such legal proceedings.
The shareholders of our VIE may be involved in personal disputes with third parties or other
incidents that may have an adverse effect on their respective equity interests in our VIE and the
validity or enforceability of our contractual arrangements with our VIE and its shareholders. For
example, in the event that any individual shareholder of our VIE divorces his or her spouse, the spouse
may claim that the equity interest of our VIE held by such shareholder is part of their community
property and should be divided between such shareholder and his or her spouse. If such claim is
supported by the court, the relevant equity interest may be obtained by the shareholder’s spouse or
another third party who is not subject to obligations under our contractual arrangements, which could
result in a loss of the effective control over our VIE by us. Similarly, if any of the equity interests of
our VIE is inherited by a third party with whom the current contractual arrangements are not binding,
we could lose our control over our VIE or have to maintain such control by incurring unpredictable
costs, which could cause significant disruption to our business and operations and harm our financial
condition and results of operations.
Although under our current contractual arrangements, (i) our VIE’s shareholders’ spouses have
executed spousal consent letters under which the spouses agree not to assert any rights over the equity
interest in our VIE held by these VIE shareholders, and (ii) it is expressly provided that our VIE and its
shareholders shall not assign any of their respective rights or obligations to any third party without the
prior written consent of our WFOE, we cannot assure you that these undertakings and arrangements
will be complied with or effectively enforced. In the case any of them is breached or becomes
unenforceable and leads to legal proceedings, it could disrupt our business, distract our management’s
attention and subject us to substantial uncertainties as to the outcome of any such legal proceedings.
The custodians or authorized users of our controlling non-tangible assets, including chops and
seals, may fail to fulfill their responsibilities, or misappropriate or misuse these assets.
Under the PRC law, legal documents for corporate transactions, including agreements and
contracts are executed using the chop or seal of the signing entity or with the signature of a legal
representative whose designation is registered and filed with relevant PRC market regulation
administrative authorities.
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The procedures we have in place to secure the use of our chops and seals may not be sufficient
to prevent all instances of abuse or negligence. There is a risk that our employees could abuse their
authority, for example, by entering into a contract not approved by us or seeking to gain control of one
of our subsidiaries or our VIE. If any employee obtains, misuses or misappropriates our chops and
seals or other controlling non-tangible assets for whatever reason, we could experience disruption to
our normal business operations. We may have to take corporate or legal action, which could involve
significant time and resources to resolve and divert management from our operations.
Contractual arrangements in relation to our VIE may be subject to scrutiny by the PRC tax
authorities and they may determine that we or our VIE owes additional taxes, which could
negatively affect our financial condition and the value of your investment.
Under applicable PRC laws and regulations, arrangements and transactions among related
parties may be subject to audit or challenge by the PRC tax authorities. We could face material and
adverse tax consequences if the PRC tax authorities determine that the contractual arrangements in
relation to our VIE were not entered into on an arm’s length basis in such a way as to result in an
impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust the
taxable income of our VIE in the form of a transfer pricing adjustment. A transfer pricing adjustment
could, among other things, result in a reduction of expense deductions recorded by our VIE for PRC
tax purposes, which could in turn increase its tax liabilities without reducing our PRC subsidiaries’ tax
expenses. In addition, the PRC tax authorities may impose late payment fees and other penalties on our
VIE for the adjusted but unpaid taxes according to the applicable regulations. Our financial position
could be materially and adversely affected if our VIE’s tax liabilities increase or if it is required to pay
late payment fees and other penalties.
Our current corporate structure and business operations may be substantially affected by the newly
enacted Foreign Investment Law.
On March 15, 2019, the NPC promulgated the Foreign Investment Law (
ʕശɛ͏΍ձ਷̮ਠ
), which took effect on January 1, 2020. Along with the Foreign Investment Law, the
Implementing Rules of Foreign Investment Law (ૢԷ)
promulgated by the State Council and the Interpretation of the Supreme People’s Court on Several
Issues Concerning the Application of the Foreign Investment Law promulgated by the Supreme
People’s Court (
ቇ͜<ج>༆ᙑ) took effect
on January 1, 2020. Since the Foreign Investment Law and its current implementation and
interpretation rules are relatively new, substantial uncertainties exist in relation to their further
application and development. For example, the Foreign Investment Law does not explicitly classify
whether VIEs that are controlled through contractual arrangements would be deemed as foreign
invested enterprises if they are ultimately “controlled” by foreign investors. However, it has a catch-all
provision under definition of “foreign investment” that includes investments made by foreign investors
in China through other means as provided by laws, administrative regulations or other methods
prescribed by the State Council. Therefore, it still leaves leeway for future laws, administrative
regulations or provisions of the State Council to provide for contractual arrangements as a form of
foreign investment, at which time it will be uncertain whether our contractual arrangements will be
deemed to be in violation of the market access requirements for foreign investment in the PRC and if
yes, how our contractual arrangements should be dealt with.
The Foreign Investment Law grants national treatment to foreign-invested entities, except for
those foreign-invested entities that operate in industries specified as either “restricted” or “prohibited”
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from foreign investment in the Special Administrative Measures for Access of Foreign Investments
(Negative List) (2021 Version) (݄(૶ఊ)(2021وor the Negative
List, jointly promulgated by the Ministry of Commerce and the National Development and Reform
Commission, or the NDRC, and took effect on January 1, 2022. The Foreign Investment Law provides
that (i) foreign-invested entities operating in “restricted” industries are required to obtain market entry
clearance and other approvals from relevant PRC government authorities; (ii) foreign investors shall
not invest in any industries that are “prohibited” under the Negative List. We operate our value-added
telecommunications services and have obtained the ICP License through our VIE. Such services are
restricted for foreign investors in the Negative List and foreign ownership may not own more than 50%
of such business. We also hold the Internet cultural business license and the radio and television
production operation license under our VIE. Furthermore, our Keep mobile app has been registered in
the National Internet Audio-visual Platforms Information Management System (
ࢹڦ
೮া၍ଣӻ୕), subject to the same regulation and supervision as an Audio-Visual License holder and
fall into the categories of prohibited foreign investment by the Negative List. There can be no
guarantee that the regulatory authorities will not require us to further obtain an Audio-visual License or
an Internet Publishing License, which also falls into the categories of prohibited foreign investment by
the Negative List. See “—Risks Related to Doing Business in China—We may be adversely affected
by the complexity, uncertainties and changes in PRC laws and regulation, and any lack of requisite
approvals, licenses, permits or registrations applicable to our business may have a material adverse
effect on our business, financial conditions and results of operations”. If our control over our VIE
through contractual arrangements are deemed as foreign investment in the future, and any business of
our VIE is “restricted” or “prohibited” from foreign investment under the “negative list” effective at
the time, we may be deemed to be in violation of the Foreign Investment Law, the contractual
arrangements that allow us to have control over our VIE may be deemed as invalid and illegal, and we
may be required to unwind such contractual arrangements and/or restructure our business operations,
any of which may have a material adverse effect on our business operation.
Furthermore, if future laws, administrative regulations or provisions mandate further actions to
be taken by companies with respect to existing contractual arrangements, we may not complete such
actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any
of these or similar regulatory compliance challenges could materially and adversely affect our current
corporate structure and business operations.
We may lose the ability to use and enjoy assets held by our VIE that are critical to the operation of
our business if our VIE declare bankruptcy or become subject to a dissolution or liquidation
proceeding.
Our VIE holds certain assets that may be critical to the operation of our business. If the
shareholders of our VIE breach the contractual arrangements and voluntarily liquidate our VIE, or if
our VIE declares bankruptcy and all or part of its assets become subject to liens or rights of third-party
creditors or are otherwise disposed of without our consent, we may be unable to continue some or all
of our business activities, which could materially and adversely affect our business, financial condition
and results of operations. In addition, if our VIE undergoes an involuntary liquidation proceeding,
third-party creditors may claim rights to some or all of its assets, thereby hindering our ability to
operate our business, which could materially or adversely affect our business, financial condition and
results of operations.
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RISKS RELATED TO DOING BUSINESS IN CHINA
Changes in China’s economic, political or social conditions or government policies could have a
material adverse effect on our business and operations.
A substantial majority of our assets and operations are located in China. Accordingly, our
business, financial condition, results of operations and prospects may be influenced to a significant
degree by political, economic and social conditions in China generally and by continued economic
growth in China as a whole. The PRC economy differs from the economies of most developed
countries in many respects, including the level of government involvement, level of development,
growth rate, control of foreign exchange and allocation of resources. Although the PRC government
has implemented measures emphasizing the utilization of market forces for economic reform, the
reduction of state ownership of productive assets, and the establishment of improved corporate
governance in business enterprises, a substantial portion of productive assets in China is still owned by
the government. In addition, the PRC government continues to play a significant role in regulating
industry development by imposing industrial policies. The PRC government also exercises significant
control over China’s economic growth through allocating resources, controlling payment of foreign
currency-denominated obligations, setting monetary policy, and providing preferential treatment to
particular industries or companies.
While the PRC economy has experienced significant growth over the past decades, growth has
been uneven, both geographically and among various sectors of the economy. The growth rate of the
Chinese economy has gradually slowed since 2010. Any adverse changes in economic conditions in
China, in the policies of the PRC government or in the laws and regulations in China could have a
material adverse effect on the overall economic growth of China. Such developments could adversely
affect our business and operating results, lead to reduction in demand for our services and adversely
affect our competitive position. The PRC government has implemented various measures to encourage
economic growth and guide the allocation of resources. Some of these measures may benefit the
overall PRC economy, but may have a negative effect on us. For example, our financial condition and
results of operations may be adversely affected by government control over capital investments or
changes in tax regulations. Any prolonged slowdown in the global and Chinese economy may reduce
the demand for our products and services and materially and adversely affect our business and results
of operations.
Uncertainties with respect to the PRC legal system and changes in laws and regulations in China
could adversely affect us.
We conduct our business primarily through our PRC subsidiaries and our VIE. Our operations
in China are governed by PRC laws and regulations. Our PRC subsidiaries are subject to laws and
regulations applicable to foreign investment in China. The PRC legal system is a civil law system
based on written statutes. Unlike the common law system, prior court decisions under the civil law
system may be cited for reference but have limited precedential value. In addition, any new or changes
in PRC laws and regulations related to foreign investment in China could affect the business
environment and our ability to operate our business in China.
From time to time, we may have to resort to administrative and court proceedings to enforce
our legal rights. Any administrative and court proceedings in China may be protracted, resulting in
substantial costs and diversion of resources and management attention. Since PRC administrative and
court authorities have significant discretion in interpreting and implementing statutory provisions and
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contractual terms, it may be more difficult to evaluate the outcome of administrative and court
proceedings and the level of legal protection we enjoy than in more developed legal systems. These
uncertainties may impede our ability to enforce the contracts we have entered into and could materially
and adversely affect our business and results of operations.
Furthermore, the PRC legal system is based in part on government policies and internal rules,
some of which are not published on a timely basis or at all and may have retroactive effect. As a result,
we may not be aware of our violation of any of these policies and rules until sometime after the
violation. Such unpredictability towards our contractual, property and procedural rights could
adversely affect our business and impede our ability to continue our operations.
We may be adversely affected by the complexity, uncertainties and changes in PRC laws and
regulation, and any lack of requisite approvals, licenses, permits or registrations applicable to our
business may have a material adverse effect on our business, financial conditions and results of
operations.
Our business is subject to supervision and regulation by various governmental authorities in
China, and such governmental authorities include the CAC, the Ministry of Commerce, or the
MOFCOM, the MIIT, the State Administration for Market Regulation, or the SAMR, the National
Health Commission, or the NHC, the Ministry of Culture and Tourism, or the MCT, the NRTA, and
the corresponding local regulatory authorities. Such governmental authorities promulgate and enforce
laws and regulations that cover a variety of business activities that relate to our operations, such as
provision of internet information, sales of internet advertisement, providing live streaming and short
videos broadcasting services, among other things. These regulations in general regulate the entry into,
the permitted scope of, as well as approvals, licenses and permits for, the relevant business activities.
Some of these laws and regulations involve ambiguities and may be subject to interpretation by the
relevant authorities on a case-by-case basis.
For example, our platform offers short videos created by ourselves and fitness instructors we
collaborate. We also deliver live streaming content. Our Keep mobile app has been registered in the
National Internet Audio-visual Platforms Information Management System (
ࢹڦ
೮া၍ଣӻ୕), subject to the same regulation and supervision as an Audio-Visual License holder. See
“Regulations—Regulations Related to Online Live Streaming Services”. However, according to the
PRC Administrative Provisions on Internet Audio-Visual Program Services, a provider of online
audio-visual program service is required to obtain a license for online transmission of audio-visual
programs, or Audio-Visual License. We have not obtained the Audio-Visual License for providing
internet audio-visual program services and content through our platform in China and we may not be
eligible for the Audio-Visual License, because the current PRC laws and regulations require an
applicant to be a wholly state-owned or state-controlled entity. Due to the ambiguity of the definition
of “online publishing service” under the relevant laws and regulations, we cannot assure you that the
relevant authorities will not take a different view and/or regard that making accessible on our platform
our recorded classes, live streaming classes, other content through in our mobile app or public
accounts, may be regarded as an “online publishing service” and thereby require us to obtain such
license in the future. Furthermore, we may be required by relevant authorities to conduct additional
branch industry and commerce registration for one Keepland fitness center which has not registered as
our subsidiary, and Shanghai Calorie due to the inconsistency of its registered address and the actual
operating address. We have been unable to complete the industry and commerce registration with the
competent authorities for one of our Keepland fitness center because the owner of such fitness center
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could not provide registered address certification required for the application. Shanghai Calorie’s
registered address is the virtual address assigned by the local government when it established, and it
continued to use such address due to the anticipated tax contribution in such local government. As of
the Latest Practicable Date, we had not been penalized by the SAMR for not completing (i) such
additional industry and commerce registration of certain Keepland fitness center and (ii) such
additional industry and commerce registration to change Shanghai Calorie’s registered address from
the virtual address assigned by the local government to its actual address. Based on the above, we and
our PRC Legal Adviser are of the view that the risk of us being penalized for not completing such
additional industry and commerce registration is relatively low. During the Track Record Period, one
Keepland fitness center with construction area of more than 300 square meters in Beijing did not obtain
certain fire safety inspection license. We had been unable to acquire such fire safety inspection license
because the area specified in the lease agreement was the actual open space of less than 300 square
meters. The aforementioned Keepland fitness center had then updated the relevant lease agreement
with the lessor to specify the construction area instead of the actual open area. As such, we were able
to and has obtained and completed the fire safety inspection. We have obtained the regulatory
confirmation from competent regulatory authority specifying that the Keepland fitness center has not
been subject to administrative penalties in respect of fire safety inspection during the Track Record
Period and up to the Latest Practicable Date.
While we are making efforts to obtain all licenses and permits and complete all registration and
relevant inspection procedures that are necessary to our various business activities, however, there is
no assurance that we can obtain all such licenses, permits and complete all such registration procedures
in a timely manner as and when requested by the relevant authorities or that we will not be subject to
penalty for operating without such licenses, permits and registrations.
If the PRC governmental authorities consider that we are operating without proper approvals,
licenses, permits or registrations, or new laws and regulations are promulgated that require us to obtain
additional approvals or licenses, complete additional registration procedures or impose additional
restrictions on the operation of any part of our business, the PRC governmental authorities have the
power, among other things, to order timely rectification, impose fines, confiscate our income, revoke
our business licenses, and require us to discontinue our relevant business or impose restrictions on the
affected portion of our business. Any of these actions by the PRC government may have a material
adverse effect on our business, results of operations and financial condition.
Any failure to comply with PRC property laws and relevant regulations regarding certain of our
leased premises may materially and adversely affect our business, financial condition, results of
operations and prospects.
We have not registered our lease agreements with the relevant government authorities. Under
the relevant PRC laws and regulations, we may be required to register and file with the relevant
government authority executed leases. The failure to register the lease agreements for our leased
properties will not affect the validity of these lease agreements, but the competent housing authorities
may order us to register the lease agreements in a prescribed period of time and impose a fine ranging
from RMB1,000 to RMB10,000 for each non-registered lease if we fail to complete the registration
within the prescribed timeframe.
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Fluctuations in exchange rates could have a material and adverse effect on our results of operations
and the value of your investment.
The conversion of RMB into foreign currencies, including Hong Kong dollars and U.S. dollars,
is based on rates set by the People’s Bank of China. It is difficult to predict how market forces or
government policies may impact the exchange rate between the RMB and the Hong Kong dollars, the
U.S. dollar or other currencies in the future. The value of RMB against the Hong Kong dollars, U.S.
dollar and other currencies is affected by changes in China’s political and economic conditions and by
China’s foreign exchange policies, among other things. We cannot assure you that RMB will not
appreciate or depreciate significantly in value against Hong Kong dollars and the U.S. dollar in the
future.
Any significant appreciation or depreciation of RMB may materially and adversely affect our
revenue, earnings and financial position, and the value of, and any dividends payable on, our Shares.
For example, to the extent that we need to convert Hong Kong dollars and U.S. dollars we receive into
RMB to pay our operating expenses, appreciation of RMB against the Hong Kong dollars and the U.S.
dollar would have an adverse effect on the RMB amount we would receive from the conversion.
Conversely, a significant depreciation of RMB against the Hong Kong dollars and the U.S. dollar may
significantly reduce the Hong Kong dollars or the U.S. dollar equivalent of our earnings, which in turn
could adversely affect the price of our Shares. We recorded currency translation loss of RMB35.4
million in 2019 and currency translation gain of RMB269.2 million in 2020, RMB151.0 million in
2021 and translation loss of RMB700.8 million in 2022. See consolidated statements of comprehensive
loss to the Accountant’s Report in Appendix I to this document.
Very limited hedging options are available in China to reduce our exposure to exchange rate
fluctuations. We started using derivative financial instruments in the first quarter of 2021 to hedge
exposure to exchange rate risk, including foreign exchange forward contracts and foreign exchange
option contracts. These derivative financial instruments reduce, but do not entirely eliminate the effect
of foreign currency exchange rate movements on our cash and cash equivalents and short-term
investments in foreign currencies. In addition, our currency exchange losses may be magnified by PRC
exchange control regulations that restrict our ability to convert RMB into foreign currency. As a result,
fluctuations in exchange rates may have a material adverse effect on your investment.
If our preferential tax treatments and government subsidies are revoked or become unavailable or if
the calculation of our tax liability is successfully challenged by the PRC tax authorities, we may be
required to pay tax, interest and penalties in excess of our tax provisions.
The Chinese government has provided tax incentives to our PRC subsidiaries in China,
including reduced enterprise income tax rates. For example, under the Enterprise Income Tax Law and
its implementation rules, the statutory enterprise income tax rate is 25%. However, the income tax of
an enterprise that has been determined to be a high and new technology enterprise can be reduced to a
preferential rate of 15%. Three of our PRC subsidiaries were subject to a preferential income tax rate
of 15%, as they were qualified as a High-New Technology Enterprises (the “ HNTE”) during the Track
Record Period. Any increase in the enterprise income tax rate applicable to our PRC subsidiaries, or
any discontinuation, retroactive or future reduction or refund of any of the preferential tax treatments
and local government subsidies currently enjoyed by our PRC subsidiaries could adversely affect our
business, financial condition and results of operations. Further, in the ordinary course of our business,
we are subject to complex income tax and other tax regulations, and significant judgment is required in
the determination of a provision for income taxes. If the PRC tax authorities successfully challenge our
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tax provision and we are required to pay tax, interest and penalties in excess of our tax provisions, our
financial condition and results of operations would be materially and adversely affected.
Certain PRC regulations may make it more difficult for us to pursue growth through acquisitions.
The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors
(), or the M&A Rules, established additional procedures and
requirements that could make merger and acquisition activities by foreign investors more time-
consuming and complex. Such regulation requires, among other things, that the MOFCOM be notified
in advance of any change of control transaction in which a foreign investor acquires control of a PRC
domestic enterprise and involves any of the following circumstances: (i) any important industry is
concerned; (ii) such transaction involves factors that have or may have an impact on the national
economic security; or (iii) such transaction will lead to a change in control of a domestic enterprise
which holds a famous trademark or PRC time-honored brand. We do not expect that the Global
Offering will trigger MOFCOM pre-notification under each of the above-mentioned circumstances or
any review by other PRC government authorities. Moreover, the PRC Anti-Monopoly Law (
ʕശɛ
) promulgated by the SCNPC on August 30, 2007 and amended on June 24, 2022,
and the Regulations on Filing Threshold for Concentration of Undertakings (ණʕ
) require that transactions which are deemed concentrations and involve parties with
specified turnover thresholds must be cleared by the SAMR, the successive authority of MOFCOM,
before they can be completed. In addition, Rules of the Ministry of Commerce on Implementation of
Security Review System of Mergers and Acquisitions of Domestic Enterprises by Foreign Investors
(
) that became effective in September
2011 and Measures for the Security Review of Foreign Investment () that
became effective in January 2021 require acquisitions by foreign investors of PRC companies engaged
in military related or certain other industries that are crucial to national defense and security be subject
to security review before consummation of any such acquisition. In August 2021, the SAMR issued the
Draft Provisions on Preventing Unfair Online Competition, which detailed the implementation of the
PRC Anti-Unfair Competition Law (
), including specified certain
online unfair competition behavior that shall be prohibited. As of the Latest Practicable Date, the Draft
Provisions on Preventing Unfair Online Competition has not been formally adopted, and due to the
lack of further clarifications, there are still uncertainties regarding the interpretation and
implementation of the Draft Provisions on Preventing Unfair Online Competition.
We may pursue potential strategic acquisitions that are complementary to our business and
operations. Complying with the requirements of these regulations to complete such transactions could
be time-consuming, and any required approval processes, including obtaining approval or clearance
from MOFCOM and the NDRC and their respective local counterparts, may delay or inhibit our ability
to complete such transactions, which could affect our ability to expand our business or maintain our
market share. It is unclear whether our business would be deemed to be in an industry that raises
national defense and security or national security concerns. Recently, the SAMR imposed
administrative penalties on a number of anti-monopoly cases in the internet industry, and the
regulatory environment of anti-monopoly is tightening.
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PRC regulations relating to offshore investment activities by PRC residents may limit our PRC
subsidiaries’ ability to change their registered capital or distribute profits to us or otherwise expose
us or our PRC resident beneficial owners to liability and penalties under PRC law.
In July 2014, the State Administration of Foreign Exchange, or SAFE, promulgated the
Circular on Issues Concerning Foreign Exchange Administration of Overseas Investment, Financing
and Round-trip Investments Conducted by Domestic Residents through Special Purpose Vehicles
(
 ),
or SAFE Circular 37. SAFE Circular 37 requires PRC residents to register with SAFE or its local
branches in connection with their direct or indirect offshore investment activities and also requires the
foreign-invested enterprise that is established through round-trip investment to truthfully disclose its
controller(s). In February 2015, SAFE promulgated a Circular on Further Simplifying and Improving
the Direct Investment-Related Foreign Exchange Administration Policies (
ආɓ
), or SAFE Circular 13, effective since June 2015. Under
SAFE Circular 13, applications for foreign exchange registration of inbound foreign direct investments
and outbound overseas direct investments, including those required under SAFE Circular 37, should be
filed with qualified banks instead of SAFE. The qualified banks examine the applications and accept
registrations under the supervision of SAFE. See “Regulations—Regulations Related to Foreign
Exchange Registration of Overseas Investment by PRC Residents” for details.
We may not at all times be fully informed of the identities of all the PRC residents holding
direct or indirect interest in our company, and we cannot provide any assurance that these PRC
residents will comply with our request to make or obtain any applicable registrations or continuously
comply with all requirements under SAFE Circular 37 or other related rules. And there is no assurance
that the registration under SAFE Circular 37 and any amendment has been and will be completed in a
timely manner, or will be completed at all. Failure by our shareholders or beneficial owners who are
PRC residents to comply with SAFE regulations, or failure by us to amend the foreign exchange
registrations of our PRC subsidiaries, could subject us to fines or legal sanctions, restrict our overseas
or cross-border investment activities, limit our PRC subsidiaries’ ability to make distributions or pay
dividends or affect our ownership structure. As a result, our business operations and our ability to
distribute profits to you could be materially and adversely affected.
We may be required to obtain prior approval or subject to filings or other requirements from the
CSRC or other PRC regulatory authorities for the Listing.
On February 17, 2023, the CSRC promulgated Trial Administrative Measures of the Overseas
Securities Offering and Listing by Domestic Companies (
ྤʫΆุྤ̮೯БᗇՎձɪ̹၍ଣ༊Б፬
) (the “Overseas Listing Trial Measures ”) and five related guidelines, which became effective on
March 31, 2023. The Overseas Listing Trial Measures comprehensively improve and reform the
existing regulatory regime for overseas offering and listing of PRC domestic companies’ securities and
regulate both direct and indirect overseas offering and listing of PRC domestic companies’ securities
through a filing-based regulatory regime.
Pursuant to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer
and list securities in overseas markets, either through direct or indirect means, are required to go
through the filing procedure with the CSRC and report relevant information. The Overseas Listing
Trial Measures provides that if the issuer meets both of the following criteria, the overseas securities
offering and listing conducted by such issuer will be deemed as an indirect overseas offering by PRC
domestic companies: (i) 50% or more of any of the issuer’s operating revenue, total profit, total assets
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or net assets as documented in its audited consolidated financial statements for the most recent fiscal
year is accounted for by domestic companies; and (ii) the main parts of the issuer’s business activities
are conducted in mainland China, or its main place(s) of business are located in mainland China, or the
majority of senior management staff in charge of its business operations and management are PRC
citizens or have their usual place(s) of residence located in mainland China. Where an issuer submits
an application for initial public offering to competent overseas regulators, such issuer must file with the
CSRC within three business days after such application is submitted.
On the same day, the CSRC held a press conference for the release of the Trial Measures and
issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic
Companies (
), which, among others, clarifies that
(i) on or prior to the effective date of the Overseas Listing Trial Measures, domestic companies that
have already submitted valid applications for overseas securities offering and listing but have not
obtained approval from overseas regulatory authorities or stock exchanges may arrange the timing for
submitting their filing applications with the CSRC in a reasonable manner, and must complete the
filing before the completion of their overseas securities offering and listing; (ii) a six-month transition
period will be granted to domestic companies which, prior to the effective date of the Overseas Listing
Trial Measures, have already obtained the approval from overseas regulatory authorities or stock
exchanges (such as companies that passed the Stock Exchange hearing), but have not completed the
indirect overseas listing; if domestic companies fail to complete the overseas listing within such six-
month transition period, they shall file with the CSRC according to the requirements.
We cannot assure you that we could meet such requirements, complete such filing in a timely
manner. Any failure may restrict our ability to complete the proposed listing or any future equity
capital raising activities, which would have a material adverse effect on our business and financial
positions. Further, as the Overseas Listing Trial Measures was recently promulgated, there remains
substantial uncertainties as to its interpretation and implementation and how it may impact our ability
to raise or utilize fund for business operation.
Any failure to comply with PRC regulations regarding the registration requirements for employee
stock incentive plans may subject the PRC plan participants or us to fines and other legal or
administrative sanctions.
In February 2012, SAFE promulgated the Circular of the State Administration of Foreign
Exchange on Issues Concerning the Administration of Foreign Exchange Used for Domestic
Individuals’ Participation in Equity Incentive Plans of Companies Listed Overseas (
̮ි၍ଣ҅
), or the SAFE Circular 7,
replacing earlier rules promulgated in 2007. Pursuant to these rules, PRC citizens and non-PRC
citizens who reside in China for a continuous period of not less than one year who participate in any
stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required
to register with SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such
overseas-listed company, and complete certain other procedures. In addition, an overseas-entrusted
institution must be retained to handle matters in connection with the exercise or sale of stock options
and the purchase or sale of shares and interests. We and our executive officers and other employees
who are PRC citizens or who reside in China for a continuous period of not less than one year and who
have been granted options will be subject to these regulations when our company becomes an
overseas-listed company upon the completion of the Global Offering. Failure to complete SAFE
registrations may subject them to fines of up to RMB300,000 for entities and up to RMB50,000 for
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individuals, and legal sanctions and may also limit our ability to contribute additional capital into our
PRC subsidiary and limit our PRC subsidiary’s ability to distribute dividends to us. We also face
regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our
directors, executive officers and employees under PRC law. See “Regulations—Regulations Related to
Stock Incentive Plans”.
In addition, the State Administration of Taxation, or SAT, has issued certain circulars
concerning employee share options and restricted shares. Under these circulars, our employees
working in China who exercise share options or are granted restricted shares will be subject to PRC
individual income tax. Our PRC subsidiaries have obligations to file documents related to employee
share options or restricted shares with relevant tax authorities and to withhold individual income taxes
of those employees who exercise their share options. If our employees fail to pay or we fail to withhold
their income taxes according to relevant laws and regulations, we may face sanctions imposed by the
tax authorities or other PRC government authorities.
We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund
any cash and financing requirements we may have, and any limitation on the ability of our PRC
subsidiaries to make payments to us could have a material and adverse effect on our ability to
conduct our business.
We are a Cayman Islands holding company and we may rely on dividends and other
distributions on equity paid by our PRC subsidiaries for our cash and financing requirements, including
the funds necessary to pay dividends and other cash distributions to our shareholders and service any
debt we may incur. If any of our PRC subsidiaries incur debt on their own behalf in the future, the
instruments governing the debt may restrict their ability to pay dividends or make other distributions to
us. Under PRC laws and regulations, our WFOE, which are our wholly foreign-owned enterprises, may
pay dividends only out of their respective accumulated profits as determined in accordance with PRC
accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set
aside at least 10% of its after-tax profits each year, if any, to fund a certain statutory reserve fund, until
the aggregate amount of such fund reaches 50% of its registered capital. At its discretion, a wholly
foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting
standards to a staff welfare and bonus fund. The reserve fund and staff welfare and bonus fund cannot
be distributed to us as dividends.
Our PRC subsidiaries generate primarily all of their revenue in RMB, which is not freely
convertible into other currencies. As result, any restriction on currency exchange may limit the ability
of our PRC subsidiaries to use their RMB revenue to pay dividends to us.
The PRC government may continue to strengthen its capital controls, and more restrictions and
a substantial vetting process may be put forward by SAFE for cross-border transactions falling under
both the current account and the capital account. Any limitation on the ability of our PRC subsidiaries
to pay dividends or make other kinds of payments to us could materially and adversely limit our ability
to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or
otherwise fund and conduct our business.
In addition, the Enterprise Income Tax Law (
) and its
implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends
payable by PRC companies to non-PRC-resident enterprises unless otherwise exempted or reduced
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according to treaties or arrangements between the PRC central government and governments of other
countries or regions where the non-PRC-resident enterprises are incorporated.
Governmental control of currency conversion may affect the value of your investment.
The PRC government imposes controls on the convertibility of the RMB into foreign currencies
and, in certain cases, the remittance of currency out of China. We receive substantially all of our
revenue in RMB. Under our current corporate structure, our Cayman Islands holding company
primarily relies on dividend payments from our PRC subsidiaries to fund any cash and financing
requirements we may have. Under existing PRC foreign exchange regulations, payments of current
account items, including profit distributions, interest payments and trade and service-related foreign
exchange transactions, can be made in foreign currencies without prior approval of SAFE by
complying with certain procedural requirements. Specifically, under the existing exchange restrictions,
without prior approval of SAFE, cash generated from the operations of our PRC subsidiaries in China
may be used to pay dividends to our company. However, approval from or registration with
appropriate government authorities is required where RMB is to be converted into foreign currency and
remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign
currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of
our PRC subsidiaries and VIE to pay off their respective debt in a currency other than RMB owed to
entities outside China, or to make other capital expenditure payments outside China in a currency other
than RMB. The PRC government may at its discretion restrict access to foreign currencies for current
account transactions in the future. If the foreign exchange control system prevents us from obtaining
sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay
dividends in foreign currencies to our shareholders, including holders of our Shares.
PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and
governmental control of currency conversion may delay or prevent us from using the proceeds of the
Global Offering to make loans or additional capital contributions to our PRC subsidiaries, which
could materially and adversely affect our liquidity and our ability to fund and expand our business.
We are an offshore holding company conducting our operations in China through our PRC
subsidiaries and our VIE. We may make loans to our PRC subsidiaries and VIE subject to the approval
from governmental authorities and foreign exchange loan registrations and limitation of amount, or we
may make additional capital contributions to our PRC subsidiaries. For example, loans by us to our
PRC subsidiaries to finance their activities cannot exceed statutory limits and must be registered with
the local counterpart of SAFE, and medium or long-term loans by us to our PRC subsidiaries must be
recorded and registered with the NDRC. If we provide funding to our wholly foreign-owned
subsidiaries through shareholder loans, in the event that the foreign debt management mechanism as
provided in the Administrative Measures for Foreign Debts Registration (
) and
other relevant rules applies, the balance of such loans cannot exceed the difference between the total
investment and the registered capital of the subsidiaries and we will need to register such loans with
the SAFE or its local branches. In addition, a foreign-invested enterprise shall use its capital pursuant
to the principle of authenticity and self-use within its business scope.
SAFE promulgated the Circular of the State Administration of Foreign Exchange on Reforming
the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-Invested
Enterprises (
), or SAFE
Circular 19, effective June 2015. According to SAFE Circular 19, the flow and use of the RMB capital
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converted from foreign currency-denominated registered capital of a foreign-invested company is
regulated such that RMB capital may not be used for equity investments, the issuance of RMB
entrusted loans, the repayment of inter-enterprise loans or the repayment of banks loans that have been
transferred to a third party. SAFE Circular 19 may significantly limit our ability to transfer any foreign
currency we hold, including the net proceeds from the Global Offering, to our PRC subsidiaries, which
may adversely affect our liquidity and our ability to fund and expand our business in China.
We may not be able to complete the necessary government registrations or obtain the necessary
government approvals on a timely basis, if at all, with respect to future loans to our PRC subsidiaries or
VIE or future capital contributions by us to our PRC subsidiaries. If we fail to complete such
registrations or obtain such approvals, our ability to use the proceeds we expect to receive from the
Global Offering and to capitalize or otherwise fund our PRC operations may be negatively affected,
which could materially and adversely affect our liquidity and our ability to fund and expand our
business.
If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification
could result in unfavorable tax consequences to us and our non-PRC shareholders.
Under the PRC Enterprise Income Tax Law (
) and its
implementation rules, an enterprise established outside of the PRC with “de facto management body”
within China is considered a “resident enterprise” and will be subject to the enterprise income tax on
its global income at the rate of 25%. The implementation rules define the term “de facto management
body” as the body that exercises full and substantial control and overall management over the business,
productions, personnel, accounts and properties of an enterprise. In 2009, the SAT issued the Circular
of the State Administration of Taxation on Issues Relating to Identification of PRC-Controlled
Overseas Registered Enterprises as Resident Enterprises in Accordance With the De Facto Standards
of Organizational Management (
֛
), or SAT Circular 82, which provides certain specific criteria for
determining whether the “de facto management body” of a PRC-controlled enterprise that is
incorporated offshore is located in China. Although this circular only applies to offshore enterprises
controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or
foreigners, the criteria set forth in the circular may reflect SAT’s general position on how the “de facto
management body” text should be applied in determining the tax resident status of all offshore
enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC
enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de
facto management body” in China and will be subject to PRC enterprise income tax on its global
income only if all of the following conditions are met: (i) the primary location of the day-to-day
operational management is in China; (ii) decisions relating to the enterprise’s financial and human
resource matters are made or are subject to approval by organizations or personnel in China; (iii) the
enterprise’s primary assets, accounting books and records, company seals, and board and shareholder
resolutions, are located or maintained in China; and (iv) at least 50% of voting board members or
senior executives habitually reside in China.
The tax resident status of an enterprise is subject to determination by the PRC tax authorities
and uncertainties remain with respect to the interpretation of the term “de facto management body”. If
the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax
purposes, we could be subject to PRC tax at a rate of 25% on our worldwide income, which could
materially reduce our net income, and we may be required to withhold a 10% withholding tax from
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dividends we pay to our shareholders that are non-resident enterprises (or 20% in the case of
non-resident individuals). In addition, non-resident enterprise shareholders may be subject to PRC tax
at a rate of 10% on gains realized on the sale or other disposition of our Shares, if such income is
treated as sourced from within China. Furthermore, if we are deemed a PRC resident enterprise, any
gain realized on the transfer of our Shares by individual shareholders or holders of our Shares may be
subject to PRC tax at a rate of 20%. Any PRC tax imposed on dividends or gains may be subject to a
reduction under an applicable tax treaty. However, it is unclear whether non-PRC shareholders of our
company would be able to obtain the benefits of any tax treaties between their country of tax residence
and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the
returns on your investment in our Shares.
We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises
by their non-PRC holding companies.
In February 2015, the SAT issued the Public Notice Regarding Certain Enterprise Income Tax
Matters on Indirect Transfer of Properties by Non-Resident Enterprises (
͏Άุ
ʮѓ), or SAT Bulletin 7. SAT Bulletin 7 extends its tax
jurisdiction to not only indirect transfers but also transactions involving transfer of other taxable assets,
through the offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7
provides certain criteria on how to assess reasonable commercial purposes and has introduced safe
harbors for internal group restructurings and the purchase and sale of equity through a public securities
market. SAT Bulletin 7 also brings challenges to both the foreign transferor and transferee (or other
person who is obligated to pay for the transfer) of the taxable assets. Where a non-resident enterprise
conducts an “indirect transfer” by transferring the taxable assets indirectly by disposing of the equity
interests of an overseas holding company, the non-resident enterprise being the transferor, or the
transferee, or the PRC entity which directly owns the taxable assets may report to the relevant tax
authority such indirect transfer. Using a “substance over form” principle, the PRC tax authority may
disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose
and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains
derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or
other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes,
currently at a tax rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the
transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to
withhold the taxes and the transferor fails to pay the taxes. However, according to the aforesaid safe
harbor rule, the PRC tax would not be applicable to the transfer by any non-resident enterprise of
Shares of the Company acquired and sold on public securities markets.
On October 17, 2017, the SAT issued the Public Notice on Issues Relating to Withholding at
Source of Income Tax of Non-resident Enterprises (
੻೼๕
ʮѓ), or the SAT Bulletin 37, which came into effect on December 1, 2017.
According to SAT Bulletin 37, where the non-resident enterprise fails to declare its tax payable
pursuant to Article 39 of the Enterprise Income Tax Law of the PRC (
੻
), the tax authority may order it to pay its tax due within required time limits, and the
non-resident enterprise shall declare and pay its tax payable within such time limits specified by the tax
authority. If the non-resident enterprise voluntarily declares and pays its tax payable before the tax
authority orders it to do so, it shall be deemed that such enterprise has paid its tax payable in time.
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We face uncertainties on the reporting and consequences of future private equity financing
transactions, share exchanges or other transactions involving the transfer of shares in our company by
investors that are non-PRC resident enterprises. The PRC tax authorities may pursue such non-resident
enterprises with respect to a filing or the transferees with respect to withholding obligation and request
our PRC subsidiaries to assist in the filing. As a result, we and non-resident enterprises in such
transactions may become at risk of being subject to filing obligations or being taxed under SAT
Bulletin 7 and SAT Bulletin 37, and may be required to expend valuable resources to comply with
them or to establish that we and our non-resident enterprises should not be taxed under these
regulations, which may have a material adverse effect on our financial condition and results of
operations.
It may be difficult to effect service of process upon us or our Directors or executive officers who
reside in China or to enforce against them in China any judgments obtained from non-PRC courts.
All of our executive Directors and executive officers reside within China, and substantially all
of our assets are located within China. Therefore, it may be difficult for investors to effect service of
process upon us or our executive Directors and officers inside China or to enforce against us or them in
China any judgments obtained from non-PRC courts. China does not have treaties providing for the
reciprocal recognition and enforcement of judgments of courts of the Cayman Islands and many other
countries and regions. Therefore, recognition and enforcement in China of judgments of a court in any
of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision
may be difficult or impossible.
On July 14, 2006, Hong Kong and China entered into the Arrangement on Reciprocal
Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the
Mainland and of the Hong Kong Special Administrative Region Pursuant to Choice of Court
Agreements Between Parties Concerned (
ʝႩ̙ձੂБ຅ԫɛ՘ᙄ
τર), or the 2006 Arrangement, and promulgated on July 3, 2008, pursuant
to which a party with a final court judgment rendered by a Hong Kong court requiring payment of
money in a civil and commercial case pursuant to a choice of court agreement in writing may apply for
recognition and enforcement of the judgment in China. Similarly, a party with a final judgment
rendered by a PRC court requiring payment of money in a civil and commercial case pursuant to a
choice of court agreement in writing may apply for recognition and enforcement of the judgment in
Hong Kong. A choice of court agreement in writing is defined as any agreement in writing entered into
between parties after the effective date of the 2006 Arrangement in which a Hong Kong court or a PRC
court is expressly designated as the court having sole jurisdiction for the dispute. Therefore, it is not
possible to enforce a judgment rendered by a Hong Kong court in China if the parties in dispute have
not agreed to enter into a choice of court agreement in writing. Although the 2006 Arrangement
became effective on August 1, 2008, the outcome and effectiveness of any action brought under the
2006 Arrangement may still be uncertain.
On January 18, 2019, the Supreme People’s Court of the PRC and the government of the Hong
Kong Special Administrative Region entered into the Arrangement on Reciprocal Recognition and
Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the
Hong Kong Special Administrative Region (
ࣩ
τર), or the 2019 Arrangement, which seeks to establish a bilateral legal mechanism that
provides clarity and certainty for the recognition and enforcement of judgments in a wider range of
civil and commercial matters between Hong Kong and mainland China, based on criteria other than a
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RISK FACTORS
written choice of court agreement. The 2006 Arrangement will be superseded upon the effectiveness of
the 2019 Arrangement. Although the 2019 Arrangement has been signed, it remains unclear as to its
effective date and uncertain as to the outcome and effectiveness of any action brought under the 2019
Arrangement.
It may be difficult for overseas regulators to conduct investigations or collect evidence within China.
Shareholder claims or regulatory investigations that are common in common law jurisdictions
(including securities law class actions and fraud claims) generally are difficult to pursue as a matter of
law or practicality in China. For example, in China, there are significant legal and other obstacles to
providing information needed for regulatory investigations or litigation initiated outside China.
Furthermore, according to Article 177 of the PRC Securities Law (
), or
Article 177, which became effective in March 2020, no overseas securities regulator may directly
conduct investigations or collect evidence and no entities or individuals may provide documents or
materials in connection with securities activities without proper authorization as stipulated under
Article 177. While detailed interpretation of or implementation rules under Article 177 have yet to be
promulgated, the inability of an overseas securities regulator to directly conduct investigations or
collect evidence within China may further increase difficulties faced by you in protecting your
interests.
RISKS RELATED TO THE GLOBAL OFFERING
There has been no public market for our Shares prior to the Global Offering, and you may not be
able to resell our Shares at or above the price you paid, or at all.
Prior to the completion of the Global Offering, there has been no public market for our Shares.
There can be no guarantee that an active trading market for our Shares will develop or be sustained
after completion of the Global Offering. The Offer Price is the result of negotiations between our
Company and the Sole Overall Coordinator (for itself and on behalf of the Underwriters), which may
not be indicative of the price at which our Shares will be traded following completion of the Global
Offering. The market price of our Shares may drop below the Offer Price at any time after completion
of the Global Offering.
The trading price of the Shares may be volatile, which could result in substantial losses to you.
In addition, the trading price of our Shares may be volatile and could fluctuate widely in
response to factors beyond our control, including general market conditions of the securities markets in
Hong Kong, China, the United States and elsewhere in the world. In particular, the performance and
fluctuation of the market prices of other companies with business operations located mainly in China
that have listed their securities in Hong Kong may affect the volatility in the price of and trading
volumes for our Shares. A number of China-based companies have listed their securities, and some are
in the process of preparing for listing their securities, in Hong Kong. Some of these companies have
experienced significant volatility, including significant price declines after their initial public offerings.
The trading performances of the securities of these companies at the time of or after their offerings
may affect the overall investor sentiment towards China-based companies listed in Hong Kong and
consequently may impact the trading performance of our Shares. These broad market and industry
factors may significantly affect the market price and volatility of our Shares, regardless of our actual
operating performance, and may result in losses on your investment in our Shares.
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RISK FACTORS
The actual or perceived sale or availability for sale of substantial amounts of our Shares, especially
by our directors, executive officers and substantial shareholders, could adversely affect the market
price of our Shares.
Future sales of a substantial number of our Shares, especially by our directors, executive
officers and substantial shareholders, or the perception or anticipation of such sales, could negatively
impact the market price of our Shares in Hong Kong and our ability to raise equity capital in the future
at a time and price that we deem appropriate.
The Shares held by our shareholders are subject to certain lock-up periods beginning on the
date on which trading in our Shares commences on the Stock Exchange. While we currently are not
aware of any intention of such persons to dispose of significant amounts of their Shares after the expiry
of the lock-up periods, we cannot assure you that they will not dispose of any Shares they may own
now or in the future. Meanwhile, if any of our Shareholders breaches the lock-up restrictions or is
released from such restrictions, they may decide to dispose the Shares they own, which, in turn, may
adversely affect the market price of our Shares.
You will incur immediate and substantial dilution and may experience further dilution in the future.
As the Offer Price of Shares is higher than the net tangible book value per share of our Shares
immediately prior to the Global Offering, purchasers of our Shares in the Global Offering will
experience an immediate dilution. If we issue additional Shares in the future, purchasers of our Shares
in the Global Offering may experience further dilution in their shareholding percentage.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable
research about our business, or if they adversely change their recommendations regarding our
Shares, the market price for our Shares and trading volume could decline.
The trading market for our Shares will depend in part on the research and reports that securities
or industry analysts publish about us or our business. If research analysts do not establish and maintain
adequate research coverage or if one or more of the analysts who covers us downgrades our Shares or
publishes inaccurate or unfavorable research about our business, the market price for our Shares would
likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports
on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market
price or trading volume for our Shares to decline.
We have no experience operating as a public company.
We have no experience conducting our operations as a public company. After we become a
public company, we may face enhanced administrative and compliance requirements, which may result
in substantial costs.
In addition, since we are becoming a public company, our management team will need to
develop the expertise necessary to comply with the numerous regulatory and other requirements
applicable to public companies, including requirements relating to corporate governance, listing
standards and securities and investor relationships issues. As a public company, our management will
have to evaluate our internal controls system with new thresholds of materiality, and to implement
necessary changes to our internal controls system. We cannot guarantee that we will be able to do so in
a timely and effective manner.
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RISK FACTORS
We cannot assure you that we will declare and distribute any amount of dividends in the future and
you may have to rely on price appreciation of our Shares for return on your investment.
We currently intend to retain most, if not all, of our available funds and any future earnings to
fund the development and growth of our business. As a result, we have not yet adopted a dividend
policy with respect to future dividends. Therefore, you should not rely on an investment in our Shares
as a source for any future dividend income.
Our board of directors has discretion as to whether to distribute dividends, subject to certain
restrictions under Cayman Islands law, namely that our Company may only pay dividends either out of
profits or share premium account, and provided always that in no circumstances may a dividend be
paid if this would result in our Company being unable to pay its debts at they fall due in the ordinary
course of business. In addition, our shareholders may by ordinary resolution declare a dividend, but no
dividend may exceed the amount recommended by our board of directors. Even if our board of
directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any,
will depend on, among other things, our future results of operations and cash flow, our capital
requirements and surplus, the amount of distributions, if any, received by us from our subsidiary, our
financial condition, contractual restrictions and other factors deemed relevant by our board of directors.
Accordingly, the return on your investment in our Shares will likely depend entirely upon any future
price appreciation of our Shares. There is no guarantee that our Shares will appreciate in value or even
maintain the price at which you purchased the Shares. You may not realize a return on your investment
in our Shares and you may even lose your entire investment in our Shares.
There can be no assurance of the accuracy or completeness of certain facts, forecasts and other
statistics obtained from various government publications, market data providers and other
independent third-party sources, including the industry expert reports, contained in this document.
This document, particularly “Industry overview”, contains information and statistics relating to
the online audio market. Such information and statistics have been derived from third-party reports,
either commissioned by us or publicly accessible and other publicly available sources. Information
from government sources has not been independently verified by us, the Joint Representatives, the Sole
Overall Coordinator, the Sole Global Coordinator, the Sole Sponsor, the Joint Bookrunners, the Joint
Lead Managers, the Underwriters or any other party involved in the Global Offering, and no
representation is given as to its accuracy. You should therefore not place undue reliance on such
information. In addition, we cannot assure you that such information is stated or compiled on the same
basis or with the same degree of accuracy as similar statistics presented elsewhere. In any event, you
should consider carefully the importance placed on such information or statistics.
You may face difficulties in protecting your interests, and your ability to protect your rights through
Hong Kong courts may be limited, because we are incorporated under Cayman Islands law.
We are an exempted company incorporated under the laws of the Cayman Islands with limited
liability. Our corporate affairs are governed by our memorandum and articles of association, the
Companies Act (2023 Revision) of the Cayman Islands, which we refer to as the Companies Act, and
the common law of the Cayman Islands. The rights of shareholders to take action against our directors,
actions by our minority shareholders and the fiduciary duties of our directors to us under Cayman
Islands law are to a large extent governed by the common law of the Cayman Islands. The common
law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the
Cayman Islands as well as from the common law of England, the decisions of whose courts are of
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RISK FACTORS
persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our
shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly
established as they would be under statutes or judicial precedent in some jurisdictions. In particular, the
Cayman Islands has a less developed body of securities laws than Hong Kong, Hong Kong has more
fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition,
Cayman Islands companies may not have standing to initiate a shareholder derivative action in Hong
Kong courts.
Shareholders of Cayman Islands exempted companies like us have no general rights under
Cayman Islands law to inspect corporate records (other than copies of the memorandum and articles of
association, the register of mortgages and charges and any special resolutions passed by the
shareholders) or to obtain copies of lists of shareholders of these companies. Our directors have
discretion under our post-offering articles of association that will become effective immediately prior
to completion of the Global Offering to determine whether or not, and under what conditions, our
corporate records may be inspected by our shareholders, save that any register held in Hong Kong shall
during normal business hours (subject to such reasonable restrictions as the Board may impose) be
open to inspection by our shareholder without charge and any other person on payment of a fee of such
amount not exceeding the maximum amount as may from time to time be permitted under the Listing
Rules as the Board may determine for each inspection. This may make it more difficult for you to
obtain the information needed to establish any facts necessary for a shareholder motion or to solicit
proxies from other shareholders in connection with a proxy contest.
As a result of all of the above, our public shareholders may have more difficulty in protecting
their interests in the face of actions taken by management, members of the board of directors or
substantial shareholders than they would as public shareholders of a company incorporated in Hong
Kong. For a discussion of significant differences between the provisions of the Companies Act and the
laws applicable to companies incorporated in Hong Kong, see “Summary of the Constitution of Our
Company and Cayman Islands Company Law” in Appendix III to this document.
You should read the entire document carefully and should not rely on any information contained in
press articles or other media regarding us and the Global Offering.
We strongly caution you not to rely on any information contained in press articles or other
media regarding us and the Global Offering. Prior to the publication of this document, there has been
press and media coverage regarding us and the Global Offering. Such press and media coverage may
include references to certain information that does not appear in this document, including certain
operating and financial information and projections, valuations and other information. We have not
authorized the disclosure of any such information in the press or media and do not accept any
responsibility for any such press or media coverage or the accuracy or completeness of any such
information or publication. We make no representation as to the appropriateness, accuracy,
completeness or reliability of any such information or publication. To the extent that any such
information is inconsistent or conflicts with the information contained in this document, we disclaim
responsibility for it and you should not rely on such information.
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RISK FACTORS
There will be a time gap of several business days between pricing and trading of our Shares offered
in the Global Offering. Holders of our Shares are subject to the risk that trading prices of our
Shares could fall during the period before trading of our Shares begins.
The Offer Price of our Shares is expected to be determined on the Price Determination Date.
However, our Shares will not commence trading on the Hong Kong Stock Exchange until they are
delivered, which is expected to be five Hong Kong business days after the pricing date. As a result,
investors may not be able to sell or deal in our Shares during that period. Accordingly, holders of our
Shares are subject to the risk that the price of our Shares could fall before trading begins as a result of
unfavorable market conditions, or other adverse developments, that could occur between the time of
sale and the time trading begins.
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WAIVERS AND EXEMPTIONS
In preparation for the Listing, we have sought the following waivers from strict compliance
with the Listing Rules and exemptions from the Companies (Winding Up and Miscellaneous
Provisions) Ordinance.
WAIVER IN RESPECT OF MANAGEMENT PRESENCE IN HONG KONG
Pursuant to Rule 8.12 of the Listing Rules, an issuer must have a sufficient management
presence in Hong Kong. This will normally mean that at least two of its executive directors must be
ordinarily resident in Hong Kong. We do not have sufficient management presence in Hong Kong for
the purposes of Rule 8.12 of the Listing Rules.
Our Group’s management headquarters, senior management, business operations and assets are
primarily based outside Hong Kong. The Directors consider that the appointment of executive directors
who will be ordinarily resident in Hong Kong would not be beneficial to, or appropriate for, our Group
and therefore would not be in the best interests of our Company or the Shareholders as a whole.
Accordingly, we have applied for, and the Stock Exchange has granted, a waiver from strict
compliance with Rule 8.12 of the Listing Rules.
We will ensure that there is an effective channel of communication between the Stock
Exchange and us by way of the following arrangements:
(a) pursuant to Rule 3.05 of the Listing Rules, we have appointed and will continue to
maintain two authorized representatives who shall act at all times as the principal channel
of communication with the Stock Exchange. Each of our authorized representatives will be
readily contactable by the Stock Exchange by telephone and/or e-mail to deal promptly
with enquiries from the Stock Exchange. Both of our authorized representatives are
authorized to communicate on our behalf with the Stock Exchange. At present, our two
authorized representatives are Mr. Wang and Mr. Huang Weibo (
تas the
designated primary authorized representative).
(b) pursuant to Rule 3.20 of the Listing Rules, each Director has provided their contact
information to the Stock Exchange and to the authorized representatives. This will ensure
that the Stock Exchange and the authorized representatives should have means for
contacting all Directors promptly at all times as and when required;
(c) we will endeavor to ensure that each Director who is not ordinarily resident in Hong Kong
must possess or can apply for valid travel documents to visit Hong Kong and can meet
with the Stock Exchange within a reasonable period; and
(d) pursuant to Rules 3A.19 of the Listing Rules, we have retained the services of Guotai
Junan Capital Limited as compliance adviser (the “ Compliance Adviser ”), who will act
as an additional channel of communication with the Stock Exchange.
WAIVER IN RESPECT OF JOINT COMPANY SECRETARIES
Pursuant to Rules 3.28 and 8.17 of the Listing Rules, the company secretary of a listed
company must be an individual who, by virtue of their academic or professional qualifications or
relevant experience, is, in the opinion of the Stock Exchange, capable of discharging the functions of
company secretary.
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WAIVERS AND EXEMPTIONS
Pursuant to Note 1 to Rule 3.28 of the Listing Rules, the Stock Exchange considers the
following academic or professional qualifications to be acceptable:
(a) a member of The Hong Kong Institute of Chartered Secretaries;
(b) a solicitor or barrister as defined in the Legal Practitioners Ordinance (Chapter 159 of the
Laws of Hong Kong); and
(c) a certified public accountant as defined in the Professional Accountants Ordinance
(Chapter 50 of the Laws of Hong Kong).
Pursuant to Note 2 to Rule 3.28 of the Listing Rules, in assessing “relevant experience”, the
Stock Exchange will consider the individual’s:
(a) length of employment with the issuer and other issuers and the roles they played;
(b) familiarity with the Listing Rules and other relevant law and regulations including the
Securities and Futures Ordinance, Companies Ordinance, Companies (Winding Up and
Miscellaneous Provisions) Ordinance and the Takeovers Code;
(c) relevant training taken and/or to be taken in addition to the minimum requirement under
Rule 3.29 of the Listing Rules; and
(d) professional qualifications in other jurisdictions.
Our Company appointed Mr. Huang Weibo (
تand Ms. Lai Siu Kuen (ࢇ)
“(Ms. Lai ”), as joint company secretaries. See “Directors and Senior Management—Joint Company
Secretaries” for their biographies.
Ms. Lai is a Chartered Secretary and a Fellow of both The Hong Kong Chartered Governance
Institute (formerly The Hong Kong Institute of Chartered Secretaries) and The Chartered Governance
Institute (formerly The Institute of Chartered Secretaries and Administrators) in the United Kingdom,
and therefore meets the qualification requirements under Rule 3.28 Note 1 of the Listing Rules and is
in compliance with Rule 8.17 of the Listing Rules.
As set out in Code Provision C.6 in Part 2 of the Corporate Governance Code under Appendix
14 to the Listing Rules, the company secretary should be an employee of the Company and have
day-to-day knowledge of the Company’s affairs. The Company’s principal business activities are
outside Hong Kong. There are practical difficulties finding persons who possesses Mr. Huang Weibo’s
day-to-day knowledge of the Company’s affairs while also having the academic and professional
qualifications required. The Company believes that Mr. Huang Weibo, by virtue of his knowledge and
past experience in handling corporate administrative matters of the Company, is capable of discharging
the functions of a joint company secretary. Further, the Company believes that it would be in the best
interests of the Company and the corporate governance of the Group to have as its joint company
secretary a person such as Mr. Huang Weibo, who is an employee of the Company and who has
day-to-day knowledge of the Company’s affairs. Mr. Huang Weibo has the necessary nexus to the
Board and close working relationship with management of the Company in order to perform the
function of a joint company secretary and to take the necessary actions in the most effective and
efficient manner.
Accordingly, while Mr. Huang Weibo does not possess the formal qualifications required of a
company secretary, we have applied for, and the Stock Exchange has granted, a waiver from strict
compliance with the requirements under Rules 3.28 and 8.17 of the Listing Rules.
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WAIVERS AND EXEMPTIONS
Pursuant to Guidance Letter HKEX-GL108-20 issued by the Stock Exchange, the waiver is
granted on two conditions:
(a) Mr. Huang Weibo must be assisted by Ms. Lai, who possesses all the requisite
qualifications and experience required under Rule 3.28 of the Listing Rules and is
appointed as a joint company secretary throughout the three-year waiver period; and
(b) the waiver will be revoked if there are material breaches of the Listing Rules by our
Company.
Prior to the end of the three-year period, the qualifications and experience of Mr. Huang Weibo
and the need for on-going assistance of Ms. Lai will be further evaluated by our Company and our
Company will liaise with the Stock Exchange to enable it to assess whether Mr. Huang Weibo, having
benefited from the assistance of Ms. Lai for the preceding three years, will have acquired the skills
necessary to carry out the duties of company secretary and the relevant experience within the meaning
of Rule 3.28 Note 2 of the Listing Rules so that a further waiver will not be necessary.
WAIVER IN RESPECT OF CONTINUING CONNECTED TRANSACTIONS
We have entered into, and expect to continue, certain transactions that will constitute
continuing connected transactions of our Company under the Listing Rules upon Listing. Accordingly,
we have applied to the Stock Exchange for, and the Stock Exchange has granted, waivers from strict
compliance with Chapter 14A of the Listing Rules. See “Connected Transactions” for further details,
including the conditions for the waiver.
WAIVER AND EXEMPTION IN RESPECT OF THE PRE-IPO SHARE INCENTIVE PLANS
The Listing Rules and the Companies (Winding Up and Miscellaneous Provisions) Ordinance
prescribes certain disclosure requirements in relation to the share options granted by our Company:
(a) Rule 17.02(1)(b) of the Listing Rules stipulates that all the terms of a scheme must be
clearly set out in this document. Our Company is also required to disclose in this
document full details of all outstanding shares and their potential dilution effect on the
shareholdings upon listing as well as the impact on the earnings per share arising from the
exercise of such outstanding shares.
(b) Paragraph 27 of Part A of Appendix 1 to the Listing Rules requires our Company to set
out in this document particulars of any capital of any member of our Group that is under
option, or agreed conditionally or unconditionally to be put under option, including the
consideration for which the option was or will be granted and the price and duration of the
option, and the name and address of the grantee.
(c) Paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance requires our Company to set out in this document,
among other things, details of the number, description and amount of any shares in or
debentures of our Company which any person has, or is entitled to be given, an option to
subscribe for, together with the certain particulars of the option, namely the period during
which it is exercisable, the price to be paid for shares or debentures subscribed for under it,
the consideration (if any) given or to be given for it or for the right to it and the names and
addresses of the persons to whom it was given.
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WAIVERS AND EXEMPTIONS
As of the Latest Practicable Date, we had granted 23,002,575 options that remain outstanding
under the Pre-IPO Share Incentive Plans to 373 grantees to subscribe for an aggregate of 23,002,575
Shares, representing approximately 4.38% of the total number of Shares in issue immediately after
completion of the Global Offering (assuming the Presumptions). See “Statutory and General
Information—Pre-IPO Share Incentive Plans” in Appendix IV to this Prospectus for details.
Our Company has applied to the Stock Exchange and the SFC respectively for: (i) a waiver
from strict compliance with the disclosure requirements under Rule 17.02(1)(b) of, and paragraph 27 of
Appendix 1A to, the Listing Rules and the condition to make available a full list of grantees with all
the particulars required under Rule 17.02(1)(b) of, and paragraph 27 of Part A of Appendix 1 to, the
Listing Rules in relation to the options granted under the Pre-IPO Share Incentive Plans (the “ ESOP
Waiver”); and (ii) a certificate of exemption under section 342A of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance exempting the Company from strict compliance with the
disclosure requirements under paragraph 10(d) of Part I of the Third Schedule to the Companies
(Winding Up and Miscellaneous Provisions) Ordinance in relation to the options granted under the
Pre-IPO Share Incentive Plans (the “ ESOP Exemption”) for the following reasons:
(a) as of the Latest Practicable Date, our Company has granted options that remain
outstanding under the Pre-IPO Share Incentive Plans to 373 grantees. Strict compliance
with such disclosure requirements in setting out full details of all the grantees under the
Pre-IPO Share Incentive Plans in this document would be costly and unduly burdensome
for our Company in light of a significant increase in cost and timing for information
compilation, preparation and printing of this Prospectus;
(b) the grant and exercise in full of the shares under the Pre-IPO Share Incentive Plans would
not cause any material adverse impact in the financial position of our Company;
(c) non-compliance with the above disclosure requirements would not prevent our Company
from providing its potential investors with an informed assessment of the activities, assets,
liabilities, financial position, management and prospects of our Company; and
(d) material information relating to the options (and underlying shares) under the Pre-IPO
Share Incentive Plans will be disclosed in this Prospectus, including the total number of
Shares subject to the Pre-IPO Share Incentive Plans, the exercise price per Share, the
potential dilution effect on the shareholding and impact on earnings per Share upon full
exercise of the share options granted under the Pre-IPO Share Incentive Plans. Our
Directors consider that the information that is reasonably necessary for the potential
investors to make an informed assessment of our Company in their investment decision
making process has been included in this Prospectus.
In light of the above, the Directors are of the view that the grant of the ESOP Waiver and the
ESOP Exemption will not prejudice the interests of the investing public.
The Stock Exchange has granted the ESOP Waiver on the conditions that:
(a) for options granted under the Pre-IPO Share Incentive Plans to (i) our Directors and the
senior management and other connected persons of our Company, (ii) our consultants, and
(iii) other grantees who have been granted options to subscribe for 350,000 Shares or
more, disclosure be made on an individual basis, including all the particulars required
under Rule 17.02(1)(b) of, and paragraph 27 of Appendix 1A to, the Listing Rules;
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WAIVERS AND EXEMPTIONS
(b) in respect of the options granted under the Pre-IPO Share Incentive Plans to other grantees
(being other than those set out in (a) above), disclosure be made, on an aggregate basis,
according to the ranges of number of Shares underlying outstanding options in: (i) 0 Share
to 27,999 Shares, and (ii) 28,000 Shares to 349,000 Shares, of (1) their aggregate number
of grantees and number of Shares subject to the options; (2) the consideration paid for the
grant of the options; and (3) the exercise period and the exercise price for the options
granted;
(c) a full list of the grantees under the Pre-IPO Share Incentive Plans (including the persons
referred to in (a) above who have been granted options to subscribe for Shares), containing
full particulars required under Rule 17.02(1)(b) and paragraph 27 of Appendix 1A of the
Listing Rules, will be made available for public inspection in accordance with the section
headed “Documents delivered to the Registrar of Companies and available on display—
Document available for inspection” in Appendix V to this Prospectus;
(d) the dilutive effect and impact on earnings per Share upon the full exercise of the options
granted under the Pre-IPO Share Incentive Plans be disclosed;
(e) a summary of the major terms of the Pre-IPO Share Incentive Plans be disclosed;
(f) the particulars of the waiver be disclosed in the Prospectus; and
(g) the grant of the ESOP Exemption.
The SFC has granted the ESOP Exemption on the conditions that:
(a) for options granted under the Pre-IPO Share Incentive Plans to (i) our Directors and the
senior management and other connected persons of our Company, (ii) our consultants, and
(iii) other grantees who have been granted options to subscribe for 350,000 Shares or
more, disclosure be made on an individual basis, including all the particulars required
under paragraph 10 of Part I of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance;
(b) in respect of the options granted under the Pre-IPO Share Incentive Plans to other grantees
(being other than those set out in (a) above), disclosure be made on an aggregate basis,
categorized into lots based on the number of Shares underlying each individual grant,
being: (i) 0 Share to 27,999 Shares, and (ii) 28,000 Shares to 349,999 Shares. For each lot
of Shares, the following disclosures will be made on the aggregate basis: (1) the aggregate
number of grantees and number of Shares subject to the options; (2) the consideration paid
for the grant of options; and (3) the exercise period and exercise price for the options
granted; and
(c) a full list of the grantees under the Pre-IPO Share Incentive Plans (including the persons
referred to in (a) above who have been granted options to subscribe for Shares), containing
all the details as required under paragraph 10 of Part I of the Third Schedule to the
Companies (Winding Up and Miscellaneous Provisions) Ordinance, will be made
available for public inspection in accordance with the section headed “Documents
delivered to the Registrar of Companies and available on display—Document available for
inspection” in Appendix V to this Prospectus;
(d) the particulars of the exemption will be disclosed in the Prospectus and the Prospectus will
be issued on or before June 30, 2023.
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WAIVERS AND EXEMPTIONS
CONSENT IN RESPECT OF ALLOCATION OF OFFER SHARES TO CONNECTED
CLIENT OF GF SECURITIES (HONG KONG) BROKERAGE LIMITED
Paragraph 5(1) of Appendix 6 to the Hong Kong Listing Rules provides that, without the prior
written consent of the Hong Kong Stock Exchange, no allocations will be permitted to “connected
clients” of the overall coordinator, any syndicate members or any distributors.
Paragraph 13(7) of the Appendix 6 to the Hong Kong Listing Rules states that “connected
clients” in relation to an exchange participant means any client which is a member of the same group
of companies as such exchange participant.
Fuqing Shengde Calorie Investment Co., Ltd. (
ʮ̡)( “Shengde”) has
agreed to be a cornerstone investor in the Global Offering. For the purpose of the cornerstone
investment, Shengde has engaged GF Securities Asset Management (Guangdong) Co., Ltd. (
ᄿ೯ᗇՎ
༟ପ၍ଣ(؇)ʮ̡), an asset manager that is a qualified domestic institutional investor as
approved by the relevant PRC authority (the “ QDII Manager”), to subscribe for and hold the relevant
Offer Shares on behalf of Shengde. As the QDII Manager is a direct wholly-owned subsidiary of GF
Securities Co., Ltd. (Stock Code: 1776) and GF Securities (Hong Kong) Brokerage Limited, which is a
Joint Bookrunner and Joint Lead Manager, is an indirect wholly-owned subsidiary of GF Securities
Co., Ltd. (Stock Code: 1776). Therefore, each of the QDII Manager and GF Securities (Hong Kong)
Brokerage Limited is a member of the same group of companies ultimately controlled by GF
Securities. Accordingly, the QDII Manager is a “connected client” of GF Securities (Hong Kong)
Brokerage Limited under paragraph 13(7) of Appendix 6 to the Listing Rules.
We have applied to the Stock Exchange for, and the Stock Exchange has granted, a written
consent under paragraph 5(1) of Appendix 6 to the Listing Rules to permit the QDII Manager, which is
a connected client of GF Securities (Hong Kong) Brokerage Limited, to subscribe for and hold the
Offer Shares on behalf of Shengde as a cornerstone investor. For further details, please see
“Cornerstone Investment” in this document.
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INFORMATION ABOUT THIS DOCUMENT AND THE GLOBAL OFFERING
DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS DOCUMENT
This document, for which our Directors (including any proposed director who is named as such
in this Prospectus) collectively and individually accept full responsibility, includes particulars given in
compliance with the Companies (Winding Up and Miscellaneous Provisions) Ordinance, the Securities
and Futures (Stock Market Listing) Rules (Chapter 571V of the Laws of Hong Kong) and the Listing
Rules for the purpose of giving information to the public with regard to our Group. Our Directors
(including any proposed Director who is named as such in this document), having made all reasonable
enquiries, confirm that, to the best of their knowledge and belief, the information contained in this
document is accurate and complete in all material respects and not misleading or deceptive, and there
are no other matters the omission of which would make any statement herein or this document
misleading.
INFORMATION ON THE GLOBAL OFFERING
This document is published solely in connection with the Hong Kong Public Offering, which
forms part of the Global Offering. The Global Offering comprises the Hong Kong Public Offering of
initially 1,083,900 Hong Kong Offer Shares and the International Offering of initially 9,754,700
International Offer Shares (subject, in each case, to reallocation on the basis as set out in “Structure of
the Global Offering” and assuming the Over-allotment Option is not exercised).
The Hong Kong Offer Shares are offered solely on the basis of the information contained and
representations made in this document and the GREEN Application Form and on the terms and subject
to the conditions set out herein and therein. No person is authorized to give any information in
connection with the Global Offering or to make any representation not contained in this document and
the GREEN Application Form, and any information or representation not contained herein must not be
relied upon as having been authorized by our Company, the Sole Sponsor, the Sole Overall
Coordinator, the Sole Global Coordinator, the Joint Bookrunners, the Underwriters, any of their
respective directors, agents, employees or advisors or any other party involved in the Global Offering.
Neither the delivery of this document nor any offering, sale or delivery made in connection
with the Offer Shares should, under any circumstances, constitute a representation that there has been
no change or development reasonably likely to involve a change in our affairs since the date of this
document or imply that the information contained in this document is correct as of any date subsequent
to the date of this document.
Further information regarding the structure of the Global Offering, including its conditions, is
set out in “Structure of the Global Offering” of this document and the procedures for applying for our
Hong Kong Offer Shares are set out in “How to apply for Hong Kong Offer Shares” and in the
GREEN Application Form.
OVER-ALLOTMENT AND STABILIZATION
Details of the arrangement relating to the Over-allotment Option and stabilization are set out
under “Structure of the Global Offering” of this document.
UNDERWRITING
The listing of our Shares on the Stock Exchange is sponsored by the Sole Sponsor and the
Global Offering is managed by the Sole Global Coordinator and the Sole Overall Coordinator. The
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INFORMATION ABOUT THIS DOCUMENT AND THE GLOBAL OFFERING
Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters under the terms of
the Hong Kong Underwriting Agreement and is subject to the Sole Global Coordinator and the Sole
Overall Coordinator, (on behalf of the Underwriters) and us agreeing on the Offer Price on or before
the Price Determination Date. An International Underwriting Agreement relating to the International
Offering is expected to be entered into on or around July 5, 2023, subject to the Offer Price being
agreed. The International Offering will be fully unde rwritten by the International Underwriters under
the terms of the International Underwriting Agreement to be entered into. If, for any reason, the
Offer Price is not agreed among the Sole Global Coordinator and the Sole Overall Coordinator (for
themselves and on behalf of the Underwriters) and us on or before the Price Determination Date, the
Global Offering will not proceed and will lapse. For full information about the Underwriters and the
underwriting arrangements, see “Underwriting”.
RESTRICTIONS ON OFFER AND SALE OF THE SHARES
Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering will
be required to, or be deemed by his/her acquisition of the Hong Kong Offer Shares to, confirm that he/
she is aware of the restrictions on offers and sales of the Hong Kong Offer Shares described in this
document and the GREEN Application Form.
No action has been taken to permit a public offering of the Offer Shares in any jurisdiction
other than Hong Kong, or the distribution of this document and/or the GREEN Application Form in
any jurisdiction other than Hong Kong. Accordingly, without limitation to the following, this document
and/or the GREEN Application Form may not be used for the purpose of, and does not constitute, an
offer or invitation in any jurisdiction or in any circumstances in which such an offer or invitation is not
authorized or to any person to whom it is unlawful to make such an offer or invitation. The distribution
of this document and the offering and sales of the Offer Shares in other jurisdictions are subject to
restrictions and may not be made except as permitted under the applicable securities laws of such
jurisdictions pursuant to registration with or authorization by the relevant securities regulatory
authorities or an exemption therefrom. In particular, the Hong Kong Offer Shares have not been
publicly offered or sold, directly or indirectly, in the PRC or the United States.
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We have applied to the Stock Exchange for the granting of the listing of, and permission to deal
in, (a) the Shares in issue and to be issued pursuant to the Global Offering (including any Shares which
may be issued pursuant to the exercise of the Over-allotment Option), and (b) the Shares to be issued
under the Share Incentive Plans.
Under section 44B(l) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, if the permission for the Shares to be listed on the Stock Exchange pursuant to this
document has been refused before the expiration of three weeks from the date of the closing of the
Global Offering or such longer period not exceeding six weeks as may, within the said three weeks, be
notified to us by or on behalf of the Stock Exchange, then any allotment made on an application in
pursuance of this document shall, whenever made, be void.
COMMENCEMENT OF DEALINGS IN THE SHARES
Dealings in the Shares on the Stock Exchange are expected to commence at 9:00 a.m. on
Wednesday, July 12, 2023. The Shares will be traded in board lots of 100 Shares each. The stock code
of the Shares will be 3650.
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INFORMATION ABOUT THIS DOCUMENT AND THE GLOBAL OFFERING
Save as disclosed in this document, no part of our Share or loan capital is listed on or dealt in
on any other stock exchange and no such listing or permission to list is being or proposed to be sought
on the Stock Exchange or any other stock exchange as of the date of this document. All the Shares will
be registered on our Hong Kong Share Register in order to enable them to be traded on the Stock
Exchange.
SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Subject to the granting of the listing of, and permission to deal in, the Shares on the Stock
Exchange and our compliance with the stock admission requirements of HKSCC, the Shares will be
accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect
from the Listing Date or any other date as determined by HKSCC. Settlement of transactions between
Exchange Participants (as defined in the Listing Rules) is required to take place in CCASS on the
second settlement day after any trading day. All activities under CCASS are subject to the General
Rules of CCASS and CCASS Operational Procedures in effect from time to time. Investors should
seek the advice of their stockbroker or other professional advisor for details of the settlement
arrangements as such arrangements may affect their rights and interests. All necessary arrangements
have been made enabling the Shares to be admitted into CCASS.
HONG KONG REGISTER OF MEMBERS AND HONG KONG STAMP DUTY
Our Company’s principal register of members will be maintained by our principal share
registrar and transfer office, ICS Corporate Services (Cayman) Limited, in the Cayman Islands. All of
the Shares issued pursuant to the Global Offering will be registered on our Company’s Hong Kong
Share Register to be maintained in Hong Kong by our Hong Kong Share Registrar, Computershare
Hong Kong Investor Services Limited. Dealings in the Shares registered in our Company’s Hong Kong
Share Register will be subject to Hong Kong stamp duty. Unless determined otherwise by our
Company, dividends payable in Hong Kong dollars in respect of Shares will be paid to the
Shareholders listed on the Hong Kong Share Register of our Company, by ordinary post, at the
Shareholders’ risk, to the registered address of each Shareholder.
PROFESSIONAL TAX ADVICE RECOMMENDED
Potential investors in the Global Offering are recommended to consult their professional
advisors as to the taxation implications of subscribing for, purchasing, holding or disposing of, and/or
dealing in the Shares or exercising rights attached to them. None of us, the Sole Sponsor, the Sole
Overall Coordinator, the Sole Global Coordinator, the Joint Bookrunners, the Underwriters, any of
their respective directors, officers, employees, agents or representatives or any other person or party
involved in the Global Offering accepts responsibility for any tax effects on, or liabilities of, any
person resulting from the subscription, purchase, holding, disposition of, or dealing in, or the exercise
of any rights in relation to, the Shares.
EXCHANGE RATE CONVERSION
Solely for your convenience, this document contains translations among certain Renminbi
amounts into Hong Kong dollars and of Renminbi amounts into U.S. dollars at specified rates.
Unless indicated otherwise, the translation of Renminbi into Hong Kong dollars and of
Renminbi into U.S. dollars, and vice versa, in this document was made at the following rates:
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INFORMATION ABOUT THIS DOCUMENT AND THE GLOBAL OFFERING
RMB0.9161 to HK$1.00; RMB7.1596 to US$1.00; and HK$7.8153 to US$1.00. No representation is
made that any amounts in Renminbi, Hong Kong dollars or U.S. dollars can be or could have been at
the relevant dates converted at the above rates or any other rates or at all.
LANGUAGE
Translated English names of Chinese laws and regulations, governmental authorities,
departments, entities (including subsidiaries of our Group), institutions, natural persons, facilities,
certificates, titles and the like included in this document and for which no official English translation
exists are unofficial translations for identification purposes only. In the event of any inconsistency, the
Chinese name shall prevail.
ROUNDING
Unless otherwise stated, all the numerical figures are rounded to one or two decimal places.
Any discrepancies in any table or chart between totals and sums of amounts listed therein are due to
rounding.
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DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
Directors
Name Address Nationality
Executive Directors
Mr. Wang Ning ( ˮྐྵ) . . . No. 1201, Unit C, Floor 11, Building 27
No. 28 Anli Road
Chaoyang District
Beijing
PRC
Chinese
Mr. Peng Wei (
ుਬ)..... N o . 601, Unit 2, Floor 6, Building 24
Dong Nei Bei Road
Dongcheng District
Beijing
PRC
Chinese
Mr. Liu Dong (
ᄎ̆) ..... N o . 304, Building 1, Jiuzhoujiayuan
Longyuan Road
Longgang District
Shenzhen City
Guangdong Province
PRC
Chinese
Non-executive Director
Mr. Li Haojun (
ࠏRoom 701, No. 22, Lane 1299
Ding Xiang Road
Pudong New District
Shanghai
PRC
Chinese
Independent non-executive Directors
Ms. Ge Xin (
໤อ) ...... C 2213, Yosemite
Shunyi District
Beijing
PRC
Chinese (Hong Kong)
Mr. Shan Yigang
(
࡝...............)
Building 807, Yujing Garden II
Shunyi District
Beijing
PRC
Chinese
Mr. Wang Haining
(
ˮऎྐྵ) ..............
Room 101, Unit 5, Building 1
89 North Fourth Ring East Road
Chaoyang District
Beijing
PRC
Chinese
See “Directors and Senior Management” for further details.
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DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
Parties Involved in the Global Offering
Sole Sponsor, Sole Overall
Coordinator and Sole Global
Coordinator
China International Capital Corporation Hong Kong
Securities Limited
29/F, One International Finance Center
1 Harbour View Street, Central
Hong Kong
Joint Bookrunners and Joint Lead
Managers
China International Capital Corporation Hong Kong
Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central
Hong Kong
GF Securities (Hong Kong) Brokerage Limited
29-30/F Li Po Chun Chambers
189 Des Voeux Road,
Central, Hong Kong
CCB International Capital Limited
9F, CCB Tower
3 Connaught Road Central
Central
Hong Kong
CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central
Hong Kong
Futu Securities International (Hong Kong) Limited
Unit C1-2, 13/F, United Centre
No.95 Queensway
Hong Kong
Tiger Brokers (HK) Global Limited
1/F, FWD Financial Centre
308 Des Voeux Road
Central
Hong Kong
Legal advisers to our Company As to Hong Kong and U.S. laws
Skadden, Arps, Slate, Meagher & Flom and affiliates
42/F, Edinburgh Tower, The Landmark
15 Queen’s Road Central
Central, Hong Kong
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DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
As to PRC law
Commerce & Finance Law Offices
12-14th Floor, China World Office 2
No. 1 Jianguomenwai Avenue
Beijing, China
As to PRC law in respect of data compliance
Global Law Office
15 & 20/F Tower 1, China Central Place
No. 81 Jianguo Road, Chaoyang District
Beijing, China
As to Cayman Islands law
Harney Westwood & Riegels
3501 The Center
99 Queen’s Road Central
Central, Hong Kong
Legal advisers to the Sole Sponsor
and the Underwriters
As to Hong Kong and U.S. laws
Davis Polk & Wardwell
10/F, The Hong Kong Club Building
3A Chater Road
Central, Hong Kong
As to PRC law
Tian Yuan Law Firm
10/F, Tower B, China Pacific Insurance Plaza
28 Fengsheng Hutong, Xicheng District
Beijing, China
Reporting accountant and
independent auditor
PricewaterhouseCoopers
Certified Public Accountants and Registered Public
Interest Entity Auditor
22/F, Prince’s Building
Central, Hong Kong
Industry consultant China Insights Industry Consultancy Limited
10F, Block B, Jing’an International Center
88 Puji Road, Jing’an District
Shanghai, China
Receiving banks Bank of China (Hong Kong) Limited
1 Garden Road
Hong Kong
Standard Chartered Bank (Hong Kong) Limited
18/F Standard Chartered Tower
388 Kwun Tong Road, Kowloon
Hong Kong
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CORPORATE INFORMATION
Headquarters Building D, Vanke Time Square
No. 9 Wangjing Street, Chaoyang District
Beijing, China
Principal place of business in Hong
Kong
5/F, Manulife Place
348 Kwun Tong Road
Kowloon, Hong Kong
Registered office in the Cayman
Islands
ICS Corporate Services (Cayman) Limited
3-212 Governors Square
23 Lime TreeBay Avenue
P.O. Box 30746, Seven Mile Beach
Grand Cayman KY1-1203
Cayman Islands
Company website
https://keep.com/
(the information contained on this website does not form
part of this document)
Joint company secretaries Mr. Huang Weibo (
ت)
Building D, Vanke Time Square
No. 9 Wangjing Street, Chaoyang District
Beijing, China
Ms. Lai Siu Kuen (
ࢇ()FCG, HKFCG)
5/F, Manulife Place
348 Kwun Tong Road
Kowloon, Hong Kong
Authorized representatives Mr. Wang Ning (
ˮྐྵ)
No. 1201, Unit C, Floor 11, Building 27
No. 28 Anli Road, Chaoyang District
Beijing, China
Mr. Huang Weibo (
ت)
Building D, Vanke Times Center
No. 9 Wangjing Street, Chaoyang District
Beijing, China
Audit committee Ms. Ge Xin (
໤อ) (Chairperson)
Mr. Shan Yigang (࡝)
Mr. Wang Haining ( ˮऎྐྵ)
Remuneration committee Mr. Wang Haining ( ˮऎྐྵ) (Chairperson)
Ms. Ge Xin ( ໤อ)
Mr. Wang Ning ( ˮྐྵ)
Nomination committee Mr. Shan Yigang (࡝)Chairperson)
Mr. Wang Haining ( ˮऎྐྵ)
Mr. Wang Ning ( ˮྐྵ)
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CORPORATE INFORMATION
Principal share registrar and
transfer office
ICS Corporate Services (Cayman) Limited
3-212 Governors Square
23 Lime TreeBay Avenue
P.O. Box 30746, Seven Mile Beach
Grand Cayman KY1-1203
Cayman Islands
Hong Kong Share Registrar Computershare Hong Kong Investor Services Limited
Shops 1712-1716, 17th Floor
Hopewell Centre
183 Queen’s Road East
Wan Chai, Hong Kong
Compliance adviser Guotai Junan Capital Limited
27/F, Low Block
Grand Millennium Plaza
181 Queen’s Road Central
Central, Hong Kong
Principal bank(s) Standard Chartered Bank (Hong Kong) Limited
15/F Payment Center, Standard Chartered Tower
388 Kwun Tong Road
Kowloon, Hong Kong
China Merchants Bank
China Merchants Bank Tower
No. 7088 Shennan Boulevard
Shenzhen, China
China CITIC Bank Corporation Limited
CITIC Tower, No. 10, Guanghua Road
Chaoyang District
Beijing, China
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INDUSTRY OVERVIEW
The information and statistics set out in this section and other sections of this Prospectus
were extracted from the report prepared by China Insights Industry Consultancy Limited, which
was commissioned by us, and from various official government publications and other publicly
available publications. We engaged China Insights Industry Consultancy Limited to prepare the
CIC Report, an independent industry report, in connection with the Global Offering. The
information from official government sources has not been independently verified by us, the Sole
Sponsor and the Sole Overall Coordinator, any of their respective directors and advisers, or any
other persons or parties involved in the Global Offering, and no representation is given as to its
accuracy.
SOURCES OF INFORMATION
We commissioned China Insights Industry Consultancy Limited, an independent market
research consulting firm that is principally engaged in the provision of market research consultancy
services, to conduct a detailed study of the fitness markets in China and globally.
During the preparation of the CIC Report, CIC performed both primary and secondary research,
and obtained knowledge, statistics, information, and industry insights on the industry trends of the
fitness markets in China and globally. Primary research involved discussing the status of the industry
with leading industry participants and industry experts. Secondary research involved reviewing
company reports, independent research reports, and available data based on CIC’s own research
database. In addition, CIC also conducted a survey, or the “CIC Survey” in March 2023 with a total of
1,000 valid samples to study fitness market in China.
The CIC Report was compiled and the expected growth in the global and China’s fitness
markets was estimated based on the following assumptions and factors: (i) that the trend of overall
global social, economic, and political environments is expected to remain stable over the next decade;
(ii) that related key industry drivers are likely to continue to drive the growth of the global and China’s
fitness market during the forecast period; and (iii) that there is no extreme force majeure or set of
industry regulations that may affect the market situation dramatically or fundamentally. The reliability
of the CIC Report may be affected by the accuracy of the foregoing assumptions and factors. To
address the impact of COVID-19 on market forecast, it is assumed that the global economy is expected
to sustain a protracted and moderate growth since 2022. The reliability of the CIC Report may be
affected by the accuracy of the foregoing assumptions and factors.
CIC is an independent consulting firm, which was founded in Hong Kong in 2015. It offers
services include industry consulting service, commercial due diligence, strategic consulting, and so on.
We have agreed to pay a fee of approximately US$206,000 to CIC in connection with the preparation
of the CIC Report. We have extracted certain information from the CIC Report in this section, as well
as in “Summary”, “Risk factors”, “Business”, “Financial information”, and elsewhere in this document
to provide our potential investors with a more comprehensive presentation of the industries where we
operate.
CHINA’S FITNESS MARKET
Driven by growing health awareness, increased access to fitness activities, increased spending
in fitness, and access to more affordable fitness products and services, China’s fitness market is
growing at an accelerated pace. It is expected that online fitness industry will continue to enjoy a
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INDUSTRY OVERVIEW
strong growth with the increasing acceptance of home-gym concept. For the overall fitness industry,
the offline fitness industry was more severely impacted by the COVID-19 as most gyms experienced
prolonged period of shutdown due to the quarantine policies during the pandemic in 2020, 2021 and
2022. In 2020, the market size of offline fitness membership and classes recorded a decrease of 11.9%
in China while the market size of online fitness content segment recorded an increase of 125.9% in
China. Furthermore, COVID-19 in certain major cities in China, including Shanghai and Beijing, also
impacted both the online and offline segments. For offline segment, due to the temporarily lockdown
and quarantine measures taken by the government, offline gyms experienced shut down of an average
of three months in Shanghai and over one month in Beijing in the first half of 2022. For online
segment, COVID-19 mainly resulted in increased users and usage of online fitness platforms.
However, due to the disruptions in supply chain and logistics services, product sales were negatively
impacted by the pandemic.
According to the CIC Report, China had the world’s largest fitness population as of
December 31, 2022. The fitness population in China, which refers to people who engage in fitness
activities more than twice per week, was 374.0 million in 2022 and is expected to reach 463.5 million
by 2027, representing a CAGR of 4.4% from 2022 to 2027. The forecasted CAGR of the fitness
population in China from 2022 to 2027 is significantly higher than those of the United States and
Europe, which are 1.7% and 2.9%, respectively. The following diagram sets forth the historical and
forecasted fitness population in China from 2016 to 2027.
China Fitness Population Penetration Rate
15.8% 17.8% 19.9% 22.0% 24.2% 25.3% 26.5% 28.8% 30.0% 31.4%
China Fitness Population, 2016 – 2027E
27.6%
China Fitness Population
32.9%
219.3
248.9
279.0
310.1
341.5
357.7
374.0
390.4
406.8
423.2
442.4
463.5
2022 2023E2016 2017 2018 2019 2021 2020 2024E 2025E 2026E 2027E
(Million)
Source: the CIC Report
According to the CIC Report, in 2022, the fitness population penetration rate in China, which
represents the fitness population as a percentage of the total population in China, was 26.5%, as
compared to that of 47.8% in the U.S. and 42.5% in Europe. In particular, the gym membership
penetration rate in China was 2.8% in 2022, much lower than that of 19.9% in the U.S. and 7.9% in
Europe. According to the CIC Report, the fitness population penetration rate in China is expected to
reach 32.9% in 2027. According to the CIC Report, China had the world’s largest fitness population of
374.0 million in 2022, which is expected to reach 463.5 million by 2027. The average annual spending
of the fitness population in 2022 was RMB2,518 per person in China, which was much lower than that
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INDUSTRY OVERVIEW
of RMB16,425 in the United States, demonstrating significant growth potential, according to the CIC
Report. At the same time, the market size of the fitness market in China is expected to increase to
RMB2,079.6 billion in 2027 from RMB941.9 billion in 2022, at a CAGR of 17.2%.
Key Growth Drivers of China’s Fitness Market
The significant growth potential of China’s fitness market is driven by the following factors:
Š Increasing Disposable Income: China’s average disposable income per capita increased at
a CAGR of 7.3% from RMB26,000 in 2017 to RMB36,900 in 2022, and is expected to
grow at a CAGR of 8.3% to RMB47,900 in 2025, according to the CIC Report. As the per
capita disposable income in China continues to increase, more people are getting aware of
their physical appearance and increasing health awareness. Such trend is expected to
stimulate the demand for fitness engagement and will drive the further growth of the
market.
Š Expanding Mass-affluent and Emerging Middle Class: Middle-class and mass affluent
population generally have higher income level, higher standard of living, and are more
focused on personal health and have higher willingness to purchase fitness services and
products. According to the CIC Report, China’s mass-affluent and emerging middle class
population, reached 561.9 million in 2020, which signaled an increasing demand for
fitness services and products.
Š Young Population: As younger population in China is generally more well-educated and
seeks to build healthy lifestyle, they tend to have higher interest in purchasing fitness
products and are more engaged in fitness activities. According to the CIC Report, over
50% of the fitness population in China in 2022 were aged between 18 and 30, and the
general young population aged between 18 and 30 in China reached 267.1 million in 2021.
Young population in China has been driving and will continue to drive increasing demand
for fitness products and activities in China.
Š Government Supports: Government policies in China in recent years encouraged more
investment in the fitness industry to strengthen the fitness infrastructure nationwide. For
example, the State Council and China’s Cabinet jointly launched National Fitness
Program, which gives guidelines to deepen sports reform, increase participation in fitness
activities, and promote fitness activities throughout the country. General Administration of
Sport of China also released The 14th Five-Year Plan for Sport Industry Development,
which encourages developing “Internet + Fitness” and “loT+ Fitness” models, increasing
the resources of fitness products and services, optimizing the integration of online and
offline fitness interaction, and promoting home fitness scenarios and online fitness
activities.
China’s fitness market includes: (i) online fitness membership and content, (ii) offline fitness
membership and classes, (iii) smart fitness devices, (iv) fitness gear and apparel, and (v) fitness food.
Much of the future growth of China’s fitness market will be attributable to China’s online fitness
market. In addition, during COVID-19 pandemic, most offline gyms in China experienced temporarily
shut down and limited hours of operation. As a result, more and more people are shifting to online
fitness platform for content and classes which resulted in much higher growth of the online fitness
market compared to that of the offline fitness market. Furthermore, the growing awareness of health
and well-being has also led to increased spending on fitness related services and products. According
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INDUSTRY OVERVIEW
to the CIC Report, China’s online fitness market accounted for 48.4% of the overall fitness market in
China in 2022, and is expected to account for 61.8% in 2027. China’s online fitness market refers to
revenue generated from online fitness memberships and content, and online sales of smart fitness
devices, fitness gear and apparel, and fitness food. The following diagram sets forth the historical and
forecasted market size and breakdown of the fitness market in China from 2016 to 2027.
China Fitness Market Breakdown by Distribution Channel, 2016 – 2027E
20172016
565.8
482.6
2018
750.5
2022
653.6
57.8%
2020 2021 2024E 2023E
1,046.0
2025E 2026E 2027E
2,079.6
61.8%
837.9 855.0
941.9
1,154.0
1,356.8
1,634.3
69.1%
66.0%
64.3%
63.3%
55.8% 53.7%
51.6%
49.6%
44.2%
46.9%
2019
42.2%
38.2%
30.9% 34.0% 35.7%
43.9%
46.3% 48.4% 50.4% 53.1%
56.1%
36.7%
(RMB Billion)
Offline Fitness MarketOnline Fitness Market
20.5% 23.1%
6.5% 10.3%
CAGR
2016-
2022
2022-
2027E
2016-2022 CAGR: 11.8% 2022-2027E CAGR: 17.2%
Source: the CIC Report
CHINA’S ONLINE FITNESS MARKET
Advanced technologies, such as big data and artificial intelligence, and wide digitalization have
been transforming the way people engage with fitness. Supported by increased internet penetration and
digitalization in the fitness industry, the online fitness market in China has been growing rapidly.
According to the CIC Report, the online fitness market in China reached RMB455.6 billion in 2022 and
is expected to increase to RMB1,285.4 billion in 2027, representing a CAGR of 23.1%. In addition, all
sectors within the online fitness market in China are growing faster than the offline fitness market in
China. In particular, according to the CIC Report, the revenue generated from online fitness memberships
and content are expected to grow at a CAGR of 28.5% from 2022 to 2027, significantly higher than the
CAGR of 7.6% for offline fitness memberships and classes for the same period. Similarly, revenue
generated from online fitness gear and apparel is expected to grow at a CAGR of 31.7% from 2022 to
2027, as compared to the CAGR of 11.2% for offline fitness gear and apparel sales for the same period,
according to the CIC Report. The following diagram sets forth the historical and forecasted market size
and breakdown of the online fitness market in China from 2016 to 2027.
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INDUSTRY OVERVIEW
China Online Fitness Market Breakdown by Segment, 2016 – 2027E
11.4%
49.8%
53.5%
31.6%
233.4
29.7%
2016
0.3%
58.1%
56.6%
12.2%
38.0%
0.0%
57.7%
2017 2019
58.4%
7.9%
369.9
11.7%
0.1%
4.6%
0.5%
2018
10.5%
0.2%
44.0%
0.8%
53.7%
58.9%
2020
613.2
6.8%
0.7%
54.3%
2021
55.3%
39.4%
0.0% 0.8%
2022
41.6%
2024E
3.4%
46.0%
4.2%
2023E
51.3%
3.9%
29.8%
0.8%
29.7%
41.1%
3.8%
36.0%
2026E
40.3%
55.3%
3.6%
0.8%
761.4
2025E
149.1
192.3
275.7
396.0
455.6
527.2
944.6
1,285.4
0.9%
2027E
Online fitness gear and apparel (B2C)Online fitness foods Online smart fitness device s (B2C) Online fitness memberships and classes
(RMB Billion)
19.2% 15.5%
CAGR
2016-
2022
2022-
2027E
26.2% 31.7%
3.7% 16.9%
NM 28.5%
Source: the CIC Report
The online fitness population penetration rate refers to the annual average online fitness
monthly active users as a percentage of the average monthly number of fitness population, which refers
to people who engage in fitness activities more than twice per week. In 2022, China’s online fitness
population penetration rate reached 41.3%, as compared to 58.1% in the United States, according to the
CIC Report. As various key factors continue to drive the growth of China’s online fitness market, the
online fitness population penetration rate in China is expected to reach 58.4% by 2027, according to
the CIC Report.
Online Fitness Penetration Rate, 2016 – 2027E
27.5%
20212016
19.5%
20182017 2026E2019 2020
38.5%
2022 2023E 2024E 2025E
14.3%
2027E
34.7%
46.3%
0.6%
26.5%
17.9%
50.9%
35.4%
54.8%
58.1%
41.3%
61.8%
43.9%
76.5%
65.4%
69.1%
48.4%
72.8%
53.2%
58.4%
12.6%
US Online Fitness Penatration Rate China Online Fitness Penatration Rate
Source: the CIC Report
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INDUSTRY OVERVIEW
KEY GROWTH DRIVERS OF CHINA’S ONLINE FITNESS MARKET
The following factors have contributed to, and will continue to drive the growth of China’s
online fitness market:
Š Active internet users and increased dependency on online services: The wide adoption of
smartphones boosted mobile internet user growth in China in the past few years.
According to the CIC Report, the total number of mobile internet users reached
1,029 million with a penetration rate of approximately 73% in 2022. At the same time, the
average daily time spent on mobile apps of China’s mobile internet users also exceeded
250 minutes in 2022, approximately 70% of which were spent on mobile apps for online
content, according to the CIC Report. The well-established mobile internet infrastructure
in China and extensive mobile phone usage enable convenient access to online fitness
content, driving further growth in China’s online fitness population.
Š Prevalence of fitness workouts at home that are suitable for all athletic levels: Affordable
fitness workouts at home have become a compelling alternative to gym memberships,
leading to increased demand for online fitness content. In addition, offline gyms are not
suitable for all, in particular those beginners without experience on using gym equipment
or knowledge of gym workout plans. These people may feel more comfortable exploring
fitness content at home. Online fitness platforms offer a comprehensive solution to address
users’ varying fitness needs and athletic levels. According to the CIC Survey, 89.8% of the
respondents spent more time on online fitness platforms in 2022 compared to 2021.
Š Increasing willingness to pay for fitness content: Gym memberships and offline training
courses have an average price of RMB394 per month in China in 2022, according to the
CIC Report. Online fitness platforms have lower operating costs and offer free fitness
content and more affordable membership subscriptions. Users have gradually realized the
value propositions from online fitness memberships, which offer personalized fitness
curriculums, access to premium fitness content, and discounts on fitness gear and food. In
addition, the young generation also attaches greater importance to fitness and health and
are more willing to pay for online fitness content. As a result, according to the CIC Report,
the online fitness subscription penetration rate was increasing in the past few years and
reached 5.6% in 2022.
Š Availability of professional online fitness content and engaging online fitness
communities: The lack of professional and qualified trainers, particularly in lower-tier
cities, has been a pain point in the fitness industry in China. According to the CIC Report,
the offline gym membership penetration rate in tier-3 and below cities was only 1.4% in
2022, as compared to 5.6% in tier-2 and above cities in China. Online fitness platforms
attract users with easily accessible content developed and demonstrated by fitness
professionals through a variety of formats, such as pre-recorded video courses and live
streaming classes. Furthermore, engaging fitness communities formed on online fitness
platforms create a social and interactive layer to online fitness.
Š Evolving customer behavior: Consumers in China are more receptive to online content and
inclined to purchase products and services through online channels, this trend is more
particularly more prevalent in the younger generation. In addition, there has been growing
mindshare and support for domestic brands especially among the younger generation in
China due to the improvement in overall competitiveness of domestic brands in terms of
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INDUSTRY OVERVIEW
product innovation, design, technology, value for money and customer reputation. Such
evolving consumer mindset and behavior are expected to further drive the growth of
China’s online fitness market.
Trends of China’s Online Fitness Market
The online fitness market in China has been demonstrating the following trends.
Š Higher market concentration: According to the CIC Report, the aggregated MAUs of top
10 online fitness content platforms in 2022 accounted for over 75% of the total users in
China’s online fitness content platforms. It is expected that players with high market
concentration will sustain market positions by attracting and retaining users with high-
quality fitness content offerings.
Š More professional and interactive online fitness content: As online fitness gains a growing
popularity, there will be increasing demand for more professional and specialized content
that can cater to users’ personalized fitness demand. In addition, online fitness content is also
expected to be delivered in various formats, such as structured courses, long videos and short
videos, and live streaming, among others, to provide users with a more interactive and
engaging workout experience.
Š Further integration with fitness hardware: Home fitness hardware products and software-
based fitness content platforms are expected to be further integrated to enable a more robust,
real-time and smart fitness assistant for users.
CHINA’S ONLINE FITNESS MEMBERSHIPS AND CONTENT SECTOR
According to the CIC Report, the annual average MAUs for online fitness memberships and
content grew from approximately 1.4 million in 2016 to 154.6 million in 2022, and is expected to reach
270.6 million by 2027, representing a CAGR of 11.9% from 2022 to 2027. Online fitness memberships
and content refer to fitness workout courses with or without fitness gear and other fitness video content
developed for the fitness population. In comparison, the total number of offline gym members in China is
expected to grow to 75.2 million in 2027 from 56.9 million in 2022, representing a lower CAGR of 5.8%,
according to the CIC Report. The following diagram sets forth the historical and forecasted MAUs of
online fitness memberships and content and offline gym members in China from 2016 to 2027.
China Online Fitness MAU and Offline Gym Member, 2016 – 2027E
30.2 33.0 37.3 43.3 45.9 51.6 56.9 61.5 65.3 67.9 71.1 75.2
1.4
35.7
49.9
85.3
120.7
137.7
154.6
171.4
188.2
204.8
235.2
270.6
2023E20222016 20192017 20212018 2020 2024E 2025E 2026E 2027E
Offline Gym Member Online Fitness MAU
11.1% 5.8%
NM 11.9%
CAGR
2016-
2022
2022-
2027E
(Million)
Source: the CIC Report
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INDUSTRY OVERVIEW
China’s fitness industry is still at the early stage of digitalization. In 2022, the online fitness
subscription penetration rate was 5.6% in China, as compared to 11.5% in the U.S., according to the
CIC Report. Compared with other industries, such as online music and online video, the current online
fitness subscription penetration rate is significantly lower in China. Revenue from online fitness
memberships and content in China are expected to experience strong growth driven by the increasing
online fitness population, greater demand for premium and personalized fitness content and increasing
online fitness subscription penetration rate. According to the CIC Report, the online fitness
memberships and content sector in China is expected to grow from RMB2,984.5 million in 2022 to
RMB10,474.5 million by 2027, at a CAGR of 28.5%, which is the fastest growing sector in China’s
online fitness market.
CHINA’S ONLINE SMART FITNESS DEVICE SECTOR
The online smart fitness device sector in China refers to online sales of smart fitness devices
used for fitness. Key categories of smart fitness devices in China include smart bikes, fitness
wristbands, smart scales, and treadmills. These smart fitness devices typically provide a smart fitness
experience for users based on fitness data. According to the CIC Report, the online sales of smart
fitness devices in China grew from RMB17.0 billion in 2016 to RMB21.2 billion in 2022, representing
a CAGR of 3.7%, and are expected to continue to grow at a CAGR of 16.9% to reach RMB46.1 billion
by 2027. The growing demand for smart fitness devices can be attributed to the increasing demand for
users to keep track of various fitness data, such as heart rate, sleep, calories burnt, and others.
Furthermore, as the fitness population seeks a more immersive and interactive fitness experience, the
industry participants start to offer more fitness solutions that integrate software and hardware, making
smart fitness devices more popular.
CHINA’S ONLINE COMPLEMENTARY FITNESS PRODUCTS SECTOR
The online complementary fitness products sector refers to online sales of (i) fitness gear, such
as dumbbells, yoga mats, kettlebells, and other fitness tools and equipment without smart features,
(ii) fitness apparel, and (iii) fitness food, including meal replacements, fitness nutrition supplements
and pre-prepared fitness meal plans. According to the CIC Report, the online sales of complementary
fitness products in China grew from RMB132.1 billion in 2016 to RMB431.4 billion in 2022,
representing a CAGR of 21.8%, and are expected to grow at a CAGR of 23.3% to reach
RMB1,228.8 billion by 2027. The fitness population increasingly looks to equip themselves with
innovative and functional fitness gear, and complement their workout sessions with fitness food to
optimize training results. In addition, the increasingly personalized fitness curriculums also drive the
demand for personalized fitness gear, apparel and diet programs. The following diagrams set forth the
historical and forecasted market size of online fitness market by sectors in China from 2016 to 2027.
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INDUSTRY OVERVIEW
2,984.5
10,474.5
2016 2022 2027E
0.8
Market size of China’s online
fitness memberships and content,
2016–2027E
RMB Million CAGR
2016-2022
NM
16,978.4
21,161.5
46,104.4
2016 2022 2027E
Market size of China’s online smart
fitness device, 2016–2027E
RMB Million CAGR
2016-2022
3.7%
132,116.5
431,414.3
1,228,817.2
20222016 2027E
Market size of China’s online
complementary fitness products,
2016–2027E
RMB Million CAGR
2016-2022 2022-2027E
21.8% 23.3%
2022-2027E 2022-2027E
28.5% 16.9%
Source: the CIC Report
RAW MATERIAL AND COMPONENTS PRICE ANALYSIS OF CHINA’S ONLINE FITNESS
MARKET
The price of raw material and components of China’s online fitness market varies among
different product categories. For example, the major raw materials and components of smart fitness
devices include motors and chips, among others, while the major raw materials and components of
complementary fitness products include fabric and textile, among others. As most online fitness
platforms tend to focus on fitness content and the operation of platform and outsource the production
and raw material and component purchasing to third-party manufacturers, the fluctuation of the price
of raw materials and components generally has limited impact on online fitness platforms. The cost of
raw materials and components may still be subject to industry-wide shortages at times and may
experience significant commodity pricing fluctuations. In particular, the price of the chips increased
significantly since 2020 due to supply shortage and may continue to grow in the future if shortage
continues.
COMPETITIVE LANDSCAPE
Key constituents in China’s online fitness market include fitness apps, video apps,
livestreaming apps, fitness vloggers, smart fitness device brands and manufacturers, and fitness
product brands. Online fitness platforms may compete with other market players such as video apps
and live streaming apps for users, advertising revenue and fitness product brands and smart fitness
device brands and manufacturers for product sales. Benefiting from the ability to integrate online
contents with offline experience and develop an active fitness community, online fitness platforms
enjoy a favorable competitive advantage over other types of players in the online fitness industry.
In comparison with other online channel such as video apps and livestreaming apps, fitness
training videos from influencers on free video-streaming platforms are typically generated at will as a
type of “content creation” by these individual users who may not possess professional knowledge and
structured training. Nor do they organize their fitness content creation in a systematic manner. Fitness
influencers’ fitness content on other free online platforms also lacks quality and consistency in terms of
video editing, language/subtitles, audio quality, recording background, disruption from advertisement,
video length, among others, which leads to less desirable fitness experience that discourages users to
follow or complete a workout. Meanwhile, the fitness content on online fitness platforms cater into
users’ strong exercise intent when they log on the app and focus on an interactive “work-out”
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INDUSTRY OVERVIEW
experience. These platforms aim to encourage users to actually participate in and complete workout
sessions rather than browsing fitness videos casually.
Major products in the smart fitness device segment include smart bikes, smart wristbands and
treadmills, among others. Major players in the market include online fitness platform, consumer
electronics brands and fitness device brands. Our Company ranked first in smart bikes as of
December 31, 2022 in China in terms of the accumulative GMV of bikes sold.
For complementary fitness products, the market is highly fragmented considering the variety of
products in this segment. Major players are globally well-known sporting goods brands. However, in
certain product categories, there are emerging brands that focus on such niche segment and enjoyed
high growth in recent years. Our Company is China’s largest yoga mat brand in terms of GMV in
2022, with a 18.3% market share in the premium yoga mat market.
Among all the online fitness platforms with launch of fitness apps and offering of online
content, our Company ranked first in China in terms of 12-month average MAUs and 12-month
average monthly subscribing members in 2022, both more than double those of any individual
competitor, according to the CIC Report. In addition, our Company also ranked first among online
fitness platforms in terms of the number of workout sessions in 2022, according to the CIC Report.
Ranking of China’s Online Fitness Platforms in 2022
Ranking Players
12-month average
MAU (million)
12-month average
monthly
subscribing members
(million)
Number of workout
sessions completed
(billion)
1 Our Company 36.4 3.62 2.1
2 Platform A (1) 8.7 0.26 0.5
3 Platform B (2) 7.5 0.51 0.3
4 Platform C (3) 6.1 0.42 0.2
5 Platform D (4) 3.0 0.11 0.1
Source: the CIC Report
Notes:
(1) Founded in 2016, Platform A is an online fitness platform which mainly offers health monitor services along with exercise and online
fitness lessons. Platform A is owned by one of the leading global providers of information and communications technology (ICT)
infrastructure and smart devices. The revenue of the Platform A is mainly from the sales of smart fitness devices.
(2) Founded in 2019, Platform B is an online fitness platform which initially acted as a step counter app and provides rewards for users. It
has launched online fitness lessons and online fitness stores. The revenue of Platform B is mainly from online advertising.
(3) Founded in 2010, Platform C is an online fitness platform that offers online fitness lessons and health monitor services. The revenue of
Platform C is mainly from online advertising.
(4) Founded in 2018, Platform D is an online fitness platform that offers step counter, running records and online fitness lessons. The
revenue of Platform D is mainly from online advertising.
According to the CIC Survey, our Company also ranked highest in the following aspects:
Š Our Company ranked first in terms of brand awareness among fitness apps and smart
fitness device brands, as 77.5% of fitness users in China and 72.7% of smart fitness device
users in China knew of the Keep mobile app.
Š Our Company had the highest market share in online fitness apps market and smart fitness
devices market of 30.8% and 25.7%, respectively, among fitness population in China.
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INDUSTRY OVERVIEW
Key Entry Barriers to China’s Online Fitness Market
The online fitness market in China demonstrates the following entry barriers.
Š Massive user base and active community . The capability to develop a large and vibrant
user base and engaging community is one of the key entry barriers to China’s online
fitness market. Interaction among users that are gathered by common topics based on the
community’s professional content can generate enormous influences in terms of boosting
brand affinity and helping appeal and retain more users. An online fitness community can
outperform its peers if it has a vast number of active users. By properly stimulating users’
enthusiasm on online fitness platforms, coupled with premium content, market participants
can gradually foster a vibrant community culture, thereby enhancing user loyalty and
attracting more potential users, which in turn generates a positive feedback loop.
Š Strong brand recognition . It is difficult for online platforms to build brand awareness,
trust, and deep connection with their users. This would require company’s continuous
excellence in content and product offerings and iteration, deep customer insight,
differentiated value proposition, and strategic brand positioning. The ability to become a
leading and well-recognized brand in China’s online fitness market, particularly among the
young generation with growing attention to personal health and wellness, will bring strong
and long-lasting brand equity that can support market participant’s long-term growth.
Š Capability to sustainably develop high-quality and innovative content at scale .
Comprehensive interactive content has been and is expected to remain a critical element
for the development of online fitness communities. Content, including diverse online
training courses to improve core strength, lose weight and for rehabilitation, should be as
multi-dimensional, professional, and systematic. Those market participants who are able to
continually generate and upgrade a wide range of interactive fitness content can better
attract and obtain users.
Š Extensive product offerings . To ensure the steady development of an online fitness
community, online platforms offer a large variety of fitness-related products to satisfy
their users’ various needs, which also provides a means to further stimulate the company’s
revenue. Users not only focus on engaging in fitness activities, but also value the
effectiveness of workouts, especially with the assistance of a wide selection of products.
To support such broad offering of products, it is also critical to build up a robust supply
chain system to streamline numerous production lines, organize stock keeping units
(SKUs) and provide manage fulfillment and logistics services in an efficient manner.
Š Online-to-offline fitness experience. A one-stop comprehensive fitness solution is
increasingly valued nowadays. As consumers are spending more time on the internet, they
tend to find a way to keep fit more easily and conveniently, which accordingly requires a
practical solution to accommodate their daily routines. Market participants that can offer
solutions connecting online service with offline products for the benefit of users are
usually more well-positioned to play a dominant role in the market.
Š Advanced technologies. Technology plays a fundamental role in the development of a
vibrant online community. People expect that their workout efficiency can be improved as
the platforms receive and analyze their past fitness activities and provide suggestions to
enhance their fitness performance. Hence, the ability to apply advanced, especially
AI-driven, technologies to fitness contents, products and devices has become vitally
important for online platforms to build sustainable competitive advantage.
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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
OVERVIEW
Keep is the largest fitness platform in China in terms of MAUs, and number of workout
sessions completed by users in 2022, according to the CIC Report. With innovation as our foundation,
we are a growing and result-oriented platform that provides users with a comprehensive fitness
solution to help them achieve their fitness goals. We generated a majority of our revenue from the sales
of our self-branded fitness products during the Track Record Period. We offer extensive and
professional fitness content with AI-assisted personalized curriculums, encompassing interactive live
streaming classes and recorded fitness courses, that dynamically adjust course content and workout
intensity based on users’ athletic levels, fitness goals, daily workout patterns and diet. Our content is
complemented by a variety of smart fitness devices, fitness gear, apparel and food, which enables us to
seamlessly connect the physical and digital realms to create an immersive, one-stop fitness experience.
Our history began in September 2014 with the establishment of Calorie Technology, through
which we commenced our operation and launched the Keep mobile app in February 2015. Since then,
we have been led by our founder, chairman of the Board and chief executive officer, Mr. Wang, a
young and visionary entrepreneur, and our first Keeper. Mr. Peng Wei, Mr. Wen Chunpeng and
Mr. Liu Dong are our co-founders. Mr. Peng Wei has served as our Director since July 2015 and is the
vice president of online operations. Mr. Wen Chunpeng is our employee and director of certain
subsidiaries that operate our Keepland business. Mr. Liu Dong has served as our Director since
April 20, 2021 and is the vice president of consumer fitness products.
KEY BUSINESS MILESTONES
The following table sets forth our key business development milestones:
Year Event
2014 We commenced our operations.
2015 We launched Keep mobile app with proprietary structured fitness courses.
The MAUs on our platform reached one million.
2016 The MAUs on our platform reached 10 million.
2018 We expanded our offerings to include smart fitness devices and complementary fitness
products under the Keep brand.
We launched our membership subscription.
2019 Our subscribing members reached one million.
2020 We launched our interactive live streaming fitness classes.
2021 The MAUs on our platform reached 40 million.
2022 Our average monthly subscribing members for the year exceeded 3.5 million.
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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
MAJOR SUBSIDIARIES AND OPERATING ENTITIES
The principal business activities during the Track Record Period and date of establishment of
each of our major subsidiaries are shown below:
Name of company Principal business activities
Date and jurisdiction
of establishment
Beijing Calorie Technology Co., Ltd.
(ʮ̡)
(“Calorie Technology”)
Sales of self-branded fitness
products, provision of
membership services, online paid
content and advertising services
September 26, 2014, PRC
Beijing Calorie Information
Technology Co., Ltd. (
̏ԯ̔༩Ԣ
ʮ̡)( “WFOE”)
Development of software July 7, 2015, PRC
Hangzhou Calorie Sports Co., Ltd.
(ʮ̡)
Sales of self-branded fitness
products
November 5, 2021, PRC
Shenzhen Calorie Technology Co.,
Ltd. (ʮ̡)
(“Shenzhen Calorie”)
Development and provision of
self-branded fitness products
August 29, 2017, PRC
MAJOR SHAREHOLDING CHANGES OF OUR COMPANY
Our Company was incorporated as an exempted company with limited liability in the Cayman
Islands on April 21, 2015. On the same day, we issued one share of par value US$0.001 to Sertus
Nominees (Cayman) Limited, which was subsequently transferred to Persistent Courage Holdings
Limited, 4,230,463 shares of par value US$0.001 each to Persistent Courage Holdings Limited and
1,414,336 shares of par value US$0.001 each to Metropolis Olympia Holdings Limited.
Between September 2014 and December 2021, we conducted nine rounds of pre-IPO financing.
See “—Pre-IPO Investments” for shareholding changes resulting from the Pre-IPO Investments. See
also “Statutory and General Information — Further Information about Our Group — Changes in share
capital of our Company” in Appendix IV for details of changes in the share capital of our Company
during the two years immediately preceding the date of this document.
On April 14, 2020, we issued 250,000 ordinary shares to Bulldog Group Ltd , subject to voting,
transfer and dividend restrictions, as a result of the termination of options granted to Mr. Liu Dong, our
co-founder, executive Director and vice president of consumer fitness products.
In March 2021, we carried out a share subdivision (the “ Share Split”), pursuant to which each
of our issued and unissued share with each share in our then issued and unissued share capital was split
into twenty shares of the corresponding class with a par value of US$0.00005 each. Upon completion
of the Share Split, the issued share capital of our Company consisted of: (i) 138,362,900 ordinary
shares, (ii) 40,000,000 Series A Preferred Shares, (iii) 35,293,880 Series B Preferred Shares, (iv)
51,926,960 Series C Preferred Shares, (v) 14,946,080 Series C-1 Preferred Shares, (vi) 39,873,000
Series D Preferred Shares, (vii) 34,497,140 Series E Preferred Shares, and (viii) 86,628,120 Series F
Preferred Shares.
In March 2021, we repurchased an aggregate of 827,760 Series E Preferred Shares from
Persistent Courage Holdings Limited at a total repurchase price of US$3,392,141, leaving 33,669,380
Series E Preferred Shares issued and outstanding. Persistent Courage Holdings Limited is
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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
wholly-controlled by Mr. Wang, our founder and Single Largest Shareholder. Mr. Wang participated in
the Series E subscription offering to provide our Company with additional capital within a relatively
short period of time, whilst simultaneously reflecting our founder’s increased support in our
Company’s future development. In March 2021, we repurchased a portion of these Series E Preferred
Shares from our founder in order to increase the respective shareholding (and voting) percentages of
our other Shareholders, which gave our Company greater leeway to issue more shares at a future fund-
raising round at a higher valuation (reflecting our Group’s growth in the interim period) whilst at the
same time minimizing the dilutive effect on our existing Shareholders. This arrangement was
considered beneficial to, and was approved by, our existing Shareholders.
On June 1, 2021, we issued 990,000 ordinary shares to Bulldog Group Ltd, subject to voting,
transfer and dividend restrictions. On June 4, 2021, we issued 14,440,000 ordinary shares to Calorie
Fortune Limited. These shares resulted from early exercise of options granted to participants of our
Pre-IPO Share Incentive Plans and are held on record for the grantees’ benefit. Calorie Fortune Limited
is a trust company in which the settlor is our Company and Futu Trustee Limited acts as the trustee and
which is empowered to vote the exercised Shares as instructed by the Board. The beneficiaries of
Calorie Fortune Limited are employees of our Company who have elected to hold their interests
through a trust company to, among other reasons, facilitate in managing and holding our shares by
share scheme participants, consolidate and simplify our shareholding structure, and facilitate dealings
in our Shares after Listing for beneficiaries who do not otherwise have a brokerage or CCASS
participant account available in Hong Kong. None of the beneficiaries are connected persons of our
Company.
On December 3, 2021, we issued 13,497,767 Series F-1 Preferred Shares to Sky Royal Trading
Limited.
On March 31, 2022, we issued 45,205,300 ordinary shares to Calorie Partner Limited, which
are reserved for satisfying awards granted or to be granted to participants of our Pre-IPO Share
Incentive Plans who are not close associates of our Company. Calorie Partner Limited is a trust
company that is wholly-owned by a trust in which our Company is the settlor, Futu Trustee Limited
acts as the trustee, and the beneficiaries are participants of our Company’s share incentive plans who
are not close associates of our Company. As trustee, Futu Trustee Limited exercises the voting and
other rights attached to the Shares as instructed by an advisory committee established by our Company.
See “Statutory and general information—Pre-IPO Share Incentive Plans” for further details.
Upon the completion of the above share issuances, the issued share capital of our Company
consisted of: (i) 198,998,200 ordinary shares, (ii) 40,000,000 Series A Preferred Shares, (iii)
35,293,880 Series B Preferred Shares, (iv) 51,926,960 Series C Preferred Shares, (v) 14,946,080 Series
C-1 Preferred Shares, (vi) 39,873,000 Series D Preferred Shares, (vii) 33,669,380 Series E Preferred
Shares, (viii) 86,628,120 Series F Preferred Shares, and (iv) 13,497,767 Series F-1 Preferred Shares.
Upon Listing, our Company will unwind its weighted voting rights structure and each issued
Share (including those with super-voting rights) will be converted or re-designated to one ordinary
share that would entitle its holder to one vote at a general meeting of the Company. See “Share capital”
for further details.
MAJOR ACQUISITIONS, DISPOSALS AND MERGERS
We have not conducted any major acquisition or disposal during the Track Record Period.
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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
ENTRY INTO THE CONTRACTUAL ARRANGEMENTS
In preparation for Listing and to ensure that the scope of entities and businesses within our VIE
structure would be kept to a minimum, we adjusted our corporate structure (including our VIE
structure) and entered into the Contractual Arrangements to replace our original contractual
arrangements that was in place before the reorganization. The internal reorganization of our VIE
structure was completed in January 2022. See “Contractual Arrangements” for more details.
VOTING PROXY AGREEMENTS
Prior to Listing, under our Company’s weighted voting rights structure, Mr. Wang (through his
controlled corporations) controlled super-voting rights, and together with Mr. Wang’s position in our
management (as chairman of our Board, executive Director and chief executive officer), Mr. Wang
was the chief architect and driver of our business growth and development. Upon Listing, our
Company shall unwind our weighted voting rights structure, which will result in Mr. Wang’s voting
percentage in our Company (through his controlled corporations) being reduced from 75.41% to
16.62% (assuming the Presumptions).
In connection with this, Mr. Wang (through his controlled corporation Persistent Courage
Holdings Limited), as proxyholder on the one hand, and certain Shareholders, as proxy granters on the
other hand, have entered into Voting Proxy Agreements. The primary reasons for entering into these
agreements are to: (a) alleviate some of the impact on the change to Mr. Wang’s voting percentage
from unwinding our weighted voting rights structure; (b) affirm the proxy granters’ support and faith in
the direction and vision of our founder, Mr. Wang, to act in a manner that is aligned with the interests
of our Group (including our long-term and strategic objectives) and our Shareholders as a whole; and
(c) reflect the importance of Mr. Wang’s guidance and leadership in our Group’s continued growth and
development.
Material terms of these agreements are summarized below:
Proxyholder Persistent Courage Holdings Limited
Proxy granters Metropolis Olympia Holdings Limited, Bulldog Group Ltd and Impressive
Appearance Holdings Limited.
Each of Metropolis Olympia Holdings Limited and Bulldog Group Ltd is
controlled by a Director and shall constitute connected persons of our
Company upon Listing. Impressive Appearance Holdings Limited is
controlled by Mr. Wen Chunpeng, our co-founder and employee and a
director of certain subsidiaries that operate our Keepland business. See “—
Corporate structure—Corporate structure after reorganization and as at the
date of this document” for further details on these entities.
Impressive Appearance Holdings Limited is an Independent Third Party, and
other than this arrangement, to the best knowledge of our Company, there is
no other voting arrangement or close associate relationship between Mr.
Wang and the proxy granters or among the proxy granters.
Subject shares All of the Shares held by the proxy granter (or their controlled affiliates) upon
Listing and from time to time thereafter.
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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
Proxy scope All matters put forth at a general meeting or for a vote by members, except
for matters on which Mr. Wang (or the proxyholder) is required to abstain
from voting under the Listing Rules and applicable laws and regulations.
Proxy term Commencing prior to Listing and, with respect to each proxy granter, until
termination by the proxyholder, the proxy grantor no longer holding the
Shares, or Mr. Wang ceasing to be our Director.
Other provisions Each proxy granter has given a right of first refusal to the proxyholder in
respect of any sale or transfer of their Shares during the proxy term.
Additionally, the parties have agreed that, without the consent of the
proxyholder, they will not make any acquisition of Shares that may result in
the parties becoming concert parties pursuant to the Takeovers Code or in
that party or persons acting in concert with that party being obliged to make a
mandatory general offer under the Takeovers Code.
Additional information None of the proxy granters is entitled to any special rights under the voting
proxy agreements and there are no reserved matters which require consent of
the proxy granters under the Voting Proxy Agreements.
None of the proxy granters are considered a group of controlling shareholders
with Mr. Wang and his controlled corporations.
Upon and after Listing, under the Model Code, dealings in our Shares,
including deemed dealings under the SFO, by Metropolis Olympia Holdings
Limited and Bulldog Group Ltd, being entities controlled by our Directors,
would require prior written approval of a Director (other than Mr. Wang and
the relevant interested Director) in accordance with the Model Code.
Impressive Appearance Holdings Limited, the remaining proxy granter, will
also be subject to the Model Code, for as long as its voting proxy
arrangement remains in effect, such that dealings by this entity in the Subject
Shares would be treated as dealings of an entity controlled by a Director.
In an event of breach of the respective Voting Proxy Agreement terms, the
usual remedies for breach of contract would be available, including but not
limited to damages (which would potentially cover the costs of a mandatory
general offer if such costs were incurred by one party as a result of breach by
the other party), specific performance or other injunctive relief.
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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
PRE-IPO INVESTMENTS
Principal terms of the Pre-IPO Investments
Between September 2014 and December 2021, we conducted nine rounds of pre-IPO financing,
pursuant to which certain Pre-IPO Investors invested in our business.
Series
Date of initial
investment
agreement
Date of last payment
of consideration
Total number
of shares
under the
subscription
agreement
Approximate
amount raised
(in thousands)
Cost per share
paid(1)
Discount to
the Offer
price (2)
Angel September 23, 2014 October 24, 2014 N/A (3) RMB 2,500 N/A (3) N/A
A June 8, 2015 June 8, 2015 40,000,000 US$ 5,000 US$0.13 97.75%
B September 18, 2015 September 24, 2015 35,293,880 US$ 9,988 US$0.28 95.14%
C April 20, 2016 May 3, 2016 51,926,960 US$ 31,987 US$0.62 89.25%
C-1 June 23, 2016 June 30, 2016 14,946,080 US$ 10,522 US$0.70 87.86%
D July 5, 2018 July 13, 2018 39,873,000 US$ 82,019 US$2.06 64.27%
E December 12,
2019, April 6, 2020
April 23, 2020 34,497,140
(4) US$ 83,345 US$2.42 58.03%
F December 11, 2020 December 17, 2020 86,628,120 US$ 355,002 US$4.10 28.89%
F-1 December 3, 2021 December 13, 2021 13,497,767 US$ 70,000 US$5.19 9.99%
Notes:
(1) Between Series F financing and Series F-1 financing, the Company conducted the Share Split, details of which are set out in “—Major
shareholding changes of our Company”. The total number of shares under the investment agreements and cost per share paid to the
Company for Series A to Series F financing have been adjusted to reflect the Share Split.
(2) Based on the mid-point of the Offer Price range.
(3) Onshore angel investment was made in respect of Calorie Technology before the Company was incorporated.
(4) In March 2021, the Company repurchased 827,760 Series E Preferred Shares from Persistent Courage Holdings Limited, leaving
33,669,380 Series E Preferred Shares issued and outstanding
Use of proceeds from the Pre-IPO
Investments
We used a portion of the proceeds from the Pre-IPO
Investments for business expansion, capital expenditure,
investment and general working capital needs of our
Company. As of the Latest Practicable Date, approximately
60.6% of the funds raised from the Pre-IPO Investments have
been utilized.
Strategic benefits the Pre-IPO
Investors brought to our Company
At the time of each of the Pre-IPO Investments, our
Directors were of the view that our Company could benefit
from the additional capital that would be provided by the
Pre-IPO Investors’ investments in our Company and their
knowledge and experience.
Basis of consideration The consideration for each of the Pre-IPO Investments was
determined based on arm’s length negotiations between the
Company and the Pre-IPO Investors after taking into
consideration the timing of the investments, the prospect of
the online fitness industry and the status of our business and
operating entities, including the growth in the Company’s
financials and key operating metrics, particularly, average
MAUs and revenue.
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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
Special Rights of the Pre-IPO Investors
The Pre-IPO Investors have been granted certain special rights in relation to our Company, including
redemption rights, information rights, pre-emptive rights, rights of first refusal, dividend and liquidation
preferences, and director appointment rights. These s pecial rights either have already been terminated as
at the Latest Practicable Date or will terminate before or upon Listing in accordance with Guidance
Letters HKEX-GL43-12 and HKEX-GL44-12.
Public Float
Upon completion of the Global Offering (assuming the Presumptions), the shares held by certain of our
Shareholders who are, or are indirectly controlled by, our core connected persons, will not be counted
towards the public float. Details of these Shareholders and their controllers are set out below:
(a) GGV Capital Select L.P., GGV Capital V L.P., GGV Capital V Entrepreneurs Fund L.P. and
GGV VII Investments Pte. Ltd. collectively holding approximately 14.42% of the issued Shares;
(b) Persistent Courage Holdings Limited and Lightmap Limited, which are controlled by Mr. Wang Ning
through Starmap Trust, a trust in which Mr. Wang is the settlor and sole beneficiary. Persistent
Courage Holdings Limited and Lightmap Limited collectively hold 16.62% of the issued Shares;
(c) Metropolis Olympia Holdings Limited, which is ultimately wholly controlled by a trust in which
Mr. Peng Wei is the settlor and sole beneficiary;
(d) Bulldog Group Ltd, which is ultimately wholly controlled by a trust in which Mr. Liu Dong is the
settlor and sole beneficiary; and
(e) Impressive Appearance Holdings Limited, which is ultimately wholly controlled by a trust in
which Mr. Wen Chunpeng is the settlor and sole beneficiary. As mentioned above, Mr. Wen is a
co-founder and a director of certain subsidiaries that operate our Keepland business. Although
Mr. Wen is not a director of our Company, there is no legal impediment or regulatory concern
preventing Mr. Wen from acting as a director of our Company; rather, Mr. Wen’s current position
within our Group represents a mutually-beneficial decision between Mr. Wen and our Company,
allowing us the benefit of Mr. Wen’s continued involvement and guidance within our Group,
whilst also enabling Mr. Wen more flexibility to pursue other endeavors.
Save as provided above, upon the completion of the Global Offering (assuming the Presumptions), the
other Pre-IPO Investors and Shareholders will collectively hold 340,825,250 Shares. The public float
will represent approximately 64.84% of the issued share capital of the Company.
To the best knowledge of our Directors, the remaining Shareholders, including the other Pre-IPO
Investors, are not core connected persons of the Company and the Shares held by them will count
towards the public float.
Information on the Pre-IPO Investors
Set out below is a description of our Pre-IPO Investors.
(a) GGV Capital Select L.P. is a limited partnership organized in the United States, which is
controlled by GGV Capital Select L.L.C. GGV Capital V L.P. is a limited partnership organized
in the United States, which is controlled by GGV Capital V L.L.C. GGV Capital V Entrepreneurs
Fund L.P. is a limited partnership organized in the United States, which is controlled by GGV
131


