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What changed in EHang Holdings Ltd's 20-F — 2022 vs 2023

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Paragraph-level year-over-year comparison of EHang Holdings Ltd's 2022 and 2023 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+757 added−733 removedSource: 20-F (2024-04-15) vs 20-F (2023-04-27)

Top changes in EHang Holdings Ltd's 2023 20-F

757 paragraphs added · 733 removed · 602 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

230 edited+43 added−41 removed545 unchanged
Biggest changeFinancial Information Relating to the VIE The following tables present the condensed consolidating schedule showing the results of operations, financial position and cash flows for our holding company, EHang Holdings, EHang Holdings’ subsidiaries other than the WFOE, the WFOE, the VIE and the VIE’s subsidiaries, eliminating adjustments and consolidated totals as of December 31, 2021 and 2022 and for the years ended December 31, 2020, 2021 and 2022. 10 Table of Contents Selected Condensed Consolidated Statements of Operations Data For the year ended December 31, EHang Holdings Other subsidiaries WFOE 2020 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE 2021 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE 2022 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals (RMB in thousands) Revenues — 64 146,905 68,372 (35,248 ) 180,093 — 2,199 57,550 28,399 (31,341 ) 56,807 — 3,175 44,098 10,147 (13,103 ) 44,317 - Third-party revenues — 64 144,749 35,280 — 180,093 — 2,199 54,378 230 — 56,807 — 2,595 41,716 6 — 44,317 - Inter-company revenues (1) — — 2,156 33,092 (35,248 ) — — — 3,172 28,169 (31,341 ) — — 580 2,382 10,141 (13,103 ) — Costs of revenues — — (99,530 ) (10,239 ) 35,855 (73,914 ) — (1,616 ) (49,098 ) (720 ) 30,657 (20,777 ) — (1,496 ) (24,655 ) (836 ) 11,889 (15,098 ) - Third-party cost of revenues — — (66,438 ) (7,476 ) — (73,914 ) — (48 ) (20,069 ) (660 ) — (20,777 ) — — (14,516 ) (582 ) — (15,098 ) - Inter-company cost of revenues (1) — — (33,092 ) (2,763 ) 35,855 — — (1,568 ) (29,029 ) (60 ) 30,657 — — (1,496 ) (10,319 ) (254 ) 11,889 — Gross profit — 64 47,375 58,133 607 106,179 — 583 8,452 27,679 (684 ) 36,030 — 1,679 19,443 9,311 (1,214 ) 29,219 Sales and marketing expenses — (4,419 ) (24,072 ) (8,695 ) — (37,186 ) — (6,859 ) (29,848 ) (7,105 ) 583 (43,229 ) — (8,009 ) (37,908 ) (8,309 ) 1,110 (53,116 ) General and administrative expenses (1,144 ) (3,537 ) (44,442 ) (12,490 ) — (61,613 ) (5,668 ) (1,383 ) (166,531 ) (13,889 ) 83 (187,388 ) (13,630 ) (1,554 ) (116,451 ) (19,380 ) (50 ) (151,065 ) Research and development expenses — — (91,967 ) (13,337 ) 52 (105,252 ) — — (115,141 ) (22,123 ) 116 (137,148 ) — — (114,692 ) (20,428 ) 38 (135,082 ) Total operating expenses (1,144 ) (7,956 ) (160,481 ) (34,522 ) 52 (204,051 ) (5,668 ) (8,242 ) (311,520 ) (43,117 ) 782 (367,765 ) (13,630 ) (9,563 ) (269,051 ) (48,117 ) 1,098 (339,263 ) Other operating income — 466 3,125 2,985 — 6,576 — 1,696 4,544 4,959 — 11,199 — 409 4,150 1,535 — 6,094 Operating loss (1,144 ) (7,426 ) (109,981 ) 26,596 659 (91,296 ) (5,668 ) (5,963 ) (298,524 ) (10,479 ) 98 (320,536 ) (13,630 ) (7,475 ) (245,458 ) (37,271 ) (116 ) (303,950 ) Share of losses from subsidiaries (2) (117,678 ) (111,170 ) — — 229,378 — (299,575 ) (298,012 ) — — 597,587 — (253,575 ) (251,156 ) — — 504,731 — Income (losses) from the VIEs (2) 30,740 30,740 30,740 — (92,220 ) — (8,730 ) (8,730 ) (8,730 ) — 26,190 — (37,603 ) (37,603 ) (37,603 ) — 112,809 — Interest and investment income 463 1,741 1,468 123 — 3,795 14 3,965 891 273 — 5,143 1 3,971 639 58 — 4,669 Interest expenses — — (2,131 ) (206 ) — (2,337 ) — — (1,445 ) (358 ) — (1,803 ) — — (3,462 ) (357 ) — (3,819 ) Foreign exchange gain (loss) — 144 (107 ) (370 ) — (333 ) — (450 ) (253 ) (124 ) — (827 ) — (494 ) (1,474 ) 480 — (1,488 ) Other income — 820 318 89 — 1,227 — 742 2,735 2,610 (1 ) 6,086 — 1,182 393 369 — 1,944 Other expenses — (1,350 ) (1,270 ) (507 ) — (3,127 ) — (6 ) (1,340 ) (343 ) 140 (1,549 ) (23,414 ) — (2,082 ) (1,308 ) — (26,804 ) Loss before income tax and income (loss) from equity method investment (87,619 ) (87,031 ) (80,963 ) 25,725 137,817 (92,071 ) (313,959 ) (308,454 ) (306,666 ) (8,421 ) 624,014 (313,486 ) (328,221 ) (291,575 ) (289,047 ) (38,029 ) 617,424 (329,448 ) Income tax expenses — — — (206 ) — (206 ) — (21 ) — (113 ) — (134 ) — (17 ) — (62 ) — (79 ) Loss before income (loss) from equity method investment (87,619 ) (87,031 ) (80,963 ) 25,519 137,817 (92,277 ) (313,959 ) (308,475 ) (306,666 ) (8,534 ) 624,014 (313,620 ) (328,221 ) (291,592 ) (289,047 ) (38,091 ) 617,424 (329,527 ) Income (loss) from equity method investments — — — 236 — 236 — — (276 ) — — (276 ) — — 196 — — 196 Net (loss) income (87,619 ) (87,031 ) (80,963 ) 25,755 137,817 (92,041 ) (313,959 ) (308,475 ) (306,942 ) (8,534 ) 624,014 (313,896 ) (328,221 ) (291,592 ) (288,851 ) (38,091 ) 617,424 (329,331 ) Net income (loss) attributable to non-controlling interest — 93 3 4,326 — 4,422 — 170 135 (368 ) — (63 ) — 414 218 478 — 1,110 Net loss attributable to ordinary shareholders (87,619 ) (86,938 ) (80,960 ) 30,081 137,817 (87,619 ) (313,959 ) (308,305 ) (306,807 ) (8,902 ) 624,014 (313,959 ) (328,221 ) (291,178 ) (288,633 ) (37,613 ) 617,424 (328,221 ) 11 Table of Contents Selected Condensed Consolidated Balance Sheets Data As of December 31, EHang Holdings Other subsidiaries WFOE 2021 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE 2022 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals (RMB in thousands) Cash and cash equivalents 72,998 137,200 28,651 8,014 — 246,863 362 52,226 185,318 11,404 — 249,310 Restricted cash — — 160 — — 160 — — — — — — Short-term investments — 65,108 — — — 65,108 — — — — — — Accounts receivable, net — 66 45,164 10,959 — 56,189 — 105 19,991 202 — 20,298 Inventories — 1,729 76,836 839 (1,329 ) 78,075 — 1,915 71,067 837 (1,455 ) 72,364 Prepayments and other current assets — 1,529 23,564 4,302 — 29,395 — 2,268 39,262 3,653 — 45,183 Amount due from a related party — — 1,360 — — 1,360 — — — — — — Amounts due from subsidiaries, the VIE and the VIE’s subsidiaries (3) — 98,375 10,550 25,774 (134,699 ) — 13,697 67,980 28,770 6,911 (117,358 ) — Property and equipment, net and intangible assets, net — 350 32,158 2,109 (51 ) 34,566 — 219 45,609 1,273 (41 ) 47,060 Right-of-use assets, net — — — — — — — 36 72,647 799 — 73,482 Investment in subsidiaries (2) 290,462 1,943 — — (292,405 ) — 213,579 111,169 — — (324,748 ) — Others — 4,784 18,837 97 — 23,718 — 4,899 18,003 268 23,170 Total assets 363,460 311,084 237,280 52,094 (428,484 ) 535,434 227,638 240,817 480,667 25,347 (443,602 ) 530,867 Short-term bank loans — — 10,000 — — 10,000 — — 49,794 — — 49,794 Short-term debt — — — — — — — — 57,838 — — 57,838 Amounts due to the Company, subsidiaries, the VIE and the VIE’s subsidiaries (3) — 10,419 78,289 45,991 (134,699 ) — 11,230 12,941 37,736 55,451 (117,358 ) — Accounts payables — — 42,535 3,025 — 45,560 — — 32,356 3,100 — 35,456 12 Table of Contents As of December 31, EHang Holdings Other subsidiaries WFOE 2021 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE 2022 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals (RMB in thousands) Accrued expenses and other liabilities 3,744 1,040 39,014 18,053 — 61,851 27,432 3,223 47,396 19,712 — 97,763 Contract liabilities — 906 12,248 1,677 — 14,831 — — 17,294 2,027 — 19,321 Long-term loans — — 8,000 9,000 — 17,000 — — — 3,846 — 3,846 Lease liabilities — — — — — — — 36 74,597 800 — 75,433 Net interest of the VIEs (2) 27,115 27,115 27,115 — (81,345 ) 64,718 64,718 64,718 — (194,154 ) — Others — 8,498 42,060 1,588 — 52,146 — 11,607 49,389 5,742 66,738 Total liabilities 30,859 47,978 259,261 79,334 (216,044 ) 201,388 103,380 92,525 431,118 90,678 (311,512 ) 406,189 Total shareholders’ equity (deficit) (2) 332,601 263,106 (21,981 ) (27,240 ) (212,440 ) 334,046 124,258 148,292 49,549 (65,331 ) (132,090 ) 124,678 13 Table of Contents Selected Condensed Consolidated Cash Flows Data For the year ended December 31, EHang Holdings Other subsidiaries WFOE 2020 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE 2021 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE 2022 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals (RMB in thousands) Net cash (used in) provided by operating activities (4) (681 ) 2,331 (148,228 ) (5,118 ) — (151,696 ) (4,874 ) (5,792 ) (107,481 ) (3,482 ) — (121,629 ) (13,738 ) (24,239 ) (140,108 ) 4,627 (173,458 ) Cash flows from investing activities Capital contribution (66,599 ) (90,000 ) — — 156,599 — (190,026 ) (109,000 ) — — 299,026 — (58,898 ) (208,484 ) — — 267,382 — Proceeds from maturities of short-term investments — 18,596 32,200 21,200 — 71,996 — — — — — — — 141,388 — 10,000 — 151,388 Purchase of short-term investments — (61,964 ) (32,200 ) (21,200 ) — (115,364 ) — — — — — — — (66,807 ) — (10,000 ) — (76,807 ) Loans to third parties — (1,900 ) (52,000 ) — — (53,900 ) — — — — — — — — — — — — Repayment of loan to a third party — — 40,000 — — 40,000 — — — — — — — — — — — — Other investing activities (484 ) (1,538 ) (6,812 ) (107 ) — (8,941 ) 150 (17,062 ) (15,611 ) (878 ) — (33,401 ) 1,580 (19,524 ) (237 ) — (18,181 ) Net cash (used in) provided by investing activities (67,083 ) (136,806 ) (18,812 ) (107 ) 156,599 (66,209 ) (189,876 ) (126,062 ) (15,611 ) (878 ) 299,026 (33,401 ) (58,898 ) (132,323 ) (19,524 ) (237 ) 267,382 56,400 Cash flows from financing activities Capital contribution — 66,599 90,000 — (156,599 ) — — 190,026 109,000 — (299,026 ) — — 58,898 208,484 — (267,382 ) — Proceeds from mandatorily redeemable non- controlling interests of a subsidiary — — 40,000 — — 40,000 — — — — — — — — — — — — Proceeds from short-term bank loans — — 15,000 — — 15,000 — — — — — — — — 49,794 — — 49,794 Repayment of a short-term bank loan — — (5,000 ) — — (5,000 ) — — — — — — — — (9,000 ) (1,000 ) — (10,000 ) Other financing activities (7,343 ) — 23 — — (7,320 ) 256,947 — 5,000 5,000 — 266,947 — 85 66,861 — — 65,946 14 Table of Contents For the year ended December 31, EHang Holdings Other subsidiaries WFOE 2020 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE 2021 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE 2022 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals (RMB in thousands) Net cash (used in) provided by financing activities (7,343 ) 66,599 140,023 — (156,599 ) 42,680 256,947 190,026 114,000 5,000 (299,026 ) 266,947 — 58,983 316,139 (1,000 ) (267,382 ) 106,740 Effect of exchange rates on cash, cash equivalents and restricted cash (5) — (6,264 ) — — — (6,264 ) — (5,067 ) — — — (5,067 ) — 12,605 — — — 12,605 Net (decrease) increase in cash, cash equivalents and restricted cash (75,107 ) (74,140 ) (27,017 ) (5,225 ) — (181,489 ) 62,197 53,105 (9,092 ) 640 — 106,850 (72,636 ) (84,974 ) 156,507 3,390 — 2,287 Cash, cash equivalents and restricted cash at the beginning of the year 85,908 158,235 64,920 12,599 — 321,662 10,801 84,095 37,903 7,374 — 140,173 72,998 137,200 28,811 8,014 — 247,023 Cash, cash equivalents and restricted cash at the end of the year 10,801 84,095 37,903 7,374 — 140,173 72,998 137,200 28,811 8,014 — 247,023 362 52,226 185,318 11,404 — 249,310 Notes: (1) Represents the elimination of the intercompany transactions at the consolidation level.
