Filed Pursuant to Rule 424(b)(5)
Registration No. 333-264942

 

Prospectus Supplement

(To Prospectus dated August 25, 2022)

 

3,654,546 American Depositary Shares Representing 58,472,736 Class A Ordinary Shares

Pre-Funded Warrants to Purchase up to 1,800,000 American Depositary Shares

Warrants to Purchase up to 5,454,546 American Depositary Shares

Up to 7,254,546 American Depositary Shares (representing up to 116,072,736 Class A Ordinary Shares underlying the Warrants and Pre-Funded Warrants)

 

 

TuanChe Limited

 

We are offering (1) 3,654,546 American depositary shares (the “ADSs”), (2) certain pre-funded warrants to purchase 1,800,000 ADSs (the “Pre-Funded Warrants”) in lieu of the ADSs being offered, and (3) certain warrants to purchase up to 5,454,546 ADSs (the “Warrants”), to certain institutional investors pursuant to a securities purchase agreement dated November 21, 2022 (the “offering”). The Warrants are offered together with the ADSs or the Pre-Funded Warrants. The combined purchase price of each ADS and the accompanying Warrants is US$2.75. The combined purchase price of each Pre-Funded Warrant and the accompanying Warrants is US$2.749, which is equal to the offering price of the ADSs and accompanying Warrants minus US$0.001. This prospectus supplement also relates to the offer and sale of up to 7,254,546 ADSs that are issuable, following issuance and delivery of the underlying Class A ordinary shares, upon exercise of the Pre-Funded Warrants and the Warrants. Each ADS represents sixteen (16) Class A ordinary shares, par value US$0.0001 per share.

 

Each Warrant is exercisable for one ADS at an exercise price of US$2.75 per ADS. The Warrants will be immediately exercisable and will expire on the fifth anniversary of the original issuance date. Each Pre-Funded Warrant is exercisable for one ADS at an exercise price of US$0.001. We are offering the Pre-Funded Warrants to certain purchasers whose purchase of the ADSs in this offering would otherwise result in such purchase, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchase, 9.99%) of our outstanding ordinary shares immediately following the consummation of this offering. The Pre-Funded Warrants are exercisable immediately and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. On November 22, 2022, certain investor partially exercised the Pre-Funded Warrants to purchase 800,000 ADSs at an exercise price of US$0.001 per ADS (the “Partial Exercise”).

 

The ADSs are listed on the Nasdaq Capital Market under the symbol “TC.” The last reported sale price of the ADSs on November 22, 2022 was US$1.20 per ADS. There is no established public trading market for the Warrants or the Pre-Funded Warrants, and we do not expect a market to develop. We do not intend to apply for listing of the Warrants or the Pre-Funded Warrants on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the Warrants and Pre-Funded Warrants will be limited.

 

We have retained Aegis Capital Corp. (the “Placement Agent”) to act as our placement agent in connection with this offering. The Placement Agent is not purchasing or selling any of the securities offered pursuant to this prospectus supplement and the accompanying prospectus and the Placement Agent is not required to arrange the purchase or sale of any specific number of securities or dollar amount. We will pay the Placement Agent a cash fee of 8.0% of the gross proceeds raised in the offering. See “Plan of Distribution” beginning on page S-84 of this prospectus supplement for more information regarding these arrangements.

 

The aggregate market value of our outstanding Class A ordinary shares held by non-affiliates, or public float calculated pursuant to General Instruction I.B.5 of Form F-3, was approximately US$103.7 million, which was based on 164,496,607 Class A ordinary shares held by non-affiliates and the per ADS price of US$10.09, which was the closing price of our ADSs on November 10, 2022. As a result, we believe we may sell the securities covered hereby without regard to the value limitation under General Instruction I.B.5 of Form F-3.

 

Our ordinary shares consist of Class A ordinary shares and Class B ordinary shares. Each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to fifteen (15) votes on all matters subject to vote at general meetings of our company. Each Class B ordinary share is convertible into one Class A ordinary share at any time at the option of the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any sale, transfer, assignment or disposition of Class B ordinary shares by a holder to any person or entity which is not an affiliate of such holder, or upon a change of ultimate beneficial ownership of any Class B ordinary share to any person or entity who is not an affiliate of such holder, each of such Class B ordinary shares shall be automatically and immediately converted into one Class A ordinary share.

 

We are not a Chinese operating company. TuanChe Limited, our ultimate Cayman Islands holding company, does not have any substantive operations. We carry out our value-added telecommunications business in mainland China through our subsidiaries as well as the variable interest entities (the “VIEs”) and their subsidiaries in mainland China. Neither the investors in us nor we ourselves have an equity ownership in, direct foreign investment in, or control of, through such ownership or investment, the VIEs. Instead, we, through our wholly owned subsidiaries in mainland China (the “WFOEs”), entered into a series of contractual arrangements with the VIEs and their respective shareholders. Neither we nor our subsidiaries own any share in the VIEs. Because of these contractual arrangements, we are the primary beneficiary of the VIEs for accounting purposes and able to consolidate the financial results of the VIEs with ours only if we meet the conditions for consolidation under U.S. GAAP. PRC laws and regulations restrict and impose conditions on foreign investment in value-added telecommunications services business. Accordingly, we operate our value-added communications business in mainland China through the VIEs and their subsidiaries, and we could receive the economic rights and exercise significant influence on the VIEs’ business operations that results in consolidation of the VIEs’ operations and financial results into our financial statements through the contractual arrangements, provided that we meet the conditions for consolidation under U.S. GAAP. The VIE structure is used to replicate foreign investment in China-based companies where the PRC laws restrict direct foreign investment in the operating companies. However, our contractual arrangements with the VIEs are not equivalent of an investment in the VIEs. The VIE structure involves unique risks to investors in the ADSs. Investors in the ADSs are purchasing equity securities of our ultimate Cayman Islands holding company rather than purchasing equity securities of the VIEs, and investors in the ADSs may never hold equity interests in the VIEs. As used in this prospectus supplement, “we,” “us,” “our company,” “our,” or “TuanChe” refers to TuanChe Limited and its subsidiaries, and the VIEs refer to TuanChe Internet Information Service (Beijing) Co., Ltd. (“TuanChe Internet”), Shenzhen Drive New Media Co., Ltd. (“Drive New Media”), Beijing Internet Drive Technology Co., Ltd., and/or Tansuojixian Technology (Beijing) Co., Ltd., and their respective subsidiaries, as the context requires.

 

 

Our corporate structure is subject to risks associated with our contractual arrangements with the VIEs. These contractual arrangements have not been properly tested in a court of law, and the PRC regulatory authorities could disallow our corporate structure at any time, which could result in a material change in our operations and the value of our securities could decline or become worthless. Because of our corporate structure, our Cayman Islands holding company, the WFOEs, the VIEs and their subsidiaries, and our investors face uncertainty with respect to the interpretation and the application of the PRC laws and regulations, including but not limited to limitation on foreign ownership of value-added telecommunications service companies, regulatory review of overseas listing of companies in mainland China through a special purpose vehicle, and the validity and enforcement of the contractual agreements. We are also subject to the risks of uncertainty about any future actions of the PRC government in this regard. Our contractual agreements may not be effective in providing control over the VIEs. To the extent practicable commercially and in compliance with the relevant PRC laws and regulations, we plan to conduct the VIEs’ current businesses through our subsidiaries in mainland China and cease substantially all of the operation of the VIEs within the next three to five years. We may also be subject to sanctions imposed by PRC regulatory agencies, including China Securities Regulatory Commission, if we fail to comply with their rules and regulations. For a detailed discussion of risks related to our corporate structure, see “Risk Factors—Risks Related to Our Corporate Structure.”

 

Under our corporate structure, our ability to pay dividends and to service any debt we may incur and pay our operating expenses principally depends on dividends paid by our subsidiaries in mainland China. Cash is transferred through our organization in the manner as follows: (1) we may transfer funds to our WFOEs through our Hong Kong subsidiary, TuanChe Information Limited, by additional capital contributions or shareholder loans, as the case may be; (2) our subsidiaries in mainland China may provide loans to the VIEs, subject to statutory limits and restrictions; (3) the VIEs may pay service fees to our subsidiaries in mainland China for services rendered by our subsidiaries in mainland China; (4) our subsidiaries in mainland China may pay service fees to the VIEs for services rendered by the VIEs; and (5) our subsidiaries in mainland China may make dividends or other distributions to us through TuanChe Information Limited. We do not have cash management policies dictating how funds are transferred throughout our organization. In 2021, our subsidiaries in mainland China received cash of RMB2.0 million from the VIEs for services rendered to the VIEs and their subsidiaries. In 2021, our subsidiaries in mainland China paid cash of RMB0.6 million to the VIEs for services rendered by the VIEs and their subsidiaries. The foregoing cash flows include all distributions and transfers between our Cayman Islands holding company, our subsidiaries and the VIEs as of the date of this prospectus supplement. As of the date of this prospectus supplement, none of our subsidiaries have ever issued any dividends or made other distributions to us or their respective holding companies nor have we or any of our subsidiaries ever paid dividends or made other distributions to U.S. investors. We currently intend to retain all future earnings to finance the VIEs’ and our subsidiaries’ operations and to expand their business and we do not expect to pay any cash dividends in the foreseeable future. For details regarding distributions and transfers between our Cayman Islands holding company, our subsidiaries and the VIEs, see “Item 5. Operating and Financial Review and Prospects—Financial Information Related to the VIEs” and “Item 5. Operating and Financial Review and Prospects—Cash Flows through Our Organization” in our annual report on Form 20-F for the fiscal year ended December 31, 2021 filed with the SEC on April 29, 2022 (the “2021 Form 20-F”), which is incorporated herein by reference, and “Prospectus Summary—Financial Information Related to the VIEs” and “Prospectus Summary—Cash Flows through Our Organization” in this prospectus supplement.

 

There are limitations on our ability to transfer cash between us, our subsidiaries and the VIEs, and there is no assurance that the PRC government will not intervene or impose restrictions on cash transfer between us, our subsidiaries and the VIEs. We may encounter difficulties in our ability to transfer cash between subsidiaries in mainland China and other subsidiaries largely due to various PRC laws and regulations imposed on foreign exchange. The majority of our income is denominated in Renminbi, and shortage in foreign currencies may restrict our ability to pay dividends or other payment to satisfy our foreign currency denominated obligations, if any. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions can be made in foreign currencies without prior approval from the State Administration of the Foreign Exchange in the PRC as long as certain procedural requirements are met. Approval from appropriate government authorities is required if Renminbi is converted into foreign currency and remitted out of the PRC to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may, at its discretion, impose restrictions on access to foreign currencies for current account transactions and if this occurs in the future, we may not be able to pay dividends in foreign currencies to our shareholders. The PRC government has implemented a series of capital control measures, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. It may continue to strengthen its capital controls and dividends and other distributions of our subsidiaries in mainland China may be subjected to tighter scrutiny and may limit the ability of our Cayman Islands holding company, to use capital from our subsidiaries in mainland China, which may restrict our ability to satisfy our liquidity requirements. To the extent cash or assets in the business is in mainland China or Hong Kong or in an entity domiciled in mainland China or Hong Kong, and may need to be used to fund operations outside of mainland China or Hong Kong, the funds and assets may not be available to fund operations or for other uses outside of mainland China or Hong Kong due to interventions in or the imposition of restrictions and limitations by the government on our, our subsidiaries’ or the VIEs’ ability to transfer cash and assets. For more detailed discussion of the restrictions and limitations on the ability to transfer cash or distribute earnings between our subsidiaries and the VIEs, and between our Cayman Islands holding company and the VIEs, see “Prospectus Summary—Cash Flows through Our Organization” and “Risk Factors—Risks Related to Our Corporate Structure—We may rely on dividends and other distributions on equity paid by our subsidiaries in mainland China and Hong Kong to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct the business” in this prospectus supplement. See “Prospectus Summary—Financial Information Related to the VIEs” for the reconciliation between the deconsolidated financial information of our Cayman Islands holding company, our subsidiaries and the VIEs and our condensed consolidated financial statements.

 

 

We and the VIEs face various legal and operational risks and uncertainties related to being based in and having significant operations in mainland China. The PRC government has significant authority to exert influence on the ability of a China-based company, such as us and the VIEs, to conduct its business, accept foreign investments or list on U.S. or other foreign exchanges. For example, we and the VIEs face risks associated with regulatory approvals of offshore offerings, oversight on cybersecurity and data privacy, as well as the lack of inspection by the Public Company Accounting Oversight Board (the “PCAOB”) on our auditors. Such risks could result in a material change in our operations and/or the value of the ADSs or could significantly limit or completely hinder our ability to offer ADSs and/or other securities to investors and cause the value of such securities to significantly decline or be worthless. These regulatory risks and uncertainties could become applicable to our Hong Kong subsidiary if regulatory authorities in Hong Kong adopt similar rules and/or regulatory actions. For a detailed description of risks relating to doing business in mainland China, see “Risk Factors—Risks Related to Doing Business in China” in this prospectus supplement.

 

Our financial statements contained in the 2021 Form 20-F have been audited by an independent registered public accounting firm that was not included in the list of PCAOB Identified Firms of having been unable to be inspected or investigated completely by the PCAOB in the PCAOB Determination Report issued in December 2021. We have not been identified by the Securities and Exchange Commission (the “SEC”) as a commission-identified issuer under the Holding Foreign Companies Accountable Act (the “HFCA Act”) as of the date of this prospectus supplement. If, in the future, we have been identified by the SEC for three consecutive years (or two consecutive years if the Accelerating Holding Foreign Companies Accountable Act is signed into law) as a commission-identified issuer whose registered public accounting firm is determined by the PCAOB that it is unable to inspect or investigate completely because of a position taken by one or more authorities in China, the SEC may prohibit our shares or the ADSs from being traded on a national securities exchange or in the over the counter trading market in the United States.

 

Investing in these securities involves risks. See the “Risk Factors” on page S-26 of this prospectus supplement, and those included in the accompanying prospectus and the documents incorporated by reference herein and therein to read about factors you should consider before investing in these securities.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of the disclosures in this prospectus, including any prospectus supplement and documents incorporated by reference. Any representation to the contrary is a criminal offense.

 

    Per ADS and
Accompanying
Warrants
  Per
Pre-Funded
Warrant and
Accompanying
Warrants
  Total
Offering price   US$ 2.75   US$ 2.749   US$ 14,998,201
Placement Agent’s Fees (1)   US$ 0.22   US$ 0.220   US$ 1,200,000
Proceeds to us (before expenses) (2)   US$ 2.53   US$ 2.529   US$ 13,798,201

  

(1) We have agreed to pay the Placement Agent a cash fee equal to 8.0% of the aggregate gross proceeds of this offering. See “Plan of Distribution” for additional information regarding total compensation payable to the Placement Agent, including expenses for which we have agreed to reimburse the Placement Agent.
(2) The amount of the offering proceeds to us presented in this table does not give effect to any exercise of the Pre-Funded Warrants or the Warrants being issued in this offering.

 

The ADSs are expected to be delivered through the book-entry transfer facilities of The Depository Trust Company in New York, New York, and the Pre-Funded Warrants, together with the associated Warrants, are expected to be delivered against payment therefor, in each case, on or about November 23, 2022.

 

Aegis Capital Corp.

 

Prospectus Supplement dated November 21, 2022

 

 

TABLE OF CONTENTS

 

PROSPECTUS SUPPLEMENT

 

      Page
ABOUT THIS PROSPECTUS SUPPLEMENT     S-1
PROSPECTUS SUPPLEMENT SUMMARY     S-3
THE OFFERING     S-18
SUMMARY CONSOLIDATED FINANCIAL DATA     S-20
RISK FACTORS     S-26
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS     S-70
USE OF PROCEEDS     S-71
DIVIDEND POLICY     S-72
CAPITALIZATION     S-73
DILUTION     S-74
DESCRIPTION OF OUR SECURITIES WE ARE OFFERING     S-75
TAXATION     S-77
PLAN OF DISTRIBUTION     S-84
LEGAL MATTERS     S-85
EXPERTS     S-86
EXPENSES OF THE OFFERING     S-87
WHERE YOU CAN FIND ADDITIONAL INFORMATION     S-88
INCORPORATION OF DOCUMENTS BY REFERENCE     S-89

 

PROSPECTUS

 

ABOUT THIS PROSPECTUS   1
PROSPECTUS SUMMARY   2
INCORPORATION OF DOCUMENTS BY REFERENCE   13
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS   14
RISK FACTORS   15
USE OF PROCEEDS   23
DESCRIPTION OF THE SECURITIES   24
DESCRIPTION OF SHARE CAPITAL   25
DESCRIPTION OF AMERICAN DEPOSITARY SHARES   40
DESCRIPTION OF PREFERRED SHARES   48
DESCRIPTION OF DEBT SECURITIES   49
DESCRIPTION OF WARRANTS   51
DESCRIPTION OF UNITS   53
PLAN OF DISTRIBUTION   54
TAXATION   57
ENFORCEABILITY OF CIVIL LIABILITIES   58
LEGAL MATTERS   60
EXPERTS   61
WHERE YOU CAN FIND MORE INFORMATION ABOUT US   62

 

 

ABOUT THIS PROSPECTUS SUPPLEMENT

 

This document is in two parts. The first part is the prospectus supplement, which describes the specific terms of this offering of ADSs, the Pre-Funded Warrants and the Warrants and also adds to and updates information contained in the accompanying prospectus and the documents incorporated by reference into this prospectus supplement and the accompanying prospectus. The second part is the accompanying prospectus dated August 25, 2022 included in the registration statement on Form F-3 (No. 333-264942), including the documents incorporated by reference therein, which provides more general information, some of which may not be applicable to this offering.

 

This prospectus supplement provides specific details regarding the offering of the ADSs, the Pre-Funded Warrants and the Warrants. If the description of the offering varies between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement.

 

You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus or any free writing prospectus provided in connection with this offering. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should assume that the information appearing in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference is accurate only as of their respective dates, regardless of the time of delivery of this prospectus supplement, the accompanying prospectus or any other offering materials, or any sale of the ADSs, the Pre-Funded Warrants or the Warrants. Our business, financial condition, results of operations and prospects may have changed since those dates. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. Neither this prospectus supplement nor the accompanying prospectus constitutes an offer, or an invitation on behalf of us to subscribe for and purchase, any of the ADSs, the Pre-Funded Warrants or the Warrants and may not be used for or in connection with an offer or solicitation by anyone, in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.

 

It is important for you to read and consider all the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus in making your investment decision.

 

In this prospectus supplement and the accompanying prospectus, unless otherwise indicated or unless the context otherwise requires, references to:

 

“ADSs” refers to American depositary shares, each representing 16 Class A ordinary shares;
“auto dealer(s)” refers to both franchised dealers and secondary dealers;
“China” refers to the People’s Republic of China; and “mainland China” or the “PRC” refers to the People’s Republic of China, and only in the context of describing the industry matters, the PRC laws, rules, regulations, regulatory authorities, and any PRC entities or citizens under such rules, laws and regulations and other legal or tax matters in this prospectus supplement, and excludes Taiwan, the Hong Kong Special Administrative Region and the Macau Special Administrative Region;
“franchised dealer(s)” refers to primary dealers authorized to sell the products of a single brand of automobiles that integrate four standard automotive related businesses including sales, spare parts, service and survey;
“GMV” refers to gross merchandise value, reflecting the total sales dollar value for automobiles sold through our and the VIEs’ marketplace;
“industry customer(s)” refers to business customers to which we offer services, including auto dealers, automakers, automobile accessory manufacturers, aftermarket service providers and other automotive related goods and service providers;
“ordinary shares” or “shares” refer to our Class A and Class B ordinary shares of par value US$0.0001 per share;
“Renminbi” or “RMB” refers to the legal currency of China;
“SEC” refers to the United States Securities and Exchange Commission;
“secondary dealer(s)” refers to car dealers that have no automobile manufacturers certification and do not have specific sales brand restrictions;
“TuanChe,” “we,” “us,” “our company” or “our” refers to TuanChe Limited, a Cayman Islands exempted company with limited liability and its subsidiaries;
“U.S. GAAP” refers to generally accepted accounting principles in the United States;
“US$,” “dollars” or “U.S. dollars” refers to the legal currency of the United States; and
“VIEs” refers to TuanChe Internet Information Service (Beijing) Co., Ltd., Shenzhen Drive New Media Co., Ltd., Beijing Internet Drive Technology Co., Ltd. and/or Tansuojixian Technology (Beijing) Co., Ltd., and their respective subsidiaries, as the context requires.

 

All discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.