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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
Capital V L.L.C. GGV VII Investments Pte. Ltd. is a company incorporated in Singapore, which
is ultimately controlled by GGV Capital VII L.L.C. GGV Capital Select L.L.C. and GGV Capital
V L.L.C. are controlled by Lee Hongwei Jenny, Jeff Richards, Jixun Foo, Glenn Solomon and
Hans Tung. GGV Capital VII L.L.C. is controlled by Lee Hongwei Jenny, Jeff Richards, Jixun
Foo, Glenn Solomon, Hans Tung and Eric Xu.
(b) SVF II Calorie Subco (DE) LLC (“ SVF”) is a special purpose vehicle indirectly majority owned
by SoftBank Vision Fund II-2 L.P. (“ SVF Fund II ”). The sole member of SVF is SVF II
Investment Holdings (Subco) LLC (“ SVF II Investment Subco ”) and the sole member of SVF II
Investment Subco is SVF II Investment Holdings LLC (“ NewCo”). SB Global Advisers Limited
(“SBGA”) has been appointed as manager and is responsible for making all decisions related to
the acquisition, structuring, financing and disposal of SVF Fund II’s investments, including as
held by NewCo.
(c) Morningside China TMT Fund IV, L.P. is an exempted limited partnership organized in the
Cayman Islands. Morningside China TMT Fund IV Co-Investment, L.P. is an exempted limited
partnership organized in the Cayman Island. Morningside China TMT Special Opportunity Fund
II, L.P. is an exempted limited partnership organized in the Cayman Islands. Evolution Special
Opportunity Fund I, L.P. is an exempted limited partnership organized in the Cayman Islands.
Evolution Fund I Co-investment, L.P. is an exempted limited partnership organized in the
Cayman Islands. Morningside China TMT Fund IV, L.P., Morningside China TMT Fund IV
Co-Investment, L.P. and Morningside China TMT Special Opportunity Fund II, L.P. are
controlled by their general partner, Morningside China TMT GP IV, L.P.. Morningside China
TMT GP IV, L.P. is controlled by its general partner, TMT General Partner Ltd.. Each of Liu Qin,
Shi Jianming and Morningside Venture (VII) Investments Limited is entitled to exercise or
control the exercise of one-third of the voting power of all issued shares in TMT General Partner
Ltd. at its general meeting. Morningside Venture (VII) Investments Limited is indirectly 100%
held through a series of 100% owned holding companies by the Landmark Trust Switzerland SA
as trustee of a discretionary trust established by Mdm. Chan Tan Ching Fen for the benefit of
certain members of her family and other charitable objects. Evolution Special Opportunity Fund I,
L.P. and Evolution Fund I Co-investment, L.P. are controlled by their general partner 5Y Capital
GP Limited. Each of Liu Qin and Shi Jianming is entitled to exercise or control the exercise of
one-half of the voting power of all issued shares in 5Y Capital GP Limited at its general meeting.
(d) MORESPARK LIMITED is a company incorporated in Hong Kong. Tencent Holdings Limited, a
Hong Kong listed company (HKSE: 0700) is the sole member of MORESPARK LIMITED.
Tencent Holdings is a leading provider of Internet value-added services in China.
(e) JenCap Squad is an exempted company incorporated in the Cayman Islands, which is wholly
owned by Jeneration Capital Partners II L.P., which is controlled by its general partner, Jeneration
Capital GP II. JenCap Squad I L.P., is an exempted limited partnership organized in the Cayman
Islands, which is controlled by its general partner JenCap Squad I GP. Jeneration Capital GP II
and JenCap Squad I GP are ultimately controlled by Jimmy Ching-Hsin Chang.
(f) BAI GmbH is a company incorporated in Germany, which is wholly owned by Reinhard Mohn
GmbH. Reinhard Mohn GmbH is wholly owned by Bertelsmann SE&Co. KgaA, which is
controlled by Bertelsmann Verwaltungsgesellschaft. Bertelsmann Verwaltungsgesellschaft is
controlled by Mr. Christoph Mohn.
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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
(g) Goldman Sachs Capital Holdings II Pte. Ltd. is a company incorporated in Singapore, which is
wholly owned by Goldman Sachs Capital Holdings I Pte. Ltd. Goldman Sachs Capital Holdings I
Pte. Ltd. is indirectly wholly owned by The Goldman Sachs Group, Inc. (NYSE: GS).
(h) BW Ventures Limited is a company incorporated under the laws of the British Virgin Islands and
wholly owned by Mr. Liu Guowei.
(i) VENTECH CHINA III SICAR is a company incorporated in Luxembourg, which is controlled by
Ventech China Lux. Ventech China Lux is controlled by Mr. Eric HUET.
(j) NVMB XII Holdings Limited is an exempted company incorporated under the laws of Cayman
Islands, which is ultimately managed and controlled by Hillhouse Investment Management, Ltd.
(“Hillhouse”), an exempted company incorporated under the laws of Cayman Islands. Founded in
2005, Hillhouse is a global private equity firm of investment professionals and operating
executives who are focused on building and investing in high quality business franchises that
achieve sustainable growth. Independent proprietary research and industry expertise, in
conjunction with world-class operating and management capabilities, are key to Hillhouse’s
investment approach. Hillhouse partners with exceptional entrepreneurs and management teams to
create value, often with a focus on innovation and growth. Hillhouse invests in the fields of
healthcare, business services, broad consumption and industrials. Hillhouse manages assets on
behalf of institutional clients from across the globe.
(k) Coatue PE Asia 43 LLC is a limited liability company incorporated under Delaware law. It’s an
investment holding entity controlled and managed by Coatue Management, L.L.C., who is an
investment advisor regulated the SEC. Coatue Management, L.L.C. is controlled by Philippe
Laffont.
(l) Candiac Limited is a company organized and existing under the laws of the Cayman Islands and
wholly owned by Tan Qing.
(m) Sky Royal Trading Limited is a private company organized and existing under the laws of Hong
Kong, which is controlled by Mr. Chen Mingyong.
Compliance with Interim Guidance
On the basis that (i) the consideration for the last round of Pre-IPO Investment was settled on
December 13, 2021, (ii) the settlement of the considerations for the Pre-IPO Investments complies with
the guidance letter requirements from the Stock Exchange and (iii) the special rights granted to the
Pre-IPO Investors have terminated or will terminate upon the Listing, the Sole Sponsor has confirmed
that the Pre-IPO Investments are in compliance with Guidance Letter HKEX-GL29-12 issued by the
Stock Exchange in January 2012 (and last updated in March 2017), HKEX-GL43-12 issued by the
Stock Exchange in October 2012 (and last updated in March 2017), and HKEX-GL44-12 issued by the
Stock Exchange in October 2012 (and last updated in March 2017).
LOCK-UP OF EXISTING SHAREHOLDERS
Pursuant to the Tenth Amended and Restated Shareholders Agreement dated December 3, 2021, each
Shareholder has agreed, upon request by the Company, to lock-up the Shares that they hold as of and
upon the Listing Date (the “ Relevant Shares ”) for a period of 180 days commencing from and
including the Price Determination Date (the “ Lock-up Period”), during which, without the consent of
the Company and the Sole Overall Coordinator, they would not, directly or indirectly (a) lend, offer,
pledge, hypothecate, hedge, sell, contract to sell, grant any option, right or warrant to purchase, or
133


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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
otherwise transfer or dispose of, directly or indirectly, any Relevant Shares; or (b) enter into any swap
or other arrangement that transfers to another, in whole or in part, any of the economic consequences
of ownership of such Relevant Shares. On June 26, 2023, the Company made a lock-up request to each
Shareholder, and accordingly, each existing Shareholder’s Relevant Shares will be locked-up for the
Lock-up Period, except as otherwise consented to by the Company and the Sole Overall Coordinator or
for customary carve-outs, such as lending to an authorized institution for a bona fide commercial loan
or distributing the interests to the Shareholder’s limited partners or shareholders or transferring to a
wholly-owned subsidiary, provided that the recipient of the interests also enters into a lock-up
restriction for the remainder of the Lock-up Period on the same or comparable terms as the
Shareholder.
Additionally, commencing from the date of this document, the Shares held by Mr. Wang through his
controlled corporations shall be locked-up for a period ending six-months from the Listing Date in
accordance with the terms specified under Rule 10.07(1)(a) of the Listing Rules.
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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
CAPITALIZATION
The following table sets out our shareholding structure as of the date of this document and immediately upon the completion of the Global
Offering, assuming the Presumptions.
Shareholders
Ordinary
Shares
Series A
Preferred
Shares
Series B
Preferred
Shares
Series C
Preferred
Shares
Series C-1
Preferred
Shares
Series D
Preferred
Shares
Series E
Preferred
Shares
Series F
Preferred
Shares
Series F-1
Preferred
Shares
Aggregate
total
number of
Shares
Aggregate
ownership
percentage
as at the
date of
this
document
Aggregate
voting
percentage
as at the
date of this
document(1)
Aggregate
total number
of Shares
immediately
upon
completion
of the
Global
Offering(2)
Aggregate
ownership
percentage
immediately
upon
completion
of the
Global
Offering(2)
Persistent Courage Holdings
Limited ................ 78,469,806 ———————— 78,469,806 15.24% 67.72% 78,469,806 14.93%
Lightmap Limited .......... 8,909,312 ———————— 8,909,312 1.73% 0.51% 8,909,312 1.69%
Calorie Partner Limited ..... 45,205,300 ———————— 45,205,300 8.78% 2.60% 45,205,300 8.60%
Calorie Fortune Limited ..... 14,440,000 ———————— 14,440,000 2.80% 0.83% 14,440,000 2.75%
BW Ventures Limited ...... 20,471,906 ———————— 20,471,906 3.98% 1.18% 20,471,906 3.89%
Metropolis Olympia Holdings
Limited ................ 10,621,480 ———————— 10,621,480 2.06% 0.61% 10,621,480 2.02%
Bulldog Group Ltd ......... 5,561,499 ———————— 5,561,499 1.08% 0.32% 5,561,499 1.06%
Impressive Appearance
Holdings Limited ........ 5,469,740 ———————— 5,469,740 1.06% 0.31% 5,469,740 1.04%
NVMB XII Holdings
Limited ................ 3,853,327 —————— 7,320,680 — 11,174,007 2.17% 0.64% 11,174,007 2.13%
CANDIAC LIMITED ...... 3,853,327 ———————— 3,853,327 0.75% 0.22% 3,853,327 0.73%
Sky Royal Trading Limited . . 2,142,503 ——————— 13,497,767 15,640,270 3.04% 0.90% 15,640,270 2.98%
VENTECH CHINA III
SICAR ................ — 12,626,440 ——————— 12,626,440 2.45% 0.73% 12,626,440 2.40%
BAI GmbH ............... — 9,978,440 12,352,860 3,245,440 — — 1,241,640 1,220,120 — 28,038,500 5.45% 1.61% 28,038,500 5.33%
Morningside China TMT
Fund IV, L.P. ........... — 8,152,400 — 22,127,960 ————— 30,280,360 5.88% 1.74% 30,280,360 5.76%
Morningside China TMT
Fund IV Co-Investment,
L.P. ................... — 815,240 — 2,212,800 — — 112,880 — — 3,140,920 0.61% 0.18% 3,140,920 0.60%
Morningside China TMT
Special Opportunity Fund
II, L.P. ................ —————— 1,128,780 — — 1,128,780 0.22% 0.06% 1,128,780 0.21%
Evolution Special Opportunity
Fund I, L.P. ............ ——————— 4,243,880 — 4,243,880 0.82% 0.24% 4,243,880 0.81%
135