Biggest changeManagement believes this scenario to be remote. 9 Table of Contents Financial Information Relating to the VIE The following tables present the condensed consolidating schedule showing the results of operations, financial position and cash flows for our holding company, EHang Holdings, EHang Holdings’ subsidiaries other than the WFOE, the WFOE, the VIE and the VIE’s subsidiaries, eliminating adjustments and consolidated totals as of December 31, 2022 and 2023 and for the years ended December 31, 2021, 2022 and 2023. 10 Table of Contents Selected Condensed Consolidated Statements of Operations Data For the year ended December 31, 2021 2022 2023 EHang Holdings Other subsidiaries WFOE VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals (RMB in thousands) Revenues — 2,199 57,550 28,399 (31,341 ) 56,807 — 3,175 44,098 10,147 (13,103 ) 44,317 — 5,346 109,581 32,808 (30,309 ) 117,426 - Third-party revenues — 2,199 54,378 230 — 56,807 — 2,595 41,716 6 — 44,317 — 5,346 102,855 9,225 — 117,426 - Inter-company revenues (1) — — 3,172 28,169 (31,341 ) — — 580 2,382 10,141 (13,103 ) — — — 6,726 23,583 (30,309 ) — Costs of revenues — (1,616 ) (49,098 ) (720 ) 30,657 (20,777 ) — (1,496 ) (24,655 ) (836 ) 11,889 (15,098 ) — (3,450 ) (62,372 ) (5,467 ) 29,174 (42,115 ) - Third-party cost of revenues — (48 ) (20,069 ) (660 ) — (20,777 ) — — (14,516 ) (582 ) — (15,098 ) — 394 (39,846 ) (2,663 ) — (42,115 ) - Inter-company cost of revenues (1) — (1,568 ) (29,029 ) (60 ) 30,657 — — (1,496 ) (10,319 ) (254 ) 11,889 — — (3,844 ) (22,526 ) (2,804 ) 29,174 — Gross profit — 583 8,452 27,679 (684 ) 36,030 — 1,679 19,443 9,311 (1,214 ) 29,219 — 1,896 47,209 27,341 (1,135 ) 75,311 Sales and marketing expenses — (6,859 ) (29,848 ) (7,105 ) 583 (43,229 ) — (8,009 ) (37,908 ) (8,309 ) 1,110 (53,116 ) — (7,627 ) (43,184 ) (10,004 ) 426 (60,389 ) General and administrative expenses (5,668 ) (1,383 ) (166,531 ) (13,889 ) 83 (187,388 ) (13,630 ) (1,554 ) (116,451 ) (19,380 ) (50 ) (151,065 ) (5,246 ) 206 (136,544 ) (8,508 ) — (150,092 ) Research and development expenses — — (115,141 ) (22,123 ) 116 (137,148 ) — — (114,692 ) (20,428 ) 38 (135,082 ) — — (150,457 ) (16,861 ) 3 (167,315 ) Total operating expenses (5,668 ) (8,242 ) (311,520 ) (43,117 ) 782 (367,765 ) (13,630 ) (9,563 ) (269,051 ) (48,117 ) 1,098 (339,263 ) (5,246 ) (7,421 ) (330,185 ) (35,373 ) 429 (377,796 ) Other operating income — 1,696 4,544 4,959 — 11,199 — 409 4,150 1,535 — 6,094 — 839 2,648 2,746 — 6,233 Operating loss (5,668 ) (5,963 ) (298,524 ) (10,479 ) 98 (320,536 ) (13,630 ) (7,475 ) (245,458 ) (37,271 ) (116 ) (303,950 ) (5,246 ) (4,686 ) (280,328 ) (5,286 ) (706 ) (296,252 ) Share of losses from subsidiaries (2) (299,575 ) (298,012 ) — — 597,587 — (253,575 ) (251,156 ) — — 504,731 — (290,785 ) (292,422 ) — — 583,207 — Income (losses) from the VIEs (8,730 ) (8,730 ) (8,730 ) — 26,190 — (37,603 ) (37,603 ) (37,603 ) — 112,809 — (5,829 ) (5,829 ) (5,829 ) — 17,487 — Interest and investment income 14 3,965 891 273 — 5,143 1 3,971 639 58 — 4,669 160 4,220 4,077 27 — 8,484 Interest expenses — — (1,445 ) (358 ) — (1,803 ) — — (1,788 ) (357 ) — (3,819 ) — — (2,728 ) (202 ) — (2,930 ) Amortization of debt discounts — — — — — — — — (1,674 ) — — — — — (12,023 ) — — (12,023 ) Foreign exchange gain (loss) — (450 ) (253 ) (124 ) — (827 ) — (494 ) (1,474 ) 480 — (1,488 ) — 342 (46 ) 98 — 394 Other income — 742 2,735 2,610 (1 ) 6,086 — 1,182 393 369 — 1,944 — 1,525 257 184 — 1,966 Other expenses — (6 ) (1,340 ) (343 ) 140 (1,549 ) (23,414 ) — (2,082 ) (1,308 ) — (26,804 ) — (4 ) (147 ) (63 ) (214 ) Loss before income tax and income (loss) from equity method investment (313,959 ) (308,454 ) (306,666 ) (8,421 ) 624,014 (313,486 ) (328,221 ) (291,575 ) (289,047 ) (38,029 ) 617,424 (329,448 ) (301,700 ) (296,854 ) (296,767 ) (5,242 ) 599,988 (300,575 ) Income tax expenses — (21 ) — (113 ) — (134 ) — (17 ) — (62 ) — (79 ) — (181 ) (25 ) — — (206 ) Loss before income (loss) from equity method investment (313,959 ) (308,475 ) (306,666 ) (8,534 ) 624,014 (313,620 ) (328,221 ) (291,592 ) (289,047 ) (38,091 ) 617,424 (329,527 ) (301,700 ) (297,035 ) (296,792 ) (5,242 ) 599,988 (300,781 ) Income (loss) from equity method investments — — (276 ) — — (276 ) — — 196 — — 196 — — (1,568 ) 8 — (1,560 ) Net (loss) income (313,959 ) (308,475 ) (306,942 ) (8,534 ) 624,014 (313,896 ) (328,221 ) (291,592 ) (288,851 ) (38,091 ) 617,424 (329,331 ) (301,700 ) (297,035 ) (298,360 ) (5,234 ) 599,988 (302,341 ) 11 Table of Contents For the year ended December 31, 2021 2022 2023 EHang Holdings Other subsidiaries WFOE VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals (RMB in thousands) Net income (loss) attributable to non-controlling interest — 170 135 (368 ) — (63 ) — 414 218 478 — 1,110 — 421 189 31 — 641 Net loss attributable to ordinary shareholders (313,959 ) (308,305 ) (306,807 ) (8,902 ) 624,014 (313,959 ) (328,221 ) (291,178 ) (288,633 ) (37,613 ) 617,424 (328,221 ) (301,700 ) (296,614 ) (298,171 ) (5,203 ) 599,988 (301,700 ) 12 Table of Contents Selected Condensed Consolidated Balance Sheets Data As of December 31, EHang Holdings Other subsidiaries WFOE 2022 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE 2023 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals (RMB in thousands) Cash and cash equivalents 362 52,226 185,318 11,404 — 249,310 12,239 130,316 81,582 4,113 — 228,250 Short-term deposits — — — — — — 14,397 — — — — 14,397 Short-term investments — — — — — — 57,494 — — — — 57,494 Restricted short-term deposits — — — — — — — — 33,942 — — 33,942 Accounts receivable, net — 105 19,991 202 — 20,298 — 543 32,607 1,636 — 34,786 Inventories — 1,915 71,067 837 (1,455 ) 72,364 — 1,926 58,247 834 (1,519 ) 59,488 Prepayments and other current assets — 2,268 39,262 3,653 — 45,183 — 5,216 15,151 4,324 — 24,691 Amounts due from subsidiaries, the VIE and the VIE’s subsidiaries (3) 13,697 67,980 28,770 6,911 (117,358 ) — 13,697 57,278 52,215 6,161 (129,351 ) — Property and equipment, net and intangible assets, net — 219 45,609 1,273 (41 ) 47,060 — 1,446 37,052 6,806 (681 ) 44,623 Right-of-use assets, net — 36 72,647 799 — 73,482 — 167 74,111 250 — 74,528 Investment in subsidiaries (2) 213,579 111,169 — — (324,748 ) — 207,846 49,091 — — (256,937 ) — Others — 4,899 18,003 268 23,170 — 2,919 17,898 6,621 (992 ) 26,446 Total assets 227,638 240,817 480,667 25,347 (443,602 ) 530,867 305,673 248,902 402,805 30,745 (389,480 ) 598,645 Short-term bank loans — — 49,794 — — 49,794 — — 69,798 — — 69,798 Short-term debt — — 57,838 — — 57,838 — — — — — — 13 Table of Contents Amounts due to the Company, subsidiaries, the VIE and the VIE’s subsidiaries (3) 11,230 12,941 37,736 55,451 (117,358 ) — 3,435 24,098 25,603 76,215 (129,351 ) — Accounts payables — — 32,356 3,100 — 35,456 — — 31,517 3,584 — 35,101 Accrued expenses and other liabilities 27,432 3,223 47,396 19,712 — 97,763 8,943 1,915 59,870 23,421 — 94,149 Contract liabilities — — 17,294 2,027 — 19,321 — 3,438 32,054 1,677 — 37,169 Long-term loans — — — 3,846 — 3,846 — — 7,000 2,308 — 9,308 Lease liabilities — 36 74,597 800 — 75,433 — 167 80,486 250 — 80,903 Net interest of subsidiaries and the VIEs (2) 64,718 64,718 64,718 — (194,154 ) — 79,503 79,503 79,503 — (238,509 ) — Others — 11,607 49,389 5,742 66,738 — 11,371 44,502 2,126 — 57,998 Total liabilities 103,380 92,525 431,118 90,678 (311,512 ) 406,189 91,881 120,492 430,332 109,581 (367,860 ) 384,426 Total shareholders’ equity (deficit) (2) 124,258 148,292 49,549 (65,331 ) (132,090 ) 124,678 213,792 128,410 (27,527 ) (78,836 ) (21,620 ) 214,219 14 Table of Contents Selected Condensed Consolidated Cash Flows Data For the year ended December 31, EHang Holdings Other subsidiaries WFOE 2021 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE 2022 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE 2023 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals (RMB in thousands) Net cash (used in) provided by operating activities (4) (4,874 ) (5,792 ) (107,481 ) (3,482 ) — (121,629 ) (13,738 ) (24,239 ) (140,108 ) 4,627 — (173,458 ) (18,778 ) (72,341 ) (12,161 ) 14,870 — (88,410 ) Cash flows from investing activities Capital contribution (190,026 ) (109,000 ) — — 299,026 — (58,898 ) (208,484 ) — — 267,382 — (150,255 ) (500 ) — — 150,755 — Proceeds from maturities of short-term investments — — — — — — — 141,388 — 10,000 — 151,388 — — — — — — Purchase of short-term investments — — — — — — — (66,807 ) — (10,000 ) — (76,807 ) (56,694 ) — — — — (56,694 ) Payments for short-term deposits — — — — — — — — — — — — (14,164 ) — — — — (14,164 ) Payments for restricted short-term deposits — — — — — — — — — — — — — — (33,437 ) — — (33,437 ) Other investing activities 150 (17,062 ) (15,611 ) (878 ) — (33,401 ) 1,580 (19,524 ) (237 ) — (18,181 ) (2 ) 114 (7,502 ) (17,007 ) — (24,397 ) Net cash (used in) provided by investing activities (189,876 ) (126,062 ) (15,611 ) (878 ) 299,026 (33,401 ) (58,898 ) (132,323 ) (19,524 ) (237 ) 267,382 56,400 (221,115 ) (386 ) (40,939 ) (17,007 ) 150,755 (128,692 ) Cash flows from financing activities Capital contribution — 190,026 109,000 — (299,026 ) — — 58,898 208,484 — (267,382 ) — — 150,255 500 — (150,755 ) — Proceeds from short-term bank loans — — — — — — — — 49,794 — — 49,794 — — 69,090 — — 69,090 Repayment of a short-term bank loan — — — — — — — — (9,000 ) (1,000 ) — (10,000 ) — — (44,640 ) (5,154 ) — (49,794 ) Other financing activities 256,947 — 5,000 5,000 — 266,947 — 85 66,861 — — 66,946 251,770 — (75,586 ) — — 176,184 Net cash (used in) provided by financing activities 256,947 190,026 114,000 5,000 (299,026 ) 266,947 — 58,983 316,139 (1,000 ) (267,382 ) 106,740 251,770 150,255 (50,636 ) (5,154 ) (150,755 ) 195,480 Effect of exchange rates on cash, cash equivalents and restricted cash (5) — (5,067 ) — — — (5,067 ) — 12,605 — — — 12,605 — 562 — — — 562 Net (decrease) increase in cash, cash equivalents and restricted cash 62,197 53,105 (9,092 ) 640 — 106,850 (72,636 ) (84,974 ) 156,507 3,390 — 2,287 11,877 78,090 (103,736 ) (7,291 ) — (21,060 ) 15 Table of Contents For the year ended December 31, EHang Holdings Other subsidiaries WFOE 2021 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE 2022 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals EHang Holdings Other subsidiaries WFOE 2023 VIE and VIE’s subsidiaries Eliminating adjustments Consolidated totals (RMB in thousands) Cash, cash equivalents and restricted cash at the beginning of the year 10,801 84,095 37,903 7,374 — 140,173 72,998 137,200 28,811 8,014 — 247,023 362 52,226 185,318 11,404 — 249,310 Cash, cash equivalents and restricted cash at the end of the year 72,998 137,200 28,811 8,014 — 247,023 362 52,226 185,318 11,404 — 249,310 12,239 130,316 81,582 4,113 — 228,250 Notes: (1) Represents the elimination of the intercompany transactions at the consolidation level.
On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination that the positions taken by authorities in mainland China and Hong Kong prevented it from inspecting and investigating completely registered public accounting firms headquartered in those jurisdictions.
On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination that the positions taken by authorities in mainland China and Hong Kong prevented it from inspecting and investigating completely registered public accounting firms headquartered in those jurisdictions.
Risks Relating to Our Corporate Structure • If the PRC government finds that the contractual arrangements between the WFOE, the VIE and the VIE’s shareholders do not comply with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. • We rely on contractual arrangements with the VIE and the VIE’s shareholders for certain business operations in the PRC, which may not be as effective as direct ownership in providing operational control. • Any failure by the VIE or the VIE’s shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business. • The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition. 16 Table of Contents • We may lose the ability to use and enjoy assets held by the VIE that are material to certain business operations in the PRC if the VIE goes bankrupt or becomes subject to a dissolution or liquidation proceeding. • Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
Risks Relating to Our Corporate Structure • If the PRC government finds that the contractual arrangements between the WFOE, the VIE and the VIE’s shareholders do not comply with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. • We rely on contractual arrangements with the VIE and the VIE’s shareholders for certain business operations in the PRC, which may not be as effective as direct ownership in providing operational control. • Any failure by the VIE or the VIE’s shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business. • The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition. 17 Table of Contents • We may lose the ability to use and enjoy assets held by the VIE that are material to certain business operations in the PRC if the VIE goes bankrupt or becomes subject to a dissolution or liquidation proceeding. • Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
International sales and operations are subject to risks such as: • limited brand recognition; • costs associated with establishing new distribution networks; • difficulty in finding qualified partners for overseas distribution; • inability to anticipate changes in local market conditions, economic landscapes, and consumers’ preferences and customs; • difficulties in staffing and managing foreign operations; • lack of familiarity with and understanding of the local legal, regulatory and policy frameworks, as well as burdens of complying with a wide variety of local laws and regulations, including those governing personal data protection and safety control; • political and economic instability; • trade restrictions; • differing employment laws and practices, as well as potential labor disruptions; • the imposition of government controls; • lesser degrees of intellectual property protection; 26 Table of Contents • tariffs and customs duties and the classifications of our goods by applicable governmental bodies; and • a legal system subject to undue influence or corruption.
International sales and operations are subject to risks such as: • limited brand recognition; • costs associated with establishing new distribution networks; • difficulty in finding qualified partners for overseas distribution; • inability to anticipate changes in local market conditions, economic landscapes, and consumers’ preferences and customs; • difficulties in staffing and managing foreign operations; • lack of familiarity with and understanding of the local legal, regulatory and policy frameworks, as well as burdens of complying with a wide variety of local laws and regulations, including those governing personal data protection and safety control; • political and economic instability; • trade restrictions; 27 Table of Contents • differing employment laws and practices, as well as potential labor disruptions; • the imposition of government controls; • lesser degrees of intellectual property protection; • tariffs and customs duties and the classifications of our goods by applicable governmental bodies; and • a legal system subject to undue influence or corruption.
Our future growth depends on whether we can continually develop and introduce new generations of our existing AAV product lines and update our operating systems and infrastructure with enhanced functionalities and value-added services. This is particularly important in the current industry landscape where technologies and consumer preferences evolve rapidly, which may shorten the lifecycles of our existing products.
Our future growth depends on whether we can continually develop and introduce new generations of our existing product lines and update our operating systems and infrastructure with enhanced functionalities and value-added services. This is particularly important in the current industry landscape where technologies and consumer preferences evolve rapidly, which may shorten the lifecycles of our existing products.
Our technology platform uses a substantial amount of algorithms and software to operate. Software products are inherently complex and often contain defects and errors, especially when first introduced. While we have performed extensive internal testing on our AAV software and hardware systems, we have a limited frame of reference by which to evaluate the long-term performance of our technology platform.
Our technology platform uses a substantial amount of algorithms and software to operate. Software products are inherently complex and often contain defects and errors, especially when first introduced. While we have performed extensive internal testing on our software and hardware systems, we have a limited frame of reference by which to evaluate the long-term performance of our technology platform.
There can be no assurance that similar approval will be granted to the operations of other customers. Further, the VIE and the VIE’s subsidiaries are required to obtain approvals from local divisions of the People’s Liberation Army Air Force, or PLAAF, for proposed flight routes in connection with our business.
There can be no assurance that similar approval will be granted to the operations of other customers or of other UAVs. Further, the VIE and the VIE’s subsidiaries are required to obtain approvals from local divisions of the People’s Liberation Army Air Force, or PLAAF, for proposed flight routes in connection with our business.
Failure to comply with applicable regulations or to obtain, maintain or renew the necessary permits, licenses, registrations or certificates could cause delays in, or prevent us from, manufacturing, marketing, selling and operating our AAV products, meeting product demand and expectations, introducing new products or expanding our service coverage, and could materially and adversely affect our operation results.