 

S-1  

 

 

This prospectus supplement contains translations between Renminbi and U.S. dollars solely for the convenience of the reader. The translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this prospectus supplement were made at a rate of RMB6.3726 to US$1.00 and RMB6.6981 to US$1.00, representing the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York on December 30, 2021 and June 30, 2022, respectively. We make no representation that the Renminbi or U.S. dollar amounts referred to in this prospectus supplement could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all.

 

S-2  

 

 

PROSPECTUS SUPPLEMENT SUMMARY

 

This prospectus supplement summary highlights selected information included elsewhere in or incorporated by reference into this prospectus supplement and the accompanying prospectus and does not contain all the information that you should consider before making an investment decision. You should read this entire prospectus supplement and the accompanying prospectus carefully, including the “Risk Factors” sections and the financial statements and related notes and other information incorporated by reference, before making an investment decision.

 

Our Business

 

We believe we, together with the VIEs, are a leading omni-channel automotive marketplace in mainland China. We, together with the VIEs, provide a scalable omni-channel automotive marketplace approach to automobile marketing and distribution. Our business model features high sales conversion effectiveness and efficiency, delivering a high and measurable return on investment for our industry customers relative to their overall marketing expenditures. We, together with the VIEs, operate and generate net revenue from the following businesses:

 

  Offline marketing solutions. We and the VIEs turn individual and isolated automobile purchase transactions into large-scale collective purchase activities through our auto shows. By attracting a large number of consumers, these events serve as integrated marketing solutions to industry customers, which include automakers, franchised dealerships, secondary dealers and automotive service providers. We and the VIEs enable interactions between large numbers of participants on both sides of a potential transaction, creating a “many-to-many” environment, within a short period of time, thus enhancing the value we and the VIEs offer to both consumer and industry customer participants of our offline events. We and the VIEs organize auto shows and charge industry customers for booth spaces in the auto shows. In addition, we and the VIEs have developed special promotion event services to better support industry customers in organizing their special promotion events through various integrated services, including event planning and executing, marketing training and onsite coaching. We and the VIEs charge fixed service fees for special promotion event services.
     
  Referral service for commercial bank. We collaborate with and facilitate a commercial bank in expanding its cooperation with our industry customers to grow its auto loan business. We charge the bank service fees for approved loan applications. We have ceased to operate the referral services since April 2022.
     
  Online marketing services and others. We and the VIEs provide online marketing services for industry customers to increase the efficiency and effectiveness of their marketing campaigns.

 

Our and the VIEs’ business model features the integration of two complementary elements: our and the VIEs’ online platform and offline events. The online platform consists of our and the VIEs’ website, tuanche.com, official WeChat account, WeChat mini-program and mobile applications. Together, these channels promote our and the VIEs’ offline events and serve as a consumer acquisition tool for the offline events. Our and the VIEs’ offline events provide consumers physical access to a broad selection of automobiles and serve as a gateway to useful data from consumer participants who have not previously entered their information on our and the VIEs’ online platform. With our and the VIEs’ data analytics capabilities, these data enhance our and the VIEs’ understanding of the automobile demand in various localities and continuously improve the effectiveness of our and the VIEs’ event planning.

 

We, together with the VIEs, complement our and the VIEs’ service offerings by collaborating with service and product providers in mainland China’s automotive industry, such as aftermarket service providers, financial institutions, and insurance companies. By extending our and the VIEs’ services beyond automobile purchases, we, together with the VIEs, offer consumers one-stop end-to-end shopping experience, establish ongoing relationships with consumers, and attract new consumers who are contemplating automobile purchases. As our and the VIEs’ consumer base increases, we believe more automakers and auto dealers are incentivized to become our and the VIEs’ industry customers, which leads to a broader selection of automobiles and more favorable pricing terms for our and the VIEs’ consumers, driving a self-reinforcing virtuous cycle.

 

In 2019, 2020 and 2021 and the six months ended June 30, 2021 and 2022, we, together with the VIEs, hosted 1,055, 449, 450, 278 and 61 auto shows across 233, 172, 142, 133 and 49 cities in mainland China, respectively. Our and the VIEs’ auto shows offered a total of 29,063, 14,341, 12,372, 7,789 and 1,303 booth spaces in 2019, 2020 and 2021 and the six months ended June 30, 2021 and 2022. The total number of automobile sales transactions we and the VIEs facilitated was 354,355, 140,264, 104,689, 64,187 and 16,591 in 2019, 2020 and 2021 and the six months ended June 30, 2021 and 2022, respectively, with a total GMV of approximately RMB47.5 billion, RMB19.8 billion, RMB14.6 billion (US$2.3 billion), RMB9.0 billion and RMB2.4 billion (US$0.4 billion) in the same periods, respectively. In 2019, 2020 and 2021 and the six months ended June 30, 2021 and 2022, we, together with the VIEs, facilitated 627, 207, 158, 61 and 46 special promotion events for our and the VIEs’ industry customers, respectively.

 

S-3  

 

 

Our net revenues were RMB644.8 million, RMB330.2 million, RMB357.6 million (US$56.1 million), RMB213.3 million and RMB89.2 million (US$13.3 million) in 2019, 2020 and 2021 and the six months ended June 30, 2021 and 2022, respectively. Historically, we generated our net revenues primarily through our offline events. We also generated net revenue from other services, including among others, referral services, virtual dealership and online marketing services, of RMB21.6 million, RMB74.9 million, RMB110.7 million (US$17.4 million), RMB53.3 million and RMB63.6 million (US$9.5 million) in 2019, 2020 and 2021 and the six months ended June 30, 2021 and 2022, respectively, representing 3.3%, 22.7%, 31.0%, 25.0% and 71.2% of our net revenues for the same periods, respectively. For a detailed breakdown of our net revenues, see “Summary Consolidated Financial Data—Summary Consolidated Statements of Operations and Comprehensive Loss” in this prospectus supplement. Our net loss was RMB251.3 million, RMB163.5 million, RMB101.9 million (US$16.0 million), RMB22.6 million and RMB56.2 million (US$8.4 million) in 2019, 2020 and 2021 and the six months ended June 30, 2021 and 2022, respectively. Our adjusted EBITDA was RMB(143.9) million, RMB(141.1) million, RMB(82.9) million (US$(13.0) million), RMB(11.8) million and RMB(30.8) million (US$(4.6) million) in 2019, 2020 and 2021 and the six months ended June 30, 2021 and 2022, respectively. We recorded adjusted net loss of RMB140.3 million, RMB145.8 million, RMB90.0 million (US$14.1 million), RMB15.9 million and RMB34.4 million (US$5.1 million) in 2019, 2020 and 2021 and the six months ended June 30, 2021 and 2022, respectively. For a detailed description of our non-GAAP measures, see “Summary Consolidated Financial Data—Non-GAAP Measures” in this prospectus supplement.

 

Our Strengths

 

We attribute our success to the following strengths.

 

Leading omni-channel automotive marketplace with an effective business model

 

We believe we, together with the VIEs, are a leading omni-channel automotive marketplace in mainland China. The total number of automobile sales transactions we and the VIEs facilitated was 354,355, 140,264, 104,689, 64,187 and 16,591 in 2019, 2020 and 2021 and the six months ended June 30, 2021 and 2022, respectively, with a total GMV of approximately RMB47.5 billion, RMB19.8 billion, RMB14.6 billion (US$2.3 billion), RMB9.0 billion and RMB2.4 billion (US$0.4 billion) in the same periods, respectively.

 

The scale of our and the VIEs’ business results in a self-reinforcing network effect whereby the participation of consumer participants and industry customers drives industry customer stickiness and predictable and recurring revenue streams. Moreover, our scale and reach, combined with our user-centric approach, helped us establish a trusted brand.

 

One of the key features of our and the VIEs’ business model is the integration of the online platform and offline events. Our and the VIEs’ online platform serves both as a consumer acquisition tool and a marketplace for the services we and the VIEs offer. We and the VIEs supplement this with offline events where consumers have the opportunity to physically interact with the auto dealers and automakers and learn about the automobiles in person. By integrating online and offline elements, we, together with the VIEs, have created a more transparent and efficient environment for automobile transactions.

 

Extensive nationwide network of industry customers

 

We, together with the VIEs, have accumulated an extensive, nationwide, and cross-brand network of industry customers since the inception of our and the VIEs’ business. As of June 30, 2022, our network served over 546 domestic and international automobile brands and over 1,069 industry customers in mainland China. This network provides consumer participants of our and the VIEs’ offline events a broad selection of automobiles and automotive services, thereby attracting more consumers to attend our and the VIEs’ offline events. Meanwhile, increased consumer attendance reduces consumer acquisition costs of our and the VIEs’ industry customers, further incentivizing them to attend our and the VIEs’ offline events. This self-reinforcing cycle solidifies our network of industry customers. Our network also features high industry customer stickiness. For example, in 2020, a total of 5,616 industry customers participated in our auto shows, approximately 54.0% of which also participated in our auto shows in 2021.

 

Comprehensive service offerings

 

Our and the VIEs’ comprehensive suite of service offerings addresses consumers’ needs in the process of purchasing a new automobile. Our and the VIEs’ offline events are designed to offer consumers the convenience of a one-stop end-to-end shopping experience. During an offline event, consumers have access to not only automakers and auto dealers, but also other businesses in mainland China’s automotive industry, such as insurance companies, financial institutions, and aftermarket service providers. We believe such comprehensive offline service offerings and our and the VIEs’ ability to offer one-stop end-to-end shopping experience increase our and the VIEs’ attractiveness to consumers, which in turn make us and the VIEs an attractive partner for auto dealers and automakers and contribute to our financial success. In addition to consumers, our service offerings also address the various needs of our and the VIEs’ industry customers. The offline events serve as a low-cost consumer acquisition channel which increases the efficiency of industry customers’ marketing spending. These events increase the level of their brand exposure, and help increase their sales volume. We, together with the VIEs, also offer demand-side platform services, which help our and the VIEs’ industry customers increase the efficiency and effectiveness of their advertising placements.

 

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Effective consumer acquisition strategy and a growing consumer base

 

We, together with the VIEs, utilize both online and offline channels to increase consumer awareness of our and the VIEs’ events. The online-and-offline split mostly depends on the region and city tier. We, together with the VIEs, attract consumer participants of offline events mainly through online platforms in tier-1 and tier-2 cities, whereas our and the VIEs’ offline channels play a more prominent role in attracting consumers in lower tier cities. This hybrid strategy helped us and the VIEs achieve low consumer acquisition cost in the past, and effectively helped us and the VIEs target consumers who are more likely to purchase automobiles in the near term. Our effective consumer acquisition strategy led to a continuously growing consumer base, with which we believe industry customers are more willing to participate in our and the VIEs’ offline events, thus contributing to our and the VIEs’ financial and operational success.

 

Strong operational capabilities driven by data analytics

 

Based on numerous offline events we and the VIEs have hosted in the past, we and the VIEs have accumulated extensive operational capabilities and logistical know-how on event planning and operations. We, together with the VIEs, have standardized operational procedures while keeping sufficient flexibility to accommodate local factors. Equipped with years of operational experience from group-purchase facilitation services and hosting offline events, our and the VIEs’ field employees play a critical role in carrying out standardized operational procedures and ensuring the operational success of offline events. Under the supervision of our and the VIEs’ operations team at our and the VIEs’ corporate headquarters, our and the VIEs’ field employees and regional supervisors ensure that offline events are planned and executed in an efficient and coordinated fashion, in line with our and the VIEs’ overall annual strategic operational plan and financial budget.

 

The data-driven nature of our and the VIEs’ operations also contributes to our and the VIEs’ superior operational results as well as improved business collaboration experience for our and the VIEs’ business partners. We, together with the VIEs, support industry customers by providing data analytics regarding consumer automobile preferences in a particular city, helping them better understand consumer trends and manage inventory and production activities. In addition, our and the VIEs’ big-data analytics increases our and the VIEs’ event operation efficiency. We, together with the VIEs, use data to reshape consumer acquisition strategy and tailor our and the VIEs’ services and offline events to better cater to consumer needs. We, together with the VIEs, also use data to direct our and the VIEs’ financial and human resources to the most efficient use.

 

Our Strategies

 

We intend to pursue the following strategies:

 

Expand into new electric vehicle business and develop related expertise through collaboration with industry partners;
Continue to broaden our and the VIEs’ service offerings, enhance service capabilities and improve consumer experience;
Expand our and the VIEs’ geographic coverage and further grow our and the VIEs’ consumer base;
Strengthen collaboration with automakers, auto dealers and automotive service providers; and
Further enhance our technology and data analytics capabilities.

 

Our Corporate Structure and Contractual Arrangements with the VIEs

 

TuanChe Limited, our ultimate Cayman Islands holding company and the entity in which investors are purchasing their interest, does not have any substantive operations. We carry out our value-added telecommunications business in mainland China through our subsidiaries as well as the VIEs and their subsidiaries in mainland China. We, through our WFOEs, entered into a series of contractual arrangements with the VIEs and their respective shareholders. The VIE structure involves unique risks to investors in the ADSs. Investors in the ADSs are purchasing equity securities of our ultimate Cayman Islands holding company rather than purchasing equity securities of the VIEs, and investors in the ADSs may never hold equity interests in the VIEs. The following diagram illustrates our corporate structure, including our principal subsidiaries and affiliated entities, as of the date of this prospectus supplement.

 

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  (1) As of the date of this prospectus supplement, shareholders who own 5% or more of our issued and outstanding ordinary shares include Mr. Wei Wen (directly and through WW Long Limited), K2 Partners, Highland Funds, Beijing Z-Park Fund Investment Center (Limited Partner), BAI GmbH, who hold 18.6%, 12.9%, 9.5%, 9.5% and 8.9% of the total outstanding shares of TuanChe Limited on an as-converted basis, respectively. Shareholders who are directors and executive officers of TuanChe Limited include Mr. Wei Wen and Mr. Jianchen Sun, who hold 18.6% and 4.4% of outstanding shares of TuanChe Limited on an as-converted basis; Ms. Wendy Hayes, Mr. Zijing Zhou, Mr. Hui Yuan and Mr. Chenxi Yu, each of whom hold less than 1% of outstanding shares of TuanChe Limited on an as-converted basis. Directors and executive officers as a group hold 24.2% of the total outstanding shares of TuanChe Limited on an as-converted basis.
  (2) Mr. Zhiwen Lan, Mr. Jianchen Sun, Mr. Qiuhua Xu, Mr. Xingyu Du, Mr. Zijing Zhou, Mr. Zhen Ye, and Lanxi Puhua Juli Equity Investment L.P. hold a 1.1226%, 15.2170%, 0.9972%, 13.2840%, 0.0973%, 0.5836%, and 2.7000% equity interest in TuanChe Internet, respectively.
  (3) Mr. Wei Wen, Mr. Jianchen Sun and Mr. Congwu Cheng hold a 77.59%, 20.00% and 2.41% equity interest in Tansuojixian (Beijing) Co., Ltd.
  (4) Mr. Mingyou Li and Mr. Xingyu Du hold a 99.0% and 1.0% equity interest in Shenzhen Drive New Media Co., Ltd., respectively.
  (5) Mr. Mingyou Li and Mr. Xingyu Du hold a 99.0% and 1.0% equity interest in Beijing Internet Drive Technology Co., Ltd., respectively.

 

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We, through the WFOEs, entered into a series of contractual arrangements with the VIEs and their respective shareholders. Neither we nor our subsidiaries own any share in the VIEs. Because of these contractual arrangements, we are the primary beneficiary of the VIEs for accounting purposes and able to consolidate the financial results of the VIEs with ours only if we meet the conditions for consolidation under U.S. GAAP. PRC laws and regulations restrict and impose conditions on foreign investment in value-added telecommunications services business. Accordingly, we operate our value-added telecommunications business in mainland China through the VIEs and their subsidiaries, and we could receive the economic rights and exercise significant influence on the VIEs’ business operations that results in consolidation of the VIEs’ operations and financial results into our financial statements through the contractual arrangements, provided that we meet the conditions for consolidation under U.S. GAAP. The VIE structure is used to replicate foreign investment in China-based companies where the PRC laws restrict direct foreign investment in the operating companies. The VIE structure is used to replicate foreign investment in China-based companies where the PRC laws restrict direct foreign investment in the operating companies. However, our contractual arrangements with the VIEs are not equivalent of an investment in the VIEs. The VIE structure involves unique risks to investors in the ADSs. Investors in the ADSs are purchasing equity securities of our ultimate Cayman Islands holding company rather than purchasing equity securities of the VIEs, and investors in the ADSs may never hold equity interests in the VIEs. Chinese regulatory authorities could disallow this structure, which would likely result in a material change in our and/or the VIE’s operations and/or a material change in the value of the securities we are registering for sale, including that it could cause the value of such securities to significantly decline or become worthless. If the PRC government deems that the contractual arrangements with the consolidated VIEs domiciled in mainland China do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we, our subsidiaries and the VIEs could be subject to severe penalties or be forced to relinquish their interests in those operations. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. To the extent cash or assets in the business is in mainland China or Hong Kong or in an entity domiciled in mainland China or Hong Kong, and may need to be used to fund operations outside of mainland China or Hong Kong, the funds and assets may not be available to fund operations or for other uses outside of mainland China or Hong Kong due to interventions in or the imposition of restrictions and limitations by the government on our, our subsidiaries’ or the VIEs’ ability to transfer cash and assets. See “Risk Factors—Risks Related to Our Corporate Structure.”

 

Our Contractual Arrangements

 

PRC laws and regulations place certain restrictions on foreign investment in value-added telecommunications service businesses. We conduct our operations in mainland China principally through our subsidiaries in mainland China, the VIEs, and their subsidiaries (collectively, the “consolidated affiliated entities”). We have entered into a series of contractual arrangements, through TuanYuan Internet Technology (Beijing) Co., Ltd. (“TuanYuan”), Beijing SanguMaolu Information Technology Limited (“Sangu Maolu”) and Chema Technology (Beijing) Co., Ltd. (“Chema Beijing”), with each of the VIEs and their respective shareholders, respectively, which enable us to:

 

  exercise significant influence over each of the consolidated affiliated entities;

 

  receive substantially all of the economic benefits of the consolidated affiliated entities; and

 

  have an exclusive call option to purchase all or part of the equity interests in and/or assets of each of the VIEs when and to the extent permitted by PRC laws.

 

As a result of these contractual arrangements, we are the primary beneficiary of the consolidated affiliated entities, and, therefore, have consolidated their financial results in our consolidated financial statements in accordance with U.S. GAAP.

 

Below is a summary of the currently effective contractual arrangements by and among our WFOEs, the VIEs and their respective shareholders.

 

Exclusive Business Cooperation Agreement

 

Pursuant to the exclusive business cooperation agreement between each of the VIEs and the applicable WFOE, the respective WFOE has the exclusive right to provide or designate any third party to provide, among other things, comprehensive business support, technical support and consulting services to the VIEs. In exchange, the VIEs pay service fees to the respective WFOE in an amount determined at such WFOE’s discretion. Without the prior written consent of the applicable WFOE, the VIEs cannot accept any consulting and/or services provided by or establish similar cooperation relationship with any third party. Such WFOE owns the exclusive intellectual property rights created as a result of the performance of this agreement. The agreement shall remain effective unless unilaterally terminated by such WFOE with a written notice or pursuant to other provisions of the agreement, whereas the VIEs do not have any right to unilaterally terminate the exclusive business cooperation agreement.

 

Exclusive Call Option Agreement

 

Under the exclusive call option agreement among the applicable WFOE, each of the VIEs and their respective shareholders, each of the shareholders of the VIEs irrevocably granted such WFOE a right to purchase, or designate a third party to purchase, all or any part of their equity interests in the VIEs at a purchase price equal to the lowest price permissible by the then-applicable PRC laws and regulations at such WFOE’s sole and absolute discretion to the extent permitted by PRC law. The shareholders of the VIEs shall promptly give all considerations they received from the exercise of the options to our WFOEs (as applicable). Without the applicable WFOE’s prior written consent, the VIEs and their respective shareholders shall not enter into any major contract except for those entered in the daily business operations. Without the applicable WFOE’s prior written consent, the VIEs and their respective shareholders shall not sell, transfer, license or otherwise dispose of any of the VIEs’ assets or allow any encumbrance of any assets. The VIEs shall not be dissolved or liquidated without the written consent by the applicable WFOE. This agreement shall remain in effect and the VIEs do not have any right to unilaterally terminate the exclusive call option agreement.

 

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Equity Pledge Agreement

 

Under the equity interest pledge agreement among the applicable WFOE, each of the VIEs and their respective shareholders, the VIEs’ shareholders pledged all of their equity of the VIEs to WFOEs as security for performance of the obligations of the VIEs and their respective shareholders under the exclusive call option agreement, the exclusive business cooperation agreement and the powers of attorney. If any of the specified events of default occurs, the respective WFOE may exercise the right to enforce the pledge immediately. Such WFOE may transfer all or any of its rights and obligations under the equity pledge agreement to its designee(s) at any time. The equity pledge agreement is binding on the VIEs’ shareholders and their successors. The equity pledge agreement shall remain in effect and the VIEs do not have any right to unilaterally terminate the equity interest pledge agreement.