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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
Shareholders
Ordinary
Shares
Series A
Preferred
Shares
Series B
Preferred
Shares
Series C
Preferred
Shares
Series C-1
Preferred
Shares
Series D
Preferred
Shares
Series E
Preferred
Shares
Series F
Preferred
Shares
Series F-1
Preferred
Shares
Aggregate
total
number of
Shares
Aggregate
ownership
percentage
as at the
date of
this
document
Aggregate
voting
percentage
as at the
date of this
document(1)
Aggregate
total number
of Shares
immediately
upon
completion
of the
Global
Offering(2)
Aggregate
ownership
percentage
immediately
upon
completion
of the
Global
Offering(2)
Evolution Fund I
Co-investment, L.P. ...... ——————— 636,580 — 636,580 0.12% 0.04% 636,580 0.12%
GGV CAPITAL SELECT
L.P. ................... — 8,427,480 3,529,380 — — 5,835,080 2,069,420 2,440,220 — 22,301,580 4.33% 1.28% 22,301,580 4.24%
GGV Capital V L.P. ........ — — 18,724,460 23,479,080 — — — 2,353,840 — 44,557,380 8.65% 2.56% 44,557,380 8.48%
GGV Capital V Entrepreneurs
Fund L.P. .............. — — 687,180 861,68 0——— 86,380 — 1,635,240 0.32% 0.09% 1,635,240 0.31%
GGV VII Investments Pte.
Ltd. ................... — ————— 7,320,700 — 7,320,700 1.42% 0.42% 7,320,700 1.39%
MORESPARK LIMITED . . . ———— 14,946,080 9,725,120 827,760 7,320,680 — 32,819,640 6.37% 1.89% 32,819,640 6.24%
Goldman Sachs Capital
Holdings II Pte. Ltd. ...... ————— 24,312,800 — — — 24,312,800 4.72% 1.40% 24,312,800 4.63%
JenCap Squad ............. —————— 24,832,980 1,220,120 — 26,053,100 5.06% 1.50% 26,053,100 4.96%
JenCap Squad I L.P. ........ —————— 3,455,920 — — 3,455,920 0.67% 0.20% 3,455,920 0.66%
SVF II Calorie Subco (DE)
L L C .................. ——————— 48,804,580 — 48,804,580 9.48% 2.81% 48,804,580 9.28%
Coatue PE Asia 43 LLC ..... ——————— 3,660,340 — 3,660,340 0.71% 0.21% 3,660,340 0.70%
Other shareholders from the
Global Offering ......... ————————— — —— 10,838,600 2.06%
Total .................... 198,998,200 40,000,000 35,293,880 51,926,960 14,946,080 39,873,000 33,669,380 86,628,120 13,497,767 514,833,387 100.00% 100.00% 525,671,987 100.00%
Notes:
(1) As at the date of this document, each share held by Persistent Courage Holdings Limited and Lightmap Limited has super-voting rights at a general me eting of the Company, which entitles its holder to
15 votes per share at a general meeting of the Company, while all other shares issued by the Company entitles its holder to one vote per share.
(2) Assuming the Presumptions.
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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
CORPORATE STRUCTURE
Corporate structure after reorganization and as at the date of this document
The following chart is a simplified depiction of the shareholding and beneficial ownership
structure of our Group as at the date of this document:
Hainan Calorie Red
Technology Co., Ltd.
Hangzhou Calorie Purple
Technology Co., Ltd.
Hangzhou Calorie Sports
Co., Ltd.
100%
Keep Inc.
(Cayman)
Calorie Technology HK Company Limited
Beijing Calorie Information Technology Co.,
Ltd.
Shanghai Leranka Information Technology Co., Ltd.
Beijing Calorie Technology Co., Ltd. Beijing Calorie Blue
Technology Co., Ltd.
Beijing Calorie Sports Co., Ltd. Shenzhen Calorie Technology
Co., Ltd.
Shenzhen Calorie Sports
Technology Co., Ltd.
Shanghai Calorie Sports
Co., Ltd.
Calorie Sports
Management (Beijing)
Co., Ltd.
denotes
consolidation through
our Contractual
Arrangements
100% 100%
100% 100% 100% 100%
100% 100%
100%
100%100%
Offshore
Onshore
Mr. Wang
Ning(1)
16.97%
Mr. Liu
Dong(3)
1.08%
GGV
entities(5)
14.73%
SVF II Calorie
Subco (DE)
LLC(5)
9.48%
Mr. Peng
Wei
(2)
2.06%
Other Pre-IPO
Investors(6)
54.62%
100%
Keep Technology PTE. LTD.Keep Sports PTE. LTD.
100% 100%
Mr. Wen
Chunpeng(4)
1.06%
Beijing Calorie Orange
Management Consulting
Co., Ltd.
100%
Guangzhou Calorie Blue
Sports Management
Co., Ltd.
100%
Beijing Calorie Blue Sports
Management Co., Ltd.
Notes:
(1) Mr. Wang Ning holds his interest through Persistent Courage Holdings Limited and Lightmap Limited. Each of Persistent Courage
Holdings Limited and Lightmap Limited is wholly owned by Arrow Factory Limited, which is controlled by Starmap Trust, a trust
controlled by Mr. Wang and in which Mr. Wang is the settlor and sole beneficiary.
(2) Mr. Peng Wei holds his interest through Metropolis Olympia Holdings Limited, which is ultimately wholly controlled by a trust in which
Mr. Peng is the settlor and sole beneficiary. These shares are subject to a Voting Proxy Agreement between the Shareholder, as proxy
granter, and Persistent Courage Holdings Limited, as proxyholder. See “—Voting Proxy Agreements” for further details.
(3) Mr. Liu Dong holds his interest through Bulldog Group Ltd, which is ultimately wholly controlled by a trust in which Mr. Liu is the
settlor and sole beneficiary. These shares are subject to a Voting Proxy Agreement between the Shareholder, as proxy granter, and
Persistent Courage Holdings Limited, as proxyholder. See “—Voting Proxy Agreements” for further details.
(4) Mr. Wen Chunpeng holds his interest through Impressive Appearance Holdings Limited, which is ultimately wholly controlled by a trust
in which Mr. Wen is the settlor and sole beneficiary. These shares are subject to a Voting Proxy Agreement between the Shareholder, as
proxy granter, and Persistent Courage Holdings Limited, as proxyholder. See “—Voting Proxy Agreements” for further details.
(5) See “ — Pre-IPO Investments—Information on the Pre-IPO Investors” and “Substantial Shareholders”.
(6) See “— Capitalization” for further details of Shareholders and their respective shareholdings.
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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
Corporate structure immediately following the Global Offering
The following chart is a simplified depiction of the shareholding and beneficial ownership
structure of our Group immediately following the completion of the Global Offering (assuming the
Presumptions):
Hainan Calorie Red
Technology Co., Ltd.
Hangzhou Calorie Purple
Technology Co., Ltd.
Hangzhou Calorie Sports
Co., Ltd.
100%
Keep Inc.
(Cayman)
Calorie Technology HK Company Limited
Beijing Calorie Information Technology Co.,
Ltd.
Shanghai Leranka Information Technology Co., Ltd.
Beijing Calorie Technology Co., Ltd. Beijing Calorie Blue
Technology Co., Ltd.
Beijing Calorie Sports Co., Ltd. Shenzhen Calorie Technology
Co., Ltd.
Shenzhen Calorie Sports
Technology Co., Ltd.
Shanghai Calorie Sports
Co., Ltd.
Calorie Sports
Management (Beijing)
Co., Ltd.
100% 100%
100% 100% 100% 100%
100% 100%
100%
100%100%
Offshore
Onshore
Mr. Wang
Ning(1)
Mr. Peng
Wei(2)
Mr. Liu
Dong(3)
GGV
entities(5)
9.28%14.42%16.62% 2.02% 1.06%
SVF II Calorie
Subco (DE) LLC(5)(7)
Other Pre-IPO
Investors(6)(7)
53.50% 2.06%
Beijing Calorie Blue Sports
Management Co., Ltd.
Other Public
Shareholders(7)
 Keep Technology PTE. LTD.Keep Sports PTE. LTD.
100% 100%
Mr. Wen
Chunpeng(4)
1.04%
denotes
consolidation through
our Contractual
Arrangements
Beijing Calorie Orange
Management Consulting
Co., Ltd.
100%
Guangzhou Calorie Blue
Sports Management
Co., Ltd.
100% 100%
Notes (1) to (6): Please refer to the details contained in the preceding pages.
(7) These shares will count towards the public float upon Listing. See “ — Pre-IPO Investments — Public float.”.
SAFE REGISTRATION
Pursuant to the Circular of the SAFE on Issues Concerning Foreign Exchange Administration
of Overseas Investment, Financing and Round-trip Investments Conducted by Domestic Residents
through Special Purpose Vehicles (
೻ҳ
ٝthe “ SAFE Circular 37 ”), promulgated by SAFE and which became
effective on July 4, 2014, (a) a PRC resident must register with the local SAFE branch before he or she
contributes assets or equity interests to an overseas special purpose vehicle (the “ Overseas SPV”) that
is directly established or indirectly controlled by the PRC resident for the purpose of conducting
investment or financing, and (b) following the initial registration, the PRC resident is also required to
register with the local SAFE branch for any major change, in respect of the Overseas SPV, including,
among other things, a change of Overseas SPV’s PRC resident shareholder(s), the name of the
Overseas SPV, terms of operation, or any increase or reduction of the Overseas SPV’s capital, share
transfer or swap, and merger or division. Pursuant to SAFE Circular 37, failure to comply with these
registration procedures may result in penalties.
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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
Pursuant to the Circular of the SAFE on Further Simplifying and Improving the Direct
Investment-Related Foreign Exchange Administration Policies (ආɓӉᔊʷձҷ
ٝthe “SAFE Circular 13 ”), promulgated by SAFE and which became
effective on June 1, 2015, the power to accept SAFE registration was delegated from local SAFE to
local banks where the assets or interests in the domestic entity are located.
Our PRC Legal Adviser has advised that Mr. Wang Ning, Mr. Peng Wei, Mr. Wen Chunpeng
and Mr. Liu Dong, who are PRC residents, have completed their initial foreign exchange registration of
overseas investments as required under SAFE Circular 37 on May 12, 2015 and April 10, 2020,
respectively.
M&A RULES
Under the M&A Rules issued on August 8, 2006, effective as of September 8, 2006 and
amended in June 2009, a foreign investor is required to obtain necessary approvals when it:
(a) acquires the equity of a domestic non-foreign invested enterprise thereby converting the
domestic enterprise into a foreign-invested enterprise;
(b) subscribes for the increased capital of a domestic non-foreign invested enterprise so as to
convert the domestic enterprise into a foreign-invested enterprise;
(c) establishes a foreign-invested enterprise which purchases and operates the assets of a
domestic enterprise; or
(d) purchases the assets of a domestic enterprise and injects those assets to establish a foreign
invested enterprise.
Our PRC Legal Adviser has advised that, given that (i) the CSRC currently has not issued any
definitive rule or interpretation concerning whether the Global Offering of our Company is subject to
this regulation, (ii) our wholly-owned PRC subsidiaries were established by foreign direct investment,
rather than through a merger or acquisition of a domestic company as defined under the M&A Rules,
and (iii) no explicit provision in the M&A Rules classifies the Contractual Arrangements among our
wholly-owned PRC subsidiaries, a variable interest entity and its shareholders as a type of acquisition
transaction under the M&A Rules, they advise that the establishment of our wholly-owned subsidiaries
and the reorganization are not subject to the M&A Rules, and the Global Offering of our Company
does not require approvals from the CSRC and MOFCOM under the M&A Rules. However, there is
uncertainty as to how the M&A Rules and other PRC laws and regulations will be interpreted or
implemented or whether the relevant authorities would promulgate further requirements and we cannot
assure you that relevant PRC governmental authorities, including the CSRC and MOFCOM, would
reach the same conclusion as our PRC Legal Adviser. For further information about the risks
associated with the CSRC approval, see “Risk Factors—Risks Related to Doing Business in China—
We may be required to obtain prior approval or subject to filings or other requirements from the CSRC
or other PRC regulatory authorities for the Listing”.
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HISTORY, REORGANIZATION, AND CORPORATE STRUCTURE
PAST LISTING APPLICATION ON OTHER EXCHANGES
We previously submitted a draft registration statement on Form F-1 relating to a proposed
initial public offering in the United States of the our American depositary shares (“ ADSs”) to the
Securities and Exchange Commission (the “ SEC”) in the second quarter of 2021 for confidential
review for the listing of our ADSs (the “ Previous U.S. Listing Application ”). Out of our own
initiative, we decided to pursue this listing application instead of the Previous U.S. Listing Application
as we consider the Hong Kong Stock Exchange a more appropriate listing venue for the Company. The
Company confirms that there is no material issue regarding the Previous U.S. Listing Application that
should be brought to the attention of the Hong Kong Stock Exchange, shareholders or potential
investors in Hong Kong.
Based on the due diligence interviews with the Company, internal control consultant, PRC
Legal Advisor, Reporting Accountant and the underwriters of Company’s proposed Previous U.S.
Listing Application, discussions with U.S. counsels of the Company and the underwriters of the
Company’s proposed Previous U.S. Listing Application and the documentary due diligence, nothing
material has come to the attention of the Sole Sponsor to cast doubt on the Company’s conclusion that
there is no material issues raised by the SEC in the Company’s Previous U.S. Listing Application
which is required to be brought to the attention of the Hong Kong Stock Exchange, shareholders or
potential investors in Hong Kong.
The Company’s PRC Legal Adviser confirmed that (i) they were not aware of any material
issues with respect to the PRC legal or compliance of the Company, and that they did not have any
material disagreement with the Company during the preparation of the Previous U.S. Listing
Application with respect to PRC legal or compliance; and (ii) to the best of their knowledge, the SEC
had not identified any material PRC legal issues during the vetting process, or any material PRC legal
issues suggesting the Company unsuitable for listing on the Nasdaq Stock Market LLC. This document
is consistent with the draft registration statement submitted to the SEC.
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BUSINESS
OVERVIEW
Who We Are
We are a growing and result-oriented platform that provides users with a comprehensive fitness
solution to help them achieve their fitness goals. We generated a majority of our revenue from the sales
of our self-branded fitness products during the Track Record Period. We offer extensive and
professional fitness content with AI-assisted personalized curriculums, encompassing interactive live
streaming classes and recorded fitness courses, that dynamically adjust course content and workout
intensity based on users’ athletic levels, fitness goals, daily workout patterns and diet. Our content is
complemented by a variety of smart fitness devices, fitness gear, apparel and food, which enables us to
seamlessly connect the physical and digital realms to create an immersive, one-stop fitness experience.
Our Keep brand is highly influential and has become synonymous with passion for fitness.
Keep is the largest fitness platform in China in terms of MAUs, and number of workout sessions
completed by users in 2022. 77.5% of fitness population in China knew of the Keep mobile app. We
have made efforts to make fitness more accessible to a larger population, encourage tens of millions to
become our users, or Keepers, and inspire them to develop a sense of belonging in our community. In
2019, 2020, 2021 and 2022, our platform recorded average MAUs of 21.8 million, 29.7 million,
34.4 million and 36.4 million, respectively. In 2022, our MAUs collectively recorded approximately
2.1 billion workout sessions on our platform. Supported by our compelling offerings and powerful
brand, we have been able to quickly expand our user base and solidify our market leading position.
Our Market Opportunity
China has a large yet under-developed and under-served fitness market, previously relying on a
traditional model of offline gyms, which typically results in lower access and participation compared to
online fitness. The traditional fitness model sets high entry barriers for beginners, as offline gyms and
fitness classes are often costly, have time and location limitations, deliver inconsistent quality and user
experience, and are less accessible in lower-tier cities in China. We believe that both the size of the
fitness population and the annual spending of the fitness population in China present significant growth
potential. China had the world’s largest fitness population of 374.0 million in 2022, which is expected
to reach 463.5 million by 2027. At the same time, the average annual spending of the fitness population
in 2022 was RMB2,518.3 per person in China, which was much lower than that of RMB16,425.2 in
the United States, demonstrating significant growth potential.
With our online fitness solution, we have effectively addressed major pain points in China’s
fitness market and fundamentally redefined people’s relationship with fitness. Our platform not only
enables people to exercise anytime and anywhere, but also creates a personalized, interactive and
immersive fitness experience that enables people to train with greater efficiency at a lower cost. These
value propositions make us popular among fitness population, and attract many newcomers to our
community.
Our Comprehensive Fitness Solution
We have developed a comprehensive fitness solution that covers users’ entire fitness life cycle,
from planning fitness goals and accessing fitness courses, to choosing fitness gear and healthy food
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BUSINESS
and tracking measurements such as weight and heart rate. Our offerings consist of online fitness
content, smart fitness devices, and complementary fitness products, as illustrated below.
Our offerings reinforce one another to address diversified fitness needs
Online
Fitness
Content
Smart
Fitness
Devices
Complementary
Fitness
Products
Recorded
Course
Live-
streaming
Class
Fitness
Food
Fitness
Apparel
Keep
Bike Fitness
Gear
Cover users’
entire fitness lifecycle
Smart
Scale
Keep
Wristband
Treadmill
Smart
Skipping
Rope
Online Fitness Content . Our content mainly includes recorded courses and live streaming
classes, both of which are developed in-house or created by third parties such as influencers and other
fitness content providers. Leveraging AI algorithms, we also provide personalized fitness curriculums
that dynamically adjust course content and workout intensity based on users’ athletic level, fitness
goals, daily workout patterns and diet, thereby optimizing the training results for our users. We
constantly refine our content based on user insights that enable us to create new courses with better
efficiency and effect. We also offer our users the opportunity to engage with more customized
premium content by subscribing to our membership services. Our platform has experienced a steady
increase in our membership penetration rate, from 3.5% in 2019, 6.4% in 2020 to 9.5% in 2021, and
further increased to 10.0% in 2022, demonstrating the success of our membership solution.
Š Recorded Courses . We have an ever-growing number of content offerings encompassing
approximately 21,200 recorded fitness courses as of December 31, 2022. Our MAUs have
recorded approximately 1.3 billion workout sessions on our platform following our
recorded courses in 2022. Users can freely choose a variety of courses based on their
fitness goals, body part focuses, fitness categories, difficulty levels, and fitness gear
available. Our recorded fitness courses feature a mix of in-house instructors, influencers
on our platform, third-party fitness professionals, and other celebrities to enrich our
content offerings and cater to users’ diverse preferences.
Š Live Streaming Classes. Our live streaming classes provide a social and interactive forum
for users to engage directly with instructors, including our in-house instructors and
influencers on our platform, and among users themselves. In 2022, we offered over 9,100
live streaming classes on our platform. The total workout sessions following our live
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BUSINESS
streaming classes in 2022 were 17.1 million. We introduced interactive features to live
streaming classes in June 2020, and recorded 7.4 million interactions in 2022. Through
bullet chatting, instructors can tailor their classes based on users’ real time feedback to
meet their dynamic demands and preferences.
Smart Fitness Devices . Enabled by an array of innovative features such as AI, automation and
social interaction, our smart fitness devices, including smart bikes, wristbands, scales, and treadmills,
increase the value of our platform to users by working synergistically with our online fitness content.
These devices track and analyze fitness activities, so that our platform is able to automatically adjust
workout difficulty level and content recommendations to improve the overall fitness experience. In
addition, our smart fitness devices can connect with one another to capture fitness activities across
multiple application scenarios, which results in more comprehensive user profiles that we may
leverage to offer more relevant recommendations and dynamically adjust fitness curriculums to
maximize results. For example:
Š Keep Bike. Our Keep Bike supports dynamic and automatic adjustment of resistance levels
in real time based on users’ athletic levels and course targets. When combined with live
streaming classes, it simulates a group cycling environment with thematic lighting and
music. We were ranked the first in smart bikes as of December 31, 2022 in China in terms
of the accumulative GMV of bikes sold.
Š Keep Wristband. Our Keep Wristband monitors various fitness measurements such as
heart rate, sleep, and blood oxygen level. Through analyzing these information, our
platform can adjust AI-assisted personalized curriculums. Our Keep Wristband also
enables users to interact with instructors and among themselves during live streaming
classes.
Š Keep Smart Skipping Rope . Our Keep Smart Skipping Rope is linked to the Keep app to
record the number of jumps, heart rate and calories burned. Users’ can track progress to
build workout routines and improve fitness performance.
Complementary Fitness Products . Leveraging the insights accumulated through growing user
base and positive feedback loop, we identified users’ unmet needs in different scenarios. To that end,
we offer a wide range of fitness products under the Keep brand that are designed with quality and style,
thereby complementing our online fitness content and smart fitness devices, elevating the overall
fitness experience for our users, and promoting our brand and spirit. Our fitness products include yoga
mats, dumbbells, gym wear, protective gear, and other fitness accessories. We are China’s largest yoga
mat brand in terms of GMV in 2022, with a 18.3% market share. We also offer a broad range of fitness
food products, such as meal replacements, fitness snacks, and nutrition supplements, providing an
integrated solution combining workout and diet to users. Based on users’ fitness goals, our platform is
able to recommend customized diet plans, with detailed information such as suggested total calorie
intake, macronutrient analysis and other health tips.
Our three business lines complement one another to create an integrated business model that
covers users’ entire fitness lifecycle. Our online fitness content brings traffic to our self-branded
products, as users tend to purchase smart fitness devices and complementary fitness products, such as
fitness gear, apparel and food, to enhance their performance and experience during workouts. At the
same time, our self-branded products redirect traffic to our online fitness content. Our fitness product
customer subscribing rate was 41.3%, 41.2%, 51.8% and 45.1% in 2019, 2020, 2021 and 2022,
respectively. In addition, technology empowers the integration of different segments, enables the
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BUSINESS
efficient and reliable operation of our platform, and ultimately drives the effectiveness of our business
model. As a result, we have become the one-stop destination providing a comprehensive fitness
solution for fitness population in China.
The Keeper Community
Our comprehensive fitness solution effectively attracts and retains users. We have China’s
largest online fitness user base with 36.4 million average MAUs in 2022. In addition, our users are
young and highly active, as approximately 74.1% of them are aged 30 or below. Social interactive
features are deeply integrated into our platform, from following one’s favorite instructors and
influencers and establishing routine training plans with them, to engaging in competition with friends
by tracking performance and achieving fitness goals together. Users actively engage in our community
to share their training results and inspire others to follow. In 2022, the total number of interactions,
including posts, likes and comments, in our community reached 1.1 billion. We believe that building a
community around fitness is highly complementary to the core fitness experience, making it more
inspiring, more competitive, and more connected.
Key Operating Data
The following table sets forth certain of our key operating data for the periods indicated:
For the Three Months Ended
March
31,
June
30,
September
30,
December
31,
March
31,
June
30,
September
30,
December
31,
March
31,
June
30,
September
30,
December
31,
March
31,
June
30,
September
30,
December
31,
2019 2020 2021 2022
(in thousands, except for revenue)
Average
MAUs ...... 15,535 22,436 29,245 19,875 27,103 33,251 32,750 25,833 31,032 35,709 41,751 28,939 34,275 41,080 38,558 31,638
Average
monthly
subscribing
members .... 3 7 5 7 5 2 1,039 915 1,473 1,981 2,149 2,035 2,539 3,235 4,154 3,193 3,470 3,860 3,885 3,269
Average
monthly
fitness product
customers . . . 110 197 232 197 236 353 329 251 280 430 423 397 454 580 642 524
Average
quarterly
revenue per
MAU (in
RMB) ...... 5 . 9 7 . 1 7 . 4 9 . 8 7 . 4 9 . 2 9 . 5 11.1 9.8 11.5 10.7 15.9 12.2 14.5 16.1 18.4
For further information, see “—Seasonality” and “Financial Information”.
Our Monetization and Results
We have a diverse set of monetization channels including membership and online paid content,
self-branded products, and advertising and other services, which are complementary to one another.
Our membership allows subscribing members to access premium services such as exclusive fitness
courses, live streaming classes, AI-assisted personalized fitness curriculums, and discounts on our self-
branded products. We also offer an extensive range of self-branded products including smart fitness
devices, fitness gear, apparel and food, which are available in our own online store and on third-party
e-commerce platforms. In addition, with China’s largest online fitness user base, we have attracted
brands and merchants to our advertising services.
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BUSINESS
Driven by our comprehensive suite of offerings and the ability to create a personalized and
integrated solution, characterized by professional fitness content and fitness products that are and
customized for individuals’ athletic levels, we have achieved continued growth during the Track
Record Period. We generated a majority of our revenue from the sales of self-branded fitness products
and invested significantly in the research and development of platform design and fitness content
during the Track Record Period. Our revenue grew by 66.9% from RMB663.1 million in 2019 to
RMB1.1 billion in 2020, increased by 46.3% to RMB1.6 billion in 2021, and further increased by
36.6% to RMB2.2 billion in 2022. Gross profit grew by 83.2% from RMB272.6 million in 2019 to
RMB499.4 million in 2020, increased by 35.5% to RMB676.6 million in 2021, and further increased
by 33.1% to RMB900.4 million in 2022. We experienced losses during the Track Record Period as we
prioritized strategic path formulation and business model optimization. Our loss for the year increased
from RMB735.0 million in 2019 to RMB2.2 billion in 2020 primarily as a result of the fair value
changes of preferred shares. Our loss for the year increased from RMB2.2 billion in 2020 to
RMB2.9 billion in 2021 as we strategically increased spending in traffic acquisition and branding to
further acquire, activate and retain users, such as attracting new users through advertisements on
various third-party apps. We recorded loss for the period of RMB2.9 billion in 2021 compared to loss
for the period of RMB104.6 million in 2022. The change was primarily a result of the changes of the
fair value of preferred shares. During the Track Record Period, we incurred branding and marketing
promotion expenses and other related expenses of RMB190.6 million in 2019, RMB178.2 million in
2020, RMB746.9 million in 2021 and RMB377.7 million in 2022. Such expenses allowed us to
increase mindshare, expand our user base and enhance monetization capability. We believe the distinct
attributes of the online fitness industry generally require a higher level of investment in general
branding, marketing and user acquisition, especially in China, where online fitness market is yet under-
penetrated but possesses significant growth potential. Our adjusted net loss (non-IFRS measure) was
RMB366.5 million, RMB106.4 million, RMB826.5 million and RMB666.9 million in 2019, 2020,
2021 and 2022, respectively. See “Financial Information—Non-IFRS Measure: Adjusted Net Loss”.
The following table breaks down our revenue by amounts and as percentages of our total
revenue for the periods presented:
For the Year Ended December 31,
2019 2020 2021 2022
RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
Revenue:
Self-branded fitness products ........ 396,034 59.7 636,709 57.5 872,452 53.9 1,136,971 51.4
—Smart fitness devices ............. 135,061 20.4 220,830 20.0 286,516 17.7 438,875 19.8
—Complementary fitness products .... 260,973 39.3 415,879 37.5 585,936 36.2 698,096 31.6
Membership and online paid content . . 151,322 22.8 338,024 30.5 557,581 34.4 894,167 40.4
—Membership subscription ......... 136,680 20.6 305,199 27.6 487,881 30.1 563,064 25.4
—Online paid content .............. 14,642 2.2 32,825 2.9 69,700 4.3 331,103 15.0
Advertising and others .............. 115,763 17.5 132,044 12.0 189,505 11.7 180,413 8.2
—Offline centers .................. 30,019 4.5 20,839 1.9 30,888 1.9 19,540 0.9
—Advertising and others (excluding
offline centers) .................. 85,744 13.0 111,205 10.1 158,617 9.8 160,873 7.3
Total ............................... 663,119 100.0 1,106,777 100.0 1,619,538 100.0 2,211,551 100.0
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BUSINESS
Year Ended December 31,
2019 2020 2021 2022
RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
Revenue from sales of self-branded fitness
products
Non-wholesale channels .............. 357,711 90.3 561,371 88.2 648,474 74.3 886,106 77.9
—Sales through Keep online stores on
third party platforms ............... 202,348 51.1 360,763 56.7 444,795 51.0 656,460 57.7
—Sales directly through Keep
platform ........................ 155,363 39.2 200,608 31.5 203,679 23.3 229,646 20.2
Wholesale channels ................. 38,323 9.7 75,338 11.8 223,978 25.7 250,865 22.1
Total ................................. 396,034 100.0 636,709 100.0 872,452 100.0 1,136,971 100.0
OUR COMPETITIVE STRENGTHS
We believe the following strengths have contributed to our success:
Largest and Innovative Platform for Online Fitness
We are the go-to online destination for fitness and healthy lifestyles in China. In 2022, we had
an average of 36.4 million MAUs, making us the largest fitness platform in China. In 2022, our MAUs
also cumulatively participated in 2.1 billion workout sessions on our platform, including 1.3 billion
workout sessions following our recorded courses, making us the No. 1 online fitness platform in China
in terms of the number of workout sessions, according to the CIC Report. Our offerings go beyond
fitness content and include self-branded products such as smart fitness devices, gear, apparel, and food,
thereby providing users with a one-stop solution and driving growing engagement.
We have redefined many aspects of the fitness industry in China with innovative
advancements. We were the first in China to introduce structured fitness courses and has the largest
fitness module library in China. Building upon modularized standard moves, we introduce intelligence
into our course design and development. We were among the first to introduce AI-assisted fitness
curriculums to provide users with a more systematic and personalized fitness solution. Our AI-assisted
fitness curriculums automatically formulate workout and diet plans based on users’ athletic levels,
fitness preferences and goals, dynamically adjust workout intensity and diet recommendations, and
systematically help users make fitness progress. We were also the first in China to introduce an
intelligent resistance level adjustment system to Keep Bike and cycling content, according to the CIC
Report. In addition, we were the first in China to map personalized running routes based on users’
running records. Along our recommended routes, users can explore unique cultural and natural
landmarks. By seamlessly integrating an online and offline fitness experience powered by technology
innovation, we have turned fitness into a lifestyle that can be pursued by anyone, anytime and
anywhere.
Extensive, Professional, Personalized and Dynamic Content Offerings
Our library of extensive, professional, personalized and dynamic content is at the core of our
success. Over the years, we have developed the largest library of recorded fitness courses in China in
terms of total number of fitness courses offered as of December 31, 2022. We have accumulated deep
domain expertise in content development and production. Our recorded courses, including proprietary
structured courses and video courses, and interactive live streaming classes, along with our AI-assisted
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curriculums, cover a variety of fitness scenarios, including indoor and outdoor workouts, with or
without fitness gear.
Š Extensive. We have accumulated extensive content in terms of both volume and breadth.
As of December 31, 2022, we had approximately 21,200 recorded fitness courses on the
platform, covering various fitness categories and difficulty levels to help users achieve
diverse fitness goals based on their fitness experience and preferences. Our current
offerings include strength training, cardio, dancing, boxing, running, stretching, yoga,
Pilates, meditation and Tai Chi. We offer content developed in-house or by influencers on
our platform, and content licensed from other fitness professionals and fitness content
providers. As of December 31, 2022, the fitness influencers, fitness professionals and
content providers on our platform contributed to approximately 17,800 recorded courses.
Š Professional. We have a specialized and professional team with years of industry
experience. Our content development experts and in-house instructors are devoted to
understanding users’ needs and preferences to help us better form and adjust our near-term
and long-term content strategies. We also systematically guide the fitness influencers to
develop professional and high-quality content focusing on achieving diverse fitness goals.
Š Personalized. We offer a comprehensive suite of structured courses that are designed to
meet diversified demand of users through hundreds of thousands of unique combinations,
including single move instructions and repetition modules. Our AI-assisted curriculums
offer comprehensive and personalized fitness programs consisting of various fitness
content and food recommendations based on users’ athletic level and fitness goals. The
content of these personalized curriculums is dynamically adjusted based on users’
progression and feedback, thereby guiding them to achieve their goals more effectively.
Š Dynamic. We systematically create new content to timely capture the market trends. We
gain extensive first-hand user insights through close interaction with users and continuous
collection of user feedback. In addition, our live streaming classes also deliver a dynamic
fitness experience where instructors can interact with users and adjust content based on
users’ feedback in real time.
We encourage every user on our platform to become a fitness influencer, who may bring their
passion to others by creating fitness content on our platform. We also recruit fitness professionals
around the world to join our platform to further enrich our content offerings and influence users . We
believe that our extensive, professional, personalized and dynamic content offerings are critical to
attracting new users to our community, where they can start their fitness journey for themselves and
influence others in their lives.
Superior User Experience Underpinned by our Smart, Interactive and Immersive Fitness Solution
We offer our users a superior experience with our smart, highly interactive and immersive
fitness solution that integrates online and offline experiences and creates a real-time face-to-face
ambience.
Š Smart. Our online fitness content and smart fitness devices are highly compatible and
seamlessly integrated, which delivers a highly personalized experience. For example, our
smart Keep Wristband monitors users’ heart rates and calculates calories burned on a real-
time basis, which are transmitted to our platform to further adjust the fitness curriculums.
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If the heart rate exceeds a certain recommended range, the duration of breaks between
fitness moves will be automatically extended to give users more time to rest.
Š Interactive. We have established multiple layers of interaction for our users. Users are
connected to our content through real-time feedback and AI-assisted fitness curriculums
that dynamically adjust fitness courses to users’ personalized needs. Users are also
connected to instructors and each other through interactive features in our community and
bullet chatting during live streaming classes. Based on users’ real-time feedback, our
instructors can understand users’ situations better and dynamically adjust content to
enhance the user experience. Other interactive features such as group competitions and
leader boards in live streaming classes further simulate a real-time face-to-face fitness
environment.
Š Immersive. Built upon the smart and interactive features, we aim to deliver an immersive
online experience to our users. Our live streaming classes and recorded video courses
feature trendy music with strong beats, colorful lighting effects, interactive functions such
as express bullet chatting, and professional studio setups to simulate face-to-face fitness
environment to better motivate users during workouts. The competitive features in live
streaming classes also incentivize users to fully immerse themselves.
Next Generation Brand Supported by a Vibrant Community
The core value of our brand is to encourage people to be more energetic and enjoy fitness as a
lifestyle. We aspire to enable everyone to participate in fitness anytime, anywhere, constantly
challenge themselves for self-betterment, nurture a strong sense of belonging, and bring positive
influence to their communities. Our Keep brand encourages positive energy among users and has
become synonymous with a heathy lifestyle.
Our platform and brand are highly influential in China. Our users appreciate and are willing to
recommend our products and content to other people. Our users cumulatively shared our content
directly from Keep to social media platforms over 38 million times in 2022, respectively. In our first
year of launch, Keep was awarded the 2015 Best App in China by Apple. Keep also received the
highest rating among all fitness apps in China in the Apple app store in 2022.
We strive to create and lead a new fitness lifestyle. Our core beliefs have encouraged tens of
millions to become Keepers and share their passion for living a healthy and active life. These users
regard our platform as the arena for their self-betterment, enjoy fitness and sports, and become fitness
enthusiasts. We believe that our large user base, innovative business model, and strong brand
recognition among fitness users in China enable us to capture the significant growth potential in the
fitness industry.
Proprietary Platform Driven by Insights and Technology
Technology innovation is deeply rooted in our corporate culture. Leveraging our cutting-edge
technology capabilities and extensive industry insights, we are well positioned to effectively predict
market trends and meet user demand.
Our platform is built on an insight-driven architecture that is constantly fine-tuned by our data
insights, AI optimization and applications. Empowered by proprietary AI technology, our platform
enables us to efficiently develop fitness content that is personalized for each user. We have derived
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in-depth understanding of users through their interactions with our platform and measurements from
smart fitness devices, including body measurements, total calories burned, fitness goals and
preferences, among others. Based on such insights and through our proprietary AI applications, we
have designed personalized fitness curriculums that are tailored to each user’s fitness goal and athletic
level, and can be dynamically adjusted according to user progression. In addition to fitness courses, our
AI-assisted fitness curriculums also offer diet and other fitness product recommendations, which
provide users with a more comprehensive fitness solution and generate cross-selling opportunities.
Our smart fitness devices are enabled by state-of-the-art technologies and designed to deliver
an integrated online and offline experience to our users. For example, we encourage users of Keep Bike
to perform an initial cycling test to gage their cycling capabilities, based on which our intelligent
resistance level adjustment system can automatically tune the resistance level on Keep Bike to offer a
more effective workout experience. Our smart Keep Wristband is also equipped with our proprietary
six-axis accelerometer and gyroscope that capture fitness activities more efficiently, enabling us to
generate more user insights and provide more real-time guidance to users. Our smart fitness devices
serve as artificial-intelligence-driven internet-of-things, or AIoT, that are dynamic touch points for the
intangible online fitness content.
Our users accumulate a considerable amount of fitness records on our platform, such as running
routes, personal records, workout history, and archived course content. We create visual
representations on our platform so that users perceive Keep as a personal fitness diary, which further
improves user stickiness and loyalty. We also listen to our users and constantly upgrade our mobile app
and refine our products and services. Users’ engagement with the our fitness products together with
information collected from users when they upload their workout record and provide feedback after
training sessions allow us to better understand user preferences. The feedback loops then enable us to
make changes quickly and adapt to user feedback in real-time while keeping users engaged.
Diversified Monetization Model Driven by Multiple Growth Levers
Our fitness content and fitness products reinforce and complement each other, and have
demonstrated synergies. Leveraging our large user base, this integrated business model brings cross-
selling opportunities. As we expand our content offerings, more users are attracted to our platform,
bringing more monetization opportunities and enhancing our attractiveness to fitness professionals and
content providers, who will further enrich our content offerings, thereby forging a virtuous cycle. The
opportunity for immersive marketing that resonates with our user base also attracts brands and
merchants to our platform for advertising services, further expanding our monetization opportunities.
As we continuously build our user loyalty, we believe users’ general willingness to subscribe to
memberships and purchase our self-branded products will grow over time, resulting in improved
financial performance. Our average monthly membership retention rate was 70.8%, 73.3%, 71.7% and
65.3% in 2019, 2020, 2021 and 2022, respectively. In 2019, 2020, 2021 and 2022, our monthly average
workout sessions per MAU was 4.3, 5.0, 4.1 and 4.8, respectively, and our monthly average workout
sessions per subscribing member was 13.5, 10.9, 7.2 and 7.8, respectively.
Currently, we generate revenue from membership and online paid content, self-branded
products, and advertising and other services. Our revenue from the membership and online paid
content has been growing rapidly. Our platform has also experienced a steady increase in membership
penetration rate, which increased from an average of 3.5% in 2019 to an average of 6.4% in 2020, an
average of 9.5% in 2021, and further increased to an average of 10.0% in 2022, compared to the
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industry average of 5.8% in China in 2022. At the same time, our self-branded fitness products
contribute significantly to our revenue, and we have a successful track record of developing and
launching popular fitness products. The Keep brand was ranked No. 1 in smart bikes in 2022 in China
in terms of GMV. We also monetize through advertising services and have attracted a large base of
brands and merchants as our advertising customers.
Experienced Management Team
Our young and energetic team are followers of our core beliefs, passionate about fitness, and
eager to embrace technological innovations and advancements. They are also motivated to influence
others and share the fun of fitness with more people in their communities and our society.
Mr. Wang Ning, our founder, the chairman of the board of Directors and chief executive
officer, is a young and visionary entrepreneur, and our first Keeper. His passion and expertise on
fitness continue to inspire and influence us. Mr. Wang believed that an online fitness solution enabled
by technology would redefine many aspects of the fitness industry and lead to a healthier lifestyle in
China, and founded Keep in 2014.
Our experienced management team has strong execution capabilities. Mr. Peng Wei, our
co-founder, Executive Director and vice president of online operations, introduced our proprietary
structured courses that combine technology with fitness to elevate user experience. Mr. Liu Dong, our
co-founder, Executive Director and vice president of consumer fitness products, had over 20 years of
experience in supply chain management and product design, and has been standardizing and
optimizing the quality of our fitness products to further enhance our brand and user experience. Our
chief financial officer, Mr. Huang Weibo, has approximately 20 years of experience in financial
management, held senior positions in a renowned public accounting firm and top technology
companies in China. We believe that the collective technology and operational experience of our
management team has contributed to and will continue to pave the way for our success.
BUSINESS STRATEGIES
The online fitness market in China reached RMB455.6 billion in 2022 and is expected to
increase to RMB1,285.4 billion in 2027, representing a CAGR of 23.1%. As various key factors
continue to drive the growth of China’s online fitness market, we believe that we are well positioned to
continue to address the demand in this market. As an online platform, we offer professional online
fitness content and engaging online fitness communities so that users can enjoy affordable fitness
workouts at home that are suitable for all athletic levels. We are also actively updating our technology,
design, fitness content and products to catch evolving user needs. See “Industry Overview—China’s
Fitness Market—Key Growth Drivers of China’s Fitness Market” and “Industry Overview—Key
Growth Drivers of China’s Online Fitness Market.” We plan to achieve our purpose to make the world
move through the following key business strategies:
Keep on Expanding Our Addressable Market and User Base
Maintaining and growing our user base is our key strategic focus as the largest fitness platform
in China. We plan to expand our addressable market by appealing to users across different ages, areas
of interest, and locations. In particular, we intend to provide more targeted offerings for users across a
wider age range and ramp up our efforts to expand our presence into lower-tier cities in China.
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We intend to retain and attract users by further improving our fitness solution and introducing a
wider variety of fitness content and innovative smart fitness devices. We intend to further expand the
fitness categories on our platform to include trendy fitness topics. We also plan to introduce more
gamified features to our online fitness content through integration with our smart fitness devices. Our
gamified features do not involve additional revenue and payment mechanism. As advised by the PRC
Legal Adviser, the gamified features in the online fitness contents are not online games and thus would
not be subject to the online games related laws and regulations. Furthermore, we will continue to
expand our self-branded product offerings to complement our online fitness content and cater to the
diverse needs of users, thereby attracting more users and solidifying our position as a one-stop fitness
platform.
Our current business and operations overseas include (i) the access to and use of our mobile
apps overseas, and (ii) the sales of certain fitness products in e-commerce platforms in North America.
As our mobile apps can be downloaded and used overseas, we actively monitor the geographic
restrictions on the use right of our licensed content and limit users’ access to the restricted content
based on their IP addresses. For our fitness products, we conduct quality inspect, trademark analysis
and other compliance check before offering them overseas. We did not have litigations, disputes, or
regulatory actions related to content access or sales of fitness products overseas in the Track Record
Period. The revenue generated from global users and global customers was not material during the
Track Record Period. In June 2022, we strategically ceased the operation of two international mobile
apps, Keep Trainer and Keep Yoga, as a part of our business strategy to streamline and consolidate our
offerings to provide better user experience as our Keep app offers similar content and features
previously offered by Keep Trainer and Keep Yoga . We currently do not have concrete and detailed
expansion plan regarding our business and operations overseas. Ultimately, we seek to expand our
business on a global scale and become a global brand through international marketing efforts and
localized product and content development strategies. We may also selectively pursue strategic
acquisitions and investments to expand our market share in the fitness industry, unlock potential
synergies, and further promote our brand value, although we have not identified any specific
investments or acquisition opportunities at this time.
Keep on Innovating and Diversifying Our Content
We will continue to invest in the development of innovative and diversified content on our
platform. We intend to continuously expand our content offerings by recruiting more quality in-house
instructors, acquire quality third-party content, and expand content generated on our platform. We will
continue to introduce more specialized content and expand into new fitness categories by cultivating
more fitness influencers on our platform, and collaborating with more fitness professionals and content
providers.
Leveraging our insights and technology, we have derived deep insights on users’ preferences
and market trends, which help shape our content development strategy and enable us to produce
content that better meets users’ needs. As we continue to accumulate such insights, we can further
improve our personalized content offerings to enhance user experience and stickiness. With more
diversified and personalized content, we will be able to deliver a more comprehensive fitness
experience, and continuously enhance user retention and loyalty.
On top of our membership and online paid courses and curriculums, we will also explore other
innovations around content, such as introducing virtual gifts in our live streaming classes. Moreover,
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we will continue to explore potential gamified features for our content to bring more fun and
excitement to fitness leveraging the close integration between our smart fitness devices and our online
fitness content.
Keep on Creating an Open Platform for Greater Engagement among Platform Participants
We have established an open and highly interactive platform connecting various platform
participants, including users, instructors, fitness influencers, advertisers, and other content providers.
We will further open up our platform to encourage greater participation and interaction from these
participants. We will inspire users and instructors to develop their own original fitness courses,
promote their quality content on our platform, and also provide professional support and incentives
throughout the development process. As the number of participants on our platform increases, more
advertisers will be attracted to our platform as well.
To enhance engagement on our platform, we will introduce more interactive features to our
online fitness community, such as chat groups with instructors and fitness influencers, which enable
users to share their experiences, contribute fitness content, and form a stronger bond with one another,
thereby enhancing user stickiness. With stronger user engagement and collective input from platform
participants, we can deliver better products and content and attract more platform participants, further
amplifying the network effect.
In addition, we will continue to create synergies across our platform by thoughtfully weaving
our online fitness content, smart fitness devices, and self-branded product offerings together. As we
continue to grow, we aim to form more synergies across our offerings and offerings from third parties,
and encourage users to spend more time on our platform, which then draws more participants to our
platform, enriches our offerings, and attracts more users.
Keep on Investing in Technology Capabilities
We will continue to strengthen our technological innovations to solidify our leading position in
the fitness industry. We will further invest in AI and other technologies to provide more personalized
fitness content offerings to users. By increasing the granularity, accuracy and quality of fitness
activities our platform, we will gain better insights to provide more relevant recommendations of
content and products to elevate the experience.
We intend to further enhance the integration of smart fitness devices and our online platform to
enable a more seamless experience online and offline. In particular, continuous innovation in our smart
fitness devices is our key strategic focus. In addition to investing in research and development to bring
new features to our existing offerings, we will create new and smarter products to transform users’
fitness experiences. We will also continue to invest in our technology infrastructure to support the
innovation of our platform, such as our audio and video streaming capabilities, to enhance content
quality and provide a more reliable experience for users.
Keep on Increasing Our Brand Value
We believe that one of our most valuable assets is our Keep brand, representing the leading online
fitness platform in China. We are committed to further strengthening our brand through online and offline
marketing. Leveraging our deep understanding and ins ights on users’ preferences and market trends, we
will implement targeted marketing and fitness campaigns to broaden our universal appeal.
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By offering high-quality products and content, we strive to improve user experience, increase
user engagement and loyalty, and create a sense of belonging in our Keeper community. As we inspire
more people to participate in fitness, empower them to achieve their own self-betterment, become new
fitness enthusiasts, and bond with one another, we will further strengthen our brand recognition. We
believe that extensive word-of-mouth referrals from loyal users are our most efficient marketing
channel for organic user acquisition.
Keep on Enhancing Our Monetization Capabilities
We will continue to enhance our monetization capabilities and explore other monetization
channels that are complementary to our overall business. We plan to continue to expand the value of
our membership by providing more exclusive benefits and products to subscribing members. For
example, by offering subscribing members more specialized and advanced fitness content, exclusive
training classes with selected instructors, additional interactive features with other subscribing
members, a member-only online store for fitness products, and innovative integration with smart
fitness devices, we expect to convert more users into our subscribing members.
As we attract more users to our platform while simultaneously increasing user engagement with
content on our platform, we believe users’ general willingness to pay for premium services and
purchase our self-branded products will continue to grow over time, resulting in improved
monetization.
OUR MILESTONES
Driven by our purpose to make the world move, we have achieved the following significant
milestones in our business.
Š February 2015: we launched Keep mobile app with our proprietary structured fitness
courses.
Š June 2015: the MAUs on our platform reached one million.
Š July 2016: the MAUs on our platform reached 10 million.
Š March 2018: we expanded our offerings to include smart fitness devices and
complementary fitness products under the Keep brand.
Š September 2018: we launched membership subscription.
Š July 2019: our subscribing members reached one million.
Š June 2020: we launched our interactive live streaming fitness classes.
Š July 2021: the MAUs on our platform reached 40 million.
Š 2022: our average monthly subscribing members for the year exceeded 3.5 million.
OUR KEEP PLATFORM - ONE UNIFIED FITNESS ARENA FOR ALL
We launched our Keep mobile app in 2015, which has become the largest fitness platform in
China in 2022. We are a leader in the fitness industry in China and are reinventing how content and
technology can help people achieve their diverse fitness goals efficiently and conveniently, thereby
transforming fitness from a burden to an integral part of lifestyles. We believe everyone can find his or
her own arena on Keep, a place where they compete with themselves to pursue self-betterment. With
AI-assisted and interactive content and smart fitness devices on our platform, everyone who seeks
fitness solutions can discover suitable offerings and receive positive reinforcement.
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Our Keep platform is a one-stop online destination for users seeking an effective and efficient
fitness solution. When users join our platform and become a part of our Keeper community, they gain
access to a comprehensive suite of fitness content and tools to reach their fitness goals. They start by
voluntarily building their fitness profiles with basic information, such as age, gender, height and
weight, preliminary fitness tests to gage their athletic levels, and surveys to better assess their fitness
goals. Based on their fitness profiles, we offer AI-assisted personalized fitness curriculums that feature
our proprietary structured courses and other fitness content with suitable difficulty levels and fitness
focus, typically lasting for a few weeks. In addition to the curriculums, users can join other fitness
courses and even live streaming classes to interact with our instructors, and find rapport in our
community during and after workouts. As users become more engaged with our platform and expand
their opportunities for discovery, they may encounter courses that need smart fitness devices such as
Keep Bike and Keep Wristband , or require fitness gear such as dumbbells and yoga mats, all of which
are available in our online store on the Keep platform. Users may also find fitness clothing and fitness
food easily on our platform to further complement their curriculums. Alternatively, some users get to
know our platform after purchasing our smart fitness devices and start from those fitness courses
related to the smart fitness devices before exploring our other extensive fitness content offerings.
We are a leader in molding and transforming the fitness industry in China. With extensive
professionally generated content, or PGC, such as proprietary structured courses and live streaming
classes, and various fitness tools on our platform, users can discover suitable fitness courses and
curriculums that address their specific fitness goals. As our community expands, fitness professionals
and influencers on our platform may capitalize on their popularity by offering diverse professional user
generated content, or PUGC, including various fitness courses and curriculums, to other users, further
enriching our content offerings. In addition to the network effect on a content level, our fitness content,
both PGC and PUGC, brings traffic to our smart fitness devices and complementary fitness products in
our online store, while people who purchase our fitness products are also drawn to our platform to
explore our extensive and diverse fitness content. As users and influencers are inexorably connected
through our high-quality content, social community, smart fitness devices, and online stores, our
platform enjoys an overall virtuous cycle that fuels its continued growth and expansion.
OUR USERS - “KEEPERS”
Our extensive, young and engaged user base is the key to our success. In 2022, approximately
76.7% of our total MAUs who provided their age information on average are below or at the age of 30.
Younger generation is typically well-educated and technology savvy, with strong demand for
innovative fitness products. In addition, approximately 54.2% of our total MAUs who provided their
location information on average come from first-, new first- and second-tier cities in China in 2022,
and we have observed growth in users in lower-tier cities as the reputation of our platform and brand
strengthen.
We started with proprietary structured courses and have expanded our offerings by empowering
users to discover quality content, enabling influencers to create and share content, attracting new users
with diverse fitness goals and athletic levels, and introducing interactive live streaming classes to our
platform. As a result, we have become the go-to destination for fitness users who seek an interactive,
immersive and smart fitness experience. Our users have demonstrated a high level of engagement on
our platform. We recorded an average MAU of 21.8 million, 29.7 million, 34.4 million and 36.4
million in 2019, 2020, 2021 and 2022. respectively. In 2019, 2020, 2021 and 2022, our monthly
average workout sessions per MAU was 4.3, 5.0, 4.1 and 4.8, respectively, and our monthly average
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workout sessions per subscribing member was 13.5, 10.9, 7.2 and 7.8, respectively. Compared to the
2.7 monthly average workout sessions per MAU of the online fitness industry in China in 2022, our
higher monthly average workout sessions per MAU demonstrated higher user stickiness. We
experienced a decrease in monthly average workout sessions per MAU in 2021 and a decrease in
monthly average workout sessions per subscribing member in 2021 due to the expansion of our user
base as we attracted new users that have lower level of engagement and less developed workout habit
when they first started using our platform. Our new initiatives, including the launch of more virtual
sports events, spurred greater user enthusiasm in our content offerings, contributing to the increase in
the monthly average workout sessions per MAU and monthly average workout sessions per
subscribing member in 2022. The average monthly membership retention rate was 70.8%, 73.3%,
71.7% and 65.3% in 2019, 2020, 2021 and 2022, respectively, demonstrating strong user loyalty and
stickiness. We experienced higher average monthly membership retention rate in 2020 as the outbreak
of COVID-19 increased users’ willingness to workout at home. The slight decrease in the average
monthly membership retention rate in 2021 and 2022 was also due to the expansion of our user base,
including subscribing members for our virtual sport events.
Profile Building
Users who visit our platform could activate the basic features on our platform, such as watching
fitness courses, without registering with our platform. Users may elect to build their fitness profiles
free of charge with (i) basic information, such as age, gender, height and weight, (ii) preliminary
fitness tests to gage their athletic levels, including the strength of various muscle groups and whether
the users are capable of completing certain moves such as push-ups, and (iii) their fitness goals, which
include body toning, muscle building, fat loss, among other things.
Based on users’ profiles, we recommend appropriate fitness courses and curriculums that are
tailored to their fitness goals and athletic levels. For users who start their Keep journeys by purchasing
our smart fitness devices, we also have initial setup tests for smart fitness devices. For example, users
who have purchased Keep Bike are guided to the initial cycling test to assess their cycling capabilities,
based on which our bikes can intelligently adjust the resistance levels for users.
Membership Subscription
On our platform, users can freely explore and join many pre-recorded professional fitness
courses and a few curriculums, and can use our outdoor activity tools to track their running, hiking and
cycling free of charge. At the same time, we offer membership subscriptions which significantly
expand the diversity and interactivity of our content offerings for our subscribing members. Many of
our fitness curriculums are available to our subscribing members, including the AI-assisted
personalized curriculums that are tailored for subscribing members based on their fitness profiles and
goals and constantly adjusted according to subscribing members’ ongoing progress. In addition,
subscribing members can join live streaming classes for cycling, strength training, cardio, boxing,
dance and yoga, and utilize our dynamic food planning and tracking tools that offer personalized
recommendations for fitness diets and recipes. We also offer coupons and discounts for other paid
content and fitness products in our online store to our subscribing members. Subscribing members on
average enjoyed approximately 25% discount for fitness products in our online store in 2022.
We had an average of 0.8 million, 1.9 million, 3.3 million and 3.6 million monthly subscribing
members in 2019, 2020, 2021 and 2022, respectively. Our membership penetration rate increased from
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3.5% in 2019 to 6.4% in 2020, to 9.5% in 2021, and further increased to 10.0% in 2022, demonstrating
the success of our customized premium fitness solution.
Users may subscribe to our monthly, quarterly or annual membership packages, with an option
to automatically renew at the end of the subscription period. Once subscribed to our membership
package, the subscribing member generally cannot cancel the membership of the current period or
receive any refund. Subscribing members may, however, choose to cancel the automatic renewal until
24 hours before the beginning of next subscribing period through app stores.
We have specified in our membership policy that the sharing of membership subscription is not
allowed and, technically, we have restricted the number of devices that can log on to the same
membership account. We believe that sharing the membership subscription among multiple users does
not give these users the benefit of being a subscribing member, as Keep helps record the personal
fitness profile and exercise history for users and offers customized curriculums to meet users’ specific
needs. During the Track Record Period and up to the Latest Practicable Date, we had not identified any
material incidents or disputes related to multiple users sharing one membership account.
Fitness Influencers
In the world of Keep, everyone is encouraged to become an influencer, as we believe in the
pervasive power of sports and fitness. We have a group of fitness professionals and amateurs on our
platform who have gained popularity in the community through their content and became influencers.
We encourage and assist these influencers in creating fitness courses to further enrich our content
offerings and attracting users with more diverse backgrounds. We believe that the fitness influencers
serve as role models for users by motivating more people to cultivate a fitness lifestyle.
We analyze user interactions and original content generated through our platform to discover
potential fitness influencers. Typically, to become influencers, users need to be experienced and
knowledgeable in at least one specialized fitness area, such as training, yoga, running, dancing or
cycling and have shared numerous posts that depict their fitness experience in our community. After
identifying users who are passionate about sharing their fitness experience and excellent in producing
original fitness content, we encourage them to become influencers on our platform, and not only give
them assistance in original content production, but also help them build their fitness fan base and
monetize their popularity. We also provide operation analysis to help influencers better understand
followers’ preferences and offer opportunities to collaboratively produce quality content with our
platform. For popular and creative influencers, we also introduce them to advertisers directly to expand
their monetization opportunities. In addition, we closely track fitness trends globally and invite fitness
professionals who have built their reputation and popularity elsewhere to join our platform, which
complements our content offerings and helps attract new users.
Keeper Community
Our online platform supports a highly engaging and interactive community gathering people
who are willing to try and value fitness in their lives. Users are greeted by our powerful slogan
“Discipline Sets Me Free ” every time they open our mobile app, and we believe this has become the
common spirit that influences users and unifies our Keeper community. Our users also publish posts to
our community using all formats, including pictures, videos and texts, to record their feelings after
completing fitness activities and share their thoughts on particular courses with other users. We offer
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various tools to simplify the recording and posting process for users, including generating pictures with
user statistics and results from the fitness courses such as calories burnt and time spent, and
automatically including the number of times the user has completed such course in the post. Users can
easily follow other users, including fitness influencers and our fitness instructors, to track their updates,
interact with them through comments and instant messaging, and compete with them for weekly fitness
hours.
We utilize AI capabilities in our community feed to present posts that are more relevant to our
users. We recommend posts that may be more interesting to users based on their past interactions and
behaviors, as well as their fitness profiles. We also recommend posts from various fitness circles that a
particular user is more likely to join to find rapport. Through our warm and supportive Keeper
community, users can explore tremendous information and other users’ experiences along their fitness
journeys on our platform.
The screenshots below illustrate the community feed and circles on our platform.
Weekly
ranking of
exercise time
Connections Following
User posts in all formats, including
pictures, videos and texts
Add
friends
Likes
User statistics
including calories
burnt and
exercise time
User interactions
Running route
OUR CONTENT OFFERINGS
We strive to provide our users with the broadest range of high-quality and engaging original
and licensed content on fitness. Our content is presented in a number of formats, including (i) recorded
structured courses that feature an edited combination of fitness moves shot in standardized
backgrounds, (ii) recorded video courses developed by us, our influencers or other content providers,
(iii) live streaming classes; and (iv) articles and short videos sharing fitness knowledge. The content on
our platform, in terms of source of production, mainly includes (x) PGC that consists of recorded
structured courses, recorded video courses and curriculums, as well as live streaming classes, all
developed and produced in-house, (y) PUGC, which refers to recorded courses and pre-planned
curriculums produced by our fitness influencers or licensed from third parties, as well as live streaming
classes produced in-house but demonstrated by influencers, and (z) AI generated content, or AIGC,
that encompasses structured courses and curriculums produced automatically using AI technology
tailored to users’ specific needs and progress. Our fitness content is the foundation for close and active
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user engagement. In 2022, the total number of workout sessions following our recorded fitness courses
was approximately 1.3 billion.
The table below sets forth our content in various formats and sources of production:
Recorded Fitness Content
Live Streaming
Classes
Fitness
Curriculums
Structured
Courses
Recorded Video
Courses
P G C ............................................ ✓✓ ✓ ✓
PUGC .......................................... — ✓✓ ✓
AIGC ........................................... ✓ —— ✓
The table below sets forth workout sessions completed following all types of content for the
periods indicated:
For the Three Months Ended
March
31,
June
30,
September
30,
December
31,
March
31,
June
30,
September
30,
December
31,
March
31,
June
30,
September
30,
December
31,
March
31,
June
30,
September
30,
December
31,
2019 2020 2021 2022
(in thousands)
Total workout
sessions
completed . . . 195,874 305,463 368,009 241,613 476,451 598,495 444,139 276,442 353,420 451,474 526,561 348,002 440,116 683,601 547,598 409,342
Our high-quality and well-trained instructors, who we refer to as Koaches on our platform, are
critical to providing users with an effective and engaging fitness experience to enjoy our proprietary
fitness content, including recorded structured courses, recorded video courses and live streaming
classes. As of December 31, 2019, 2020, 2021 and 2022, we had 41, 29, 37 and 44 in-house instructors
producing content on our platform, respectively. Our fitness instructors help content development
experts design the fitness courses and record demonstration and instruction videos for various moves.
We are highly selective in recruiting our fitness instructors, who serve as the front line in
delivering our purpose, representing our brand image, welcoming users to our community, and
passionately motivating users to exercise more. Before they are approved to formally record our fitness
courses, our newly hired instructors must complete a rigorous and comprehensive onboarding program
to ensure they have the requisite fitness skills and understanding to deliver our systematically
developed content effectively. Subjects of these programs include our content development workflows,
online fitness course planning, in-depth training on utilizing our platform, musical and visual
presentation, corporate culture, user communication protocols and other aspects of their
responsibilities. We also closely supervise our instructors’ performance and help them prepare and
rehearse for live streaming classes. Our instructors for live streaming classes are required to attend
relevant trainings and are subject to instructions from live streaming class directors. Directors can cut
the real-time streams if there are any inappropriate behaviors. Bullet chatting during the live streaming
classes is monitored directly by the AI system.
Our Recorded Fitness Content
Our proprietary fitness content mainly includes (i) structured courses that feature an edited
combination of fitness moves shot in a standardized format, (ii) video courses developed by us and
demonstrated by our in-house instructors or celebrities, and (iii) a complementary Fitness
Encyclopedia serving as a guide to our recorded fitness courses. As of December 31, 2022, we offered
approximately 3,400 recorded fitness courses that were developed in-house. At the same time, we also
offered approximately 17,800 recorded courses from fitness influencers, fitness professionals and
content providers as of December 31, 2022, compared to that 7,600 as of December 31, 2021.
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The proprietary fitness courses on our platform are popular among users, indicating their
originality and effectiveness. In 2022, the number of workout sessions following our recorded courses
reached 1.3 billion, among which 524.9 million are workout sessions following our recorded courses
developed in house, and 770.6 million are following the recorded courses developed by third parties. In
2022, 15 of the top 30 most followed recorded fitness courses on our platform were our proprietary
courses, which demonstrated the popularity of our self-developed fitness content. In particular, a 13-
minute at-home abs workout was one of the most popular courses on our platform, and our MAUs
recorded cumulatively 210 million workout sessions following this course as of December 31, 2022.
Our fitness courses cover a wide range of fitness categories to offer our users a professional,
comprehensive and constantly refreshed experience. Our current offerings include strength training,
cardio, dancing, boxing, running, stretching, yoga, Pilates, meditation and Tai Chi, among other things.
These courses and curriculums serve various fitness goals, such as fat loss, body toning, muscle
building, flexibility, and posture improvements. Users may easily find their desired content by filters,
including fitness goals, target body parts, fitness categories, difficulty levels, and fitness gear or
devices used.
The following table summarizes the key difference between structured courses and recorded
video courses:
Structured Courses Recorded Video Courses
Content ........................ A combination of fitness moves
edited in a standardized format
with breaks and repetitions
A typical continuous video of a
fitness session from beginning to
the end
Instructor ...................... In-house coaches In-house coaches, influencers, and
third-party content providers
Can be generated through AI ....... Y e s N o
Our Structured Courses
Our structured courses are highly modularized, and generally range from 5 to 30 minutes
consisting of 10 to 35 sections of standard fitness moves, such as push-ups, squats, and crunches, with
breaks in between. Typically, most of these moves are demonstrated by our in-house instructors in the
format of short videos with a standard white background. Each section shows several repetitions of
simple moves, and we insert breaks between sections, the duration of which can be easily adjusted by
users based on their proficiency. The courses often follow a similar routine where we start with a
couple of warm-up sections and end with a few sections of relaxing and stretching moves. Since the
short videos of our moves, each serving as a module in our course, are design-neutral and reusable, our
time and cost of developing and producing a new structured course is reduced by building and
compiling upon existing modules as the standard moves in our fitness library accumulate.
This modularized structure also enables intelligent course development leveraging AI
technology, where our platform automatically generates fitness courses using moves in our library
specifically for particular users based on their fitness goals and athletic levels. These courses can also
dynamically adapt to changing user profiles, such as updated weight and body fat percentage received
from Keep smart scale, and real-time responses, such as heart rate during workout received from Keep
Wristband.
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The screenshots below illustrate our structured courses.
Overview of
course
content
Detailed tips
for each move
Timer View detailed
instructions
Number of users
joining the course
at the same time
Video
instruction by
Koaches
Recorded Video Courses
Our recorded video courses cover a wide range of fitness categories, including cardio, dancing,
boxing, among other things, and include courses developed in-house and by influencers and fitness
content providers. Our comprehensive and performance-driven fitness content development capability
is fundamental to the quality of our recorded video course offerings developed in-house. Underlying
this distinctive capability are our highly systemized and streamlined development processes, which, in
turn, are executed primarily by our specialized in-house instructors. Our recorded video courses also
feature corresponding trendy music with strong beats, colorful lighting effects, and professional studio
setups to simulate a face-to-face fitness environment from various angles to better motivate users
during the workout. We sometimes collaborate with celebrities to record our video courses. Past live
streaming classes delivered by our in-house instructors are also archived as our recorded video courses.
We have also piloted dancing courses taught by virtual coaches using AI algorithms.
In addition to courses planned and presented by our in-house development team and instructors,
we also offer content produced by fitness influencers and licensed from third-party fitness content
providers. We believe that building an open platform further enriches our content offerings, attracts
potential users and amplifies the network effects.
We encourage fitness influencers, including those who become influencers through our
platform and fitness professionals drawn to our platform, to develop and produce fitness content to
further enrich our content offerings. See “—Our Users-“ Keepers”—Fitness Influencers”. PUGC has
emerged as a highly popular category of content, as it combines the diversity and preference of users
and the quality and specialization offered by professionals. As of December 31, 2022, our platform
offered approximately 17,800 fitness courses produced by fitness influencers, fitness professionals and
content providers.
We typically enter into contracts with our influencers that range from three to five years and
offer them economic incentives to compensate and reward them for quality content generated on our
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platform. These contracts typically include content purchase contracts, agency agreements with
influencers, and cooperation agreements with agencies of influencers. We either directly purchase their
content or apply a revenue sharing model. For top influencers, we generally ensure that some of the
content is exclusive or released first in China through our platform. We also ensure the content from
the influencers cannot be deleted on our platform in general after the contract expires so that users who
have already joined the course will still have access after the contract expires. In addition, we also
collaborate with content providers to develop quality and tailored content for our platform, such as fat
loss courses and ballet fitness, and we own the intellectual property rights of the designed content. We
have also introduced certain creative and quality influencers to advertisers directly to expand their
monetization opportunities.
Moreover, we strive to acquire fitness content that is appealing to our users, and we constantly
look for desired content to expand our content offerings. We partnered with reputable fitness content
providers around the world to offer licensed courses, such as Zumba, which features high- and
low-intensity fitness dance moves, and Les Mills featuring at-home workout classes. We generally
enter into licensing agreements with fitness content providers that range from one to three years. Under
these agreements, we are granted limited license to distribute and use the licensed content at Keepland
fitness centers or on our platform and to further promote, market and advertise through various social
media channels in China. Similar to the limited license in music and other industries requiring
licensing, the limited license may be limited usage to a particular geographical region, or may restrict
us from further editing the content, among others.
The screenshots below illustrate the recorded video courses on our platform.
Yoga
Aerobics
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Fitness Encyclopedia
In addition to structured fitness courses, we have been constantly creating articles and short
videos on fitness, covering topics such as detailed dos and don’ts on workout moves, nutrition
guidance during fitness curriculums, gym equipment basics, among others. We regularly publish such
proprietary fitness content on other third-party social media platforms such as Weibo and Weixin
public accounts, and in the Fitness Encyclopedia on our platform.
In the Fitness Encyclopedia, the fitness knowledge is organized by popular topics, including
diet, fat loss, muscle building, body toning, running, yoga, posture improvement, dance, cardio, and
gym, among others. Under each topic, users can read professionally generated articles covering various
aspects of the topic, access related proprietary fitness courses for free, and see relevant posts from
other users sharing their fitness experience. There are also sub-topics providing specific knowledge on
related fitness equipment and diet and nutrition information tailored for the topic. The Fitness
Encyclopedia offers users an entry to a structured and comprehensive database to acquire systematic
knowledge on fitness.
Interactive Live Streaming Classes
Live streaming classes provide an open venue for our users to gather online and interact with
instructors, including our in-house Koaches and fitness influencers, and other users while they
complete fitness training. Our course development professionals work closely with our instructors to
effectively plan and present our course content in a stimulating and engaging manner. Unlike
traditional pre-recorded courses, live streaming classes allow the users to interact with our instructors
through bullet chatting on a real-time basis and therefore facilitate a more vibrant and socially native
experience among instructors and users. Our instructors and course development personnel are
specifically trained for online live streaming fitness classes and are subject to instructions from live
streaming class directors. Directors can cut the real-time streams if there are any inappropriate
behaviors. Bullet chatting during the live streaming classes is monitored directly by the AI system.
We are the pioneer of introducing live streaming to the fitness industry in China. We offer an
immersive experience to our users by enabling our instructors to proactively interact with users
leveraging smart fitness devices to supplement our comprehensive fitness solution. We design the live
sessions with special lighting and upbeat music to make workouts enjoyable and immersive. Our smart
fitness devices such as Keep Bike and Keep Wristband can be easily integrated with live streaming
classes to provide an interactive experience—for example, users who wear Keep Wristbands will be
able to join in-session competitions with other users who participate in the same live streaming class
through the wristbands’ real-time feeds of workout measurements, and monitor their ranking projected
live on the screen. Our live streaming services enable instructors to interact with users to introduce and
sell fitness products to our users.
In addition, we provide a virtual gifting function for users to gift the virtual items purchased by
virtual Keep coins to live streaming instructors. The purchase and gifting serve as a great way to
stimulate the interactions between users and instructors and increase user engagement in live streaming
classes. In addition to real-name registration for live streaming instructors, we also require real-name
registration for users who give virtual gifting during online livestreaming classes, and prohibit minors
under minor protection mode and users without real-name registration from giving virtual gifting
during livestreaming classes. We have set up a customer hotline and email dedicated for minor-related
concerns including potential complaints or disputes regarding minors’ virtual gifting. We have not
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received any material complaints, reports or disputes on minors’ virtual gifting during the Track
Record Period and up to the Latest Practicable Date. We design virtual gifting function with limits for
spending. As of the Latest Practicable Date, the value of virtual gifts available in our livestreaming
classes ranges from RMB0.1 to RMB88.8. We also set the limit on maximum spending for each user
as RMB50,000 per day and RMB100,000 per month while there have been no explicit provisions on
the standard for the maximum amount of virtual gift spending under PRC laws and regulations as of
the Latest Practicable Date.
Currently, our live streaming content is available to subscribing members only and covers
fitness categories such as indoor cycling, dance fitness, fat loss, cardio, strength training, boxing, and
yoga. In 2022, we offered over 9,100 live streaming classes on our platform, approximately 760 per
month. The total workout sessions following our live streaming classes in 2022 were 17.1 million.
Since we introduced the interactive features, such as bullet chatting and high fiving during classes, to
live streaming classes in June 2020, the total number of interactions increased from 0.9 million in the
three months ended December 31, 2020 to 1.3 million in the three months ended December 31, 2022.
The screenshots below illustrate the live streaming classes on our platform.
Real-time ranking of
in-session competitions
Virtual rewards for
group challenge
Real-time ranking
based on Keep Wristband
Workout data
Real-time
bullet chatting Follow
The screenshots below illustrate the gifting and product-selling function in live streaming
classes.
Personalized Curriculum Planning
We offer a wide range of fitness courses featuring bodyweight exercises, free-weights
exercises, high-intensity interval training, cardio, boxing, dance fitness, stretching, yoga, cycling and
running, among other things. Leveraging these diverse content resources, we have designed various
AI-assisted course curriculums exclusively to our subscribing members, each with its own theme and
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focus, to enable users to start achieving their fitness goals under professional guidance with one click.
In 2022, the workout sessions following the courses within our fitness curriculums exceeded 183
million. For example, we offer one- and four-week personalized fat loss curriculums, and personalized
curriculums for abs strengthening and leg toning, all using AI technology. The curriculums are
personalized based on user profiles including fitness goals, height, weight, age, gender, and results
from fitness tests that assess users’ athletic levels. See “—Our Users-“ Keepers”—Profile building”.
The course difficulty gradually increases as users become more fit, and the content is dynamically
adjusted according to ongoing user feedback. Our comprehensive curriculums also feature relevant
fitness articles and food planning and recommendation tools, which can intelligently recommend diets
for users depending on their profiles and fitness content within the curriculums.
PROFESSIONAL COURSE DEVELOPMENT
Our development professionals combine our accumulated fitness content creation experience
over the past six years and our multi-dimensional user feedback to develop our comprehensive fitness
courses. We have a dedicated team of fitness content development personnel that research, develop,
and produce our proprietary fitness content.
User preference is the most critical factor when we plan and produce our proprietary fitness
content. We hold a content planning meeting regularly where we analyze all fitness categories and how
they fit into our target user profiles with different ages, genders, and annual incomes to form our
production plan for the next year. For a new course, we thoroughly study the fitness and consumption
trends on our platform and use industry insights and AI to identify new content topics and conduct
one-on-one discussions with many target users to gage their needs and preferences. With careful
analysis, we then decide on our course content with clear views of the core value we provide and the
goal we address through a given course. The course plan is subject to several rounds of internal reviews
and revisions before we shoot and produce the course. After the course is launched on our platform, we
track the operating performance of the course, such as course completion rate and repeat workout rate,
and obtain user feedback through surveys so that we can further refine and optimize the course.
In addition, our courses are generally divided into five difficulty levels so that our users can
easily choose suitable courses based on their fitness proficiency. We also recommend suitable
difficulty levels based on users’ fitness test results. Many of our proprietary courses are designed in a
series with progressing difficulty levels, and users may easily find corresponding higher-level courses
within the same series as their athletic levels advance through practicing our fitness courses.
Additionally, it is essential for us to maintain the quality of the professional fitness content on
our platform. We require reputable certifications and recognitions in relevant fitness fields for our
influencers, such as American Council on Exercise (ACE), National Academy of Sports Medicine
(NASM), and National Strengths and Conditioning Association (NSCA) for fitness training, Running
Science Lab for running, Registered Yoga School (RYS), and Registered Yoga Teacher (RYT) for
yoga, and so forth. We closely review and evaluate the fitness content produced by fitness influencers
and licensed from third-party content providers to ensure its quality before publishing it on our
platform. Our operating team supports the production of content by influencers and other content
providers and our content development team monitors and screens the content submitted to our
platform. We review and ensure that the content does not violate fitness principals and is safe for users
to follow and practice. As of December 31, 2022, there were 34 employees that govern and monitor the
behaviors of influencers. Our content screening employees typically hold degrees in sports and fitness
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and have at least three years of content screening experience, and we also offer periodic training
sessions to keep them apprised of new fitness theories and fitness topics.
SMART FITNESS DEVICES
Leveraging our strong technology-driven product development capabilities, we offer a range of
smart fitness devices to provide users with a holistic fitness experience. These devices, mainly
including Keep Bike, Keep Wristband, smart scale and treadmill, can record fitness activities, based on
which we can adjust course content, curriculums and food plans. Our existing users may conveniently
purchase these smart fitness devices for a more personalized fitness experience tailored to their own
changing performances, while new users who purchase these smart fitness devices gain access to a
brand-new approach to fitness on our platform.
Keep Bike
We launched the first generation of Keep Bike in 2019. Our Keep Bike currently features a
symmetric design, a white aluminum alloy frame for durability and stability, a nearly silent hidden spin
with reliable resistance system, and an adjustable screen holder for smartphones, tablets and laptops or
a high-resolution display, all in a compact, 3.4’ by 1.7’ footprint. Our Keep Bike won the 2019 iF
Design Award. In China, the retail price of our Keep Bike ranges from RMB1,399 to RMB5,099
depending on the configuration, and includes fast delivery and professional set up. As of December 31,
2022, we cumulatively shipped approximately 194,000 Keep Bikes through our online store and third-
party e-commerce websites.
We offer live streaming cycling classes every day and on-demand cycling courses to our
subscribing members to unlock the full potential of Keep Bike . During the classes, our Keep Bike can
automatically adjust resistance levels based on instructor’s targets and users’ cycling capabilities,
therefore users can achieve a more focused and immersive cycling experience. We present a league
table in live streaming classes showing rankings of the participating users to motivate them in an
interactive and positive way. Our instructors can see users’ ranking, current pedaling frequency,
resistance level and past cycling experience, as well as bullet chatting, all providing resources for our
instructors to actively interact with participants during classes. Our instructors can also actively adjust
resistance levels for participating users and check their corresponding performance.
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The pictures below illustrate our Keep Bike and our live streaming cycling classes.
Cycling capability test
Course library Live streaming
cycling classPersonal training data Smart resistance
adjustment
Real-time
interactions
Compared to traditional fitness bikes, Keep Bike is the first fitness bike in China that offers
intelligent resistance adjustment. New users may start with a cycling capability test to gage their
cycling proficiency, based on which their bikes set the initial baseline resistance levels. During the live
streaming classes, based on class programs, instructor’s target, users’ personal baseline resistance
level, and pedaling frequency, our Keep Bike can intelligently adjust the resistance level in real time to
offer personalized difficulty level and maximize the training efficiency for users. Our proprietary
electromagnetic control system supports fast and responsive resistance adjustment in 0.3 second. Based
on users’ fitness progression, we also recommend users to retake the cycling capability test to update
their baseline resistance levels for future cycling.
Keep Wristband
We launched our smart wristband under the Keep brand in 2019. Our smart Keep Wristband ,
embedded with our proprietary six-axis accelerometer and gyroscope, can track users’ daily workouts,
including running, yoga, cycling, walking, elliptical machine, rower, swimming, among others. It also
supports real-time heart rate monitoring and tracking, blood oxygen testing, sleep monitoring, and
various reminders and alerts. The fitness activities are synced to and analyzed on our platform so that
users can review their fitness performance through various metrics and visual presentations. Keep
Wristband empowers a new kind of fitness experience for an expanded spectrum of fitness categories
by adjusting course content, break periods, and difficulty in real time according to users’ heart rates.
For example, we offer fat loss courses that guide users to maintain their heart rates within a target
range that is most effective for fat loss throughout the workouts using our Keep Wristbands.
The retail price of our Keep Wristband ranges from RMB169 to RMB289 depending on the
configuration as of the Latest Practicable Date. As of December 31, 2022, we shipped approximately
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1.9 million Keep Wristbands through our online store and third-party e-commerce websites in total.
The pictures below illustrate our Keep Wristband with heart rate monitoring and workout tracking
features.
Sleep monitoring and
real-time heart rate
tracking
Daily workout
tracking
Daily step counter
Keep Smart Scale
We launched our smart scale under the Keep brand in 2018. Our smart scale features a round
ultra-thin design with pastel colors, supports 15 body measurements, including weight, body fat
percentage, bone mass, and lean body mass, among others, of up to ten users, and connects to our
platform wirelessly. Based on updated body measurements received from the Keep smart scale, our
AI-assisted personalized curriculums can tweak workout plans and update food recommendation
accordingly for users, thereby helping users achieve their fitness goals more efficiently. See “—Our
Content Offerings—Personalized curriculum planning”.
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The retail price of our Keep smart scale ranges from RMB59 to RMB199 depending on the
configuration as of the Latest Practicable Date. As of December 31, 2022, we shipped approximately
1.3 million Keep smart scales through our online store and third-party e-commerce websites in total.
The pictures below illustrate our Keep smart scale with body measurement tracking features.
Body measurements
including BMI, body fat
percentage, bone mass
and others
Weight
Fitness
report
Keep Treadmill
We launched our treadmill under the Keep brand in 2018. Our K3 customizable treadmill
features a foldable compact design, a shock-absorbing high performance responsive belt using multi-
fold noise control, and a nearly silent brushless motor providing great power and durability. Unlike a
traditional treadmill, Keep treadmill is supported by and works closely with an extensive and constantly
updated running content library on Keep platform. When paired with the running courses on our
platform, our treadmill can automatically adjust and customize speed for users based on their running
status and course targets. We also offer voice guidance for more effective and enjoyable running and
provide visualized performance analytics after the workouts as positive feedback to motivate users.
In China, the retail price of our treadmill ranges from RMB2,099 to RMB3,099 depending on the
configuration, and includes fast delivery and professional set up. As of December 31, 2022, we shipped
approximately 222 thousand treadmills through our online store and third-party e-commerce websites in
total. The pictures below illustrate our treadmill and related running content on our platform.
Visualized performance analyticsFoldable compact design
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Keep Smart Skipping Rope
In August 2021, we launched smart skipping rope as an upgrade to traditional skipping ropes. Our
smart skipping rope features a sleek ropeless design to provide fast rotation and tangle free workout
experience, extra comfortable handles that offer a strong grip and high-quality ball bearing for better aerobic
exercise effect. The smart skipping rope is linked to the Keep app to record the number of jumps, calories
burned. Users can track progress to build workout routines and improve fitness performance. We also
recommend users jump rope music workout sessions where users complete a certain number of jumps with
our fitness instructors following motivating music. In addition, users are encouraged to wear Keep
wristband to sync personal fitness data, such as heart rate, during jump rope workouts. The combination of
our smart fitness devices help users develop a comprehensive fitness routine, track their workout progress
and achieve their fitness goals.
In China, the retail price of our smart skipping rope ranges from RMB110 to RMB219
depending on the configuration. As of December 31, 2022, we shipped over 600 thousand smart
skipping ropes through our online store and third-party e-commerce websites in total. The pictures
below illustrate our smart skipping rope.
COMPLEMENTARY FITNESS PRODUCTS
We offer a wide range of fitness-related products under our Keep brand to complete the fitness
offerings on our platform. Our fitness gear is designed for at-home workouts and enable users to enjoy
our fitness content to its full potential. Our fitness apparel demonstrates an optimized design for
functionality and style and can provide comfort throughout fitness activities and build confidence for
our users. We believe in the power of workouts and healthy diet to achieve fitness goals. Our fitness
food complements users’ fitness journeys by providing users with well-balanced and nutritional food
choices. Users can find our fitness products in the online store on our platform conveniently or through
third-party e-commerce websites.
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Fitness Gear and Apparel
We provide high-quality fitness gear under our Keep brand on our one-stop platform to users so
that they can easily and directly choose their desired products efficiently to fully utilize the relevant
fitness content on our platform. To complement our user experience and establish brand awareness, we
also offer fitness clothing for various fitness categories such as running, yoga and workouts.
We offer a wide range of fitness gear to support the courses and curriculums we offer on our
platform, including at-home workout gear such as dumbbells, kettle bells, jumping ropes, and
percussion massage devices, and yoga gear such as yoga mats, yoga balls, stretching bands and foam
blocks, as well as protective gear such as knee sleeves, gloves and wrist wraps. The retail price of our
fitness gear ranges from RMB9.9 to RMB584 as of the Latest Practicable Date. Users can fully take
advantage of our fitness content with fitness gear, which is optimized for users to explore as much
content as possible on our platform. For example, we offer yoga mats that are longer and wider than
traditional yoga mats, and are thicker and more cushioned for better joint support. This design enables
users to use the mats to accomplish not only yoga but also various other workouts on our platform.
We offer a comprehensive line of fitness apparel and accessories for women and men. Our
fitness apparel includes shirts and tops, leggings and tights, pants and shorts, hoodies and jackets, and
sports underwear, all designed to support various fitness activities such as yoga, running, and strength
training, and at the same time comfortable for daily casual wear. The retail price of our fitness apparel
ranges from RMB29 to RMB699 as of the Latest Practicable Date. We are committed to providing
apparel and accessories with a curated selection of fabrics that provide support, protection, and
comfort. For example, we utilize soft and breathable fabrics in fitness clothing for low impact
workouts like yoga, and use durable material with shape retention properties in legging and tights to
provide flexible stretch and compression for running and other more intense activities.
The pictures below illustrate some examples of our fitness gear and apparel:
Fitness Food
Nutrition and diet are critical for users to achieve their fitness goals efficiently. We offer food
planning and recommendation tools under our Keep brand on our platform so that users can learn how to
eat healthily, and we have launched fitness food products to enable an integrated fitness solution for users.
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We have created a range of meal replacement products featuring a balanced combination of
macronutrients and micronutrients, including carbs, protein, vitamins and minerals. Meal replacement
products are available by standard packaged meals and in three-day or weekly meal plans. We also
offer fitness supplements such as protein powders and protein bars. In addition, we offer various fitness
snacks such as chicken breasts, chickpeas, and whole wheat sticks that are satisfying to users’ appetites
without disrupting their diet. The retail price of our fitness food ranges from RMB9 to RMB465 as of
the Latest Practicable Date.
The picture below illustrates some examples of our fitness food:
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The table below sets forth the revenue, gross profit and gross profit margin of our top 10 major
fitness products.
In 2019 In 2020 In 2021 In 2022
Revenue
Gross
profit
Gross
profit
margin
(%) Revenue
Gross
profit
Gross
profit
margin
(%) Revenue
Gross
profit
Gross
profit
margin
(%) Revenue
Gross
profit
Gross
profit
margin
(%)
(RMB in thousands, except for percentage)
1 Keep Treadmill
Classic Edition
79,296 20,466 25.8 Keep Treadmill
Classic Edition
82,025 25,070 30.6 Keep Bike Pro
& Basic Edition
84,216 28,517 33.9 Keep Wristband
B3(1)
90,992 (14,614) (16.1)
2 Keep Smart
Wristband B1
31,781 6,423 20.2 Keep Bike Pro 53,425 16,342 30.6 Keep Wristband
B2(1)
60,944 (8,518) (14.0) Keep Bike Mini 85,877 3,093 3.6
3 Resistance Band 24,656 23,236 94.2 Extra Wide and
Thick Fitness
Mat
52,452 26,454 50.4 Keep Treadmill
Fashion &
Adventure
Edition
50,630 14,040 27.7 Keep Bike Pro 56,957 4,896 8.6
4 Keep Smart
Scale S1
16,735 3,648 21.8 Keep Wristband
B1
38,958 9,359 24.0 Extra Wide and
Thick Fitness
Mat
45,649 16,511 36.2 Extra Wide and
Thick Fitness
Mat
49,688 20,523 41.3
5 Extra Wide and
Thick Fitness
Mat
16,683 4,760 28.5 Keep Smart
Scale SE
(Bluetooth
Edition)
18,451 5,028 27.3 Keep Fascial
Gun G1
39,772 7,013 17.6 Keep Jumping
Rope SR1 (with
Counter)
43,768 16,205 37.0
6 Keep Fascial
Gun
Customized
Edition
9,712 3,990 41.1 Muscle
Relaxation
Foam Roller
Classic &
Portable Edition
15,699 9,741 62.0 Keep Treadmill
Classic Edition
36,120 5,245 14.5 Keep Treadmill
Comfort Edition
33,376 2,280 6.8
7 Keep Walking
Machine W1
8,844 1,438 16.3 Keep Treadmill
Fashion &
Adventure
Edition
15,028 4,821 32.1 Keep Jumping
Rope R1 (with
Counter)
33,179 6,372 19.2 High Protein
Dark Chocolate
Crunchy Balls
26,290 10,110 38.5
8 Muscle
Relaxation
Foam Roller
Classic &
Portable Edition
7,198 3,626 50.4 Keep Fascial
Gun G1
12,891 3,488 27.1 Keep Smart
Scale SE
(Bluetooth
Edition)
22,446 5,415 24.1 Keep Wristband
B2
(1)
25,358 (4,764) (18.8)
9 Pre-cooked
Chicken Breast
6,859 2,849 41.5 Keep Walking
Machine W1
12,401 3,685 29.7 Pre-cooked
Chicken Breast
14,952 5,346 35.8 Keep Smart
Scale SE
(Bluetooth
Edition)
24,222 3,273 13.5
10 Extra Thick
Fitness Mat
6,809 2,099 30.8 Fitness Mat
with Alignment
Lines
10,474 5,661 54.0 Keep Wristband
B3
14,520 2,049 14.1 Keep Bike
Benchmark
Version 22
19,775 5,062 25.6
Note:
(1) We generally provide discounts to previous editions of the Keep Wristband after the launch a new edition of the wristband, resulting in
gross loss of certain editions of the wristband during relevant period.
OUR FITNESS-CENTRIC MONETIZATION MODEL
We generate revenue primarily through (i) sales of smart fitness devices, (ii) sales of
complementary fitness products, (iii) membership and online paid content, and (iv) advertisements on
our platform. We generated a majority of our revenue from the sales of self-branded fitness products
and invested significantly in the research and development of platform design and fitness content.
Smart Fitness Devices
Our fitness content is enhanced by our smart fitness devices, including Keep Bike , Keep
Wristband, treadmill and smart scale. Users who purchase our smart fitness devices can link our
devices to the fitness content on our platform to enable an enhanced experience. Our online fitness
content encourages users to explore our smart fitness devices for a more immersive and effective
fitness experience, while people who purchase our smart fitness devices are directed to Keep platform
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to browse our broad range of fitness content. Our fitness content and smart fitness devices reinforce
each other, contributing to a comprehensive, personalized and intelligent fitness solution to our users.
Complementary Fitness Products
To complement our comprehensive fitness solution, we also offer fitness gear, apparel and
fitness food under our Keep brand. We operate an online store directly in our Keep mobile app, where
users can easily explore our products at their fingertips and enjoy a shopping experience elevated by
detailed product descriptions, peer reviews and multi-angle illustrations to ensure informed purchasing
decisions. In addition, when users join the fitness courses on our platform that require particular fitness
gear such as stretching bands or dumbbells, they can conveniently explore the related products through
the Gear button under the course description. We also direct users from product description pages of
smart fitness devices or fitness gear to those fitness courses related to the use of such products. The
product offerings in our Keep online store seamlessly connect with our comprehensive fitness courses
and curriculums, forming an integrated one-stop fitness destination for users. Users can also purchase
our products across major e-commerce platforms in China, including JD.com and Tmall. Through
engaging users across multiple sales channels, we direct more users to our platform and greatly expand
our user base.
In 2022, the average monthly revenue generated from self-branded fitness products per fitness
product customer was RMB172.4. We plan to further enrich product offering by introducing products
of different price levels and features to cater to a broader purchase base with different fitness demand
and purchasing power.
Membership and Online Paid Content
We provide our users with a wide variety of online fitness content and we monetize through
membership subscriptions that unlock many privileged features on our platform, paid fitness courses,
and paid curriculums addressing varied fitness goals. Online fitness content on our platform can be
categorized, in terms of monetization, as (i) free content available to all users, (ii) subscribing member
exclusive content that can be accessed through membership subscription, and (iii) online paid content
that can be purchased on a la crate basis. The majority of the pre-recorded courses on our platform and
curriculums, whether produced in-house or by other parties, are free content available to all of our
users, including our subscribing members, who also have exclusive access to live streaming classes
and AI-assisted personalized curriculums. Our membership can be subscribed on a monthly, quarterly,
or yearly basis, and users may elect to renew the subscription automatically. As of the Latest
Practicable Date, our listed monthly, quarterly and yearly subscription fees were RMB25-RMB40,
RMB68-RMB98 and RMB248-RMB328, respectively. We also expand the content offerings to users
by providing paid courses and curriculums that focus on various fitness goals, and users can access
these courses and curriculums repeatedly after purchasing them on an a la carte basis. The fees for
these a la carte paid courses and curriculums on our platform typically range from RMB28 to
RMB512. Subscribing members can enjoy discounts on paid courses and curriculums. In 2022, the
average monthly revenue generated from membership per subscribing member was RMB13.0.
Advertisements on our Platform
We display advertisements on our platform for a selected collection of brands and merchants.
We have an experienced advertising sales team consisting of professionals with extensive experience
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in the internet advertising industry in China and with deep insights on our brand values. We offer a
variety of advertising services via the Keep app without compromising user experience, primarily
including (i) display advertisement that pops up after the app is loaded, and banners on the homepage,
(ii) native advertising placement in the community feed, and (iii) collaboration with advertisers during
fitness content development.
In 2019, 2020, 2021 and 2022, we worked with 38, 36, 78 and 75 advertising customers,
respectively. Our advertisers consist of a variety of brands attracted by our platform and user base,
including automobiles, luxury brands, fast moving consumer goods, and advertisers in other fitness
related industries. For specific types of advertisements such as advertisements relating to
pharmaceuticals, medical instruments, agrochemicals, and veterinary pharmaceutical, we implement
internal procedure to check or verify that the advertisers have fulfilled requisite government
requirements, including the advertiser’s operating qualifications, proof of quality inspection of the
advertised products and services, and, with respect to certain industries, government approvals of the
content of the advertisement and filings with the local authorities. See “Risk Factors—Risks Related to
Our Business and Industry—Advertisements in our app may subject us to penalties and other
administrative actions”.
Since the inception, we have been a firm believer that everyone, including those new to fitness,
should be able to enjoy fitness anytime and anywhere. In other words, we started off focusing on the
fitness needs of mass population (i.e., “bottom-up” approach) as opposed to a specific segment of
fitness niche market. Fitness product sales is a natural extension of our online fitness business model to
address the needs of users when viewed in holism — this sets us apart from players that take a “top-
down” approach in their go-to-market strategy and philosophy. Therefore, users and their diversified
fitness needs are the real propulsion power behind our business model. With our evolving technology,
we break traditional constraints and bring users to the forefront of fitness by providing a
comprehensive, accessible and affordable fitness solution. Our business and monetization model has
been focusing on and gradually built upon our users’ demand, which stems from online fitness content
that can be accessed by the mass. As a result, we consider MAU a key indicator to assess our business
performance as it demonstrates the efficacy of our fitness solution, including the quality of our content,
the satisfactory level of user experience, and the effectiveness of marketing campaigns. A healthy
MAU trend signals that we are executing our business strategies effectively and are sufficiently
attracting and retaining users. Along with the growth of the MAUs, our platform has experienced a
steady increase in our membership penetration rate, being the average number of monthly subscribing
members as a percentage of the average MAUs, from 3.5% in 2019 to 6.4% in 2020, 9.5% in 2021, and
further to 10.0% in 2022.
BUSINESS SUSTAINABILITY
China’s fitness market presents substantial growth potential as both the size of the fitness
population and the annual spending of the fitness population are expected to continue to increase. In
particular, the online fitness market in China is expected to grow from RMB455.6 billion in 2022 to
RMB1,285.4 billion in 2027, with a CAGR of 23.1%, driven by the growing prevalence of home
fitness and a large and growing digital-native population. We are founded in 2014 to provide a
comprehensive, accessible and affordable online fitness solution. Prior to the adoption of our
monetization strategies in 2018, we devoted resources to build a massive and ever-growing content
library, expand our user base and improve our technology capabilities to optimize user experience. Our
average MAUs increased at a CAGR of approximately 26% from 2016 to 2018. In 2018, we embarked
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on our journey towards monetization. Through user behavior analysis and surveys, we discovered that
users had a common desire for affordable and high-quality fitness products that could enhance their
workout experience. However, the online fitness product market in China was underdeveloped, with a
lack of trusted brands and products with satisfactory designs. Therefore, in March 2018, we expanded
our offerings by introducing self-branded smart fitness devices and complementary fitness products. In
September 2018, we launched our membership subscription program to provide more high quality
content and complementary offerings. Leveraging our large user base, we also expanded our
advertising businesses and collaborated with more advertising customers. As an innovative and
growing company with relatively short monetization history, we have been focusing on exploring a
suitable and sustainable business model instead of seeking immediate financial returns or profitability
so as to lay a solid foundation for our long-term development.
Since our inception, we have been devoting resources to build a massive and ever-growing
content library and improve our technology innovation to optimize user experience as their needs
evolve. Benefiting from such efforts, our Keep brand has become highly influential in China and we
have accumulated the largest online fitness user base in China as of December 31, 2022. In 2019, 2020,
2021 and 2022, our platform recorded average MAUs, which include both paying and non-paying
users, of 21.8 million, 29.7 million, 34.4 million and 36.4 million, respectively. In 2022, our MAUs
collectively recorded approximately 2.1 billion workout sessions on our platform.
We constantly develop and launch new products and services to cover people’s entire fitness
lifecycle, including membership services, smart fitness devices and complementary fitness products.
By thoughtfully weaving our offerings together, we have developed an integrated business model with
synergies across different segments. During the Track Record Period, we experienced substantial
growth in our business operation and financial condition. Our revenue grew by 66.9% from RMB663.1
million in 2019 to RMB1.1 billion in 2020, increased by 46.3% to RMB1.6 billion in 2021, and further
increased by 36.6% to RMB2.2 billion in 2022, mainly attributable to the increased revenue from self-
branded fitness products and membership and online paid content. Our revenue from self-branded
fitness products increased during the Track Record Period due to an increase in our fitness product
customers and increased revenue generated from non-DTC channels. Our revenue from membership
and online paid content increased during the Track Record Period as a result of an increase in our
average monthly subscribing members and growing membership penetration rate. Our revenue per
MAU, defined as the total revenue of a given period divided by the average MAUs of that period, was
RMB30.5, RMB37.2, RMB47.1 and RMB60.8 in 2019, 2020, 2021 and 2022, respectively. Our gross
profit grew by 83.2% from RMB272.6 million in 2019 to RMB499.4 million in 2020, increased by
35.5% to RMB676.6 million in 2021, and further increased by 33.1% to RMB900.4 million in 2022.
We recorded gross margins of 41.1%, 45.1%, 41.8% and 40.7% in 2019, 2020, 2021 and 2022,
respectively. We experienced a decrease in our overall gross margin in 2021 compared to 2020
primarily attributable to (i) the decreased gross margin of self-branded fitness products segment as we
offered more discounts to incentivize user purchase and (ii) decreased gross margin of membership and
online paid content segment as we incurred increased content related cost to further expand our content
offerings. We experienced a decrease in our overall gross margin in 2022 compared to 2021, primarily
attributable to (i) the decreased gross margin of our membership and online paid content segment
which reflected the growing revenue contribution of virtual sports events and its comparably lower
gross margin due to the higher cost of medals, and (ii) the decreased gross margin of our advertising
and others segment as a result of the negative impact the COVID-19 pandemic had on our Keepland
business. Although virtual sports events recorded a lower profit margin as compared to our other
membership and online paid services, we expect to further operate the virtual sports events as they
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improve user engagement and contribute to the growth of our revenue and gross profit. We incurred
net losses in 2019, 2020, 2021 and 2022 as we strategically focused on growing our user base via
investing in our brand as well as innovative, high quality fitness content and product offerings to pave
the way for long term profitability. We recorded adjusted net loss (non-IFRS measure) of RMB366.5
million and RMB106.4 million in 2019 and 2020, respectively. As our confidence in long-term
profitability strengthened, we strategically increased our spending in traffic acquisition and branding to
further acquire, activate and retain users in 2021. As a result, our adjusted net loss (non-IFRS measure)
increased from RMB106.4 million in 2020 to RMB826.5 million in 2021. In 2022, we reduced our
investment in marketing activities and made more efficient spending on user acquisition. Our adjusted
net loss (non-IFRS measure) narrowed from RMB826.5 million in 2021 to RMB666.9 million in 2022.
We expect to continue incurring net loss and net operating cash outflow in the near future as we
continue to invest in user growth and the skills to capture the substantial opportunities in various
specialized aspects of the industry and strengthen competitive moats.
To grow our revenue and achieve profitability, we plan to further (i) grow our user base and
deepen our user engagement; (ii) enhance our monetization capabilities leveraging multiple growth
levers; and (iii) improve our gross margin and operating leverage.
Grow User Base and Deepen User Engagement
Driven by our focus on mass population and compelling content offerings, we have built user
base on our platform. We plan to further expand our addressable market by appealing to users across
different ages, areas of interest, and locations and grow our user base. In 2022, on average
approximately 76.6% of our total MAUs who provided their age information are below the age of 30.
In addition, approximately 54.2% of our total MAUs on average who provided their location
information come from first-, new first- and second-tier cities in China in 2022. Approximately 40%,
45%, 48% and 46% of our total MAUs on average who provided their location information come from
third-tier and below cities in 2019, 2020, 2021 and 2022, respectively. As these users have different
purchasing power and willingness to pay, we plan to strategically launch more offerings at different
price points. In addition, we have been continuously diversifying our content offerings to include
content captivating to the mass population. For example, we started to offer extensive content in
martial arts and dancing in 2021 and ball game content in 2022. We will also introduce a wider variety
of content and product offerings at different price levels to cater to the diversified needs of the mass
population. For example, for each type of the smart fitness devices, we have rolled out multiple models
at different price points. In the meantime, we will continue to refine our content and user interface to
make it easier for users to follow fitness instructions. Leveraging our deep insights on users’
preferences and market trends, we will also dynamically shape our content development strategy and
produce more diversified content that can attract targeted user groups. For example, we were one of the
first in China to launch virtual coach, the computer-generated coach that can lead dancing and other
fitness courses using AI technology. We also plan to further improve user engagement and experience
by making our fitness solution more personalized and interactive, such as introducing new gamified
features to our online fitness content through integration with smart fitness devices and enriching the
library of live-streaming classes and AI-assisted curriculums.
As we continuously enhance user engagement and stickiness, we believe users’ general
willingness to subscribe to memberships and purchase our self-branded products will grow over time,
resulting in improved monetization potential. Our average monthly membership retention rate 70.8%,
73.3%, 71.7% and 65.3% in 2019, 2020, 2021 and 2022, respectively. We experienced a higher
average monthly membership retention rate in 2020 as the outbreak of COVID-19 increased users’
willingness to workout at home. The slight decrease in the average monthly membership retention rate
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in 2021 and 2022 was also due to the expansion of our user base, especially subscribing members for
our virtual sport events. In 2019, 2020, 2021 and 2022, our monthly average workout sessions per
MAU was 4.3, 5.0, 4.1 and 4.8, respectively, and our monthly average workout sessions per
subscribing member was 13.5, 10.9, 7.2 and 7.8, respectively.
Enhance Monetization Capabilities Leveraging Multiple Growth Levers
We have developed a diversified monetization model and currently generate revenue primarily
from (i) membership and online paid content, (ii) self-branded fitness products, and (iii) advertising
and others, which reinforce one another. Leveraging our vertical integration capabilities and deep
insights accumulated from our large user base, we believe we will be able to further enhance our
current monetization avenues and create new monetization channels.
Š Membership and Online Paid Content . Our platform recorded subscribing members of
0.8 million, 1.9 million, 3.3 million and 3.6 million in 2019, 2020, 2021 and 2022,
respectively. Our MAUs to members conversion ratio, or the membership penetration rate,
increased from 3.5% in 2019 to 6.4% in 2020, 9.5% in 2021, and further increased to
10.0% in 2022. Our revenue from membership and online paid content increased from
RMB151.3 million in 2019 to RMB338.0 million in 2020, RMB557.6 million in 2021, and
further increased to RMB894.2 million in 2022.
We recorded membership and online content income per subscribing member of
RMB196.5, RMB177.0, RMB170.0 and RMB246.9 in 2019, 2020, 2021 and 2022,
respectively. We experienced a decrease in membership and online content income per
subscribing member in 2021 as we enhanced our promotional efforts and expanded our
subscribing member base. Our membership and online content income per subscribing
member increased in 2022 as a result of our new initiatives. For example, we collaborated
with more renowned IPs and launched an increasing number of themed virtual sports
events. Our online paid content revenue per MAU increased from RMB0.67 in 2019 to
RMB1.10 in 2020, RMB2.03 in 2021, and further increased to RMB9.1 in 2022.
Unlike fitness training videos from key opinion leaders on online video platforms that are
typically generated at will as a type of “content creation” by these individual users who
may not possess professional knowledge and structured training or do not organize their
fitness content creation in a systematic manner, our content features professional training
sessions developed by fitness training experts across multiple fitness categories, is
organized in a systematic way with different levels of difficulty and structured
combination of fitness moves for various fitness purposes, and can be easily customized
based on specific users’ progression and feedback. In addition, we offer highly interactive
content, such as live streaming classes and gamified features, to stimulate users’
willingness to participate, and our content is also adjustable and customizable through AI
technology to provide users with individual experience. We also continue to optimize our
content based on user feedback and activities. In China’s fitness market where the
majority of fitness population work out at home or outdoor rather than going to gym
regularly, professional, systematic and structured fitness content on Keep greatly expands
the diversity and possibility of home fitness in a systematic and scientific way. Keep
platform aims to encourage users to actually participate in and complete workout sessions
rather than browsing fitness videos casually, for example, through helping users analyze
and visualize their complete workout session histories and rewarding them with badges
and ranks. We plan to continue to enhance our value propositions to our users through
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more innovative and enriched content as shown in the following initiatives, and evolving
membership rights and privileges, which we believe will help to increase membership
penetration and subscribing members’ spending. Our major initiatives include the
following:
Š We intend to expand into more fitness categories. Our existing fitness content
offerings are primarily focused on workout activities, and we will continue to monitor
industry trends and expand into more niche fitness categories, such as dancing,
martial art, jump rope workout and outdoor activities to further diversify our
expansive offerings. For example, we have expanded our “Fat Burning Cardio
Dance” fitness courses, which contain beginner-friendly fitness content, from 200
courses in 2020 to over 1,000 courses in 2021 and over 4,000 courses in 2022. “Fat
Burning Cardio Dance” fitness courses have been well received by our users
demonstrated by the increase in workout sessions. Workout sessions completed for
“Fat Burning Cardio Dance” courses were approximately 5 million, 17 million, 70
million and 165 million in 2019, 2020, 2021 and 2022, respectively.
Š We will introduce more PUGC content on our platform to increase user engagement
and stickiness, by establishing partnerships with more fitness content providers and
strengthening the relationships with existing partners. In addition to maintaining our
strong partnership with well-known fitness influencers, we were also successful in
developing in-house fitness influencers such as An An Xiaoyu (
ڠand Zhao
Meili ( ႻӚɢ), who were among the top 10 fitness influencers on the Keep platform
in 2021 based on the number of workout sessions completed. We closely monitor and
manage our PUGC creators and offer them regular trainings, collaborate with them to
produce high quality content and accelerate their growth by actively promoting their
content on our platform. We target to not only attract new PUGC creators, but also
provide compelling value propositions to retain them. With growing PUGC content,
we expect to see continued growth in user engagement. The number of PUGC
courses has increased significantly from 140 as of December 31, 2019 to 2,900 as of
December 31, 2020, 7,600 as of December 31, 2021, and further increased to
approximately 17,800 as of December 31, 2022. Workout sessions completed for
PUGC courses were 10 million, 184 million, 441 million and 771 million in 2019,
2020, 2021 and 2022, respectively.
Š We plan to introduce new features in our recorded courses, live-streaming classes and
AI-assisted curriculums. We were the pioneer in China to introduce gamified features
in fitness live streaming classes to bring more fun and excitement, and thus elevate
user experience. We will improve the connectivity between our content offerings and
smart fitness devices to deliver immersive experience and elevate fitness outcome for
users. For example, Keep Wristband can play a more important role in these
interactive courses to detect heart rate. In addition, in May 2022, we introduced an
innovative feature that shows recommended heart rate in real time to maximize
metabolic efficiency. We will also upgrade our online courses to enhance the
interactivity between users and content. For example, we plan to introduce virtual
coaches presented by real people to simulate face-to-face fitness environment during
structured courses. Such virtual coaches will ask users to provide feedback during
training sessions. This enables our system to better understand individualized fitness
needs through constant user interactions during trainings to adjust course content and
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workout intensity and provide real-time training instructions, feedback and increase
user engagement.
Š We intend to introduce creative formats amid the latest macro and industry trends.
For example, we initiated virtual sports events as an innovative and engaging format
to encourage users to achieve different milestones for customized awards. Since then,
we have cooperated with a number of renowned IPs and launched a series of themed
events along with creative marketing campaigns on social media and short video
platform that continue to drive the growth of our revenue from virtual sports events.
For example, we cooperated with a renowned international cartoon IP and launched a
series of online themed running events in 2022. The number of paying users who
participated in the events in 2022 exceeded 1.5 million and the GMV generated from
event registration fees exceeded RMB90 million. In 2022, we witnessed a continued
growth in revenue from virtual sports events, which recorded year-over-year growth
of more than 500%. We will cooperate with more IPs and introduce more similar
activities that help to grow user base and improve monetization in the future.
Š Self-branded Fitness Products . Driven by a successful track record of developing and
launching popular fitness products and a growing number of fitness product customers, the
sales of our self-branded fitness products grew significantly over the Track Record Period
from RMB396.0 million in 2019 to RMB636.7 million in 2020, RMB872.5 million in 2021,
and further increased to RMB1.1 billion in 2022. Our valuable insights through years of
operation enable us to continuously identify users’ unmet needs for more intelligent fitness
experience and more compact product design, and thus enhance and expand our self-branded
product offerings. Our smart fitness device and complementary fitness product business lines
are more than conventional online sales of fitness products. We develop and manage our
fitness devices and products based on (i) insights on users’ fitness activities and performances
through their engagement with fitness content, (ii) personalized presentation and
recommendation based on users’ specific needs, and (iii) users’ feedbacks in the Keeper
community. In addition, demand for fitness products require certain level of fitness experience,
and we provide such guidance to our users through the professional fitness content. For
example, users may discover that they need to buy a dumbbell if they want to gain the access
to relevant content that requires a dumbbell on Keep platform. A link to purchase our self-
branded dumbbell is present in course description and users may also purchase the requisite
gear when they join the workout session. The subscribing members and users are not required
to purchase our fitness products to participate in our fitness content.
Š We plan to continuously improve our self-branded fitness products based on user
feedback and industry developments. Since we introduced our first model of Keep
Bike in October 2019, we have developed three new models with additional
functionalities and features. Similarly, we introduced three models of Keep
Wristband, three models of treadmill and three models of smart scale during the
Track Record Period. In the first quarter of 2022, we successfully introduced new
models of treadmill and Keep Bike. We are also in the process of researching and
developing other types of smart fitness devices. In August 2021, we launched smart
skipping ropes as an upgrade to traditional skipping ropes with sleek, ropeless design,
and can be seamlessly connected with the Keep app, which offers diversified skipping
rope courses and makes personalized workout recommendation powered by real-time
performance tracking. As of December 31, 2022, we cumulatively shipped over 600
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thousand smart skipping ropes. We will continue to upgrade our products, and
introduce more models to cater to different user preferences and use case scenarios.
In particular, for each type of products, we will offer models at different price points
to attract users with different purchasing power. We launched and plan to launch a
total of five to six new smart fitness device models in 2023.
Š We intend to research and develop new fitness products and enrich our product
portfolio leveraging our deep industry insights and understanding of fitness demand.
In 2021, we launched approximately 300 SPUs, including strength training balance
boards and protein bars, which are widely welcomed by our users. In 2022, we
launched 313 SPUs. We will launch new categories of smart fitness devices and
complementary fitness products to further enrich our offering portfolio, thus appeal to
new users and capture more wallet share of our existing users.
Š We will further diversify our distribution channels to maximize touch points to reach
our target end users, and boost revenue generated from non-DTC channels. We have
expanded into DTC channels such as Douyin since the second half of 2021. For
example, we successfully launched product promotion for our self-branded Black
Chocolate Crispy Ball in our fitness food category on Douyin to expand our end user
reach. In each of the fourth quarter of 2021 and 2022, the GMV for Black Chocolate
Crispy Ball generated from Douyin accounted for more than 10% of the GMV of
total fitness food from all of our DTC channels. For non-DTC channels, wholesale
revenue generated through JD self-owned stores and third-party distribution channels
grew by 197.3% and 12.0% year-over-year, and contributed to 25.7% and 22.1% of
total self-branded fitness products revenue in 2021 and 2022, up from that of 11.8%
in 2020. We will continue to assess and expand sales and distribution channels based
on our business objectives, product offerings and channel efficiency.
Š Advertising and Others . We offer online advertising services to brands and merchants. In
addition, we launched Keepland fitness centers and offline classes to enable users to
experience our online content at offline locations. We believe such offline fitness
experience can deepen user engagement and enhance users’ loyalty to our brand. During
the Track Record Period, we generated revenue of RMB115.8 million, RMB132.0 million,
RMB189.5 million, and RMB180.4 million from advertising and other services in 2019,
2020, 2021 and 2022, respectively. We recorded revenue from advertising income per
advertiser of RMB2.3 million, RMB3.1 million, RMB2.0 million and RMB2.1 million in
2019, 2020, 2021 and the 2022, respectively. The decrease in advertising income per
advertiser in 2021 was the result of us further expanding and diversifying our advertising
customer base, especially the influx of advertisers that purchased short-term advertising
services. Customers that purchase short-term advertising services, such as one-off
promotion of their brands, generally contribute less revenue per customer compared to
advertising customers that purchase long-term advertising services, leading to a decrease
in advertising income per advertiser. We recorded average monthly advertising income per
MAU of RMB0.18, RMB0.32, RMB0.36 and RMB0.41 for each of the quarter in 2019,
respectively, RMB0.15, RMB0.32, RMB0.35 and RMB0.42 for each of the quarter in
2020, respectively, RMB0.25, RMB0.40, RMB0.40 and RMB0.49 for each of the quarter
in 2021, respectively, and RMB0.34, RMB0.33, RMB0.36 and RMB0.41 for each of the
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quarter in 2022, respectively. Our development plans for the segment include the
following:
Š With online content, self-branded products and offline fitness centers, the opportunity
for multi-channel marketing that resonates with our large user base will naturally attract
brands and merchants to our platform, thus enhancing the growth potential of our
advertising services.
Š We have introduced new format of offline fitness classes through the offering of
Keep selected fitness classes. In addition to operating self-owned Keepland fitness
centers, since 2021, we launched Keep selected fitness classes in collaboration with
third-party offline gyms. For collaboration with third-party offline gyms, we only
provide our fitness content and services from our coaches to hold Keep fitness classes
in these gyms from time to time, and we are not involved in the operation of these
gyms. We plan to further expand such asset-light format in the future. We target to
collaborate with more offline gyms in Beijing and other first-tier cities leveraging our
online traffic and offer fitness classes covering more fitness categories, such as ballet
and boxing. We believe this asset-light format of engaging with our users enables us
to expand our presence quickly and efficiently, deliver an integrated online and
offline fitness experience, and address the diverse fitness needs of our users.
Š We will also enhance our advertising customer base. For example, we will focus on
strengthening our relationship with advertising agents to reach clients in bulk. We
will also communicate with more sports associations to jointly promote services and
locate more suitable advertising opportunities for our business. In addition, we plan to
proactively reach out to suitable companies that place advertisements on other media
and convert them to our advertising customers. In particular, we plan to increase the
penetration rate of advertisements in health-related industries, especially those that
are highly relevant to fitness, sports, and health, and industries promoting low-carbon
society, such as electric cars. We believe working with advertising customers from
health-related industry create synergies due to the overlap of user base and target
users. Our users are also generally more health-conscious and are thus are more likely
to purchase health related products, making us the ideal partners for such advertising
customers. In addition, we believe we are more well-positioned to serve advertising
customers that promote sustainable business as our business inherently promotes low-
carbon lifestyle. We have collaborated with several businesses in such industries to
develop fitness course series with their brand logos in course backgrounds. We have
designed courses with electric vehicle company that help drivers increase attention
and focus, lower stress and reduce anxiety while driving. Our advertising customer
has the courses built-in the entertainment system of their electric cars. The courses
also well-integrate with other in-car devices to provide users with a holistic
experience. For example, the courses allow for the automatic adjustment of interior
lighting to create a more relaxing atmosphere. We also plan to launch a series of
promoting activities centered around the slogan “Calorie for Battery”. We will
encourage users to complete more workout sessions on our platform in exchange for
free charging of their electric cars or electric car test drive opportunities in
collaboration with electric vehicle companies. We will continue to strengthen our
collaboration with advertisers in the selected industries and continue to expand our
advertising customer base. In addition, as we grow our MAUs and explore marketing
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scenarios for users, we expect to see increased revenue brought by the advertisements
on our platform, which helps retain our advertising customers and enhance the value
of our advertising services, thereby increasing our monetization results.
Improve Gross Margin and Operating Leverage
We believe our gross margins demonstrate the effectiveness of our innovative business model
and lay a solid foundation for future profitability. We expect to experience an increase in gross margin.
Š Selling and marketing expenses. During the Track Record Period, selling and marketing
expenses accounted for the largest portion of our operating expenses. As we are at an early
stage of operations, we invested in our brand awareness to solidify our first-mover
advantage. Our selling and marketing expenses as a percentage of our total revenue
decreased from 44.6% in 2019 to 27.3% in 2020. In early 2021, we strategically decided to
increase spending in user acquisition and branding to increase mindshare, enhance brand
awareness, further expand user base and solidify our market leading position. As a result,
our selling and marketing expenses as a percentage of total revenue increased to 59.0% in
2021 from that of 27.3% in 2020. Due to such increased efforts, we experienced an
increase in our user base and membership penetration. Starting from late 2021, we have
gradually increased the efficiency of our selling and marketing initiatives and reduced
expenses. Our selling and marketing expenses as a percentage of our total revenue
decreased from 59.0% in 2021 to 29.2% in 2022. Despite the decrease in selling and
marketing expenses as percentages of total revenue, our average MAUs increased by 5.9%
year-over-year to 36.4 million in 2022. In addition, membership penetration rate reached
10.0% in 2022. On the other hand, we expanded our presence on social media to promote
our content and services, including virtual sports events. Going forward, we expect to
continuously evaluate and monitor the effectiveness and efficiency of our promotional
campaigns and marketing spending.
Š Administrative expenses. Our administrative expenses as a percentage of revenue were
18.4% in 2019, higher than that of 6.2% in 2020, primarily due to rental fees incurred in
2019 when we furnished our office space and professional fee (including auditor’s
remuneration) incurred in 2019 in connection with our financing activities in the same
year. Our administrative expenses as a percentage of revenue increased from 6.2% in 2020
to 13.6% in 2021, which was primarily due to the expansion of general and administrative
personnel and increased professional fees associated with listing, and decreased to 11.1%
in 2022 as we enhance the efficiency of our general and administrative team. We expect
administrative expenses as a percentage of revenue to decrease in the future as we achieve
greater economies of scale.
Š Research and development expenses. Our research and development expenses as a
percentage of revenue was 29.3%, 15.2%, 22.0% and 24.3% in 2019, 2020, 2021, and
2022, respectively. Our research and development expenses as a percentage of revenue
decreased in 2020 primarily due to a decrease in social insurance contribution as a result
of the relief policies promulgated by the government in response to the COVID-19
pandemic and as we optimized staffing efficiency. The increase in 2021 and 2022 was
primarily due to the expansion of our research and development team and continuous
investment to strengthen our technological capabilities. Going forward, we expect to
continue to invest in research and development to improve our technology infrastructure
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and innovate our offerings. We also plan to further improve our research and development
efficiency. We expect research and development expenses as a percentage of revenue to
decrease in the future due to the return from our upfront research and development
investments and the improved operating leverage. In particular, we expect our research
and development team to grow at a slower pace than in previous years as we optimize our
headcount planning to improve research and development efficiency. We expect that, by
operating more efficiently and effectively, our research and development spending as a
percentage of total revenue will further decrease.
Š Fulfillment expenses. Our fulfillment expenses accounted for 8.3%, 8.3%, 7.9%, and 9.1%
of total revenue in 2019, 2020, 2021 and 2022, respectively. We periodically review the
geographical distribution of inventory and shipments to optimize the warehouse locations
and storing structure. For example, we started to use a new warehouse in Dongguan to
shorten the shipment distance in South China in April 2021. In addition, we optimize our
supply chain system, including enhancing our order fulfillments methods to allow
automatic combination of orders to the same address from the same customer within two
hours. We expect fulfillment expenses as a percentage of revenue to decrease in the long
run, primarily due to (i) our increased bargaining power and better pricing terms with
logistics suppliers, which we have achieved through our scale advantage; and (ii) our
optimized and streamlined logistics distribution system, which enables direct delivery
from suppliers to consumers, eliminating the need for intermediary distributors.
Going forward, we intend to efficiently manage costs and expenses as a percentage of total
revenue and further benefit from operating leverage. In addition, we expect to enjoy greater economies
of scale on our platform as we continue to improve our one-stop, integrate fitness solution to unlock
synergies across segments and increase flexibility in managing expenses. We have established an
integrated business model. Online fitness content brings traffic to our self-branded fitness products, as
users tend to purchase smart fitness devices and complementary fitness products, such as fitness gear,
apparel and food, to enhance their performance and experience during workouts. At the same time,
fitness products redirect traffic to online fitness content. With a continuously growing user base
supported by core competencies in online content, fitness products and offline fitness centers, the
opportunity for multi-channel marketing that can capture an online and offline user base at scale will
continuously attract brands and merchants to our platform, thus enhancing the growth potential of
advertising services. Our integrated business model is not a simple combination of different segments.
Leveraging our integrated business model and cross-selling opportunities, we have achieved continued
and balanced revenue growth.
In summary, we experienced losses during the Track Record Period as we prioritized strategic
path formulation and business model optimization over immediate breakeven. As we continue to scale
up our business, invest in marketing and branding to grow user base, expand content and product
offerings to enhance monetization capabilities, as well as optimize cost structure and improve
operating leverage, we expect to grow revenue and narrow our adjusted net loss (non-IFRS measure).
Upon the successful implementation of the aforementioned measures, our Directors believe that we are
effectively paving the way for long-term sustainable profitability.
Working Capital Sufficiency
Taking into account the financial resources available to us, including our cash and cash
equivalents on hand, short-term time deposits, financial assets at fair value through profit or loss, and
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the estimated net proceeds from the Global Offering, our Directors are of the view that we have
sufficient working capital to meet our present needs and for the next twelve months from the date of
this document. We also proactively review and adjust our cash management policy and working capital
needs according to general economic conditions and our short-term business plans. In addition, in view
of our net cash outflows, net liabilities position and net losses during the Track Record Period, we plan
to ensure our working capital sufficiency by taking advantage of above-mentioned measures to narrow
down our net loss and improve our profitability. Further, as evidenced by our historical equity
financing activities, we are able to obtain investment from well-known institutions. This also signifies
the confidence of prominent investors in our Company. We currently do not have plans to issue new
shares to raise funds shortly after the Listing and in the near future. We believe that potential external
financing sources, including those to which we will gain access after the Global Offering, will provide
additional funding to fuel our business operation and expansion until we achieve profitability. Taking
into account the above, and based on the written confirmation from the Company in respect of working
capital sufficiency, review of the accountants’ report, the financial due diligence conducted on the
historical financial information of the Group during the Track Record Period and the discussion with
the Directors, nothing material has come to the attention of the Sole Sponsor that would cast doubt on
the Company’s conclusion that the Company has sufficient working capital to meet its present needs,
that is for the next twelve months from the date of this document.
TECHNOLOGY, RESEARCH AND DEVELOPMENT
We aspire to lead the innovation in the new era of China’s fitness industry leveraging our
insights and technologies. The success of our business is supported by our strong technological
capabilities that enable us to deliver a holistic and seamless fitness experience for our users. Our
research and development team, coupled with our proprietary artificial intelligence technology, the
large volume of fitness activities generated on our platform and collected through smart fitness devices
each day, and our track record of successful product design and development, have created
opportunities for continued improvements in our technology capabilities, enabling reliability,
scalability and flexibility.
We invest substantial resources in research and development to improve our technology, refine
our online platform, and develop new technology-enabled fitness products that are complementary to
our content offerings and find ways to better serve the users on our platform. We incurred research and
development expenses of RMB194.2 million, RMB167.9 million, RMB355.6 million and RMB536.9
million for the years ended December 31, 2019, 2020, 2021 and 2022, respectively.
Our dedicated research and development team mainly includes AI algorithm engineers that
conduct modeling and algorithm research, security engineers that focus on cybersecurity and quality
control, platform development engineers that develop and implement services on our platform, and
product development engineers that specialize on designing and developing smart fitness devices and
complementary fitness products. As of December 31, 2022, over 31% of our employees engaged in
research and development and technology hold a master’s degree.
Insights and Artificial Intelligence
We have accumulated user fitness information, interactions and transactions on our platform,
which provide us with valuable industry insights on user preference and demand, and fitness content
trends, and help us develop AI-assisted customized fitness content, products and services. For example,
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during a fitness course, we record what moves the user completes or skips, whether the user extends or
shortens the breaks in between, and the associated heart rate records from our Keep Wristband. On the
behavioral level, we record information such as user interactions, browsing history, page views and
clicks, and transactions on our platform. Our system delivers speed and scalability, providing insights
and analytics support across the fitness content, products and services on our platform. We have
optimized our technology structure to make it more suitable for artificial intelligence and machine
learning processes.
Based on our cumulative insights, we are well-positioned to develop various advanced AI
applications to enhance the user experience and help them achieve their fitness goals more effectively
on our platform. Examples of the AI applications on our platform include:
Š Personalized experience . We have developed comprehensive profiles for users on our
platform based on the information they provide, such as fitness goals and body
measurements, results from fitness tests, and users’ viewing and interaction histories. We
use advanced machine learning technology to offer personalized content feeds within our
community and provide courses and curriculums that are suitable for their fitness goals.
Š AI-assisted courses and curriculums . We are among the first in China to introduce
AI-assisted fitness curriculums to provide users with a more systematic and personalized
fitness solution. Based on user profiles, feedback during fitness activities, changing body
measurements from smart scale and real-time heart rate from the Keep Wristband , we offer
intelligent courses and curriculums that are tailored to users’ needs and can dynamically
adapt to their fitness progressions using AI technology. See “—Our Content Offerings—
Our recorded fitness content—Our structured courses” and “—Our Content Offerings—
Personalized curriculum planning”.
Š Dynamic food planning tools . We offer food planning tools for our subscribing members,
where we offer specific food and recipes for each meal within the day based on users’
fitness goals and training on that day. Our proprietary food planning technology
empowered by AI not only calculates target calories, but also takes into account
macronutrient composition, fitness activities received from the Keep Wristband and smart
scales, and other fitness factors. Our smart food planning tools, together with our
AI-assisted curriculums, ensure a comprehensive and dynamic fitness experience while
helping users achieve their fitness goals efficiently and effectively.
Š Running route mapping . Our platform provides powerful running assistance to runners,
and they can use our mobile app to track their outdoor running with detailed recording of
route, pace, elevation, and other fitness information. We have accumulated a significant
amount of running routes personalized for users based on their locations, fitness goals and
past running experience. We are the first in China to map personalized running routes.
Š Automatic music playlist generation. When a user has finished running, Keep can generate
a corresponding piece of music based on the running records, such as pace, cadence and
heart rate. We introduced the concept of “composing while running” to enhance user
engagement by offering a brand-new running experience. We are the first in China to
enable automatic music playlist generation in fitness industry based on data insights.
Š Gamified features in live streaming classes. We are the pioneer of introducing gamified
features in fitness live streaming classes in China, according to the CIC Report. One
example is “Burger Challenge”, an innovative and interactive feature of the live streaming
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classes. For each live streaming class, based on the participants, Keep automatically
assigns different types of food, such as burger or donuts, with an amount to consume as
the challenge for users. Users may start their challenge during the live streaming classes
and track their food consumption progress. Burger Challenge helps provide our users with
additional sense of success during their workouts.
Product Design and Development
We are committed to providing users with an innovative, immersive and highly interactive
experience through integrating our industry-leading smart fitness devices and complementary fitness
products with our comprehensive content offerings. With our strong product design and development
personnel and our deep and specialized understanding of fitness and user demands, we are well
equipped with capabilities that cover the end-to-end process of product development. Our capabilities
allow us to develop a new fitness product from concept to online launch in less than eight months.
Our product team supports the fitness product design and the development of key fitness
product components, including the six-axis accelerometer and gyroscope in our Keep Wristband and
the intelligent resistance adjustment system in Keep Bike, among others. We strive to design our fitness
products to meet users’ preferences for elevated fitness experiences. For example, because the flat
buttons on a traditional treadmill are inconvenient to control during running, we designed our treadmill
with a rotating button spiral. Our intelligent resistance adjustment system allows users to ride freely
following the rhythms without worrying about adjusting resistance level. We are also devoted to
integrating the appearance of our fitness products with our brand. Our product design shows our
attitude towards esthetic appearance and compatible function at the same time, and conveys our deep
understanding of fitness experience. Our design esthetics value simplicity, clean lines, smooth curves
and simple elegance, distinguishing us from our competitors. We believe that our esthetically unified
product design and deep understanding of fitness will help build a club of brand-loyal Keepers.
We develop and manage our fitness devices and products based on (i) insights on our users’
fitness activities and performances through their engagement with fitness content, (ii) personalized
content presentation based on users’ specific needs, and (iii) users’ real-time feedbacks in the
community. In product development, we mainly focus on the development of features that provide
immersive interaction between our fitness products and content offerings. For example, our intelligent
resistance adjustment system embedded in Keep Bike offers real-time resistance adjustment based on
course target, users’ athletic level and fitness progression. We always perform product validation to
ensure that our products function in the expected manner when placed in the intended environment. For
example, we rigorously test the performance of our Keep Wristband at different settings, especially in
the water to make sure that its strong water-resistance capability can support the monitoring and
tracking of fitness activities such as swimming.
Technology Infrastructure
We have developed a secure, efficient and cost-effective cloud-based core system to operate
our business. Cloud-based technology allows us to process large amounts of complex information
in-house, which significantly reduces cost and improves operation efficiency. We partner with third-
party cloud service providers so that we enjoy the instant scalability and robustness of cloud-based
services. Cloud service allows us to handle traffic spikes that are significantly higher than our normal
traffic reliably.
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OUTSOURCING, SUBCONTRACTING, SUPPLY AND LOGISTICS
We closely collaborate with a network of third-party outsourcing and subcontracting partners,
suppliers and logistics service providers to produce and deliver the fitness products on our platform. We
cooperated with 9, 15, 28 and 30 contract manufacturers for our smart fitness devices in 2019, 2020, 2021
and 2022, respectively, and 43, 49, 52 and 56 contract manufactures for fitness gear, 10, 8, 14 and 12 for
fitness apparel, and 28, 30, 29 and 35 for fitness food in these periods, respectively. We also engaged four,
five, five and six third-party storage providers, and four, five, five and six third-party logistics service
providers in 2019, 2020, 2021 and 2022, respectively. The large scale of our business allows us to work
with first-class partners and establish more favorable contract terms with them. Our robust supply chain
capabilities and powerful logistics network allow us to produce and deliver high-quality products, drive user
satisfaction and achieve operational efficiency.
Outsourcing and Subcontracting
We outsource and subcontract the manufacturing of our products to multiple contract
manufacturers located in China. We believe that outsourcing the manufacturing of our products enables
greater scale and flexibility at lower costs than establishing our own manufacturing facilities. We select
third-party outsourcing and subcontracting partners based on factors such as quality, capacity, price,
years of operation, reputation and compliance with applicable laws and regulations. Most of our
outsourcing and subcontracting partners have extensive industry experience and have cooperated with
other fitness brands in China and globally. All of our outsourcing and subcontracting partners are
independent third parties located in China.
Our outsourcing and subcontracting partners produce our products using design specifications
and standards that we establish. We then enter into framework agreements with outsourcing and
subcontracting partners to place orders. The terms of our agreements with our outsourcing and
subcontracting partners are generally one year with automatic annual renewal. The outsourcing and
subcontracting partners will be responsible for the production, preservation and transportation of the
products within the scope of their responsibility. The outsourcing and subcontracting partners shall
ensure that the products provided must meet the quality standards as mutually agreed with us and in
compliance with the relevant industry and national standards. They shall also ensure that the raw
materials used in production are consistent with the descriptions in the production order. We conduct
quality check on the products that we receive from outsourcing and subcontracting partners and will
only proceed with payments if the products pass the quality check. The outsourcing and subcontracting
partners also provide product warranty for the smart fitness devices subject to terms and conditions.
The product warranty period is generally 12 months after users receive the products. During the
product warranty period with our outsourcing and subcontracting partners, we can request outsourcing
and subcontracting partners to fulfill the obligations of return, exchange and repair at any time in
accordance with relevant national laws and regulations, and mutual agreement. The outsourcing fee
varies based on different production orders. Although we generally do not restrict our outsourcing and
subcontracting partners to supply fitness products to other parties, they are required to supply
exclusively to us the fitness products that are protected under our intellectual properties, such as smart
fitness devices and certain fitness gear collections.
Quality Control . We are committed to maintaining the highest level of quality in our products,
including fitness food products. We seek to ensure quality control by carefully reviewing the
production process and rigorously testing the products produced by our outsourcing and subcontracting
partners. We have adopted strict quality control measures that follow customary industry practice,
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including a full process quality control and final product inspection to ensure product quality. We have
a quality control team that regularly inspects our outsourcing and subcontracting partners’ facilities and
is involved throughout the entire development process. Although we do not have employees stationed
at the facilities of our outsourcing and subcontracting partners, our quality control team performs
sampling inspection to ensure that our outsourcing and subcontracting partners fully adhere to our
quality standards. For our new products to be produced, we conduct thorough examinations of product
samples and each of their components at the product verification testing stage to make sure they satisfy
all the technical requirements set forth in our design before the beginning of commercial production.
We also periodically review the performance of our third-party outsourcing and subcontracting
partners to secure sufficient manufacturing capacity and quality production of our products.
Raw Materials and Components
Our raw materials and components for our self-branded fitness products segment mainly
include electronic control system, treadmill bodies, LCD, chips, and silicone case, among others. The
raw materials and components used in our products are sourced either directly by us or on our behalf
by our outsourcing and subcontracting partners from a variety of component suppliers. We mainly
purchase raw materials and components from China. We and our outsourcing and subcontracting
partners procure raw materials and components that meet particular specifications into our products
based upon a forecasted production plan.
Raw materials and components essential to our products are generally available from multiple
sources. To ensure that we continue to offer products incorporating high quality materials and
components, we seek to work with major material and component suppliers directly to foster long-term
and in-depth cooperation. We typically enter into framework agreements with suppliers for our key
materials and components and take measures to ensure that they meet particular specifications,
including belt size and motor for smart fitness devices and characteristics such as stretch ability,
capability to wick moisture and durability for gear and apparel. The terms of the agreements with our
component suppliers are generally one year with automatic annual renewal. See “—Suppliers”.
Quality Control . We also actively coordinate the relationships between our outsourcing and
subcontracting partners and component suppliers to continue to provide users with leading fitness
technology and quality fitness products. We seek to guarantee the quality of raw materials and
components sourced by outsourcing and subcontracting partners through regular inspection to confirm
that they comply with our internal standards.
Some of the raw materials and components needed for the production of our products,
including those that are available from multiple sources, may at times subject to industry-wide
shortages and may experience significant commodity pricing fluctuations. Historically, we have not
experienced material shortages of our raw materials and components as we have pre-stocked inventory
according to manufacturing plan. Our cost of raw materials and components are subject to industry-
wide commodity pricing. In particular we have experienced increased cost of chips historically in line
with industry price fluctuations. See “Industry Overview—Raw Material and Components Price
Analysis of China’s Online Fitness Market.” We aim to maintain a steady supply of necessary
components or raw materials at reasonable prices by expanding our supply channels, developing long-
term relationship with major suppliers, and increasing our inventory to meet the needs of our
production.
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Logistics and Fulfillment
We primarily work with third-party storage providers and logistics service providers for
warehousing, logistics and fulfillment of our products. We collaborate with third-party storage
providers and leverage their warehouse and geographical coverage. Our small packages are distributed
nationally through three warehouses in three cities in China and our large packages are stored in cloud
warehouses distributed in various cities. We also have a distribution and sorting center for after-sales
services. We have established a comprehensive enterprise resource planning (ERP) system for
warehouse management with our storage providers to closely monitor each step of the fulfillment
process from the time a purchase order is confirmed to when the product is packaged and picked up by
delivery service providers. We also keep track of the real-time inventory level to mitigate inventory
risk. We usually enter into agreements with our storage providers for a term of one year.
We engage third-party logistics service providers to collect our products from warehouses and
deliver them to users. We usually negotiate and enter into logistics agreements with our logistics
service providers for a term of one year with automatic annual renewal. For our Keep Bike and
treadmill, our logistic service providers also offer professional installation services so that the users can
start using our devices right away. With the assistance of third-party logistics companies and the wide
geographic distribution of our warehouses, we are able to ensure speedy and reliable delivery and
setup. Our average shipping duration from payment to the delivery of orders is approximately three
days.
SALES AND MARKETING
Sales
We sell our smart fitness devices and complementary fitness products primarily through direct
sales channels and wholesale channels. Under the direct sales channels, we sell our products through
our online store and our official stores on third-party e-commerce platforms. The online store on Keep
platform offers the full line-up of our products directly to users with insightful product descriptions.
Under the wholesale channels, we distribute our products through wholesalers to expand our user reach
and drive sales.
Pricing Policy
Our products and services are offered under fixed price with consideration of various factors.
On one hand, we adopt a user-oriented approach to consider the budget of our target user group and the
competitive market position of our products and services at a given price. On the other hand, we price
our products and services with reference to market dynamics and our financial performance, and
consider our research and development expenses, outsourcing costs and the gross profit of the products
that we may achieve taking into the relevant costs and expenses. In particular, we set the membership
subscription fees based on market rate and target user survey on fitness budget. For fitness devices and
products, we take into account the cost and our expected gross profit, as well as the price range of
similar products in the market. For advertising services, we also consider the format and duration of the
advertisement, display location, market pricing, among others.
Marketing
We benefit significantly from our large and engaged user base, word-of-mouth referrals and a
continued increase in user subscriptions driven by content and growing branding awareness. Our
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unique and well-established brand spirit has helped us establish our community and build a large and
engaging user base. At Keep, we believe in the power of branding and are committed to creating a new
fitness culture that inspires users in China, and further enhancing brand awareness to drive the sale of
our fitness content and products. We promote our platform and raise brand awareness through a variety
of online and offline marketing and brand promotion activities. Our content, product and technology
teams collaborate closely with our sales and marketing team to align and execute our sales and
marketing strategies and ensure optimized user acquisition. We have launched various branding
initiatives and acquired users through a variety of marketing channels:
Š Influencer marketing . We work closely with influencers on our platform who capture the
passionate, enthusiastic and persistent message we try to deliver through our brand to
generate creative and professional fitness related content. The influencers we collaborate
with usually have an extensive number of followers on our platform and other social
networks. They help us attract new users and retain existing users by uploading fitness
courses on our platform and actively engaging with users. users are not only attracted by
the professional fitness content delivered by the influencers, but also the fitness experience
they share within the Keeper community. This allows the creation of a strong bond and the
building of deep emotional connections between influencers and users which in turn help
increase user retention.
Š General branding. We conduct general branding activities primarily in the form of fitness
events, outdoor bulletin boards, television commercials, and through our offline fitness
centers. We have hosted branded fitness contests and sponsored world-class fitness events,
such as city marathons, Spartan races and Ultimate Fighting Championships. We also
regularly organize pop-up events across China to build close connection with our fans and
users. Some of our users would fly thousands of miles to meet other users, and share the
stories of how they progress and succeed together with us. We also expand our user reach
and increase our brand awareness by displaying captivating adds with powerful slogans in
coveted places in public transportation, high-end residential buildings and core business
districts. In addition, as a trial initiative, we operate Keepland fitness centers to encourage
visitors to take part in group courses with its instructors. Participants can also try out our
smart fitness devices such as Keep Bike and Keep Wristband during the exercise. Such
trial initiative enables users to experience our online content at offline locations, promote
integrated fitness training and enable holistic fitness experience with the help of smart
fitness devices. We believe that the offline fitness experience provided by Keepland
fitness centers and our Keep selected fitness classes deepen our brand engagement and
loyalty, increase user touchpoints and further drive subscribing member conversion. We
owned and operated 13, 9, 9 and 7 Keepland fitness centers in Beijing, China as of
December 31, 2019, 2020, 2021 and 2022, respectively, to provide offline fitness services.
We also launched Keep selected fitness classes in collaboration with third-party offline
gyms in August 2021. We only provide our fitness content and services from our coaches
to hold Keep fitness classes in these gyms from time to time, and we are not involved in
the operation of these gyms. We expect to greatly expand the offline fitness class exposure
to our customers while steering away from the heavy physical operations of the gym,
which aligns with our overall strategy and initiatives for offline business. In 2021 and
2022, we collaborated with 8 and 90 gyms to offer Keep selected fitness classes,
respectively. The pricing for both Keepland fitness centers and Keep selected fitness
classes was RMB49-89 per person per class as of the Latest Practicable Date.
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Š Other initiatives. We use a unique combination of brand and product-specific marketing to
build brand awareness and strengthen our reputation in the fitness industry. For example,
we held a Chinese New Year calories exchange event in 2021, which allows users to
exchange their calories burnt through workout on our platform for New Year gifts, such as
steak and other groceries, Keep Wristband , and membership. The event efficiently
promoted our brand and attracted approximately two million participants within two
weeks and caused several user traffic spikes. We also leverage our presence on major
e-commerce platforms which enables us to market our products and reach a wider group of
users. We join e-commerce platforms’ major promotion activities during China’s online
shopping festivals on June 18, November 11, and December 12. In addition, we publish
promotional materials related to our products on social media platforms to acquire new
users. We attract new users through ads on various third-party apps, such as short video
platforms.
PRODUCTS AND SERVICES
Providing responsive and helpful user service is our high priority. In our ongoing efforts to
maintain user satisfaction and improve our products and content, we maintain a dedicated user service
team. We provide timely, attentive and upbeat user service to our users through instant online
messaging and call centers. Our platform service representatives answer users’ questions with regard to
our Keep platform, including questions on fitness curriculums, membership subscription and software
malfunctions. Our sales representatives for smart fitness devices and complementary fitness products
handle user inquiries at all stages of the shopping experience and assist users with questions regarding
delivery, product particulars, payment and checkout. Users can engage with these user service
representatives through functionalities embedded in our mobile apps. We train our user service
representatives to answer user inquiries and proactively educate potential users about our content,
products and promotional events.
Customer Complaints Policy
We collect user feedback through multiple channels. Users can submit their feedback through
our mobile app or Weixin mini program. We channel such feedback to different teams and utilize
valuable insights provided by users to guide the improvements of user experience and empower fitness
content, products and services optimization. We also integrate user feedback into our decision-making
process by conducting in-depth user survey before we launch new content and products. Our customer
service personnel also responds to customer complaints and suggestions. During the Track Record
Period and up to the Latest Practicable Date, we had not received any material customer complaints.
Warranty and Product Return Policies
We provide warranty programs for our smart fitness devices. We generally offer one-year
product warranties to users. Users can generally request free replacement or free repair of defective
products if the product malfunctions within one year of purchase.
We also strictly abide by the seven-day return policy for our fitness products. Users can return
the products within seven days of delivery subject to certain terms and conditions. Users can rely on
our one-stop after-sales services in our online store to submit online application for product exchange,
on-site repair and maintenance. Users can also take advantage of our self-service feature to manage
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their orders and request after-sales services easily and conveniently. We promptly process such
applications or requests to improve user satisfaction. For the allocation of liability for product defects
between us and our suppliers, please see “—Outsourcing, Subcontracting, Supply and Logistics—
Outsourcing and subcontracting”.
During the Track Record Period, we have not experienced material product recalls or product
returns. There have been some immaterial product complaints from time to time. We incurred warranty
expenses, which cover the cost of providing warranty services, of RMB1.1 million, RMB2.6 million,
RMB7.6 million and RMB11.8 million for the years ended December 31, 2019, 2020, 2021 and 2022,
respectively.
SEASONALITY
Our results of operations are subject to seasonal fluctuations. Normally, the first quarter of each
calendar year contributes to the smallest portion of our annual revenue, primarily due to a decrease in
users’ willingness to exercise during the winter season and reduced sales of our self-branded fitness
products during the Chinese New Year holiday period in the quarter. We usually observe an increase in
revenue in the second and third quarters of each year, mainly because we experience relatively higher
average MAUs and average monthly subscribing members in the second and third quarters as people
are more willing to exercise during spring and summer, and upticks in the sales of our self-branded
fitness products after the Chinese New Year. Furthermore, when e-commerce platforms hold special
promotional campaigns during China’s online shopping festivals on June 18, November 11, and
December 12, we typically observe an increase in sales of our fitness products immediately following
these campaigns. In addition, we generally recorded lower advertising revenue for the first quarter of
each year as advertising customers usually make plans for their yearly advertising spending at the start
of each year and therefore tend to lower their advertising and promotional spending before their
advertising budget is set. Seasonal fluctuations have not thus far posed material operational and
financial challenges to us. However, the seasonal trends that we have experienced in the past may not
apply to, or be indicative of, our future operating results. See “Risk Factors—Risks Related to Our
Business and Industry—Our results of operations are subject to fluctuations due to seasonality”. We
also experienced relatively higher average MAUs and average monthly fitness product customers in
the first half of 2020 mainly due to the increased demand for at-home fitness content as a result of the
COVID-19 pandemic. See “Financial Information—Impact of COVID-19 on our operations and
financial performance.”
INTELLECTUAL PROPERTY
We regard our patents, trademarks, copyrights, domain names, know-how, proprietary
technologies, and similar intellectual property as critical to our success. As of December 31, 2022, we
have 346 patents registered and 154 pending patent applications in China. We also own 1,027
registered trademarks, 416 copyrights including 57 software programs developed by us relating to
various aspects of our operations, and 30 registered domain names, including keep.com.
We seek to protect our technology and associated intellectual property rights through a
combination of patent, copyright and trademark laws, fair competition laws, as well as license
agreements and other contractual protections. In addition, we enter into confidentiality and
non-disclosure agreements with our employees, our manufacturers and suppliers and others to protect
our proprietary rights. The agreements we enter into with our employees also provide that all patents,
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software, inventions, developments, works of authorship and trade secrets created by them during the
course of their employment are our property. For example, under our agreements with our instructors,
we are the owner of the intellectual property arising out of live streaming classes on our platform.
We own the intellectual property rights of fitness content we produced in-house and we
typically obtain the intellectual property arising from live streaming on our platform and certain fitness
courses which we created in collaboration with third parties, such as instructors. We maintain an
extensive amount of PUGC primarily consisting of fitness content created by influencers and other
licensed content from fitness content providers. We obtain licenses to display recorded fitness content
generated by influencers and content providers with whom we maintain a collaborative relationship. In
addition, we combine fitness content with a broad catalog of music to create an immersive and
motivating fitness experience for our users. To secure the rights to use music in our content, we enter
into agreements to obtain licenses from rights holders such as music publishers, artists, and other
copyright owners or their agents. Under these agreements, we typically obtain the music use right for
our fitness content with a use term ranging from one year to permanent and pay royalties to the
copyright owners or their agents. We may also request these parties to choose or customize the right
music based on the context that we provide. The terms of these agreements range from one to two
years. We also partner with third parties for their services to screen music of different genres and
obtain licenses.
We intend to protect our technology and proprietary rights vigorously. We have employed
internal policies, confidentiality agreements, encryptions and data security measures to protect our
proprietary rights. During the Track Record Period and up to the Latest Practicable Date, we did not
initiate any material litigations for the infringement of our intellectual property rights, and no material
claims or disputes were brought against us in relation to any infringement of trademarks, copyrights or
other intellectual property. However, there can be no assurance that our efforts will be successful. Even
if our efforts are successful, we may incur significant costs in defending our rights. From time to time,
third parties may initiate litigation against us alleging infringement of their proprietary rights or
declaring their non-infringement of our intellectual property rights. See “Risk Factors—Risks Related
to Our Business and Industry—We and our content providers have been and may be subject to
intellectual property infringement claims or allegations, which may be expensive to defend and may
disrupt our business” and “Risk Factors—Risks Related to Our Business and Industry—We may not be
able to prevent others from unauthorized use of our intellectual property, which could harm our
business and competitive position”.
OUR ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) INITIATIVES
With our evolving technology, we break traditional constraints and bring users to the forefront
of fitness by providing a comprehensive, accessible and affordable fitness solution. We believe that the
power of sports and fitness is pervasive, and everyone can be an influencer to set his or her community
in motion.
As a company offering a comprehensive fitness solution to the society, we believe that our
business inherently promotes low-carbon lifestyle and healthy living following the ESG principles. We
believe our continued growth depends on our integration of ESG values into our corporate strategies
and operations. With the unprecedented challenges regarding climate change and the COVID-19
pandemic, we have become more active to take on social responsibilities and we will continue to bring
fitness to everyone in our society. We are committed to operating on an ethical and compliant basis
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and elevating user experience through technological innovation. We will continue to promote a diverse
and inclusive environment for talents, and pursue environmentally friendly operations following the
principles of low carbon economy, thereby contributing to public welfare and helping build a
sustainable community.
Identification, Assessment and Mitigation of our ESG Risks
During the Track Record Period and up to the Latest Practicable Date, we have not been subject
to any fines or other penalties due to non-compliance in relation to health, work safety, social or
environmental regulations, and have not had any accident, or claim for personal or property damage
made by our employees which had materially and adversely affected our financial condition or
business operations.
We have identified the following ESG risks which we consider material and may have an
impact on our business, strategy or financial performance.
Safety Issues related to Fitness Activities and Food Quality
As an inherent risk in the fitness market, we may face disputes or legal actions for injuries or
other health or safety related issues suffered by our users while exercising following our content or
utilizing our fitness products due to improper usage or an individual’s health conditions, among other
reasons. We may also face disputes or legal actions for injuries or other incidents that may happen to
our users while they are on our premises. Selling food for human consumption involves inherent legal
and other risks, and there is increasing governmental scrutiny and public awareness regarding food
safety. Unexpected side effects, illness or injury related to allergens, food-borne illnesses or other food
safety incidents (including food tampering or contamination) caused by products we sell, or involving
suppliers that supply us with ingredients and other products, could expose us to product liability,
negligence or other lawsuits. See “Risk Factors—Risks related to our business and industry—We
could be subject to claims related to health or safety arising from the use of our fitness content or
products, consumption of our fitness food and exercising on our premises”.
Set forth below are the various measures that we undertake to manage and mitigate risks
relating to product quality and safety:
Š We have established comprehensive internal policies and procedures related to
outsourcing partner quality control, research and development quality control, and
manufacturing quality control, among others.
Š We regularly sample and test food products manufactured by our suppliers, monitoring
production conditions, and filter nonconforming ingredient and finished food products.
Š We require detailed food quality and hygiene standards in our fitness food suppliers,
including inspection of raw materials, storage temperature control, equipment sanitization
and cleansing, staff health certificate management and personal hygiene, among others.
Š We strictly require the qualification and professionality of in-house instructors and fitness
content developers and third-party influencers and content providers.
Š We follow customary industry practice to control the product quality of our smart fitness
devices and fitness gear, including, among others, manufacturing process, inspection and
final product quality check.
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Š We have developed a proprietary manufacturing execution system, or MES, to manage the
manufacturing details of our fitness products. Our outsourcing partners and suppliers can
connect to our MES to streamline the whole production quality control process.
Š We impose mandatory training and tests to our staff to enable them to give appropriate
guidance and proper warnings to our users.
Š We have obtained product liability insurance for our smart fitness devices, fitness gear and
fitness food.
Supply Chain Management
Responsible sourcing and sound supply chain management are essential for us to ensure
reliable product quality and sustainability along our supply chain. If we are unable to select quality
third-party outsourcing manufacturers and suppliers, or monitor, audit and manage different parties in
the supply chain may expose us to risks of suppliers’ non-compliance with applicable laws and
regulations and unethical practices, which could diminish our competitiveness and harm our reputation.
We have established a supply chain approval process, through which suppliers and outsourcing
manufacturers must provide relevant qualifications or certifications, such as their business licenses,
food production and operation licenses, among others, and demonstrate legal compliance with
environmental and social policies prior to approval. If the suppliers or outsourcing manufacturers are
not compliant with the applicable laws and regulations regarding safety and quality or commit
misconducts, we may terminate our contracts with them. We require that all the products we obtain
from outsourcing manufacturers fully comply with applicable national industrial standards. We also
hire third-party quality testing companies to check the compliance of each product and display the
testing report to our users.
Environmental Protection
We monitor environmental, social and climate-related risks and opportunities that may impact
on our business, strategy and financial performance and evaluate the magnitude of resulting impact
over the short, medium and long-term horizon. We take these issues into account when developing our
business strategy and may adjust our strategy in a particular region in response to changing
environmental, social and climate-related landscape. See “—Our Environmental, Social and
Governance (ESG) Initiatives—Environmental Protection”.
Environmental Protection
We recognize the importance of contributing to sustainable development for the benefit of our
society and environment. With this in mind, we strive to minimize the impact of our operations on the
environment and promote sustainability and environmental awareness at all levels of our organization.
For example, we moved our public welfare project of Dream Sports Ground online in 2021 so that all
users could contribute to the project by completing virtual fitness tasks in a low-carbon way.
We are committed to sustainability as part of our corporate strategy, and we strive to cultivate a
sustainable mindset among our employees and work environment. We have conducted a series of
campaigns that aim to reduce waste and carbon emissions of both our company and our employees,
including trash-sorting in all of our offices, water reduction, and carbon emission reduction. We have
established several protocols in our offices in our effort to reduce water-usage. We placed signs to
remind our employees to reduce their water usage.
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We are also committed to carbon mitigation measures and will continue to explore ways to
further improve energy efficiency. To improve energy efficiency, we closely monitor and evaluate our
power usage level. In 2022, our average annual power usage was approximately 676 thousand kWh.
We have implemented a series of measures to reduce power usage and save energy, including daily
inspection to turn off electronic devices when not in use, limiting temperature setting range or setting
standard office temperature when using the air conditioning system and implementing “office power
saving mode” when our offices are closed. We intend to lower our office electricity consumption
through such measures. We also ask our employees to be mindful of the environment when consuming
office supplies, such as using double-sided printing, only printing when necessary, archiving files
digitally and using scrap pater. We consumed a total of 1.5 tons of paper in 2022. We will continue to
raise the paper consumption awareness of our employees through trainings and continue to improve
paper consumption efficiency. In addition, we continually evaluate our water usage level. In 2022, we
