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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

FORM 20-F

(Mark One)

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For the fiscal year ended December 31, 2017.2020.

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Date of event requiring this shell company report ___________

For the transition period from ___________ to ___________

Commission file number: 001-36363

Tarena International, Inc.

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

6/F, No. 1 Andingmenwai Street, Litchi Tower,

Suite 10017, Building E, Zhongkun Plaza, A18 Bei San Huan West Road, HaidianChaoyang District, Beijing100011,

Beijing 100098, People’s Republic of China

(Address of principal executive offices)

1/F, Block A, Training Building,

65 Kejiyuan Road, Baiyang Jie Dao,

Economic Development District,

Hangzhou 310000, People’s Republic of China

(Address of principal executive offices)

Yuduo Yang,Wing Kee Lau, Chief Financial Officer

E-mail: yangyd@tedu.cnliuyongji@tedu.cn

Suite 10017, Building E, Zhongkun Plaza, A18 Bei San Huan West Road, Haidian6/F, No. 1 Andingmenwai Street, Litchi Tower,

Chaoyang District, Beijing100011,

Beijing 100098, People’s Republic of China

Telephone: +86 10-6213 5687139 0119 2404

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

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Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

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(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. As of December 31, 2017,2020, there were 56,215,58955,552,443 ordinary shares outstanding, par value $0.001 per share, being the sum of 49,009,53048,346,384 Class A ordinary shares (excluding 7,099,141 Class A ordinary shares issued to our depositary bank for bulk issuance of ADSs reserved for issuances upon the exercise or vesting of awards under our share incentive plan) and 7,206,059 Class B ordinary shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
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☐ Yesx⌧ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.¨☐Yesx⌧ No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.x☒ Yes¨☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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⌧ Yes¨◻ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “accelerated filer,” “large accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.x☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark which basis of accounting the registrant has beenused to prepare the financial statements included in this filing:

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If “other”“Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.¨☐ Item 17¨☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).¨☐ Yesx⌧ No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
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☐ Yes¨☐ No

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We present our financial results in RMB. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. This annual report contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations of Renminbi into U.S. dollars were made at the rate at RMB6.5250 to US$1.00, the exchange rate as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System in effect as of December 31, 2020 (except the cash dividend which is translated at the rate on the exercise date).

FORWARD-LOOKING INFORMATION

This annual report on Form 20-F contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

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You should read thoroughly this annual report and the documents that we refer to in this annual report with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this annual report include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART I.

Not Applicable.

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Not Applicable.

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ITEM 3.KEY INFORMATION

Selected Consolidated Financial Data

The following selected consolidated statements of comprehensive income data (other than ADS data) for the years ended December 31, 2015, 20162018, 2019 and 20172020 and the selected consolidated balance sheet data as of December 31, 20162019 and 20172020 have been derived from our audited consolidated financial statements included elsewhere in this annual report. The following selected consolidated statements of comprehensive income data (other than ADS data) for the yearsyear ended December 31, 20132016 and 20142017 and the selected consolidated balance sheet data as of December 31, 2013, 20142017 and 20152018 have been derived from our audited consolidated financial statements which are not included in this annual report. The following selected consolidated balance sheet data as of December 31, 2016 has been derived from our unaudited consolidated financial statements which are not included in this annual report and has been prepared on the same basis as our audited consolidated financial statements and includes all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair presentation of our financial position and operating results for the year presented. Our historical results for any period are not necessarily indicative of results to be expected for any future period. The selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” below. Our audited consolidated financial statements are prepared and presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.

Exchange Rate Information

We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. On April 20, 2018, the noon buying rate was RMB6.2945 to US$1.00.

The following table sets forth information concerning exchange rates betweenpresents our selected consolidated balance sheet data as of the RMB and the U.S. dollar for the periodsdates indicated.

Source: Federal Reserve Statistical Release

Note:

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Not Applicable.

Not Applicable.

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Risks Related to Our Audit Committee Investigation, Restatement of Our Consolidated Financial Statements, Internal Controls and Related Matters

We completed an audit committee investigation in the past, which required significant management time and attention, resulted in significant legal and other expenses, and led to the termination of a number of employees, including certain executive officers.

As previously disclosed, our Audit Committee undertook an independent investigation (the “Independent Investigation”) of our accounting practices and internal control over financial reporting related to revenue recognition with the assistance of independent advisors during 2019. We incurred significant costs in connection with the Audit Committee’s investigation, and our management team devoted significant time to the investigation.

We may receive inquiries from the SEC and other regulatory authorities regarding our restated financial statements or matters relating to our restatement, and we and our current and former directors and officers may be subject to future claims, investigations or proceedings. Any future inquiries from the SEC or other regulatory authorities, or future claims or proceedings as a result of the restatement or any related regulatory investigation will, regardless of the outcome, likely consume a significant amount of our internal resources and result in additional costs.

We have entered into indemnification agreements with our current and former directors and certain of our officers, and our articles of association require us, to the fullest extent permitted by Cayman Islands law, to indemnify each of our directors and officers who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he or she is or was a director or officer of the Company. Although we maintain insurance coverage in amounts and with deductibles that we believe are appropriate for our operations, our insurance coverage may not cover all claims that may be brought against us or our current and former directors and officers, and insurance coverage may not continue to be available to us at a reasonable cost. As a result, we have been and may continue to be exposed to substantial uninsured liabilities, including pursuant to our indemnification obligations, which could materially and adversely affect our business, prospects, results of operations and financial condition.

Matters relating to or arising from the restatement and the Audit Committee’s investigation, including adverse publicity and potential concerns from our students, have had and could continue to have an adverse effect on our business and financial condition.

We have been and could continue to be the subject of negative publicity focusing on the restatement and adjustment of our financial statements, and we may be adversely impacted by negative reactions from our students or others with whom we do business. Concerns include the perception of the effort required to address our accounting and control environment, and the ability for us to be a long-term provider to our students. Continued adverse publicity and potential concerns from our customers could harm our business and have an adverse effect on our financial condition.

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We identified material weaknesses in our internal control over financial reporting for 2019. Even though we have undertaken remedial steps to address the material weaknesses in our internal control over financial reporting and did not note or identify any deficiencies that we believe to be material weaknesses as of December 31, 2020, our ability to report our financial results accurately or to prevent fraud may be adversely affected, and investor confidence and the market price of the ADSs may be adversely affected, if we fail to maintain effective internal control over financial reporting in the future.

Our independent registered public accounting firm has conducted an audit of our internal control over financial reporting. In the course of auditing our internal control, we and our independent registered public accounting firm identified certain material weaknesses in our internal control over financial reporting as of December 31, 2019. A material weakness is a deficiency, or combination of deficiencies, in internal controls, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses in our internal controls identified as of December 31, 2019 related to:

As a result of the material weaknesses, management has concluded that our internal control over financial reporting was ineffective as of December 31, 2019. In addition, our independent registered public accounting firm attesting the effectiveness of our internal control and reported that our internal control over financial reporting was ineffective as of December 31, 2019.

During 2020, we have undertaken the remedial steps to address the material weaknesses in our internal control over financial reporting as set forth under “Item 15. Controls and Procedures—Management’s Annual Report on Internal Control over Financial Reporting—Management’s Plan for Remediation of Material Weaknesses.”  Our management, with the participation of our chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of our company’s internal control over financial reporting as of December 31, 2020. Based on this evaluation, we did not note or identify any deficiencies that we believe to be material weaknesses as of December 31, 2020.

Even though we did not note or identify any deficiencies that we believe to be material weaknesses as of December 31, 2020. Our ability to report our financial results accurately or to prevent fraud may be adversely affected, and investor confidence and the market price of the ADSs may be adversely affected, if we fail to maintain effective internal control over financial reporting in the future.

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Risks Relating to Our Business

We incurred net losses in 2017, 2018, 2019 and 2020, and we may incur net losses again in the future.

While we have achieved positive net income between 2014 and 2016, we incurred net loss of RMB147 thousand, RMB592.2 million, RMB1,038.9 million and RMB771.2 million (US$118.2 million) in 2017, 2018, 2019 and 2020, respectively. We cannot assure you that we will be able to generate net profits again in the future. Our ability to achieve profitability will depend in large part on our ability to increase our operating margin, either by growing our revenues at a rate faster than our operating expenses increase, or by reducing our operating expenses, especially our selling and marketing expenses, as a percentage of our net revenues. We intend to continue to invest in our branding and marketing activities to attract new students, improve our online learning modules to enhance student experience. We cannot assure you that we will be successful in these efforts, and we may continue to incur net losses for period of time in the future.

If we are not able to continue to attract students to enroll in our courses, our business and prospects will be materially and adversely affected.

