U Power (UCAR) - 2023 Q4 - Annual Report

Introduction The company is a Cayman Islands holding company operating through PRC entities, with key terms defined and a 1-for-100 reverse share split noted Company Overview and Definitions This section defines key terms and entities relevant to the annual report and notes a 1-for-100 reverse share split effective March 31, 2024 - U Power Limited is a Cayman Islands holding company, conducting operations through PRC operating entities[8] - A 1-for-100 reverse share split was effected on March 31, 2024, impacting share amounts retroactively[11] Special Note Regarding Forward-Looking Statements This section cautions investors that the annual report contains forward-looking statements subject to substantial risks and uncertainties Disclaimer on Forward-Looking Statements This section cautions investors that the annual report contains forward-looking statements subject to substantial risks and uncertainties, particularly those detailed under 'Item 3. Key Information—D. Risk Factors.' It advises against undue reliance on these statements due to the evolving market environment and unforeseen factors - The report contains forward-looking statements involving substantial risks and uncertainties, which may cause actual results to differ materially[13] - Key factors influencing forward-looking statements include goals, strategies, business development, financial condition, market trends, regulatory changes, and competitive environment[14] - Investors should not place undue reliance on forward-looking statements due to the rapidly evolving industry and potential inaccuracies in underlying assumptions[17] Part I This part covers the company's identity, key information, business overview, and financial performance, including risk factors and operating results Item 1. Identity of Directors, Senior Management and Advisers This item is marked as 'Not Applicable' in the report - Content is 'Not Applicable'[19] Item 2. Offer Statistics and Expected Timetable This item is marked as 'Not Applicable' in the report - Content is 'Not Applicable'[19] Item 3. Key Information This section outlines critical information about the company, emphasizing its structure as a Cayman Islands holding company operating through PRC subsidiaries, and the associated legal and operational risks - The company is a Cayman Islands holding company with no material operations, conducting business through PRC operating entities, which poses unique risks to investors[20] - The company is subject to legal and operational risks associated with its operations in China, including potential government intervention, cybersecurity reviews, and anti-monopoly supervision[20][21] - While not required for its initial U.S. listing, future offerings will require filing with the CSRC, and denial of approvals could significantly impact share value[22] - The company relies on dividends from PRC subsidiaries, which are subject to PRC foreign exchange controls and statutory reserve requirements, and does not anticipate paying cash dividends in the foreseeable future[25][27] - The company's auditor is Singapore-based and PCAOB-inspected, currently unaffected by the HFCAA, but future obstruction of PCAOB access could lead to delisting risks[32] A. [Reserved] This sub-item is marked as '[Reserved]' in the report - Content is '[Reserved]'[41] B. Capitalization and Indebtedness This sub-item is marked as 'Not applicable' in the report - Content is 'Not applicable'[41] C. Reasons for the Offer and Use of Proceeds This sub-item is marked as 'Not applicable' in the report - Content is 'Not applicable'[41] D. Risk Factors This section details significant risks across several categories, including doing business in China, the company's business and industry, vehicle sourcing, UOTTA-powered EV and battery-swapping, and risks related to ordinary shares and the trading market - The company has incurred substantial losses (RMB25.5 million net loss in 2023) and negative operating cash flows (RMB65.4 million in 2023), raising substantial doubt about its ability to continue as a going concern[162] - Significant risks are associated with doing business in China, including changes in economic, political, or social conditions, vague and uncertain laws, government intervention, and data security regulations[43][44][46] - The company faces intense competition in the automotive and EV markets, and its limited operating history in the emerging EV market poses challenges to future prospects[48][165][168] - Uncertainty exists regarding the approval of pending patent applications for UOTTA technology, and the company may struggle to prevent unauthorized use of its intellectual property, harming its competitive position[50][181] - The success of the UOTTA-powered EV and battery-swapping business depends on consumer demand and willingness to adapt, as well as the company's ability to develop, market, and sell these products amidst a lack of unified industry standards[53][238][247] - The trading price of the company's ordinary shares has been, and is likely to remain, volatile, potentially resulting in substantial losses for investors due to market, industry, and company-specific factors[58][275] Item 4. Information on the Company This section provides an overview of the company's history, business operations, competitive