recorded annual water usage of approximately 4,958 tons. We strive to foster a conservation culture in
our Company and will continue to monitor and control energy and water usage level in our daily
operation.
We aim to create fitness that leaves a mark on the world, equipment that doesn’t. We will
continuously improve the environmental impacts of our products, from materials to manufacturing, and
we always bear environmental impact in mind when selecting raw materials, components, and
outsourcing manufacturers. For example, all of our apparel packagings use recycled materials to ensure
environmental sustainability. Our apparel meets relevant national standards in terms of durability and
chemicals, among others, which would promote sustainable consumer purchase pattern with reduced
waste and result in less likelihood to pollute the environment with hazardous substances. We also
thrive to choose more natural materials in making our fitness products, such as yoga mat, and we
ensure that the procedures to process these materials follow the relevant national standards. We also
place great emphasis on supply chain sustainability and have been promoting a responsible, low-
carbon and bio-diversity paradigm along our value chain. We have strict requirements on our
outsourcing manufacturers and regularly inspect whether the manufacturing facilities adopt the
production standards related to environmental protection.
We are also devoted to increasing environmental awareness in the society. For example, we
held earth day cycling fat loss event in 2018 and offer a special “earth day knight” badge to all users
who completed the tasks. Over 30,000 users registered for this event. In September 2021, together with
hundreds of other companies in China, we joined an initiative for digital space and green, low-carbon
activities at the first China Digital Carbon Neutrality Summit.
Social Responsibility
Social responsibility has been central to how we do business. We carry out our purpose and
instill our belief through contributing to the wide community. Leveraging what we are best at, we have
mainly centered our efforts in the fitness industry, as follows.
Š We believe that fitness has the power to positively shape the future of the young
generation. We have been constantly making donations to the construction of fitness
infrastructures and facilities for young children. We have donated fitness equipment to and
built fitness facilities for schools in less developed regions in China to help more children
get off the sidelines and enjoy fitness. In August 2016, our first Dream Sports Ground
landed in an elementary school in Qinghai Province, providing children with better sports
conditions. In November 2019, we, together with one of our business partners, built a
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brand new and high level sports ground for the children in Xinjiang Tahekureke
Elementary School to facilitate their daily physical exercises. In June 2021, the latest
Dream Sports Ground was completed in cooperation with the China Internet Foundation
for Public Welfare in an elementary school in Shaanxi Province.
Š We invited visually impaired runners and their guide runners to shoot a public welfare
short film named “ I Am Your Eyes ”. By exploring their stories and recording their mental
journeys, we helped raise the public awareness of the hardship the visually impaired
people of our society have been enduring in their everyday lives.
Š We have also invited nonprofit organizations such as WildAid and celebrity ambassadors
to join our Keeper community to raise nutrition awareness among public and help them
maintain a healthy and balanced diet. In addition, we advocate reducing meat consumption
and making fresh fruits and vegetables a bigger part of people’s diet to develop a healthy
lifestyle and contribute to a healthy planet.
We believe it is our responsibility to stand out in difficult times and our commitment to society
is embodied in our efforts during the COVID-19 outbreak. We proactively supported China’s
nationwide efforts to contain the spread of COVID-19 and took responsibility to support the
communities. In 2020, we rolled out a seven-day curriculum together with General Administration of
Sport of China to encourage people to stay indoor to combat the spread of the pandemic. In March
2022, Keep cooperated with the Chinese Red Cross Foundation to send out 100,000 bi-weekly
membership subscription packages to residents in Changchun, China during the quarantine periods due
to the COVID-19 pandemic. Keep also offers free 14-day membership for people subject to home
quarantine across China and we have sent out over 73,000 membership packages up to the Latest
Practicable Date. We believe our supportive efforts in this special time strengthened our ties with the
communities we serve and consolidated our long-standing value in being socially responsible.
Corporate Governance
We are on a continuous journey to the improvement of wellbeing of everyone working with and
for us. We foster inclusion and equality among employees from all backgrounds, regardless of
employment type (full-time or part-time), religion, age, gender, sexual minorities, disability, sexual
orientation, citizenship status and parental status, among others. We believe that diversity, including
but not limited to gender diversity, is important to us in thriving in the business environment. Hence,
we consider diversity in determining the composition of our personnel. For example, as of
December 31, 2022, approximately 46% of our employees are female.
We are committed to fostering a vibrant and encouraging environment where employee can
engage in fitness training every day at workplace. We have implemented a comprehensive gym and a
Keepland offline fitness center inside our main office building, which allow employees to join our
courses and curriculums conveniently. We also provide our employees with holistic training programs
to help them advance on their career paths. We treat the health and safety of our employees as our top
priority and have taken additional measures to protect the physical and mental health, safety and
wellbeing of our employees during the COVID-19 pandemic.
We comply with the laws and regulations in the PRC regarding anti-corruption. In addition, we
have adopted and strictly implemented our internal anti-corruption policies as stipulated in our
employee handbook, which is signed by all our employees. Pursuant to our anti-corruption policies,
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any employee who takes a bribe from any business partner for the purpose of getting business will be
subject to penalties or termination of labor contracts. In addition, we have imposed a whistleblowing
procedure that allows employees to report actual or suspected wrongdoing. The identities of the whistle
blowers are kept strictly confidential.
We have built a sound corporate governance structure to ensure the effectiveness of our
management. The board of directors are overseeing ESG-related issues and perform relevant ESG
governance responsibilities on behalf of the board. See “Directors and Senior Management—Corporate
Governance—Environmental, Social and Governance (‘ ESG’)”.
COMPETITION
The online fitness industry in China is rapidly evolving and increasingly competitive. We face
competition for users in each area of our business from various market players in the specific area. In
terms of online fitness content, we may compete with other market players such as video apps and live
streaming apps for users, advertising revenue and fitness product brands and smart fitness device
brands and manufacturers for product sales. Fitness training videos from key opinion leaders on free
video-streaming platforms are typically generated at will as a type of “content creation” by these
individual users who may not possess professional knowledge and structured training in fitness. Nor do
they produce their fitness content creation in a systematic manner. Fitness content from key opinion
leaders on other free online platforms also lacks quality and consistency in terms of video editing,
language/subtitles, audio quality, recording background, disruption from advertisement, video length,
among others, which leads to less desirable fitness experience that discourages users to follow or
complete a workout. Meanwhile, the fitness content on our platform caters into users’ strong exercise
intent when they log on the app and focus on an interactive “work-out” experience. Our online fitness
content is designed to encourage users to actually participate in and complete workout sessions rather
than browsing fitness videos casually. For the smart fitness device segment, we mainly compete with
consumer electronics brands and fitness device brands. We integrate our online fitness content with
smart fitness devices for better user engagement and more immersive fitness experience that other
video and live-streaming apps cannot offer. For complementary fitness products, the market is highly
fragmented considering the variety of products in this segment. Major competitors include globally
well-known sporting goods brands.
We believe that we are strategically positioned in the online fitness industry and we can
compete favorably with our competitors primarily on the following factors: (i) our leading market
position, (ii) diverse and quality of content offerings, (iii) breadth of product offerings, (iv) our
comprehensive fitness solution that integrates online content and offline experience, (v) our established
brand and engaging community, and (vi) our technology and innovation. However, some of our current
or future competitors may have greater technical or distribution resources than we do and it is difficult
for us to predict our competitors’ actions in these areas or the timing and impact of new entrants into
the market. See “Risk Factors—Risks Related to Our Business and Industry—We operate in a fast-
evolving industry and may not be able to compete effectively”.
CUSTOMERS
Our customers include users who purchase our fitness content and products and participate in
our Keep offline fitness classes, advertisers who post advertisements of their content, products and
services on our online platform and wholesale channels that we use for selling our self-branded fitness
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products and services. See “— Wholesale Channels”. Our main customers are individuals seeking our
self-branded fitness products. Substantially all of these customers are located in China. All of our five
largest customers are independent third parties. We do not believe that we have customer concentration
risks or counterparty risks.
None of our Directors, their associates or any of our current Shareholders (who, to the knowledge
of our Directors, own more than 5% of our share capital) has any interest in any of our five largest
customers during the Track Record Period that is required to be disclosed under the Listing Rules.
During the Track Record Period, sales from our five largest customers in each year during the
Track Record Period accounted for 12.7%, 12.0%, 16.2% and 11.2% of our total sales in each year
ended December 31, 2019, 2020, 2021 and 2022, respectively, and sales from our largest customer
accounted for 5.5%, 5.8%, 10.1% and 6.4% of our total sales in each year ended December 31, 2019,
2020, 2021 and 2022, respectively. The top five customers are primarily wholesale channels that
purchased our self-branded products and advertising companies who purchased our online advertising
service, while our largest customer in each year during the Track Record Period was wholesale channel
that purchase our self-branded products. In general, we enter into framework agreements with
customers to provide advertising services. Under these agreements, our customers will typically pay us
within six months upon the acceptance of our services. The terms of agreements vary from one month
to a year. For the agreements with our largest customer who purchases our self-branded products, see
“—Wholesale Channels”.
Name of Customers
Products/Services
Sold
Sales Amount
(In RMB
Millions)
% of Total
Sales
Length of
Relationship
Credit Period
Granted to Us
For the Year Ended December 31, 2019
Customer A(1) Self-branded
fitness products
36.2 5.5% Since 2018 Within three
months
Customer B
(2) Advertisements 14.1 2.1% Since 2017 Within three
months
Customer C(3) Advertisements 13.0 2.0% Since 2019 Within three
months
Customer D(4) Advertisements 13.0 2.0% Since 2016 Within three
months
Customer E(5) Advertisements 7.9 1.1% Since 2018 Within three
months
Name of Customers
Products/Services
Sold
Sales Amount
(In RMB
Millions)
% of Total
Sales
Length of
Relationship
Credit Period
Granted to Us
For the Year Ended December 31, 2020
Customer A Self-branded
fitness products
63.8 5.8% Since 2018 Within three
months
Customer F(6) Advertisements 22.3 2.0% Since 2019 Within three
months
Customer E Advertisements 20.1 1.8% Since 2018 Within three
months
Customer C Advertisements 17.4 1.6% Since 2019 Within three
months
Customer B Advertisements 8.7 0.8% Since 2017 Within three
months
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Name of Customers
Products/Services
Sold
Sales Amount
(In RMB
Millions)
% of Total
Sales
Length of
Relationship
Credit Period
Granted to Us
For the Year Ended December 31, 2021
Customer A Self-branded
fitness products
163.3 10.1% Since 2018 Within three
months
Customer G(7) Self-branded
fitness products
36.3 2.2% Since 2020 Within three
months
Customer C Advertisements 22.3 1.4% Since 2019 Within three
months
Customer B Advertisements 22.0 1.4% Since 2017 Within three
months
Customer H
(8) Advertisements 18.1 1.1% Since 2021 Within three
months
Name of Customers
Products/Services
Sold
Sales Amount
(In RMB
Millions)
% of Total
Sales
Length of
Relationship
Credit Period
Granted by Us
For the Year Ended December 31, 2022
Customer A Self-branded
fitness products
141.1 6.4% Since 2018 Within three
months
Customer G Self-branded
fitness products
38.6 1.7% Since 2020 Within three
months
Customer I(9) Self-branded
fitness products
32.0 1.4% Since 2022 Within three
months
Customer J(10) Self-branded
fitness products
20.7 0.9% Since 2022 Within three
months
Customer C Advertisement 18.0 0.8% Since 2019 Within three
months
Notes:
(1) Located in Beijing, Company A is an e-commerce retail platform that sells electronics, computers, accessories, household supplies,
beauty and personal care products, food products, apparel and other products.
(2) Located in Guangzhou, Company B is an advertising company that provides advertising, marketing, consulting and other service.
(3) Located in Shanghai, Company C is a media company that provides service including social media marketing and branding, photograph
and video production and other service.
(4) Located in Shanghai, Company D is an advertising company that designs, plans, and publishes advertisements on various platforms, and
provides event planning, marketing and other service.
(5) Located in Tianjin, Company E is a media company that provides service including advertising, broadcasting, digital marketing and
motion pictures.
(6) Located in Beijing, Company F is a high-tech company that is involved in technology development, technology consulting, technology
transferring, advertising and other service.
(7) Located in Hangzhou, Company G is a retail company that sells apparel, lingerie, jewelry, cosmetics, shoes and other products to
consumers.
(8) Located in Guangzhou, Company H is an advertising company that offers advertising, brand marketing, image designing and other service.
(9) Located in Hangzhou, Company I is an e-commerce company that sells apparel, shoes, accessories, household supplies and other
products to retail and wholesale customers.
(10) Located in Hangzhou, Company J is an e-commerce company that sells apparel, shoes, accessories, household supplies and other
products to retail and wholesale customers.
WHOLESALE CHANNELS
We sell our self-branded fitness products to wholesale channels, such as JD.com, that purchase
our self-branded fitness products and then sell to end-users through their online platforms or offline
channels.
We had 12, 44, 69 and 82 wholesale customers as at December 31, 2019, 2020, 2021 and 2022,
respectively. Revenue from our wholesale customers (“ Wholesale Revenue ”) represented
approximately 5.8%, 6.8%, 13.8% and 11.3% of our total revenue for the years ended December 31,
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2019, 2020, 2021 and 2022, respectively. We have a seller-buyer relationship with our wholesale
customers. Revenue is recognized when control of the products is transferred, i.e. when products are
delivered to and accepted by our wholesale customers, or, in rare cases, when orders are placed by the
wholesale party’s end customer and the products are subsequently delivered out of wholesale channels’
warehouse to end customers.
Under the wholesale agreements, we invoice our wholesale customers on a periodic basis based
on the actual amount of goods sold, subject to any deductions requested by our wholesale customers
(e.g., for damaged goods or adjustments for discounts in sale price) within a short period of time
following delivery of the goods, typically within three months; such deductions are reflected in the
sales amount recorded in the same period as delivery of goods, meaning that such deductions are
already excluded from the revenue amount recorded for that period. Accordingly, the aging analysis for
receivables from Wholesale Revenue is typically within 90 days. Typically, adjustments for discounts
are based on wholesale customers’ actual amount of goods purchased or sold. In general, our wholesale
customers are allowed to refund excess inventory, slow-selling products, defects and products returned
within seven days upon the receipt of their retail customers. We incurred product returns of RMB1.4
million, RMB2.2 million, RMB6.7 million and RMB7.7 million through Customer A in 2019, 2020,
2021 and 2022, respectively, and RMB32 thousand, RMB903 thousand, nil and RMB141 thousand
through other wholesale channels in 2019, 2020, 2021 and 2022, respectively. The product returns
represented 3.7%, 4.1%, 3.0% and 3.1% of our wholesale revenue in 2019, 2020, 2021 and 2022,
respectively. For clarity, revenue from our wholesale channels customers are recognized net of these
product return amounts, and therefore, these product return amounts are not recognized in our sales
figures for the respective calendar period. Products returned during the Track Record Period were
mainly slow-selling products and fitness foods approaching expiration date.
We enter into different sales arrangements with wholesale channels based on the time the
control of the products is being transferred. There are mainly two types of arrangements with
wholesales channels. Under type I arrangements, the wholesale channels take ownership of the
products upon delivery of the products to the wholesale channels’ warehouses. Revenue is recognized
when control of the products is transferred to the wholesale channels’ warehouses. Under type II
arrangements, the wholesale channels take ownership of the products when orders are placed by end
customers and the products are subsequently delivered out of the wholesale channels’ warehouse.
Revenue is recognized once orders are placed by end customers and the products have left the
wholesale channels’ warehouse. We conducted most of the sales with wholesale channels under type I
arrangement. We only entered into type II arrangement with few wholesale channels. Except for the
differences in the transfer of control, there are no other terms or conditions in the agreements with the
wholesale channels that would significantly affect the time revenue from the sales of self-branded
fitness products is recognized. We recorded revenue recognized under type I arrangements of
RMB38.3 million, RMB67.4 million, RMB221.2 million and RMB248.3 million in 2019, 2020, 2021
and 2022, respectively, and nil, RMB7.9 million, RMB2.8 million and RMB2.6 million in revenue
recognized under type II arrangements in 2019, 2020, 2021 and 2022, respectively.
As of December 31, 2022, we had 82 wholesale customers with operating history range from
around 1 to 64 years. All of the wholesale customers are corporate entities, with registered capital
ranging from RMB30 thousand to US$1,398 million. Our corporate wholesale customers contributed
substantially all of our wholesale revenue as of December 31, 2022. They are all duly established and
have operating history from around 1 year to 64 years. JD.com, our largest wholesale customer,
contributed revenue of RMB36.2 million, RMB63.8 million, RMB163.3 million and RMB141.1
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million in 2019, 2020, 2021 and 2022, respectively, and is not subject to minimum sales targets or
minimum price requirements. The terms of our arrangements with our largest wholesale customer are
consistent with the industry practice. Our wholesale customers other than JD.com contributed revenue
of RMB2.1 million, RMB11.5 million, RMB60.7 million and RMB109.8 million in 2019, 2020, 2021
and 2022, respectively. See Note 2.19.1(a)(ii) to the Accountant’s Report (Appendix I) for more
information on the accounting policy of the revenue recognition of the wholesale customers, and
Note 21 to the Accountant’s Report (Appendix I) for information on our accounts receivables. To our
best knowledge, as of the date of this document, each wholesale customer is an Independent Third
Party and there is no other material relationship with our Group that would required to be disclosed.
SUPPLIERS
Our suppliers primarily consist of raw materials, components and finished goods suppliers,
advertising and marketing service providers, warehousing, packaging and delivery suppliers, third-
party application stores and other payment channels, third-party platform suppliers, data storage, server
hosting, and bandwidth providers and fitness content providers. Substantially all of these suppliers are
located in China. All of our five largest suppliers are independent third parties. We do not believe that
we have supplier concentration risks or counterparty risks.
None of our Directors, their associates or any of our current Shareholders (who, to the knowledge of
our Directors, own more than 5% of our share capital) has any interest in any of our five largest suppliers
during the Track Record Period that is required to be disclosed under the Listing Rules.
During the Track Record Period, purchases from our five largest suppliers in each year during
the Track Record Period accounted for 15.3%, 21.7%, 16.0% and 15.8% of our total purchases in each
year ended December 31, 2019, 2020, 2021 and 2022, respectively, and purchases from our largest
supplier accounted for 3.4%, 5.5%, 4.9% and 3.8% of our total purchases in each year ended
December 31, 2019, 2020, 2021 and 2022, respectively.
Name of Suppliers
Products/Services
Purchased
Purchase
Amount
(In RMB
Millions)
% of Total
Purchase Costs
Length of
Relationship
Credit Period
Granted to Us
For the Year Ended December 31, 2019
Supplier A(1) Marketing
channels, sales
channels and
information
technology
service
35.5 3.4% Since 2018 Within three
months
Supplier B
(2) Raw materials,
components and
finished goods
35.4 3.3% Since 2019 Within three
months
Supplier C
(3) Raw materials,
components and
finished goods
30.7 2.9% Since 2018 Within three
months
Supplier D
(4) Finished goods 30.5 2.9% Since 2018 Within three
months
Supplier E(5) Channel
promotion
services
30.0 2.8% Since 2018 Precharge
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Name of Suppliers
Products/Services
Purchased
Purchase
Amount
(In RMB
Millions)
% of Total
Purchase Costs
Length of
Relationship
Credit Period
Granted to Us
For the Year Ended December 31, 2020
Supplier F(6) Raw materials,
components and
finished goods
68.6 5.5% Since 2019 Within three
months
Supplier A Marketing
channels, sales
channels and
information
technology
service
57.0 4.6% Since 2018 Within three
months
Supplier G
(7) Raw materials,
components and
finished goods
56.4 4.6% Since 2019 Within three
months
Supplier D Finished goods 48.7 3.9% Since 2018 Within three
months
Supplier H
(8) Platform fees 38.0 3.1% Since 2019 Within three
months
Name of Suppliers
Products/Services
Purchased
Purchase
Amount
(In RMB
Millions)
% of Total
Purchase Costs
Length of
Relationship
Credit Period
Granted to Us
For the Year Ended December 31, 2021
Supplier F Raw materials,
components and
finished goods
126.9 4.9% Since 2019 Within three
months
Supplier A Marketing
channels, sales
channels and
information
technology
service
100.7 3.9% Since 2018 Within three
months
Supplier I
(9) Channel
promotion
services
73.8 2.8% Since 2020 Within three
months
Supplier J
(10) Advertisement
placement
59.8 2.3% Since 2021 Within three
months
Supplier K(11) Raw materials,
components and
finished goods
54.8 2.1% Since 2019 Within three
months
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Name of Suppliers
Products/Services
Purchased
Purchase
Amount
(In RMB
Millions)
% of Total
Purchase Costs
Length of
Relationship
Credit Period
Granted to Us
For the Year Ended December 31, 2022
Supplier L(12) Raw materials,
components and
finished goods
111.3 3.8% Since 2018 Within three
months
Supplier A Marketing channels,
sales channels
and information
technology service
100.7 3.4% Since 2018 Within three
months
Supplier F Raw materials,
components and
finished goods
92.7 3.2% Since 2019 Within three
months
Supplier M
(13) Logistics
service
89.2 3.0% Since 2022 Within three
months
Supplier N(14)
Finished goods
69.5 2.4% Since 2022 Within three
months
Notes:
(1) Located in Hangzhou, Company A is a technology company specializing in e-commerce, retail and information technology. Company A
provides marketing channels, sales channels, information technology service and other service to customers.
(2) Located in Huizhou, Company B is a high-tech company that designs, develops and sells smart electronics, online software and other
smart devices.
(3) Located in Kunshan, Company C is a high-tech company that designs, manufactures and sells personal fitness equipment, smart
electronics, online software and other sports equipment.
(4) Located in Fuqing, Company D specializes in design, develops, manufactures, and sells plastic fitness products, apparel, shoes and other
plastic products.
(5) Located in Beijing, Company E is a digital media company that provides service including advertising, marketing, designing, consulting
and other service.
(6) Located in Shenzhen, Company F is a high-tech company that designs, develops, manufactures and sells electronic products, computer
hardware, digital accessories, online software and other products.
(7) Located in Kunshan, Company G is a high-tech company that specializes in designing, developing, manufacturing and selling smart
electronics, sports equipment, and other fitness products.
(8) Located in United States, Company H is a high-tech company that designs, develops and sells consumer electronics, computer software,
online services, personal computers and other hardware products.
(9) Located in Shanghai, Company I is a media company that provides advertising, marketing, event planning, consulting and other service.
(10) Located in Hangzhou, Company J is a media company that.is involved in advertising, marketing, broadcasting, production and
performance brokerage services.
(11) Located in Shenzhen, Company K is a high-tech company that designs, develops and sells smart electronic devices, computer hardware,
online software and other smart devices.
(12) Located in Xiamen, Company L is a manufacturing company that designs, develops, manufactures and sells fitness products, sports
equipment, steel products, furniture, electronic devices and other products.
(13) Located in Shanghai, Company M is mainly engaged in logistics service, supply chain management service, warehouse service and other
services.
(14) Located in Shenzhen, Company N is a manufacturing company, specializing in metal products, printing materials and other products.
We believe we have sufficient alternative suppliers that can provide us with substitutes of
comparable quality and prices. During the Track Record Period, we did not experience any disruption
to our business as a result of any significant shortage or delay in the supply of the products we sourced
from our suppliers.
We generally enter into framework agreements with major suppliers for our raw materials,
components and finished goods, marketing and information technology services. We will pay the
suppliers on the agreed terms in effect at time of purchase order. Our suppliers usually grant us a credit
period within three months. The payment terms for our suppliers vary on a transaction basis. The terms
of the agreements with our raw materials, components and finished goods suppliers are generally one
year. The agreements can generally be terminated upon mutual agreements. Under the framework
agreements with our suppliers of raw materials, components and finished goods, we are allowed to
return or get refund for products defects.
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EMPLOYEES
We had a total of 1,243 full-time employees and 547 part-time employees as of December 31,
2022. The following table sets forth the numbers of our full-time employees categorized by function as
of December 31, 2022.
Function Number of Employees
Technology ................................................................ 3 9 5
Sales and marketing ......................................................... 3 4 6
Research and development .................................................... 2 3 2
Management ............................................................... 1 1 6
Platform and other operations .................................................. 4 9
Content production .......................................................... 1 0 5
Total ..................................................................... 1,243
Our success depends on our ability to attract, motivate, train and retain qualified personnel. We
believe we offer our employees competitive compensation packages and an environment that
encourages self-development and, as a result, have generally been able to attract and retain qualified
personnel and maintain a stable core management team. As of December 31, 2022, 46% of our
management function employees are female. In addition, our employees are also users in our
community. We are committed to fostering a vibrant and encouraging environment where employee
can engage in fitness training every day at workplace. We have implemented a comprehensive gym
and a Keepland offline fitness center inside our main office building, which allow employees to join
our courses and curriculums conveniently. We also have a number of self-organized fitness teams and
host a variety of fitness activities each year. For example, we organize an employee athletic event
every year and display an employee league board in terms of workout activities on Keep.
As required by regulations in China, we participate in various employee social security plans
that are organized by municipal and provincial governments, including pension, unemployment
insurance, childbirth insurance, work-related injury insurance, medical insurance and housing
insurance. We are required under PRC law to make contributions to employee benefit plans at
specified percentages of the salaries, bonuses and certain allowances of our employees, up to a
maximum amount specified by the local government from time to time. Bonuses are generally
discretionary and based in part on employee performance and in part on the overall performance of our
business. We have granted, and plan to continue to grant, share-based incentive awards to our
employees in the future to incentivize their contributions to our growth and development.
We enter into standard labor contracts and confidentiality agreements with our employees. To
date, we have not experienced any significant labor disputes. None of our employees are represented
by labor unions. In addition to employees, we also work with labor outsourcing agencies to place their
outsourced personnel to perform live streaming services, marketing and promotion services and
content services to meet our temporary staffing demand with flexibility. Under the labor outsourcing
agreement, the labor outsourcing agencies are responsible for recruiting and arranging their own
workers to undertake the above service as required by us. Generally, we enter into a one-year term
labor outsourcing agreement with the labor outsourcing agencies. The outsourcing agreement
comprises the sections including but not limited to the service matters, rights and obligations of all
parties, service methods, service fees, legal liabilities, and contract period. The PRC Legal Advisor is
of the view that execution of the labor outsourcing arrangements will not violate current PRC laws and
regulations. See “Regulations—Regulations related to employment, social insurance and housing
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provident fund”. We do not count these outsourced personnel towards our total labor force as these
personnel do not enter into employment arrangements with us.
During the Track Record Period, we engaged third-party service providers to pay social
insurance and housing provident funds for a small portion of our employees (the “ Third-Party
Arrangement”), and as of Latest Practicable Date, none of the our employees’ social insurance and
housing provident funds were paid through the Third-Party Arrangement. During the Track Record
Period, none of the third-party service providers that our Company cooperates with had failed to pay,
or delayed in paying, any social insurance premiums or housing provident fund contributions for our
employees and we have not received any inquiry from relevant government authorities in this regard.
The Third-Party Arrangement, although not uncommon in China, are not in strict compliance
with relevant PRC laws and regulations. If the Third-Party Arrangement is challenged by government
authorities, we may be deemed to fail to discharge our obligations in relation to the payment of social
insurance and housing provident funds through our own accounts as an employer. However, given that
there is no PRC law and regulations explicitly stipulate whether such Third-Party Arrangement would
be penalized or fined or not, we may face uncertainties as to the application and implementation of
laws and regulations in this regard and thus may not be practical for us to estimate the maximum
potential fine or penalty quantitatively.
Additionally, we have established new entities or branches in the cities where the employees
involved in the Third-Party Arrangement work or reside, so as to cease the Third-Party Arrangement
and to rectify such non-compliance. We have also transferred all the employees involved in the Third-
Party Arrangement to the entities or branches newly established.
Based on the above, our PRC Legal Adviser is of the view that the risk of the Company being
subject to material penalties and thus having a material adverse impact on the business and results of
operations by reason of the adoption of the Third-Party Arrangement during the Track Record Period is
relatively low, further considering that (i) the third-party service providers have confirmed in writing
that they have paid such contributions in full in a timely manner and none of them has been subject to
any administrative penalty in this regard; (ii) we have obtained written compliance certificates from
relevant competent authorities confirming that the Company has not been subject to any administrative
penalty from relevant government authorities in this regard during the Track Record Period; and (iii)
the Company has confirmed that it has not received labor arbitration notices from any of their
employees in relation to the Third-Party Arrangement during the Track Record Period and up to the
Latest Practicable Date. Please also see “Risk Factors—Risks Related to Our Business and Industry—
Enforcement of stricter labor laws and regulations and increases in labor costs in the PRC may
adversely affect our business and our profitability”.
FACILITIES AND PROPERTIES
We are headquartered in Beijing and have several offices in China. As of December 31, 2022,
we had leased an aggregate of approximately 14,948 square meters of office space. We have also
leased a total size of approximately 2,714 square meters for warehousing and offline fitness centers in
China. We lease our premises under operating lease agreements from independent third parties. These
leases vary in duration from three to five years. We believe that our existing facilities are generally
adequate to meet our current needs, but we expect to seek additional space as needed to accommodate
future growth.
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As of December 31, 2022, none of the properties leased by us had a carrying amount of 15% or
more of our combined total assets. According to Chapter 5 of the Hong Kong Listing Rules and
section 6(2) of the Companies (Exemption of Companies and Prospectuses from Compliance with
Provisions) Notice, this document is exempt from the requirements of section 342(1)(b) of the
Companies (Winding up and Miscellaneous Provisions) Ordinance to include all interests in land or
buildings in a valuation report as described under paragraph 34(2) of the Third Schedule to the
Companies (Winding up and Miscellaneous Provisions) Ordinance.
RISK MANAGEMENT AND INTERNAL CONTROL
We have devoted ourselves to establishing and maintaining risk management and internal
control systems consisting of policies and procedures that we consider to be appropriate for our
business operations, and we are dedicated to continuously improving these systems. We continually
review the implementation of our risk management and internal control policies and procedures to
enhance their effectiveness and sufficiency.
Financial Reporting Risk Management
We have in place a set of accounting policies in connection with our financial reporting risk
management. We have various procedures in place to implement accounting policies, and our financial
department reviews our management accounts based on such procedures. We also provide regular
training to our finance department employees to ensure that they understand our financial management
and accounting policies and implement them in our daily operations.
Internal Control Risk Management
We have designed and adopted strict internal procedures to ensure the compliance of our
business operations with the relevant rules and regulations. Our internal control team works closely
with our legal, finance and business departments to: (a) perform risk assessments and advise risk
management strategies; (b) improve business process efficiency and monitor internal control
effectiveness; and (c) promote risk awareness throughout our Company. We maintain internal
procedures to ensure that we have obtained all material requisite licenses, permits and approvals for
our business operation, and our internal control team conduct regular reviews to monitor the status and
effectiveness of those licenses and approvals. Our in-house legal department works with relevant
business departments to obtain requisite governmental approvals or consents, including preparing and
submitting all necessary documents for filing with relevant government authorities within the
prescribed regulatory timelines.
Data and Technology System Risk Management
We consider the protection of the personal privacy of users to be of paramount importance. To
ensure the confidentiality and integrity of our data, we maintain a comprehensive and rigorous data
protection program. We gain access to fitness activities data through our platform and our smart fitness
devices and we encrypt and store certain sensitive personal data on our own and third-party cloud
servers, which are protected by firewalls. We collect personal information from users only with their
prior consents.
During the Track Record Period, our app users may provide us with certain of their personal
data that can be used to provide functions in the platform and better serve our users, including their
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phone number, profile photo, name, location, among other things. We also obtain users’ personal
information related to their devices when they are using Keep app, such as the device information, the
logs, the IP address, etc. Some of these personal data are likely to be regarded as sensitive personal
data, so we obtain users’ separate consent in each category by requiring them to enable the permission
in the operation system of their devices. In addition, we have taken several measures to protect
sensitive data against potential unauthorized access. For example, we have established a strict approval
mechanism, pursuant to which each category of user data can only be accessed by certain designated
and authorized personnel to the extent that is necessary after internal approval. Also, after collecting
the personal information, we will promptly de-identify certain sensitive personal data by using mask
code and other means.
In addition, users have the right to revoke their consent to privacy policy and permissions in the
operation system previously granted to us or to delete their data in our app. Once the users send us the
request to revoke any prior consent, we will process such request within a reasonable time and cease to
process their personal information thereafter.
We may provide information to third parties data processors in our daily operations. In doing
so, we will inform the users of the recipient, purpose and method of processing and type of personal
data, and obtain the users’ separate consent before providing personal information to such processors.
We have set forth certain data destruction rules in our policies. We delete user data through
data erasure and physical destruction. Our policy requires us to regularly evaluate the effectiveness of
our data destruction practice.
We have not suffered from any material data leakage during the Track Record Period and up to
the Latest Practicable Date. We place great importance to users’ personal data, and we use encryption
technology to protect users’ privacy and formulate strict policies to manage all data we have. We
continually evaluate the effectiveness of our data security and privacy protection procedures, monitor
our compliance status in accordance with the latest changes in applicable regulatory requirements and
regularly update our privacy policy and internal procedures to better protect our users’ privacy and
interests.
Our PRC legal adviser in respect of PRC data compliance law is of the view that the personal
data collection, data usage, data process, data storage, provision of data to third parties, disclosure of
personal information, data transfer and output and internet security system of the Keep app are in
compliance with PRC laws and regulations in all material aspects pursuant to effective laws and
regulations.
The CAC issued a notice on June 11, 2021, or the CAC Notice, requiring 129 named apps,
including our app, to rectify the non-compliance with the necessity principle in the collection of
personal information and the Necessary Personal Information Rules. We have refined the scope of
basic functions and services of our Keep mobile app so that users may use such basic functions and
services without providing any personal information. In late June 2021, we submitted a written report
within the prescribed time-frame to show rectification we had adopted as required under the CAC
Notice. We also updated our data privacy policy to clarify how we collect and use the users’ data, the
scope of basic functional services that the users may use without providing any personal information
for implementation throughout our mobile app, and we may only use such data and information to
provide and improve our services, content and advertising in strict compliance with such policies. As
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of the Latest Practicable Date, we have not been informed by the CAC of any further requirements of
rectification with respect to the foregoing incident. To prevent the recurrence of the non-compliance
with the Necessary Personal Information Rules, we have refined the scope of basic functions and
services of Keep app. Users do not need to provide us with any personal information when using basic
functions and services. We will continually monitor the Group’s compliance status and regularly
update our privacy policy and internal procedures to better protect our users’ privacy and interests.
We employ a variety of technical solutions to prevent and detect risks and vulnerabilities in
user privacy and data security, such as encryption, firewall, data backup system, vulnerability scanning
and database audit. For instance, we store and transmit users’ certain sensitive data in encrypted
formats and obtained the network security protection certificate (grade 3, certificate number:
11010513071-20001). We maintain data logs that record all attempted and successful processing of
personal data. We also have clear and strict data authorization and authentication procedures in place.
Our employees only have access to data that are directly relevant and necessary to their job
responsibilities and for limited purposes and are required to get approval upon every hyper-privileged
access attempt. See “Risk Factors—Risks Related to Our Business and Industry—Our business
generates, processes, collects and stores a large amount of data, and the unauthorized access, improper
use or disclosure of such data could subject us to significant reputational, financial, legal and
operational consequences, and deter current and potential users from using our services”.
Human Resources Risk Management
We provide regular and specialized training tailored to the needs of our employees in different
departments. Through these trainings, we ensure that our staff’s skill sets remain up-to-date and enable
them to discover and meet users’ needs. We have in place an employee handbook approved by our
management and distributed to all our employees, which contains internal rules and guidelines
regarding best commercial practice, work ethics, fraud prevention mechanism, negligence and
corruption. We also provide employees with resources for explanation on guidelines contained in the
employee handbook.
We also have in place a code of business conduct and ethics, and an anti-bribery and corruption
policy approved by our board of directors, providing to our employees the best commercial practice
and work ethics as well as our anti-bribery guidance and measures. We make our internal reporting
channel open and available to our staff for any wrongdoing or misconduct. Reported incidents and
persons will be investigated and appropriate measures will be taken in response to the findings.
Audit Committee Experience and Qualification and Board Oversight
We have established an audit committee to monitor the implementation of our risk management
policies across our Company on an ongoing basis to ensure that our internal control system is effective
in identifying, managing, and mitigating risks involved in our business operations. The audit
committee consists of three members, namely Ge Xin, Shan Yigang and Wang Haining, all being
independent directors. For the professional qualifications and experiences of the members of our audit
committee, see “Directors and Senior Management—Directors”.
We will also maintain a risk management department that is responsible for reviewing the
effectiveness of internal controls and reporting to the audit committee on any issues identified. Our risk
management department members will hold regular meetings to discuss any internal control issues we
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face and the corresponding measures to implement toward resolving such issues. The risk management
department will report to the audit committee to ensure that any major issues identified thus are
channeled to the committee on a timely basis. The audit committee will then discuss the issues and report
to the board of directors if necessary.
INSURANCE
We maintain various insurance policies to safeguard against risks and unexpected events. In
addition to social security insurance for our employees as required by PRC law, we also provide
supplemental commercial medical insurance for our employees. We have also obtained product
liability insurance for our smart fitness devices, fitness gear and fitness food. We consider our
insurance coverage to be sufficient for our business operations in China and other countries where we
operate, and we believe our insurance coverage is in line with the industry norm. However, any
uninsured occurrence of business disruption, litigation or natural disaster, or significant damages to our
uninsured equipment or facilities could have a material and adverse effect on our results of operations.
See “Risk Factors—Risks Related to our Business and Industry—We may not have sufficient
insurance to cover our business risks, so that any uninsured occurrence of business disruption may
result in substantial costs to us and the diversion of our resources, which could have an adverse effect
on our results of operations and financial condition”.
LEGAL PROCEEDINGS AND COMPLIANCE
We are involved in disputes and legal or administrative proceedings in the ordinary course of
our business. We are not a party to any material legal or administrative proceedings during the Track
Record Period and up to the Latest Practicable Date. However, litigation or any other legal or
administrative proceeding, regardless of the outcome, is likely to result in substantial cost and
diversion of our resources, including our management’s time and attention. See “Risk Factors—Risks
Related to Our Business and Industry—We have in the past been subject to legal and regulatory
proceedings and may continue to be subject to these proceedings from time to time in the ordinary
course of our business”.
During the Track Record Period, we have been ordered by the competent authorities to stop
publishing certain advertisements and imposed a fine for RMB30,000 by using dictions on the product
sales page on both Keep mobile app and third-party platforms without identifying the source of data.
Further, we were given an administrative punishment of warning, confiscation of illegal income of
RMB596.48 and a fine of RMB1,192.96 by the competent authorities for selling fitness food with
misleading ingredient descriptions. And we have taken measures in place to avoid the re-occurrence of
similar incidents, including: (i) engaging a third-party consultant to conduct compliance check on
product description pages before release; (ii) conducting selective inspections on product description
pages on a weekly basis by our in-house legal team; and (iii) holding periodical trainings to business
departments regarding recent regulatory development and practice related to product advertising,
consumer protection and other relevant regulatory compliance.
During the Track Record Period and up to the Latest Practicable Date, neither we nor our
directors had been and were involved in any material non-compliance incidents that have led to fines,
enforcement actions or other penalties that could, individually or in the aggregate, have a material
adverse effect on our business, financial condition and results of operations. However, we could be
subject to fines and orders requiring that we change our practices, which could have an adverse effect
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on our business and results of operations if our practice fails to comply with laws and regulations,
especially with data laws and regulations. See “Risk Factors—Risks Related to Our Business and
Industry—Our business generates, processes, collects and stores a large amount of data, and the
unauthorized access, improper use or disclosure of such data could subject us to significant
reputational, financial, legal and operational consequences, and deter current and potential users from
using our services”. There are no similar non-compliance incidents after we strengthen the
cybersecurity measures and enhance the internal control in respect of product advertising and
consumer protection.
LICENSES, PERMITS AND APPROVALS
As of the Latest Practicable Date, we had obtained all requisite licenses, permits, approvals and
certificates from the relevant government authorities that are material for the business operations of our
major subsidiaries and major Consolidated Affiliated Entities, except the Audio-Visual License and
Internet Publishing License as disclosed in “Risk Factors—Risks Related to Doing Business in
China—We may be adversely affected by the complexity, uncertainties and changes in PRC laws and
regulation, and any lack of requisite approvals, licenses, permits or registrations applicable to our
business may have a material adverse effect on our business, financial conditions and results of
operations”. Our business is subject to evolving regulation, and we are required to obtain and maintain
applicable licenses, permits and approvals to conduct our business. In the opinion of our PRC Legal
Adviser, except as otherwise disclosed in “Risk Factors—Risks Related to Doing Business in China—
We may be adversely affected by the complexity, uncertainties and changes in PRC laws and
regulation, and any lack of requisite approvals, licenses, permits or registrations applicable to our
business may have a material adverse effect on our business, financial conditions and results of
operations”, all of our major subsidiaries complied in all material aspects with relevant laws and
regulations during the Track Record Period and up to the Latest Practicable Date.
The following table sets forth details of our material licenses, permits and approvals:
License/Permit Holder Issuing Authority Grant Date Expiration Date
ICP License Calorie Technology Beijing Communications
Administration
September 18,
2021
December 29,
2027
Internet Cultural Business
License
Calorie Technology Beijing Municipal
Bureau of Culture and
Tourism
July 10, 2019 July 9, 2025
Radio and Television
Production Operation
License
Calorie Technology Beijing Municipal Radio
and Television Bureau
May 6, 2023 May 6, 2025
Registration on the
National Internet
Audio-visual Platforms
Information
Registration
Management System
Calorie Technology National Radio and
Television
Administration
March 15,
2023
June 30, 2024
Food Operating License Calorie Technology Administration for
Market Regulation of
Chaoyang District
Beijing
February 16,
2022
September 3,
2025
Food Operating License Hangzhou Calorie Sports
Co., Ltd.
Administration for
Market Regulation of
Yuhang District
Hangzhou
November 19,
2021
November 18,
2026
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BUSINESS
AWARDS AND RECOGNITION
During the Track Record Period, we have received recognition for the quality and popularity of
our fitness content, products and services. Some of the significant awards and recognition that we or
our senior management have received are set forth below.
Award/Recognition Award Year Awarding Institution/Authority
National Sports Industry Demonstration Project (᜗ԃ
ପุͪᇍධͦ)
2022 State Administration of Sports
Interesting brands in 2022 (2022೐) 2022 China News Weekly
Public Welfare Partner of the Year (ʮूΥЪ͹М) 2022 China Social Assistance Foundation
Prominent brand - ranked first in the category for three
consecutive years (ᗳୋ
ɓ)
2022 First Finance
The Third iSEE Innovation Technology Award ( ୋɧ
֣iSEE௴อҦஔᆤ)
2021 FOODAILY, FOODAILY FBIC2021
Annual Growth Brand (೐) 2021 CBNDATA
Best Growth To C Company (ɢTo CΆุ) 2021 iResearch
Best Dessert Award in Global Innovative Food Appraisal
Competition (ᆤ)
2021 Food and Beverage Innovation Forum
Application Tool Award ( Ꮠ͜ʈՈᆤ) 2020 Golden Reward
China Business Network ’s 2020 Golden Sign: shortlisted
for five consecutive years and ranked first in terms of
consumer popularity in its category (
ୋɓৌ຾ᕏ
Ⴆ2020ۜ
ୋɓ)
2020 China Business Network
Tmall Golden Laurel Award: Tmall AI Intelligent Fitness
Leader (ᆤj˂፟AI٫)
2020 Tmall
Digital Innovation Award ( ᅰο௴อᆤ) 2020 Beijing Business Today
2020 Top 100 China New Economy Unicorn Enterprises
(2020ʕ਷อ຾᏶ዹԉᖕΆุ: Top 100)
2020 36Kr
The King of New Economy: The Most Competitive
Enterprise (ɢΆุ)
2020 36Kr
Original Content Gold Award (ᆤ) 2020 TOPDIGITAL
Star Award: The Best Technology Platform Award (˗
ᆤ௰ԳҦஔ̨̻ᆤ)
2019 Sensors Data
Long Xi Creative Award: Bronze Award for Film and
Television Broadcasting ( Ꮂᖗ௴จᆤjᅂൖᄿᅧზᆤ)
2019 Long Xi Committee
The King of Lifestyle (˙όʘˮ) 2019 36Kr
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CONTRACTUAL ARRANGEMENTS
BACKGROUND
Certain businesses currently operated or will be operated by us in the PRC are subject to
foreign investment restrictions and license requirements (the “ Relevant Businesses ”). We operate
Relevant Businesses through our Onshore Holdco (Calorie Technology) and its subsidiaries. We do not
directly own equity interest in Onshore Holdco, which is held by the Registered Shareholders.
The agreements underlying the Contractual Arrangements provide a mechanism through which:
(a) economic benefits of Onshore Holdco are able to be transferred to us through the Consulting and
Services Agreement and the Business Cooperation Agreement (each defined below); and (b) we are
able to control Onshore Holdco through the Option Agreement, the Share Pledge Agreements, and the
Powers of Attorneys (each defined below). Pursuant to this arrangement, all substantial and material
business decisions of Onshore Holdco (and its subsidiaries) will be instructed and supervised by our
Group, through our WFOE (Beijing Calorie Information Technology Co., Ltd.), and all risks arising
from Onshore Holdco’s (and its subsidiaries’) business are also effectively borne by our Group as a
result of the Consolidated Affiliated Entities being treated as our controlled subsidiaries; accordingly,
we are entitled to economic benefits generated by the Consolidated Affiliated Entities business through
the Contractual Arrangements.
During each of the financial years ended December 31, 2019, 2020, 2021 and 2022, the revenue
contribution of the Consolidated Affiliated Entities to our Group accounted for approximately 97.5%,
98.0%, 99.6% and 40.7%, respectively. The decrease in revenue contribution between 2021 and 2022
is the result of moving business operations from our Consolidated Affiliated Entities to other
subsidiaries in the Group (those in which we directly hold equity interest) in order to narrowly tailor
our Contractual Arrangements. Substantially all of the revenue generated from the Relevant Businesses
are recorded under the Group’s “membership and online paid content” reportable segment.
PRC LAWS RELATING TO FOREIGN INVESTMENT RESTRICTIONS
Foreign investment activities in the PRC are mainly governed by the Special Administrative
Measures (Negative List) for Foreign Investment Market Access (2021 Version) (
ɝतй၍
૶ఊ 2021) and the Catalog of Industries for Encouraging Foreign Investment
(2020 Version) ( ོᎸ̮ਠҳ༟ପุͦ፽(2020وcollectively, the “ Investment Restrictions ”),
which were promulgated and are amended from time to time jointly by the MOFCOM and the NDRC.
The Investment Restrictions sets out a list of industries in which foreign investment is restricted or
prohibited.
A summary of our businesses that are subject to foreign investment restriction or prohibition
are set out below:
Prohibited Business Transmission of audio-visual programs
Each of our recorded fitness video courses and live streaming business
constitutes “internet audio-visual program services” (
ਕ), which
requires an Audio-Visual License or registration on the “National Internet
Audio-Visual Platforms Information Management System” (
Ό਷ၣഖൖᛓ̨̻
೮া၍ଣӻ୕). According to the Investment Restrictions and other
applicable PRC Laws, foreign investors are prohibited from holding equity
interest in an enterprise carrying out the business of transmission of audio-
visual programs via information network. As of the Latest Practicable Date, our
Keep app, operated by Onshore Holdco, has been registered in the National
Internet Audio-visual Platforms Information Management System (
Ό਷ၣഖൖ
೮া၍ଣӻ୕).
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CONTRACTUAL ARRANGEMENTS
Internet culture business
Our recorded fitness video courses and live-streaming business and Keeper
community classify as commercial internet cultural activities, which require an
internet cultural business license (
ၣഖ˖ʷ຾ᐄ஢̙ᗇ). As of the Latest
Practicable Date, Onshore Holdco holds an internet cultural business license for
commercial internet cultural activities issued by the Beijing Municipal Bureau
of Culture and Tourism. According to the Investment Restrictions and other
applicable PRC Laws, foreign investors are prohibited from holding equity
interest in an enterprise carrying out internet cultural business (except for
music).
Radio and television program production
Our recorded fitness video courses fall within the scope of “radio and television
program production and operation business” (
ᄿᅧཥൖືͦႡЪ຾ᐄุਕ),
which requires a radio and television production operation license ( ᄿᅧཥൖື
ͦႡЪ຾ᐄ஢̙ᗇ). As of the Latest Practicable Date, Onshore Holdco holds a
radio and television production operation license for production and operation
of radio and television programs issued by the Beijing Municipal Radio and
Television Bureau. According to the Investment Restrictions and other
applicable PRC Laws, foreign investors are prohibited from holding equity
interest in an enterprise engaging in radio and television program production
and operation business.
Based on the above, the PRC Legal Adviser is of the view that the Group’s
recorded fitness video courses, live streaming business and Keeper community
fall within the scope of the prohibited business category under the Investment
Restrictions.
Restricted Business Value-added telecommunication services
Operation of the Keep app is a restricted business.
Additionally, each of our recorded fitness video courses, live-streaming
business, our membership subscriptions and Keeper community, which are
operated on the Keep app, constitutes, or shall constitute in the future, value-
added telecommunications (“ VAT”) services, which requires an ICP License.
As of the Latest Practicable Date, Onshore Holdco holds an ICP License for the
operation of its VAT business.
On March 29, 2022, the State Council promulgated the Decision of the State
Council on Revising and Repealing Certain Administrative Regulations
਷
, which amended the then-FITE
Regulations with the amendments taking effect on May 1, 2022 (the “ New
FITE Regulations ”). Under the New FITE Regulations, foreign investors are
permitted to hold up to 50% (but not more) equity interest in entities requiring
an ICP License to operate, provided that the foreign investor first satisfies
qualification requirements, including registered capital and other requirements
or proof required under the new FITE Regulations (“ VAT Qualification
Requirements”). However, the New FITE Regulations removed the
requirements that the foreign-investor would need to have a good track record
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CONTRACTUAL ARRANGEMENTS
and experience in operating VAT businesses overseas. Additionally, the New
FITE Regulations do not further elaborate on the proof, record or
documentation required to constitute the necessary proof for satisfying the VAT
Qualification Requirements. As of the Latest Practicable Date, no applicable
PRC laws had provided clear guidance or interpretation on the VAT
Qualification Requirements, there are uncertainties as to whether the overseas
entities within our Group (including its shareholders or other overseas
subsidiaries) will meet the VAT Qualification Requirements by virtue of their
investment experience in the VAT business, and thereby be able to hold not
more than 50% of the equity interest in the Consolidated Affiliated Entities.
As noted above, the operation of our online recorded fitness video courses, live-streaming, our
Keeper community and membership subscriptions, which are offered through our Keep app, involves a
mixture of engaging in: (i) audio-visual program services; (ii) internet cultural business; (iii) radio and
television program production business; and (iv) VAT business. Since these businesses fall within both
“foreign-prohibited” and “foreign-restricted” business categories under the Investment Restrictions, we
are unable to set up an alternative structure to our current corporate structure through the Contractual
Arrangements that would allow us to partially control, and derive substantially all of the economic
benefits from, these entities. Additionally, the VAT business provided by the relevant entities are
integrated into the operation of online recorded fitness video courses, live-streaming and our Keeper
community and cannot be separated from our transmitting audio-visual program services and providing
internet cultural business and radio and television program production business, which falls under the
“foreign-prohibited” business category.
In addition, we operate certain services that are not restricted under PRC Laws but are ancillary
to, and inseparable from, prohibited businesses, and hence such services cannot be operated outside of
our Contractual Arrangement structure. This includes: (a) customer service (i.e., providing customer
communication channels, through which users of the Keep app can contact our customer service
officers to communicate feedback or queries) and other maintenance services (i.e., customer account
maintenance services and after-sales service and maintenance, as well as back-end functions such as
data storage, security and server side functions) for our Keep app, which is embedded within, and
accessible through, our Keep app, and is closely linked to and is an inseparable part of operating our
online recorded fitness video courses, live-streaming and our Keeper community, which falls under the
“foreign-prohibited” business category; (b) operating a traditional e-commerce business (i.e., selling
products through our self-operated online store on the Keep app) that is embedded within, and
accessible through, our Keep app; and (c) operating live streaming e-commerce business (i.e., selling
products through links embedded or presented in live streaming courses, and where broadly defined,
also includes selling access to live streaming courses) that is embedded within, and accessible through,
our Keep app, and that is fully integrated into and forms an inseparable part of our live streaming
business, which, as mentioned above, falls under the foreign-prohibited business category.
Our traditional e-commerce and live streaming e-commerce businesses on the Keep app (i.e.,
selling directly through our own platform) are separate from, and do not form part of, our Group’s e-
commerce business conducted on third-party platforms (“ e-commerce activity on third-party
platforms”), which includes sales to our wholesale channels online and direct-to-customer sales on
online third party platforms.
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CONTRACTUAL ARRANGEMENTS
E-commerce (i.e., the act of selling through an online medium) is not, in itself, a “foreign-
prohibited” or “foreign-restricted” business. However, our operation of traditional e-commerce and
live streaming e-commerce activities must remain within our VIE structure because: (a) it is operated
by the same entity (Onshore Holdco) and platform (our Keep app) that also operates “foreign-
prohibited” and “foreign-restricted” businesses; and (b) both traditional and live streaming e-commerce
activities are fully integrated into and cannot be divorced from activities constituting “foreign-
prohibited” or “foreign-restricted” businesses (e.g., our traditional e-commerce is conducted through
our Keep app, while our live streaming e-commerce is embedded in and accessed through our live
streaming sessions).
Our e-commerce activity on third-party platforms operate outside of our VIE structure and are
not subject to the Contractual Arrangements and are not considered “foreign-prohibited” or “foreign-
restricted” businesses for our Company. This is because, as mentioned above, it is not the e-commerce
activity itself that is required to be within our VIE structure, but rather, it is its fusion with other
“foreign-prohibited” and “foreign-restricted” businesses that renders it inseparable from activities that
are required to be within our VIE structure. Since our e-commerce activity on third-party platforms can
be operated separately from our “foreign-prohibited” or “foreign-restricted” businesses, following our
reorganization, this business is operated outside of our VIE structure.
In respect of the VAT Qualification Requirements, our PRC Legal Adviser has advised us that
the foreign investor’s fulfillment of the VAT Qualification Requirements is ultimately subject to MIIT
examination of the substance and merits. Given that our VAT business is integrated into, and forms
part of, the business that falls under the “foreign-prohibited” business category, we and our PRC Legal
Adviser are of the view that it is not viable for our Company to hold any equity interest in those
Consolidated Affiliated Entities that currently, or will in the future, engage in VAT business
operations, other than through our Contractual Arrangements.
Furthermore, given that the “foreign-restricted” business (being the VAT business) is operated
by, and is completely integrated into and cannot be divorced from, the above-mentioned three “foreign-
prohibited” businesses, a regulatory confirmation with respect to our satisfying the VAT Qualification
Requirements would not have any affect on our Company’s ability to hold any equity interest in
Onshore Holdco since we would, irrespective of meeting the VAT Qualification Requirements, still be
prohibited from holding any equity interest in Onshore Holdco (or another entity operating our VAT
business) under current PRC laws as Onshore Holdco (or such other entity) would also be operating
“foreign-prohibited” businesses. As at the date of this document, the Company has not received any
enquiries or notices from the relevant authorities with regards to the Contractual Arrangements and
VIE structure, or their compliance with applicable PRC Laws.
The remaining Consolidated Affiliated Entities, namely Beijing Calorie Sports Co., Ltd.,
Shanghai Calorie Sports Co., Ltd., Calorie Sports Management (Beijing) Co., Ltd., and Shenzhen
Calorie Technology Co., Ltd., do not have any business operations and are not expected to commence
any operations before Listing. These entities provide our Group with greater flexibility to operate or
invest in future foreign-prohibited and/or foreign-restricted businesses should an appropriate
opportunity arise and enable our Group to better organize and structure our corporate and business
activities, including facilitating in acquisitions or disposals in the PRC. To the maximum extent
permissible under PRC laws, we will not operate or control any business that is not foreign-prohibited
or foreign-restricted through these entities and, in respect of any business operations conducted through
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CONTRACTUAL ARRANGEMENTS
these entities in the future, we will hold the maximum percentage of equity interest permissible under
PRC laws by our subsidiaries outside of the VIE structure such that our VIE structure, as a whole,
remains narrowly tailored.
Based on the above reasons, we and our PRC Legal Adviser are of the view that the
Contractual Arrangements and VIE structure are narrowly tailored. We will unwind and terminate the
Contractual Arrangements wholly or partly once our businesses are no longer prohibited or restricted
from foreign investment and to the extent permissible under PRC Laws.
CONTRACTUAL ARRANGEMENTS
The following simplified diagram illustrates our VIE structure under the Contractual
Arrangements:
Calorie HK
Beijing Calorie Information
Technology Co., Ltd.
(WFOE)Onshore Holdco(1)
100%
100%
100%
denotes legal and beneficial ownership
denotes contractual relationship
Our Company
Registered Shareholders(2)
Subsidiaries of Onshore
Holdco(1)
100%
granting control over Onshore
Holdco to WFOE
service fees
services
Notes:
(1) These constitute our Consolidated Affiliated Entities.
(2) The Registered Shareholders are four individuals. Mr. Wang Ning, Mr. Peng Wei, Mr. Wen Chunpeng and Mr. Liu Dong, who each
holds 85.4%, 8.1%, 4.8% and 1.7% equity interest in Onshore Holdco, respectively. Mr. Wang is our founder and serves as the chairman
of our Board and executive officer of our company. Mr. Peng and Mr. Liu are our co-founders, Directors and part of senior management
of our Company. Mr. Wen is our co-founder, an employee and a director of certain subsidiaries that operate our Keepland business.
Arrangements that allow us to receive economic benefits from our Consolidated Affiliated
Entities
Consulting and Services Agreement
Under the amended and restated exclusive consulting and services framework agreement dated
December 27, 2021 entered into by WFOE and Onshore Holdco (the “ Consulting and Services
Agreement”), WFOE will provide (a) support services to Onshore Holdco based on the needs of its
three main businesses; and (b) administrative support services (e.g., finance, legal and human resources
services) to Onshore Holdco, based on the needs of its daily operations. The three main businesses are
membership subscriptions, advertising business and e-commerce business. In consideration, Onshore
Holdco will pay WFOE service fees based on the cost of services with a markup determined by the
parties. Additionally, all intellectual property rights (including copyrights, patents, technical know-how
and trade secrets) arising from the performance of this agreement would exclusively belong to and be
the right of WFOE, and WFOE shall be held harmless by Onshore Holdco. This agreement is for an
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CONTRACTUAL ARRANGEMENTS
initial term of three years, and automatically renewed by two-year periods thereafter, unless otherwise
expressly provided by law (in which case the WFOE may, at its sole discretion, determine whether to
renew this agreement). Onshore Holdco may not terminate this agreement except as expressly required
by law.
Business Cooperation Agreement
Under the amended and restated exclusive business cooperation agreement dated December 27,
2021 entered into by WFOE, Onshore Holdco and the Registered Shareholders (the “ Business
Cooperation Agreement”), among other things, (a) the Registered Shareholders undertook that the
Onshore Holdco will not to engage in transactions that could materially affect the assets, business,
personnel, rights, obligations or operations of Onshore Holdco without the written consent of WFOE or
its designated party; and (b) Onshore Holdco and the Registered Shareholders agree to appoint WFOE’s
candidate as Onshore Holdco’s director or remove or replace any director or senior manager, and accept
WFOE’s recommendation on employment, daily management of operations, and financial management
matters in respect of Onshore Holdco. This agreement is for an initial term of fifteen years, and may be
extended upon WFOE’s request. Additionally, WFOE may terminate this agreement at any time; but
neither Onshore Holdco nor the Registered Shareholders has a right to terminate this agreement.
Additionally, all rights and obligations under this agreement will be binding on the parties’ successors
and assignees, and in particular, WFOE’s successors (including administrators and liquidators) may
inherit WFOE’s rights and obligations under this agreement.
Arrangements that provide us with effective control over our Consolidated Affiliated Entities
Option Agreement
Under the amended and restated exclusive transfer option agreement dated December 27, 2021
entered into by WFOE, Onshore Holdco and the Registered Shareholders (the “ Option Agreement”),
each Registered Shareholder granted to WFOE or its designated person an irrevocable and exclusive
option to acquire, at any time, all their equity interests in Onshore Holdco at the minimum price
permissible under PRC Laws. The option period is from the agreement date until all Registered
Shareholders have transferred all their equity interests in Onshore Holdco to WFOE or its designated
person.
To better manage our Group’s loss exposure, if any:
(a) the Registered Shareholders undertook to WFOE that, unless with prior consent of WFOE
or its designated person, the following matters, among others, would not take place:
(i) supplement, modify or amend constitutional documents of Onshore Holdco that would
materially adversely affect Onshore Holdco’s assets, operations, liabilities, equity
interests, other legitimate rights or performance of this agreement, or procure Onshore
Holdco to enter into transactions that will materially adversely affect the assets,
operations, equity interests and other legitimate rights of Onshore Holdco; (ii) changing
the board or senior management composition of Onshore Holdco; (iii) approving any
dividend or bonus distributions; (iv) disposing of or otherwise encumbering Onshore
Holdco’s equity interest; (v) taking any act relating to restructuring (e.g., mergers and
acquisitions, investing in third-parties, liquidating or dissolving Onshore Holdco);
(b) the Registered Shareholders additionally undertook to, among others: (i) immediately
notify WFOE of any litigation, arbitration or administrative procedure occurring or likely
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CONTRACTUAL ARRANGEMENTS
occurring that is related to or may materially adversely affect the equity interests of
Onshore Holdco; (ii) comply with this agreement and any other agreement with WFOE
and perform their obligations thereunder; (iii) cooperate and take necessary actions to
assist in the performance of the Option Agreement (e.g., amending Onshore Holdco’s
constitutional documents and make relevant registrations to reflect any transfer under this
agreement); (iv) ensure that any proceeds distributed by Onshore Holdco received by
Registered Shareholders (e.g., as profit or dividend distribution or proceeds from
liquidation) will be gifted in the manner designated by WFOE as permissible under PRC
Laws; and
(c) Onshore Holdco undertook to WFOE that, unless with prior consent of WFOE or its
designated person, the following matters, among others, would not take place: (i) taking
actions that would materially adversely affect its assets, operations, liabilities, equity
interest and other legitimate rights (e.g., incurring any debts or entering into any material
contracts) (other than those arising out of the ordinary course of business); (ii) distributing
dividends or bonuses to its shareholders; (iii) disposing of or otherwise encumbering its
assets, business or income (other than those arising out of the ordinary course of business);
and (iv) amending its constitutional documents, entering into any merger, or acquiring or
investing in third-parties.
Share Pledge Agreements
On December 27, 2021, each Registered Shareholder entered into an amended and restated
share pledge agreement with WFOE and Onshore Holdco (“ Share Pledge Agreements ”). Under these
agreements, each Registered Shareholder pledged all their equity interest in Onshore Holdco, held
from time to time, to WFOE to guarantee performance under the Contractual Arrangements by the
shareholder and Onshore Holdco. The pledge period is from the agreement date until all contractual
obligations are fulfilled or guaranteed debts fully paid off.
To preserve the pledged interests, each Registered Shareholder undertook that, among others:
(i) the pledged interests will not be transferred or encumbered without WFOE’s prior written consent;
and (ii) any rights over the pledged interests enjoyed by WFOE shall not be prejudiced by the
Registered Shareholder or their successor or any other person at any time and in any manner, and the
Registered Shareholder shall take all necessary and required measures and execute all necessary and
required documents to assist WFOE in realizing its rights over the pledged interests.
Powers of Attorney
On December 27, 2021, each Registered Shareholder granted an amended and restated power
of attorney (the “ Powers of Attorney ”), under which the Registered Shareholder irrevocably
appointed WFOE or its designated person to act as the Registered Shareholder’s attorney-in-fact
(“attorney-in-fact”) with respect to all rights attached to equity interests in Onshore Holdco held by
the Registered Shareholder from time to time. These rights include, among others: (i) proposing to
convene and attend a shareholders’ meeting or signing any relevant shareholders’ resolutions;
(ii) exercising all rights attached to the equity interests at law and under Onshore Holdco’s
constitutional documents (including voting rights and transferring or pledging relevant equity interests
in Onshore Holdco); and (iii) nominating and appointing Onshore Holdco’s legal representative,
chairpersons, directors and senior management. To avoid conflicts of interest, the attorney-in-fact shall
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CONTRACTUAL ARRANGEMENTS
not be Onshore Holdco’s shareholder or persons who are not independent or may have conflicts of
interest. Other than this, the attorney-in-fact may be a director of our Group (who does not have a
material conflict of interest) and an administrator or liquidator of WFOE. Each Power of Attorney
remains in effect until the Registered Shareholder ceases to be a shareholder of Onshore Holdco.
Spousal consents
Each spouse of the Registered Shareholders has, where applicable, undertaken: (i) not to take
any action with the intent to interfere with the arrangements under the Contractual Arrangements,
including making any claim that such equity interest constitutes the property or community property;
(ii) to unconditionally and irrevocably waive any and all rights or entitlements whatsoever to such
equity interest that may be granted to the spouse according to any applicable laws; and (iii) to the
extent the spouse acquires any equity interest in Onshore Holdco, to enter into a set of contractual
arrangements with the same or comparable terms as the Contractual Arrangements.
Further information about our Contractual Arrangements
Onshore Holdcos’s subsidiaries
The Contractual Arrangements are entered into among WFOE, Onshore Holdco and its
Registered Shareholders. Nevertheless, there are sufficient protective measures in place with respect to
our Company’s interests over Onshore Holdco’s subsidiaries, including: (a) the subsidiaries are
wholly-owned and controlled by Onshore Holdco, over which we have extensive control including
over the composition of Onshore Holdco’s board of directors and senior management (under the
Option Agreement); and (b) both Onshore Holdco and its Registered Shareholders have undertaken to
WFOE under the Option Agreement that, without the prior consent of WFOE, no actions would be
taken that would materially adversely affect the assets, operations, liabilities, equity interest and other
legitimate rights of Onshore Holdco, the scope of which covers Onshore Holdco’s subsidiaries given
that their operations, business and financials are consolidated into those of Onshore Holdco.
Dispute resolution
Disputes arising from the Contractual Arrangement agreements shall be resolved through good
faith negotiations. If a dispute is not resolved within 30 days after one party issues a notice to
negotiate, either party to the agreement may submit the dispute to the China International Economic
and Trade Arbitration Commission (“ CIETAC”) for arbitration in Beijing in accordance with the then-
effective arbitration rules of CIETAC. The arbitration award shall be final and binding on all parties.
The dispute resolution provisions also provide that to the extent permitted by PRC Laws, the arbitral
tribunal may award remedies over the shares or assets of our Onshore Holdco or injunctive relief (e.g.,
limiting the conduct of business, limiting or restricting transfer or sale of assets) or order the winding
up of Onshore Holdco. Any party may apply to a court with competent jurisdiction to: (i) grant interim
measures while the arbitration tribunal is being established (including specific performance and relief
over Onshore Holdco’s assets); and (ii) enforce an arbitral award after it becomes effective.
“Competent jurisdiction” includes Cayman Islands, Hong Kong, the PRC and any other jurisdiction in
which Onshore Holdco’s main assets are located. During arbitration, except for the disputed areas that
are subject to arbitration, the parties shall continue to perform their other obligations under the
Contractual Arrangements.
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However, our PRC Legal Adviser advises that: (i) the tribunal would not normally grant
injunctive relief or order the winding up of Onshore Holdco under current PRC Laws; and (ii) interim
remedies or enforcement orders granted by overseas courts, such as those of Hong Kong or Cayman
Islands, may not be recognizable or enforceable under the current PRC Laws. As such, if a breach
occurs under the Contractual Arrangements, we may not be able to obtain sufficient remedies in a
timely manner, which may materially and adversely affect, among others, our ability to control the
Consolidated Affiliated Entities and their businesses and continue to consolidate their financials into
our Group. See “Risk Factors—Risks Related to Our Corporate Structure”.
Conflict of Interests
See “Share Pledge Agreements” and “Powers of Attorney” in “—Arrangements that provide us
with effective control over our Consolidated Affiliated Entities” above.
Loss Sharing
Under current PRC Laws, neither our Company nor WFOE is legally required to share losses
of, or provide financial support to, Onshore Holdco. Further, Onshore Holdco is a limited liability
company that is solely liable for its own debts and losses in relation to its assets and liabilities.
Notwithstanding this, WFOE intends to provide continuous support and assistance to Onshore
Holdco and its subsidiaries, as necessary, and their financial performance will be consolidated into our
Company’s accounts. As such, our operational and financial performance would be materially and
adversely affected if Onshore Holdco suffers loss. To minimize the risk of loss, we have undertaken a
number of measures under the Contractual Arrangements. In particular, see “Option agreement” and
“Share pledge agreements” in the sub-section “—Arrangements that provide us with effective control
over our Consolidated Affiliated Entities” above for more information.
Succession
WFOE’s rights over Onshore Holdco may be survived by a liquidator in the event of winding-
up, including through: (i) the administrator or liquidator being appointed the attorney-in-fact under the
Powers of Attorneys and gaining control over Onshore Holdco as if they were the shareholders; and (ii)
through the dispute resolution mechanism of the Contractual Arrangements, which provides the arbitral
tribunal with power to, among other things, award remedies over the shares or assets of Onshore
Holdco and grant injunctive relief.
In the event that Onshore Holdco is wound-up, WFOE’s interests in Onshore Holdco are
protected, including through: (i) the Registered Shareholders undertaking in the Option Agreement
that, among other things, proceeds received by them from liquidation would be gifted to WFOE’s
designated person; (ii) the Registered Shareholders undertaking in the Share Pledge Agreements that,
among other things, WFOE’s rights over the pledged shares would not be prejudiced by the Registered
Shareholders or their successors; and (iii) each spouse of the Registered Shareholders undertaking,
among other things, in the event of acquiring any equity interest in Onshore Holdco, to enter into a set
of contractual arrangements with the same or comparable terms as the Contractual Arrangements to
preserve WFOE’s rights as against such spouse.
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Insurance
We do not maintain an insurance policy to cover the risks relating to the Contractual
Arrangements.
Our confirmation
As of the Latest Practicable Date, we had not encountered any interference or encumbrance
from any PRC governing bodies in operating our businesses through the Consolidated Affiliated
Entities under the Contractual Arrangements.
LEGALITY OF THE CONTRACTUAL ARRANGEMENTS
We believe that the Contractual Arrangements are narrowly tailored to minimize the potential
conflict with relevant PRC Laws.
In addition, our PRC Legal Adviser is of the opinion that:
(a) parties to each of the agreements have obtained all necessary approvals and authorizations
to execute and perform the Contractual Arrangements, and each of the agreements is
binding on the parties thereto;
(b) none of the Contractual Arrangements violates any provisions of the articles of association
of WFOE or Onshore Holdco;
(c) the Contractual Arrangements would not fall within the circumstances stipulated in the
PRC Civil Code including in particular “impairing others’ legitimate rights and interests
with malicious collusion”, which will lead the arrangements to be deemed an invalid act
under the PRC Civil Code;
(d) the execution and performance of the Contractual Arrangements are not required to obtain
any approvals or authorisations from the PRC governmental authorities, except that:
(i) the exercise of the option by WFOE or its designee of its rights under the Contractual
Arrangements to acquire all or part of the equity interests in and/or assets of Onshore
Holdco is subject to the approvals of, consent of, filing with and/or registrations with
the PRC governmental authorities;
(ii) any share pledge contemplated under the Share Pledge Agreements are subject to the
registration and/or filing with competent administration bureau for market regulation;
and
(iii) the arbitration awards/interim remedies provided under the dispute resolution
provision of the Contractual Arrangements and/or any ruling/judgment granted by
overseas courts shall be recognized by the PRC courts before compulsory
enforcement; and
(e) the Contractual Arrangement is enforceable under the PRC Laws, except in relation to the
provisions regarding the dispute resolution and the liquidation mechanisms under these
agreements. These agreements provide that any dispute shall be submitted to the CIETAC
for arbitration, in accordance with the then-effective arbitration rules. The arbitration shall
be conducted in Beijing. They also provide that the arbitrator may award interim remedies
over the shares or assets of Onshore Holdco or injunctive relief (e.g., for the conduct of
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business or to compel the transfer of assets) or order the winding-up of Onshore Holdco;
and the courts of Hong Kong, the Cayman Islands and the PRC also have jurisdiction for
the grant and/or enforcement of the arbitral award and the interim remedies. However, our
PRC Legal Adviser has advised that the tribunal normally would not grant such injunctive
relief or order the winding-up of Onshore Holdco pursuant to current PRC Laws. In
addition, interim remedies or enforcement orders granted by overseas courts such as those
of Hong Kong and the Cayman Islands may not be recognizable or enforceable under the
current PRC Laws.
Our PRC Legal Adviser also advised us that there are substantial uncertainties regarding the
interpretation and application of current and future PRC Laws and regulations and accordingly, there
can be no assurance that the PRC regulatory authorities will not in the future take a view that is
contrary to or otherwise different from the above opinion.
See “Risk Factors— Risks Related to Our Corporate Structure—If the PRC government finds
that the agreements that establish the structure for operating some of our operations in China do not
comply with PRC regulations relating to the relevant industries, or if these regulations or the
interpretation of existing regulations change in the future, we could be subject to severe penalties or be
forced to relinquish our interests in those operations”.
Nevertheless, based on the above analysis and advice from our PRC Legal Adviser, our
Directors are of the view that the adoption of the Contractual Arrangements is unlikely to be deemed
ineffective or invalid under the current applicable PRC Laws.
DEVELOPMENT IN PRC LEGISLATION ON FOREIGN INVESTMENT
Background of the Foreign Investment Law
On March 15, 2019, the NPC approved the Foreign Investment Law which became effective
on January 1, 2020. On December 26, 2019, the State Council promulgated the Implementation
Rules of the Foreign Investment Law, which came into effect on January 1, 2020. The Foreign
Investment Law stipulates certain forms of foreign investment, but does not explicitly stipulate
contractual arrangements as a form of foreign investment. The Implementation Rules of the Foreign
Investment Law are also silent on whether foreign investment includes contractual arrangements.
As advised by our PRC Legal Adviser, since contractual arrangements are not specified as
foreign investment under the Foreign Investment La w and the Regulations on the Implementation of
the Foreign Investment Law, and if future laws, regulations and provisions prescribed by the State
Council do not incorporate contractual arrangements as a form of foreign investment, our
Contractual Arrangements as a whole and each of the agreements comprising the Contractual
Arrangements will not be affected and will continue to be legal, valid and binding on the parties with
an exception, for which, see “Contractual Arrangements—Legality of the Contractual
Arrangements”.
Impact and consequences of the Foreign Investment Law
Conducting operations through contractual arrangements has been adopted by many PRC-based
companies, including our Group. We use the Contractual Arrangements to establish control of Onshore
Holdco, by WFOE, through which we operate our business in the PRC. The Foreign Investment Law
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stipulates that foreign investment includes “foreign investors invest in China through any other
methods under laws, administrative regulations or provisions prescribed by the State Council” without
elaboration on the meaning of “other methods”. There are possibilities that future laws, administrative
regulations or provisions prescribed by the State Council may regard contractual arrangements as a
form of foreign investment, at which time it will be uncertain whether the Contractual Arrangements
will be deemed to be in violation of the foreign investment access requirements and how the above-
mentioned Contractual Arrangements will be handled. Therefore, there is no guarantee that the
Contractual Arrangements and the business of Onshore Holdco will not be materially and adversely
affected in the future due to changes in PRC Laws and regulations.
See “Risk Factors—Risks Related to Our Corporate Structure—Our current corporate structure
and business operations may be substantially affected by the newly enacted Foreign Investment Law”.
COMPLIANCE WITH THE CONTRACTUAL ARRANGEMENTS
Our Group has adopted the following measures to ensure the effective operation of our Group
with the implementation of the Contractual Arrangements and our compliance with the Contractual
Arrangements:
(a) major issues arising from the implementation and compliance with the Contractual
Arrangements or any regulatory enquiries from government authorities will be submitted
to our Board, if necessary, for review and discussion on an occurrence basis;
(b) our Board will review the overall performance of and compliance with the Contractual
Arrangements at least once a year;
(c) our Company will disclose the overall performance of and compliance with the
Contractual Arrangements in our annual reports; and
(d) our Company will engage external legal advisers or other professional advisers, if
necessary, to assist the Board to review the implementation of the Contractual
Arrangements, review the legal compliance of WFOE and Onshore Holdco to deal with
specific issues or matters arising from the Contractual Arrangements.
ACCOUNTING ASPECTS OF THE CONTRACTUAL ARRANGEMENTS
Under the Consulting and Services Agreement and the Business Cooperation Agreement, it was
agreed that, in consideration of the services provided by WFOE, Onshore Holdco shall pay service fees
to WFOE. The service fee shall equal the cost of the services provided and a mark-up determined by
the parties. Additionally, WFOE has a right to periodically receive or inspect the accounts of the
Consolidated Affiliated Entities.
In addition, under the Option Agreement and Share Pledge Agreements, WFOE has absolute
contractual control over the distribution of dividends or any other amounts to the Registered
Shareholders given that WFOE’s prior written consent is required before any distribution can be made.
If the Registered Shareholders receive any income, profit distribution or dividend, they shall promptly
transfer or pay such income, profit distribution or dividend to WFOE or its designated person to the
extent permissible under PRC Laws.
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As a result of the Contractual Arrangements among WFOE, Onshore Holdco and the
Registered Shareholders, WFOE is able to effectively control, recognize and receive the economic
benefit of the business and operations of the Consolidated Affiliated Entities. Accordingly, the
Consolidated Affiliated Entities are treated as controlled entities of our Company and consolidated by
our Company. The basis of consolidating the results of the Consolidated Affiliated Entities is disclosed
in Note 2.2.1 to the Accountant’s Report set out in Appendix I to this document.
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Substantially all of our business is located in PRC. The following is a summary of the principal
PRC laws, rules and regulations relevant to our business and operations in the PRC or the rights of our
shareholders to receive dividends and other distributions from us.
REGULATIONS RELATED TO VALUE-ADDED TELECOMMUNICATIONS SERVICES
The Telecommunications Regulations of the People’s Republic of China (
ʕശɛ͏΍ձ਷ཥ
ૢԷ) (the “ Telecom Regulations ”), promulgated by State Council of the PRC on September 25,
2000 and amended on July 29, 2014 and February 6, 2016, is the primary PRC law governing
telecommunications services, and set out the regulatory framework for the telecommunication service
providers in the PRC. The Telecom Regulations categorizes telecommunications services as either
basic telecommunications services, which we generally do not provide, or value-added
telecommunications services. Providers of value-added telecommunications services are required to
obtain a license for providing value-added telecommunications services. According to the Catalog of
Telecommunications Business (
ุਕʱᗳͦ፽) (the “ Catalog”), attached to the Telecom
Regulations and amended in February 2003, December 2015, and June 2019, information services
provided via public communication network or the Internet are value-added telecommunications
services. We engage in business activities that are value-added telecommunications services as defined
and described by the Telecom Regulations and the Catalog.
The Administrative Measures for Internet Information Services (
ਕ၍ଣ፬
)( t h e“ Measures for Internet ”), was promulgated by State Council of the PRC on
September 25, 2000 and later amended with immediate effect on January 8, 2011. Pursuant to the
Measures for Internet, the Internet information services providers, also referred to as Internet content
providers, or ICPs, that provide commercial services are required to obtain an operating permit (the
“ICP License ”) from the MIIT or its provincial counterpart before engaging in any commercial
Internet information service operations in the PRC. On March 1, 2009, the MIIT issued the
Administrative Measures for Telecommunications Businesses Operating Permits (
ุਕ຾ᐄ஢
)( t h e“ Telecom License Measures ”), which initially became effective on April 10,
2009, and was amended on July 3, 2017 and came into effect on September 1, 2017, to supplement
the Telecom Regulations. The Telecom License Measures set forth more specific provisions
regarding the types of licenses required to provide value-added telecommunications services, the
qualifications and procedures for obtaining such licenses and the administration and supervision of
such licenses. Beijing Calorie Technology Co., Ltd. has obtained the ICP license which authorizes
the provision of internet information services.
REGULATION RELATED TO FOREIGN INVESTMENT RESTRICTIONS IN VALUE-
ADDED TELECOMMUNICATIONS SERVICES
Foreign direct investment in telecommunications companies in the PRC is regulated by the
Regulations for Administration of Foreign-invested Telecommunications Enterprises (
̮ਠҳ༟ཥ
)( t h e“ FITE Regulations ”), which became effective on February 6, 2016. The
FITE Regulations requires foreign-invested telecommunications enterprises in the PRC, or the FITE,
to be established as Sino-foreign joint ventures, and foreign investors shall not acquire more than
50% of the equity interest of such an enterprise. In addition, the foreign investor of the FITE
engaging in value-added telecommunications services must satisfy a number of stringent
performance and operational experience requirements, including demonstrating a track record and
experience in operating a value-added telecommunications business overseas. The FITEs that meet
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these requirements must obtain approvals from the MIIT and the MOFCOM or their authorized local
branches, before launching the value-added telecommunications business in the PRC.
The State Council promulgated the Decision of the State Council on Revising and Repealing
Certain Administrative Regulationson March 29,
2022, according to which the FITE Regulations was amended and has come into effect on May 1, 2022
(the “New FITE Regulations ”). The New FITE Regulations only requires foreign investors shall not
acquire more than 50% of the equity interest of such FITE, except as otherwise provided, and do not
further require stringent performance and operational experience for foreign investor of such FITE
engaging in value-added telecommunication services. The FITEs that meet these requirements must
obtain approvals from the MIIT or its authorized local branches, before launching the value-added
telecommunications business in the PRC.
The Negative List, was promulgated by the NDRC and the MOFCOM jointly on December 27,
2021 and came into effect on January 1, 2022. According to the Negative List, the proportion of foreign
investments in an entity engaging in value-added telecommunications services (except for e-commerce,
domestic multi-party communications, storage-forwarding and call centers) shall not exceed 50%.
The Negative List further provides that the PRC domestic enterprise engaged in foreign
investment prohibited business and intend to offer and list securities in overseas markets shall obtain
approval from relevant government authorities, and any overseas investor in the enterprise shall not
participate in the operation and management of the enterprise, and the equity ratio of overseas investor
in the enterprise shall be governed mutatis mutandis by the relevant regulations of the domestic
securities investments made by overseas investors, or the Requirement. At a press conference held on
January 18, 2022, the NDRC clarified that the foregoing Requirement would only apply to PRC
domestic enterprise’s direct overseas offerings. Therefore, the PRC Legal Adviser is of the view that
due to the Group’s holding structure and Contractual Arrangements, the Listing constitutes PRC
domestic company’s indirect overseas offering and thus would not be prohibited from future fund
raisings based on such Requirement, and the Listing would not be subject to the Requirement.
On July 13, 2006, the predecessor to the MIIT issued the Notice of the Ministry of Information
Industry on Strengthening the Administration of Foreign Investment in Value-added
Telecommunications Services (
) (the
“MIIT Notice ”), which reiterates certain provisions of the FITE Regulations. Under the MIIT Notice,
a domestic company that holds an ICP License is considered to be a type of value-added
telecommunications business in China, and is prohibited from leasing, transferring or selling the
license to foreign investors in any form, and from providing any assistance, including providing
resources, sites or facilities, to foreign investors to conduct value-added telecommunications
businesses illegally in China. Trademarks and domain names that are used in the provision of Internet
content services must be owned by the ICP License holder or its shareholders. The MIIT Notice
requires each ICP License holder to have appropriate facilities for its approved business operations and
to maintain such facilities in the regions covered by its license. To comply with the above foreign
investment restrictions, we operate our value-added telecommunications services in China through
Beijing Calorie Technology Co., Ltd., our variable interest entity. However, due to lack of
interpretative materials from the relevant PRC government authorities, there remain uncertainties with
respect to whether PRC government authorities would consider our corporate structure and contractual
arrangements to constitute foreign ownership of a value-added telecommunications business. See
“Risk Factors—Risks Related to Our Corporate Structure—If the PRC government finds that the
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agreements that establish the structure for operating some of our operations in China do not comply
with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of
existing regulations change in the future, we could be subject to severe penalties or be forced to
relinquish our interests in those operations”.
REGULATIONS RELATED TO ONLINE CULTURAL ACTIVITIES
The Interim Administrative Provisions on Internet Culture (
) (the
“Internet Culture Provisions ”), promulgated by the Ministry of Culture (which is currently known as
Ministry of Culture and Tourism), on May 10, 2003 and last amended with immediate effect on
December 15, 2017, provides that Internet culture activities are classified into non-commercial Internet
cultural activities and commercial Internet cultural activities. Under the Internet Culture Provisions,
Internet culture activities include: (i) the production, reproduction, importation, distribution or
streaming of Internet culture products (such as online program, online series, online performance, etc.);
(ii) the dissemination of culture products via Internet; and (iii) the exhibitions, competitions and other
similar activities concerning Internet culture products. To conduct commercial Internet culture
activities, the Internet cultural business license is a prerequisite. If any entity engages in commercial
Internet culture activities without approval, the cultural administration authorities or other relevant
government may order such entity to cease operating Internet culture activities as well as impose other
punishments including issuing administrative warning, levying fines up to RMB30,000 and listing such
entity on the cultural market blacklist in the case of continued non-compliance. In addition, Internet
cultural business (except for music) remains a prohibited area for foreign investment in the Negative
List. Beijing Calorie Technology Co., Ltd. has obtained the Internet cultural business license.
REGULATIONS RELATED TO PRODUCTION AND OPERATION OF RADIO AND
TELEVISION PROGRAMS
On July 19, 2004, the State Administration of Radio, Film and Television, or the SARFT
(currently known as National Radio and Television Administration), promulgated the Regulations on
the Administration of Production of Radio and Television Programs (
ᄿᅧཥൖືͦႡЪ຾ᐄ၍ଣ஝
), as last amended on October 29, 2020, which stipulates that any entities that engage in the
production of radio and television programs are required to apply for a Radio and Television
Production Operation License from the SARFT or its local level counterparts. Entities with the Radio
and Television Production Operation License shall conduct their operations strictly within the
approved scope of production and operation. Except for radio and television broadcasting institutions,
the abovementioned permit holders shall not produce radio and television programs concerning current
political news or special topics, columns and other programs of the same kind. Beijing Calorie
Technology Co., Ltd. has obtained the Radio and Television Production Operation License for its
business.
REGULATIONS RELATED TO INTERNET AUDIO-VISUAL PROGRAM SERVICES
On April 13, 2005, the State Council promulgated Decisions on the Entry of the Non-state-
owned Capital into the Cultural Industry (
),
according to which non-state-owned capital and foreign investors are generally not allowed to conduct
the business of transmitting audio-visual programs via information network.
According to the Administrative Regulations on Internet Audio-Visual Program Service (
ʝᑌ
) (the “ Audio-Visual Regulations ”), promulgated by the SARFT and the
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Ministry of Information Industry, or the MII (which is currently known as MIIT), on December 20,
2007 and last amended on August 28, 2015, Internet audio-visual program service refers to activities of
making, editing and integrating audio-visual programs, providing them to the general public via
Internet, and providing audio-visual programs uploading and transmission services. An Internet audio-
visual program service provider shall obtain an Audio-Visual Permit issued by the SARFT or complete
certain registration procedures with the SARFT. On March 30, 2009, the SARFT promulgated the
Notice on Strengthening the Administration of the Content of Internet Audio-Visual Programs (
׵
), which reiterates the pre-approval requirements for the Internet
audio-visual programs, including those on mobile network (if applicable), and prohibits Internet audio-
visual programs containing violence, pornography, gambling, terrorism, superstition or other
prohibited elements.
Pursuant to the Audio-Visual Regulations, providers of Internet audio-visual program services
are generally required to be either state-owned or state-controlled. According to the Official Answers to
Press Questions Regarding the Internet Audio-Visual Program Regulations (
ఱ<ਕ
֛>ਪ) published on the SARFT’s website on February 3, 2008, the SARFT and MII
clarified that providers of Internet audio-visual program services who had legally engaged in such
services prior to the adoption of the Audio-visual Regulations shall be eligible to re-register their
businesses and continue their operations of Internet audio-visual program services so long as those
providers have not been in violation of the laws and regulations. This exemption will not be granted to
Internet audio-visual program service providers established after the adoption of the Audio-Visual
Regulations. These policies have later been reflected in the Notice on Relevant Issues Concerning
Application and Approval of Audio-Visual Permit (
ਂλ<ၣഖෂᅧൖᛓືͦ஢̙ᗇ>ࣨ
), issued by SARFT on April 8, 2008 and amended on August 28, 2015.
According to the Administrative Provisions on Online Audio-Visual Information Services (ၣ
), promulgated jointly by the CAC, the MCT and the NRTA on
November 18, 2019 and effective on January 1, 2020, online audio-visual information service
providers shall authenticate user’s real identity information based on organization code, identity card
number, mobile phone number, etc. Online audio- visual information service providers shall not serve
users who fail to provide their real identity information. Online audio-visual information service
providers shall strengthen the management of the audio-visual information posted by users, deploy and
apply identification technologies for illegal and non-real audio and video; if any user is found to
produce, post or disseminate content prohibited by laws or regulations, the transmission of such
information shall be ceased, and disposal measures such as deletion shall be taken to prevent the
information from spreading, and such service providers shall save relevant records, and report to the
CAC, the MCT, the NRTA, etc. As of the date of this document, we have not obtained an Audio-
Visual Permit. Uncertainties exist as to whether we will be required by relevant PRC government
authorities to obtain the Audio-Visual Permit. For detailed analysis, see “Risk Factors—Risks Related
to Doing Business in China—We may be adversely affected by the complexity, uncertainties and
changes in PRC laws and regulation, and any lack of requisite approvals, licenses, permits or
registrations applicable to our business may have a material adverse effect on our business, financial
conditions and results of operations”.
REGULATIONS RELATED TO ONLINE LIVE STREAMING SERVICES
On November 4, 2016, the CAC issued the Administrative Regulations on Online Live
Streaming Services (
) (the “ Online Live Streaming Regulations ”),
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which came into effect on December 1, 2016. According to the Online Live Streaming Regulations, all
online live streaming service providers shall take various measures during operation of live streaming
services, including, but not limited to: (i) establish platforms for reviewing live streaming content,
conducting classification and grading management according to the online live streaming content
categories, user scale and others, add tags to graphics, video, audio or broadcast tag information for
platforms; (ii) conduct verification on online live streaming users with valid identification information
(e.g., authentic mobile phone numbers) and validate the registration of online live streaming publishers
based on their identification documents (such as identity documents, business licenses and organization
code certificates); (iii) examine and verify the authenticity of the identification information of online
live streaming service publishers, classify and file such identification information records with the
Internet information offices at the provincial level where they are located and provide such information
to relevant law enforcement departments upon legal request; (iv) enter into a service agreement with
the users of online live streaming services of which the essential clauses shall be under guidance of
Internet information offices at the provincial level, to clarify the rights and obligations of the parties
and require them to comply with the laws, regulations and platform conventions; and (v) establish a
credit-rating system and a blacklist system, to provide management and services according to such
credit rating, prohibit re-registration of accounts by online live streaming service users on the black list
and promptly report such users to relevant Internet information offices.
On September 2, 2016, the State Administration of Press, Publication, Radio, Film and
Television, or the SAPPRFT (currently known as National Radio and Television Administration),
issued the Circular on Issues concerning Strengthening the Administration of Online Live Streaming of
Audio-Visual Programs (
) (the “ Online Live
Streaming Circular ”). According to the Online Live Streaming Circular, appropriate Audio-Visual
Permit is a prerequisite for online audio-visual live streaming of general cultural events of social
communities, sports events, important political, military, economic, social, and cultural events.
Relevant information about specific activities to be streamed shall be filled in advance to the provincial
counterparts of the SAPPRFT. Online audio-visual live streaming service providers shall censor and
tape such programs and retain them for at least 60 days for future check by the administrative
departments; and they shall have an emergency plan in place to replace programs in violation of laws
and regulations. Bullet-screen comments shall be forbidden in the live streaming of important political,
military, economic, social, sports and cultural events. Special censor shall be appointed for bullet-
screen comments in the live streaming of general cultural events of social communities and sports
events. Hosts, guests and targets hired or invited by online audio-visual live streaming programs shall
meet the following requirements: (i) patriotic and law-abiding; (ii) good public reputation and social
image, no scandals and misdeeds; and (iii) dress, hairstyle, language and actions are consistent with
public order and good morals, and not drawing topics with vulgar content or content inappropriate to
discuss in public.
According to Circular 78 issued by the NRTA on November 12, 2020, platforms providing
online show live streaming or e-commerce live streaming services shall, among other things, (i)
register their information and business operations by November 30, 2020 on the National Internet
Audio-visual Platforms Information Management System (
೮া၍ଣӻ୕), (ii)
ensure real-name registration for all live streaming hosts and virtual gifting users, (iii) prohibit users
that are minors or without real-name registration from virtual gifting, and (iv) set a limit on the
maximum amount of virtual gifting per time, per day, and per month. The overall ratio of front-line
content analysts to live streaming rooms shall be 1:50 or higher on such platforms. The training for
content analysts shall be strengthened and content analysts who have passed the training shall be
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registered in the system. A platform shall report the number of its live streaming rooms, streamers and
content analysts to the provincial branch of the NRTA on a quarterly basis. If celebrities or persons of
non-PRC nationality intend to open live streaming rooms on a platform, it shall also report to
competent authorities in advance. Online show live streaming platforms shall tag content and streamers
by category. A streamer cannot change the category of the programs offered in his or her live
streaming room without prior approval from the platform.
Opinions on Further Regulating the Profit-Making Behavior of Online Live Streaming to
Promote the Healthy Development of the Industry (
ආБุ਄ੰ೯
จԈ) issued on March 25, 2022 by SAMR, SAT and CAC, reiterates that live streaming
platforms and live streaming service providers shall perform their personal income tax withholding
obligations in accordance with laws and regulations and shall not transfer or evade their personal
income tax withholding obligations, and shall not plan or help live streaming publishers with tax
evasion. Such regulation also stipulates that online live-streaming platforms shall verify and register
online live-streaming publishers based on their identification information and ensure the authenticity
and credibility of the verified information.
In order to further strengthen the standardized management of the online live streaming
industry, the CAC, the National Office of Anti-Pornography and Anti-Illegal, the MIIT, the Ministry of
Public Security, or the MPS, the MCT, the SAMR and the NRTA jointly issued the Circular on the
Guiding Opinions on Strengthening Standardized Management of Online Live Streaming (
̋੶
ኬจԈ) (the “ Guiding Opinions on Online Live Streaming ”) on
February 9, 2021, which further stipulates several requirements on the online live streaming, including
but not limited to: (i) online live streaming platforms which provide online audio-visual program
services must obtain the Audio-Visual Permit (or complete the registration on the National Internet
Audio-visual Platforms Information Management System (
೮া၍ଣӻ୕)) and
complete the ICP filing procedure, (ii) online live streaming platforms providing live streaming
information services shall strictly abide by laws, regulations, and the relevant provisions; strictly
perform their statutory duties and obligations, implement primary responsibilities of online live
streaming platforms, and (iii) online hosts carrying out online live streaming activities shall not engage
in activities prohibited by laws and regulations. As of the Latest Practicable Date, we have completed
the registration on the National Internet Audio-visual Platforms Information Management System (
Ό
೮া၍ଣӻ୕). Based on the consultation on November 25, 2021 with Beijing
Municipal Radio and Television Bureau, the local competent authority that is responsible for the
supervision and management of online audio-visual program services in Beijing, enterprises that have
registered in the National Internet Audio-visual Platforms Information Management System (
Ό਷ၣ
೮া၍ଣӻ୕) are subject to the same supervision and management as an Audio-Visual
License holder, and an applicant of Audio-Visual License shall be a wholly state-owned or state-
controlled entity according to the current laws and regulations. Based on the above, we and our PRC
Legal Adviser are of the view that the Group may not be eligible for applying the Audio-Visual
License and the likelihood for the Group being subject to severe penalties due to the lack of the Audio-
Visual License is relatively low as of the Latest Practicable Date. In addition, with respect to virtual
gifting, Guiding Opinions on Online Live Streaming provides that online live streaming platforms shall
(i) guide and regulate users’ consumption and rational rewards in accordance with the laws and
regulations; (ii) keep records of live streaming images, interactive messages, recharge and virtual
gifting in accordance with the laws and regulations; (iii) not provide recharge and virtual gifting
services to minors; (iv) establish exclusive customer service teams for minors to give priority to the
acceptance and timely handling of relevant complaints and disputes involving minors. If a minor
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fraudulently uses adult account and gives virtual gifts, the refund shall be made in accordance with the
provisions after verification; (v) establish rules for the administration of live streaming virtual gifting
services, specifying that the virtual gifting services provided by platforms to users are information and
entertainment consumer services. A reasonable maximum amount of virtual gifting shall be set for the
amount of single virtual consumer goods or a single virtual gifting and consumption reminders shall be
given to users whose cumulative amount of virtual gifting in a single day triggers the corresponding
threshold, and a virtual gifting cooling-off period and delayed pay-in period shall be set if necessary.
Furthermore, on June 1, 2021, the Law of the PRC on the Protection of Minors (2020 Revision)
(
ج2020ࠈࡌ)) took effect, which provides that, among others, live
streaming service providers are not allowed to provide minors under age of 16 with an online live
streaming host account registration service, and must obtain the consent from parents or other
guardians and verify the identity of the minors before allowing minors aged 16 or above to register live
streaming host accounts. In addition, on March 14, 2022, the CAC once again released the Regulations
on the Protection of Minors on the Internet (Draft for Comment) (
ᚐૢԷᅄӋจԈ
ᇃ), or the Protection of Minors on the Internet Regulations, which are open for public comments
until April 13, 2022 and has not become effective as of the date of this document. The Protection of
Minors on the Internet Regulations stipulates that (i) online product and service providers are
prohibited from providing minors with products and services that would induce minors to indulge,
(ii) online service providers for products and services such as online games, live broadcasting, audio-
video, and online social networking shall take measures to establish special management systems of
user duration, access authority and consumption for minors, (iii) online live streaming service
providers shall not provide minors under the age of 16 with the account registration service of online
live streaming publishers; when providing account registration service of online live streaming
publishers for minors reaching the age of 16, the service providers shall verify the identity information
of the minors and obtain the consent of their parents or other guardians, (iv) when processing the
personal information of minors online, information processors shall follow the principles of legitimacy,
rightfulness and necessity, and (v) online services providers shall take measures to reasonably restrict
minors of the amount of consumption each time and the accumulative amount of consumption per day
in respect of online products and services, and shall not provide minors with any paid service which
are inconsistent with their civil capacity.
We have implemented the following measures to ensure ongoing compliance with the
Protection of Minors of the PRC: (i) minor protection mode will pop up on our apps which notifies
minors could use it; (ii) our app’s privacy policies include policies and provisions that specifically
designed to protect the privacy of minor under 18 and children under 14, which is in compliance with
the requirements of current laws and regulations regarding data and privacy protection of minors;
(iii) our app enables users to turn on minor protection mode which restricts the contents to what are
suitable for minors; and (iv) we currently only allow in-house instructors or, in rare cases, contracted
fitness influencers to host live streaming classes, and has not provided other users including minors
with access to the function to hold livestreaming classes; further, we prohibit minors under 18 from
giving virtual gifts during online live streaming and has set up a customer hotline and email dedicated
for minor issues including potential complaints or disputes regarding minors’ virtual gifting. As of the
Latest Practicable Date, we had not experienced any material adverse impact on our business
operations due to the above-mentioned laws of protection minors and had not been subject to any
penalties in connection with protection of minors.
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In addition, the aforementioned existing laws and regulations currently in force have provided
specific and refined guidance on fitness influencer management and minor protection for online
product and service providers. For example, the Law of the PRC on the Protection of Minors (2020
Revision), provides refined protection in minors’ personal information, parents’ consent, anti-addiction
mode, limitation on minors’ registration and consumption (especially on virtual gifting) in live
streaming; and the Guiding Opinions on Online Live Streaming and the Profit-Making Behavior of
Online Live Streaming to Promote the Healthy Development of the Industry requires the Company and
the fitness influencer to strictly comply with such regulations, especially in tax matters, and the
Company to verify the authenticity and credibility of the fitness influencer’s registered information.
The Company’s PRC Legal Adviser also confirms that the recent regulatory developments on fitness
influencer and minor protection, which include the Guiding Opinions on Online Live Streaming, the
Regulations for the Protection of Minors of the PRC on the Internet (Draft for Comments), if become
effective in their current forms, do not raise additional material compliance requirement and will not
have material adverse effect on the Group’s operations because all major requirements which may
apply to the Group has already been stipulated in existing PRC laws and regulations.
Furthermore, the Regulations for the Protection of Minors of the PRC on the Internet (Draft for
Comments) have no age limit for registration in and membership subscription, except: (i) Internet
operators who collect, store, use, transfer and disclose personal information of children under the age of
14 shall establish special rules and user agreements for the protection of children’s personal information,
inform the children’s guardians in a noticeable and clear manner and obtain the consent of the children’s
guardians; (ii) online live streaming service providers shall not provide minors under the age of 16 with
the account registration service of online live streaming publishers; when providing account registration
service of online live streaming publishers for minors reaching the age of 16, the service providers shall
verify the identity information of the minors and obtain the consent of their parents or other guardians;
and (iii) users under the age of 18 shall be prohibited from virtual gifting. We have implemented policies
and measures that are required under the aforementioned PRC laws and regulations.
REGULATIONS RELATED TO INTERNET PUBLISHING
On February 4, 2016, the SAPPRFT and MIIT jointly issued the Rules for the Administration
for Internet Publishing Services (
) (the “ Internet Publishing Rules ”),
which took effect on March 10, 2016. The Internet Publishing Rules define “Internet publications” as
digital works that are edited, produced, or processed to be published and provided to the public through
the Internet, including (a) original digital works, such as pictures, maps, games, and comics; (b) digital
works with content that is consistent with the type of content that, prior to the Internet age, typically
was published in media such as books, newspapers, periodicals, audio-visual products, and electronic
publications; (c) digital works in the form of online databases compiled by selecting, arranging, and
compiling other types of digital works; and (d) other types of digital works identified by the
SAPPRFT. Under the Internet Publishing Rules, Internet operators distributing such Internet
publications via information network are required to apply for an Internet publishing license with the
relevant governmental authorities and submit the application, if approved, to the SAPPRFT for
approval before distributing Internet publications. We currently do not hold an Internet Publishing
License. As of the date of this document, there are no explicit interpretations from PRC government
authorities or prevailing enforcement practice deeming the provision of our course materials through
our platform as “online publishing services” which requires an Internet Publishing License. In
December 2021, as confirmed in a telephone interview with officer in the publicity department of the
CPC Beijing Municipal Committee, being the competent person of the competent regulatory authority
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in relation to the Internet Publishing License’s issuance in Beijing, a company would not be required to
obtain Internet Publishing License if no paper media publication is involved, and it would not be
deemed to violate or be punished for violating laws and regulations related to online publishing if we
engage in our existing business without obtaining the Internet Publishing License. Based on the above
and due to the ambiguity of the definition of “online publishing service” under the relevant laws and
regulations, we and our PRC Legal Adviser are of the view that the risk of us being compelled by law
and regulations to obtain the Internet Publishing License is relatively low as of the Latest Practicable
Date. Nevertheless, it remains unclear whether the local PRC government authorities would adopt a
different practice. In addition, it remains uncertain whether the PRC government authorities would
issue more explicit interpretation and rules or promulgate new laws and regulations. See “Risk
Factors—Risks Related to Doing Business in China—We may be adversely affected by the
complexity, uncertainties and changes in PRC laws and regulation, and any lack of requisite approvals,
licenses, permits or registrations applicable to our business may have a material adverse effect on our
business, financial conditions and results of operations”.
REGULATIONS RELATED TO E-COMMERCE SERVICES
On January 26, 2014, the SAIC promulgated the Administrative Measures for Online Trading
(
), which became effective on March 15, 2014. The Administrative Measures for
Online Trading strengthen the protection of consumers and impose more stringent requirements and
obligations on online trading or service operators. For example, online business operators are required
to issue invoices to consumers for online products and services. Consumers are generally entitled to
return products purchased from online business operators within seven days upon receipt, without
giving any reason. Online business operators are prohibited from collecting any information on
consumers or disclosing, selling or providing any such information to any third party, or sending
commercial electronic messages to consumers, without their consent. Fictitious transactions, deletion
of adverse comments and technical attacks on competitors’ websites are prohibited as well. On
March 15, 2021, the SAIC promulgated the Measures for the Supervision and Administration of Online
Trading (
) (the “ New Online Trading Measures ”), which took effect on
May 1, 2021, to replace the Administrative Measures for Online Trading. The New Online Trading
Measures further regulates and refines the e-commerce supervision system, including, but not limited
to (i) clarifying the characteristics and responsibilities of e-commerce operators; (ii) refining the
requirements of the collection and use of personal information, expressly stating that consumers cannot
be forced directly or in any disguised manner to consent to the collection or use of personal
information that is not directly related to the business activities by means of a general authorization,
default authorization, bundling with other authorization, and discontinuing installation, etc., and
clarifying the obligation of the e-commerce operators and their staff to keep the personal information
collected confidential; (iii) strengthening the protection of consumer rights, for example, if
e-commerce operators provide services with auto-renewable subscriptions, e-commerce operators shall
remind the consumers in a conspicuous way five days before each automatic renewal and let the
consumers make the decisions; and (iv) reinforcing the liabilities of e-commerce operators.
On August 31, 2018, the SCNPC promulgated the E-Commerce Law (
), which
became effective on January 1, 2019. The E-Commerce Law proposes a series of requirements on
e-commerce operators including individuals and entities carrying out business online, e-commerce
platform operators and merchants within the platform. Pursuant to the E-Commerce Law, an
e-commerce operator shall (i) fulfill its tax obligations in accordance with laws; (ii) ensure
commodities sold or services offered by it shall meet certain requirements to safeguard personal safety
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and property security and the requirements on environmental protection, and not supply or offer any
commodity or service prohibited by laws and administrative regulations; (iii) issue purchase vouchers
or service documentation, such as paper or electronic invoices for selling commodities or providing
services; (iv) disclose information about commodities or services in a comprehensive, faithful, accurate
and timely manner, so as to safeguard consumers’ right to know and right of choice, and not engage in
false or misleading publicity activities by means of fictitious deals, fabricated user comments or
otherwise to cheat and mislead consumers; (v) provide consumers with irrelevant to their personal
characteristics, and respect and equally safeguard the lawful rights and interests of consumers, while
displaying search results of commodities or services to consumers according to their interests,
preferences, consumption habits and other personal characteristics; (vi) warn consumers about the
tie-in nature of the commodities and services in a prominent position and cannot set the tie-in
commodities or services as the default option, if to offer tie-in commodities or services; (vii) deliver
commodities or services according to its promises or the ways and time limits as agreed upon with
consumers, and bear the likely risks and responsibilities when commodities are in transit, except when
the consumers select a courier service provider separately; and (viii) comply with applicable laws and
regulations on the protection of personal information if the e-commerce operator collects and uses
consumers’ personal information.
In addition, China has adopted a licensing system for food supply operations under the Food
Safety Law (
) and its implementation rules. Entities or individuals that intend to engage
in food production, food distribution or food service businesses must obtain licenses or permits for
such businesses. Pursuant to the Administrative Measures on Food Operation Licensing (
຾ᐄ஢
) issued by the State Food and Drug Administration, or the SFDA, on August 31, 2015
and last amended on November 17, 2017, an enterprise needs to obtain a Food Operation Permit from
the local food and drug administration, and the permits already obtained by food business operators
prior to the effective date of these new measures will remain valid for their originally approved validity
period. Pursuant to the Measures for Investigation and Handling of Illegal Acts Involving Online Food
Safety (
) issued by the SFDA on July 13, 2016 and amended on
April 2, 2021, a food producer or food business operator which carries out business via self-established
website shall, within 30 working days after obtaining the approval from competent authorities, file with
the local food and drug administrative authorities. We sell food and nutritional supplements through
our mobile apps and websites and third-party e-commerce platforms. Our PRC subsidiaries or their
branches engaging in food operation business have obtained Food Operation Permits and have filed
with the local food and drug administrative authorities and thus our sale of fitness food is in
compliance with applicable laws and regulations in all material aspects.
REGULATIONS RELATED TO MOBILE INTERNET APPLICATIONS INFORMATION
SERVICES
In addition to the Telecom Regulations and other regulations above, mobile Internet
applications, or the APPs, are specifically regulated by the Provisions on the Administration of Mobile
Internet Applications Information Services (
) (the “ APP
Provisions”), which was promulgated by the CAC on June 28, 2016 and amended on June 14, 2022,
and the latest amendment of which took effect from August 1, 2022. According to the APP Provisions,
relevant qualifications required by laws and regulations shall be acquired for providing app
information services and the engagement in app distribution services such as Internet app stores. The
CAC and its local branches shall be responsible for the supervision and administration of nationwide
and local APP information respectively.
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APP providers shall fulfill their responsibilities of information security management, and
perform the following duties, including, but not limited to: (i) in accordance with the principles of “real
name at background, any name at foreground”, verify identities with the registered users through
mobile phone numbers, identity document numbers or unified social credit codes; (ii) establish and
improve the mechanism for regulating personal information processing and user information security
protection, following the principle of “legality, legitimate, necessity and good faith” in processing
personal information, with clear and reasonable purposes; (iii) establish a sound information content
review and management mechanism, and establish and improve management measures for user
registration, account management, information review, routine inspections, and emergency response,
with professionals and technical capabilities commensurate with their service scale; (iv) adhere to the
principle of being most beneficial to minors, and strictly implement the requirements for the
registration and login of minors’ user accounts with real identity information in accordance with the
law; (v) not induce users to download apps by means of false advertisement, bundled downloads, or
other acts, or via machine or manual comment control, or by using illegal and harmful information; (vi)
perform the obligation of ensuring data security, establish a sound whole-process data security
management system, take technical measures to ensure data security and other security measures,
strengthen risk monitoring, and shall not endanger national security or public interests, or damage the
legitimate rights and interests of others.
REGULATIONS RELATED TO ONLINE ADVERTISING BUSINESS
On April 24, 2015, the SCNPC enacted the Advertising Law of the People’s Republic of China
(
) (the “ New Advertising Law ”), which became effective on September 1,
2015 and last amended on April 29, 2021. The New Advertising Law requires that advertisers,
advertising operators and advertisement publishers shall abide by the laws and administrative
regulations, and by the principles of fairness and good faith while engaging in advertising activities.
On July 4, 2016, the SAIC issued the Interim Measures for the Administration of Online
Advertising (
) (the “ Internet Advertising Measures ”), effective on
September 1, 2016. According to the Internet Advertising Measures, Internet Advertising refers to
commercial advertising for direct or indirect marketing goods or services in the form of text, image,
audio, video, or other means through websites, web pages, Internet apps, or other Internet media,
including promotion through emails, texts, images, video with embedded links and paid-for search
results. The Internet information service providers must stop any person from using their information
services to publish illegal advertisements if they are aware of, or should reasonably be aware of, such
illegal advertisements even though the Internet information service providers merely provide
information services and are not involved in the Internet advertisement businesses. The Internet
Advertising Measures specifically set out the following requirements: (a) advertisements must be
identifiable and marked with the word “advertisement” enabling consumers to distinguish them from
non-advertisement information; (b) sponsored search results must be clearly distinguished from natural
search results; (c) advertisements shall be published or distributed by means of the Internet without
affecting the normal use of the network by users, and it is forbidden to send advertisements or
advertisement links by email without the recipient’s permission or induce Internet users to click on an
advertisement in a deceptive manner; and (d) Internet advertisement publishers are required to verify
relevant supporting documents and check the content of the advertisement and are prohibited from
publishing any advertisement with unverified content or without all the necessary qualifications. On
February 25, 2023, the SAMR promulgated the Measures for the Administration of Online Advertising
(
) (the “ New Internet Advertising Measures ”) which became effective
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on May 1, 2023. The New Internet Advertising Measures states that all Internet Advertising activities
will be regulated and clearly states that livestreaming room operators and livestreaming marketers must
abide by the responsibilities and obligations of Internet Advertising operators. The New Internet
Advertising Measures also provides that Internet advertisement publishers should not publish
advertisements on vehicles or intelligence household electronic appliances without the users’
permission or request. The New Internet Advertising Measures further strengthens the
one-click-to-close requirement and prohibits advertisements for certain items on Internet media that
targets minors, including, among others, advertisements related to online games that are harmful to the
physical or mental health of minors.
We have established training programs for employees, including regular training and specific
training for New Advertising Law and Internet Advertising Measures, for clarifying the requirements
for publishing advertisements on internet and all the requirements for verifying relevant supporting
documents and checking the content of the advertisements. In addition, we monitor inappropriate and
illegal contents by implementing internal procedure to check and verify the authenticity and content of
the information on advertisements and product pages.
REGULATIONS RELATED TO INTERNET INFORMATION SECURITY AND PRIVACY
PROTECTION
PRC government authorities have enacted laws and regulations with respect to Internet
information security and protection of personal information from any abuse or unauthorized disclosure.
Internet information in China is regulated and restricted from a national security standpoint. The
SCNPC enacted the Decisions on Maintaining Internet Security (
)o n
December 28, 2000, which was further amended on August 27, 2009 and may subject violators to
criminal punishment in China for any effort to: (i) gain improper entry into a computer or system of
strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets;
(iv) spread false commercial information; or (v) infringe intellectual property rights. The MPS has
promulgated measures that prohibit use of the Internet in ways which, among other things, result in a
leakage of state secrets or a spread of socially destabilizing content. If an Internet information service
provider violates these measures, the MPS and its local branches may shut down its websites and
suggest the relevant authority to revoke its operating license if necessary.
Under the Several Provisions on Regulating the Market Order of Internet Information Services
(
), issued by the MIIT on December 29, 2011 and became
effective on March 15, 2012, an Internet information service provider must collect users’ personal
information by obtaining the consent of users, expressly inform the users of the method, content and
purpose of the collection and processing of such user’s personal information and properly maintain the
user’s personal information.
In addition, pursuant to the Decision on Strengthening the Protection of Online Information
(
) issued by the SCNPC on December 28, 2012 and the Order for the
Protection of Telecommunication and Internet User Personal Information (ɛ
) issued by the MIIT on July 16, 2013, any collection and use of a user’s personal
information must be subject to the consent of the user and be within the specified purposes, methods
and scopes. An Internet information service provider must also keep such information strictly
confidential, and is further prohibited from divulging, tampering or destroying any such information, or
selling or providing such information to other parties. An Internet information service provider is
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required to take technical and other measures to prevent the collected personal information from any
unauthorized disclosure, damage or loss.
On November 7, 2016, the SCNPC issued the Cyber Security Law of the PRC (ʕശɛ͏΍ձ
) (the “ Cybersecurity Law ”), which took effect as of June 1, 2017. Pursuant to the
Cybersecurity Law, a network operator, which includes, among others, Internet information services
providers, must take technical measures and other necessary measures in accordance with the
provisions of applicable laws and regulations as well as the compulsory requirements of the national
and industrial standards to safeguard the safe and stable operation of the networks, effectively respond
to the network security incidents, prevent illegal and criminal activities, and maintain the integrity,
confidentiality and availability of network data. Any violation of the provisions and requirements
under the Cybersecurity Law may subject the Internet service provider to warnings, fines, confiscation
of illegal gains, revocation of licenses, shutdown of websites or even criminal liabilities.
On January 23, 2019, the Office of the Central Cyberspace Affairs Commission, the MIIT, the
MPS, and the SAMR jointly issued the Notice on Special Governance of Illegal Collection and Use of
Personal Information via Apps (
࢝Appʮѓ), which
restates the requirement of legal collection and use of personal information, encourages app operators
to conduct security certifications, and encourages search engines and app stores to clearly mark and
recommend those certified apps.
On August 22, 2019, the CAC issued the Regulation on Cyber Protection of Children’s
Personal Information (
) effective on October 1, 2019. Network
operators are required to establish special policies and user agreements to protect children’s personal
information, and to appoint special personnel in charge of protecting children’s personal information.
Network operators who collect, use, transfer or disclose personal information of children are required
to, in a prominent and clear way, notify and obtain consent from children’s guardians.
On November 28, 2019, the CAC, MIIT, the MPS and the SAMR jointly issued the Measures
to Identify Illegal Collection and Usage of Personal Information by Apps (
Appࡈ
), which lists six types of illegal collection and usage of personal information,
including, but not limited to “not publishing rules on the collection and usage of personal information”,
“not providing privacy rules”, and “collecting and using users’ personal information without consent”.
On May 28, 2020, the NPC adopted the Civil Code of the PRC (
Պ),
effective on January 1, 2021. According to the Civil Code, individuals have the right of privacy. No
organization or individual shall process any individual’s private information or infringe an individual’s
right of privacy, unless otherwise prescribed by law or with the consent of such individual or such
individual’s guardian.
On March 12, 2021, the CAC, the MIIT, the MPS and the SAMR jointly issued the Rules on
the Scope of Necessary Personal Information for Common Types of Mobile Internet Applications
(
) (the “ Necessary Personal Information
Rules”), which came into effect on May 1, 2021. According to the Necessary Personal Information
Rules, mobile app operators shall not deny users’ access to its basic functions and services on the basis
that such user disagrees with the provision of their personal information that is not necessary. The
Necessary Personal Information Rules further provides relevant scopes of necessary personal
information for different types of mobile apps.
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On June 27, 2022, the CAC promulgated the Administrative Provisions on the Account
Information of Internet Users (, which took effect on August 1, 2022.
The obligations of internet-based information service providers include but not limited to:
(i) authenticate the identity information of the users who apply for registration of relevant account and
verify the account information submitted by users upon registration; (ii) display the location
information of IP addresses of internet users’ accounts on the information page of internet users’
accounts; and (iii) equip themselves with professional and technical capabilities appropriate to the
scale of services.
On June 10, 2021, the SCNPC promulgated the Data Security Law, which took effect on
September 1, 2021. The Data Security Law provides a national data security review system, under
which data processing activities that affect or may affect national security shall be reviewed. In
addition, it clarifies that the data security protection obligations of organizations and individuals
carrying out data activities and implementing data security protection responsibility, data processors
shall establish and improve the whole-process data security management rules, organize and
implement data security trainings as well as take appropriate technical measures and other necessary
measures to protect data security.
On July 6, 2021, the General Office of the CPC Central Committee and the General Office of
the State Council jointly promulgated the July 6 Opinion, which emphasizes on the prevention of
illegal securities activities and tightened supervision on overseas listings by China-based companies.
The opinions aim to achieve this by establishing a regulatory system and revising the existing rules and
regulations for overseas listings by Chinese entities and affiliates, including potential extraterritorial
application of China’s securities laws. As the opinions are new, official guidance and implementation
rules have not been issued and the final interpretation of and potential impact from these opinions
remain unclear at this stage.
On July 30, 2021, the State Council promulgated the CII Regulations, effective on September 1,
2021. According to the CII Regulations, a “critical information infrastructure” has the meaning of an
important network facility and information system in important industries such as, among others,
public communications and information services, energy, transport, water conservation, finance, public
services, e-government affairs and national defense science, as well as other important network
facilities and information systems that may seriously endanger national security, the national economy,
the people’s livelihood, or the public interests in the event of damage, loss of function, or data leakage.
On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law,
effective on November 1, 2021. The Personal Information Protection Law requires, among others, that
(i) the processing of personal information should have a clear and reasonable purpose which should be
directly related to the processing purpose, in a method that has the least impact on personal rights and
interests, and (ii) the collection of personal information should be limited to the minimum scope
necessary to achieve the processing purpose to avoid the excessive collection of personal information.
Different types of personal information and personal information processing will be subject to various
rules on consent, transfer, and security. Entities processing personal information bear responsibilities
for their activities of processing personal information, and shall adopt necessary measures to safeguard
the security of the personal information that they process. Otherwise, the entities processing personal
information could be ordered to correct, or suspend or terminate the provision of services, and face
confiscation of illegal income, fines or other penalties.
On July 7, 2022, the CAC promulgated the Cross-Border Data Transfer Measures which came
into effect on September 1, 2022. The Cross-Border Data Transfer Measures provides four
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circumstances, under any of which data processors shall, through the local cyberspace administration at
the provincial level, apply to the national cyberspace administration for security assessment of cross-
border data transfer. These circumstances include: (i) where a data processor transfers important data
overseas; (ii) where a critical information infrastructure operator, or a data processor processing the
personal information of more than one million individuals, who, in either case, transfers personal
information overseas; (iii) where a data processor who has, since January 1 of the previous year
cumulatively transferred overseas the personal information of more than 100,000 individuals, or the
sensitive personal information of more than 10,000 individuals; or (iv) other circumstances under
which security assessment of data cross-border transfer is required as prescribed by the national
cyberspace administration. Although our PRC legal adviser in respect of PRC data compliance law and
our Directors are not of the view that the security assessment for cross-border data transfer would be
applicable to us to date, there might be newly issued explanations or implementation rules,
uncertainties with respect to applications to the CAC under the Cross-Border Data Transfer Measures
still exist, and we will continually monitor our compliance status in accordance with the latest changes
in applicable regulatory requirements. Our PRC legal adviser in respect of PRC data compliance law is
of the view that the Company is in compliance with the Cross-Border Data Transfer Measures in all
material respects.
On November 14, 2021, the CAC published a discussion draft of the Draft Data Security
Regulations, which provides that data processors conducting the following activities shall apply for
cybersecurity review: (i) merger, reorganization or separation of network platform operators that have
acquired a large number of data resources related to national security, economic development or public
interests affects or may affect national security; (ii) listing abroad (
਷̮ɪ̹) of data processors
processing over one million users’ personal information; (iii) listing in Hong Kong which affects or
may affect national security; (iv) other data processing activities that affect or may affect national
security. The Draft Data Security Regulations also state that data processors processing important data
or going public overseas (
ྤ̮) shall conduct an annual data security assessment by themselves or
entrust a data security service institution to do so, and submit the data security assessment report of the
previous year to the local branch of CAC at the municipal level before January 31, of each year. In
addition, the Draft Data Security Regulations also require network platform operators to establish
platform rules, privacy policies and algorithm strategies related to data, and solicit public comments on
their official websites and personal information protection related sections for no less than 30 working
days when they formulate platform rules or privacy policies or makes any amendments that may have a
significant impact on users’ rights and interests. Further, platform rules and privacy policies formulated
by operators of large Internet platforms with more than 100 million daily active users, or amendments
to such rules or policies by operators of large Internet platforms with more than 100 million daily
active users that may have significant impacts on users’ rights and interests shall be evaluated by a
third-party organization designated by the CAC and reported to local branch of the CAC at the
provincial level for approval. The CAC solicited comments on this draft, but there is no timetable as to
when it will be enacted.
We have taken several measures to comply with the Draft Data Security Regulations although
it has not been formally adopted, including: (i) implementing comprehensive data security policies,
including Guideline of Data Security Management System, Information Security Management Policy,
Information Security Vulnerability Management Policy and Data Security Training Management
Policy, and measures to cover the management of all key aspects of data lifecycle management;
(ii) providing prior notices to individual users regarding the collection, usage, storage of their personal
information and displaying the privacy policy in a manner the users could easily access to; and
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(iii) taking technical measures to protect the personal data we collect and monitoring the data security
practices. We have not suffered from any material data leakage during the Track Record Period and up
to the Latest Practicable Date. Subject to the further interpretation of Draft Data Security Regulations
by the competent authorities, we may be required to make further adjustments to our business
operations to comply with the effective version of Draft Data Security Regulations in the future. Based
on the above, our PRC legal adviser in respect of PRC data compliance law is of the view that the
Company would be able to comply with the Draft Data Security Regulations in all material respects
assuming the Draft Data Security Regulations are implemented in their current forms.
On December 31, 2021, the CAC together with other regulatory authorities published
Administrative Provisions on Algorithm Recommendation for Internet Information Services (
ʝᑌ
), effective on March 1, 2022 which provides, among others, that
algorithm recommendation service providers shall establish and improve the management systems and
technical measures for algorithm mechanism and principle review, scientific and technological ethics
review, user registration, information release review, data security and personal information protection,
anti-telecommunications and Internet fraud, security assessment and monitoring, and security incident
emergency response, formulate and disclose the relevant rules for algorithm recommendation services,
and be equipped with professional staff and technical support appropriate to the scale of the algorithm
recommendation service.
On December 28, 2021, thirteen regulatory authorities jointly released the Cybersecurity
Review Measures. The Cybersecurity Review Measures provides that: (i) network platform operators
that are engaged in data processing activities which have or may have an implication on national
security shall undergo a cybersecurity review; (ii) the CSRC is one of the regulatory authorities for
purposes of jointly establishing the state cybersecurity review mechanism; (iii) network platform
operators that master personal information of more than one million users and seek to list abroad (
਷̮
ɪ̹) shall file for a cybersecurity review with the Cybersecurity Review Office; and (iv) the risks of
core data, material data or large amounts of personal information being stolen, leaked, destroyed,
damaged, illegally used or transmitted to overseas parties, and the risks of critical information
infrastructure, core data, material data or large amounts of personal information being influenced,
controlled or used maliciously shall be collectively taken into consideration during the cybersecurity
review process. Pursuant to the Basic Law of the Hong Kong Special Administrative Region of the
People’s Republic of China, the Hong Kong Special Administrative Region is an inalienable part and a
local administrative region, of the People’s Republic of China. We intend to list on the Hong Kong
Stock Exchange. Therefore, the requirement regarding “listing abroad” (
਷̮ɪ̹) shall not be
applicable to us. In addition, considering the type and nature of the personal information we gathered is
of less national security significance, the risk of us being required to undertake cybersecurity review
for the Listing under the Cybersecurity Review Measures is relatively low.
We have adopted a strict data privacy policy for protecting the confidential information of our
users to abide by network security requirements under such laws and regulations and we have taken
several measures to better protect our users’ privacy and interests. See “Risk Factors—Risks Related to
Our Business and Industry—Our business generates, processes, collects and stores a large amount of
data, and the unauthorized access, improper use or disclosure of such data could subject us to
significant reputational, financial, legal and operational consequences, and deter current and potential
users from using our services”. Based on the above, our PRC legal adviser in respect of PRC data
compliance law is of the view that we are in compliance with the existing PRC laws and regulations in
respect of data compliance in all material aspects, and our Directors are of the view that the existing
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laws and regulations in respect of data compliance will not have material adverse impacts on our
business operations.
REGULATIONS RELATED TO INTELLECTUAL PROPERTY PROTECTION
Copyright
On September 7, 1990, the SCPNC promulgated the Copyright Law of the PRC (ʕശɛ͏΍
) (the “ Copyright Law ”), which was amended in 2001, 2010, and 2020, respectively.
The Copyright Law provides that Chinese citizens, legal persons, or other organizations shall, whether
published or not, enjoy copyright in their works, which include, among others, works of literature, art,
natural science, social science, engineering technology and computer software. Copyright owners of
protected works enjoy personal and property rights with respect to publication, authorship, alteration,
integrity, reproduction, distribution, lease, exhibition, performance, projection, broadcasting,
dissemination via information network, production, adaptation, translation, compilation and other
rights that shall be enjoyed by the copyright owners. Reproducing, publishing, performing, projecting,
broadcasting or plagiarizing without permission from the owner of the copyright, unless otherwise
provided in the Copyright Law of the PRC, shall constitute infringements of copyrights.
In order to further implement the Computer Software Protection Regulations (
ڭ
ᚐૢԷ), promulgated by the State Council on December 20, 2001 and amended on January 8, 2011
and January 30, 2013 respectively, the National Copyright Administration, or the NCA, issued
Computer Software Copyright Registration Procedures (
)o n
February 20, 2002, which specify detailed procedures and requirements with respect to the registration
of software copyrights.
To address the problem of copyright infringement related to content posted or transmitted over
the Internet, on April 29, 2005 the NCA and the MII jointly promulgated the Measures for
Administrative Protection of Copyright Related to Internet (
), which
became effective on May 30, 2005. Upon receipt of an infringement notice from a legitimate copyright
holder, an ICP operator must take remedial actions immediately by removing or disabling access to the
infringing content. If an ICP operator knowingly transmits infringing content or fails to take remedial
actions after receipt of a notice of infringement harming public interest, the ICP operator could be
subject to administrative penalties, including an order to cease infringing activities, confiscation by the
authorities of all income derived from the infringement activities, or payment of fines.
On May 18, 2006, the State Council promulgated the Regulations on the Protection of the Right
to Network Dissemination of Information (
ᚐૢԷ), which was amended in 2013.
Under these regulations, an owner of the network dissemination rights with respect to written works or
audio or video recordings who believes that information storage, search or link services provided by an
Internet service provider infringe his or her rights may require that the Internet service provider delete,
or disconnect the links to, such works or recordings.
As of December 31, 2022, we have registered 57 computer software copyright in the PRC.
Trademark
On August 23, 1982, the SCNPC promulgated the Trademark Law of the PRC (
ʕശɛ͏΍ձ
) (the “Trademark Law”), which was last amended on April 23, 2019. On August 3, 2002,
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the State Council promulgated the Implementation Regulation for the Trademark Law (ʕശɛ͏΍ձ
ૢԷ), which was amended on April 29, 2014. Under the Trademark Law and the
implementation regulation, the Trademark Office of China National Intellectual Property
Administration, or the Trademark Office, is responsible for the registration and administration of
trademarks in China. Registered trademarks are valid for a term of 10 years from the date of the
registration. A registration renewal application shall be filed within twelve months prior to the
expiration of the term. A trademark registrant may license its registered trademark to another party by
entering into a trademark license contract. Trademark license agreements must be filed with the
Trademark Office to be recorded. The licensor shall supervise the quality of the commodities on which
the trademark is used, and the licensee shall guarantee the quality of such commodities. As with
trademarks, the Trademark Law has adopted a “first come, first file” principle with respect to
trademark registration. Where trademark for which a registration application has been made is identical
or similar to another trademark which has already been registered or been subject to a preliminary
examination and approval for use on the same kind of or similar commodities or services, the
application for registration of such trademark may be rejected. Any person applying for the registration
of a trademark may not prejudice the existing right first obtained by others, nor may any person
register in advance a trademark that has already been used by another party and has already gained a
“sufficient degree of reputation” through such party’s use.
As of December 31, 2022, we have 815 registered trademarks in the PRC.
Patent Law
The SCNPC promulgated the Patent Law of the PRC (
)o n
March 12, 1984, which was amended in 1992, 2000, 2008, and 2020, respectively. On June 15, 2001,
the State Council promulgated the Implementation Regulation for the Patent Law (
ʕശɛ͏΍ձ਷ਖ਼
), which was amended on December 28, 2002 and January 9, 2010. According to these
laws and regulations, the State Intellectual Property Office is responsible for administering patents in
the PRC. The PRC patent system adopts a “first to file” principle, which means that where more than
one person files a patent application for the same invention, a patent will be granted to the person who
filed the application first. To be patentable, invention or utility models must meet three conditions:
novelty, inventiveness and practical applicability. Furthermore, patents cannot be granted for scientific
discoveries, rules and methods for intellectual activities, methods used to diagnose or treat diseases,
animal and plant breeds or substances obtained by means of nuclear transformation. A patent is valid
for twenty years in the case of an invention and ten years in the case of utility models and designs,
starting from the application date. Except under certain specific circumstances provided by law, any
third-party user shall obtain prior consent or a proper license from the patent owner to use the patent,
otherwise, such third party may result in an infringement of the rights of the patent holder.
As of December 31, 2022, we have been granted 346 patents in the PRC.
Domain Names
Domain names are protected under the Administrative Measures on the Internet Domain Names
(
) promulgated by the MIIT on August 24, 2017. The MIIT is the major
regulatory body responsible for the administration of the PRC internet domain names, under
supervision of which the China Internet Network Information Center, or the CNNIC, is responsible for
the daily administration of “.cn” domain names and Chinese domain names. CNNIC adopts the “first
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to file” principle with respect to the registration of domain names. In November 2017, the MIIT
promulgated the Notice on Regulating the Use of Domain Names in Providing Internet-based
Information Services (), which became
effective on January 1, 2018. Pursuant to the notice, the domain name used by an internet-based
information service provider in providing internet-based information services must be registered and
owned by such provider in accordance with the law. If the internet-based information service provider
is an entity, the domain name registrant must be the entity (or any of the entity’s shareholders), or the
entity’s principal or senior manager.
As of December 31, 2022, we have held 30 domain names relating to our business.
REGULATIONS RELATED TO PRODUCT LIABILITY AND CONSUMER PROTECTION
The Product Quality Law of the PRC (
) applies to all production
and sale activities in China. Pursuant to this law, products offered for sale must satisfy relevant quality
and safety standards. Enterprises may not produce or sell counterfeit products in any fashion, including
forging brand labels or giving false information regarding a product’s manufacturer. Violations of state
or industrial standards for health and safety and any other related violations may result in civil
liabilities and administrative penalties, such as compensation for damages, fines, suspension or
shutdown of business, as well as confiscation of products illegally produced and sold and the proceeds
from such sales. Severe violations may subject the responsible individual or enterprise to criminal
liabilities. Where a defective product causes physical injury to a person or damage to another person’s
property, the victim may claim compensation from the manufacturer or from the seller of the product.
If the seller pays compensation and it is the manufacturer that should bear the liability, the seller has a
right of recourse against the manufacturer. Similarly, if the manufacturer pays compensation and it is
the seller that should bear the liability, the manufacturer has a right of recourse against the seller.
The MIIT sets forth various requirements for consumer protection in the Notice on Issues
Concerning Short Message Service (
), issued on
April 15, 2004, which addresses certain problems in the telecommunications sector, including
ambiguity in billing practices for premium services, poor quality of connections and unsolicited SMS
messages, all of which impinge upon the rights of consumers. On May 26, 2016, the MIIT issued the
Measures on the Complaint Settlement of the Telecommunication Services Users (
͜˒͡ൡஈଣ
), or the Complaint Settlement Measures, which took effect on July 30, 2016. The Complaint
Settlement Measures require telecommunication services providers to respond to their users within
fifteen days upon the receipt of any complaint delivered by such users, the failure of which will give
the complaining users the right to file a complaint against the service providers with the provincial
branch offices of the MIIT. We are aware of the increasingly strict legal environment covering product
quality and consumer protection in the PRC, and we strive to adopt all measures necessary to ensure
that our business complies with these evolving standards in all material aspects.
REGULATIONS RELATED TO FOREIGN EXCHANGE
Regulations Related to Foreign Currency Exchange
The principal regulations governing foreign currency exchange in PRC are the Administrative
Regulations for Foreign Exchange of the PRC (
ʕശɛ͏΍ձ਷̮ි၍ଣૢԷ) (the “ Foreign
Exchange Regulations ”), which was promulgated by the State Council on January 29, 1996 and last
amended on August 5, 2008. Under the Foreign Exchange Regulations, the RMB is freely convertible
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for current account items, including the distribution of dividends, interest payments, trade and service-
related foreign exchange transactions, but not for capital account items, such as direct investments,
loans, repatriation of investments and investments in securities outside of the PRC, unless the prior
approval of the SAFE is obtained and prior registration with the SAFE or its local branches is made.
The SAFE released the SAFE Circular 19, on March 30, 2015 and it became effective on
June 1, 2015. In accordance with the SAFE Circular 19, the foreign exchange capital of foreign-
invested enterprises shall be subject to the “discretional foreign exchange settlement” approach. The
proportion of discretional foreign exchange settlement of the foreign exchange capital of a foreign-
invested enterprise is temporarily determined to be 100%, while SAFE can adjust the aforementioned
proportion in due time based on the situation of international balance of payments. On June 9, 2016,
the SAFE published the SAFE Circular 16, and it took effect at the same time. According to the SAFE
Circular 16, enterprises that have registered in the PRC may also discretionally determine to convert
their foreign debts from foreign currency to RMB.
The SAFE issued the SAFE Circular 13, on February 13, 2015, and it took effect on June 1,
2015. The SAFE Circular 13 requires PRC residents or entities to register with qualified banks rather
than SAFE or its local branches with relation to the direct investment in foreign exchange beyond
China.
Regulations Related to Foreign Exchange Registration of Overseas Investment by PRC Residents
On July 4, 2014, SAFE promulgated the SAFE Circular 37, which has become effective on the
same date.
Under SAFE Circular 37, PRC residents, including PRC individuals and institutions, shall
register with local branches of SAFE in connection with their direct establishment or indirect control of
an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’
legally owned onshore or offshore assets or interests, as a “special purpose vehicle” under SAFE
Circular 37. SAFE Circular 37 further requires amendment to the registration in the event of any
significant or material changes with respect to the special purpose vehicle. In the event that a PRC
shareholder holding equity interests in a special purpose vehicle fails to comply with the required
SAFE registration, the PRC subsidiaries of such special purpose vehicle may be prohibited from
making profit distributions to its offshore parent company and prohibited from carrying out subsequent
cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability
to contribute additional capital into its PRC subsidiaries.
Under SAFE Circular 37, if a non-listed special purpose vehicle uses its own equity to grant
equity incentives to any directors, supervisors, senior management or any other employees directly
employed by a domestic enterprise which is directly or indirectly controlled by such special purpose
vehicle, or with which such an employee has established an employment relationship, related PRC
residents and individuals may, prior to exercising their rights, apply to the SAFE for foreign exchange
registration formalities for such special purpose vehicle. However, in practice, different local SAFE
offices may have different views and procedures on the interpretation and implementation of the SAFE
Regulation, and since SAFE Circular 37 was the first regulation to regulate the foreign exchange
registration of a non-listed special purpose vehicle’s equity incentives granted to PRC residents, there
remains uncertainty with respect to its implementation. These aforementioned regulations shall apply
to our direct and indirect shareholders who are PRC residents and may apply to any offshore
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acquisitions and share transfer that we make in the future if our shares are issued to PRC residents. See
“Risk Factors—Risks Related to Doing Business in China—PRC regulations relating to offshore
investment activities by PRC residents may limit our PRC subsidiaries’ ability to change their
registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial
owners to liability and penalties under PRC law”.
REGULATIONS RELATED TO STOCK INCENTIVE PLANS
Under the SAFE Circular 7, which was enacted by SAFE on February 15, 2012 and became
effective on the same date, and other relevant rules, domestic employees, directors, supervisors,
consultants and other senior management taking part in any equity incentive plan of an overseas
publicly listed company, who is a PRC citizen or non-PRC citizen residing in China for a continuous
period of no less than one year, shall complete the registration and other several procedures with SAFE
and its local branch. The PRC residents joining in the equity incentive plan must retain one domestic
qualified agent to handle the registration in SAFE, opening of bank account, capital transfer and other
procedures relevant to the equity incentive plan. At the same time, an overseas institution shall be
entrusted, as well, to perform the exercise, trade the corresponding shares or equities, capital transfer
and other issues. The income of foreign exchange PRC residents by selling out the shares according to
the equity incentive plan and the dividend distributed by the overseas-listed company shall be
distributed to the PRC residents after being remitted to the bank account in China opened by the
domestic institutions. In addition, SAFE Circular 37 provides that PRC residents who participate in a
share incentive plan of an overseas unlisted special purpose company may register with SAFE or its
local branches before he or she would exercise the rights of employee stock ownership plan. Failure to
complete the SAFE registrations may result in fines and legal sanctions on such domestic individuals
and may also limit their capability to contribute additional capital into the wholly foreign-owned
subsidiary in China and further limit such subsidiary’s capability to distribute dividends. See “Risk
Factors—Risks Related to Doing Business in China—Any failure to comply with PRC regulations
regarding the registration requirements for employee stock incentive plans may subject the PRC plan
participants or us to fines and other legal or administrative sanctions”.
REGULATIONS RELATED TO DIVIDEND DISTRIBUTION
The principal laws and regulations governing distribution of dividends of foreign holding
companies include the Company Law of the PRC (
), which was last
amended on October 26, 2018, the Foreign Investment Law (), which
was promulgated on March 15, 2019, and the Implementation Rules of the Foreign Investment Law
(ૢԷ), which was promulgated on December 26, 2019.
Under these laws and regulations, foreign investment enterprises in China may pay dividends
only out of their accumulated profits, if any, determined in accordance with the PRC accounting
standards and regulations. In addition, foreign investment enterprises in the PRC are required to
allocate at least 10% of their respective accumulated profits (after tax) each year, if any, to certain
reserve funds until the amount of reserves has reached 50% of the registered capital of the enterprises.
The amount of reserves is not distributable as cash dividends. Any PRC companies shall not distribute
any profits until any losses from prior fiscal years have been offset. Under our current corporate
structure, our Cayman Islands holding company primarily relies on dividend payments from our PRC
subsidiary to fund any cash and financing requirements we may have. Limitation on the ability of our
VIE to make remittance to our wholly-foreign owned enterprise and on the ability of our wholly-
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foreign owned enterprise to pay dividends to us could limit our ability to access cash generated by the
operations of those entities. See “Risk Factors—Risks Related to Doing Business in China—We may
rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and
financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make
payments to us could have a material and adverse effect on our ability to conduct our business”.
REGULATIONS RELATED TO M&A
On August 8, 2006, six PRC regulatory agencies, including the MOFCOM and the CSRC,
jointly issued the M&A Rules, which became effective on September 8, 2006 and amended on June 22,
2009. The M&A Rules includes provisions that purport to require that an offshore special purpose
vehicle formed for purposes of the overseas listing of equity interests in PRC companies and controlled
directly or indirectly by PRC companies or individuals to obtain the approval of the CSRC prior to the
listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. The
M&A Rules also establish procedures and requirements that could make some acquisitions of PRC
companies by foreign investors more time-consuming and complex, including requirements in some
instances that the MOFCOM be notified in advance of any change-of-control transaction in which a
foreign investor takes control of a PRC domestic enterprise.
In February 2011, the General Office of the State Council promulgated a Notice on
Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by
Foreign Investors (
) (the
“Circular 6 ”), which established a security review system for mergers and acquisitions of domestic
enterprises by foreign investors. Under Circular 6, a security review is required for mergers and
acquisitions by foreign investors having “national defense and security” concerns and mergers and
acquisitions by which foreign investors may acquire “de facto control” of domestic enterprises with
“national security” concerns. In August 2011, the MOFCOM promulgated the Rules on
Implementation of Security Review System for Mergers and Acquisitions of Domestic Enterprises by
Foreign Investors (
), effective from
September 1, 2011, which provide that the MOFCOM will look into the substance and actual impact of
a transaction and prohibit foreign investors from bypassing the security review requirement by
structuring transactions through proxies, trusts, indirect investments, leases, loans, control through
contractual arrangements or offshore transactions.
REGULATIONS CONCERNING OVERSEAS SECURITIES OFFERING AND LISTING
On February 17, 2023, the CSRC promulgated Trial Administrative Measures of the Overseas
Securities Offering and Listing by Domestic Companies ( ྤʫΆุྤ̮೯БᗇՎձɪ̹၍ଣ༊Б፬
) (the “ Overseas Listing Trial Measures ”) and five related guidelines, which became effective on
March 31, 2023. The Overseas Listing Trial Measures comprehensively improve and reform the existing
regulatory regime for overseas offering and listing of PRC domestic companies’ securities and regulate
both direct and indirect overseas offering and listing of PRC domestic companies’ securities through a
filing-based regulatory regime.
Pursuant to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer
and list securities in overseas markets, either through direct or indirect means, are required to go
through the filing procedure with the CSRC and report relevant information. The Overseas Listing
Trial Measures provides that an overseas offering and listing is explicitly prohibited, if: (i) such
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securities offering and listing is explicitly prohibited by laws, regulations or relevant rules; (ii) the
intended overseas securities offering and listing may endanger national security as determined by
competent authorities under the State Council in accordance with law; (iii) the domestic company
intending to make the securities offering and listing, or its controlling shareholder(s) and the actual
controller, have committed relevant crimes such as corruption, bribery, embezzlement,
misappropriation of property or undermining the order of the economy during the latest three years;
(iv) the domestic company intending to make the securities offering and listing is currently under
investigations for suspicion of criminal offenses or major violations of laws and regulations, and no
conclusion has yet been made thereof; or (v) there are material ownership disputes over equity held by
the domestic company’s controlling shareholder(s) or by other shareholder(s) that are controlled by the
controlling shareholder(s) and/or actual controller.
The Overseas Listing Trial Measures also provides that if the issuer meets both of the following
criteria, the overseas securities offering and listing conducted by such issuer will be deemed as indirect
overseas offering by PRC domestic companies: (i) 50% or more of any of the issuer’s operating revenue,
total profit, total assets or net assets as documented in its audited consolidated financial statements for the
most recent fiscal year is accounted for by domestic companies; and (ii) the main parts of the issuer’s
business activities are conducted in mainland China, or its main place(s) of business are located in
mainland China, or the majority of senior management staff in charge of its business operations and
management are PRC citizens or have their usual place(s) of residence located in mainland China. Where
an issuer submits an application for initial public offering to competent overseas regulators, such issuer
must file with the CSRC within three business days after such application is submitted.
On the same day, the CSRC also held a press conference for the release of the Trial Measures
and issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic
Companies (
),which, among others, clarifies that
(1) on or prior to the effective date of the Overseas Listing Trial Measures, domestic companies that
have already submitted valid applications for overseas securities offering and listing but have not
obtained approval from overseas regulatory authorities or stock exchanges may arrange the timing for
submitting their filing applications with the CSRC in a reasonably manner, and must complete the
filing before the completion of their overseas securities offering and listing; (2) a six-month transition
period will be granted to domestic companies which, prior to the effective date of the Overseas Listing
Trial Measures, have already obtained the approval from overseas regulatory authorities or stock
exchanges (such as companies that passed the Stock Exchange hearing), but have not completed the
indirect overseas listing; if domestic companies fail to complete the overseas listing within such six-
month transition period, they shall file with the CSRC according to the requirements. At the press
conference, officials from the relevant CSRC department clarified that, as for companies seeking
overseas offering and listing with contractual arrangements (VIE structure), the CSRC will solicit
opinions from relevant regulatory authorities and file for overseas listing of enterprises with VIE
structure that meet the compliance requirements.
On February 24, 2023, the CSRC, together with the Ministry of Finance, the National
Administration of State Secrets Protection Bureau and the National Archives Administration issued the
“Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities
Offering and Listing by Domestic Companies” (
੗ձᏦ
), which sets forth the requirements for the confidentiality and archives
requirements of direct or indirect overseas listing of domestic enterprises, and will come into effect on
March 31, 2023.
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REGULATIONS RELATED TO EMPLOYMENT, SOCIAL INSURANCE AND HOUSING
PROVIDENT FUND
On June 29, 2007, the SCNPC promulgated the Employment Contract Law of the PRC (ʕശ
), which became effective as of January 1, 2008, and was amended on
December 28, 2012, which requires employers to provide written contracts to their employees, restricts
the use of temporary workers and aims to give employees long-term job security.
An employer and an employee may enter into a fixed-term labor contract, an un-fixed term
labor contract, or a labor contract that concludes upon the completion of certain work assignments,
after reaching agreement upon due negotiations. An employer may legally terminate a labor contract
and dismiss its employees after reaching agreement upon due negotiations with its employees or by
fulfilling the statutory conditions.
The PRC government authorities have passed a variety of laws and regulations regarding social
insurance and housing funds from time to time, including, among others, the PRC Social Insurance
Law (
) and the Regulation on the Administration of Housing Provident
Funds (၍ଣૢԷ). Pursuant to these laws and regulations, companies registered and
operating in China are required under the Social Insurance Law and the Regulations on the
Administration of Housing Funds to apply for social insurance registration and housing funds deposit
registration within 30 days of their establishment and to pay for their employees different social
insurance including pension insurance, medical insurance, work-related injury insurance,
unemployment insurance and maternity insurance to the extent required by law. Failure to comply with
such laws and Regulation may result in various fines and legal sanctions and supplemental
contributions to the local social insurance and housing fund governmental authorities. We have caused
all of our full-time employees to enter into written employment contracts with us and have provided
and currently provide our employees with proper welfare and employee benefits as required by the
PRC laws and regulations.
On May 28, 2020, the NPC adopted the Civil Code of the PRC (
Պ),
effective on January 1, 2021. According to the Civil Code, a work contract is a contract under which a
contractor, in accordance with the requirements of a client, completes a work and delivers the work
product to the client who pays remuneration in return. The contractor shall complete the principal part
of the word with his own equipment, technology, and labor force, unless otherwise agreed by the
parties. A contractor may entrust the accessory part of his contracted work with a third person, and the
contractor shall be accountable to the client concerning the word product completed by the third
person.
On January 24, 2014, the Ministry of Human Resources and Social Security promulgated the
Interim Provisions on Labour Dispatch (
) (the “Interim Labour Dispatch”),
effective on March 1, 2014, specified the scope and proportion of the usage of laborer, execution and
performance of labor dispatch agreements and legal liability. According to the Interim Labour
Dispatch, an employer shall strictly control the number of dispatched laborers which shall not exceed
10% of the total number of its workers. Where an employer uses laborers in the form of labor dispatch
under the name of hired work, outsourcing, etc., the provisions hereof shall apply.
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REGULATION RELATED TO TAXATION
PRC Enterprise Income Tax Law
The Enterprise Income Tax Law () which was enacted by the
NPC on March 16, 2007 and amended on February 24, 2017 and December 29, 2018, and the
Implementing Rules of the Enterprise Income Tax Law (
ૢԷ),
which was promulgated by the State Council on December 6, 2007 and amended on April 23, 2019
(collectively, the “PRC EIT Law”). The PRC EIT Law applies a uniform 25% enterprise income tax
rate to both foreign-invested enterprises and domestic enterprises, except where tax incentives are
granted to special industries and projects. Enterprises qualifying as “High and New Technology
Enterprises” are entitled to a 15% enterprise income tax rate rather than the 25% uniform statutory tax
rate. The preferential tax treatment continues as long as an enterprise can retain its “High and New
Technology Enterprise” status.
Under the PRC EIT Law, an enterprise established outside China with a “de facto management
body” within China is considered a “resident enterprise”, which means it can be treated as domestic
enterprise for enterprise income tax purposes. A non-resident enterprise that does not have an
establishment or place of business in China, or has an establishment or place of business in China but
the income of which has no actual relationship with such establishment or place of business, shall pay
enterprise income tax on its income deriving from inside China at the reduced rate of 10%. Dividends
generated after January 1, 2008 and payable by a foreign-invested enterprise in China to its foreign
enterprise investors are subject to a 10% withholding tax, unless any such foreign investor’s
jurisdiction of incorporation has a tax treaty with China that provides for a preferential withholding
arrangement.
PRC Value-added Tax and Business Tax
Pursuant to the Provisional Regulations on PRC Value-Added Tax (
೼ᅲ
БૢԷ) promulgated by the PRC State Council on December 13, 1993 which was most recently
amended on November 19, 2017 and its implementation regulations promulgated by the MOF on
December 18, 2008, and subsequently amended by the MOF and the SAT on October 28, 2011, unless
otherwise specified by relevant laws and regulations, any entity or individual engaged in the sales of
goods, provision of processing, repairs and replacement services and importation of goods into China
is generally required to pay a value-added tax, or VAT, for revenue generated from sales of products,
while qualified input VAT paid on taxable purchase can be offset against such output VAT.
On December 30, 2022, the SCNPC has publicly solicited opinions on PRC Value-Added Tax
Law (Draft ) (
) (the “Draft PRC Value-Added Tax Law”), which
stipulates VAT tax payers, the territory of taxation, tax rate, tax payable, tax incentives and taxation
administration. Except as otherwise stipulated by the Draft PRC Value-Added Tax Law, for general
VAT taxpayers providing services and selling intangible assets, the value-added tax rate is 6%. The
Provisional Regulations on PRC Value-Added Tax will be repealed on the same day the Draft PRC
Value-Added Tax Law comes into effect.
Pursuant to the Notice of the Ministry of Finance and the State Administration of Taxation on
the Adjustment to Value-added Tax Rates (
) issued on April 4, 2018,
which came into effect on May 1, 2018, the deduction rates of 17% and 11% applicable to the
taxpayers who have VAT taxable sales activities or imported goods are adjusted to 16% and 10%,
respectively.
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In accordance with the Announcement on Relevant Policies for Deepening Value-Added Tax
Reform (ʮѓ) issued by the MOF, the SAT and the General
Administration of Customs on March 20, 2019, which came into force on April 1, 2019, with respect to
VAT taxable sales or imported goods of a VAT general taxpayer, where the VAT rate of 16% applies
currently, it shall be adjusted to 13%; and the currently applicable VAT rate of 10% shall be adjusted
to 9%.
REGULATIONS RELATED TO ANTI-MONOPOLY
On August 30, 2007, the SCNPC adopted the PRC Anti-Monopoly Law (
ʕശɛ͏΍ձ਷ˀᕹ
) (the “ AML”), which became effective on August 1, 2008 and provides the regulatory
framework for the PRC anti-monopoly. Under the AML, the prohibited monopolistic acts include
monopolistic agreements, abuse of a dominant market position and concentration of businesses that
may have the effect to eliminate or restrict competition.
Pursuant to the AML, a business operator that possesses a dominant market position is
prohibited from abusing its dominant market position, including conducting the following acts:
(i) selling commodities at unfairly high prices or buying commodities at unfairly low prices;
(ii) without justifiable reasons, selling commodities at prices below cost; (iii) without justifiable
reasons, refusing to enter into transactions with their trading counterparts; (iv) without justifiable
reasons, allowing trading counterparts to make transactions exclusively with itself or with the business
operators designated by it; (v) without justifiable reasons, tying commodities or imposing unreasonable
trading conditions to transactions; (vi) without justifiable reasons, applying differential prices and other
transaction terms among their trading counterparts who are on an equal footing; and (vii) other acts
determined as abuse of dominant market position by the relevant governmental authorities. The
SCNPC decided to amend the AML on June 24, 2022. The amendment to the AML took effect from
August 1, 2022, which further stipulates that undertakings which hold dominant market position shall
not abuse their dominant market position to engage in the preceding activities by taking advantage of
data, technology and platform rules.
Pursuant to the Regulations on Filing Threshold for Concentration of Undertakings (
਷ਕ৫
) promulgated by the PRC State Council on August 3, 2008 and
amended on September 18, 2018, when a concentration of undertakings occurs and reaches any of the
following thresholds, the undertakings concerned shall file a prior notification with the anti-monopoly
authorities, if (i) the total global turnover of all operators participating in the transaction exceeded
RMB10 billion in the preceding fiscal year and at least two of these operators each had a turnover of
more than RMB400 million within PRC in the preceding fiscal year, or (ii) the total turnover within
PRC of all the operators participating in the concentration exceeded RMB2 billion in the preceding
fiscal year, and at least two of these operators each had a turnover of more than RMB400 million
within PRC in the preceding fiscal year are triggered, and no concentration shall be implemented
without such filing. “Concentration of undertakings” means any of the following: (i) merger of
undertakings; (ii) acquisition of control over another undertaking by acquiring equity or assets; or
(iii) acquisition of control over, or exercising decisive influence on, another undertaking by contract or
by any other means.
In addition, pursuant to the AML and relevant regulations, entering into monopolistic
agreements, which means agreements or concerted practices to eliminate or restrict competition, is
prohibited, unless such agreements satisfy the specific exemptions prescribed therein, such as
251