The success of our business depends primarily on the number of students enrolled in our courses. Therefore, our ability to continue to attract students to enroll in our courses is critical to the continued success and growth of our business. This in turn will depend on several factors, including our ability to develop new courses and enhance existing courses to respond to changes in market trends and student demands, expand our learning center network and geographic footprint while keeping a high utilization rate of our facilities, manage our growth while maintaining consistent and high education quality, broaden our relationships with corporate employers and market our courses effectively to a broader base of prospective students, including young kids.children as well as their parents. Furthermore, our ability to attract students also depends on our ability to provide educational content that is perceived as more effective than the standard curricula of universities in China in terms of practical job-oriented training and as complementary to standard curricula of primary and secondary schools in China. If we are unable to continue to attract students to enroll in our courses, our net revenues may decline, which may have a material adverse effect on our business, financial condition and results of operations.

We may not be able to continue to recruit, train and retain qualified instructors and teaching assistants, who are critical to the success of our business and effective delivery of our education services to students.

Our instructors and teaching assistants are critical to maintaining the quality of our educational services and our reputation. We seek to hire highly qualified instructors with rich industry experience and strong teaching skills. As our kidK-12 education program continues to develop, we will need to recruit more teaching assistants. We recruit dedicated teaching assistants primarily from outstanding graduates of our courses. There is a limited pool of instructors and teaching assistants with these attributes, and we must provide competitive compensation packages to attract and retain them. We must also provide ongoing training to our instructors and teaching assistants to ensure that they stay abreast of changes in curriculum, student demands, industry standards and other trends necessary to teach and tutor effectively. We have not experienced major difficulties in recruiting, training or retaining qualified instructors and teaching assistants in the past. However, we may not always be able to recruit, train and retain enough qualified instructors and teaching assistants in the future to keep pace with our growth and maintain consistent education quality. A shortage of qualified teaching staff, a decrease in the quality of our teaching staff’s classroom performance, whether actual or perceived, or a significant increase in compensation to retain qualified instructors and teaching assistants would have a material adverse effect on our business, financial condition and results of operations.

If we are not able to continually tailor our curriculum to market demand and enhance our courses to adequately and promptly respond to developments in the professional job market, our courses may become less attractive to students.

New trends in the global economy and rapid developments in the professional services industries may change the type of skills required for professionals in the marketplace. This requires us to continually develop, update and enhance our course materials to adapt to the needs of the professional job market in China. We may be unable to update our courses in a timely and cost-effective manner, or at all, to keep pace with changes in market requirements. Any inability to track and respond to these changes in a cost-effective and timely manner or to tailor our courses to the professional services markets in China would render our courses less attractive to students, which may materially and adversely affect our reputation and ability to continue to attract students and cause us to lose market share.

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If we fail to develop and introduce new courses in anticipation of market demand in a timely and cost-effective manner, our competitive position and ability to generate revenues may be materially and adversely affected.

Since inception, our primary focus has been on providing IT professional education services. We have since expanded our course offerings to include non-IT training courses, includingsuch as digital art, online sales and marketing and accounting. We have also launched IT and non-IT training courses customized for young kids since December 2015, which primarily include computer programming and robotics programming, digital arts (including 3D printing) and coding mathematics.programming. We intend to continue developing new courses in anticipation of market demand. The introduction of new courses is subject to risks and uncertainties. Unexpected technical, operational, logistical, regulatory or other problems could delay or prevent the introduction of one or more new courses. Moreover, we cannot assure you that any of these new courses will match the quality or popularity of those developed by our competitors, achieve widespread market acceptance or generate the desired level of income for our students.

Offering new courses requires us to make investments in content development, recruit and train additional qualified instructors and teaching assistants, increase marketing efforts and re-allocate resources away from other uses. We may have limited experience with the content of new courses and may need to modify our systems and strategies to incorporate new courses into our existing course offerings. In offering courses in new subject areas, we may face new risks and challenges that we are not familiar with. Furthermore, we may experience difficulties in recruiting or otherwise identifying qualified instructors to develop the content for these new courses. If we are unable to offer new courses in a timely and cost-effective manner, our results of operations and financial condition could be adversely affected.

We rely on JavaK-12 computer programming, digital arts, K-12 robotics programming and digital artjava courses for a majoritymajor part of our total net revenues, and a decrease in the popularity and usage of Java or Adobe design technologyK-12 computer programming, digital arts, K-12 robotics programming and java courses would have a material adverse effect on our business and results of operations.

A majoritymajor part of our total net revenues areis generated from the JavaK-12 computer programming, digital arts, K-12 robotics programming courses and digital artjava courses. In 2015, 20162020, K-12 computer programming, digital arts, K-12 robotics programming and 2017, our Java coursejava courses contributed 28.5%to 20.6%, 35.1%16.8%, 15.7% and 33.7%13.8% of our total student enrollments, and our digital art course contributed 30.8%, 27.6% and 36.0% of our total student enrollments,net revenues, respectively. The historical rapid growth of our business has been driven by the popularity and usage of Java technology and Adobe design, and we expect net revenues from these courses to continue to represent a substantial portion of our total net revenues in the near future. We believe our reliance on Java and digital art courses is mainly attributable to the wide adoption and popularity of Java technology and Adobe design. However, whether Java as a programming language or Adobe design technology as a digital art tool can maintain their popularity is beyond our control. Meanwhile, K-12 computer programming courses are increasingly popular and contribute to an increasing percentage of our net revenues. Any factor that materially and adversely affects student enrollment in our digital arts, Java or digital artK-12 computer programming courses and K-12 robotics programming, such as a decrease in the popularity and usage of Adobe design, Java technology or Adobe designK-12 computer programming would have a material adverse effect on business and our results of operations.

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Our business depends on the market recognition of our brand,brands, and if we are unable to maintain or enhance our brand recognition, our business, financial condition and results of operations may be materially and adversely affected.

We believe that the market recognition of our “Tarena” (达内) brandand “TongchengTongmei” brands has significantly contributed to the success of our business and believe that maintaining and enhancing the reputation of this brandthese brands is critical to sustaining our competitive advantage. Our ability to maintain and enhance our brand recognition and reputation depends primarily on the perceived effectiveness and quality of our courses as well as the success of our marketing and promotion efforts. As we continue to grow and expand into new course areas, we may not be able to maintain the quality and consistency of our educational services as we did in the past. We have devoted significant resources to promoting our courses and brandbrands in recent years, including Internet-basedinternet-based marketing and advertising, traditional media advertising, press conference and sponsoring industry trade seminars and software design competitions.product launch event. However, our marketing and promotion efforts may not be successful or may inadvertently negatively impact our brand recognition and reputation. For example, if any governmental authority or competitor publicly alleges that any of our advertisements are misleading, our brand reputation may be adversely impacted. If we are unable to maintain and further enhance our brand recognition and reputation and increase awareness of our courses, or if we incur excessive marketing and promotion expenses, our results of operations may be materially and adversely affected. If we are unable to sustain our brand image, we may not be able to maintain premium tuition fees over our competitors, which may further exacerbate the extent of any adverse effect on our results of operations. Furthermore, any negative publicity relating to our company or our courses and services, regardless of its veracity, could harm our brand image and in turn materially and adversely affect our business and operating results.

Our business, financial condition and results of operations have been and may continue to be adversely affected by the COVID-19 outbreak.

The outbreak of COVID-19 has spread rapidly to many parts of the world. Since the beginning of 2020, outbreaks of COVID-19 have resulted in the temporary closure of many corporate offices, retail stores, and manufacturing facilities across China. In early 2020, in response to intensifying efforts to contain the spread of COVID-19, the Chinese government took a number of actions, which included extending the Chinese New Year holiday, quarantining individuals infected with or suspected of having COVID-19, prohibiting certain travels, encouraging employees of enterprises to work remotely from home, and cancelling public activities, among others.

The COVID-19 pandemic has adversely affected many of our business activities, including delivering lectures at our learning centers, recruiting students and conducting our day-to-day business in 2020. As part of China’s nationwide efforts to contain the spread of COVID-19, our classrooms in Beijing as well as our learning centers across China have underwent temporary yet prolonged closure from February 2020 to May 2020. Although we have arranged online webcasts for our students to study at home, which covered most of our adult students and K-12 students, we may not be able to achieve the same effectiveness and service quality without the disciplined and focused learning environment at our learning centers. Many of the quarantine measures within China have since been relaxed as of the date of this annual report, and we have gradually opened our learning centers and resumed our offline classes. However, our learning centers may be ordered to suspend classes and cancel offline activities again if China fails to fully contain COVID-19 or suffers a COVID-19 relapse.

In addition, we have experienced difficulty in recruiting students as we are unable to host regular seminars, information sessions and preparatory training camps for prospective students at our learning centers as usual as well as conducting other offline sales and marketing activities due to the general restrictions on travel and outdoor activities. We have arranged for online recruiting activities, such as conducting online promotional courses, but the effectiveness of such efforts is uncertain. Our ability to recruit students directly from cooperative universities and colleges is also negatively impacted as most universities and colleges have been closed in the first half of 2020. Even though most universities and colleges reopened in the second half of 2020, our ability to recruit students may not quickly or fully recover, or at all. The outbreak of COVID-19 in China also caused temporary closures of many of our offices, adjustment of operation hours and work-from-home arrangements in our Beijing headquarters and other offices in China during the first half of 2020.