Failure to comply with applicable regulations or to obtain, maintain or renew the necessary permits, licenses, registrations or certificates could cause delays in, or prevent us from, manufacturing, marketing, selling and operating our products, meeting product demand and expectations, introducing new products or expanding our service coverage, and could materially and adversely affect our operation results.
We cannot assure you that we have obtained the CCC for all the components of our AAVs that are listed in the CCC Product Catalogue. Failure to install components with a CCC may prevent us from selling the affected products and negatively affect our manufacturing and sales of AAVs. See “Item 4. Information on the Company—B.
We cannot assure you that we have obtained the CCC for all the components of our products that are listed in the CCC Product Catalogue. Failure to install components with a CCC may prevent us from selling the affected products and negatively affect our manufacturing and sales of our products. See “Item 4. Information on the Company—B.
If we fail to implement and maintain an effective system of internal controls to remediate our material weaknesses over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence in our company and the market price of the ADSs may be materially and adversely affected.
If we fail to implement and maintain an effective system of internal controls to remediate the material weaknesses in our internal control over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence in our company and the market price of the ADSs may be materially and adversely affected.
If our consolidated affiliated entity undergoes a voluntary or involuntary liquidation proceeding, the independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations. 46 Table of Contents Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
If our consolidated affiliated entity undergoes a voluntary or involuntary liquidation proceeding, the independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations. 47 Table of Contents Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
Any defects, errors, or failures in our products or the misuse of our AAVs, operating systems and infrastructure could also result in injury, death or property damage. Our risks in this area are particularly pronounced given we have limited field experience in the operation of our AAVs.
Any defects, errors, or failures in our products or the misuse of our products, operating systems and infrastructure could also result in injury, death or property damage. Our risks in this area are particularly pronounced given we have limited field experience in the operation of our products.
We adopted the 2015 Share Incentive Plan, or the 2015 Plan, and the 2019 Share Incentive Plan, or the 2019 Plan (collectively, the “Plans”), to incentivize our employees, directors and consultants and align their interests with ours. We recognize expenses in our consolidated statement of loss in accordance with U.S. GAAP.
We adopted the 2015 Share Incentive Plan, or the 2015 Plan, the 2019 Share Incentive Plan, or the 2019 Plan, and the 2023 Share Incentive Plan, or the 2023 Plan (collectively, the “Plans”), to incentivize our employees, directors and consultants and align their interests with ours. We recognize expenses in our consolidated statement of loss in accordance with U.S. GAAP.
We have entered into a number of long-term agreements with customers and partners relating to the sale of our AAVs. Some of these agreements are conditional, and our counterparty is not obligated to purchase our products unless a number of conditions are satisfied.
We have entered into a number of long-term agreements with customers and partners relating to the sale of our products. Some of these agreements are conditional, and our counterparty is not obligated to purchase our products unless a number of conditions are satisfied.
While we are committed to producing safe and high-quality products, there can be no assurance that our safety technology will be effective in preventing incidents related to product safety, such as accidents involving our AAVs.
While we are committed to producing safe and high-quality products, there can be no assurance that our safety technology will be effective in preventing incidents related to product safety, such as accidents involving our products.
In addition to market and industry factors, the price and trading volume for the ADSs may be highly volatile for factors specific to our own operations, including the following: • variations in our revenues, earnings and cash flows; • regulatory developments affecting us, our customers, or our industry; • announcements of studies and reports relating to the quality of our products and service offerings or those of our competitors; • announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; • announcements of new products or service offerings and expansions by us or our competitors; • changes in financial estimates by securities analysts; • detrimental adverse publicity about us, our products or services or our industry; • additions or departures of key personnel; 59 Table of Contents • detrimental negative publicity about us, our management or our industry; • release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and • actual or potential litigation or regulatory investigations. • the ADS being delisted and prohibited from trading in the U.S.
In addition to market and industry factors, the price and trading volume for the ADSs may be highly volatile for factors specific to our own operations, including the following: • variations in our revenues, earnings and cash flows; • regulatory developments affecting us, our customers, or our industry; • announcements of studies and reports relating to the quality of our products and service offerings or those of our competitors; • announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; • announcements of new products or service offerings and expansions by us or our competitors; • changes in financial estimates by securities analysts; • detrimental adverse publicity about us, our products or services or our industry; • additions or departures of key personnel; • detrimental negative publicity about us, our management or our industry; • release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and • actual or potential litigation or regulatory investigations. • the ADS being delisted and prohibited from trading in the U.S.
Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations. 49 Table of Contents The approval of and the filing with the CSRC or other PRC governmental authorities may be required in connection with our future offshore offerings under PRC law and if required, we cannot predict whether or how soon we will be able to obtain such approval or complete such filing.
Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations. 50 Table of Contents The approval of and the filing with the CSRC or other PRC governmental authorities may be required in connection with our future offshore offerings under PRC law and if required, we cannot predict whether or how soon we will be able to obtain such approval or complete such filing.
If any of these strategic third parties suffers negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with any such third party.
If any of these strategic third parties suffer negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with any such third party.
In addition, certain orders and pre-orders of our AAVs are conditioned on their meeting defined technical specifications (such as a specified cruising speed, operational range and payload capacity) according to agreed-upon delivery timetables. See “Item 4. Information on the Company—B. Business Overview—Our Business Lines” for further details. Future customers may also require performance specifications that we are unable to deliver.
In addition, certain orders and pre-orders of our products are conditioned on their meeting defined technical specifications (such as a specified cruising speed, operational range and payload capacity) according to agreed-upon delivery timetables. See “Item 4. Information on the Company—B. Business Overview—Our Business Lines” for further details. Future customers may also require performance specifications that we are unable to deliver.
Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: • the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; • the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; • the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and • the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: • the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; • the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; 66 Table of Contents • the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and • the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions. 30 Table of Contents If our business partners, contractors, suppliers, sales agents, dealers or third-party logistics services providers fail to use ethical business practices and comply with applicable laws and regulations, our brand image could be harmed due to negative publicity beyond our own control.
Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions. 31 Table of Contents If our business partners, contractors, suppliers, sales agents, dealers or third-party logistics services providers fail to use ethical business practices and comply with applicable laws and regulations, our brand image could be harmed due to negative publicity beyond our own control.
For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCAA after we file this annual report on Form 20-F for the fiscal year ended December 31, 2022. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions.
For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCAA after we file this annual report on Form 20-F for the fiscal year ended December 31, 2023. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions.
If we fail to establish and maintain satisfactory relationships with our third-party distributors, we may not be able to sell, market and distribute our AAVs according to our internal budget and plans, our future revenues and market share may not grow at a pace that we expect, and we could be subject to increases in sales and marketing and other costs which would harm our results of operations and financial condition.
If we fail to establish and maintain satisfactory relationships with our third-party distributors, we may not be able to sell, market and distribute our products according to our internal budget and plans, our future revenues and market share may not grow at a pace that we expect, and we could be subject to increases in sales and marketing and other costs which would harm our results of operations and financial condition.
Risk Factors—Risks Relating to Our Corporate Structure—Any failure by the VIE or the VIE’s shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.” Therefore, our contractual arrangements with the VIE may not be as effective in ensuring our power to direct the significant activities of the VIE as direct ownership in the VIE would be. 44 Table of Contents Any failure by the VIE or the VIE’s shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.
Risk Factors—Risks Relating to Our Corporate Structure—Any failure by the VIE or the VIE’s shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.” Therefore, our contractual arrangements with the VIE may not be as effective in ensuring our power to direct the significant activities of the VIE as direct ownership in the VIE would be. 45 Table of Contents Any failure by the VIE or the VIE’s shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.
For example, the severity of the past COVID-19 pandemic resulted in lock-downs, travel restrictions and quarantines imposed by governments across the world and materially affected general commercial activities on a global scale. In 2022, we experienced delayed fulfillments from suppliers as well as reduced demand for our AAVs from the tourism sector, which suffered disproportionately from the pandemic.
For example, the severity of the past COVID-19 pandemic resulted in lock-downs, travel restrictions and quarantines imposed by governments across the world and materially affected general commercial activities on a global scale. In 2022, we experienced delayed fulfillments from suppliers as well as reduced demand for our products from the tourism sector, which suffered disproportionately from the pandemic.
Therefore, it still leaves leeway for future laws, administrative regulations or provisions to provide for contractual arrangements as a form of foreign investment. 43 Table of Contents The Foreign Investment Law grants foreign invested entities the same treatment as PRC domestic entities, except for those foreign invested entities that operate in industries deemed to be either “restricted” or “prohibited” in the “negative list” to be published.
Therefore, it still leaves leeway for future laws, administrative regulations or provisions to provide for contractual arrangements as a form of foreign investment. 44 Table of Contents The Foreign Investment Law grants foreign invested entities the same treatment as PRC domestic entities, except for those foreign invested entities that operate in industries deemed to be either “restricted” or “prohibited” in the “negative list” to be published.
There is also substantial uncertainty as to the outcome of any such legal proceedings. 45 Table of Contents The shareholders of the VIE may be involved in personal disputes with third parties or other incidents that may have an adverse effect on their respective equity interests in the VIE and the validity or enforceability of our contractual arrangements with them.
There is also substantial uncertainty as to the outcome of any such legal proceedings. 46 Table of Contents The shareholders of the VIE may be involved in personal disputes with third parties or other incidents that may have an adverse effect on their respective equity interests in the VIE and the validity or enforceability of our contractual arrangements with them.
There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. See “Item 10. Additional Information—E. Taxation—PRC Taxation.” As of December 31, 2022, our PRC subsidiaries and the VIE located in the PRC reported accumulated loss and therefore they had no retained earnings for offshore distribution.
There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. See “Item 10. Additional Information—E. Taxation—PRC Taxation.” As of December 31, 2023, our PRC subsidiaries and the VIE located in the PRC reported accumulated loss and therefore they had no retained earnings for offshore distribution.
Images and videos captured by cameras attached to our AAVs are stored on our servers, servers of third-party cloud storage providers or other servers designated by our customers. We, therefore, process, including but not limited to collect, store, process, use, transfer, provide, disclose and delete, personal data from our users in order to better understand and serve our users.
Images and videos captured by cameras attached to our UAVs are stored on our servers, servers of third-party cloud storage providers or other servers designated by our customers. We, therefore, process, including but not limited to collect, store, process, use, transfer, provide, disclose and delete, personal data from our users in order to better understand and serve our users.
We cannot predict when these regulations will change, and any new regulations may impose onerous requirements and restrictions. 18 Table of Contents In China, the Civil Aviation Administration of China, or CAAC, published the Guidance on UAV Airworthiness Assessment Based on Operation Risks, or the UAV Airworthiness Guidance, on January 25, 2019, which is based on the assessment, classification and management of operational risks of UAVs.
We cannot predict when these regulations will change, and any new regulations may impose onerous requirements and restrictions. 19 Table of Contents In China, the Civil Aviation Administration of China, or the CAAC, published the Guidance on UAV Airworthiness Assessment Based on Operation Risks, or the UAV Airworthiness Guidance, on January 25, 2019, which is based on the assessment, classification and management of operational risks of UAVs.
We may also be required to restate our financial statements from prior periods. 41 Table of Contents It may be difficult for overseas authorities to conduct investigations or collect evidence within China. Shareholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in China.
We may also be required to restate our financial statements from prior periods. 42 Table of Contents It may be difficult for overseas authorities to conduct investigations or collect evidence within China. Shareholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in China.
The effect of this discretionary proxy is that if you do not vote at shareholders’ meetings, you cannot prevent the Class A ordinary shares underlying your ADSs from being voted, except under the circumstances described above. This may make it more difficult for shareholders to influence the management of our company.
The effect of this discretionary proxy is that if you do not vote at shareholders’ meetings, you cannot prevent the underlying Class A ordinary shares represented by your ADSs from being voted, except under the circumstances described above. This may make it more difficult for shareholders to influence the management of our company.
While the battery packs used for our AAVs are designed to passively contain any single cell’s release of energy without spreading to neighboring cells, a field or testing failure of our AAVs could occur, which could result in accidents, casualty or damages, and subject us to lawsuits, product recalls, and/or redesign efforts.
While the battery packs used for our products are designed to passively contain any single cell’s release of energy without spreading to neighboring cells, a field or testing failure of our products could occur, which could result in accidents, casualty or damages, and subject us to lawsuits, product recalls, and/or redesign efforts.
From time to time, we or the VIE may have to resort to litigation to enforce our and the VIE’s intellectual property rights, which could result in substantial costs and diversion of our resources. 33 Table of Contents Failure to safeguard personal information could subject us to penalties, damage our reputation and brand, and harm our business and results of operations.
From time to time, we or the VIE may have to resort to litigation to enforce our and the VIE’s intellectual property rights, which could result in substantial costs and diversion of our resources. 34 Table of Contents Failure to safeguard personal information could subject us to penalties, damage our reputation and brand, and harm our business and results of operations.
Risks Relating to the ADSs and Trading Market • The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors. • If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding the ADSs, the market price for the ADSs and trading volume could decline. • The sale or availability for sale of substantial amounts of the ADSs could adversely affect their market price. • We are a “controlled company” within the meaning of the Nasdaq Stock Market Rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies. 17 Table of Contents Risks Relating to Our Business and Industry Our future growth depends on the demand for, and customers’ willingness to adopt, our AAVs and air mobility solutions.
Risks Relating to the ADSs and Trading Market • The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors. • If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding the ADSs, the market price for the ADSs and trading volume could decline. • The sale or availability for sale of substantial amounts of the ADSs could adversely affect their market price. • We are a “controlled company” within the meaning of the Nasdaq Stock Market Rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies. 18 Table of Contents Risks Relating to Our Business and Industry Our future growth depends on the demand for, and customers’ willingness to adopt, our products and air mobility solutions.
The majority of our revenue generated from sales of the EH216 series AAVs are from a limited number of customers that mainly operate our AAVs in tourism locations in China, rather than in broad, mainstream commercial operations. Therefore, in 2021 and 2022, we faced delayed collection of our accounts receivable from some of our customers later than the due dates.
The majority of our revenue generated from sales of the EH216 series products are from a limited number of customers that mainly operate our products in tourism locations in China, rather than in broad, mainstream commercial operations. Therefore, in 2021 and 2022, we faced delayed collection of our accounts receivable from some of our customers later than the due dates.
A major breach of our network security and systems could create serious negative consequences for our business and future prospects, including possible fines, penalties, reduced customer demand for our AAVs, and harm to our reputation and brand. See “Item 4. Information on the Company—B. Business Overview—PRC Regulation” for further details.
A major breach of our network security and systems could create serious negative consequences for our business and future prospects, including possible fines, penalties, reduced customer demand for our products, and harm to our reputation and brand. See “Item 4. Information on the Company—B. Business Overview—PRC Regulation” for further details.
Should a high-profile accident occur resulting in substantial casualty or damages, either involving our AAVs or products offered by other companies, public confidence in and regulatory attitudes toward AAVs could deteriorate. Any of the foregoing could materially and adversely affect our results of operations, financial condition and growth prospects.
Should a high-profile accident occur resulting in substantial casualty or damages, either involving our UAVs or products offered by other companies, public confidence in and regulatory attitudes toward UAVs could deteriorate. Any of the foregoing could materially and adversely affect our results of operations, financial condition and growth prospects.
Risks Relating to Our Business and Industry • Our future growth depends on the demand for, and customers’ willingness to adopt, our AAVs and air mobility solutions. • In the jurisdictions where we, the VIE and the VIE’s subsidiaries sell and plan to sell products, the commercial use of AAVs is subject to an uncertain or lengthy approval process; we cannot predict when regulations will change, and any new regulations may impose onerous requirements and restrictions with which we, the VIE and the VIE’s subsidiaries, the AAVs and potential customers may be unable to comply.
Risks Relating to Our Business and Industry • Our future growth depends on the demand for, and customers’ willingness to adopt, our products and air mobility solutions. • In the jurisdictions where we, the VIE and the VIE’s subsidiaries sell and plan to sell products, the commercial use of eVTOL aircraft is subject to an uncertain or lengthy approval process; we cannot predict when regulations will change, and any new regulations may impose onerous requirements and restrictions with which we, the VIE and the VIE’s subsidiaries, the eVTOL aircraft and potential customers may be unable to comply.