 

Powers of Attorney

 

Pursuant to the powers of attorney executed by the shareholders of the VIEs, each of them irrevocably authorized the applicable WFOE to act on their respective behalf as exclusive agent and attorney, with respect to all rights of shareholders concerning all the equity interest held by each of them in the VIEs, including but not limited to the right to attend shareholder meetings on behalf of such shareholder, the right to exercise all shareholder rights and the voting rights (including the right to sell, transfer, pledge and dispose of all or a portion of the equity interests held by such shareholder), and the right to appoint legal representatives, directors, supervisors and chief executive officers and other senior management.

 

In the opinion of Shihui Partners, our PRC legal counsel, the contractual arrangements among WFOEs, the VIEs and their respective shareholders are valid, binding and enforceable under applicable PRC law currently in effect, except that the equity pledge under that certain equity pledge agreement would not be deemed validly created until they are registered with the competent governmental authorities. However, Shihui Partners has also advised us that there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations and there can be no assurance that the PRC government will ultimately take a view that is consistent with the opinion of our PRC legal counsel. For a description of the risks related to our corporate structure, see “Risk Factors — Risks Related to Our Corporate Structure.”

 

Spousal Consent Letters

 

Pursuant to the spousal consent letters, each of the spouses of the individual shareholders of the VIEs unconditionally and irrevocably agrees that the equity interest in the VIEs held by and registered in the name of her respective spouse will be disposed of pursuant to the relevant equity pledge agreement, the exclusive call option agreement and the powers of attorney. In addition, each of them agrees not to assert any rights over the equity interest in the VIEs held by his or her respective spouse. In addition, in the event that any of them obtains any equity interest in the VIEs held by her respective spouse for any reason, such spouse agrees to be bound by similar obligations and agreed to enter into similar contractual arrangements.

 

Our corporate structure is subject to risks associated with our contractual arrangements with the VIEs. These contractual arrangements have not been properly tested in a court of law, and the PRC regulatory authorities could disallow our corporate structure at any time, which could result in a material change in our operations and the value of our securities could decline or become worthless. The legal system in the PRC is not as developed as in other jurisdictions such as the United States. As a result, uncertainties in the PRC legal system could limit our ability, as a Cayman Islands holding company, to enforce these contractual arrangements and doing so may be costly. Because of our corporate structure, our Cayman Islands holding company, the WFOEs, the VIEs and their subsidiaries, and our investors face uncertainty with respect to the interpretation and the application of the PRC laws and regulations, including but not limited to limitation on foreign ownership of value-added telecommunications service companies and the validity and enforcement of the contractual agreements. We are also subject to the risks of uncertainty about any future actions of the PRC government in this regard. Our contractual agreements may not be as effective as direct ownership in providing control over the VIEs. We may also be subject to sanctions imposed by PRC regulatory agencies, including China Securities Regulatory Commission, if we fail to comply with their rules and regulations. For a detailed discussion of risks related to our corporate structure, see “Risk Factors — Risks Related to Our Corporate Structure.”

 

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Cash Flows through Our Organization

 

TuanChe Limited is a holding company with no material operations of its own. We currently conduct our operations through our WFOEs, the VIEs and their respective subsidiaries. Cash is transferred through our organization in the manner as follows: (1) we may transfer funds to our WFOEs through our Hong Kong subsidiary, TuanChe Information Limited, by additional capital contributions or shareholder loans, as the case may be; (2) our subsidiaries in mainland China may provide loans to the VIEs, subject to statutory limits and restrictions; (3) the VIEs may pay service fees to our subsidiaries in mainland China for services rendered by our subsidiaries in mainland China; (4) our subsidiaries in mainland China may pay service fees to the VIEs for services rendered by the VIEs; and (5) our subsidiaries in mainland China may make dividends or other distributions to us through TuanChe Information Limited. We do not have cash management policies dictating how funds are transferred throughout our organization. We may encounter difficulties in our ability to transfer cash between subsidiaries in mainland China and other subsidiaries largely due to various PRC laws and regulations imposed on foreign exchange. If we intend to distribute dividends through TuanChe Limited (the “Parent”), our WFOEs will transfer the dividends to TuanChe Information Limited in accordance with the laws and regulations of the PRC, and then TuanChe Information Limited will transfer the dividends to the Parent, and the dividends will be distributed from the Parent to all shareholders respectively in proportion to the shares they hold, regardless of whether the shareholders are U.S. investors or investors in other countries or regions.

 

In 2021, our subsidiaries in mainland China received cash of RMB2.0 million from the VIEs for services rendered to the VIEs and their subsidiaries. In 2021, our subsidiaries in mainland China paid cash of RMB0.6 million to the VIEs for services rendered by the VIEs and their subsidiaries. The foregoing cash flows include all distributions and transfers between our Cayman Islands holding company, our subsidiaries and the VIEs as of the date of this prospectus supplement. For details regarding distributions and transfers between our Cayman Islands holding company, our subsidiaries and the VIEs, see “Item 5. Operating and Financial Review and Prospects—Cash Flows through Our Organization” in the 2021 Form 20-F.

 

Dividend Distribution to U.S. Investors and Tax Consequences

 

As of the date of this prospectus supplement, none of our subsidiaries has issued any dividends or made other distributions to us or their respective holding companies nor have we or any of our subsidiaries ever paid dividends or made other distributions to U.S. investors. We currently intend to retain all future earnings to finance the VIEs’ and our subsidiaries’ operations and to expand their business. As a result, we do not expect to pay and cash dividends in the foreseeable future.

 

Under our corporate structure, our ability to pay dividends and to service any debt we may incur and pay our operating expenses principally depends on dividends paid by our subsidiaries in mainland China. Under applicable PRC laws and regulations, our subsidiaries in mainland China are permitted to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our subsidiaries in mainland China are required to allocate at least 10% of their accumulated profits each year, if any, to fund statutory reserves of up to 50% of the registered capital of the enterprise. Statutory reserves are not distributable as cash dividends except in the event of liquidation. Furthermore, if our 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 payments to us. In addition, the PRC tax authorities may require us to adjust the taxable income under the contractual arrangements we currently have in place in a manner that would materially and adversely affect our WFOEs’ ability to pay dividends and other distributions to us. Any limitation on the ability of our subsidiary to distribute dividends to us or on the ability of the VIEs to make payments to us may restrict our ability to satisfy our liquidity requirements.

 

Restrictions on Our and the VIEs’ Ability to Transfer Cash Out of Mainland China

 

To the extent cash or assets in the business is in mainland China or Hong Kong or in an entity domiciled in mainland China or Hong Kong, and may need to be used to fund operations outside of mainland China or Hong Kong, the funds and assets may not be available to fund operations or for other uses outside of mainland China or Hong Kong due to interventions in or the imposition of restrictions and limitations by the government on our, our subsidiaries’ or the VIEs’ ability to transfer cash and assets.

 

We may encounter difficulties in our ability to transfer cash between subsidiaries in mainland China and other subsidiaries largely due to various PRC laws and regulations imposed on foreign exchange. The majority of our income is denominated in Renminbi, and shortage in foreign currencies may restrict our ability to pay dividends or other payment to satisfy our foreign currency denominated obligations, if any. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions can be made in foreign currencies without prior approval from the State Administration of the Foreign Exchange in the PRC as long as certain procedural requirements are met. Approval from appropriate government authorities is required if Renminbi is converted into foreign currency and remitted out of the PRC to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may, at its discretion, impose restrictions on access to foreign currencies for current account transactions and if this occurs in the future, we may not be able to pay dividends in foreign currencies to our shareholders. The PRC government has implemented a series of capital control measures, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. It may continue to strengthen its capital controls and dividends and other distributions of our subsidiaries in mainland China may be subjected to tighter scrutiny and may limit the ability of our Cayman Islands holding company, to use capital from our subsidiaries in mainland China, which may restrict our ability to satisfy our liquidity requirements. For more detailed discussion of the restrictions and limitations on the ability to transfer cash or distribute earnings between our subsidiaries in mainland China and the VIEs, and between our Cayman Islands holding company and the VIEs, see “Risk Factors — Risks Related to Our Corporate Structure — We may rely on dividends and other distributions on equity paid by our subsidiaries in mainland China and Hong Kong to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct the business” in this prospectus supplement.

 

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Financial Information Related to the VIEs

 

The following table presents the consolidated balance sheet information relating to the Parent, the VIEs and the non-variable interest entities as of December 31, 2020 and 2021 and June 30, 2022 (unaudited).

 

    As of December 31, 2020  
                Non-VIE              
          VIE           Other     Intercompany     Group  
    Parent     Consolidated     WFOE     subsidiaries     Elimination     Consolidated  
Cash, cash equivalents and restricted cash     46,501       20,178       66,481       6,585             139,745  
Amount due from the subsidiaries of the Group     101,952       73,036       70,094       1,134       (246,216 )      
Other current assets     50,358       18,132       120,747             (17,581 )     171,656  
Total current assets     198,811       111,346       257,322       7,719       (263,797 )     311,401  
Property and equipment, net           578       17,946             (12,816 )     5,708  
Intangible assets                             21,821       21,821  
Long-term investments           8,949                         8,949  
Investments in subsidiaries, VIEs and subsidiaries of VIEs     97,465             30,100       565,453       (693,018 )      
Operating lease right-of-use assets, net           2,003       8,798                   10,801  
Goodwill                 115,414                   115,414  
Other non-current assets                 5,728             (5,415 )     313  
Total non-current assets     97,465       11,530       177,986       565,453       (689,428 )     163,006  
Total assets     296,276       122,876       435,308       573,172       (953,225 )     474,407  
Accounts payable           3,827       17,967                   21,794  
Amount due to the subsidiaries of the Group           210,102       65,590       7,358       (283,050 )      
Short-term operating lease liabilities           1,025       4,886                   5,911  
Other current liabilities     6,614       61,473       80,372                   148,459  
Total current liabilities     6,614       276,427       168,815       7,358       (283,050 )     176,164  
Lease liabilities, non-current           978       3,070                   4,048  
Other non-current liabilities     1,498       185       5,451                   7,134  
Total non-current liabilities     1,498       1,163       8,521                   11,182  
Total liabilities     8,112       277,590       177,336       7,358       (283,050 )     187,346  
Total equity/(deficit)     288,164       (154,714 )     257,972       565,814       (670,175 )     287,061  

 

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    As of December 31, 2021  
                Non-VIE              
          VIE           Other     Intercompany     Group  
    Parent     Consolidated     WFOE     subsidiaries     Elimination     Consolidated  
Cash, cash equivalents and restricted cash     41,811       4,974       44,076       6,437             97,298  
Amount due from the subsidiaries of the Group     106,845       91,767       1,976       133,860       (334,448 )      
Other current assets     1,016       29,100       95,876             (17,581 )     108,411  
Total current assets     149,672       125,841       141,928       140,297       (352,029 )     205,709  
Property and equipment, net           379       32,989             (29,901 )     3,467  
Intangible assets                             17,711       17,711  
Long-term investments           5,357                         5,357  
Investments in subsidiaries, VIEs and subsidiaries of VIEs     52,139             30,100       596,994       (679,233 )        
Operating lease right-of-use assets, net           1,025       4,079                   5,104  
Goodwill                 115,414                   115,414  
Other non-current assets                 2,256             (1,943 )     313  
Total non-current assets     52,139       6,761       184,838       596,994       (693,366 )     147,366  
Total assets     201,811       132,602       326,766       737,291       (1,045,395 )     353,075  
Accounts payable           395       29,182                   29,577  
Amount due to the subsidiaries of the Group     1,232       253,003       102,196       13,756       (370,187 )      
Short-term operating lease liabilities           1,025       1,564                   2,589  
Other current liabilities     5,210       52,646       61,762                   119,618  
Total current liabilities     6,442       307,069       194,704       13,756       (370,187 )     151,784  
Lease liabilities, non-current                 1,475                   1,475  
Other non-current liabilities     957       98       5,451                   6,506  
Total non-current liabilities     957       98       6,926                   7,981  
Total liabilities     7,399       307,167       201,630       13,756       (370,187 )     159,765  
Total equity/(deficit)     194,412       (174,565 )     125,136       723,535       (675,208 )     193,310  

 

    As of June 30, 2022
            Non-VIE        
        VIE       Other   Intercompany   Group
    Parent   Consolidated   WFOE   subsidiaries   Elimination   Consolidated
Cash, cash equivalents and restricted cash   10,106   7,438    16,084   6,502   —    40,130
Amount due from the subsidiaries of the Group   113,414   98,138    167,187   1,166   (379,905)  
Other current assets   1,195   44,705    51,410   33   —    97,343
Total current assets   124,715   150,281    234,681   7,701   (379,905)   137,473
Property and equipment, net     253    1,839     —    2,092
Long-term investments     5,142        —    5,142
Investments in subsidiaries, VIEs and subsidiaries of VIEs   27,482   —    30,110   667,657   (725,249)  
Operating lease right-of-use assets, net     519    11,206     —    11,725
Goodwill     —    115,414     —    115,414
Other non-current assets     —    429     —    429
Total non-current assets   27,482   5,914    158,998   667,657   (725,249)   134,802
Total assets   152,197   156,195    393,679   675,358   (1,105,154)   272,275
Accounts payable     4,753    8,429     —    13,182
Amount due to the subsidiaries of the Group   1,283   264,510    109,567   14,126   (389,486)  
Short-term operating lease liabilities     1,140    2,000     —    3,140
Other current liabilities   6,791   49,455    40,745   901   —    97,892
Total current liabilities   8,074   319,858    160,741   15,027   (389,486)   114,214
Lease liabilities, non-current     —    6,628     —    6,628
Other non-current liabilities   743   1,859    5,451     —    8,053
Total non-current liabilities   743   1,859    12,079     —    14,681
Total liabilities   8,817   321,717    172,820   15,027   (389,486)   128,895
Total equity/(deficit)   143,380   (165,522)   220,859   660,331   (715,668)   143,380

 

S-11  

 

 

The following table presents the consolidated statements of operations and comprehensive loss and cash flows relating to the Parent, the VIEs and the non-variable interest entities for the year ended and as of December 31, 2019, 2020 and 2021 and for the six months ended and as of June 30, 2022 (unaudited).

 

Consolidated statements of operations and comprehensive (loss)/income data

 

    Year Ended December 31, 2019  
                Non-VIE              
    Parent     VIE
Consolidated
    WFOE     Other
subsidiaries
    Intercompany
Elimination
    Group
Consolidated
 
Net revenues           144,115       503,584       323       (3,249 )     644,773  
Cost of revenues           (46,507 )     (142,805 )     (1 )     2,772       (186,541 )
Operating expenses     (20,479 )     (91,793 )     (606,916 )     (558 )     477       (719,269 )
Loss from operations     (20,479 )     5,815       (246,137 )     (236 )           (261,037 )
Equity in loss of subsidiaries, VIEs and subsidiaries of VIEs     (235,804 )                       235,804        
Other income, net     5,643       1,635       2,356       104             9,738  
Net income/(loss)     (250,640 )     7,450       (243,781 )     (132 )     235,804       (251,299 )

 

    Year Ended December 31, 2020  
                Non-VIE              
    Parent     VIE
Consolidated
    WFOE     Other
subsidiaries
    Intercompany
Elimination
    Group
Consolidated
 
Net revenues           104,819       241,343             (15,934 )     330,228  
Cost of revenues           (28,573 )     (71,271 )           11,043       (88,801 )
Operating expenses     (11,041 )     (82,900 )     (323,694 )     (8 )     4,891       (412,752 )
Loss from operations     (11,041 )     (6,654 )     (153,622 )     (8 )           (171,325 )
Equity in loss of subsidiaries, VIEs and subsidiaries of VIEs     (153,967 )                       153,967        
Other income/(loss), net     1,974       2,160       3,146       (465 )           6,815  
Income tax expense           1,032                         1,032  
Net loss     (163,034 )     (3,462 )     (150,476 )     (473 )     153,967       (163,478 )

 

    Year Ended December 31, 2021  
                Non-VIE              
    Parent     VIE
Consolidated
    WFOE     Other
subsidiaries
    Intercompany
Elimination
    Group
Consolidated
 
Net revenues           93,975       327,958             (64,381 )     357,552  
Cost of revenues           (44,519 )     (101,054 )           60,283       (85,290 )
Operating expenses     (6,710 )     (84,191 )     (296,300 )     (6 )     4,098       (383,109 )
Loss from operations     (6,710 )     (34,735 )     (69,396 )     (6 )           (110,847 )
Equity in loss of subsidiaries, VIEs and subsidiaries of VIEs     (96,058 )                       96,058        
Other income/(loss), net     823       4,170       4,075       (166 )           8,902  
Net loss     (101,945 )     (30,565 )     (65,321 )     (172 )     96,058       (101,945 )

 

S-12  

 

 

    Six Months Ended June 30, 2021  
                Non-VIE              
          VIE           Other     Intercompany     Group  
    Parent     Consolidated     WFOE     subsidiaries     Elimination     Consolidated  
Net revenues           57,846       180,437             (24,956 )     213,327  
Cost of revenues           (32,310 )     (42,099 )           23,019       (51,390 )
Operating expenses     (3,384 )     (37,333 )     (150,390 )     (5 )     1,937       (189,175 )
Loss from operations     (3,384 )     (11,797 )     (12,052 )     (5 )           (27,238 )
Equity in loss of subsidiaries, VIEs and subsidiaries of VIEs     (19,667 )                       19,667        
Other income/(expenses), net     455       2,694       1,052       (75 )           4,126  
Income tax expense           516                         516  
Net loss     (22,596 )     (8,587 )     (11,000 )     (80 )     19,667       (22,596 )

 

    Six Months Ended June 30, 2022  
                Non-VIE              
          VIE           Other     Intercompany     Group  
    Parent     Consolidated     WFOE     subsidiaries     Elimination     Consolidated  
Net revenues           43,012       48,572             (2,373 )     89,211  
Cost of revenues           (2,501 )     (14,454 )                 (16,955 )
Operating expenses     (2,950 )     (38,444 )     (76,424 )     (1,067 )     2,373       (116,512 )
(Loss)/ income from operations     (2,950 )     2,067       (42,306 )     (1,067 )           (44,256 )
Equity in loss of subsidiaries, VIEs and subsidiaries of VIEs     (53,527 )                       53,527        
Other income/(expenses), net     311       (12,888 )     476       191             (11,910 )
Net loss     (56,166 )     (10,821 )     (41,830 )     (876 )     53,527       (56,166 )

 

Consolidated cash flow information

 

    Year Ended December 31, 2019  
                Non-VIE              
    Parent     VIE
Consolidated
    WFOE     Other
subsidiaries
    Intercompany
Elimination
    Group
Consolidated
 
Net cash used in operating activities     (3,086 )     (6,612 )     (151,518 )     (590 )           (161,806 )
Net cash used in investing activities     (319,916 )     (5,418 )     (12,413 )     (151,813 )     302,012       (187,548 )
Net cash (used in) provided by financing activities     (37,245 )           151,006       151,006       (302,012 )     (37,245 )
Effect of exchange rate changes     3,313             (818 )     995             3,490  
Net decrease in cash and cash equivalents     (356,934 )     (12,030 )     (13,743 )     (402 )           (383,109 )

 

    Year Ended December 31, 2020  
                Non-VIE              
    Parent     VIE
Consolidated
    WFOE     Other subsidiaries     Intercompany
Elimination
    Group
Consolidated
 
Net cash  (used in) provided by operating activities     (13,622 )     (4,945 )     (70,791 )     504             (88,854 )
Net cash (used in) provided by investing activities     (40,851 )     12,050       (1,518 )     (65,736 )     133,753       37,698  
Net cash provided by (used in) financing activities     1,330       (63 )     66,396       66,027       (133,753 )     (63 )
Effect of exchange rate changes     (2,358 )           (73 )     (2,054 )           (4,485 )
Net (decrease)/increase in cash and cash equivalents     (55,501 )     7,042       (5,986 )     (1,259 )           (55,704 )

 

S-13  

 

 

    Year Ended December 31, 2021  
                Non-VIE              
    Parent     VIE
Consolidated
    WFOE     Other
subsidiaries
    Intercompany
Elimination
    Group
Consolidated
 
Net cash  (used in) provided by operating activities     (10,358 )     (22,124 )     (69,764 )     9,991             (92,255 )
Net cash provided by (used in) investing activities     7,287       2,920       (213 )     (45,199 )     83,061       47,856  
Net cash provided by (used in) financing activities           4,000       47,674       38,387       (83,061 )     7,000  
Effect of exchange rate changes     (1,619 )           (102 )     (3,327 )           (5,048 )
Net decrease in cash and cash equivalents     (4,690 )     (15,204 )     (22,405 )     (148 )           (42,447 )

 

    Six Months Ended June 30, 2021  
                Non-VIE              
    Parent     VIE
Consolidated
    WFOE     Other
subsidiaries
    Intercompany
Elimination
    Group
Consolidated
 
Net cash (used in)/generated from operating activities     (531 )     (23,095 )     (27,038 )     10,404             (40,260 )
Net cash generated from / (used in) investing activities     39,211       3,892       (214 )     (6,935 )     12,926       48,880  
Net cash generated from financing activities           4,000       9,463       6,463       (12,926 )     7,000  
Effect of exchange rate changes     (880 )           (18 )     (6,229 )           (7,127 )
Net increase/(decrease) in cash, cash equivalents and restricted cash     37,800       (15,203 )     (17,807 )     3,703             8,493  

 

    Six Months Ended June 30, 2022  
                Non-VIE              
          VIE           Other     Intercompany     Group  
    Parent     Consolidated     WFOE     subsidiaries     Elimination     Consolidated  
Net cash (used in)/generated from operating activities     (1,248 )     3,523       (55,414 )     55       (2,288 )     (55,372 )
Net cash used in investing activities     (31,769 )           (126 )     (31,090 )     62,869       (116 )
Net cash (used in) / generated from financing activities           (1,060 )     28,973       32,896       (62,869 )     (2,060 )
Effect of exchange rate changes     1,312             864       (1,796 )           380  
Net (decrease) / increase in cash, cash equivalents and restricted cash     (31,705 )     2,463       (25,703 )     65       (2,288 )     (57,168 )

 

Recent Development

 

We recently announced our strategic collaboration with YangMing New Energy Technology (“YangMing”), Beijing S-TECH Technology (“S-TECH”) and IAT Automobile Technology Co., Ltd. (Shenzhen Stock Exchange: 300825) (“IAT”) to explore opportunities in and strengthen our capabilities in the new energy vehicle (“NEV”) industry. Pursuant to the collaboration agreements, we will collaborate with YangMing to research EV batteries and strengthen our supply chain capacity, with S-TECH to leverage its technologies for our vehicle model development, and with IAT on, among others, vehicle and component research and development, manufacturing and software development.