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The COVID-19 global pandemic has resulted in, and may intensify, global economic distress, and the duration and extent of the impact of COVID-19 outbreak is highly uncertain at this time. The extent to which it may affect our results of operations, financial condition and cash flows will depend on the future development of the outbreak, which is also highly uncertain and will depend on a number of factors, including the duration and severity of COVID-19, possibility of new waves in China and other countries, the development and progress of distribution of COVID-19 vaccine and other medical treatment, the potential change in consumer behavior due to the prolonged impact of COVID-19, the actions taken by government authorities to contain the outbreak and stimulate the economy to improve business condition, all of which are beyond our control. If the situation materially deteriorates in China or globally, our business, results of operations and financial condition could be materially and adversely affected.

We may not be able to maintain our high job placement rate for our adult students, which could harm our ability to attract student enrollments.

We gather data on post-course job placement rates by conducting surveys of our adult graduates. Based on the survey responses, we calculate the six-month post-course job placement rates for a month by dividing (i) the number of job-seeking students enrolled in such month who (A) successfully graduated from our programs with graduation certificates awarded and (B) indicated that they had received employment offers within six months of graduation, by (ii) the total number of job-seeking students enrolled in such month who later successfully graduated from our programs with graduation certificates awarded. We calculate the annual average six-month post-course job placement rate for a year by averaging the six-month post-course job placement ratesrate of each month of such year.month. Our average six-month post-course job placement rate for each of 20152018, 2019 and 20162020 was overabout 90%. When calculating such job placement rates for 20152018, 2019 and 2016,2020, a majority of the employment reported by relevant students was full-time employment, and a majority of the employment reported by relevant students was in the fields of their studies with us. All of the students enrolled in 20152017 and 20162018 who later successfully graduated from our programs with graduation certificates awarded and who were job-seeking, have filled out our surveys. Among the students enrolled in 20152017, 2018 and 2016,2019, 86%, 88% and 88%96% of such students, respectively, graduated from our programs with graduation certificates awarded. Among the students enrolled in 20152017, 2018 and 20162019 who later successfully graduated from our programs with graduation certificates awarded, 77%76%, 75% and 77%65% of such students, respectively, were deemed to be job-seeking students.

Our student job placement rate depends on a wide range of external and internal factors. External factors include the macroeconomic conditions, the performance of the professional services sector in China and the recruiting demand of corporate employers. Internal factors include our education quality, the efforts of our career services personnel, our ability to provide adequate staffing to achieve desired results and our relationships with corporate employers. A number of such external and internal factors are outside of our control. Our historical job placement rates have been high. However, we cannot assure you that we will be able to maintain our current level of job placement rate for our students in the future. Any decrease in our job placement rate could harm our ability to recruit students, which may materially and adversely affect our business, financial condition and results of operations.

Our newly launched kidK-12 education programs may not be successful due to our limited experience in providing education services to minors.

In December 2015, we launched our kidK-12 education programs under the brand nameTongchengTongmei featuring IT training courses and non-IT training courses for kidK-12 students. In March 2016, we rolled out another kidK-12 education program to offer kidsK-12 robotics programming courses. In 2017, we continued to roll out a new kidK-12 education course in coding mathematics to further diversify our course offerings in kidK-12 education. In 2018 and 2019, our computer coding and robotics programming courses were popular among our K-12 students and the revenues from K-12 computer programming courses exceeded 10% of our total revenues in 2019. In 2020, we launched Creative Programming Starter course which gained popularity among our K-12 students. Our kidK-12 education programs target students aged between sixthree and eighteen, and are the most important part of our efforts to enter into the K-12 STEAM education market. As we have been primarily engaging in adult vocational trainingeducation programs since our inception, we have very limited experience in providing education programs to minors, who have distinct learning preference and mentality as compared to adult students and require tailored courses and dedicated class management. Although the courses offered through our kid education programs are designed based on minors’ learning patterns and interests, we cannot guarantee you that our kid education programs will be able to continue to attract students or be proved to achieve satisfactory education results. If students lose interests in our kid education programs or find the courses offered in our kid education programs ineffective, our business, results

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Our student enrollment rate could be impacted by the operations of academic K-12 education and tutoring service providers, given our target students have limited time and energy and they need to choose among different courses and programs. The K-12 education and tutoring market is highly competitive and the concept of STEAM education is relatively new in China. Students and their parents may prefer academic education and tutoring programs over our STEAM programs. We cannot assure you that we will be successful in competing for students, and if we fail, our financial status and results of operation will be adversely impacted.

Furthermore, we have incurred costs in establishing new learning centers due to the fast expansion of our K-12 education business recently, which we believe are essential to support our education programs in the future. If, however, we fail to utilize such new learning centers efficiently, or otherwise fully benefit from the investments we made, our financial status and result of operation will be adversely impacted.

If the level of performance by the students of our kidK-12 education program deteriorates or satisfaction with our services declines, our business, financial condition, results of operations and reputation could be adversely affected.

The success of our business depends on our ability to deliver a satisfactory learning experience and improved educational results. Although the courses provided under our kidK-12 education programs do not directly link to the academic performance of our students, their effectiveness could be evaluated by our students and their parents in an intuitive way by referring to the improvements in programming skills or performances in robotics competitions. The performance of our students in the IT training courses, non-IT training course, and kidK-12 robotics programming and coding mathematics course will impact the acceptance of, and the student and parent satisfaction with, our courses.

Accidents or injuries suffered by our students, their parents or other people caused by us, or perceived to be caused by us may adversely affect our reputation, subject us to liability and cause us to incur substantial costs.

We have a large number of K-12 students and their parents on our premises to attend classes and/or use our facilities, and they may suffer accidents or injuries or other harm on our premises, including those caused by or otherwise arise from the actions of our employees. Although we have enhanced preventive measures to avoid such incidents, we cannot assure you that there will be no any incident in the future.

WeOther than the liability insurance for part of our adult students and travel insurance for our K-12 students participating in our camp or event-related travel, we do not carry liability insurance for most of our students at our learning centers. In the event of accidents or injuries or other harm caused or perceived to be caused by us, our facilities and/or services may be perceived to be unsafe, which may discourage prospective students from attending our classes and participate in our activities. We could also face claims alleging that we should be liable for the accidents or injuries, or we were negligent, provided inadequate supervision to our employees and therefore should be held jointly liable for harm caused by them. A material liability claim against us or any of our teachers or other employees could adversely affect our reputation, enrollment and revenues. Even if unsuccessful, such a claim could create unfavorable publicity, cause us to incur substantial expenses and divert the time and attention of our management.management.

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Our business, financial condition and results of operations may be adversely affected by a downturn in the global or Chinese economy.

Because our student enrollment of our professional education courses may depend on our students’ and potential students’ levels of disposable income, perceived job prospects and willingness to spend, as well as the level of hiring demand of professional services positions, our business and prospects may be affected by economic conditions in China or globally. In addition, for our kidK-12 education programs, our student enrollment may depend on the disposable income and willingness to spend of the parents. The global macroeconomic environment is facing challenges, including the escalation of the European sovereign debt crisis since 2011, the end of quantitative easing by the U.S. Federal Reserve, the economic slowdown in the Eurozone in 2014, and the expected exit of the United Kingdom from the European Union.Union, and the impact of COVID-19 in 2020. It is unclear whether the Chinese economy will resume its high growth rate. The Chinese economy has slowed down in recent years. According to the National Bureau of Statistics of China, in 2017,2020, China’s gross domestic product grew at a rate of 6.9%2.3%. There have been concerns over unrest in the Middle East and Africa, which have resulted in volatility in oil and other markets, and over the prolonged crisis in Ukraine which contributed to the collapse in the value of the Russian ruble, and the resulting Russian financial crisis. There have also been concerns about the territorial disputes involving China in Asia and the economic effects.effects, as well as the relationship between China and the U.S., including those resulting from the ongoing trade dispute between the two countries. Economic conditions in China, including the performance of the IT and other professional services industries, are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. A decline in the economic prospects of IT and other professionals could alter current or prospective students’ spending priorities and the recruiting demand from professional service industries. We cannot assure you that professional education spending in general or with respect to our course offerings in particular will increase, or not decrease, from current levels, or if the macroeconomic environment deteriorates, parents will continue to spend on STEAM education for their children. Therefore, a slowdown in China’s economy or the global economy may lead to a reduction in demand for education services, which could materially and adversely affect our financial condition and results of operations.

If we fail to successfully execute our growth strategies, our business and prospects may be materially and adversely affected.

Our growth strategies include growing our student enrollments for existing courses, expanding our course offerings, further enhancing the quality of our education services and expanding our corporate employer network. We may not succeed in executing our growth strategies due to a number of factors, including, without limitation, the following:

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If we fail to execute our growth strategies successfully, we may not be able to maintain our growth rate and our business and prospects may be materially and adversely affected as a result.