strengths, strategies, and intellectual property, highlighting the shift to EV battery-swapping technology - The company completed its initial public offering in April 2023, raising $15.0 million, and a follow-on offering in December 2023, raising $12.0 million[299] - The company is transitioning from a vehicle sourcing service provider to an EV market player focused on its proprietary UOTTA battery-swapping technology[303] - Revenue Breakdown by Business Segment (2021-2023) | Revenue Source | 2021 (RMB thousands) | 2022 (RMB thousands) | 2023 (RMB thousands) | 2023 (US$ thousands) | | :--------------- | :------------------- | :------------------- | :------------------- | :------------------- | | Sourcing services | 1,394 | 4,428 | 1,513 | 213 | | Product sales | 6,616 | 3,061 | 17,062 | 2,403 | | Battery-swapping services | - | 307 | 1,189 | 167 | | Total Revenues | 8,010 | 7,796 | 19,764 | 2,783 | - The UOTTA technology is an intelligent modular battery-swapping solution designed for EVs, including vehicle-mounted units, customized VCUs, a data management platform, and battery-swapping stations (Titan and Chipbox models)[306] - The company holds 39 issued patents and 18 pending patent applications in China, along with registered trademarks and software copyrights, for its UOTTA technology[307][357] - The Zibo Factory, completed in August 2021, commenced manufacturing UOTTA battery-swapping stations in January 2022, with an anticipated annual production capacity of 180 to 250 units[308][350] - The company is involved in several legal proceedings, including disputes over rent, loan payables, and equity transfers, with some cases resulting in adverse judgments or settlements[366][367][368][369][371][372] A. History and Development of the Company The company, U Power Limited, was incorporated in the Cayman Islands in June 2021, completed its IPO and a follow-on offering in 2023, and entered a subscription agreement in May 2024 - Ordinary shares commenced trading on the Nasdaq Capital Market on April 20, 2023, following an initial public offering that raised $15.0 million in gross proceeds[299] - A registered follow-on offering was closed on December 6, 2023, raising $12.0 million in gross proceeds[299] - On May 13, 2024, the company entered a subscription agreement with Fortune Light Assets Ltd. (FTA) to offer ordinary shares for $1,000,001, with a right to purchase up to 492,611 additional shares for up to $3,000,000[300] B. Business Overview U Power Limited is transitioning from a vehicle sourcing service provider to an EV market player focused on its proprietary UOTTA battery-swapping technology, emphasizing R&D, strategic partnerships, and expanding sales channels - The company is a vehicle sourcing service provider in China, transitioning to an EV market player focused on its proprietary UOTTA battery-swapping technology[303] - Revenue Contribution by Business Segment (2021-2023) | Business Segment | 2021 (%) | 2022 (%) | 2023 (%) | | :--------------- | :------- | :------- | :------- | | Sourcing Business | 17.4 | 56.8 | 7.7 | | EV Business | 82.6 | 39.2 | 86.3 | - UOTTA technology provides a comprehensive EV battery power solution, including vehicle-mounted supervisory control units, customized vehicle control units, a data management platform, and battery-swapping stations (Titan and Chipbox models)[306] - The company has established strategic partnerships with major Chinese automobile manufacturers (FAW Jiefang Qingdao Automotive Co., Ltd, HUBEI TRI-RING Motor Co., Ltd) to jointly develop UOTTA-powered electric trucks[308][312] - The Zibo Factory, completed in August 2021, commenced manufacturing UOTTA battery-swapping stations in January 2022, with an anticipated full production capacity of 180 to 250 units per year[308][350] - As of the report date, the company holds 39 issued patents and 18 pending patent applications in China, along with registered trademarks and software copyrights, related to its UOTTA technology[307][357] C. Organizational Structure This section refers to 'Item 3. Key Information — Our Corporate History' for details on the company's organizational structure - Refer to 'Item 3. Key Information — Our Corporate History' for details on the company's organizational structure[445] D. Property, Plants and Equipment This section refers to 'Item 4. Information on the Company — B. Business Overview — Properties' for details on the company's property, plants, and equipment - Refer to 'Item 4. Information on the Company — B. Business Overview — Properties' for details on the company's property, plants, and equipment[445] Item 4A. Unresolved Staff Comments This item is marked as 'Not applicable' in the report - Content is 'Not applicable'[445] Item 5. Operating and Financial Review and Prospects This section provides a detailed analysis of the company's financial condition and results of operations, highlighting the shift from vehicle sourcing to EV battery-swapping technology, noting significant losses and a going concern doubt - Total revenues increased by 153.5% from RMB7.8 million in 2022 to RMB19.8 million (US$2.8 million) in 2023, primarily driven by increased product sales of battery swapping stations[450][485] - The company incurred a net loss of RMB25.5 million (US$3.6 million) in 2023, a 55.8% decrease from RMB57.7 million in 2022[162][492][503] - Substantial doubt