 

Our Risks and Challenges

 

Investing in our securities entails a significant level of risk. Before investing in the ADSs, you should carefully consider all of the risks and uncertainties mentioned in the section titled “Risk Factors” in addition to all of the other information in this prospectus supplement. The occurrence of one or more of the events or circumstances described “Risk Factors,” alone or in combination with other events or circumstances, may adversely affect our business, results of operations and financial condition.

 

S-14  

 

 

We and the VIEs face various legal and operational risks and uncertainties related to being based in and having significant operations in mainland China. The PRC government has significant authority to exert influence on the ability of a China-based company, such as us and the VIEs, to conduct its business, accept foreign investments or list on U.S. or other foreign exchanges. For example, we and the VIEs face risks associated with regulatory approvals of offshore offerings, oversight on cybersecurity and data privacy, as well as the lack of inspection by the PCAOB on our auditors. Such risks could result in a material change in our operations and/or the value of the ADSs or could significantly limit or completely hinder our ability to offer ADSs and/or other securities to investors and cause the value of such securities to significantly decline or be worthless. The PRC government also has significant discretion over the conduct of the business of us and the VIEs and may intervene with or influence our operations or the development of the value-added telecommunications service industry as it deems appropriate to further regulatory, political and societal goals. Furthermore, the PRC government has recently indicated an intent to exert more oversight and control over overseas securities offerings and foreign investment in China-based companies. Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless. These regulatory risks and uncertainties could become applicable to our Hong Kong subsidiary if regulatory authorities in Hong Kong adopt similar rules and/or regulatory actions. For further details, see “Risk Factors—Risks Related to Our Corporate Structure” and “Risk Factors—Risks Related to Doing Business in China” in this prospectus supplement.

 

We and the VIEs have obtained all licenses, permits or approvals from the PRC regulatory authorities for our and the VIEs’ business operations of offline marketing services, referral service for commercial bank and online marketing services, except that (1) TuanChe Internet is renewing the commercial performance permit, which expired on November 10, 2022, and that (2) we and/or the VIEs may need to obtain certain permits each time before we and/or the VIEs hold an offline event. We and the VIEs did not obtain requisite permits for the provision of certain livestreaming services when provided at a preliminary stage. As of the date of this prospectus supplement, we and the VIEs have taken measures to rectify such defect by entering into collaboration arrangements with the operators of livestreaming platforms holding the requisite permits, and we have not received any inquiry or investigation from any PRC government authority regarding such service provision. As of the date of this prospectus supplement, except as disclosed above and in “Risk Factors—Risks Related to Our Business and Industry—Failure to obtain, renew, or retain licenses, permits or approvals or failure to comply with applicable laws and regulations may affect our and the VIEs’ ability to conduct business” in this prospectus supplement, we and the VIEs have obtained all licenses, permits or approvals to conduct our and the VIEs’ business. As of the date of this prospectus supplement, TuanChe Internet Information Service (Beijing) Co., Ltd. has obtained certain value-added telecommunications service license for the operation of internet content service from the Beijing Administration of Telecommunications which will remain valid until September 2023, Shenzhen Drive New Media Co., Ltd. has obtained certain value-added telecommunications service license for the operation of internet content service from the Guangdong Administration of Telecommunications which will remain valid until June 2024, and TuanChe (Beijing) Automobile Sales & Service Co., Ltd., a subsidiary of TuanChe Internet, has obtained certain value-added telecommunications service license for the operation of internet content service from the Beijing Administration of Telecommunications which will remain valid until January 2026. Under PRC laws and regulations, we and the VIEs are required to obtain and maintain the aforementioned licenses, permits and approvals in order to conduct and operate our and the VIEs’ business. TuanChe Internet is renewing the commercial performance permit, which expired on November 10, 2022. We and the VIEs would not engage in activities that would be potentially deemed as public live artistic performance until a successful renewal of such certificate is obtained, and we do not expect such renewal process would adversely affect our and the VIEs’ current business operations. In addition, we and the VIEs may be required to obtain certain permits each time before we and the VIEs hold an offline event, including a security permit to organize large-scale mass activities and a permit for temporary occupation of urban roads, depending on the estimated number of participants and the need to temporarily occupy public roads. Although we and the VIEs have endeavored and will continue to endeavor to obtain all necessary permits according to our estimate of the condition of each specific event, we cannot assure you that we and the VIEs have been or will continue to be in full compliance with the licensing requirements for all the offline events we and the VIEs have held or will hold because the regulatory practices with respect to an offline event vary among different regions and the local authorities retain broad discretion in enforcing the license requirements. In addition, if relevant PRC government authorities determine that we or the VIEs are operating our offline events without proper licenses or permits or impose additional restrictions on the operation of any of our offline events, we and the VIEs might be subject to administration penalties, such as fines, confiscation of income, additional restrictions and force discontinuation of our offline events, which may materially and adversely affect our and the VIEs’ business, results of operations and financial condition. As of the date of this prospectus supplement, we and the VIEs have not been denied application for any permits or licenses required for our and the VIEs’ business operations and the offline events we and the VIEs have held. As of the date of this prospectus supplement, except as disclosed above, we and the VIEs have obtained requisite licenses in full compliance with applicable laws and regulations for offline events held, and we and the VIEs have not received any inquiry or investigation from any PRC government authority regarding non-compliance of the offline events. See “Risk Factors—Risks Related to Our Business and Industry—Our and the VIEs’ failure to obtain necessary permits for offline events may subject us and the VIEs to penalties and adversely affect our business, results of operations, and financial condition.” However, the licensing requirements in mainland China are constantly evolving, and we may be subject to more stringent regulatory requirements due to changes in the political or economic policies in the relevant jurisdictions. We cannot assure you that we or the VIEs will be able to satisfy such regulatory requirements, and as a result, we or the VIEs may be unable to retain, obtain or renew relevant licenses, permits or approvals in the future. If we or the VIEs fail to do so, we or the VIEs may be subject to administrative penalties or sanctions, which may materially and adversely affect our business, financial condition and results of operations. In addition, if we, our subsidiaries or the VIEs inadvertently conclude that other permissions and approvals, including those from the Cyberspace Administration of China (the “CAC”) or the China Securities Regulatory Commission (the “CSRC”), are not required or applicable laws, regulations or interpretations change and we, our subsidiaries or the VIEs are required to obtain such permissions or approvals in the future, we, our subsidiaries’ and the VIEs’ operations in mainland China may be subject to sanctions imposed by the relevant PRC regulatory authority, including fines and penalties, revocation of our subsidiaries’ and the VIEs’ licenses and suspension of their respective business, restrictions or limitations on our ability to pay dividends outside of mainland China, regulatory orders, litigation or adverse publicity, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations.

 

S-15  

 

 

As of the date of this prospectus supplement, neither we nor any of our subsidiaries, the VIEs or their subsidiaries have obtained the approval or clearance from either the CSRC or the CAC for any offering we may make under this prospectus supplement and accompanying prospectus. As advised by our PRC legal counsel, Shihui Partners, we are not required to obtain the approval or clearance from either the CSRC or the CAC in connection with any such offering under the PRC laws and regulations currently in effect, since our PRC legal counsel is not aware of any PRC laws or regulations in effect requiring that we obtain a prior permission from the CSRC or the CAC for the potential offering under this prospectus supplement and the accompanying prospectus. However, there remains significant uncertainty inherent in relying on the opinion of our PRC legal counsel as to the enactment, interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities. We cannot assure you that regulators in mainland China will not take a contrary view to that of our PRC legal counsel or will not subsequently require us to undergo the approval or clearance procedures and subject us to penalties for non-compliance. As of the date of this prospectus supplement, we have not been informed by the CSRC or the CAC of any requirements, approvals or permissions that TuanChe should obtain prior to this offering for the time being. See “Risk Factors—Risks Related to Doing Business in China—Any actions by the Chinese government, including any decision to intervene or influence the operations of our subsidiaries in mainland China or the VIEs or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to the operations of our subsidiaries in mainland China or the VIEs, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless” and “—The approval of and the filing with the CSRC or other PRC government authorities may be required in connection with this offering and our future offshore offering under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing” in this prospectus supplement.

 

Our financial statements contained in the 2021 Form 20-F have been audited by an independent registered public accounting firm that was not included in the list of PCAOB Identified Firms of having been unable to be inspected or investigated completely by the PCAOB in the PCAOB Determination Report issued in December 2021. We have not been identified by the SEC as a commission-identified issuer under the Holding Foreign Company Accountable Act (the “HFCA Act”) as of the date of this prospectus supplement. If, in the future, we have been identified by the SEC for three consecutive years as a commission-identified issuer whose registered public accounting firm is determined by the PCAOB that it is unable to inspect or investigate completely because of a position taken by one or more authorities in China, the SEC may prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. Additionally, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three. If we fail to meet the new listing standards specified in the HFCA Act, we could face possible delisting from the Nasdaq Stock Market, cessation of trading in over-the-counter market, deregistration from the SEC and/or other risks, which may materially and adversely affect, or effectively terminate, the ADSs trading in the United States.

 

In particular, we face risks and challenges in the following aspects, including:

 

Risks Related to Our Business and Industry

 

· reliance on mainland China’s automotive industry for our net revenues and future growth;

 

· material and adverse impact from the COVID-19 pandemic on our and the VIEs’ business operations;

 

· our and the VIEs’ dependence on collaboration with industry customers;

 

· our and the VIEs’ ability to attract and retain automobile consumers;

 

· our net losses in the past and ability to generate net income;

 

· liquidity risks in the operation and expansion of our and the VIEs’ business;

 

· our and the VIEs’ evolving business focuses which may make it difficult to evaluate our and the VIEs’ business by comparing our results of operations from period to period, or to predict the profitability of certain of our and the VIEs’ business lines due to their limited operating history;

 

Risks Related to Our Corporate Structure

 

· the agreements that establish the structure for operating some of our operations in mainland China to be found not compliant with PRC regulations relating to the relevant industries;

 

· uncertainties with respect to the interpretation and implementation of the PRC Foreign Investment Law;

 

· the risk of losing the ability to use and enjoy assets held by the VIEs and their subsidiaries that are important to our business if the VIEs and their subsidiaries declare bankruptcy or become subject to a dissolution or liquidation proceeding;

 

S-16  

 

 

· failure of the custodians or authorized users of our and the VIEs’ controlling non-tangible assets, including chops and seals, to fulfill their responsibilities, or misappropriate or misuse these assets, our business and operations may be materially and adversely affected;

 

Risks Related to Doing Business in China

 

· impact from PRC economic, political and social conditions, as well as changes in any government policies, laws and regulations;

 

· uncertainties with respect to the PRC legal system;

 

· government actions to intervene or influence of our and the VIEs’ operations or to exert control over our offshore securities offerings;

 

· approval of CSRC or other PRC government authorities that may be required in connection with this offering and our future offshore securities offerings;

 

· failure to comply with governmental regulations and other legal obligations concerning data protection and cybersecurity;

 

· PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion delaying or preventing us from using the proceeds of this offering;

 

· the ADSs being delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect auditors who are located in China;

 

Risks Related to Our Securities, including the ADSs

 

· our emerging growth company status and the applicability of certain reduced reporting requirements;

 

· volatility in the trading price of the ADSs;

 

· our dual-class share structure with different voting rights that may limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of the Class A ordinary shares and ADSs may view as beneficial.

 

Corporate Information

 

Our principal executive offices are located at 9F, Ruihai Building, No. 21 Yangfangdian Road Haidian District, Beijing 100038, People’s Republic of China. Our telephone number at this address is +86 10-6399-8902. Our registered office in the Cayman Islands is located at the offices of Osiris International Cayman Limited, Suite #4-210, Governors Square, 23 Lime Tree Bay Avenue, PO Box 32311, Grand Cayman KY1-1209, Cayman Islands. Our website is at http://ir.tuanche.com/. Our agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168.

 

Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is at http://ir.tuanche.com/. The information contained on our website is not a part of this prospectus supplement.

 

S-17  

 

 

THE OFFERING

 

Issuer TuanChe Limited

 

ADSs offered by us pursuant to this prospectus supplement   10,909,092 ADSs, representing 174,545,472 Class A ordinary shares (including up to 7,254,546 ADSs issuable upon the exercise of the Pre-Funded Warrants and the Warrants)

 

Pre-Funded Warrants offered by us We are offering the Pre-Funded Warrants, to purchase 1,800,000 ADS in lieu of the ADSs being offered to certain purchasers whose purchase of the ADSs in this Offering would otherwise result in such purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, upon the election of the holder, 9.99%) of our outstanding Class A ordinary shares immediately following the consummation of this offering. Each Pre-Funded Warrant is exercisable for one ADS at an exercise price of US$0.001. The combined purchase price of each Pre-Funded Warrant and the accompanying Warrants is US$2.749. The Pre-Funded Warrants are exercisable immediately and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. This prospectus supplement also relates to the offering of 1,800,000 ADSs issuable upon exercise of the Pre-Funded Warrants sold in this offering. On November 22, 2022, certain investor partially exercised the Pre-Funded Warrants to purchase 800,000 ADSs at an exercise price of US$0.001 per ADS.
   
Warrants offered by us We are offering Warrants to purchase up to 5,454,546 ADSs, representing up to 87,272,736 Class A ordinary shares. Each Warrant is exercisable for one ADS at an exercise price of US$2.75 per ADS. The Warrants will be immediately exercisable and will expire on the fifth anniversary of the original issuance date. The Warrants may be exercised only for a whole number of ADSs. No fractional ADSs will be issued upon exercise of the Warrants. The ADSs and the Warrants will be issued separately, but will be purchased together in this offering. This prospectus supplement also relates to the offering of up to 5,454,546 ADSs issuable upon exercise of the Warrants.
   
Offering price

The combined purchase price of each ADS and the accompanying Warrants is US$2.75.

The combined purchase price of each Pre-Funded Warrant and the accompanying Warrants is US$2.749.

   
ADSs outstanding before this offering 5,980,364
   
ADSs outstanding immediately after this offering 10,434,910  (including the issuance of 800,000 ADSs pursuant to the Partial Exercise, and assuming no exercise of the Warrants and the remaining Pre-Funded Warrants). Assuming all of the Warrants and the Pre-Funded Warrants issued in this offering were immediately exercised, there would be 16,889,456 ADSs outstanding after this offering.
   
Ordinary shares outstanding before this offering 321,832,295 ordinary shares, including (1) 266,571,715 Class A ordinary shares and (2) 55,260,580 Class B ordinary shares.

 

Ordinary shares outstanding after this offering 393,105,031 ordinary shares, including (1) 337,844,451 Class A ordinary shares and (2) 55,260,580 Class B ordinary shares (including the issuance of 800,000 ADSs pursuant to the Partial Exercise and assuming no exercise of the Warrants and the remaining Pre-Funded Warrants). Assuming all of the Warrants and the Pre-Funded Warrants issued in this offering were immediately exercised, there would be 496,377,767 ordinary shares.

 

The ADSs Each ADS represents sixteen (16) Class A ordinary shares, par value US$0.0001 per share.

 

  The depositary will be the holder of the Class A ordinary shares underlying the ADSs and you will have the rights as provided in the deposit agreement among us, the depositary and the owners and holders of the ADSs.

 

  We have no plan to declare or pay any dividends in the near future on our ordinary shares. If, however, we pay dividends on our Class A ordinary shares, the depositary will distribute the net cash dividends and other distributions it receives on our Class A ordinary shares after deducting its fees and expenses in accordance with the terms set forth in the deposit agreement.

 

  You may surrender and cancel your ADSs to the depositary to withdraw Class A ordinary shares underlying your ADSs. There are fees applicable to such cancellations.

 

  We may amend or terminate the deposit agreement without your consent. If you continue to hold the ADSs after an amendment to the deposit agreement, you agree to be bound by the deposit agreement as amended.

 

  To better understand the terms of the ADSs, you should carefully read the “Description of the American Depositary Shares” section of the accompanying prospectus. You should also read the deposit agreement, which is an exhibit to the registration statement that includes the accompanying prospectus.

 

Listing The ADSs are listed on the Nasdaq Capital Market under the symbol “TC.” The ADSs and ordinary shares are not listed on any other stock exchange or traded on any automated quotation system. There is no established public trading market for the Warrants or the Pre-Funded Warrants, and we do not expect a market to develop. We do not intend to apply for listing of the Warrants or the Pre-Funded Warrants on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the Warrants and the Pre-Funded Warrants will be limited.

 

S-18  

 

 

Use of proceeds

We estimate that we will receive net proceeds of approximately US$13.3 million and after deducting the placement agent fee and estimated offering expenses payable by us.

 

  We intend to use our net proceeds from this offering for the research and development of new energy vehicles and general corporate purposes and working capital.

 

  See “Use of Proceeds” for more information.

 

Lock-up Our executive officers and directors and 10% shareholders of our company have agreed not to sell, transfer or dispose of any ADSs, ordinary shares or similar securities for a period of 90 days after the closing of the offering.

 

Company standstill We have agreed that neither we nor any of our subsidiaries shall, for a period of ninety (90) days, (1) offer, sell, issue or otherwise transfer or dispose of, directly or indirectly, any equity of our company or any securities convertible into or exercisable or exchangeable for equity of our company or (2) file or cause to be filed any registration statement relating to the offering of any equity of our company or any securities convertible into or exercisable or exchangeable for equity of our company, subject to certain exceptions.

 

Risk factors Investing in our securities involves a high degree of risk. Before investing in our securities, you should carefully consider the risk factors described in the section titled “Risk Factors” beginning on page S-26 of this prospectus supplement as well as the risks identified in documents that are incorporated by reference in this prospectus supplement.

 

Depositary The Bank of New York Mellon.

 

Payment and settlement The ADSs are expected to be delivered through the book-entry transfer facilities of The Depository Trust Company in New York, New York, and the Pre-Funded Warrants, together with the associated Warrants, are expected to be delivered against payment therefor, in each case, on or about November 23, 2022.

 

The number of ordinary shares that will be outstanding immediately after this offering is based upon:

 

    266,571,715 Class A ordinary shares, including the 6,663,321 Class A ordinary shares held by Best Cars Limited, the nominee of our equity incentive trust, and 55,260,580 Class B ordinary shares issued and outstanding as of the date of this prospectus supplement, and
       
    71,272,736 Class A ordinary shares represented by 4,454,546 ADSs that we will issue and sell in this offering, including the issuance of 800,000 ADSs pursuant to the Partial Exercise, and assuming no exercise of the Warrants and the remaining Pre-Funded Warrants.