We may not be able to manage our business expansion effectively, which could harm our financial condition and results of operations.

We have expanded rapidly and we plan to continue to expand our operations in different geographic areas as we address the growth of our customer base and market opportunities. We increased the number of ourclosed 54 non-performing learning centers for professional education services from 145and opened 4 new centers in 2019. We closed 26 such non-performing learning centers and did not open any new centers in 2020. There were 130 and 104 learning centers for professional education services as of December 31, 2016 to 184 as of December 31, 2017.2019 and 2020, respectively. We also significantly increased the number of our learning centers exclusively for kidK-12 education programs from 6 as of December 31, 2016 to 30 as of December 31, 2017.2017 to 148 as of December 31, 2018, to 217 as of December 31, 2019 and further to 236 as of December 31, 2020. This expansion has resulted, and will continue to result, in substantial demands on our management, personnel and operational, technological and other resources. To manage the expected growth of our operations, we will be required to expand our existing operational, administrative and technological systems and our financial systems, procedures and controls and to expand training and management of our growing employee base. In addition, the geographic dispersion of our operations requires significant management resources. We cannot assure you that our current and planned personnel, systems, procedures and controls will be adequate to support our future operations, or that we will be able to effectively and efficiently manage the growth of our operations or recruit and retain qualified personnel to support our expansion. Any failure to effectively and efficiently manage our expansion may materially and adversely affect our ability to capitalize on new business opportunities, which in turn may have a material adverse effect on our financial condition and results of operations.

The growth of our business is in part dependent on our continuing access to a broad network of corporate employers.

We derive both direct benefits, such as increased enrollment driven by employer-specific customized courses, and indirect benefits, such as higher student job placement rate and strengthening of the Tarena brand, from our access to a large number of corporate employers. We believe our access to a large number of corporate employers in a wide range of industries is one of our core competitive strengths. If our access to these corporate employers were to become constrained or limited, or the benefits we derive from this access were to be diminished, whether by our own actions or actions of our competitors, our growth prospects and our business would be harmed.

Our success depends on the continuing efforts of our senior management team and other key personnel and our business may be adversely affected if we lose their services.

Our future success depends heavily upon the continuing services of our senior management team. If any member of our senior management team leaves us and we fail to effectively manage a transition to new personnel, or if we fail to attract and retain experienced and passionate instructors, regional managers and other key personnel on acceptable terms, our business, financial conditions and results of operations could be adversely affected. We will need to continue to hire additional personnel, especially qualified instructors and regional managers, as our business grows. A shortage in the supply of personnel with requisite skills or our failure to attract and retain high-quality executives or key personnel could impede our ability to increase revenues from our existing courses, to launch new course offerings and to expand our operations and would have an adverse effect on our business and financial results.

Mr. Shaoyun Han, our founder, chairman and chief executive officer, has played an important role in the growth and development of our business since its inception. To date, we have relied heavily on Mr. Han’s expertise in, and familiarity with, our business operations, his leadership, and his reputation in the professional education services industry. If Mr. Han is unable or unwilling to continue in his present positions, we may not be able to easily replace him and may incur additional expenses to identify and train his successor. We do not maintain key man insurance on Mr. Han.

The operations of certain of our learning centers providing professional education services are, or may be deemed by relevant PRC government authorities to be, beyond their authorized business scope or without proper license or registration. If the relevant PRC government authorities take actions against such learning centers, our business and operations could be materially and adversely affected.

The principal regulations governing private education in China consist of theEducation Law, thePrivate Education Law with its Amendment, and thePrivate Education Law Implementation Rules.See “Regulations—Regulations on Private Education—Education—The Law for Promoting Private Education and its Implementation Rules.”

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Under these PRC laws and regulations and related administrative requirements in effect, private schools are classified as either non-profit private schools or for-profit private schools, and all kinds of private schools that provide education for academic credentials, pre-school education, training for self-study examinations preparation and other cultural education, as well as professional education including training for professional qualifications, are required to obtain a school permit before their registration as legal entities with competent authorities. For-profit private training institutions shall be regulated and governed with reference to the abovementioned rules. To provide professional education services as a for-profit private school, a company may, in the capacity of a school sponsor, establish a private school which obtains a school permit from competent human resources and social security authorities.authorities. After obtaining a school permit, the registration of a private school will be completed once the competent industry and commerce administration authorities includeschools shall add the relevant professional education services in the authorized scope of business as specified in thetheir business licenses, and complete the registration with the local branch of the private school.State Administration for Market Regulation, or the SAMR (formerly known as the State Administration for Industry and Commerce, or the SAIC). Under theAmendment to the Private Education Law and thePrivate Education Law Implementation Rules, a material change in a for-profit private school shall be approved by the competent education authorities or the authorities in charge of human resources and social security before it can be registered with the competent local branch of the State Administration for Industry and Commerce, or SAIC, the predecessor of the State Administration for Market Regulation newly established in April 2018.

SAMR. However, since theAmendment to the Private Education Law just became effective on September 1, 2017 and the relevant detailed rules by national and mostsome of the local government authorities have not been officially issued, there remains uncertainties about the registration process for the newly established private schools (including the private training institutions, similarly hereinafter) or the re-registration process for pre-existing private schools. In practice, there still exists the following two ways to operate and provide the professional education services may be provided byservices: (i) a private school which holds a school permit issued by the human resources and social security authorities and such a school can thencould establish and operate learning centers within the approved regions to provide professional education services, provided that learning centers located outside the region of the registered address of the private schools shall be registered with original approving authorities. Alternatively, professional education services may also be provided byauthorities; or (ii) a company obtaining approval from the competent industry and commerce administration authorities to includewith the relevant professional education services registered in theits authorized scope of business as specified in its business licenses with the local branch of the SAMR could provide professional education services, which approachway has been adoptedwidely used before the promulgation of theAmendment to the Private Education Law. AIn the latter way, a company with “professional education services” or an equivalent statement included in its approved scope of business can operate learning centers by itself or through its registered branches. In addition,However, many local government authorities have different views on the relevant rules and regulations and have adopted different practices in granting school permits to private schools or issuing business licenses to companies that provide professional education services. AlthoughFor example, in some cities, such as Beijing, Shanghai and Hangzhou, allow companiesentities are permitted to include “professional education services” in their business scope the industry and commerce administration authoritiesas specified in their business licenses, but in certain other areas have adopted regional policies ofcities, entities are not allowingpermitted to, or are prohibited to, add “professional education services” or similar statement to be includedservices in thetheir business scope as specified in their business licenses according to the policies of any company.

the local branch of the SAMR.

We use both ways discussed above to establish our learning centers. As of December 31, 2017,2020, we had a total of 214340 learning centers, of which 6549 were managed by schools and 149291 were managed by our subsidiaries. Among the learning centers operated by our subsidiaries, 49118 have neither professional education services nor education information related consultation as an authorized scope of business in the licenses of our subsidiaries or their registered branches operating these learning centers as of December 31, 2017,2020, and these learning centers in the aggregate accounted for 17.6%27% of our student enrollments in 2017.2020. We were not able to include professional education services in these companies’ authorized business scope mainly because the industry and commerce administration authorities in these areasrelevant local branch of SAMR have aformulated general local policypolicies prohibiting the inclusion of “professional education services” or similar services in the business scope of any company.entity. In addition, 1359 learning centers operated by our subsidiaries only have “education information related consultation” rather than “professional education services” in their respective authorized scopes of business, and these learning centers in the aggregate accounted for 4.3%18.6% of our student enrollments in 2017.2020. The difference between “educational services” and “education information related consultation” is not very clear under applicable PRC laws and regulations, and it is possible that the relevant PRC government authorities may determine that operating learning centers in the way as currently conducted by our relevant subsidiaries is beyond the scope of “education information related consultation.” For these learning centers, we have been communicating, and will continue to communicate, with the competent industry and commerce administration authoritiesrelevant local branch of the SAMR to expand the authorized business scope of the relevant subsidiaries to include “professional education services” or similar statement.services. For regions where it becomes apparent that we will not be able to expand the authorized business scope of the relevant subsidiaries, we will also explore the possibility of obtaining approval from the competent authorities to set up private schools to take over the operations of the relevant subsidiaries. If the relevant PRC government authorities discover or determine that our subsidiaries operate beyond their authorized business scope, they may order the relevant subsidiaries to complete the registration for change of business scope within a given period, failing which each company is subject to a one-time fine of RMB10,000 to RMB100,000, or may be ordered to cease its operation. We have been fined once for RMB50,000 for conducting business outside the authorized business scope since 2011.