exists about the company's ability to continue as a going concern due to significant losses and negative operating cash flows (RMB65.4 million in 2023)[162][788] - Research and development expenses significantly decreased by 76.6% from RMB9.4 million in 2022 to RMB2.2 million (US$0.3 million) in 2023, reflecting reduced UOTTA technology innovation activities[488] - Cash and cash equivalents and restricted cash increased from RMB5.9 million in 2022 to RMB36.2 million (US$5.1 million) in 2023, supported by proceeds from IPO and other financings[504][790][791] A. Operating Results The company's operating results show a significant revenue increase in 2023, primarily from battery swapping station sales, following a decrease in 2022 due to COVID-19 and market development challenges - Total Revenues (2021-2023) | Year | Amount (RMB thousands) | Amount (US$ thousands) | YoY Change | | :--- | :--------------------- | :--------------------- | :--------- | | 2021 | 8,010 | - | - | | 2022 | 7,796 | - | -2.5% | | 2023 | 19,764 | 2,783 | +153.5% | - Revenue Breakdown by Business Segment (2023) | Revenue Source | Amount (RMB thousands) | Percentage of Total Revenue | | :------------- | :--------------------- | :-------------------------- | | Sourcing services | 1,513 | 7.7% | | Product sales | 17,062 | 86.3% | | Battery-swapping services | 1,189 | 6.0% | - Net Loss (2021-2023) | Year | Amount (RMB thousands) | Amount (US$ thousands) | YoY Change | | :--- | :--------------------- | :--------------------- | :--------- | | 2021 | (49,064) | - | - | | 2022 | (57,667) | (8,400) | +17.5% | | 2023 | (25,466) | (3,587) | -55.8% | - Research and development expenses decreased by 76.6% from RMB9.4 million in 2022 to RMB2.2 million (US$0.3 million) in 2023, due to reduced UOTTA technology innovation activities[488] - The impact of the COVID-19 pandemic on business operations was immaterial in fiscal year 2023, but caused project postponements and supply chain instability in 2022[458][459] B. Liquidity and Capital Resources The company's liquidity is primarily from operations, bank loans, and equity contributions, with cash and cash equivalents increasing in 2023 due to financing activities, despite net loss and negative operating cash flows - Cash and Cash Equivalents and Restricted Cash (2022-2023) | Year | Amount (RMB thousands) | Amount (US$ thousands) | | :--- | :--------------------- | :--------------------- | | 2022 | 5,908 | - | | 2023 | 36,239 | 5,104 | - Net cash used in operating activities increased from RMB12.9 million in 2022 to RMB65.4 million (US$9.2 million) in 2023[510] - Net cash provided by financing activities significantly increased from RMB4.5 million in 2022 to RMB179.4 million (US$25.3 million) in 2023, primarily due to proceeds from the issuance of ordinary shares[515] - Contractual Obligations (as of December 31, 2023) | Obligation Type | Total (RMB thousands) | Total (US$ thousands) | Payment due Less than 1 year (RMB thousands) | Payment due 1-3 years (RMB thousands) | Payment due 3-5 years (RMB thousands) | Payment due More than 5 years (RMB thousands) | | :--------------------------------------------- | :-------------------- | :-------------------- | :------------------------------------------- | :------------------------------------ | :------------------------------------ | :------------------------------------------ | | Long-term bank borrowings | 9,500 | 1,338 | 9,500 | - | - | - | | Short-term bank borrowing | 5,000 | 704 | 5,000 | - | - | - | | Operating lease liabilities | 9,351 | 1,317 | 2,250 | 4,290 | 2,025 | 786 | | Loan payable to WuYi Transportation Construction | 5,200 | 732 | 5,200 | - | - | - | | Total | 29,051 | 4,091 | 21,950 | 4,290 | 2,025 | 786 | C. Trend Information The company is not aware of any new material trends, uncertainties, demands, commitments, or events likely to adversely affect its financial performance or condition beyond those already disclosed - No new material trends, uncertainties, demands, commitments, or events are identified beyond those already disclosed in the annual report that are reasonably likely to materially affect the company's financial performance or condition[531] D. Critical Accounting Policies and Estimates This section outlines critical accounting policies and estimates under U.S. GAAP, emphasizing areas requiring significant judgment such as revenue recognition, inventory valuation, impairment of long-lived assets, and leases - Revenue is recognized under ASC 606 when control of goods or services is transferred to the customer, with allocation based on relative standalone selling price[535][536][539][750][752][754] - Long-lived assets and equity method investments are evaluated for impairment when events or changes in circumstances indicate that the carrying amount may not be fully recoverable[546][744][746] - Leases are accounted for under ASC Topic 842, with right-of-use assets and liabilities recognized at lease commencement based on the present value of remaining lease payments[548][776] - The company adopted ASU 2021-08 (Business Combinations) in January 2023 with minimal impact and is evaluating ASU 2022-03 (Fair Value Measurement) and ASU 2023-07 (Segment Reporting) for future impact[783][784][785][786][787] Item 6. Directors, Senior Management and Employees This section details the company's board of directors