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REGULATIONS
improving technologies or increasing the efficiency and competitiveness of small and medium-sized
undertakings.
On February 7, 2021, the Anti-monopoly Commission of the State Council issued the Anti-
monopoly Guidelines on Platform Economy () (the “ Guidelines”),
which became effective on the same day. The Guidelines provide that the AML and relevant
regulations are applicable to internet platforms and businesses participating in platform economy.
In August 2021, the SAMR issued the Draft Provisions on Preventing Unfair Online
Competition, which mainly regulates the production and operation activities of business operators
through the Internet and other information networks, and specifically stipulates the general norms of
online competition, prohibits the use of technical means to impede, interfere or conduct other unfair
competition behaviors and prohibits the use of technical means to conduct other online unfair
competition behaviors. As of the Latest Practicable Date, the Draft Provisions on Preventing Unfair
Online Competition has not been formally adopted, and due to the lack of further clarification, there
are still uncertainties regarding the interpretation and implementation of the Draft Provisions on
Preventing Unfair Online Competition.
If business operators fail to comply with the AML or relevant regulations, the anti-monopoly
authorities have the power to cease the relevant activities, unwind the transactions, and confiscate
illegal gains and fines.
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RELATIONSHIP WITH OUR SINGLE LARGEST SHAREHOLDER
OUR SINGLE LARGEST SHAREHOLDER
As at the date of this document, Mr. Wang controls 16.97% equity interest and 75.41% voting
rights of our Company as a result of his controlled corporations holding super-voting rights in our
Company. Upon Listing, our Company will unwind our weighted voting rights structure and under the
Articles of Association, which takes effect upon Listing, all issued Shares (including Shares held by
Mr. Wang through his controlled corporations) will be entitled to one vote each at a general meeting of
our Company.
Upon Listing, Mr. Wang will be interested in and will control 87,379,118 Shares through
Lightmap Limited and Persistent Courage Holdings Limited. Mr. Wang will be interested in and will
be entitled to exercise 16.62% of the total issued equity interests and voting rights of our issued Shares
in general meetings (assuming the Presumptions). Additionally, pursuant to the Voting Proxy
Agreements, Mr. Wang, through Persistent Courage Holdings Limited, will be entitled to the voting
rights attached to Shares representing an aggregate of 4.12% of our Company’s total issued share
capital upon Listing (assuming the Presumptions). Based on the above, prior to and upon Listing, Mr.
Wang will continue to be our Single Largest Shareholder.
The following diagram summarizes the structure through which Mr. Wang holds interests in
our Company upon the Listing, assuming the Presumptions:
Mr. Wang(1)
Arrow Factory Limited(1)
Company
Lightmap Limited(1)(2) Persistent Courage Holdings Limited(1)(3)
1.69% 14.93%
Notes:
(1) Each of Persistent Courage Holdings Limited and Lightmap Limited is wholly owned by Arrow Factory Limited. The entire interest in
each of Persistent Courage Holdings Limited and Lightmap Limited is held through Starmap Trust, which is a trust controlled by
Mr. Wang and in which Mr. Wang is the settlor and sole beneficiary. Mr. Wang is a Director and chief executive of our Company. Each
of Arrow Factory Limited, Lightmap Limited, and Persistent Courage Holdings Limited is a holding company with no business
operations.
(2) Upon Listing, Lightmap Limited will hold 8,909,312 Shares, representing approximately 1.69% of the voting rights in the Company
capable of being exercised on resolutions in general meetings.
(3) Upon Listing, Persistent Courage Holdings Limited will hold 78,469,806 Shares, representing approximately 14.93% of the voting rights
in the Company capable of being exercised on resolutions in general meetings. Additionally, pursuant to the Voting Proxy Agreements,
Mr. Wang, through Persistent Courage Holdings Limited, will be entitled to the voting rights attached to an aggregate of 21,652,719
Shares, representing 4.12% of our Company’s voting rights. See “History, reorganization, and corporate structure—Voting Proxy
Agreements” for further details.
Our Group operates independently of our Single Largest Shareholder. Apart from his interest in
our Company, our Single Largest Shareholder does not currently have any interest in a business that
competes or is likely to compete, either directly or indirectly, with our Group’s business that, were Mr.
Wang considered a “controlling shareholder” under the Listing Rules, would be required to disclose
under Rule 8.10 of the Listing Rules.
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RELATIONSHIP WITH OUR SINGLE LARGEST SHAREHOLDER
INDEPENDENCE FROM OUR SINGLE LARGEST SHAREHOLDER
Management independence
Our business is managed and conducted by our Board and senior management. Mr. Wang, our
Single Largest Shareholder, is also an executive Director.
Our Directors consider that our Board and senior management will function independently of
our Single Largest Shareholder because:
(a) each Director is aware of their fiduciary duties as a director which require, among others,
that they act for the benefit and in the interest of our Company and do not allow any
conflict between their duties as a Director and their personal interests;
(b) our daily management and operations are carried out by our senior management team, all
of whom have substantial experience in the industry in which our Company is engaged,
and will therefore be able to make business decisions that are in the best interests of our
Group;
(c) we have three independent non-executive Directors and certain matters of our Company
must always be referred to them for review;
(d) in the event that there is a potential conflict of interest arising out of any transaction to be
entered into between our Group and our Directors or their respective associates, the
interested Director(s) is(are) required to declare the nature of such interest before voting at
the relevant Board meeting; and
(e) we have adopted other corporate governance measures to manage conflicts of interest, if
any, between our Group and our Single Largest Shareholder, as detailed in “—Corporate
Governance Measures”.
Based on the above, our Directors believe that our business is managed independently of our
Single Largest Shareholder.
Operational independence
Our Group is not operationally dependent on the Single Largest Shareholder. Our Company
(through our subsidiaries) holds all relevant licenses and owns all relevant intellectual properties and
research and development facilities necessary to carry on our business. We have sufficient capital,
facilities, equipment and employees to operate our business independently from our Single Largest
Shareholder. We also have independent access to our customers and an independent management team
to operate our business.
Based on the above, our Directors believe that we are able to operate independently of our
Single Largest Shareholder.
Financial independence
Our Group has an independent financial system and makes financial decisions according to our
Group’s own business needs. We have an independent internal control and accounting system and also
have an independent finance department responsible for discharging the treasury function. We are
capable of obtaining financing from third parties, if necessary, without reliance on our Single Largest
Shareholder.
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RELATIONSHIP WITH OUR SINGLE LARGEST SHAREHOLDER
There will be no outstanding loans or guarantees provided by, or granted to, our Single Largest
Shareholder or his respective associates as of the Listing Date.
Based on the above, our Directors believe that our business is financially independent of our
Single Largest Shareholder.
CORPORATE GOVERNANCE MEASURES
The Company and our Directors are committed to upholding and implementing the highest
standards of corporate governance and recognize the importance of protecting the rights and interests
of all Shareholders, including the rights and interests of our minority Shareholders.
Under the Articles of Association, extraordinary general meetings of the Company may be
convened on the written requisition of any one or more members holding, as at the date of deposit of
the requisition, in aggregate shares representing not less than one-tenth of the paid up capital of the
Company which carry the right of voting at general meetings of the Company. In addition, pursuant to
the Shareholder communication policy to be adopted by the Company upon Listing, Shareholders are
encouraged to put governance related matters to the Directors and to the Company directly in writing.
We will also adopt the following corporate governance measures to resolve actual or potential
conflict of interests between our Group and our Single Largest Shareholder:
(a) where a Shareholders’ meeting is held pursuant to the Listing Rules to consider proposed
transactions or arrangements in which our Single Largest Shareholder or any of his
associates has a material interest, our Single Largest Shareholder shall abstain from voting
and their votes shall not be counted;
(b) our Company has established internal control mechanisms to identify connected
transactions, and we will comply with the applicable Listing Rules if we enter into
connected transactions with our Single Largest Shareholder or any of his associates after
Listing;
(c) the independent non-executive Directors will review, on an annual basis, whether there is
any conflict of interests between our Group and our Single Largest Shareholder (the
“Annual Review ”) and provide impartial and professional advice to protect the interests
of our minority Shareholders;
(d) our Single Largest Shareholder will undertake to provide all information necessary or
requested by the independent non-executive Directors for the Annual Review, including
all relevant financial, operational and market information;
(e) our Company will disclose decisions on matters reviewed by the independent
non-executive Directors either in its annual reports or by way of announcements as
required by the Listing Rules;
(f) where our Directors reasonably request the advice of independent professionals, such as
financial advisers, the appointment of such independent professionals will be made at our
Company’s expense;
(g) we have appointed Guotai Junan Capital Limited as our compliance adviser to provide
advice and guidance to us in respect of compliance with the applicable laws and
regulations, as well as the Listing Rules, including various requirements relating to
corporate governance; and
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RELATIONSHIP WITH OUR SINGLE LARGEST SHAREHOLDER
(h) we have established our audit committee, remuneration committee and nomination
committee with written terms of reference in compliance with the Listing Rules and the
Code of Corporate Governance in Appendix 14 to the Listing Rules.
Based on the above, our Directors believe that sufficient corporate governance measures have
been put in place to manage conflicts of interest between our Group and our Single Largest
Shareholder, and to protect minority Shareholders’ interests after the Listing.
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CONNECTED TRANSACTIONS
CONNECTED PERSON
The Contractual Arrangements were entered into between our Group and certain persons, set
out below, that will become connected persons of our Company upon Listing. Accordingly, the
Contractual Arrangements will become connected transactions upon the Listing.
Name of connected person Relationship
Mr. Wang Ning ................................ Director, chief executive of our Company, and
substantial shareholder of Calorie Technology
Mr. Peng Wei and Mr. Liu Dong ................... Directors of our Company
SUMMARY OF OUR CONNECTED TRANSACTIONS
Transaction
Proposed annual caps for
the years ending
December 31,
2023 2024 2025
(in RMB million)
Contractual Arrangements
1. Contractual Arrangements ...................................... N / A N / A N / A
CONTRACTUAL ARRANGEMENTS
Background
As disclosed in “Contractual Arrangements”, due to regulatory restrictions on foreign
ownership in the PRC, we conduct a portion of our business in Mainland China through Calorie
Technology. We do not hold equity interests in Calorie Technology. Rather, through the Contractual
Arrangements, we have effective control over Calorie Technology. See “Contractual Arrangements”
for further detail on the agreements underlying the Contractual Arrangements.
Listing Rules implications
The transactions contemplated under the Contractual Arrangements and any new transactions,
contracts and agreements or renewal of existing transactions, contracts and agreements to be entered
into by, among others, Calorie Technology (or any of its subsidiaries in the future) and any member of
our Group (“ New Intergroup Agreements ” and each of them, a “ New Intergroup Agreement ”)
technically constitute continuing connected transactions under Chapter 14A of the Listing Rules, as
certain parties to the Contractual Arrangements, namely, the persons listed above, are connected
persons of the Company.
Reasons for the transactions and the waiver application
The transactions underlying the Contractual Arrangements enable the Consolidated Affiliated
Entities to be consolidated into our Group and allow our Group to obtain the economic benefits
(including profits earned) generated by the Consolidated Affiliated Entities, which are then
consolidated into our Company’s accounts and may be distributed up to our Shareholders. See
“Contractual Arrangements” for further details on how we are able to consolidate and derive the
economic benefits from the Consolidated Affiliated Entities.
As a result of the Contractual Arrangements, our Company, through WFOE, effectively has
100% control over the Consolidated Affiliated Entities and shall be entitled to 100% of the
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CONNECTED TRANSACTIONS
distributions made by the Consolidated Affiliated Entities (that do not otherwise remain with the
Consolidated Affiliated Entities). Accordingly, the Consolidated Affiliated Entities are effectively
treated as our wholly-owned subsidiaries (within the meanings ascribed to them under the Companies
Ordinance and the Listing Rules) and form part of our Group and are no different in substance and
effect from those subsidiaries in which we hold equity interest.
Since the Consolidated Affiliated Entities are part of our Group, transactions under New
Intergroup Agreements would be in the same nature as intragroup transactions typically conducted
between our Company and our wholly-owned legal subsidiaries or among our wholly-owned legal
subsidiaries, which would not constitute connected transactions under Chapter 14A of the Listing
Rules. Transaction fees (if any) and benefits generated under the Contractual Agreements and the
Intergroup Agreements remain within our Group, which means that benefits received by the
Consolidated Affiliated Entities will at the same time equally benefit our Company and be in the
interests of our Shareholders as a whole. As a result of the Contractual Arrangements, no transaction
fee (if any) or benefit received by the Consolidated Affiliated Entities would flow to the Registered
Shareholders.
Given the above, our Directors (including the independent non-executive Directors) are of the
view that the Contractual Arrangements, the New Intergroup Agreements, and the transactions
contemplated thereunder are fundamental to our Group’s legal structure and business and corporate
operations, that such transactions have been and will be entered into in the ordinary and usual course of
business of our Group, are on normal commercial terms or better, and are fair and reasonable and in the
interests of our Company and our Shareholders as a whole.
Additionally, our Directors consider that, given that our Group is placed in an unique situation
with respect to the connected transactions rules in connection with the Contractual Arrangements and
New Intergroup Agreements, it would be unduly burdensome and impracticable, and it would add
unnecessary administrative costs to our Company, if such transactions are subject to strict compliance
with the requirements under Chapter 14A of the Listing Rules, including the announcement, annual
reporting, and independent Shareholders’ approval (including recommendation from an independent
financial adviser) requirements.
Waiver application
Based on the above reasons, we have applied for, and the Stock Exchange has granted us, in
respect of the Contractual Arrangements and New Intergroup Agreements, (i) a waiver from strict
compliance with the announcement, circular and independent shareholders’ approval (including
recommendation from an independent financial adviser) requirements under Chapter 14A of the
Listing Rules; (ii) a waiver from strict compliance with the requirement to set a term of not exceeding
three years under Rule 14A.52 of the Listing Rules; and (iii) a waiver from strict compliance with the
requirements to set monetary annual caps under Rule 14A.53(1) of the Listing Rules (collectively, the
“Applicable Requirements ”), for so long as our Shares are listed on the Stock Exchange, subject to
the following conditions:
(a)
No change without independent non-executive Directors’ approval. No change to the
Contractual Arrangements (including with respect to any fees payable to WFOE
thereunder) will be made without the approval of the independent non-executive Directors.
(b)
No change without independent Shareholders’ approval. Save as described below, no
material change to the agreements governing the Contractual Arrangements will be made
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CONNECTED TRANSACTIONS
without the approval of our independent Shareholders. Once the independent
Shareholders’ approval of any change has been obtained, no further announcement or
approval by our independent Shareholders, except for those described above, will be
required under Chapter 14A of the Listing Rules unless and until further changes are
proposed. The periodic reporting requirement regarding the Contractual Arrangements in
the annual reports of our Company will continue to be applicable.
(c)
Economic benefits and flexibility. The Contractual Arrangements will continue to enable
our Group to receive economic benefits generated by Calorie Technology through: (i) our
Group’s option (if and when allowed under applicable PRC Laws) to acquire, all or part
of, the entire equity interests in Calorie Technology for nil consideration or for the
minimum amount of consideration permitted by applicable PRC Laws; (ii) the business
structure under which the profit generated by Calorie Technology is substantially retained
by our Group, such that no annual cap shall be set on the amount of service fees payable to
WFOE by Calorie Technology under the Consultancy and Services Agreement and the
Business Cooperation Agreement (as defined and described in “Contractual
Arrangements”); and (iii) our Group’s right to control the management and operation of,
as well as, in substance, all of the voting rights of Calorie Technology.
(d)
Renewal and reproduction. On the basis that the Contractual Arrangements provide an
acceptable framework for the relationship between our Company and its subsidiaries in
which our Company has direct shareholding, on the one hand, and Calorie Technology, on
the other hand, that framework may be renewed and/or reproduced without being in strict
compliance with the Applicable Requirements (including obtaining the approval of our
Shareholders): (i) upon the expiry of the existing arrangements; (ii) in connection with any
changes to the Registered Shareholder in respect of its shareholding in or director(s) of the
Consolidated Affiliated Entities; or (iii) in relation to any existing, newly established or
acquired wholly foreign-owned enterprise (or foreign-controlled joint venture) or
operating company (including branch company), engaging in the same business as that of
our Group. Such renewal and/or reproduction is justified by business expediency. The
directors, chief executive or substantial shareholders of any existing or new wholly
foreign-owned enterprise (or foreign-controlled joint venture) or operating company
(including branch company) engaging in the same business as that of our Group which our
Group may establish will, upon renewal and/or reproduction of the Contractual
Arrangements, be treated as connected persons of our Group and transactions between
these connected persons and our Group other than those under similar Contractual
Arrangements shall comply with Chapter 14A of the Listing Rules. This condition is
subject to relevant PRC Laws and approvals. Any such renewed or reproduced agreements
will be on substantially the same terms and conditions as the existing Contractual
Arrangements.
DIRECTORS’ CONFIRMATION
Our Directors (including independent non-executive Directors) are of the view that: (a) the
Contractual Arrangements have been entered into in our ordinary and usual course of business on
normal commercial terms or better (for our Company), which are fair and reasonable and in the
interests of our Company and our Shareholders as a whole; (b) the proposed alternative caps and the
term of the agreements underlying the Contractual Arrangement, which exceeds three years, are fair
and reasonable and in the interests of us and our Shareholders as a whole; and (c) the term of the
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CONNECTED TRANSACTIONS
agreements is justifiable and in line with normal business practice agreements of this type, and
necessary to ensure that the Consolidated Affiliated Entities remain controlled, and their economic
interest may be enjoyed, by the Company on an uninterrupted basis.
SOLE SPONSOR’S CONFIRMATION
Based on the documentation provided by the Company and the Sole Sponsor’s due diligence,
the representations and confirmations provided by the Company and the Directors to the Sole Sponsor
and discussions with the Company, the Sole Sponsor is of the view that: (a) the Contractual
Arrangements are fundamental to the Group’s legal structure and business operations and that the
Contractual Arrangements have been entered into in the ordinary and usual course of business, on
normal commercial terms and are fair and reasonable and in the interests of the Company and the
Shareholders as a whole; and (b) the proposed alternative caps and the term of the agreements
underlying the Contractual Arrangement, which exceeds three years, are fair and reasonable and in the
interests of us and our Shareholders as a whole. In addition, taking into account the reasons for
entering into the Contractual Arrangements and the factors mentioned above, the Sole Sponsor is of the
view that it is normal business practice for the Contractual Arrangements to be for a term that is longer
than three years.
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DIRECTORS AND SENIOR MANAGEMENT
DIRECTORS
The Board consists of seven Directors, comprising three executive Directors, one non-executive
Director and three independent non-executive Directors. The following table provides certain
information about the Directors:
Name Age Position
Date of joining the
Group
Date of
appointment as
a Director Roles and responsibilities
WANG Ning
(ˮྐྵ) ..........
32 Executive
Director,
Chairman, Chief
Executive Officer
and Founder
September
2014
April 21,
2015
Responsible for the overall
strategy, business
development and
management of our
Company
PENG Wei
(
ుਬ) ..........
36 Executive
Director, Vice
President of
Online Operations
and Co-founder
October 2014 July 23, 2015 Leading and managing our
Keep online platform,
including content and user
management
LIU Dong
(
ᄎ̆) ..........
45 Executive
Director, Vice
President of
Consumer Fitness
Products and
Co-founder
October 2017 April 20,
2021
Responsible for the overall
strategy and operation of
our fitness products
business unit including
smart devices
LI Haojun
(
ࠏ........)
36 Non-executive
Director
September
2015
September 21,
2015
Providing professional
opinion and judgment to
the Board
GE Xin
(
໤อ) ..........
46 Independent
non-executive
Director
N/A Listing Date
(1) Providing independent
opinion and judgment to
the Board
WANG Haining
(
ˮऎྐྵ) ........
45 Independent
non-executive
Director
N/A Listing Date
(1) Providing independent
opinion and judgment to
the Board
SHAN Yigang
(
࡝........)
50 Independent
non-executive
Director
N/A Listing Date
(1) Providing independent
opinion and judgment to
the Board
Note:
(1) The appointment of Ms. Ge Xin, Mr. Shan Yigang and Mr. Wang Haining as independent non-executive Directors will take effect from
July 12, 2023.
Save as disclosed below, none of the Directors had held any directorships in listed companies
during the three years immediately prior to the Latest Practicable Date, there is no other information in
respect of the Directors to be disclosed pursuant to Rules 13.51(2)(a) to (v) of the Listing Rules, and
there is no other matter that needs to be brought to the attention of Shareholders or potential investors.
Executive Directors
Mr. Wang Ning (
ˮྐྵ) aged 32, is an executive Director, the Chief Executive Officer, the
Chairman of the Board, and the founder of our Company. Mr. Wang is responsible for the overall
strategy, business direction and management of our Company.
Mr. Wang founded Keep in September 2014, immediately after he graduated from university.
Mr. Wang received his bachelor’s degree in computer science from Beijing Information Science and
Technology University in July 2014.
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DIRECTORS AND SENIOR MANAGEMENT
Mr. Peng Wei ( ుਬ), aged 36, is an executive Director, vice president of online operations and
co-founder of our Company. He has served as our Director since July 2015 and the vice president of
online operations since October 2014. Mr. Peng leads and manages our Keep online platform,
including content and user management.
Prior to joining our Group in October 2014, Mr. Peng was the product manager of Beijing
Yuanli Future Technology Co., Ltd. (formerly known as Beijing Fenbi Future Technology Co., Ltd.)
from July 2013 to October 2014. Mr. Peng received his bachelor’s degree in psychology from Tianjin
University of Commerce in June 2009 and master’s degree in psychology from Peking University in
July 2013.
Mr. Liu Dong (
ᄎ̆), aged 45, is an executive Director, vice president of consumer fitness
products and co-founder of our Company. He has served as our director since April 2021 and vice
president of consumer fitness products since September 2017. Mr. Liu is responsible for the overall
strategy and operation of our smart fitness products business unit including smart devices.
Before joining our Group in October 2017, Mr. Liu was the co-founder and president of Qibai
(Beijing) Technology Development Co., Ltd. from September 2014 to September 2017. From October
2009 to April 2013, Mr. Liu served as the president assistant of Sungy Mobile Limited. From October
2001 to September 2009, Mr. Liu served in various capacities at BenQ in China, including sales
manager, product manager and manager of Beijing branch. Mr. Liu received his bachelor’s degree in
mechanical and electronic engineering from Xi’an Technological University in July 2000.
Non-executive Director
Mr. Li Haojun (
ࠏ)aged 36, is a non-executive Director of the Company. Mr. Li joined
GGV Capital in May 2014 and has served as a partner at GGV Capital since April 2021. Prior to that,
Mr. Li served as an assistant investment director at Vertex Venture from August 2012 to April 2014,
where he led and participated in several early and growth-stage investments in the TMT sector. From
July 2011 to August 2012, Mr. Li served as a product manager for Tencent Holdings Ltd (stock code:
00700). Mr. Li received his bachelor’s degree in electronics from Peking University in July 2008 and
master’s degree in microelectronics from Peking University in July 2011.
Independent Non-Executive Directors
Ms. Ge Xin (
໤อ), aged 46, was appointed as an independent non-executive Director with
effect from the Listing Date. Ms. Ge is the founding partner of G-Bridge Partners Ltd since September
2022. Ms. Ge served as an advisor of Du Xiaoman from February 2022 to December 2022 and was a
senior vice president and the chief financial officer of Du Xiaoman from May 2019 to January 2022.
Prior to that, she served as a partner of Ares Management Private Equity Group from June 2014 to
December 2018. From August 2005 to May 2014, Ms. Ge served as a managing director at the
investment banking division at Goldman Sachs. She was a sponsor principal of Goldman Sachs (Asia)
L.L.C. and a responsible officer from January 2012 to May 2014, in respect of Type 1 (dealing in
securities) and Type 6 (advising on corporate finance) regulated activities. She worked at
PricewaterhouseCoopers in Beijing and San Francisco from July 1998 to June 2003. Ms. Ge was a
Certified Public Accountant in the United States. Ms. Ge received her dual bachelor’s degrees in
English literature and economics from Peking University in June 1998. She received her master’s
degree in business administration from Harvard Business School in June 2005.
Mr. Shan Yigang (
࡝)aged 50, was appointed as an independent non-executive Director
with effect from the Listing Date. Mr. Shan has served as the executive director of KE Holdings Inc.
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DIRECTORS AND SENIOR MANAGEMENT
(stock code: 2423; NYSE: BEKE) since July 2018. He has been a director of Beijing Lianjia from
December 2007 to September 2021. Prior to joining Beijing Lianjia, Mr. Shan was the co-founder of
Dalian Haowangjiao Real Estate Brokerage Co., Ltd. from December 1999 to November 2007.
Mr. Shan obtained his EMBA degree from Tsinghua University in January 2019.
Mr. Wang Haining (
ˮऎྐྵ), aged 45, was appointed as an independent non-executive
Director with effect from the Listing Date. Mr. Wang has served as the chairman and general manager
of Happy Elements Technology (Beijing) Limited since February 2012 where he previously served as
the executive director from July 2012 to February 2017. He founded Beijing Shuangyu Hudong
Technology Development Co., Ltd. in October 2009. Prior to that, he served as the senior director of
Renren Inc. (NYSE: RENN) from June 2007 to October 2009. From March 2005 to June 2007, he
served as an account executive of SAP. He served as a high tech industry manager of Oracle from
March 2004 to March 2005. Mr. Wang obtained his bachelor’s degree in information technology from
Wuhan University in July 2000.
SENIOR MANAGEMENT
The following table provides information about members of the senior management of our
Company:
Name Age Position
Date of joining the
Group Roles and responsibilities
WANG Ning
(ˮྐྵ) ................
32 Executive Director,
Chairman, Chief
Executive Officer and
Founder
September
2014
Responsible for the overall
strategy, business
development and
management of our
Company
PENG Wei
(
ుਬ) ................
36 Executive Director, Vice
President of Online
Operations and
Co-founder
October 2014 Leading and managing our
Keep online platform,
including content and user
management
LIU Dong
(
ᄎ̆) ................
45 Executive Director, Vice
President of Consumer
Fitness Products and
Co-founder
October 2017 Responsible for the overall
strategy and operation of
our smart fitness products
business unit including
smart devices
HUANG Weibo
(
ت...............)
43 Chief Financial Officer November 2020 Overseeing the finance,
legal, risk management
and the investing and
financing activities of our
Company
Mr. Wang Ning ( ˮྐྵ) aged 32, is an executive Director, the Chief Executive Officer, the
Chairman of the Board, and the founder of our Company. See “—Executive Directors” above.
Mr. Peng Wei ( ుਬ), aged 36, is an executive Director, vice president of online operations and
co-founder of our Company. See “—Executive Directors” above.
Mr. Liu Dong ( ᄎ̆), aged 45, is an executive Director, vice president of consumer fitness
products and co-founder of our Company. See “—Executive Directors” above.
Mr. Huang Weibo (ت)aged 43, is the Chief Financial Officer of our Company and
oversees the finance, legal, risk management and the investing and financing activities of our
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Company. Before joining the Group in November 2020, Mr. Huang held senior executive and
managerial positions in top technology companies and a renowned public accounting firm. Mr. Huang
served as the chief financial officer of Ziroom Inc. from March 2017 to October 2020. Prior to that,
Mr. Huang served as the executive president and chief financial officer of Rongchain Inc. from January
2016 to March 2017. Mr. Huang served as the senior finance director of Didi Infinity Technology
Development Co., Ltd. from November 2014 to January 2016, and the senior finance director of
Douban Inc. from August 2013 to October 2014. Prior to that, he worked at Deloitte Touche Tohmatsu
from August 2001 to May 2011, where his last position was associate director. In addition, Mr. Huang
also served as a finance management consultant in the World Bank from November 2012 to June 2013.
Mr. Huang became a member of the Chinese Institute of Certified Public Accountants in August 2010,
a certified internal auditor in November 2005, and a certified information system auditor in June 2006.
Mr. Huang received his bachelor’s degree in public finance and taxation from Sun Yat-sen University
in June 2001 and a master’s degree in business administration from Georgetown University in May
2013.
JOINT COMPANY SECRETARIES
Mr. Huang Weibo (
ت)has been appointed as our joint company secretary. See “—Senior
Management” above.
Ms. Lai Siu Kuen (ࢇ)has been appointed as our joint company secretary. Ms. Lai is a
director of corporate services of Tricor Services Limited. She is well experienced in advising and
assisting with the corporate secretarial and corporate governance matters of Hong Kong listed
companies. She is currently the sole/joint company secretary(ies) of several companies whose shares
are listed on the Hong Kong Stock Exchange, including CGN Mining Company Limited (stock code:
1164), Pujiang International Group Limited (stock code: 2060), Shanghai Junshi Biosciences Co., Ltd.
(stock code: 1877) and Yangtze Optical Fiber and Cable Joint Stock Limited Company (stock code:
6869), She holds a bachelor’s degree in accounting, received November 1997, and, since October
2012, is a fellow member of both The Hong Kong Chartered Governance Institute and The Chartered
Governance Institute in the United Kingdom.
CORPORATE GOVERNANCE
Audit Committee
We have established an audit committee with written terms of reference in compliance with
Rule 3.21 of the Listing Rules and the Corporate Governance Code set out in Appendix 14 to the
Listing Rules. The primary duties of the audit committee are to review and supervise the financial
reporting process and internal controls system of the Group, review and approve connected
transactions and to advise the Board. The audit committee comprises three independent non-executive
Directors, namely Ms. Ge Xin, Mr. Shan Yigang and Mr. Wang Haining. Ms. Ge Xin is the chairlady
of the committee and is the director appropriately qualified as required under Rules 3.10(2) and 3.21 of
the Listing Rules.
Remuneration Committee
We have established a remuneration committee with written terms of reference in compliance
with Rule 3.25 of the Listing Rules and the Corporate Governance Code set out in Appendix 14 to the
Listing Rules. The primary duties of the remuneration committee are to review and make
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DIRECTORS AND SENIOR MANAGEMENT
recommendations to the Board regarding the terms of remuneration packages, bonuses and other
compensation payable to the Directors and senior management. The remuneration committee
comprises Mr. Wang Haining, Ms. Ge Xin and Mr. Wang Ning. Mr. Wang Haining is the chairman of
the committee.
Nomination Committee
We have established a nomination committee with written terms of reference in compliance
with the Code on Corporate Governance set out in Appendix 14 to the Listing Rules. The primary
duties of the nomination committee are to make recommendations to the Board regarding the
appointment of Directors and Board succession. The nomination committee comprises Mr. Shan
Yigang, Mr. Wang Haining and Mr. Wang Ning. Mr. Shan Yigang is the chairman of the committee.
Corporate Governance Code
We aim to implement a high standard of corporate governance, which we believe is crucial to
safeguard the interests of our Shareholders. To accomplish this, we expect to comply with the
Corporate Governance Code set out in Appendix 14 to the Listing Rules after the Listing, save that our
visionary founder Mr. Wang will serve as both our Chairman and Chief Executive Officer as discussed
below.
Management Presence
According to Rule 8.12 of the Listing Rules, we must have sufficient management presence in
Hong Kong. This normally means that at least two of our executive Directors must be ordinarily
resident in Hong Kong.
Since the principal business operations of our Group are conducted in China, members of our
senior management are, and are expected to continue to be, based in China. Further, as our executive
Directors have a vital role in our Group’s operations, it is crucial for them to remain in close proximity to
our Group’s central management located in China. Our Company does not and, for the foreseeable future,
will not have a sufficient management presence in Hong Kong. We have applied for, and the Stock
Exchange has granted, a waiver from compliance with Rule 8.12 of the Listing Rules. For further details,
see “Waivers and Exemptions—Waiver in respect of management presence in Hong Kong”.
Chairman of the Board and Chief Executive
Pursuant to code provision C.2 in Part 2 of the Corporate Governance Code set out in
Appendix 14 to the Listing Rules, companies listed on the Stock Exchange are expected to comply
with, but may choose to deviate from the requirement that the responsibilities between the chairperson
and the chief executive officer should be segregated and should not be performed by the same
individual. We do not have a separate chairperson and chief executive officer and Mr. Wang currently
performs these two roles. The Board believes that vesting the roles of both chairperson and chief
executive officer in the same person has the benefit of ensuring consistent leadership within the Group
and enables more effective and efficient overall strategic planning for the Group. The Board considers
that the balance of power and authority for the present arrangement will not be impaired and this
structure will enable the Company to make and implement decisions promptly and effectively. The
Board will continue to review and consider splitting the roles of chairperson of the Board and the chief
executive officer of the Company if and when it is appropriate taking into account the circumstances of
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DIRECTORS AND SENIOR MANAGEMENT
the Group as a whole. For further information relating to the Company’s corporate governance
measures, see “Relationship with Our Single Largest Shareholder—Corporate Governance Measures”.
Board Diversity
Our Company has adopted a board diversity policy which sets out the approach to achieve
diversity of the Board. Our Company recognizes and embraces the benefits of having a diverse Board
and sees increasing diversity at the Board level, including gender diversity, as an essential element in
maintaining the Company’s competitive advantage and enhancing its ability to attract, retain and
motivate employees from the widest possible pool of available talent. Pursuant to the board diversity
policy, in reviewing and assessing suitable candidates to serve as a director of the Company, the
nomination committee will consider a number of aspects, including but not limited to gender, age,
cultural and educational background, professional qualifications, skills, knowledge, and industry and
regional experience. Pursuant to the board diversity policy, the nomination committee will discuss
periodically and when necessary, agree on the measurable objectives for achieving diversity, including
gender diversity, on the Board and recommend them to the Board for adoption.
Environmental, Social and Governance (“ESG”)
As the bulk of our operations are conducted online, our impact on the environment is limited
and we have a small carbon footprint. Nevertheless, we regard environment protection as an important
corporate responsibility. Our audit committee will be tasked with overseeing and reviewing the
environmental, social and governance aspects of our operations. We intend to appoint an ESG
consultant as soon as practicable following our Listing to provide professional advice to us on
formulating our ESG key strategies and how to improve the ESG aspects of our operations.
Our Board will adopt an ESG policy to take effect upon the Listing, which will set out our key
ESG-related goals and review standards. In accordance with such ESG policy, certain senior officers of
our Group will be tasked with the day-to-day management of ESG matters and take full responsibilities
for the decision-making and reporting with regard to ESG-related work. Such senior officers will
report on a regular basis to our Audit Committee, who will represent our Board for the review and
oversight of our ESG policies, performance and risks. Our Audit Committee will also be required
under the ESG policy to regularly examine and evaluate the implementation of our ESG policies and
any possible deficiencies and make comprehensive public disclosures on ESG matters on an annual
basis.
Our senior officers, together with our Audit Committee, and our ESG consultant, will regularly
evaluate the performance of our suppliers and contract manufacturers, in terms of their ESG impact. To
the extent possible, we intend to agree with such suppliers and contract manufacturers for them to
undertake to report their ESG impact to us on a regular basis for our assessment.
Upon the Listing, we will publish the “Environmental, Social and Governance Report” annually
in accordance with Appendix 27 of the Listing Rules to comprehensively analyze and disclose
important ESG matters, including our ESG related risk management, performance and achievement.
We intend to be public and transparent in terms of our ESG performance before our public investors
and stakeholders, which will include detailed disclosures on metrics and targets used to assess and
manage environmental, social and climate-related risks.
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DIRECTORS AND SENIOR MANAGEMENT
COMPLIANCE ADVISER
We have appointed Guotai Junan Capital Limited as the compliance adviser (the “ Compliance
Adviser”) pursuant to Rule 3A.19 of the Listing Rules. The Compliance Adviser will provide us with
guidance and advice as to compliance with the Listing Rules and applicable Hong Kong laws. Pursuant
to Rule 3A.19 of the Listing Rules, the Compliance Adviser will advise the Company in certain
circumstances including:
(a) before the publication of any regulatory announcement, circular, or financial report;
(b) where a transaction, which might be a notifiable or connected transaction, is
contemplated, including share issues and share repurchases;
(c) where we propose to use the proceeds of the Global Offering in a manner different from
that detailed in this document or where the business activities, development or results of
the Group deviate from any forecast, estimate or other information in this document;
and
(d) where the Stock Exchange makes an inquiry to the Company regarding unusual
movements in the price or trading volume of its listed securities or any other matters in
accordance with Rule 13.10 of the Listing Rules.
The term of appointment of the Compliance Adviser shall commence on the Listing Date and
end on the date on which our Company distributes to Shareholders the annual report of our financial
results for the first full financial year commencing after the Listing Date and such appointment may be
subject to extension by mutual agreement.
DIRECTORS’ REMUNERATION
Our Directors and senior management receive remuneration (including salaries, bonuses, share-
based compensation and other employee benefits) on their behalf. See Note 10 to the Accountant’s
Report in Appendix I for more details.
The aggregate amount of remuneration (including basic salaries, housing allowances, other
allowances and benefits in kind, contributions to pension plans and discretionary bonuses) for our
Directors for the years ended December 31, 2019, 2020, 2021 and 2022 was approximately RMB3.6
million, RMB5.1 million, RMB14.8 million and RMB17.8 million, respectively.
The aggregate amount of remuneration (including basic salaries, housing allowances, other
allowances and benefits in kind, contributions to pension plans and discretionary bonuses) for the five
highest paid individuals for the years ended December 31, 2019, 2020, 2021 and 2022 was
approximately RMB11.3 million, RMB20.2 million, RMB82.3 million and RMB61.5 million,
respectively.
Save as disclosed above, and in the Accountant’s Report set out in Appendix I, no other
payments have been paid or are payable, in respect of the years ended December 31, 2019, 2020, 2021
and 2022 by our Company to our Directors.
No remuneration was paid to our Directors or the five highest paid individuals as an
inducement to join, or upon joining, our Group. No compensation was paid to, or receivable by, our
Directors or past directors or the five highest paid individuals for the Track Record Period for the loss
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DIRECTORS AND SENIOR MANAGEMENT
of office as director of any member of our Group or of any other office in connection with the
management of the affairs of any member of our Group. None of our Directors waived any
emoluments during the same period.
See “Statutory and general information—Pre-IPO Share Incentive Plans” in Appendix IV for
details regarding the incentive plans for our Directors and the senior management.
COMPETITION
Each of the Directors confirms that as of the Latest Practicable Date, save as disclosed in this
document, he/she did not have any interest in a business which materially competes or is likely to
compete, directly or indirectly, with our business, that would require disclosure under Rule 8.10 of the
Listing Rules.
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SUBSTANTIAL SHAREHOLDERS
SUBSTANTIAL SHAREHOLDERS
So far as our Directors are aware, immediately following completion of the Global Offering
(assuming the Presumptions) the following persons will have an interest or short position in our Shares
or underlying Shares which would fall to be disclosed to us under the provisions of Divisions 2 and 3
of Part XV of the SFO, or, will be, directly or indirectly, interested in 10% or more of the issued voting
shares of our Company or any other member of our Group:
Name of Shareholder Capacity / Nature of interest
Number of
Shares(1)
Approximate percentage
of interest in shares of
our Company after the
Global Offering(1)
GGV Shareholders Interest in controlled
corporations
75,814,900 14.42%
GGV Capital Select L.P. (2)* Beneficial owner 22,301,580 4.24%
GGV Capital V L.P. (2) Beneficial owner 44,557,380 8.48%
GGV Capital V Entrepreneurs Fund L.P. (2)* Beneficial owner 1,635,240 0.31%
GGV VII Investments Pte. Ltd. (2)* Beneficial owner 7,320,700 1.39%
SVF II Calorie Subco (DE) LLC
SVF II Calorie Subco (DE) LLC
(3) Beneficial owner 48,804,580 9.28%
5Y Capital Interest in controlled
corporations
39,430,520 7.50%
Morningside China TMT Fund IV, L.P. (4) Beneficial owner 30,280,360 5.76%
Morningside China TMT Fund IV
Co-Investment, L.P. (4)*
Beneficial owner 3,140,920 0.60%
Morningside China TMT Special
Opportunity Fund II, L.P. (4)*
Beneficial owner 1,128,780 0.21%
Evolution Special Opportunity Fund I,
L.P.(4)*
Beneficial owner 4,243,880 0.81%
Evolution Fund I Co-investment, L.P. (4)* Beneficial owner 636,580 0.12%
MORESPARK LIMITED
MORESPARK LIMITED(5) Beneficial owner 32,819,640 6.24%
JenCap Interest in controlled
corporations
29,509,020 5.62%
JenCap Squad(6)* Beneficial owner 26,053,100 4.96%
JenCap Squad I L.P. (6)* Beneficial owner 3,455,920 0.66%
BAI GmbH
BAI GmbH
(7) Beneficial owner 28,038,500 5.33%
Mr. Wang Ning Interest in controlled
corporations
109,031,837 20.72%
Lightmap Limited(8)* Beneficial owner 8,909,312 1.69%
Persistent Courage Holdings Limited (8) Beneficial owner 78,469,806 14.93%
Interest under contract 21,652,719 4.1%
Futu Trustee Limited (9) Trustee 59,645,300 11.35%
Calorie Partner Limited Beneficial interest 45,205,300 8.60%
Calorie Fortune Limited* Beneficial interest 14,440,000 2.75%
Notes:
* These entities are not substantial shareholders as they will not have an interest or short position in our Shares or underlying Shares which
would fall to be disclosed to us under the provisions of Divisions 2 and 3 of Part XV of the SFO, and will not be, directly or indirectly,
interested in 10% or more of the issued voting shares of our Company or any other member of our Group. These entities are disclosed in
this table for the sake of completeness.
(1) The table above assumes (i) the preferred shares will be automatically converted into Shares on a 1:1 basis, (ii) the Global Offering
becomes unconditional and the Offer Shares are issued pursuant to the Global Offering, (iii) the Over-allotment Option is not exercised
and no Shares are issued under the Share Incentive Plans, and (iv) no Shares are issued or canceled and no other potential change to the
share capital materialize as described in “Share Capital—Potential changes to share capital” below.
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SUBSTANTIAL SHAREHOLDERS
(2) GGV Capital Select L.P. is controlled by GGV Capital Select L.L.C. GGV Capital V L.P. is controlled by GGV Capital V L.L.C. GGV
Capital V Entrepreneurs Fund L.P. is controlled by GGV Capital V L.L.C. GGV VII Investments Pte. Ltd. is ultimately controlled by
GGV Capital VII L.L.C. GGV Capital Select L.L.C. and GGV Capital V L.L.C. are controlled by Lee Hongwei Jenny, Jeff Richards,
Jixun Foo, Glenn Solomon and Hans Tung. GGV Capital VII L.L.C. is controlled by Lee Hongwei Jenny, Jeff Richards, Jixun Foo,
Glenn Solomon, Hans Tung and Eric Xu.
(3) SVF II Calorie Subco (DE) LLC (“ SVF”) is a special purpose vehicle indirectly majority owned by SoftBank Vision Fund II-2 L.P.
(“SVF Fund II ”). The sole member of SVF is SVF II Investment Holdings (Subco) LLC (“ SVF II Investment Subco ”) and the sole
member of SVF II Investment Subco is SVF II Investment Holdings LLC (“ NewCo”). SB Global Advisers Limited (“ SBGA”) has been
appointed as manager and is responsible for making all decisions related to the acquisition, structuring, financing and disposal of SVF
Fund II’s investments, including as held by NewCo.
(4) Morningside China TMT Fund IV, L.P., Morningside China TMT Fund IV Co-Investment, L.P. and Morningside China TMT Special
Opportunity Fund II, L.P. are controlled by their general partner, Morningside China TMT GP IV, L.P.. Morningside China TMT GP IV,
L.P., is controlled by its general partner, TMT General Partner Ltd.. Each of Liu Qin, Shi Jianming and Morningside Venture
(VII) Investments Limited is entitled to exercise or control the exercise of one-third of the voting power of all issued shares in TMT
General Partner Ltd. at its general meeting. Morningside Venture (VII) Investments Limited is indirectly 100% held through a series of
100% owned holding companies by the Landmark Trust Switzerland SA as trustee of a discretionary trust established by Mdm. Chan
Tan Ching Fen for the benefit of certain members of her family and other charitable objects. Evolution Special Opportunity Fund I, L.P.
and Evolution Fund I Co-investment, L.P. are controlled by their general partner 5Y Capital GP Limited. Each of Liu Qin and Shi
Jianming is entitled to exercise or control the exercise of one-half of the voting power of all issued shares in 5Y Capital GP Limited at its
general meeting.
(5) Tencent Holdings Limited (HKSE: 0700) is the sole member of MORESPARK LIMITED.
(6) JenCap Squad is wholly owned by Jeneration Capital Partners II L.P., which is controlled by its general partner, Jeneration Capital GP II.
JenCap Squad I L.P., is controlled by its general partner JenCap Squad I GP. Jeneration Capital GP II and JenCap Squad I GP are
ultimately controlled by Jimmy Ching-Hsin Chang.
(7) BAI GmbH is wholly owned by Reinhard Mohn GmbH. Reinhard Mohn GmbH is wholly owned by Bertelsmann SE&Co. KgaA, which
is controlled by Bertelsmann Verwaltungsgesellschaft. Bertelsmann Verwaltungsgesellschaft is controlled by Mr. Christoph Mohn.
(8) Each of Persistent Courage Holdings Limited and Lightmap Limited is wholly owned by Arrow Factory Limited, which is controlled by
Starmap Trust, a trust controlled by Mr. Wang Ning and in which Mr. Wang is the settlor and sole beneficiary. Additionally, pursuant to
the Voting Proxy Agreements, Mr. Wang, through Persistent Courage Holdings Limited as proxyholder, is entitled to the votes attached
to an aggregate of 21,652,719 Shares held by the proxy granters. Accordingly, under the SFO, Mr. Wang, through Persistent Courage
Holdings Limited, is deemed to be interested in the subject shares under the Voting Proxy Agreements. See “History, reorganization, and
corporate structure—Voting Proxy Agreements” for further details.
(9) Futu Trustee Limited is the trustee of Calorie Partner Limited and Calorie Fortune Limited, which hold Shares on behalf of participants
of the Pre-IPO Share Incentive Plans who are not close associates of our Company. See “Statutory and general information—Pre-IPO
Share Incentive Plans” in Appendix IV for further information. Under the SFO, Futu Trustee Limited is deemed to be interested in the
Shares held by corporations controlled by the trusts in which it is trustee, on an aggregated basis.
Except as disclosed above, our Directors are not aware of any other person who will,
immediately following completion of the Global Offering (assuming the Presumptions), have an
interest or short position in our Shares or underlying Shares which would fall to be disclosed to us
under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, will be, directly or indirectly,
interested in 10% or more of the issued voting shares of our Company or any other member of our
Group.
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CORNERSTONE INVESTORS
OVERVIEW
We have entered into cornerstone investment agreements (“ Cornerstone Investment
Agreement(s)”) with cornerstone investors set out in this chapter (“Cornerstone Investor(s)”), pursuant
to which the Cornerstone Investors have agreed to, subject to certain conditions, subscribe, or cause their
designated entities (including qualified domestic institutional investor(s) (“ QDII(s)”) or qualified
domestic limited partnership(s) (“QDLP(s)”) as approved by the relevant PRC authorities) to subscribe,
for such number of Offer Shares (rounded down to the nearest whole board lot of 100 Shares) that may
be purchased at the Offer Price of an aggregate amount of up to approximately US$9.79 million
(approximately HK$76.54 million) (calculated based on the conversion rate of US$1.00 to HK$7.8153)
(exclusive of brokerage, SFC transaction levy, St ock Exchange trading fee and AFRC transaction levy)
(each a “Cornerstone Investment” and collectively, the “Cornerstone Placing”).
The Cornerstone Placing will form part of the International Offering, and the Cornerstone
Investors will not acquire any Offer Shares under the Global Offering (other than pursuant to the
Cornerstone Investment Agreements). The Offer Shares to be acquired by the Cornerstone Investors
will rank pari passu in all respects with the fully paid Shares in issue and will be counted towards the
public float of our Company under Rule 8.24 of the Listing Rules.
Other than a guaranteed allocation of the relevant Offer Shares at the final Offer Price, the
Cornerstone Investors do not have any preferential rights under the Cornerstone Investment
Agreements, as compared with other public Shareholders. There are no side arrangements between us
and the Cornerstone Investors or any benefit, direct or indirect, conferred on the Cornerstone Investors
by virtue of or in relation to the Cornerstone Placing, other than a guaranteed allocation of the relevant
Offer Shares at the final Offer Price.
There will be no delayed delivery or deferred settlement of Offer Shares to be subscribed by the
Cornerstone Investors and the consideration will be settled by the Cornerstone Investors on or before
the Listing Date. The Offer Shares to be subscribed by the Cornerstone Investors may be affected by
reallocation in the event of over-subscription under the Hong Kong Public Offering, as described in
“Structure of the Global Offering—The Hong Kong Public Offering—Reallocation and Clawback”.
Details of the actual number of Offer Shares to be allocated to the Cornerstone Investors will be
disclosed in the allotment results announcement to be issued by us on or around July 11, 2023.
THE CORNERSTONE INVESTORS
The information about our Cornerstone Investors set out below has been provided by the
Cornerstone Investors in connection with the Cornerstone Placing:
1. Shenzhen Fenda Technology Co., Ltd.
Shenzhen Fenda Technology Co., Ltd. (
ඳ)( “ Fenda Tech ”)
was founded in the PRC in 1993 and listed on the Shenzhen Stock Exchange in 2012
(stock code: 002681). Fenda Tech started with research and development and
manufacturing of loudspeakers, and after 30 years of development and precipitation and
innovation and upgrading, it has formed four core technical capabilities of wireless,
electroacoustic, software and precision manufacturing. Fenda Tech’s products mainly
include electroacoustic products, health appliances, smart wear and smart home four
business segments. It is a leading new intelligent hardware integration solution provider
and service provider.
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CORNERSTONE INVESTORS
2. Fuqing Shengde Calorie Investment Co., Ltd.
Established in China on May 31, 2023, Fuqing Shengde Calorie Investment Co., Ltd. (ڞ
ඳ)( “Shengde”) is a wholly-owned subsidiary of Fujian Shengde
Investment Group Co., Ltd. (ඳ)( “Shengde Group”). Established
in China on September 17, 2021, Shengde Group is an integrated industry supply chain
company focusing on yoga sports equipment. It vertically covers the core stages in the
product cycle, including elastomeric polymer raw materials, foam materials, finished
products production, warehousing, logistics services and other research and development,
manufacturing and logistics processes. With the belief that technological innovation is the
most important element to its corporate development, Shengde Group continues to develop
in the areas of new material research and development and smart manufacturing. Shengde
Group’s member companies have been awarded honorary titles including “National High-
tech Enterprise” (
ॴ৷อҦஔΆุ), “Provincial Science and Technology Small Giant”
(Ҧʃ̶ɛ), “National Science and Technology Enterprise” (Άุ) and
“Provincial Specialized New Enterprise” (ॴਖ਼ၚतอΆุ). Shengde Group is ultimately
beneficially owned by Weng Chen ( ॽೠ). Mr. Weng is an Independent Third Party.
3. Xiamen Evere Sports Goods Co., Ltd.
Xiamen Evere Sports Goods Co., Ltd. (ʮ̡)( “Evere Sports ”) is a
company established in the PRC in 1998 and is principally engaged in the OEM (original
equipment manufacturing) and ODM (original design manufacturing) as well as sale of
sports equipments, including workout bikes, treadmills, multi-functional training machine,
rowing machine and so forth. The founder and the sole shareholder of Evere Sports is
Mr. Lin Han Sung (
ؒMr. Lin is an Independent Third Party.
We became acquainted with each of Fenda Tech, Shengde Group and Evere Sports through
previous business cooperations as they are our existing suppliers; they approached us for investment
opportunities when they noticed our application for the Listing. As confirmed by each of the
Cornerstone Investors, their subscription under the Cornerstone Placing would be financed by their
own internal financial resources and/or the financial resources of their shareholders. We believe that
the Cornerstone Investment signifies our Cornerstone Investors’ confidence in the Company and its
business prospect, especially as our Cornerstone Investors are seasoned participants within the
industries in which we operate.
Immediately following the Global Offering, the Cornerstone Investors will not become
substantial shareholders of our Company and the Cornerstone Investors will not have any Board
representation in our Company.
To our Company’s best knowledge, each Cornerstone Investor (and, for Cornerstone Investors
who will subscribe for our Offer Shares through QDII or ODLP, each of such QDII or QDLP) is: (i) an
Independent Third Party and is not connected person; (ii) independent of other Cornerstone Investors;
(iii) not accustomed to take instructions from us, our Directors, chief executive, substantial
shareholders, existing Shareholders or any of its subsidiaries or their respective close associates in
relation to the acquisition, disposal, voting or other disposition of the Shares registered in their name or
otherwise held by them; and (iv) not financed by us, our Directors, chief executive, substantial
shareholders, existing Shareholders or any of its subsidiaries or their respective close associates.
To the extent that any Cornerstone Investor has engaged a QDII or QDLP to subscribe for the
relevant Offer Shares on its behalf, such Cornerstone Investor will procure such QDII or QDLP to
comply with the terms of its Cornerstone Investment Agreement in order to ensure the compliance of
such Cornerstone Investor with its obligations under its Cornerstone Investment Agreement.
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CORNERSTONE INVESTORS
To the best knowledge of our Company, the Cornerstone Investments do not require
shareholders’ approval from the shareholders of the listed Cornerstone Investor, or the corresponding
listed shareholder of the Cornerstone Investor in cases where its shareholder(s) is listed, on any stock
exchange as disclosed above in “—The Cornerstone Investors”.
CORNERSTONE PLACING
The table below sets out details of the Cornerstone Placing:
Assuming a final Offer Price of HK$28.92 per Share
(being the low-end of the indicative Offer Price range)
Cornerstone
Investor
Subscription
amount
Number of Offer
Shares to be
acquired (1)
Assuming the Over-Allotment
Option is not exercised
Assuming the Over-Allotment
Option is fully exercised
Approximately
% of the
Offer Shares
Approximately
% of the
issued share
capital (2)
Approximately
% of the
Offer Shares
Approximately
% of the
issued share
capital (2)
Fenda Tech US$5.00 million 1,351,300 12.47% 0.26% 10.84% 0.26%
Shengde US$2.00 million 540,400 4.99% 0.10% 4.34% 0.10%
Evere Sports RMB20.00 million 754,800 6.96% 0.14% 6.06% 0.14%
Total HK$76.54 million (3) 2,646,500 24.42% 0.50% 21.23% 0.50%
Assuming a final Offer Price of HK$45.19 per Share
(being the mid-point of the indicative Offer Price range)
Cornerstone
Investor
Subscription
amount
Number of Offer
Shares to be
acquired (1)
Assuming the Over-Allotment
Option is not exercised
Assuming the Over-Allotment
Option is fully exercised
Approximately
% of the
Offer Shares
Approximately
% of the
issued share
capital (2)
Approximately
% of the
Offer Shares
Approximately
% of the
issued share
capital (2)
Fenda Tech US$5.00 million 864,700 7.98% 0.16% 6.94% 0.16%
Shengde US$2.00 million 345,800 3.19% 0.07% 2.77% 0.07%
Evere Sports RMB20.00 million 483,000 4.46% 0.09% 3.88% 0.09%
Total HK$76.54 million (3) 1,693,500 15.62% 0.32% 13.59% 0.32%
Assuming a final Offer Price of HK$61.46 per Share
(being the high-end of the indicative Offer Price range)
Cornerstone
Investor
Subscription
amount
Number of Offer
Shares to be
acquired (1)
Assuming the Over-Allotment
Option is not exercised
Assuming the Over-Allotment
Option is fully exercised
Approximately
% of the Offer
Shares
Approximately
% of the issued
share capital (2)
Approximately
% of the Offer
Shares
Approximately
% of the issued
share capital (2)
Fenda Tech US$5.00 million 635,800 5.87% 0.12% 5.10% 0.12%
Shengde US$2.00 million 254,300 2.35% 0.05% 2.04% 0.05%
Evere Sports RMB20.00 million 355,100 3.28% 0.07% 2.85% 0.07%
Total HK$76.54 million (3) 1,245,200 11.49% 0.24% 9.99% 0.24%
Notes:
(1) Rounded down to the nearest whole board lot of 100 Shares. Calculated based on the exchange rate set out in “Information about this
document and the Global Offering—Exchange rate conversion”.
(2) Immediately following the Global Offering, assuming the Presumptions.
(3) Calculated based on the conversion rates of US$1.00 to HK$7.8153 and RMB1.00 to HK$1.0916, as applicable.
CLOSING CONDITIONS
The subscription obligation of each Cornerstone Investor under their respective Cornerstone
Investment Agreement is subject to, among other things, the following closing conditions:
(a) the underwriting agreements for the Hong Kong Public Offering and the International Offering
being entered into and having become effective and unconditional (in accordance with their
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CORNERSTONE INVESTORS
respective original terms or as subsequently waived or varied by agreement of the parties thereto)
by no later than the time and date as specified in the underwriting agreements, and neither of the
aforesaid underwriting agreements having been terminated;
(b) the Offer Price having been agreed upon between our Company and the Sole Overall Coordinator
(on behalf of the underwriters of the Global Offering);
(c) the Listing Committee of the Stock Exchange having granted the listing of, and permission to deal
in, the Shares (including the Shares subscribed for by the Cornerstone Investors) as well as other
applicable waivers and approvals, and such approval, permission or waiver having not been
revoked prior to the commencement of dealings in the Shares on the Stock Exchange;
(d) no Laws shall have been enacted or promulgated by any governmental authority which prohibits
the consummation of the transactions contemplated in the Global Offering or in the respective
Cornerstone Investment Agreement and there shall be no orders or injunctions from a court of
competent jurisdiction in effect precluding or prohibiting consummation of such transactions; and
(e) the representations, warranties, undertakings and confirmations of such Cornerstone Investor and
(where applicable) the guarantor under the respective Cornerstone Investment Agreement are and
will be accurate, true and complete in all respects and not misleading or deceptive and that there is
no material breach of such Cornerstone Investment Agreement on the part of such Cornerstone
Investor and (where applicable) the guarantor.
RESTRICTIONS ON DISPOSALS BY THE CORNERSTONE INVESTORS
Each Cornerstone Investor has agreed that it will not, whether directly or indirectly, at any time
during the period of twelve months (except for Fenda Tech, in the case of which the period is six months)
following the Listing Date (the “Lock-up Period”), dispose of any of the Offer Shares they have purchased
pursuant to the relevant Cornerstone Investment Agreement, save for in certain limited circumstances, such
as transfers to any of its wholly-owned subsidiaries who will be bound by the same obligations of such
Cornerstone Investor, including the Lock-up Period restriction.
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SHARE CAPITAL
AUTHORIZED AND ISSUED SHARE CAPITAL
The following is a description of our authorized share capital and the amount in issue and to be
issued as fully paid or credited as fully paid upon Listing, assuming the Presumptions.
Authorized share capital
Number Description of share
Aggregate
nominal
value
1,000,000,000 .......... Shares US$50,000
Issued share capital
Number Description of share
Aggregate
nominal value
514,833,387 ............ Shares in issue as at date of this document US$25,741.67
10,838,600 ............. Shares to be issued pursuant to the Global Offering US$ 541.93
525,671,987 ............ Shares in issue immediately after Global Offering US$26,283.60
The above table assumes (i) the Presumptions, and (ii) the Global Offering becomes
unconditional and Shares are issued pursuant to the Global Offering.
Our voting structure before and after Listing
Under our current weighted voting rights structure, our share capital comprises series A to
Series F-1 Preferred Shares and ordinary shares. See “History, Reorganization, and Corporate
Structure—Capitalization” for details of these Shares and their shareholders. Each ordinary share held
by Mr. Wang’s controlled entities, Persistent Courage Holdings Limited and Lightmap Limited,
entitled the holder to 15 super-voting rights at a general meeting of the Company. All other ordinary
shares and preferred shares entitled its holder to one vote per share at a general meeting of the
Company.
Pursuant to the shareholders’ agreement (currently in effect and which shall terminate upon
completion of the Listing), all preferred shares shall be automatically and immediately converted into
ordinary shares on a one-to-one basis.
Additionally, upon Listing, the Memorandum and Articles of Association will take effect,
under which, our Company will no longer have a weighted voting rights structure and all super-voting
rights attached to Shares controlled by Mr. Wang will be unwound and all issued Shares of our
Company will entitle their holders to one vote per share at a general meeting of our Company.
Upon the conversion of all issued preference shares into ordinary shares, our Company will
have in issue 315,835,187 additional ordinary shares, representing approximately 61.35% the total
number of issued Shares (immediately before the Global Offering). Following this, upon Listing, our
Company will have in issue 525,671,987 ordinary shares (assuming the Presumptions), each of which
will entitle its holder to one vote at the general meetings of our Company.
For further details, see the summary of our Articles of Association in Appendix III to this
document.
Ranking
The Offer Shares rank equally with all Shares currently in issue or to be issued as mentioned in
this document and, in particular, will rank pari passu for all dividends or other distributions declared,
made or paid on the Shares in respect of a record date which falls after the date of this document.
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SHARE CAPITAL
POTENTIAL CHANGES TO SHARE CAPITAL
Circumstances under which general meeting and class meeting are required
Our Company may by ordinary resolution of Shareholders (i) increase its capital;
(ii) consolidate and divide its share capital into shares of larger amount; (iii) subdivide its shares into
shares of smaller amount; (iv) cancel any shares which have not been taken or agreed to be taken. In
addition, our Company may reduce its share capital or capital redemption reserve by its shareholders
passing a special resolution (v) make provision for the allotment and issue of shares which do not carry
any voting rights; (vi) change the currency of denomination of its share capital; and (vii) reduce its
share premium account in any manner authorized, and subject to any conditions prescribed by law.
See “Summary of the Constitution of Our Company and Cayman Islands Company Law—
Articles of Association—Alteration of capital” in Appendix III for further details.
Subject to the Cayman Companies Act, if at any time the share capital of our Company is
divided into different classes of shares, all or any of the special rights attached to any class of shares
may (unless otherwise provided for by the terms of issue of the shares of that class) be varied or
abrogated either with the consent in writing of the holders of not less than three-fourths in nominal
value of the issued shares of that class or with the sanction of a resolution passed at a separate meeting
of the holders of the shares of that class by members holding shares representing three-fourths in
nominal value of the shares present in person or by proxy and voting at such meeting.
See “Summary of the Constitution of Our Company and Cayman Islands Company Law—
Articles of Association—Shares—Variation of rights of existing shares or classes of shares” in Appendix
III for further details.
General mandate to issue Shares
Subject to the Global Offering becoming unconditional, our Directors were granted a general
mandate to allot, issue and deal with any Shares or securities convertible into Shares of not more than
the sum of:
Š 20% of the total number of Shares in issue immediately following completion of the
Global Offering (but excluding any Shares which may be issued pursuant to the exercise
of the Over-allotment Option and the shares to be issued under the Share Incentive Plans);
and
Š the total number of Shares repurchased by our Company pursuant to the authority referred
to in “—General mandate to repurchase Shares” below.
This general mandate to issue Shares will remain in effect until the earliest of:
Š the conclusion of the next annual general meeting of our Company unless, by ordinary
resolution passed at that meeting, the authority is renewed, either unconditionally or
subject to condition;
Š the expiration of the period within which the next annual general meeting of our Company
is required to be held under any applicable laws of the Cayman Islands or the
Memorandum and Articles of Association; and
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SHARE CAPITAL
Š the passing of an ordinary resolution by Shareholders in a general meeting revoking or
varying the authority.
General mandate to repurchase Shares
Subject to the Global Offering becoming unconditional, our Directors were granted a general
mandate to repurchase our own Shares up to 10% of the total number of Shares in issue immediately
following completion of the Global Offering (but excluding any Shares which may be issued pursuant
to the exercise of the Over-allotment Option and excluding the share to be issued under the Share
Incentive Plans).
This mandate only relates to repurchases on the Stock Exchange or on any other stock
exchange on which the securities of our Company may be listed and which is recognized by the SFC
and the Stock Exchange for this purpose, and in accordance with all applicable laws and the
requirements under the Listing Rules or equivalent rules or regulations of any other stock exchange as
amended from time to time.
This general mandate to repurchase Shares will remain in effect until the earliest of:
Š the conclusion of the next annual general meeting of our Company unless, by ordinary
resolution passed at that meeting, the authority is renewed, either unconditionally or
subject to condition;
Š the expiration of the period within which the next annual general meeting of our Company
is required to be held under any applicable laws of the Cayman Islands or the
memorandum and the articles of association of our Company; and
Š the passing of an ordinary resolution by our Shareholders in a general meeting revoking or
varying the authority.
See “Statutory and General Information—Further Information About Our Group—Explanatory
statement on repurchase of our own securities” in Appendix IV for further details on the general
mandates to issue and repurchase Shares.
Shares Incentive Plans
We have adopted the Share Incentive Plans. See “Statutory and General Information—Pre-IPO
Share Incentive Plans” and “Statutory and General Information—Post-IPO Share Incentive Plan” in
Appendix IV for further details.
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FINANCIAL INFORMATION
In the following section we discuss our historical financial results for the years ended
December 31, 2019, 2020, 2021 and 2022. You should read the following discussion and analysis
together with our audited consolidated financial statements as of and for the years ended
December 31, 2019, 2020, 2021 and 2022, and the accompanying notes included in the
Accountant’s Report in Appendix I to this document. Our consolidated financial statements have
been prepared in accordance with International Financial Reporting Standards (“ IFRSs”).
This discussion and analysis contain forward-looking statements that reflect our current
views with respect to future events and our financial performance and involves risks and
uncertainties. These statements are based on our assumptions and analysis in light of our
experience and perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate under the circumstances.
However, whether actual outcomes and developments will meet our expectations and predictions
depends on a number of risks and uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of any number of factors. In
evaluating our business, you should carefully consider all of the information provided in this
document, including “Risk factors” and “Business”.
OVERVIEW
We are a growing and result-oriented platform that provides users with a comprehensive fitness
solution to help them achieve their fitness goals. We generated a majority of our revenue from the sales
of our self-branded fitness products during the Track Record Period. We offer extensive and
professional fitness content with AI-assisted personalized curriculums, encompassing interactive live
streaming classes and recorded fitness courses, that dynamically adjust course content and workout
intensity based on users’ athletic levels, fitness goals, daily workout patterns and diet. Our content is
complemented by a variety of smart fitness devices, fitness gear, apparel and food, which enables us to
seamlessly connect the physical and digital realms to create an immersive, one-stop fitness experience.
Our Keep brand is highly influential and has become synonymous with passion for fitness.
77.5% of fitness population in China knew of the Keep mobile app. We have made efforts to make
fitness more accessible to a larger population, encourage tens of millions to become our users, or
Keepers, and inspire them to develop a sense of belonging in our community. In 2019, 2020, 2021 and
2022, our platform recorded average MAUs of 21.8 million, 29.7 million, 34.4 million and 36.4
million, respectively. In 2022, our MAUs collectively recorded approximately 2.1 billion workout
sessions on our platform. Supported by our compelling offerings and powerful brand, we have been
able to quickly expand our user base and solidify our market leading position.
We primarily generate revenue from self-branded fitness products, membership and online paid
content, and advertising and others. We have achieved continued growth during the Track Record
Period. We generated a majority of our revenue from the sales of self-branded fitness products and
invested significantly in the research and development of platform design and fitness content. Our
revenue grew by 66.9% from RMB663.1 million in 2019 to RMB1.1 billion in 2020, increased by
46.3% to RMB1.6 billion in 2021, and further increased by 36.6% to RMB2.2 billion in 2022. Gross
profit grew by 83.2% from RMB272.6 million in 2019 to RMB499.4 million in 2020, increased by
35.5% to RMB676.6 million in 2021, and further increased by 33.1% to RMB900.4 million in 2022.
Our loss for the year increased from RMB735.0 million in 2019 to RMB2.2 billion in 2020, and further
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FINANCIAL INFORMATION
increased to RMB2.9 billion in 2021 as we strategically increased spending in traffic acquisition and
branding to further acquire, activate and retain users. Our loss for the year decreased from RMB2.9
billion in 2021 to RMB104.6 million in 2022 due to the changes in fair value of convertible
redeemable preferred shares. Our adjusted net loss (non-IFRS measure) was RMB366.5 million,
RMB106.4 million, RMB826.5 million, and RMB666.9 million in 2019, 2020, 2021 and 2022,
respectively. See “—Non-IFRS Measure: Adjusted Net Loss”.
BASIS OF PREPARATION
Our historical financial information of the Group has been prepared in accordance with IFRSs
and interpretations issued by International Accounting Standards Board (“ IASB”) applicable to
companies reporting under IFRSs.
Our historical financial information has been prepared on a historical cost basis, except for
certain financial assets and liabilities measured at fair value.
Our preparation of the historical financial information in conformity with IFRSs requires the
use of certain critical accounting estimates. It also requires management to exercise its judgment in the
process of applying the accounting policies. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the historical financial
information are disclosed in Note 4 to the Accountant’s Report in Appendix I to this document.
Our historical financial information has been prepared based on the consolidated financial
statements of the Group. Inter-company transactions, balances and unrealized gains/losses on
transactions between group companies are eliminated on consolidation.
MAJOR FACTORS AFFECTING OUR RESULTS OF OPERATIONS
The online fitness industry in China is rapidly evolving and increasingly competitive. Our
business and operating results are affected by the general factors affecting China’s online fitness
industry, including China’s overall economic growth and level of per capita disposable income, the
competitive landscape of the online fitness industry in China and PRC governmental policies and
initiatives affecting China’s online fitness industry. In addition, they are also affected by factors
affecting consumer habits and trends in online fitness, including mobile internet usage and penetration
rate, consumption of fitness goods and services, and consumers’ willingness to pay for premium online
fitness content and experiences. Changes in any of these general factors could affect the demand for
content and products on our platform and our results of operations.
Despite the general factors mentioned above, we believe our results of operations are more
directly affected by the following specific factors:
Our ability to scale user base and increase user engagement
User Base
Our business depends on our ability to grow our user base and expand our content and product
offerings. A large and growing base of fitness users on our platform is critical for the growth of our
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FINANCIAL INFORMATION
revenue. We have experienced rapid user growth since our inception. The following table sets forth our
average MAUs for the periods indicated:
For the Three Months Ended
March 31,
2019
June 30,
2019
September 30,
2019
December 31,
2019
March 31,
2020
June 30,
2020
September 30,
2020
December 31,
2020
March 31,
2021
June 30,
2021
September 30,
2021
December 31,
2021
March 31,
2022
June 30,
2022
September 30,
2022
December 31,
2022
(in thousands)
Average
MAUs .... 15,535 22,436 29,245 19,875 27,103 33,251 32,750 25,833 31,032 35,709 41,751 28,939 34,275 41,080 38,558 31,638
We have achieved substantial growth in our average MAUs. We experienced increased demand
for at-home fitness content as a result of the COVID-19 pandemic. The COVID-19 pandemic also
accelerated the market education process and enhanced fitness awareness of the general public, thereby
attracting more users to view and consume online fitness content. Although quarantine and travel
restrictions are gradually lifted starting from the second quarter of 2020 as the COVID-19 pandemic
became more contained in China, the effects of our expanded influence on fitness population and
increased user demand for high-quality fitness content and products remained, which is demonstrated
by the continuous increase in MAUs. We experienced relatively higher average MAUs in the second
and third quarter of each year during the Track Record Period, which was primarily due to an increase
in users’ willingness to exercise during spring and summer. Our MAUs include active users who
logged into their user accounts on our platform through our mobile app, including through smart TV
and other smart devices at least once in a given month. Our active users generally view and participate
in a multitude of fitness content offerings on our platform, including recorded video courses, live
streaming classes, fitness curriculums and other content in the community.
User Engagement
Our ability to attract, engage and retain users is key to our continued revenue growth. We seek
to encourage users to actively engage on our platform by developing and offering more diversified and
interactive fitness content, such as live streaming. Utilizing industry insights gained through user
engagement on our platform, we are able to meet users’ evolving needs and develop new and appealing
fitness content faster and more efficiently. Having extensive, professional, personalized and dynamic
content offerings helps us strengthen the popularity of our brand, increases user loyalty and encourages
user engagement. In 2022, our MAUs recorded approximately 2.1 billion workout sessions on our
platform. We also expect to continue to encourage content development from fitness influencers on our
platform, and introduce new content sourced from fitness professionals and fitness content providers to
respond to the latest industry trends.
We also have a track record of successfully introducing smart fitness devices, including Keep
Bike, Keep Wristband , smart scale and treadmill, and other complemental fitness products, including
fitness gear, apparel and food to complement our content offerings and enhance users’ fitness
experience. In order to expand our open platform and extend our user reach, we expect to continue to
introduce new fitness products that are developed in house or by third-party fitness product suppliers.
The success of new smart fitness devices and other products will impact the growth of our business,
our ability to continue to attract and engage users, and our short-term and long-term financial
performance, including our revenue and operating expenses, in particular marketing expenses
associated with the launch and promotion of such new products.
Our ability to enhance our monetization capability
Our revenue and results of operations depend on our ability to monetize our large user base,
convert more users to paying users, and increase the spending of our paying users. Paying users on our
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FINANCIAL INFORMATION
platform include users who make payments for various content offerings and products on our platform,
including membership subscriptions, a la carte payments for fitness courses and curriculums, and
purchases of smart fitness devices and other complemental fitness products. Our paying user base has
generally been increasing as we expand our content offerings, and introduce live streaming classes and
diversify the fitness products we offer. In particular, the number of average monthly subscribing
members has increased from 0.8 million in 2019 to 1.9 million in 2020, 3.3 million in 2021, and further
increased to 3.6 million in 2022, as we continued to strengthen our content development capabilities
and expand our fitness content offerings. We also witnessed a steady increase in our membership
penetration rate, from 3.5% in 2019 to 6.4% in 2020, 9.5% in 2021, and further increased to 10.0% in
2022. Our average monthly fitness product customers increased from 184 thousand in 2019 to 292
thousand in 2020, 383 thousand in 2021, and further increased to 550 thousand in 2022. However, the
number of our subscribing members and fitness product customers may also fluctuate as they are often
affected by a variety of factors such as seasonality and our marketing and promotion efforts.
The following table sets forth our average monthly subscribing members and fitness product
customers for the periods indicated:
For the Three Months Ended
March 31,
2019
June 30,
2019
September 30,
2019
December 31,
2019
March 31,
2020
June 30,
2020
September 30,
2020
December 31,
2020
March 31,
2021
June 30,
2021
September 30,
2021
December 31,
2021
March 31,
2022
June 30,
2022
September 30,
2022
December 31,
2022
(in thousands)
Average
monthly
subscribing
members . . . 375 752 1,039 915 1,473 1,981 2,149 2,035 2,539 3,235 4,154 3,193 3,470 3,860 3,885 3,269
Average
monthly
fitness
product
customers . . 110 197 232 197 236 353 329 251 280 430 423 397 454 580 642 524
In an effort to monetize our user base and retain paying users, we continue to diversify our
content offerings and fitness products and refine our monetization avenues without compromising user
experience. We plan to deepen our partnership with third-party fitness content providers to offer more
fitness content tailored to our platform and our users and enhance our capabilities to develop content
in-house. And we also plan to identify users’ unmet needs and introduce new fitness products and
expand our self-branded product offerings. Our revenue growth will also be affected by our ability to
effectively continue to expand our paying user base and execute our monetization strategies.
Our ability to manage costs and expenses
Our ability to manage and control our costs and expenses is critical to the success of our
business. We will continue to invest in people and technology to drive our business growth. We expect
to continue to enjoy economies of scale as we effectively manage our costs and expenses and improve
our financial results.
Selling and Marketing Expenses
Our results of operations depend on our ability to attract and retain users at reasonable
marketing expenses. While we are a young business, we have been successful in building our popular
fitness brand and marketing our products. We also benefit significantly from our large and engaged
user base, word-of-mouth referrals and continued growth in user subscriptions driven by content and
growing brand awareness. We work closely with influencers on our platform who join us to generate
creative and professional fitness content and deliver a brand image embodying positivity, passion and
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FINANCIAL INFORMATION
persistence. We conduct offline marketing primarily in the form of fitness events, outdoor bulletin
boards, television commercials, and our offline fitness centers. Through our cutting-edge technology
and industry insights, we monitor the efficiency of our various marketing and distribution channels and
adjust our marketing spend and strategy accordingly in a timely manner. Meanwhile, the reputation and
attractiveness of our brand and platform among users serve as a highly efficient marketing and user
acquisition channel for our fitness content and products.
Research and Development Expenses
Our ability to innovate and keep pace with the growth of our business and bring forward
cutting-edge technologies for building our content and product offerings will affect our results of
operations. Our current research and development efforts are primarily focused on refining our online
platform and developing new technology-enabled fitness products, which we believe are crucial for us
to integrate and scale our offerings and enhance user engagement. For example, leveraging our AI
technology, we are able to offer intelligent courses and curriculums that are tailored to users’ needs and
can dynamically adapt our fitness content curation based on users’ profiles, feedback during fitness
activities, changing body measurements from our smart scale and real-time heart rate from Keep
Wristband. In addition, the growth of our business relies on retaining and recruiting research and
development talents who have insights and experience in the tech and online fitness sector to develop
products that attracts strong followings.
Fulfillment Expenses
Our results of operations are also affected by our ability to control our operating costs and
expenses and continuously optimize our supply chain management. We have developed an efficient
supply chain involving outsourcing, warehousing and logistics. We cooperate with leading outsourcing
manufacturers with strong capabilities, and warehousing and logistics service providers with physical
proximity to users, enabling us to shorten the production and fulfillment process further, thereby
improving user experience.
IMPACT OF COVID-19 ON OUR OPERATIONS AND FINANCIAL PERFORMANCE
The outbreak of COVID-19 has severely impacted China and the rest of the world. In an effort
to contain the spread of COVID-19, China took precautionary measures that reduced economic
activities, including temporary closure of corporate offices, retail outlets and manufacturing facilities
and strict implementation of quarantine measures. Our business and operations have also been affected
adversely as a result. For example, the operation of Keepland fitness centers and the operation of our
contract manufacturers and logistics partners for the first quarter of 2020. As many of the
precautionary measures have later been lifted or relaxed, we and our business partners gradually
resumed normal operations since the second quarter of 2020. As a result of the Omicron variants
outbreak in late March 2022 in multiple regions in China, six of our fitness food suppliers suspended
operations from April or May to June 2022, including five in Shanghai and one in Zhejiang, which
negatively impacted the supply of 18 of our SKUs, including, for example, sugar-free whole wheat
bread and pumpkin quinoa crisp. We also delayed the issuance of several new fitness products,
including collagen peptide jelly and probiotic protein powder. In addition, we experienced logistics
disruptions, especially in Shanghai, in the first half of 2022. We had about 59 thousand backlog orders
in Shanghai after the resumption of logistics services in June 2022. The impact of the lockdown on
supply chain and logistics services, however, was limited as the fitness products in stock helped us
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cope with the supply chains disruption in the second quarter of 2022. For the advertising and others
business segment, all of the Keepland fitness centers located in Beijing suspended operation in May
2022 as a result of the COVID-19 pandemic. Many third-party offline gyms we collaborated with in
connection with the Keep selected fitness classes also experienced temporary shutdown in 2022 due to
temporary measures taken in response of the COVID-19 resurgence. All of the third-party offline gyms
we collaborated with had resumed normal operation as of the Latest Practicable Date. The decline in
economic activities during COVID-19 resurgence also caused our advertising customers to tighten
their advertising budget. This, together with the slower growth of the internet advertising market, had a
negative impact on our advertising revenue.
The COVID-19 pandemic also led to an increase in people’s willingness to work out at home
and an increase in online traffic to our platform. 89.8% of the China’s fitness population spent more
time on online fitness platforms in 2022 compared to 2021. We recorded higher average MAUs,
average monthly subscribing members and average monthly fitness product customers. In addition,
more users tend to follow our fitness content and complete workout sessions as a result of the outbreak
of COVID-19 pandemic. As the outbreak of COVID-19 increased users’ willingness to workout at
home, we also witnessed a higher average monthly membership retention rate in 2020. Please refer to
“Business—Our users - ‘ Keepers’.” In addition, we reduced our branding and marketing promotion
expenses and other related expenses in 2020 due to the increased engagement of our users as a result of
the COVID-19 pandemic. We believe the COVID-19 pandemic only accelerated the process of
bringing in users who would sooner or later become our users rather than creating a temporary user
inflow. We believe our MAUs will continue to grow as we continue to upgrade our fitness content,
expand and deepen the services provided to subscribing members, and further invest in marketing and
user acquisition. The overall impact of the COVID-19 pandemic on our business operation and
financial performance has been immaterial. See “Risk Factors—Risks Related to Our Business and
Industry—The COVID-19 outbreak has impacted our business, operating results and financial
condition.” and “Risk Factors—Risks Related to Our Business and Industry—The COVID-19 outbreak
has impacted our business, operating results and financial condition.”.
Most of the travel restrictions and quarantine requirements were lifted in December 2022. The
extent to which the pandemic impacts our results of operations going forward will depend on future
developments which are uncertain and unpredictable, including the frequency, duration and extent of
outbreaks of COVID-19, the appearance of new variants with different characteristics, the
effectiveness of efforts to contain or treat cases, and future actions that may be taken in response to
these developments.
Taking into account (i) the financial resources available to us, including cash and cash
equivalents, and the portion of the estimated net proceeds from the Global Offering expected to be
used for working capital and general corporate purposes, and (ii) the prudent estimates for the
settlement of accrued expenses and accounts payables, we believe we retain substantial ability to
manage our business growth and achieve an optimal balance between business expansion and
operating efficiency.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Some of our accounting policies require us to apply estimates and assumptions as well as
complex judgments relating to accounting items. The estimates and assumptions we use and the
judgments we make in applying our accounting policies have a significant impact on our financial
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position and results of operations. Our management continually evaluates such estimates, assumptions
and judgments based on past experience and other factors, including expectation of future events that
are believed to be reasonable under the circumstances. There has not been any material deviation
between our management’s estimates or assumptions and actual results, and we have not made any
material changes to these estimates or assumptions during the Track Record Period. We do not expect
any material changes in these estimates and assumptions in the foreseeable future.
Set forth below are discussions of the accounting policies that we believe are of critical
importance to us or involve the most significant estimates, assumptions and judgments used in the
preparation of our financial statements. Other significant accounting policies, estimates, assumptions
and judgments, which are important for understanding our financial condition and results of operations,
are set forth in detail the notes of the Accountant’s Report in Appendix I to this document.
Significant Accounting Policies
Revenue recognition
We recognize revenue when or as the control of the promised goods or services is transferred to
a customer, net of value-added taxes (“ VAT”), rebates and certain sales incentives. If control of the
services transfers over time, revenue is recognized over the period of the contract by reference to the
progress towards complete satisfaction of that performance obligation. Otherwise, revenue is
recognized at a point in time when the customer obtains control of the goods and services. For further
details, see Note 2.19 to the Accountant’s Report in Appendix I to this document.
Further details of our revenue recognition policies are as follows:
(a) Sales of self-branded fitness products
The self-branded fitness products derives revenue from sale of self-branded fitness products,
such as bikes, wristbands and treadmills, and complementary fitness products such fitness gears,
apparels and fitness food, including delivery services. Our revenue are primarily derived from (i) sales
of our products to end customers directly through our online stores run on third party’s ecommerce
platforms and through the online platform operated by us and (ii) sales of our products to third-party
wholesale channels who then sell to end customers.
(i) Sales of products to end customers directly through our online stores run on third party’s
ecommerce platforms and through the online platform operated by us.
We set up online stores on third party’s ecommerce platforms to sell our products to end
customers. The platforms provide services to us to support the operations of the online stores including
processing sales orders and collecting cash consideration from end customers. The platforms charge
our service fees based on our sales through these online stores. We enter into sales contracts directly
with the end customers. The platforms do not take control of the goods and have no sales contract with
end customers. We are responsible for selling and fulfilling all obligations according to our sales
contracts with end customers, including delivering products and providing customer support.
Therefore, we determine that the end customers are our customers. The sales contracts with end
customers include a customer’s right to return products within 7 days after receipt of goods.
Sales from the end customers through our online platform are prepaid and recorded as contract
liabilities. We recognize revenue from sales to end customers upon delivery of the product to end
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customers in an amount equal to the contract sales prices less estimated sales allowances for sales
returns and sales incentives.
We identify our performance obligation to end customers as to transfer the control of the
ordered products to end customers. Contracts with customers may include multiple performance
obligations if there is a need to split one customer order into multiple deliveries. Under these
circumstances, transaction prices will be allocated to different performance obligations based on
relative standalone selling prices. We recognize revenue from sales to end customers upon receipts of
the products by end customers in an amount equal to the contract sales prices less estimated sales
allowances for sales returns and sales incentives.
(ii) Sales of products to third party wholesale channels who then sell to end customers.
The third-party wholesale channels purchase products from us and then resell the products to
end customers. Subject to the underlying agreements with the wholesale channels, there are mainly two
types of arrangements with wholesale channels. Under type I arrangements, the wholesale channels
take control of the products upon delivery of the products to the wholesale channels’ warehouses and
accepted by the wholesale channels. Under type II arrangements, the wholesale channels take control
of the products when orders are placed by end customers and the products are subsequently delivered
out of wholesale channels’ warehouse to end customers. The wholesale channels are entitled to rights
of return and price protection rebates. After taking control of the products, the wholesale channels are
responsible for selling and fulfilling all obligations in the sales contracts with end customers, including
delivering the products and providing customer support. Therefore, we determine that the wholesale
channels are our customers. Under the distribution agreement, we have a sale contract with our
wholesale channels and have no sales contract with the end customers.
Sales to our wholesale channels are on credit terms which is usually less than three months. We
recognize revenue and receivables from sales to the wholesale channels upon transferring the control
of the products to the wholesale channels in an amount equal to the contract sales prices less estimated
sales allowances for sales returns and price protection rebates.
We provide price protection rebates to certain wholesale channels to effectively compensate the
wholesale channels when the wholesale channels offer discount to end customers, which are accounted
for as variable consideration. We estimate these amounts based on the expected amount to be provided
to the third party wholesale channels considering the contracted rebate rates and estimated sales
volume based on historical pattern, and account for it as a reduction of the transaction price.
(b) Membership subscription and online paid content service
Our membership subscriptions provide unlimited access to content on our online platform of
live streaming classes and on-demand fitness classes. The contract period for the membership
subscription ranges from one month to one year. All membership subscriptions are non-refundable. We
have one stand ready obligation to provide our subscribing members with access to content on our
online platform, fitness classes and related membership benefits throughout the subscription period.
Therefore, revenue is recognized ratably over the contract period as the membership subscription
services are delivered. We collect membership subscription in advance and records it as contract
liabilities.
Online paid content service primarily includes the virtual sports events service. We arrange
virtual sports events on our own platform. Revenue is generated from event entry fees charged to event
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participants. Entry fees are paid in advance and non-refundable after the event participants complete
the events or after the end of the virtual sports event. The performance obligation is satisfied over the
service period, as the services are delivered.
(c) Advertising services
Advertising revenue is derived from online advertising, most of which is in the form of display
advertisement. Display advertising arrangements allow customers, primarily advertising agencies, to
place advertisements on particular areas of our online platform in particular formats and over particular
periods of time. We recognize revenue from advertising services ratably over the periods during which
the advertising services are provided.
Certain customers may receive rebates, which are accounted for as variable consideration. We
estimate rebates based on expected revenue volume with reference to their historical results and
account for such as a reduction of revenue.
Inventories
Inventories are stated at the lower of cost or net realizable value. Costs are assigned to
individual items of inventories on the basis of weighted average costs. Costs of purchased inventories
are determined after deducting rebates and discounts. Net realizable value is the estimated selling price
in the ordinary course of business less the estimated costs of completion and the estimated costs
necessary to make the sale.
Convertible redeemable preferred shares (“Preferred Shares”)
Preferred Shares issued by us are redeemable at the option of the holder upon occurrence of
certain events. These instruments can also be converted into ordinary shares of the Company at any
time at the option of the holders, or automatically upon occurrence of an initial public offering of the
Company.
We designated the Preferred Shares as financial liabilities at fair value through profit or loss.
They are initially recognized at fair value. Any directly attributable transaction costs are recognized in
profit or loss. Fair value changes relating to market risk are recognized in profit or loss, while, the
component of fair value changes relating to our own credit risk is recognized in other comprehensive
income (“OCI”). Amounts recorded in OCI related to credit risk are not subject to recycling in profit
or loss, but are transferred to accumulated losses when realized.
The Preferred Shares were classified as non-current liabilities unless the Preferred Shares’
holders can demand our Company to redeem the Preferred Shares within 12 months after the end of the
reporting period.
Share-based compensation
As of the date of this document, we operate two Share Incentive Plan (the “ ESOP Plans ”),
under which we receive services from employees or non-employees in exchange for our equity
instruments.
The fair value of options granted under the ESOP Plans is recognized as share-based
compensation over the requisite service period, with a corresponding increase in equity. The total
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amount to be expensed is determined by reference to the fair value of the options granted to employees
on grant date by using binomial option-pricing models:
Š including any market performance conditions;
Š excluding the impact of any service and non-market performance vesting conditions; and
Š including the impact of any non-vesting conditions.
The total expense is recognized over the vesting period, which is the period over which all of
the specified vesting conditions are to be satisfied.
We recognize share-based compensation expenses in the consolidated income statements based
on awards ultimately expected to vest, after considering estimated forfeitures. The number of share
options granted expected to vest has been reduced to reflect historical experience of forfeiture of
certain percentage of options granted prior to completion of vesting period and accordingly the share
option expense has been adjusted.
Leases
We, as a lessee, leases office buildings and fitness centers. Lease contracts are typically made
for fixed periods of several months to six years. Lease is recognized as a right-of-use asset and a
corresponding lease liability at the date at which the leased asset is available for use by us.
Contracts may contain both lease and non-lease components. We allocate the consideration in
the contract to the lease and non-lease components based on their relative stand-alone prices.
Lease terms are negotiated on an individual basis and contain a wide range of different terms
and conditions. The lease agreements do not impose any covenants other than the security interests in
the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing
purposes.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease
liabilities include the net present value of the fixed payments (including in-substance fixed payments).
Lease payments to be made under reasonably certain extension options are also included in the
measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. We use the
incremental borrowing rate, for the implicit rate cannot be readily determined, which is the rate that we
would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use
assets in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, we make adjustments using a build-up approach
that starts with a risk-free interest rate adjusted for credit risk for leases held by them.
Lease payments are allocated between principal and finance cost. The finance cost is charged to
profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
Š the amount of the initial measurement of lease liabilities;
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Š any lease payments made at or before the commencement date less any lease incentives
received;
Š any initial direct costs; and
Š restoration costs
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the
lease term on a straight-line basis. If we are reasonably certain to exercise a purchase option, the right-
of-use assets is depreciated over the underlying asset’s useful life.
Payments associated with short-term leases are recognized on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less without a
purchase option.
(a) Variable lease payments
Some property leases contain variable payment terms that are linked to sales generated from a
fitness center. For certain fitness centers including fixed and variable rental payment terms, the
variable lease payments that depend on sales are recognized in the consolidated income statements in
the period in which the condition that triggers those payments occurs.
(b) Modification of lease
Except for COVID-19-related rent concessions in which we applied the practical expedient, we
account for a lease modification as a separate lease if:
(i) the modification increases the scope of the lease by adding the right to use one or more
underlying assets; and
(ii) the consideration for the lease increases by an amount commensurate with the stand-alone
price for the increase in scope and any appropriate adjustments to that stand-alone price to
reflect the circumstances of the particular contract.
For a lease modification that is not accounted for as a separate lease, we remeasure the lease
liabilities, less any lease incentives receivable, based on the lease term of the modified lease by
discounting the revised lease payments using a revised discount rate at the effective date of the
modification. We account for the remeasurement of lease liabilities by making corresponding
adjustments to the relevant right-of-use assets.
For partial or full termination of the lease for lease modifications that decrease the scope of the
lease, decreasing the carrying amount of the right-of-use asset. We recognize in the consolidated
income statements of any gain or loss relating to the partial or full termination of the lease.
Current and deferred income tax
The income tax expense for the period is the tax payable on the current period’s taxable income
based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences and to unused tax losses.
(a) Current income tax
The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the end of the reporting period in the countries where we, our subsidiaries and
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structured entities operate and generate taxable income. We periodically evaluate positions taken in tax
returns with respect to situations in which applicable tax regulation is subject to interpretation and
considers whether it is probable that a taxation authority will accept an uncertain tax treatment. We
measure our tax balances either based on the most likely amount or the expected value, depending on
which method provides a better prediction of the resolution of the uncertainty.
(b) Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated
financial statements. Deferred income tax is also not accounted for if it arises from initial recognition
of an asset or liability in a transaction other than a business combination that, at the time of the
transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting
period and are expected to apply when the related deferred tax assets is realized or the deferred income
tax liabilities is settled.
Deferred tax assets are recognized only if it is probable that future taxable amounts will be
available to utilize those temporary differences and losses.
Deferred tax liabilities and assets are not recognized for temporary differences between the
carrying amount and tax bases of investments in foreign operations where we are able to control the
timing of the reversal of the temporary differences and it is probable that the differences will not
reverse in the foreseeable future.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset
current tax assets and liabilities and where the deferred tax balances relate to the same taxation
authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right
to offset and intends either to settle on a net basis, or to realize the asset and settle the liability
simultaneously.
Current and deferred tax are recognized in profit or loss, except to the extent that they relate to
items recognized in OCI or directly in equity. In this case, the tax is recognized in OCI or directly in
equity, respectively.
(c) Tax incentives
We may be entitled to claim special tax deductions in relation to qualifying expenditure. We
account for such allowances as tax credits, which means that the allowance reduces income tax payable
and current tax expense. A deferred tax asset is recognized for unclaimed tax credits that are carried
forward as deferred tax assets.
Critical Accounting Estimates and Judgments
Recognition of share-based compensation expenses
We set up the ESOP Plan and granted options to employees and other qualifying participants.
The fair value of the options are determined by the binomial option pricing model, and is expected to
be expensed over the respective vesting periods. Significant estimates and assumptions, including
forfeiture rate, risk-free interest rate, expected volatility and dividend yield, are made by the Directors.
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Estimation of the fair value of financial liabilities
The convertible redeemable preferred shares we issued are not traded in an active market, and
the respective fair value is determined by using valuation techniques. We applied the discounted cash
flow method to determine the underlying equity value of the Company and adopted the option-pricing
method and equity allocation model to determine the fair value of the Preferred Shares. Key
assumptions such as risk-free interest rate, discount rate for lack of marketability (“ DLOM”) and
volatility are based on our best estimates.
Level 3 of Fair Value Management
In respect of the valuation of the financial liabilities categorized within level 3 at fair value
through profit or loss (the “ Level 3 Financial Liabilities ”), with reference to the guidance under the
“Guidance Note on Directors’ Duties in the Context of Valuations in Corporate Transactions” issued
by the SFC in May 2017 (the “ Guidance”) applicable to directors of companies listed on the Stock
Exchange, we adopted the following procedures: (i) engaged a third-party valuation firm to manage the
valuation of level 3 instruments for financial reporting purposes; (ii) carefully considered available
information in assessing the financial data and assumptions including but not limited to terms,
conversion price, redemption feature and liquidation preferences; and (iii) appraised the fair value of
financial liabilities at least once a year. Based on the above procedures, our Directors are of the view
that the valuation of our financial liabilities are fair and reasonable and our financial statements are
properly prepared. The details on the fair value measurement of the financial liabilities at fair value
through profit or loss, particularly the fair value hierarchy, the valuation techniques and key
assumptions, including significant unobservable inputs and the sensitive analysis of the unobservable
inputs to the fair values, are disclosed in Note 3.3 to the Accountant’s Report in Appendix I to this
Prospectus. The Reporting Accountant performed its works in accordance with Hong Kong Standard
on Investment Circular Reporting Engagement 200 “Accountants’ Reports on Historical Financial
Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public
Accountants (the “ HKSIR 200 ”) for the purpose of expressing an opinion on our historical financial
information for the Track Record Period as a whole and its opinion on the Historical Financial
Information of the Group for the Track Record Period as a whole is set out on page I-1 to I-2 of
Appendix I to this document.
In relation to the valuation of the financial liabilities categorized as Level 3 fair value
measurement, the Sole Sponsor has conducted relevant due diligence work, including but not limited
to, (i) reviewed the relevant notes in the Accountant’s Report as contained in Appendix I to this
document for the valuation of certain financial liabilities categorized as Level 3 fair value
measurement, (ii) conducted interviews with the Company and the independent valuer of the Company
(the “Independent Valuer ”) about the valuation methodology, the key basis and assumptions for the
valuation of financial liabilities categorized as Level 3 fair value measurement; (iii) conducted
interview with the Reporting Accountant to understand the work they have performed in relation to the
valuation of the Level 3 financial assets and liabilities for the purpose of reporting on the Historical
Financial Information, as a whole, of the Group; (iv) obtained and reviewed the valuation report
prepared by the Independent Valuer; and (v) obtained and reviewed the credentials of the Independent
Valuer. Having considered the work done by the Directors and the Reporting Accountant and the
relevant due diligence done as stated above, nothing material has come to the Sole Sponsor’s attention
that would cause the Sole Sponsor to disagree with the Directors and the Reporting Accountant in
respect of the valuation of such financial liabilities.
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Contractual arrangements
We exercise control over certain structured entities and have the right to recognize and receive
substantially all the economic benefits from them through the Contractual Arrangements. The
Directors consider that we control these structured entities notwithstanding that it does not have direct
or indirect legal ownership in equity of these entities as we have power over the financial and operating
policies of these entities and receives substantially all the economic interest returns generated from the
business activities of these entities through these Contractual Arrangements. Accordingly, all these
structured entities are accounted for as controlled structured entities and their financial statements have
also been consolidated by the Company throughout the Track Record Period.
Nevertheless, the Contractual Arrangements may not be as effective as direct legal ownership
in providing us with direct control over the structured entities. Uncertainties presented by the PRC
legal system could impede our beneficiary rights of the results, assets and liabilities of the structured
entities. Significant judgment is involved in determining whether we are able to control these entities
through these Contractual Arrangements. The Directors of the Company, after taking into account of
the advice from our external legal advisors, consider that the Contractual Arrangements entered into by
us are in compliance with the relevant PRC laws and regulations and are therefore legally binding and
enforceable.
Current and deferred income tax
We are subject to income taxes in several jurisdictions. Significant judgment is required in
determining the provision for income taxes. There are many transactions and calculations for which the
ultimate tax determination is uncertain during the ordinary course of business. Where the final tax
outcome of these matters is different from the amounts that were initially recorded, such differences
will impact the current and deferred tax assets and liabilities in the period in which such determination
is made.
Deferred tax assets relating to certain temporary differences or tax losses are recognized when
management considers that it is probable that future taxable profit will be available against which the
temporary differences or tax losses can be utilized. As of December 31, 2022, we did not recognize
deferred tax assets in respect of cumulative tax losses that can be carried forward against future taxable
income. The outcome of their actual utilization may be different from management’s estimation.
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DESCRIPTION OF MAJOR COMPONENTS OF OUR RESULTS OF OPERATIONS
The following table sets forth a summary of our consolidated results of operations for the
periods presented, both in absolute amount and as percentages of our total revenue. This information
should be read together with our consolidated financial statements and related notes in this document.
The results of operations in any particular period are not necessarily indicative of our future trends.
For the Year Ended December 31,
2019 2020 2021 2022
RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
Revenue .............................. 663,119 100.0 1,106,777 100.0 1,619,538 100.0 2,211,551 100.0
Cost of revenues (1) ...................... (390,493) (58.9) (607,350) (54.9) (942,910) (58.2) (1,311,171) (59.3)
Gross profit ........................... 272,626 41.1 499,427 45.1 676,628 41.8 900,380 40.7
Fulfillment expenses(1) ................... (55,128) (8.3) (92,411) (8.3) (127,872) (7.9) (201,586) (9.1)
Selling and marketing expenses (1) .......... (295,785) (44.6) (301,693) (27.3) (956,220) (59.0) (646,177) (29.2)
Administrative expenses(1) ................ (122,199) (18.4) (68,977) (6.2) (218,276) (13.6) (245,614) (11.1)
Research and development expenses (1) ...... (194,170) (29.3) (167,920) (15.2) (355,582) (22.0) (536,877) (24.3)
Other income .......................... 12,602 1.9 4,195 0.4 4,258 0.3 6,509 0.3
Other gains/(losses), net .................. 9,520 1.4 (984) (0.1) 8,981 0.6 (65,375) (3.0)
Operating loss ......................... (372,534) (56.2) (128,363) (11.6) (968,083) (59.8) (788,740) (35.7)
Finance income ........................ 5,017 0.8 5,325 0.5 13,828 0.9 27,536 1.2
Finance expenses ....................... (11,225) (1.7) (5,769) (0.5) (7,777) (0.5) (7,313) (0.3)
Finance (expenses)/income, net ............ (6,208) (0.9) (444) (0.0) 6,051 0.4 20,223 0.9
Fair value changes of convertible redeemable
preferred shares ...................... (356,303) (53.7) (2,114,943) (191.1) (1,946,205) (120.2) 664,969 30.1
Loss before income tax ................. (735,045) (110.8) (2,243,750) (202.7) (2,908,237) (179.6) (103,548) (4.7)
Income tax expense ..................... — — — — — — (1,003) (0.0)
Loss for the year ....................... (735,045) (110.8) (2,243,750) (202.7) (2,908,237) (179.6) (104,551) (4.7)
Loss for the year attributable to:
Owners of the Company ............. (728,979) (109.9) (2,239,609) (202.4) (2,908,237) (179.6) (104,551) (4.7)
Non-controlling interests ............. (6,066) (0.9) (4,141) (0.3) — — — —
Note:
(1) Share-based compensation expenses were allocated as follows:
For the Year Ended December 31,
2019 2020 2021 2022
(RMB in thousands)
Share-based compensation expenses:
Cost of revenues ......................................... 8 0 2 1,825 7,139 1,691
Selling and marketing expenses ............................. 1,231 1,552 11,953 11,091
Research and development expenses ......................... 3,533 3,446 28,106 21,279
Administrative expenses ................................... 6,726 15,600 88,307 68,230
Fulfillment expenses ...................................... — — — 3 2 2
Total ...................................................... 12,292 22,423 135,505 102,613
NON-IFRS MEASURE: Adjusted Net Loss
To supplement our consolidated financial statements, which are presented in accordance with
IFRSs, we also use adjusted net loss as an additional financial measure, which is not required by, or
presented in accordance with, IFRSs.
We believe adjusted net loss provides useful information to investors and others in
understanding and evaluating our consolidated results of operations in the same manner as they help
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our management. However, our presentation of adjusted net loss may not be comparable to similarly
titled measures presented by other companies. The use of adjusted net loss has limitations as an
analytical tool, and you should not consider it in isolation from, or as a substitute for an analysis of, our
results of operations or financial condition as reported under IFRSs.
We define adjusted net loss as loss for the year, excluding share-based compensation expenses
and fair value changes of convertible redeemable preferred shares. We exclude these items because
they do not involve any cash outflow:
Š Share-based compensation expenses primarily represent the non-cash employee benefit
expenses incurred in connection with our 2016 Plan and 2021 Plan. Such expenses in any
specific period are not expected to result in future cash payments.
Š Fair value changes of convertible redeemable preferred shares mainly represent changes in
the fair value of the convertible redeemable preferred shares issued by us and relate to
changes in our valuation. We do not expect to record any further fair value changes of the
convertible redeemable preferred shares after Listing as preferred shares liabilities will be
redesignated and reclassified from liabilities to equity after automatically converting into
ordinary shares upon Listing.
For the years ended December 31, 2019, 2020, 2021 and 2022, our adjusted net loss (non-IFRS
measure) was approximately RMB366.5 million, RMB106.4 million, RMB826.5 million and
RMB666.9 million, respectively. The following table reconciles our adjusted net loss for the periods
presented to the most directly comparable financial measure calculated and presented in accordance
with IFRSs, which is loss for the period:
For the Year Ended December 31,
2019 2020 2021 2022
RMB RMB RMB RMB
(in thousands)
Reconciliation of loss to adjusted net loss (Non-IFRS
measure):
Loss for the year ...................................... (735,045) (2,243,750) (2,908,237) (104,551)
Add:
Share-based compensation expenses ...................... 12,292 22,423 135,505 102,613
Fair value changes of convertible redeemable preferred
shares ............................................ 356,303 2,114,943 1,946,205 (664,969)
Adjusted net loss for the year (Non-IFRS measure) ........ (366,450) (106,384) (826,527) (666,907)
Revenue
We have three reportable segments: (i) self-branded fitness products, (ii) membership and
online paid content, and (iii) advertising and others. We identify our reportable segments in the same
manner that our chief operating decision maker, or CODM, reviews the operating results in assessing
performance and allocating resources. See our consolidated financial statements in this document for
additional information regarding our reportable segments.
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The following table breaks down our revenue by amounts and as percentages of our total
revenue for the periods presented:
For the Year Ended December 31,
2019 2020 2021 2022
RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
Revenue:
Self-branded fitness products ............ 396,034 59.7 636,709 57.5 872,452 53.9 1,136,971 51.4
—Smart fitness devices ................ 135,061 20.4 220,830 20.0 286,516 17.7 438,875 19.8
—Complementary fitness products ....... 260,973 39.3 415,879 37.5 585,936 36.2 698,096 31.6
Membership and online paid content ...... 151,322 22.8 338,024 30.5 557,581 34.4 894,167 40.4
—Membership subscription ............. 136,680 20.6 305,199 27.6 487,881 30.1 563,064 25.4
—Online paid content ................. 14,642 2.2 32,825 2.9 69,700 4.3 331,103 15.0
Advertising and others ................. 115,763 17.5 132,044 12.0 189,505 11.7 180,413 8.2
—Offline centers ..................... 30,019 4.5 20,839 1.9 30,888 1.9 19,540 0.9
—Advertising and others (excluding offline
centers) ........................... 85,744 13.0 111,205 10.1 158,617 9.8 160,873 7.3
Total .................................. 663,119 100.0 1,106,777 100.0 1,619,538 100.0 2,211,551 100.0
Self-branded fitness products. We generate revenue from the sale of self-branded fitness
products, including smart fitness devices, such as Keep Bike , Keep Wristband , smart scale, and
treadmill, and complementary fitness products including fitness gear, apparel and food. We sell our
self-branded fitness products to users either directly through our online store and third-party
e-commerce platforms or through third-party wholesale channels.
Membership and online paid content. We generate revenue from (i) subscribing member
exclusive content that can be accessed through membership subscription, and (ii) online paid content
that can be purchased on a la carte basis. The majority of the pre-recorded courses and curriculum,
whether produced in-house or by other parties, are free content available to all of our users. Users can
subscribe to our membership to access privileged content and features that are exclusive to subscribing
members, including live streaming classes and AI-assisted personalized curriculum. Our membership
can be subscribed on a monthly, quarterly, or yearly basis, and users may elect to renew the
subscription automatically. As of the Latest Practicable Date, our listed monthly, quarterly and yearly
subscription fees were RMB25-RMB40, RMB68-RMB98 and RMB248-RMB328, respectively. Paid
content refers to paid courses and curriculum that users can purchase on an a la carte basis and access
repeatedly after purchase. The fees for these a la carte paid courses and curriculum on our platform
typically range from RMB28 to RMB512. Subscribing members can enjoy discounts on paid courses
and curriculum.
Advertising and others. We generate revenue from online advertising, which is primarily in the
form of display advertisement. Display advertising arrangements allow the placement of
advertisements on particular areas of our platform in particular formats and over particular periods of
time. Such advertisements primarily appear on the app opening page and top banner. We enter into
contracts mainly with third-party advertising agencies. The fee arrangement for our advertising
services is determined on a case-by-case basis, taking into account various factors, including the
format and duration of the advertisement, display location, market pricing, among others. Others
primarily represent revenue generated from our Keepland fitness centers. The revenue from advertising
and others increased from RMB115.8 million in 2019 and RMB 132.0 million in 2020 to RMB 189.5
million in 2021, which was mainly attributable to the expansion of our advertiser base and advertisers’
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increased spending on our platform. In addition, the growth of our average MAUs allowed advertisers
to enjoy greater exposure, and attracted more advertisers to promote their products and services on our
platform. The revenue from advertising and others decreased by 4.8% from RMB189.5 million in 2021
to RMB180.4 million in 2022, primarily due to COVID-19’s negative impact on our Keepland
business and the advertising budget of our advertising customers.
Cost of revenues
Our cost of revenues primarily consist of (i) cost of self-branded fitness products, (ii) cost of
membership and online paid content, and (iii) cost of advertising and others.
The following tables set forth a breakdown of our cost of revenues by amounts and as
percentages of total revenue for the periods indicated.
For the Year Ended December 31,
2019 2020 2021 2022
RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
Cost of revenues:
Self-branded fitness products ...... 256,354 38.7 405,806 36.7 629,147 38.8 816,883 36.9
Membership and online paid
content ..................... 55,086 8.3 119,135 10.8 233,098 14.4 409,082 18.5
Advertising and others ........... 79,053 11.9 82,409 7.4 80,665 5.0 85,206 3.9
Total ............................. 390,493 58.9 607,350 54.9 942,910 58.2 1,311,171 59.3
For the Year Ended December 31,
2019 2020 2021 2022
RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
Cost of revenues:
Cost of self-branded fitness products
sold ............................ 248,789 37.5 395,244 35.7 612,682 37.8 790,571 35.7
Cost of virtual sports events ........... 4,197 0.6 11,512 1.0 33,049 2.0 163,674 7.4
Channel fees paid to third-party
application stores and other payment
channels ........................ 27,175 4.1 69,312 6.3 101,517 6.3 91,064 4.1
Content related cost ................. 7,901 1.2 12,155 1.1 33,964 2.1 64,613 2.9
Employee benefit expenses ........... 32,299 4.9 32,737 3.0 61,455 3.8 58,918 2.7
Advertising production cost ........... 19,256 2.9 35,687 3.2 32,258 2.0 32,857 1.5
Outsourcing and other labor costs ...... 4,024 0.6 6,002 0.5 10,668 0.7 15,145 0.7
Taxes and surcharges ................ 1,147 0.2 3,870 0.3 5,319 0.3 11,411 0.5
Other cost of revenues ............... 45,705 6.9 40,831 3.8 51,998 3.2 82,918 3.8
Total ............................ 390,493 58.9 607,350 54.9 942,910 58.2 1,311,171 59.3
Our cost of self-branded fitness products consists primarily of material costs, manufacturing
costs and related costs that are directly attributable to the production of fitness products.
Our cost of membership and online paid content consists primarily of (i) channel fees paid to
third-party application stores and other payment channels, (ii) salaries and benefits paid to employees
related to content production, (iii) content-related cost, and (iv) cost of medals for virtual sports events.
Content-related cost primarily represents (i) audio and video production fee, (ii) cost we incurred in
purchasing content rights, and (iii) compensation and revenue sharing fee paid to fitness influencers in
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connection with the joint-production of fitness courses. We collaborate with content providers to
develop quality and tailored content for our platform, including recorded fitness courses and live-
streaming classes. We also source quality content directly from content providers.
Our cost of advertising and others consists primarily of advertising production fees, including
advertisement-related video production cost and salaries and benefits paid to employees.
Gross profit
The following table sets forth our gross profit for the periods indicated:
For the Year Ended
December 31,
2019 2020 2021 2022
(RMB in thousands)
Gross profit ............................................... 272,626 499,427 676,628 900,380
Fulfillment expenses
Our fulfillment expenses primarily consist of product delivering expenses paid to third-party
couriers, packaging expenses, warehousing expenses, and salaries and benefits paid to relevant
personnel. We expect our fulfillment expenses to increase in absolute amount as the sales continue to
grow.
Selling and marketing expenses
Our selling and marketing expenses primarily consist of branding and promotion expenses,
personnel expenses, and platform commission expenses relating to the promotion and sales of our self-
branded fitness products and membership and online paid content. Branding and promotion expenses
primarily represent traffic acquisition expenses to acquire users through app stores and various third-
party apps such as short video platforms, branding expenses to increase mindshare and enhance brand
awareness, as well as marketing fees to promote self-branded products on third-party platforms.
Personnel expenses primarily represent benefits paid to sales and marketing personnel, including share-
based compensation expenses. Platform commission expenses primarily represent commissions paid to
third-party channels for the sales of our self-branded fitness products. We expect our selling and
marketing expenses to increase in absolute amount as we seek to continue to grow our user base,
introduce new content and products, raise our brand awareness and further expand our marketing
efforts.
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The following table sets forth a breakdown of our selling and marketing expenses by amounts
and as percentages of total revenue for the periods indicated.
Year Ended December 31,
2019 2020 2021 2022
RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
Selling and marketing expenses:
Branding and marketing promotion expenses and
other related expenses ....................... 190,629 28.7 178,226 16.2 746,863 46.1 377,736 17.0
Platform commission and other selling and marketing
expenses ................................. 17,134 2.6 39,109 3.5 57,073 3.5 80,916 3.7
Employee benefit expenses (including SBC) ....... 61,656 9.3 55,453 5.0 110,222 6.8 149,963 6.8
Others ..................................... 26,366 4.0 28,905 2.6 42,062 2.6 37,562 1.7
Total ...................................... 295,785 44.6 301,693 27.3 956,220 59.0 646,177 29.2
Our selling and marketing expenses increased from RMB295.8 million in 2019 to RMB301.7
million in 2020 and RMB956.2 million in 2021, which was primarily due to an increase of RMB568.6
million in branding and marketing promotion expenses and other related expenses, driven by our
efforts to increase mindshare, enhance brand awareness and expand user base. Our selling and
marketing expenses decreased by 32.4% from RMB956.2 million in 2021 to RMB646.2 million in
2022, which was primarily due to a decrease of RMB369.1 million in branding and marketing
promotion expenses and other related expenses as we reduced marketing spending and made more
efficient spending on user acquisition. We reduced traffic acquisition spending and adopted optimal
mix of marketing channels and strategies which allowed us to acquire users more efficiently. For
example, we strategically reduced spending for general branding activities in collaboration with variety
shows and user acquisition on short video platforms and increased our promotion and user acquisition
efforts in app stores. On the other hand, we expanded our presence on social media to promote our
content and services, including virtual sports events.
Administrative expenses
Our administrative expenses primarily consist of salaries and benefits, including share-based
compensation expenses, and other expenses which are related to the general corporate functions, rental
and general expenses associated with these functions and professional service fees. We expect our
administrative expenses to increase in absolute amount as we will incur additional expenses related to
the anticipated growth of our business and accounting, investor relations and other costs related to our
operations as a public company.
Research and development expenses
Our research and development expenses primarily consist of salaries and benefits, including
share-based compensation expenses, for research and development personnel dedicated to the
development and enhancement of our app and self-branded fitness products, cloud computing fees and
rental expenses. We expect our research and development expenses to increase in absolute amount as
we continue to expand our research and development team to further develop our technology, refine
our online platform and upgrade new technology-enabled fitness products.
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Other income
Other income consists of government grants and value-added tax deduction. The following
table sets forth a breakdown of our other income both in absolute amount and as a percentage of total
revenue for the years presented.
For the Year Ended December 31,
2019 2020 2021 2022
RMB % RMB % RMB % RMB %
(in thousands, except for percentages)
Government grants .............................. 12,602 1.9 4,195 0.4 3,012 0.2 1,815 0.1
Value-added tax deduction ........................ — — — — 1,246 0.1 4,694 0.2
Total ......................................... 12,602 1.9 4,195 0.4 4,258 0.3 6,509 0.3
During the years ended December 31, 2019, 2020, 2021 and 2022, the government grants were
mainly incentives provided to us by local government authorities in China to support high-tech and
culture industry. None of the government grants are recurring in nature and none of the government
grants is related to COVID-19 pandemic.
Other gains/(losses), net
Our other gains/(losses), net primarily includes net fair value gains on financial assets at fair
value through profit or loss, net fair value losses on financial liabilities at fair value through profit or
loss.
Finance (expenses)/income, net
Our finance (expenses)/income, net primarily includes finance income from bank deposits, net
finance expenses from leases and borrowings.
Fair value changes of convertible redeemable preferred shares
The convertible redeemable preferred shares issued by us are not traded in an active market and
the respective fair value is determined by using valuation techniques. The discounted cash flow method
was used to determine the underlying equity value of us and the option-pricing method and equity
allocation model was adopted to determine the fair value of the preferred shares. Please refer to Note
3.3 to the Accountant’s Report included in Appendix I to this document for the key assumptions in
determining the fair value of the convertible redeemable preferred shares.
Taxation
Cayman Islands
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits,
income, gains, or appreciation, and there is no taxation in the nature of inheritance tax or estate duty.
There are no other taxes likely to be material to us levied by the government of the Cayman Islands
except for stamp duties, which may be applicable on instruments executed in, or, after execution,
brought to, or produced before a court of, the Cayman Islands. In addition, the Cayman Islands does
not impose withholding tax on dividend payments.
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Hong Kong Income Tax
When Calorie HK was incorporated in Hong Kong, the subsidiary was subject to Hong Kong
profits tax at a rate of 16.5% for taxable income earned in Hong Kong. On March 21, 2018, the Hong
Kong Legislative Council passed The Inland Revenue (Amendment) (No. 7) Bill 2017 (the ‘‘Bill’’)
which introduces the two-tiered profits tax rates regime. The Bill was signed into law on March 28,
2018 and was gazetted on the following day.
Under the two-tiered profits tax rates regime, the first HK$2 million of profits of qualifying group
entity in Hong Kong will be taxed at 8.25%, and profits above HK$2 million will be taxed at 16.5%.
PRC Enterprise Income Tax (“EIT”)
Under the PRC Enterprise Income Tax Law, our PRC subsidiaries, consolidated affiliated
entities and their subsidiaries are subject to the statutory rate of 25%, subject to preferential tax
treatments available to qualified enterprises in certain encouraged sectors of the economy. Enterprises
that qualify as “high and new technology enterprises”, or HNTEs, are entitled to a preferential rate of
15%, subject to a requirement that they re-apply for HNTE status every three years.
In October 2017 and December 2020, Beijing Calorie Information Technology Co., Ltd., was
qualified as a High and New Technology enterprise (“ HNTE”) and enjoyed a preferential tax rate of
15% from 2017 to 2022. In November 2018 and December 2021, Beijing Calorie Technology Co., Ltd.
was qualified as HNTE and enjoyed a preferential tax rate of 15% from 2018 to 2023. In December
2020, Shenzhen Calorie Technology Co., Ltd. was qualified as a HNTE and enjoyed a preferential tax
rate of 15% from 2020 to 2022. Our remaining PRC entities were subject to enterprise income tax at a
rate of 25% in 2019, 2020, 2021 and 2022. According to a policy promulgated by the State Tax Bureau
of the PRC and effective from 2008 onwards, enterprises engaged in research and development
activities are entitled to claim an additional tax deduction amounting to 50% of the qualified research
and development expenses incurred in determining its tax assessable profits for that year. The
additional tax deducting amount of the qualified research and development expenses have been
increased from 50% to 75%, effective from 2018 to 2023, according to a new tax incentives policy
promulgated by the State Tax Bureau of the PRC in September 2018 (“ Super Deduction ”). Pursuant
to the PRC Enterprise Income Tax Law and other applicable laws and regulations, a 5% or 10%
withholding tax is levied on dividends declared to foreign investors from China.
If our holding company in the Cayman Islands or any of our subsidiaries outside of China were
deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, it would be subject to
enterprise income tax on its worldwide income at a rate of 25%. See “Risk factors—Risks related to
doing business in China—If we are classified as a PRC resident enterprise for PRC income tax
purposes, such classification could result in unfavorable tax consequences to us and our non-PRC
shareholders”.
PERIOD TO PERIOD COMPARISON OF RESULTS OF OPERATIONS
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
Revenue
Our total revenue increased by 36.6% from RMB1.6 billion in 2021 to RMB2.2 billion in 2022,
mainly attributable to the increased revenue from self-branded fitness products and membership and
online paid content.
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Self-branded fitness products. The revenue from self-branded fitness products increased by
30.3% from RMB872.5 million in 2021 to RMB1.1 billion in 2022, which was mainly attributable to
the growth in average monthly fitness product customers and increased revenue generated from
non-DTC channels. Our average monthly fitness product customers increased by 43.8% from
approximately 383 thousand in 2021 to approximately 550 thousand in 2022.
Membership and online paid content. The revenue from membership and online paid content
increased by 60.4% from RMB557.6 million in 2021 to RMB894.2 million in 2022, which was mainly
attributable to an increase in the average monthly subscribing members, growing membership
penetration rate and increased revenue generated from virtual sports events. Our average monthly
subscribing members increased from 3.3 million in 2021 to 3.6 million in 2022, driven by our enriched
content and efficient marketing and promotion efforts.
Advertising and others. The revenue from advertising and others decreased by 4.8% from
RMB189.5 million in 2021 to RMB180.4 million in 2022, which was mainly attributable to
COVID-19’s negative impact on our Keepland business and the advertising budget of our advertising
customers.
Cost of revenues
Our cost of revenues increased by 39.1% from RMB942.9 million in 2021 to RMB1.3 billion in
2022, which was generally in line with the increase in our total revenue.
Self-branded fitness products. Our cost of self-branded fitness products increased by 29.8%
from RMB629.1 million in 2021 to RMB816.9 million in 2022, which was mainly attributable to the
increase in the sales of our self-branded fitness products.
Membership and online paid content. Our costs of membership and online paid content
increased by 75.5% from RMB233.1 million in 2021 to RMB409.1 million in 2022, which was mainly
attributable to an increase of RMB130.6 million in the cost of virtual sports events and an increase of
RMB30.6 million in content related costs.
Advertising and others. Our costs of advertising and others increased by 5.6% from
RMB80.7 million in 2021 to RMB85.2 million in 2022, which was mainly attributable to an increase
of RMB5.4 million in outsourcing and other labor costs as we expanded our collaboration with third-
party offline gyms and worked with more part-time coaches in connection with our Keep selected
fitness classes.
Gross profit
Our overall gross profit increased by 33.1% from RMB676.6 million in 2021 to
RMB900.4 million in 2022.
Our gross profit of self-branded fitness products increased by 31.6% from RMB243.3 million
in 2021 to RMB320.1 million in 2022. Our gross profit of membership and online paid content
increased by 49.5% from RMB324.5 million in 2021 to RMB485.1 million in 2022. Our gross profit of
self-branded fitness products and membership and online paid content increased as we generated
higher sales for our fitness products and content. Our gross profit of advertising and others decreased
by 12.5% from RMB108.8 million in 2021 to RMB95.2 million in 2022 primarily due to a decrease in
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revenue from our Keepland business. We experienced a decrease in our overall gross margin in 2022
compared to 2021, primarily attributable to (i) the decreased gross margin of our membership and
online paid content segment which reflected the growing revenue contribution of virtual sports events
and its comparably lower gross margin due to the higher cost of medals, and (ii) the decreased gross
margin of our advertising and others segment as a result of the negative impact the COVID-19
pandemic had on our Keepland business.
Fulfillment expenses
Our fulfillment expenses increased by 57.6% from RMB127.9 million in 2021 to
RMB201.6 million in 2022, which was primarily due to the growth in the sales volume of our self-
branded fitness products and the expansion of our virtual sports events service.
Selling and marketing expenses
Our selling and marketing expenses decreased by 32.4% from RMB956.2 million in 2021 to
RMB646.2 million in 2022, which was primarily due to a decrease of RMB369.1 million in branding
and marketing promotion expenses and other related expenses as we reduced marketing spending and
made more efficient spending on user acquisition. We reduced traffic acquisition spending and adopted
optimal mix of marketing channels and strategies which allowed us to acquire users more efficiently.
For example, we strategically reduced spending for general branding activities in collaboration with
variety shows and user acquisition on short video platforms and increased our promotion and user
acquisition efforts in app stores. On the other hand, we expanded our presence on social media to
promote our content and services, including virtual sports events.
Administrative expenses
Our administrative expenses increased by 12.5% from RMB218.3 million in 2021 to
RMB245.6 million in 2022, which was primarily due to an increase of RMB21.3 million in personnel
cost as we expanded our general and administrative team.
Research and development expenses
Our research and development expenses increased by 51.0% from RMB355.6 million in 2021
to RMB536.9 million in 2022, which was primarily due to an increase of RMB133.8 million in
research and development personnel costs (including related share-based compensation expenses) as a
result of the increase in research and development personnel and an increase of RMB16.1 million in
cloud computing fees as we continue to strengthen our technological capabilities.
Other income
Our other income increased by 52.9% from RMB4.3 million in 2021 to RMB6.5 million in
2022, which was primarily due to an increase in value-added tax deduction.
Other gains/(losses), net
We recorded other gains, net of RMB9.0 million in 2021 and other losses, net of
RMB65.4 million in 2022. The change was primarily due to an increase of net fair value losses on
financial liabilities at fair value through profit or loss.
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Finance (expenses)/income, net
Our finance (expense)/income, net increased by 234.2% from RMB6.1 million in 2021 to
RMB20.2 million in 2022. The change was primarily due to an increase in interest income from bank
deposits.
Fair value changes of convertible redeemable preferred shares
We recorded fair value loss of convertible redeemable preferred shares of RMB1.9 billion in
2021 compared to fair value gain of convertible redeemable preferred shares of RMB665.0 million in
2022. The change in the fair value of convertible redeemable preferred shares was primarily
attributable to the changes in the valuation of our Company. See Note 34 to the Accountant’s Report in
Appendix I to this document for details regarding the changes in fair value changes of convertible
redeemable preferred shares.
Loss for the year
Our loss for the year was RMB104.6 million in 2022 compared to loss for the year of
RMB2.9 billion in 2021. The change was primarily due to the decrease in fair value changes of
preferred shares. Our adjusted net loss (non-IFRS measure) was RMB826.5 million and
RMB666.9 million for 2021 and 2022, respectively.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
Revenue
Our total revenue increased by 46.3% from RMB1.1 billion in 2020 to RMB1.6 billion in 2021,
mainly attributable to the increased revenue from self-branded fitness products and membership and
online paid content.
Self-branded fitness products. The revenue from self-branded fitness products increased by
37.0% from RMB636.7 million in 2020 to RMB872.5 million in 2021, which was mainly attributable
to the growth in average monthly fitness product customers and increased revenue generated from
non-DTC channels. Our average monthly fitness product customers increased by 31.0% from
approximately 292 thousand in 2020 to approximately 383 thousand in 2021.
Membership and online paid content. The revenue from membership and online paid content
increased by 65.0% from RMB338.0 million in 2020 to RMB557.6 million in 2021, which was mainly
attributable to an increase in the average monthly subscribing members due to the expanding user base
and growing membership penetration rate. The average monthly subscribing members increased from
1.9 million in 2020 to 3.3 million in 2021, driven by our enriched content and increased marketing and
promotion efforts.
Advertising and others. The revenue from advertising and others increased by 43.5% from
RMB132.0 million in 2020 to RMB189.5 million in 2021, which was mainly attributable to the
expansion of our advertiser base and advertisers’ increased spending on our platform. The number of
our advertising customers increased from 36 in 2020 to 78 in 2021. In addition, the growth of our
average MAUs allowed advertisers to enjoy greater exposure, and attracted more advertisers to
promote their products and services on our platform. Our average MAUs increased from 29.7 million
in 2020 to 34.4 million in 2021.
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Cost of revenues
Our cost of revenues increased by 55.2% from RMB607.4 million in 2020 to
RMB942.9 million in 2021, which was generally in line with the increase in our total revenue.
Self-branded fitness products. Our cost of self-branded fitness products increased by 55.0%
from RMB405.8 million in 2020 to RMB629.1 million in 2021, which was mainly attributable to the
increase in the sales of our self-branded fitness products.
Membership and online paid content. Our costs of membership and online paid content
increased by 95.7% from RMB119.1 million in 2020 to RMB233.1 million in 2021, which was mainly
attributable to (i) an increase of RMB31.6 million in channel fees paid to third-party application stores
and other payment channels, (ii) an increase of RMB27.6 million in staff cost and related share-based
compensation expenses and (iii) an increase of RMB21.8 million as we expanded our content
offerings.
Advertising and others. Our costs of advertising and others decreased by 2.1% from
RMB82.4 million in 2020 to RMB80.7 million in 2021, which was mainly attributable to a decrease of
RMB3.4 million in advertising production fees and a decrease in depreciation expenses of leasehold
improvement of RMB2.7 million primarily for our offline fitness centers, partially offset by an increase
of RMB3.2 million in outsourcing and other labor costs primarily relating to the Keepland business
which was negatively impacted by the COVID-19 pandemic in the first half of 2020.
Gross profit
Our overall gross profit increased by 35.5% from RMB499.4 million in 2020 to
RMB676.6 million in 2021.
Our gross profit of self-branded fitness products increased by 5.4% from RMB230.9 million in
2020 to RMB243.3 million in 2021. Our gross profit of membership and online paid content increased
by 48.2% from RMB218.9 million in 2020 to RMB324.5 million in 2021. Our gross profit of self-
branded fitness products and membership and online paid content increased as we generated higher
sales for our fitness products and content. Our gross profit of advertising and others increased by
119.3% from RMB49.6 million in 2020 to RMB108.8 million in 2021 primarily due to an increase in
advertising revenue as we grew our advertising services.
We experienced a decrease in our overall gross margin in 2021 compared to 2020 primarily
attributable to (i) the decreased gross margin of self-branded fitness products segment as we offered
more discounts to incentivize user purchase, including more discounts for fitness products offered to
subscribing members in our online stores, compared to 2020, and (ii) decreased gross margin of
membership and online paid content segment as we incurred increased content related cost as we
further expanded our content offerings which resulted in lower gross margin in 2021, but will
contribute to our long-term revenue growth as more users are attracted by our extensive fitness content
offerings.
Fulfillment expenses
Our fulfillment expenses increased by 38.4% from RMB92.4 million to RMB127.9 million in
2021, which was primarily due to the growth in the sales volume of our self-branded fitness products.
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Selling and marketing expenses
Our selling and marketing expenses increased by 217.0% from RMB301.7 million in 2020 to
RMB956.2 million in 2021, which was primarily due to an increase of RMB568.6 million in branding
and marketing promotion expenses and other related expenses, driven by our efforts to increase
mindshare, enhance brand awareness and expand user base. The increase in branding and marketing
promotion expenses and other related expenses primarily includes an increase of RMB242.0 million in
traffic acquisition expenses, and an increase of RMB311.7 million in our spending related to the
general branding for our app and self-branded fitness products.
Administrative expenses
Our administrative expenses increased by 216.4% from RMB69.0 million in 2020 to
RMB218.3 million in 2021, which was primarily due to an increase of RMB104.8 million in personnel
cost and related share-based compensation expenses as we expanded our general and administrative
team and an increase of RMB41.7 million in professional fees including listing expenses and auditor’s
remuneration.
Research and development expenses
Our research and development expenses increased by 111.8% from RMB167.9 million in 2020 to
RMB355.6 million in 2021, which was primarily due to an increase of RMB150.9 million in research and
development personnel costs including related share-based compensation expenses and an increase of
RMB18.0 million in cloud computing fees as we continue to strengthen our technological capabilities.
Other income
We recorded other income of RMB4.2 million in 2020 and RMB4.3 million in 2021, which
primarily consisted government grants.
Other gains/(losses), net
We recorded other losses, net of RMB1.0 million in 2020 and other gains, net of
RMB9.0 million in 2021. The change was primarily due to an increase of RMB8.7 million in net fair
value gains on financial assets at fair value through profit or loss.
Finance (expenses)/income, net
We recorded net finance expenses of RMB0.4 million in 2020 and net finance income of
RMB6.1 million in 2021. The change was primarily due to the increased bank deposits as a result of
our new round of financing in the end of 2020.
Fair value changes of convertible redeemable preferred shares
Our fair value changes of convertible redeemable preferred shares decreased by 8.0% from
RMB2.1 billion in 2020 to RMB1.9 billion in 2021. The changes in the fair value of our convertible
redeemable preferred shares were primarily attributable to the changes in the valuation of our
Company. See Note 34 to the Accountant’s Report in Appendix I to this document for details regarding
the changes in fair value changes of convertible redeemable preferred shares.
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Loss for the year
Our loss for the year was RMB2.9 billion in 2021, as compared to RMB2.2 billion in 2020. Our
adjusted net loss (non-IFRS measure) for the year was RMB106.4 million and RMB826.5 million for
2020 and 2021, respectively.
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Revenue
Our total revenue increased by 66.9% from RMB663.1 million in 2019 to RMB1.1 billion in
2020, mainly attributable to the increased revenue from self-branded fitness products and membership
and online paid content.
Self-branded fitness products. The revenue from self-branded fitness products increased by
60.8% from RMB396.0 million in 2019 to RMB636.7 million in 2020, which was mainly attributable
to the growth in sales volume resulting from the increasing fitness product customers. Our average
monthly fitness product customers increased by 58.6% from approximately 184 thousand in 2019 to
approximately 292 thousand in 2020.
Membership and online paid content. The revenue from membership and online paid content
increased by 123.4% from RMB151.3 million in 2019 to RMB338.0 million in 2020, which was
mainly attributable to an increase in the average monthly subscribing members due to the expanding
user base and growing membership penetration rate. The average monthly subscribing members
increased from 0.8 million in 2019 to 1.9 million in 2020, driven by our enriched content.
Advertising and others. The revenue from advertising and others increased by 14.1% from
RMB115.8 million in 2019 to RMB132.0 million in 2020, which was mainly attributable to
advertisers’ increased spending on our platform. The growth of our user base allowed advertisers to
enjoy greater exposure, and attracted more advertisers to promote their products and services on our
platform. Our average MAUs increased from 21.8 million in 2019 to 29.7 million in 2020.
Cost of revenues
Our cost of revenues increased by 55.5% from RMB390.5 million in 2019 to
RMB607.4 million in 2020, which was in line with the increase in our total revenue.
Self-branded fitness products. Our cost of self-branded fitness products increased by 58.3%
from RMB256.4 million in 2019 to RMB405.8 million in 2020, which was mainly attributable to an
increase of RMB146.5 million in procurement cost that was in line with the growth in the sales volume
of our self-branded fitness products.
Membership and online paid content. Our costs of membership and online paid content
increased by 116.3% from RMB55.1 million in 2019 to RMB119.1 million in 2020, which was mainly
attributable to an increase of RMB41.8 million in channel fees paid to third-party application stores
and other payment channels, and an increase of RMB5.2 million in employee benefit expenses
including share-based compensation expenses.
Advertising and others. Our costs of advertising and others increased by 4.2% from
RMB79.1 million in 2019 to RMB82.4 million in 2020, which was mainly attributable to an increase
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of RMB16.4 million in advertising production cost that was in line with the growth of advertising
revenue, partially offset by a decrease of RMB7.0 million in rental expenses, primarily as a result of
the negative impact the COVID-19 pandemic had on the operation of our offline fitness centers.
Gross profit
Our overall gross profit increased by 83.2% from RMB272.6 million in 2019 to
RMB499.4 million in 2020.
The gross profit of self-branded fitness products increased by 65.3% from RMB139.7 million
in 2019 to RMB230.9 million in 2020. The gross profit of membership and online paid content
increased by 127.5% from RMB96.2 million in 2019 to RMB218.9 million in 2020. Our gross profit of
self-branded fitness products and membership and online paid content increased as we generated
higher sales for our fitness products and content. The gross profit of advertising and others increased
by 35.2% from RMB36.7 million in 2019 to RMB49.6 million in 2020, which was primarily due to
advertisers’ increased spending on our platform. We experienced an increase in our overall gross
margin in 2020 compared to 2019, primarily attributable to the growth of our membership and online
paid content segment as a percentage of our revenue. Membership and online paid content has a higher
growth margin, therefore driving a higher gross margin for our overall revenue.
Fulfillment expenses
Our fulfillment expenses increased by 67.6% from RMB55.1 million in 2019 to
RMB92.4 million in 2020 due to an increase in warehousing, packaging and delivery expenses
primarily attributable to the growth in sales volume of our self-branded fitness products.
Selling and marketing expenses
Our selling and marketing expenses increased by 2.0% from RMB295.8 million in 2019 to
RMB301.7 million in 2020, which was primarily due to an increase of RMB22.0 million in platform
commission and other selling and marketing expenses related to the operation of online stores, partially
offset by a decrease of RMB12.4 million in branding and marketing promotion expenses and other
related expenses as a result of our reduced marketing efforts during the COVID-19 pandemic.
Administrative expenses
Our administrative expenses decreased by 43.6% from RMB122.2 million in 2019 to
RMB69.0 million in 2020, which was primarily due to a decrease of RMB25.1 million in rental fee
primarily because we classified rental fees as administrative expenses in 2019 during the period when
we furnished our office space and a decrease of RMB7.2 million in professional fee (including
auditor’s remuneration) incurred in 2019 resulting from our financing activities in the same year. The
decrease was partially offset by an increase of RMB8.9 million in share-based compensation expenses
that were allocated to administrative expenses.
Research and development expenses
Our research and development expenses decreased by 13.5% from RMB194.2 million in 2019
to RMB167.9 million in 2020, primarily due to a decrease of RMB17.4 million in social insurance
contribution as a result of the relief policies promulgated by the government in response to the
COVID-19 pandemic and as we optimized staffing efficiency.
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Other income
Our other income decreased by 66.7% from RMB12.6 million in 2019 to RMB4.2 million in
2020, which was primarily due to a decrease in government grants.
Other gains/(losses), net
We recorded other gains, net of RMB9.5 million in 2019 and other losses, net of
RMB1.0 million in 2020. The change was primarily due to a decrease of RMB10.0 million in gains on
lease modification and termination.
Finance income/(expenses), net
Our finance income/(expenses), net increased by 92.8% from net finance expenses of RMB6.2
million in 2019 to net finance expenses of RMB0.4 million in 2020, which was primarily the result of a
decrease in interest expenses arising from lease liabilities due to the adjustments we made to our
operating sites.
Fair value changes of convertible redeemable preferred shares
Our fair value changes of convertible redeemable preferred shares increased by 493.6% from
RMB356.3 million in 2019 to RMB2.1 billion in 2020. The changes in the fair value of our convertible
redeemable preferred shares were primarily attributable to the increase in our the valuation of
Company. See Note 34 to the Accountant’s Report in Appendix I to this document for details regarding
the changes in fair value changes of convertible redeemable preferred shares.
Loss for the year
Our loss for the year was RMB2.2 billion in 2020, as compared to RMB735.0 million in 2019.
Our adjusted net loss (non-IFRS measure) for the year was RMB106.4 million in 2020 and
RMB366.5 million in 2019.
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DISCUSSION OF CERTAIN KEY ITEMS OF CONSOLIDATED BALANCE SHEET
Current Assets/Liabilities
The following table sets forth our current assets and current liabilities as at the dates indicated.
As at
December 31,
As at
April 30,
2019 2020 2021 2022 2023
(Unaudited)
(RMB in thousands)
Current assets
Inventories ............................. 94,635 117,904 198,763 167,737 142,694
Accounts receivables ..................... 79,908 180,766 310,368 251,676 212,666
Prepayments and other current assets ........ 71,875 77,719 86,819 128,966 136,769
Financial assets at fair value through profit or
loss ................................. — 429,310 255,949 139,864 71,901
Short-term time deposits (1) ................. — — 454,963 68,740 188,679
Cash and cash equivalents ................. 563,914 2,342,713 1,653,517 1,672,217 1,466,444
Total ..................................... 810,332 3,148,412 2,960,379 2,429,200 2,219,153
Current liabilities
Accounts payables ....................... 46,305 58,534 141,007 154,095 137,998
Accrued expenses ....................... 88,450 127,516 186,399 244,537 200,160
Other current liabilities ................... 13,119 30,554 63,918 65,301 64,868
Contract liabilities ....................... 38,918 80,227 86,959 84,104 102,130
Borrowings ............................ — — 87,584 74,524 67,508
Lease liabilities ......................... 29,946 33,348 40,999 44,554 43,393
Total ..................................... 216,738 330,179 606,866 667,115 616,057
Net current assets ........................... 593,594 2,818,233 2,353,513 1,762,085 1,603,096
Note:
(1) All time deposits held at bank with original maturities over three months and less than one year with corresponding interest receivables
were classified as short-term time deposits. US$14.9 million, US$6.2 million and US$3.2 million short-term time deposits were pledged
to Bank of Jiang Su Co., Ltd for bank borrowings as at December 31, 2021 and 2022, and April 30, 2023, respectively. RMB25.5 million
and RMB25.5 million were pledged in the Bank of Ningbo Co., Ltd, as at December 31, 2022 and April 30, 2023, respectively. Except
for above pledged short-term time deposits, other deposits can be withdrawn with no restriction.
We had net current assets positions as at December 31, 2019, 2020, 2021 and 2022. Our net
current assets positions as of each of these dates were primarily attributable to our large balance of
inventories, accounts receivables, prepayments and other current assets, financial assets at fair value
through profit or loss, short-term time deposits and cash and cash equivalents, partially offset by our
accounts payables, accrued expenses and other current liabilities, lease liabilities, contract liabilities
and borrowings. Cash and cash equivalents account for a substantial portion of our current assets.
Prepayments and other current assets primarily represent royalty licenses, deductible value added taxes
and prepayments for promotion fees. See “—Liquidity and Capital Resources” for further details on
change of the balance of our cash and cash equivalents.
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Inventories
The following table sets forth our inventories as of the dates indicated.
As at December 31,
2019 2020 2021 2022
RMB in thousands
Inventories:
Raw materials .............................................. 5 3 4 1,188 123 716
Components ................................................ 3,333 9,599 20,273 12,563
Finished goods .............................................. 94,638 113,527 186,378 168,695
98,505 124,314 206,774 181,974
Less: provision for impairment (1) ............................... (3,870) (6,410) (8,011) (14,237)
Total ..................................................... 94,635 117,904 198,763 167,737
Note:
(1) Provision for impairment represent the amount by which the carrying amount of the inventories exceeds its net realizable value and was
recorded in the cost of revenues in the consolidated income statements.
Our inventories were RMB94.6 million, RMB117.9 million, RMB198.8 million and
RMB167.7 million as at December 31, 2019, 2020, 2021 and 2022, respectively. We experienced a
decrease in inventory as at December 31, 2022 compared to that of December 31, 2021 as we
improved our inventory management system and achieved more effective and efficient inventory
management.
The following table sets forth provision for impairment movements for the periods indicated.
Year ended December 31,
2019 2020 2021 2022
(RMB in thousands)
At the beginning of the year ..................................... (806) (3,870) (6,410) (8,011)
Provision for impairment ......................................... (3,064) (2,540) (1,601) (6,226)
At the end of the year ........................................... (3,870) (6,410) (8,011) (14,237)
Inventory turnover days for a given period are equal to the average balances of inventories that
are related to self-branded fitness products, net of provision for inventory write-down, at the beginning
and at the end of the period divided by cost of self-branded fitness products sold during the period and
multiplied by the number of days during the period. Our inventories turnover days decreased from 98
days in 2020 to 94 days in 2021 and 78 days in 2022, which were primarily due to our continued
efforts to improve inventory management. As at April 30, 2023, RMB137.1 million, or 81.7%, of our
inventories as of December 31, 2022 had been subsequently utilized.
As at December 31, 2019, 2020, 2021 and 2022, 99.2%, 98.6%, 97.0% and 100% of our
inventories had age of less than one year, respectively. During the Track Record Period, more than
80% of the inventories with an age of over one year was finished goods. Inventories with an age of
over one year increased from RMB0.8 million as at December 31, 2019 to RMB1.7 million as at
December 31, 2020, and decreased from RMB6.0 million as at December 31, 2021 to nil as of
December 31, 2022. The decrease of inventories with an age of over one year was primarily due to the
disposal of old and excess inventories to optimize our inventory.
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The following table sets forth the aging analysis of our inventories as at the dates indicated.
As at December 31, 2019
0-360
days
Over 360
days Total
(RMB in thousands)
Raw materials and components ........................................ 3,832 35 3,867
Finished goods ..................................................... 90,002 766 90,768
Total ............................................................. 93,834 801 94,635
As at December 31, 2020
0-360
days
Over 360
days Total
(RMB in thousands)
Raw materials and components ........................................ 10,787 — 10,787
Finished goods ..................................................... 105,424 1,693 107,117
Total ............................................................. 116,211 1,693 117,904
As at December 31, 2021
0-360
days
Over 360
days Total
(RMB in thousands)
Raw materials and components ........................................ 19,289 1,107 20,396
Finished goods ..................................................... 173,438 4,929 178,367
Total ............................................................. 192,727 6,036 198,763
As at December 31, 2022
0-360
days
Over 360
days Total
(RMB in thousands)
Raw materials and components ........................................ 13,279 — 13,279
Finished goods ..................................................... 154,458 — 154,458
Total ............................................................. 167,737 — 167,737
We regularly carried out inventory review on the recoverability of our inventory. Provision for
inventory is recorded where events and changes in circumstances indicate that the carrying cost of
inventories will not be fully realized. Inventories are stated at the lower of cost or net realizable value.
Costs are assigned to individual items of inventories on the basis of weighted average costs. Costs of
purchased inventories are determined after deducting rebates and discounts. Net realizable value is the
estimated selling price in the ordinary course of business less the estimated costs of completion and the
estimated costs necessary to make the sale. As at December 31, 2019, 2020 and 2021, the balance of
provision for impairment were approximately RMB3.9 million, RMB 6.4 million and RMB8.0 million,
respectively, which were in line with the increase of inventory balances. The balance of provision for
impairment as at December 31, 2022 was RMB14.2 million. We experienced an increase in the
provision for impairment due to the decreased net realizable values of inventory as at December 31,
2022.
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Accounts receivables
Our accounts receivables represent amounts due from customers and agent for goods sold or
services performed in the ordinary course of business. The following table sets forth our accounts
receivables as of the dates indicated.
As at December 31,
2019 2020 2021 2022
(RMB in thousands)
Accounts receivables ......................................... 80,861 183,006 312,659 258,576
Less: credit loss allowances ................................... (953) (2,240) (2,291) (6,900)
Total ..................................................... 79,908 180,766 310,368 251,676
Our accounts receivables increased from RMB79.9 million as at December 31, 2019 to
RMB180.8 million as at December 31, 2020 and RMB310.4 million as at December 31, 2021. The
increase in accounts receivables was primarily due to an increase in accounts receivables arising
from the increased sales of our self-branded fitness products and joint membership. Under the joint
membership arrangements we had in cooperation with other popular platforms, our membership
subscriptions were sold in bundle with the membership package of our joint membership partners at
both platforms to promote subscriptions and broaden our user reach. Our accounts receivables
decreased from RMB310.4 million as at December 31, 2021 to RMB251.7 million as at December
31, 2022, primarily due to our continued efforts to improve accounts receivable collections.
We generally allow a credit period of three months to our customers. Aging analysis of
accounts receivables based on recognition date is as follows:
As at December 31,
2019 2020 2021 2022
(RMB in thousands)
Up to 3 months ............................................. 70,995 157,193 156,064 135,423
3 to 6 months ............................................... 6,268 21,874 109,277 48,144
6 to 9 months ............................................... 1,996 126 13,407 21,137
9 months to 1 year ........................................... 4 0 1 — 5,309 11,466
Over 1 year ................................................ 1,201 3,813 28,602 42,406
Total ..................................................... 80,861 183,006 312,659 258,576
Accounts receivables turnover days for a given period are equal to the average balances of
accounts receivables at the beginning and at the end of the period divided by revenue during the period
and multiplied by the number of days during the period. Our accounts receivables turnover days
increased from 43 days in 2020 to 55 days in 2021, primarily due to an increase in accounts receivables
from our joint membership partners as usually no settlement is required during the cooperation period.
Our accounts receivables turnover days decreased from 55 days in 2021 to 46 days in 2022, primarily
due to our continued efforts to improve accounts receivable collections. As at April 30, 2023,
RMB166.7 million, or 64.5%, of our accounts receivables as at December 31, 2022 had been
subsequently settled.
To strengthen the recovering of outstanding receivables, we have established effective customer
credit policies, implemented strengthened credit term review and approval procedures and strengthened
the receivables management performance review with respect to the relevant sales personnel. We do not
hold any collateral or other credit enhancements over our accounts receivable balances.
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We have assessed the recoverability of the relevant outstanding account receivables. Most of
the outstanding account receivables as of December 31, 2022 were aged less than one year.
Approximately 71.3% of our trade receivables aged less than one year as of December 31, 2022 were
recovered as of April 30, 2023. In light of the life cycle collection history of our accounts receivables,
the collection ratio is relatively high if the aging is still within one year. Therefore, we believe the risk
of us not being able to recover the relevant account receivables aged less than one year is relatively
low based on our evaluation of the historical credit standing, ongoing monitoring and the credit records
of these customers.
Moreover, we monitor long aged account receivables closely and update the collection status of
account receivables on a regular basis. Among the approximately RMB42.4 million account
receivables aged over one year that had not been settled as of December 31, 2022, approximately
RMB12.6 million were recovered as at April 30, 2023. As of December 31, 2022, the balance of
account receivables aged more than one year primarily consisted of the accounts receivables due from
our joint membership partners who sold our membership cards in conjunction with their own
membership cards to third-party end customers. We agreed with the joint membership partners to not
settle the sales proceeds attributable to the sales of our membership cards during the cooperation
period. In June 2022, the cooperation with one of our joint membership partners expired and the
corresponding outstanding accounts receivables balance was fully settled.
With regard to the balance of account receivables aged over one year, we performed an
impairment analysis at the end of each of the period within the Track Record Period and made
sufficient provision for account receivables aged over one year. We assess the credit quality of our
customers and other debtors by taking into account various factors including their financial position,
past operational and financial performance and forward-looking factors. To measure the expected
credit losses, accounts receivables have been grouped based on shared credit risk characteristics and
credit rating. The expected loss rates are based on the historical payment profiles, historical loss rates
and data published by external credit rating institution, adjusted to reflect current and forward-looking
information on macroeconomic factors affecting the ability of the customers to settle the receivables.
We have identified factors such as the Gross Domestic Products (“ GDP”) of the PRC to be the most
relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these
factors. Therefore, we believe sufficient provision has been made for the balance of accounts
receivables.
We have been continuously receiving payments from relevant customers or making settlement
with relevant customers to settle the accounts receivables due from them. Therefore, we believe there
is no recoverability issue after making the necessary adjustments for loss allowance.
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Prepayments and other current assets
The following table sets forth our prepayments and other current assets as at the dates
indicated.
Group As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Deductible value added taxes ................................ 17,041 6,474 32,613 69,849
Royalty licenses ........................................... 1,213 1,627 4,507 9,827
Prepayments for promotion fees .............................. 4,183 10,490 17,010 7,481
Deferred payment channel fees (1) .............................. 4,759 9,178 11,682 6,870
Prepayments for listing expenses .............................. — — 1,735 5,597
Short-term rental and other deposits ........................... 2,291 2,222 4,763 5,564
Software license fees ....................................... 5 9 4 9 5 9 2,588 3,916
Prepayments for products procurement ......................... 5,155 11,588 7,863 3,178
Receivable from Preferred Shares shareholder ................... 34,228 32,703 — —
Others ................................................... 2,411 2,478 4,058 16,684
Total 71,875 77,719 86,819 128,966
Notes:
(1) We amortized the deferred payment channel fees during the membership period which is usually up to one year.
Our prepayments and other current assets increased from RMB71.9 million as at December 31,
2019 to RMB77.7 million as at December 31, 2020, RMB86.8 million as at December 31, 2021 and
further increased to RMB129.0 million as at December 31, 2022. The increase in prepayments and
other current assets from December 31, 2019 to December 31, 2020 was primarily due to an increase in
prepayments for promotion fees and prepayments for products procurement as we increased spending
on promotional activities and the increased sales of our self-branded fitness products. The increase in
prepayments and other current assets from December 31, 2020 to December 31, 2021 was due to an
increase in deductible value added taxes which relate to our increased promotional spending and an
increase in prepayments for promotion fees as we increased spending on promotional activities,
partially offset by a decrease in receivables from shareholders of the company’s preferred shares. The
increase in prepayments and other current assets from December 31, 2021 to December 31, 2022 was
primarily due to an increase in deductible value-added taxes. As at April 30, 2023, RMB64.7 million,
or 50.1%, of our prepayments and other current assets as at December 31, 2022 had been subsequently
settled.
Financial assets at fair value through profit or loss
Our financial assets at fair value through profit or loss primarily consist of wealth management
products we purchased to improve returns on our excess liquidity. Short-term wealth management
products with maturity period within one year that we purchased from various reputable financial
institutions in China without guaranteed returns. Wealth management products mainly represent
deposits with variable interest rates indexed to the performance of underlying assets or principal that
are not-guaranteed by certain financial institutions. We recorded wealth management product of, nil,
RMB429.3 million, RMB255.9 million and RMB139.9 million as of December 31, 2019, 2020, 2021
and 2022, respectively. Going forward, we may continue to invest in wealth management products. We
plan to make investment decisions related to the purchase of such products on a case-by-case basis.
We manage and evaluate the performance of investments on a fair value basis in accordance
with our risk management and investment strategy. To monitor and control the investment risks
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associated with our wealth management product portfolio, we have adopted a comprehensive set of
internal policies and guidelines to manage our investment in wealth management products. Mr. Huang
Weibo, the chief financial officer of the Company, has been supervising our investment. Prior to
making any material investments in wealth management products or modifying our existing investment
portfolio, the proposal shall be approved by Mr. Huang and his designated senior member of our
management. Our investment strategy related to wealth management products focuses on minimizing
the financial risks by reasonably and conservatively matching the maturities of the portfolio to
anticipated operating cash needs, while generating desirable investment returns for the benefits of our
Shareholders. We primarily invest in wealth management products issued by major commercial banks
with low risks and a short-to mid-term of no more than one year. We make investment decisions
related to wealth management products on a case-by-case basis after thoroughly considering a number
of factors, including but not limited to macro-economic environment, general market conditions, risk
control and credit of issuing banks, our own working capital conditions, and the expected profit or
potential loss of the investment. Mr. Huang has approximately 20 years of experience in financial
management, held senior positions in a renowned public accounting firm and top technology
companies in China. In addition, we have a professional and efficient financial management team. The
team members have professional certifications, such as CPA and strong financial and cash
management capabilities with prior working experience in renowned multinational enterprises and
accounting firms. We also require Board approval for (i) any investment in any other individual or
entity in excess of US$8,000,000 and (ii) any incurrence of indebtedness or capital expenditure in
excess of US$5,000,000 or exceeding 10% of the approved annual budget individually or in aggregate.
During the Track Record Period, our investment in wealth management products did not meet the
threshold for Board approval, therefore the Board was not involved in the investment process. After the
Listing, our investments in financial assets at fair value through profit or loss will be subject to
compliance with Chapter 14 of the Listing Rules. The fair values are based on valuation techniques
which maximize the use of observable market data where it is available and rely as little as possible on
entity specific estimates and are within level 2 of the fair value hierarchy.
The following table sets forth our current financial assets at fair value through profit or loss as
of the dates indicated.
As at December 31,
2019 2020 2021 2022
(RMB in thousands)
Current assets
Wealth management products ................................. — 429,310 255,029 139,864
Foreign currency forward contracts ............................ — — 9 2 0 —
Total .................................................... — 429,310 255,949 139,864
Our financial assets at fair value through profit or loss increased from nil as at December 31,
2019 to RMB429.3 million as of December 31, 2020 as we purchased certain wealth management
products in 2020. Our financial assets at fair value through profit or loss decreased from
RMB429.3 million as at December 31, 2020 to RMB255.9 million as at December 31, 2021 and
further decreased to RMB139.9 million as at December 31, 2022, as certain financial products we held
were redeemed to cash and cash equivalents.
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Accounts payables
Accounts payables represent liabilities for goods and services provided to us prior to the end of
financial year which are unpaid. The amounts are unsecured and are generally paid within three months
of invoice date. Accounts payables are presented as current liabilities unless payment is not due within
12 months after the reporting period. The following table sets forth the accounts payables and their
aging analysis as of the dates indicated based on invoiced date.
As at December 31,
2019 2020 2021 2022
(RMB in thousands)
Up to 3 months .............................................. 46,305 58,534 141,007 154,095
Our accounts payables increased from RMB46.3 million in 2019 to RMB58.5 million in 2020,
RMB141.0 million in 2021 and further increased to RMB154.1 million as at December 31, 2022. The
increase in our accounts payables was in line with the growth of our business.
Accounts payables turnover days for a given period are equal to the average balances of
accounts payables at the beginning and at the end of the period divided by cost of revenue during the
period and multiplied by the number of days during the period. Our accounts payables turnover days
increased from 32 days in 2020 to 39 days in 2021 and further to 41 days in 2022, primarily due to
extended contractual payment period as a result of our increased bargaining power and our continuous
efforts to enhance our relationship with our suppliers. As at April 30, 2023, RMB145.0 million, or
94.1%, of our accounts payables as at December 31, 2022 had been subsequently settled.
Accrued expenses
The following table sets forth our accrued expenses of the dates indicated:
As at December 31,
2019 2020 2021 2022
(RMB in thousands)
Accrued expenses:
Accrued payroll related expenses ............................... 30,903 54,982 93,544 136,083
Accrued promotion fees ...................................... 28,214 58,126 55,350 46,969
Accrued transportation fees .................................... 5,255 4,892 10,550 33,132
Accrued professional service fees and unpaid issuance cost .......... 12,699 6,243 21,527 21,913
Accrued office facilities fees ................................... 10,020 1,040 3,275 3,224
Others .................................................... 1,359 2,233 2,153 3,216
Total ..................................................... 88,450 127,516 186,399 244,537
Our accrued expenses increased from RMB88.5 million as at December 31, 2019 to
RMB127.5 million as at December 31, 2020, primarily due to an increase in accrued promotion fees as
we increased promotion activities and an increase in accrued payroll related expenses as we increased
employee headcount. Our accrued expenses increased from RMB127.5 million as at December 31,
2020 to RMB186.4 million as at December 31, 2021, primarily due to an increase in accrued payroll
related expenses as we increased employee headcount and an increase in unpaid issuance cost relating
to this offering. Our accrued expenses increased from RMB186.4 million as at December 31, 2021 to
RMB244.5 million as at December 31, 2022, primarily due to an increase in accrued payroll related
expenses with more employee headcount and higher accrued transportation fees as our sales volume
increased.
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Non-Current Assets/Liabilities
The following table sets forth our non-current assets and non-current liabilities as at the dates
indicated:
As at December 31,
2019 2020 2021 2022
(RMB in thousands)
Non-current assets:
Property and equipment ........................... 31,667 23,302 31,992 30,603
Right-of-use assets ............................... 125,783 97,164 98,913 90,659
Intangible assets ................................. 7,098 6,723 9,219 9,316
Other non-current assets ........................... 16,722 11,530 20,035 73,763
Total .............................................. 181,270 138,719 160,159 204,341
Non-current liabilities:
Lease liabilities .................................. 110,178 80,057 72,820 59,069
Convertible redeemable preferred shares .............. 2,810,328 6,918,563 9,201,503 9,401,472
Other non-current liability ......................... .——— 16,048
Total .............................................. 2,920,506 6,998,620 9,274,323 9,476,589
Property and equipment
Our property and equipment decreased from RMB31.7 million as at December 31, 2019 to
RMB23.3 million as at December 31, 2020, primarily due to the depreciation of property and
equipment in the ordinary course of business. Our property and equipment increased from
RMB23.3 million as at December 31, 2020 to RMB32.0 million as at December 31, 2021, primarily
due to (i) electronic devices we purchased as we expanded our operation and increased employee
headcount and (ii) renovation as a result of our newly lease office space. We recorded property and
equipment of RMB30.6 million as at December 31, 2022.
Right-of-use assets
Our right-of-use assets represent carrying amounts of leased properties, including office
buildings and fitness centers. These leases have a fixed term of one year to six years. Lease terms are
negotiated on an individual basis and contain different terms and conditions. Right-of-use assets are
depreciated on a straight-line basis over the shorter of their respective estimated useful life and the
lease term. The following table sets forth our right-of-use assets as at the dates indicated.
As at December 31,
2019 2020 2021 2022
(RMB in thousands)
Right-of-use assets
Office buildings ............................................... 105,698 84,698 86,158 83,726
Fitness centers ................................................ 20,085 12,466 12,755 6,933
Total ....................................................... 125,783 97,164 98,913 90,659
Our right-of-use assets decreased from RMB125.8 million as at December 31, 2019 to
RMB97.2 million as at December 31, 2020, primarily due to depreciation of leased asset and
adjustments we made to our operating sites. Our right-of-use assets increased from RMB97.2 million
as at December 31, 2020 to RMB98.9 million as at December 31, 2021 as we leased additional office
space. Our right-of-use assets decreased from RMB98.9 million as at December 31, 2021 to RMB90.7
million as at December 31, 2022, primarily due to the amortization of right-of-use assets.
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Lease liabilities
Our non-current lease liabilities represent the payment obligations on our leases in relation to
properties that we lease primarily for office buildings and fitness centers.
Our non-current lease liabilities decreased from RMB110.2 million as at December 31, 2019 to
RMB80.1 million as at December 31, 2020 due to adjustments we made to our operating sites. Our
non-current lease liabilities decreased from RMB80.1 million as at December 31, 2020 to
RMB72.8 million as at December 31, 2021, and further decreased to RMB59.1 million as at December
31, 2022, as we settled certain rental expenses.
Other non-current assets
Other non-current assets primarily represent long-term royalty licenses, naming rights and
sponsorship fees, corporate investment, deposits on lease and prepayments for property, equipment and
intangible assets.
The following table sets forth our other non-current assets as at the dates indicated.
As at December 31,
2019 2020 2021 2022
(RMB in thousands)
Loans to management ........................................... 3,900———
Long-term royalty licenses, naming rights and sponsorship fees .......... — — 6,904 41,782
Corporate investment .......................................... .——— 15,000
Deposits on lease ............................................... 12,193 11,318 13,067 13,437
Prepayments for property, equipment and intangible assets .............. 6 2 9 2 1 2 6 4 3,544
Total ........................................................ 16,722 11,530 20,035 73,763
Other non-current assets decreased from RMB16.7 million as of December 31, 2019 to
RMB11.5 million as of December 31, 2020, primarily due to management’s repayment of loans. Other
non-current assets increased from RMB11.5 million as of December 31, 2020 to RMB20.0 million as
of December 31, 2021, primarily due to an increase in long-term royalty licenses, naming rights and
sponsorship fees as we newly purchased certain royalty licenses with contract periods of more than one
year. Other non-current assets further increased to RMB73.8 million as of December 31, 2022,
primarily due to an increase in (i) long-term royalty licenses, naming rights and sponsorship fees, (ii)
corporate investment, and (iii) prepayments for property, equipment and intangible assets. Corporate
investment represents our acquisition of certain ordinary shares with preferential rights of a private
company in December 2022. Currently, their product is in the form of a mini-program that allows users
to search for offline sports activities online and sign up to participate. The private company’s business
aligns with our goals to explore the outdoor sports market. We believe this partnership will help us to
explore and validate a larger market and reach untapped users. The acquisition aims to promote better
collaboration and foster synergy between the two companies. The increase in long-term royalty
licenses, naming rights and sponsorship fees primarily represents fees we incurred to obtain certain
naming rights to further enhance our brand image. The increase in prepayments for property,
equipment and intangible assets is mainly attributed to the increase in intangible assets that have been
paid for but are not yet ready for use. These assets are primarily used for enhancing internal
management within our Company.
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Convertible redeemable preferred shares
During the Track Record Period, we issued certain convertible redeemable preferred shares to
our investors. See “History, Reorganization, and Corporate Structure” of this document and Note 34 to
the Accountant’s Report in Appendix I to this document for details of the convertible redeemable
preferred shares. We applied the discounted cash flow method to determine the underlying equity value
of our Company and adopted the option-pricing method and equity allocation model to determine the
fair value of the convertible redeemable preferred shares. See Note 3.3 to the Accountant’s Report in
Appendix I to this document for the key assumptions used to determine the fair value of the convertible
redeemable preferred shares.
KEY FINANCIAL RATIOS
For the Year Ended December 31,
2019 2020 2021 2022
Total revenue growth (%) ...................................... — 66.9 46.3 36.6
Total gross margin (%) ........................................ 41.1 45.1 41.8 40.7
Net loss margin (%) ........................................... (110.8) (202.7) (179.6) (4.7)
Adjusted net margin (Non-IFRS measure) (%) (1) .................... (55.3) (9.6) (51.0) (30.2)
Note:
(1) Adjusted net margin (non-IFRS measure) represents adjusted net loss (non-IFRS measure) for the periods indicated as a percentage of
total revenue of such period. For details of the adjusted net loss (non-IFRS measure) of the periods indicated, see “—Non-IFRS Measure:
Adjusted Net Loss”.
LIQUIDITY AND CAPITAL RESOURCES
During the Track Record Period and up to the Latest Practicable Date, we funded our cash
requirements principally from historical equity financing activities. Our cash and cash equivalents
primarily consist of cash in hand, deposits held at call with banks, highly liquid investments placed in
banks with original maturities of three months or less and cash held at third party payment platform
that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value. We had cash and cash equivalents of RMB563.9 million, RMB2.3 billion,
RMB1.7 billion and RMB1.7 billion as at December 31, 2019, 2020, 2021 and 2022, respectively.
The following table sets forth a summary of our cash flows for the periods indicated.
For the Year Ended December 31,
2019 2020 2021 2022
(RMB in thousands)
Selected Consolidated Cash Flow Data:
Net cash outflow from operating activities before movements in
working capital ..................................... (270,534) (55,477) (785,636) (561,590)
Change in working capital .............................. (6,455) (15,345) (82,866) 106,610
Income tax paid ....................................... — — — (1,003)
Net cash outflow from operating activities .................. (276,989) (70,822) (868,502) (455,983)
Net cash inflow/(outflow) from investing activities ........... 345,364 (447,757) (296,803) 459,691
Bank borrowings interests paid ........................... — — (2,181) (2,312)
Net cash inflow/(outflow) from financing activities ........... 408,281 2,307,841 497,328 (66,830)
Net increase/(decrease) in cash and cash equivalents .......... 476,656 1,789,262 (667,977) (63,122)
Cash and cash equivalents at the beginning of the year ........ 88,834 563,914 2,342,713 1,653,517
Effects of exchange rate changes on cash and cash
equivalents ........................................ (1,576) (10,463) (21,219) 81,822
Cash and cash equivalents at the end of the year .......... 563,914 2,342,713 1,653,517 1,672,217
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In view of our net operating cash outflows position as of December 31, 2022, going forward,
we plan to improve such position by further diversifying our monetization channels and enhancing our
monetization capabilities leveraging our vertical integration capabilities and deep insights accumulated
from our large user base. For membership and online paid content, we will continue to expand into
more fitness categories, introduce more fitness content and new features in our online courses. For
example, we have expanded into more niche fitness categories, such as martial art and dancing. We are
also working to improve the connectivity between our content offerings and smart fitness devices to
deliver more immersive experience and better training results. For self-branded fitness products, we
will continue to research and develop new fitness products and enhance our existing product offerings.
We will launch new categories of smart fitness devices and complementary fitness products to capture
more wallet share of our existing users. For advertising and others, we have introduced Keep selected
fitness classes as new format of offline fitness classes to increase user touch point. We plan to further
expand such asset-light format to provide more integrated online and offline experience. We also plan
to increase collaboration with advertisers in selected industries, such as fitness, sports and electric cars.
We believe our continuous efforts in content and product development will drive continuous revenue
growth and enhance our overall monetization capabilities.
We will also adopt comprehensive measures to effectively control our operating expenses, in
particular selling and marketing expenses through effective and efficient promotion campaigns and
marketing spending. In addition, we expect to enjoy greater economies of scale on our platform as we
continue to improve our one-stop, integrate fitness solution to unlock synergies across segments and
increase flexibility in managing expenses. We will also enhance working capital management
efficiency through continuously building a stable and collaborative relationship with our suppliers and
customers and enhance credit management. For example, we have established effective customer credit
policies and implemented strengthened credit term review and approval procedures to strengthen the
recovering of outstanding receivables.
Net Cash Outflow from Operating Activities
Net cash outflow from operating activities in 2022 was RMB456.0 million. The difference
between net cash used in operating activities and the loss before income tax of RMB103.5 million was
the result of (i) non-cash items, which primarily consist of fair value gains of preferred shares of
RMB665.0 million and share-based compensation expenses of RMB102.6 million, and (ii) changes in
working capital, which primarily consist of an increase in accrued expenses and other current liabilities
of RMB57.5 million, a decrease in account receivables of RMB51.4 million and a decrease in
inventories of RMB24.8 million, partially offset by an increase in prepayments and other current assets
of RMB38.6 million.
Net cash outflow from operating activities in 2021 was RMB868.5 million. The difference
between net cash used in operating activities and loss before income tax of RMB2.9 billion was the
result of (i) non-cash items, which primarily consist of fair value changes of preferred shares of
RMB1.9 billion and share-based compensation expenses of RMB135.5 million, and (ii) changes in
working capital, which primarily consist of increase in accrued expenses and other current liabilities of
RMB91.0 million and an increase in accounts payables of RMB82.5 million, offset by an increase in
accounts receivables of RMB130.9 million and an increase in inventories of RMB82.5 million.
Net cash outflow from operating activities in 2020 was RMB70.8 million. The difference
between net cash used in operating activities and loss before income tax of RMB2.2 billion was the
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result of (i) non-cash items, which primarily consist of fair value changes of preferred shares of
RMB2.1 billion, depreciation of right-of-use assets RMB31.3 million and share-based compensation
expenses of RMB22.4 million, and (ii) changes in working capital, which primarily consist of increase
in accrued expenses and other current liabilities of RMB65.6 million, offset by an increase in accounts
receivables of RMB102.1 million.
Net cash outflow from operating activities in 2019 was RMB277.0 million. The difference
between net cash used in operating activities and net loss of RMB735.0 million was the result of
(i) non-cash items, which primarily consist of fair value changes of preferred shares of
RMB356.3 million and depreciation of right-of-use assets RMB57.5 million and (ii) changes in
working capital, which primarily consist of increase in accounts payables of RMB30.5 million,
increase in contract liabilities of RMB29.0 million and increase in accrued expenses and other current
liabilities of RMB20.1 million, offset by an increase in inventories of RMB52.8 million and an
increase in accounts receivables of RMB37.5 million.
Net Cash inflow/(outflow) from Investing Activities
Net cash inflow from investing activities in 2022 was RMB459.7 million, primarily due to
proceeds from maturities of short-term time deposits and forward contracts of RMB595.2 million and
proceeds from disposal of financial assets at fair value through profit or loss of RMB487.8 million,
partially offset by investments in financial assets at fair value through profit or loss of RMB365.2
million and investments in short-term time deposits of RMB236.3 million.
Net cash outflow from investing activities in 2021 was RMB296.8 million, primarily due to
proceeds from disposal of financial assets at fair value through profit or loss of RMB1.3 billion and
proceeds from maturities of short-term time deposits and forward contracts of RMB516.5 million,
partially offset by investments in financial assets at fair value through profit or loss of RMB1.1 billion
and investments in short-term time deposits of RMB975.2 million.
Net cash outflow from investing activities in 2020 was RMB447.8 million, primarily due to
investments in financial assets at fair value through profit or loss of RMB806.0 million and
investments in short-term time deposits of RMB156.1 million, partially offset by proceeds from
disposal of financial assets at fair value through profit or loss of RMB355.9 million and proceeds from
maturity of short-term time deposits and forward contracts of RMB155.9 million.
Net cash inflow from investing activities in 2019 was RMB345.4 million, primarily due to
proceeds from disposal of financial assets at fair value through profit or loss of RMB241.4 million and
proceeds from maturity of short-term time deposits of RMB209.7 million, partially offset by
investments in short-term time deposits of RMB75.2 million and purchase of property and equipment
of RMB35.9 million.
Net Cash Inflow/(Outflow) from Financing Activities
Net cash outflow from financing activities in 2022 was RMB66.8 million, primarily due to
repayment of borrowings of RMB87.5 million and payments for principal elements and related interest
of leases of RMB45.8 million, partially offset by proceeds from bank borrowings of RMB74.5 million.
Net cash inflow from financing activities in 2021 was RMB497.3 million, primarily due to
proceeds from borrowing of RMB87.5 million and proceeds from issuance of convertible redeemable
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preferred shares of RMB478.9 million, partially offset by payments for principal elements of lease and
related interest of RMB43.4 million and repurchases of convertible redeemable preferred shares of
RMB19.7 million.
Net cash inflow from financing activities in 2020 was RMB2.3 billion, primarily due to
proceeds from the issuance of convertible redeemable preferred shares of RMB2.4 billion, partially
offset by payments for principal elements of lease and related interest of RMB33.3 million and
transactions with non-controlling interests of RMB30.0 million.
Net cash inflow from financing activities in 2019 was RMB408.3 million, primarily due to
proceeds from the issuance of convertible redeemable preferred shares of RMB490.4 million, partially
offset by payment for principal elements of lease and related interest of RMB47.2 million.
INDEBTEDNESS
The following table sets forth the breakdown of our indebtedness as of the dates indicated:
As at December 31,
As at
April 30,
2019 2020 2021 2022 2023
(Unaudited)
(RMB in thousands)
—Preferred Shares ........................ 2,810,328 6,918,563 9,201,503 9,401,472 11,847,188
—Borrowings ............................ — — 87,584 74,524 67,508
—Lease liabilities ......................... 140,124 113,405 113,819 103,623 90,363
Total ................................... 2,950,452 7,031,968 9,402,906 9,579,619 12,005,059
Borrowings
As at December 31, 2019 and 2020, we did not have any bank borrowings. We recorded
borrowings of RMB87.6 million and RMB74.5 million as at December 31, 2021 and 2022, respectively,
with a weighted average interest rate for the outstanding borrowings of 4.2% and 3.3%. Borrowings in
the amount of RMB87.6 million and RMB61.5 million were secured bank loan as at December 31, 2021
and 2022, respectively. Borrowings in the amount of RMB13.0 million were unsecured bank loan as at
December 31, 2022. We recorded borrowings of RMB67.5 million as at April 30, 2023. We did not have
any unutilized banking facilities as of December 31, 2019, 2020 and 2021. We had RMB17.0 million in
unutilized banking facilities as of December 31, 2022.
Convertible Redeemable Preferred Shares
As at December 31, 2019, 2020, 2021 and 2022, our convertible redeemable preferred shares had
a fair value of RMB2.8 billion, RMB6.9 billion, RMB9.2 billion and RMB9.4 billion, respectively. For
further information regarding the preferred shares, see Note 34 to the Accountant’s Report in Appendix I
to this document. We have not repurchased any preferred shares since December 31, 2022. All of the
convertible redeemable preferred shares are unsecured and unguaranteed.
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Lease Liabilities
Our lease liabilities are in relation to properties that we lease primarily for our office buildings
and fitness centers. The following table sets forth our lease liabilities as of the dates indicated:
As at December 31,
As at
April 30,
2019 2020 2021 2022 2023
(Unaudited)
Lease liabilities: (RMB in thousands)
Current ...................................... (29,946) (33,348) (40,999) (44,554) (43,393)
Non-current .................................. (110,178) (80,057) (72,820) (59,069) (46,970)
Total ....................................... (140,124) (113,405) (113,819) (103,623) (90,363)
Our lease liabilities decreased from RMB140.1 million as at December 31, 2019 to
RMB113.4 million as at December 31, 2020 due to adjustments we made to our operating sites. We
recorded lease liabilities of RMB113.4 million as at December 31, 2020 and RMB113.8 million as at
December 31, 2021, and our lease liabilities decreased from RMB113.8 million as at December 31,
2021 to RMB103.6 million as at December 31, 2022, and further decreased to RMB90.4 million as at
April 30, 2023.
No Other Outstanding Indebtedness
Except as discussed above, we did not have any material mortgages, charges, debentures, loan
capital, debt securities, loans, bank overdrafts or other similar indebtedness, finance lease or hire
purchase commitments, liabilities under acceptances (other than normal trade bills), acceptance credits,
which are either guaranteed, unguaranteed, secured or unsecured as at April 30, 2023.
CONTINGENT LIABILITIES OR GUARANTEES
As at December 31, 2019, 2020, 2021, and 2022, and April 30, 2023, we did not have any
material contingent liabilities or guarantees.
CAPITAL EXPENDITURES
Our capital expenditures are primarily incurred for purchases of property and equipment and
purchase of intangible assets. The following table sets forth our capital expenditures for the years
indicated.
For the Year Ended December 31,
2019 2020 2021 2022
(RMB in thousands)
Payment for long-term naming rights and sponsorship fees ............ — — — (16,048)
Purchases of property and equipment ............................. (35,887) (6,443) (19,887) (13,201)
Purchase of intangible assets .................................... (303) (770) (4,743) (6,455)
Total ...................................................... (36,190) (7,213) (24,630) (35,704)
Our capital expenditures were RMB36.2 million in 2019, RMB7.2 million in 2020, RMB24.6
million in 2021 and RMB35.7 million in 2022.
We intend to fund our future capital expenditures with our existing cash balance and proceeds
from the Global Offering. See “Use of proceeds” for more details. We may reallocate the fund to be
utilized on capital expenditure and long-term investments based on our ongoing business needs.
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CONTRACTUAL OBLIGATIONS
Capital Commitments
We did not have any material commitments as at December 31, 2019, 2020, 2021 and 2022.
OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS
As of the Latest Practicable Date, we had not entered into any off-balance sheet arrangements.
MATERIAL RELATED PARTY TRANSACTIONS
We enter into transactions with our related parties from time to time.
Our Directors believe that our transactions with the related parties during the Track Record
Period were conducted in the normal course of business and on an arm’s length basis, and they did not
distort our results of operations or make our historical results not reflective of our future performance.
In 2017, we provided an interest-free, unsecured loan amounting RMB3.0 million to one of the
management with a term of one year, which was later extended to December 31, 2021. The loan was
repaid during the year ended December 31, 2020.
In 2018, we provided an interest-free, unsecured loan in the amount of RMB0.9 million to one
of the management with a term of five years. The loan was repaid during the year ended December 31,
2020.
In 2021, we provided an interest-free, unsecured loan in the amount of RMB3.0 million to one of
the management with a term of five years. The loan was repaid during the year ended December 31, 2021.
We repurchased certain Series E Preferred Shares held by an entity wholly owned and
controlled by Mr. Wang Ning, our founder, chairman of the board of Directors and chief executive
officer of our Company, for a total consideration of RMB22 million. The consideration was fully paid
as at December 31, 2022.
For more details about our related party transactions, see Note 37 to the Accountant’s Report in
Appendix I to this document.
FINANCIAL RISK DISCLOSURE
We are exposed to a variety of financial risks, including market risks (such as foreign exchange
risk, interest rate risk), credit risk and liquidity risk. Our overall risk management program focuses on the
unpredictability of financial markets and seeks to minimize potential adverse effects on our financial
performance. Risk management is carried out by our senior management. See Note 3 to the Accountant’s
Report in Appendix I to this document for a detailed description of our financial risk management.
Foreign exchange risk
Foreign exchange risk primarily arises from recognized assets and liabilities denominated in a
currency other than the functional currency of our entities. The functional currency for our PRC
subsidiaries is RMB. For our Company and certain of our overseas subsidiaries, the functional
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currency is USD. We manage the foreign exchange risk by performing regular reviews of our net
foreign exchange exposures and control these exposures through entering into foreign exchange
forward contracts, when necessary.
Our foreign exchange risk primarily arises from cash and cash equivalents and short-term
deposits denominated in USD held by subsidiaries whose functional currency is RMB, and cash and
cash equivalents denominated in RMB held by subsidiaries whose functional currency is USD. If USD
had strengthened/weakened by 5% against RMB with all other variables held constant, the estimated
changes of loss before income tax for the years ended December 31, 2019, 2020, 2021 and 2022 are set
forth in the table below:
Loss before income tax Year ended December 31,
2019 2020 2021 2022
(RMB in thousands)
Increase 5% ..................................................... 1,266 13,075 4,912 204
Decrease 5% .................................................... (1,266) (13,075) (6,506) (204)
Currency translation differences
We recorded currency translation loss of RMB35.4 million in 2019 and currency translation
gain of RMB269.2 million in 2020, RMB151.0 million in 2021 and translation loss of RMB700.8
million in 2022. Currency translation difference is recognized in other comprehensive income/(loss)
and represents the difference arising from the translation of the financial statements of companies
within the Group that have a functional currency different from the reporting currency of RMB for the
financial statements of the Company and the Group. The fluctuation of currency translation differences
during the Track Record Period was primarily due to the exchange rate changes of USD against the
reporting currency RMB, which resulted in the changes in book value of the U.S. dollar-dominated
convertible redeemable preferred shares.
Interest rate risk
Our exposure to interest rate risk primarily relates to borrowings with fixed rates, short-term
time deposits and cash and cash equivalents. Those carried at floating rates expose us to cash flow
interest rate risk whereas those carried at fixed rates expose us to fair value interest rate risk.
We regularly monitor our interest rate risk to ensure there is no undue exposure to significant
interest rate movements.
Credit risk
Our credit risk exposures are primarily attributable to cash and cash equivalents, short-term
time deposits, accounts receivables and other receivables included in prepayments and other current
assets. The carrying amount of these financial assets represents our maximum exposure to credit risk in
relation to the corresponding class of financial assets.
Risk management
Accounts receivables and other receivables included in prepayments and other current assets
are managed on a group basis. Our finance team is responsible for managing and analyzing the credit
risk for each new customer/debtor before standard credit payment terms are offered. We assess the
credit quality of our customers and other debtors by taking into account various factors including their
financial position, past operational and financial performance and forward-looking factors.
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Cash and cash equivalents and short-term time deposits are mainly placed with reputable
financial institutions in the PRC and international financial institutions outside of the PRC. There has
been no recent history of default in relation to these financial institutions. The expected credit loss is
not material.
Impairment of financial assets
Accounts receivables
During the Track Record Period, we apply the IFRS 9 simplified approach to measure expected
credit losses under which the lifetime expected credit losses for all accounts receivables are estimated.
To measure the expected credit losses, accounts receivables have been grouped based on shared credit
risk characteristics and credit rating.
The expected loss rates are based on the historical payment profiles, historical loss rates and
data published by external credit rating institution, adjusted to reflect current and forward-looking
information on macroeconomic factors affecting the ability of the customers to settle the receivables.
We have identified the Gross Domestic Products (“ GDP”) of the PRC to be the most relevant factors,
and accordingly adjusts the historical loss rates based on expected changes in these factors.
Other receivables included in prepayments and other current assets
Impairment on other receivables included in prepayments and other current assets is measured
as either 12-month expected credit losses or lifetime expected credit loss, depending on whether there
has been a significant increase in credit risk since initial recognition. If a significant increase in credit
risk of a receivable has occurred since initial recognition, then impairment is measured as lifetime
expected credit loss. Management makes periodic collective assessments as well as individual
assessment on the recoverability of other receivables included in prepayments and other current assets
based on historical settlement records and past experience.
Others
Cash and cash equivalents and short-term time deposits are also subject to the impairment
requirements of IFRS 9. However, the identified impairment loss was immaterial.
Liquidity Risk
In the management of the liquidity risk, we monitor and maintain a level of cash and cash
equivalents, short-term time deposits and investments in wealth management products and foreign
currency forward contracts linked to an exchange rate or retain adequate financing arrangements
deemed adequate by the management to finance our operations and mitigate the effects of fluctuations
in cash flows. For further details, see Note 3.1 to the Accountant’s Report set out in Appendix I.
DIVIDEND
We are a holding company incorporated under the laws of the Cayman Islands. As a result, the
payment and amount of any future dividends will also depend on the availability of dividends received
from our subsidiaries. PRC laws require that dividends shall be paid only out of the profit for the year
determined according to PRC accounting principles, which differ in many aspects from the generally
accepted accounting principles in other jurisdictions, including IFRSs. PRC laws also require foreign-
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invested enterprises to set aside at least 10% of its after-tax profits, if any, to fund its statutory reserves
until the aggregate amount of such fund reaches 50% or more of its registered capital, which are not
available for distribution as cash dividends. Dividend distribution to our shareholders is recognized as
a liability in the period in which the dividends are approved by our shareholders or Directors, where
appropriate. During the Track Record Period, no dividends have been paid or declared by us.
DISTRIBUTABLE RESERVES
As of December 31, 2022, we did not have any distributable reserves.
WORKING CAPITAL CONFIRMATION
Taking into account the financial resources available to us, including our cash and cash
equivalents on hand and the estimated net proceeds from the Global Offering, our Directors are of the
view that we have sufficient working capital to meet our present needs and for the next twelve months
from the date of this document. We had negative cash flows from operations in 2019, 2020, 2021 and
2022. Our net cash used in operating activities was RMB277.0 million, RMB70.8 million,
RMB868.5 million and RMB456.0 million, respectively, in 2019, 2020, 2021 and 2022. Our Directors
confirm that we had no material defaults in payment of trade and non-trade payables during the Track
Record Period.
LISTING EXPENSE
Based on the mid-point Offer Price of HK$45.19 per share, the total estimated listing expenses
in relation to the Global Offering is approximately RMB113.3 million, assuming the Over-allotment
Option is not exercised and no additional Shares are issued pursuant to the Share Incentive Plans,
among which (a) underwriting-related expenses, including underwriting commission and other
expenses, are expected to be approximately RMB21.7 million and (b) non-underwriting-related
expenses are expected to be approximately RMB91.6 million, comprising (1) fees and expenses of
legal advisers and the Reporting Accountant of approximately RMB72.3 million and (2) other fees and
expenses of approximately RMB19.3 million, representing approximately 25.3% of the gross proceeds
from the Global Offering (assuming the mid-point of the indicative Offer Price range and no exercise
of the Over-allotment Option), of which approximately RMB16.9 million is directly attributable to the
issue of our Shares to the public and will be deducted from equity, and approximately RMB96.4
million is expected to be expensed upon the Listing.
UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS
ATTRIBUTABLE TO OWNERS OF OUR COMPANY
The following unaudited pro forma statement of adjusted net tangible assets of the Group
prepared in accordance with Rule 4.29 of the Listing Rules is set out below to illustrate the effect of the
Global Offering on the consolidated net tangible assets of the Group attributable to the equity holders
of the Company as of December 31, 2022 as if the Global Offering had taken place on that date.
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FINANCIAL INFORMATION
The unaudited pro forma adjusted net tangible assets of the Group has been prepared for
illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the
consolidated net tangible assets of the Group had the Global Offering been completed as at
December 31, 2022 or at any future dates following the completion of the Global Offering.
Audited
consolidated net
tangible liabilities
of the Group
attributable to
equity holders of
the Company as
at December 31,
2022
(Note 1)
Estimated impact to the
net tangible liabilities upon
conversion of the Series A
Preferred Shares, Series B
Preferred Shares, Series C
Preferred Shares, Series C-1
Preferred Shares, Series
D Preferred Shares, Series
E Preferred Shares, Series F
Preferred Shares, and
Series F-1 Preferred Shares
(Note 2)
Estimated net
proceeds from
the Global
Offering
(Note 3)
Unaudited pro
forma adjusted net
tangible assets of
the Group
attributable to the
equity holders of
the Company as at
December 31, 2022
Unaudited pro forma
adjusted net tangible
assets per Share
(Note 4)
RMB’000 RMB’000 RMB’000 RMB’000 RMB HK$
Based on an Offer Price
of HK$28.92 per
Share ............ ( 7,519,479) 9,401,472 238,208 2,120,201 4.56 4.98
Based on an Offer Price
of HK$61.46 per
Share ............ ( 7,519,479) 9,401,472 550,777 2,432,770 5.23 5.71
Notes:
(1) The audited consolidated net tangible liabilities of the Group attributable to the equity holders of the Company as at December 31, 2022
is extracted from the Accountant’s Report set out in Appendix I to this document which is based on the audited consolidated net
liabilities of the Group attributable to the equity holders of the Company as at December 31, 2022 of RMB7,510,163,000 with
adjustments for the intangible assets as at December 31, 2022 of RMB9,316,000.
(2) All Series A Preferred Shares, Series B Preferred Shares, Series C Preferred Shares, Series C-1 Preferred Shares, Series D Preferred
Shares, Series E Preferred Shares, Series F Preferred Shares and Series F-1 Preferred Shares (“ Series Preferred Shares ”) will be
automatically converted to Shares upon the Global Offering. The Series Preferred Shares were accounted for as a liability to the
Company. Accordingly, for the purpose of the unaudited pro forma adjusted net tangible assets, the unaudited pro forma adjusted
consolidated net tangible liabilities of the Group attributable to the equity holders of the Company will be increased by
RMB9,401,472,000, being the carrying amount of the Series Preferred Shares as of December 31, 2022.
(3) The estimated net proceeds from the Global Offering are based on the indicative Offer Price of HK$28.92 and HK$61.46 per share,
respectively, after deduction of the underwriting fees and other related expenses and takes no account of any Shares which may be
allotted and issued upon the exercise of the Over-allotment Option or any Shares or any Shares which may be granted, issued or
repurchased by the Company pursuant to the general mandates.
(4) The unaudited pro forma net tangible assets per Share is arrived at after the adjustments referred to in the preceding paragraphs and on
the basis that 525,671,987 Shares were in issue assuming that the Global Offering and the conversion of Series Preferred Shares to
Shares had been completed on December 31, 2022, excluding the 60,635,300 restricted shares that were accounted for as treasury shares,
but takes no account of any Shares which may be allotted and issued upon the exercise of the Over-allotment Option or any Shares which
may be granted, issued or repurchased by the Company pursuant to the general mandates.
(5) For the purpose of this unaudited pro forma adjusted net tangible assets per Share, the amounts stated in Renminbi are converted into
Hong Kong dollars at the rate of HK$1.00 to RMB0.9161. No representation is made that Renminbi amounts have been, could have been
or may be converted to Hong Kong dollars, or vice versa, at that rate.
(6) Except as disclosed above, no adjustment has been made to reflect any trading results or other transactions of the Group entered into
subsequent to December 31, 2022.
NO MATERIAL ADVERSE CHANGE
After performing sufficient due diligence work which our Directors consider appropriate and
after due and careful consideration, the Directors confirm that, up to the date of this document, there
has been no material adverse change in our financial or trading position or prospects since
December 31, 2022, which is the end date of the periods reported on in the Accountant’s Report
included in Appendix I to this document, and there is no event since December 31, 2022 that would
materially affect the information as set out in the Accountant’s Report included in Appendix I to this
document.
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FINANCIAL INFORMATION
DISCLOSURE UNDER RULES 13.13 TO 13.19 OF THE LISTING RULES
Our Directors confirm that, as of the Latest Practicable Date, there was no circumstance that
would give rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules.
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FUTURE PLANS AND USE OF PROCEEDS
FUTURE PLANS
See “Business—Business Strategies” for a detailed description of our future plans.
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately HK$366.2 million after
deducting the estimated underwriting fees and the estimated offering expenses payable by us in the
Global Offering, and assuming an Offer Price of HK$45.19 per Share (being the mid-point of the Offer
Price range of between HK$28.92 and HK$61.46 per Share) and assuming the Over-allotment Option
is not exercised, or HK$437.2 million if the Over-allotment Option is exercised in full. We intend to
use the net proceeds we will receive from this offering for the following purposes:
(a) Approximately 35% of net proceeds, or approximately HK$128.2 million, assuming the
Over-allotment Option is not exercised, is expected to be used over the next three years
for research and development to advance our technological capabilities and drive product
innovation. See “Business—Business Strategies—Keep on Investing in Technology
Capabilities”.
Š Approximately 15% of net proceeds, or approximately HK$55.0 million, assuming the
Over-allotment Option is not exercised, is expected to be used to continue to attract, retain
and incentivize our research and development talents to support our research and
development initiatives and product innovation and enhance the integration of self-
branded fitness products with our online fitness content, thereby enabling a more seamless
experience. We plan to hire new research and development engineers in the next three
years, among which 45% are specialized in artificial intelligence, data analysis and
technology infrastructure, 30% are specialized in smart fitness device software and
hardware research and development and 25% are specialized in online user experience.
We typically require an undergraduate degree in computer science or other related fields
and professional proficiency in the specialized areas for new hires, and we expect to offer
competitive compensation in the market.
Š Approximately 10% of net proceeds, or approximately HK$36.6 million, assuming the
Over-allotment Option is not exercised, is expected to be used to continue to invest in
Keep smart fitness devices, including conducting continuous research and development
and adding new features to our existing offerings, and creating new and innovative
products for users with various fitness needs. For example, we plan to continue to integrate
our smart fitness devices with real-time motion detection functions to provide a more
interactive user experience. In addition, we will focus on the categories of at-home
equipment and personal fitness trackers as part of our new product development strategy.
Š Approximately 10% of net proceeds, or approximately HK$36.6 million, assuming the
Over-allotment Option is not exercised, is expected to be used to continue to invest in
artificial intelligence, data analysis and technology infrastructure to strengthen our
technological capabilities and enhance digital connectivity and interaction among platform
participants. For example, we plan to continue to enhance our technology on computer
vision, sensors, heart rate, voice recognition, among others, to better assess users’ fitness
status and athletic level. In addition, we will continue to upgrade our big data platform to
effectively process the information on our platform and enhance our data analytic
capabilities. At the same time, we will continue to upgrade our bandwidth and our data
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FUTURE PLANS AND USE OF PROCEEDS
center to support our increasing user base, and purchase and/or rent servers to build
multiple clouds to enhance our service stability.
(b) Approximately 30 % of net proceeds, or approximately HK$109.8 million, assuming the
Over-allotment Option is not exercised, is expected to be used over the next three years
for the development and diversification of our fitness content. See “Business—Business
Strategies—Keep on Innovating and Diversifying Our Content”.
Š Approximately 12% of net proceeds, or approximately HK$43.9 million, assuming the
Over-allotment Option is not exercised, is expected to be used to continue to invest in our
in-house, vertically integrated content development capability by increasing the number of
recorded fitness courses and live streaming classes and catering to users’ diversified
preferences, thereby further driving user engagement. We plan to continue to invest in in-
house fitness content development, fitness moves shooting, in-house instructor recruiting
and training, and more interactive features in our fitness content, thereby providing a
unique and interactive fitness experience to our users. We plan to create more than 100
fitness courses developed in-house each month in the next three years, covering muscle
building, HIIT, yoga, meditation, outdoor running, cycling and rowing, among others.
Š Approximately 9% of net proceeds, or approximately HK$33.0 million, assuming the
Over-allotment Option is not exercised, is expected to be used to expand our fitness
content library and enrich users’ experience through other innovative initiatives, such as
introducing virtual coaches and more gamified features into the fitness content. Virtual
coaches are computer-generated coaches that can lead dancing and other fitness courses
using AI technology, and gamified features are fun interactions to enhance user
engagement and experience during workout sessions. See “Business—Our Content
Offerings—Our Recorded Fitness Content—Recorded Video Courses” and “Business—
Technology, Research and Development—Insights and Artificial Intelligence”. For
example, we plan to offer users virtual characters like those in role-playing games whose
body profiles reflect user engagement and fitness progress on Keep. Users can obtain
better body profiles and virtual apparel and gear through joining more workouts, thereby
enhancing the fun on Keep platform.
Š Approximately 6% of net proceeds, or approximately HK$21.9 million, assuming the
Over-allotment Option is not exercised, is expected to be used to continue to introduce
more specialized content and expand into new fitness categories by cultivating more
fitness influencers on our platform and collaborating with more fitness professionals. We
plan to further streamline content development process to attract more influencers to
enrich our content library. We plan to have thousands of influencers creating fitness
courses on Keep each month in the next three years and continue to extend our content
coverage in ball games, martial arts, dancing and other fitness categories.
Š Approximately 3% of net proceeds, or approximately HK$11.0 million, assuming the
Over-allotment Option is not exercised, is expected to be used to continue to expand our
content offerings by purchasing more valuable and exclusive fitness intellectual properties
and acquiring qualified third-party content to build competitive moats and satisfy the
evolving needs of our users. We will selectively target fitness content that is professionally
produced with a large follower base in niche fitness categories. In addition to purchasing
more fitness content and obtaining music licenses, we will also collaborate with content
providers to create differentiated content for Keep.
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FUTURE PLANS AND USE OF PROCEEDS
(c) Approximately 25% of net proceeds, or approximately HK$91.5 million, assuming the
Over-allotment Option is not exercised, is expected to be used over the next three years
for the investment in branding and promotion. Out of this part of net proceeds, in terms of
marketing channels, we plan to spend approximately 50% on social media and short video
platforms, 20% on long video platforms, 20% on third-party e-commerce platforms, and 10%
on outdoor media and other traditional media channels.
Š Approximately 12% of net proceeds, or approximately HK$43.9 million, assuming the
Over-allotment Option is not exercised, is expected to be used in user acquisition activities
to continue to gain mindshare and attract users across different ages, areas of interest, and
locations. See “Business—Business Strategies—Keep on Expanding Our Addressable
Market and User Base”.
Š Approximately 10% of net proceeds, or approximately HK$36.6 million, assuming the
Over-allotment Option is not exercised, is expected to be in branding activities used to
continue to promote our brand and strengthen its image and influence among users. We
will strengthen online branding efforts, including short videos, and sponsor offline
activities and public sports facilities. See “Business—Business Strategies—Keep on
Increasing Our Brand Value”.
Š Approximately 3% of net proceeds, or approximately HK$11.0 million, assuming the
Over-allotment Option is not exercised, is expected to be used in promotional activities to
continue to promote our fitness devices and products through placing ads in social media,
holding live streaming promotion sessions and collaborating with other brands, among
others.
(d) Approximately 10% of net proceeds, or approximately HK$36.6 million, assuming the
Over-allotment Option is not exercised, is expected to be used for general corporate
purposes and working capital needs.
In the event that the Offer Price is set at the maximum Offer Price or the minimum Offer Price
of the indicative Offer Price range, the net proceeds of the Global Offering will increase or decrease to
approximately HK$536.7 million and HK$195.6 million, respectively. If we make an upward or
downward offer price adjustment to set the final Offer Price to be above or below the mid-point of the
Offer Price range, we will increase or decrease the allocation of the net proceeds to the above purposes
on a pro rata basis.
The additional net proceeds that we would receive if the Over-allotment Option were exercised
in full would be (i) HK$96.7 million (assuming an Offer Price of HK$61.46 per Share, being the
maximum Offer Price), (ii) HK$71.1 million (assuming an Offer Price of HK$45.19 per Share, being
the mid-point of the Offer Price range) and (iii) HK$45.5 million (assuming an Offer Price of
HK$28.92 per Share, being the minimum Offer Price).
To the extent that the net proceeds from the Global Offering (including the net proceeds from
the exercise of the Over-allotment Option) are either more or less than expected, we may adjust our
allocation of the net proceeds for the above purposes on a pro rata basis.
To the extent that the net proceeds of the Global Offering are not immediately required for the
above purposes or if we are unable to put into effect any part of our plan as intended, we will hold such
funds in short-term deposits with licensed banks and/ or authorized financial institutions (as defined
under the Securities and Futures Ordinance) so long as it is deemed to be in the best interests of the
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FUTURE PLANS AND USE OF PROCEEDS
Company. In such event, we will comply with the appropriate disclosure requirements under the
Listing Rules.
Since we are an offshore holding company, we will need to make capital contributions and
loans to our PRC subsidiaries or through loans to our Consolidated Affiliated Entities such that the net
proceeds of this offering can be used in the manner described above. Such capital contributions and
loans are subject to a number of limitations and approval processes under PRC laws and regulations.
There are no costs associated with registering loans or capital contributions with relevant PRC
authorities, other than nominal processing charges. Under PRC laws and regulations, the PRC
governmental authorities are required to process such approvals or registrations or deny our application
within a prescribed period, which are usually less than 90 days. The actual time taken, however, may
be longer due to administrative delay. We cannot assure you that we can obtain the approvals from the
relevant governmental authorities, or complete the registration and filing procedures required to use
our net proceeds as described above, in each case on a timely basis, or at all. This is because PRC
regulation of loans and direct investment by offshore holding companies to PRC entities may delay or
prevent us from using the proceeds of this offering to make loans or additional capital contributions to
our PRC subsidiaries or Consolidated Affiliated Entities, which could materially and adversely affect
our liquidity and our ability to fund and expand our business.
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UNDERWRITING
HONG KONG UNDERWRITERS
China International Capital Corporation Hong Kong Securities Limited
GF Securities (Hong Kong) Brokerage Limited
CCB International Capital Limited
CMB International Capital Limited
Futu Securities International (Hong Kong) Limited
Tiger Brokers (HK) Global Limited
UNDERWRITING
This document is published solely in connection with the Hong Kong Public Offering. The
Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters on a conditional
basis. The International Offering is expected to be fully underwritten by the International Underwriters.
If, for any reason, the Offer Price is not agreed between the Sole Global Coordinator and the Sole
Overall Coordinator (on behalf of the Underwriters) and our Company, the Global Offering will not
proceed and will lapse.
The Global Offering comprises the Hong Kong Public Offering of initially 1,083,900 Hong
Kong Offer Shares and the International Offering of initially 9,754,700 International Offer Shares,
subject, in each case, to reallocation on the basis as described in “Structure of the Global Offering” in
this document as well as to the Over-allotment Option (in the case of the International Offering).
UNDERWRITING ARRANGEMENTS AND EXPENSES
Hong Kong Public Offering
Hong Kong Underwriting Agreement
The Hong Kong Underwriting Agreement was entered into on June 29, 2023. Pursuant to the
Hong Kong Underwriting Agreement, we are offering the Hong Kong Offer Shares for subscription on
the terms and conditions set out in this document, the GREEN Application Form and the Hong Kong
Underwriting Agreement at the Offer Price.
Subject to (a) the Listing Committee granting approval for the listing of, and permission to deal
in, the Shares in issue and to be issued pursuant to the Global Offering (including additional Shares
that may be issued pursuant to the exercise of the Over-allotment Option and the Shares to be issued
under Share Incentive Plans), on the Main Board of the Stock Exchange and such approval not having
been subsequently revoked prior to the commencement of trading of the Shares on the Stock Exchange
and (b) certain other conditions set out in the Hong Kong Underwriting Agreement, the Hong Kong
Underwriters have agreed severally but not jointly to procure subscribers for, or themselves to
subscribe for, their respective applicable proportions of the Hong Kong Offer Shares being offered
which are not taken up under the Hong Kong Public Offering on the terms and conditions set out in
this document, the GREEN Application Form and the Hong Kong Underwriting Agreement.
The Hong Kong Underwriting Agreement is conditional on, among other things, the
International Underwriting Agreement having been executed and becoming unconditional and not
having been terminated in accordance with its terms.
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UNDERWRITING
Grounds for termination
The Sole Global Coordinator, the Sole Sponsor and the Sole Overall Coordinator (for
themselves on behalf of the Hong Kong Underwriters) shall, in their sole and absolute discretion, be
entitled by notice (in writing) to the Company to terminate the Hong Kong Underwriting Agreement
with immediate effect if prior to 8:00 a.m. on the Listing Date:
(1) there shall develop, occur, exist or come into effect:
(a) any event or series of events or circumstances in the nature of force majeure
(including, without limitation, any acts of government, declaration of a regional,
national or international emergency or war, calamity, crisis, epidemic, pandemic,
outbreaks of diseases or its escalation, mutation or aggravation (including, without
limitation, COVID-19, SARS, swine or avian flu, H5N1, H1N1, H1N7, H7N9,
Ebola virus, Middle East respiratory syndrome (MERS) and such related/mutated
forms), accidents or prolonged interruption or delay in transportation, economic
sanctions, strikes, labor disputes, lock-outs, other industrial actions, fire, explosion,
flooding, earthquake, tsunami, volcanic eruption, riots, rebellion, civil commotion,
calamity, public disorder, acts of war, outbreak or escalation of hostilities (whether
or not war is declared), acts of God or acts of terrorism (whether or not
responsibility has been claimed)), economic sanctions, paralysis in government
operations, interruptions or delay in transportation in or affecting Hong Kong, the
PRC, the United States, Singapore, the United Kingdom, the European Union (or
any member thereof), the Cayman Islands or any other jurisdiction relevant to any
member of the Group (collectively, the “Relevant Jurisdictions”); or
(b) any change, or any development involving a prospective change, or any event or
circumstance likely to result in any change or development involving a prospective
change, in any local, national, regional or international financial, economic,
political, military, industrial, legal, fiscal, regulatory, currency, credit or market
conditions, equity securities or exchange control or any monetary or trading
settlement system or other financial markets (including, without limitation,
conditions in the stock and bond markets, money and foreign exchange markets, the
interbank markets and credit markets) in or affecting any Relevant Jurisdictions; or
(c) any moratorium, suspension or restriction (including, without limitation, any
imposition of or requirement for any minimum or maximum price limit or price
range) in or on trading in securities generally on the Stock Exchange, the Shanghai
Stock Exchange, the Shenzhen Stock Exchange, the New York Stock Exchange, the
NASDAQ Global Market or the London Stock Exchange; or
(d) any general moratorium on commercial banking activities in the Cayman Islands,
Hong Kong (imposed by the Financial Secretary or the Hong Kong Monetary
Authority or other competent Authority), the PRC, New York (imposed at Federal
or New York State level or other competent Authority), London, or any other
Relevant Jurisdiction, or
(e) any disruption in commercial banking or foreign exchange trading or securities
settlement or clearance services, procedures or matters in any Relevant Jurisdiction;
or
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UNDERWRITING
(f) the imposition of sanctions, in whatever form, or the withdrawal of trading
privileges, directly or indirectly, under any sanction laws, or regulations in, Hong
Kong, the PRC or any other Relevant Jurisdiction; or
(g) a change or development involving a prospective change in or affecting taxes or
exchange control, currency exchange rates or foreign investment regulations
(including, without limitation, a material devaluation of the Hong Kong dollar,
United States dollar, the Renminbi, Euro, British pound against any foreign
currencies, a change in the system under which the value of the Hong Kong dollar is
linked to that of the United States dollar or RMB is linked to any foreign currency or
currencies), or the implementation of any exchange control, in any of the Relevant
Jurisdictions or affecting an investment in the Offer Shares; or
(h) any litigation or claim of any third party being instigated against any member of the
Group; or
(i) an authority or a political body or organization in any Relevant Jurisdiction
commencing any investigation or other action, or announcing an intention to
investigate or take other action, against any Director; or
(j) a contravention by any member of the Group of the Listing Rules or applicable
laws; or
(k) a prohibition by an authority on the Company for whatever reason from offering,
allotting, issuing or selling any of the Shares (including the option shares) pursuant
to the terms of the Global Offering; or
(l) non-compliance of this Prospectus, or the GREEN Application Form or the
Offering Circular; or any aspect of the Global Offering with the Listing Rules or any
other applicable laws; or
(m) the issue or requirement to issue by the Company of any supplement or amendment
to this Prospectus (or to any other documents issued or used in connection with the
contemplated offer and sale of the Shares) pursuant to the Companies Ordinance or
the Companies (Winding Up and Miscellaneous Provisions) Ordinance or the
Listing Rules, the CSRC Rules or any requirement or request of the Stock
Exchange, the CSRC and/or the SFC; or
(n) a valid demand by any creditor for repayment or payment of any indebtedness of
any member of the Group or in respect of which any member of the Group is liable
prior its stated maturity; or
(o) a valid demand by any creditor for repayment or payment of any indebtedness of
any member of the Group or in respect of which any member of the Group is liable
prior to its stated maturity or any loss or damage sustained by that member of the
Group (howsoever caused and whether or not the subject of any insurance or claim
against any person); or
(p) any breach of, or any event or circumstance rendering untrue or incorrect,
incomplete or misleading in any respect, any of the warranties; or
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UNDERWRITING
(q) there is the commencement by any governmental, political or regulatory body; of
any investigation or other action against any Director in his or her capacity as such
an announcement by any governmental, political or regulatory body that it intends to
take any such action,
which, individually or in the aggregate, in the sole and absolute opinion of the Sole Global
Coordinator, the Sole Overall Coordinator and the Sole Sponsor:
(a) has or will have or may have a material adverse effect on the assets, liabilities,
business, general affairs, management, prospects, shareholders’ equity, profits,
losses, results of operations, position or condition, financial or otherwise , or
performance of the Group as a whole or to any present or prospective shareholder of
the Company in its capacity as such; or
(b) has or will have or may have a material adverse effect on the success of the Global
Offering or the level of applications under the Hong Kong Public Offering or the
level of interest under the International Offering ; or
(c) makes or will make or may make it inadvisable or inexpedient or impracticable for
the Global Offering to proceed or to market the Global Offering or the delivery or
distribution of the Offer Shares on the terms and in the manner contemplated by the
Offer Related Documents (as defined below); or
(d) has or will have or may have the effect of making any part of the Hong Kong
Underwriting Agreement (including underwriting) incapable of performance in
accordance with its terms or preventing or delaying the processing of applications
and/or payments pursuant to the Global Offering or pursuant to the underwriting
thereof.
(2) there has come to the notice of the Sole Global Coordinator, the Sole Overall Coordinator
or the Sole Sponsor:
(a) that any statement contained in any of the Offering Documents, the formal notice,
the Operative Documents, the Preliminary Offering Circular, the PHIP and/or in any
notices, announcements, advertisements, communications or other documents issued
or used by or on behalf of the Company (provided such statement has been approved
or authorized by the Company) in connection with the Hong Kong Public Offering
(collectively, the “Offer Related Documents”) (including any supplement or
amendment thereto) was, when it was issued, or has become, untrue, incorrect,
inaccurate, incomplete or misleading or deceptive in any material respect, or that
any forecast, estimate, expression of opinion, intention or expectation contained in
any of the Offer Related Documents (including any supplement or amendment
thereto) is not fair and honest made on reasonable grounds or, where appropriate,
and based on reasonable assumptions with reference to the facts and circumstances
then subsisting; or that any matter has arisen or has been discovered which would,
had it arisen or been discovered immediately before the date of this Prospectus,
constitute a material omission from or misstatement in any of the Offer Related
Documents (including any supplement or amendment thereto); or
(b) any material breach of any of the obligations imposed upon any party to the Hong
Kong Underwriting Agreement or the International Underwriting Agreement (other
than upon any of the Hong Kong Underwriters or the International Underwriters); or
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UNDERWRITING
(c) there is an event, act or omission which gives or is likely to give rise to any liability
of a material amount of any of the Warrantors pursuant to the indemnities given by
any of them under the Hong Kong Underwriting Agreement or the International
Underwriting Agreement; or
(d) any Material Adverse Change (as defined in the Hong Kong Underwriting
Agreement); or
(e) the chairman, the chief executive officer or the chief financial officer of the
Company or any of the executive Directors vacating his/her or her office; or
(f) that approval by the Listing Committee of the Stock Exchange of the listing of, and
permission to deal in, the Shares to be issued or sold (including any additional
Shares that may be issued or sold pursuant to the exercise of the Over-Allotment
Option) under the Global Offering is refused or not granted, other than subject to
customary conditions, on or before the Listing Date, or if granted, the approval is
subsequently withdrawn, qualified (other than by customary conditions) or withheld;
or
(g) any expert (other than the Sole Sponsor) specified in this Prospectus, whose consent
is required for the issue of the prospectus with the inclusion of its reports, letters or
opinions and references to its name included in the form and context in which it
respectively appears, has withdrawn its consent to being named in this Prospectus;
or
(h) the Company withdraws any of the Offering Documents or the Global Offering; or
(i) there is a prohibition on the Company for whatever reason from offering, allotting,
issuing or selling any of the Offer Shares pursuant to the terms of the Global
Offering; or
(j) any Director or member of senior management of the Company disclosed in this
Prospectus is being charged with an indictable offence or is prohibited by operation
of law or otherwise disqualified from taking part in the management of a company;
or
(k) there is any order or petition for the winding-up of any member of the Group or any
composition or arrangement made by any member of the Group with its creditors or
a scheme of arrangement entered into by any member of the Group or any resolution
for the winding-up of any member of the Group or the appointment of a provisional
liquidator, receiver or manager over all or part of the material assets or undertaking
of any member of the Group or anything analogous thereto occurring in respect of
any member of the Group.
Undertakings to the Stock Exchange pursuant to the Listing Rules
Undertakings by the Company
Under Rule 10.08 of the Listing Rules, the Company has undertaken to the Stock Exchange that
no further Shares or securities convertible into our equity securities (whether or not of a class already
listed) may be issued by us or form the subject of any agreement to such an issue within six (6) months
from the date on which the Shares first commence dealing on the Stock Exchange (whether or not such
issue of Shares or our securities will be completed within six (6) months from the commencement of
dealing), except for (as applicable): (a) the issue of Shares, the listing of which has been approved by
the Stock Exchange, pursuant to a share option scheme under Chapter 17 of the Listing Rules; (b) the
exercise of conversion rights attaching to warrants issued as part of the Global Offering; (c) any
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capitalization issue, capital reduction or consolidation or sub-division of Shares; (d) the issue of Shares
or securities pursuant to an agreement entered into before the commencement of dealing, the material
terms of which have been disclosed in the Prospectus issued in connection with the Global Offering; or
(e) the issue of Shares or securities pursuant to (i) the Global Offering, including any Shares that may
be issued pursuant to the exercise of the Over-allotment Option; (ii) the conversion of each preferred
share issued by the Company immediately prior to the Listing to one ordinary share of the Company;
(iii) the exercise of options or vesting of awards granted under the Pre-IPO Share Incentive Plans; (iv)
the exercise of options or vesting of awards granted under the Post-IPO Share Incentive Plans.
Undertakings by the single largest shareholders of the Company
In accordance with Rule 10.07(1)(a) of the Listing Rules, the single largest shareholders of the
Company, hereby irrevocably and unconditionally undertake to the Stock Exchange and the Company
that, except pursuant to the Global Offering, as already disclosed in the Prospectus, or as permitted
under the Listing Rules, the single largest shareholders of the Company shall not and shall procure that
the registered holders controlled by the single largest shareholders of the Company shall not:
(a) in the period commencing on the date by reference to which disclosure of our
shareholding is made in the Prospectus and ending on the date which is six (6) months
from the date on which dealings in the Shares commence on the Stock Exchange (“First
Six-month Period”), dispose of, nor enter into any agreement to dispose of or otherwise
create any options, rights, interests or encumbrances in respect of, any of the Shares
directly or indirectly beneficially owned by the single largest shareholders of the
Company.
It is noted nothing in the above shall prevent the undersigned from pledging or charging any Shares as
security for a bona fide commercial loan in accordance with Note (2) to Rule 10.07(2) or the share
lending arrangement to be entered into by the relevant shareholder pursuant to Rule 10.07(3) of the
Listing Rules.
In accordance with Note 3 to Rule 10.07(2) of the Listing Rules, the single largest shareholders of the
Company also irrevocably and unconditionally undertake to the Stock Exchange and the Company that
during the First Six-month Period:
(b) if the single largest shareholders of the Company pledge or charge the Shares beneficially
owned by the single largest shareholders of the Company in favor of an authorized
institution (as defined in the Banking Ordinance, Chapter 155 of the Laws of Hong
Kong), the single largest shareholders of the Company will immediately inform the
Company of such pledge or charge together with the number of Shares so pledged or
charged; and
(c) if the single largest shareholders of the Company receive indications, either verbal or
written, from the pledgee or chargee that any of the pledged or charged Shares will be
disposed of, the single largest shareholders of the Company will immediately inform the
Company of such indications.
Undertakings pursuant to the Hong Kong Underwriting Agreement
Undertakings by the Company
Except for the offer and sale of the Offer Shares pursuant to the Global Offering (including
pursuant to the Over-Allotment Option) and otherwise pursuant to the Listing Rules, during the period
commencing on the date of the Hong Kong Underwriting Agreement and ending on, and including, the
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date that is six months after the Listing Date (the “ First Six-Month Period ”), the Company hereby
undertakes to each of the Sole Global Coordinator, the Joint Bookrunners, the Joint Lead Managers,
the Sole Sponsor, the Sole Overall Coordinator, the CMIs, the Hong Kong Underwriters and the Sole
Sponsor not to without the prior written consent of the Sole Sponsor, the Sole Global Coordinator and
the Sole Overall Coordinator (for themselves and on behalf of the Hong Kong Underwriters) and
unless in compliance with or as permitted under the requirements of the Listing Rules (particularly,
Rule 10.08 of the Listing Rules) or other applicable laws:
(i) allot, issue, sell, accept subscription for, offer to allot, issue, , repurchase or sell, contract
or agree to allot, issue or sell, mortgage, charge, pledge, hypothecate, lend, grant or sell
any option, warrant, contract or right to subscribe for or purchase, grant or purchase any
option, warrant, contract or right to allot, issue or sell, or otherwise transfer or dispose of
or create an Encumbrance over, or agree to transfer or dispose of or create an
Encumbrance over, either directly or indirectly, conditionally or unconditionally, any
legal or beneficial interest in, any Shares or other securities of the Company or any
interest in any of the foregoing (including, any securities convertible into or
exchangeable or exercisable for or that represent the right to receive, or any warrants or
other rights to purchase, any Shares), or deposit any Shares or other securities of the
Company, as applicable, with a depositary in connection with the issue of depositary
receipts; or
(ii) enter into any swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of any Shares or other securities of the
Company, or any interest in any of the foregoing (including, any securities convertible
into or exchangeable or exercisable for or that represent the right to receive, or any
warrants or other rights to purchase, any Shares); or
(iii) enter into any transaction with the same economic effect as any transaction described in
(i) or (ii) above; or
(iv) offer to or agree to or announce any intention to effect any transaction described in
paragraphs (i), (ii) or (iii) above,
in each case, whether any of the transactions described in paragraphs (i), (ii) or (iii) above is to be
settled by delivery of Shares or other securities of the Company or shares, or in cash or otherwise
(whether or not the issue of such Shares or other shares or securities will be completed within the First
Six-Month Period).
Undertakings by Mr. Wang Ning
Mr. Wang undertakes to each of the Company, the Sole Sponsor, the Sole Global Coordinator
and the Sole Overall Coordinator (for themselves and on behalf of the Hong Kong Underwriters) that,
without the prior written consent of the Sole Sponsor, the Sole Global Coordinator and the Sole
Overall Coordinator (for themselves and on behalf of the Hong Kong Underwriters) and unless in
compliance with or as permitted under the requirements of the Listing Rules or applicable laws that he
will not, at any time during the First Six-Month Period, and procure his controlled entities not to,
dispose of, nor enter into any agreement to dispose of or otherwise create any options, rights, interests
or encumbrances in respect of, any securities of the Company in respect of which he is (or his
controlled entities are) shown in this Prospectus to be the beneficial owner(s), unless it is otherwise
permitted under Rule 10.07 of the Listing Rules.
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Lock-up Restrictions of Existing Shareholders
Each of our Shareholders as of the date of this document entered into lock-up arrangements
pursuant to the Tenth Amended and Restated Shareholders Agreement dated December 3, 2021. For
details of the key terms of the lock-up arrangements, please refer to the section headed “History,
reorganization and corporate structure—Lock-up of existing shareholders” of this document.
Hong Kong Underwriters’ interests in the Company
Save as disclosed in this Prospectus, save for their respective obligations under the Hong Kong
Underwriting Agreement, and, if applicable, the Stock Borrowing Agreement as of the Latest
Practicable Date, none of the Hong Kong Underwriters was interested, legally or beneficially, directly
or indirectly, in any Shares or any securities of any member of the Group or had any right or option
(whether legally enforceable or not) to subscribe for or purchase, or to nominate persons to subscribe
for or purchase, any Shares or any securities of any member of the Group.
Following the completion of the Global Offering, the Hong Kong Underwriters and their
affiliated companies may hold a certain portion of the Shares as a result of fulfilling their respective
obligations under the Hong Kong Underwriting Agreement.
International Offering
International Underwriting Agreement
In connection with the International Offering, we expect to enter into the International
Underwriting Agreement with the International Underwriters on the Price Determination Date. Under
the International Underwriting Agreement and subject to the Over-allotment Option, the International
Underwriters would, subject to certain conditions set out therein, agree severally but not jointly to
procure subscribers for, or themselves to subscribe for, their respective applicable proportions of the
International Offer Shares initially being offered pursuant to the International Offering. It is expected
that the International Underwriting Agreement may be terminated on similar grounds as the Hong
Kong Underwriting Agreement. Potential investors should note that in the event that the International
Underwriting Agreement is not entered into, the Global Offering will not proceed. See “Structure of
the Global Offering—The International Offering”.
Over-allotment Option
We are expected to grant to the International Underwriters the Over-allotment Option,
exercisable by the Sole Global Coordinator and the Sole Overall Coordinator on behalf of the
International Underwriters, on or before Friday August 4, 2023, being the 30th day from the last day
for lodging applications under the Hong Kong Public Offering, pursuant to which we may be required
to issue up to an aggregate of 1,625,700 additional Shares, representing not more than 15% of the
number of Offer Shares initially available under the Global Offering, at the Offer Price, to cover over-
allocations in the International Offering, if any. See “Structure of the Global Offering—Over-allotment
Option”.
Commissions and Expenses
The Underwriters will receive an underwriting commission of 3.25% of the aggregate Offer
Price of all the Offer Shares including any Offer Shares to be issued pursuant to the exercise of the
Over-allotment Option (the “Fixed Fees”).
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The Company may, at its sole and absolute discretion, pay to one or more Underwriters or
Capital Market Intermediaries an incentive fee up to 1.25% of the aggregate Offer Price of all the Offer
Shares, including Offer Shares to be issued pursuant to the Over-allotment Option (the “ Discretionary
Fees”). The ratio of fixed fee and discretionary fee payable by the Company to all syndicate members
participating in the Global Offering is expected to be approximately 72:28 (assuming the Discretionary
Fees will be paid in full).
For any unsubscribed Hong Kong Offer Shares reallocated to the International Offering, the
underwriting commission will not be paid to the Hong Kong Underwriters but will instead be paid, at
the rate applicable to the International Offering, and such commission will be paid to the relevant
International Underwriters.
The aggregate underwriting commissions payable to the Underwriters in relation to the Global
Offering (assuming an Offer Price of HK$45.19 per Offer Share (which is the mid-point of the Offer
Price range), the full payment of the discretionary incentive fee and the exercise of the Over-allotment
Option in full) will be approximately HK$25.35 million.
Assuming an Offer Price of HK$45.19 per Offer Share (which is the mid-point of the Offer
Price range), the aggregate underwriting commissions and fees together with the Stock Exchange
listing fees, the SFC transaction levy, the Stock Exchange trading fee, the AFRC transaction levy, legal
and other professional fees and printing and all other expenses relating to the Global Offering are
estimated to be approximately HK$123.7 million (assuming the Over-allotment Option is not
exercised).
Sole Sponsor’s Fee
The Sole Sponsor will receive an aggregate fee of US$500,000 for acting as the sponsor for the
Listing.
Indemnity
We have agreed to indemnify the Hong Kong Underwriters for certain losses which they may
suffer or incur, including losses arising from their performance of their obligations under the Hong
Kong Underwriting Agreement and any breach by us of the Hong Kong Underwriting Agreement.
INDEPENDENCE OF THE SOLE SPONSOR
China International Capital Corporation Hong Kong Securities Limited is an independent
sponsor under Rule 3A.07 of the Listing Rules.
ACTIVITIES BY SYNDICATE MEMBERS
The underwriters of the Hong Kong Public Offering and the International Offering (together,
the “Syndicate Members ”) and their affiliates may each individually undertake a variety of activities
(as further described below) which do not form part of the underwriting or stabilizing process.
The Syndicate Members and their affiliates are diversified financial institutions with
relationships in countries around the world. These entities engage in a wide range of commercial and
investment banking, brokerage, funds management, trading, hedging, investing and other activities for
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their own account and for the account of others. In the ordinary course of their various business
activities, the Syndicate Members and their respective affiliates may purchase, sell or hold a broad
array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit
default swaps and other financial instruments for their own account and for the accounts of their
customers. Such investment and trading activities may involve or relate to assets, securities and/or
instruments of our Company and/or persons and entities with relationships with our Company and may
also include swaps and other financial instruments entered into for hedging purposes in connection
with the Group’s loans and other debt.
In relation to the Shares, the activities of the Syndicate Members and their affiliates could
include acting as agent for buyers and sellers of the Shares, entering into transactions with those buyers
and sellers in a principal capacity, including as a lender to initial purchasers of the Shares (which
financing may be secured by the Shares) in the Global Offering, proprietary trading in the Shares, and
entering into over the counter or listed derivative transactions or listed or unlisted securities
transactions (including issuing securities such as derivative warrants listed on a stock exchange) which
have as their underlying assets, assets including the Shares. Such transactions may be carried out as
bilateral agreements or trades with selected counterparties. Those activities may require hedging
activity by those entities involving, directly or indirectly, the buying and selling of the Shares, which
may have a negative impact on the trading price of the Shares. All such activities could occur in Hong
Kong and elsewhere in the world and may result in the Syndicate Members and their affiliates holding
long and/or short positions in the Shares, in baskets of securities or indices including the Shares, in
units of funds that may purchase the Shares, or in derivatives related to any of the foregoing.
In relation to issues by Syndicate Members or their affiliates of any listed securities having the
Shares as their underlying securities, whether on the Stock Exchange or on any other stock exchange,
the rules of the stock exchange may require the issuer of those securities (or one of its affiliates or
agents) to act as a market maker or liquidity provider in the security, and this will also result in hedging
activity in the Shares in most cases.
All such activities may occur both during and after the end of the stabilizing period described in
“Structure of the Global Offering”. Such activities may affect the market price or value of the Shares,
the liquidity or trading volume in the Shares and the volatility of the price of the Shares, and the extent
to which this occurs from day to day cannot be estimated.
It should be noted that when engaging in any of these activities, the Syndicate Members will be
subject to certain restrictions, including the following:
(a) the Syndicate Members (other than the Stabilization Manager or any person acting for it)
must not, in connection with the distribution of the Offer Shares, effect any transactions
(including issuing or entering into any option or other derivative transactions relating to
the Offer Shares), whether in the open market or otherwise, with a view to stabilizing or
maintaining the market price of any of the Offer Shares at levels other than those which
might otherwise prevail in the open market; and
(b) the Syndicate Members must comply with all applicable laws and regulations, including
the market misconduct provisions of the SFO, including the provisions prohibiting
insider dealing, false trading, price rigging and stock market manipulation.
Certain of the Syndicate Members or their respective affiliates have provided from time to time,
and expect to provide in the future, investment banking and other services to our Company and each of
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our affiliates for which such Syndicate Members or their respective affiliates have received or will
receive customary fees and commissions.
In addition, the Syndicate Members or their respective affiliates may provide financing to
investors to finance their subscriptions of Offer Shares in the Global Offering.
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THE GLOBAL OFFERING
This document is published in connection with the Hong Kong Public Offering as part of the
Global Offering.
The listing of the Shares on the Stock Exchange is sponsored by the Sole Sponsor. The Sole
Sponsor have made an application on behalf of our Company to the Listing Committee of the Stock
Exchange for the listing of, and permission to deal in, the Shares in issue and to be issued pursuant to
the Global Offering (including the additional Shares which may be issued pursuant to the exercise of
the Over-allotment Option and the Shares to be issued under the Share Incentive Plans).
10,838,600 Offer Shares will initially be made available under the Global Offering comprising:
(a) the Hong Kong Public Offering of initially 1,083,900 Offer Shares (subject to reallocation)
in Hong Kong as described in the sub-section “The Hong Kong Public Offering” in this
section below; and
(b) the International Offering of initially 9,754,700 Offer Shares (subject to reallocation and
the Over-allotment Option) (i) in the United States solely to QIBs in reliance on Rule
144A or another exemption from, or in a transaction not subject to, the registration
requirements of the U.S. Securities Act and (ii) outside the United States (including to
professional and institutional investors within Hong Kong) in offshore transactions in
reliance on Regulation S, as described in “The International Offering” this section below.
Investors may either:
(i) apply for Hong Kong Offer Shares under the Hong Kong Public Offering; or
(ii) apply for or indicate an interest for International Offer Shares under the International
Offering,
but may not do both.
The Offer Shares will represent approximately 2.06% of the total Shares in issue immediately
following the completion of the Global Offering, assuming that the Over-allotment Option is not
exercised and no Share is issued under the Share Incentive Plans. If the Over-allotment Option is
exercised in full, the Offer Shares (including Shares issued pursuant to the full exercise of the Over-
allotment Option) will represent approximately 2.36% of the total Shares in issue immediately
following the completion of the Global Offering and the issue of Offer Shares pursuant to the Over-
Allotment Option, assuming no Share is issued under the Share Incentive Plans.
The number of Offer Shares to be offered under the Hong Kong Public Offering and the
International Offering may be subject to reallocation as described in “—The Hong Kong Public
Offering—Reallocation and Clawback” below.
References in this document to applications, GREEN Application Form, application monies or
the procedure for applications relate solely to the Hong Kong Public Offering.
THE HONG KONG PUBLIC OFFERING
Number of Offer Shares initially offered
Our Company is initially offering 1,083,900 Offer Shares for subscription by the public in
Hong Kong at the Offer Price, representing approximately 10.00% of the total number of Offer
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Shares initially available under the Global Offering. The number of Offer Shares initially offered under
the Hong Kong Public Offering, subject to any reallocation of Offer Shares between the International
Offering and the Hong Kong Public Offering, will represent approximately 0.21% of the total Shares in
issue immediately following the completion of the Global Offering (assuming the Presumptions).
The Hong Kong Public Offering is open to members of the public in Hong Kong as well as to
institutional and professional investors in Hong Kong. Professional investors generally include brokers,
dealers, companies (including fund managers) whose ordinary business involves dealing in shares and
other securities and corporate entities that regularly invest in shares and other securities.
Completion of the Hong Kong Public Offering is subject to the conditions set out in “—
Conditions of the Global Offering”.
Allocation
Allocation of Offer Shares to investors under the Hong Kong Public Offering will be based
solely on the level of valid applications received under the Hong Kong Public Offering. The basis of
allocation may vary, depending on the number of Hong Kong Offer Shares validly applied for by
applicants. Such allocation could, where appropriate, consist of balloting, which could mean that some
applicants may receive a higher allocation than others who have applied for the same number of Hong
Kong Offer Shares, and those applicants who are not successful in the ballot may not receive any Hong
Kong Offer Shares.
For allocation purposes only, the total number of Hong Kong Offer Shares available under the
Hong Kong Public Offering (after taking into account any reallocation referred to below) will be
divided equally into two pools: pool A and pool B (with any odd lot being allocated to pool A). The
Hong Kong Offer Shares in pool A will be allocated on an equitable basis to applicants who have
applied for Hong Kong Offer Shares with an aggregate price of HK$5 million (excluding the
brokerage, the SFC transaction levy, the Stock Exchange trading fee payable and the AFRC transaction
levy) or less. The Hong Kong Offer Shares in pool B will be allocated on an equitable basis to
applicants who have applied for Hong Kong Offer Shares with an aggregate price of more than
HK$5 million (excluding the brokerage, the SFC transaction levy, the Stock Exchange trading fee
payable and AFRC transaction levy) and up to the total value in pool B.
Investors should be aware that applications in pool A and applications in pool B may receive
different allocation ratios. If any Hong Kong Offer Shares in one (but not both) of the pools are
unsubscribed, such unsubscribed Hong Kong Offer Shares will be transferred to the other pool to
satisfy demand in that other pool and be allocated accordingly. For the purpose of the immediately
preceding paragraph only, the “price” for Hong Kong Offer Shares means the price payable on
application therefor (without regard to the Offer Price as finally determined). Applicants can only
receive an allocation of Hong Kong Offer Shares from either pool A or pool B and not from both
pools. Multiple or suspected multiple applications under the Hong Kong Public Offering and any
application for more than 541,900 Hong Kong Offer Shares is liable to be rejected.
Reallocation and Clawback
The allocation of the Offer Shares between the Hong Kong Public Offering and the
International Offering is subject to reallocation. Paragraph 4.2 of Practice Note 18 of the Listing Rules
requires a clawback mechanism to be put in place which would have the effect of increasing the
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number of Offer Shares under the Hong Kong Public Offering to a certain percentage of the total
number of Offer Shares offered under the Global Offering if the International Offering is fully
subscribed or oversubscribed and certain prescribed total demand levels are reached under the Hong
Kong Public Offering.
If the number of Offer Shares validly applied for under the Hong Kong Public Offering
represents (a) 15 times or more but less than 50 times, (b) 50 times or more but less than 100 times and
(c) 100 times or more of the total number of Offer Shares initially available under the Hong Kong
Public Offering, then Offer Shares will be reallocated to the Hong Kong Public Offering from the
International Offering. As a result of such reallocation, the total number of Offer Shares available
under the Hong Kong Public Offering will be increased to 3,251,600 Offer Shares (in the case of (a)),
4,335,500 Offer Shares (in the case of (b)) and 5,419,300 Offer Shares (in the case of (c)), representing
approximately 30%, 40% and 50% of the total number of Offer Shares initially available under the
Global Offering, respectively (before any exercise of the Over-allotment Option).
In each case, the additional Offer Shares reallocated to the Hong Kong Public Offering will be
allocated between pool A and pool B and the number of Offer Shares allocated to the International
Offering will be correspondingly reduced in such manner as the Sole Global Coordinator and the Sole
Overall Coordinator deem appropriate.
If the Hong Kong Public Offering is not fully subscribed for, the Sole Global Coordinator and
the Sole Overall Coordinator have the authority to reallocate all or any unsubscribed Hong Kong Offer
Shares to the International Offering, in such proportions as the Sole Global Coordinator and the Sole
Overall Coordinator deem appropriate. In addition, the Sole Global Coordinator and the Sole Overall
Coordinator may in their sole discretion reallocate Offer Shares from the International Offering to the
Hong Kong Public Offering to satisfy valid applications under the Hong Kong Public Offering. In
particular, if (i) the International Offering is not fully subscribed and the Hong Kong Public Offering is
fully subscribed or oversubscribed irrespective of the number of times; or (ii) the International Offering
is fully subscribed or oversubscribed and the Hong Kong Public Offering is fully subscribed or
oversubscribed with the number of Offer Shares validly applied for in the Hong Kong Public Offering
representing less than 15 times of the number of Offer Shares initially available for subscription under
the Hong Kong Public Offering, the Sole Global Coordinator and the Sole Overall Coordinator have
the authority to reallocate International Offer Shares originally included in the International Offering to
the Hong Kong Public Offering in such number as they deem appropriate, provided that in accordance
with Guidance Letter HKEX-GL91-18 issued by the Stock Exchange, (i) the number of International
Offer Shares reallocated to the Hong Kong Public Offering should not exceed 1,083,900 Shares,
representing 10% of the Offer Shares initially available under the Global Offering, increasing the total
number of Offer Shares available under the Hong Kong Public Offering to 2,167,800 Shares,
representing approximately 20% of the Offer Shares; and (ii) the final Offer Price should be fixed at
the bottom end of the indicative Offer Price range (i.e. HK$28.92 per Offer Share) stated in this
document.
In each case, the additional Offer Shares reallocated to the Hong Kong Public Offering will be
allocated between pool A and pool B and the number of Offer Shares allocated to the International
Offering will be correspondingly reduced in such manner as the Sole Global Coordinator and the Sole
Overall Coordinator deem appropriate.
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Details of any reallocation of Offer Shares between the Hong Kong Public Offering and the
International Offering will be disclosed in the results announcement of the Global Offering, which is
expected to be published on Tuesday, July 11, 2023.
Applications
Each applicant under the Hong Kong Public Offering will be required to give an undertaking
and confirmation in the application submitted by him that he and any person(s) for whose benefit he is
making the application has not applied for or taken up, or indicated an interest for, and will not apply
for or take up, or indicate an interest for, any International Offer Shares under the International
Offering. Such applicant’s application is liable to be rejected if such undertaking and/or confirmation
is/are breached and/or untrue (as the case may be) or if he has been or will be placed or allocated
International Offer Shares under the International Offering.
Applicants under the Hong Kong Public Offering are required to pay, on application, the
maximum Offer Price of HK$61.46 per Offer Share in addition to the brokerage, the SFC transaction
levy, the Stock Exchange trading fee and the AFRC transaction levy payable on each Offer Share,
amounting to a total of HK$6,207.99 for one board lot of 100 Shares. If the Offer Price, as finally
determined in the manner described in “Pricing and allocation” in this section below, is less than the
maximum Offer Price of HK$61.46 per Offer Share, appropriate refund payments (including the
brokerage, the SFC transaction levy, the AFRC transaction levy and the Stock Exchange trading fee
attributable to the surplus application monies) will be made to successful applicants, without interest.
Further details are set out in “How to apply for Hong Kong Offer Shares”.
THE INTERNATIONAL OFFERING
Number of Offer Shares initially offered
The International Offering will consist of an offering of initially 9,754,700 Offer Shares,
representing approximately 90.00% of the total number of Offer Shares initially available under the
Global Offering (subject to reallocation and the Over-allotment Option). The number of Offer Shares
initially offered under the International Offering, subject to any reallocation of Offer Shares between
the International Offering and the Hong Kong Public Offering, will represent approximately 1.86% of
the total Shares in issue immediately following the completion of the Global Offering (assuming the
Presumptions).
Allocation
The International Offering will include selective marketing of Offer Shares to QIBs in the
United States as well as institutional and professional investors and other investors anticipated to have
a sizeable demand for such Offer Shares in Hong Kong and other jurisdictions outside the United
States in reliance on Regulation S. Professional investors generally include brokers, dealers, companies
(including fund managers) whose ordinary business involves dealing in shares and other securities and
corporate entities that regularly invest in shares and other securities. Allocation of Offer Shares
pursuant to the International Offering will be effected in accordance with the “book-building” process
described in “Pricing and allocation” in this section and based on a number of factors, including the
level and timing of demand, the total size of the relevant investor’s invested assets or equity assets in
the relevant sector and whether or not it is expected that the relevant investor is likely to buy further
Shares and/or hold or sell its Offer Shares after the Listing. Such allocation is intended to result in a
distribution of the Offer Shares on a basis which would lead to the establishment of a solid professional
and institutional shareholder base to the benefit of the Group and the Shareholders as a whole.
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The Sole Global Coordinator and the Sole Overall Coordinator (on behalf of the Underwriters)
may require any investor who has been offered Offer Shares under the International Offering and who
has made an application under the Hong Kong Public Offering to provide sufficient information to the
Sole Global Coordinator and the Sole Overall Coordinator so as to allow it to identify the relevant
applications under the Hong Kong Public Offering and to ensure that they are excluded from any
allocation of Offer Shares under the Hong Kong Public Offering.
Reallocation
The total number of Offer Shares to be issued or sold pursuant to the International Offering
may change as a result of the clawback arrangement described in “—The Hong Kong Public
Offering—Reallocation and clawback” above, the exercise of the Over-allotment Option in whole or in
part and/or any reallocation of unsubscribed Offer Shares originally included in the Hong Kong Public
Offering.
OVER-ALLOTMENT OPTION
In connection with the Global Offering, our Company is expected to grant the Over-allotment
Option to the International Underwriters, exercisable by the Sole Global Coordinator and the Sole
Overall Coordinator (on behalf of the International Underwriters).
Pursuant to the Over-allotment Option, the International Underwriters will have the right,
exercisable by the Sole Global Coordinator and the Sole Overall Coordinator (on behalf of the
International Underwriters), on or before Friday August 4, 2023, being the 30th day from the last day
for lodging applications under the Hong Kong Public Offering, to require our Company to issue up to
an aggregate of 1,625,700 additional Offer Shares, representing not more than 15% of the total number
of Offer Shares initially available under the Global Offering, at the Offer Price under the International
Offering to, among other things, cover over-allocations in the International Offering, if any.
If the Over-allotment Option is exercised in full, the additional Offer Shares to be issued
pursuant thereto will represent approximately 0.31% of the total Shares in issue immediately following
the completion of the Global Offering and the issue of Offer Shares pursuant to the Over-allotment
Option, assuming no Share is issued under the Share Incentive Plans . If the Over-allotment Option is
exercised, an announcement will be made.
STABILIZATION
Stabilization is a practice used by underwriters in some markets to facilitate the distribution of
securities. To stabilize, the underwriters may bid for, or purchase, the securities in the secondary
market during a specified period of time, to retard and, if possible, prevent a decline in the initial
public market price of the securities below the offer price. Such transactions may be effected in all
jurisdictions where it is permissible to do so, in each case in compliance with all applicable laws and
regulatory requirements, including those of Hong Kong. In Hong Kong, the price at which stabilization
is effected is not permitted to exceed the offer price.
In connection with the Global Offering, the Stabilization Manager (or any person acting for it),
on behalf of the Underwriters, may over-allocate or effect transactions with a view to stabilizing or
supporting the market price of the Shares at a level higher than that which might otherwise prevail for a
limited period after the Listing Date. However, there is no obligation on the Stabilization Manager (or
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STRUCTURE OF THE GLOBAL OFFERING
any person acting for it) to conduct any such stabilizing action. Such stabilizing action, if taken,
(a) will be conducted at the absolute discretion of the Stabilization Manager (or any person acting for
it) and in what the Stabilization Manager reasonably regards as the best interest of our Company,
(b) may be discontinued at any time and (c) is required to be brought to an end within 30 days of the
last day for lodging applications under the Hong Kong Public Offering.
Stabilization action will be entered into in accordance with the laws, rules and regulations in
place in Hong Kong. Stabilization action permitted in Hong Kong pursuant to the Securities and
Futures (Price Stabilizing) Rules of the SFO includes (a) over-allocating for the purpose of preventing
or minimizing any reduction in the market price of the Shares, (b) selling or agreeing to sell the Shares
so as to establish a short position in them for the purpose of preventing or minimizing any reduction in
the market price of the Shares, (c) purchasing, or agreeing to purchase, the Shares pursuant to the
Over-allotment Option in order to close out any position established under paragraph (a) or (b) above,
(d) purchasing, or agreeing to purchase, any of the Shares for the sole purpose of preventing or
minimizing any reduction in the market price of the Shares, (e) selling or agreeing to sell any Shares in
order to liquidate any position established as a result of those purchases, and (f) offering or attempting
to do anything as described in paragraph (b), (c), (d) or (e) above.
Specifically, prospective applicants for and investors in the Offer Shares should note that:
(a) the Stabilization Manager (or any person acting for it) may, in connection with the
stabilizing action, maintain a long position in the Shares;
(b) there is no certainty as to the extent to which and the time or period for which the
Stabilization Manager (or any person acting for it) will maintain such a long position;
(c) liquidation of any such long position by the Stabilization Manager (or any person acting
for it) and selling in the open market may have an adverse impact on the market price of
the Shares;
(d) no stabilizing action can be taken to support the price of the Shares for longer than the
stabilization period, which will begin on the Listing Date, and is expected to expire on
Friday, August 4, 2023, being the 30th day after the last day for lodging applications under
the Hong Kong Public Offering. After this date, when no further stabilizing action may be
taken, demand for the Shares, and therefore the price of the Shares, could fall;
(e) the price of the Shares cannot be assured to stay at or above the Offer Price either during
or after the stabilization period by the taking of any stabilizing action; and
(f) stabilizing bids or transactions effected in the course of the stabilizing action may be made
at any price at or below the Offer Price and can, therefore, be done at a price below the
price paid by applicants for, or investors in, the Offer Shares.
Our Company will ensure or procure that an announcement in compliance with the Securities
and Futures (Price Stabilizing) Rules of the SFO will be made within seven days of the expiration of
the stabilization period.
Over-Allocation
Following any over-allocation of Shares in connection with the Global Offering, the
Stabilization Manager (or any person acting for it) may cover such over-allocations, among other
methods, by exercising the Over-allotment Option in full or in part, by using Shares purchased by the
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STRUCTURE OF THE GLOBAL OFFERING
Stabilization Manager (or any person acting for it) in the secondary market at prices that do not exceed
the Offer Price or through stock borrowing arrangements or a combination of these means.
STOCK BORROWING ARRANGEMENT
In order to facilitate the settlement of over-allocations, if any, in connection with the Global
Offering, the Stabilization Manager (or its affiliates, or any person acting for it) may choose to borrow
up to 1,625,700 Shares (being the maximum number of Shares which may be issued upon exercise of
the Over-allotment Option) from Persistent Courage Holdings Limited pursuant to the Stock
Borrowing Agreement. The Stock Borrowing Agreement is expected to be entered into between the
Stabilization Manager (or any person acting for it) and Persistent Courage Holdings Limited on or
about the Price Determination Date.
If the Stock Borrowing Agreement with Persistent Courage Holdings Limited is entered into,
the borrowing of Shares will only be effected by the Stabilizing Manager (or any person acting for it)
for the settlement of overallocations in the International Offering and such borrowing arrangement is
not subject to the restrictions of Rule 10.07(1)(a) of the Listing Rules, provided that the requirements
set out in Rule 10.07(3) of the Listing Rules, being that the Stock Borrowing Agreement will be for the
sole purpose of covering any short position prior to the exercise of the Over-allotment Option in
connection with the International Offering, are complied with.
The same number of Shares as that borrowed must be returned to Persistent Courage Holdings
Limited or its respective nominees on or before the third Business Day following the earlier of (i) the
last day on which the Over-allotment Option may be exercised, and (ii) the day on which the Over-
allotment Option is exercised in full, or such earlier time as may be agreed in writing between the
parties.
The stock borrowing arrangement under the Stock Borrowing Agreement will be effected in
compliance with all applicable laws, listing rules and regulatory requirements. The stock borrowing
arrangement with Persistent Courage Holdings Limited will only be effected by the Stabilizing
Manager for the sole purpose of covering any short position prior to the exercise of the Over-allotment
Option in connection with the International Offering.
No payment will be made to Persistent Courage Holdings Limited, by the Stabilizing Manager
(or any person acting for it) in relation to such stock borrowing arrangement.
PRICING AND ALLOCATION
Pricing for the Offer Shares for the purpose of the various offerings under the Global Offering
will be fixed on the Price Determination Date, which is expected to be on or about Wednesday, July 5,
2023 and, in any event, no later than Tuesday, July 11, 2023, by agreement between the Sole Global
Coordinator and the Sole Overall Coordinator (on behalf of the Underwriters) and our Company, and
the number of Offer Shares to be allocated under the various offerings will be determined shortly
thereafter.
The Offer Price will not be more than HK$61.46 per Offer Share and is expected to be not less
than HK$28.92 per Offer Share, unless otherwise announced, as further explained below. Applicants
under the Hong Kong Public Offering must pay, on application, the maximum Offer Price of
HK$61.46 per Offer Share plus brokerage of 1%, SFC transaction levy of 0.0027%, Stock Exchange
trading fee of 0.00565% and AFRC transaction levy of 0.00015%, amounting to a total of
HK$6,207.99 for one board lot of 100 Shares. Prospective investors should be aware that the Offer
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STRUCTURE OF THE GLOBAL OFFERING
Price to be determined on the Price Determination Date may be, but is not expected to be, lower
than the minimum Offer Price stated in this document.
The International Underwriters will be soliciting from prospective investors indications of
interest in acquiring Offer Shares in the International Offering. Prospective professional and
institutional investors will be required to specify the number of Offer Shares under the International
Offering they would be prepared to acquire either at different prices or at a particular price. This
process, known as “book-building”, is expected to continue up to, and to cease on or about, the last day
for lodging applications under the Hong Kong Public Offering.
Announcement of Offer Price Reduction
The Sole Global Coordinator and the Sole Overall Coordinator (for themselves and on behalf of
the Underwriters) may, where they deem appropriate, based on the level of interest expressed by
prospective investors during the book-building process in respect of the International Offering, and
with the consent of our Company, reduce the number of Offer Shares offered and/or the Offer Price
Range below that stated in this document at any time on or prior to the morning of the last day for
lodging applications under the Hong Kong Public Offering. In such a case, our Company will, as soon
as practicable following the decision to make such reduction, and in any event not later than the
morning of the last day for lodging applications under the Hong Kong Public Offering, cause to be
published on the websites of our Company and the Stock Exchange at https://keep.com/ and
www.hkexnews.hk, respectively, notices of the reduction. Upon the issue of such a notice, the revised
number of Offer Shares and/or the Offer Price range will be final and conclusive and the Offer Price, if
agreed upon by the Sole Global Coordinator and the Sole Overall Coordinator (on behalf of the
Underwriters) and our Company, will be fixed within such revised Offer Price Range. Our Company
will also, as soon as practicable following the decision to make such change, issue a supplemental
prospectus updating investors of the change in the number of Offer Shares being offered under the
Global Offering and/or the Offer Price, extend the period under which the Hong Kong Public Offering
was opened for acceptance to allow potential investors sufficient time to consider their subscriptions or
reconsider their submitted subscriptions, and require investors who had applied for the Hong Kong
Offer Shares to positively confirm their applications for Offer Shares in light of the change in the
number of Offer Shares and/or the Offer Price.
Before submitting applications for the Hong Kong Offer Shares, applicants should have regard
to the possibility that any announcement of a reduction in the number of Offer Shares and/or the Offer
Price range may not be made until the last day for lodging applications under the Hong Kong Public
Offering. Such notice will also include confirmation or revision, as appropriate, of the working capital
statement and the Global Offering statistics as currently set out in this document, and any other
financial information which may change as a result of any such reduction. In the absence of any such
notice so published, the number of Offer Shares will not be reduced and/or the Offer Price, if agreed
upon by the Sole Global Coordinator and the Sole Overall Coordinator (on behalf of the Underwriters)
and our Company, will under no circumstances be set outside the Offer Price Range as stated in this
document.
If applications for the Offer Shares have been submitted prior to the day which is the last day
for lodging applications under the Hong Kong Public Offering, such applications can be subsequently
withdrawn if the number of Offer Shares and/or the indicative Offer Price range is so reduced.
The final Offer Price, the level of indications of interest in the International Offering, the level
of applications in the Hong Kong Public Offering, the basis of allocations of the Hong Kong Offer
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STRUCTURE OF THE GLOBAL OFFERING
Shares and the results of allocations in the Hong Kong Public Offering are expected to be made
available through a variety of channels in the manner described in “How to apply for Hong Kong Offer
Shares—D. Publication of results” in this document.
UNDERWRITING
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters under
the terms and conditions of the Hong Kong Underwriting Agreement and is subject to, among other
things, the Sole Global Coordinator and the Sole Overall Coordinator (on behalf of the Underwriters)
and our Company agreeing on the Offer Price.
Our Company expects to enter into the International Underwriting Agreement relating to the
International Offering on the Price Determination Date.
These underwriting arrangements, including the Underwriting Agreements, are summarized in
“Underwriting”.
CONDITIONS OF THE GLOBAL OFFERING
Acceptance of all applications for Offer Shares will be conditional on:
(a) the Listing Committee granting approval for the listing of, and permission to deal in, the
Shares in issue and to be issued pursuant to the Global Offering (including the additional
Shares which may be issued pursuant to the exercise of the Over-allotment Option and the
Shares to be issued under the Share Incentive Plans) on the Main Board of the Stock
Exchange and such approval not subsequently having been withdrawn or revoked prior to
the Listing Date;
(b) the Offer Price having been agreed between the Sole Global Coordinator and the Sole
Overall Coordinator (on behalf of the Underwriters) and our Company;
(c) the execution and delivery of the International Underwriting Agreement on or about the
Price Determination Date; and
(d) the obligations of the Hong Kong Underwriters under the Hong Kong Underwriting
Agreement and the obligations of the International Underwriters under the International
Underwriting Agreement becoming and remaining unconditional and not having been
terminated in accordance with the terms of the respective agreements,
in each case on or before the dates and times specified in the respective Underwriting
Agreements (unless and to the extent such conditions are validly waived on or before such dates and
times) and, in any event, not later than the date which is 30 days after the date of this document.
If, for any reason, the Offer Price is not agreed between the Sole Global Coordinator, the Sole
Overall Coordinator (on behalf of the Underwriters) and our Company on or before Tuesday, July 11,
2023, the Global Offering will not proceed and will lapse.
The consummation of each of the Hong Kong Public Offering and the International Offering is
conditional upon, among other things, the other offering becoming unconditional and not having been
terminated in accordance with its terms.
If the above conditions are not fulfilled or waived prior to the dates and times specified, the
Global Offering will lapse and the Stock Exchange will be notified immediately. Notice of the lapse of
the Hong Kong Public Offering will be published on the websites of our Company and the Stock
Exchange at https://keep.com/ and www.hkexnews.hk, respectively, on the next day following such
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STRUCTURE OF THE GLOBAL OFFERING
lapse. In such a situation, all application monies will be returned, without interest, on the terms set out
in “How to apply for Hong Kong Offer Shares—F. Refund of Application Monies”. In the meantime,
all application monies will be held in separate bank account(s) with the receiving banks or other
bank(s) in Hong Kong licensed under the Banking Ordinance (Chapter 155 of the Laws of
Hong Kong).
Share certificates for the Offer Shares will only become valid at 8:00 a.m. on Wednesday,
July 12, 2023, provided that the Global Offering has become unconditional in all respects at or before
that time.
DEALINGS IN THE SHARES
Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00 a.m. in
Hong Kong on Wednesday, July 12, 2023, it is expected that dealings in the Shares on the Stock
Exchange will commence at 9:00 a.m. on Wednesday, July 12, 2023.
The Shares will be traded in board lots of 100 Shares each and the stock code of the Shares will
be 3650.
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HOW TO APPLY FOR HONG KONG OFFER SHARES
IMPORTANT NOTICE TO INVESTORS:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong Public
Offering. We will not provide any printed copies of this document or any printed copies of any
application forms for use by the public.
This document is available at the website of the Stock Exchange at www.hkexnews.hk
under the “HKEXnews > New Listings > New Listing Information” section, and our website at
https://keep.com/. If you require a printed copy of this document, you may download and print
from the website addresses above.
The contents of the electronic version of this document are identical to the printed
document as registered with the Registrar of Companies in Hong Kong pursuant to Section 342C
of the Companies (Winding Up and Miscellaneous Provisions) Ordinance.
Set out below are procedures through which you can apply for the Hong Kong Offer
Shares electronically. We will not provide any physical channels to accept any application for the
Hong Kong Offer Shares by the public.
If you are an intermediary, broker or agent, please remind your customers, clients or
principals, as applicable, that this document is available online at the website addresses above.
A. APPLICATIONS FOR THE HONG KONG OFFER SHARES
1. HOW TO APPLY
We will not provide any printed application forms for use by the public.
To apply for Hong Kong Offer Shares, you may:
(a)
apply online via the White Form eIPO service at www.eipo.com.hk;o r
(b) apply through CCASS EIPO service to electronically cause HKSCC Nominees to apply
on your behalf, including by:
(i) instructing your broker or custodian who is a CCASS Clearing Participant or a
CCASS Custodian Participant to give electronic application instructions via
CCASS terminals to apply for the Hong Kong Offer Shares on your behalf; or
(ii) (if you are an existing CCASS Investor Participant ) giving electronic application
instructions through the CCASS Internet System ( https://ip.ccass.com) or through
the CCASS Phone System by calling +852 2979 7888 (using the procedures in
HKSCC’s “An Operating Guide for Investor Participants” in effect from time to
time). HKSCC can also input electronic application instructions for CCASS
Investor Participants through HKSCC’s Customer Service Center at 1/F, One & Two
Exchange Square, 8 Connaught Place, Central, Hong Kong by completing an input
request.
If you apply through channel (1) above, the Hong Kong Offer Shares successfully applied for
will be issued in your own name.
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HOW TO APPLY FOR HONG KONG OFFER SHARES
If you apply through channels (2)(i) or (2)(ii) above, the Hong Kong Offer Shares successfully
applied for will be issued in the name of HKSCC Nominees and deposited directly into CCASS to be
credited to your or a designated CCASS Participant’s stock account.
None of you or your joint applicant(s) may make more than one application, except where you
are a nominee and provide the required information in your application.
We, the Sole Global Coordinator, the Sole Overall Coordinator, the designated White Form
eIPO Service Provider and their respective agents may reject or accept any application in full or in part
for any reason at their discretion.
2. WHO CAN APPLY
Eligibility for the Application
You can apply for Hong Kong Offer Shares if you or the person(s) for whose benefit you are
applying:
Š are 18 years of age or older;
Š have a Hong Kong address;
Š are outside the United States, and are not a United States Person (as defined in Regulation
S under the U.S. Securities Act); and
Š are not a legal or natural person of the PRC (except qualified domestic institutional
investors).
If an application is made by a person under a power of attorney, the Sole Global Coordinator
the Sole Overall Coordinator may accept it at their discretion and on any conditions they think fit,
including requiring evidence of the attorney’s authority.
The number of joint applicants may not exceed four and they may not apply by means of the
White Form eIPO service for the Hong Kong Offer Shares.
Unless permitted by the Listing Rules, you cannot apply for any Hong Kong Offer Shares if
you are:
Š an existing beneficial owner of Shares and/or a substantial shareholder of any of our
subsidiaries;
Š our Director or chief executive officer and/or a director or chief executive officer of our
subsidiaries;
Š a close associate (as defined in the Listing Rules) of any of the above; and
Š have been allocated or have applied for any International Offer Shares or otherwise
participate in the International Offering.
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Items Required for the Application
If you apply for the Hong Kong Offer Shares online through the White Form eIPO service,
you must:
Š have a valid Hong Kong identity card number; and
Š provide a valid e-mail address and a contact telephone number.
If you are a firm, the application must be in the individual members’ names. If you are applying
for the Hong Kong Offer Shares online by instructing your broker or custodian who is a CCASS
Clearing Participant or a CCASS Custodian Participant to give electronic application instructions via
CCASS terminals, please contact them for the items required for the application.
3. TERMS AND CONDITIONS OF AN APPLICATION
By applying through the application channels specified in this document, you:
Š undertake to execute all relevant documents and instruct and authorize us and/or the Sole
Global Coordinator and the Sole Overall Coordinator (or their agents or nominees), as our
agents, to execute any documents for you and to do on your behalf all things necessary to
register any Hong Kong Offer Shares allocated to you in your name or in the name of
HKSCC Nominees as required by the Articles of Association;
Š agree to comply with the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, the Cayman Companies Act and the Articles of Association;
Š confirm that you have read the terms and conditions and application procedures set out in
this document and agree to be bound by them;
Š confirm that you have received and read this document and have only relied on the
information and representations contained in this document in making your application
and will not rely on any other information or representations except those in any
supplement to this document;
Š confirm that you are aware of the restrictions on the Global Offering in this document;
Š agree that none of us, the Sole Sponsor, the Sole Overall Coordinator, the Sole Global
Coordinator, the Joint Bookrunners, the Joint Lead Managers, the Underwriters, any of our
or their respective directors, officers, employees, partners, agents, advisers and any other
parties involved in the Global Offering (the “ Relevant Persons ”), and the W hite Form
eIPO Service Provider is or will be liable for any information and representations not in
this document (and any supplement to this document);
Š undertake and confirm that you or the person(s) for whose benefit you have made the
application have not applied for or taken up, or indicated an interest for, and will not apply
for or take up, or indicate an interest for, any Offer Shares under the International Offering
nor participated in the International Offering;
Š agree to disclose to us, our Hong Kong Share Registrar, receiving banks, the Sole Global
Coordinator, the Sole Overall Coordinator, the Sole Sponsor, the Joint Bookrunners, the
Joint Lead Managers, the Underwriters and/or their respective advisers and agents any
personal data which they may require about you and the person(s) for whose benefit you
have made the application;
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Š if the laws of any place outside Hong Kong apply to your application, agree and warrant
that you have complied with all such laws and none of us, the Sole Global Coordinator, the
Sole Overall Coordinator, and the Underwriters nor any of their respective officers or
advisers will breach any law outside Hong Kong as a result of the acceptance of your offer
to purchase, or any action arising from your rights and obligations under the terms and
conditions contained in this document;
Š agree that once your application has been accepted, you may not rescind it because of an
innocent misrepresentation;
Š agree that your application, any acceptance of it and the resulting contract will be
governed by, and construed in accordance with the laws of Hong Kong;
Š represent, warrant and undertake that (i) you understand that the Hong Kong Offer Shares
have not been and will not be registered under the U.S. Securities Act; and (ii) you and
any person for whose benefit you are applying for the Hong Kong Offer Shares are outside
the United States (as defined in Regulation S) or are a person described in paragraph (h)(3)
of Rule 902 of Regulation S;
Š warrant that the information you have provided is true and accurate;
Š agree to accept the Hong Kong Offer Shares applied for, or any lesser number allocated to
you under the application;
Š authorize us to place your name(s) or the name of the HKSCC Nominees, on our register
of members as the holder(s) of any Hong Kong Offer Shares allocated to you, and we and/
or our agents to send any share certificate(s) and/or any e-Refund payment instructions
and/or any refund check(s) to you or the first-named applicant for joint application by
ordinary post at your own risk to the address stated on the application, unless you have
fulfilled the criteria mentioned in “—Personal collection” in this section to collect the
share certificate(s) and/or refund check(s) in person;
Š declare and represent that this is the only application made and the only application
intended by you to be made to benefit you or the person for whose benefit you are
applying;
Š understand that we, the Sole Overall Coordinator and the Sole Global Coordinator will
rely on your declarations and representations in deciding whether or not to make any
allotment of any of the Hong Kong Offer Shares to you and that you may be prosecuted
for making a false declaration;
Š (if the application is made for your own benefit) warrant that no other application has been
or will be made for your benefit by giving electronic application instructions to HKSCC
directly or indirectly or through the White Form eIPO service or by any one as your
agent or by any other person; and
Š (if you are making the application as an agent for the benefit of another person) warrant
that (i) no other application has been or will be made by you as agent for or for the benefit
of that person or by that person or by any other person as agent for that person giving
electronic application instructions to HKSCC; and (ii) you have due authority to give
electronic application instructions on behalf of that other person as their agent.
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For the avoidance of doubt, we and all other parties involved in the preparation of this
document acknowledge that each applicant and CCASS Participant who gives or causes to give
electronic application instructions is a person who may be entitled to compensation under Section 40
of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E
of the Companies (Winding Up and Miscellaneous Provisions) Ordinance).
4. MINIMUM APPLICATION AMOUNT AND PERMITTED NUMBERS
Your application through White Form eIPO service or the CCASS EIPO service must be for
a minimum of 100 Hong Kong Offer Shares and in one of the numbers set out in the table below. You
are required to pay the amount next to the number you select.
Keep Inc.
(HK$61.46 per Hong Kong Offer Share)
NUMBER OF HONG KONG OFFER SHARES THAT MAY BE APPLIED FOR AND
PAYMENTS
No. of Hong
Kong Offer
Shares applied
for
Amount
payable on
application
No. of Hong
Kong Offer
Shares applied
for
Amount payable
on application
No. of Hong
Kong Offer
Shares applied
for
Amount payable
on application
No. of Hong
Kong Offer
Shares applied
for
Amount payable
on application
HK$ HK$ HK$ HK$
100 6,207.99 1,500 93,119.74 8,000 496,638.60 90,000 5,587,184.17
200 12,415.96 2,000 124,159.64 9,000 558,718.41 100,000 6,207,982.41
300 18,623.95 2,500 155,199.56 10,000 620,798.23 150,000 9,311,973.61
400 24,831.93 3,000 186,239.48 20,000 1,241,596.48 200,000 12,415,964.82
500 31,039.92 3,500 217,279.38 30,000 1,862,394.72 250,000 15,519,956.03
600 37,247.90 4,000 248,319.30 40,000 2,483,192.97 300,000 18,623,947.24
700 43,455.87 4,500 279,359.21 50,000 3,103,991.20 350,000 21,727,938.44
800 49,663.86 5,000 310,399.12 60,000 3,724,789.45 400,000 24,831,929.65
900 55,871.84 6,000 372,478.94 70,000 4,345,587.68 450,000 27,935,920.85
1,000 62,079.82 7,000 434,558.78 80,000 4,966,385.93 541,900
(1) 33,641,056.68
(1) Maximum number of Hong Kong Offer Share you may apply for.
No application for any other number of the Hong Kong Offer Shares will be considered and any
such application is liable to be rejected.
5. APPLYING THROUGH THE WHITE FORM eIPO SERVICE
General
Individuals who meet the criteria in “– 2. Who can apply” in this section may apply through the
White Form eIPO Service Provider for the Hong Kong Offer Shares to be allotted and registered in
their own names through the designated website at www.eipo.com.hk.
Detailed instructions for application through the White Form eIPO service are on the
designated website. If you do not follow the instructions, your application may be rejected and may not
be submitted to us. If you apply through the designated website, you authorize the White Form eIPO
Service Provider to apply on the terms and conditions in this document, as supplemented and amended
by the terms and conditions of the White Form eIPO Service Provider.
Time for Submitting Applications under the White Form eIPO
You may submit your application to the designated White Form eIPO Service Provider at
www.eipo.com.hk (24 hours daily, except on the last application day) from 9:00 a.m. on Friday,
June 30, 2023 until 11:30 a.m. on Wednesday, July 5, 2023 and the latest time for completing full
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HOW TO APPLY FOR HONG KONG OFFER SHARES
payment of application monies in respect of such applications will be 12:00 noon on Wednesday,
July 5, 2023 or such later time under “– C. Effect of bad weather on the opening and closing of the
application lists” in this section.
No Multiple Applications
If you apply by means of White Form eIPO service, once you complete payment in respect of
any electronic application instruction given by you or for your benefit through the White Form
eIPO service to make an application for Hong Kong Offer Shares, an actual application shall be
deemed to have been made. For the avoidance of doubt, giving an electronic application instruction
under White Form eIPO service more than once and obtaining different application reference
numbers without effecting full payment in respect of a particular reference number will not constitute
an actual application.
If you are suspected of submitting more than one application through the White Form eIPO
service or by any other means, all of your applications are liable to be rejected.
Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance
For the avoidance of doubt, we and all other parties involved in the preparation of this
document acknowledge that each applicant who gives or causes to give electronic application
instructions is a person who may be entitled to compensation under Section 40 of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance).
6. APPLYING THROUGH CCASS EIPO SERVICE
General
You may instruct your broker or custodian who is a CCASS Clearing Participant or a CCASS
Custodian Participant to give electronic application instructions via CCASS terminals to apply for
the Hong Kong Offer Shares on your behalf. CCASS Participants may give electronic application
instructions to apply for the Hong Kong Offer Shares and to arrange payment of the money due on
application and payment of refunds under their participant agreements with HKSCC and the General
Rules of CCASS and the CCASS Operational Procedures.
If you are a CCASS Investor Participant, you may give these electronic application
instructions through the CCASS Internet System ( https://ip.ccass.com) or through the CCASS Phone
System by calling +852 2979 7888 (using the procedures in HKSCC’s “An Operating Guide for
Investor Participants” in effect from time to time). HKSCC can also input electronic application
instructions for CCASS Investor Participants through HKSCC’s Customer Service Center at 1/F,
One & Two Exchange Square, 8 Connaught Place, Central, Hong Kong if you complete an input
request.
You will be deemed to have authorized HKSCC and/or HKSCC Nominees to transfer the
details of your application to us, the Sole Overall Coordinator, the Sole Global Coordinator and our
Hong Kong Share Registrar.
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Applying through CCASS EIPO service
Where you have applied through CCASS EIPO service (either indirectly through a broker or
custodian or directly) and an application is made by HKSCC Nominees on your behalf:
Š HKSCC Nominees will only be acting as a nominee for you and is not liable for any
breach of the terms and conditions of this document;
Š HKSCC Nominees will do the following things on your behalf:
(i) agree that the Hong Kong Offer Shares to be allotted shall be issued in the name of
HKSCC Nominees and deposited directly into CCASS for the credit of the CCASS
Participant’s stock account on your behalf or your CCASS Investor Participant’s
stock account;
(ii) agree to accept the Hong Kong Offer Shares applied for or any lesser number
allocated;
(iii) undertake and confirm that you have not applied for or taken up, will not apply for
or take up, or indicate an interest for, any Offer Shares under the International
Offering;
(iv) (if the electronic application instructions are given for your benefit) declare that
only one set of electronic application instructions has been given for your benefit;
(v) (if you are an agent for another person) declare that you have only given one set of
electronic application instructions for the other person’s benefit and are duly
authorized to give those instructions as their agent;
(vi) confirm that you understand that we, our Directors, the Sole Overall Coordinator
and the Sole Global Coordinator will rely on your declarations and representations
in deciding whether or not to make any allotment of any of the Hong Kong Offer
Shares to you and that you may be prosecuted if you make a false declaration;
(vii) authorize us to place HKSCC Nominees’ name on our register of members as the
holder of the Hong Kong Offer Shares allocated to you and to send share
certificate(s) and/or refund monies under the arrangements separately agreed
between us and HKSCC;
(viii) confirm that you have read the terms and conditions and application procedures set
out in this document and agree to be bound by them;
(ix) confirm that you have received and/or read a copy of this document and have relied
only on the information and representations in this document in causing the
application to be made, save as set out in any supplement to this document;
(x) agree that none of us, the Sole Global Coordinator, the Sole Overall Coordinator,
the Underwriters, their respective directors, officers, employees, partners, agents,
advisers and any other parties involved in the Global Offering, is or will be liable
for any information and representations not contained in this document (and any
supplement to this document);
(xi) agree to disclose your personal data to us, our Hong Kong Share Registrar,
receiving banks, the Sole Global Coordinator, the Sole Overall Coordinator, the
Underwriters and/or its respective advisers and agents;
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(xii) agree (without prejudice to any other rights which you may have) that once HKSCC
Nominees’ application has been accepted, it cannot be rescinded for innocent
misrepresentation;
(xiii) agree that any application made by HKSCC Nominees on your behalf is irrevocable
before the fifth day after the time of the opening of the application lists (excluding
any day which is Saturday, Sunday or public holiday in Hong Kong), such
agreement to take effect as a collateral contract with us and to become binding
when you give the instructions and such collateral contract to be in consideration of
our Company agreeing that it will not offer any Hong Kong Offer Shares to any
person before the fifth day after the time of the opening of the application lists
(excluding any day which is Saturday, Sunday or public holiday in Hong Kong),
except by means of one of the procedures referred to in this document. However,
HKSCC Nominees may revoke the application before the fifth day after the time of
the opening of the application lists (excluding for this purpose any day which is a
Saturday, Sunday or public holiday in Hong Kong) if a person responsible for this
document under Section 40 of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance gives a public notice under that section which excludes or
limits that person’s responsibility for this document;
(xiv) agree that once HKSCC Nominees’ application is accepted, neither that application
nor your electronic application instructions can be revoked, and that acceptance
of that application will be evidenced by our announcement of the Hong Kong
Public Offering results;
(xv) agree to the arrangements, undertakings and warranties under the participant
agreement between you and HKSCC, read with the General Rules of CCASS and
the CCASS Operational Procedures, for the giving electronic application
instructions to apply for Hong Kong Offer Shares;
(xvi) agree with us, for ourselves and for the benefit of each Shareholder (and so that we
will be deemed by our acceptance in whole or in part of the application by HKSCC
Nominees to have agreed, for itself and on behalf of each of the Shareholders, with
each CCASS Participant giving electronic application instructions ) to observe
and comply with our Memorandum and Articles of Association, the Companies
(Winding Up and Miscellaneous Provisions) Ordinance and the Cayman
Companies Act; and
(xvii) agree that your application, any acceptance of it and the resulting contract will be
governed by, and construed in accordance with the laws of Hong Kong.
Effect of Applying through CCASS EIPO service
By applying through CCASS EIPO service, you (and, if you are joint applicants, each of you
jointly and severally) are deemed to have done the following things. Neither HKSCC nor HKSCC
Nominees shall be liable to us or any other person in respect of the things mentioned below:
Š instructed and authorized HKSCC to cause HKSCC Nominees (acting as nominee for the
relevant CCASS Participants) to apply for the Hong Kong Offer Shares on your behalf;
Š instructed and authorized HKSCC to arrange payment of the maximum Offer Price,
brokerage, SFC transaction levy, AFRC transaction levy and the Stock Exchange trading
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fee by debiting your designated bank account and, in the case of a wholly or partially
unsuccessful application and/or if the Offer Price is less than the maximum Offer Price per
Offer Share initially paid on application, refund of the application monies (including
brokerage, SFC transaction levy, AFRC transaction levy and the Stock Exchange trading
fee) by crediting your designated bank account; and
Š instructed and authorized HKSCC to cause HKSCC Nominees to do on your behalf all the
things stated in this document.
Time for Inputting Electronic Application Instructions
(1)
CCASS Clearing/Custodian Participants can input electronic application instructions at the
following times on the following dates:
Friday, June 30, 2023 - 9:00 a.m. to 8:30 p.m.
Monday, July 3, 2023 - 8:00 a.m. to 8:30 p.m.
Tuesday, July 4, 2023 - 8:00 a.m. to 8:30 p.m.
Wednesday, July 5, 2023 - 8:00 a.m. to 12:00 noon
CCASS Investor Participants can input electronic application instructions from 9:00 a.m. on
Friday, June 30, 2023 until 12:00 noon on Wednesday, July 5, 2023 (24 hours daily, except on,
Wednesday, July 5, 2023, the last application day).
The latest time for inputting your electronic application instructions will be 12:00 noon on
Wednesday, July 5, 2023, the last application day or such later time as described in “– C. Effect of bad
weather on the opening and closing of the application lists” in this section.
Note:
(1) These times are subject to change as HKSCC may determine from time to time with prior notification to CCASS Clearing/Custodian
Participants and/or CCASS Investor Participants
If you are instructing your broker or custodian who is a CCASS Clearing Participant or a
CCASS Custodian Participant to give electronic application instructions via CCASS terminals to
apply for the Hong Kong Offer Shares on your behalf, you are advised to contact your broker or
custodian for the latest time for giving such instructions which may be different from the latest time as
stated above.
No Multiple Applications
If you are suspected of having made multiple applications or if more than one application is
made for your benefit, the number of Hong Kong Offer Shares applied for by HKSCC Nominees will
be automatically reduced by the number of Hong Kong Offer Shares for which you have given such
instructions and/ or for which such instructions have been given for your benefit. Any electronic
application instructions to make an application for the Hong Kong Offer Shares given by you or for
your benefit to HKSCC shall be deemed to be an actual application for the purposes of considering
whether multiple applications have been made.
Personal Data
The following Personal Information Collection Statement applies to any personal data held by
us, the Hong Kong Share Registrar, the receiving bank(s), the Sole Global Coordinator, the Overall
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Coordinator, the Sole Sponsor, the Joint Bookrunners, the Joint Lead Managers, the Underwriters and
any of their respective advisers and agents about applicants other than HKSCC Nominees. By applying
through CCASS EIPO service, you agree to all of the terms of the Personal Information Collection
Statement below.
Personal Information Collection Statement
This Personal Information Collection Statement informs applicant for, and holder of, the Hong
Kong Offer Shares, of the policies and practices of us and the Hong Kong Share Registrar in relation to
personal data and the Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong).
Reasons for the collection of your personal data
It is necessary for applicants and registered holders of the Hong Kong Offer Shares to supply
correct personal data to us or our agents and the Hong Kong Share Registrar when applying for the
Hong Kong Offer Shares or transferring the Hong Kong Offer Shares into or out of their names or in
procuring the services of the Hong Kong Share Registrar.
Failure to supply the requested data may result in your application for the Hong Kong Offer
Shares being rejected, or in delay or the inability of our Company or the Hong Kong Share Registrar to
effect transfers or otherwise render their services. It may also prevent or delay registration or transfers
of the Hong Kong Offer Shares which you have successfully applied for and/or the dispatch of share
certificate(s) to which you are entitled.
It is important that the holders of the Hong Kong Offer Shares inform us and the Hong Kong
Share Registrar immediately of any inaccuracies in the personal data supplied.
Purposes
Your personal data may be used, held, processed, and/or stored (by whatever means) for the
following purposes:
Š processing your application and refund check, where applicable, verification of
compliance with the terms and application procedures set out in this document and
announcing results of allocation of the Hong Kong Offer Shares;
Š compliance with applicable laws and regulations in Hong Kong and elsewhere;
Š registering new issues or transfers into or out of the names of the holders of the
Company’s Shares including, where applicable, HKSCC Nominees;
Š maintaining or updating our Register of Members;
Š verifying identities of the holders of the Shares;
Š establishing benefit entitlements of holders of the Shares, such as dividends, rights issues,
bonus issues, etc.;
Š distributing communications from our Company and our subsidiaries;
Š compiling statistical information and profiles of the holder of the Shares;
Š disclosing relevant information to facilitate claims on entitlements; and
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Š any other incidental or associated purposes relating to the above and/or to enable us and
the Hong Kong Share Registrar to discharge their obligations to holders of the Shares and/
or regulators and/or any other purposes to which the securities’ holders may from time to
time agree.
Transfer of personal data
Personal data held by us and our Hong Kong Share Registrar relating to the holders of the Hong
Kong Offer Shares will be kept confidential but we and our Hong Kong Share Registrar may, to the
extent necessary for achieving any of the above purposes, disclose, obtain or transfer (whether within
or outside Hong Kong) the personal data to, from or with any of the following:
Š our appointed agents such as financial advisers, receiving bankers and overseas principal
share registrar;
Š where applicants for the Hong Kong Offer Shares request a deposit into CCASS, HKSCC
or HKSCC Nominees, who will use the personal data for the purposes of operating
CCASS;
Š any agents, contractors or third-party service providers who offer administrative,
telecommunications, computer, payment or other services to us or the Hong Kong Share
Registrar in connection with their respective business operation;
Š the Hong Kong Stock Exchange, the SFC, the AFRC and any other statutory regulatory or
governmental bodies or otherwise as required by laws, rules or regulations; and
Š any persons or institutions with which the holders of the Hong Kong Offer Shares have or
propose to have dealings, such as their bankers, solicitors, accountants or stockbrokers etc.
Retention of personal data
We and the Hong Kong Share Registrar will keep the personal data of the applicants and
holders of the Hong Kong Offer Shares for as long as necessary to fulfill the purposes for which the
personal data were collected. Personal data which is no longer required will be destroyed or dealt with
in accordance with the Personal Data (Privacy) Ordinance.
Access to and correction of personal data
Holders of the Hong Kong Offer Shares have the right to ascertain whether our Company or the
Hong Kong Share Registrar hold their personal data, to obtain a copy of that data, and to correct any
data that is inaccurate. Our Company and the Hong Kong Share Registrar have the right to charge a
reasonable fee for the processing of such requests. All requests for access to data or correction of data
should be addressed to us, at our registered address disclosed in “Corporate information” or as notified
from time to time, for the attention of the secretary, or the Hong Kong Share Registrar for the attention
of the privacy compliance officer.
7. WARNING FOR ELECTRONIC APPLICATIONS
The subscription for the Hong Kong Offer Shares by the CCASS EIPO service (directly or
indirectly through your broker or custodian) is only a facility provided to CCASS Participants.
Similarly, the application for Hong Kong Offer Shares through the White Form eIPO service is also
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only a facility provided by the designated White Form eIPO Service Provider to public investors.
Such facilities are subject to capacity limitations and potential service interruptions and you are
advised not to wait until the last application day in making your electronic applications. We, our
Directors, the Joint Bookrunners, the Sole Sponsor, the Sole Global Coordinator, the Sole Overall
Coordinator, the Underwriters and the White Form eIPO Service Provider take no responsibility for
such applications and provide no assurance that any CCASS Participant or person applying through
CCASS EIPO service or person applying through the designated White Form eIPO Service Provider
will be allotted any Hong Kong Offer Shares.
To ensure that CCASS Investor Participants can give their e lectronic application instructions ,
they are advised not to wait until the last minute to input their instructions to the systems.
In the event that CCASS Investor Participants have problems in the connection to CCASS
Phone System or the CCASS Internet System for submission of electronic application instructions ,
they should go to HKSCC’s Customer Service Center to complete an input request form for electronic
application instructions before 12:00 noon on Wednesday, July 5, 2023, the last application day, or
such time as described in “— C. Effect of bad weather on the opening and closing of the application
lists” in this section.
8. HOW MANY APPLICATIONS CAN YOU MAKE
Multiple applications for the Hong Kong Offer Shares are not allowed except by nominees.
All of your applications will be rejected if more than one application through the CCASS
EIPO service (directly or indirectly through your broker or custodian) or through the White Form
eIPO service, is made for your benefit (including the part of the application made by HKSCC
Nominees acting on electronic application instructions ), and the number of Hong Kong Offer Shares
applied by HKSCC Nominees will be automatically reduced by the number of Hong Kong Offer
Shares for which you have given such instructions and/or for which such instructions have been given
for your behalf.
For the avoidance of doubt, giving an electronic application instruction under the White
Form eIPO service more than once and obtaining different application reference numbers without
effecting full payment in respect of a particular reference number will not constitute an actual
application. However, any electronic application instructions to make an application for the Hong
Kong Offer Shares given by you or for your benefit to HKSCC will be deemed to be an actual
application for the purposes of considering whether multiple applications have been made.
If an application is made by an unlisted company and:
Š the principal business of that company is dealing in securities; and
Š you exercise statutory control over that company,
then the application will be treated as being made for your benefit.
“Unlisted company” means a company with no equity securities listed on the Stock Exchange.
“Statutory control” means you:
Š control the composition of the board of directors of the company;
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Š control more than half of the voting power of the company; or
Š hold more than half of the issued share capital of the company (not counting any part of it
which carries no right to participate beyond a specified amount in a distribution of either
profits or capital).
B. HOW MUCH ARE THE HONG KONG OFFER SHARES
The maximum Offer Price is HK$61.46 per Offer Share. You must also pay brokerage of 1.0%,
SFC transaction levy of 0.0027%, Hong Kong Stock Exchange trading fee of 0.00565% and AFRC
transaction levy of 0.00015%. This means that for one board lot of 100 Hong Kong Offer Shares, you
will pay HK$6,207.99.
You must pay the maximum Offer Price, brokerage, SFC transaction levy, AFRC transaction
levy and the Stock Exchange trading fee in full upon application for the Hong Kong Offer Shares.
You may submit an application through the White Form eIPO service or the CCASS EIPO
service in respect of a minimum of 100 Hong Kong Offer Shares. Each application or electronic
application instruction in respect of more than 100 Hong Kong Offer Shares must be in one of the
numbers set out in the table in “—4. Minimum application amount and permitted numbers” or as
otherwise specified on the designated website at www.eipo.com.hk.
If your application is successful, brokerage will be paid to the Exchange Participants (as
defined in the Listing Rules), and the SFC transaction levy, AFRC transaction levy and the Stock
Exchange trading fee are paid to the Stock Exchange (in the case of the SFC transaction levy and
AFRC transaction levy, collected by the Stock Exchange on behalf of the SFC and the AFRC
respectively).
For further details on the Offer Price, please refer to “—Structure of the Global Offering —
Pricing and allocation”.
C. EFFECT OF BAD WEATHER ON THE OPENING AND CLOSING OF THE
APPLICATION LISTS
The application lists will not open if there is:
Š a tropical cyclone warning signal number 8 or above; or
Š a “black” rainstorm warning; and/or
Š Extreme Conditions,
in force in Hong Kong at any time between 9:00 am and 12:00 noon on Wednesday, July 5, 2023.
Instead they will open between 11:45 am and 12:00 noon on the next business day which does not have
either of those warnings in Hong Kong in force at any time between 9:00 am and 12:00 noon.
If the application lists do not open and close on Wednesday, July 5, 2023 or if there is/are a
tropical cyclone warning signal number 8 or above or a “black” rainstorm warning signal and/or
Extreme Conditions in force in Hong Kong that may affect the dates mentioned in “Expected
timetable” in, an announcement will be made on our website at https://keep.com/ and the website of
the Stock Exchange at www.hkexnews.hk.
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D. PUBLICATION OF RESULTS
We expect to announce the final Offer Price, the level of indication of interest in the
International Offering, the level of applications in the Hong Kong Public Offering and the basis of
allocation of the Hong Kong Offer Shares on Tuesday, July 11, 2023 on our website at
https://keep.com/ and the website of the Stock Exchange at www.hkexnews.hk.
The results of allocations and the Hong Kong identity card/passport/Hong Kong business
registration numbers of successful applicants under the Hong Kong Public Offering will be available at
the times and dates and in the manner specified below:
Š
in the announcement to be posted on our website at https://keep.com/ and the Stock
Exchange’s website at www.hkexnews.hk by no later than 9:00 a.m. on Tuesday, July 11,
2023;
Š from the designated results of allocations website at www.iporesults.com.hk
(alternatively: English https://www.eipo.com.hk/en/Allotment; Chinese
https://www.eipo.com.hk/zh-hk/Allotment) with a “search by ID” function on a 24-hour
basis from 8:00 a.m. on Tuesday, July 11, 2023 to 12:00 midnight, on Monday, July 17,
2023; and
Š from the allocation results telephone enquiry line by calling +852 2862 8555 between 9:00
a.m. and 6:00 p.m. on Tuesday, July 11, 2023, Wednesday, July 12, 2023, Thursday,
July 13, 2023 and Friday, July 14, 2023.
If we accept your offer to purchase (in whole or in part), which it may do by announcing the
basis of allocations and/or making available the results of allocations publicly, there will be a binding
contract under which you will be required to purchase the Hong Kong Offer Shares if the conditions of
the Global Offering are satisfied and the Global Offering is not otherwise terminated. Further details
are contained in “Structure of the Global Offering”.
You will not be entitled to exercise any remedy of rescission for innocent misrepresentation at
any time after acceptance of your application. This does not affect any other right you may have.
E. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED HONG KONG
OFFER SHARES
You should note the following situations in which the Hong Kong Offer Shares will not be
allotted to you:
If your application is revoked:
By applying through the CCASS EIPO service or through the White Form eIPO Service
Provider, you agree that your application or application made by HKSCC Nominees on your behalf
cannot be revoked on or before the fifth day after the time of the opening of the application lists
(excluding for this purpose any day which is Saturday, Sunday or public holiday in Hong Kong). This
agreement will take effect as a collateral contract with us.
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Your application or the application made by HKSCC Nominees on your behalf may only be
revoked on or before the fifth day after the time of the opening of the application lists (excluding any
days which is a Saturday, Sunday or public holiday in Hong Kong) in the following circumstances:
Š if a person responsible for this document under Section 40 of the Companies (Winding Up
and Miscellaneous Provisions) Ordinance (as applied by Section 342E of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance) gives a public notice under that
section on or before the fifth day after the time of the opening of the application lists
(excluding any days which is a Saturday, Sunday or public holiday in Hong Kong) which
excludes or limits that person’s responsibility for this document; or
Š if any supplement to this document is issued, applicants who have already submitted an
application will be notified that they are required to confirm their applications. If
applicants have been so notified but have not confirmed their applications in accordance
with the procedure to be notified, all unconfirmed applications will be deemed revoked.
If your application or the application made by HKSCC Nominees on your behalf has been
accepted, it cannot be revoked. For this purpose, acceptance of applications which are not rejected will
be constituted by notification in the press of the results of allocation, and where such basis of
allocation is subject to certain conditions or provides for allocation by ballot, such acceptance will be
subject to the satisfaction of such conditions or results of the ballot respectively.
If we or our agents exercise discretion to reject your application:
We, the Sole Global Coordinator, the Sole Overall Coordinator, the designated White Form
eIPO Service Provider and their respective agents and nominees have full discretion to reject or accept
any application, or to accept only part of any application, without giving any reasons.
If the allotment of Hong Kong Offer Shares is void:
The allotment of Hong Kong Offer Shares will be void if the Listing Committee of the Stock
Exchange does not grant permission to list the Shares either:
Š Within three weeks from the closing date of the application lists; or
Š Within a longer period up to six weeks if the Listing Committee notifies us of that longer
period within three weeks of the closing date of the application lists.
If:
Š you make multiple applications or suspected multiple applications;
Š you or the person for whose benefit you are applying have applied for or taken up, or
indicated an interest for, or have been or will be placed or allocated (including
conditionally and/or provisionally) Hong Kong Offer Shares and International Offer
Shares;
Š your payment is not made correctly;
Š your electronic application instructions through the White Form eIPO service are not
completed in accordance with the instructions, terms and conditions on the designated
website at www.eipo.com.hk;
Š the Underwriting Agreements do not become unconditional or are terminated;
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Š we, the Sole Overall Coordinator or the Sole Global Coordinator believe that by accepting
your application, it or they would violate applicable securities or other laws, rules or
regulations; or
Š your application is for more than 50% of the Hong Kong Offer Shares initially offered
under the Hong Kong Public Offering.
F. REFUND OF APPLICATION MONIES
If an application is rejected, not accepted or accepted in part only, or if the Offer Price as finally
determined is less than the maximum Offer Price of HK$61.46 per Offer Share (excluding brokerage,
SFC transaction levy, AFRC transaction levy and the Stock Exchange trading fee thereon), or if the
conditions of the Hong Kong Public Offering are not fulfilled in accordance with “Structure of the
Global Offering – Conditions of the Global Offering” or if any application is revoked, the application
monies, or the appropriate portion thereof, together with the related brokerage, SFC transaction levy,
AFRC transaction levy and the Stock Exchange trading fee, will be refunded, without interest or the
check or banker ’s cashier order will not be cleared.
Any refund of your application monies will be made on or before Tuesday, July 11, 2023.
G. DISPATCH/COLLECTION OF SHARE CERTIFICATES/e-REFUND PAYMENT
INSTRUCTIONS/REFUND CHECKS
You will receive one share certificate for all Hong Kong Offer Shares allotted to you under the
Hong Kong Public Offering (except pursuant to applications made through the CCASS EIPO service
where the share certificates will be deposited into CCASS as described below).
No temporary document of title will be issued in respect of the Shares. No receipt will be issued
for sums paid on application.
Subject to arrangement on dispatch/collection of share certificates and refund monies as
mentioned below, any refund checks and share certificates are expected to be posted on or before
Tuesday, July 11, 2023. The right is reserved to retain any share certificate(s) and any surplus
application monies pending clearance of check(s) or banker’s cashier’s order(s).
Share certificates will only become valid at 8:00 a.m. on Wednesday, July 12, 2023 provided
that the Global Offering has become unconditional and the right of termination described in
“Underwriting” has not been exercised. Investors who trade Shares prior to the receipt of Share
certificates or the Share certificates becoming valid do so at their own risk.
Personal Collection
(i) If you apply through the White Form eIPO service
(a) If you apply for 300,000 Hong Kong Offer Shares or more and your application is wholly
or partially successful, you may collect your Share certificate(s) and/or refund check(s)
(where applicable) from our Hong Kong Share Registrar, Computershare Hong Kong
Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s
Road East, Wan Chai, Hong Kong from 9:00 a.m. to 1:00 p.m. on Tuesday, July 11, 2023,
or such other date as notified by the Company in the newspaper as the date of dispatch/
collection of share certificates/e-Refund payment instructions/ refund checks.
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(b) If you do not collect your Share certificate(s) and/or refund check(s) (where applicable)
personally within the time specified for collection, they will be sent to the address
specified in your application instructions by ordinary post at your own risk.
(c) If you apply for less than 300,000 Hong Kong Offer Shares through the White Form
eIPO service, your Share certificate(s) and/or refund check(s) (where applicable) will be
sent to the address specified in your application instructions on or before Tuesday, July 11,
2023 by ordinary post at your own risk.
(d) If you apply and pay the application monies from a single bank account, any refund
monies will be dispatched to that bank account in the form of e-Refund payment
instructions. If you apply and pay the application monies from multiple bank accounts, any
refund monies will be dispatched to the address as specified in your application
instructions in the form of refund check(s) by ordinary post at your own risk.
(ii) If you apply through CCASS EIPO service
Allocation of Hong Kong Offer Shares
For the purposes of allocating Hong Kong Offer Shares, HKSCC Nominees will not be treated
as an applicant. Instead, each CCASS Participant who gives electronic application instructions or
each person for whose benefit instructions are given will be treated as an applicant.
Deposit of Share Certificates into CCASS and Refund of Application Monies
(a) If your application is wholly or partially successful, your share certificate(s) will be issued
in the name of HKSCC Nominees and deposited into CCASS for the credit of your
designated CCASS Participant’s stock account or your CCASS Investor Participant’s
stock account on Tuesday, July 11, 2023, or, on any other date determined by HKSCC or
HKSCC Nominees.
(b) We expect to publish the application results of CCASS Participants (and where the
CCASS Participant is a broker or custodian, we will include information relating to the
relevant beneficial owner), your Hong Kong identity card number/passport number or
other identification code (Hong Kong business registration number for corporations) and
the basis of allotment of the Hong Kong Public Offering in the manner specified in “—
D. Publication of results” in this section on Tuesday, July 11, 2023. You should check the
announcement published by us and report any discrepancies to HKSCC before 5:00 p.m.
on Tuesday, July 11, 2023 or such other date as determined by HKSCC or HKSCC
Nominees.
(c) If you have instructed your broker or custodian who is a CCASS Clearing Participant or
a CCASS Custodian Participant to give electronic application instructions via CCASS
terminals to apply for the Hong Kong Offer Shares on your behalf, you can also check the
number of Hong Kong Offer Shares allotted to you and the amount of refund monies (if
any) payable to you with that broker or custodian.
(d) If you have applied as a CCASS Investor Participant, you can also check the number of
Hong Kong Offer Shares allotted to you and the amount of refund monies (if any) payable
to you via the CCASS Phone System and the CCASS Internet System (under the
procedures contained in HKSCC’s “An Operating Guide for Investor Participants” in
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HOW TO APPLY FOR HONG KONG OFFER SHARES
effect from time to time) on Tuesday, July 11, 2023. Immediately following the credit of
the Hong Kong Offer Shares to your stock account and the credit of refund monies to your
bank account, HKSCC will also make available to you an activity statement showing the
number of Hong Kong Offer Shares credited to your CCASS Investor Participant stock
account and the amount of refund monies (if any) credited to your designated bank
account.
(e) Refund of your application monies (if any) in respect of wholly and partially unsuccessful
applications and/or difference between the Offer Price and the maximum Offer Price per
Offer Share initially paid on application (including brokerage, SFC transaction levy,
AFRC transaction levy and the Stock Exchange trading fee but without interest) will be
credited to your designated bank account or the designated bank account of your broker
or custodian on Tuesday, July 11, 2023.
H. ADMISSION OF THE SHARES INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, the Shares and we comply
with the stock admission requirements of HKSCC, the Shares will be accepted as eligible securities by
HKSCC for deposit, clearance and settlement in CCASS with effect from the date of commencement
of dealings in the Shares or any other date HKSCC chooses. Settlement of transactions between
Exchange Participants (as defined in the Listing Rules) is required to take place in CCASS on the
second settlement day after any trading day.
All activities under CCASS are subject to the General Rules of CCASS and CCASS
Operational Procedures in effect from time to time.
Investors should seek the advice of their stockbroker or other professional adviser for details of
the settlement arrangement as such arrangements may affect their rights and interests.
All necessary arrangements have been made enabling the Shares to be admitted into CCASS.
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APPENDIX I ACCOUNTANT’S REPORT
The following is the text of a report set out on pages I-1 to I-2, received from the
Company’s reporting accountant, PricewaterhouseCoopers, Certified Public Accountants, Hong
Kong, for the purpose of incorporation in this prospectus. It is prepared and addressed to the
directors of the Company and to the Sole Sponsor pursuant to the requirements of HKSIR 200,
Accountants’ Reports on Historical Financial Information in Investment Circulars issued by the
Hong Kong Institute of Certified Public Accountants.
ACCOUNTANT’S REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF KEEP INC. AND CHINA INTERNATIONAL CAPITAL CORPORATION
HONG KONG SECURITIES LIMITED
Introduction
We report on the historical financial information of Keep Inc. (the “ Company”) and its
subsidiaries (together, the “ Group”) set out on pages I-3 to I-86, which comprises the consolidated
balance sheets as at December 31, 2019, 2020, 2021 and 2022, the company balance sheets as at
December 31, 2019, 2020, 2021 and 2022, and the consolidated income statements, the consolidated
statements of comprehensive loss, the consolidated statements of changes in deficit in equity and the
consolidated statements of cash flows for each of the years ended December 31, 2019, 2020, 2021 and
2022 (the “ Track Record Period ”) and a summary of significant accounting policies and other
explanatory information (together, the “ Historical Financial Information ”). The Historical Financial
Information set out on pages I-3 to I-86 forms an integral part of this report, which has been prepared
for inclusion in the prospectus of the Company dated June 30, 2023 (the “ Prospectus”) in connection
with the initial listing of shares of the Company on the Main Board of The Stock Exchange of Hong
Kong Limited.
Directors’ responsibility for the Historical Financial Information
The directors of the Company are responsible for the preparation of Historical Financial
Information that gives a true and fair view in accordance with the basis of preparation set out in Note
2.1 to the Historical Financial Information, and for such internal control as the directors determine is
necessary to enable the preparation of Historical Financial Information that is free from material
misstatement, whether due to fraud or error.
Reporting accountant’s responsibility
Our responsibility is to express an opinion on the Historical Financial Information and to report
our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment
Circular Reporting Engagements 200, Accountants’ Reports on Historical Financial Information in
Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA”).
This standard requires that we comply with ethical standards and plan and perform our work to obtain
reasonable assurance about whether the Historical Financial Information is free from material
misstatement.
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APPENDIX I ACCOUNTANT’S REPORT
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Historical Financial Information. The procedures selected depend on the reporting
accountant’s judgement, including the assessment of risks of material misstatement of the Historical
Financial Information, whether due to fraud or error. In making those risk assessments, the reporting
accountant considers internal control relevant to the entity’s preparation of Historical Financial
Information that gives a true and fair view in accordance with the basis of preparation set out in
Note 2.1 to the Historical Financial Information in order to design procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Our work also included evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the Historical Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purposes of the accountant’s
report, a true and fair view of the financial position of the Company as at December 31, 2019, 2020, 2021
and 2022 and the consolidated financial position of the Group as at December 31, 2019, 2020, 2021 and
2022 and of its consolidated financial performance and its consolidated cash flows for the Track Record
Period in accordance with the basis of preparation set out in Note 2.1 to the Historical Financial
Information.
Report on matters under the Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited (the “Listing Rules”) and the Companies (Winding Up and Miscellaneous
Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying Financial
Statements as defined on page I-3 have been made.
Dividends
We refer to note 28 to the Historical Financial Information which states that no dividends have
been paid by Keep Inc. in respect of the Track Record Period.
No statutory financial statements for the Company
No statutory financial statements have been prepared for the Company since its date of
incorporation.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong
June 30, 2023
I-2