  

Except as otherwise indicated, all information in this prospectus supplement assumes no exercise of the Warrants and the Pre-Funded Warrants, other than the Partial Exercise, issuable pursuant to this offering.

 

S-19  

 

 

SUMMARY CONSOLIDATED FINANCIAL DATA

 

The following summary consolidated statement of operations data for the years ended December 31, 2019, 2020 and 2021, summary consolidated balance sheet data as of December 31, 2020 and 2021, and summary consolidated cash flow data for the years ended 2019, 2020 and 2021 have been derived from our audited consolidated financial statements included in the 2021 Form 20-F. The summary consolidated statement of operations data for the six months ended June 30, 2021 and 2022, the summary consolidated balance sheet data as of June 30, 2022, and summary consolidated cash flow data for the six months ended June 30, 2021 and 2022 are derived from our unaudited consolidated financial statements included in our current report on Form 6-K furnished with the SEC on September 29, 2022 (the “Interim Report”). Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP.

 

Our historical results are not necessarily indicative of results expected for future periods. You should read this Summary Consolidated Financial Data section together with our audited consolidated financial statements and the related notes included in the 2021 Form 20-F and information under “Item 5. Operating and Financial Review and Prospects” of the 2021 Form 20-F, as well as our unaudited consolidated financial statements and the related notes included in the Interim Report (excluding Exhibit 99.1 thereto titled “Press Release”), which are incorporated into this prospectus supplement by reference.

 

S-20  

 

 

Summary Consolidated Statements of Operations and Comprehensive Loss

 

    Year ended December 31,     Six Months ended June 30,  
    2019     2020     2021     2021     2022  
    RMB     RMB     RMB     RMB     RMB     US$  
    (All amounts in thousands, except for share and per share data)  
                      (Unaudited)  
Net revenues                                                
Offline Marketing Services:                                                
Auto shows     603,407       250,481       242,860       158,129       25,229       3,767  
Special promotion events     19,772       4,851       3,994       1,911       429       64  
Referral service for commercial bank     156       18,694       67,010       33,509       26,482       3,954  
Online marketing services and others     21,438       56,202       43,688       19,778       37,071       5,535  
Total net revenues     644,773       330,228       357,552       213,327       89,211       13,320  
Cost of revenues     (186,541 )     (88,801 )     (85,290 )     (51,390 )     (16,955 )     (2,531 )
Gross profit     458,232       241,427       272,262       161,937       72,256       10,789  
Operating expenses:                                                
Selling and marketing expenses     (572,040 )     (279,665 )     (274,670 )     (140,810 )     (77,205 )     (11,526 )
General and administrative expenses     (103,890 )     (98,820 )     (72,788 )     (30,643 )     (26,933 )     (4,021 )
Research and development expenses     (43,339 )     (34,267 )     (35,651 )     (17,722 )     (12,374 )     (1,847 )
Total operating expenses     (719,269 )     (412,752 )     (383,109 )     (189,175 )     (116,512 )     (17,394 )
Loss from operations     (261,037 )     (171,325 )     (110,847 )     (27,238 )     (44,256 )     (6,605 )
Other income/(expenses):                                                
Interest income, net     7,020       2,409       625       496       29       4  
Foreign exchange (loss)/gain     (661 )     (25 )     (149 )     246       189       28  
(Loss)/gain from equity method investments     (917 )     933       258       (220 )     (215 )     (32 )
Impairment of long-term investment     (1,000 )           (700 )     (700 )            
Impairment of long-lived assets                             (15,614 )     (2,331 )
Other income, net     5,296       3,498       8,868       4,304       3,701       553  
Loss before income taxes     (251,299 )     (164,510 )     (101,945 )     (23,112 )     (56,166 )     (8,383 )
Income tax benefit           1,032             516              
Net loss     (251,299 )     (163,478 )     (101,945 )     (22,596 )     (56,166 )     (8,383 )
Net loss attributable to the non-controlling interests     (659 )     (444 )                        
Net loss attributable to TuanChe Limited's ordinary shareholders     (250,640 )     (163,034 )     (101,945 )     (22,596 )     (56,166 )     (8,383 )
Net loss     (251,299 )     (163,478 )     (101,945 )     (22,596 )     (56,166 )     (8,383 )
Other comprehensive income/(loss):                                                
Foreign currency translation adjustments     8,416       (6,853 )     (1,603 )     (874 )     88       13  
Total other comprehensive income/(loss)     8,416       (6,853 )     (1,603 )     (874 )     88       13  
Total comprehensive loss     (242,883 )     (170,331 )     (103,548 )     (23,470 )     (56,078 )     (8,370 )
Comprehensive loss attributable to:                                                
TuanChe Limited’s shareholders     (242,224 )     (169,887 )     (103,548 )     (23,470 )     (56,078 )     (8,370 )
Non-controlling interests     (659 )     (444 )                        
Net loss attributable to the TuanChe Limited’s ordinary shareholders per share                                                
Basic and diluted     (0.85 )     (0.54 )     (0.33 )     (0.07 )     (0.18 )     (0.03 )
Weighted average number of ordinary shares                                                
Basic and diluted     294,922,074       304,439,440       306,792,324       305,884,935       309,041,616       309,041,616  

 

S-21  

 

 

 

Summary Consolidated Balance Sheets 

 

    December 31,      
    2020     2021     June 30, 2022  
    RMB     RMB     RMB     US$  
    (All amounts in thousands)  
                (unaudited)  
ASSETS                                
Current assets:                                
Cash and cash equivalents     109,916       63,461       32,184       4,805  
Restricted cash     29,829       33,837       7,946       1,186  
Time deposits     45,674                    
Accounts and notes receivable, net     66,126       47,951       40,416       6,034  
Prepayment and other current assets, net     59,856       60,460       56,927       8,499  
Total current assets     311,401       205,709       137,473       20,524  
Non-current assets:                                
Property, equipment and software, net     5,708       3,467       2,092       312  
Intangible assets, net     21,821       17,711              
Operating lease right-of-use assets     10,801       5,104       11,725       1,750  
Long-term investments     8,949       5,357       5,142       768  
Goodwill     115,414       115,414       115,414       17,231  
Other non-current assets     313       313       429       64  
Total non-current assets     163,006       147,366       134,802       20,125  
Total assets     474,407       353,075       272,275       40,649  
LIABILITIES AND SHAREHOLDERS’ EQUITY                                
Current liabilities:                                
Accounts payable     21,794       29,577       13,182       1,968  
Advance from customers     21,466       15,401       4,772       712  
Salary and welfare benefits payable     57,996       39,870       36,330       5,424  
Short-term borrowings           7,000       3,140       469  
Other taxes payable     22,992       21,822       21,702       3,240  
Current portion of deferred revenue     4,054       4,139       3,497       522  
Short-term operating lease liabilities     5,911       2,589       4,309       643  
Guarantee liabilities     387       4,073       1,617       241  
Other current liabilities     41,564       27,313       25,665       3,832  
Total current liabilities     176,164       151,784       114,214       17,051  
Non-current portion of deferred revenue     185       98       59       9  
Long-term borrowings                 1,800       269  
Deferred tax liability     5,451       5,451       5,451       814  
Long-term operating lease liabilities     4,048       1,475       6,628       990  
Other non-current liabilities     1,498       957       743       110  
Total non-current liabilities     11,182       7,981       14,681       2,192  
Total liabilities     187,346       159,765       128,895       19,243  
Commitments and contingencies                                
Shareholders’ equity:                                
Class A ordinary shares: US$0.0001 par value; 800,000,000 shares authorized; 268,202,667 shares issued and 250,477,368 shares outstanding as of December 31, 2020 ; US$0.0001 par value; 800,000,000 shares authorized; 268,202,667 shares issued and 252,501,213 shares outstanding as of December 31, 2021 ; US$0.0001 par value; 800,000,000 shares authorized; 268,202,667 shares issued and 254,276,963 shares outstanding as of June 30, 2022     181       182       183       28  
Class B ordinary shares: US$0.0001 par value; 60,000,000 shares authorized, and 55,260,580 issued and outstanding as of December 31, 2020 and 2021 and June 30, 2022     35       35       35       5  
Treasury stock (14,907,047 treasury stock as of December 31, 2020 and 2021 and June 30, 2022)     (45,886 )     (45,886 )     (45,886 )     (6,851 )
Additional paid-in capital     1,221,339       1,231,135       1,236,179       184,557  
Accumulated deficit     (881,700 )     (983,645 )     (1,039,811 )     (155,240 )
Accumulated other comprehensive loss     (5,805 )     (7,408 )     (7,320 )     (1,093 )
Total TuanChe Limited shareholders’ equity     288,164       194,413       143,380       21,406  
Non-controlling interests     (1,103 )     (1,103 )            
Total shareholders’ equity     287,061       193,310       143,380       21,406  
TOTAL LIABILITIES AND EQUITY     474,407       353,075       272,275       40,649  

 

S-22  

 

 

Summary Consolidated Statements of Cash Flows

 

    Year ended December 31,     Six Months ended June 30,  
    2019     2020     2021     2021     2022  
    RMB     RMB     RMB     RMB     RMB     US$  
    (All amounts in thousands, except for share and per share data)  
                      (Unaudited)  
Cash flows from operating activities :                                                
Net Loss     (251,299 )     (163,478 )     (101,945 )     (22,596 )     (56,166 )     (8,383 )
Adjustment to reconcile net loss to net cash used in operating activities:                                                
Impairment on long-term investments     1,000             700       700       15,614       2,331  
Depreciation of property, equipment and software     3,770       2,975       3,298       2,579       1,576       205  
Amortization of intangible assets           4,134       4,110       2,055       2,097       313  
Amortization of non-current assets     656                                
Share-based compensation     110,401       17,448       9,797       4,415       6,148       918  
Allowance for doubtful accounts     13,684       30,227       17,796       4,942       3,783       565  
Loss/ (Gain) from long-term investments     917       (933 )     (258 )     220       215       32  
(Gain)/ Loss on disposal of property and equipment, subsidiary     (5 )     51       429                    
Recognition of deferred income     (611 )     (550 )     (513 )     (256 )     (513 )     (77 )
Foreign exchange loss     661       (25 )     149       (246     (189 )     (28
Loss on changes in guarantee liabilities           233       1,542       1,542       (2,456     (367
Deferred income taxes           (1,032 )           (516 )            
Non-cash lease expense           157                          
Changes in operating assets and liabilities:                                                
Accounts receivable     (30,524 )     (7,390 )     6,504       3,790       7,400       1,105  
Prepayment and other current assets     (24,100 )     13,638       (4,177 )     (8,853 )     133     48
Accounts payable     (1,171 )     15,970       7,782       (148 )     (16,395 )     (2,448 )
Advance from customers     (9,899 )     15,296       (6,065 )     (16,631 )     (10,630 )     (1,587 )
Salary and welfare benefits payable     19,190       (16,041 )     (12,977 )     (12,946 )     (3,540 )     (529 )
Deferred revenue           1,720                   (681 )     (102 )
Other taxes payable     (1,037 )     876       (1,170 )     1,563       (120 )     (18 )
Other current liabilities     6,561       (2,130 )     (17,257 )     126     (1,648 )     (246 )
Net cash used in operating activities     (161,806 )     (88,854 )     (92,255 )     (40,260 )     (55,372 )     (8,268 )
Cash flows from investing activities:                                                
Purchase of property, equipment and software, and other non-current assets     (13,243 )     (2,048 )     (968 )     (694 )     (116 )     (17 )
Placement of time deposits     (69,762 )     (141,016 )                        
Bridge loan provided for acquisition     (99,148 )                              
Cash paid for short-term investments           (7,105 )                        
Cash paid for long-term investments     (5,400 )     (700 )     (2,250 )     (1,500 )            
Cash received from maturity of time deposits           166,192       45,674       45,674              
Cash received from disposal of long-term investments           250       5,400       5,400              
Cash received from acquisition of a subsidiary           1,330                          
Cash received from disposal of property, equipment and software     5                                
Cash received from disposal of short-term investments           20,795                          
Net cash (used in)/generated from investing activities     (187,548 )     37,698       47,856       48,880       (116 )     (17 )
Cash flows from financing activities:                                                
Cash payments for repurchase of restricted shares from employees     (26,228 )                              
Cash payments for repurchase of shares     (13,749 )                              
Cash received from borrowings           3,000       10,000       7,000       4,940       738  
Cash repayments of short-term borrowings           (3,000 )     (3,000 )           (7,000 )     (1,045 )
Cash received from the depositary bank     2,732                                
Cash paid from other financing activities           (63 )                        
Net cash (used in)/generated from financing activities     (37,245 )     (63 )     7,000       7,000       (2,060 )     (307 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash     3,490       (4,485 )     (5,048 )     (7,127 )     380       57  
Net decrease in cash, cash equivalents and restricted cash     (383,109 )     (55,704 )     (42,447 )     8,493       (57,168 )     (8,535 )
Cash, cash equivalents and restricted cash at beginning of the year     578,558       195,449       139,745       139,745       97,298       14,526  
Including :                                                
Cash and cash equivalents at the beginning of the year     578,558       193,920       109,916       109,916       63,461       9,474  
Restricted cash at the beginning of the year           1,529       29,829       29,829       33,837       5,052  
Cash, cash equivalents and restricted cash at end of the year     195,449       139,745       97,298       148,238       40,130       5,991  
Including :                                                
Cash and cash equivalents at the end of the year     193,920       109,916       63,461       126,150       32,184       4,805  
Restricted cash at the end of the year     1,529       29,829       33,837       22,088       7,946       1,186  
Supplemental disclosures of cash flow information:                                                
Cash paid for interest expense           (61 )     (182 )     (59 )     (91 )     (14 )
Supplemental schedule of non-cash investing and financing activities:                                                
Right-of-use assets obtained in exchange for new operating lease liabilities           10,801                   9,285       1,386  
Bridge loan credited into cash portion of acquisition           99,896                          
Equity consideration of the acquisition           16,969                          

 

S-23  

 

 

Non-GAAP Measures

 

To supplement our consolidated financial statements which are presented in accordance with U.S. GAAP, we also use adjusted EBITDA and adjusted net loss as additional non-GAAP financial measures. We present these non-GAAP financial measures because they are used by our management to evaluate our operating performance. We also believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our consolidated results of operations in the same manner as our management and in comparing financial results across accounting periods and to those of our peer companies.

 

We define adjusted EBITDA as net loss excluding depreciation and amortization, interest income, net, change of guarantee liability, share-based compensation expenses, impairment of long-term investment and impairment of long-lived assets. We define adjusted net loss as net loss excluding change of guarantee liability, share-based compensation expenses, impairment of long-term investment and impairment of long-lived assets. We believe that adjusted EBITDA and adjusted net loss provide useful information to investors and others in understanding and evaluating our operating results. These non-GAAP financial measures adjust for the impact of items that we do not consider indicative of the operational performance of our business and should not be considered in isolation or construed as an alternative to net loss or any other measure of performance or as an indicator of our operating performance. Investors are encouraged to compare the historical non-GAAP financial measures with the most directly comparable GAAP measures. Adjusted EBITDA and adjusted net loss presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.

 

S-24  

 

 

The following tables set forth a reconciliation of our adjusted EBITDA and adjusted net loss to net loss for the years indicated.

 

    Year ended December 31,     Six Months ended June 30,  
    2019     2020     2021     2021     2022  
    RMB     RMB     RMB     RMB     RMB     US$  
    (All amounts in thousands)  
Net loss     (251,299 )     (163,478 )     (101,945 )     (22,596 )     (56,166 )     (8,383 )
Add:                                                
Depreciation and amortization     3,483       7,109       7,668       4,634       3,673       548  
Subtract:                                                
Interest income, net     7,020       2,409       625       496       29       4  
EBITDA     (254,836 )     (158,778 )     (94,902 )     (18,458 )     (52,522 )     (7,839 )
Add:                                                
Share-based compensation expenses     109,968       17,448       9,796       4,415       6,148       918  
Change of guarantee liability           233       1,542       1,542              
Impairment of long-term investment     1,000             700       700              
Impairment of long-lived assets                             15,614       2,331  
Adjusted EBITDA     (143,868 )     (141,097 )     (82,864 )     (11,801 )     (30,760 )     (4,590 )

 

    Year ended December 31,     Six Months ended June 30,  
    2019     2020     2021     2021     2022  
    RMB     RMB     RMB     RMB     RMB     US$  
    (All amounts in thousands)  
Net loss     (251,299 )     (163,478 )     (101,945 )     (22,596 )     (56,166 )     (8,383 )
Add:                                                
Share-based compensation expenses     109,968       17,448       9,796       4,415       6,148       918  
Change of guarantee liability           233       1,542       1,542              
Impairment of long-term investment     1,000             700       700              
Impairment of long-lived assets                             15,614       2,331  
Adjusted net loss     (140,331 )     (145,797 )     (89,907 )     (15,939 )     (34,404 )     (5,134 )

 

S-25  

 

  

RISK FACTORS

 

An investment in our securities involves significant risks. You should carefully consider all the information in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein, including the risks and uncertainties described below, before making an investment in our securities. Any of the following risks could materially and adversely affect our business, financial condition and results of operations. In any such case, the market price of the ADSs could decline, and you may lose all or part of your investment.

 

Risks Related to Our Business and Industry

 

We rely on mainland China’s automotive industry for our net revenues and future growth, the prospects of which are subject to many uncertainties, including government regulations and policies.

 

We rely on mainland China’s automotive industry for our net revenues and future growth. We and the VIEs benefited greatly from the rapid growth of mainland China’s automotive industry in the past. However, the prospects of mainland China’s automotive industry are subject to many uncertainties, including those relating to general economic conditions in mainland China, the urbanization rate of mainland China’s population and the cost of automobiles. In addition, government policies may have a considerable impact on the growth of the automotive industry in mainland China. For example, in an effort to alleviate traffic congestion and improve air quality, a number of cities in mainland China have issued regulations to limit the number of new passenger car license plates issued each year starting from 2010. In September 2013, the PRC government released a plan for the prevention and remediation of air pollution, which requires large cities to further restrict the number of automobiles. Since 2010, the Beijing municipal government has issued the interim regulations, which were amended from time to time, to control the quantity of small passenger cars in the city. Pursuant to the latest Interim Provisions of Quantity Adjustment and Control for Small Passenger Cars in Beijing and the Implementing Rules of the Interim Provisions of Quantity Adjustment and Control for Small Passenger Cars in Beijing (Revised in 2020), both of which were came into force on January 1, 2021, the city imposes an annual quota on the issuance of new vehicle registration plates. The annual car license plate quota in 2022 has been further reduced to 100,000, down from 150,000 in 2017. Some other cities in mainland China, including Tianjin, Hangzhou, and Shenzhen, have also implemented certain interim provisions to control the quantity of small cars in the cities. Such regulatory developments, as well as other uncertainties, may adversely affect the growth prospects of mainland China’s automotive industry, and in turn reduce consumer demand for automobiles. If automakers, auto dealers or automotive service providers reduce their marketing expenditures as a result, our and the VIEs’ business, financial condition and results of operations could be materially and adversely affected.

 

S-26  

 

 

Our and the VIEs’ business operations have been and may continue to be materially and adversely affected by the COVID-19 pandemic.

 

The outbreak of a novel strain of coronavirus (COVID-19) spread throughout China and to other countries globally. We, the VIEs, as well as our and the VIEs’ suppliers and customers, have experienced significant business disruptions due to government-mandated quarantine measures and travel restrictions to contain the spread of the pandemic. Out of public health concerns, we and the VIEs cancelled all offline events such as auto shows and special promotion events previously scheduled in February and March 2020, and held very few offline events in April 2020. We and the VIEs continued to reduce the number of offline events in the first half of 2020, as the Chinese government issued guidelines to continue to curb indoor public gatherings. For example, on April 6, 2020, the State Council promulgated a notice pursuant to which the various shows and fairs shall be temporarily suspended due to the COVID-19 pandemic. As the COVID-19 pandemic became largely under control in mainland China, we and the VIEs saw a rapid pick-up of the number of auto shows we held in the second half of 2020. However, regional outbreak may occur from time to time, causing us and the VIEs to have no choice but cancel our auto shows and special promotion events. For example, we and the VIEs were forced to cancel 157 auto shows in 2021 and 59 auto shows in the first half of 2022 due to regional COVID-19 outbreak. In addition, the spread of COVID-19 may continue to cause a general slowdown of the Chinese economy in 2020, 2021 and beyond, leading to a further slump in the demand for automobiles in mainland China. Furthermore, as the business operations of our and the VIEs’ industry customers have also been severely disrupted, we and the VIEs continue to experience a delay in collecting our and the VIEs’ account receivables since the COVID-19 outbreak, which could materially and adversely affect our liquidity. In response to the significant impact of the COVID-19 pandemic, we and the VIEs implemented measures to adjust the pace of business expansion and conserve resources, such as furlough arrangements and scaling back recruitment budget and employee size in 2020, 2021 and the first half of 2022. As the COVID-19 pandemic has been largely contained, our and the VIEs’ daily operation has been mostly back to normal with necessary pandemic prevention measures in place. However, regional outbreak of COVID-19 may still subject our and the VIEs’ business, results of operations, financial condition and cash flows to uncertainties, and we and the VIEs may resort to other cost cutting measures if the outbreak of COVID-19 and its impact persist or escalate, which may result in labor disputes and have a material adverse effect on our and the VIEs’ business, results of operations and financial condition. We and the VIEs are closely monitoring the development of the COVID-19 pandemic and continuously evaluate its impact on our and the VIEs’ business, results of operations, financial condition and liquidity, the severity of which will depend on the duration of the pandemic and the government’s responsive measures.