As the approvals from the PLAAF are usually granted on a one-off basis or are only valid for a limited period of time and the local divisions of PLAAF may exercise air traffic control under certain circumstances which may restrict us from operating our AAVs from time to time, we cannot assure you that the VIE and the VIE’s subsidiaries will be able to obtain such approval for each matter on which we will work on with our customers or partners in the future.
As the approvals from the PLAAF are usually granted on a one-off basis or are only valid for a limited period of time and the local divisions of PLAAF may exercise air traffic control under certain circumstances which may restrict us from operating our eVTOL aircraft from time to time, we cannot assure you that the VIE and the VIE’s subsidiaries will be able to obtain such approval for each matter on which we will work on with our customers or partners in the future.
During such modifications, they may use third-party parts that may not be compatible with our products. We do not test, nor do we endorse, such modification. In addition, the use of improper external cabling or unsafe charging outlets can expose our customers to injury from AAV malfunctioning.
During such modifications, they may use third-party parts that may not be compatible with our products. We do not test, nor do we endorse, such modification. In addition, the use of improper external cabling or unsafe charging outlets can expose our customers to injury from product malfunctioning.
Under the deposit agreement for the ADSs, if you do not vote, the depositary may give us a discretionary proxy to vote the Class A ordinary shares underlying your ADSs at shareholders’ meetings if: • we have timely provided the depositary with notice of meeting and related voting materials; 62 Table of Contents • we have instructed the depositary that we wish a discretionary proxy to be given; • we have informed the depositary that there is no substantial opposition as to a matter to be voted on at the meeting; and • a matter to be voted on at the meeting would not have a material adverse impact on shareholders.
Under the deposit agreement for the ADSs, if you do not vote, the depositary may give us a discretionary proxy to vote the Class A ordinary shares underlying your ADSs at shareholders’ meetings if: • we have timely provided the depositary with notice of meeting and related voting materials; • we have instructed the depositary that we wish a discretionary proxy to be given; • we have informed the depositary that there is no substantial opposition as to a matter to be voted on at the meeting; and • a matter to be voted on at the meeting would not have a material adverse impact on shareholders.
Increased competition may lead to lower AAV unit sales and increased inventory, which may result in downward price pressure and adversely affect our business, financial condition, operating results and prospects. Our ability to successfully compete in our industry will be fundamental to our future success in existing and new markets and will affect our market share.
Increased competition may lead to lower product unit sales and increased inventory, which may result in downward price pressure and adversely affect our business, financial condition, operating results and prospects. Our ability to successfully compete in our industry will be fundamental to our future success in existing and new markets and will affect our market share.
Such efforts mainly include building a community of engaged online and offline users as well as other branding initiatives, such as AAV shows and events. To promote our brand, we may be required to change our user development and branding practices, which could result in substantially increased expenses.
Such efforts mainly include building a community of engaged online and offline users as well as other branding initiatives, such as product shows and events. To promote our brand, we may be required to change our user development and branding practices, which could result in substantially increased expenses.
We purchase certain key externally sourced components and raw materials, such as computers chips, batteries, motors and electronic displays, from external suppliers for use in our assembly, production and operations of AAVs. A continuous and stable supply of components and raw materials that meet our standards is crucial to our assembly, production and operations.
We purchase certain key externally sourced components and raw materials, such as computers chips, batteries, motors and electronic displays, from external suppliers for use in our assembly, production and operations of our products. A continuous and stable supply of components and raw materials that meet our standards is crucial to our assembly, production and operations.
We rely on third-party logistics providers to deliver our domestic sales orders and certain overseas orders. Inadequate third-party logistics services or failure to mitigate the risks of damage or disruption to our distribution logistics could adversely affect our business. Our ability to transport and sell our AAVs is critical to our success across our operations.
We rely on third-party logistics providers to deliver our domestic sales orders and certain overseas orders. Inadequate third-party logistics services or failure to mitigate the risks of damage or disruption to our distribution logistics could adversely affect our business. Our ability to transport and sell our products is critical to our success across our operations.
While we obtain components from multiple sources whenever possible, some of the components used in our AAVs are currently selected to be purchased from a single source to improve cost-efficiency. Disruption in the supply of components, whether or not from a single-source supplier, could temporarily disrupt commercial production of our AAVs.
While we obtain components from multiple sources whenever possible, some of the components used in our products are currently selected to be purchased from a single source to improve cost-efficiency. Disruption in the supply of components, whether or not from a single-source supplier, could temporarily disrupt commercial production of our products.
Although we have experienced growth, our historical performance may not be indicative of our future performance due to our limited operating history. We are currently commercializing our AAVs and air mobility solutions, and have a short history of accepting orders for our AAVs and delivering them to customers for testing, training and demonstration purposes.
Although we have experienced growth, our historical performance may not be indicative of our future performance due to our limited operating history. We are currently commercializing our products and air mobility solutions, and have a short history of accepting orders for our products and delivering them to customers for testing, training and demonstration purposes.
Even if we are fully insured as it relates to a claim, the claim could nevertheless diminish our brand and divert management’s attention and resources, which could have a negative impact on our business, financial condition and result of operations. We generally provide standard warranties on our AAVs.
Even if we are fully insured as it relates to a claim, the claim could nevertheless diminish our brand and divert management’s attention and resources, which could have a negative impact on our business, financial condition and result of operations. We generally provide standard warranties on our products.
We typically rely on third-party logistics service providers to deliver our domestic sales orders and certain overseas orders. Damage or disruption to our distribution logistics due to disputes, weather, natural disasters, fire, explosions, terrorism, pandemics or labor strikes could impair our ability to distribute or sell our AAVs.
We typically rely on third-party logistics service providers to deliver our domestic sales orders and certain overseas orders. Damage or disruption to our distribution logistics due to disputes, weather, natural disasters, fire, explosions, terrorism, pandemics or labor strikes could impair our ability to distribute or sell our products.
We are a relatively young company with a short operating history, and we may not be able to sustain our rapid growth, effectively manage our growth or implement our business strategies. We, the VIE and the VIE’s subsidiaries have been providing AAV commercial solutions since 2014.
We are a relatively young company with a short operating history, and we may not be able to sustain our rapid growth, effectively manage our growth or implement our business strategies. We, the VIE and the VIE’s subsidiaries have been providing UAV commercial solutions since 2014.
We may rely on some third-party distributors for sales, marketing and distribution activities relating to our AAVs. Currently we do not rely on any third-party distributors for sales, marketing and distribution activities relating to our AAVs. However, some of our business partners may act as third-party distributors that sell, market and distribute our AAVs to their customers in the future.
We may rely on some third-party distributors for sales, marketing and distribution activities relating to our products. Currently we do not rely on any third-party distributors for sales, marketing and distribution activities relating to our products. However, some of our business partners may act as third-party distributors that sell, market and distribute our products to their customers in the future.
In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting.
In addition, once we ceased to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting.
We may become subject to product liability claims or warranty claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims. We may be exposed to significant product liability claims if our AAVs do not perform as expected or malfunction.
We may become subject to product liability claims or warranty claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims. We may be exposed to significant product liability claims if our products do not perform as expected or malfunction.
Additionally, to export our AAVs to certain jurisdictions, we may face challenges in coordinating with both PRC and the applicable foreign governments and regulatory authorities. If we cannot export our AAVs to such jurisdictions, our business, prospects, financial condition and operating results may be materially and adversely impacted.
Additionally, to export our products to certain jurisdictions, we may face challenges in coordinating with both PRC and the applicable foreign governments and regulatory authorities. If we cannot export our products to such jurisdictions, our business, prospects, financial condition and operating results may be materially and adversely impacted.
If customers modify our AAVs or operating systems, the AAVs may not operate properly, which may cause damage, create negative publicity and harm our business. Our customers may try to modify our AAVs or operating systems for various reasons, which could compromise the performance and safety of our AAVs, as well as the safety of their passengers.
If customers modify our products or operating systems, the products may not operate properly, which may cause damage, create negative publicity and harm our business. Our customers may try to modify our products or operating systems for various reasons, which could compromise the performance and safety of our products, as well as the safety of their passengers.
The term of a warranty is between six months to three years, depending on the product line and the specific part or component. The occurrence of any material defects in our AAVs could make us liable for damages and warranty claims.
The term of a warranty is between six months to three years, depending on the product line and the specific part or component. The occurrence of any material defects in our products could make us liable for damages and warranty claims.
If any new regulation is put in place, or a different interpretation of existing regulation is adopted, our ability to manufacture, market, sell or operate our AAVs or to advertise or deliver air mobility solutions in general may be limited or otherwise affected.
If any new regulation is put in place, or a different interpretation of existing regulation is adopted, our ability to manufacture, market, sell or operate our products or to advertise or deliver air mobility solutions in general may be limited or otherwise affected.
Violation of labor or other laws by our suppliers, business partners, sales agent, dealers or third-party logistics services suppliers or the divergence of their labor or other practices from those generally accepted as ethical in the markets in which we do business could also attract negative publicity, diminish our brand image and reduce demand for our AAVs and AAV commercial solutions.
Violation of labor or other laws by our suppliers, business partners, sales agent, dealers or third-party logistics services suppliers or the divergence of their labor or other practices from those generally accepted as ethical in the markets in which we do business could also attract negative publicity, diminish our brand image and reduce demand for our products and commercial solutions.
The success of these products and services are and will be subject to risks, including with respect to: • the extent of market reception and adoption of AAVs as transportation and logistics solutions; • our navigating a new and evolving regulatory environment; • our timely fulfillment of product orders; • our ability to produce safe, high-quality and cost-effective AAVs on an ongoing basis; • the performance of our AAVs relative to customer expectations and customers’ interest in and demand for our AAVs and air mobility solutions; and • our building a well-recognized and respected brand.
The success of these products and services are and will be subject to risks, including with respect to: • the extent of market reception and adoption of pilotless eVTOL aircraft as transportation and logistics solutions; • our navigating a new and evolving regulatory environment; • our timely fulfillment of product orders; • our ability to produce safe, high-quality and cost-effective eVTOL aircraft on an ongoing basis; • the performance of our pilotless eVTOL aircraft relative to customer expectations and customers’ interest in and demand for our pilotless eVTOL aircraft and air mobility solutions; and • our building a well-recognized and respected brand.
In the future, we may, voluntarily or involuntarily, initiate a recall if any of our AAVs, including any systems or components sourced from our suppliers, prove to be defective or noncompliant with applicable laws and regulations.
In the future, we may, voluntarily or involuntarily, initiate a recall if any of our products, including any systems or components sourced from our suppliers, prove to be defective or noncompliant with applicable laws and regulations.
Problems with key equipment in one or more of our production facilities may affect our ability to produce our AAVs or cause us to incur significant expenses to repair or replace such equipment. Scheduled and unscheduled maintenance programs may affect our production output.
Problems with key equipment in one or more of our production facilities may affect our ability to produce our products or cause us to incur significant expenses to repair or replace such equipment. Scheduled and unscheduled maintenance programs may affect our production output.
Failure to ensure the safe operation of our AAVs will affect our reputation and the sales of our AAVs, which will ultimately adversely affect our business operation and financial results. We have incurred, and in the future may continue to incur, net losses. We have incurred net losses in the past.
Failure to ensure the safe operation of our products will affect our reputation and the sales of our products, which will ultimately adversely affect our business operation and financial results. We have incurred, and in the future may continue to incur, net losses. We have incurred net losses in the past.
We may be compelled to undertake product recalls or take other actions, which could adversely affect our brand image and results of operations. Our AAVs may not perform in line with customers’ expectations.
We may be compelled to undertake product recalls or take other actions, which could adversely affect our brand image and results of operations. Our products may not perform in line with customers’ expectations.
Huazhi Hu, or an affiliate controlled by our founder, such Class B ordinary shares shall be automatically and immediately converted into the same number of Class A ordinary shares. As of March 31, 2023, Mr.
Huazhi Hu, or an affiliate controlled by our founder, such Class B ordinary shares shall be automatically and immediately converted into the same number of Class A ordinary shares. As of March 31, 2024, Mr.
In the jurisdictions where we, the VIE and the VIE’s subsidiaries sell and plan to sell products, the commercial use of AAVs is subject to an uncertain or lengthy approval process; we cannot predict when regulations will change, and any new regulations may impose onerous requirements and restrictions with which we, the VIE and the VIE’s subsidiaries, the AAVs and potential customers may be unable to comply.
In the jurisdictions where we, the VIE and the VIE’s subsidiaries sell and plan to sell products, the commercial use of eVTOL aircraft is subject to an uncertain or lengthy approval process; we cannot predict when regulations will change, and any new regulations may impose onerous requirements and restrictions with which we, the VIE and the VIE’s subsidiaries, the eVTOL aircraft and potential customers may be unable to comply.
Although we monitor such authorized personnel, there is no assurance such procedures will prevent all instances of abuse or negligence. Accordingly, if any of our authorized personnel misuse or misappropriate our corporate chops or seals, we could encounter difficulties in maintaining control over the relevant entities and experience significant disruption to our operations.
Although we monitor such authorized personnel, there is no assurance such procedures will prevent all instances of abuse or negligence. 59 Table of Contents Accordingly, if any of our authorized personnel misuse or misappropriate our corporate chops or seals, we could encounter difficulties in maintaining control over the relevant entities and experience significant disruption to our operations.
Companies, organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability to make, use, develop, sell or market our AAVs, AAV operating systems and infrastructure or their components, which could make it more difficult for us to operate our business.
Companies, organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability to make, use, develop, sell or market our products, operating systems and infrastructure or their components, which could make it more difficult for us to operate our business.
Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition, and prospects. Increases in labor costs and enforcement of stricter labor laws and regulations in the PRC may adversely affect our business and our profitability.
Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition, and prospects. 51 Table of Contents Increases in labor costs and enforcement of stricter labor laws and regulations in the PRC may adversely affect our business and our profitability.
Any product defects, accidents or any other failure of our AAVs to perform as expected could harm our reputation and result in adverse publicity, revenue loss, delivery delays and product recalls, which could harm our brand and reputation.
Any product defects, accidents or any other failure of our products to perform as expected could harm our reputation and result in adverse publicity, revenue loss, delivery delays and product recalls, which could harm our brand and reputation.
The SEC, U.S. Department of Justice and other authorities often have substantial difficulties in bringing and enforcing actions against non-U.S. companies and non-U.S. persons, including company directors and officers, in certain emerging markets, including China.
Department of Justice and other authorities often have substantial difficulties in bringing and enforcing actions against non-U.S. companies and non-U.S. persons, including company directors and officers, in certain emerging markets, including China.
Any decline in the business of our business partners or the deterioration of our relationship with them could have a material adverse effect on our operating results. We collaborate with various business partners to promote our AAVs and AAV commercial solutions. There can be no guarantee that those business partners will continue to collaborate with us in the future.
Any decline in the business of our business partners or the deterioration of our relationship with them could have a material adverse effect on our operating results. We collaborate with various business partners to promote our products and commercial solutions. There can be no guarantee that those business partners will continue to collaborate with us in the future.
We also face regulatory uncertainties that could restrict our abilities to adopt additional incentive plans for our directors, executive officers and employees under PRC laws. 55 Table of Contents The State Administration of Taxation, or SAT, has issued certain circulars concerning employee share options and restricted shares.
We also face regulatory uncertainties that could restrict our abilities to adopt additional incentive plans for our directors, executive officers and employees under PRC laws. The State Administration of Taxation, or SAT, has issued certain circulars concerning employee share options and restricted shares.
For the years ended December 31, 2020, 2021 and 2022, cash paid by WFOE to other subsidiaries were nil, nil, and RMB0.6 million, respectively, which represented purchase of inventories.
For the years ended December 31, 2021, 2022 and 2023, cash paid by WFOE to other subsidiaries were nil, RMB0.6 million and nil, respectively, which represented purchase of inventories.
We rely on external suppliers for raw materials and certain key externally sourced components and parts used in the assembly of our AAVs, and have limited control over the quality of these components and parts.
We rely on external suppliers for raw materials and certain key externally sourced components and parts used in the assembly of our products, and have limited control over the quality of these components and parts.
A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about our AAVs and business and inhibit or prevent commercialization of our current and future AAV models. Our insurance coverage might not be sufficient to cover all potential product liability claims.
A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about our products and business and inhibit or prevent commercialization of our current and future models. Our insurance coverage might not be sufficient to cover all potential product liability claims.