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APPENDIX I ACCOUNTANT’S REPORT
I. HISTORICAL FINANCIAL INFORMATION OF THE GROUP
Preparation of Historical Financial Information
Set out below is the Historical Financial Information which forms an integral part of this
accountant’s report.
The financial statements of the Group for the Track Record Period, on which the Historical
Financial Information is based, were audited by PricewaterhouseCoopers in accordance with
International Standards on Auditing issued by the International Auditing and Assurance Standards
Board (“Underlying Financial Statements”).
The Historical Financial Information is presented in Renminbi (“ RMB”) and all values are
rounded to the nearest thousand (RMB’000) except when otherwise indicated.
I-3


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APPENDIX I ACCOUNTANT’S REPORT
CONSOLIDATED INCOME STATEMENTS
Year ended December 31,
2019 2020 2021 2022
Note RMB’000 RMB’000 RMB’000 RMB’000
Revenues .................................... 6 663,119 1,106,777 1,619,538 2,211,551
Cost of revenues ............................... 7 (390,493) (607,350) (942,910) (1,311,171)
Gross profit .................................. 272,626 499,427 676,628 900,380
Fulfillment expenses ............................ 7 (55,128) (92,411) (127,872) (201,586)
Selling and marketing expenses ................... 7 (295,785) (301,693) (956,220) (646,177)
Administrative expenses ......................... 7 (122,199) (68,977) (218,276) (245,614)
Research and development expenses ............... 7 (194,170) (167,920) (355,582) (536,877)
Other income ................................. 8 12,602 4,195 4,258 6,509
Other gains/(losses), net ......................... 9 9,520 (984) 8,981 (65,375)
Operating loss ................................ (372,534) (128,363) (968,083) (788,740)
Finance income ................................ 1 1 5,017 5,325 13,828 27,536
Finance expenses .............................. 1 1 (11,225) (5,769) (7,777) (7,313)
Finance (expenses)/income, net ................... (6,208) (444) 6,051 20,223
Fair value changes of convertible redeemable preferred
shares ..................................... 3 4 (356,303) (2,114,943) (1,946,205) 664,969
Loss before income tax ......................... (735,045) (2,243,750) (2,908,237) (103,548)
Income tax expense ............................ 1 3 — — — (1,003)
Loss for the year .............................. (735,045) (2,243,750) (2,908,237) (104,551)
Loss for the year attributable to:
Owners of the Company ......................... (728,979) (2,239,609) (2,908,237) (104,551)
Non-controlling interests ........................ (6,066) (4,141) — —
(735,045) (2,243,750) (2,908,237) (104,551)
Loss per share for the loss attributable to the
owners of the Company (expressed in RMB per
share) ..................................... 1 4
Basic loss per share ............................ (5.47) (16.56) (21.20) (0.76)
Diluted loss per share ........................... (5.47) (16.56) (21.20) (0.76)
I-4


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APPENDIX I ACCOUNTANT’S REPORT
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Year ended December 31,
2019 2020 2021 2022
Note RMB’000 RMB’000 RMB’000 RMB’000
Loss for the year ................................ (735,045) (2,243,750) (2,908,237) (104,551)
Other comprehensive income/(loss)
Items that will not be reclassified to profit or loss
Fair value change on convertible redeemable preferred
shares due to own credit risk ..................... 3 4 28,039 86,103 (97,242) (46,730)
Currency translation differences .................... (35,367) 269,198 150,991 (700,844)
Other comprehensive income/(loss) for the year, net
of tax ....................................... (7,328) 355,301 53,749 (747,574)
Total comprehensive loss for the year .............. (742,373) (1,888,449) (2,854,488) (852,125)
Total comprehensive loss for the year attributable to
Owners of the Company .......................... (736,307) (1,884,308) (2,854,488) (852,125)
Non-controlling interests .......................... (6,066) (4,141) — —
(742,373) (1,888,449) (2,854,488) (852,125)
I-5


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APPENDIX I ACCOUNTANT’S REPORT
CONSOLIDATED BALANCE SHEETS
As at December 31,
2019 2020 2021 2022
Note RMB’000 RMB’000 RMB’000 RMB’000
ASSETS
Non-current assets
Property and equipment ....................... 1 5 31,667 23,302 31,992 30,603
Right-of-use assets ........................... 1 6 125,783 97,164 98,913 90,659
Intangible assets ............................. 1 7 7,098 6,723 9,219 9,316
Other non-current assets ....................... 1 8 16,722 11,530 20,035 73,763
181,270 138,719 160,159 204,341
Current assets
Inventories ................................. 2 3 94,635 117,904 198,763 167,737
Accounts receivables ......................... 2 1 79,908 180,766 310,368 251,676
Prepayments and other current assets ............. 2 2 71,875 77,719 86,819 128,966
Financial assets at fair value through profit or loss . . 20 — 429,310 255,949 139,864
Short-term time deposits ....................... 2 4 — — 454,963 68,740
Cash and cash equivalents ..................... 2 4 563,914 2,342,713 1,653,517 1,672,217
810,332 3,148,412 2,960,379 2,429,200
Total assets ................................. 991,602 3,287,131 3,120,538 2,633,541
DEFICIT IN EQUITY
Deficit in equity attributable to owners of the Company
Share capital ................................ 2 5 4 0 4 2 4 7 6 1
Other reserves ............................... 2 6 17,442 365,893 555,142 (89,833)
Accumulated losses ........................... (2,167,994) (4,407,603) (7,315,840) (7,420,391)
Deficit in equity attributable to owners of the
Company ................................. (2,150,512) (4,041,668) (6,760,651) (7,510,163)
Non-controlling interests ...................... 4,870 — — —
Total deficit in equity ........................ (2,145,642) (4,041,668) (6,760,651) (7,510,163)
LIABILITIES
Non-current liabilities
Lease liabilities .............................. 1 6 110,178 80,057 72,820 59,069
Convertible redeemable preferred shares .......... 3 4 2,810,328 6,918,563 9,201,503 9,401,472
Other non-current liability ..................... — — — 16,048
2,920,506 6,998,620 9,274,323 9,476,589
Current liabilities
Accounts payables ........................... 3 0 46,305 58,534 141,007 154,095
Accrued expenses ............................ 3 1 88,450 127,516 186,399 244,537
Other current liabilities ........................ 3 1 13,119 30,554 63,918 65,301
Contract liabilities ............................ 3 2 38,918 80,227 86,959 84,104
Borrowings ................................. 3 3 — — 87,584 74,524
Lease liabilities .............................. 1 6 29,946 33,348 40,999 44,554
216,738 330,179 606,866 667,115
Total liabilities .............................. 3,137,244 7,328,799 9,881,189 10,143,704
Total deficit in equity and liabilities ............ 991,602 3,287,131 3,120,538 2,633,541
I-6


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APPENDIX I ACCOUNTANT’S REPORT
COMPANY BALANCE SHEETS
As at December 31,
2019 2020 2021 2022
Note RMB’000 RMB’000 RMB’000 RMB’000
ASSETS
Non-current assets
Investments in subsidiaries .................. 1 2 986,973 2,031,248 3,684,383 4,488,868
Intangible assets .......................... 6,876 6,041 5,601 5,749
993,849 2,037,289 3,689,984 4,494,617
Current assets
Prepayments and other current assets .......... 2 2 34,749 32,763 1,864 5,830
Financial assets at fair value through profit or
loss .................................. 2 0 — 368,659 255,029 139,864
Cash and cash equivalents .................. 2 4 490,841 1,370,066 330,181 74,760
525,590 1,771,488 587,074 220,454
Total assets .............................. 1,519,439 3,808,777 4,277,058 4,715,071
DEFICIT IN EQUITY
Deficit in equity attributable to owners of the Company
Share capital ............................. 2 5 4 0 4 2 4 7 6 1
Other reserves ............................ 2 6 (3,988) 300,584 438,257 48,523
Accumulated losses ........................ (1,297,554) (3,413,302) (5,375,404) (4,755,032)
Total deficit in equity ..................... (1,301,502) (3,112,676) (4,937,100) (4,706,448)
LIABILITIES
Non-current liabilities
Convertible redeemable preferred shares ....... 3 4 2,810,328 6,918,563 9,201,503 9,401,472
2,810,328 6,918,563 9,201,503 9,401,472
Current liabilities
Accrued expenses ......................... 3 1 10,613 2,890 10,492 16,426
Other current liabilities ..................... 3 1 — — 2,163 3,621
10,613 2,890 12,655 20,047
Total liabilities ........................... 2,820,941 6,921,453 9,214,158 9,421,519
Total deficit in equity and liabilities ......... 1,519,439 3,808,777 4,277,058 4,715,071
I-7


--- page 388 ---
APPENDIX I ACCOUNTANT’S REPORT
CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT IN EQUITY
Attributable to owners of the
Company
Share
capital
Other
reserves
Accumulated
losses Sub-Total
Non-controlling
interests Total
Note RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2019 ............................................... 4 0 12,478 (1,439,015) (1,426,497) 10,936 (1,415,561)
Loss for the year ......................................................... — — (728,979) (728,979) (6,066) (735,045)
Other comprehensive income/(loss)
Fair value change on convertible redeemable preferred shares due to own credit risk . . . 34 — 28,039 — 28,039 — 28,039
Currency translation differences ............................................ — (35,367) — (35,367) — (35,367)
Total comprehensive loss for the year ...................................... — (7,328) (728,979) (736,307) (6,066) (742,373)
Transactions with owners in their capacity as owners
Share-based compensation ................................................. 2 9 — 12,292 — 12,292 — 12,292
Total transactions with owners in their capacity as owners .................... — 12,292 — 12,292 — 12,292
Balance at December 31, 2019 ............................................. 40 17,442 (2,167,994) (2,150,512) 4,870 (2,145,642)
Balance at January 1, 2020 ............................................... 4 0 17,442 (2,167,994) (2,150,512) 4,870 (2,145,642)
Loss for the year ......................................................... — — (2,239,609) (2,239,609) (4,141) (2,243,750)
Other comprehensive income/(loss)
Fair value change on convertible redeemable preferred shares due to own credit risk . . . 34 — 86,103 — 86,103 — 86,103
Currency translation differences ............................................ — 269,198 — 269,198 — 269,198
Total comprehensive income/(loss) for the year .............................. — 355,301 (2,239,609) (1,884,308) (4,141) (1,888,449)
Transactions with owners in their capacity as owners
Issuance of ordinary shares ................................................ 2 ( 2 ) — — — —
Share-based compensation ................................................. 2 9 — 22,423 — 22,423 — 22,423
Transactions with non-controlling interests .................................... 2 7 — (29,271) — (29,271) (729) (30,000)
Total transactions with owners in their capacity as owners .................... 2 (6,850) — (6,848) (729) (7,577)
Balance at December 31, 2020 ............................................. 42 365,893 (4,407,603) (4,041,668) — (4,041,668)
I-8


--- page 389 ---
APPENDIX I ACCOUNTANT’S REPORT
CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT IN EQUITY (Continued)
Attributable to owners of the
Company
Note
Share
capital
Other
reserves
Accumulated
losses Total
RMB’000 RMB’000 RMB’000 RMB’000
Balance at January 1, 2021 .................................................................... 4 2 365,893 (4,407,603) (4,041,668)
Loss for the year .............................................................................. — — ( 2,908,237) (2,908,237)
Other comprehensive income/(loss)
Fair value change on convertible redeemable preferred shares due to own credit risk ........................ 3 4 — ( 97,242) — (97,242)
Currency translation differences .................................................................. — 150,991 — 150,991
Total comprehensive income/(loss) for the year .................................................... — 53,749 (2,908,237) (2,854,488)
Transactions with owners in their capacity as owners
Issuance of ordinary shares ...................................................................... 5 ( 5 ) — —
Share-based compensation ...................................................................... 2 9 — 135,505 — 135,505
Total transactions with owners in their capacity as owners .......................................... 5 135,500 — 135,505
Balance at December 31, 2021 .................................................................. 47 555,142 (7,315,840) (6,760,651)
Balance at January 1, 2022 .................................................................... 4 7 555,142 (7,315,840) (6,760,651)
Loss for the year .............................................................................. — — ( 104,551) (104,551)
Other comprehensive loss
Fair value change on convertible redeemable preferred shares due to own credit risk ........................ 3 4 — ( 46,730) — (46,730)
Currency translation differences .................................................................. — ( 700,844) — (700,844)
Total comprehensive loss for the year ............................................................ — (747,574) (104,551) (852,125)
Transactions with owners in their capacity as owners
Issuance of ordinary shares ...................................................................... 1 4 (14) — —
Share-based compensation ...................................................................... 2 9 — 102,613 — 102,613
Total transactions with owners in their capacity as owners .......................................... 14 102,599 — 102,613
Balance at December 31, 2022 .................................................................. 61 (89,833) (7,420,391) (7,510,163)
I-9


--- page 390 ---
APPENDIX I ACCOUNTANT’S REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
2019 2020 2021 2022
Note RMB’000 RMB’000 RMB’000 RMB’000
Cash flows from operating activities
Cash used in operations ................................ 3 5 (276,989) (70,822) (868,502) (454,980)
Income tax paid ...................................... — — — (1,003)
Net cash outflow from operating activities ............... (276,989) (70,822) (868,502) (455,983)
Cash flows from investing activities
Investments in financial assets at fair value through profit or
loss .............................................. 20 — (806,036) (1,148,240) (365,201)
Investment in a private company ......................... 1 8 — — — (15,000)
Proceeds from disposal of financial assets at fair value through
profit or loss ....................................... 20 241,448 355,904 1,322,277 487,827
Investments in short-term time deposits ................... (75,162) (156,101) (975,215) (236,287)
Proceeds from maturity of short-term time deposits and forward
c o n t r a c t s .......................................... 209,673 155,883 516,472 595,209
Purchase of property and equipment ...................... (35,887) (6,443) (19,887) (13,201)
Purchase of intangible assets ............................ (303) (770) (4,743) (6,455)
Interest income received ............................... 5,017 5,325 12,349 28,589
Payment for long-term naming rights and sponsorship fees .... — — — (16,048)
Proceeds from disposal of property and equipment .......... 5 7 8 5 8 1 1 8 4 2 5 8
Loans to related party ................................. — — (3,000) —
Repayment of loans to related parties ..................... — 3,900 3,000 —
Loan to a third party .................................. — — — (5,000)
Repayment from a third party ........................... — — — 5,000
Net cash inflow/(outflow) from investing activities ........ 345,364 (447,757) (296,803) 459,691
Cash flows from financing activities
Proceeds from bank borrowings ......................... — — 87,472 74,476
Repayment of borrowings .............................. (34,370) — — (87,472)
Bank borrowings interests paid .......................... — — (2,181) (2,312)
Proceeds from issuance of convertible redeemable preferred
shares ............................................ 490,360 2,382,202 478,869 —
Transactions cost on issuance of convertible redeemable
preferred shares .................................... (558) (11,069) (3,052) —
Payment for listing expenses ............................ — — (678) (3,526)
Transactions with non-controlling interests ................ — (30,000) — —
Repurchases of convertible redeemable preferred shares ...... — — (19,738) (2,229)
Payments for principal elements and related interest of
leases ............................................ 16 (47,151) (33,292) (43,364) (45,767)
Net cash inflow/(outflow) from financing activities ........ 408,281 2,307,841 497,328 (66,830)
Net increase/(decrease) in cash and cash equivalents ...... 476,656 1,789,262 (667,977) (63,122)
Cash and cash equivalents at the beginning of the year ....... 2 4 88,834 563,914 2,342,713 1,653,517
Effects of exchange rate changes on cash and cash
equivalents ........................................ (1,576) (10,463) (21,219) 81,822
Cash and cash equivalents at the end of the year .......... 2 4 563,914 2,342,713 1,653,517 1,672,217
Non-cash financing and investing activities
Receivables from convertible redeemable preferred shares
shareholders ....................................... 34,228 32,703 — —
Prepayments for property, equipment and intangible assets .... 9 6 3 4 1 7 1 4 8 (3,480)
Payables for purchase of property and equipment ........... — — 1,731 191
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--- page 391 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1 General information and reorganization
1.1 General information
Keep Inc. (the “ Company”) was incorporated in the Cayman Islands on April 21, 2015 as an
exempted company with limited liability. The registered office is at the offices of ICS Corporate
Services (Cayman) Limited, 3-212 Governors Square, 23 Lime TreeBay Avenue, P.O. Box 30746,
Seven Mile Beach, Grand Cayman KY1-1203, Cayman Islands.
The Company is an investment holding company. The Company and its subsidiaries, including
structured entities (collectively, the “Group”), is primarily engaged in operating an integrated online
and offline platform for fitness service and online retail of fitness related products in the People’s
Republic of China (“the PRC”).
Mr. Ning Wang is an ultimate controlling shareholder of the Company as at the date of the
report.
1.2 History and reorganization of the Group
Prior to the incorporation of the Company and the completion of the reorganization (the
“Reorganization”), as explained below, the Group carried out its business operations through Beijing
Calorie Technology Co., Ltd. (“ BJ Tech ”) in the “PRC”, which was held by Mr. Ning Wang (one of
the founders, the chairman of the board of directors and chief executive officer of the Group), other
three founders and an angel investor, accounting for 58.6%, 19.6% and 21.8% of equity interests,
respectively.
On April 21, 2015, the Company was incorporated in the Cayman Islands. The authorized share
capital of the Company was USD 50,000, consisting of 50,000,000 ordinary shares (1,000,000,000
authorized ordinary shares after the share split in March 2021. See Note 25) of USD 0.001 par value
(USD 0.00005 par value after the share split in March 2021) each, of which 9,949,910 ordinary shares
were issued (198,998,200 issued ordinary shares after the share split) as at December 31, 2022. The
Company was controlled by Persistent Courage Holdings Limited, a company duly incorporated and
validly existing under the laws of the British Virgin Islands and beneficially wholly-owned by
Mr. Ning Wang.
On May 7, 2015, Calorie Technology HK Company Limited (“ Calorie HK ”) was established
by the Company, as a wholly-owned subsidiary of the Company located in Hong Kong.
On July 7, 2015, Beijing Calorie Information Technology Co., Ltd. (“ BJ IT ”) was established
by Calorie HK, as a wholly foreign-owned enterprise (the “ WFOE”) of the Company located in the
PRC.
BJ Tech completed the first round of onshore financing in December 2014. To facilitate
offshore financing, an offshore corporate structure was formed in July 2015.
In July 2015, BJ IT obtained control over BJ Tech by entering a series of contractual
arrangements (“Contractual Arrangements ”). The Company concurrently issued ordinary shares to
shareholders of BJ Tech or their affiliates, substantially in proportion to their previous respective
equity interests in BJ Tech immediately prior to the Reorganization.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
1 General information and reorganization (continued)
1.2 History and reorganization of the Group (continued)
The Reorganization has been accounted for as a recapitalization among entities under common
control since the same controlling shareholder controlled these entities immediately before and after
the Reorganization. The consolidation of the Company and its subsidiaries has been accounted for at
historical cost and the financial statements are prepared as if the corporate structure of the Group had
been in existence since inception of the Group.
Nevertheless, the Contractual Arrangements may not be as effective as direct legal ownership
in providing the Group with direct control over the structured entity. Uncertainties presented by the
PRC legal system could impede the Group’s beneficiary rights of the results, assets and liabilities of
the structured entity. The directors of the Company, based on the advice of its legal counsel, consider
that the Contractual Arrangements among BJ IT, BJ Tech and its owners are in compliance with the
relevant PRC laws and regulations and are legally binding and enforceable.
All of these operating companies are treated as controlled structured entities of the Company
and their financial statements have also been consolidated by the Company. See details in Note 12.
2 Summary of significant accounting policies
This note provides a list of the significant accounting policies applied in the preparation of the
Historical Financial Information. These policies have been consistently applied throughout the Track
Record Period, unless otherwise stated.
2.1 Basis of preparation
The Historical Financial Information of the Group have been prepared in accordance with
International Financial Reporting Standards (“ IFRSs”) and interpretations issued by International
Accounting Standards Board (“IASB”) applicable to companies reporting under IFRSs.
The Historical Financial Information has been prepared on a historical cost basis, except for
certain financial assets and liabilities measured at fair value.
The preparation of the Historical Financial Information in conformity with IFRSs requires the
use of certain critical accounting estimates. It also requires management to exercise its judgement in
the process of applying the Group’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the Historical
Financial Information are disclosed in Note 4.
The Historical Financial Information has been prepared based on the consolidated financial
statements of the Group. Inter-company transactions, balances and unrealized gains/losses on
transactions between group companies are eliminated on consolidation.
As at December 31, 2019, 2020, 2021 and 2022, the Group was in a net liability position of
RMB2.1 billion, RMB4.0 billion, RMB6.8 billion and RMB7.5 billion, respectively. The Group
assesses its liquidity by its ability to generate cash from operating activities and attract additional
capital and/or finance funding. Historically, the Group has relied principally on both operational
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.1 Basis of preparation (continued)
sources of cash and non-operational sources of financing from investors (e.g. convertible redeemable
preferred shares) to fund its operations and business development. The Group’s ability to continue as a
going concern is dependent on management’s ability to successfully execute its business plan, which
includes increasing revenues while controlling operating expenses, as well as, generating operational
cash flows and continuing to gain support from existing and new investors.
Based on the above considerations, the Group’s historical performance and management’s
operating and financing plans, the Group believes the cash and cash equivalents, short-term time
deposits, financial assets at fair value through profit or loss and the operating and financing cash flows
are sufficient to meet the cash requirements to fund planned operations and other obligations for at
least the next twelve months after December 31, 2019, 2020, 2021 and 2022. Therefore, the Historical
Financial Information has been prepared on a going concern basis, which contemplates the realization
of assets and settlement of liabilities in the normal course of business.
2.1.1 Change in accounting policy and disclosures
All effective standards, amendments to standards and interpretations, which are mandatorily
effective for the financial year beginning on January 1, 2022, are consistently applied to the Group for
the Track Record Period.
(a) New standards and interpretations not yet adopted
Certain new accounting standards, amendments and interpretations have been issued but are not
yet effective and have not been early adopted by the Group during the Track Record Period. These
standards are not expected to have a material impact on the Group in the current or future reporting
periods and on foreseeable future transactions.
Standards and amendments
Effective for annual
years beginning on
or after
Amendments to IFRS 10 and IAS 28, “Sale or Contribution of Assets between an Investor
and its Associate or Joint Venture” ............................................. T ob e determined
IFRS 17, “Insurance Contracts” ................................................. January 1, 2023
Amendments to IAS 1 and IFRS Practice Statement 2—Disclosure of Accounting Policies . . January 1, 2023
Amendments to IAS 8—Definition of Accounting Estimates .......................... January 1, 2023
Amendments to IAS 12—Deferred tax related to assets and Liabilities arising from a Single
Transaction ............................................................... January 1, 2023
Amendments to IAS 1, “Classification of Liabilities as Current or Non-current” ........... January 1, 2024
Amendments to IFRS 16—Leases liability in a sale and leaseback ...................... January 1, 2024
Amendments to IAS 1—Non-current liabilities with covenants ........................ January 1, 2024
The Group has already commenced an assessment of the impact of these new or revised
standards and amendments. Management expects that “IAS 1 (Amendment) ‘Classification of
liabilities as current or non-current’”, after its adoption on January 1, 2024, may cause a
reclassification of “Convertible redeemable preferred shares” from non-current liabilities to current
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.1 Basis of preparation (continued)
2.1.1 Change in accounting policy and disclosures (continued)
(a) New standards and interpretations not yet adopted—continued
liabilities, as the preferred shares may be converted into ordinary shares at the option of the preferred
shareholders at any time. Except for this, no significant impact on the financial performance and
positions of the Group is expected when they become effective.
2.2 Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control.
The Group controls an entity where the Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power to direct the
activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred
to the Group. They are deconsolidated from the date that control ceases.
Inter-company transactions, balances and unrealized gains on transactions between group
companies are eliminated. Unrealized losses are also eliminated unless the transaction provides
evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the
consolidated income statements, consolidated statements of changes in deficit in equity and
consolidated balance sheets respectively.
2.2.1 Subsidiaries controlled through Contractual Arrangements
In order to comply with the PRC laws and regulations which prohibit or restrict foreign control
of companies involved in provision of internet content and other restricted businesses, the Group
operates its business operations within these areas in the PRC through a series of Contractual
Arrangements entered into among the Company, its wholly-owned subsidiaries, and certain domestic
entities that legally owned by certain management members of the Group (“ Nominee Shareholders”)
authorized by the Group. The Contractual Arrangements include consulting and services agreement,
option agreements, share pledge agreements, business cooperation agreement, spousal consents and
powers of attorney, which enable the Group to:
Š govern the financial and operating policies of the PRC operating entities;
Š exercise equity holder voting rights of the PRC operating entities;
Š receive substantially all of the economic interest returns generated by the PRC operating
entities in consideration for the technical support, consulting and other services provided
exclusively by the WFOE;
Š obtain an irrevocable and exclusive right to purchase part or all of the equity interests in
the PRC operating entities at any time and from time to time, at the minimum
consideration permitted by the relevant law in China at the time of transfer; and
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.2 Subsidiaries (continued)
2.2.1 Subsidiaries controlled through Contractual Arrangements (continued)
Š obtain a pledge over all of its equity interests from its respective Nominee Shareholders as
collateral for all of the PRC operating entities’ payments due to the Group to secure
performance of entities’ obligation under the Contractual Arrangements.
Accordingly, the Group has rights to control these entities.
2.2.2 Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of
control as transactions with equity owners of the Group. A change in ownership interest results in an
adjustment between the carrying amounts of the controlling and non-controlling interests to reflect
their relative interests in the subsidiary. Any difference between the amount of the adjustment to
non-controlling interests and any consideration paid or received is recognized in a separate reserve
within equity attributable to owners of the Group.
2.2.3 Separate financial statements
Investments in subsidiaries are accounted for at cost less impairment. Cost includes directly
attributable costs of investment. The results of subsidiaries are accounted for by the Company on the
basis of dividend received and receivable.
Impairment testing of the investments in subsidiaries is required upon receiving a dividend
from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the
period the dividend is declared or if the carrying amount of the investment in the separate financial
statements exceeds the carrying amount in the consolidated financial statements of the investee’s net
assets including goodwill.
2.3 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision-maker (“ CODM”). The CODM, who is responsible for allocating
resources and assessing performance of the operating segments, has been identified as the Chief
Executive Officer of the Group.
2.4 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial information of each of the Group’s entities are measured using
the currency of the primary economic environment in which the entity operates (the “ functional
currency”). The functional currency of the Company and its overseas subsidiaries is USD. The
Company’s primary subsidiaries and structured entities are incorporated in the PRC and for these
subsidiaries and structured entities, the RMB is the functional currency. The Group’s presentation
currency is RMB.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.4 Foreign currency translation (continued)
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange
rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at period-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognized in the consolidated income statements on a
net basis within other gains/(losses), net.
Non-monetary items that are measured at fair value in a foreign currency are translated using
the exchange rates at the date when the fair value was determined. Translation differences on assets
and liabilities carried at fair value are reported as part of the fair value gain or loss. For example,
translation differences on non-monetary assets and liabilities such as equities held at fair value through
profit or loss (“ FVPL”) are recognized in profit or loss as part of the fair value gain or loss and
translation differences on non-monetary assets such as equities classified as fair value through other
comprehensive income (“FVOCI”) are recognized in other comprehensive income (“ OCI”).
(c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a
hyper-inflationary economy) that have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
Š assets and liabilities for each consolidated balance sheets presented are translated at the
closing rate at the date of that consolidated balance sheets;
Š income and expenses for each consolidated income statement and consolidated statement
of comprehensive loss are translated at average exchange rates (unless this average is not a
reasonable approximation of the cumulative effect of rates prevailing on the transaction
dates, in which case income and expenses are translated at the rate on the dates of the
transactions); and
Š all resulting currency translation differences are recognized in other comprehensive
income or loss.
2.5 Property and equipment
Property and equipment are stated at historical cost less accumulated depreciation and
accumulated impairment losses (if any). Historical cost includes expenditures that are directly
attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset,
as appropriate, only when it is probable that future economic benefits associated with the item will
flow to the Group and the cost of the item can be measured reliably. The carrying amount of any
component accounted for as a separate asset is derecognized when replaced. All other repairs and
maintenance are charged to profit or loss during the reporting period in which they are incurred.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.5 Property and equipment (continued)
Depreciation on property and equipment is calculated using the straight-line method to allocate
their cost, net of residual values, over their estimated useful lives, as follows:
Š Electronic equipment 3-5 years
Š Office and fitness equipment 4-5 years
Š Leasehold improvements the shorter of the term of the leases or the estimated useful
lives of the assets
The residual values and useful lives of property and equipment are reviewed, and adjusted if
appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount (Note 2.7).
Gains and losses on disposals are determined by comparing the proceeds with the carrying
amount and are recognized within other gains/(losses), net in the consolidated income statements.
2.6 Intangible assets
(a) Domain names and software
Separately acquired domain names and software are initially recognized and measured at
historical cost. They have a finite useful life and are subsequently carried at cost less accumulated
amortisation and impairment losses (if any).
Costs associated with maintaining software programs are recognized as an expense as incurred.
Development costs that are directly attributable to the design and testing of identifiable and unique
software products controlled by the Group are recognized as intangible assets, where the following
criteria are met:
Š it is technically feasible to complete the software so that it will be available for use
Š management intends to complete the software and use or sell it
Š there is an ability to use or sell the software
Š it can be demonstrated how the software will generate probable future economic benefits
Š adequate technical, financial and other resources to complete the development and to use
or sell the software are available, and
Š the expenditure attributable to the software during its development can be reliably
measured.
Directly attributable costs that are capitalized as part of the software include employee costs
and an appropriate portion of relevant overheads.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.6 Intangible assets (continued)
(a) Domain names and software (continued)
Capitalized development costs are recorded as intangible assets and amortized from the point at
which the asset is ready for use.
(b) Research and development
Research expenditures are recognized as an expense as incurred. Costs incurred on
development projects are capitalized as intangible assets when recognition criteria are met, including
(a) it is technically feasible to complete the software so that it will be available for use;
(b) management intends to complete the software and use or sell it; (c) there is an ability to use or sell
the software; (d) it can be demonstrated how the software will generate probable future economic
benefits; (e) adequate technical, financial and other resources to complete the development and to use
or sell the software are available; and (f) the expenditure attributable to the software during its
development can be reliably measured. Other development costs that do not meet those criteria are
expensed as incurred. There were no development costs meeting these criteria and capitalized as
intangible assets during the Track Record Period.
(c) Amortisation methods and periods
Length of estimated useful life is determined to be the shorter of the period of contractual rights
or estimated period during which such intangible assets can bring economic benefits to the Group.
The Group amortizes intangible assets with a finite useful life using the straight-line method
over the following periods:
Domain name 20 years The period of effective
registration during which such
domain name can bring
economic benefits
Software 1-3 years Shorter of the period of
contractual rights or estimated
period during which such
software can bring economic
benefits
2.7 Impairment of non-financial assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they
might be impaired. Other assets are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is
recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of the cash inflows from other assets or groups
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.7 Impairment of non-financial assets (continued)
of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment
are reviewed for possible reversal of the impairment at the end of each reporting period.
2.8 Investments and other financial assets
(a) Classification
The Group classifies its financial assets in the following measurement categories:
Š those to be measured at fair value (either through OCI or through profit or loss); and
Š those to be measured at amortized cost.
The classification depends on the entity’s business model for managing the financial assets and
the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or
OCI. For investments in debt instruments, this will depend on the business model in which the
investment is held. For investments in equity instruments that are not held for trading, this will depend
on whether the Group has made an irrevocable election at the time of initial recognition to account for
the equity investment at FVOCI.
The Group reclassifies debt investments when and only when its business model for managing
those assets changes.
See Note 19 for details of each type of financial assets.
(b) Recognition and derecognition
Purchases and sales of financial assets are recognized on trade date, being the date on which the
Group commits to purchase or sell the asset. Financial assets are derecognized when the rights to
receive cash flows from the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
(c) Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss, transaction costs that are directly attributable to
the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are
immediately expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining
whether their cash flows are solely payment of principal and interest.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.8 Investments and other financial assets (continued)
(c) Measurement (continued)
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for
managing the asset and the cash flow characteristics of the asset. There are three measurement
categories into which the Group classifies its debt instruments:
Š Amortized cost: Assets that are held for collection of contractual cash flows where those
cash flows represent solely payments of principal and interest are measured at amortized
cost. Interest income from these financial assets is included in finance income using the
effective interest rate method. Any gain or loss arising on derecognition is recognized
directly in profit or loss and presented in other gains/(losses), net together with foreign
exchange gains/(losses). Impairment losses are presented as separate line item in the
consolidated income statements.
Š FVOCI: Assets that are held for collection of contractual cash flows and for selling the
financial assets, where the assets’ cash flows represent solely payments of principal and
interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI,
except for the recognition of impairment gains or losses, interest income and foreign
exchange gains and losses, which are recognized in profit or loss. When the financial asset is
derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from
equity to profit or loss and recognized in other gains/(losses), net. Interest income from these
financial assets is included in finance income using the effective interest rate method.
Foreign exchange gains and losses are presented in other gains/(losses), net and impairment
expenses are presented as separate line item in the consolidated income statements.
Š FVPL: Assets that do not meet the criteria for amortized cost or FVOCI are measured at
FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is
recognized in profit or loss and presented net within other gains/(losses), net in the period
in which it arises.
(d) Impairment
While cash and cash equivalents, short-term time deposits with original maturities over three
months but less than one year are also subject to the impairment requirements of IFRS 9, the identified
impairment loss was immaterial.
The Group assesses on a forward-looking basis the expected credit loss associated with its debt
instruments carried at amortized cost. The impairment methodology applied depends on whether there
has been a significant increase in credit risk.
For accounts receivables, the Group applies the simplified approach permitted by IFRS 9,
which requires lifetime expected credit losses to be recognized from initial recognition of the
receivables, see Note 3.1 for details.
Impairment of other receivables that are included in prepayments and other current assets are
measured as either 12-month expected credit losses or lifetime expected credit loss, depending on
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.8 Investments and other financial assets (continued)
(d) Impairment (continued)
whether there has been a significant increase in credit risk since initial recognition. If a significant
increase in credit risk of a receivable has occurred since initial recognition, then impairment is
measured as lifetime expected credit losses.
2.9 Inventories
Inventories are stated at the lower of cost or net realizable value. Costs are assigned to
individual items of inventories on the basis of weighted average costs. Costs of purchased inventories
are determined after deducting rebates and discounts. Net realizable value is the estimated selling price
in the ordinary course of business less the estimated costs of completion and the estimated costs
necessary to make the sale.
2.10 Accounts receivables
Accounts receivables are primarily amounts due from customers for goods sold or services
performed in the ordinary course of business. They are generally due for settlement within one year (or
in the normal operating cycle of the business if longer) and therefore all classified as current assets.
Accounts receivables are recognized initially at the amount of consideration that is
unconditional, unless they contain significant financing components when they are recognized at fair
value. The Group holds the accounts receivables with the objective of collecting the contractual cash
flows and therefore measures them subsequently at amortized cost using the effective interest method,
less loss allowance. See Note 21 for further information about the Group’s accounting for accounts
receivables, Note 22 for further information about other receivables and Note 2.8(d) for a description
of the Group’s impairment policies.
2.11 Cash and bank balance
For the purpose of presentation in the statements of cash flows, cash and cash equivalents
include cash in hand, deposits held at call with banks, highly liquid investments placed in banks with
original maturities of three months or less, cash held at third party payment platforms that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in
value. Time deposits (with original maturities of three months or less) with restriction on use held at
bank were classified as cash and cash equivalents as long as the restrictions did not change the nature
of the cash.
All time deposits held at bank with original maturities over three months and less than one year
with corresponding interest receivables were classified as short-term time deposits.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.12 Share capital
Ordinary shares are classified as equity.
The repurchase of ordinary shares held by certain shareholder is measured at fair value of
ordinary shares and debited to share capital and other reserves accordingly. The difference between fair
value of ordinary shares and the repurchase price was recognized as profit or loss.
2.13 Accounts payables
Accounts payables represent liabilities for goods and services provided to the Group prior to the
end of financial year which are unpaid. The amounts are unsecured and are generally paid within three
months of invoice date. Accounts payables are presented as current liabilities unless payment is not
due within 12 months after the reporting period. They are recognized initially at their fair value and
subsequently measured at amortized cost using the effective interest method.
2.14 Convertible redeemable preferred shares (“Preferred Shares”)
Preferred Shares issued by the Company are redeemable at the option of the holder upon
occurrence of certain events. These instruments can also be converted into ordinary shares of the
Company at any time at the option of the holders, or automatically upon occurrence of an initial public
offering of the Company. For details, refer to Note 34.
The Group designated the Preferred Shares as financial liabilities at fair value through profit or
loss. They are initially recognized at fair value. Any directly attributable transaction costs are
recognized in profit or loss. Fair value changes relating to market risk are recognized in profit or loss,
while, the component of fair value changes relating to the Company’s own credit risk is recognized in
OCI. Amounts recorded in OCI related to credit risk are not subject to recycling in profit or loss, but
are transferred to accumulated losses when realized.
The Preferred Shares were classified as non-current liabilities unless the Preferred Shares’
holders can demand the Company to redeem the Preferred Shares within 12 months after the end of the
reporting period.
2.15 Borrowings
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings
are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction
costs) and the redemption amount is recognized in profit or loss over the period of the borrowings
using the effective interest method. Borrowings costs are expensed in the period in which they are
incurred.
Borrowings are removed from the consolidated balance sheets when the obligation specified in
the contract is discharged, canceled or expired. The difference between the carrying amount of a
financial liability that has been extinguished or transferred to another party and the consideration paid,
including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss as
finance expenses.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.15 Borrowings (continued)
Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the reporting period.
2.16 Current and deferred income tax
The income tax expense for the period is the tax payable on the current period’s taxable income
based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences and to unused tax losses.
Current income tax
The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the end of the reporting period in the countries where the Company, its
subsidiaries and structured entities operate and generate taxable income. Management periodically
evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is
subject to interpretation and considers whether it is probable that a taxation authority will accept an
uncertain tax treatment. The Group measures its tax balances either based on the most likely amount or
the expected value, depending on which method provides a better prediction of the resolution of the
uncertainty.
Deferred income tax
Deferred income tax is provided in full, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated
financial statements. Deferred income tax is also not accounted for if it arises from initial recognition
of an asset or liability in a transaction other than a business combination that, at the time of the
transaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting
period and are expected to apply when the related deferred tax assets is realized or the deferred income
tax liabilities is settled.
Deferred tax assets are recognized only if it is probable that future taxable amounts will be
available to utilize those temporary differences and losses.
Deferred tax liabilities and assets are not recognized for temporary differences between the
carrying amount and tax bases of investments in foreign operations where the Group is able to control
the timing of the reversal of the temporary differences and it is probable that the differences will not
reverse in the foreseeable future.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset
current tax assets and liabilities and where the deferred tax balances relate to the same taxation
authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right
to offset and intends either to settle on a net basis, or to realize the asset and settle the liability
simultaneously.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.16 Current and deferred income tax (continued)
Deferred income tax (continued)
Current and deferred tax are recognized in profit or loss, except to the extent that they relate to
items recognized in OCI or directly in equity. In this case, the tax is recognized in OCI or directly in
equity, respectively.
Tax incentives
Companies within the Group may be entitled to claim special tax deductions in relation to
qualifying expenditure. The Group accounts for such allowances as tax credits, which means that the
allowance reduces income tax payable and current tax expense. A deferred tax asset is recognized for
unclaimed tax credits that are carried forward as deferred tax assets.
2.17 Employee benefits
(i) Short-term obligations
Liabilities for wages, salaries, bonuses and other allowances that are expected to be settled
wholly within 12 months after the end of the period in which the employees render the related service
are recognized in respect of employees’ services up to the end of the reporting period and are measured
at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as
current employee benefit obligations, which are included in accrued expenses in the consolidated
balance sheets.
(ii) Pension obligations
Full-time employees in the PRC are covered by various government-sponsored defined
contribution pension plans under which the employees are entitled to a monthly pension based on
certain formulas. The relevant government agencies are responsible for the pension liability to these
retired employees. The Group contributes on a monthly basis to these pension plans. Under these
plans, the Group has no further payment obligation for post-retirement benefits beyond the
contributions made. Contributions to these plans are expensed as incurred.
(iii) Housing funds, medical insurances and other social insurances
Employees of the Group in the PRC are entitled to participate in various government supervised
housing funds, medical insurances and other social insurance plan. The Group contributes on a
monthly basis to these funds based on certain percentages of the salaries of the employees, subject to
certain ceiling. The Group’s liability in respect of these funds is limited to the contributions payable in
each year. Contributions to the housing funds, medical insurances and other social insurances are
expensed as incurred.
(iv) Bonus entitlements
The expected cost of bonus payments is recognized as a liability when the Group has a present
contractual or constructive obligation as a result of services rendered by employees and a reliable
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.17 Employee benefits (continued)
(iv) Bonus entitlements (continued)
estimate of the obligation can be made. Liabilities for bonus plans are expected to be settled within 1
year and measured at the amounts expected paid when they are settled.
(v) Termination benefits
Termination benefits are payable when employment is terminated by the Group before the
normal retirement date, or when an employee accepts voluntary redundancy in exchange for these
benefits. The Group recognizes termination benefits at the earlier of the following dates: (a) when the
Group can no longer withdraw the offer of those benefits; and (b) when the Group recognizes costs for
a restructuring that is within the scope of IAS 37—Provisions, Contingent Liabilities and Contingent
Assets (“IAS 37 ”) and involves the payment of terminations benefits. In the case of an offer made to
encourage voluntary redundancy, the termination benefits are measured based on the number of
employees expected to accept the offer. Benefits falling due more than 12 months after the end of the
reporting period are discounted to present value.
2.18 Share-based compensation
The Group operates two Share Incentive Plan (the “ ESOP Plans ”), under which it receives
services from employees or non-employees in exchange for equity instruments of the Company.
The fair value of options granted under the ESOP Plans is recognized as share-based
compensation over the requisite service period, with a corresponding increase in equity. The total
amount to be expensed is determined by reference to the fair value of the options granted to employees
on grant date by using binomial option-pricing models:
Š including any market performance conditions;
Š excluding the impact of any service and non-market performance vesting conditions; and
Š including the impact of any non-vesting conditions.
The total expense is recognized over the vesting period, which is the period over which all of
the specified vesting conditions are to be satisfied.
The Group recognizes share-based compensation expenses in its consolidated income
statements based on awards ultimately expected to vest, after considering estimated forfeitures of the
Group. The number of share options granted expected to vest has been reduced to reflect historical
experience of forfeiture of certain percentage of options granted prior to completion of vesting period
and accordingly the share option expense has been adjusted.
2.19 Revenue recognition
The Group primarily derives revenue from (1) sales of self-branded fitness products,
(2) membership subscription service and online paid content service, and (3) advertising service. The
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.19 Revenue recognition (continued)
Group recognizes revenue when or as the control of the promised goods or services is transferred to a
customer, net of value-added taxes (“ VAT”), rebates and certain sales incentives. If control of the
services transfers over time, revenue is recognized over the period of the contract by reference to the
progress towards complete satisfaction of that performance obligation. Otherwise, revenue is
recognized at a point in time when the customer obtains control of the goods and services.
Contracts with customers may include multiple performance obligations. For such
arrangements, the Group allocates transaction price to each performance obligation based on its
relative standalone selling price. The Group generally determines standalone selling prices based on
the prices charged to customers. If the standalone selling price is not directly observable, it is estimated
using expected cost plus a margin, depending on the availability of observable information.
Assumptions and estimations have been made in estimating the relative selling price of each distinct
performance obligation, and changes in judgments on these assumptions and estimates may impact the
revenue recognition.
2.19.1 The accounting policy for the Group’s principal revenue sources
(a) Sales of self-branded fitness products
The Group derives revenue from sale of self-branded fitness products, including bikes,
wristbands, smart scale and treadmills, and complementary fitness products such as fitness gears,
apparels and fitness food, including delivery services. The Group’s revenue are primarily derived from
(i) sales of the Group’s products to end customers directly through the Group’s online stores run on
third party’s ecommerce platforms and through the online platform operated by the Group and (ii) sales
of the Group’s products to third-party wholesale channels who then sell to end customers.
(i) Sales of the Group’s products to end customers directly through the Group’s online stores
run on third party’s ecommerce platforms and through the online platform operated by the Group.
The Group sets up online stores on third party’s ecommerce platforms to sell the Group’s
products to end customers. The platforms provide services to the Group to support the operations of the
online stores including processing sales orders and collecting cash consideration from end customers.
The platforms charge the Group service fees based on the Group’s sales through these online stores.
The Group enters into sales contracts directly with the end customers. The platforms do not take
control of the goods and have no sales contract with end customers. The Group is responsible for
selling and fulfilling all obligations according to its sales contracts with end customers, including
delivering products and providing customer support. Therefore, the Group determines that the end
customers are the Group’s customers. The sales contracts with end customers usually include a
customer’s right to return products within 7 days after receipt of goods.
The Group identifies its performance obligation to end customers as to transfer the control of
the ordered products to end customers. Contracts with customers may include multiple performance
obligations if there is a need to split one customer order into multiple deliveries. Under these
circumstances, transaction prices will be allocated to different performance obligations based on
I-26