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For our learning centers operated by schools, we are also required to obtain and maintain various licenses and permits and make filings for each learning center with the competent human resources and social security authorities and civil affairs authorities. As of December 31, 2017, 302020, 18 of our learning centers are operated by schools outside their registered address without being registered with the original approving authorities, which may subject us to fines of RMB10,000 to RMB50,000, confiscation of the gains derived from the noncompliant operations or the suspension of the noncompliant learning centers. These 3018 learning centers in the aggregate accounted for 18.3%4.8% of our total student enrollments in 2017.2020. As of the date of this annual report, all of our 2546 schools have the school permit, among which two2 schools need to apply for updating their principal’s information. Besides,Separately, as of December 31, 2017,2020, we have set up five (5)15 schools registered as schools requiring “reasonable returns” provided in thePrivate Education Law. We are informed by the local human resources and social security authorities in some cities in China that they have stopped issuing new school permits temporarily before any detailed implementing rules being officially issued.

On August 10, 2018, the Ministry of Justice published the draft submitted for approval of the Amendment to the Regulations on the Implementation of the Private Education Promotion Law of the PRC, or the Draft Amendment to Private Education Promotion Regulations, to seek public comments. According to the Draft Amendment to Private Education Promotion Regulations, the private training institutions which provide activities aiming at quality promotion, personality development in the areas of linguistic competence, arts, physical activities, technology, as well as activities targeting at the cultural education for adults and non-degree continuing education are allowed to be registered as a legal person directly. The private training institutions which provide training for professional qualifications or skills shall obtain a school permit issued by the human resources and social security authorities and make filing with the education authorities. If such institutions use the internet technology to conduct training for professional qualifications or skills, they shall obtain the corresponding internet operating permit and make filing with the human resources and social security authorities at the provincial level where the institution is domiciled. However, it is uncertain when the Draft Amendment to Private Education Promotion Regulations would be signed into law and whether the final version would have any substantial changes. During such transitional period between the promulgation of theAmendment to the Private Education Law and the issuance of the relevant detailed rules by national and most of the local government authorities, the above uncertainties and local policies and practices have created certain obstacles for us to comply with all applicable rules and regulations for all of our local operations. Although weWe have not been fined once for RMB155,000 for providing professional training without school permit. We may be subject to any material fines or other penalties in relation to any non-compliance with licensing requirements in the past with respect to our learning centers operated by schools, if we fail to cure any non-compliance in a timely manner, we may be subject to fines, confiscation of the gains derived from our noncompliant operations or the suspension of our noncompliant learning centers, which may materially and adversely affect our business and results of operation.

The operations of certain learning centers providing after-school K-12 education programs are, or may be deemed by relevant PRC government authorities to be, beyond their authorized business scope or without proper license or registration. If the relevant PRC government authorities take actions against such learning centers, our business and operations could be materially and adversely affected.

On February 13, 2018,The General Office of the State Council promulgated the Opinions of the General Office of the State Council on Regulating the Development of Off-Campus Training Institutions, or Circular 80, on August 6, 2018. Circular 80 provides that after-school education institutions shall obtain school operation permits and business licenses. For courses of school academic subjects such as Chinese, mathematics, English, physics, chemistry and biology, the key information of such courses, including the specific subjects, course schedules, and course syllabi, shall be filed with the local education authorities and made public, and the course progress shall not surpass the same-period progress of local primary schools and secondary schools. Circular 80 further provides that after-school education institutions shall obtain approvals from local education authorities for opening new branches or learning centers. In addition, the MOE and other relevant authorities promulgated theNotice on Effectively Reducing Extracurricular Burdensa series of Primarynotices in 2018 and Middle School Students2019 to regulate the operation of the after-school education institutions, which emphasize and Conducting Special Administrative Actions for Off-campus Training Institutions, orstrengthen theNotice, same principle as provided in Circular 80.

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Our K-12 education programs were launched in December 2015, which proposes several rectification requirements on "test-oriented" non-academic culturalinclude IT training courses and educationalnon-IT training institutions and requires relevant government authorities to pay close attentioncourses, were operated through our 236 learning centers in 53 cities in China as of December 31, 2020, as well as through the internet. According to the "strong test-oriented" training, suchrules mentioned above, our learning centers providing K-12 education programs may be deemed as "advance teaching", especially mathematics and Chinese courses provided by the off-campus training institutions. Accordingafter-school education institutions which are required to theNotice, such off-campus training institutions shall obtain school operation permits and make filings regardingbusiness licenses. In addition, the classes, content, enrollment target and lecture time for disciplinary training with the local branches of the MOE. The coding mathematics course provided byTongchengTongmei shares similar content with elementary school mathematics courses, which may be regarded as the "strong test-oriented", and the informatics olympiad training organized under IT-training courses byof TongchengTongmei may be regarded as the primarycourses of school competition-related courses, eachacademic subjects, which are required to be filed with the local education authorities and the progress of which may needshall not surpass the same-period progress of local primary schools and secondary schools. As of December 31, 2020, 13 of our leaning centers has obtained school operation permits from the local education authorities for our after-school kid education programs, and 124 have either professional education services or education information related consultation as an authorized scope of business in the licenses of our subsidiaries or their registered branches operating these learning centers. However, since the Circular 80 just became effective on August 6, 2018, there remains uncertainties about the registration process with respect to be rectified pursuantafter-school K-12 education programs, and the filing process with respect to theNotice. However, according courses of school academic subjects with some local education authorities. We have been communicating and will continue to communicate, with the competent provincial education regulatory authorities to obtain school operation permits and filings with respect to the courses of school academic subjects. Although we have not been subject to any material fines or other penalties in relation to any non-compliance with licensing and filing requirements in the past with respect to our oral consultation with the relevant local branches of the MOE, there has been no specific standards or implementation rules for theNotice and it is uncertain whether our coding mathematics course provided byTongchengTongmei or the informatics olympiad organized byTongchengTongmei are in compliance with theNotice. If our business is regarded as violating theNotice andlearning centers providing after-school K-12 education programs, if we fail to cure any non-compliance in a timely manner, we may be subject to fines, confiscation of the gains derived from our noncompliant operations or the suspension of our noncompliant business,learning centers, which may materially and adversely affect our business and results of operation.

In addition, according to the Draft Amendment to Private Education Promotion Regulations, if private training institutions use the internet technology to conduct training and educational activities, they shall obtain the corresponding internet operating permit and make filing with the education authorities at the provincial level where the institution is domiciled. However, it is uncertain when the Draft Amendment to Private Education Promotion Regulations would be signed into law and whether the final version would have any substantial changes. According to the Implementation Opinions on Regulating Online After-School Training, or the Online After-School Training Opinions, promulgated by the MOE jointly with certain other PRC government authorities and effective on July 12, 2019, the academic subjects online after-school training institutions for primary and secondary school students shall file with the competent provincial education regulatory authorities before October 31, 2019 and that such education regulatory authorities shall, jointly with other provincial government authorities, review such filings and the qualifications of the academic subjects online after-school training institutions submitting such filings. After receiving the rectification opinion from relevant regulatory authorities, the academic subjects online after-school training institutions shall complete rectification and resubmit their materials before the end of June 2020. The Online After-School Training Opinions also impose a series of new regulatory requirements, including (i) each class shall not last longer than 40 minutes and shall be taken at intervals of not less than 10 minutes; (ii) live streaming courses provided to students receiving compulsory education shall not end later than 9:00 p.m.; (iii) where fees are charged based on the number of classes, fees are not allowed to be collected in a lump sum for more than 60 classes, and where fees are charged based on the length of the course, the fees shall not be collected for a course length of more than three months; and (iv) instructors are required to obtain the necessary teacher qualification licenses. As of the date of this annual report, we have not received any rectification opinion from relevant regulatory authorities, or been subject to penalties imposed by the relevant government authorities for alleged failure of us to comply with the Online After-School Training Opinions, and we have been communicating and will continue to communicate, with the competent provincial education regulatory authority to complete such filings, but we cannot assure you that we will complete such filing and comply with other regulatory requirements under the Online After-School Training Opinions and its related local rules in a timely manner. If we fail to cure any non-compliance in a timely manner, we may be subject to fines, confiscation of the gains derived from our noncompliant operations or the suspension of our noncompliant disciplinary online after-school training, which may materially and adversely affect our business and results of operation.

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We may lose market share and our profitabilityfinancial results may be materially and adversely affected, if we fail to compete effectively with our present and future competitors or to adjust effectively to changing market conditions and trends.

The professional education services market in China is fragmented, rapidly evolving and highly competitive. We face competition in our offered courses and in many of the geographic markets in which we operate. As the IT professional education market in China matures, there is increased demand for highly specialized IT labor, and we may face competition from IT professional education providers that offer specialized training programs targeting certain niche job markets in the IT industry. In the future, we may also face competition from new entrants into the Chinese IT professional education market. As we expand beyond IT education into other fields of professional education, we also face competition for student enrollment from existing online and offline providers of professional education services, as well as smaller regional professional education services providers in China. Furthermore, we also face competition from other K-12 education service providers.