The failure to manage any of these risks could negatively affect our international business and consequently our overall business and operating results. In addition, the concern over these risks may also prevent us from entering into, or marketing, selling or releasing certain of our AAVs and AAV commercial solutions and related services in, certain markets.
The failure to manage any of these risks could negatively affect our international business and consequently our overall business and operating results. In addition, the concern over these risks may also prevent us from entering into, or marketing, selling or releasing certain of our products and commercial solutions and related services in, certain markets.
This could adversely affect our ability to fulfill our sales orders and consequently may have an adverse effect on our business and results of operations. In addition, we are vulnerable to natural disasters and other calamities such as hurricanes, tornadoes, floods, earthquakes and other adverse weather and climate conditions.
This could adversely affect our ability to fulfill our sales orders and consequently may have an adverse effect on our business and results of operations. 28 Table of Contents In addition, we are vulnerable to natural disasters and other calamities such as hurricanes, tornadoes, floods, earthquakes and other adverse weather and climate conditions.
Promoting and positioning our brand will likely depend significantly on our ability to provide high-quality AAVs and AAV commercial solutions and engage with our customers as intended. In addition, we expect that our ability to develop, maintain and strengthen the EHang brand will also depend heavily on the success of our user development and branding efforts.
Promoting and positioning our brand will likely depend significantly on our ability to provide high-quality products and commercial solutions and engage with our customers as intended. In addition, we expect that our ability to develop, maintain and strengthen the EHang brand will also depend heavily on the success of our user development and branding efforts.
(4) For the years ended December 31, 2020, 2021 and 2022, the WFOE did not charge any service fee from the VIE as the VIE was in cumulative loss position.
(4) For the years ended December 31, 2021, 2022 and 2023, the WFOE did not charge any service fee from the VIE as the VIE was in cumulative loss position.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeAny person applying for the registration of a trademark may not injure existing trademark rights first obtained by others, nor may any person register in advance a trademark that has already been used by another party and has already gained a “sufficient degree of reputation” through such party’s use. 96 Table of Contents Regulations on Domain Names The MIIT promulgated the Measures on Administration of Internet Domain Names , or the Domain Name Measures, on August 24, 2017, which took effect on November 1, 2017 and replaced the Administrative Measures on China Internet Domain Name s promulgated by the MIIT on November 5, 2004.
Biggest changeAny person applying for the registration of a trademark may not injure existing trademark rights first obtained by others, nor may any person register in advance a trademark that has already been used by another party and has already gained a “sufficient degree of reputation” through such party’s use.
In addition, after the completion of nationality registration with CAAC, the civil aviation will possess the nationality of PRC. An aircraft possessing the nationality of PRC may take flight if it holds an Airworthiness Certificate.
In addition, after the completion of nationality registration with the CAAC, the civil aviation will possess the nationality of PRC. An aircraft possessing the nationality of PRC may take flight if it holds an Airworthiness Certificate.
The Special Conditions provided clear safety requirements for the type certification of EH216-S, including flight performance, aircraft structures, design and manufacture, propulsion systems, data link, ground control station, etc.
The Special Conditions provided clear safety requirements for the type certification of the EH216-S, including flight performance, aircraft structures, design and manufacture, propulsion systems, data link, ground control station, etc.
In addition, on December 21, 2022, CAAC promulgated Analysis Guideline for Determination of the Classification and System Safety of Civil Unmanned Aerial Vehicle Airworthiness , pursuant to which, the operation risks of UAVs shall be determined by severity and possibility of integrated adverse effects, based on the potential adverse effects during the operation of the civil unmanned aerial vehicle system.
In addition, on December 21, 2022, the CAAC promulgated Analysis Guideline for Determination of the Classification and System Safety of Civil Unmanned Aerial Vehicle Airworthiness , pursuant to which, the operation risks of UAVs shall be determined by severity and possibility of integrated adverse effects, based on the potential adverse effects during the operation of the civil unmanned aerial vehicle system.
To speed up the building of legal and criterion system for civil unmanned aerial vehicle, CAAC also published Guideline for the Construction of Regulation and Standard of Civil Unmanned Aerial Vehicles V1.0 , which will provide further details on airworthiness, flight operation and business operation.
To speed up the building of legal and criterion system for civil unmanned aerial vehicle, the CAAC also published Guideline for the Construction of Regulation and Standard of Civil Unmanned Aerial Vehicles V1.0 , which will provide further details on airworthiness, flight operation and business operation.
The company operating the regulated activities must first obtain a General Aviation Enterprise Operation License from CAAC for using UAVs in such activities, and the applicant shall meet certain criteria including, among others, (a) the applicant shall be a corporation having a PRC national as its legal representative; (b) the applicant shall possess proper civil aircraft meeting certain requirements, such as the completion of registration in PRC and the compliance with the related airworthiness requirements, standard airworthiness certificate for civil aircraft used for passenger carrying and human carrying business activities (unless otherwise stipulated by CAAC), the compatibility with the commercial general aviation activities to be engaged in, at least two civil aircrafts for engaging in passenger carrying business or one civil aircraft for human-carrying and other business; (c) there are pilots who are suitable for civil aircraft, having professional training and obtaining related license; and (d) the applicant shall have purchased third party liability insurance policy on the ground.
The company operating the regulated activities must first obtain a General Aviation Enterprise Operation License from CAAC for using UAVs in such activities, and the applicant shall meet certain criteria including, among others, (a) the applicant shall be a corporation having a PRC national as its legal representative; (b) the applicant shall possess proper civil aircraft meeting certain requirements, such as the completion of registration in PRC and the compliance with the related airworthiness requirements, standard airworthiness certificate for civil aircraft used for passenger carrying and human carrying business activities (unless otherwise stipulated by CAAC), the compatibility with the commercial general aviation activities to be engaged in, at least two civil aircraft for engaging in passenger carrying business or one civil aircraft for human-carrying and other business; (c) there are pilots who are suitable for civil aircraft, having professional training and obtaining related license; and (d) the applicant shall have purchased third party liability insurance policy on the ground.
This platform, which has been put into trial running internally, is designed to connect and interact with the back-end command-and-control system, as well as the front-end flight booking and payment service windows through either our own app or third-party apps, in order to provide the operation team with a clear and efficient management platform, and offer passengers a smooth flight booking and riding experience.
This platform, which has been put into trial running internally, is designed to connect and interact with the back-end command-and-control system, as well as the future front-end flight booking and payment service windows through either our own app or third-party apps, in order to provide the operation team with a clear and efficient management platform, and offer passengers a smooth flight booking and riding experience.
Pursuant to the Interim Provisions of the State Administration for Industry and Commerce on the Ratio of the Registered Capital to the Total Investment of a Sino-Foreign Equity Joint Venture Enterprise, promulgated by SAMR on February 17, 1987 and taking effect on March 1, 1987, with respect to a sino-foreign equity join venture, the registered capital shall be (i) no less than 7/10 of its total investment, if the total investment is US$3 million or under US$3 million; (ii) no less than 1/2 of its total investment, if the total investment is ranging from US$3 million to US$10 million (including US$10 million), provided that the registered capital shall not be less than US$2.1 million if the total investment is less than US$4.2 million; (iii) no less than 2/5 of its total investment, if the total investment is ranging from US$10 million to US$30 million (including US$30 million), provided that the registered capital shall not be less than US$5 million if the total investment is less than US$12.5 million; and (iv) no less than 1/3 of its total investment, if the total investment exceeds US$30 million, provided that the registered capital shall not be less than US$12 million if the total investment is less than US$36 million. 100 Table of Contents On January 11, 2017, the People’s Bank of China, or the PBOC promulgated the Notice of the People’s Bank of China on Matters concerning the Macro-Prudential Management of Full-Covered Cross-Border Financing, or the PBOC Notice No. 9.
Pursuant to the Interim Provisions of the State Administration for Industry and Commerce on the Ratio of the Registered Capital to the Total Investment of a Sino-Foreign Equity Joint Venture Enterprise, promulgated by SAMR on February 17, 1987 and taking effect on March 1, 1987, with respect to a sino-foreign equity join venture, the registered capital shall be (i) no less than 7/10 of its total investment, if the total investment is US$3 million or under US$3 million; (ii) no less than 1/2 of its total investment, if the total investment is ranging from US$3 million to US$10 million (including US$10 million), provided that the registered capital shall not be less than US$2.1 million if the total investment is less than US$4.2 million; (iii) no less than 2/5 of its total investment, if the total investment is ranging from US$10 million to US$30 million (including US$30 million), provided that the registered capital shall not be less than US$5 million if the total investment is less than US$12.5 million; and (iv) no less than 1/3 of its total investment, if the total investment exceeds US$30 million, provided that the registered capital shall not be less than US$12 million if the total investment is less than US$36 million. 102 Table of Contents On January 11, 2017, the People’s Bank of China, or the PBOC promulgated the Notice of the People’s Bank of China on Matters concerning the Macro-Prudential Management of Full-Covered Cross-Border Financing, or the PBOC Notice No. 9.
Our quality control team undertakes robust inspections of our production lines in accordance with internal guidelines and assessment criteria. We also conduct licensed flight tests for our AAVs under a variety of conditions, which have proven to be an efficient and effective means for us to assess the quality and airworthiness of our products.
Our quality control team undertakes robust inspections of our production lines in accordance with internal guidelines and assessment criteria. We also conduct licensed flight tests for our products under a variety of conditions, which have proven to be an efficient and effective means for us to assess the quality and airworthiness of our products.
Except for purchase orders, we have also entered into a number of long-term framework and conditional agreements time to time with our customers and business partners relating to preorder or distribution of our AAV solutions. These non-binding agreements do not obligate the customers to purchase the products unless certain conditions are satisfied.
Except for purchase orders, we have also entered into a number of long-term framework and conditional agreements time to time with our customers and business partners relating to preorder or distribution of our products and solutions. These non-binding agreements do not obligate the customers to purchase the products unless certain conditions are satisfied.
A rich set of AAV product portfolio for diversified commercial solutions Based on our first priority of safety as well as our three fundamental technological principles, we have developed a scalable, integrated UAM technology platform. It carries a rich set of innovative AAV products with differentiated advantages for diversified and immense market demands.
A rich set of product portfolio for diversified commercial solutions Based on our first priority of safety as well as our three fundamental technological principles, we have developed a scalable, integrated UAM technology platform. It carries a rich set of innovative products with differentiated advantages for diversified and immense market demands.
We believe this white paper has facilitated the education of the emerging market at the early stage and consolidated our thought leadership as the first mover in the innovative industry. Sales We adopted the direct sales model to sell our AAV products and solutions to our customers, which are mainly public and private enterprises.
We believe this white paper has facilitated the education of the emerging market at the early stage and consolidated our thought leadership as the first mover in the innovative industry. Sales We adopted the direct sales model to sell our products and solutions to our customers, which are mainly public and private enterprises.
We have historically complied with these requirements for our AAVs. The Administrative Procedures for the Real-name Registration of Civil UAVs (Draft) issued by the CAAC on March 30, 2020 make changes to the real-name registration process mainly for the purpose of making it more convenient for owners who purchase private UAVs.
We have historically complied with these requirements for our UAVs. The Administrative Procedures for the Real-name Registration of Civil UAVs (Draft) issued by the CAAC on March 30, 2020 make changes to the real-name registration process mainly for the purpose of making it more convenient for owners who purchase private UAVs.
Risk Factors—Risks Relating to Our Business and Industry—Our framework and conditional agreements may not result in material sales of our products.” After-Sales Services and Warranty We provide after-sales services for customers of our AAVs. We currently offer free installation and training programs thereafter to prepare our customers for its safe operation.
Risk Factors—Risks Relating to Our Business and Industry—Our framework and conditional agreements may not result in material sales of our products.” After-Sales Services and Warranty We provide after-sales services for customers of our products. We currently offer free installation and training programs thereafter to prepare our customers for its safe operation.
The team consists of members with strong backgrounds in the fields of electrical engineering, aerospace engineering, mechanical engineering, automation, material engineering and software development. The key R&D team members are mainly graduates of top universities. Our research and development team focuses on core research development, engineering technology, hardware development, and command-and-control systems of AAVs.
The team consists of members with strong backgrounds in the fields of electrical engineering, aerospace engineering, mechanical engineering, automation, material engineering and software development. The key R&D team members are mainly graduates of top universities. Our research and development team focuses on core research development, engineering technology, hardware development, and command-and-control systems.
According to the Circular of the State Administration of Foreign Exchange on Abolishing and Nullifying Five Regulatory Documents on Foreign Exchange Administration and Seven Regulatory Documents on Foreign Exchange Administration promulgated on December 30, 2019, there are no longer restrictions on the use of foreign exchange settlement in the special overseas inflow deposit account and the special domestic inflow deposit account. 99 Table of Contents The Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts , or the SAFE Circular No. 16, which was promulgated by the SAFE and became effective on June 9, 2016, provides that enterprises registered in the PRC may also convert their foreign debts from foreign currency into Renminbi on a self-discretionary basis.
According to the Circular of the State Administration of Foreign Exchange on Abolishing and Nullifying Five Regulatory Documents on Foreign Exchange Administration and Seven Regulatory Documents on Foreign Exchange Administration promulgated on December 30, 2019, there are no longer restrictions on the use of foreign exchange settlement in the special overseas inflow deposit account and the special domestic inflow deposit account. 101 Table of Contents The Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts , or the SAFE Circular No. 16, which was promulgated by the SAFE and became effective on June 9, 2016, provides that enterprises registered in the PRC may also convert their foreign debts from foreign currency into Renminbi on a self-discretionary basis.
With autonomous systems, it is also convenient to effectively manage large-scale aircraft fleets and flight routes. The ability to remotely monitor and control AAVs in emergencies makes them a reliable transportation option for emergency services and critical medical supplies.
With autonomous systems, it is also convenient to effectively manage large-scale aircraft fleets and flight routes. The ability to remotely monitor and control aircraft in emergencies makes them a reliable transportation option for emergency services and critical medical supplies.
The WFOE may terminate the agreement at its sole discretion. 108 Table of Contents In the opinion of AllBright Law Offices, our PRC legal counsel: • the ownership structures of the WFOE, the VIE and the VIE’s subsidiaries are in compliance with applicable PRC laws and regulations; and • such contractual arrangements constitute valid, legal and binding obligations enforceable against each party of such agreements in accordance with the terms of each agreement from their respective effective dates to the date of this annual report, and will not result in any violation of PRC laws or regulations currently in effect.
The WFOE may terminate the agreement at its sole discretion. 110 Table of Contents In the opinion of AllBright Law Offices, our PRC legal counsel: • the ownership structures of the WFOE, the VIE and the VIE’s subsidiaries are in compliance with applicable PRC laws and regulations; and • such contractual arrangements constitute valid, legal and binding obligations enforceable against each party of such agreements in accordance with the terms of each agreement from their respective effective dates to the date of this annual report, and will not result in any violation of PRC laws or regulations currently in effect.
Dividend Distribution The principal laws and regulations regulating the distribution of dividends by foreign-invested enterprises in the PRC include the PRC Company Law , as amended in 2004, 2005, 2013 and 2018, the Foreign Investment Law of PRC promulgated in 2020 and the Implementation Rules to the Foreign Investment Law promulgated in 2020.
Dividend Distribution The principal laws and regulations regulating the distribution of dividends by foreign-invested enterprises in the PRC include the PRC Company Law , as amended in 2004, 2005, 2013, 2018 and 2023, the Foreign Investment Law of PRC promulgated in 2020 and the Implementation Rules to the Foreign Investment Law promulgated in 2020.
On top of our sales in the PRC, we have exported our AAVs to Asia, Europe, North America and Latin America. We strive to ensure that our exported products comply with the regulatory and safety standards of the local markets.
On top of our sales in the PRC, we have exported our products to Asia, Europe, North America and Latin America. We strive to ensure that our exported products comply with the regulatory and safety standards of the local markets.
Both our EH216-S and Falcon B have passed the tests of geo-fencing by the Civil UAS Inspection Center of China Academy of Civil Aviation Science and Technology (CAST), and obtained the certificate from the China National Accreditation Service for Conformity Assessment (CNAS) and ILAC-MRA in July 2019, which is internationally recognized. 89 Table of Contents Pilot Operations The Department of Flight Standard, the Department of Aircraft Airworthiness Certification and the Office of Air Traffic Regulation of the CAAC, jointly issued the Pilot Operation Rules (Interim) for Specific Unmanned Aircraft , or the Interim Rules, on February 1, 2019, pursuant to which, unmanned aircrafts are classified into nine categories based on their empty weight and takeoff gross weight.