and executive officers, their compensation, board practices, employee information, and share ownership, highlighting board composition and committee structures - The board of directors consists of five members, including three independent directors (Xiaochun Li, Quanshi Chen, and Jean Christophe von Pfetten) who satisfy Nasdaq independence requirements[565] - Key executive officers include Mr. Jia Li (Chairman and CEO) and Ms. Bingyi Zhao (CFO and Director), both with extensive industry and financial experience[554][555] - Directors owe fiduciary duties to the company under Cayman Islands law, including duties of loyalty, honesty, and acting in the company's best interests[567] - The company has established an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, each with specific oversight responsibilities[576] - As of April 1, 2024, the company had 77 full-time employees, with 26 in Research and Development and 30 in Operation and Administrative roles[360][361] - Approximately RMB1.5 million in cash compensation was paid to executive officers and directors for the year ended December 31, 2023, with no compensation to non-executive directors[564] A. Directors and Senior Management The company's board of directors comprises five members, including three independent directors, with key executive officers possessing extensive industry and financial experience - Directors and Executive Officers | Name | Age | Title | | :--- | :-- | :---- | | Jia Li | 51 | Chief Executive Officer, Director, and Chairman of the Board of Directors | | Bingyi Zhao | 42 | Chief Financial Officer and Director | | Xiaochun Li | 50 | Independent Director | | Quanshi Chen | 79 | Independent Director | | Jean Christophe von Pfetten | 56 | Independent Director | - Mr. Jia Li, founder of the operative subsidiary, has over 20 years of business experience in sales, marketing, and management in the automotive and financial industries[554] - Ms. Bingyi Zhao has over 10 years of experience in the financial sector and has served as CEO of Youpin Automobile Service Group Co., Ltd. since July 2018[555] B. Compensation For the year ended December 31, 2023, the company paid approximately RMB1.5 million in cash to its executive officers and directors, with no compensation to non-executive directors, and contributes to government-mandated employee social security plans - An aggregate of approximately RMB1.5 million in cash was paid to executive officers and directors for the year ended December 31, 2023[564] - No compensation was paid to non-executive directors[564] - PRC subsidiaries are required to make contributions to government-mandated employee social security plans (medical, maternity, workplace injury, unemployment, pension, housing funds)[564] C. Board Practices The board of directors consists of five members, with three independent directors meeting Nasdaq requirements, and has established Audit, Compensation, and Nominating/Corporate Governance Committees - The board of directors consists of five directors, with three independent directors (Xiaochun Li, Quanshi Chen, and Jean Christophe von Pfetten) satisfying Nasdaq corporate governance rules for independence[565] - Directors are appointed for a one-year term, expiring at the next annual general meeting, and hold office until successors are elected or they are removed[566] - Under Cayman Islands law, directors owe fiduciary duties to the company, including duties of loyalty, honesty, and acting in the company's best interests[567] - The company has established an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, each with a defined charter and responsibilities[576] - The Audit Committee oversees accounting and financial reporting, selects independent auditors, and reviews related-party transactions[578] - The Compensation Committee reviews and approves executive officer compensation and recommends non-employee director compensation[579] - The Nominating and Corporate Governance Committee identifies and recommends director nominees, reviews board composition, and advises on corporate governance[580] D. Employees As of April 1, 2024, the company had 77 full-time employees, with the largest segments in research and development and operations and administration, maintaining good working relationships and providing statutory social security benefits - Employee Count by Function (as of April 1, 2024) | Function | Number of Employees | | :------------------------- | :------------------ | | Executives | 4 | | Research and Development | 26 | | Sales and marketing | 5 | | Operation and Administrative | 30 | | Manufacturing | 12 | | Total number of employees | 77 | - The company's PRC subsidiaries participate in various government-mandated employee social security plans, including pension, unemployment, childbirth, work-related injury, medical, and housing insurance[361] - The company maintains good working relationships with its employees and has not experienced any significant labor disputes[361] E. Share Ownership This section details the beneficial ownership of the company's ordinary shares by directors, executive officers, and major shareholders, with 2,460,938 total outstanding ordinary shares as of the report date - As of the report date, there were 2,460,938 ordinary shares outstanding[584] - Beneficial Ownership of Directors and Executive Officers | Name | Ordinary