Some of our competitors may be able to devote more resources than we can to the development, promotion and provision of their education services and respond more quickly than we can to changes in student needs, market trends or new technologies. In addition, some of our competitors may be able to respond faster to changes in student preferences in some of our geographic markets and engage in price-cutting strategies. For our kidK-12 education programs, some of our competitors may have more experiences in designing courses based on minor’s preferences, mentality and learning curve. We cannot assure you that we will be able to compete successfully against current or future competitors. If we are unable to maintain our competitive position or otherwise respond to competitive pressure effectively, we may be forced to reduce our tuition fees and lose our market share, which will adversely impact our profitability.

financial results.

Our business and financial results may be materially and adversely affected if we are unable to maintain our cooperative relationships with financing service providers for student loans.

In 2015, 20162018, 2019 and 2017,2020, a substantial portion of our students relied on loans provided or arranged by a number of financing service providers to pay our tuition fees. We have entered into cooperative agreementsIn 2018, we collaborated with well-known personal financing service providers such as Baidu Small Loan Co., Ltd. (or Baidu Small Loan) and, Bank of China Consumer Finance Co., Ltd. (or BOC CFC), pursuant to which they provide loans to our students for the payment of our tuition fees. We have also entered into agreements with CreditEase Business Consulting (Beijing)and Beijing Ronglian Shiji Information Technology Co., Ltd. (or CreditEase), RenRenDai and ShiTuDai, whereby they assisted our students in obtaining loans to pay for our tuition fees. In 2015, 20162018, 2019 and 2017, approximately 50.4%2020, 45.6%, 55.1%52.3% and 52.4%15.0% of our students received loans provided or arranged by financing service providers to pay for our tuition fees.

Our financing service partners have full discretion in deciding whether or not to extend or arrange for loans to a particular student. Furthermore, macroeconomic conditions in China may force the financing service providers to decrease or eliminate the amount of credit available for our students, making it difficult for our prospective students to afford our education. In addition, if the default rates on the loans provided or arranged by these and other financing service providers were to increase, they may raise the interest rates on the student loans, making such financing options less attractive to our students. Although peer-to-peer lending is generally protected as private loans between individuals under PRC law and has flourished in recent years in China, there are uncertainties as to the licensing requirements and the nature of business provided by those intermediaries, such as CreditEase, RenRenDai and ShiTuDai, in facilitating the peer-to-peer lending. According to theGuide to the Record-filing of Online Lending Information Intermediaries, issued in November 2016, or theRecord-filing Guidelines, and theNotice on Rectification and Inspection Acceptance of Risk of Peer-to-peer Lending, issued on December 2017, orCircular 57, certain local governmental authorities shall establish an inspection team to conduct risk rectification inspections on peer-to-peer lending information intermediaries within their jurisdictions. If a peer-to-peer lending information intermediary institution passes the inspection, the local governmental authorities shall complete its record-filling under theRecord-filing Guidelines.Circular 57 also requires local governmental authorities to complete such record-filings of peer-to-peer lending information intermediaries within its jurisdiction by the end of April 2018, except that the deadline for certain complicated cases may be postponed to May 2018 or June 2018, as appropriate. According to theNotice of Further Regulating Campus Loans issued on June 29, 2017, theNotice of the Office of the Leading Group for the Special Campaign against Internet Financial Risks and the Office of the Leading Group for the Special Campaign against Peer-to-peer Lending Risks on the Regulation and Rectification of the “Cash Loan” Businessissued on December 1, 2017, the “campus loans” services shall be prohibited and the peer-to-peer lending institutions shall not provide loan to any student in school or any borrower without source of repayment or repayment capacity. If those peer-to-peer lending institutions could not complete the record-filings or the current services provided by peer-to-peer lending institutions to our student are prohibited, or more new PRC laws and/or regulations are passed in the future prohibiting peer-to-peer lending facilitated by, or imposing significant licensing requirements on, intermediaries such as CreditEase, RenRenDai and ShiTuDai, we cannot assure you that CreditEase, RenRenDai or ShiTuDai will be able to obtain relevant licenses and continue facilitating peer-to-peer lending in the future. If CreditEase, RenRenDai or ShiTuDai ceases to facilitate peer-to-peer lending to our students in the future, if our cooperative relationships with the financing service providers are damaged or lost, or if the financing service providers significantly increase their interest rates, our business and financial results would be adversely affected.

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If we fail to protect our intellectual property rights, we may lose our competitive advantage and our brandbrands and operations may suffer.

We consider our copyrights, trademarks, trade names and domain names invaluable to our ability to continue to develop and enhance our brand recognition. Unauthorized use of our copyrights, trademarks, trade names and domain names may damage our reputation and brand.brands. Our major brand names and logos are registered trademarks in China. Our proprietary curricula and course materials, together with our Tarena Teaching System, or TTS, are protected by copyrights. However, preventing copyright, trademark and trade name infringement or misuse could be difficult, costly and time-consuming, particularly in China. The measures we take to protect our copyrights, trademarks and other intellectual property rights are currently based upon a combination of trademark and copyright laws in China and may not be adequate to prevent unauthorized uses. Furthermore, application of laws governing intellectual property rights in China is uncertain and evolving, and could involve substantial uncertainties to us. There had been several incidents in the past where third parties used our “Tarena” (达内) brand without our authorization, and we had to resort to litigation to protect our intellectual property rights. These proceedings were all resolved in our favor and our brand and business were not materially harmed. However, if we are unable to adequately protect our trademarks, copyrights and other intellectual property rights in the future, we may lose our competitive advantage, our brand name may be harmed and our business may suffer materially. Furthermore, our management’s attention may be diverted by violations of our intellectual property rights, and we may be required to enter into costly litigation to protect our proprietary rights against any infringement or violation.

We may be subject to intellectual property rights claims or other claims which could result in substantial costs and diversion of our financial and management resources away from our business.

We cannot assure you that our course materials, other educational contents or other intellectual properties developed or used by us do not or will not infringe upon patents, valid copyrights or other intellectual property rights held by third parties. We have, and may from time to time be subject to legal proceedings and claims relating to the intellectual property of others. In addition, some of our employees were previously employed at other companies, including our current and potential competitors. To the extent these employees are involved in content development at our company similar to content development in which they have been involved at their former employers, we may become subject to claims that such employees or we may have used or disclosed trade secrets or other proprietary information of the former employers of our employees. In addition, our competitors may file lawsuits against us. If any such claim arises in the future, litigation or other dispute resolution proceedings may be necessary to retain our ability to offer our current and future course materials or other content, which could result in substantial costs and diversion of our financial and management resources. Furthermore, if we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property rights, incur additional costs to license or develop alternative intellectual property rights and be forced to pay fines and damages, any of which may materially and adversely affect our business.

We recruit a significant portion of our students directly from our network of cooperative universities and colleges. If we lose these relationships, or the benefits we derive from these relationships diminish, our growth and our business may be harmed.

We haveAs of December 31, 2020, we established various kinds of cooperative relationships with over 750665 universities and colleges in China. We enroll a significant percentage of our students directly from these universities and colleges through jointly offered majors, on-campus learning sites and university recruiting promotional events. We recruited approximately 15.7% ofevents and other marketing approaches as agreed by our students in 2017 from these universities and colleges.university partners. If our relationships with any of these universities and colleges were to be damaged or lost, or the benefits we derive from these relationships were to be diminished, whether by our own actions, actions of one or more governmental entities or actions of our competitors, our growth and our business may be harmed.

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Failure to control rental costs, obtain leases at desired locations at reasonable prices or protect our leasehold interests could materially and adversely affect our business.

A majority of our offices and learning centers are located on leased premises. At the end of each lease term we must negotiate an extension of the lease. If we are not able to negotiate an extension on terms acceptable to us, we will be forced to move to a different location, or the rent may increase significantly. This could disrupt our operations and adversely affect our profitability. All of our leases are subject to renewal at market prices, which could result in a substantial rent increase each renewal period. We compete with many other businesses for sites in certain highly desirable locations. As a result, we may not be able to obtain new leases at desirable locations or renew our existing leases on acceptable terms or at all, which could adversely affect our business. As of December 31, 2017,2020, we had received from our lessors copies of title certificates or proof of authorization to lease the properties to us for all leased properties. However, we cannot assure you that we will be able to obtain copies of title certificates or proof of authorization to lease any properties that we may lease in the future or the title to these properties we currently lease or any properties that we may lease in the future will not be otherwise challenged. Furthermore, several of our leased properties are owned by universities or built on allocated land in China. Such properties may not be legally leased to us under PRC law. Our leasehold interest in these properties may be challenged by relevant PRC governmental authorities to be invalid, and we may be forced to move out of such premises.

In addition, we have not registered most of our lease agreements with relevant PRC governmental authorities as required by PRC law, and although failure to do so does not in itself invalidate the leases, we may not be able to defend these leases against bona fide third parties. As of the date of this annual report, we are not aware of any actions, claims or investigations being contemplated by governmental authorities against us or our lessors with respect to the defects in our leased real properties or any challenges by third parties to our use of these properties. However, if any of our leases are terminated as a result of challenges by third parties or governmental authorities for lack of title certificates or proof of authorization to lease, we may not be able to protect our leasehold interest and may be forced to relocate the affected learning centers and incur additional expenses relating to such relocation. If we fail to find suitable replacement sites in a timely manner or on terms acceptable to us, our business and results of operations could be materially and adversely affected.