Both our EH216-S and Falcon B have passed the tests of geo-fencing by the Civil UAS Inspection Center of China Academy of Civil Aviation Science and Technology (CAST), and obtained the certificate from the China National Accreditation Service for Conformity Assessment (CNAS) and ILAC-MRA in July 2019, which is internationally recognized. 91 Table of Contents Pilot Operations The Department of Flight Standard, the Department of Aircraft Airworthiness Certification and the Office of Air Traffic Regulation of the CAAC, jointly issued the Pilot Operation Rules (Interim) for Specific Unmanned Aircraft , or the Interim Rules, on February 1, 2019, pursuant to which, unmanned aircraft are classified into nine categories based on their empty weight and takeoff gross weight.
Autonomous flying is also embedded in our genes from day one. Unlike other manually controlled UAVs or piloted eVTOL aircraft, our intelligent AAVs can fly without any human pilot onboard and operate autonomously from take-off to landing along pre-determined flight routes under the safe protection by electric fence within the pre-approved airspace.
Autonomous flying is also embedded in our genes from day one. Unlike other manually controlled UAVs or piloted eVTOL aircraft, our intelligent pilotless eVTOL aircraft and UAVs can fly without any human pilot onboard and operate autonomously from take-off to landing along pre-determined flight routes under the safe protection by electric fence within the pre-approved airspace.
We provide an integrated and efficient digital platform with customized AAV models as turn-key solutions for monitoring and management across many ordinary municipal functions and public utilities, such as traffic management, powerline inspection, environmental monitoring, firefighting, emergency rescue, aerial mapping, etc. Compared with the traditional manpower-and-time-consuming working mode, the cost-effectiveness and efficiency are greatly improved.
We provide an integrated and efficient digital platform with customized UAV models as turn-key solutions for monitoring and management across many ordinary municipal functions and public utilities, such as traffic management, powerline inspection, environmental monitoring, firefighting, emergency rescue, aerial mapping, etc. Compared with the traditional manpower-and-time-consuming working mode, the cost-effectiveness and efficiency are greatly improved.
Since the revised draft has not been formally adopted as of the date of the document, the revised draft (especially its operative provisions) and its anticipated adoption or effective date are subject to further changes with substantial uncertainty. 95 Table of Contents However, the relationship between the Data Security Law of the PRC and the implemented National Security Law of the PRC, the Cyber Security Law of the PRC , the Confidentiality Law of the PRC and the Personal Information Protection Law of the PRC needs to be carefully clarified.
Since the revised draft has not been formally adopted as of the date of the document, the revised draft (especially its operative provisions) and its anticipated adoption or effective date are subject to further changes with substantial uncertainty. 97 Table of Contents However, the relationship between the Data Security Law of the PRC and the implemented National Security Law of the PRC, the Cyber Security Law of the PRC , the Confidentiality Law of the PRC and the Personal Information Protection Law of the PRC needs to be carefully clarified.
Our Competitive Strengths Pioneer and leader in the global UAM industry As the world’s leading AAV technology platform company, we are the pioneer and leader in the global UAM industry with prominent first-mover advantages.
Our Competitive Strengths Pioneer and leader in the global UAM industry As the world’s leading UAM technology platform company, we are the pioneer and leader in the global UAM industry with prominent first-mover advantages.
According to our tests, the aircraft could still land safely even if any three propellers were intendedly stopped in flight, although the probability of which happens is extremely rare in normal situations. Additionally, our redundancy design is also reflected in our electric systems, sensors, flight control systems, communication systems, etc. to strengthen safety and reliability of our AAVs.
According to our tests, the aircraft could still land safely even if any three propellers were intendedly stopped in flight, although the probability of which happens is extremely rare in normal situations. Additionally, our redundancy design is also reflected in our electric systems, sensors, flight control systems, communication systems, etc. to strengthen safety and reliability of our products.
If the construction entity fails to pass the fire safety inspection before such venue is put into use, or fails to conform to the fire safety requirements after such inspection, it shall be subject to (i) orders to suspend the construction of projects, use of such projects or operation of relevant business; and (ii) a fine ranging between RMB30,000 and RMB300,000. 106 Table of Contents C.
If the construction entity fails to pass the fire safety inspection before such venue is put into use, or fails to conform to the fire safety requirements after such inspection, it shall be subject to (i) orders to suspend the construction of projects, use of such projects or operation of relevant business; and (ii) a fine ranging between RMB30,000 and RMB300,000. 108 Table of Contents C.
We not only provide large-scale aerial media performance services for outdoor events such as celebrations, festivals, and brand campaigns, but also offer aerial media packages that includes our proprietary GD series AAVs and relevant software to our customers who are able to design and carry out performances themselves with our products.
We not only provide large-scale aerial media performance services for outdoor events such as celebrations, festivals, and brand campaigns, but also offer aerial media packages that includes our proprietary GD series UAVs and relevant software to our customers who are able to design and carry out performances themselves with our products.
For example, we have established a partnership with Hong Kong Aircraft Engineering Company Limited (“HAECO”), a subsidiary of Swire Group and a world leading aircraft engineering and maintenance company, to cooperate in multiple areas such as continued airworthiness, digital platforms, after-sales maintenance service system, aircraft maintenance, and talent training for the commercial operation of our AAVs.
For example, we have established a partnership with Hong Kong Aircraft Engineering Company Limited (“HAECO”), a subsidiary of Swire Group and a world leading aircraft engineering and maintenance company, to cooperate in multiple areas such as continued airworthiness, digital platforms, after-sales maintenance service system, aircraft maintenance, and talent training for the commercial operation of our eVTOL aircraft.
A substantial majority of our employees are based at our headquarters in Guangzhou. As of the date of this annual report, we do not currently own any of our premises. We believe that our existing facilities are generally adequate to meet our current needs, but we expect to seek additional space as needed to accommodate our future growth. Item 4A.
A substantial majority of our employees are based at our headquarters in Guangzhou. As of the date of this annual report, we do not currently own any of our premises. We believe that our existing facilities are generally adequate to meet our current needs, but we expect to seek additional space as needed to accommodate our future growth.
We also use redundant data transmission links, which enable us to switch to a backup communication system if the primary system is breached. • Battery Management System Our intelligent battery management system, or BMS, is an industrial-grade solution that monitors all parameters of AAV batteries, including temperature, capacity and voltage.
We also use redundant data transmission links, which enable us to switch to a backup communication system if the primary system is breached. • Battery Management System Our intelligent battery management system, or BMS, is an industrial-grade solution that monitors all parameters of our products’ batteries, including temperature, capacity and voltage.
To the extent our AAVs are operated and controlled through distributed operation (such as during the delivery of our aerial media and smart management solutions), we may be required to obtain any official pilot license for certain pilot issued by the CAAC according to the Draft New Regulation on UAV Pilots.
To the extent our UAVs are operated and controlled through distributed operation (such as during the delivery of our aerial media and smart management solutions), we may be required to obtain any official pilot license for certain pilot issued by the CAAC according to the Draft New Regulation on UAV Pilots.
Cluster management is another key principle as well as our technological advantage to ensure flight safety and autonomy. Our proprietary airborne operating systems and on-the-ground command-and-control systems, or standalone smartphone-or-tablet-or-computer-based controller app, enable reliable and simultaneous management of AAV fleets at scale.
Cluster management is another key principle as well as our technological advantage to ensure flight safety and autonomy. Our proprietary airborne operating systems and on-the-ground command-and-control systems, or standalone smartphone-or-tablet-or-computer-based controller app, enable reliable and simultaneous management of aircraft fleets at scale.
In the event of malfunction of certain parts of our AAVs, the operating systems automatically activate the backup components to ensure proper functioning and performance of our AAVs. • Command-and-Control System We have extensive expertise in command-and-control system. Our proprietary command-and-control system can accurately monitor in-flight status, dispatch aircraft, effect pre-warning and contingency measures, etc.
In the event of malfunction of certain parts of our products, the operating systems automatically activate the backup components to ensure proper functioning and performance of our products. • Command-and-Control System We have extensive expertise in command-and-control system. Our proprietary command-and-control system can accurately monitor in-flight status, dispatch aircraft, effect pre-warning and contingency measures, etc.
Our PRC related PRC operating entities are required to obtain clearance from the local counterpart of the People’s Liberation Army Air Force for the flight routes for our AAVs. Subject to any difference in policies adopted by the local authorities, approval for airspace and flight plan is normally granted by the local flight control department of the military.
Our PRC related PRC operating entities are required to obtain clearance from the local counterpart of the People’s Liberation Army Air Force for the flight routes for our UAVs. Subject to any difference in policies adopted by the local authorities, approval for airspace and flight plan is normally granted by the local flight control department of the military.
Leveraging the advantages of EH216-S’s smaller size, lighter weight, lower noise, higher flexibility compared with helicopters or large eVTOL aircraft, the E-Port network is easier to be deployed, established and expanded by operators in urban areas with lesser costs and time.
Leveraging the advantages of EH216-S’s smaller size, lighter weight, lower noise, higher flexibility compared with helicopters or larger eVTOL aircraft, the E-Port network is easier to be deployed, established and expanded by operators in urban areas with lesser costs and time.
We believe these are necessary and significant efforts to accumulate our customer base and partner network, to cultivate the new market from the infancy stage evolving to the mature period, and to catalyze the establishment of UAM ecosystem for the commercial operations. 83 Table of Contents We kept communicating with our customers, investors and followers through multiple domestic and international online and offline channels and activities, including but not limited to our website, various social media and video platforms, hotlines and emails, mainstream media coverages, brand and product launch events, high-profile exhibitions and industry conferences, worldwide trial and demonstration autonomous flights, etc.
We believe these are necessary and significant efforts to accumulate our customer base and partner network, to cultivate the new market from the infancy stage evolving to the mature period, and to catalyze the establishment of UAM ecosystem for the commercial operations. 85 Table of Contents We kept communicating with our customers, investors and followers through multiple domestic and international online and offline channels and activities, including but not limited to our website, various social media and video platforms, e-commerce platforms, hotlines and emails, mainstream media coverages, brand and product launch events, high-profile exhibitions and industry conferences, worldwide trial and demonstration autonomous flights, etc.
The power of attorney granted under the shareholders voting proxy agreement will remain effective continuously from the date of execution, and the WFOE is entitled to assign its rights relating to the equity interests to any other person or entity at its own discretion. 107 Table of Contents Loan Agreement.
The power of attorney granted under the shareholders voting proxy agreement will remain effective continuously from the date of execution, and the WFOE is entitled to assign its rights relating to the equity interests to any other person or entity at its own discretion. 109 Table of Contents Loan Agreement.
In addition, the following entities were incorporated to engage in the business of AAV manufacturing and sales and the provision of AAV commercial solutions and related services: • In October 2015, Ehfly Technology established EHang Intelligent Equipment (Guangzhou) Co., Ltd., or the WFOE, as a wholly-owned subsidiary in China.
In addition, the following entities were incorporated to engage in the business of product manufacturing and sales and the provision of commercial solutions and related services: • In October 2015, Ehfly Technology established EHang Intelligent Equipment (Guangzhou) Co., Ltd., or the WFOE, as a wholly-owned subsidiary in China.
As a Tsinghua University-trained software engineer, Mr. Hu has amassed substantial experience in the development of command-and-control systems. He was one of the key architects and lead developers behind certain large-scale command-and-control systems, such as that for the 2008 Beijing Olympics.
As a Tsinghua University-trained software engineer, Mr. Hu has amassed substantial experience in the development of command-and-control systems. He was one of the key architects and lead developers behind certain large-scale command-and-control systems, such as that for the 2008 Summer Olympics Games in Beijing.
Together with our supplier review committee, our quality control team also collaborates with our suppliers to ensure that their processes and systems are capable of delivering the parts and components we need at the required quality levels, on time and within budgets. Our AAVs are produced with strict product quality control.
Together with our supplier review committee, our quality control team also collaborates with our suppliers to ensure that their processes and systems are capable of delivering the parts and components we need at the required quality levels, on time and within budgets. Our products are produced with strict product quality control.
Generally, for the flights of our AAVs, we, the VIE and the VIE’s subsidiaries have established prior communications with the local flight control department, the public security authority and the local counterpart of the CAAC in seeking the necessary approvals and have ensured compliance with their respective instructions in all material respects.
Generally, for the flights of our UAVs, we, the VIE and the VIE’s subsidiaries have established prior communications with the local flight control department, the public security authority and the local counterpart of the CAAC in seeking the necessary approvals and have ensured compliance with their respective instructions in all material respects.
We have consolidated the financial results of the VIE and the VIE’s subsidiaries in our consolidated financial statements in accordance with U.S. GAAP.
We have consolidated the financial results of the VIE and the VIE’s subsidiaries in our consolidated financial statements in accordance with U.S.
As of December 31, 2022, we had delivered four command-and-control centers or systems to our customers for smart city management in Shaoguan, Lianyungang, Hezhou and Shenzhen, in China. • UAM Operational Platform Digitization is essential for UAM flight operation and safety management.
As of December 31, 2023, we had delivered four command-and-control centers or systems to our customers for smart city management in Shaoguan, Lianyungang, Hezhou and Shenzhen, in China. • UAM Operational Platform Digitization is essential for UAM flight operation and safety management.
The system ensures that our AAVs fly in pre-determined routes and maintain smooth and efficient operation. It also has the capability to monitor and detect irregularity in the status and operation of our AAVs and to activate contingency measures to restrict and limit actions or movements of our AAVs in emergency situations.
The system ensures that our products fly in pre-determined routes and maintain smooth and efficient operation. It also has the capability to monitor and detect irregularity in the status and operation of our products and to activate contingency measures to restrict and limit actions or movements of our products in emergency situations.
On October 29, 2021, CAAC promulgated Civil Unmanned Aircraft Registration Management Procedures (Draft for Comment) which requires real-name registration and nationality registration. 88 Table of Contents Operations of AAVs Airspace Control According to the General Flight Rules issued by the State Council and the CMC on October 18, 2007 and took effect on November 22, 2007, the overall flight control within the territory of the PRC is under the unified organization of and enforcement by the People’s Liberation Army Air Force, and the various flight control departments shall exercise air traffic control in accordance with their respective responsibilities.
On October 29, 2021, the CAAC promulgated Civil Unmanned Aircraft Registration Management Procedures (Draft for Comment) which requires real-name registration and nationality registration. 90 Table of Contents Operations of UAVs Airspace Control According to the General Flight Rules issued by the State Council and the CMC on October 18, 2007 and took effect on November 22, 2007, the overall flight control within the territory of the PRC is under the unified organization of and enforcement by the People’s Liberation Army Air Force, and the various flight control departments shall exercise air traffic control in accordance with their respective responsibilities.
Operational Services With our strategic positioning to be a UAM platform operator, we adopt an integrated business model by selling AAV solutions and providing operational services. We plan to initiate commercial operational services to our customers and end users after obtaining required certificates and approvals.
Operational Services With our strategic positioning to be a UAM platform operator, we adopt an integrated business model by selling products and solutions and providing operational services. We plan to initiate commercial operational services to our customers and end users after obtaining required certificates and approvals.
In particular, Class I captures unmanned aircrafts with empty weight and takeoff gross weight between 0 to 1.5 kg (including 1.5 kg); Class II captures unmanned aircrafts with empty weight between 1.5 kg and 4 kg (including 4 kg) and takeoff gross weight between 1.5 kg and 7 kg (including 7 kg); Class III captures unmanned aircrafts with empty weight between 4 kg and 15 kg (including 15 kg) and takeoff gross weight between 7 kg and 25 kg (including 25 kg); Class IV captures unmanned aircrafts with empty weight between 15 kg and 116 kg (including 116 kg) and takeoff gross weight between 25 kg and 150 kg (including 150 kg); Class XI captures unmanned aircrafts with empty weight between 116 kg and 5,700 kg (including 5,700 kg) and takeoff gross weight between 150 kg and 5,700 kg (including 5,700 kg); Class XII captures unmanned aircrafts with empty weight and takeoff gross weight in excess of 5,700 kg.