 

Our and the VIEs’ business is substantially dependent on our and the VIEs’ collaboration with industry customers, including automakers, auto dealers, and automotive service providers, and our and the VIEs’ agreements with them typically do not contain long-term contractual commitments.

 

Our and the VIEs’ business is substantially dependent on collaboration with automakers, auto dealers and automotive service providers. We and the VIEs’ generally enter into cooperation agreements with them (1) on an ad-hoc basis for a particular auto show or special promotion event or (2) for a stipulated term of up to one year, and our and the VIEs’ agreements do not impose any contractual obligations requiring them to maintain their relationships with us or the VIEs beyond the completion of each such event we and the VIEs organize or beyond the contractual term. Accordingly, there is no guarantee for future cooperation after the event and there is no assurance that we and the VIEs can maintain stable and long-term business relationships with any such industry customers. If a significant number of our and the VIEs’ industry customers terminate or do not renew their agreements with us or the VIEs and we and the VIEs are not able to replace these business partners on commercially reasonable terms in a timely manner or at all, our and the VIEs business, results of operations and financial condition would be materially and adversely affected.

 

If we and the VIEs fail to attract and retain automobile consumers, our and the VIEs’ business and results of operations may be materially and adversely affected.

 

In order to maintain and strengthen our and the VIEs’ leading market position and to attract industry customers, we and the VIEs must continue to attract and retain consumers to our and the VIEs’ auto shows and other offline events. We and the VIEs must also innovate and introduce services and applications that improve consumers’ purchase experience. In addition, we and the VIEs must maintain and enhance our and the VIEs’ brand recognition among automobile consumers. If we and the VIEs fail to enhance consumers’ ability to secure favorable purchase prices, offer a superior purchase experience or maintain and enhance our and the VIEs’ brand, we and the VIEs may not be able to attract and retain automobile consumers and thus fail to retain and attract industry customers, from whom we and the VIEs derive net revenues, and our and the VIEs’ brand and reputation may be materially and adversely affected.

 

If our and the VIEs’ consumer base decreases, our and the VIEs’ service offerings may be less attractive to industry customers. As a result, our and the VIEs’ net revenues may decline, and our and the VIEs’ business, financial condition and results of operations may be materially and adversely affected.

 

S-27  

 

 

We have a limited track record in operating in the NEV industry, which makes it difficult to evaluate our business and future prospects.

 

We announced our plan to expand into the NEV industry in January 2021, and we have a limited track record in operating in the NEV industry, and hence have limited experience in designing, developing, manufacturing, marketing and selling NEVs. We face a number of risks and challenges in China’s NEV industry, including but not limited to our ability to develop and produce safe, reliable and high quality NEVs, advance our technologies, expand our sales and service network, market and promote our products and services, improve our operational efficiency and attract, retain and motivate our employees, in particular, our R&D personnel. If we fail to address any or all of these risks and challenges, our business may be materially and adversely affected.

 

We may face intense competition in China’s NEV market, and demand for NEVs may be cyclical and volatile.

 

China’s NEV market is intensely competitive. We will compete with both local and international competitors, established companies and potential new entrants. If we successfully execute our plan to expand into the NEV market, we will directly compete with other NEV companies, which include electric vehicles, plug-in hybrid electric vehicles (including extended-range electric vehicles) and fuel cell electric vehicles, and we may also face competition from new and well-funded entrants, which will increase the level of competition we face. In addition, volatility in the NEV industry may materially and adversely affect our business, prospects, operating results and financial condition. The sales volume of NEVs in China may not grow at the rate that we expect, or at all. Demand for NEVs could be volatile, depending to a large extent on general economic, political and social conditions in a given market and the introduction of new vehicles and technologies. We have fewer financial resources than more established automakers to withstand changes in the market and disruptions in demand. Demand for NEVs may also be affected by factors directly impacting automobile prices or the cost of purchasing and maintaining automobiles, such as sales and financing incentives, prices of raw materials and components, cost of oil and gasoline and governmental regulations, including tariffs, import regulation and sales taxes. These factors may have a more pronounced impact on our business given our relatively smaller scale and less financial resources as compared to many traditional automakers.

 

Our successful expansion into the NEV industry largely depends on our ability to develop, manufacture and deliver NEVs of high quality, safety, reliability and consumer appeal, on schedule and at a large scale.

 

Our successful expansion into the NEV industry largely depends on our ability to develop, manufacture, and deliver at a large scale NEVs of high quality, safety, reliability and appeal to consumers in a timely manner. This ability is subject to risks, including:

 

lack of necessary funding;

delays or disruptions in our supply chain and production, including in our procurement of raw materials and components such as chips and battery cells;

delays in the research and development of technologies necessary for our vehicles;

deficiencies in quality control;

compliance with environmental and workplace safety related laws and regulations;

cost overruns; and

loss of skilled and talented employees.

 

Any of the foregoing could materially and adversely affect our ability to successfully expand into the NEV industry, which would in turn affect our future prospects.

 

We and the VIEs have incurred net losses in the past and may incur losses again in the future.

 

We and the VIEs commenced business operations in 2010, and only began to generate significant net revenues in 2012 from group-purchase facilitation business. Our net revenues were, RMB644.8 million, RMB330.2 million, RMB357.6 million (US$56.1 million), RMB213.3 million and RMB 89.2 million (US$13.3 million) in 2019, 2020 and 2021 and for the six months ended June 30, 2021 and 2022, respectively. We and the VIEs may fail to recapture a sustainable growth rate, which may continue to decrease in the future, especially considering the impact of the COVID-19 pandemic. We experienced net loss attributable to our shareholders of RMB250.6 million, RMB163.0 million and RMB101.9 million (US$16.0 million), RMB22.6 million and RMB 56.2 million (US$8.4 million) in 2019, 2020 and 2021 and for the six months ended June 30, 2021 and 2022, respectively. See “Summary Consolidated Financial Data—Summary Consolidated Statements of Operations and Comprehensive Loss” in this prospectus supplement.

 

Our and the VIEs’ ability to achieve profitability and positive cash flow will depend in large part on our and the VIEs’ ability to execute our and the VIEs’ growth strategies and appropriately control our and the VIEs’ costs and expenses. We and the VIEs may continue to incur significant losses in the future for a number of reasons, including the other risks described in this prospectus supplement. We and the VIEs may also further encounter unforeseen expenses, difficulties, complications, delays and other unknown events. If we and the VIEs fail to increase net revenues at the rate we and the VIEs anticipate or if our and the VIEs’ expenses increase at a faster rate than the increase in our and the VIEs’ net revenues, we and the VIEs may not be able to achieve profitability.

 

S-28  

 

 

We and the VIEs may also continue to incur net losses in the future due to various factors beyond our and the VIEs’ control, such as changes in the macroeconomic and regulatory environment, as well as competitive dynamics. Our and the VIEs’ inability to respond to these changes in a timely and effective manner may materially and adversely affect our and the VIEs’ business, results of operations and financial condition.

 

We and the VIEs may face liquidity risks in the operation and expansion of our and the VIEs’ business.

 

We and the VIEs face liquidity risks in the operation of our and the VIEs’ businesses. Under our and the VIEs’ auto show business, we and the VIEs in some cases permit industry customers to pay us and the VIEs after they attend the offline events we and the VIEs organize. We and the VIEs also in some cases pay service and venue providers in advance. As we and the VIEs undertake to expand industry customer base to include more automakers, we and the VIEs may offer extended payment periods. If our and the VIEs industry customers fail to pay us and the VIEs within the pre-agreed payment periods, or if we and the VIEs are unable to collect the proceeds from secondary dealers before or shortly after we and the VIEs pay automakers or franchised dealerships, we and the VIEs may have outlay capital, which might impose a strain on our and the VIEs’ working capital. Further, while we and the VIEs continue to explore opportunities to grow our and the VIEs’ business, we and the VIEs have not yet achieved a business scale that is able to generate a sufficient level of revenues to achieve net profit and positive cash flows from operating activities, and we expect the operating losses and negative cash flows from operations will continue for the foreseeable future. While we believe we have sufficient cash for the next twelve months from the date of this prospectus supplement, if we are unable to grow the business to achieve economies of scale in the future, it will become even more difficult for us to sustain a sufficient source of cash to cover our operating costs. The liquidity risks could materially and adversely affect our business, results of our and the VIEs’ operations, and financial condition.

 

We have entered into collaboration, and may establish or seek collaborations, strategic alliances or equity investment in connection with our expansion into the NEV industry in the future, and we may not timely realize the benefits of such arrangements.

 

We may from time to time establish or seek collaborations, strategic alliances or equity investment in connection with our expansion into the NEV industry. As of the date of this prospectus supplement, we have collaborated with NEV technology solution providers and manufacturers in China, including YangMing, S-TECH and IAT. For details, see “Prospectus Summary—Recent Developments.” We face significant competition in seeking appropriate strategic partners, and the negotiation process for collaboration, alliances or licensing arrangements can be complex and time-consuming. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for research, development and commercialization of our NEVs. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing shareholders, or disrupt our management and business. Furthermore, such collaborations are subject to numerous risks, which may include the following:

 

such collaboration may fail to integrate into our current product and service offerings;

collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration project;

collaborators may not pursue the research, development and commercialization of our NEVs or may elect not to continue or renew our collaboration due to availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities;

collaborators could independently develop, or develop with third parties, NEVs that compete directly or indirectly with our NEV products or product candidates;

disputes may arise between us and collaborators that cause delays in or termination of the research, development or commercialization of our NEVs, or that result in costly litigation or arbitration that diverts management’s attention and resources; and/or

collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further research, development or commercialization initiatives.

 

As a result, we may not be able to realize the benefit of current or future collaborations, strategic alliances or equity investment in connection with our expansion into the NEV industry if we are unable to successfully launch our NEV products or achieve the revenue or specific net income that justifies such arrangement. If we fail to enter into collaborations or do not have sufficient funds or expertise to undertake the necessary research, development and commercialization activities, we may not be able to further develop our NEV products or bring them to market and generate expected revenue, which would harm our business, results of operations, financial condition and prospects.

 

S-29  

 

 

Historically our and the VIEs business focuses have evolved and may continue to change in the future, which may make it difficult to evaluate our and the VIEs’ business by comparing our results of operations from period to period, or to predict the profitability of certain of our and the VIEs’ business lines due to their limited operating history.

 

We and the VIEs have expanded and adjusted business focuses multiple times in the past in order to compete in the evolving automotive industry in mainland China. We and the VIEs commenced automobile group-purchase business in 2010, and began auto show business in the fourth quarter of 2016. In 2017, we and the VIEs expanded auto shows to tier-3 and below cities. We and the VEs began the operation of virtual dealership business in the second quarter of 2018, and we and the VIEs ceased operation of, and did not generate any revenue from, virtual dealership business in 2021. In January 2020, we completed the acquisition of Longye, a leading developer and implementer of social CRM cloud systems for mainland China’s automotive industry. Going forward, we and the VIEs may establish new business lines or discontinue existing ones as our and the VIEs’ business further develops and new business opportunities arise in the automotive industry. On January 21, 2022, we announced our preliminary plan to expand into and develop the new electric vehicle business. As a result, it is difficult to make period-over-period comparisons of our results of operations, liquidity position or financial conditions. In addition, it may be difficult to predict the profitability of our and the VIEs’ certain business lines, especially special promotion events and online marketing services, due to their limited operating history. We cannot assure you that our and the VIEs’ business will continue to grow as a result of our and the VIEs’ expanded and adjusted business focuses, or that our and the VIEs’ attempts to expand or adjust our and the VIEs’ business focus will be successful.

 

We may adopt new share incentive plans and grant equity-based awards in the future, which may dilute our existing shareholders and cause us to incur substantial share-based compensation expenses.

 

In June 2018, our directors approved the Share Incentive Plan (the “Plan”), pursuant to which up to 38,723,321 ordinary shares may be granted to our employees, directors and consultants. As of the date of this prospectus supplement, 6,560,752 ordinary shares remain available for grants under the Plan. We may adopt new share incentive plans to permit the grants of additional equity-based awards, especially in light of our recent endeavor to explore the NEV industry. We believe the grants of equity-based awards are important to our ability to attract, retain and motivate our employees. Any future grants of equity-based awards may dilute our existing shareholders and cause the value in their investment to decline. Additionally, we may incur substantial share-based compensation expenses in connection with such grants, which may materially and adversely affect our business, results of operations and financial condition.

 

We and the VIEs may not be able to successfully operate and expand social CRM cloud services, which could materially and adversely affect our and the VIEs’ business, results of operations and financial condition.

 

In January 2020, we completed the acquisition of Longye, a leading developer and implementer of social customer relationship management (social CRM) cloud systems for mainland China’s automotive industry. Longye’s principal software as a service (SaaS) product, Cheshangtong, provides mainland China’s auto dealers with social CRM cloud services based on a system that facilitates the effective flow of information between auto dealers and customers. We and the VIEs may fail to successfully integrate Longye into our and the VIEs’ business operations due to limited operating experience and other reasons beyond our and the VIEs’ control. We cannot assure you that Cheshangtong will continue to enjoy its popularity among auto dealers. Should any resulting disputes arise or should we and the VIEs fail to integrate Longye into our and the VIEs’ business operations, our and the VIEs’ business, results of operations and financial condition could be materially and adversely affected.

 

S-30  

 

 

Our and the VIEs’ business is subject to risks related to the overall automotive industry ecosystem, including consumer demand, consumption habits, global supply chain challenges and other macroeconomic issues.

 

Decreasing consumer demand could adversely affect the market for automobile purchases and, as a result, adversely affect our and the VIEs’ business. Consumer purchases of new and used automobiles generally decline during recessionary periods and other periods in which disposable income is adversely affected. Purchases of new and used automobiles are typically discretionary for consumers and have been, and may continue to be, affected by negative trends in the economy, including the rising cost of energy and gasoline, the limited availability and increasing cost of credit, reductions in business and consumer confidence, stock market volatility, and increased unemployment. Further, in recent years the automotive market has experienced rapid changes in technology and consumer demands. Self-driving technology, ride sharing, transportation networks, and other fundamental changes in transportation could impact consumer demand for the purchase of automobiles. A reduction in the number of automobiles purchased by consumers could adversely affect automakers and auto dealers and lead to a reduction in their spending on our and the VIEs’ services. In addition, our and the VIEs’ business may be negatively affected by challenges to the overall automotive industry ecosystem, including global supply chain challenges and other macroeconomic issues such as uncertainty with respect to trade policies, treaties, government regulations and tariffs between China and the United States due to the recent trade tension. Specifically, following the disruptions to semiconductor manufacturers due to the COVID-19 pandemic and an increase in global demand for personal computers for work-from-home economies, there is an ongoing global chip shortage, which would materially and adversely affect the automotive industry, and demand from our and the VIEs’ industry customers for our and the VIEs’ automobile marketing and distribution services may thus decline, which may materially and adversely affect our and the VIEs’ business, results of operations and financial condition. The global chip shortage may also make it difficult for us and the VIEs to procure sufficient chip supply if and when we launch our electric vehicle manufacturing business. The occurrence of any of the foregoing could materially and adversely affect our and the VIEs’ business, results of operations, and financial condition.

 

If we and the VIEs fail to help facilitate the marketing and sales of industry customers due to factors beyond our and the VIEs’ control, our and the VIEs’ operational and financial results might suffer.

 

Our and the VIEs’ industry customers are attracted to our and the VIEs’ offline events due to their marketing needs and the prospects of selling a large number of automobiles to individual consumers through the events. The marketing results and the sales volume at our and the VIEs’ offline events might fail to meet the expectation of our and the VIEs’ industry customers due to factors beyond our and the VIEs’ control, including among others, changes in the regulatory environment, a downturn or unfavorable development in the automotive industry, overall economic downturn and the resulting decrease in purchasing power and willingness of consumers, and contingencies that occur on event dates such as inclement weather or sudden public security measures which affect our and the VIEs’ ability to host the events effectively, or at all. Other factors that affect consumer attendance at our and the VIEs’ offline events may also affect sales volume, such as conflicts with other local events, road traffic control, outbreak of contagious disease or the potential for infection, or acts of nature, such as earthquakes, storms, and typhoons. If we and the VIEs fail to help facilitate the marketing and sales of our and the VIEs’ industry customers, they might be less inclined to participate in our and the VIEs’ future events, which directly affects our and the VIEs’ business, results of operations, and financial condition.

 

We and the VIEs may incur additional costs and decrease the number of auto shows due to severe weather conditions, which could negatively impact our gross profit margin and overall results of operations.

 

We and the VIEs host most of the auto shows outdoors. The table below sets forth the number of outdoor auto shows during the periods indicated:

 

    For the three months ended  
    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
 
Number of outdoor auto shows           46       103       137       71       131       40       74       17       28  

 

In addition to the COVID-19 pandemic, severe weather conditions may also cause unplanned cancellation of our and the VIEs’ outdoor auto shows and lower the level of industry customer attendance at the affected auto shows, resulting in a decrease in our net revenues. For example, in 2020, we and the VIEs cancelled two auto shows due to weather conditions. In addition, to ensure the smooth operation of these outdoor auto shows and minimize the impact of potential severe weather conditions on these outdoor auto shows, we and the VIEs may seek to manage such contingencies by securing backup indoor venues or setting up temporary facilities for these auto shows. These contingency management plans could lead to our and the VIEs’ outlay of additional financial resources, which could negatively impact our gross profit margin and overall results of operations.

 

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Our and the VIEs’ failure to obtain necessary permits for offline events may subject us and the VIEs to penalties and adversely affect our and the VIEs’ business, results of operations, and financial condition.

 

Under PRC laws and regulations, we and the VIEs may be required to obtain certain permits each time before we and the VIEs hold an offline event, including a security permit to organize large-scale mass activities and a permit for temporary occupation of urban roads, depending on the estimated number of participants and the need to temporarily occupy public roads. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Security Administration of Large-scale Mass Activities and Temporary Urban Road Occupation” in the 2021 Form 20-F. Although we and the VIEs have endeavored and will continue to endeavor to obtain all necessary permits according to our and the VIEs’ estimate of the condition of each specific event, we cannot assure you that we and the VIEs have been or will continue to be in full compliance with the licensing requirements for all the offline events we and the VIEs have held or will hold because the regulatory practices with respect to an offline event vary among different regions and the local authorities retain broad discretion in enforcing the licensing requirements. In addition, the licensing requirements in mainland China are constantly evolving, and we and the VIEs may be subject to more stringent regulatory requirements due to political or economic changes in the future. We cannot assure you that we and the VIEs will be able to satisfy such regulatory requirements and as a result we and the VIEs may be unable to obtain the necessary permits for each of our offline events in a timely manner in the future. TuanChe Internet is renewing the commercial performance permit, which expired on November 10, 2022. We and the VIEs would not engage in activities that would be potentially deemed as public live artistic performance until a successful renewal of such certificate is obtained, and we do not expect such renewal process would adversely affect our and the VIEs’ current business operations. If relevant PRC government authorities determine that we and the VIEs are operating offline events without proper licenses or permits or impose additional restrictions on the operation of any of the offline events, we and the VIEs might be subject to administrative penalties, such as fines, confiscation of income, additional restrictions and forced discontinuation of the offline events, which may materially and adversely affect our and the VIEs’ business, results of operations, and financial condition. As of the date of this prospectus supplement, except as disclosed above, we and the VIEs have obtained requisite licenses in full compliance with applicable laws and regulations for offline events held, and we and the VIEs have not received any inquiry or investigation from any PRC government authority regarding non-compliance of the offline events.