Shares Beneficially Owned | Percent | | :--- | :--------------------------------- | :------ | | Jia Li | 378,544 | 15.382% | | Bingyi Zhao | 12,245 | 0.498% | | Xiaochun Li | 0 | 0% | | Quanshi Chen | 0 | 0% | | Jean Christophe von Pfetten | 0 | 0% | | Directors, Director Nominees and Executive Officers as a group (5 persons) | 390,789 | 15.88% | - Beneficial Ownership of 5% Shareholders | Name | Ordinary Shares Beneficially Owned | Percent | | :--- | :--------------------------------- | :------ | | U Trend Limited | 157,859 | 6.541% | | Upincar Limited | 149,435 | 6.072% | | Zeng Lingzhi | 300,000 | 12.19% | Item 7. Major Shareholders and Related Party Transactions This section provides information on major shareholders and details various related party transactions, including amounts due from and to affiliates and key management personnel - Information on major shareholders is referenced from 'Item 6. Directors, Senior Management and Employees — E. Share Ownership'[590] - Related parties include affiliates of Jia Li (Controlling shareholder, Director and CEO) and Bingyi Zhao (Director and Chief Financial Officer), and other directors[592] - Amounts Due From Related Parties (as of December 31, 2023) | Related Party | Amount (RMB thousands) | Amount (US$ thousands) | | :------------ | :--------------------- | :--------------------- | | Youche Jingpin | 20 | 3 | | Shanghai Youcang | 111 | 15 | | Bingyi Zhao | 11 | 2 | | Total | 142 | 20 | - Amounts Due To Related Parties (as of December 31, 2023) | Related Party | Amount (RMB thousands) | Amount (US$ thousands) | | :------------ | :--------------------- | :--------------------- | | Li Ke | 4,170 | 587 | | Jia Li | 582 | 82 | | Bingyi Zhao | 673 | 95 | | Hangzhou Youyue | 6 | 1 | | Total | 5,431 | 765 | A. Major Shareholders This section refers to 'Item 6. Directors, Senior Management and Employees — E. Share Ownership' for information on major shareholders - Refer to 'Item 6. Directors, Senior Management and Employees — E. Share Ownership' for information on major shareholders[590] B. Related Party Transactions The company engages in various transactions with related parties, including affiliates of its CEO and CFO, involving loans, advances, and other operational dealings, with specific outstanding balances - Major related parties include affiliates of Jia Li (Controlling shareholder, Director and CEO) and Bingyi Zhao (Director and Chief Financial Officer), and other directors[592] - Amounts Due From Related Parties (as of December 31, 2023) | Related Party | Amount (RMB thousands) | Amount (US$ thousands) | | :------------ | :--------------------- | :--------------------- | | Youche Jingpin | 20 | 3 | | Shanghai Youcang | 111 | 15 | | Bingyi Zhao | 11 | 2 | | Total | 142 | 20 | - Amounts Due To Related Parties (as of December 31, 2023) | Related Party | Amount (RMB thousands) | Amount (US$ thousands) | | :------------ | :--------------------- | :--------------------- | | Li Ke | 4,170 | 587 | | Jia Li | 582 | 82 | | Bingyi Zhao | 673 | 95 | | Hangzhou Youyue | 6 | 1 | | Total | 5,431 | 765 | C. Interests of Experts and Counsel This item is marked as 'Not applicable' in the report - Content is 'Not applicable'[603] Item 8. Financial Information This section confirms the inclusion of consolidated financial statements in Item 18 and provides details on legal proceedings and the company's dividend policy, stating no significant changes have occurred since the audited financial statements - Consolidated financial statements are appended as part of this annual report under Item 18[604] - Information on legal proceedings is referenced from 'Item 4. Information on The Company — B. Business Overview — Legal Proceedings'[604] - The board of directors has complete discretion on dividend distribution; no cash dividends are planned for the foreseeable future, as earnings will be retained for business expansion[605][606] - No significant changes have been experienced since the date of the audited consolidated financial statements included in this annual report[606] A. Consolidated Statements and Other Financial Information This section confirms that the consolidated financial statements are included as part of the annual report under Item 18, and references legal proceedings and dividend policy - Consolidated financial statements are appended as part of this annual report under Item 18[604] - Information on legal proceedings is referenced from 'Item 4. Information on The Company — B. Business Overview — Legal Proceedings'[604] - The board of directors has complete discretion on dividend distribution; no cash dividends are planned for the foreseeable future, as earnings will be retained for business expansion. Dividends from PRC subsidiaries are subject to PRC taxes and regulations[605][606] B. Significant Changes The company has not experienced any significant changes since the date of its audited consolidated financial statements included in this annual report, other than those already disclosed - No significant changes have been experienced since the date of the audited consolidated financial statements included in this annual report, except as disclosed elsewhere[606] Item 9. The Offer and Listing This section confirms the company's ordinary shares have been listed on the Nasdaq Capital Market under the symbol 'UCAR' since April 20, 