In particular, Class I captures unmanned aircraft with empty weight and takeoff gross weight between 0 to 1.5 kg (including 1.5 kg); Class II captures unmanned aircraft with empty weight between 1.5 kg and 4 kg (including 4 kg) and takeoff gross weight between 1.5 kg and 7 kg (including 7 kg); Class III captures unmanned aircraft with empty weight between 4 kg and 15 kg (including 15 kg) and takeoff gross weight between 7 kg and 25 kg (including 25 kg); Class IV captures unmanned aircraft with empty weight between 15 kg and 116 kg (including 116 kg) and takeoff gross weight between 25 kg and 150 kg (including 150 kg); Class XI captures unmanned aircraft with empty weight between 116 kg and 5,700 kg (including 5,700 kg) and takeoff gross weight between 150 kg and 5,700 kg (including 5,700 kg); Class XII captures unmanned aircraft with empty weight and takeoff gross weight in excess of 5,700 kg.
The Interim Rules are applicable to Class IV unmanned aircrafts, Class III unmanned aircrafts with high risks and the pilot operation of which would need a pre-assessment in the belief of the authority, Class XI and Class XII unmanned aircrafts with low risks and in relation to which the authority believes a pilot operation assessment is sufficient.
The Interim Rules are applicable to Class IV unmanned aircraft, Class III unmanned aircraft with high risks and the pilot operation of which would need a pre-assessment in the belief of the authority, Class XI and Class XII unmanned aircraft with low risks and in relation to which the authority believes a pilot operation assessment is sufficient.
Smart City Management Solutions We believe we are the first company having developed and delivered the smart city management solutions with integrated and intelligent command-and-control systems or centers that can centralize and coordinate a wide range of AAV applications simultaneously.
Smart City Management Solutions We believe we are the first company having developed and delivered the smart city management solutions with integrated and intelligent command-and-control systems or centers that can centralize and coordinate a wide range of UAV applications simultaneously.
We are also obligated to provide information relating to our AAV products and purchasers starting from June 2017 and pursuant to the Administrative Provisions on the Real-name Registration of Private Unmanned Aerial Vehicles issued by the CAAC.
We are also obligated to provide information relating to our UAV products and purchasers starting from June 2017 and pursuant to the Administrative Provisions on the Real-name Registration of Private Unmanned Aerial Vehicles issued by the CAAC.
Prior application must be filed and approval be obtained before any flight can be conducted within the PRC territory, including test flights for our AAVs, and take-offs relating to our aerial media solutions and logistics services.
Prior application must be filed and approval be obtained before any flight can be conducted within the PRC territory, including test flights for our UAVs, and take-offs relating to our aerial media solutions and logistics services.
It’s developed from the EH216-S and customized for cargo transportation with 250kg payload. • VT Series The VT series refers to a series of electric lift-and-cruise AAVs we have designed and developed, consisting of the VT-30, the VT-20, and the VT-10.
It’s developed from the EH216-S and customized for cargo transportation with 250kg payload. • VT Series The VT series refers to a series of electric lift-and-cruise models we have designed and developed, consisting of the VT-30, the VT-20, and the VT-10.
Our proprietary redundancy control algorithms are based on a real-time voting mechanism. Our AAVs are designed with distributed electric propulsion, with an aim of achieving the highest level of safety through redundancy and efficiency.
Our proprietary redundancy control algorithms are based on a real-time voting mechanism. Our products are designed with distributed electric propulsion, with an aim of achieving the highest level of safety through redundancy and efficiency.
Since the revised draft has not been formally adopted as of the date of the document, the revised draft and its anticipated adoption or effective date are subject to further changes with substantial uncertainty. The pilots who operate our AAV flights also completed the AAV training provided by our company on the basis of the CAAC UAV Pilot Licenses.
Since the revised draft has not been formally adopted as of the date of the document, the revised draft and its anticipated adoption or effective date are subject to further changes with substantial uncertainty. The pilots who operate our UAVs also completed the training provided by our company on the basis of the CAAC UAV Pilot Licenses.
It has a planned total gross floor area of approximately 24,000 square meters, equipped with a series of function areas across the production processes for different types of our AAV models from manufacturing of key components and carbon fiber composite airframes to aircraft assembling and flight testing.
It has a planned total gross floor area of approximately 24,000 square meters, equipped with a series of function areas across the production processes for different types of our products from manufacturing of key components and carbon fiber composite airframes to aircraft assembling and flight testing.
We customize and adapt our AAVs to capture live videos, images and data generated by attached modules such as cameras, electro-optical, infrared or other sensors, and loudspeakers as our customers’ requirements.
We customize and adapt our UAVs to capture live videos, images and data generated by attached modules such as cameras, electro-optical, infrared or other sensors, and loudspeakers as our customers’ requirements.
Explore new monetization opportunities and develop diversified revenue streams We plan to explore new monetization opportunities and develop diversified revenue streams by leveraging our fundamental AAV technology platform to pursuit operating synergies across our business lines and better economic efficiency. For example, we may charge recurring fees for our software system licenses, operational and maintenance services for our AAVs.
Explore new monetization opportunities and develop diversified revenue streams We plan to explore new monetization opportunities and develop diversified revenue streams by leveraging our fundamental technology platform to pursuit operating synergies across our business lines and better economic efficiency. For example, we may charge recurring fees for our software system licenses, operational and maintenance services for our products.
The law mandates that the design of engines, screw propellers and apparatuses used in civil aircrafts must be approved with a Type Certificate, whereas the production and maintenance of engines, screw propellers and apparatuses used in civil aircrafts require a Production Certificate and a Maintenance Certificate, respectively.
The law mandates that the design of engines, screw propellers and apparatuses used in civil aircraft must be approved with a Type Certificate, whereas the production and maintenance of engines, screw propellers and apparatuses used in civil aircraft require a Production Certificate and a Maintenance Certificate, respectively.
As of the date of this annual report, 40 of our employees have obtained UAV class III pilot licenses and class IV pilot licenses, which satisfied the requirement to operate these categories of our AAVs.
As of the date of this annual report, 40 of our employees have obtained UAV class III pilot licenses and class IV pilot licenses, which satisfied the requirement to operate these categories of our UAVs.
Ultimately, a new, innovative and environmentally-friendly transportation solution is needed in urban areas and in high demand. eVTOL Technologies Make UAM Possible The advancements in eVTOL technologies are enabling a new era of transportation with UAM, poised to revolutionize the way we move people and goods across urban and suburban areas.
Ultimately, a new, innovative and environmentally-friendly transportation solution is needed in urban areas and in high demand. 71 Table of Contents eVTOL Technologies Make UAM Possible The advancements in eVTOL technologies are enabling a new era of transportation with UAM, poised to revolutionize the way we move people and goods across urban and suburban areas.
Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year. Taxation Enterprise Income Tax On March 16, 2007, the SCNPC promulgated the Enterprise Income Tax Law of the PRC which was amended on February 24, 2017 and December 29, 2018.
Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year. 104 Table of Contents Taxation Enterprise Income Tax On March 16, 2007, the SCNPC promulgated the Enterprise Income Tax Law of the PRC which was amended on February 24, 2017 and December 29, 2018.
Huazhi Hu is one of the pioneers and leaders in the global AAV industry, who was awarded the Technology Innovation Award by the Living Legends of Aviation Europe in 2019 and ranked the Top one inventor at air taxi firms, who personally took 10% share of all patents filed globally as of August 11, 2022 according to a Roland Berger analyst’s research.
Huazhi Hu is one of the pioneers and leaders in the global pilotless eVTOL aircraft industry, who was awarded the Technology Innovation Award by the Living Legends of Aviation Europe in 2019 and ranked the Top one inventor at air taxi firms, who personally took 10% share of all patents filed globally as of August 11, 2022 according to a Roland Berger analyst’s research.
They were usually delivered to and adopted by our customers for smart city management. • GD Series The GD series refers to our small-sized quadrotor AAVs, consisting of the GD2.0X used for aerial surveillance, last-mile delivery, aerial media performances and others, and the GD3.0 specially for aerial media performances.
They were usually delivered to and adopted by our customers for smart city management. • GD Series The GD series refers to our electric small-sized quadrotor UAVs, consisting of the GD2.0X used for aerial surveillance, last-mile delivery, aerial media performances and others, and the GD3.0 specially for aerial media performances.
In the final phase, we have manufactured several EH216-S conforming aircraft in our Yunfu production facility, passed the manufacturing conformity inspection by the CAAC, and are conducting required compliance tests at flight bases in Guangzhou and Hezhou as well as laboratories in other locations.
In the final phase, we have manufactured several EH216-S conforming aircraft in our Yunfu production facility, passed the manufacturing conformity inspection by the CAAC, and conducted required compliance tests at flight bases in Guangzhou and Hezhou as well as laboratories in other locations.
Designing our AAVs: Type Certification issued by CAAC shows that the design of the aviation products or its component parts meet the requirements under applicable airworthiness regulations.
Designing our UAVs: Type Certification issued by the CAAC shows that the design of the aviation products or its component parts meet the requirements under applicable airworthiness regulations.
In this regard, if a non-listed SPV grants equity incentives to its directors, supervisors, senior officers or other employees in its domestic subsidiaries, the relevant domestic individual residents may register with the SAFE before exercising their rights. 104 Table of Contents In addition, the SAT has issued certain circulars concerning employee stock options and restricted shares.
In this regard, if a non-listed SPV grants equity incentives to its directors, supervisors, senior officers or other employees in its domestic subsidiaries, the relevant domestic individual residents may register with the SAFE before exercising their rights. In addition, the SAT has issued certain circulars concerning employee stock options and restricted shares.
Taking the EH216-S as an example, each E-Port is identified and registered in our UAM flight operation and management platform, therefore our AAVs can serve for on-demand flights only within E-Port network to ensure safety and autonomy.
Taking the EH216-S as an example, each E-Port is identified and registered in our UAM flight operation and management platform, therefore our eVTOL aircraft can serve for on-demand flights only within E-Port network to ensure safety and autonomy.
As the first mover of electric passenger-carrying AAVs, we were dedicated to not only designing, developing, and manufacturing our products that are able to be certified, but also collaborating with the CAAC and contribute our years of practice and experience to formulating the innovative type certification standards from a holistic view for our AAVs from zero to one.
As the first mover of electric passenger-carrying pilotless eVTOL aircraft, we were dedicated to not only designing, developing, and manufacturing our products that are able to be certified, but also collaborating with the CAAC and contribute our years of practice and experience to formulating the innovative type certification standards from a holistic view for our pilotless eVTOL aircraft from zero to one.
The WFOE is engaged in the research, development, manufacture and sale of AAVs, and the research and development of software, communication technology and AAV technologies related to air mobility and intelligent aviation. • In January 2016, we obtained a controlling financial interest in Guangzhou EHang Intelligent Technology Co., Ltd., or the VIE, because the WFOE entered into a series of contractual arrangements with the VIE and the VIE’s shareholders.
The WFOE is engaged in the research, development, manufacture and sale of UAVs, and the research and development of software, communication technology and UAV technologies related to air mobility and intelligent aviation. • In January 2016, we obtained a controlling financial interest in Guangzhou EHang Intelligent Technology Co., Ltd., or the VIE, because the WFOE entered into a series of contractual arrangements with the VIE and the VIE’s shareholders.
Furthermore, with their vertical take-off and landing capabilities, AAVs can utilize more urban airspace and reduce the strain on ground transportation infrastructure. The introduction of AAVs has the potential to change the way people live and travel, bringing social and economic revolutions in many conventional fields, including tourism and local transportation.
Furthermore, with their vertical take-off and landing capabilities, eVTOL aircraft can utilize more urban airspace and reduce the strain on ground transportation infrastructure. The introduction of pilotless eVTOL aircraft has the potential to change the way people live and travel, bringing social and economic revolutions in many conventional fields, including tourism and local transportation.
As of December 31, 2022, except for the first AAV command-and-control center established in Guangzhou for our own use, we had delivered four command-and-control centers or systems along with suitable AAV models as integrated packages for smart city management solutions to our customers in Shaoguan, Lianyungang, Hezhou and Shenzhen, China.
As of December 31, 2023, except for the first UAV command-and-control center established in Guangzhou for our own use, we had delivered four command-and-control centers or systems along with suitable models as integrated packages for smart city management solutions to our customers in Shaoguan, Lianyungang, Hezhou and Shenzhen, China.
In addition, we intent to extent to long-range inter-city air transportation by introducing the VT-30 into the market in the future. Our main customers are public and private enterprises in the tourism and aviation industries.
In addition, we intent to extent to long-range inter-city air transportation by introducing the VT-30 into the market after its certification in the future. Our main customers are public and private enterprises in the tourism and aviation industries.
Compared with the customers’ conventional option of helicopters, our EH216-S AAV solutions have much lower lifetime cost than helicopters by greatly decreasing acquisition price, maintenance costs, and pilot expenses, while providing safer, autonomous, eco-friendly and quieter new way of air mobility. China is our principal market.
Compared with the customers’ conventional option of helicopters, our EH216-S has much lower lifetime cost than helicopters by greatly decreasing acquisition price, maintenance costs, and pilot expenses, while providing safer, autonomous, eco-friendly and quieter new way of air mobility. China is our principal market.
While the sky above has always been a possibility, we brought a safe, autonomous, eco-friendly, cost-effective, easy-to-use and efficient air mobility solution one step closer to reality when we unveiled our first passenger-carrying AAV in 2016. Our AAVs require minimal space for vertical take-off and landing, enabling urban travel to expand to the three-dimensional space.
While the sky above has always been a possibility, we brought a safe, autonomous, eco-friendly, cost-effective, easy-to-use and efficient air mobility solution one step closer to reality when we unveiled our first passenger-carrying pilotless eVTOL aircraft in 2016. Our eVTOL aircraft require minimal space for vertical take-off and landing, enabling urban travel to expand to the three-dimensional space.
We have a dedicated software technology group to lead the research and development of AAV software and algorithms. Our success has been driven by a passionate, visionary, tech-savvy and entrepreneurial management team with a unique combination of aviation, internet and software expertise. Our founder, chairman and chief executive officer, Mr.
We have a dedicated software technology group to lead the research and development of software and algorithms. 83 Table of Contents Our success has been driven by a passionate, visionary, tech-savvy and entrepreneurial management team with a unique combination of aviation, internet and software expertise. Our founder, chairman and chief executive officer, Mr.
Designed for short-to-medium-range low-altitude intra-city air mobility, it has a suitable flight performance for urban environment, the maximum flight range of 30km, the maximum flight time of 25min, and the cruising speed of 100km/h.
Designed for short-to-medium-range low-altitude intra-city air mobility, it has a suitable flight performance for urban environment, the maximum flight range of 30km, the maximum flight time of 25min, and the maximum speed of 130km/h.
In July 2021, the EH216-F has passed a comprehensive 10-month technical examination to prove its reliability and performance through 52 different types of tests by the China National Fire-Fighting Equipment Quality Supervision Testing Center, which is under the Ministry of Emergency Management of China. The EH216-L is an electric logistics AAV launched in September 2020.
In July 2021, the EH216-F has passed a comprehensive 10-month technical examination to prove its reliability and performance through 52 different types of tests by the China National Fire-Fighting Equipment Quality Supervision Testing Center, which is under the Ministry of Emergency Management of China. The EH216-L is an aerial logistics eVTOL aircraft launched in September 2020.
With the delivery record unparalleled by others, we are a pioneer in the market and a leading player in the global UAM industry. 71 Table of Contents In December 2019, EHang was successfully listed on Nasdaq following an initial public offering, becoming the world’s first publicly traded company in the UAM industry.
With the delivery record unparalleled by others, we are a pioneer in the market and a leading player in the global UAM industry. In December 2019, EHang was successfully listed on Nasdaq following an initial public offering, becoming the world’s first publicly traded company in the UAM industry.
E-Ports can locate at the rooftop, on mountains, near to parking lots, subway or railway stations, airports or harbors, so as to seamlessly connect with other transportation nodes to expand the three-dimensional travel networks. 77 Table of Contents The scale of each E-Port is determined by the customer demands, density of flight routes and traffic volumes.
Our E-Ports can locate flexibly at the rooftop, on mountains, near to parking lots, subway or railway stations, airports or harbors, so as to seamlessly connect with other transportation nodes to expand the three-dimensional travel networks. The scale of each E-Port is determined by the customer demands, density of flight routes and traffic volumes.