 

Relevant government authorities may suspend our and the VIEs’ offline events due to various reasons beyond our and the VIEs’ control.

 

Even if we and the VIEs have obtained all prerequisite permits, government authorities may unexpectedly suspend our and the VIEs’ scheduled offline events due to a variety of reasons beyond our and the VIEs’ control. For example, two weeks prior to an auto show in April 2018 in Beijing National Stadium, the local public security authority abruptly demanded that the VIEs suspend the auto show for one morning, even though the VIEs had already obtained the required approvals, and in 2022, we and the VIEs, adhering to government requirements, canceled 59 offline events due to the COVID-19 pandemic as of the date of this prospectus supplement. Under such circumstances, we and the VIEs usually negotiate with industry customers to reschedule the auto show. In addition, the local police security authorities may prevent consumers from entering our and the VIEs’ auto shows and impose administrative penalties on us and the VIEs if the visitor flow exceeds the prescribed limit. Such abrupt suspensions, re-scheduling and restrictions might adversely affect the sales volumes of our and the VIEs’ industry customers, which in turn could discourage them from participating in our and the VIEs’ future events and materially and adversely affect our and the VIEs’ business, results of operations, and financial condition. As of the date of this prospectus supplement, we and the VIEs have obtained requisite licenses in full compliance with applicable laws and regulations for offline events held, and we and the VIEs have not received any inquiry or investigation from any PRC government authority regarding non-compliance of the offline events.

 

Successful strategic relationships with third-party cooperative partners are important for our and the VIEs’ future success.

 

We and the VIEs have established strategic relationships with third-party business partners from a variety of industries. For example, we and the VIEs have established strategic business relationships with insurance companies that offer automotive insurance products during our and the VIEs’ offline events, which we believe will enhance consumers’ end-to-end shopping experience. We and the VIE have also entered into strategic partnerships with Tmall Auto, the automotive arm of Alibaba Group’s Tmall, through which we expect to further explore additional growth opportunities along mainland China’s automotive transaction value chain, and Beijing Easyhome Furnishing Chain Group Co., Ltd., a company that operates one of the largest home improvement supplies and furniture chains in mainland China, through which we expect to jointly establish an innovative one-stop retail experience that combines home decoration products and automotive services to serve a broader range of consumers in mainland China. Also, we and the VIEs operate some of our and the VIEs’ auto shows in cooperation with one of the leading e-commerce platforms in mainland China, which we believe will increase the influence of our and the VIEs’ auto shows. We anticipate that we will continue to leverage our strategic relationships with existing third-party business partners and potentially establish new relationships with more partners in order to grow our and the VIEs’ business. However, we and the VIEs’ may have disagreements or disputes with such third-party business partners, or our and the VIEs’ interests may not be aligned with theirs, which could cause disruptions to or terminations of such business collaboration and adversely affect our and the VIEs’ reputation, results of operations, and financial condition.

 

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We and the VIEs face various forms of competition, and if we and the VIEs fail to compete effectively, we and the VIEs may lose market shares and our and the VIEs’ business, prospects, and results of operations may be materially and adversely affected.

 

We and the VIEs compete with alternative auto show organizers and other marketing service providers. As we and the VIEs expand business operations and service offerings, we expect to encounter more competitors from more industries and markets as well as different forms of competition. Some of these competitors or potential competitors may have longer operating histories and may have better resources than us and the VIEs in terms of funding, management, technology and sales and marketing. Our and the VIEs’ competitors may be acquired and consolidated by owners who are able to further invest significant resources into our and the VIEs’ operating field. If we and the VIEs are unable to compete effectively and at a reasonable cost against our and the VIEs’ existing and future competitors, our and the VIEs’ business, prospects, and results of operations could be materially and adversely affected.

 

If we and the VIEs are unable to manage business growth or execute growth strategies effectively, our and the VIEs’ business and prospects may be materially and adversely affected.

 

We and the VIEs have historically experienced rapid growth in our and the VIEs’ auto shows and other offline events nationwide. Our net revenues increased significantly from RMB280.7 million in 2017 to RMB651.0 million in 2018, and remained stable at RMB644.8 million in 2019. Our net revenue decreased to RMB330.2 million in 2020. We were not able to sustain this level of growth in 2020 due to the impact of COVID-19 that led to cancellation of most of our and the VIEs’ auto shows and offline events. Our revenue increased to RMB357.6 million (US$56.1 million) in 2021, primarily due to our continuous and expanded collaboration with a commercial bank for our referral services. Our net revenues decreased by 58.2% from RMB213.3 million in the six months ended June 30, 2021 to RMB89.2 million (US$13.3 million) in the six months ended June 30, 2022, primarily due to a reduced number of offline activities as a result of tightened government restrictions in response to regional COVID-19 outbreak. We may not be able to achieve business and revenue growth in the future due to a number of factors, including, among others, our and the VIEs’ ability to retain and expand industry customer base, maintain customer satisfaction, compete effectively within the automotive industry, integrate, develop, motivate and manage an increasing number of employees, control expenses and acquire the resources for future growth as well as macroeconomic factors that are beyond our and the VIEs’ control, such as the continuing impact of the COVID-19 pandemic and the global chip shortage. If our and the VIEs’ operational capabilities fall behind, the quality of our and the VIEs’ services and efficiency of operations could suffer, which could harm our and the VIEs’ brand, results of operations and our and the VIEs’ overall business.

 

In addition, our and the VIEs’ anticipated development and expansion plans will place a significant strain on our and the VIEs’ management, systems and resources. Our development and expansion strategies of new electric vehicle business will require substantial managerial efforts and skills and incurrence of additional expenditures and may subject us to new or increased risks. Moreover, our and the VIEs’ expansion strategies may incur higher costs than the net revenues generated. Our and the VIEs’ failure to efficiently or effectively implement growth strategies or manage the growth of our and the VIEs’ operations may limit our and the VIEs’ future growth and hamper our and the VIEs’ business strategies.

 

The consolidated financial statements incorporated by reference herein contain disclosures related to our ability to continue as a going concern.

 

The consolidated financial statements included in the 2021 Form 20-F and the unaudited consolidated financial statements in the Interim Report, which are incorporated by reference in this prospectus supplement, were prepared on a going concern basis, which assumes that we will continue to operate in the future in the normal course of business. We have incurred recurring operating losses since our inception, including net losses of RMB251.3 million, RMB163.5 million, RMB101.9 million (US$16.0 million), RMB 22.6 million and RMB56.2 million (US$8.4 million) in 2019, 2020 and 2021 and the six months ended June 30, 2021 and 2022, respectively. Net cash used in operating activities was RMB161.8 million, RMB88.9 million, RMB92.3 million (US$14.5 million), RMB0.5 million and RMB1.2 million (US$0.2 million) in 2019, 2020 and 2021 and the six months ended June 30, 2021 and 2022, respectively. Accumulated deficit was RMB881.7 million, RMB983.6 million (US$154.4 million) and RMB1,039.8 million (US$155.2 million) as of December 31, 2020 and 2021 and June 30, 2022. As of December 31, 2020 and 2021 and June 30, 2022, we had cash and cash equivalents of RMB109.9 million, RMB63.5 million (US$10.0 million) and RMB32.2 million (US$4.9 million), respectively. The COVID-19 pandemic, especially the resulting high cancelation rate of scheduled offline auto shows, negatively impacted our and the VIEs’ business operations in 2020, 2021 and the first half of 2022 and has continued to impact our financial position, results of operations and cash flows. These conditions raise substantial doubt about our ability to continue as a going concern.

 

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Our ability to continue as a going concern is dependent on our management’s ability to successfully execute the business plan of reducing fixed labor cost, pursuing cooperation opportunities in the electric vehicle industry, pursuing potential financing to improve our cash flow from operating and financing activities, and effectively responding to the future development of the COVID-19 pandemic. Based on cash flow projections from operating and financing activities, our current balance of cash and cash equivalents, and the impact of the COVID-19 pandemic on our and the VIEs’ operations, our management believes that our current cash and cash equivalents, time deposits and anticipated cash flow from operations upon successful execution of our business plans will be sufficient to meet our anticipated cash needs from operations and other commitments for at least the next 12 months from the date of this prospectus supplement. However, there is no assurance that the plans will be successfully implemented. Failure to successfully implement the plan will have a material adverse effect on our and the VIEs’ business, results of operations and financial position, and may materially and adversely affect our ability to continue as a going concern.

 

Our independent registered public accounting firm included an explanatory paragraph expressing substantial doubt relating to our ability to continue as a going concern in its report on our consolidated financial statements for the year ended December 31, 2021, and a similar discussion was included in the consolidated financial statements in the Interim Report. The inclusion of a going concern explanatory paragraph may negatively impact the trading price of the ADSs, have an adverse impact on our and the VIEs’ relationship with third parties with whom we and the VIEs do business, including our and the VIEs’ customers, vendors and employees, and could make it challenging and difficult for us and the VIEs to raise additional debt or equity financing to the extent needed, all of which could have a material adverse impact on our and the VIEs’ business, results of operations, financial condition and prospects.

 

For additional information on the above-referenced accounting standards and matters affecting our ability to continue as a going concern, see Note 1 of the financial statements included in the 2021 Form 20-F, the discussion included in “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Capital Resources” in the Form 20-F, Note 1 of the financial statements included in the Interim Report, and the discussion included in “Exhibit 99.4 Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in the Interim Report.

 

Our and the VIEs’ business depends heavily on our and the VIEs’ reputation and consumer perception of our and the VIEs’ brand, and any negative publicity or other harm to our and the VIEs’ brand or failure to maintain and enhance our and the VIEs’ brand recognition may materially and adversely affect our and the VIEs’ financial condition and results of operations.

 

We believe that our and the VIEs’ reputation and consumer perception of our brand “TuanChe” are critical to our financial condition and results of operations. Maintaining and enhancing our and the VIEs’ reputation and brand recognition depends primarily on the quality and consistency of our and the VIEs’ services, as well as the success of our and the VIEs’ marketing and promotional efforts. While we and the VIEs have devoted significant resources to brand promotion efforts in recent years, our and the VIEs’ ongoing marketing efforts may not be successful in further promoting our and the VIEs’ brand. In addition, there may be from time to time negative publicity about us and the VIEs, our and the VIEs’ business, management or services. For example, if auto dealers breach their contracts with automobile consumers concluded during the auto show and raise the purchase price, we and the VIEs may be found at fault by consumers and our and the VIEs’ reputation may be materially and adversely affected. We and the VIEs may be subject to litigation as well as government or regulatory investigation as a result of such negative publicity, which might require us and the VIEs to spend significant time and resources to resolve.

 

Our and the VIEs’ failure to satisfactorily handle complaints from industry customers and consumers could also harm our and the VIEs’ reputation and discourage them from attending our and the VIEs’ future offline events. For example, they may complain about the cancellation or rescheduling of our and the VIEs’ auto shows. While we and the VIEs have been improving and will continue to improve our and the VIEs’ customer service capabilities, we cannot assure you that our and the VIEs’ employees will satisfactorily resolve all complaints from industry customers or consumers. If we and the VIEs fail to resolve a particular complaint from industry customers or consumers, whether or not such resolutions are within our and the VIEs’ control, our and the VIEs’ perceived reputation and the confidence these industry customers and consumers place in us and the VIEs may diminish, which could materially and adversely affect our and the VIEs’ business, financial condition and results of operations.

 

Acquisitions, strategic alliances and investments could prove difficult to integrate, disrupt our and the VIEs’ business and lower our and the VIEs’ results of operations and the value of your investment.

 

As part of our business strategy, we regularly evaluate investments in, or acquisitions of, complementary businesses, joint ventures, services and technologies. For example, in January 2020, we completed the acquisition of Longye, a leading system developer and implementer of social CRM systems. We expect that periodically we will continue to make such investments and acquisitions and establish such strategic collaboration relationships in the future. Acquisitions, strategic alliances and investments involve numerous risks, including:

 

the potential failure to achieve the expected benefits and synergies of the combination or acquisition;

difficulties in, and the cost of, integrating operations, technologies, services and personnel;

lack of knowledge and experience in the new business;

inability to obtain funding for the investments;

potential write-offs of acquired assets or investments; and

downward effect on our and the VIEs’ results of operations.

 

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In addition, if we finance acquisitions by issuing equity or convertible debt securities, such arrangements may dilute our existing shareholders, which could affect the market price of the ADSs. Further, if we fail to properly evaluate and execute acquisitions or investments, our business and prospects may be seriously harmed and the value of your investment may decline.

 

Furthermore, we may fail to identify or secure suitable acquisition and business partnership opportunities or our and the VIEs’ competitors may capitalize on such opportunities before we do, which could impair our and the VIEs’ ability to compete with our and the VIEs’ competitors and adversely affect our and the VIEs’ growth prospects and results of operations.

 

Any financial or economic crisis, or perceived threat of such a crisis, including a significant decrease in consumer confidence, may materially and adversely affect our and the VIEs’ business, financial condition and results of operations.

 

Any actual or perceived threat of a financial crisis in mainland China, in particular a credit and banking crisis, could have an indirect, but material and adverse, impact on our and the VIEs’ business and results of operations. Economic conditions in mainland 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 mainland China.

 

Furthermore, any slowdown in mainland China’s economic development might lead to tighter credit markets, increased market volatility, sudden declines in business and consumer confidence and dramatic changes in business and consumer behaviors. For example, the COVID-19 pandemic has caused a general slowdown of the Chinese economy in 2020, and in response to the uncertainty in economic conditions, consumers might delay, reduce or cancel purchases of automobiles, which to some extent are considered as luxury items by many people in mainland China, and as a result, our and the VIEs’ industry customers may also defer, reduce or cancel purchasing our and the VIEs’ services. In addition, although the government-mandated quarantine measures against the COVID-19 pandemic have largely been lifted in mainland China, normal economic activities in mainland China, including production, transportation and sales of automobiles, may be disrupted if there is any regional outbreak of COVID-19. The continued spread of the COVID-19 pandemic throughout the world also materially and adversely affect the supply chain of mainland China’s automobile industry, as well as the business, results of operations, financial condition and liquidity of major market players in this industry, including automakers and auto dealers, from whom we generate a substantial portion of our net revenues. To the extent any fluctuations in the Chinese economy significantly affect the demand from automakers or auto dealers for our and the VIEs’ services or change the spending habits of automobile consumers, our and the VIEs’ business, results of operations, and financial condition may be materially and adversely affected. See “—Our and the VIEs’ business operations have been and may continue to be materially and adversely affected by the COVID-19 pandemic.”

 

In addition, the economic downturn may reduce the number of automakers and auto dealers in mainland China resulting in the decrease of the demand for our and the VIEs’ services. Since the early 1990s, many non-automotive enterprises joined mainland China’s automotive industry and began to offer new lines of automobiles. An increasing number of foreign brands gradually entered the PRC market primarily by forming joint ventures with Chinese brands. Growing automobile production capacity and production volume have significantly increased the number of auto dealers. By contrast, negative economic trends could lead to market consolidation of automakers and auto dealers, which in effect will reduce our and the VIEs’ customer base and, in turn, reduce the demand for our and the VIEs’ services. As a result, our ability to generate net revenues, as well as our and the VIEs’ business, results of operations and financial condition, will be materially and adversely affected. 

 

We and the VIEs may not be able to successfully expand our and the VIEs’ operations into certain additional geographical markets in mainland China.

 

We and the VIEs organized auto shows in 233, 172, 142, 133 and 49 cities across mainland China in 2019, 2020 and 2021 and the six months ended June 30, 2021 and 2022, and we had sales representatives located in 148, 126, 119 and 49 cities as of December 31, 2019, 2020 and 2021 and June 30, 2022. We and the VIEs plan to expand our and the VIEs’ operations to more cities and counties in mainland China. Geographic expansion is particularly important for us and the VIEs to acquire more industry customers, whose operations are usually localized and spread out in the regions they serve. Nonetheless, expansion into new geographical markets imposes additional burdens on our and the VIEs’ sales, marketing and general managerial resources. As mainland China is a large and diverse market, business practices and demands may vary significantly by region and our and the VIEs’ experience in the markets in which we and the VIEs currently operate may not be applicable in other parts of mainland China. As a result, we and the VIEs may not be able to leverage our and the VIEs’ experience when entering into new markets in mainland China. If we and the VIEs are unable to manage expansion efforts effectively, if such expansion efforts take longer than planned or if costs for these efforts exceed expectations, our and the VIEs’ business, results of operations, and financial condition may be materially and adversely affected.

 

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We and the VIEs may be subject to administrative penalties if we and the VIEs fail to register our and the VIEs’ premises as branches.

 

Under the PRC laws and regulations, a company is required to register a branch, whether in the form of a branch office or a subsidiary under the PRC laws, at each of the premises where it conducts business outside its registered domicile. As of the date of this prospectus supplement, we and the VIEs have registered certain regional offices, including those in Shenzhen, Chongqing, Tianjin, Hangzhou, Xi’an, Harbin, and Hefei, as our and the VIEs’ branches, and we and the VIEs’ have not yet received any inquiry or investigation from any PRC government authority regarding the absence of any registration. However, we cannot assure you that we and the VIEs will set up all necessary branches in a timely manner due to complex procedural requirements and the relocation of branch offices from time to time, if the PRC regulatory authorities determine that we and the VIEs have failed to complete registration in a timely manner as required by the applicable laws and regulations, we and the VIEs may be subject to penalties, including fines, confiscation of income and suspension of operation, which may adversely affect our and the VIEs’ business, results of operations, and financial condition.

 

Our and the VIEs’ cooperation with a commercial bank might be deemed as operating financing guarantee business in violation of relevant financing guarantee regulations in China.

 

In October 2019, we and the VIEs commenced our and the VIEs’ referral services in collaboration with a commercial bank, where we and the VIEs facilitate the bank in expanding its cooperation with our and the VIEs’ industry customers to grow its auto loan business. With respect to such cooperation with the commercial bank, we and the VIEs are required to compensate the bank for the outstanding principal loan amount and interest of such auto loan upon the occurrence of certain events of default by the referred customers. The specified events of default by referred customers, include the failure to timely complete the vehicle mortgage registration within a certain period of time or the repayment of the first three installment of loan becoming overdue for more than thirty days. Therefore, such cooperation might be deemed as operating financing guarantee business without proper qualification under the Regulations on the Supervision and Administration of Financing Guarantee Companies (the “Financing Guarantee Regulations”), which were promulgated by State Council on August 2, 2017 and became effective on October 1, 2017, and the Supplementary Provisions on the Supervision and Administration of Financing Guarantee Companies (the “Financing Guarantee Supplementary Provisions”), which were promulgated by the China Banking and Insurance Regulatory Commission (the “CBIRC”), and other eight PRC regulatory agencies and became effective on October 9, 2019.

 

Pursuant to the Financing Guarantee Regulations, “financing guarantee” refers to the activities in which guarantors provide guarantee to the guaranteed parties as to the debt financing (including but not limited to the extension of loans or issuance of bonds), and “financing guarantee companies” refer to companies legally established and operating financing guarantee business. According to the Financing Guarantee Regulations, the establishment of financing guarantee companies shall be subject to the approval by the competent government authorities, and, unless otherwise stipulated by the state, no entity may operate financing guarantee business without such approval. If any entity violates these regulations and operates financing guarantee business without approval, the entity may be subject to various penalties, including but not limited to suspension of operation, confiscation of illegal gains, fines of up to RMB1,000,000 and criminal liabilities if such operation constitutes a crime.

 

In addition to the Financing Guarantee Regulations, the Financing Guarantee Supplementary Provisions further clarifies that institutions providing services such as client recommendation and credit assessment to various institutional funding partners shall not render any financing guarantee services, directly or in disguised form, without the necessary approval. Otherwise, the penalties set forth in the Financing Guarantee Regulations may be imposed by the regulatory authorities, and the existing business shall be properly settled. In case an institution intends to continue the financing guarantee business, certain financing guarantee companies shall be established in accordance with the Financing Guarantee Regulations.

 

As of the date of this prospectus supplement, we and the VIEs have not been subject to any fine or other penalties with regard to our cooperation with the commercial bank. However, due to a lack of further interpretations, the exact definition and scope of “operating financing guarantee business” under the Financing Guarantee Regulations or “providing financing guarantee services in disguised form” under the Financing Guarantee Supplementary Provisions remain unclear. It is uncertain whether we and the VIEs would be deemed to have operated financing guarantee business or provided financing guarantee services in disguised form because of our and the VIEs’ arrangements with the commercial bank.

 

Nevertheless, we and the VIEs have been taking necessary measures to fully comply with the foregoing laws and regulations on financing guarantee business. However, we cannot assure you that we will not be subject to penalties for our past operation of such business. To the extent any of the foregoing were to occur, our and the VIEs’ business, results of operations and financial condition could be adversely affected.

