| Statutory Reserves and Restricted Net Assets |
22. Statutory Reserves and Restricted Net Assets Relevant PRC laws and regulations permit payments of dividends by the Group’s entities incorporated in the PRC only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, the Group’s entities in the PRC are required to annually appropriate 10% of their net after-tax income to the statutory general reserve fund prior to payment of any dividends, unless such reserve funds have reached 50% of their respective registered capital. As a result of these and other restrictions under PRC laws and regulations, the Group’s entities and the VIE subsidiary incorporated in the PRC are restricted in their ability to transfer a portion of their net assets to the Company either in the form of dividends, loans or advances, which restricted portion as calculated amounted to US$421,006 and US$428,431 as of December 31, 2024 and 2025. There are no significant differences between U.S. GAAP and PRC accounting standards in connection with the reported net assets of the legally owned subsidiaries in the PRC and the VIE. Even though the Company currently does not require any such dividends, loans or advances from the PRC entities for working capital and other funding purposes, the Company may in the future require additional cash resources from them due to changes in business conditions, to fund future acquisitions and development, or merely to declare and pay dividends or distributions to its shareholders. Except for the above, there is no other restriction on use of proceeds generated by the Group’s subsidiaries and the VIE to satisfy any obligations of the Company. The Group terminated the contractual arrangements entered into by the WFOE with the VIE and the VIE’s shareholders in November 2025, and thereafter Hangzhou Tuya Technology was no longer the variable interest entity of the Group. For the year ended December 31, 2025, the Company performed a test on the restricted net assets of subsidiaries and VIE in accordance with Securities and Exchange Commission Regulation S-X Rule 4-08(e)(3), “General Notes to Financial Statements” and concluded that the restricted net assets exceeded 25% of the consolidated net assets of the Company as of December 31, 2025 and the condensed financial information of the Company (referred to as the “Parent Company” below) are required to be presented. Condensed Financial Information of the Parent Company (All amounts in US$ thousands (“US$”), except for share and per share data, unless otherwise noted) Balance Sheet | | | | | | | As of December 31, | | | 2024 | | 2025 | | | US$ | | US$ | ASSETS | | | | | Current assets: | | | | | Cash and cash equivalents | | 96 | | 512 | Amounts due from subsidiaries | | 272,159 | | 199,945 | Prepayments and other current assets | | 549 | | 92 | Total current assets | | 272,804 | | 200,549 | Non-current assets: | | | | | Investment in subsidiaries and VIE | | 740,268 | | 823,856 | Total non-current assets | | 740,268 | | 823,856 | Total assets | | 1,013,072 | | 1,024,405 | LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | Liabilities | | | | | Accruals and other current liabilities | | 4,857 | | 1,800 | Other non-current liabilities | | 767 | | — | Total liabilities | | 5,624 | | 1,800 | Shareholders’ equity: | | | | | Ordinary shares (US$0.00005 par value; nil shares authorized, issued and outstanding as of December 31, 2024 and 2025, respectively) | | — | | — | Class A ordinary shares (US$0.00005 par value; 800,000,000 and 800,000,000 shares authorized as of December 31, 2024 and 2025, respectively; 504,387,299 and 541,364,923 shares issued as of December 31, 2024 and 2025, respectively; 495,601,588 and 541,119,562 shares outstanding as of December 31, 2024 and 2025, respectively) | | 25 | | 27 | Class B ordinary shares (US$0.00005 par value; 200,000,000 and 200,000,000 shares authorized as of December 31, 2024 and 2025, respectively; 70,205,300 and 70,163,253 shares issued and outstanding as of December 31, 2024 and 2025, respectively) | | 4 | | 4 | Treasury stock (US$0.00005 par value; 8,785,711 and 245,361 shares as of December 31, 2024 and 2025, respectively) | | (15,726) | | (12) | Additional paid-in capital | | 1,612,712 | | 1,549,389 | Accumulated other comprehensive loss | | (19,716) | | (14,842) | Accumulated deficit | | (569,851) | | (511,961) | Total shareholders’ equity | | 1,007,448 | | 1,022,605 | Total liabilities and shareholders’ equity | | 1,013,072 | | 1,024,405 |
Statement of Comprehensive (Loss)/Income | | | | | | | | | Year Ended December 31, | | | 2023 | | 2024 | | 2025 | | | US$ | | US$ | | US$ | Operation expense | | | | | | | General and administrative expenses | | (4,212) | | (5,671) | | (2,797) | Share of (loss)/gain of subsidiaries and the VIE | | (59,372) | | 6,314 | | 55,520 | Total operating expenses | | (63,584) | | 643 | | 52,723 | Other non-operating income, net | | 3,113 | | 4,180 | | 5,215 | Financial income, net | | 238 | | 296 | | — | Foreign exchange loss | | (82) | | (122) | | (48) | (Loss)/profit before income tax expense | | (60,315) | | 4,997 | | 57,890 | Net (loss)/profit | | (60,315) | | 4,997 | | 57,890 | | | | | | | | Net (loss)/profit attributable to ordinary shareholders | | (60,315) | | 4,997 | | 57,890 | | | | | | | | Net (loss)/profit | | (60,315) | | 4,997 | | 57,890 | Other comprehensive income/(loss) | | | | | | | Changes in fair value of long-term investments | | (7,791) | | 14 | | 115 | Transfer out of fair value changes of long-term investments | | 15,537 | | (65) | | — | Foreign currency translation | | (2,722) | | (2,574) | | 4,759 | Total comprehensive (loss)/income | | (55,291) | | 2,372 | | 62,764 |
Statement of Cash Flows | | | | | | | | | Year Ended December 31, | | | 2023 | | 2024 | | 2025 | | | US$ | | US$ | | US$ | Net cash used in operating activities | | (3,478) | | (3,606) | | (739) | Advance to, and investment in subsidiaries | | (7,940) | | — | | (1,189) | Net cash provided by inter-company transactions | | 30,349 | | 15,509 | | 72,214 | Net cash generated from investing activities | | 22,409 | | 15,509 | | 71,025 | Payment for repurchase of ordinary shares | | (3,339) | | (70) | | (12) | Payment for cancellation of treasury shares | | — | | — | | (12) | Payments of dividend | | — | | (33,022) | | (69,848) | Proceeds from exercise of share options | | 1,187 | | 168 | | 2 | Payments of deferred offering costs | | (71) | | (276) | | — | Net cash used in financing activities | | (2,223) | | (33,200) | | (69,870) | Effect of exchange rate changes on cash and cash equivalents, restricted cash | | — | | — | | — | Net increase/(decrease) in cash and cash equivalents | | 16,708 | | (21,297) | | 416 | Cash and cash equivalents at the beginning of the year | | 4,685 | | 21,393 | | 96 | Cash and cash equivalents at the end of the year | | 21,393 | | 96 | | 512 |
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