Our accounts receivable have been relatively high. Inability to collect our accounts receivable on a timely basis, if at all, could materially and adversely affect our financial condition, liquidity and results of operations.

Understanding the difficulty for recent college graduates to afford the tuition fees of our courses, we offered qualified students the post-graduation tuition payment option beginning in 2006, which led to our relatively high accounts receivable. As of December 31, 2015, 20162018, 2019 and 2017,2020, our outstanding accounts receivable, net of allowance for doubtful accounts, were RMB155RMB52.1 million, RMB99RMB32.2 million and RMB231RMB33.0 million (US$5.1 million), respectively. Although we conduct financial evaluations of our students applying to use our post-graduation tuition payment option, we do not require collateral or other security from our students. Adverse changes in the macroeconomic environment and the earnings capacity of our students may negatively impact our ability to collect our accounts receivable. Furthermore, as time passes, it might be more difficult for us to collect historical accounts receivables. Our bad debt allowance charged to expense decreased from RMB33.6amounted nil, RMB2.3 million and RMB9.2 million (US$1.4 million) in 2016 to RMB31.52018, 2019 and 2020, respectively. Our balance of bad debt allowance amounted RMB2.3 million in 2017. However, thereand RMB9.2 million (US$1.4 million) as of December 31, 2019 and 2020, respectively. There is no guarantee that our bad debt allowance expense will keep decreasingnot increase in the following years. Our inability to collect our accounts receivable on a timely basis, if at all, could cause our bad debt allowance to increase or remain relatively high in the future, and materially and adversely affect our financial condition, liquidity and results of operations.

Furthermore, we have extended loans with one-year terms to certain of our employees to support their personal needs. As of December 31, 2020, our outstanding accounts receivable for such loans was RMB20.4 million (US$3.1 million). We have no receivables due from any of our directors and officers. If we cannot collect such outstanding accounts receivable in a timely manner, or at all, our financial condition, liquidity and result of operations will be adversely impacted, and any legal proceedings initiated to collect such receivables may adversely impact our relationship with such employees.

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Capacity constraints of our learning centers could cause us to lose students to our competitors.

Our learning centers are limited in size and number of classrooms. We may not be able to admit all students who would like to enroll in our courses due to the capacity constraints of our learning centers. If we fail to expand our physical capacity as quickly as the demand for our classroom-based services grows, we could lose potential students to our competitors, which could adversely affect our results of operations and business prospects. As we further expand our kidK-12 education programs, we may face more intense capacity challenges.

Furthermore, the investment in the expansion of learning centers can be costly, which may have adverse impact on our gross margin, if we can manage to make such investments at all.

We may not be able to recoup the capital expenditures or investments we make to expand and upgrade our teaching, administrative, research and other capabilities.

We purchased two office buildings in Beijing for an aggregate price of RMB231.9 million in 2016. The office buildings are mainly for teaching purpose, and to a lesser extent for an administrative function. We also purchased a building in Qingdao and another one in Haikou for an aggregate price of RMB49.6 million in 2016. The purpose of these two buildings is for teaching purposes as learning centers to accommodate the growing demand in local market and enjoy local favorable policies. We may continue to invest in our teaching, administrative, research and other capabilities as our business further develops. Although we will evaluate the feasibility of each property purchase for the good of business operation, we are likely to incur costs associated with these investments earlier than some of the anticipated benefits and the return on these investments may be lower, or may develop more slowly, than we expect. We may not be able to recover our capital expenditures or investments, in part or in full, or the recovery of these capital expenditures or investments may take longer than expected. As a result, the carrying value of the related assets may be subject to an impairment charge, which could adversely affect our profitability.

Our strategy of investments and acquiring complementary businesses and assets may fail.

As part of our business strategy, we have pursued, and intend to continue to pursue, selective strategic investments and acquisitions of businesses and assets that complement our existing business. Investments and acquisitions involve uncertainties and risks, including:

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Any failure to address these risks successfully may have a material and adverse effect on our financial condition and results of operations. Investments and acquisitions may require a significant amount of capital investment, which would decrease the amount of cash available for working capital or capital expenditures. In addition, if we use our equity securities to pay for investments and acquisitions, we may dilute the value of our ADSs and the underlying ordinary shares. If we borrow funds to finance investments and acquisitions, such debt instruments may contain restrictive covenants that could, among other things, restrict us from distributing dividends. Moreover, acquisitions may also generate significant amortization expenses related to intangible assets. We may also incur impairment charges to earnings for investments and acquired businesses and assets which are determined to be impaired, and recognize the proportional share of the net losses of the investees to the extent of the amount of the investments for the equity method investments.

The geographic concentration of our learning centers may unfavorably impact our operations.

We derive a substantial portion of our net revenues from our entities in Hangzhou and Beijing. Revenue derived from the entities in Hangzhou accounted for 33.0%, 31.9% and 30.0% of our net revenues in 2015, 2016 and 2017, respectively. Revenue derived from the entities in Beijing accounted for 12.3%,12.4%13.5%, 13.8% and 13.0%17.2% of our net revenues in 2015, 20162018, 2019 and 2017,2020, respectively. As a result of this geographic concentration, our results of operations are significantly affected by economic conditions in Hangzhou and Beijing. Furthermore, any natural disaster or health epidemics affecting the Hangzhou and Beijing regions could significantly impact our operations. Although we have been and will be exploring opportunities of setting up additional learning centers in second tier or third-tier cities, we expect that we will continue to derive a substantial portion of our net revenues from Hangzhou and Beijing in the near future. Deterioration in economic conditions and the professional services industries in these markets could decrease the demand for our courses, which in turn could negatively impact our operations and business prospects.

Our historical financial and operating results growth rates and profitability may not be indicative of future performance.

Although we commenced operations in 2002, our significant business growth and expansion began in 2009.2009, and certain of our courses, especially our K-12 education courses, were only developed in recent years. Our business and our prospects must be evaluated in light of the risks and uncertainties encountered by companies at a comparable stage of development. In addition, the professional education services market in China is still at an early stage of development, which makes it difficult to evaluate our business and future prospects. Furthermore, our results of operations may vary from period to period in response to a variety of other factors, including general economic conditions and regulations, government actions pertaining to the professional education services sector in China, changes in spending on professional education services, our ability to control cost of revenues and operating expenses, and non-recurring charges incurred in connection with acquisitions or other extraordinary transactions or under unexpected circumstances. Due to the above factors, some of which are beyond our control, our historical financial and operating results growth rates and profitability may not be indicative of our future performance and you should not rely on our past results or our historic growth rates as indicators of our future performance.

Uncertainty resulting from the non-binding proposal letter and other related matters may adversely affect our business.

On December 8, 2020, we received a preliminary non-binding proposal letter, or the Proposal Letter, from Mr. Shaoyun Han, our founder and chairman of the board of directors, to acquire all of our outstanding Class A ordinary shares that are not already owned by Mr. Han and his affiliates for a purchase price of $4.00 per ADS, or US$4.00 per Class A ordinary share, in cash. On December 10, 2020, our board of directors formed a special committee consisting of two independent directors, Mr. Arthur Lap Tat Wong, as the chairman of the special committee, and Mr. Hon Sang Lee, to evaluate and consider the Proposal Letter. On December 30, 2020, we announced that the special committee has retained Duff & Phelps, LLC as its independent financial advisor and Gibson, Dunn & Crutcher LLP as its U.S. legal counsel to assist it in this process. As of the date of this annual report, no decisions have been made with respect to the Proposal Letter or any alternative strategic option that we may pursue. There can be no assurance that any definitive offer will be received, that any definitive agreement will be executed relating to the transaction contemplated by the Proposal Letter or that any other transaction will be approved or consummated. Moreover, the proposal or any alternative strategic option, whether or not consummated, presents a risk of diverting management focus, employee attention and resources from other strategic opportunities and from operational matters. Also, certain events and developments relating to the proposal may increase the volatility of the trading price of the ADSs. Furthermore, we could be subject to potential lawsuits in connection with the proposed transaction.

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Our ability to broadcast our lectures live and to offer online learning modules on TTS depends upon the performance and reliability of our systems and the Internetinternet infrastructure and telecommunications networks in China.

We deliver live broadcasts of our lectures via a dedicated network provided by China Telecom and China Unicom to terminals located in selected learning centers with high student enrollment and via public Internetinternet infrastructure to other learning centers. Any unscheduled service interruption of the Internetinternet infrastructure and telecommunications networks in China could cause us to be unable to deliver these live broadcasts, forcing us to resort to using pre-recorded lectures in the event of such service interruptions. Our inability to broadcast live lectures during service interruptions may damage the quality of our education and student experience, which may hurt our reputation and negatively impact our financial condition and results of operations. Furthermore, our gross profit and net income could be adversely affected if the prices that we pay for telecommunications and Internetinternet services rise significantly.