 

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Material weaknesses in our internal control over financial reporting have been identified, and if we fail to implement and maintain effective internal control over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud.

 

We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the Nasdaq Capital Market. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Commencing with our fiscal year ended December 31, 2019, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting in our Form 20-F filing for that year, as required by Section 404 of the Sarbanes-Oxley Act.

 

Our management has concluded that, as of December 31, 2021, our existing disclosure controls and procedures and internal control over financial reporting were ineffective, due to a material weakness. In accordance with U.S. GAAP and financial reporting requirements set forth by the SEC, a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. The material weakness relates to lack of sufficient financial reporting and accounting personnel, especially those with U.S. GAAP knowledge.

 

To remedy the material weakness, we have begun to, and will continue to (1) hire additional finance and accounting staff with qualifications and work experiences in U.S. GAAP and SEC reporting requirements to formalize and strengthen the key internal control over financial reporting, (2) allocate sufficient resources to prepare and review consolidated financial statements and related disclosures in accordance with U.S. GAAP and SEC reporting requirements, and (3) hire qualified consultant to assess Sarbanes-Oxley Act compliance readiness, to assess where we can improve our overall internal control over financial reporting function, and to assist us in implementing improvements where necessary.

 

Once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. In the future, our management may conclude that our internal control over financial reporting remains ineffective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

 

Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. In light of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

 

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. Generally, if we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of the ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

 

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Our and the VIEs’ failure or alleged failure to comply with China’s anti-corruption laws or the U.S. Foreign Corrupt Practices Act could result in penalties, which could harm our and the VIEs’ reputation and have an adverse effect on our and the VIEs’ business, results of operations, and financial condition.

 

We and the VIEs are subject to PRC laws and regulations related to anti-corruption, which prohibit bribery to government agencies, state or government owned or controlled enterprises or entities, to government officials or officials that work for state or government owned enterprises or entities, as well as bribery to non-government entities or individuals. We are also subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”), which generally prohibits companies and any individuals or entities acting on their behalf from offering or making improper payments or providing benefits to foreign officials for the purpose of obtaining or keeping business, along with various other anti-corruption laws. Our and the VIEs’ existing policies prohibit any such conduct and we and the VIEs are in the process of implementing additional policies and procedures, and providing training, to ensure that we, the VIEs and our and the VIEs’ employees and other third parties comply with PRC anti-corruption laws and regulations, the FCPA and other anti-corruption laws to which we and the VIEs are subject. There is, however, no assurance that such policies or procedures will work effectively all the time or protect us and the VIEs against liability under the FCPA or other anti-corruption laws. There is no assurance that our and the VIEs’ employees and other third parties would always comply with our and the VIEs’ policies and procedures. Further, there is uncertainty in connection with the implementation of PRC anti-corruption laws. We and the VIEs could be held liable for actions taken by our and the VIEs’ employees and other third parties with respect to our and the VIEs’ business or any businesses that we and the VIEs may acquire. As of the date of this prospectus supplement, significantly all our and the VIEs’ operations are in the PRC. If we or the VIEs are found not to be in compliance with PRC anti-corruption laws, the FCPA and other applicable anti-corruption laws, we and the VIEs may be subject to criminal, administrative, and civil penalties and other remedial measures, which could have an adverse impact on our and the VIEs’ business, results of operations and financial condition. Any investigation of any potential violations of the FCPA or other anti-corruption laws by U.S. or foreign authorities, including Chinese authorities, could adversely impact our and the VIEs’ reputation, cause us and the VIEs to lose customer relationships, subject us and the VIEs to administrative penalties or sanctions, and lead to other adverse impacts on our and the VIEs’ business, results of operations, and financial condition.

 

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If we and the VIEs lose the services of any of our and the VIEs’ key executive officers, senior management, or other key employees, or are unable to retain, recruit and hire sufficiently qualified staff, our and the VIEs’ ability to effectively manage and execute our and the VIEs’ operations and meet our and the VIEs’ strategic objectives could be harmed.

 

Our and the VIEs’ future success depends on the continued service of our and the VIEs’ key executive officers, senior management, and other key employees. We and the VIEs benefit from the leadership of a strong management team with proven vision, rich professional work experience and extensive knowledge of mainland China’s automotive industry. We and the VIEs also rely on a number of key staff for the development and operation of our and the VIEs’ business. In addition, we and the VIEs will need to continue attracting and retaining skilled and experienced staff for our and the VIEs’ businesses to maintain our competitiveness.

 

If one or more of our and the VIEs’ key personnel are unable or unwilling to continue in their present positions, we and the VIEs may not be able to replace them easily or at all and may incur additional expenses to recruit and train new personnel. In addition, if any of our and the VIEs’ executive officers, senior management, or key employees joins a competitor or forms a competing company, we and the VIEs may be disadvantaged in the competition and risk losing our and the VIEs’ know-how, trade secrets, suppliers and customers. Substantially all of our and the VIEs’ employees, including each of our and the VIEs’ executive officers, senior management, and key employees, have entered into employment agreements with us and the VIEs, respectively, which contain customary non-compete provisions. Although non-compete provisions are generally enforceable under PRC laws, PRC legal practice regarding the enforceability of such provisions is not as well-developed as in countries such as the United States. Therefore, if we and the VIEs lose the services of any of our and the VIEs’ key executive officers, senior management, or other key employees, or are unable to retain, recruit and hire experienced staff, our and the VIEs’ ability to effectively manage and execute our and the VIEs’ operations and meet our and the VIEs’ strategic objectives could be harmed.

 

We and the VIEs rely upon certain online advertising service providers, and any significant change in our and the VIEs’ relationship with these suppliers could have a material adverse effect on our and the VIEs’ business, results of operations, and financial condition if we and the VIEs cannot find suitable replacements.

 

Historically we and the VIEs relied upon certain online advertising service providers to advertise our and the VIEs’ service offerings. Our and the VIEs’ two largest online advertising service providers accounted for approximately 55.1%, 47.4%, 62.2%, 62.3% and 51.3% of our total online advertising expenses in 2019, 2020 and 2021 and the six months ended June 30, 2021 and 2022, respectively. Our and the VIEs’ agreements with them typically do not contain long-term contractual commitments. We cannot assure you that we and the VIEs will be able to maintain business relationships with these existing advertising suppliers. In the event that the existing major online advertising service providers terminate or refuse to renew their agreements with us or the VIEs, and we and the VIEs are unable to find new providers with similar or more favorable terms within a reasonable period of time or at all, our business, results of operations, and financial condition may be materially and adversely affected.

 

If we and the VIEs fail to protect our and the VIEs’ intellectual property rights, our and the VIEs’ brand and business performance may suffer.

 

We and the VIEs rely on a combination of trademark, patent, copyright and trade secret protection laws in China and other jurisdictions, as well as through confidentiality agreements and other measures, to protect our and the VIEs’ intellectual property rights. Our and the VIEs’ major brand names and logos are registered trademarks in China. Most of our and the VIEs’ professionally produced contents available on our and the VIEs’ websites are protected by copyright laws. Despite our and the VIEs’ precautions, third parties may obtain and use our and the VIEs’ intellectual property without our and the VIEs’ authorization. Historically, the Chinese legal system and courts have not protected intellectual property rights to the same extent as the U.S. legal system and courts, and companies operating in mainland China continue to face an increased risk of intellectual property infringement. Furthermore, the validity, application, enforceability and scope of protection of intellectual property rights for many internet-related activities, such as internet commercial methods patents, are uncertain and still evolving in China and abroad, which may make it more difficult for us and the VIEs to protect our and the VIEs’ intellectual property. From time to time, other websites may use our and the VIEs’ articles, photographs or other content without our and the VIEs’ proper authorization. Although such use has not in the past caused any material damage to our and the VIEs’ business, it is possible that there may be misappropriation on a much larger scale with a material adverse impact to our and the VIEs’ brand, business, and results of operations.

 

Third parties may claim that we and the VIEs infringe their proprietary intellectual property rights, which could cause us and the VIEs to incur significant legal expenses and prevent us and the VIEs from promoting our and the VIEs’ services.

 

Internet, technology and media companies are frequently involved in litigation based on allegations of infringement of intellectual property rights, unfair competition, invasion of privacy, defamation and other violation of other parties’ rights. We and the VIEs have not experienced any material claims on these issues against us or the VIEs in the past, but as we and the VIEs face increasing competition and as litigation becomes more common in mainland China in resolving commercial disputes, we and the VIEs face a higher risk of being the subject of intellectual property infringement claims. We and the VIEs may be subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our and the VIEs’ business. We and the VIEs could also be subject to claims based upon the content that is displayed on our and the VIEs’ websites or accessible from our and the VIEs’ websites through links to other websites or information on our and the VIEs’ websites supplied by third parties. Intellectual property claims and litigation are expensive and time-consuming to investigate and defend and may divert resources and management attention from the operation of our websites. Such claims, even if they do not result in liability, may harm our and the VIEs’ reputation. Any resulting liability or expenses, or changes required of our and the VIEs’ websites to reduce the risk of future liability, may have a material adverse effect on our and the VIEs’ business, financial condition, and results of operations.

 

We and the VIEs may be subject to liability for placing advertisements with inappropriate or misleading content.

 

PRC laws and regulations prohibit advertising companies from producing, distributing or publishing any advertisement with content that violates PRC laws and regulations, impairs the national dignity of China, involves designs of the national flag, the national emblem or the national anthem, is considered reactionary, obscene, superstitious or absurd, is fraudulent, or disparages similar products. As we and the VIEs provide advertising services to our and the VIEs’ industry customers, we and the VIEs are obligated to review supporting documents provided by advertisers, verify the content of the advertisements and are prohibited from publishing any advertisement inconsistent with or with the lack of supporting documents. In addition, in case we and the VIEs are advertisers, we and the VIEs are required by PRC laws and regulations to ensure that the content of our and the VIEs’ advertisements is true and in full compliance with applicable laws and regulations. While we and the VIEs have made significant efforts to comply with such verification requirements before publishing, we cannot assure you that all the content contained in the advertisements is true and accurate as required by the advertising laws and regulations, especially given the uncertainty in the interpretation of these PRC laws and regulations. If we and the VIEs are found to be in violation of applicable PRC advertising laws and regulations, we and the VIEs may be subject to penalties, including fines, confiscation of our and the VIEs’ advertising income, orders to cease dissemination of the advertisements, orders to publish an announcement correcting the misleading information, and suspension or termination of our and the VIEs’ advertising business, any of which may have a material and adverse effect on our and the VIEs’ business and results of operations. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Advertisements” in the 2021 Form 20-F.

 

The performance and reliability of the internet infrastructure and wireless and landline telecommunications networks in mainland China will affect our and the VIEs’ operations and growth, including our and the VIEs’ ability to accommodate prospective customers in the future.

 

With our principal executive offices located in mainland China, we and the VIEs conduct central management of consumer data, provide data transmission and communications, and monitor our and the VIEs’ overall operations, relying on wireless and landline telecommunications networks in mainland China. The national networks in mainland China are connected to the internet through international gateways controlled by the PRC government, which are the only channels through which a domestic user can connect to the internet. These international gateways may not support the demand necessary for the continued growth in internet traffic by users in mainland China. We cannot assure you that the development of mainland China’s information infrastructure will be adequate to support our and the VIEs’ operations and growth. In addition, in the event of any infrastructure disruption or failure, we and the VIEs would have no access to alternative networks and services on a timely basis, if at all, which could have a material adverse effect on our and the VIEs’ business, results of operations, and prospects.

 

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Unintended leakage of consumer information or privacy breaches may materially and adversely affect our and the VIEs’ reputation and business performance.

 

During the ordinary course of our and the VIEs’ business, we and the VIEs collect and store a large amount of automobile consumer data gathered from our and the VIEs’ offline events. We and the VIEs rely on encryption and authentication technology to provide the security and authentication necessary for secure transmission of such data. However, our and the VIEs’ security control may not prevent the improper leakage of consumer data. Anyone may circumvent our and the VIEs’ security measures and misappropriate proprietary information or cause interruptions in our and the VIEs’ operations. A security breach that leads to leakage of our and the VIEs’ consumer data could still harm our and the VIEs’ reputation. Moreover, many jurisdictions have passed laws regulating the storage, sharing, use, disclosure and protection of personally identifiable or other confidential information and data. The Chinese government has enacted a series of laws and regulations relating to the protection of privacy and personal information, under which internet service providers and other network operators are required to clearly indicate the purposes, methods and scope of any information collection and usage, obtain appropriate user consent and establish user information protection systems with appropriate remedial measures. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to Internet Information Security and Privacy Protection” in the 2021 Form 20-F. However, the regulatory framework for privacy protection in mainland China and other jurisdictions is fast-evolving, and therefore, involves uncertainties and is subject to change in the foreseeable future. We cannot assure you that our and the VIEs’ existing privacy and personal information protection measures will be considered sufficient under the current or future applicable laws and regulations. In addition to laws, regulations and other applicable rules, industry associations or other private parties may adopt different privacy protection standards. Because the interpretation and application of privacy and data protection laws and privacy protection standards is still uncertain, it is possible that these laws or privacy standards may be interpreted and applied in a manner inconsistent with our and the VIEs’ practices. Our and the VIEs’ actual or perceived failure to comply with industry standards, governmental regulation and other legal obligations related to user privacy could harm our and the VIEs’ business. We and the VIEs may be required to expend significant capital and other resources to prevent such security breaches or alleviate problems caused by such breaches. Any of the circumstances may materially and adversely affect our and the VIEs’ business and results of operations.

 

Failure to obtain, renew, or retain licenses, permits or approvals or failure to comply with applicable laws and regulations may affect our and the VIEs’ ability to conduct business.

 

We and the VIEs have obtained all material licenses, permits or approvals from the PRC regulatory authorities for our and the VIEs’ current operations, except that we and the VIEs may need to obtain certain permits each time before we and the VIEs hold an offline event. See “—Our and the VIEs’ failure to obtain necessary permits for our and the VIEs’ offline events may subject us and the VIEs to penalties and adversely affect our and the VIEs’ business, results of operations, and financial condition.” However, the licensing requirements in mainland China are constantly evolving, and we and the VIEs may be subject to more stringent regulatory requirements due to changes in the political or economic policies in the relevant jurisdictions. We cannot assure you that we and the VIEs will be able to satisfy such regulatory requirements and as a result we and the VIEs may be unable to retain, obtain or renew relevant licenses, permits or approvals in the future. If we and the VIEs fail to do so, we and the VIEs may be subject to administrative penalties or sanctions, which may materially and adversely affect our and the VIEs’ business, financial condition, and results of operations. For example, TuanChe Internet has obtained certain value-added telecommunications service license for the operation of internet content service from the Beijing Administration of Telecommunications which will remain valid until September 2023, Drive New Media has obtained certain value-added telecommunications service license for the operation of internet content service from the Guangdong Administration of Telecommunications which will remain valid until June 2024, and TuanChe (Beijing) Automobile Sales & Service Co., Ltd., a subsidiary of TuanChe Internet, has obtained certain value-added telecommunications service license for the operation of internet content service from the Beijing Administration of Telecommunications which will remain valid until January 2026. However, as we and the VIEs provide mobile applications to mobile device users, it is uncertain if we and the VIEs will be required to obtain a separate operating license for our mobile applications in addition to the value-added telecommunications service licenses, although we believe that not obtaining such separate license is in line with the current market practice.

 

We and the VIEs may need additional capital, and we and the VIEs may be unable to obtain such capital in a timely manner or on acceptable terms, or at all.

 

We and the VIEs may require additional capital from time to time to grow our and the VIEs’ business, including to expand into and develop the new electric vehicle business, better serve our and the VIEs’ customers, develop new features or enhance our and the VIEs’ marketplace, improve our and the VIEs’ operating and technology infrastructure or conduct acquisition of complementary businesses and technologies. Accordingly, we and the VIEs may need to sell additional equity or debt securities or obtain a credit facility. Future issuances of equity or equity-linked securities, such as the issuance of securities in connection with this offering under this prospectus supplement and the accompanying prospectus, could significantly dilute our existing shareholders, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our ordinary shares. The incurrence of debt financing would result in increased debt service obligations and could result in operating and financing covenants that would restrict our and the VIEs’ operations or our ability to pay dividends to our shareholders.

 

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Our and the VIEs’ ability to obtain additional capital is subject to a variety of uncertainties, including:

 

our and the VIEs’ market position and competitiveness in the automotive industry;

 

our and the VIEs’ future profitability, overall financial condition, results of operations and cash flows;

 

general market conditions for capital raising activities in mainland China and globally; and

 

economic, political and other conditions in mainland China and globally.

 

We and the VIEs may be unable to obtain additional capital in a timely manner or on acceptable terms or at all, and such financing may also be subject to regulatory requirements. On December 24, 2021, the China Securities Regulatory Commission (the “CSRC”), issued the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) and the Administrative Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) (collectively, the “Draft Overseas Listing Regulations”), which propose to require PRC companies and their overseas special purpose vehicles to file with the CSRC and meet compliance rules for their listing in overseas markets. The Draft Overseas Listing Regulations, if enacted in their current forms, may make it difficult for us to obtain additional financing through future overseas offering of securities. See “—Risks Related to Doing Business in China—The approval of and the filing with the CSRC or other PRC government authorities may be required in connection with this offering and our future offshore offering under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.” If we and the VIEs are unable to obtain adequate financing on terms satisfactory to us and the VIEs and when we and the VIEs require it in the future, our and the VIEs ability to continue to support our and the VIEs business growth and our ability to continue as a going concern could be significantly impaired, and our and the VIEs’ business and prospects could be adversely affected.

 

Failure to renew or retain any preferential tax treatments that are available in China could adversely affect our and the VIEs’ results of operations and financial condition.

 

The modified Enterprise Income Tax Law, effective on December 29, 2018 and its implementation rules and regulations generally impose a uniform income tax rate of 25% on all enterprises, but grant preferential treatments, including a preferential enterprise tax rate of 15%, to high and new technology enterprises (the “HNTEs”), strongly supported by the state. Such preferential tax rate is subject to reapplication and renewal every three years. During the three-year period, an HNTE must conduct annual qualification self-reviews, and will lose the 15% preferential rate and be subject to the regular 25% rate for any year in which it does not meet relevant criteria. TuanYuan, TuanChe Internet and Drive New Media have been accredited as HNTEs and are eligible for a preferential enterprise tax rate of 15% for as long as they meet the criteria of HNTE in each year of the accredited period. We cannot assure you that our affiliated entities will continue to meet the relevant criteria, and that the tax authorities will continue to approve the preferential tax rate of 15% even if these entities are accredited as HNTE. Moreover, it is uncertain how the modified Enterprise Income Tax Law and its implementing rules and regulations will be interpreted or implemented in the future. It is possible that the HNTE status currently enjoyed by TuanYuan, TuanChe Internet and Drive New Media, and other income tax exemptions for which our affiliated entities qualify, will be challenged by tax authorities and be repealed. Future implementation of rules and regulations might be inconsistent with current interpretations of the modified Enterprise Income Tax.

 

Seasonality may cause fluctuations in our and the VIEs’ results of operations.

 

Our quarterly net revenues and other results of operations have fluctuated in the past and may continue to fluctuate depending upon a number of factors, many of which are beyond our control. For these reasons, comparing our results of operations on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. For example, consumer purchases typically slow down in the first quarter, and then increase through the next three quarters of each year. Therefore, the demand for booth spaces in our and the VIEs’ auto shows is generally the lowest in the first quarter of each year, primarily due to a general slowdown in business activities and a reduced number of working days during the Chinese New Year holiday period. The timing of such releases, however, is subject to uncertainties due to various factors such as automakers’ design or manufacturing issues, their marketing plans, general marketing conditions and government incentives or restrictions. These factors may make our and the VIEs’ results of operations difficult to predict and cause our quarterly results of operations to fall short of expectations.

 

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We and the VIEs may be held liable for injuries to individual participants of our and the VIEs’ offline events or damages to automobiles displayed in our and the VIEs’ offline events, which may adversely affect our and the VIEs’ reputation and adversely affect our and the VIEs’ financial condition and results of operations.

 

We and the VIEs strive to ensure the safety of the participants and the automobiles displayed during our and the VIEs’ offline events. However, we cannot guarantee that no physical injury or damages will occur during such events, for which we and the VIEs could be held liable. For example, under the PRC laws and regulations, the undertaker of a mass activity bears tort liability for damages to a third party arising from such undertakers’ failure to fulfill its security obligations. If the act of a third party results in damage to others in a mass activity, the undertaker that failed to fulfill security obligations shall also bear supplementary liability. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Consumer Rights Protection and Tort Liabilities” in th