2023, with other sub-items marked as 'Not applicable' - The company's ordinary shares have been listed on the Nasdaq Capital Market under the symbol 'UCAR' since April 20, 2023[607] - Sub-items including Plan of Distribution, Selling Shareholders, Dilution, and Expenses of the Issue are marked as 'Not applicable'[607] A. Offer and Listing Details. The company's ordinary shares commenced trading on the Nasdaq Capital Market on April 20, 2023, under the ticker symbol 'UCAR' - Ordinary shares commenced trading on the Nasdaq Capital Market on April 20, 2023, under the symbol 'UCAR'[607] B. Plan of Distribution This item is marked as 'Not applicable' in the report - Content is 'Not applicable'[607] C. Markets The company's ordinary shares are listed on the Nasdaq Capital Market under the symbol 'UCAR' since April 20, 2023 - The company's ordinary shares are listed on the Nasdaq Capital Market under the symbol 'UCAR'[607] D. Selling Shareholders This item is marked as 'Not applicable' in the report - Content is 'Not applicable'[607] E. Dilution This item is marked as 'Not applicable' in the report - Content is 'Not applicable'[607] F. Expenses of the Issue This item is marked as 'Not applicable' in the report - Content is 'Not applicable'[607] Item 10. Additional Information This section provides additional corporate information, including details on share capital changes, governing documents, material contracts, exchange controls, and taxation, covering U.S. federal income tax consequences for shareholders - A 1-for-100 share consolidation was effected on March 31, 2024, impacting the company's issued and unissued share capital[609] - The authorized share capital is US$50,000, divided into 5,000,000,000 ordinary shares of par value US$0.00001 each, with 2,460,938 shares issued and outstanding as of the report date[611] - PRC subsidiaries are subject to a 25% Enterprise Income Tax (EIT), and dividends paid to non-PRC resident enterprises are subject to a 10% withholding tax, potentially reduced to 5% under tax treaties[616][622][628] - The company does not expect to be classified as a Passive Foreign Investment Company (PFIC) for the current or foreseeable future, but this determination is subject to annual review and market fluctuations[634][635] - The company is subject to SEC reporting requirements as a foreign private issuer, filing annual reports on Form 20-F, and is exempt from certain U.S. domestic issuer provisions[644][296] A. Share Capital The company effected a 1-for-100 share consolidation on March 31, 2024, with authorized share capital of US$50,000 and 2,460,938 ordinary shares issued and outstanding - A 1-for-100 share consolidation on all issued and unissued share capital was effective on March 31, 2024[609] - The authorized share capital is US$50,000, divided into 5,000,000,000 ordinary shares of par value US$0.00001 each[611] - As of the report date, 2,460,938 Ordinary Shares are issued and outstanding[611] B. Memorandum and Articles of Association The company's affairs are governed by its Amended and Restated Memorandum and Articles of Association, Cayman Islands law, and Nasdaq rules, with the document filed as Exhibit 1.1 - The company's affairs are governed by its Amended and Restated Memorandum and Articles of Association, the Companies Law of the Cayman Islands, the common law of the Cayman Islands, and Nasdaq rules[610] - The Memorandum and Articles of Association are filed as Exhibit 1.1 to this annual report[610] C. Material Contracts The company has not entered into any material contracts other than those in the ordinary course of business or already described in 'Item 4. Information on the Company' or elsewhere in the annual report - The company has not entered into any material contracts beyond those in the ordinary course of business or already described in 'Item 4. Information on the Company' or elsewhere in this annual report[612] D. Exchange Controls This section refers to 'Item 4. Information on the Company — B. Business Overview — Regulations — Regulations on Foreign Currency Exchange' for details on exchange controls - Refer to 'Item 4. Information on the Company — B. Business Overview — Regulations — Regulations on Foreign Currency Exchange' for details on exchange controls[613] E. Taxation This section details the tax implications for the company and its shareholders in the Cayman Islands, PRC, and under U.S. federal income tax laws, covering enterprise income tax, withholding tax, and potential PFIC status - The Cayman Islands currently levies no taxes on profits, income, gains, or appreciation, and there is no withholding tax on dividends or capital in the Cayman Islands[614] - PRC subsidiaries are subject to a 25% Enterprise Income Tax (EIT). There is a risk that the Cayman Islands holding company could be deemed a PRC resident enterprise, subjecting its worldwide income to 25% EIT[616][620] - Dividends paid by PRC subsidiaries to non-PRC resident enterprises are generally subject to a 10% withholding tax, which may be reduced to 5% under applicable tax treaties if certain conditions are met[622][628] - Indirect transfers of equity interests in PRC resident enterprises by non-PRC resident enterprises may be re-characterized as direct transfers and subject to a 10% PRC withholding tax if they lack a reasonable commercial purpose[623][626] - The company