Our ability to offer online learning modules also depends on the performance and reliability of the Internetinternet infrastructure in China. Disruptions to the Internetinternet infrastructure of China may deny our students access to the learning functionalities on our TTS orTMOOC.cn, which may hinder students from effectively learning our education contents. Furthermore, increases in the traffic on TTS orTMOOC.cn could also strain the capacity of our existing computer systems, which could lead to slower response times or system failures. This would cause a disruption or suspension in our course offerings, which would hurt our brandbrands and reputation and negatively affect our revenue growth. We may need to incur additional costs to improve our systems in order to accommodate increased demand if we anticipate that our systems cannot handle higher traffic volume in the future.

Accidents or injuries suffered by our students or other people on our premises may adversely affect our reputation, subject us to liability and cause us to incur substantial costs.

We do not carry liability insurance for most of our students at our learning centers. In the event of accidents, injuries or other harm to students or other people on our premises, including those caused by or otherwise arising from the actions of our employees on our premises, our facilities may be perceived to be unsafe, which may discourage prospective students from attending our classes. We could also face claims alleging that we were negligent or provided inadequate supervision to our employees and therefore should be held jointly liable for harm caused by them or are otherwise liable for injuries suffered by our students or other people on our premises. A liability claim, even if unsuccessful, against us or any of our employees could adversely affect our reputation, enrollment and revenues, causing us to incur substantial expenses and divert the time and attention of our management.

If we fail to implement an effective system of internal controls, we may be unable to accurately report our results of operations or prevent fraud or fail to meet our reporting obligations, and investor confidence and the market price of our ADSs may be materially and adversely affected.

We are subject to reporting obligations under the U.S. securities laws. Among other things, the Securities and Exchange Commission, or the SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, adopted rules requiring every public company, including us, to include a management report on the company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal control over financial reporting. In addition, once we cease to be an “emerging growth company,” as such term is defined in the Jumpstart Our Business Startups Act of 2012 (as amended by the Fixing America’s Surface Transportation Act of 2015), or the JOBS Act, our independent registered public accounting firm may be required to report on the effectiveness of our internal control over financial reporting.

As a result of management’s assessment, our management identified a material weakness as of December 31, 2017, which was the insufficient review in areas subject to significant estimates and judgments. See “Item 15. Controls and Procedures.” This material weakness may result in a material misstatement to our quarterly or annual consolidated financial statements that would not be prevented or detected. As a result of the material weakness, management has concluded that our internal control over financial reporting was ineffective as of December 31, 2017.

Our management has been engaged in, and continues to be engaged in making necessary changes and improvements to the overall design of its control environment to address the material weakness in internal control over financial reporting and the ineffectiveness of our disclosure controls and procedures described above.

To remediate the material weakness described above with respect to controls over the period-end financial statement reporting and controls over significant complex transactions, we plan to continue to: (i) reinforce the oversight and review procedure over areas subject to significant estimates and judgments; and (ii) enhance our accounting manual to provide our accounting team with more comprehensive guidelines on the accounting policies under U.S. GAAP and SEC rules and requirements. We plan to continue to assess our standardized processes to further enhance the effectiveness of our financial review, including the analysis and monitoring of financial information in a consistent and thorough manner.

We expect that we will incur more costs in the implementation of such measures. However, the implementation of these measures may not fully address the material weakness in our internal control over financial reporting. Our failure to correct the material weakness and control deficiency or our failure to discover and address any other material weakness or control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations and prospects, as well as the trading price of our ADSs, may be materially and adversely affected. Moreover, 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.

We have limited insurance coverage for our operations in China.

Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies do in more developed economies. We have determined that the risks of disruption or liability from our business, the loss or damage to our fixed assets, including our equipment and office furniture, the cost of insuring for these risks, and the difficulties associated with acquiring such insurance on commercially reasonable terms render it commercially impractical for us to have such insurance. As a result,We maintain property insurance policy covering two of our buildings in Yizhuang, Beijing for losses due to disasters, including fire, earthquake, flood. we do not have any other business interruption, litigation or property insurance coverage for our operations in China. Any uninsured occurrence of personal injury, loss or damage to fixed assets, or litigation or business disruption may result in the incurrence of substantial costs and the diversion of resources, which could have an adverse effect on our operating results.

Our business is subject to seasonal fluctuations, which may cause our operating results to fluctuate from quarter to quarter. This may result in volatility in and adversely affect the price of our ADSs.

We have experienced, and expect to continue to experience, seasonal fluctuations in our net revenues and results of operations, primarily due to seasonal changes in student enrollment. Historically, our courses tend to have the largest student enrollment, cash collection and net revenues in the third and fourth quarters. We generally generate less tuition fees in the first quarter of each year due to the Chinese New Year holiday. Our expenses, however, do not necessarily correspond to changes in our student enrollment and net revenues. We make investments in marketing and promotion, instructor recruitment and training and course development throughout the year. We expect quarterly fluctuations in our net revenues and results of operations to continue. These fluctuations could result in volatility and adversely affect the price of our ADSs. As our net revenues grow, these seasonal fluctuations may become more pronounced.

Higher labor costs and inflation in China may adversely affect our business and our profitability.

Labor costs in China have risen in recent years. We employed 9,58210,181 employees in China as of December 31, 2017.2020. The increases in labor cost may erode our profitability and materially harm our business, financial condition and results of operations. In addition, PRC government have promulgated some new laws and regulations to enhance labor protection in recent years, such as the Labor Contract Law and the Social Insurance Law, which are also expected to cause our labor costs to increase. As the interpretation and implementation of these new laws and regulations are still evolving, our employment practice may not be at all times be deemed in compliance with the new laws and regulations. If we are subject to severe penalties or incur significant liabilities in connection with labor disputes or investigation, our business and profitability may be adversely affected.

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Although we have not in the past been materially affected by inflation since our inception, we can provide no assurance that we will not be affected in the future by higher rates of inflation in China.

We have granted share-based awards and may grant more share-based awards in the future, which may materially reduce our net income.

We adopted a share plan in 2008, or the 2008 Plan, that permits granting of options to purchase our ordinary shares, restricted shares (or share appreciation rights or other similar awards) and rights to purchase restricted shares. Under the 2008 Plan, the maximum aggregate number of ordinary shares that may be issued pursuant to all awards under our share plan is 8,184,990 shares. In February 2014, we adopted a 2014 share incentive plan, or the 2014 Plan. Pursuant to the 2014 Plan, we may issue options, restricted shares and restricted share units to our qualified employees, directors and consultants on a regular basis. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2014 Plan, or the Award Pool, is 1,833,696, provided that the shares reserved in the Award Pool shall be increased on the first day of each calendar year, commencing with January 1, 2015, if the unissued shares reserved in the Award Pool on such day account for less than 2% of the total number of shares issued and outstanding on a fully-diluted basis on December 31 of the immediately preceding calendar year, as a result of which increase the shares unissued and reserved in the Award Pool immediately after each such increase shall equal 2% of the total number of shares issued and outstanding on a fully-diluted basis on December 31 of the immediately preceding calendar year. As a result of grants and potential future grants under the 2008 Plan and the 2014 Plan, we have incurred and will continue to incur share-based compensation expenses. As of December 31, 2017,2020, the unrecognized compensation cost related to unvested options and non-vested shares amounted to RMB59.3RMB13.4 million and RMB6.8RMB14.8 million, respectively, which will be recognized over a weighted average period of approximately 1.721.42 years and 7.46 years.2.63 years, respectively. Expenses associated with share-based compensation awards granted under our share plan may materially reduce our future net income. However, if we limit the size of grants under our share plan to minimize share-based compensation expenses, we may not be able to attract or retain key personnel.

Any natural catastrophes, severe weather conditions, health epidemics and other extraordinary events could severely disrupt our business operations.

The occurrence of natural catastrophes such as earthquakes, floods, typhoons, tsunamis or any acts of terrorism may result in significant property damages as well as loss of revenues due to interruptions in our business operations. HealthIn addition to COVID-19, health epidemics such as outbreaks, of Zika, Ebola, avian influenza, severe acute respiratory syndrome (SARS) or the influenza A (H1N1), and severe weather conditions such as snow storm and hazardous air pollution, as well as the government measures adopted in response to these events, could require the temporary closure of our offices and learning centers.

centers and quarantines of our employees.

Furthermore, our ability to broadcast live lectures and provide our education services through TTS orTMOOC.cn depends on the continuing operation of our technology system, which is vulnerable to damage or interruption from natural catastrophes and other extraordinary events. Our disaster recovery planning cannot account for every conceivable possibility. Any damage to or failure of our technology system could result in interruptions in our services, and our brandbrands could be damaged if students believe our systems are unreliable. Such disruptions could severely interfere with our business operations and adversely affect our results of operations.