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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.19 Revenue recognition (continued)
2.19.1 The accounting policy for the Group’s principal revenue sources (continued)
(a) Sales of self-branded fitness products—continued
relative standalone selling prices. Sales from the end customers through the Group’s online platform
are prepaid and recorded as contract liabilities. The Group recognizes revenue from sales to end
customers upon delivery of the product to end customers in an amount equal to the contract sales
prices less estimated sales allowances for sales returns and sales incentives.
(ii) Sales of the Group’s products to third-party wholesale channels who then sell to end
customers
The third-party wholesale channels purchase products from the Group and then resell the
products to end customers. Subject to the underlying agreements with the wholesale channels, there are
mainly two types of arrangements with wholesale channels. Under type I arrangements, the wholesale
channels take control of the products upon delivery of the products to the wholesale channels’
warehouses and accepted by the wholesale channels. Under type II arrangements, the wholesale
channels take control of the products when orders are placed by end customers and the products are
subsequently delivered out of wholesale channels’ warehouse to end customers. The wholesale
channels are entitled to rights of return and price protection rebates. After taking control of the
products, the wholesale channels are responsible for selling and fulfilling all obligations in their sales
contracts with end customers, including delivering the products and providing customer support.
Therefore, the Group determines that the wholesale channels are the Group’s customers. Under the
distribution agreement, the Group has a sale contract with their wholesale channels and has no sales
contract with the end customers.
Sales to the Group’s wholesale channels are on credit terms which is usually less than three
months. The Group recognizes revenue and receivables from sales to the wholesale channels upon
transferring the control of the products to the wholesale channels in an amount equal to the contract
sales prices less estimated sales allowances for sales returns and price protection rebates.
The Group provides price protection rebates to certain wholesale channels to effectively
compensate the wholesale channels when the wholesale channels offer discount to end customers,
which are accounted for as variable consideration. The Group estimates these amounts based on the
expected amount to be provided to the third-party wholesale channels considering the contracted rebate
rates and estimated sales volume based on historical pattern, and account for it as a reduction of the
transaction price.
(b) Membership subscription and online paid content service
The Group’s membership subscriptions provide unlimited access to content on its online
platform of live streaming classes and on-demand fitness classes. The contract period for the
membership subscription ranges from one month to one year. All membership subscriptions are
non-refundable. The Group has one stand ready obligation to provide its subscribing members with
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.19 Revenue recognition (continued)
2.19.1 The accounting policy for the Group’s principal revenue sources (continued)
(b) Membership subscription and online paid content service—continued
access to content on its online platform, fitness classes and related membership benefits throughout the
subscription period. Therefore, revenue is recognized ratably over the contract period as the
membership subscription services are delivered. The Group collects membership subscription in
advance and records it as contract liabilities.
Online paid content service primarily includes the virtual sports events service. The Groups
arranges virtual sports events on its own platform. Revenue is generated from event entry fees charged
to event participants. Entry fees are paid in advance and non-refundable after the event participants
complete the events or after the end of the virtual sports event. The performance obligation is satisfied
over the service period, as the services are delivered.
(c) Advertising services
Advertising revenue is derived from online advertising, most of which is in the form of display
advertisement. Display advertising arrangements allow customers, primarily advertising agencies, to
place advertisements on particular areas of the Group’s online platform in particular formats and over
particular periods of time. The Group recognizes revenue from advertising services ratably over the
periods during which the advertising services are provided.
Certain customers may receive rebates, which are accounted for as variable consideration. The
Group estimates rebates based on expected revenue volume with reference to their historical results
and account for such as a reduction of revenue.
2.19.2 Contract balances
When either party to a customer contract has performed, the Group presents the contract in the
consolidated balance sheets as a contract asset or a contract liability, depending on the relationship
between the Group’s performance and the customer’s payment. Contract balances include accounts
receivables and contract liabilities.
A receivable is recorded when the Group has an unconditional right to consideration. A right to
consideration is unconditional if only the passage of time is required before payment of the
consideration is due.
Payment terms and conditions vary by contract and service type. A contract liability is the
Group’s obligation to transfer goods or services to a customer for which the Group has received
consideration from the customer.
2.19.3 Practical expedients and exemptions
The Group has elected to use the practical expedient to not disclose the remaining performance
obligations for contracts that have durations of one year or less, as substantially all of the Group’s
contracts have duration of one year or less.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.19 Revenue recognition (continued)
2.19.3 Practical expedients and exemptions (continued)
The revenue standard requires the Group to recognize an asset for the incremental costs of
obtaining a contract with a customer if the benefit of those costs is expected to be longer than one year.
The Group has determined that sales commission for sales personnel meet the definition of incremental
costs of obtaining a contract. The Group generally expenses sales commissions when incurred because
the amortisation period is generally one year or less. These costs are recorded within selling and
marketing expenses.
2.19.4 Financing components
The Group does not expect to have any contracts where the period between the transfer of the
promised goods or services to the customer and payment by the customer exceeds one year. As a
consequence, the Group has applied the practical expedient of not to adjust any of the transaction
prices for the time value of money.
2.20 Loss per share
Basic loss per share is calculated by dividing:
(a) the loss attributable to owners of the Company, excluding any costs of servicing equity
other than ordinary shares, and
(b) by the weighted average number of ordinary shares outstanding during the year, adjusted
for bonus elements in ordinary shares issued during the year and excluding treasury
shares.
Diluted loss per share adjusts the figures used in the determination of basic loss per share to
take into account:
(a) the after-income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares, and
(b) the weighted average number of additional ordinary shares that would have been
outstanding assuming the conversion of all dilutive potential ordinary shares.
2.21 Leases
The Group, as a lessee, leases office buildings and fitness centers. Lease contracts are typically
made for fixed periods of several months to six years. Lease is recognized as a right-of-use asset and a
corresponding lease liability at the date at which the leased asset is available for use by the Group.
Contracts may contain both lease and non-lease components. The Group allocates the
consideration in the contract to the lease and non-lease components based on their relative stand-alone
prices.
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--- page 410 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.21 Leases (continued)
Lease terms are negotiated on an individual basis and contain a wide range of different terms
and conditions. The lease agreements do not impose any covenants other than the security interests in
the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing
purposes.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease
liabilities include the net present value of the fixed payments (including in-substance fixed payments).
Lease payments to be made under reasonably certain extension options are also included in the
measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. The Group uses
the incremental borrowing rate, for the implicit rate cannot be readily determined, which is the rate that
the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the
right-of-use assets in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group makes adjustments uses a build-up
approach that starts with a risk-free interest rate adjusted for credit risk for leases held by them.
Lease payments are allocated between principal and finance cost. The finance cost is charged to
profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
Š the amount of the initial measurement of lease liabilities;
Š any lease payments made at or before the commencement date less any lease incentives
received;
Š any initial direct costs; and
Š restoration costs
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the
lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the
right-of-use assets is depreciated over the underlying asset’s useful life.
Payments associated with short-term leases are recognized on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less without a
purchase option.
(a) Variable lease payments
Some property leases contain variable payment terms that are linked to sales generated from a
fitness center. For certain fitness centers including fixed and variable rental payment terms, the
variable lease payments that depend on sales are recognized in the consolidated income statements in
the period in which the condition that triggers those payments occurs.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.21 Leases (continued)
(b) Modification of lease
Except for COVID-19-related rent concessions in which the Group applied the practical
expedient, the Group accounts for a lease modification as a separate lease if:
(i) the modification increases the scope of the lease by adding the right to use one or more
underlying assets; and
(ii) the consideration for the lease increases by an amount commensurate with the stand-alone
price for the increase in scope and any appropriate adjustments to that stand-alone price to
reflect the circumstances of the particular contract.
For a lease modification that is not accounted for as a separate lease, the Group remeasures the
lease liabilities, less any lease incentives receivable, based on the lease term of the modified lease by
discounting the revised lease payments using a revised discount rate at the effective date of the
modification. The Group accounts for the remeasurement of lease liabilities by making corresponding
adjustments to the relevant right-of-use assets.
For partial or full termination of the lease for lease modifications that decrease the scope of the
lease, decreasing the carrying amount of the right-of-use asset. The Group recognizes in the consolidated
income statements of any gain or loss relating to the partial or full termination of the lease.
2.22 Fulfillment expenses
Fulfillment expenses primarily consist of product delivering expenses paid to third party
couriers, packaging expenses, warehousing expenses and salaries and benefits paid to relevant
personnel.
2.23 Government grants
Grants from the government are recognized at their fair value where there is reasonable
assurance that the grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognized in the profit or loss over the
period necessary to match them with the costs that they are intended to compensate.
Government grants relating to the purchase of property and equipment are included in
non-current liabilities as deferred income and are credited to profit or loss on a straight-line basis over
the expected lives of the related assets.
Government grants provided to the Group mainly related to financial assistance from the local
government in the PRC. There are no unfulfilled condition or other contingencies relating to these
grants.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
2 Summary of significant accounting policies (continued)
2.24 Interest income
Interest income from financial assets at FVPL is included in the net fair value gains/(losses) on
these assets, see Note 9 below.
Interest income is presented as finance income where it is earned from financial assets that are
held for cash management purposes, see Note 11 below.
Interest income is calculated by applying the effective interest rate to the gross carrying amount
of a financial asset except for financial assets that subsequently become credit-impaired. For credit-
impaired financial assets, the effective interest rate is applied to the net carrying amount of the
financial asset (after deduction of the loss allowance).
2.25 Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a
result of past events; it is probable that an outflow of resources will be required to settle the obligation;
and the amount has been reliably estimated. Provisions are not recognized for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required
in settlement is determined by considering the class of obligations as a whole. A provision is
recognized even if the likelihood of an outflow with respect to any one item included in the same class
of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure
required to settle the present obligation at the end of the reporting period. The discount rate used to
determine the present value is a pre-tax rate that reflects current market assessments of the time value
of money and the risks specific to the liability. The increase in the provision due to passage of time is
recognized as interest expense.
2.26 Dividend distribution
Provision is made for the amount of any dividend declared, being appropriately authorized and
no longer at the discretion of the Company, on or before the end of the reporting period but not
distributed at the end of the reporting period.
3 Financial risk management
3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign
exchange risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk
management program focuses on the unpredictability of financial markets and seeks to minimize
potential adverse effects on the Group’s financial performance. Risk management is carried out by the
senior management of the Group.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
3 Financial risk management (continued)
3.1 Financial risk factors (continued)
(a) Market risk
(i) Foreign exchange risk
Foreign exchange risk primarily arises from recognized assets and liabilities denominated in a
currency other than the functional currency of the Group’s entities. The Group manages its foreign
exchange risk by performing regular reviews of the Group’s net foreign exchange exposures and
control these exposures through entering into foreign exchange forward contracts, when necessary.
The Group’s foreign exchange risk primarily arises from cash and cash equivalents and short-
term deposits denominated in USD held by subsidiaries whose functional currency is RMB, and cash
and cash equivalents denominated in RMB held by subsidiaries whose functional currency is USD. If
USD had strengthened/weakened by 5% against RMB with all other variables held constant, the
estimated changes of loss before income tax for the years ended December 31, 2019, 2020, 2021 and
2022 are listed in below table:
Loss before income tax Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Increase 5% .............................................. 1,266 13,075 4,912 204
Decrease 5% .............................................. (1,266) (13,075) (6,506) (204)
(ii) Interest rate risk
The Group’s interest rate risk primarily arises from borrowings with fixed rates, short-term time
deposits and cash and cash equivalents. Those carried at floating rates expose the Group to cash flow
interest rate risk whereas those carried at fixed rates expose the Group to fair value interest rate risk.
The Group regularly monitors its interest rate risk to ensure there is no undue exposure to
significant interest rate risk.
(b) Credit risk
Credit risk mainly arises from cash and cash equivalents, short-term time deposits, accounts
receivables and other receivables included in prepayments and other current assets. The carrying
amount of these financial assets represents the Group’s maximum exposure to credit risk in relation to
the corresponding class of financial assets.
(i) Risk management
Accounts receivables and other receivables included in prepayments and other current assets
are managed on a group basis. The finance team is responsible for managing and analyzing the credit
risk for each new customer/debtor before standard credit payment terms are offered. The Group
assesses the credit quality of its customers and other debtors by taking into account various factors
including their financial position, past operational and financial performance and forward-looking
factors.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
3 Financial risk management (continued)
3.1 Financial risk factors (continued)
(b) Credit risk (continued)
(i) Risk management—continued
Cash and cash equivalents and short-term time deposits are mainly placed with reputable
financial institutions in the PRC and international financial institutions outside of the PRC. There has
been no recent history of default in relation to these financial institutions. The expected credit loss is
not material.
(ii) Impairment of financial assets
Accounts receivables
During the Track Record Period, the Group applies the IFRS 9 simplified approach to
measuring expected credit losses under which the lifetime expected credit losses for all accounts
receivables are estimated. To measure the expected credit losses, accounts receivables have been
grouped based on shared credit risk characteristics and credit rating.
The expected loss rates are based on the historical payment profiles, historical loss rates and
data published by external credit rating institution, adjusted to reflect current and forward-looking
information on macroeconomic factors affecting the ability of the customers to settle the receivables.
The Group has identified factors such as the Gross Domestic Products (“ GDP”) of the PRC to be the
most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in
these factors.
On that basis, the loss allowances of accounts receivables as at December 31, 2019, 2020, 2021
and 2022 were determined as follows:
As at December 31,
2019 2020 2021 2022
RMB RMB RMB RMB
in thousands, except for percentages
Expected loss rate ........................................... 1.18% 1.22% 0.73% 2.67%
Gross carrying amount ....................................... 80,861 183,006 312,659 258,576
Loss allowance provision ..................................... 9 5 3 2,240 2,291 6,900
Accounts receivables are written off when there is no reasonable expectation of recovery.
Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a
debtor to engage in a repayment plan with the Group, and indicators of severe financial difficulty. The
amounts of accounts receivables written off during the years ended December 31, 2019, 2020, 2021
and 2022 were nil, nil, RMB1,207,000 and RMB2,684,000, respectively (Note 21).
Impairment losses on accounts receivables are presented as “administrative expenses” in the
consolidated income statements. Subsequent recoveries of amounts previously written off are credited
against the same line item.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
3 Financial risk management (continued)
3.1 Financial risk factors (continued)
(b) Credit risk (continued)
(ii) Impairment of financial assets—continued
Other receivables included in prepayments and other current assets
Impairment on other receivables included in prepayments and other current assets is measured
as either 12-month expected credit losses or lifetime expected credit loss, depending on whether there
has been a significant increase in credit risk since initial recognition. If a significant increase in credit
risk of a receivable has occurred since initial recognition, then impairment is measured as lifetime
expected credit loss. Management makes periodic collective assessments as well as individual
assessment on the recoverability of other receivables included in prepayments and other current assets
based on historical settlement records and past experience.
On that basis, the loss allowances of other receivables included in prepayments and other
current assets as at December 31, 2019, 2020, 2021 and 2022 were immaterial.
Others
While cash and cash equivalents and short-term time deposits are also subject to the
impairment requirements of IFRS 9, the identified impairment loss was immaterial.
(c) Liquidity risk
The Group intends to maintain sufficient cash and cash equivalents. Due to the dynamic nature
of the underlying business, the policy of the Group is to regularly monitor the Group’s liquidity risk
and to maintain adequate liquid assets such as cash and cash equivalents, short-term time deposits and
investments in wealth management products and foreign currency forward contracts linked to an
exchange rate or to retain adequate financing arrangements to meet the Group’s liquidity requirements.
The table below analyzes the Group’s non-derivative financial liabilities into relevant maturity
grouping based on the remaining period at each balance sheet date to the contractual maturity date. The
amounts disclosed in the table are the contractual undiscounted cash flows.
The Group recognizes the financial instruments issued to investors at fair value through profit
or loss. Accordingly, the financial instruments issued to investors are managed on a fair value basis
rather than by maturing dates.
Less than
1 year
Between
1 and
2 years
Between
2 and
5 years
Over 5
years
Total
contractual
cash flows
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at December 31, 2019
Accounts payables ............................... 46,305 — — — 46,305
Accrued expenses (excluding accrued payroll related
expenses) .................................... 57,547 — — — 57,547
Other current liabilities (excluding tax payables) ....... 6,305 — — — 6,305
Lease liabilities .................................. 35,201 35,206 84,448 — 154,855
Total .......................................... 145,358 35,206 84,448 — 265,012
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
3 Financial risk management (continued)
3.1 Financial risk factors (continued)
(c) Liquidity risk (continued)
Less than
1 year
Between
1 and
2 years
Between
2 and
5 years
Over 5
years
Total
contractual
cash flows
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at December 31, 2020
Accounts payables ............................... 58,534 — — — 58,534
Accrued expenses (excluding accrued payroll related
expenses) .................................... 72,534 — — — 72,534
Other current liabilities (excluding tax payables) ....... 15,203 — — — 15,203
Lease liabilities .................................. 36,683 32,526 53,188 — 122,397
Total .......................................... 182,954 32,526 53,188 — 268,668
As at December 31, 2021
Accounts payables ............................... 141,007 — — — 141,007
Accrued expenses (excluding accrued payroll related
expenses) .................................... 92,855 — — — 92,855
Other current liabilities (excluding tax payables) ....... 26,010 — — — 26,010
Borrowings (Note a) .............................. 89,001 — — — 89,001
Lease liabilities .................................. 43,885 44,912 30,295 — 119,092
Total .......................................... 392,758 44,912 30,295 — 467,965
As at December 31, 2022
Accounts payables ............................... 154,095 — — — 154,095
Accrued expenses (excluding accrued payroll related
expenses) .................................... 108,454 — — — 108,454
Other current liabilities (excluding tax payables) ....... 32,815 — — — 32,815
Borrowings (Note a) .............................. 75,882 — — — 75,882
Lease liabilities .................................. 46,973 34,873 25,871 — 107,717
Total .......................................... 418,219 34,873 25,871 — 478,963
Note a: As at December 31, 2021 and 2022, borrowings amounting to RMB87,584,000 and RMB61,521,000 were all secured. See details in
Note 33.
3.2 Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue
as a going concern in order to provide returns for shareholders and benefits for other stakeholders and
to maintain an optimal capital structure to enhance shareholders’ value in the long-term.
The Group monitors capital (including share capital, other reserves and Preferred Shares on an
as-if-converted basis) by regularly reviewing the capital structure. As a part of this review, the Group
considers the cost of capital and the risks associated with the issued share capital. The Group may
adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or
repurchase the Company’s shares. In the opinion of the directors of the Company, the Group’s capital
risk is low. As a result, capital risk is not significant for the Group and measurement of capital
management is not a tool currently used in the internal management reporting procedures of the Group.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
3 Financial risk management (continued)
3.3 Fair value estimation
The table below analyzes the Group’s financial instruments carried at fair value as at each
balance sheet date, by level of the inputs to valuation techniques used to measure fair value. Such
inputs are categorized into three levels within a fair value hierarchy as follows:
(1) Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
(2) Inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level
2); and
(3) Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs) (level 3).
The following table presents the Group’s financial assets and liabilities that are measured at fair
value at December 31, 2019:
Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Liabilities
Preferred Shares ........................................ — — 2,810,328 2,810,328
Total ................................................. — — 2,810,328 2,810,328
The following table presents the Group’s financial assets and liabilities that are measured at fair
value at December 31, 2020:
Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Assets
Financial assets at fair value through profit or loss
—Wealth management products ........................... — 429,310 — 429,310
Total ................................................. — 429,310 — 429,310
Liabilities
Preferred Shares ........................................ — — 6,918,563 6,918,563
Total ................................................. — — 6,918,563 6,918,563
The following table presents the Group’s financial assets and liabilities that are measured at fair
value at December 31, 2021:
Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Assets
Financial assets at fair value through profit or loss
—Wealth management products ........................... — 255,029 — 255,029
—Foreign currency forward contracts ....................... — 9 2 0 — 9 2 0
Total ................................................. — 255,949 — 255,949
Liabilities
Preferred Shares ........................................ — — 9,201,503 9,201,503
Total ................................................. — — 9,201,503 9,201,503
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
3 Financial risk management (continued)
3.3 Fair value estimation (continued)
The following table presents the Group’s financial assets and liabilities that are measured at fair
value at December 31, 2022:
Level 1 Level 2 Level 3 Total
RMB’000 RMB’000 RMB’000 RMB’000
Assets
Financial assets at fair value through profit or loss
—Wealth management products ........................... — 139,864 — 139,864
—Investment in a private company (included in other non-current
assets) .............................................. — — 15,000 15,000
Total ................................................. — 139,864 15,000 154,864
Liabilities
Preferred Shares ........................................ — — 9,401,472 9,401,472
Total ................................................. — — 9,401,472 9,401,472
(a) Financial instruments in level 1
The fair value of financial instruments traded in active markets is based on quoted market
prices at each of the reporting dates. A market is regarded as active if quoted prices are readily and
regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory
agency, and those prices represent actual and regularly occurring market transactions on an arm’s
length basis. The quoted market price used for financial assets held by the Group is the current bid
price. These instruments are included in level 1.
(b) Financial instruments in level 2
The fair value of financial instruments that are not traded in an active market is determined by
using valuation techniques. These valuation techniques maximize the use of observable market data
where it is available and rely as little as possible on entity specific estimates. If all significant inputs
required to fair value of an instrument are observable, the instrument is included in level 2.
(c) Financial instruments in level 3
If one or more of the significant inputs is not based on observable market data, the instrument is
included in level 3.
Specific valuation techniques used to value financial instruments include:
Š Quoted market prices or dealer quotes for similar instruments;
Š Discounted cash flow model and unobservable inputs mainly including assumptions of
expected future cash flows and discount rate; and
Š A combination of observable and unobservable inputs, including risk-free rate, expected
volatility, discount rate for lack of marketability (“ DLOM”), market multiples, etc.
Level 3 instruments of the Group’s assets and liabilities include Preferred Shares and
investment in a private company.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
3 Financial risk management (continued)
3.3 Fair value estimation (continued)
(c) Financial instruments in level 3 (continued)
The changes in level 3 instruments of Preferred Shares for the years ended December 31, 2019,
2020, 2021 and 2022 are presented in the Note 34. The changes in level 3 instruments of the
investment in a private company for the year ended December 31, 2022 are presented in the Note 18.
The Company engaged a third-party valuation firm to manage the valuation of level 3
instruments of Preferred Shares for financial reporting purposes. At least once every year, the valuation
firm would use valuation techniques to determine the fair value of the Group’s level 3 instruments.
As Preferred Shares are not traded in an active market, their fair values have been determined
by using various applicable valuation techniques, including discounted cash flows. The following table
summarizes the quantitative information about the key assumptions used in recurring level 3 fair value
measurements.
At December 31, 2019
Description
Key
assumptions
Range of key
assumptions
Relationship of key
assumptions to fair value
Preferred Shares
Risk-free interest rate 1.62%
The higher the risk-free interest rate,
the lower the fair value
DLOM 10%
The higher the DLOM, the lower the
fair value
Volatility 45.6%
The higher the expected volatility, the
lower the fair value
At December 31, 2020
Description
Key
assumptions
Range of key
assumptions
Relationship of key
assumptions to fair value
Preferred Shares
Risk-free interest rate 0.17%
The higher the risk-free interest rate,
the lower the fair value
DLOM 10%
The higher the DLOM, the lower the
fair value
Volatility 53.8%
The higher the expected volatility, the
lower the fair value
At December 31, 2021
Description
Key
assumptions
Range of key
assumptions
Relationship of key
assumptions to fair value
Preferred Shares
Risk-free interest rate 1.25%
The higher the risk-free interest rate,
the lower the fair value
DLOM 5%
The higher the DLOM, the lower the
fair value
Volatility 53.2%
The higher the expected volatility, the
lower the fair value
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
3 Financial risk management (continued)
3.3 Fair value estimation (continued)
(c) Financial instruments in level 3 (continued)
At December 31, 2022
Description Key assumptions
Range of key
assumptions
Relationship of key
assumptions to fair value
Preferred Shares
Risk-free interest rate 4.11%
The higher the risk-free interest rate,
the lower the fair value
DLOM 5%
The higher the DLOM, the lower the
fair value
Volatility 63.5%
The higher the expected volatility, the
lower the fair value
As at December 31, 2019, 2020, 2021 and 2022, the discounted cash flow method was used to
determine the total equity value and the equity allocation model was adopted to determine the fair
value of the Preferred Shares. Key assumptions under discounted cash flow method included risk-free
interest rate, DLOM and expected volatility.
For the Preferred Shares, risk-free interest rates are determined based on the yield of USD
Treasury Strips with a maturity life equal to the expected time to a liquidation/redemption event as at
each of the valuation dates. DLOM was estimated based on the option-pricing method. Under option-
pricing method, the cost of put option, which can hedge the price change before the private held share
can be sold, was considered as a basis to determine DLOM. Volatility was estimated at the valuation
dates based on average of historical volatilities of the comparable companies in the same industry for a
period from the respective valuation dates to expected liquidation/redemption date. In addition to the
assumptions adopted above, the Company’s projections of future performance were also factored into
the determination of the fair value of the Preferred Shares on each valuation date.
The Company performed sensitivity test to changes in unobservable inputs in determining the
fair value of the Preferred Shares issued by the Company. The changes in unobservable inputs
including risk free rate, DLOM and expected volatility will result in a significantly higher or lower fair
value measurement. The increase in the fair value of the Preferred Shares would increase the loss of
fair value change in the consolidated income statements. When performing the sensitivity test,
management applied an increase or decrease to each unobservable input, which represents
management’s assessment of reasonably possible change to these unobservable inputs.
If the Company’s key valuation assumptions used to determine the fair value of the Preferred
Shares had increased/decreased by 10% with all other variables held constant, the estimated fair value
changes from carrying amount are listed in below table (assuming the change of key factors would not
have significant impact on fair value change attributable to credit risk):
Fair value of the Preferred Shares As at December 31, 2019
Expected
volatility DLOM Risk-free interest rate
RMB’000 RMB’000 RMB’000
Increase 10% .............................................. (1,233) (4,476) (211)
Decrease 10% ............................................. 1,154 4,476 211
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
3 Financial risk management (continued)
3.3 Fair value estimation (continued)
(c) Financial instruments in level 3 (continued)
Fair value of the Preferred Shares As at December 31, 2020
Expected
volatility DLOM Risk-free interest rate
RMB’000 RMB’000 RMB’000
Increase 10% .............................................. (2,368) (11,781) (28)
Decrease 10% ............................................. 2,311 11,781 28
Fair value of the Preferred Shares As at December 31, 2021
Expected
volatility DLOM Risk-free interest rate
RMB’000 RMB’000 RMB’000
Increase 10% .............................................. ( 1 , 549) (7,596) (168)
Decrease 10% ............................................. 1,428 7,596 168
Fair value of the Preferred Shares As at December 31, 2022
Expected
volatility DLOM Risk-free interest rate
RMB’000 RMB’000 RMB’000
Increase 10% .............................................. ( 1 , 130) (7,105) (281)
Decrease 10% ............................................. 1,051 7,105 284
There were no transfers between level 1, 2 and 3 of fair value hierarchy classifications during
the years ended December 31, 2019, 2020, 2021 and 2022.
On December 1, 2022, the Group acquired certain ordinary shares with preferential rights of
one private company with consideration of RMB 15,000,000 and measured the investment at financial
assets at fair value through profit or loss (Note 18). The consideration was close to its fair value as at
December 31, 2022.
The carrying amounts of the Group’s financial assets that are not measured at fair value,
including cash and cash equivalents, short-term time deposits, accounts receivables, other receivables
including in prepayments and other current assets, and the Group’s financial liabilities that are not
measured at fair value, including borrowing, accounts payables, accrued expenses and other current
liabilities, approximate their fair values due to their short maturities.
4 Critical estimates and judgments
The preparation of financial statements requires the use of accounting estimates which will
seldom equal the actual results. Management needs to exercise judgement in applying the Group’s
accounting policies.
Estimates and judgments are continually evaluated and are based on historical experience and
other factors, including expectations of future events that may have a financial impact on the entity and
that are believed to be reasonable under the circumstances. The estimates and assumptions that have a
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
4 Critical estimates and judgments (continued)
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are addressed below:
4.1 Recognition of share-based compensation expenses
The Group set up the ESOP Plan and granted options to employees and other qualifying
participants. The fair value of the options granted to the employees is determined by the binomial
option pricing model at the grant date, and is expected to be expensed over the respective vesting
periods. Significant estimates and assumptions, including forfeiture rate, risk-free interest rate,
expected volatility and dividend yield, are made by the directors (Note 29).
4.2 Estimation of the fair value of financial liabilities
The Preferred Shares issued by the Company are not traded in an active market, and the
respective fair value is determined by using valuation techniques. The Group applied the discounted
cash flow method to determine the underlying equity value of the Company and adopted the option-
pricing method and equity allocation model to determine the fair value of the Preferred Shares. Key
assumptions such as risk-free interest rate, DLOM and volatility based on the Group’s best estimates,
which is disclosed in Note 3.3.
4.3 Contractual arrangements
As disclosed in Note 2.2.1, the Group exercises control over certain structured entities and has
the right to recognize and receive substantially all the economic benefits from them through the
Contractual Arrangements. The directors consider that the Group controls these structured entities
notwithstanding that it does not have direct or indirect legal ownership in equity of these entities as the
Group has power over the financial and operating policies of these entities and receives substantially
all the economic interest returns generated from the business activities of these entities through these
Contractual Arrangements. Accordingly, all these structured entities are accounted for as controlled
structured entities and their financial statements have also been consolidated by the Company
throughout the Track Record Period.
Nevertheless, the Contractual Arrangements may not be as effective as direct legal ownership
in providing the Group with direct control over the structured entities. Uncertainties presented by the
PRC legal system could impede the Group’s beneficiary rights of the results, assets and liabilities of
the structured entities. Significant judgement is involved in determining whether the Group is able to
control these entities through these Contractual Arrangements. The directors of the Company, after
taking into account of the advice from its external legal advisors, consider that the Contractual
Arrangements entered into by the Group are in compliance with the relevant PRC laws and regulations
and are therefore legally binding and enforceable.
4.4 Current and deferred income tax
The Group is subject to income taxes in several jurisdictions. Significant judgement is required
in determining the provision for income taxes. There are many transactions and calculations for which
the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax
outcome of these matters is different from the amounts that were initially recorded, such differences
will impact the current and deferred tax assets and liabilities in the period in which such determination
is made.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
4 Critical estimates and judgments (continued)
4.4 Current and deferred income tax (continued)
Deferred tax assets relating to certain temporary differences or tax losses are recognized when
management considers that it is probable that future taxable profit will be available against which the
temporary differences or tax losses can be utilized. As at December 31, 2022, the Group did not
recognize deferred tax assets in respect of cumulative tax losses that can be carried forward against
future taxable income (Note 13). The outcome of their actual utilization may be different from
management’s estimation.
5 Segment information
The Group’s business activities, for which discrete financial information is available, are
regularly reviewed and evaluated by the CODM. The CODM, who is responsible for allocating
resources and assessing performance of the operating segments, has been identified as the Chief
Executive Officer that makes strategic decisions. The Group evaluated its operating segments
separately or aggregately, and determined that it has reportable segments as follows:
Š Self-branded fitness products
Š Membership and online paid content
Š Advertising and others
The CODM assesses the performance of the operating segments mainly based on revenues and
gross profit of each operating segment. Thus, segment result would present revenues, cost of revenues
and gross profit, which is in line with CODM’s performance review.
The cost of revenues for the self-branded fitness products primarily consists of material costs,
manufacturing cost and related costs that are directly attributable to the cost of products sold. The cost
of revenues for the membership and online paid content primarily consists of payment channel fees
paid to third-party application stores and other payment channels, salaries and benefits paid to
employees, content related cost and cost of virtual sports events. The cost of revenues for the
advertising and others primarily consists of salaries and benefits paid to employees and content related
cost and advertising production cost.
The Company is domiciled in the Cayman Islands while the Group mainly operates its
businesses in the PRC and earns substantially all of the revenues from external customers attributed to
the PRC. As at December 31, 2019, 2020, 2021 and 2022, substantially all of the non-current assets of
the Group were located in the PRC. Therefore, no geographical segments are presented.
There were no material inter-segment sales during the years ended December 31, 2019, 2020,
2021 and 2022. The revenues from external customers reported to the CODM are measured in a
manner consistent with that applied in the consolidated income statements.
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--- page 424 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
5 Segment information (continued)
The segment results for the years ended December 31, 2019, 2020, 2021 and 2022 are as
follows:
Year ended December 31, 2019
Self-branded
fitness products
Membership
and online
paid content
Advertising
and others Total
RMB’000 RMB’000 RMB’000 RMB’000
Revenue ......................................... 396,034 151,322 115,763 663,119
Cost of revenues ................................... (256,354) (55,086) (79,053) (390,493)
Gross profit ...................................... 139,680 96,236 36,710 272,626
Year ended December 31, 2020
Self-branded
fitness
products
Membership
and online
paid content
Advertising
and others Total
RMB’000 RMB’000 RMB’000 RMB’000
Revenue .......................................... 636,709 338,024 132,044 1,106,777
Cost of revenues .................................... (405,806) (119,135) (82,409) (607,350)
Gross profit ....................................... 230,903 218,889 49,635 499,427
Year ended December 31, 2021
Self-branded
fitness
products
Membership
and online
paid content
Advertising
and others Total
RMB’000 RMB’000 RMB’000 RMB’000
Revenue .......................................... 872,452 557,581 189,505 1,619,538
Cost of revenues .................................... ( 629,147) (233,098) (80,665) (942,910)
Gross profit ....................................... 243,305 324,483 108,840 676,628
Year ended December 31, 2022
Self-branded
fitness
products
Membership
and online
paid content
Advertising
and others Total
RMB’000 RMB’000 RMB’000 RMB’000
Revenue ......................................... 1,136,971 894,167 180,413 2,211,551
Cost of revenues ................................... ( 816,883) (409,082) (85,206) (1,311,171)
Gross profit ...................................... 320,088 485,085 95,207 900,380
The Company is domiciled in the Cayman Islands while the Group mainly operates its
businesses in the PRC and earns substantially all of the revenues from external customers attributed to
the PRC.
As at December 31, 2019, 2020, 2021 and 2022, substantially all of the non-current assets of
the Group were located in the PRC.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
6 Revenues
The breakdown of revenues for the years ended December 31, 2019, 2020, 2021 and 2022 is as
follows:
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Self-branded fitness products ............................ 396,034 636,709 872,452 1,136,971
Membership and online paid content ...................... 151,322 338,024 557,581 894,167
Advertising and others ................................. 115,763 132,044 189,505 180,413
Total 663,119 1,106,777 1,619,538 2,211,551
Timing of revenue recognition is as follows:
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Revenue recognized at a point in time ..................... 418,241 672,332 942,559 1,200,022
Revenue recognized over time ........................... 244,878 434,445 676,979 1,011,529
Total 663,119 1,106,777 1,619,538 2,211,551
The major customer which contributed more than 10% of the total revenues of the Group for
the years ended December 31, 2019, 2020, 2021 and 2022 is listed as below:
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Customer A ............................................. 5.5% 5.8% 10.1% 6.4%
All the revenues derived from other single external customers were less than 10% of the
Group’s total revenues for the years ended December 31, 2019, 2020, 2021 and 2022.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
7 Expenses by nature
The following table sets forth a breakdown of the cost of revenues, fulfillment expenses, selling
and marketing expenses, administrative expenses and research and development expenses by nature for
the periods indicated:
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Cost of self-branded fitness products sold ................. 248,789 395,244 612,682 790,571
Employee benefit expenses (Note 10) ..................... 281,626 254,190 580,563 766,827
Branding and marketing promotion expenses and other related
expenses ......................................... 190,629 178,226 746,863 377,736
Warehousing, packaging and delivery expenses ............. 47,275 81,717 109,590 175,586
Cost of virtual sports events ............................ 4,197 11,512 33,049 163,674
Channel fees paid to third-party application stores and other
payment channels .................................. 27,175 69,312 101,517 91,064
Platform commission and other selling and marketing
expenses ......................................... 17,134 39,109 57,073 80,916
Cloud service, bandwidth and server custody fees ........... 25,163 32,640 54,373 71,487
Outsourcing and other labor costs ........................ 23,282 21,025 35,064 69,388
Content related cost ................................... 7,901 12,155 33,964 64,613
Traveling, entertainment, general office expenses and
utilizations costs ................................... 31,063 20,234 38,509 42,288
Listing expenses ..................................... — — 17,977 41,084
Depreciation of right-of-use assets (Note 16) ............... 57,491 31,256 36,718 40,008
Advertising production cost ............................ 19,256 35,687 32,258 32,857
Professional fees ..................................... 24,267 18,692 42,855 20,334
Depreciation of property and equipment (Note 15) .......... 22,489 13,660 12,865 14,522
Warranty expenses ................................... 1,084 2,641 7,565 11,824
Tax and surcharges ................................... 1,147 3,870 5,319 11,411
Share-based compensation expenses—non-employee ........ 2,063 3,729 20,825 7,910
Credit loss allowances on financial assets (Note 21) ......... 5 9 2 1,287 1,258 7,293
Provision for impairment of inventories (Note 23) ........... 3,064 2,540 1,601 6,226
Amortisation of intangible assets (Note 17) ................ 4 4 8 6 6 8 2,107 2,451
Auditor’s remuneration ................................ 9 2 2 8 8 1 1 5 3 1 0
—Audit fee ......................................... 6 5 7 2 6 1 3 9
—Non-audit fee ...................................... 2 7 2 1 6 5 4 2 7 1
Others ............................................. 21,548 8,669 16,150 51,045
Total .............................................. 1,057,775 1,238,351 2,600,860 2,941,425
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
7 Expenses by nature (continued)
The following table sets forth a breakdown of the cost of revenues by nature for the periods
indicated:
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Cost of self-branded fitness products sold ...................... 248,789 395,244 612,682 790,571
Cost of virtual sports events ................................. 4,197 11,512 33,049 163,674
Channel fees paid to third-party application stores and other payment
channels .............................................. 27,175 69,312 101,517 91,064
Content related cost ....................................... 7,901 12,155 33,964 64,613
Employee benefit expenses ................................. 32,299 32,737 61,455 58,918
Advertising production cost ................................. 19,256 35,687 32,258 32,857
Outsourcing and other labor costs ............................ 4,024 6,002 10,668 15,145
Taxes and surcharges ...................................... 1,147 3,870 5,319 11,411
Other cost of revenues ..................................... 45,705 40,831 51,998 82,918
Total ................................................... 390,493 607,350 942,910 1,311,171
8 Other income
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Government grants .......................................... 12,602 4,195 3,012 1,815
Value-added tax deduction .................................... — — 1,246 4,694
Total ..................................................... 12,602 4,195 4,258 6,509
9 Other gains/(losses), net
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Net losses on disposal of property and equipment .................. (1,484) (985) (27) (65)
Net fair value gains on financial assets at fair value through profit or
loss (Note 20) ............................................ — 8 8 8,826 1,164
Net fair value losses on financial liabilities at fair value through profit or
loss ..................................................... — — — (67,271)
Net foreign exchange gains/(losses) ............................. 6 1 9 (156) 399 (582)
Donations .................................................. (280) (623) (318) (164)
Gains on lease modifications (Note 16) .......................... 8,400 247 — —
Gains on lease termination (Note 16) ............................ 1,887 — — —
Others .................................................... 3 7 8 4 4 5 1 0 1 1,543
Total ..................................................... 9,520 (984) 8,981 (65,375)
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
10 Employee benefit expenses
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Wages, salaries and bonuses .................................. 196,429 203,425 372,419 535,130
Share-based compensation expenses ............................ 10,229 18,694 114,680 94,703
Other social security costs, housing benefits and other employee
benefits ................................................ 74,968 32,071 93,464 136,994
Total .................................................... 281,626 254,190 580,563 766,827
(a) Pension costs—defined contribution plans
Employees of the Group companies in the PRC are required to participate in a defined
contribution retirement scheme administered and operated by the local municipal government. The
Group contributes funds which are calculated on fixed percentage of the employees’ salary (subject to
a floor and cap) as set by local municipal governments to each scheme locally to fund the retirement
benefits of the employees.
(b) Five highest paid individuals
One of the five individuals whose emoluments were the highest in the Group for the years ended
December 31, 2019, 2020, 2021 and 2022 was a director of the Group. The emoluments payable to the
remaining 4, 4, 4 and 4 individuals for the years ended December 31, 2019, 2020, 2021 and 2022 are as
follows:
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Wages, salaries and bonuses ................................... 3,945 5,571 7,682 7,477
Share-based compensation expenses ............................. 5,263 12,322 63,176 39,935
Other social security costs, housing benefits and other employee
benefits ................................................. 5 0 3 2 9 5 4 9 7 5 3 4
Total ..................................................... 9,711 18,188 71,355 47,946
The emoluments fell within the following bands:
Year ended December 31,
2019 2020 2021 2022
HK$1,000,001 to HK$10,000,000 ........................................... 4322
HK$10,000,001 to HK$20,000,000 .......................................... — 1 — 1
HK$20,000,001 to HK$30,000,000 .......................................... — — 1 —
HK$30,000,001 to HK$40,000,000 .......................................... — — — 1
HK$40,000,001 to HK$50,000,000 .......................................... — — 1 —
Total ................................................................. 4444
I-48


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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
10 Employee benefit expenses (continued)
(c) Benefits and interests of directors
The remuneration of every director and the chief executive officer is set out below:
For the year ended December 31, 2019
j
Name
Wages,
salaries and
bonuses
Share-based
compensation
expenses
Other social security
costs, housing
benefits and other
employee benefits Total
RMB’000 RMB’000 RMB’000 RMB’000
Ning Wang ................................... 9 4 2 — 1 2 6 1,068
Wei Peng ..................................... 9 0 7 — 1 2 6 1,033
Haojun Li .................................... — — — —
Qin Liu ...................................... — — — —
Dennis S Chang (Note a) ........................ — — — —
Yuehui Peng .................................. 9 6 4 4 5 8 1 2 6 1,548
David Tse Young Chou (Note b) ................... — — — —
Hainan Tan (Note b) ............................ — — — —
Total ........................................ 2,813 458 378 3,649
Note a: Resigned from the Company’s director in December 2019.
Note b: Appointed as the director in December 2019.
For the year ended December 31, 2020:
Name
Wages, salaries
and bonuses
Share-based
compensation
expenses
Other social security
costs, housing
benefits and other
employee benefits Total
RMB’000 RMB’000 RMB’000 RMB’000
Ning Wang ................................. 1,418 — 74 1,492
Wei Peng .................................. 1,521 — 74 1,595
Haojun Li .................................. — — — —
Qin Liu .................................... — — — —
Yuehui Peng (Note c) ......................... 1,520 395 74 1,989
David Tse Young Chou (Note d) ................ — — — —
Hainan Tan ................................ — — — —
Yue Yat Michael, HuI (Note e) .................. — — — —
Dennis S Chang (Note f) ...................... — — — —
Total ..................................... 4,459 395 222 5,076
Note c: Resigned from the Company’s director in December 2020.
Note d: Resigned from the Company’s director in July 2020.
Note e: Appointed as the director in July 2020.
Note f: Appointed as the director in December 2020.
I-49


--- page 430 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
10 Employee benefit expenses (continued)
(c) Benefits and interests of directors (continued)
For the year ended December 31, 2021:
Name
Wages, salaries
and bonuses
Share-based
compensation
expenses
Other social security
costs, housing
benefits and other
employee benefits Total
RMB’000 RMB’000 RMB’000 RMB’000
Ning Wang ................................. 1,715 — 130 1,845
Wei Peng .................................. 1,841 — 130 1,971
Haojun Li .................................. — — — —
Qin Liu (Note g) ............................. — — — —
Hainan Tan (Note g) ......................... — — — —
Yue Yat Michael, Hui (Note g) .................. — — — —
Dennis S Chang (Note g) ...................... — — — —
Dong Liu (Note h) ........................... 1,781 9,052 130 10,963
Total ..................................... 5,337 9,052 390 14,779
Note g: Resigned from the Company’s director in April 2021.
Note h: Appointed as the director in April 2021.
For the year ended December 31, 2022:
Name
Wages, salaries
and bonuses
Share-based
compensation
expenses
Other social security
costs, housing
benefits and other
employee benefits Total
RMB’000 RMB’000 RMB’000 RMB’000
Ning Wang ................................. 1,914 — 139 2,053
Wei Peng .................................. 2,064 — 117 2,181
Haojun Li .................................. — — — —
Dong Liu .................................. 2,023 11,389 139 13,551
Total ..................................... 6,001 11,389 395 17,785
No director and chief executive officer of the Company waived any emoluments during the
Track Record Period.
(i) Benefits and interests of directors
Except for benefits and interests disclosed above, there is no other benefits and interests offered
to the directors.
(ii) Directors’ termination benefits
No director’s termination benefit subsisted at the end of the period or at any time during the
Track Record Period.
(iii) Consideration provided to third parties for making available directors’ services
No consideration provided to third parties for making available director’s services subsisted at
the end of the period or at any time during the Track Record Period.
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--- page 431 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
10 Employee benefit expenses (continued)
(c) Benefits and interests of directors (continued)
(iv) Information about loans, quasi-loans and other dealings in favor of directors, controlled
bodies corporate by and connected entities with such directors
No quasi-loans and other dealings in favor of directors, controlled bodies corporate by and
connected entities with such directors was subsisted at the end of the period or at any time during the
Track Record Period.
(v) Directors’ material interests in transactions, arrangements or contracts
No significant transactions, arrangements and contracts in relation to the Group’s business to
which the Company was a party and in which a director of the Company had a material interest whether
directly or indirectly, subsisted at the end of the period or at any time during the Track Record Period.
11 Finance (expenses)/income, net
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Finance income:
Interest income from bank deposits ............................ 5,017 5,325 13,828 27,536
Finance expenses:
Interest expenses from lease (Note 16) ......................... (11,225) (5,769) (5,484) (4,657)
Interest expenses from borrowings ............................ — — (2,293) (2,248)
Interest expenses from other liability ........................... — — — (408)
Total ................................................... (6,208) (444) 6,051 20,223
I-51


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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
12 Subsidiaries
The Company’s subsidiaries (including controlled and structured entities) during the Track Record Period are set out below. Unless otherwise
stated, they have share capital consisting solely of ordinary shares that are held directly or indirectly by the Company, and the proportion of owners hip
interests held equals the voting rights held by the Company. The country of incorporation or registration is also their principal place of business.
Name
Place of incorporation/
establishment and kind of
legal entity
Date of
incorporation/
establishment
Particulars of
issued/ paid-in
capital
Effective interest held by the owner
As at December 31,
Principal activities Note2019 2020 2021 2022
Subsidiaries
Directly held:
Calorie Technology HK Company
Limited .........................
Hong Kong, limited
liability company
May 7, 2015 USD 0.21 100% 100% 100% 100% Investment holding
and investment
c
Keep Sports PTE. Ltd. ............... Singapore, limited
liability company
August 25,
2021
Nil N/A N/A 100% 100% Sales of self-
branded fitness
products
d
Keep Technology PTE. Ltd. ........... Singapore, limited
liability company
August 25,
2021
Nil N/A N/A 100% 100% Dormant d
Indirectly held:
Beijing Calorie Information Technology
Co., Ltd. ........................
Beijing, China, limited
liability company
July 7, 2015 USD360,000,000 100% 100% 100% 100% Development of
software
b
Shanghai Leranka Information
Technology Co., Ltd. ..............
Shanghai, China,
limited liability
company
May 27,
2021
Nil N/A N/A 100% 100% Investment f
Beijing Calorie Blue Technology Co.,
Ltd. ............................
Beijing, China, limited
liability company
August 25,
2021
Nil N/A N/A 100% 100% Provision of other
services
f
Beijing Calorie Blue Sports Management
Co., Ltd. ........................
Beijing, China, limited
liability company
September 7,
2021
Nil N/A N/A 100% 100% Provision of other
services
f
Guangzhou Calorie Blue Sports
Management Co., Ltd. .............
Guangzhou, China,
limited liability
company
August 18,
2022
Nil N/A N/A N/A 100% Provision of other
services
g
Hainan Calorie Red Technology Co.,
Ltd. ............................
Hainan, China, limited
liability company
October 27,
2021
Nil N/A N/A 100% 100% Production of
online contents
e
I-52


--- page 433 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
12 Subsidiaries (continued)
Name
Place of incorporation/
establishment and kind of
legal entity
Date of
incorporation/
establishment
Particulars of
issued/ paid-in
capital
Effective interest held by the owner
As at December 31,
Principal activities Note2019 2020 2021 2022
Hangzhou Calorie Sports Co., Ltd. . . . Hangzhou, China,
limited liability
company
November 5,
2021
Nil N/A N/A 100% 100% Sales of self-
branded fitness
products
e
Shenzhen Calorie Sports Technology
Co., Ltd. .....................
Shenzhen, China,
limited liability
company
November 18,
2021
Nil N/A N/A 100% 100% Development of self-
branded fitness
products
e
Hangzhou Calorie Purple Technology
Co., Ltd. .....................
Hangzhou, China,
limited liability
company
November 5,
2021
RMB2,000,000 N/A N/A 100% 100% Provision of advertising
services
e
Beijing Calorie Orange Management
Consulting Co., Ltd. ............
Beijing, China, limited
liability company
December 5,
2022
Nil N/A N/A N/A 100% Investment g
Structured entities:
Beijing Calorie Technology Co., Ltd. Beijing, China, limited
liability company
September 26,
2014
RMB2,439,024 100% 100% 100% 100% Provision of membership
and online paid
content services
a,b
Shenzhen Calorie Technology Co.,
Ltd. .........................
Shenzhen, China,
limited liability
company
August 29,
2017
RMB1,000,000 100% 100% 100% 100% Development of self-
branded fitness
products
a,b
Beijing Calorie Sports Co., Ltd. ..... Beijing, China, limited
liability company
November 7,
2017
RMB1,000,000 80% 100% 100% 100% Provision of other
services
a,b
Shanghai Calorie Sports Co., Ltd. . . . Shanghai, China,
limited liability
company
November 28,
2018
RMB1,000,000 100% 100% 100% 100%
Provision of other
services
a,b
Calorie Sports Management (Beijing)
Co., Ltd. .....................
Beijing, China, limited
liability company
June 29,
2018
RMB1,000,000 100% 100% 100% 100% Provision of other
services
a,b
Suqian Calorie Technology Co.,
Ltd. .........................
Jiangsu, China,
limited liability
January 21,
2019
N/A 100% N/A N/A N/A Provision of other
services
a,h
I-53


--- page 434 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
12 Subsidiaries (continued)
Note a: As described in Note 2.2, the Company does not have direct or indirect legal ownership in equity of these structured entities or their subsidiar ies. Nevertheless, under certain Contractual Arrangements
entered into with these structured entities and their registered owners, the Company and its other legally owned subsidiaries have rights to exercis e power over these structured entities, receive
variable returns from its involvement in these structured entities, and have the ability to affect those returns through its power over these structu red entities. As a result, they are presented as structured
entities of the Company.
Note b: The statutory financial statements were audited by Beijing Dongshendingli International Certified Public Accountants for the years ended D ecember 31, 2019, 2020 and 2021. The statutory financial
statements were audited by Beijing Dongshen LLP for the year ended December 31, 2022.
Note c: The statutory financial statements were audited by Sammi Y. S. Liu & Co. Certified Public Accountants (Practising) for the years ended Decembe r 31, 2019, 2020 and 2021. The statutory financial
statement for the year ended December 31,2022 has not yet been issued.
Note d: No audited financial statements were issued for these companies as they are not required to issue audited financial statements under the statu tory requirements of their respective places of
incorporation.
Note e: No audited financial statements were issued for these companies as they are established during 2021 and no material financial transactions in 2021. The statutory financial statements were audited by
Beijing Dongshen LLP for the year ended December 31, 2022.
Note f: The statutory financial statements were audited by Beijing Dongshendingli International Certified Public Accountants for the year ended De cember 31, 2021. The statutory financial statements were
audited by Beijing Dongshen LLP for the year ended December 31, 2022.
Note g: These companies are newly established during 2022. The statutory financial statements were audited by Beijing Dongshen LLP for the year ended December 31, 2022.
Note h: Suqian Calorie Technology Co., Ltd. was canceled in 2020.
I-54


--- page 435 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
13 Income tax expense
(a) Cayman Islands
The Company is incorporated as an exempted company with limited liability under the
Companies Act of the Cayman Islands and is not subject to tax on income or capital gains.
Additionally, the Cayman Islands do not impose a withholding tax on payments of dividends to
shareholders. The Cayman Islands are not party to any double tax treaties that are applicable to any
payments made by or to the Company.
(b) Hong Kong Income Tax
Calorie HK incorporated in Hong Kong was subject to Hong Kong profits tax at a rate of 16.5%
for taxable income earned in Hong Kong. On March 21, 2018, the Hong Kong Legislative Council
passed The Inland Revenue (Amendment) (No. 7) Bill 2017 (the ‘‘Bill’’) which introduces the
two-tiered profits tax rates regime. The Bill was signed into law on March 28, 2018 and was gazetted
on the following day.
Under the two-tiered profits tax rates regime, the first HK$2 million of profits of qualifying
group entity in Hong Kong will be taxed at 8.25%, and profits above HK$2 million will be taxed at
16.5%.
(c) PRC Enterprise Income Tax (“EIT”)
In accordance with the Enterprise Income Tax Law (“ EIT Law ”), Foreign Investment
Enterprises (“ FIEs”) and domestic companies are subject to Enterprise Income Tax (“ EIT”) at a
uniform rate of 25%. In October 2017 and December 2020, BJ IT was qualified as a High and New
Technology enterprise (“ HNTE”) and enjoyed a preferential tax rate of 15% from 2017 to 2022. In
November 2018 and December 2021, BJ Tech was qualified as a HNTE and enjoyed a preferential tax
rate of 15% from 2018 to 2023. In December 2020, Shenzhen Calorie was qualified as a HNTE and
enjoyed a preferential tax rate of 15% from 2020 to 2022. BJ Tech, BJ IT and Shenzhen Calorie were
in accumulated loss position for the years ended December 31, 2019, 2020, 2021 and 2022. The other
entities incorporated in the PRC are subject to an enterprise income tax at a rate of 25%.
According to a policy promulgated by the State Tax Bureau of the PRC and effective from
2008 onwards, enterprises engaged in research and development activities are entitled to claim an
additional tax deduction amounting to 50% of the qualified research and development expenses
incurred in determining its tax assessable profits for that year. The additional tax deducting amount of
the qualified research and development expenses have been increased from 50% to 75%, effective
from 2018 to 2023, according to a new tax incentives policy promulgated by the State Tax Bureau of
the PRC in September 2018 (“ Super Deduction”).
The EIT Law also provides that an enterprise established under the laws of a foreign country or
region but whose “de facto management body” is located in the PRC be treated as a resident enterprise
for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its
global income. The Implementing Rules of the EIT Law merely define the location of the “de facto
management body” as “the place where the exercising, in substance, of the overall management and
I-55


--- page 436 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
13 Income tax expense (continued)
(c) PRC Enterprise Income Tax (“EIT”) (continued)
control of the production and business operation, personnel, accounting, properties, etc., of a non-PRC
company is located”. Based on a review of surrounding facts and circumstances, the Group does not
believe that it is likely that its entities registered outside of the PRC should be considered as resident
enterprises for the PRC tax purposes.
(d) Withholding tax in mainland China (“WHT”)
The EIT Law also imposes a withholding income tax of 10% on dividends distributed by a FIE
to its immediate holding company outside of China, if such immediate holding company is considered
as a non-resident enterprise without any establishment or place within China or if the received
dividends have no connection with the establishment or place of such immediate holding company
within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty
with China that provides for a different withholding arrangement. The Cayman Islands, where the
Company incorporated, does not have such tax treaty with China. According to the arrangement
between the mainland China and Hong Kong Special Administrative Region on the Avoidance of
Double Taxation and Prevention of Fiscal Evasion in August 2006, dividends paid by an FIE in China
to its immediate holding company in Hong Kong will be subject to withholding tax at a rate of no more
than 5% (if the immediate holding company in Hong Kong is the beneficial owner of the FIE and owns
directly at least 25% of the shares of the FIE). In accordance with accounting guidance, all
undistributed earnings are presumed to be transferred to the parent company and withholding taxes
should be accrued accordingly. All FIEs are subject to the withholding tax from January 1, 2008. The
presumption may be overcome if the Group has sufficient evidence to demonstrate that the
undistributed dividends will be re-invested and the remittance of the dividends will be postponed
indefinitely.
The undistributed earnings and reserves of the Group entities located in the PRC are considered
to be indefinitely reinvested, because the Group does not have any present plan to pay any cash
dividends on its ordinary shares in the foreseeable future and intends to retain most of its available
funds and any future earnings for use in the operation and expansion of its business. Accordingly, no
deferred tax liability on 10% WHT of aggregate undistributed earnings and reserves of the Company’s
entities located in the PRC has been accrued that would be payable upon the distribution of those
amounts to the Company as at December 31, 2022. As at December 31, 2019, 2020, 2021 and 2022,
the Company did not record any withholding tax on the retained earnings of its subsidiaries and
structured entity in the PRC as they were still in accumulated deficit position.
I-56


--- page 437 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
13 Income tax expense (continued)
(d) Withholding tax in mainland China (“WHT”) (continued)
The tax on the Group’s loss before income tax differs from the theoretical amount that would
arise using the rates prevailing in the jurisdictions in which the Group operates:
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Loss before income tax ................................ (735,045) (2,243,750) (2,908,237) (103,548)
Tax calculated at applicable tax rate of 25% ................ 183,761 560,938 727,059 25,887
Tax effects of:
—Effect of different tax rates in other jurisdictions .......... (91,666) (528,942) (490,427) 148,112
—Effect of preferential income tax rates of certain
subsidiary ......................................... (33,287) (12,787) (93,937) (31,025)
—Tax losses and temporary deductible timing differences for
which no deferred tax assets was recognized ............. (68,841) (21,288) (133,982) (150,107)
—Expenses not deductible for income tax purposes .......... (3,874) (10,048) (26,386) (25,648)
—Super deduction for research and development expenses .... 13,907 12,127 17,673 32,781
—Withholding tax of royalty fee (Note a) .................. — — — (1,003)
— — — (1,003)
Note a: The Group’s subsidiary outside of PRC recognized withholding tax for royalty fee from the PRC entity.
(e) Deferred tax assets not recognized
The Group has not recognized any deferred tax assets in respect of the following items:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Tax losses and timing difference
—Deductible temporary differences ....................... 274,246 280,451 665,277 706,308
—Deductible cumulative tax losses (Note a) ................ 687,024 830,151 1,337,612 2,035,548
961,270 1,110,602 2,002,889 2,741,856
Unrecognized deferred tax assets: ....................... 151,263 172,551 306,533 456,640
Note a: These tax losses of PRC entities will expire from 2023 to 2033.
14 Loss per share
Following the share split as detailed in Note 25, the weighted average number of ordinary
shares for the purpose of basic and diluted loss per share for the years ended December 31, 2019, 2020,
2021 and 2022 has been retrospectively adjusted.
(a) Basic loss per share
Basic loss per share for the years ended December 31, 2019, 2020, 2021 and 2022 are
calculated by dividing the loss attributable to the Company’s owners by the weighted average number
of ordinary shares in issue during the year.
I-57


--- page 438 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
14 Loss per share (continued)
(a) Basic loss per share (continued)
Year ended December 31,
2019 2020 2021 2022
Net loss attributable to owners of the Company (RMB’000) . . . (728,979) (2,239,609) (2,908,237) (104,551)
Weighted average number of ordinary shares in issue (thousand
shares) ........................................... 133,360 135,217 137,175 138,363
Basic loss per share (expressed in RMB per share) ........ (5.47) (16.56) (21.20) (0.76)
(b) Diluted loss per share
Diluted loss per share is calculated by adjusting the weighted average number of ordinary
shares outstanding to assume conversion of all dilutive potential ordinary shares.
During the years ended December 31, 2019, 2020, 2021 and 2022, the Company had three
categories of potential ordinary shares: Preferred Shares, restricted shares and share options granted
under the ESOP Plans. As the Company incurred losses for the years ended December 31, 2019, 2020,
2021 and 2022, these potential ordinary shares were not included in the calculation of diluted loss per
share as their inclusion would be anti-dilution. Accordingly, the amounts of diluted loss per share for
the years ended December 31, 2019, 2020, 2021 and 2022 were the same as basic loss per share of the
respective year.
15 Property and equipment
The detailed information of property and equipment for the years ended December 31, 2019,
2020, 2021 and 2022 is as below:
Leasehold
improvements
Electronic
equipment
Office and
fitness
equipment
Assets under
construction Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost
At January 1, 2019 ......................... 9,332 9,496 2,844 5,226 26,898
Additions ................................. — 3,773 5,093 27,984 36,850
Disposal .................................. — (1,183) (2,004) — (3,187)
Transfers ................................. 33,210 — — (33,210) —
At December 31, 2019 ...................... 42,542 12,086 5,933 — 60,561
Accumulated depreciation
At January 1, 2019 ......................... (4,334) (2,441) (755) — (7,530)
Additions ................................. (18,413) (3,198) (878) — (22,489)
Disposal .................................. — 7 6 0 3 6 5 — 1,125
At December 31, 2019 ...................... (22,747) (4,879) (1,268) — (28,894)
Net carrying amount
At January 1, 2019 ......................... 4,998 7,055 2,089 5,226 19,368
At December 31, 2019 ...................... 19,795 7,207 4,665 — 31,667
I-58


--- page 439 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
15 Property and equipment (continued)
Leasehold
improvements
Electronic
equipment
Office and
fitness
equipment
Assets under
construction Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost
At January 1, 2020 ......................... 42,542 12,086 5,933 — 60,561
Additions ................................. — 2,612 505 3,744 6,861
Disposal .................................. — (1,933) (1,141) — (3,074)
Transfers ................................. 3,744 — — (3,744) —
At December 31, 2020 ...................... 46,286 12,765 5,297 — 64,348
Accumulated depreciation
At January 1, 2020 ......................... (22,747) (4,879) (1,268) — (28,894)
Additions ................................. (8,964) (3,607) (1,089) — (13,660)
Disposal .................................. — 1,238 270 — 1,508
At December 31, 2020 ...................... (31,711) (7,248) (2,087) — (41,046)
Net carrying amount
At January 1, 2020 ......................... 19,795 7,207 4,665 — 31,667
At December 31, 2020 ...................... 14,575 5,517 3,210 — 23,302
Leasehold
improvements
Electronic
equipment
Office and
fitness
equipment
Assets under
construction Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost
At January 1, 2021 ......................... 46,286 12,765 5,297 — 64,348
Additions ................................. — 13,035 1,336 7,395 21,766
Disposal .................................. — ( 1 , 760) (449) — (2,209)
Transfers ................................. 7,395 — — (7,395) —
At December 31, 2021 ...................... 53,681 24,040 6,184 — 83,905
Accumulated depreciation
At January 1, 2021 ......................... (31,711) (7,248) (2,087) — (41,046)
Additions ................................. (6,748) (5,086) (1,031) — (12,865)
Disposal .................................. — 1,642 356 — 1,998
At December 31, 2021 ...................... (38,459) (10,692) (2,762) — (51,913)
Net carrying amount
At January 1, 2021 ......................... 14,575 5,517 3,210 — 23,302
At December 31, 2021 ...................... 15,222 13,348 3,422 — 31,992
I-59


--- page 440 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
15 Property and equipment (continued)
Leasehold
improvements
Electronic
equipment
Office and
fitness
equipment
Assets under
construction Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Cost
At January 1, 2022 ......................... 53,681 24,040 6,184 — 83,905
Additions ................................. 2 8 5,522 3,540 4,366 13,456
Disposal .................................. — ( 970) (399) — (1,369)
Transfers ................................. 4,366 — — (4,366) —
At December 31, 2022 ...................... 58,075 28,592 9,325 — 95,992
Accumulated depreciation
At January 1, 2022 ......................... (38,459) (10,692) (2,762) — (51,913)
Additions ................................. ( 6,751) (6,330) (1,441) — (14,522)
Disposal .................................. — 8 6 8 1 7 8 — 1,046
At December 31, 2022 ...................... (45,210) (16,154) (4,025) — (65,389)
Net carrying amount ........................
At January 1, 2022 ......................... 15,222 13,348 3,422 — 31,992
At December 31, 2022 ...................... 12,865 12,438 5,300 — 30,603
Depreciation expenses have been charged to the consolidated income statements as follows:
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Research and development expenses ........................... 2,159 2,492 3,657 5,739
Cost of revenues ........................................... 7,887 8,260 5,691 3,708
Selling and marketing expenses ............................... 1,433 1,489 1,702 2,558
Administrative expenses .................................... 11,010 1,419 1,815 2,517
22,489 13,660 12,865 14,522
16 Leases
(a) Items recognized in the consolidated balance sheets
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Right-of-use assets
Office buildings ........................................... 105,698 84,698 86,158 83,726
Fitness centers ............................................ 20,085 12,466 12,755 6,933
Total ................................................... 125,783 97,164 98,913 90,659
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Lease liabilities
Current ................................................ (29,946) (33,348) (40,999) (44,554)
Non-current ............................................ (110,178) (80,057) (72,820) (59,069)
Total ................................................. (140,124) (113,405) (113,819) (103,623)
I-60


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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
16 Leases (continued)
(a) Items recognized in the consolidated balance sheets (continued)
Additions to the right-of-use assets for the years ended December 31, 2019, 2020, 2021 and
2022 were RMB21,420,000, RMB4,329,000, RMB39,854,000 and RMB31,754,000, respectively.
The decrease of the right-of-use assets due to modification of leasing contracts for the years
ended December 31, 2019, 2020, 2021 and 2022 were RMB100,462,000, RMB1,692,000,
RMB1,387,000 and nil, respectively.
(b) Items recognized in the consolidated income statements:
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Depreciation of right-of-use assets
—Office buildings ......................................... 43,972 22,544 28,327 32,892
—Fitness centers .......................................... 13,519 8,712 8,391 7,116
Gains on lease modification (Note 9) .......................... (8,400) (247) — —
Gains on lease termination (Note 9) ........................... (1,887) — — —
Losses on breach of lease contracts ............................ 14,498 729 — 297
Covid-19-related rent concessions from lessors .................. — (1,586) — (840)
Interest expense (included in finance expenses) (Note 11) .......... 11,225 5,769 5,484 4,657
Expense relating to short-term leases not included in lease liabilities
(included in cost of revenues, selling and marketing expenses,
administrative expenses and research and development
expenses) .............................................. 3 9 4 1 1 2,751 3,914
Total ................................................... 73,321 35,932 44,953 48,036
(c) Items recognized in the consolidated statements of cash flows:
The total cash outflows in financing activities for the years ended December 31, 2019, 2020,
2021 and 2022 are as below:
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Principal elements of lease payments .......................... 35,926 27,523 37,880 41,110
Related interest paid ........................................ 11,225 5,769 5,484 4,657
Total ................................................... 47,151 33,292 43,364 45,767
The weighted average incremental borrowing rate applied to the lease liabilities was 4.6% per
annum during the year ended December 31, 2019, 2020 and 2021, and 3.5% per annum during the year
ended December 31, 2022.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
17 Intangible assets
The detailed information of intangible assets for the years ended December 31, 2019, 2020,
2021 and 2022 is as below:
Domain name Software Total
RMB’000 RMB’000 RMB’000
Cost
At January 1, 2019 .............................................. 7,271 — 7,271
Additions ...................................................... — 3 0 3 3 0 3
Currency translation differences .................................... 1 1 9 — 1 1 9
At December 31, 2019 ........................................... 7,390 303 7,693
Accumulated amortisation
At January 1, 2019 .............................................. (147) — (147)
Additions ...................................................... (367) (81) (448)
At December 31, 2019 ........................................... (514) (81) (595)
Net carrying amount
At January 1, 2019 .............................................. 7,124 — 7,124
At December 31, 2019 ........................................... 6,876 222 7,098
Cost
At January 1, 2020 .............................................. 7,390 303 7,693
Additions ...................................................... — 7 7 0 7 7 0
Currency translation differences .................................... (477) — (477)
At December 31, 2020 ........................................... 6,913 1,073 7,986
Accumulated amortisation
At January 1, 2020 .............................................. (514) (81) (595)
Additions ...................................................... (358) (310) (668)
At December 31, 2020 ........................................... (872) (391) (1,263)
Net carrying amount
At January 1, 2020 .............................................. 6,876 222 7,098
At December 31, 2020 ........................................... 6,041 682 6,723
Cost
At January 1, 2021 .............................................. 6,913 1,073 7,986
Additions ...................................................... 1 8 8 4,555 4,743
Currency translation differences .................................... (158) — (158)
At December 31, 2021 ........................................... 6,943 5,628 12,571
Accumulated amortisation
At January 1, 2021 .............................................. (872) (391) (1,263)
Additions ...................................................... (306) (1,801) (2,107)
Currency translation differences .................................... 1 8 — 1 8
At December 31, 2021 ........................................... (1,160) (2,192) (3,352)
Net carrying amount
At January 1, 2021 .............................................. 6,041 682 6,723
At December 31, 2021 ........................................... 5,783 3,436 9,219
I-62


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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
17 Intangible assets (continued)
Domain name Software Total
RMB’000 RMB’000 RMB’000
Cost
At January 1, 2022 .............................................. 6,943 5,628 12,571
Additions ...................................................... — 2,911 2,911
Disposal ....................................................... — (1,716) (1,716)
Currency translation differences .................................... 6 2 4 — 6 2 4
At December 31, 2022 ........................................... 7,567 6,823 14,390
Accumulated amortisation
At January 1, 2022 .............................................. (1,160) (2,192) (3,352)
Additions ...................................................... ( 365) (2,086) (2,451)
Disposal ....................................................... — 8 4 9 8 4 9
Currency translation differences .................................... (120) — (120)
At December 31, 2022 ........................................... (1,645) (3,429) (5,074)
Net carrying amount .............................................
At January 1, 2022 ............................................. 5,783 3,436 9,219
At December 31, 2022 ........................................... 5,922 3,394 9,316
Amortisation expenses have been charged to the consolidated income statements as follow:
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Research and development expenses ........................... 6 3 1 3 8 5 8 4 1,149
Administrative expenses .................................... 3 6 7 3 5 8 7 0 4 7 7 8
Selling and marketing expenses ............................... 1 8 1 7 2 8 1 9 5 2 4
Total ................................................... 448 668 2,107 2,451
18 Other non-current assets
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Long-term royalty licenses, naming rights and sponsorship fees
(Note a) ............................................... — — 6,904 41,782
Investment in a private company (Note b) ....................... — — — 15,000
Deposits on lease .......................................... 12,193 11,318 13,067 13,437
Prepayments for property, equipment and intangible assets ......... 6 2 9 2 1 2 6 4 3,544
Loans to management (Note 37) .............................. 3,900———
Total ................................................... 16,722 11,530 20,035 73,763
Note a: As at December 31, 2022, the balance of long-term royalty licenses, naming rights and sponsorship fees mainly included
RMB38,012,000 of naming rights and sponsorship fees for a period of five years and RMB3,770,000 of royalty licenses, of which
the contract periods are more than one year.
Note b: On December 1, 2022, the Group acquired certain ordinary shares with preferential rights of one private company representing 15%
equity interest, for consideration of RMB15,000,000, which was close to its fair value as at December 31, 2022. The Group has the
right to require and demand the investee to redeem all of the shares held by the Group upon redemption events which are out of
control of issuers. The investment is measured at fair value through profit or loss.
I-63


--- page 444 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
18 Other non-current assets (continued)
Other non-current assets are denominated in the following currencies:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
R M B.................................................... 16,722 11,530 13,817 70,453
U S D .................................................... — — 6,218 3,310
Total ................................................... 16,722 11,530 20,035 73,763
19 Financial instruments by category
The detailed information of financial instruments by category during the Track Record Period
is as below:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Assets as per consolidated balance sheets
Financial assets measured at fair value through profit or loss:
—Wealth management products .......................... — 429,310 255,029 139,864
—Foreign currency forward contracts (included in financial
assets at fair value through profit or loss) ................. — — 9 2 0 —
—Investment in a private company (included in other non-
current assets) ....................................... — — — 15,000
Financial assets measured at amortized costs:
—Accounts receivables ................................. 79,908 180,766 310,368 251,676
—Receivable from a preferred shareholder and short-term rental
and other deposits (included in prepayments and other current
assets) ............................................. 36,519 34,925 4,763 5,564
—Other non-current assets (excluding prepayments for property
and equipment and prepayments for royalty licenses and long-
term service) ........................................ 16,093 11,318 13,067 13,437
—Short-term time deposits .............................. — — 454,963 68,740
—Cash and cash equivalents ............................. 563,914 2,342,713 1,653,517 1,672,217
Total 696,434 2,999,032 2,692,627 2,166,498
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Liabilities as per consolidated balance sheets
Financial liabilities measured at fair value through profit or
loss:
—Convertible redeemable preferred shares ................ 2,810,328 6,918,563 9,201,503 9,401,472
Financial liabilities measured at amortized cost:
—Accounts payables .................................. 46,305 58,534 141,007 154,095
—Accrued expenses (excluding accrued payroll related
expenses) ......................................... 57,547 72,534 92,855 108,454
—Other current liabilities (excluding tax payables) .......... 6,305 15,203 26,010 32,815
—Borrowings ....................................... — — 87,584 74,524
—Lease liabilities .................................... 140,124 113,405 113,819 103,623
Total .............................................. 3,060,609 7,178,239 9,662,778 9,874,983
I-64


--- page 445 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
19 Financial instruments by category (continued)
The Group’s exposure to various risks associated with the financial instruments is discussed in
Note 3.
The maximum exposure to credit risk at the end of the reporting period is the carrying amount
of each class of financial assets mentioned above.
20 Financial assets at fair value through profit or loss
Group As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Current assets
—Wealth management products .............................. — 429,310 255,029 139,864
—Foreign currency forward contracts .......................... — — 9 2 0 —
Total ................................................... — 429,310 255,949 139,864
Company As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Current assets
—Wealth management products ............................ — 368,659 255,029 139,864
Movements in financial assets at fair value through profit or loss are as below:
Group Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
At the beginning of the year .............................. 240,876 — 429,310 255,949
Additions ............................................. — 806,036 1,148,240 365,201
Disposal .............................................. (241,448) (355,904) (1,322,277) (487,827)
Change in fair value through profit or loss (Note 9) ............ — 8 8 8,826 1,164
Currency translation differences ........................... 5 7 2 (20,910) (8,150) 5,377
At the end of the year .................................. — 429,310 255,949 139,864
Company Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
At the beginning of the year .............................. 240,876 — 368,659 255,029
Additions ............................................. — 665,385 1,148,240 305,201
Disposal .............................................. (241,448) (275,904) (1,255,611) (427,312)
Change in fair value through profit or loss ................... — 6 6 1,891 1,569
Currency translation differences ........................... 5 7 2 (20,888) (8,150) 5,377
At the end of the year .................................. — 368,659 255,029 139,864
I-65


--- page 446 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
21 Accounts receivables
The detailed information of accounts receivables during the Track Record Period is as below:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Accounts receivables ....................................... 80,861 183,006 312,659 258,576
Less: credit loss allowances .................................. (953) (2,240) (2,291) (6,900)
Total ................................................... 79,908 180,766 310,368 251,676
The Group generally allows a credit period of three months to its customers. Aging analysis of
accounts receivables based on recognition date is as follows:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Up to 3 months ............................................ 70,995 157,193 156,064 135,423
3 to 6 months ............................................. 6,268 21,874 109,277 48,144
6 to 9 months ............................................. 1,996 126 13,407 21,137
9 months to 1 year ......................................... 4 0 1 — 5,309 11,466
Over 1 year ............................................... 1,201 3,813 28,602 42,406
Total ................................................... 80,861 183,006 312,659 258,576
Due to the short-term nature of the current receivables, their carrying amount is considered to
be the same as their fair value and were denominated in RMB.
Information about the impairment of accounts receivables and the Group’s exposure to credit
risk can be found in Note 3.1.
Movements on the Group’s allowance for credit loss of accounts receivables are as follows:
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
At the beginning of the year ................................. (361) (953) (2,240) (2,291)
Additional provision ....................................... (592) (1,287) (1,258) (7,293)
Receivables written off as uncollectable ........................ — — 1,207 2,684
At the end of the year ...................................... (953) (2,240) (2,291) (6,900)
I-66


--- page 447 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
22 Prepayments and other current assets
The detailed information of prepayments and other current assets during the Track Record
Period is as below:
Group As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Deductible value added taxes ................................ 17,041 6,474 32,613 69,849
Royalty licenses ........................................... 1,213 1,627 4,507 9,827
Prepayments for promotion fees .............................. 4,183 10,490 17,010 7,481
Deferred payment channel fees (Note a) ........................ 4,759 9,178 11,682 6,870
Prepayments for listing expenses .............................. — — 1,735 5,597
Short-term rental and other deposits ........................... 2,291 2,222 4,763 5,564
Software license fees ....................................... 5 9 4 9 5 9 2,588 3,916
Prepayments for products procurement ......................... 5,155 11,588 7,863 3,178
Receivable from Preferred Shares shareholder ................... 34,228 32,703 — —
Others ................................................... 2,411 2,478 4,058 16,684
Total 71,875 77,719 86,819 128,966
Note a: The Group amortized the deferred payment channel fees during the membership period which is usually up to one year.
The Group applies the IFRS 9 to measuring expected credit losses for other receivables
included prepayments and other current assets. For detailed information about the methods, refer to
Note 3.1.
Prepayments and other current assets are denominated in the following currencies:
Group As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
R M B.................................................... 37,126 44,956 84,289 123,136
U S D .................................................... 34,749 32,763 2,530 5,830
Total ................................................... 71,875 77,719 86,819 128,966
Company As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Prepayments for listing expenses .............................. — — 1,735 5,597
Receivable from Preferred Shares shareholder ................... 34,228 32,703 — —
Others ................................................... 5 2 1 6 0 1 2 9 2 3 3
Total ................................................... 34,749 32,763 1,864 5,830
Prepayments and other current assets are denominated in the following currencies:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
USD .................................................... 34,749 32,763 1,864 5,830
I-67


--- page 448 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
23 Inventories
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Raw materials ............................................. 5 3 4 1,188 123 716
Components .............................................. 3,333 9,599 20,273 12,563
Finished goods ............................................ 94,638 113,527 186,378 168,695
98,505 124,314 206,774 181,974
Less: provision for impairment (Note a) ........................ (3,870) (6,410) (8,011) (14,237)
Total ................................................... 94,635 117,904 198,763 167,737
Note a: Provision for impairment was recognized for the amount by which the carrying amount of the inventories exceeds its net realizable
value and was recorded in cost of revenues in the consolidated income statements. The provision for impairment expense of
inventories amounted to RMB3,064,000, RMB2,540,000, RMB1,601,000 and RMB6,226,000 for the years ended December 31,
2019, 2020, 2021 and 2022, respectively.
Provision for impairment movements for the years ended December 31, 2019, 2020, 2021 and
2022 are as below:
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
At the beginning of the year ................................. (806) (3,870) (6,410) (8,011)
Provision for impairment .................................... (3,064) (2,540) (1,601) (6,226)
At the end of the year ...................................... (3,870) (6,410) (8,011) (14,237)
Inventories recognized as cost of revenues during the years ended December 31, 2019, 2020,
2021 and 2022 amounted to RMB252,986,000, RMB406,756,000, RMB645,731,000 and
RMB954,245,000, respectively.
24 Cash and bank balances
(a) Cash and cash equivalents
Group As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Cash at bank and in hand ................................ 560,026 1,023,929 852,639 1,426,480
Time deposits with initial terms within three months .......... — 1,304,980 778,984 232,203
Cash held at third party payment platforms .................. 3,888 13,804 21,894 13,534
Total ............................................... 563,914 2,342,713 1,653,517 1,672,217
Cash and cash equivalents are denominated in the following currencies:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
R M B................................................ 45,920 709,498 555,079 1,357,777
U S D ................................................ 517,994 1,633,215 1,098,438 314,162
S G D ................................................ — — — 2 7 8
Total ............................................... 563,914 2,342,713 1,653,517 1,672,217
I-68


--- page 449 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
24 Cash and bank balances (continued)
(a) Cash and cash equivalents (continued)
The interest rates on time deposits of the Group with initial terms within three months were
0.21%, 0.03% to 2.10% and 2.00% to 4.63% as at December 31, 2020, 2021 and 2022.
Company As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Cash at bank and in hand ................................... 490,841 65,086 84,314 12,079
Time deposits with initial terms within three months ............. — 1,304,980 245,867 62,681
Total .................................................. 490,841 1,370,066 330,181 74,760
Cash and cash equivalents are denominated in the following currencies:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
U S D ................................................... 490,841 1,370,066 330,179 74,468
R M B .................................................. — — 2 2 9 2
Total .................................................. 490,841 1,370,066 330,181 74,760
The interest rates on time deposits of the Company with initial terms within three months were
0.21%, 0.03% to 0.11% and 4.63% as at December 31, 2020, 2021 and 2022, respectively.
(b) Short-term time deposits
Group As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Short-term time deposits denominated in USD ................... — — 454,963 43,217
Short-term time deposits denominated in RMB .................. — — — 25,523
— — 454,963 68,740
The short-term time deposits consist of RMB453,504,000 and RMB68,333,000 in principal and
RMB1,459,000 and RMB407,000 in interest receivables as at December 31, 2021 and December 31,
2022, respectively.
The interest rates on short-term time deposits of the Group were in the range of 0.14% to 1.50%
as at December 31, 2021, and in the range of 1.50% to 3.40% as at December 31, 2022.
I-69


--- page 450 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
25 Share capital
Authorized Number of ordinary shares
Nominal value of
ordinary shares
’000 USD’000
At January 1, 2019 ........................................ 40,898 41
Issuance of Series E Preferred Shares .......................... (1,552) (2)
At December 31, 2019 ...................................... 39,346 39
Issuance of Series E Preferred Shares .......................... (173) —
Issuance of Series F Preferred Shares ........................... (4,331) (4)
At December 31, 2020 ...................................... 34,842 35
Split of shares ............................................. 661,993 —
Repurchase of Series E Preferred Shares ........................ 8 2 8 —
Issuance of Series F-1 Preferred Shares ......................... (13,498) (1)
At December 31, 2021 and 2022 ............................. 684,165 34
Issued Number of
ordinary shares
Nominal value
of ordinary
shares
Equivalent
nominal value of
ordinary shares
’000 USD’000 RMB’000
At January 1, 2019 and December 31, 2019 ................ 6,668 7 40
Issuance of ordinary shares (Note 29) ....................... 2 5 0 — 2
At December 31, 2020 .................................. 6,918 7 42
Split of shares ......................................... 131,445 — —
Issuance of ordinary shares ............................... 15,430 1 5
At December 31, 2021 .................................. 153,793 8 47
Issuance of ordinary shares ............................... 45,205 2 14
At December 31, 2022 .................................. 198,998 10 61
In March 2021, the Company effected a 20-for-1 share split whereby each of the issued and
unissued share with a par value of USD 0.001 each was sub-divided into 20 shares with a par value of
USD 0.00005 each, such that the authorized share capital became USD 50,000 divided into
1,000,000,000 ordinary shares of a par value of USD 0.00005 each.
Key terms of the issued Preferred Shares have been set out in Note 34.
I-70


--- page 451 ---
APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
26 Other reserves
The following table shows a breakdown of the consolidated balance sheets line item ‘other
reserves’ and the movements in these reserves during the year. A description of the nature and purpose
of each reserve is provided below the table.
Group Treasury
stock
Capital
reserve
Share-based
compensation
Currency
translation
differences
Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at January 1, 2019 ................. — 58,857 27,392 (57,499) (16,272) 12,478
Share-based compensation .............. — — 12,292 — — 12,292
Currency translation differences (Note a) . . — — — (35,367) — (35,367)
Fair value change on Preferred Shares due
to own credit risk ................... — — — — 28,039 28,039
As at December 31, 2019 .............. — 58,857 39,684 (92,866) 11,767 17,442
Issuance of ordinary shares ............. ( 1 ) ( 1 ) — — — ( 2 )
Share-based compensation .............. — — 22,423 — — 22,423
Transactions with non-controlling
interests .......................... — (29,271) — — — (29,271)
Currency translation differences (Note a) . . — — — 269,198 — 269,198
Fair value change on Preferred Shares due
to own credit risk ................... — — — — 86,103 86,103
As at December 31, 2020 .............. (1) 29,585 62,107 176,332 97,870 365,893
Issuance of ordinary shares (Note b) ...... ( 4 ) ( 1 ) — — — ( 5 )
Share-based compensation .............. — — 135,505 — — 135,505
Currency translation differences (Note a) . . — — — 150,991 — 150,991
Fair value change on Preferred Shares due
to own credit risk ................... — — — — (97,242) (97,242)
As at December 31, 2021 (5) 29,584 197,612 327,323 628 555,142
Group Treasury
stock
Capital
reserve
Share-based
compensation
Currency
translation
differences
Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at January 1, 2022 ................ ( 5 ) 29,584 197,612 327,323 628 555,142
Issuance of ordinary shares (Note c) ...... (14) — — — — (14)
Share-based compensation ............. — — 102,613 — — 102,613
Currency translation differences
(Note a) .......................... — — — (700,844) — (700,844)
Fair value change on Preferred Shares due
to own credit risk ................... — — — — (46,730) (46,730)
As at December 31, 2022 .............. (19) 29,584 300,225 (373,521) (46,102) (89,833)
Note a: Currency translation difference represents the difference arising from the translation of the financial statements of companies within
the Group that have a functional currency different from the reporting currency of RMB for the financial statements of the
Company and the Group.
Note b: In June 2021, the Company issued and allotted 14,440,000 ordina ry shares to Calorie Fortune Limited controlled by the Company and
990,000 ordinary shares to Bulldog Group Limited controlled by one founder at the par value of USD 0.00005 each. With respect to the
14,440,000 ordinary shares issued to Calorie Fortune Limited, the Company has the power to direct the grant of awards associated with
these shares, has exposure or rights to variable returns from its involvement with the award scheme, and has the ability to use its power
over the award scheme to affect the amount of the Company’s return. Therefore, the 14,440,000 ordinary shares held for the Company’s
employee share award scheme were regarded as treasury shares and presented as a deduction in equity as “Other reserves”.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
26 Other reserves (continued)
Note c: On March 31, 2022, the Company issued 45,205,300 ordinary shares to Calorie Partner Limited, which are reserved for satisfying awards
granted or to be granted to participants of the Company’s employee share award scheme who are not close associates of the Company.
Calorie Partner Limited is a trust company that is wholly-owned by a trust in which the Company is the settlor, Futu Trustee Limited acts
as the trustee, and the beneficiaries are participants of the Company’s share option plans who are not close associates of the Company. As
trustee, Futu Trustee Limited exercises the voting and other ri ghts attached to the shares as instructed by an advisory committee
established by the Company. Therefore, the 45,205,300 ordinary shares were regarded as treasury shares and presented as a deduction in
equity as “Other reserves”.
Company Treasury
stock
Capital
reserve
Share-based
compensation
Currency
translation
differences
Others Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
As at January 1, 2019 ................ — 2,925 27,392 (38,561) (16,272) (24,516)
Share-based compensation ............. — — 12,292 — — 12,292
Currency translation differences ......... — — — (19,803) — (19,803)
Fair value change on Preferred Shares due
to own credit risk ................... — — — — 28,039 28,039
As at December 31, 2019 .............. — 2,925 39,684 (58,364) 11,767 (3,988)
Issuance of ordinary shares ............. ( 1 ) ( 1 ) — — — ( 2 )
Share-based compensation ............. — — 22,423 — — 22,423
Currency translation differences ......... — — — 196,048 — 196,048
Fair value change on Preferred Shares due
to own credit risk ................... — — — — 86,103 86,103
As at December 31, 2020 .............. (1) 2,924 62,107 137,684 97,870 300,584
Issuance of ordinary shares ............. ( 4 ) ( 1 ) — — — ( 5 )
Share-based compensation ............. — — 135,505 — — 135,505
Currency translation differences ......... — — — 99,415 — 99,415
Fair value change on Preferred Shares due
to own credit risk ................... — — — — (97,242) (97,242)
As at December 31, 2021 .............. (5) 2,923 197,612 237,099 628 438,257
Issuance of ordinary shares ............. (14) — — — — (14)
Share-based compensation ............. — — 102,613 — — 102,613
Currency translation differences ......... — — — (445,603) — (445,603)
Fair value change on Preferred Shares due
to own credit risk ................... — — — — (46,730) (46,730)
As at December 31, 2022 .............. (19) 2,923 300,225 (208,504) (46,102) 48,523
I-72


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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
27 Transactions with non-controlling interests
During the year ended December 31, 2020, the Group acquired additional equity interests in
one subsidiary from the relevant non-controlling interests at cash consideration of RMB30,000,000.
The difference between the carrying amounts of non-controlling interests acquired and consideration
paid is set out below.
Year ended
December 31, 2020
RMB’000
Total carrying amount of non-controlling interests acquired ............................ ( 729)
Less: total consideration paid to non-controlling interests .............................. (30,000)
Total difference recognized within equity ......................................... 29,271
28 Dividends
No dividends have been paid or declared by the Company during each of the years ended
December 31, 2019, 2020, 2021 and 2022.
29 Share-based compensation
(a) Founder’s Restricted Shares
In April 2020, the Company canceled 4,483,820 share options (after share split) held by one
founder and concurrently issued 2,500,000 unrestricted ordinary shares (after share split) and
2,500,000 restricted ordinary shares (after share split) to this founder which will vest in equal yearly
installment over the two years following December 13, 2019. The cancelation of the original share
options along with grant of the replacement awards were accounted for as a probable-to-probable
modification. The cumulative amount of compensation cost that should be recognized is the original
grant-date fair value of the award plus any incremental fair value resulting from the modification.
The movement of the restricted shares during the years ended December 31, 2019, 2020, 2021
and 2022 was as follow (after taking into consideration of share split):
Number of restricted shares
Unvested as at January 1, 2019 and December 31, 2019 .................. —
Modified from options to restricted shares ............................... 2,500,000
Vested ........................................................... (1,250,000)
Unvested as at December 31, 2020 .................................... 1,250,000
Vested ........................................................... (1,250,000)
Unvested as at December 31, 2021 and December 31, 2022 ............... —
(b) Share options
In January 2016, the board of the directors of the Company approved the establishment of 2016
Employee’s share option plan (the “ 2016 ESOP”) with the purpose of providing incentives and rewards
to its management, employees and non-employees. The maximum number of ordinary shares available
for issuance pursuant to the 2016 ESOP shall be 35,536,640 ordinary shares (after share split).
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
29 Share-based compensation (continued)
(b) Share options (continued)
In March 2021, the Company approved the establishment of a 2021 Employee’s share option
plan (the “ 2021 ESOP ”) with the purpose of providing incentives and rewards to its management,
employees and non-employees. The maximum number of ordinary shares available for issuance
pursuant to the 2021 ESOP shall be 25,108,660 ordinary shares (after share split).
With respect to the service conditions, there are 8 types of vesting schedule, which are:
Š Type (i) 25% of the total granted share options shall become vested on each anniversary of
the vesting commencement date for 4 years thereafter;
Š Type (ii) 50% of the share options shall become vested on the second anniversary of the
vesting commencement date and 25% of the total granted share options are vested on the
third and fourth anniversary of the vesting commencement date;
Š Type (iii) 50% of the total granted share options shall become vested on each anniversary
of the vesting commencement date for 2 years thereafter;
Š Type (iv) 75% of the total granted share options shall become vested on the first
anniversary of the vesting commencement date and 25% of the total granted share options
shall become vested on the second anniversary of the vesting commencement date;
Š Type (v) 33% of the total granted share options shall become vested on each anniversary
of the vesting commencement date for 3 years thereafter;
Š Type (vi) 100% of the total granted share options shall become vested on the vesting
commencement date;
Š Type (vii) 100% of the total granted share options shall become vested on the third
anniversary of the vesting commencement date;
Š Type (viii) 100% of the total granted share options shall become vested on the first
anniversary of the vesting commencement date;
Certain types of share options are exercisable at any time after the qualified initial public
offering (“QIPO”), provided these types of options have vested. The QIPO means a fully underwritten
initial public offering by the Company acceptable to the board of directors, with a minimum pre-
offering Company valuation and aggregate IPO proceeds to the Company agreed among the
shareholders pursuant to the Company’s memorandum of association. The options are exercisable for a
maximum period of 10 years after the date of grant.
In April 2021, 2,000,000 options were modified with the exercise price from USD 2.42 to
USD 0.80, leading to RMB9,694,000 incremental costs.
In June 2021, the Company issued 14,440,000 ordinary shares to Calorie Fortune Limited
controlled by the Company and 990,000 ordinary shares to Bulldog Group Limited controlled by one
founder. On March 31, 2022, the Company issued 45,205,300 ordinary shares to Calorie Partner
Limited, of which 24,714,825 ordinary shares have been granted to participants of the Company’s
employee share award scheme as at December 31, 2022. All of these 40,144,825 ordinary shares will
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
29 Share-based compensation (continued)
(b) Share options (continued)
either continue to be subject to satisfaction of the service condition only or of both service and
performance conditions set forth in the applicable equity award agreements. If the aforementioned
vesting conditions are not satisfied, or the exercise price are not paid, the holders of the share options
will not be entitled to the share or voting and economic rights over the shares issued to Calorie Fortune
Limited, Bulldog Group Limited and Calorie Partner Limited. Thus, the Company still consider the
above issued shares as share options from accounting perspective. There is no incremental fair value
change immediately before and after the modification of the aforementioned share options.
Consequently, no modification accounting is applied.
Movements in the number of share options granted and their related weighted average exercise
prices (taking into account the effect of share split as described above) are as follows (all share options
are presented as after share split):
Number of share
options
Weighted average
exercise price per
share option(USD)
Outstanding as at January 1, 2019 ................................... 29,327,820 0.61
Granted during the year ........................................... 7,746,000 1.98
Forfeited during the year .......................................... (5,681,000) 1.16
Outstanding as at December 31, 2019 ................................ 31,392,820 0.85
Exercisable as at December 31, 2019 ................................. 8,790,000 0.14
Outstanding as at January 1, 2020 ................................... 31,392,820 0.85
Granted during the year ........................................... 820,000 1.96
Forfeited during the year .......................................... (3,458,500) 1.61
Modified from option to restricted shares ............................. (4,483,820) 0.13
Outstanding as at December 31, 2020 ................................ 24,270,500 0.91
Exercisable as at December 31, 2020 ................................. 8,810,000 0.14
Outstanding as at January 1, 2021 ................................... 24,270,500 0.91
Granted during the year (Note a) .................................... 15,564,500 1.75
Forfeited during the year .......................................... ( 1,222,500) 2.12
Outstanding as at December 31, 2021 ................................ 38,612,500 1.21
Exercisable as at December 31, 2021 ................................. 10,050,000 0.19
Outstanding as at January 1, 2022 ................................... 38,612,500 1.21
Granted during the year ........................................... 4,707,500 2.65
Forfeited during the year .......................................... ( 3,165,175) 2.30
Outstanding as at December 31, 2022 ................................ 40,154,825 1.29
Exercisable as at December 31, 2022 ................................. 10,050,000 0.19
Note a: In April 2021, 10,000 options were granted to one management from the Company but not involved any trust companies.
The weighted-average remaining contract life for outstanding share options was 7.73 years,
6.67 years, 7.10 years and 6.32 years as at December 31, 2019, 2020, 2021 and 2022, respectively.
The Group has used the discounted cash flow method to determine the underlying equity fair
value of the Company and adopted the equity allocation model to determine the fair value of the
underlying ordinary shares. Key assumptions, such as projections of future performance, are
determined by the Group with best estimate.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
29 Share-based compensation (continued)
(b) Share options (continued)
Based on fair value of the underlying ordinary shares, the Group has used Binomial model to
determine the fair value of the share option as at the grant date. Key assumptions are set as below:
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Fair value per share (USD) ............... 1.14-1.38 1.45-2.75 3.82~4.97 3.78~4.09
Risk-free interest rates ................... 1.82%~2.31% 0.47%~0.65% 1.51%~1.74% 2.32%~3.84%
Dividend yield ......................... 0 % 0 % 0 % 0 %
Expected volatility ...................... 45.7%-48.6% 52.1%-53.4% 50.4%~53.6% 53.2%~54.3%
Expected terms ......................... 1 0 years 10 years 10 years 10 years
The weighted-average fair value of granted share options was USD0.44, USD1.05, USD3.19
and USD2.37 per share for the years ended December 31, 2019, 2020, 2021 and 2022, respectively.
(c) Share-based compensation expenses
The share-based compensation expenses have been charged to the consolidated income
statements for the years ended December 31, 2019, 2020, 2021 and 2022 as follows:
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Administrative expenses .................................... 6,726 15,600 88,307 68,230
Research and development expenses ........................... 3,533 3,446 28,106 21,279
Selling and marketing expenses ............................... 1,231 1,552 11,953 11,091
Cost of revenues ........................................... 8 0 2 1,825 7,139 1,691
Fulfillment expenses ....................................... — — — 3 2 2
Total ................................................... 12,292 22,423 135,505 102,613
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Share-based compensation expenses
Related to founder’s restricted shares .......................... — 8,735 1,669 —
Related to share options ..................................... 12,292 13,688 133,836 102,613
Total ................................................... 12,292 22,423 135,505 102,613
30 Accounts payables
Accounts payables and their aging analysis based on invoice date are as follows:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Up to 3 months ........................................... 46,305 58,534 141,007 154,095
Accounts payables are unsecured and are generally paid within three months of invoice date.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
30 Accounts payables (continued)
The carrying amounts of accounts payables are considered to be the same as their fair values,
due to their short-term nature, and are substantially denominated in RMB.
31 Accrued expenses and other current liabilities
The breakdown of accrued expenses and other current liabilities are as follows:
(a) Accrued expenses
Group As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Accrued payroll related expenses ............................. 30,903 54,982 93,544 136,083
Accrued promotion fees ..................................... 28,214 58,126 55,350 46,969
Accrued transportation fees .................................. 5,255 4,892 10,550 33,132
Accrued professional service fees and unpaid issuance cost ......... 12,699 6,243 21,527 21,913
Accrued office facilities fees ................................. 10,020 1,040 3,275 3,224
Others ................................................... 1,359 2,233 2,153 3,216
Total ................................................... 88,450 127,516 186,399 244,537
Company As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Accrued professional service fees and unpaid issuance cost ......... 10,613 2,890 10,492 16,426
Accrued expenses are denominated in the following currencies:
Group As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
R M B.................................................... 77,837 124,626 175,907 228,111
U S D .................................................... 10,613 2,890 10,492 16,426
Total ................................................... 88,450 127,516 186,399 244,537
(b) Other current liabilities
Group As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Tax payables ............................................. 6,814 15,351 37,908 32,486
Deposits ................................................. 1,662 4,461 5,459 11,643
Payable to joint strategic partners ............................. 1 3 0 6,984 7,884 7,467
Payable to shareholder for share repurchase (Note 37) ............. — — 2,163 —
Others ................................................... 4,513 3,758 10,504 13,705
Total ................................................... 13,119 30,554 63,918 65,301
Company As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Amount due to subsidiaries .................................. — — — 3,621
Payable to shareholder for share repurchase (Note 37) ............. — — 2,163 —
Total ................................................... — — 2,163 3,621
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
31 Accrued expenses and other current liabilities (continued)
(b) Other current liabilities (continued)
Other current liabilities are denominated in the following currencies:
Group As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
R M B.................................................... 13,115 30,554 61,754 65,196
U S D .................................................... 4 — 2,164 105
Total ................................................... 13,119 30,554 63,918 65,301
32 Contract liabilities
The breakdown of contract liabilities are as follows:
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Contract liabilities from membership and online paid content
service ................................................ 29,745 70,485 76,017 72,933
Contract liabilities from advertising and others service ............ 8,148 7,918 10,195 6,922
Contract liabilities from self-branded fitness products sales ......... 1,025 1,824 747 4,249
Total ................................................... 38,918 80,227 86,959 84,104
The above-mentioned contract liabilities represented the contract liabilities in connection with
the advances for the purchase of self-branded fitness products and advanced cash receipt for services
including membership and online paid content customers and advertising and others. Revenue
recognized from the contract liabilities balance as at January 1, 2019, 2020, 2021 and 2022 in each
year of 2019, 2020, 2021 and 2022 was RMB9,947,000, RMB38,918,000, RMB80,227,000 and
RMB86,959,000, respectively.
33 Borrowings
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Bank loan—secured ........................................ — — 87,584 61,521
Bank loan—unsecured ...................................... — — — 13,003
Total ................................................... — — 87,584 74,524
The term of bank borrowings as of December 31, 2021 and 2022 are within one year. The
weighted average interest rate for the outstanding borrowings, as at December 31, 2021 and 2022 was
4.2% and 3.3%, respectively.
For the secured bank loan: (i) The amount of RMB87,584,000 and RMB36,053,000 borrowings
are secured by oversea deposits with the amount of USD14,930,000 and USD6,150,000 included in
short-term time deposits, which are pledged to Bank of Jiang Su Co., Ltd, as at December 31, 2021 and
2022, respectively; (ii) The amount of RMB25,468,000 borrowings are secured by domestic deposits
with the amount of RMB25,500,000 in the Bank of Ningbo Co., Ltd, as at December 31, 2022.
I-78


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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
34 Convertible redeemable preferred shares
Since the date of incorporation, the Company has completed several rounds of financing by
issuing Preferred Shares to investors, namely, series A Preferred Shares, series B Preferred Shares,
series C Preferred Shares, series C-1 Preferred Shares, series D Preferred Shares, series E Preferred
Shares, series F Preferred Shares and series F-1 Preferred Shares.
The details of the issuance are set out in the table below (after taking into consideration of share
split):
Date of Issuance
Purchase
Price
(US$/Share)
Number of
Shares Total consideration
USD’000 RMB’000
Series A Preferred Shares ........... June 8, 2015 USD0.13 40,000,000 5,000 30,603
Series B Preferred Shares ........... September 21, 2015 USD0.28 35,293,880 9,988 63,532
Series C Preferred Shares ........... April 20, 2016 USD0.62 51,926,960 31,987 206,569
Series C-1 Preferred Shares ......... June 29, 2016 USD0.70 14,946,080 10,522 69,786
Series D Preferred Shares ........... July 5, 2018 USD2.06 39,873,000 82,019 542,800
Series E Preferred Shares ........... December 13, 2019
April 14, 2020 USD2.42 34,497,140 83,345 583,374
Series F Preferred Shares ........... December 11, 2020 USD4.10 86,628,120 355,002 2,321,891
Series F-1 Preferred Shares .......... December 3, 2021 USD5.19 13,497,767 70,000 446,166
316,662,947 647,863 4,264,721
The key terms of the Preferred Shares pursuant to the Company’s memorandum of association
at December 3, 2021 are summarized as follows:
(a) Dividends rights
Holders of Preferred Shares of later series have preference to receive any declaration or
payment of any cash or non-cash dividends in the following sequence: series F-1 Preferred Shares,
series F Preferred Shares, series E Preferred Shares, series D Preferred Shares, series C-1 Preferred
Shares, series C Preferred Shares, series B Preferred Shares, series A Preferred Shares and ordinary
shares, cumulative dividends at a simple rate of ten percent (10%) per annum of the original issue price
of such Preferred Shares on each such Preferred Share held by such holder, payable when, as and if
declared by the board.
(b) Conversion feature
All of the Preferred Shares are convertible, at the option of the holders at any time after the
original issue date of the relevant series of Preferred Shares into such number of fully paid ordinary
shares. The Series A, B, C, C-1, F and F-1 Preferred Shares shall automatically be converted into
ordinary shares at the then effective conversion price upon the closing of a QIPO or upon the written
consent of the holders of two-thirds (Series C & C-1 voting together as a single class and to the
exclusion of other classes and series of Shares; Series F & F-1 voting together as a single class and to
the exclusion of other classes and series of Shares). The Series D and E Preferred Shares shall
automatically be converted into ordinary shares at the then effective conversion price upon the closing
of a QIPO or upon the written consent of the holders of 51%.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
34 Convertible redeemable preferred shares (continued)
(b) Conversion feature (continued)
The conversion ratio for each Preferred Share shall be determined by dividing the issue price by
the then conversion price, in effect at the time of the conversion. The initial conversion price of each
series of Preferred Share shall be its respective subscription price and shall be subject to adjustment in
the event of the issuance of additional ordinary shares at a per share price less than the conversion
price.
(c) Redemption feature
Upon the occurrence of any redemption event as described below, the Company shall, at the
written request of any holder of the Preferred Shares, redeem all or any of the issued and outstanding
Preferred Shares held and as elected by such holder of the Preferred Shares.
“Redemption Event” means the occurrence of any of the followings events: (i) If the Company
has not consummated a qualified public offering at the 5
th anniversary of the issuance date of series F-1
Preferred Shares; or (ii) The occurrence of any material breach or violation by the Company or any
holder of the ordinary shares; or (iii) The occurrence of a change in the regulatory environment
pursuant to which the Company can no longer conduct their respective businesses under the control
documents and the existing variable interest entity structure.
The series A Preferred Shares’ redemption price shall be equal to the issue price compounded
with an interest rate of 10% per annum plus all declared but unpaid dividends thereon up to the date of
redemption. The series B, C and C-1 Preferred Shares’ redemption price shall be equal to 130%, 150%
and 150% of the respective Preferred Shares’ issue price plus all declared but unpaid dividends thereon
up to the date of redemption. The series D, E, F and F-1 Preferred Shares’ redemption price shall be
equal to the issue price compounded with an interest rate of 8% per annum plus all declared but unpaid
dividends thereon up to the date of redemption.
(d) Liquidation preferences
Upon the occurrence of any liquidation event, whether voluntary or involuntary, all assets and
funds of the Company legally available for distribution shall be distributed to the shareholders in the
following order and manner:
Holders of Preferred Shares of later series have preference to the distribution of assets or funds
over holders of Preferred Shares of earlier series and holders of ordinary shares, in the following
sequence: series F-1 Preferred Shares, series F Preferred Shares, series E Preferred Shares, series D
Preferred Shares, series C-1 Preferred Shares, series C Preferred Shares, series B Preferred Shares,
series A Preferred Shares and ordinary shares. The amount of liquidation will be equal to 120% of the
issuance price plus all accrued or declared but unpaid dividends.
Liquidation events include a liquidation, winding-up or dissolution of the Company, or a
merger, acquisition or sale of voting control of the Company in which its shareholders do not retain a
majority of the voting power in the surviving entity, a sale of all or substantially all of the Company’s
assets or the exclusive licensing of substantially all of the Company’s intellectual property, including
without limitation.
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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
34 Convertible redeemable preferred shares (continued)
(d) Liquidation preferences (continued)
The Group does not bifurcate any embedded derivatives from the host instruments and
designates the entire instruments as financial liabilities at fair value through profit or loss with the
changes in the fair value recorded in the consolidated income statements.
In March 2021, the Company entered into share repurchase agreement with one selling
shareholder in connection with the sale and repurchase of 827,760 issued and outstanding series E
preferred shares (after share split) held by the selling shareholder at an aggregate repurchase price of
RMB 22 million, which was fully paid as at December 31, 2022. The difference between the fair value
and repurchase consideration amount was recorded in fair value changes of convertible redeemable
preferred shares in the consolidated income statements.
The movements of the Preferred Shares are set out as below:
RMB’000
At January 1, 2019 ................................................................ 1,923,479
Issuance of Series E Preferred Shares ................................................... 524,588
Change in fair value ................................................................ 328,264
Includes: change in fair value due to own credit risk ................................... (28,039)
Currency translation differences ....................................................... 33,997
At December 31, 2019 .............................................................. 2,810,328
Total unrealized losses and change in fair value for the year included in fair value changes of
convertible redeemable preferred shares ............................................... 356,303
At January 1, 2020 ................................................................ 2,810,328
Issuance of Series E Preferred Shares ................................................... 58,786
Issuance of Series F Preferred Shares ................................................... 2,321,891
Change in fair value ................................................................ 2,028,840
Includes: change in fair value due to own credit risk ................................... (86,103)
Currency translation differences ....................................................... (301,282)
At December 31, 2020 .............................................................. 6,918,563
Total unrealized losses and change in fair value for the year included in fair value changes of
convertible redeemable preferred shares ............................................... 2,114,943
At January 1, 2021 ................................................................ 6,918,563
Issuance of Series F-1 Preferred Shares ................................................. 446,166
Repurchase of Series E Preferred Shares ................................................ (21,967)
Change in fair value ................................................................ 2,043,447
Includes: change in fair value due to own credit risk ................................... 97,242
Currency translation differences ....................................................... ( 184,706)
At December 31, 2021 .............................................................. 9,201,503
Total unrealized losses and change in fair value for the year included in fair value changes of
convertible redeemable preferred shares ............................................... 1,946,205
At January 1, 2022 ................................................................ 9,201,503
Change in fair value ................................................................ (618,239)
Includes: change in fair value due to own credit risk ................................... 46,730
Currency translation differences ....................................................... 818,208
At December 31, 2022 .............................................................. 9,401,472
Total unrealized income and change in fair value for the year included in fair value changes of
convertible redeemable preferred shares ............................................... (664,969)
I-81


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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
34 Convertible redeemable preferred shares (continued)
(d) Liquidation preferences (continued)
The Group applied the discount cash flow method to determine the underlying equity value of
the Company and adopted equity allocation model to determine the fair value of the Preferred Shares.
Key assumptions are set in Note 3.3.
Changes in fair value of Preferred Shares were recorded in fair value changes of convertible
redeemable preferred shares in the consolidated income statements, and the fair value changes in the
Preferred Shares that are attributable to changes of credit risk of this liability are recorded in other
comprehensive loss/income.
35 Cash flow information
(a) Cash used in operations
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Loss before income tax ............................... (735,045) (2,243,750) (2,908,237) (103,548)
Adjustments for:
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation of property and equipment ................... 22,489 13,660 12,865 14,522
Share-based compensation expenses ...................... 12,292 22,423 135,505 102,613
Amortisation of intangible assets ......................... 4 4 8 6 6 8 2,107 2,451
Depreciation of right-of-use assets ....................... 57,491 31,256 36,718 40,008
Fair value (gains)/losses on financial assets or liabilities at fair
value through profit or loss ........................... — (88) (8,826) 66,107
Foreign exchange losses/(gains) on short-term time deposits . . . — — 968 (11,295)
Provision for impairment of inventories ................... 3,064 2,540 1,601 6,226
Net losses on disposal of property and equipment ........... 1,484 985 27 65
Credit loss allowances on financial assets .................. 5 9 2 1,287 1,258 7,293
Fair value changes of Preferred Shares .................... 356,303 2,114,943 1,946,205 (664,969)
Issuance cost of Preferred Shares ........................ 12,540 1,988 224 —
Finance expenses/(income), net .......................... 6,208 444 (6,051) (20,223)
Covid-19-related rent concessions from lessors ............. — (1,586) — (840)
Gains on lease modifications ............................ ( 8,400) (247) — —
Changes in working capital:
(Increase)/decrease in accounts receivables ................ (37,511) (102,145) (130,860) 51,399
Increase in prepayments and other current assets ............ (6,698) (7,386) (41,106) (38,621)
(Increase)/decrease in inventories ........................ (52,844) (25,809) (82,460) 24,800
Decrease/(increase) in other non-current assets .............. 10,947 875 (8,653) 1,283
Increase in accounts payables ........................... 30,548 12,229 82,473 13,088
Increase in accrued expenses and other current liabilities ...... 20,132 65,582 91,008 57,516
Increase/(decrease) in contract liabilities ................... 28,971 41,309 6,732 (2,855)
Cash used in operations ............................... (276,989) (70,822) (868,502) (454,980)
I-82


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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
35 Cash flow information (continued)
(b) Non-cash investing and financing activities
Non-cash transactions are about the changes in prepayments and payables related to property and
equipment addition, and receivable from Series E pref erred shareholders Series F preferred shareholder
and Series F-1 preferred shareholder. Excluding these, there were no other material non-cash investing
and financing transactions for the years ended December 31, 2019, 2020, 2021 and 2022.
(c) Reconciliation of liabilities generated from financing activities
Liabilities from financing activities
Preferred
Shares
Lease
liabilities Borrowings Total
RMB’000 RMB’000 RMB’000 RMB’000
Liabilities from financing activities as at January 1, 2019 ...... 1,923,479 263,688 34,370 2,221,537
Cash flows ............................................. 490,360 (47,151) (34,370) 408,839
Fair value changes of Preferred Shares ....................... 356,303 — — 356,303
Interest expenses ......................................... — 11,225 — 11,225
Fair value change on Preferred Shares due to own credit risk ...... (28,039) — — (28,039)
Change in receivables from a preferred shareholder ............. 34,228 — — 34,228
Currency translation differences ............................. 33,997 — — 33,997
Leases ................................................. — (87,638) — (87,638)
Liabilities from financing activities as at December 31, 2019 ... 2,810,328 140,124 — 2,950,452
Liabilities from financing activities
Preferred
Shares
Lease
liabilities Borrowings Total
RMB’000 RMB’000 RMB’000 RMB’000
Liabilities from financing activities as at January 1, 2020 ...... 2,810,328 140,124 — 2,950,452
Cash flows ............................................. 2,382,202 (33,292) — 2,348,910
Fair value changes of Preferred Shares ....................... 2,114,943 — — 2,114,943
Interest expenses ......................................... — 5,769 — 5,769
Fair value change on Preferred Shares due to own credit risk ...... (86,103) — — (86,103)
Change in receivables from preferred shareholders .............. (1,525) — — (1,525)
Currency translation differences ............................. (301,282) — — (301,282)
Leases ................................................. — 8 0 4 — 8 0 4
Liabilities from financing activities as at December 31, 2020 ... 6,918,563 113,405 — 7,031,968
Liabilities from financing activities
Preferred
Shares
Lease
liabilities Borrowings Total
RMB’000 RMB’000 RMB’000 RMB’000
Liabilities from financing activities as at January 1, 2021 ...... 6,918,563 113,405 — 7,031,968
Cash flows ............................................. 459,131 (43,364) 85,291 501,058
Fair value changes of Preferred Shares ....................... 1,946,205 — — 1,946,205
Interest expenses ......................................... — 5,484 2,293 7,777
Fair value change on Preferred Shares due to own credit risk ...... 97,242 — — 97,242
Payables to repurchase Preferred Shares ...................... (2,229) — — (2,229)
Change in receivables from a preferred shareholder ............. (32,703) — — (32,703)
Currency translation differences ............................. (184,706) — — (184,706)
Leases ................................................. — 38,294 — 38,294
Liabilities from financing activities as at December 31, 2021 ... 9,201,503 113,819 87,584 9,402,906
I-83


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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
35 Cash flow information (continued)
(c) Reconciliation of liabilities generated from financing activities (continued)
Liabilities from financing activities
Preferred
Shares
Lease
liabilities Borrowings Total
RMB’000 RMB’000 RMB’000 RMB’000
Liabilities from financing activities as at January 1, 2022 .... 9,201,503 113,819 87,584 9,402,906
Cash flows ........................................... (2,229) (45,767) (15,308) (63,304)
Fair value changes of Preferred Shares ..................... (664,969) — — (664,969)
Interest expenses ...................................... — 4,657 2,248 6,905
Fair value change on Preferred Shares due to own credit risk .... 46,730 — — 46,730
Payables to repurchase Preferred Shares .................... 2,229 — — 2,229
Currency translation differences .......................... 818,208 — — 818,208
Leases ............................................... — 30,914 — 30,914
Liabilities from financing activities as at December 31,
2022 .............................................. 9,401,472 103,623 74,524 9,579,619
36 Commitments
The Group did not have any material commitments as at December 31, 2019, 2020, 2021 and
2022.
37 Related party transactions
Parties are considered to be related if one party has the ability directly or indirectly, to control the
other party or exercise significant influence over the other party in making financial and operational
decisions. Parties are also considered to be related if they are subjected to common control. Members of key
management and their close family members of the Group are also considered as related parties.
The following significant transactions were carried out between the Group and its related
parties during the periods presented. In the opinion of the directors of the Company, the related party
transactions were carried out in the normal course of business and at terms negotiated between the
Group and the respective related parties.
(a) Names and relationships with related parties
The following individuals are significant related parties of the Group that had transactions and/
or balances with the Group during the Track Record Period.
Name Relationship
Mr. Ning Wang ................................ Director and management of the Group
Mr. Dong Liu .................................. Director and management of the Group
I-84


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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
37 Related party transactions (continued)
(b) Balances with related parties
As at December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Amounts due from related parties (non-trade) .................... 3,900 — — —
Amount due to a related party (non-trade) ....................... — — 2,163 —
In 2017, the Group provided an interest-free, unsecured loan amounting RMB3,000,000 to one
of the management with a term of one year, which was later extended to December 31, 2021. The loan
was repaid during the year ended December 31, 2020.
In 2018, the Group provided an interest-free, unsecured loan in the amount of RMB900,000 to
one of the management with a term of five years. The loan was repaid during the year ended
December 31, 2020.
In 2021, the Group provided an interest-free, unsecured loan in the amount of RMB3,000,000 to
one of the management with a term of five years. The loan was repaid during the year ended
December 31, 2021.
In March 2021, the Group repurchased series E preferred shares from one selling shareholder.
The unpaid consideration to repurchase series E preferred shares was recorded in other current
liabilities as at December 31, 2021, which is mentioned in Note 31(b). The consideration was fully
paid as at December 31, 2022.
(c) Key management personnel compensation
Year ended December 31,
2019 2020 2021 2022
RMB’000 RMB’000 RMB’000 RMB’000
Wages, Salaries and bonuses ................................. 3,695 6,621 7,742 8,501
Share-based compensation expenses ........................... 3,795 9,797 42,595 37,831
Other social security costs, housing benefits and other employee
benefits ................................................ 5 0 3 3 0 8 5 1 9 5 3 4
Total ................................................... 7,993 16,726 50,856 46,866
38 Contingencies
On June 11, 2021, the Company received a notice publicly issued by the Cyberspace
Administration of China, regarding the Company’s non-compliance with the necessity principle in the
collection of personal information and Rules on the Scope of Necessary Personal Information for
Common Types of Mobile Internet Applications, which came into effect on May 1, 2021. On the basis
that the Company refined the scope of basic functions and services of the Company’s mobile app and
submitted a written report to show rectification the Company adopted as required under the notice in
late June 2021, the Company determined that the loss contingency due to penalties and other legal
consequences as of result of the above-mentioned non-compliance is not probable and determined that
the estimate of the loss contingency is not reasonably estimable.
I-85


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APPENDIX I ACCOUNTANT’S REPORT
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION (Continued)
39 Events occurring after the reporting period
There are no material subsequent events undertaken by the Company or by the Group after
December 31, 2022.
III. SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company or any of the companies
now comprising the Group in respect of any period subsequent to December 31, 2022. No dividend or
distribution has been declared or made by the Company or any of the companies now comprising the
Group in respect of any period subsequent to December 31, 2022.
I-86


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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
The information set out in this Appendix does not form part of the Accountant’s Report
from PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, the reporting
accountant of the Company, as set out in Appendix I in this prospectus, and is included herein for
illustrative purposes only.
The unaudited pro forma financial information should be read in conjunction with
“Financial information” in this prospectus and the Accountant’s Report set out in Appendix I to
this prospectus.
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED NET TANGIBLE ASSETS
The following unaudited pro forma statement of adjusted net tangible assets of the Group
prepared in accordance with Rule 4.29 of the Listing Rules is set out below to illustrate the effect of the
Global Offering on the consolidated net tangible assets of the Group attributable to the equity holders
of the Company as of December 31, 2022 as if the Global Offering had taken place on that date.
The unaudited pro forma adjusted net tangible assets of the Group has been prepared for
illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the
consolidated net tangible assets of the Group had the Global Offering been completed as at
December 31, 2022 or at any future dates following the completion of the Global Offering.
Audited
consolidated net
tangible liabilities
of the Group
attributable to
equity holders of
the Company as
at December 31,
2022
(Note 1)
Estimated impact to the
net tangible liabilities upon
conversion of the Series A
Preferred Shares, Series B
Preferred Shares, Series C
Preferred Shares, Series C-1
Preferred Shares, Series
D Preferred Shares, Series
E Preferred Shares, Series F
Preferred Shares, and
Series F-1 Preferred Shares
(Note 2)
Estimated net
proceeds from
the Global
Offering
(Note 3)
Unaudited pro
forma adjusted net
tangible assets of
the Group
attributable to the
equity holders of
the Company as at
December 31, 2022
Unaudited pro forma
adjusted net tangible
assets per Share
(Note 4)
RMB’000 RMB’000 RMB’000 RMB’000 RMB HK$
Based on an Offer Price
of HK$28.92 per
Share ............ ( 7,519,479) 9,401,472 238,208 2,120,201 4.56 4.98
Based on an Offer Price
of HK$61.46 per
Share ............ ( 7,519,479) 9,401,472 550,777 2,432,770 5.23 5.71
II-1


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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
Notes:
(1) The audited consolidated net tangible liabilities of the Group attributable to the equity holders of the Company as at December 31, 2022
is extracted from the Accountant’s Report set out in Appendix I to this prospectus, which is based on the audited consolidated net
liabilities of the Group attributable to the equity holders of the Company as at December 31, 2022 of RMB7,510,163,000 with
adjustments for the intangible assets as at December 31, 2022 of RMB9,316,000.
(2) All Series A Preferred Shares, Series B Preferred Shares, Series C Preferred Shares, Series C-1 Preferred Shares, Series D Preferred
Shares, Series E Preferred Shares, Series F Preferred Shares and Series F-1 Preferred Shares (“ Series Preferred Shares ”) will be
automatically converted to Shares upon the Global Offering. The Series Preferred Shares were accounted for as a liability to the
Company. Accordingly, for the purpose of the unaudited pro forma adjusted net tangible assets, the unaudited pro forma adjusted
consolidated net tangible liabilities of the Group attributable to the equity holders of the Company will be increased by
RMB9,401,472,000, being the carrying amount of the Series Preferred Shares as of December 31, 2022.
(3) The estimated net proceeds from the Global Offering are based on the indicative Offer Price of HK$28.92 and HK$61.46 per share,
respectively, after deduction of the underwriting fees and other related expenses and takes no account of any Shares which may be
allotted and issued upon the exercise of the Over-allotment Option or any Shares or any Shares which may be granted, issued or
repurchased by the Company pursuant to the general mandates.
(4) The unaudited pro forma net tangible assets per Share is arrived at after the adjustments referred to in the preceding paragraphs and on
the basis that 525,671,987 Shares were in issue assuming that the Global Offering and the conversion of Series Preferred Shares to
Shares had been completed on December 31, 2022, excluding the 60,635,300 restricted shares that were accounted for as treasury shares,
but takes no account of any Shares which may be allotted and issued upon the exercise of the Over-allotment Option or any Shares which
may be granted, issued or repurchased by the Company pursuant to the general mandates.
(5) For the purpose of this unaudited pro forma adjusted net tangible assets per Share, the amounts stated in Renminbi are converted into
Hong Kong dollars at the rate of HK$1.00 to RMB0.9161. No representation is made that Renminbi amounts have been, could have been
or may be converted to Hong Kong dollars, or vice versa, at that rate.
(6) Except as disclosed above, no adjustment has been made to reflect any trading results or other transactions of the Group entered into
subsequent to December 31, 2022.
II-2


--- page 469 ---
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
B. REPORT FROM THE REPORTING ACCOUNTANT ON UNAUDITED PRO FORMA
FINANCIAL INFORMATION
The following is the text of a report received from PricewaterhouseCoopers, Certified Public
Accountants, Hong Kong, for the purpose of incorporation in this prospectus.
INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE
COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION
To the Directors of Keep Inc.
We have completed our assurance engagement to report on the compilation of unaudited pro
forma financial information of Keep Inc. (the “ Company”) and its subsidiaries (collectively the
“Group”) by the directors of the Company (the “ Directors”) for illustrative purposes only. The
unaudited pro forma financial information consists of the unaudited pro forma statement of adjusted
consolidated net tangible assets of the Group as at December 31, 2022, and related notes (the
“Unaudited Pro Forma Financial Information ”) as set out on pages II-1 to II-2 of the Company’s
prospectus dated June 30, 2023, in connection with the proposed initial public offering of the shares of
the Company (the “ Prospectus”). The applicable criteria on the basis of which the Directors have
compiled the Unaudited Pro Forma Financial Information are described on pages II-1 to II-2 of the
Prospectus.
The Unaudited Pro Forma Financial Information has been compiled by the Directors to
illustrate the impact of the proposed initial public offering on the Group’s financial position as at
December 31, 2022 as if the proposed initial public offering had taken place at December 31, 2022. As
part of this process, information about the Group’s financial position has been extracted by the
Directors from the Group’s financial information for the year ended December 31, 2022, on which an
accountant’s report has been published.
Directors’ Responsibility for the Unaudited Pro Forma Financial Information
The Directors are responsible for compiling the Unaudited Pro Forma Financial Information in
accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “ Listing Rules”) and with reference to Accounting Guideline 7,
Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars (“AG 7 ”)
issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA”).
Our Independence and Quality Control
We have complied with the independence and other ethical requirements of the Code of Ethics
for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of
integrity, objectivity, professional competence and due care, confidentiality and professional behavior.
Our firm applies Hong Kong Standard on Quality Control (HKSQC) 1, Quality Control for
Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related
Services Engagements , issued by the HKICPA and accordingly, maintains a comprehensive system of
quality control including documented policies and procedures regarding compliance with ethical
requirements, professional standards and applicable legal and regulatory requirements.
II-3


--- page 470 ---
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
Reporting Accountant’s Responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing
Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not
accept any responsibility for any reports previously given by us on any financial information used in
the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom
those reports were addressed by us at the dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial
Information Included in a Prospectus , issued by the HKICPA. This standard requires that the reporting
accountant plans and performs procedures to obtain reasonable assurance about whether the Directors
have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of
the Listing Rules and with reference to AG 7 issued by the HKICPA.
For purposes of this engagement, we are not responsible for updating or reissuing any reports or
opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial
Information, nor have we, in the course of this engagement, performed an audit or review of the
financial information used in compiling the Unaudited Pro Forma Financial Information.
The purpose of unaudited pro forma financial information included in a prospectus is solely to
illustrate the impact of a significant event or transaction on unadjusted financial information of the
entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for
purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of
the proposed initial public offering at December 31, 2022 would have been as presented.
A reasonable assurance engagement to report on whether the unaudited pro forma financial
information has been properly compiled on the basis of the applicable criteria involves performing
procedures to assess whether the applicable criteria used by the directors in the compilation of the
unaudited pro forma financial information provide a reasonable basis for presenting the significant
effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence
about whether:
Š The related pro forma adjustments give appropriate effect to those criteria; and
Š The unaudited pro forma financial information reflects the proper application of those
adjustments to the unadjusted financial information.
The procedures selected depend on the reporting accountant’s judgment, having regard to the
reporting accountant’s understanding of the nature of the company, the event or transaction in respect
of which the unaudited pro forma financial information has been compiled, and other relevant
engagement circumstances.
The engagement also involves evaluating the overall presentation of the unaudited pro forma
financial information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
II-4


--- page 471 ---
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
Our work has not been carried out in accordance with auditing standards or other standards and
practices generally accepted in the United States of America or auditing standards of the Public
Company Accounting Oversight Board (United States) or standards and practices of any professional
body in any other overseas jurisdiction and accordingly should not be relied upon as if it had been
carried out in accordance with those standards and practices.
Opinion
In our opinion:
(a) the Unaudited Pro Forma Financial Information has been properly compiled by the
Directors on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial
Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, June 30, 2023
II-5


--- page 472 ---
APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR
COMPANY AND CAYMAN ISLANDS COMPANY LAW
Set out below is a summary of certain provisions of the constitution of the Company and certain
aspects of the company laws of the Cayman Islands.
The Company was incorporated in the Cayman Islands as an exempted company with limited
liability on April 21, 2015 under the Companies Act. The Company’s constitutional documents consist
of the Memorandum of Association and the Articles of Association.
1. MEMORANDUM OF ASSOCIATION
The Memorandum provides, inter alia , that the liability of the members of the Company is
limited, that the objects for which the Company is established are unrestricted (and therefore include
acting as an investment holding company) and that the Company shall have full power and authority to
carry out any object not prohibited by the Companies Act or any other law of the Cayman Islands.
2. ARTICLES OF ASSOCIATION
The Articles were conditionally adopted on June 12, 2023 and will become effective on the
Listing Date. A summary of certain provisions of the Articles is set out below.
2.1 Shares
(a) Classes of Shares
The share capital of the Company consists of a single class of ordinary shares.
(b) Variation of Rights of Existing Shares or Classes of Shares
If at any time the share capital of the Company is divided into different classes of Shares, all or
any of the rights attached to any class of Shares for the time being issued (unless otherwise provided
by the terms of issue of the Shares of that class) may, whether or not the Company is being wound up,
be varied with the consent in writing of the holders of at least three-fourths of the issued Shares of that
class, or with the approval of a resolution passed by at least three-fourths of the votes cast by the
holders of the Shares of that class present and voting in person or by proxy at a separate meeting of
such holders. The provisions of the Articles relating to general meetings shall apply mutatis mutandis
to every such separate meeting, except that the necessary quorum shall be two persons together holding
(or, in the case of a member being a corporation, by its duly authorized representative) or representing
by proxy at least one-third of the issued Shares of that class. Every holder of Shares of the class shall
be entitled on a poll to one vote for every such Share held by him/her, and any holder of Shares of the
class present in person or by proxy may demand a poll.
For the purposes of a separate class meeting, the Board may treat two or more classes of Shares
as forming one class of Shares if the Board considers that such classes of Shares would be affected in
the same way by the proposals under consideration, but in any other case shall treat them as separate
classes of Shares.
Any rights conferred upon the holders of Shares of any class shall not, unless otherwise
expressly provided in the rights attaching to the terms of issue of the Shares of that class, be deemed to
be varied by the creation or issue of further Shares ranking pari passu therewith.
III-1