does not expect to be classified as a Passive Foreign Investment Company (PFIC) for the current or foreseeable future, but this determination is an annual factual assessment subject to changes in income, assets, and market price[634][635] F. Dividends and Paying Agents This item is marked as 'Not applicable' in the report - Content is 'Not applicable'[643] G. Statement by Experts This item is marked as 'Not applicable' in the report - Content is 'Not applicable'[643] H. Documents on Display The company is subject to SEC reporting requirements under the Exchange Act, filing annual reports on Form 20-F. As a foreign private issuer, it is exempt from certain U.S. domestic issuer provisions - The company is subject to the periodic reporting and other informational requirements of the Exchange Act, including filing annual reports on Form 20-F[644] - As a foreign private issuer, the company is exempt from certain provisions applicable to U.S. domestic issuers, such as quarterly reports on Form 10-Q, proxy solicitations, and insider trading reports[644][296] I. Subsidiary Information This section refers to 'Item 3. Key Information — Our Corporate Structure' for a listing of the company's subsidiaries - Refer to 'Item 3. Key Information — Our Corporate Structure' for a listing of the company's subsidiaries[645] Item 11. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to credit risk, primarily from cash and accounts receivable, and manages liquidity by monitoring requirements and funding lines, with inflation in China not materially affecting operations - Financial instruments expose the company to concentrations of credit risk, primarily from cash and cash equivalents (RMB36.2 million or US$5.1 million as of December 31, 2023) and accounts receivable[646] - The company manages liquidity risk by regularly monitoring requirements, compliance with lending covenants, and maintaining sufficient cash reserves and committed lines of funding[648] - Inflation in China has not materially affected the company's results of operations to date, with the consumer price index showing a -0.3% change in December 2023[650] Item 12. Description of Securities Other Than Equity Securities This item is marked as 'Not applicable' for debt securities, warrants and rights, other securities, and American Depositary Shares - Content is 'Not applicable' for Debt Securities, Warrants and Rights, Other Securities, and American Depositary Shares[650] Part II This part addresses defaults, use of proceeds, controls and procedures, audit committee expertise, code of ethics, principal accountant fees, corporate governance, and cybersecurity Item 13. Defaults, Dividend Arrearages and Delinquencies This item is marked as 'None' in the report, indicating no defaults, dividend arrearages, or delinquencies - No defaults, dividend arrearages, or delinquencies are reported[652] Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds This section states that the rights of security holders remain unchanged and details the use of proceeds from the initial public offering ($13.4 million net) and a follow-on offering ($10.6 million net) in 2023 - The rights of security holders remain unchanged[652] - Net proceeds of approximately $13.4 million from the initial public offering (April 2023) were used for business planning, strategic advisory services, a potential acquisition, and loan services to customers in Hong Kong[653][654] - Net proceeds of approximately $10.6 million from the follow-on offering (December 2023) were transferred to Energy U for business operations, deposited in an escrow account (partially refunded to investors), and used for day-to-day operations[655][656] Item 15. Controls and Procedures The company's disclosure controls and procedures were deemed ineffective as of December 31, 2023, due to a material weakness related to insufficient skilled staff and a lack of formal accounting policies - Disclosure controls and procedures were deemed ineffective as of December 31, 2023[659] - A material weakness was identified due to a lack of sufficient skilled staff with U.S. GAAP and SEC reporting knowledge, and the absence of a formal accounting policies and procedures manual[661] - Remediation measures include streamlining the accounting department, enhancing U.S. GAAP expertise, hiring new finance team members, providing training, and completing a systematic accounting manual[661] - The company, as an emerging growth company and non-accelerated filer, is not required to include an attestation report from its registered public accounting firm regarding internal control over financial reporting[662] Item 16. [RESERVED] This item is marked as '[RESERVED]' in the report - Content is '[RESERVED]'[665] Item 16A. Audit Committee Financial Expert Mr. Jean Christophe von Pfetten is identified as an 'audit committee financial expert' and meets the independence requirements of NASDAQ and Rule 10A-3 under the Exchange Act - Mr. Jean Christophe von Pfetten qualifies as an 'audit committee financial expert' as defined in Item 16A of Form 20-F[665] - Mr. Jean Christophe von Pfetten satisfies the independence requirements of Section 5605(a)(2) of the NASDAQ Listing Rules and Rule 10A-3 under the Exchange Act[665] Item 16B. Code of Ethics The board of directors has adopted a code of business conduct and ethics applicable to all directors, officers, and employees, which is publicly available on the company's website - The board of directors has adopted a code of business conduct and ethics applicable to all directors, officers, and employees[666] - The code of business conduct and ethics is publicly available on the company's website[666] Item 16C. Principal Accountant Fees and Services This section details the fees paid to Onestop Assurance PAC, the independent registered public accounting firm, for audit services in 2021, 2022, and 2023. All audit and non-audit services are pre-approved by the audit committee - Onestop Assurance PAC is the independent registered public accounting firm[667] - Audit Fees Paid to Onestop Assurance PAC (2021-2023) | Year | Audit Fees (US$) | | :--- | :--------------- | | 2021 | 150,000 | | 2022 | 170,000 | | 2023 | 187,000 | - The audit committee's policy is to pre-approve all audit and non-audit services provided by the independent registered public accounting firm[669] Item 16D. Exemptions from the Listing Standards for Audit Committees This item is marked as 'Not applicable' in the report - Content is 'Not applicable'[670] Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers This item is marked as 'None' in the report - Content is 'None'[670] Item 16F. Change in Registrant's Certifying Accountant On May 10, 2023, the company appointed Onestop Assurance PAC as its independent registered public accounting firm, replacing WWC, P.C., which was dismissed on the same day. This change was approved by the audit committee - On May 10, 2023, Onestop Assurance PAC was appointed as the independent registered public accounting firm[671] - WWC, P.C., the former independent registered public accounting firm, was dismissed on May 10, 2023[671] - The appointment of Onestop Assurance PAC was approved by the audit committee of the board of directors[671] Item 16G. Corporate Governance As a Cayman Islands foreign private issuer listed on Nasdaq, the company follows home country corporate governance practices, specifically electing not to comply with Nasdaq Listing Rule 5635 regarding shareholder approval for certain security issuances - As a Cayman Islands company listed on Nasdaq, the company follows its home country corporate governance practices[673] - The company elected to follow home country rules in lieu of Nasdaq Listing Rule 5635, which requires shareholder approval for certain security issuances (e.g., 20% or more of common stock for less than market/book value, or change of control)[674] - Other than the specified exemption, there are no significant differences between the company's corporate governance practices and those followed by U.S. domestic companies under Nasdaq Capital Market listing standards[674] Item 16H. Mine Safety Disclosure This item is marked as 'Not applicable' in the report - Content is 'Not applicable'[675] Item 16I. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is marked as 'Not applicable' in the report - Content is 'Not applicable'[675] Item 16J. Insider Trading Policies The board of directors has adopted an insider trading policy for directors, senior management, and employees, governing the purchase, sale, and other dispositions of company securities - The board of directors has adopted an insider trading policy[676] - The policy governs the purchase, sale, and other dispositions of company securities by directors, senior management, and employees[676] Item 16K. Cybersecurity The company has established cybersecurity risk management processes to identify, assess, and mitigate risks, aligning with strategic objectives. It monitors incidents for potential business impact and continuously adapts its strategy. No material cybersecurity incidents have occurred to date - The company has established cybersecurity risk management to identify, assess, and mitigate cybersecurity risks, aligning with strategic objectives and risk appetite[677] - Cybersecurity incidents are closely monitored for their potential impact on business strategy, operations, and financial condition[677] - As of the date of this annual report, no material cybersecurity incidents have occurred that have affected or are reasonably likely to materially affect the company[677] Part III This part confirms the inclusion of consolidated financial statements in Item 18 and lists all exhibits filed with the annual report Item 17. Financial Statements The company has elected to provide financial statements pursuant to Item 18 - The company has elected to provide financial statements pursuant to Item 18[679] Item 18. Financial Statements The consolidated financial statements of U Power Limited and its operating subsidiaries are included at the end of this annual report - The consolidated financial statements of U Power Limited and its operating subsidiaries are included at the end of this annual report[680] Item 19. Exhibits This section provides a comprehensive list of exhibits filed with the annual report, including corporate governance documents, material agreements, and certifications - This section lists all exhibits filed with the annual report, including Amended and Restated Memorandum of Association, Specimen Certificate for Ordinary Shares, Form of Underwriter's Warrants, Employment Agreements, Indemnification Agreements, various cooperation and investment agreements, and certifications[681]