--- page 473 ---
APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR
COMPANY AND CAYMAN ISLANDS COMPANY LAW
(c) Alteration of Capital
The Company may by ordinary resolution:
(i) increase its share capital by the creation of new Shares of such amount and with such
rights, priorities and privileges attached to such Shares as it may determine;
(ii) consolidate and divide all or any of its share capital into Shares of a larger amount than its
existing Shares. On any consolidation of fully paid Shares and division into Shares of a
larger amount, the Board may settle any difficulty which may arise as it thinks expedient
and, in particular (but without prejudice to the generality of the foregoing), may as
between the holders of Shares to be consolidated determine which particular Shares are to
be consolidated into a consolidated Share, and if it shall happen that any person shall
become entitled to fractions of a consolidated Share or Shares, such fractions may be sold
by some person appointed by the Board for that purpose and the person so appointed may
transfer the Shares so sold to the purchaser(s) thereof and the validity of such transfer shall
not be questioned, and the net proceeds of such sale (after deduction of the expenses of
such sale) may either be distributed among the persons who would otherwise be entitled to
a fraction or fractions of a consolidated Share or Shares rateably in accordance with their
rights and interests or may be paid to the Company for the Company’s benefit;
(iii) sub-divide its Shares or any of them into Shares of an amount smaller than that fixed by
the Memorandum; and
(iv) cancel any Shares which, as at the date of passing of the resolution, have not been taken or
agreed to be taken by any person and diminish the amount of its share capital by the
amount of the Shares so canceled.
The Company may by special resolution reduce its share capital or any undistributable reserve,
subject to the provisions of the Companies Act.
(d) Transfer of Shares
Subject to the terms of the Articles, any member of the Company may transfer all or any of his/
her Shares by an instrument of transfer. If the Shares in question were issued in conjunction with
rights, options, warrants or units issued pursuant to the Articles on terms that one cannot be transferred
without the other, the Board shall refuse to register the transfer of any such Share without evidence
satisfactory to it of the like transfer of such right, option, warrant or unit.
Subject to the Articles and the requirements of the Stock Exchange, all transfers of Shares shall
be effected by an instrument of transfer in the usual or common form or in such other form as the
Board may approve and may be under hand or, if the transferor or transferee is a recognized clearing
house or its nominee(s), under hand or by machine imprinted signature, or by such other manner of
execution as the Board may approve from time to time.
Execution of the instrument of transfer shall be by or on behalf of the transferor and the
transferee, provided that the Board may dispense with the execution of the instrument of transfer by the
transferor or transferee or accept mechanically executed transfers. The transferor shall be deemed to
remain the holder of a Share until the name of the transferee is entered in the register of members of
the Company in respect of that Share.
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Subject to the provisions of the Companies Act, if the Board considers it necessary or
appropriate, the Company may establish and maintain a branch register or registers of members at such
location or locations within or outside the Cayman Islands as the Board thinks fit. The Board may, in
its absolute discretion, at any time transfer any Share on the principal register to any branch register or
any Share on any branch register to the principal register or any other branch register.
The Board may, in its absolute discretion, decline to register a transfer of any Share (not being a
fully paid Share) to a person of whom it does not approve or on which the Company has a lien, or a transfer
of any Share issued under any share option scheme upon which a restriction on transfer subsists or a transfer
of any Share to more than four joint holders. It may also decline to recognize any instrument of transfer if
the proposed transfer does not comply with the Articles or any requirements of the Listing Rules.
The Board may decline to recognize any instrument of transfer unless a certain fee, up to such
maximum sum as the Stock Exchange may determine to be payable, is paid to the Company, the
instrument of transfer is properly stamped (if applicable), is in respect of only one class of Share and is
lodged at the relevant registration office or the place at which the principal register is located
accompanied by the relevant share certificate(s) and such other evidence as the Board may reasonably
require is provided to show the right of the transferor to make the transfer (and if the instrument of
transfer is executed by some other person on his/her behalf, the authority of that person so to do).
The register of members may, subject to the Listing Rules, be closed at such time or for such
period not exceeding in the whole 30 days in each year as the Board may determine (or such longer
period as the members of the Company may by ordinary resolution determine, provided that such
period shall not be extended beyond 60 days in any year).
Fully paid Shares shall be free from any restriction on transfer (except when permitted by the
Stock Exchange) and shall also be free from all liens.
(e) Redemption of Shares
Subject to the provisions of the Companies Act, the Listing Rules and any rights conferred on
the holders of any Shares or attaching to any class of Shares, the Company may issue Shares that are to
be redeemed or are liable to be redeemed at the option of the members or the Company. The
redemption of such Shares shall be effected in such manner and upon such other terms as the Company
may by special resolution determine before the issue of such Shares.
(f) Power of the Company to Purchase its own Shares
Subject to the Companies Act, or any other law or so far as not prohibited by any law and
subject to any rights conferred on the holders of any class of Shares, the Company shall have the power
to purchase or otherwise acquire all or any of its own Shares (which includes redeemable Shares),
provided that the manner and terms of purchase have first been authorized by ordinary resolution and
that any such purchase shall only be made in accordance with the relevant code, rules or regulations
issued from time to time by the Stock Exchange and/or the Securities and Futures Commission of
Hong Kong from time to time in force.
(g) Power of any Subsidiary of the Company to own Shares in the Company
There are no provisions in the Articles relating to the ownership of Shares in the Company by a
subsidiary.
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(h) Calls on Shares and Forfeiture of Shares
Subject to the terms of allotment and issue of any Shares (if any), the Board may, from time to
time, make such calls as it thinks fit upon the members in respect of any monies unpaid on the Shares
held by them (whether in respect of par value or share premium). A member who is the subject of the call
shall (subject to receiving at least 14 clear days’ notice specifying the time or times for payment) pay to
the Company at the time or times so specified the amount called on his/her Shares. A call may be made
payable either in one sum or by installments, and shall be deemed to have been made at the time when
the resolution of the Board authorizing such call was passed. The joint holders of a Share shall be
severally as well as jointly liable for the payment of all calls and installments due in respect of such
Share.
If a call remains unpaid after it has become due and payable, the member from whom the sum
is due shall pay interest on the unpaid amount at such rate as the Board shall determine (together with
any expenses incurred by the Company as a result of such non-payment) from the day it became due
and payable until it is paid, but the Board may waive payment of such interest or expenses in whole or
in part.
If a member fails to pay any call or installment of a call after it has become due and payable,
the Board may, for so long as any part of the call or installment remains unpaid, give to such member
not less than 14 clear days’ notice requiring payment of the unpaid amount together with any interest
which may have accrued and which may still accrue up to the date of payment (together with any
expenses incurred by the Company as a result of such non-payment). The notice shall specify a further
day on or before which the payment required by the notice is to be made. The notice shall also state
that, in the event of non-payment at or before the appointed time, the Shares in respect of which the
call was made will be liable to be forfeited.
If such notice is not complied with, any Share in respect of which the notice was given may,
before the payment required by the notice has been made, be forfeited by a resolution of the Board.
Such forfeiture shall include all dividends, other distributions and other monies payable in respect of
the forfeited Share and not paid before the forfeiture.
A person whose Shares have been forfeited shall cease to be a member in respect of the
forfeited Shares, shall surrender to the Company for cancelation the certificate(s) for the Shares
forfeited and shall remain liable to pay to the Company all monies which, as at the date of forfeiture,
were payable by him/her to the Company in respect of the Shares together with (if the Board shall in its
discretion so require) interest thereon from the date of forfeiture until the date of payment as the Board
may determine and any expenses incurred by the Company as a result of such non-payment.
2.2 Directors
(a) Appointment, Retirement and Removal
The Company in general meeting may from time to time fix and may from time to time by
special resolution increase or reduce the maximum and minimum number of Directors, provided that
the number of Directors shall not be less than two (2).
The Company may by ordinary resolution of the members elect any person to be a Director.
The Board may also appoint any person to be a Director at any time, either to fill a casual vacancy or
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as an additional Director subject to any maximum number fixed by a special resolution of the
Company or the Articles. Any Director so appointed shall hold office only until the first annual general
meeting of the Company after his/her appointment and shall then be eligible for re-election at such
meeting. Any Director so appointed by the Board shall not be taken into account in determining the
Directors or the number of Directors who are to retire by rotation at an annual general meeting.
There is no shareholding qualification for Directors nor is there any specified age limit for
Directors.
The members may by ordinary resolution remove any Director (including a managing or
executive Director) before the expiration of his/her term of office, notwithstanding anything in the
Articles or any agreement between the Company and such Director, and may by ordinary resolution
elect another person in his/her stead. Nothing shall be taken as depriving a Director so removed of any
compensation or damages payable to such Director in respect of the termination of his/her appointment
as Director or of any other appointment or office as a result of the termination of his/her appointment
as Director.
The office of a Director shall be vacated if:
(i) the Director gives notice in writing to the Company that he/she resigns from his/her office
as Director;
(ii) the Director is absent, without being represented by proxy or an alternate Director
appointed by him/her, for a continuous period of 12 months without special leave of
absence from the Board, and the Board passes a resolution that he/she has by reason of
such absence vacated his/her office;
(iii) the Director becomes bankrupt or has a receiving order made against him/her or suspends
payment or compounds with his/her creditors generally;
(iv) the Director dies or an order is made by any competent court or official on the grounds
that he/she is or may be suffering from mental disorder or is otherwise incapable of
managing his/her affairs and the Board resolves that his/her office be vacated;
(v) the Director is prohibited from being or ceases to be a Director by operation of law;
(vi) the Director has been required by the Stock Exchange to cease to be a Director or no
longer qualifies to be a Director pursuant to the Listing Rules; or
(vii) the Director is removed from office by notice in writing served upon him/her signed by not
less than three-fourths in number (or, if that is not a round number, the nearest lower round
number) of the Directors (including himself/herself) then in office.
At each annual general meeting, one-third of the Directors for the time being shall retire from
office by rotation. If the number of Directors is not a multiple of three, then the number nearest to but
not less than one-third shall be the number of retiring Directors, provided that every Director shall be
subject to retirement by rotation at least once every three years. The Directors to retire at each annual
general meeting shall be those who have been in office longest since their last re-election or
appointment and, as between persons who became or were last re-elected Directors on the same day,
those to retire shall (unless they otherwise agree among themselves) be determined by lot.
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(b) Power to Allot and Issue Shares and other Securities
Subject to the provisions of the Companies Act, the Memorandum and Articles and, where
applicable, the Listing Rules, and without prejudice to any rights or restrictions for the time being
attached to any Shares, the Board may allot, issue, grant options over or otherwise dispose of Shares
with or without preferred, deferred or other rights or restrictions, whether with regard to dividend,
voting, return of capital or otherwise, to such persons, at such times, for such consideration and on
such terms and conditions as it in its absolute discretion thinks fit, provided that no Shares shall be
issued at a discount to their par value.
The Company may issue rights, options, warrants or convertible securities or securities of a
similar nature conferring the right upon the holders thereof to subscribe for, purchase or receive any
class of Shares or other securities in the Company on such terms as the Board may from time to time
determine.
Neither the Company nor the Board shall be obliged, when making or granting any allotment
of, offer of, option over or disposal of Shares, to make, or make available, any such allotment, offer,
option or Shares to members or others whose registered addresses are in any particular territory or
territories where, in the absence of a registration statement or other special formalities, this is or may,
in the opinion of the Board, be unlawful or impracticable. However, no member affected as a result of
the foregoing shall be, or be deemed to be, a separate class of members for any purpose whatsoever.
(c) Power to Dispose of the Assets of the Company or any of its Subsidiaries
Subject to the provisions of the Companies Act, the Memorandum and Articles and any
directions given by special resolution of the Company, the Board may exercise all powers and do all
acts and things which may be exercised or done by the Company to dispose of the assets of the
Company or any of its subsidiaries. No alteration to the Memorandum or Articles and no direction
given by special resolution of the Company shall invalidate any prior act of the Board which would
have been valid if such alteration or direction had not been made or given.
(d) Borrowing Powers
The Board may exercise all the powers of the Company to raise or borrow money, secure the
payment of any sum or sums of money for the purposes of the Company, mortgage or charge all or any
part of its undertaking, property and uncalled capital of the Company, and, subject to the Companies
Act, issue debentures, debenture stock, bonds and other securities, whether outright or as collateral
security for any debt, liability or obligation of the Company or of any third party.
(e) Remuneration
A Director shall be entitled to receive such sums as shall from time to time be determined by
the Board or the Company in general meetings. The Directors shall also be entitled to be repaid all
expenses reasonably incurred by them in connection with attendance at meetings of the Board or
committees of the Board, or general meetings of the Company or separate meetings of the holders of
any class of Shares or debentures of the Company, or otherwise in connection with the business of the
Company and the discharge of their duties as Directors, and/or to receive fixed allowances in respect
thereof as may be determined by the Board.
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The Board or the Company in general meetings may also approve additional remuneration to
any Director for any services which in the opinion of the Board or the Company in general meetings go
beyond such Director’s ordinary routine work as a Director.
(f) Compensation or Payments for Loss of Office
There are no provisions in the Articles relating to compensation or payment for loss of office.
(g) Loans to Directors
There are no provisions in the Articles relating to making of loans to Directors.
(h) Disclosure of Interest in Contracts with the Company or any of its Subsidiaries
With the exception of the office of auditor of the Company, a Director may hold any other
office or place of profit with the Company in conjunction with his/her office of Director for such
period and upon such terms as the Board may determine, and may be paid such extra remuneration for
that other office or place of profit, in whatever form, in addition to any remuneration provided for by or
pursuant to the Articles. A Director may be or become a director, officer or member of any other
company in which the Company may be interested, and shall not be liable to account to the Company
or the members for any remuneration or other benefits received by him/her as a director, officer or
member of such other company.
No person shall be disqualified from the office of Director or alternate Director or prevented by
such office from contracting with the Company, nor shall any such contract or any other contract or
transaction entered into by or on behalf of the Company in which any Director or alternate Director is
in any way interested be or be liable to be avoided, nor shall any Director or alternate Director so
contracting or being so interested be liable to account to the Company for any profit realized by or
arising in connection with any such contract or transaction by reason of such Director or alternate
Director holding such office or of the fiduciary relationship established by it, provided that the nature
of interest of any Director or alternate Director in any such contract or transaction shall be disclosed by
such Director or alternate Director at or prior to the consideration and vote thereon.
A Director shall not vote on (or be counted in the quorum in relation to) any resolution of the
Board in respect of any contract or arrangement or other proposal in which he/she or any of his/her
close associate(s) has a material interest, and if he/she shall do so his/her vote shall not be counted and
he/she shall not be counted in the quorum for such resolution. This prohibition shall not apply to any of
the following matters:
(i) the giving of any security or indemnity to the Director or his/her close associate(s) in
respect of money lent or obligations incurred or undertaken by him/her or any of them at
the request of or for the benefit of the Company or any of its subsidiaries;
(ii) the giving of any security or indemnity to a third party in respect of a debt or obligation of
the Company or any of its subsidiaries for which the Director or his/her close associate(s)
has/have himself/herself/themselves assumed responsibility in whole or in part whether
alone or jointly under a guarantee or indemnity or by the giving of security;
(iii) any proposal concerning an offer of Shares, debentures or other securities of or by the
Company or any other company which the Company may promote or be interested in for
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subscription or purchase, where the Director or his/her close associate(s) is/are or is/are to
be interested as a participant in the underwriting or sub- underwriting of the offer;
(iv) any proposal or arrangement concerning the benefit of employees of the Company or any
of its subsidiaries, including the adoption, modification or operation of (A) any
employees’ share scheme or any share incentive or share option scheme under which the
Director or his/her close associate(s) may benefit or (B) any pension fund or retirement,
death or disability benefits scheme which relates to the Director, his/her close associates
and employees of the Company or any of its subsidiaries and does not provide in respect
of any Director or his/her close associate(s) any privilege or advantage not generally
accorded to the class of persons to which such scheme or fund relates; and
(v) any contract or arrangement in which the Director or his/her close associate(s) is/are
interested in the same manner as other holders of Shares, debentures or other securities of
the Company by virtue only of his/her/their interest in those Shares, debentures or other
securities.
2.3 Proceedings of the Board
The Board may meet anywhere in the world for the despatch of business and may adjourn and
otherwise regulate its meetings as it thinks fit. Unless otherwise determined, two Directors including at
least the chairman of the Company present in person from the start and throughout such meeting shall
be a quorum. Questions arising at any meeting shall be determined by a majority of votes. In the case
of an equality of votes, the chairman of the meeting shall have a second or casting vote.
Notwithstanding anything to the contrary contained herein, resolutions of the Board regarding the
appointment or removal of the chief executive officer and the chairman of the Company shall be
determined by at least two-thirds (2/3) of the votes held by all the Directors.
2.4 Alterations to the Constitutional Documents and the Company’s Name
The Memorandum and Articles may only be altered or amended, and the name of the Company
may only be changed, by special resolution of the Company.
2.5 Meetings of Members
(a) Special and Ordinary resolutions
A special resolution must be passed by a majority of not less than three-fourths of the voting
rights held by such members as, being entitled so to do, vote in person or by proxy or, in the case of
any members which is a corporation, by its duly authorized representative(s) or by proxy, at a general
meeting of which notice specifying the intention to propose the resolution as a special resolution has
been duly given. A special resolution may also be approved in writing by all the members entitled to
vote at a general meeting in one or more instruments each signed by one or more of such members.
An ordinary resolution, in contrast, is a resolution passed by a simple majority of the voting
rights held by such members as, being entitled to do so, vote in person or by proxy or, in the case of
any member which is a corporation, by its duly authorized representative(s) or by proxy, at a general
meeting. An ordinary resolution may also be approved in writing by all the members entitled to vote at
a general meeting in one or more instruments each signed by one or more of such members.
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Subject to paragraph 2.1(b) of this section, the provisions of special resolutions and ordinary
resolutions shall apply mutatis mutandis to any resolutions passed by the holders of any class of shares.
(b) Voting Rights and Right to Demand a Poll
Subject to any rights, restrictions or privileges as to voting for the time being attached to any class
or classes of Shares, at any general meeting: (a) on a poll every member present in person (or, in the case
of a member being a corporation, by its duly authorized representative) or by proxy shall have one vote
for every Share and (b) on a show of hands every member who is present in person (or, in the case of a
member being a corporation, by its duly authorized representative) or by proxy shall have one vote.
In the case of joint holders, the vote of the senior holder who tenders a vote, whether in person
or by proxy shall be accepted to the exclusion of the votes of the other join holders, and seniority shall
be determined by the order in which the names of the holders stand in the register of members of the
Company.
No person shall be counted in a quorum or be entitled to vote at any general meeting unless he/
she is registered as a member on the record date for such meeting, nor unless all calls or other monies
then payable by him/her in respect of the relevant Shares have been paid.
At any general meeting a resolution put to the vote of the meeting shall be decided by way of
poll save that the chairman of the meeting may, pursuant to the Listing Rules, allow a resolution which
relates purely to a procedural or administrative matter to be voted on by a show of hands.
Any corporation or other non-natural person which is a member of the Company may in
accordance with its constitutional documents, or in the absence of such provision by resolution of its
directors or other governing body or by power of attorney, authorize such person as it thinks fit to act
as its representative at any meeting of the Company or of any class of members, and the person so
authorized shall be entitled to exercise the same powers as the corporation or other non-natural person
could exercise as if it were a natural person member of the Company.
If a recognized clearing house or its nominee(s) is a member of the Company, it may appoint
proxies or authorize such person or persons as it thinks fit to act as its representative(s), who enjoy
rights equivalent to the rights of other members, at any meeting of the Company (including but not
limited to general meetings and creditors meetings) or at any meeting of any class of members of the
Company, provided that if more than one person is so authorized, the authorization shall specify the
number and class of Shares in respect of which each such person is so authorized. A person so
authorized shall be entitled to exercise the same rights and powers on behalf of the recognized clearing
house or its nominee(s) as if such person were a natural person member of the Company, including the
right to speak and vote individually on a show of hands or on a poll.
All members of the Company (including a member which is a recognized clearing house (or its
nominee(s))) shall have the right to (i) speak at a general meeting and (ii) vote at a general meeting
except where a member is required by the Listing Rules to abstain from voting to approve the matter
under consideration. Where any member is, under the Listing Rules, required to abstain from voting on
any particular resolution or restricted to voting only for or only against any particular resolution, any
votes cast by or on behalf of such member in contravention of such requirement or restriction shall not
be counted. Otherwise, all members shall have the right to vote at a general meeting.
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(c) Annual General Meetings and Extraordinary General Meetings
The Company must hold a general meeting for each financial year as its annual general
meeting. Such meeting shall be specified as such in the notices calling it, and must be held within six
months after the end of the Company’s financial year.
The Board may convene an extraordinary general meeting whenever it thinks fit. In addition,
one or more members holding, as at the date of deposit of the requisition, in aggregate not less than
one-tenth of the voting rights (on a one vote per Share basis) in the share capital of the Company may
make a requisition to convene an extraordinary general meeting and/or add resolutions to the agenda of
a general meeting. Such requisition, which must state the objects and the resolutions to be added to the
agenda of the meeting and must be signed by the requisitionists, shall be deposited at the principal
place of business of the Company in Hong Kong or, in the event the Company ceases to have such a
principal place of business, the registered office of the Company. If the Board does not within 21 days
from the date of deposit of such requisition duly proceed to convene a general meeting to be held
within the following 21 days, the requisitionists or any of them representing more than one-half of the
total voting rights of all the requisitionists may themselves convene a general meeting, but any such
meeting so convened shall be held no later than the day falling three months after the expiration of the
said 21-day period. A general meeting convened by requisitionists shall be convened in the same
manner as nearly as possible as that in which general meetings are to be convened by the Board, and
all reasonable expenses incurred by the requisitionists shall be reimbursed to the requisitionists by the
Company.
(d) Notices of Meetings and Business to be Conducted
An annual general meeting of the Company shall be called by at least 21 days’ notice in
writing, and any other general meeting of the Company shall be called by at least 14 days’ notice in
writing. The notice shall be exclusive of the day on which it is served or deemed to be served and of
the day for which it is given, and must specify the date, time, place and agenda of the meeting, the
particulars of the resolution(s) to be considered at the meeting and the general nature of the business to
be considered at the meeting.
Except where otherwise expressly stated, any notice or document (including a share certificate)
to be given or issued under the Articles shall be in writing, and may be served by the Company on any
member personally, by post to such member’s registered address, (to the extent permitted by the
Listing Rules and all applicable laws and regulations) by electronic means or (in the case of a notice)
by advertisement published in the manner prescribed under the Listing Rules.
Notwithstanding that a meeting of the Company is called by shorter notice than as specified
above, if permitted by the Listing Rules, such meeting shall be deemed to have been duly called if it is
so agreed:
(i) in the case of an annual general meeting, by all members of the Company entitled to attend
and vote thereat; and
(ii) in the case of an extraordinary general meeting, by a majority in number of the members
having a right to attend and vote at the meeting holding not less than 95% of the total
voting rights held by such members.
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If, after the notice of a general meeting has been sent but before the meeting is held, or after the
adjournment of a general meeting but before the adjourned meeting is held (whether or not notice of
the adjourned meeting is required), the Board in its absolute discretion consider that it is impractical or
unreasonable for any reason to hold a general meeting on the date or at the time and place specified in
the notice calling such meeting, it may change or postpone the meeting to another date, time and place.
The Board also has the power to provide in every notice calling a general meeting that in the
event of a gale warning, a black rainstorm warning or extreme conditions is/are in force at any time on
the day of the general meeting (unless such warning is canceled at least a minimum period of time
prior to the general meeting as the Board may specify in the relevant notice), the meeting shall be
postponed without further notice to be reconvened on a later date.
Where a general meeting is postponed:
(A) the Company shall endeavor to cause a notice of such postponement, which shall set out
the reason for the postponement in accordance with the Listing Rules, to be placed on the
Company’s website and published on the Stock Exchange’s website as soon as practicable,
provided that failure to place or publish such notice shall not affect the automatic
postponement of a general meeting due to a gale warning, a black rainstorm warning or
extreme conditions being in force on the day of the general meeting;
(B) the Board shall fix the date, time and place for the reconvened meeting and at least seven
clear days’ notice shall be given for the reconvened meeting. Such notice shall specify the
date, time and place at which the postponed meeting will be reconvened and the date and
time by which proxies shall be submitted in order to be valid at such reconvened meeting
(provided that any proxy submitted for the original meeting shall continue to be valid for
the reconvened meeting unless revoked or replaced by a new proxy); and
(C) only the business set out in the notice of the original meeting shall be considered at the
reconvened meeting, and notice given for the reconvened meeting does not need to specify
the business to be considered at the reconvened meeting, nor shall any accompanying
documents be required to be recirculated. Where any new business is to be considered at
such reconvened meeting, the Company shall give a fresh notice for such reconvened
meeting in accordance with the Articles.
(e) Quorum for Meetings and Separate Class Meetings
No business shall be considered at any general meeting unless a quorum is present when the
meeting proceeds to business, and continues to be present until the conclusion of the meeting.
The quorum for a general meeting shall be two members present in person (or in the case of a
member being a corporation, by its duly authorized representative) or by proxy and entitled to vote. In
respect of a separate class meeting (other than an adjourned meeting) convened to approve the
variation of class rights, the necessary quorum shall be two persons holding or representing by proxy
not less than one-third of the issued Shares of that class.
(f) Proxies
Any member (including a member which is a Clearing House (or its nominee(s))) of the
Company entitled to attend and vote at a meeting of the Company is entitled to appoint another person
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(being a natural person) as his/her proxy to attend and vote in his/her place. A member who is the
holder of two or more Shares may appoint more than one proxy to represent him/her and vote on his/
her behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member of
the Company and shall be entitled to exercise the same powers on behalf of a member who is a natural
person and for whom he/she acts as proxy as such member could exercise. In addition, a proxy shall be
entitled to exercise the same powers on behalf of a member which is a corporation and for which he/
she acts as proxy as such member could exercise as if it were a natural person member present in
person at any general meeting. On a poll or on a show of hands, votes may be given either personally
(or, in the case of a member being a corporation, by its duly authorized representative) or by proxy.
The instrument appointing a proxy shall be in writing and executed under the hand of the
appointor or of his/her attorney duly authorized in writing, or if the appointor is a corporation or other
non-natural person, either under its seal or under the hand of a duly authorized representative.
The Board shall, in the notice convening any meeting or adjourned meeting, or in an instrument
of proxy sent out by the Company, specify the manner by which the instrument appointing a proxy
shall be deposited and the place and time (being no later than the time appointed for the
commencement of the meeting or adjourned meeting to which the instrument of proxy relates) at which
such instrument shall be deposited.
Every instrument of proxy, whether for a specified meeting or otherwise, shall be in such form
that complies with the Listing Rules as the Board may from time to time approve. Any form issued to a
member for appointing a proxy to attend and vote at a general meeting at which any business is to be
considered shall be such as to enable the member, according to his/her intentions, to instruct the proxy
to vote in favor of or against (or, in default of instructions, to exercise the discretion of the proxy in
respect of) each resolution dealing with any such business.
2.6 Accounts and Audit
The Board shall cause to be kept such books of account as are necessary to give a true and fair
view of the state of the Company’s affairs and to explain its transactions in accordance with the
Companies Act.
The books of accounts of the Company shall be kept at the principal place of business of the
Company in Hong Kong or, subject to the provisions of the Companies Act, at such other place or
places as the Board thinks fit and shall always be open to inspection by any Director. No member (not
being a Director) or other person shall have any right to inspect any account, book or document of the
Company except as conferred by the Companies Act or ordered by a court of competent jurisdiction or
as authorized by the Board or the Company in general meeting.
The Board shall cause to be prepared and laid before the Company at every annual general
meeting a profit and loss account for the period since the preceding account, together with a balance
sheet as at the date to which the profit and loss account is made up, a Directors’ report with respect to
the profit or loss of the Company for the period covered by the profit and loss account and the state of
the Company’s affairs as at the end of such period, an auditors’ report on such accounts and such other
reports and accounts as may be required by law and the Listing Rules.
The members shall at each annual general meeting appoint auditor(s) to hold office by ordinary
resolution of the members until the conclusion of the next annual general meeting on such terms and
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with such duties as may be agreed with the Board. The auditors’ remuneration shall be fixed by the
members at the annual general meeting at which they are appointed by ordinary resolution of the
members or by the Board if authority is so delegated by the members. The members may, at any
general meeting convened and held in accordance with the Articles, remove the auditors by ordinary
resolution at any time before the expiration of the term of office and shall, by ordinary resolution, at
that meeting appoint new auditors in their place for the remainder of the term.
The accounts of the Company shall be prepared and audited based on the generally accepted
accounting principles of Hong Kong, the International Accounting Standards or such other standards as
may be permitted by the Stock Exchange.
2.7 Dividends and other Methods of Distribution
Subject to the Companies Act and the Articles, the Company may by ordinary resolution
resolve to declare dividends and other distributions on Shares in issue in any currency and authorize
payment of the dividends or distributions out of the funds of the Company lawfully available therefor,
provided that (i) no dividends shall exceed the amount recommended by the Board, and (ii) no
dividends or distributions shall be paid except out of the realized or unrealized profits of the Company,
out of the share premium account or as otherwise permitted by law.
The Board may from time to time pay to the members of the Company such interim dividends
as appear to the Board to be justified by the financial conditions and the profits of the Company. In
addition, the Board may from time to time declare and pay special dividends on Shares of such
amounts and on such dates as it thinks fit.
Except as otherwise provided by the rights attached to any Shares, all dividends and other
distributions shall be paid according to the amounts paid up on the Shares that a member holds during
the period in respect of which the dividends and distributions are paid. No amount paid up on a Share
in advance of calls shall for this purpose be treated as paid up on the Share.
The Board may deduct from any dividends or other distributions payable to any member of the
Company all sums of money (if any) then payable by him/her to the Company on account of calls or
otherwise. The Board may retain any dividends or distributions payable on or in respect of a Share
upon which the Company has a lien, and may apply the same in or towards satisfaction of the debts,
liabilities or engagements in respect of which the lien exists.
No dividends or other distributions payable by the Company on or in respect of any Share shall
carry interest against the Company.
Where the Board or the Company in general meeting has resolved that a dividend should be
paid or declared, the Board may further resolve:
(a) that such dividend be satisfied in whole or in part in the form of an allotment of Shares
credited as fully paid on the basis that the Shares so allotted shall be of the same class as
the class already held by the allottee, provided that the members entitled thereto will be
entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment;
or
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(b) that the members entitled to such dividend will be entitled to elect to receive an allotment
of Shares credited as fully paid in lieu of the whole or such part of the dividend as the
Board may think fit on the basis that the Shares so allotted shall be of the same class as the
class already held by the allottee.
Upon the recommendation of the Board, the Company may by ordinary resolution resolve in
respect of any one particular dividend of the Company determine that notwithstanding the foregoing, a
dividend may be satisfied wholly in the form of an allotment of Shares credited as fully paid without
offering any right to members to elect to receive such dividend in cash in lieu of such allotment.
Any dividends, distributions or other monies payable in cash in respect of Shares may be paid
by wire transfer to the holder of such Shares or by check or warrant sent by post to the registered
address of such holder, or in the case of joint holders, to the registered address of the holder who is first
named on the register of members of the Company, or to such person and to such address as the holder
or joint holders may in writing direct. Any one of two or more joint holders may give effectual receipts
for any dividends, distributions or other monies payable in respect of the Shares held by them as joint
holders.
Whenever the Board or the Company in general meeting has resolved that a dividend be paid or
declared, the Board may further resolve that such dividend be satisfied in whole or in part by the
distribution of specific assets of any kind.
Any dividends or other distributions which remain unclaimed for six years from the date on
which such dividends or distributions become payable shall be forfeited and shall revert to the
Company.
2.8 Inspection of Corporate Records
For so long as any part of the share capital of the Company is listed on the Stock Exchange, any
member may inspect any register of members of the Company maintained in Hong Kong (except when
the register of members is closed in accordance with the Companies Ordinance) without charge and
require the provision to him/her of copies or extracts of such register in all respects as if the Company
were incorporated under and were subject to the Companies Ordinance.
2.9 Rights of Minorities in relation to Fraud or Oppression
There are no provisions in the Articles concerning the rights of minority members in relation to
fraud or oppression. However, certain remedies may be available to members of the Company under
the Cayman Islands laws, as summarized in paragraph 3.6 below.
2.10 Procedures on Liquidation
Subject to the Companies Act, the members of the Company may by special resolution resolve
to wind up the Company voluntarily or by the court.
Subject to any rights, privileges or restrictions as to the distribution of available surplus assets
on liquidation for the time being attached to any class or classes of Shares:
(a) if the assets available for distribution among the members of the Company are more than
sufficient to repay the whole of the Company’s paid up capital at the commencement of
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the winding up, the surplus shall be distributed pari passu among such members in
proportion to the amount paid up on the Shares held by them at the commencement of the
winding up; and
(b) if the assets available for distribution among the members of the Company are insufficient
to repay the whole of the Company’s paid up capital, such assets shall be distributed so
that, as nearly as may be, the losses shall be borne by the members in proportion to the
capital paid up, or ought to be paid up, on the Shares held by them at the commencement
of the winding up.
If the Company is wound up (whether the liquidation is voluntary or compelled by the court),
the liquidator may, with the approval of a special resolution and any other approval required by the
Companies Act, divide among the members in kind the whole or any part of the assets of the
Company, whether the assets consist of property of one kind or different kinds, and the liquidator may,
for such purpose, set such value as he/she deems fair upon any one or more class or classes of property
to be so divided and may determine how such division shall be carried out as between the members or
different classes of members and the members within each class. The liquidator may, with the like
approval, vest any part of the assets in trustees upon such trusts for the benefit of the members as the
liquidator thinks fit, provided that no member shall be compelled to accept any shares or other property
upon which there is a liability.
3. COMPANY LAWS OF THE CAYMAN ISLANDS
The Company was incorporated in the Cayman Islands as an exempted company on April 21,
2015 subject to the Companies Act. Certain provisions of the company laws of the Cayman Islands are
set out below but this section does not purport to contain all applicable qualifications and exceptions or
to be a complete review of all matters of the company laws of the Cayman Islands, which may differ
from equivalent provisions in jurisdictions with which interested parties may be more familiar.
3.1 Company Operations
An exempted company such as the Company must conduct its operations mainly outside the
Cayman Islands. An exempted company is also required to file an annual return each year with the
Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount of its
authorized share capital.
3.2 Share Capital
Under the Companies Act, a Cayman Islands company may issue ordinary, preference or
redeemable shares or any combination thereof. Where a company issues shares at a premium, whether
for cash or otherwise, a sum equal to the aggregate amount or value of the premium on those shares
shall be transferred to an account, to be called the share premium account. At the option of a company,
these provisions may not apply to premium on shares of that company allotted pursuant to any
arrangements in consideration of the acquisition or cancelation of shares in any other company and
issued at a premium. The share premium account may be applied by the company subject to the
provisions, if any, of its memorandum and articles of association, in such manner as the company may
from time to time determine including, but without limitation, the following:
(a) paying distributions or dividends to members;
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(b) paying up unissued shares of the company to be issued to members as fully paid bonus
shares;
(c) any manner provided in section 37 of the Companies Act;
(d) writing-off the preliminary expenses of the company; and
(e) writing-off the expenses of, or the commission paid or discount allowed on, any issue of
shares or debentures of the company.
Notwithstanding the foregoing, no distribution or dividend may be paid to members out of the
share premium account unless, immediately following the date on which the distribution or dividend is
proposed to be paid, the company will be able to pay its debts as they fall due in the ordinary course of
business.
Subject to confirmation by the court, a company limited by shares or a company limited by
guarantee and having a share capital may, if authorized to do so by its articles of association, by special
resolution reduce its share capital in any way.
3.3 Financial Assistance to Purchase Shares of a Company or its Holding Company
There are no statutory prohibitions in the Cayman Islands on the granting of financial assistance
by a company to another person for the purchase of, or subscription for, its own, its holding company’s
or a subsidiary’s shares. Therefore, a company may provide financial assistance provided the directors
of the company, when proposing to grant such financial assistance, discharge their duties of care and
act in good faith, for a proper purpose and in the interests of the company. Such assistance should be
on an arm’s-length basis.
3.4 Purchase of Shares and Warrants by a Company and its Subsidiaries
A company limited by shares or a company limited by guarantee and having a share capital
may, if so authorized by its articles of association, issue shares which are to be redeemed or are liable
to be redeemed at the option of the company or a member and, for the avoidance of doubt, it shall be
lawful for the rights attaching to any shares to be varied, subject to the provisions of the company’s
articles of association, so as to provide that such shares are to be or are liable to be so redeemed. In
addition, such a company may, if authorized to do so by its articles of association, purchase its own
shares, including any redeemable shares; an ordinary resolution of the company approving the manner
and terms of the purchase will be required if the articles of association do not authorize the manner and
terms of such purchase. A company may not redeem or purchase its shares unless they are fully paid.
Furthermore, a company may not redeem or purchase any of its shares if, as a result of the redemption
or purchase, there would no longer be any issued shares of the company other than shares held as
treasury shares. In addition, a payment out of capital by a company for the redemption or purchase of
its own shares is not lawful unless, immediately following the date on which the payment is proposed
to be made, the company shall be able to pay its debts as they fall due in the ordinary course of
business.
Shares that have been purchased or redeemed by a company or surrendered to the company
shall not be treated as canceled but shall be classified as treasury shares if held in compliance with the
requirements of section 37A(1) of the Companies Act. Any such shares shall continue to be classified
as treasury shares until such shares are either canceled or transferred pursuant to the Companies Act.
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A Cayman Islands company may be able to purchase its own warrants subject to and in
accordance with the terms and conditions of the relevant warrant instrument or certificate. Thus there is
no requirement under the Cayman Islands laws that a company’s memorandum or articles of
association contain a specific provision enabling such purchases. The directors of a company may
under the general power contained in its memorandum of association be able to buy, sell and deal in
personal property of all kinds.
A subsidiary may hold shares in its holding company and, in certain circumstances, may
acquire such shares.
3.5 Dividends and Distributions
Subject to a solvency test, as prescribed in the Companies Act, and the provisions, if any, of the
company’s memorandum and articles of association, a company may pay dividends and distributions
out of its share premium account. In addition, based upon English case law which is likely to be
persuasive in the Cayman Islands, dividends may be paid out of profits.
For so long as a company holds treasury shares, no dividend may be declared or paid, and no
other distribution (whether in cash or otherwise) of the company’s assets (including any distribution of
assets to members on a winding up) may be made, in respect of a treasury share.
3.6 Protection of Minorities and Shareholders’ Suits
It can be expected that the Cayman Islands courts will ordinarily follow English case law
precedents (particularly the rule in the case of Foss vs. Harbottle and the exceptions to that rule) which
permit a minority member to commence a representative action against or derivative actions in the
name of the company to challenge acts which are ultra vires, illegal, fraudulent (and performed by
those in control of the Company) against the minority, or represent an irregularity in the passing of a
resolution which requires a qualified (or special) majority which has not been obtained.
Where a company (not being a bank) is one which has a share capital divided into shares, the
court may, on the application of members holding not less than one-fifth of the shares of the company
in issue, appoint an inspector to examine the affairs of the company and, at the direction of the court, to
report on such affairs. In addition, any member of a company may petition the court, which may make
a winding up order if the court is of the opinion that it is just and equitable that the company should be
wound up.
In general, claims against a company by its members must be based on the general laws of
contract or tort applicable in the Cayman Islands or be based on potential violation of their individual
rights as members as established by a company’s memorandum and articles of association.
3.7 Disposal of Assets
There are no specific restrictions on the power of directors to dispose of assets of a company,
however, the directors are expected to exercise certain duties of care, diligence and skill to the standard
that a reasonably prudent person would exercise in comparable circumstances, in addition to fiduciary
duties to act in good faith, for proper purpose and in the best interests of the company under English
common law (which the Cayman Islands courts will ordinarily follow).
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3.8 Accounting and Auditing Requirements
A company must cause proper records of accounts to be kept with respect to: (i) all sums of
money received and expended by it; (ii) all sales and purchases of goods by it; and (iii) its assets and
liabilities.
Proper books of account shall not be deemed to be kept if there are not kept such books as are
necessary to give a true and fair view of the state of the company’s affairs and to explain its
transactions.
If a company keeps its books of account at any place other than at its registered office or any
other place within the Cayman Islands, it shall, upon service of an order or notice by the Tax
Information Authority pursuant to the Tax Information Authority Act (2021 Revision) of the Cayman
Islands, make available, in electronic form or any other medium, at its registered office copies of its
books of account, or any part or parts thereof, as are specified in such order or notice.
3.9 Exchange Control
There are no exchange control regulations or currency restrictions in effect in the Cayman
Islands.
3.10 Taxation
Pursuant to section 6 of the Tax Concessions Act (2018 Revision) of the Cayman Islands, the
Company has obtained an undertaking from the Governor-in-Cabinet that:
(a) no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or
income or gains or appreciations shall apply to the Company or its operations; and
(b) no tax be levied on profits, income, gains or appreciations or which is in the nature of
estate duty or inheritance tax shall be payable by the Company:
(i) on or in respect of the shares, debentures or other obligations of the Company; or
(ii) by way of withholding in whole or in part of any relevant payment as defined in
section 6(3) of the Tax Concessions Act (2018 Revision).
The undertaking for the Company is for a period of 20 years from March 7, 2022.
The Cayman Islands currently levy no taxes on individuals or corporations based upon profits,
income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty.
There are no other taxes likely to be material to the Company levied by the Government of the Cayman
Islands save for certain stamp duties which may be applicable, from time to time, on certain
instruments.
3.11 Stamp Duty on Transfers
No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands
companies save for those which hold interests in land in the Cayman Islands.
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3.12 Loans to Directors
There is no express provision prohibiting the making of loans by a company to any of its
directors. However, the company’s articles of association may provide for the prohibition of such loans
under specific circumstances.
3.13 Inspection of Corporate Records
The members of a company have no general right to inspect or obtain copies of the register of
members or corporate records of the company. They will, however, have such rights as may be set out
in the company’s articles of association.
3.14 Register of Members
A Cayman Islands exempted company may maintain its principal register of members and any
branch registers in any country or territory, whether within or outside the Cayman Islands, as the
company may determine from time to time. There is no requirement for an exempted company to make
any returns of members to the Registrar of Companies in the Cayman Islands. The names and
addresses of the members are, accordingly, not a matter of public record and are not available for
public inspection. However, an exempted company shall make available at its registered office, in
electronic form or any other medium, such register of members, including any branch register of
member, as may be required of it upon service of an order or notice by the Tax Information Authority
pursuant to the Tax Information Authority Act (2021 Revision) of the Cayman Islands.
3.15 Register of Directors and Officers
Pursuant to the Companies Act, the Company is required to maintain at its registered office a
register of directors, alternate directors and officers. The Registrar of Companies shall make available
the list of the names of the current directors of the Company (and, where applicable, the current
alternate directors of the Company) for inspection by any person upon payment of a fee by such
person. A copy of the register of directors and officers must be filed with the Registrar of Companies
in the Cayman Islands, and any change must be notified to the Registrar of Companies within 30 days
of any change in such directors or officers, including a change of the name of such directors or officers.
3.16 Winding up
A Cayman Islands company may be wound up by: (i) an order of the court; (ii) voluntarily by
its members; or (iii) under the supervision of the court.
The court has authority to order winding up in a number of specified circumstances including
where, in the opinion of the court, it is just and equitable that such company be so wound up.
A voluntary winding up of a company (other than a limited duration company, for which
specific rules apply) occurs where the company resolves by special resolution that it be wound up
voluntarily or where the company in general meeting resolves that it be wound up voluntarily because
it is unable to pay its debt as they fall due. In the case of a voluntary winding up, the company is
obliged to cease to carry on its business from the commencement of its winding up except so far as it
may be beneficial for its winding up. Upon appointment of a voluntary liquidator, all the powers of the
directors cease, except so far as the company in general meeting or the liquidator sanctions their
continuance.
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In the case of a members’ voluntary winding up of a company, one or more liquidators are
appointed for the purpose of winding up the affairs of the company and distributing its assets.
As soon as the affairs of a company are fully wound up, the liquidator must make a report and
an account of the winding up, showing how the winding up has been conducted and the property of the
company disposed of, and call a general meeting of the company for the purposes of laying before it
the account and giving an explanation of that account.
When a resolution has been passed by a company to wind up voluntarily, the liquidator or any
contributory or creditor may apply to the court for an order for the continuation of the winding up
under the supervision of the court, on the grounds that: (i) the company is or is likely to become
insolvent; or (ii) the supervision of the court will facilitate a more effective, economic or expeditious
liquidation of the company in the interests of the contributories and creditors. A supervision order takes
effect for all purposes as if it was an order that the company be wound up by the court except that a
commenced voluntary winding up and the prior actions of the voluntary liquidator shall be valid and
binding upon the company and its official liquidator.
For the purpose of conducting the proceedings in winding up a company and assisting the court,
one or more persons may be appointed to be called an official liquidator(s).The court may appoint to
such office such person or persons, either provisionally or otherwise, as it thinks fit, and if more than
one person is appointed to such office, the court shall declare whether any act required or authorized to
be done by the official liquidator is to be done by all or any one or more of such persons. The court
may also determine whether any and what security is to be given by an official liquidator on his/her
appointment; if no official liquidator is appointed, or during any vacancy in such office, all the
property of the company shall be in the custody of the court.
3.17 Mergers and consolidations
The Companies Act permits mergers and consolidations between Cayman Islands companies
and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a)
“merger” means the merging of two or more constituent companies and the vesting of their
undertaking, property and liabilities in one of such companies as the surviving company, and (b)
“consolidation” means the combination of two or more constituent companies into a consolidated
company and the vesting of the undertaking, property and liabilities of such companies to the
consolidated company. In order to effect such a merger or consolidation, the directors of each
constituent company must approve a written plan of merger or consolidation, which must then be
authorized by (a) a special resolution of each constituent company and (b) such other authorization, if
any, as may be specified in such constituent company’s articles of association. The written plan of
merger or consolidation must be filed with the Registrar of Companies of the Cayman Islands together
with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and
liabilities of each constituent company and an undertaking that a copy of the certificate of merger or
consolidation will be given to the members and creditors of each constituent company and that
notification of the merger or consolidation will be published in the Cayman Islands Gazette. Dissenting
members have the right to be paid the fair value of their shares (which, if not agreed between the
parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject
to certain exceptions. Court approval is not required for a merger or consolidation which is effected in
compliance with these statutory procedures.
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3.18 Mergers and Consolidations involving a Foreign Company
Where the merger or consolidation involves a foreign company, the procedure is similar, save
that with respect to the foreign company, the directors of the Cayman Islands exempted company are
required to make a declaration to the effect that, having made due enquiry, they are of the opinion that
the requirements set out below have been met: (i) that the merger or consolidation is permitted or not
prohibited by the constitutional documents of the foreign company and by the laws of the jurisdiction
in which the foreign company is incorporated, and that those laws and any requirements of those
constitutional documents have been or will be complied with; (ii) that no petition or other similar
proceeding has been filed and remains outstanding or order made or resolution adopted to wind up or
liquidate the foreign company in any jurisdictions; (iii) that no receiver, trustee, administrator or other
similar person has been appointed in any jurisdiction and is acting in respect of the foreign company,
its affairs or its property or any part thereof; (iv) that no scheme, order, compromise or other similar
arrangement has been entered into or made in any jurisdiction whereby the rights of creditors of the
foreign company are and continue to be suspended or restricted.
Where the surviving company is the Cayman Islands exempted company, the directors of the
Cayman Islands exempted company are further required to make a declaration to the effect that, having
made due enquiry, they are of the opinion that the requirements set out below have been met: (i) that
the foreign company is able to pay its debts as they fall due and that the merger or consolidated is bona
fide and not intended to defraud unsecured creditors of the foreign company; (ii) that in respect of the
transfer of any security interest granted by the foreign company to the surviving or consolidated
company (a) consent or approval to the transfer has been obtained, released or waived; (b) the transfer
is permitted by and has been approved in accordance with the constitutional documents of the foreign
company; and (c) the laws of the jurisdiction of the foreign company with respect to the transfer have
been or will be complied with; (iii) that the foreign company will, upon the merger or consolidation
becoming effective, cease to be incorporated, registered or exist under the laws of the relevant foreign
jurisdiction; and (iv) that there is no other reason why it would be against the public interest to permit
the merger or consolidation.
3.19 Reconstructions and Amalgamations
Reconstructions and amalgamations may be approved by (i) 75% in value of the members or
class of members or (ii) a majority in number representing 75% in value of the creditors or class of
creditors, in each case, depending on the circumstances, as are present at a meeting called for such
purpose and thereafter sanctioned by the Grand Court of the Cayman Islands. Whilst a dissenting
member has the right to express to the court his/her view that the transaction for which approval is
being sought would not provide the members with a fair value for their shares, it can be expected that
the court would approve the transaction if it is satisfied that (i) the company is not proposing to act
illegally or beyond the scope of our corporate authority and the statutory provisions as to majority vote
have been complied with, (ii) the members have been fairly represented at the meeting in question,
(iii) the transaction is such as a businessman would reasonable approve and (iv) the transaction is not
one that would more properly be sanctioned under some other provisions of the Companies Act or that
would amount to a “fraud on the minority”.
If the transaction is approved, no dissenting member would have any rights comparable to the
appraisal rights (namely the right to receive payment in cash for the judicially determined value of his/
her shares), which may be available to dissenting members of corporations in other jurisdictions.
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3.20 Takeovers
Where an offer is made by a company for the shares of another company and, within four
months of the offer, the holders of not less than 90% of the shares which are the subject of the offer
accept, the offeror may, at any time within two months after the expiration of that four-month period,
by notice require the dissenting members to transfer their shares on the terms of the offer. A dissenting
member may apply to the Cayman Islands courts within one month of the notice objecting to the
transfer. The burden is on the dissenting member to show that the court should exercise its discretion,
which it will be unlikely to do unless there is evidence of fraud or bad faith or collusion as between the
offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing out
minority members.
3.21 Indemnification
The Cayman Islands laws do not limit the extent to which a company’s articles of association
may provide for indemnification of officers and directors, save to the extent any such provision may be
held by the court to be contrary to public policy, for example, where a provision purports to provide
indemnification against the consequences of committing a crime.
3.22 Economic Substance
The Cayman Islands enacted the International Tax Co-operation (Economic Substance) Act
(2021 Revision) together with the Guidance Notes published by the Cayman Islands Tax Information
Authority from time to time. The Company is required to comply with the economic substance
requirements from July 1, 2019 and make an annual report in the Cayman Islands as to whether or not
it is carrying on any relevant activities and if it is, it must satisfy an economic substance test.
4. GENERAL
Harney Westwood & Riegels, the Company’s legal adviser on Cayman Islands laws, has sent to
the Company a letter of advice summarizing the aspects of the Companies Act set out in section 3
above. This letter, together with copies of the Companies Act, the Memorandum and the Articles, is on
display on the websites of the Stock Exchange and the Company as referred to in the paragraph headed
“Documents delivered to the Registrar of Companies and available on display” in Appendix V. Any
person wishing to have a detailed summary of the Companies Act or advice on the differences between
it and the laws of any jurisdiction with which he/she is more familiar is recommended to seek
independent legal advice.
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APPENDIX IV STATUTORY AND GENERAL INFORMATION
FURTHER INFORMATION ABOUT OUR GROUP
Incorporation
Our Company was incorporated under the laws of the Cayman Islands on April 21, 2015 as an
exempted company with limited liability. Our registered office address is at ICS Corporate Services
(Cayman) Limited, 3-212 Governors Square, 23 Lime TreeBay Avenue, P.O. Box 30746, Seven Mile
Beach, Grand Cayman KY1-1203, Cayman Islands. Accordingly, our Company’s corporate structure
and Memorandum and Articles of Association are subject to the relevant laws of the Cayman Islands.
A summary of our Memorandum and Articles of Association is set out in Appendix III.
Our registered place of business in Hong Kong is at 5/F, Manulife Place, 348 Kwun Tong
Road, Kowloon, Hong Kong. We were registered as a non-Hong Kong company under Part 16 of the
Companies Ordinance on January 17, 2022 with the Registrar of Companies in Hong Kong. Ms. Lai
Siu Kuen has been appointed as the authorized representative of our Company for the acceptance of
service of process in Hong Kong. The address for service of process is 5/F, Manulife Place, 348 Kwun
Tong Road, Kowloon, Hong Kong.
Changes in share capital of our Company
The following sets out the changes in our Company’s issued share capital within the two years
immediately preceding the date of this document:
We issued the following fully paid-up shares with a par value of US$0.00005 each to the
following shareholders:
Shareholder Number of share
Class of
share Issuance Date
Persistent Courage Holdings Limited .................... 78,469,806 Ordinary March 4, 2021
Metropolis Olympia Holdings Limited ................... 10,621,480 Ordinary March 4, 2021
BW Ventures Limited ................................ 20,471,906 Ordinary March 4, 2021
Impressive Appearance Holdings Limited ................ 5,469,740 Ordinary March 4, 2021
Bulldog Group Ltd ................................... 5,561,499(1) Ordinary March 4, 2021
NVMB XII Holdings Limited .......................... 3,853,327 Ordinary April 20, 2021
CANDIAC LIMITED ................................ 3,853,327 Ordinary April 20, 2021
Calorie Fortune Limited ............................... 14,440,000(2) Ordinary June 4, 2021
Lightmap Limited ................................... 8,909,312 Ordinary June 24, 2021
Sky Royal Trading Limited ............................ 2,142,503 Ordinary December 3, 2021
BAI GmbH ......................................... 9,978,440 Series A March 4, 2021
VENTECH CHINA III SICAR ......................... 12,626,440 Series A March 4, 2021
Morningside China TMT Fund IV, L.P. .................. 8,152,400 Series A March 4, 2021
Morningside China TMT Fund IV Co-Investment, L.P. ...... 815,240 Series A March 4, 2021
GGV Capital Select L.P. .............................. 8,427,480 Series A March 4, 2021
BAI GmbH ......................................... 12,352,860 Series B March 4, 2021
GGV Capital V L.P. .................................. 18,724,460 Series B March 4, 2021
GGV Capital V Entrepreneurs Fund L.P. ................. 687,180 Series B March 4, 2021
GGV Capital Select L.P. .............................. 3,529,380 Series B March 4, 2021
BAI GmbH ......................................... 3,245,440 Series C March 4, 2021
GGV Capital V L.P. .................................. 23,479,080 Series C March 4, 2021
GGV Capital V Entrepreneurs Fund L.P. ................. 861,680 Series C March 4, 2021
Morningside China TMT Fund IV, L.P. .................. 22,127,960 Series C March 4, 2021
Morningside China TMT Fund IV Co-Investment, L.P. ...... 2,212,800 Series C March 4, 2021
MORESPARK LIMITED ............................. 14,946,080 Series C-1 March 4, 2021
MORESPARK LIMITED ............................. 9,725,120 Series D March 4 2021
Goldman Sachs Capital Holdings II Pte. Ltd. .............. 24,312,800 Series D December 3, 2021


--- page 495 ---
IV-2
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Shareholder Number of share
Class of
share Issuance Date
GGV Capital Select L.P. .............................. 5,835,080 Series D March 4, 2021
BAI GmbH ......................................... 1,241,640 Series E March 4, 2021
Morningside China TMT Fund IV Co-Investment, L.P. ...... 112,880 Series E March 4, 2021
MORESPARK LIMITED ............................. 827,760 Series E March 4, 2021
GGV Capital Select L.P. .............................. 2,069,420 Series E March 4, 2021
JenCap Squad ....................................... 24,832,980 Series E March 4, 2021
Morningside China TMT Special Opportunity Fund II, L.P. . . 1,128,780 Series E March 4, 2021
JenCap Squad I L.P. .................................. 3,455,920 Series E March 4, 2021
BAI GmbH ......................................... 1,220,120 Series F March 4, 2021
GGV Capital V L.P. .................................. 2,353,840 Series F March 4, 2021
GGV Capital V Entrepreneurs Fund L.P. ................. 86,380 Series F March 4, 2021
MORESPARK LIMITED ............................. 7,320,680 Series F March 4, 2021
GGV Capital Select L.P. .............................. 2,440,220 Series F March 4, 2021
JenCap Squad ....................................... 1,220,120 Series F March 4, 2021
GGV VII Investments Pte. Ltd. ......................... 7,320,700 Series F March 4, 2021
Evolution Special Opportunity Fund I, L.P. ............... 4,243,880 Series F March 4, 2021
Evolution Fund I Co-investment, L.P. .................... 636,580 Series F March 4, 2021
Coatue PE Asia 43 LLC ............................... 3,660,340 Series F March 4, 2021
NVMB XII Holdings Limited .......................... 7,320,680 Series F March 4, 2021
SVF II Calorie Subco (DE) LLC ........................ 48,804,580 Series F March 4, 2021
Sky Royal Trading Limited ............................ 13,497,767 Series F-1 December 3, 2021
Calorie Partner Limited
(3) ............................. 45,205,300 Ordinary March 31, 2022
Note:
(1) Includes 990,000 restricted shares that are subject to voting, transfer and dividend restrictions.
(2) The 14,440,000 shares are restricted shares that are subject to voting, transfer and dividend restrictions.
(3) The 45,205,300 shares are restricted shares that are subject to voting, transfer and dividend restrictions.
Save as disclosed above and in “—Resolutions of our Shareholders dated June 12, 2023”
below, there has been no alteration in the share capital of our Company within the two years
immediately preceding the date of this document.
Changes in the share capital of members of our Group
A summary of the corporate information and the particulars of our subsidiaries are set out in
Note 12 to the Accountant’s Report as set out in Appendix I.
The following sets out the changes in the share or registered capital of members of our Group
within the two years immediately preceding the date of this document:
(a) On January 25, 2021, the registered capital of Beijing Calorie Information Technology Co.,
Ltd. was increased from US$300,000,000 to US$400,000,000.
Save as disclosed above, there has been no alteration in the share capital of any member of our
Group within the two years immediately preceding the date of this document.


--- page 496 ---
IV-3
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Resolutions of our Shareholders dated June 12, 2023
Resolutions of our Shareholders were passed on June 12, 2023, pursuant to which, in summary,
among others, conditional upon Listing (as set out in this document):
(a) the Memorandum and the Articles were approved and adopted conditional on and
effective upon Listing;
(b) the Global Offering, Listing and Over-allotment Option were approved, and our
Directors were authorized to negotiate and agree the Offer Price and to allot and issue
the Offer Shares (including pursuant to the Over-allotment Option);
(c) a general mandate (the “ Sale Mandate ”) was granted to our Directors to allot, issue
and deal with any Shares or securities convertible into Shares and to make or grant
offers, agreements or options which would or might require Shares to be allotted,
issued or dealt with, provided that the number of Shares so allotted, issued or dealt
with or agreed to be allotted, issued or dealt with by our Directors, shall not exceed
20% of the total number of Shares in issue immediately following the completion of
Global Offering;
(d) a general mandate (the “ Repurchase Mandate ”) was granted to our Directors to
repurchase our own Shares on the Stock Exchange or on any other stock exchange on
which the securities of our Company may be listed and which is recognized by the
SFC and the Stock Exchange for this purpose, such number of Shares as will represent
up to 10% of the total number of Shares in issue immediately following completion of
the Global Offering;
(e) the Sale Mandate was extended by the addition to the total number of Shares which
may be allotted and issued or agreed to be allotted and issued by our Directors
pursuant to such general mandate of an amount representing the total number of the
Shares purchased by our Company pursuant to the Repurchase Mandate, provided that
such extended amount shall not exceed 10% of the total number of the Shares in issue
immediately following completion of the Global Offering; and
(f) each issued preferred share be converted into one ordinary share of par value
US$0.00005 each, in each case upon Listing.
Each of the general mandates referred to above will remain in effect until the earliest of:
Š the conclusion of the next annual general meeting of our Company unless, by ordinary
resolution passed at that meeting, the authority is renewed, either unconditionally or
subject to condition;
Š the expiration of the period within which the next annual general meeting of our Company
is required to be held under any applicable laws of the Cayman Islands or the
Memorandum and Articles of Association; and
Š the passing of an ordinary resolution by our Shareholders in a general meeting revoking or
varying the authority.
Explanatory statement on repurchase of our own securities
The following summarizes restrictions imposed by the Listing Rules on share repurchases by a
company listed on the Stock Exchange and provides further information about the repurchase of our
own securities.


--- page 497 ---
IV-4
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Shareholders’ approval
A listed company whose primary listing is on the Stock Exchange may only purchase its shares
on the Stock Exchange, either directly or indirectly, if: (i) the shares proposed to be purchased are
fully-paid up, and (ii) its shareholders have given a specific approval or general mandate by way of an
ordinary resolution of shareholders.
Size of mandate
The exercise in full of the Repurchase Mandate, on the basis of 525,671,987 Shares in issue
immediately following completion of the Global Offering (assuming the Presumptions), could
accordingly result in up to approximately 52,567,198 Shares being repurchased by our Company.
The total number of shares which a listed company may repurchase on the Stock Exchange may
not exceed 10% of the number of issued shares as at the date of the shareholder approval.
Reasons for repurchases
Our Directors believe that it is in the best interests of our Company and Shareholders for our
Directors to have general authority from the Shareholders to enable our Company to repurchase Shares
in the market. Such repurchases may, depending on market conditions and funding arrangements at the
time, lead to an enhancement of the net asset value per Share and/or earnings per Share and will only
be made where our Directors believe that such repurchases will benefit our Company and
Shareholders.
Source of funds
Purchases must be funded out of funds legally available for the purpose in accordance with the
Memorandum and Articles of Association and the applicable Laws of the Cayman Islands.
Our Company shall not purchase its own Shares on the Stock Exchange for a consideration
other than cash or for settlement otherwise than in accordance with the trading rules of the Stock
Exchange from time to time.
Any purchases by our Company may be made out of profits or out of an issue of new shares
made for the purpose of the purchase or, if authorized by the Memorandum and Articles of Association
and subject to the Companies Ordinance, out of capital, and, in the case of any premium payable on the
purchase out of profits or from sums standing to the credit of our share premium account or, if
authorized by the Memorandum and Articles of Association and subject to the Companies Ordinance,
out of capital.
Suspension of repurchase
A listed company shall not repurchase its shares on the Stock Exchange at any time after inside
information has come to its knowledge until the information is made publicly available. In particular,
during the period of one month immediately preceding the earlier of: (i) the date of the board meeting
(as such date is first notified to the Stock Exchange in accordance with the Listing Rules) for the
approval of the company’s results for any year, half-year, quarterly or any other interim period
(whether or not required under the Listing Rules); and (ii) the deadline for the issuer to announce its
results for any year or half-year under the Listing Rules, or quarterly or any other interim period


--- page 498 ---
IV-5
APPENDIX IV STATUTORY AND GENERAL INFORMATION
(whether or not required under the Listing Rules), until the date of the results announcement, the
company may not repurchase its shares on the Stock Exchange unless there are exceptional
circumstances.
Trading restrictions
A listed company is prohibited from repurchasing its shares on the Stock Exchange if the
purchase price is 5% or more than the average closing market price for the five preceding trading days
on which its shares were traded on the Stock Exchange.
A listed company may not repurchase its shares if that repurchase would result in the number of
listed securities which are in the hands of the public falling below the relevant prescribed minimum
percentage as required by the Stock Exchange.
Status of repurchased shares
The listing of all repurchased shares (whether through the Stock Exchange or otherwise) shall
be automatically canceled and the relevant documents of title must be canceled and destroyed as soon
as reasonably practicable.
Close associates and core connected persons
None of our Directors or, to the best of their knowledge having made all reasonable enquiries,
any of their close associates have a present intention, in the event the Repurchase Mandate is approved,
to sell any Shares to our Company.
No core connected person of our Company has notified our Company that they have a present
intention to sell Shares to our Company, or have undertaken to do so, if the Repurchase Mandate is
approved.
A listed company shall not knowingly purchase its shares on the Stock Exchange from a core
connected person (namely a director, chief executive or substantial shareholder of the company or any
of its subsidiaries, or a close associate of any of them), and a core connected person shall not
knowingly sell their interest in shares of the company to it.
Takeover implications
If, as a result of any repurchase of Shares, a Shareholder’s proportionate interest in the voting
rights of our Company increases, such increase will be treated as an acquisition for the purposes of the
Takeovers Code. Accordingly, a Shareholder or a group of Shareholders acting in concert could obtain
or consolidate control of our Company and become obliged to make a mandatory offer in accordance
with Rule 26 of the Takeovers Code. Save as aforesaid, our Directors are not aware of any
consequences which would arise under the Takeovers Code as a consequence of any repurchases
pursuant to the Repurchase Mandate.
General
If the Repurchase Mandate were to be carried out in full at any time, there may be a material
adverse impact on our working capital or gearing position (as compared with the position disclosed in


--- page 499 ---
IV-6
APPENDIX IV STATUTORY AND GENERAL INFORMATION
our most recent published audited accounts). However, our Directors do not propose to exercise the
Repurchase Mandate to such an extent as would have a material adverse effect on our working capital
or gearing position.
Our Directors have undertaken to the Stock Exchange to will exercise the Repurchase Mandate
in accordance with the Listing Rules and the applicable laws in the Cayman Islands.
We have not made any repurchases of our Shares in the previous six months.
FURTHER INFORMATION ABOUT OUR BUSINESS
Summary of material contracts
The following are contracts (not being contracts entered into in the ordinary course of business)
entered into by any member of our Group within the two years immediately preceding the date of this
document that are or may be material:
(a) an amended and restated exclusive consulting and services framework agreement (
ࠈࡌ
՘ᙄ) (the “ Consulting and Services Agreement ”) dated
December 27, 2021 entered into between the Beijing Calorie Information Technology
Co., Ltd. (
ʮ̡)( “ WFOE”) and Beijing Calorie Technology
Co., Ltd. (ʮ̡)( “ Onshore Holdco ”), pursuant to which the
Onshore Holdco agreed to engage the WFOE as the provider of, among other things,
services ancillary to the Onshore Holdco’s online membership, advertising and
e-commerce businesses, in return for service fees;
(b) an amended and restated exclusive business cooperation agreement (
࢕
ุਕΥЪ՘ᙄ) (the “ Business Cooperation Agreement ”) dated December 27, 2021
entered into between the WFOE, Onshore Holdco and the registered shareholders of
Onshore Holdco (“ Registered Shareholders ”, being Mr. Wang Ning (
ˮྐྵ)
(“Mr. Wang ”), Mr. Peng Wei ( ుਬ)( “ Mr. Peng ”), Mr. Wen Chunpeng (ᘄ)
(“Mr. Wen ”), and Mr. Liu Dong ( ᄎ̆)( “ Mr. Liu ”)), pursuant to which, among
others, the Registered Shareholders agreed not to, and to cause the Onshore Holdco not
to, enter into any transaction that may materially affect the Onshore Holdco’s assets,
business, personnel, rights, obligations or operations without the prior written consent of
the WFOE or its designated person;
(c) an amended and restated exclusive transfer option agreement (
ಂᛆ՘
ᙄ)( t h e“Option Agreement”) dated December 27, 2021 entered into among the WFOE,
Onshore Holdco and Registered Shareholders, pursuant to which each of the Registered
Shareholders granted to the WFOE an irrevocable and exclusive option to purchase (or
cause a person or persons designated by the WFOE to purchase) part or all of their equity
interests in the Onshore Holdco at the lowest consideration permitted under the PRC Laws;


--- page 500 ---
IV-7
APPENDIX IV STATUTORY AND GENERAL INFORMATION
(d) an amended and restated share pledge agreement dated December 27, 2021 entered into
between the WFOE, Onshore Holdco and Mr. Wang, pursuant to which Mr. Wang
pledged to the WFOE all of Mr. Wang’s equity interests in the Onshore Holdco, as
guarantee for Mr. Wang’s and the Onshore Holdco’s performance of their obligations
under the Consulting and Services Agreement, Business Cooperation Agreement,
Option Agreement and the power of attorney granted by Mr. Wang in favor of the
WFOE dated December 27, 2021;
(e) an amended and restated share pledge agreement dated December 27, 2021 entered into
between the WFOE, Onshore Holdco and Mr. Peng, pursuant to which Mr. Peng
pledged to the WFOE all of Mr. Peng’s equity interests in the Onshore Holdco, as
guarantee for Mr. Peng’s and the Onshore Holdco’s performance of their obligations
under the Consulting and Services Agreement, Business Cooperation Agreement,
Option Agreement and the power of attorney granted by Mr. Peng in favor of the
WFOE dated December 27, 2021;
(f) an amended and restated share pledge agreement dated December 27, 2021 entered into
between the WFOE, Onshore Holdco and Mr. Wen, pursuant to which Mr. Wen
pledged to the WFOE all of Mr. Wen’s equity interests in the Onshore Holdco, as
guarantee for Mr. Wen’s and the Onshore Holdco’s performance of their obligations
under the Consulting and Services Agreement, Business Cooperation Agreement,
Option Agreement and the power of attorney granted by Mr. Wen in favor of the WFOE
dated December 27, 2021;
(g) an amended and restated share pledge agreement dated December 27, 2021 entered into
between the WFOE, Onshore Holdco and Mr. Liu, pursuant to which Mr. Liu pledged
to the WFOE all of Mr. Liu’s equity interests in the Onshore Holdco, as guarantee for
Mr. Liu’s and the Onshore Holdco’s performance of their obligations under the
Consulting and Services Agreement, Business Cooperation Agreement, Option
Agreement and the power of attorney granted by Mr. Liu in favor of the WFOE dated
December 27, 2021;
(h) a cornerstone investment agreement dated June 28, 2023 entered into between the
Company, Shenzhen Fenda Technology Co., Ltd. (
ඳ) and
China International Capital Corporation Hong Kong Securities Limited pursuant to
which Shenzhen Fenda Technology Co., Ltd. (
ඳ) agreed to
subscribe for Shares at the Offer Price in the amount of the Hong Kong dollar
equivalent of US$5.00 million;
(i) a cornerstone investment agreement dated June 28, 2023 entered into between the
Company, Fuqing Shengde Calorie Investment Co., Ltd. (
ඳ)
(as the investor), Fujian Shengde Investment Group Co., Ltd. (܄
ඳ) (as the guarantor) and China International Capital Corporation Hong Kong
Securities Limited pursuant to which Fuqing Shengde Calorie Investment Co., Ltd. (ڞ
ඳ) agreed to subscribe for Shares at the Offer Price in the
amount of the Hong Kong dollar equivalent of US$2.00 million;


--- page 501 ---
IV-8
APPENDIX IV STATUTORY AND GENERAL INFORMATION
(j) a cornerstone investment agreement dated June 28, 2023 entered into between the
Company, Xiamen Evere Sports Goods Co., Ltd. (ඳ) and
China International Capital Corporation Hong Kong Securities Limited pursuant to
which Xiamen Evere Sports Goods Co., Ltd. (
ඳ) agreed to
subscribe for Shares at the Offer Price in the amount of the Hong Kong dollar
equivalent of RMB20.00 million; and
(k) the Hong Kong Underwriting Agreement.
Intellectual property rights
Save as disclosed below, as of the Latest Practicable Date, there were no other trademarks,
service marks, patents, intellectual property rights, or industrial property rights which are or may be
material in relation to our business.
Trademarks registered in China and overseas
As at the Latest Practicable Date, we had registered the followings trademarks in China and
overseas which we consider to be or may be material to our business:
No. Trademark Registered Owner Class
Place of
Registration
Registration
Number
Registration
Date
1.
 WFOE 41 PRC 33775442 2020-12-14
9 PRC 23889966 2019-04-14
9 PRC 37423625 2020-10-07
28 PRC 17744980 2017-12-14
28 PRC 37460275 2020-05-14
28 PRC 30582074 2020-10-28
28 PRC 23889973 2021-06-07
27 PRC 41448813 2020-06-07
25 PRC 23889972 2020-05-28
25 PRC 32052377 2020-12-14
25 PRC 45516328 2021-05-07
25 PRC 41430768 2021-05-21
29 PRC 24468841 2018-11-21
29 PRC 45422216A 2021-03-07
29 PRC 45393936 2022-03-28
30 PRC 45388812 2021-04-14
30 PRC 45430694 2021-04-21
32 PRC 45407342 2021-02-21
33 PRC 41421454 2020-07-28
35 PRC 17744973 2017-05-07
35 PRC 41412432 2020-08-28
38 PRC 17744970 2017-09-21
38 PRC 23889975 2018-04-21
43 PRC 41427251 2020-10-07
43 PRC 34195683 2020-11-28
44 PRC 23889976 2020-12-28
44 PRC 41418101 2020-10-21
9 Europe Union 1437482 2019-5-30
28 Europe Union 1443578 2019-07-04
35 Europe Union 1459242 2019-09-26
36 Europe Union 1448310 2019-08-01
38 Europe Union 1448736 2019-07-25


--- page 502 ---
IV-9
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Trademark Registered Owner Class
Place of
Registration
Registration
Number
Registration
Date
41 Europe Union 1444012 2019-06-27
9 United States 1437482 2019-12-19
28 United States 1443578 2019-12-05
35 United States 1459242 2019-04-04
38 United States 1448736 2020-07-23
41 United States 1444012 2019-08-15
25 HKSAR 305750163AB 2022-04-06
28 HKSAR 305750163AB 2022-04-06
29 HKSAR 305750163AB 2022-04-06
30 HKSAR 305750163AB 2022-04-06
32 HKSAR 305750163AB 2022-04-06
2.
9 PRC 17745044 2017-09-21
9 PRC 33775439A 2019-10-28
9 PRC 33775439 2020-11-28
41 PRC 17745012 2016-10-07
41 PRC 23889965 2018-04-21
41 PRC 41437104 2020-10-21
28 PRC 39500915 2020-06-07
28 PRC 43895788A 2020-11-21
27 PRC 17745026 2016-10-07
27 PRC 23889961 2018-04-21
27 PRC 41417682 2020-06-07
29 PRC 41441074 2020-08-14
29 PRC 49875941 2021-06-21
30 PRC 17745023 2016-10-07
30 PRC 23889962 2018-04-21
30 PRC 41431010 2020-06-07
32 PRC 17745021 2018-02-21
32 PRC 41428532 2020-06-28
35 PRC 17745018 2017-10-28
35 PRC 41440142 2020-10-21
36 PRC 17745017 2016-10-07
38 PRC 17745015 2016-10-07
38 PRC 23889964 2018-04-21
43 PRC 17745010 2016-10-07
43 PRC 41438673 2020-06-21
44 PRC 17745009 2016-10-07
44 PRC 41421733 2020-06-07
9 HKSAR 305750172 2022-02-15
25 HKSAR 305750172 2022-02-15
28 HKSAR 305750172 2022-02-15
29 HKSAR 305750172 2022-02-15
30 HKSAR 305750172 2022-02-15
32 HKSAR 305750172 2022-02-15
35 HKSAR 305750172 2022-02-15
38 HKSAR 305750172 2022-02-15
41 HKSAR 305750172 2022-02-15
42 HKSAR 305750172 2022-02-15
9 Europe Union 1461962 2019-10-10
28 Europe Union 1474580 2019-12-26
35 Europe Union 1451406 2019-08-15
36 Europe Union 1448705 2019-08-01
38 Europe Union 1446765 2019-07-25


--- page 503 ---
IV-10
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Trademark Registered Owner Class
Place of
Registration
Registration
Number
Registration
Date
41 Europe Union 1460226 2019-10-03
28 United States 1474580 2020-01-30
35 United States 1451406 2019-09-19
36 United States 1448705 2019-08-29
38 United States 1446765 2019-10-31
41 United States 1460226 2019-11-14
3.
9 PRC 34221789 2019-10-07
9 PRC 37892073 2020-06-07
9 PRC 52885352A 2022-08-07
28 PRC 49783779 2022-09-14
28 PRC 34225740A 2019-08-28
29 PRC 34222617 2020-08-21
30 PRC 34184000 2019-06-21
35 PRC 34213184 2019-10-07
38 PRC 34203759 2019-09-07
4.
28 PRC 50065891 2021-06-14
41 PRC 50072676A 2021-06-14
5.
41 PRC 32556814 2019-04-14
9 PRC 36266752 2020-08-28
28 PRC 29693263 2019-02-07
35 PRC 32556817 2019-04-14
38 PRC 32556815 2019-04-14
9 Europe Union 1444971 2019-07-11
28 Europe Union 1483128 2020-02-06
35 Europe Union 1455410 2019-09-05
36 Europe Union 1450787 2019-08-08
38 Europe Union 1506236 2020-07-16
41 Europe Union 1450655 2019-08-15
9 United States 1444971 2019-12-12
28 United States 1483128 2020-08-06
35 United States 1455410 2019-10-10
36 United States 1450787 2019-10-03
38 United States 1506236 2020-07-23
41 United States 1450655 2019-10-03
6.
41 PRC 27151804 2018-10-07
9 PRC 33909410 2020-08-07
28 PRC 27151805 2018-10-07
36 PRC 33909413 2019-06-07
43 PRC 53948009 2021-09-21
7.
25 HKSAR 305750154 2022-02-15
35 HKSAR 305750154 2022-02-15
25 PRC 36774773 2019-11-14
8.
25 PRC 19638054 2018-07-28
9.
 41 PRC 19971776 2017-07-07
10.
 41 PRC 19972384 2017-07-07
11.
 35 PRC 34218097 2020-03-28
30 PRC 51583509A 2021-07-21


--- page 504 ---
IV-11
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Trademark Registered Owner Class
Place of
Registration
Registration
Number
Registration
Date
12.ᑜballet 41 PRC 45551821 2021-04-14
13. Power wave ዷਗ
኷ᖬ
41 PRC 37443429 2020-01-28
14. Sun SaluteਗФ
࢝
41 PRC 37440261 2020-01-28
15. Ultra Burn 41 PRC 37411105 2020-02-07
16. Power Linkː
ގ
41 PRC 37461415 2020-01-28
17. Air Sling 41 PRC 37450577 2020-01-28
18. Dyna-balance 41 PRC 37458783 2020-01-28
19. Energy Boost 41 PRC 37445510 2020-01-28
20.
32 PRC 43680593 2020-09-28
21.ྌ 32 PRC 42621178 2020-09-07
22.
 32 PRC 48952748 2021-03-21
23.
 32 PRC 48119644 2021-04-28
24.
 41 PRC 16365365 2016-05-21
25.
 25 PRC 6558194 2020-07-07
Trademark applications pending in China
As at the Latest Practicable Date, we had no trademark applications pending in China which we
consider to be or may be material to our business.
Trademark applications pending in Hong Kong
As at the Latest Practicable Date, we had applied for the registration of the following
trademarks in Hong Kong which we consider to be or may be material to our business:
No. Trademark Applicant Class
Application
number
Application
date
1.
 WFOE 9, 35, 38, 41, 42 305750163AA 2021/9/18
2.
 WFOE 9, 25, 28, 29, 30, 32, 35, 38, 41, 42 305894001 2022/3/1


--- page 505 ---
IV-12
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Copyrights
As at the Latest Practicable Date, we had registered the following computer software copyrights
which we consider to be or may be material to our business:
No. Copyright Version
Registration
Number Registration Date
1. Keep-Mobile Fitness Instructor Software
(Android)(Keep-)
V1.0.0 2016SR326466 2016/11/11
2. Keep-Mobile Fitness Instructor Software
(IOS)(Keep-୅ਗ਄Ԓ઺ᇖழ΁IOS)
V1.0.0 2016SR326456 2016/11/11
3. Keep-Mobile Fitness Instructor Software
(IOS)(Keep-୅ਗ਄Ԓ઺ᇖழ΁IOS)
V7.8 2021SR1227494 2021/08/18
4. Keep-Mobile Fitness Instructor Software (Android)
(Keep-୅ਗ਄Ԓ઺ᇖழ΁Android)
V7.8 2021SR1227495 2021/08/18
5. Keep Pangu E-commerce Backend Management
System (Keep̨၍ଣӻ୕)
V2.0 2021SR0872260 2021/06/10
6. Smart Body Fat Scale Software(IOS) ( ౽ঐ᜗ইफ़ழ
΁ IOS)
V1.0 2020SR0582240 2020/06/08
7. Smart Body Fat Scale Software (Android) ( ౽ঐ᜗
ইफ़ழ΁Android)
V1.0 2020SR0582209 2020/06/08
8. Smart Spinning Riding Software (IOS) ( ౽ঐਗชఊ
ԓᕣБழ΁IOS)
V1.0 2020SR0582137 2020/06/08
9. Smart Spinning Riding Software (Android) ( ౽ঐਗ
ชఊԓᕣБழ΁Android)
V1.0 2020SR0582201 2020/06/08
As at the Latest Practicable Date, we had registered the following copyrights which we
consider to be or may be material to our business:
No. Category Copyright Registration number Registration Date
1. Fine Art Works (ஔ
ۜ)
Freedom from self-
discipline (ഗҢІ͟)
਷Ъ೮ο-2018-F-00445249 2018/1/31
2. Fine Art Works (ஔ
ۜ)
K logo brand design sketch
(K logoྡ)
਷Ъ೮ο-2019-F-00739570 2019/6/12
3. Fine Art Works (ஔ
ۜ)
Keep logo brand design
sketch (Keep logoࠇ
ྡ)
਷Ъ೮ο-2019-F-00739548 2019/6/12
4. Fine Art Works (ஔ
ۜ)
Keep main logo
deformation Logo (Keep ˴
ᅺᜊҖLogo)
਷Ъ೮ο-2021-F-00129242 2021/6/10
5. Fine Art Works (ஔ
ۜ)
Keep auxiliary graphics
Logo (Keep ႾпྡҖ Logo)
਷Ъ೮ο-2021-F-00084243 2021/4/14
6. Fine Art Works (ஔ
ۜ)
Keep ballet class name
Logo (Keepᑜሙ೻Τ
၈Logo)
਷Ъ೮ο-2020-F-01167556 2020/11/17
7. Fine Art Works (ஔ
ۜ)
Keep hot yoga class Logo
(KeepᆠϨຄТሙ೻Logo)
਷Ъ೮ο-2021-F-00129243 2021/6/10
8. Fine Art Works (ஔ
ۜ)
Keep fat burning party class
Logo (Keep࿁ሙ
೻Logo)
਷Ъ೮ο-2021-F-00129241 2021/6/10


--- page 506 ---
IV-13
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Category Copyright Registration number Registration Date
9. Fine Art Works (ஔ
ۜ)
Keep championship coach
class Logo (Keep઺ᇖ
ሙ೻Logo)
਷Ъ೮ο-2021-F-00129240 2021/6/10
10. Fine Art Works (ஔ
ۜ)
Keep live class background
Logo (Keepߠ
౻Logo)
਷Ъ೮ο-2021-F-00129239 2021/6/10
11. Fine Art Works (ஔ
ۜ)
keep sticker-paper man
(keep൨ॷ-ɛ)
਷Ъ೮ο-2016-F-00298727 2016/8/12
12. Fine Art Works (ஔ
ۜ)
Keep blind box series
artwork (Keepۜ
ྡ)
਷Ъ೮ο-2021-F-00084249 2021/4/14
13. Films And Works
Created By Similar
Filming Methods ( ཥ
ᅂձᗳЧᙲႡཥᅂ˙
ۜ)
Freedom from self-
discipline (ഗҢІ͟)
਷Ъ೮া-2017-I-00366531 2017/4/5
14. Films And Works
Created By Similar
Filming Methods ( ཥ
ᅂձᗳЧᙲႡཥᅂ˙
ۜ)
Flexible and elegant woman
yoga class (දंሯɾग़ຄ
Тሙ)
਷Ъ೮া-2018-I-00590661 2018/8/3
15. Films And Works
Created By Similar
Filming Methods ( ཥ
ᅂձᗳЧᙲႡཥᅂ˙
ۜ)
KeepKit fat burning running
class (KeepKitਗൺሙ
೻)
਷Ъ೮ο-2019-I-00737854 2019/5/9
16. Films And Works
Created By Similar
Filming Methods ( ཥ
ᅂձᗳЧᙲႡཥᅂ˙
ۜ)
Forming slender and long
neck like a swan;
eliminating cervical traction
(˂ᕰ᎕ቮϓjऊ๘᎘ଘˏ)
਷Ъ೮ο-2019-I-00846547 2019/9/23
Patents
As at the Latest Practicable Date, we had registered the following invention related patents
which we consider to be or may be material to our business:
No. Patent Category Patent Patent Owner Patent Number
Grant
Date
Expiry
Date
Smart Hardwares
1. Invention Method,
device,
terminal and
storage
medium for
counting steps
(
eༀ
ໄe୞၌ձπ
Ꮇʧሯ
)
WFOE 201910364327X 2021/7/27 2039/4/30


--- page 507 ---
IV-14
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Patent Category Patent Patent Owner Patent Number
Grant
Date
Expiry
Date
2. Invention Feet-on-the-
ground
Determination
method and
device based
on six-axis
sensor (
ʬ
໔
ج
ʿༀໄ
)
WFOE 2019104313421 2021/7/9 2039/5/22
3. Invention Method,
device,
equipment and
storage
medium of
determining
swimming laps
(
ਸ਼ᅰ
eༀ
ໄeண௪ʿπ
Ꮇʧሯ
)
WFOE 2020100803956 2021/7/27 2040/2/5
4. Invention Method,
device,
wearable
equipment and
storage
medium for
counting rope
skipping (
༪ᖬ
eༀ
Ꮦண
௪ʿπᎷʧሯ
)
WFOE 201910005350X 2020/8/7 2039/1/3
5. Invention Method,
device,
electronic
equipment and
storage
medium for
adjusting
resistance (
ɓ
ٙ
eༀ
ໄeཥɿண௪
ʿπᎷʧሯ
)
Shenzhen
Calorie|
WFOE
2019109902278 2021/7/6 2039/10/17
6. Utility model Transmission
resistance
control device
and exercise
bike (
ɓ၇ෂਗ
ɢછՓༀໄ
ʿ਄Ԓԓ
)
Shenzhen
Calorie |
WFOE
2019217986798 2020/7/10 2029/10/24


--- page 508 ---
IV-15
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Patent Category Patent Patent Owner Patent Number
Grant
Date
Expiry
Date
7. Utility model Mechanism for
adjusting
exercise bike
cushion and
exercise bike
(
ɓ၇਄ԒԓѬ
ྦሜືዚ࿴ʿ
਄Ԓԓ
)
Shenzhen
Calorie |
WFOE
2019216310716 2020/6/23 2029/9/27
8. Utility model Braking device
and exercise
bike (
ԓ
ༀໄʿ਄Ԓԓ)
Shenzhen
Calorie |
WFOE
2019217449124 2020/7/3 2029/10/17
9. Utility model Control knob,
running
machine,
rowing
machines,
exercise bike,
elliptical
machine and
strength
equipment (
છ
ՓૅඐeൺӉ
ዚeΒ୵ዚe
਄Ԓԓeዕ෥
ዚʿɢඎኜ૛
)
Shenzhen
Calorie
2018216336459 2019/7/19 2028/10/9
10. Utility model Running
machine (ൺӉ
ዚ)
Shenzhen
Calorie
2018216366755 2019/7/19 2028/10/9
11. Invention Method,
device,
wearable
equipment and
storage
medium for
identifying
movement
trajectory (
ਗ
㡱ᗆй˙
eༀໄe̙
Ꮦண௪ʿπ
Ꮇʧሯ
)
WFOE 2019100080808 2021/11/5 2039/1/4


--- page 509 ---
IV-16
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Patent Category Patent Patent Owner Patent Number
Grant
Date
Expiry
Date
12. Invention Method,
device,
equipment and
storage
medium for
determining
motion state
(
࿒
eༀ
ໄeண௪ʿπ
Ꮇʧሯ
)
WFOE 2019100196626 2022/02/25 2039/01/09
13. Invention Method,
device,
wearable
equipment and
storage
medium for
identifying
swimming
stroke (
ᗆ
eༀໄ
Ꮦண௪
ʿπᎷʧሯ
)
WFOE 2019102846436 2022/08/12 2039/04/10
14. Invention Method,
device and
wearable
equipment for
triggering
information
(
ج
߈
Ꮦண௪
)
WFOE 2019109445573 2022/05/03 2039/09/30
15. Invention Method and
device for
acquiring
swimming data
and method for
controlling
swimming data
collection
equipment (
ದ
ᅰኽᐏ՟˙
ʿༀໄeದ
ᅰኽમණண
ج
)
Shenzhen
Calorie |
WFOE
2020111128076 2022/06/10 2040/10/16


--- page 510 ---
IV-17
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Patent Category Patent Patent Owner Patent Number
Grant
Date
Expiry
Date
16. Invention Display
method,
device,
terminal
equipment and
storage
medium for (
ɓ
e
ༀໄe୞၌ண
௪ʿπᎷʧሯ
)
WFOE 2018115805942 2022/05/03 2038/12/24
17. Invention Method,
device, storage
medium and
processor for
generating
music (
ᆀ͛
eༀໄ
eπᎷʧሯʿ
ஈଣኜ
)
WFOE 2019102096919 2022/03/15 2039/03/19
18. Invention Method,
device,
terminal
equipment and
storage
medium for
determining
sport tracks (
ɓ
㡱ᆽ
eༀໄ
e୞၌ண௪ձ
πᎷʧሯ
)
WFOE 2020107072928 2022/08/16 2040/07/21
19. Invention Method,
device and
system for
processing
data during
exercise (
༶ਗ
ᅰኽ
ʿༀ
ໄeӻ୕
)
WFOE 2019102088611 2022/04/26 2039/03/19
20. Invention Method,
device,
equipment and
storage
medium for
evaluating
running
posture (
ɓ၇
ج
eༀໄeண௪
ձπᎷʧሯ
)
WFOE 201911014229X 2022/07/29 2039/10/23


--- page 511 ---
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Patent Category Patent Patent Owner Patent Number
Grant
Date
Expiry
Date
Others
21. Invention Method,
device,
wearable
equipment and
storage
medium for
recommending
course (
ɓ၇ሙ
e
Ꮦ
ண௪ʿπᎷʧ
ሯ
)
WFOE 2019100980854 2021/5/28 2039/1/31
22. Invention Method, push
method,
device,
medium and
server for
maintaining
push content
pool (
ၪᚐપ৔
ج
e
ༀໄeʧሯʿ
ਕኜ
)
WFOE 2019104784701 2021/1/15 2039/6/3
23. Invention Method,
device,
equipment and
storage
medium for
determining
atlas of human
limb joints (
ᗫ
ج
eༀໄeண௪
ձπᎷʧሯ
)
WFOE 2019103378931 2021/7/6 2039/4/25
24. Invention Method and
device for
playing stage
running voice
(
ࠪ
ʿༀ
ໄ
)
Calorie
Technology
2018104564783 2020/7/24 2038/5/14
25. Invention Method and
device for
displaying data
(
˙
ձༀໄ)
WFOE 2017105005325 2020/11/20 2037/6/27
IV-18


--- page 512 ---
IV-19
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Patent Category Patent Patent Owner Patent Number
Grant
Date
Expiry
Date
26. Invention Method,
device, storage
medium and
processor for
generating
sport video (
༶
͛ϓ
eༀໄe
πᎷʧሯʿஈ
ଣኜ
)
WFOE 2018111106845 2020/10/27 2038/9/21
27. Invention Method,
device,
terminal
equipment and
storage
medium for
extracting
characteristics
(
ج
eༀໄe୞၌
ண௪ʿπᎷʧ
ሯ
)
WFOE 2019104784684 2021/11/19 2039/6/3
28. Invention Method and
device for
processing
sport tracks
video (
ࠐ
ஈଣ
ʿༀໄ
WFOE 2019102088575 2022/02/22 2039/03/19
As at the Latest Practicable Date, we had applied for the registration of the following patents in
China which we consider to be or may be material to our business:
No. Patent Category Patent Patent Owner Patent Number Application Date
Smart Hardware
1. Invention Method, device,
equipment and storage
medium for estimating
calories (
ɓ၇̔༩ԢПၑ
eༀໄeண௪ʿπᎷ
ʧሯ
)
WFOE 2020115898060 2020/12/29
2. Invention Method, device, smart
bracelet for evaluating
sport movement (
༶ਗਗ
ʿༀໄe౽
ঐ˓ᐑ
)
Shenzhen Calorie |
WFOE
2018113554259 2018/11/14
3. Invention Method, device and
wearable equipment for
identifying badminton
stroke action (
ϻˣଢᏘଢ
eༀໄձ
Ꮦண௪
)
WFOE 2019103566856 2019/4/29


--- page 513 ---
IV-20
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Patent Category Patent Patent Owner Patent Number Application Date
4. Invention Method and wearable
equipment for identifying
gesture and gesture
control system (
˓ැᗆй
Ꮦண௪ʿ˓ැ
છՓӻ୕
)
WFOE 2019105282929 2019/6/18
5. Invention Method and device for
scoring action ( ਗЪ൙ʱ
ʿༀໄ)
WFOE 2019107255451 2019/8/7
6. Invention Method and device for
detecting sleep state ( ွ
ʿༀໄ)
WFOE 2019110896846 2019/11/8
7. Invention Method, device and
processor for transferring
data (
ʿༀໄ
eஈଣኜ)
Shenzhen Calorie |
WFOE
2020111116454 2020/10/16
8. Invention Method and device based
on action identification
(
ʿༀ
ໄ)
WFOE 2021102986208 2021/3/19
9. Invention Method and device for
sports gaming ( ༶ਗ༷Ꮥ
ʿༀໄ)
WFOE 2021113509734 2021/11/15
10. Invention Method and device for
interacting boxing game
(
ʿༀ
ໄ)
WFOE 2021103972819 2021/4/13
11. Invention Method and device for
interacting fitness
training (
ʹʝ
ʿༀໄ)
WFOE 2021103963858 2021/4/13
12. Invention Method for displaying
effect based on
movement frequency and
device and electronic
equipment for displaying
effect (
ࣖٙ
ͪༀ
ໄeཥɿண௪
)
Shenzhen Calorie |
WFOE
202110887215X 2021/8/3
13. Invention Method, device and
wearable system for
determining fitness plan
(
ʿᆽ
Ꮦӻ୕)
WFOE 2020112575109 2020/11/11
14. Invention Method, device, storage
medium and processor
for determining fitness
equipment parameters (
਄
e
ༀໄeπᎷʧሯʿஈଣኜ
)
Calorie Technology |
WFOE
2021102812136 2021/3/16


--- page 514 ---
IV-21
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Patent Category Patent Patent Owner Patent Number Application Date
15. Invention Method, device, storage
medium and processor
for controlling fitness
equipment (
છ
eༀໄeπᎷʧሯ
ʿஈଣኜ
)
Calorie Technology |
WFOE
2021102830670 2021/3/16
16. Invention Method, device, storage
medium and processor
for adjusting fitness
equipment (
ሜ
ձༀໄd˸ʿπᎷ
ʧሯձஈଣኜ
)
Calorie Technology |
WFOE
2021102811839 2021/3/16
17. Invention Method, device, storage
medium and processor
for adjusting resistance
of fitness equipment (
਄
eༀໄ
eπᎷʧሯʿஈଣኜ
)
Calorie Technology |
WFOE
2021102811792 2021/3/16
18. Invention Method and device for
displaying page (࢝ࠦࠫ
ʿༀໄ)
WFOE 2021102986195 2021/3/19
19. Invention Method and device for
displaying comments (࢝
ʿༀໄ)
WFOE 2021103044726 2021/3/22
20. Invention Grouping method,
device, storage medium
and processor (
ج
eༀໄeπᎷʧሯʿஈଣ
ኜ
)
WFOE 2021104211976 2021/4/19
Others
21. Invention Method, device, storage
medium and processor
for detecting athletic
ability (
˙
ʿༀໄeπᎷʧሯeஈ
ଣኜ
)
WFOE 2018110062248 2018/8/30
22. Invention Method, device and
electronic equipment for
measuring action
difficulty (
ၑ
ʿༀໄeཥɿண௪)
WFOE 2019114254186 2019/12/31
23. Invention Method, device, storage
medium and electronic
equipment for
determining fitness
course (
֛
eༀໄeπᎷʧሯʿ
ཥɿༀໄ
)
WFOE 2021108020268 2021/7/15


--- page 515 ---
IV-22
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Patent Category Patent Patent Owner Patent Number Application Date
24. Invention Method, device, storage
medium and electronic
equipment for
determining fitness
course (
֛
eༀໄeπᎷʧሯʿ
ཥɿༀໄ
)
WFOE 2021108020183 2021/7/15
25. Invention Method, device, storage
medium and electronic
equipment for adjusting
fitness course (
਄Ԓሙ೻
eༀໄeπᎷ
ʧሯʿཥɿༀໄ
)
WFOE 2021108032388 2021/7/15
26. Invention Method, device, storage
medium and electronic
equipment for adjusting
fitness course (
਄Ԓሙ೻
eༀໄeπᎷ
ʧሯʿཥɿༀໄ
)
WFOE 2021108032301 2021/7/15
27. Invention Method, device, storage
medium and electronic
equipment for
recommending fitness
course (
પᑥ
eༀໄeπᎷʧሯʿ
ཥɿༀໄ
)
WFOE 2021108032373 2021/7/15
28. Invention Method, device,
equipment and storage
medium for generating
3D human body model
(
ج
eༀໄeண௪ձπᎷʧሯ)
WFOE 2018116385021 2018/12/29
29. Invention Method, device, and
electronic equipment for
generating image (
ྡ྅͛
ʿༀໄeཥɿண௪)
WFOE 2019109512421 2019/10/8
30. Invention Method, device and
electronic equipment for
processing tracks data (
ࠐ
ʿༀໄ
eཥɿண௪
)
WFOE 2019110084294 2019/10/22
31. Invention Method, device and
system for processing
track data (
ஈ
㡱
ஈଣӻ୕
)
WFOE 2020105250460 2020/6/10
32. Invention Method, device,
equipment and storage
medium for restoring
sports tracks (
ࠐ
eༀໄeண
௪ʿπᎷʧሯ
)
WFOE 2020107073047 2020/7/21


--- page 516 ---
IV-23
APPENDIX IV STATUTORY AND GENERAL INFORMATION
No. Patent Category Patent Patent Owner Patent Number Application Date
33. Invention Method, device,
equipment and storage
medium for correcting
tracks (
eༀ
ໄeண௪ʿπᎷʧሯ)
WFOE 202010987637X 2020/9/18
34. Invention Method, device, wearable
equipment and storage
medium for restoring
tracks (
ج
Ꮦண௪ʿπ
Ꮇʧሯ
)
WFOE 2021105020444 2021/5/8
35. Invention Method and device for
processing data for
running applications (
ɓ
ᅰኽஈ
ձༀໄ
)
WFOE 2017109723635 2017/10/18
36. Invention Method and device for
determining sport goals
(
ʿༀ
ໄ)
WFOE 2019107852734 2019/8/23
Domain names
As at the Latest Practicable Date, we owned the following domain names which we consider to
be or may be material to our business:
No. Domain Name Registered Owner Registration Date Expiry Date
1. keep.com Calorie Technology 1995-8-29 2028/9/17
FURTHER INFORMATION ABOUT OUR DIRECTORS
Particulars of Directors’ service contracts and appointment letters
Executive Directors
Each of our executive Directors entered into a service contract with our Company on June 26,
2023. The term of appointment shall be for an initial term of three years from the Listing Date or until
the third annual general meeting of our Company after the Listing Date, whichever is sooner (subject
to retirement as and when required under the Articles of Association). Either party may terminate the
agreement by giving not less than three months’ written notice.
Non-executive Director
Our non-executive Director entered into an appointment letter with our Company on June 26,
2023. The term of appointment shall be for an initial term of three years from the Listing Date or until
the third annual general meeting of our Company after the Listing Date, whichever is sooner (subject
to retirement as and when required under the Articles of Association). Either party may terminate the
agreement by giving not less than three months’ written notice.
Independent non-executive Directors
Each of our independent non-executive Directors entered into an appointment letter with our
Company on June 26, 2023. The term of appointment shall be for an initial term of three years from the


--- page 517 ---
IV-24
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Listing Date or until the third annual general meeting of our Company after the Listing Date,
whichever is sooner (subject to retirement as and when required under the Articles of Association).
Either party may terminate the agreement by giving not less than three months’ written notice.
Remuneration of Directors
(a) Save as disclosed above, none of our Directors has or is proposed to have a service contract
with any member of our Group other than contracts expiring or determinable by the employer
within one year without the payment of compensation (other than statutory compensation).
(b) The aggregate amount of remuneration paid and benefits in kind granted to our Directors by our
Group in respect of the year ended December 31, 2022 was approximately RMB17.8 million.
(c) Under the arrangements currently in force, we estimate that the aggregate remuneration payable
to, and benefits in kind receivable by, our Directors by any member of our Group in respect of
the year ending December 31, 2023 is approximately RMB17.9 million.
Disclosure of interests
Interests and short positions of our Directors in the share capital of our Company or our associated
corporations following completion of the Global Offering
Immediately following completion of the Global Offering (assuming the Presumptions), and
other than as disclosed in “Substantial Shareholders”, the interests or short positions of our Directors
and chief executives in the shares, underlying shares and debentures of our Company or our associated
corporations (within the meaning of Part XV of the SFO), which will have to be notified to our
Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including
interests and short positions which he/she is taken or deemed to have under such provisions of the
SFO), or which will be required, pursuant to section 352 of the SFO, to be entered in the register
referred to therein, or which will be required, pursuant to the ‘Model Code for Securities Transactions
by Directors of Listed Issuers’ contained in the Listing Rules, to be notified to our Company and the
Stock Exchange once our Company’s Shares are listed on the Stock Exchange, are set out below:
Name of
director Nature of interest Number of issued Shares
Number of Shares
underlying
outstanding options
granted
Approximate %
interest in Shares of
our Company
immediately after the
Global Offering
(1)
Mr. Peng Wei (2) Interest in controlled
corporation
10,621,480
Shares — 2.02%
Mr. Liu Dong (3) Interest in controlled
corporation
5,561,499
Shares — 1.06%
Beneficial interest in
Restricted Shares granted
under the Pre-IPO Share
Incentive Plans — 10,000 Shares 0.002%
Notes:
(1) The calculations are made assuming the Over-allotment Option is not exercised and no Shares are issued under the Share Incentive Plans.
(2) Mr. Peng holds his interests in our Company through his controlled corporation, Metropolis Olympia Holdings Limited, which holds
10,621,480 Shares. Metropolis Olympia Holdings Limited is wholly-owned by Pacinoson Limited, which in turn is controlled by a trust
that is controlled by Mr. Peng and in which Mr. Peng is the settlor and sole beneficiary. Under the SFO, Mr. Peng Wei is deemed to be
interested in all the interests in our
Company held by Metropolis Olympia Holdings Limited.
(3) Mr. Liu is beneficially interested in 10,000 Shares, which underlines the outstanding options granted to him under the 2016 Plan. Mr. Liu
holds additional interests in our Company through his controlled corporation. Bulldog Group Ltd, which holds 5,561,499 Shares, of
which 990,000 of the Shares were awarded to Mr. Liu Dong pursuant to the Pre-IPO Share Incentive Plans and are held by Bulldog


--- page 518 ---
IV-25
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Group Ltd as Restricted Shares (with restrictions on transfer, voting and income) until the relevant vesting and exercise conditions are
fulfilled. Bulldog Group Ltd is ultimately wholly controlled by a trust in which Mr. Liu is the settlor and sole beneficiary. Under the
SFO, Mr. Liu Dong is deemed to be interested in all the interest in our Company held by Bulldog Group Ltd.
(4) For details of Mr.Wang’s interest in our Company, please see “Substantial Shareholders”.
Interests and short positions disclosable under Divisions 2 and 3 of Part XV of the SFO
For information, so far as is known to our Directors or chief executive, of each person, other
than our Directors or chief executive, who immediately following completion of the Global Offering
(assuming the Presumptions) who will have an interest or short position in the Shares or underlying
shares of our Company which would fall to be disclosed to our Company under the provisions of
Divisions 2 and 3 of Part XV of the SFO, or, is, directly or indirectly, interested in 10% or more of the
issued voting shares of any class of shares of our Company or any other member of our Group, see
“Substantial Shareholders”.
PRE-IPO SHARE INCENTIVE PLANS
Summary of material terms of the Pre-IPO Share Incentive Plans
Overview
The following is a summary of the principal terms of the 2016 Plan and the 2021 Plan
(collectively the Pre-IPO Share Incentive Plans) of our Company as approved and adopted by the
Board, as amended from time to time. The plans are not subject to Chapter 17 of the Listing Rules and
will not involve the grant of options by our Company to subscribe for new shares after Listing. Upon
Listing, we will not make any new grants of awards under the Pre-IPO Share Incentive Schemes and
we will be subject to, and will comply with, Amended Chapter 17 of the Listing Rules.
Purpose
The Pre-IPO Share Incentive Plans are adopted with a view to attracting and retaining the best
available personnel for positions of substantial responsibility, to provide additional incentives to
selected employees, directors, and consultants and to promote the success of our business by offering
these individuals an opportunity to acquire a proprietary interest in the success of our Company or to
increase there interest, by issuing them Shares or by permitting them to purchase Shares.
Eligibility
Persons eligible to participate in the Pre-IPO Share Incentive Plans include employees of our
Company or any parent or subsidiary of our Company, a member of the board of directors of the
Company, or any consultant who is engaged by the Company or its parent or subsidiary to render
consulting or advisory services to such entity (the “ Service Providers”).
Maximum number of Shares
The maximum aggregate number of Shares which may be issued pursuant to all awards
pursuant to the 2016 Plan is 35,536,640 ordinary Shares, and the maximum aggregate number of
Shares which may be issued pursuant to all awards pursuant to the 2021 Plan is 25,108,660 ordinary
Shares.
As at the Latest Practicable Date, an aggregate of 45,215,300 Shares underlie awards that
remain unexercised, unvested or ungranted under the Pre-IPO Share Incentive Plans, of which (a)


--- page 519 ---
IV-26
APPENDIX IV STATUTORY AND GENERAL INFORMATION
45,205,300 ordinary shares were issued to Calorie Partner Limited, which are reserved for satisfying
awards granted or to be granted to participants of our Pre-IPO Share Incentive Plans. Calorie Partner
Limited is a trust company wholly-owned by a trust in which our Company is the settlor, Futu Trustee
Limited acts as the trustee, and the beneficiaries are participants of our Company’s share incentive
plans who are not close associates of our Company; and (b) 10,000 Shares remain to be issued and
which underlie the options granted to our Director, Mr. Liu Dong. The ordinary Shares issued to and
held by Calorie Partner Limited and that are unvested will not be used to vote at general meetings of
our Company by the trustee, in accordance with Amended Chapter 17 of the Listing Rules.
A breakdown of the ordinary Shares underlying the Pre-IPO Share Incentive Plans as at the
Latest Practicable Date are set out below:
2016 Plan 2021 Plan Total
Shares issued pursuant to exercised options ....................... 15,430,000 — 15,430,000 (1)
Shares issued and underlying granted outstanding options ............ 18,291,750 4,700,825 22,992,575 (2)
Shares issued and underlying ungranted awards .................... 1,804,890 20,407,835 22,212,725 (2)(3)
Shares remaining to be issued and underlying granted and outstanding
options .................................................. 10,000 — 10,000 (4)
Scheme limit ............................................... 35,536,640 25,108,660 60,645,300
Notes:
(1) These Shares are held by Bulldog Group Ltd (as to 990,000) and Calorie Fortune Limited (as to 14,440,000). See “History,
Reorganization, and corporate Structure—Major Shareholding Changes of our Company”.
(2) These Shares are held by Calorie Partner Limited, see “History, Reorganization, and corporate Structure—Major Shareholding Changes
of our Company” and “—Pre-IPO Share Incentive Plans—Summary of material terms of the Pre-IPO Share Incentive Plans—Maximum
number of Shares”.
(3) These Shares represent 4.31% and 4.23% of our Company’s total issued share number immediately before and after the Global Offering
(assuming the Presumptions). After Listing, these Shares will be used to fund share options and share awards granted under the Post-IPO
Share Incentive Scheme, and the Company will treat a share option or share award funded by these Shares as a share option or share
award funded by new shares of the Company and such grant will comply with Amended Chapter 17 of the Listing Rules, including the
requirements that relate to grants of awards funded by new shares, and will be granted under the Post-IPO Share Incentive Scheme,
which will be a share scheme with terms that comply with the Amended Chapter 17. Accordingly, these Shares (representing 4.23% of
our total issued share number immediately upon Listing) will form part of the 10% total scheme limit under the Post-IPO Share Incentive
Scheme, the terms of which are further detailed in this section below.
(4) These Shares underlie outstanding options granted to Mr. Liu Dong, our Director, and have not been issued. See “—Further information
about our Directors—Disclosure of interests”.
Administration
The Pre-IPO Share Incentive Plans are administered by the Board acting as the administrator.
The Board shall, subject to the terms of the plans, have the authority in its discretion to:
(a) to determine the fair market value of the Shares;
(b) to select the Service Providers to whom awards may from time to time be granted;
(c) to determine the number of Shares to be covered by each award granted;
(d) to approve forms of agreement for use under the plans;
(e) to determine the terms and conditions, of any award granted. Such terms and conditions
include, but are not limited to, the exercise price, the time or times when award may be
exercised (which may be based on performance criteria), any vesting acceleration or
waiver of forfeiture restrictions, and any restriction or limitation regarding any award or
the Shares relating thereto, based in each case on such factors as the administrator, in its
sole discretion, shall determine;


--- page 520 ---
IV-27
APPENDIX IV STATUTORY AND GENERAL INFORMATION
(f) to determine whether and under what circumstances an option may be settled in cash
instead of Shares;
(g) to reduce the exercise price of any option to the then current fair market value if the fair
market value of the Shares covered by such option has declined since the date the option
was granted;
(h) to initiate an option exchange program;
(i) to prescribe, amend and rescind rules and regulations relating to the plans, including rules
and regulations relating to sub-plans established for the purpose of qualifying for preferred
tax treatment under foreign tax law;
(j) to allow optionees to satisfy withholding tax obligations by electing to have the Company
withhold from the Shares to be issued upon exercise of an award that number of Shares
having a fair market value equal to the amount required to be withheld. The fair market
value of the Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by optionees to have Shares withheld for this
purpose shall be made in such form and under such conditions as the administrator may
deem necessary or advisable;
(k) to construe and interpret the terms of the plans and awards granted pursuant to the plans;
(l) to make all other determinations that as the administrator may deem necessary or
advisable to administrate the plans; and
(m) to delegate any of the powers above.
Grant of Awards
Awards include any option, award of stock purchase right, award of restricted share unit, award
of restricted shares, or other share-based award as determined by the Board granted under the plans.
Options
The Board is authorized to grant options to participants on the terms and conditions as set out in
the 2016 Plan and the 2021 Plan. The option agreement evidencing the options shall include such
additional provisions as may be specified by the Board.
The term of each option shall be stated in the option agreement; provided, however, that the
term shall be no more than ten years from the date of grant thereof. The per share exercise price for the
Shares to be issued upon exercise of an option shall be such price as is determined by the
administrator. The consideration to be paid for the Shares to be issued upon exercise of an Option,
including the method of payment, shall be determined by the administrator. Such consideration may
consist of (i) cash; (ii) check; (iii) promissory note; (iv) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the optionee for more than six (6) months on
the date of surrender, and (y) have a fair market value on the date of surrender equal to the aggregate
exercise price of the Shares as to which such Option shall be exercised, (v) consideration received by
the Company under a cashless exercise program implemented by the Company in connection with the
plans; or (vi) any combination of the foregoing methods of payment. No new options may be granted
under the Pre-IPO Share Incentive Plans after Listing.


--- page 521 ---
IV-28
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Restricted Share Units
The Board may grant restricted share units to participants as the Board in its sole discretion
shall determine at any time and from time to time. The award agreement evidencing the restricted share
units shall specify such other terms and conditions as the Board , in its sole discretion, shall determine.
The Company may continue to grant restricted share units after Listing in accordance with the terms of
the respective Pre-IPO Share Incentive Plan.
Limits on transfer
Unless otherwise approved by the Board, the awards may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by the laws of succession
and may be exercised, during the lifetime of the optionee, only by the optionee and in the event of
death of the optionee, in accordance with the relevant provision in the plans.
Adjustments
Subject to any required action by Shareholders, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for issuance under the plans
but as to which no awards have yet been granted or which have been returned to the plans upon
cancelation or expiration of an award, as well as the price per Share covered by each such outstanding
award, shall be proportionately adjusted for any increase or decrease in the number of Shares resulting
from a reclassification of the Shares, or any other increase or decrease in the number of Shares effected
without receipt of consideration by the Company. The conversion of any convertible securities of the
Company shall not be deemed to have been “effected without receipt of consideration”. No issuance by
the Company of shares of stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of
Shares subject to an award. If the Company shall at any time increase or decrease the number of its
outstanding Shares, or change in any way the rights and privileges of such Shares by means of the
payment of a stock dividend or any other distribution upon such Shares, or through a stock split,
subdivision, consolidation, combination, reclassification or recapitalization involving the stock, then in
relation to the Shares that is affected by one or more of the above events, the numbers, rights and
privileges of the following shall be increased, decreased or changed in like manner as if such Shares
had been issued and outstanding, fully paid and nonassessable at the time of such occurrence: (i) the
number of shares of Shares as to which options may be granted under the plans; and (ii) the Shares
included in each outstanding option granted.
Amendment and termination
The Board may at any time amend, alter, suspend or terminate Pre-IPO Share Incentive Plan.
The Board shall obtain Shareholders’ approval of any amendment to the extent necessary and desirable
to comply with applicable laws. No amendment, alternation, suspension or termination of the plans
shall impair the rights of any optionee in any material way any optionee previously granted pursuant to
the plans, unless mutually agreed otherwise in meeting between the optionee and the administrator.
Termination of the plans shall not affect the administrator’s ability to exercise the powers granted to it
with respect to options granted under the plans prior to the date of such termination .
Term of the Pre-IPO Share Incentive Plans
Unless terminated earlier by the Board, the 2016 Plan and the 2021 Plan will terminate ten
years after their respective adoption date.


--- page 522 ---
IV-29
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Details about the outstanding options granted under the Pre-IPO Share Incentive Plans
General
The below table sets out the key details of outstanding options granted under the Pre-IPO Share
Incentive Plans as of the Latest Practicable Date:
(a) Total grantees with outstanding options:
- under the 2016 Plan 197
- under the 2021 Plan 253
(b) Total number of outstanding options:
- under the 2016 Plan 18,301,750
- under the 2021 Plan 4,700,825
(c) Total Shares underlying the outstanding options:
- under the 2016 Plan 18,301,750
- under the 2021 Plan 4,700,825
(d) Dates between which outstanding options were granted:
- for the 2016 Plan March 7, 2016 -
September 1, 2022
- for the 2021 Plan June 8, 2021 -
February 14, 2023
(e) Range of exercise price for outstanding options:
- for the 2016 Plan US$0.005 to
US$4.098
- for the 2021 Plan US$2.3356 to
US$2.956
(f) Consideration for accepting the outstanding options granted: No cash
consideration was paid
by the grantees for the
outstanding options
granted.
As our Group incurred losses for the year ended December 31, 2022, the dilutive potential of
the ordinary shares arising from any options from the Share Incentive Plans are not included in the
calculation of diluted loss per share as their inclusion would be anti-dilutive. Accordingly, diluted loss
per share for the year ended December 31, 2022 was the same as basic loss per share for the
corresponding periods. As at the date of this document, 10,000 Shares remain to be issued under the
Pre-IPO Share Incentive Plans, which, if fully issued, would have a nominal dilutive effect on our total
issued share capital.


--- page 523 ---
IV-30
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Details of outstanding options held by Directors, senior management and other connected persons
The table below sets out the details of the outstanding options granted to (i) our Director,
members of the senior management or connected persons of our Company, (ii) consultants, and (iii)
other grantees who have been granted options to subscribe for 350,000 Shares or more ( “Significant
Other Grantees” ). No other outstanding options that remain outstanding were granted to any other
Directors, senior management or connected persons of our Company.
Name Role Address Plan Date of grant
Vesting
period(3)
Exercise
price
(per Share)
Number of
Shares
underlying the
outstanding
options granted
Approximate
percentage
of issued
shares
immediately
after
completion
of the Global
Offering(1)
Directors
Mr. Liu Dong
Executive
Director
No. 304,
Building 1,
Jiuzhoujiayuan
Longyuan Road
Longgang
District
Shenzhen City
Guangdong
Province China
2016 Plan April 22, 2021 See note 2. US$0.80 10,000 0.002%
Consultants
Zhu Liang Consultant Room 6-111,
Yinlu, No. 9,
Xianlin West
Road, Yuhang
District,
Hangzhou,
Zhejiang, China
2016 Plan April 1, 2019
April 1, 2019
March 1, 2021
January 1,
2020 –
December 1,
2022
US$1.03
US$1.03
US$2.42
200,000
400,000
600,000
0.228%
Yu Xianghai Consultant Wanke
Gongwang
Yueshan Liyuan,
Dongzhou
Street, Fuyang
District,
Hangzhou,
Zhejiang, China
2016 Plan March 1, 2021 January 1,
2021 –
December 1,
2022
US$2.42 600,000 0.114%
Wei Huaning Consultant 47-1 Yanlan
Mountain,
Longhu,
Houshayu,
Shunyi District,
Beijing, China
2016 Plan June 8, 2021 December 1,
2021 –
December 1,
2022
US$2.42 600,000 0.114%
Weng Tao Consultant Room 809,
Building 16,
Post Modern
City, Baiziwan,
Chaoyang
District, Beijing,
China
2016 Plan June 8, 2021 June 1,
2022 –
June 1,
2023
US$2.34 120,000 0.023%


--- page 524 ---
IV-31
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Name Role Address Plan Date of grant
Vesting
period(3)
Exercise
price
(per Share)
Number of
Shares
underlying the
outstanding
options granted
Approximate
percentage
of issued
shares
immediately
after
completion
of the Global
Offering(1)
Significant Other Grantees
Huang Jingjing Vice
President
of Fitness
and
Content
Center
No. 8, Shadi
Street, Shadi
Township,
Enshi City,
Hubei Province,
China
2016 Plan August 1, 2019 January
1, 2021
–
January
1, 2023
US$2.06 800,000 0.152%
Wang Liang Senior
Product
Managing
Director of
AIoT
Business
Unit
Room 3108,
Block A, Fengye
Apartment,
Nanyuan,
No. 1040,
Nanshan
Boulevard,
Nanshan
District,
Shenzhen, China
2016 Plan
2021 Plan
October 17, 2017
June 8, 2021
July 17,
2019 –
April 1,
2025
US$0.13
US$2.34
600,000
90,000
0.131%
Su Jinyuan Vice
President
of the
Financial
Department
302, Unit 4,
Building 1,
Jinshangjiayuan,
A2 Huayuan
Road, Haidian
District, Beijing,
China
2016 Plan September 19, 2018 June
19,
2020
US$2.06 600,000 0.114%
Li Chongxin Senior
Product
Technical
Director of
Online
Platform
Business
Unit
201, Unit 2,
Building 911,
Runze Yuexi,
Beiyuan,
Chaoyang
District, Beijing,
China
2016 Plan
2021 Plan
November 11, 2016
March 7, 2017
March 27, 2017
August 1, 2019
June 8, 2021
July 14,
2017 to
April 1,
2022
US$0.45
US$0.45
US$0.70
US$2.06
US$2.34
140,000
60,000
130,000
70,000
20,000
0.008%
Dai Chunping Project
Director of
AIoT
Business
Unit
2407, Block C,
Building 1,
Tianxia Feicui
Mingzhu,
Nantou Street,
Nanshan
District,
Shenzhen, China
2016 Plan
2021 Plan
October 17, 2017
June 8, 2021
July 17,
2019 –
April 1,
2025
US$0.13
US$2.34
360,000
20,000
0.072%


--- page 525 ---
IV-32
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Name Role Address Plan Date of grant
Vesting
period(3)
Exercise
price
(per Share)
Number of
Shares
underlying the
outstanding
options granted
Approximate
percentage
of issued
shares
immediately
after
completion
of the Global
Offering(1)
An Ran Product
Manager
of AIoT
Business
Unit
Room 1321,
Unit 2,
Building 13,
Hujialou North
Street,
Chaoyang North
Road, Chaoyang
District, Beijing,
China
2016 Plan
2021 Plan
March 7, 2016
March 7, 2016
March 27, 2016
August 1, 2019
June 8, 2021
May 18,
2016 –
April 1,
2025
US$0.13
US$0.28
US$0.70
US$2.06
US$2.34
80,000
40,000
100,000
100,000
30,000
0.066%
Notes:
(1) The calculations are made assuming the Presumptions.
(2) 50% of the Shares underlying the option shall vest upon the second anniversary of the vesting commencement date. Another 25% of the
Shares subject to the option shall vest upon the third and fourth anniversary of the vesting commencement date respectively or at such
time that the plan administrator may designate at its sole discretion.
(3) The exercise period of these options commence from the vesting date of the relevant options and end on the tenth anniversary of the
grant date thereof. If requested by the Company or any representative of the Company’s underwriters in connection with an initial public
offering, the grantee will not be permitted to sell or otherwise transfer any of the Shares or securities of the Company during the 180-day
period following the closing date of such initial public offering.


--- page 526 ---
IV-33
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Details of outstanding options granted to other grantees
The table below sets out the details of the outstanding options granted to the remaining 362
grantees under the Pre-IPO Share Incentive Plans, as of the Latest Practicable Date, who are not (i)
Directors, members of the senior management or connected persons of our Company, (ii) consultants,
or (iii) Significant Other Grantees:
Range of
Shares
Underlying
outstanding
Options
Total
number
of
grantees Date of grant
Vesting
period(2)
Exercise
price
(US$)
Number of
Shares
underlying the
outstanding
options granted
Approximate
percentage of
issued shares
immediately
after
completion of
the Global
Offering(1)
Under the 2016 Plan:
0 to 27,999 Shares ........... 6 8 March 7, 2016 -
August 23, 2022
see note 2 0.125 -
2.956
935,250 0.18%
28,000 Shares to 349,999
Shares ...................
118 March 7, 2016 -
September 1, 2022
see note 2 0.005 -
4.098
11,756,500 2.24%
Sub-total: .................. 1 8 6
grantees
12,691,750 2.42%
Under the 2021 Plan:
0 to 27,999 Shares ........... 2 0 4 June 8, 2021 -
February 14, 2023
see note 2 2.3356
- 2.956
1,820,825 0.35%
28,000 Shares to 349,999
Shares ...................
45 June 8, 2021 -
February 14, 2023
see note 2 2.3356
- 2.956
2,720,000 0.52%
Sub-total: .................. 2 4 9
grantees
4,540,825 0.87%
Under both the 2016 Plan and 2021 Plan:
0 to 27,999 Shares ........... 2 0 0 March 7, 2016 -
February 14, 2023
see note 2 0.125 -
2.956
1,844,075 0.35%
28,000 Shares to 349,999
Shares ...................
162 March 7, 2016 -
February 14, 2023
see note 2 0.005 -
4.098
15,388,500 2.93%
Total: ..................... 3 6 2
grantees
17,232,575 3.28%
Notes:
(1) The calculations are made assuming the Over-allotment Option is not exercised and no Shares are issued under the Pre-IPO Share
Incentive Plans.
(2) Please refer to Note 29(b) of the Accountant’s Report in Appendix I for the vesting schedule. The exercise period of these options
commence from the vesting date of the relevant options and end on the tenth anniversary of the grant date thereof. If requested by the
Company or any representative of the Company’s underwriters in connection with an initial public offering, the grantee will not be
permitted to sell or otherwise transfer any of the Shares or securities of the Company during the 180-day period following the closing
date of such initial public offering.
POST-IPO SHARE INCENTIVE PLAN
Overview
The following is a summary of the principal terms of the 2023 Plan approved by our Company
in June 12, 2023, which will be adopted immediately prior to Listing. This plan will constitute a share
scheme governed by Amended Chapter 17.


--- page 527 ---
IV-34
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Purpose
The purpose of this plan is to: (a) provide our Company with a flexible means of attracting,
remunerating, incentivising, retaining, rewarding, compensating and/or providing benefits to Eligible
Participants (defined below); (b) align the interests of Eligible Participants with those of our Company
and Shareholders by providing such Eligible Participants with the opportunity to acquire proprietary
interests in our Company and become Shareholders; and (c) encourage Eligible Participants to
contribute to the long-term growth, performance and profits of the Company and to enhance the value
of our Company and our Shares for the benefit of our Company and Shareholders as a whole.
Eligibility
The following participants are eligible to participate in this plan (“ Eligible Participants”):
Employee Participants A director, officer or employee of our Group on the grant date.
Related Entity Participant A director, officer or employee of (i) our holding company (if any);
(ii) subsidiaries of our holding company other than our Group (if
any); and (iii) associate companies of our Company.
Service Provider Participant Persons providing services to our Group on a continuing basis in its
ordinary and usual course of business that are in the interests of the
long term growth of our Group, as determined by the scheme
administrator, pursuant to the criteria set out in this plan, and:
(a) includes (i) content creators that provide significantly
contributes to our Group and business; (ii) third-party
platforms that is, or is anticipated to be going forward, a
significant business partner or otherwise significant to our
business; and (iii) consultants, suppliers and service providers
that is, or is anticipated to be going forward, a significant
business partner or otherwise significant to our business; but
(b) does not include (i) placing agents or financial advisors
providing advisory services for fundraising, mergers or
acquisitions; or (ii) professional service providers such as
auditors or valuers who provide assurance or are required to
perform their services with impartiality and objectivity.
Awards and Scheme Limits
We may grant share options and share awards (collectively, “ awards”) funded by new ordinary
shares of our Company (or shares treated as new shares of our Company, including the Rollover
Award Shares), or an equivalent value determined at the prevailing market rate, under this plan.
The 2023 Plan shall have the following scheme:
Total scheme limit The total number of Shares which may be issued pursuant to all
awards to be granted under this plan and under any other share
schemes of our Company is 10% of the Shares in issue on the
Listing Date.
Service Provider Participants
sub-limit
The total number of Shares which may be issued pursuant to all
awards to be granted to Service Provider Participants under this
plan is 2,500,000 Shares.


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IV-35
APPENDIX IV STATUTORY AND GENERAL INFORMATION
The above limits may be refreshed by Shareholders at general meeting in accordance with Rule
17.03C of Amended Chapter 17.
Additionally, each Eligible Participant shall be subject to an individual grant limit and
additional approval requirements, (a) with respect to a Director, chief executive or substantial
shareholder of our Company, or their respective associates, as specified in Rule 17.04 of Amended
Chapter 17; and (b) with respect to any Eligible Participant, as specified in Rule 17.03D of Amended
Chapter 17.
Administration
This plan shall be administered by our Board, which may establish a committee and appoint
person(s) to administer and implement this plan (collectively, the “ scheme administrator ”). The
scheme administrator’s powers are subject to applicable laws, rules and regulations, and include the
power to: (a) interpret the plan rules; (b) make grants and determine conditions of the awards granted
(e.g., grant date, vesting period, vesting schedule and conditions such as performance targets, clawback
arrangements, exercise price and period, exercise method and how to settle vested awards, and other
conditions and restrictions); (c) approve award letters; and (d) take any other actions deemed necessary
or prudent to give effect to the terms and intent of the plan rules or awards.
Notwithstanding these powers, the administration of this plan shall comply with all applicable
shareholder approval, announcement, circular, and reporting requirements imposed by the Listing
Rules (as amended from time to time) and shall be subject to applicable laws, rules and regulations.
Grants
Grants of awards shall be determined by the scheme administrator and shall be made to Eligible
Participants only.
Grants shall not be made in contravention of the Model Code set out in Appendix 10 to the
Listing Rules and where our Company is in possession of inside information and until (and including)
one full trading day after the date that such information is announced, including within the one month
prior to the earlier of our Board approving any annual, half-year or quarterly results, or the deadline for
our Company announcing such results under the Listing Rules.
Acceptance
The scheme administrator shall determine the period within which a grant may be valid for
acceptance by the grantee, and the method of and purchase price (if any) payable with acceptance,
which shall be set out in the award letter. However, if not otherwise specified in the award letter, a
grantee shall have 10 Business Days from the grant date to accept the award. Any awards not accepted
by the grantee within the acceptance period (in the manner specified) shall be deemed as declined and
automatically lapse.
Vesting period
The scheme administrator shall determine the vesting period and specify this in the award letter.
However, the vesting period may not be for a period less than 12 months from the grant date, except in
limited circumstances set out in this plan. These circumstances may only apply to Employee Participants
and are consistent with the scenarios contemplated in FAQ 092-2022 issued by the Stock Exchange.


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IV-36
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Vesting conditions
The scheme administrator may set vesting conditions on awards, which shall be specified in the
award letter. These include performance targets, criteria or conditions to be satisfied in order for the
relevant award to vest and be settled by the Company, and may be based on, among other criteria,
performance appraisals within a specified period, business/financial/transactional/performance
milestones, current and anticipated future contribution to our Group and business, minimum service
period, upon reaching other specified targets.
Voting and dividend rights
Awards do not carry any right to vote at general meetings of our Company, nor any right to
dividends, transfer or other rights. No grantee shall enjoy any of the rights of a Shareholder by virtue of
being granted an award unless and until the Shares underlying an award are delivered to the grantee
pursuant to the vesting and exercise of such award.
Transferability
Awards are personal to the grantee and shall not be assignable or transferrable, except where a
waiver has been granted by the Stock Exchange with respect to the proposed transfer, and such transfer
has been made in compliance with the Listing Rules and with the consent of our Company. Following
such transfer, the transferee shall be bound by the plan rules and award letter as if the transferee were
the grantee.
Clawback
Where certain events specified in the plan arise, our Board may determine that, with respect to
a grantee, awards granted but not yet exercised shall immediately lapse, and with respect to any Shares
delivered or amount paid to the grantee, the grantee be required to transfer the same value, whether in
Shares and/or cash, back to our Company (or nominee). These circumstances are:
(a) the grantee ceasing to be an Eligible Participant by reason of termination for cause or
without notice, or the result of being charged/penalized/convicted of an offense involving
the grantee’s integrity or honesty;
(b) the grantee commits a serious misconduct or breach, including with respect to a policy or
code of or other agreement with our Group, which is considered to be material; or
(c) the award is no longer determined to be appropriate and aligned with the purpose of this plan.
Lapsed and canceled awards
The scheme administrator may cancel an award with the prior consent of the grantee. Award
shares underlying canceled awards shall be treated in the manner required under the Listing Rules.
Awards shall automatically lapse upon the following events:
(a) the award has not been accepted by the grantee (in the manner specified) within the
acceptance period;
(b) expiry of the exercise price;
(c) the clawback mechanism being triggered;


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IV-37
APPENDIX IV STATUTORY AND GENERAL INFORMATION
(d) following the grantee’s death or permanent incapacity, bankruptcy, or where the grantee
ceases to be an Eligible Participant or terminates their employment or contractual
engagement with our Group for reasons other than as already provided for in this plan, or
where the grantee’s employment or contractual engagement has been suspended, or the
grantee’s position in or with respect to our Group has been vacated, for more than six
months;
(e) forfeiture of the award by the grantee; or
(f) the grantee transfers the award in breach of the transferability provisions specified in the plan.
Term of this plan and termination
Subject to any early termination as determined by our Board, this plan shall have a plan life of
ten years from the adoption date.
No grants may be made after termination of this plan. Notwithstanding termination of this plan,
this plan and its rules shall continue to be valid and effective to the extent necessary to give effect to
the vesting and exercise of awards granted prior to termination, and the termination shall not affect any
subsisting rights already granted to a grantee. For the avoidance of doubt, awards granted during the
plan life but that remain unexercised or unexpired prior to the termination shall continue to be valid
and exercisable in accordance with this plan and the relevant award letter.
Amendment and termination
The scheme administrator may, in their sole discretion, amend this plan or an award provided
that:
(a) the amendment, and the amended plan or award, shall comply with the relevant
requirements under Amended Chapter 17; and
(b) additional approvals (e.g., from the relevant grantee, Shareholders at general meeting, or
another body) are obtained as, and in the manner, required under the Notes to Rule
17.03(18) of Amended Chapter 17.
Award letter
A grant shall be accompanied by an award letter, which shall set out the particulars, terms and
conditions of the grant, including particulars of the grant/award, vesting conditions, method of
settlement, and other rights or restrictions attached to or in respect of the award (or underlying award
shares).
OTHER INFORMATION
Estate duty
Our Directors have been advised that no material liability for estate duty is likely to fall upon
any member of our Group.
Litigation
Save as disclosed in this document, no member of our Group is engaged in any litigation,
arbitration or claim of material importance, and no litigation, arbitration or claim of material


--- page 531 ---
IV-38
APPENDIX IV STATUTORY AND GENERAL INFORMATION
importance is known to our Directors to be pending or threatened by or against our Company that
would have a material adverse effect on our Company’s results of operations or financial condition.
The Sole Sponsor
The listing of our Shares on the Hong Kong Stock Exchange is solely sponsored by China
International Capital Corporation Hong Kong Securities Limited which is an independent sponsor
under Rule 3A.07 of the Listing Rules.
The Sole Sponsor will receive an aggregate of US$500,000 for acting as the Company’s
sponsor for the Listing.
Consent of experts
This document contains statements made by the following experts:
Name Qualification
China International Capital
Corporation Hong Kong Securities
Limited
A licensed corporation under the SFO for Type 1 (dealing in securities),
Type 2 (dealing in futures contracts), Type 4 (advising on securities),
Type 5 (advising on futures contracts) and Type 6 (advising on corporate
finance) of the regulated activities as defined under the SFO
Commerce & Finance Law Offices Qualified PRC lawyers
Harney Westwood & Riegels Cayman Islands attorneys-at-law
PricewaterhouseCoopers Certified Public Accountants under Professional Accountants Ordinance
(Cap. 50)
Registered Public Interest Entity Auditor under Accounting and
Financial Reporting Council Ordinance (Cap. 588)
China Insights Industry Consultancy
Limited
Industry consultant
Global Law Office Qualified PRC lawyers
As at the Latest Practicable Date, none of the experts named above has any shareholding in any
member of our Group or the right (whether legally enforceable or not) to subscribe for or to nominate
persons to subscribe for securities in any member of our Group.
Each of the experts named above have given and have not withdrawn their respective written
consent to the issue of this document with copies of their reports, letters, opinions or summaries of
opinions (as the case may be) and the references to their names included herein in the form and context
in which they are respectively included.
Binding effect
This document shall have the effect, if an application is made in pursuance hereof, of rendering
all persons concerned bound by all the provisions (other than the penal provisions) of sections 44A and
44B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance so far as applicable.
Bilingual document
The English language and Chinese language versions of this document are being published
separately in reliance upon the exemption provided by section 4 of the Companies (Exemption of


--- page 532 ---
IV-39
APPENDIX IV STATUTORY AND GENERAL INFORMATION
Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of
Hong Kong).
The English version of this document is the official version, and where are inconsistencies
between the English version and translations thereof, the English version of this document shall
prevail.
Preliminary expenses
We have not incurred any material preliminary expenses in relation to the incorporation of our
Company.
Disclaimers
(a) Save as disclosed in this document and in the section “Underwriting”, within the two years
immediately preceding the date of this document:
(i) there are no commissions for subscribing or agreeing to subscribe, or procuring or
agreeing to procure subscriptions, for any shares in or debentures of our Company;
and
(ii) there are no commissions, discounts, brokerages or other special terms granted in
connection with the issue or sale of any capital of any member of our Group, and no
Directors, promoters or experts named in “—Other information—Consent of experts”
received any such payment or benefit.
(b) Save as disclosed in this document:
(i) there are no founder, management or deferred shares in our Company or any member
of our Group (other than the 990,000 Restricted Shares held by Bulldog Group Ltd
and the 14,440,000 Restricted Shares held by Calorie Fortune Limited);
(ii) we do not have any promoter and no cash, securities or other benefit has been paid,
allotted or given within the two years immediately preceding the date of this
document, or are proposed to be paid, allotted or given to any promoters;
(iii) none of the Directors or the experts named in “—Other information—Consent of
experts” above has any interest, direct or indirect, in the promotion of, or in any
assets which have been, within the two years immediately preceding the date of this
document, acquired or disposed of by or leased to, any member of our Group, or are
proposed to be acquired or disposed of by or leased to any member of our Group; and
(iv) there are no bank overdrafts or other similar indebtedness by our Company or any
member of our Group;
(v) there are no hire purchase commitments, guarantees or other material contingent
liabilities of our Company or any member of our Group;
(vi) there are no outstanding debentures of our Company or any member of our Group;
(vii) there are no other stock exchange on which any part of the equity or debt securities of
our Company is listed or dealt in or on which listing or permission to deal is being or
is proposed to be sought;


--- page 533 ---
IV-40
APPENDIX IV STATUTORY AND GENERAL INFORMATION
(viii) there are no arrangements under which future dividends are waived or agreed to be
waived;
(ix) there were no significant interruptions in the business of the Group which may have
or have had a significant effect on our financial position in the last 12 months;
(x) and save for the Share Incentive Plans, no capital of any member of our Group is
under option, or is agreed conditionally or unconditionally to be put under option;
(xi) there are no restrictions affecting the remittance of profits or repatriation of capital
into Hong Kong and from outside Hong Kong;
(xii) there are no contracts or arrangements subsisting at the date of this document in
which a Director is materially interested or which is significant in relation to the
business of our Group.


--- page 534 ---
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND AVAILABLE ON DISPLAY
DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
The documents attached to the copy of this document delivered to the Registrar of Companies
in Hong Kong for registration were, among other documents,:
(a) a copy of the GREEN Application Form;
(b) the written consents referred to in “Statutory and general information—Other
information—Consent of experts” in Appendix IV; and
(c) copies of the material contracts referred to in “Statutory and general information—Further
information about our business—Summary of material contracts” in Appendix IV.
DOCUMENTS AVAILABLE ON DISPLAY
Copies of the following documents will be available on display on the Company’s website
(https://keep.com/) and the Stock Exchange’s website ( https://www.hkexnews.hk) up to and
including the date which is 14 days from the date of this document:
(a) the Memorandum and the Articles;
(b) the material contracts referred to in “Statutory and general information—Further
information about our business—Summary of material contracts” in Appendix IV;
(c) the service contracts and the letters of appointment with our Directors referred to in
“Statutory and general information—Further information about our Directors—Particulars
of Directors’ service contracts and appointment letters” in Appendix IV;
(d) the report issued by China Insights Industry Consultancy Limited, a summary of which is
set forth in “Industry overview”;
(e) the PRC legal opinions issued by Commerce & Finance Law Offices, our PRC Legal
Adviser on PRC law, in respect of certain general corporate matters and property interests
in the PRC of our Group;
(f) the PRC legal opinions issued by Global Law Office, our PRC legal adviser in respect of
PRC data compliance law;
(g) the Accountant’s Report and the report on the unaudited pro forma financial information
of our Group from PricewaterhouseCoopers, the texts of which are set out in Appendix I
and Appendix II, respectively;
(h) the audited consolidated financial statements as of and for the years ended December 31,
2019, 2020, 2021 and 2022;
(i) the letter of advice prepared by Harney Westwood & Riegels, our legal adviser on
Cayman Islands law, summarizing certain aspects of Cayman company law referred to in
Appendix III;
(j) the Cayman Companies Act;
(k) the written consents referred to in “Statutory and general information—Other
information—Consent of experts” in Appendix IV; and
(l) the terms of the Share Incentive Plans.
V-1


--- page 535 ---
DOCUMENT AVAILABLE FOR INSPECTION
A full list of the grantees under the Pre-IPO Share Incentive Plans will be available for
inspection in person at the offices of Skadden, Arps, Slate, Meagher & Flom at 42/F, Edinburgh
Tower, The Landmark, 15 Queen’s Road Central, Hong Kong, during normal business hours and with
prior appointment for a period up to an including the date which is 14 days from the date of this
document.
V-2
APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES AND AVAILABLE ON DISPLAY


--- page 536 ---
Keep Inc.Keep Inc.
Sole Sponsor, Sole Overall Coordinator, Sole Global Coordinator, Joint Bookrunner and Joint Lead Manager
Joint Bookrunners and Joint Lead Managers
(A company incorporated in the Cayman Islands with limited liability)
Stock Code: 3650
Global Offering
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