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Market for Common Equity — stock, dividends, buybacks

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Biggest changeFor the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in thousands, except for percentages) Total revenues 180,093 100.0 56,807 100.0 44,317 6,425 100.0 Costs of revenues (1) (73,914 ) (41.0 ) (20,777 ) (36.6 ) (15,098 ) (2,189 ) (34.1 ) Gross profit 106,179 59.0 36,030 63.4 29,219 4,236 65.9 Operating expenses: Sales and marketing expenses (1) (37,186 ) (20.7 ) (43,229 ) (76.1 ) (53,116 ) (7,701 ) (119.9 ) General and administrative expenses (1) (61,613 ) (34.2 ) (187,388 ) (329.9 ) (151,065 ) (21,902 ) (340.9 ) Research and development expenses (1) (105,252 ) (58.4 ) (137,148 ) (241.4 ) (135,082 ) (19,585 ) (304.8 ) Total operating expenses (204,051 ) (113.3 ) (367,765 ) (647.4 ) (339,263 ) (49,188 ) (765.6 ) Other operating income 6,576 3.6 11,199 19.7 6,094 884 13.8 Operating loss (91,296 ) (50.7 ) (320,536 ) (564.3 ) (303,950 ) (44,068 ) (685.9 ) Other (expense) income: Interest and investment income 3,795 2.1 5,143 9.1 4,669 677 10.5 Interest expenses (2,337 ) (1.3 ) (1,803 ) (3.2 ) (3,819 ) (554 ) (8.6 ) Foreign exchange loss (333 ) (0.2 ) (827 ) (1.5 ) (1,488 ) (216 ) (3.3 ) Other income 1,227 0.7 6,086 10.7 1,944 282 4.4 Other expense (3,127 ) (1.7 ) (1,549 ) (2.7 ) (26,804 ) (3,886 ) (60.5 ) Total other (expense) income (775 ) (0.4 ) 7,050 12.4 (25,498 ) (3,697 ) (57.5 ) 114 Table of Contents For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in thousands, except for percentages) Loss before income tax and income (loss) from equity method investment (92,071 ) (51.1 ) (313,486 ) (551.8 ) (329,448 ) (47,765 ) (743.4 ) Income tax expenses (206 ) (0.1 ) (134 ) (0.2 ) (79 ) (11 ) (0.2 ) Loss before income (loss) from equity method investment (92,277 ) (51.2 ) (313,620 ) (552.1 ) (329,527 ) (47,776 ) (743.6 ) Income (loss) from equity method investment 236 0.1 (276 ) (0.5 ) 196 28 0.5 Net loss (92,041 ) (51.1 ) (313,896 ) (552.6 ) (329,331 ) (47,748 ) (743.1 ) Note: (1) Share-based compensation expense was allocated in costs of revenues and operating expenses as follows: For the Year Ended December 31, 2020 2021 2022 RMB RMB RMB US$ (in thousands, except share and share related data) Costs of revenues 2,443 — — — Sales and marketing expenses 10,883 18,327 22,125 3,208 General and administrative expenses 14,453 71,147 38,452 5,575 Research and development expenses 27,078 31,657 36,321 5,266 Total 54,857 121,131 96,898 14,049 Year ended December 31, 2022 compared with year ended December 31, 2021 Revenues Our total revenues decreased by 22.0% from RMB56.8 million in 2021 to RMB44.3 (US$6.4 million) in 2022, as we have been strategically transitioning from a product sales centric model into an integrated model of both product sales and AAV operational flight services, and we have been progressing the certification process for EH216-S.
Biggest changeThe results of operations in any particular period are not necessarily indicative of our future trends. 115 Table of Contents For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (in thousands, except for percentages) Total revenues 56,807 100.0 44,317 100.0 117,426 16,539 100.0 Costs of revenues (1) (20,777 ) (36.6 ) (15,098 ) (34.1 ) (42,115 ) (5,932 ) (35.9 ) Gross profit 36,030 63.4 29,219 65.9 75,311 10,607 64.1 Operating expenses: Sales and marketing expenses (1) (43,229 ) (76.1 ) (53,116 ) (119.9 ) (60,389 ) (8,506 ) (51.4 ) General and administrative expenses (1) (187,388 ) (329.9 ) (151,065 ) (340.9 ) (150,092 ) (21,140 ) (127.8 ) Research and development expenses (1) (137,148 ) (241.4 ) (135,082 ) (304.8 ) (167,315 ) (23,566 ) (142.5 ) Total operating expenses (367,765 ) (647.4 ) (339,263 ) (765.6 ) (377,796 ) (53,212 ) (321.7 ) Other operating income 11,199 19.7 6,094 13.8 6,233 878 5.3 Operating loss (320,536 ) (564.3 ) (303,950 ) (685.9 ) (296,252 ) (41,727 ) (252.3 ) Other (expenses) income: Interest and investment income 5,143 9.1 4,669 10.5 8,484 1,195 7.2 Interest expenses (1,803 ) (3.2 ) (2,145 ) (8.6 ) (2,930 ) (413 ) (2.5 ) Amortization of debt discounts — — (1,674 ) (3.8 ) (12,023 ) (1,693 ) (10.2 ) Foreign currency exchange (losses) gains, net (827 ) (1.5 ) (1,488 ) (3.3 ) 394 55 0.3 Other non-operating income 6,086 10.7 1,944 4.4 1,966 277 1.7 Other non-operating expenses (1,549 ) (2.7 ) (26,804 ) (60.5 ) (214 ) (30 ) (0.2 ) Total other (expenses) income 7,050 12.4 (25,498 ) (57.5 ) (4,323 ) (609 ) (3.7 ) Loss before income tax and (loss) income from equity method investment (313,486 ) (551.8 ) (329,448 ) (743.4 ) (300,575 ) (42,336 ) (256.0 ) Income tax expenses (134 ) (0.2 ) (79 ) (0.2 ) (206 ) (29 ) (0.2 ) Loss before (loss) income from equity method investment (313,620 ) (552.1 ) (329,527 ) (743.6 ) (300,781 ) (42,365 ) (256.1 ) (Loss) income from equity method investment (276 ) (0.5 ) 196 0.5 (1,560 ) (220 ) (1.3 ) Net loss (313,896 ) (552.6 ) (329,331 ) (743.1 ) (302,341 ) (42,585 ) (257.5 ) Note: (1) Share-based compensation expense was allocated in costs of revenues and operating expenses as follows: 116 Table of Contents For the Year Ended December 31, 2021 2022 2023 RMB RMB RMB US$ (in thousands, except share and share related data) Costs of revenues — — — — Sales and marketing expenses 18,327 22,125 18,958 2,670 General and administrative expenses 71,147 38,452 79,327 11,173 Research and development expenses 31,657 36,321 53,200 7,493 Total 121,131 96,898 151,485 21,336 Year ended December 31, 2023 compared to year ended December 31, 2022 Revenues Our total revenues increased by 165.0% from RMB44.3 in 2022 to RMB117.4 million (US$16.5 million) in 2023, primarily due to the increase in the sales volume of EH216 series products.
Since the smart city management solutions are on a project basis with different individual transaction values depending on the project nature, project size, etc. Revenues from smart city management solutions may be more concentrated in certain years or periods, and therefore are subject to greater period-to-period fluctuations.
Since the smart city management solutions are on a project basis with different individual transaction values depending on the project nature, project size, etc., revenues from smart city management solutions may be more concentrated in certain years or periods, and therefore are subject to greater period-to-period fluctuations.
Our PRC subsidiaries are required to set aside at least 10% of its after-tax profits after making up previous years’ accumulated losses each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. These reserves are not distributable as cash dividends.
Our PRC subsidiaries are required to set aside at least 10% of their after-tax profits after making up previous years’ accumulated losses each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. These reserves are not distributable as cash dividends.
The performance obligation under the contract is the delivery of AAVs, which is satisfied at a point in time, in general upon our receipt of acknowledgement receipts from customers or under some circumstances upon the AAVs have been shipped to the contractually agreed location when the products are sold to customers outside PRC.
The performance obligation under the contract is the delivery of products, which is satisfied at a point in time, in general upon our receipt of acknowledgement receipts from customers or under some circumstances upon the products have been shipped to the contractually agreed location when the products are sold to customers outside PRC.
The changes in operating assets and liabilities primarily included an increase of RMB10.1 million (US$1.5 million) in accounts receivable in relation to the receivables that we are entitled to receive, an increase of RMB2.3 million (US$0.3 million) in inventories in relation to procurement of materials for production and finished goods, an increase of RMB22.9 million (US$3.3 million) in prepayments in relations of prepayments to suppliers and other service providers, and a decrease of RMB10.1 million (US$1.5 million) in accounts payable in relation to payments for purchase of materials and offset mainly by a decrease of RMB1.3 million (US$0.2 million) in amount due from a related party in relation to the receipt of outstanding payment for sale of product, and an increase of RMB4.5 million (US$0.7 million) in contract liabilities in relation to more payments received before the sale of products or services to customers, and an increase of RMB36.3 million (US$5.3 million) which was mainly due to the estimated provision of US$3.375 million for an employment dispute.
The changes in operating assets and liabilities primarily included an increase of RMB10.1 million in accounts receivable in relation to the receivables that we are entitled to receive, an increase of RMB2.3 million in inventories in relation to procurement of materials for production and finished goods, an increase of RMB22.9 million in prepayments in relations of prepayments to suppliers and other service providers, and a decrease of RMB10.1 million in accounts payable in relation to payments for purchase of materials and offset mainly by a decrease of RMB1.3 million in amount due from a related party in relation to the receipt of outstanding payment for sale of product, and an increase of RMB4.5 million in contract liabilities in relation to more payments received before the sale of products or services to customers, and an increase of RMB36.3 million which was mainly due to the estimated provision of US$3.375 million for an employment dispute.
Risk Factors—Risks Relating to Doing Business in China—We may not be able to obtain certain benefits under the relevant tax treaty on dividends paid by our PRC subsidiaries to us through our Hong Kong subsidiary.” 112 Table of Contents The EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “de facto management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its global income.
Risk Factors—Risks Relating to Doing Business in China—We may not be able to obtain certain benefits under the relevant tax treaty on dividends paid by our PRC subsidiaries to us through our Hong Kong subsidiary.” The EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “de facto management body” is located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its global income.
Our critical accounting estimates are described below. The critical accounting estimates should be read in conjunction with our risk factors as disclosed in “Item 3. Key Information—D. Risk Factors.” See Note 2 to our consolidated financial statements for the year ended December 31, 2022 for more information on our critical accounting policies.
Our critical accounting estimates are described below. The critical accounting estimates should be read in conjunction with our risk factors as disclosed in “Item 3. Key Information—D. Risk Factors.” See Note 2 to our consolidated financial statements for the year ended December 31, 2023 for more information on our critical accounting policies.
The purchase price for aerial media solution packages consists of small-sized aerial media AAVs or component packages, related software, maintenance and/or training services, etc. Others. We generate other revenues mainly from stand-alone sales of consumer drones and their components and spare parts.
The purchase price for aerial media solution packages consists of small-sized aerial media UAVs or component packages, related software, maintenance and/or training services, etc. Others. We generate other revenues mainly from stand-alone sales of consumer drones and their components and spare parts.
Other than as shown above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2022. Off-Balance Sheet Arrangements We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties.
Other than as shown above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2023. Off-Balance Sheet Arrangements We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties.
We recognize revenues from aerial media solutions when the aerial media performance is fulfilled by us or customers purchase aerial media solution packages from us. The service fee for each performance is determined mainly by the length of performance, complexity, number of AAVs involved, manpower and regulatory requirements.
Aerial media solutions . We recognize revenues from aerial media solutions when the aerial media performance is fulfilled by us or customers purchase aerial media solution packages from us. The service fee for each performance is determined mainly by the length of performance, complexity, number of UAVs involved, manpower and regulatory requirements.
Revenues from air mobility solutions consist of revenues from (i) sales of the EH216 series AAVs and (ii) provision of logistics services. Revenues from sales of the EH216 series AAVs are based on firm customer orders with fixed terms and conditions, including pricing, net of discounts, if any.
Revenues from air mobility solutions consist of revenues from (i) sales of the EH216 series products and (ii) provision of logistics services. Revenues from sales of the EH216 series products are based on firm customer orders with fixed terms and conditions, including pricing, net of discounts, if any.
In addition, payments of dividends from Ehfly Technology to our company are not subject to any withholding tax in Hong Kong. No provision for Hong Kong profits tax was made as we had no estimated assessable profit that was subject to Hong Kong profits tax during 2022.
In addition, payments of dividends from Ehfly Technology to our company are not subject to any withholding tax in Hong Kong. No provision for Hong Kong profits tax was made as we had no estimated assessable profit that was subject to Hong Kong profits tax during 2023.
We expect that our costs of revenues will increase in the foreseeable future as we increase our AAV sales volume and expand our commercial solutions business. Operating expenses Our total operating expenses consist of sales and marketing expenses, general and administrative expenses and research and development expenses.
We expect that our costs of revenues will increase in the foreseeable future as we increase our product sales volume and expand our commercial solutions business. Operating expenses Our total operating expenses consist of sales and marketing expenses, general and administrative expenses and research and development expenses.
Interest and investment income We recorded interest and investment income of RMB4.7 million (US$0.7 million) in 2022 and 5.1 million in 2021, both of which consisted primarily of interest earned from our cash and cash equivalents, short-term investments and long-term loans receivable .
Interest and investment income We recorded interest and investment income of RMB4.7 million in 2022 and 5.1 million in 2021, both of which consisted primarily of interest earned from our cash and cash equivalents, short-term investments and long-term loans receivable.
Our WFOE, the VIE and their respective subsidiaries in China had set aside a cumulative amount of RMB1.2 million (US$0.2 million) for such statutory reserve funds as of December 31, 2022.
Our WFOE, the VIE and their respective subsidiaries in China had set aside a cumulative amount of RMB1.2 million (US$0.2 million) for such statutory reserve funds as of December 31, 2023.
Smart city management solutions mainly include (i) design and development of command-and-control systems and related facilities, and (ii) sale of AAVs and other related products. For design and development of command-and-control systems and related facilities, we recognize revenues using a percentage of completion method.
Smart city management solutions mainly include (i) design and development of command-and-control systems and related facilities, and (ii) sale of UAVs and other related products. For design and development of command-and-control systems and related facilities, we recognize revenues using a percentage of completion method.
We plan to fund our future capital expenditures with our existing cash balance. Material Cash Requirements Our material cash requirements as of December 31, 2022 and any subsequent interim period primarily include operating lease commitments, short-term bank loans, short-term debt, long-term bank loans, settlement payments, mandatorily redeemable non-controlling interests and investment obligations.
We plan to fund our future capital expenditures with our existing cash balance. Material Cash Requirements Our material cash requirements as of December 31, 2023 and any subsequent interim period primarily include operating lease commitments, short-term bank loans, long-term bank loans, settlement payments, mandatorily redeemable non-controlling interests and investment obligations.
Gross profit and gross profit margin As a result of the foregoing, our gross profit decreased by 18.9% from RMB36.0 million in 2021 to RMB29.2 million (US$4.2 million) in 2022. However, our gross profit margin increased from 63.4% in 2021 to 65.9% in 2022 primarily due to higher averaging selling price of EH216 AAVs in 2022.
Gross profit and gross profit margin As a result of the foregoing, our gross profit decreased by 18.9% from RMB36.0 million in 2021 to RMB29.2 million in 2022. However, our gross profit margin increased from 63.4% in 2021 to 65.9% in 2022 primarily due to higher averaging selling price of EH216 products in 2022.
Our WFOE has not paid dividends and will not be able to pay dividends until it generates accumulated profits and meets the requirements for statutory reserve funds. 123 Table of Contents Inflation Since our inception, inflation in China has not materially affected our results of operations.
Our WFOE has not paid dividends and will not be able to pay dividends until it generates accumulated profits and meets the requirements for statutory reserve funds. Inflation Since our inception, inflation in China has not materially affected our results of operations.
The changes in operating assets and liabilities primarily included an increase of RMB36.0 million (US$5.6 million) in inventories in line with our business expansion, an increase of RMB13.0 million (US$2.0 million) in prepayments, and a decrease of RMB7.7 million (US$1.2 million) in accounts payable and offset mainly by a decrease of RMB39.3 million (US$6.2 million) in accounts receivable resulting from our efforts in collections from customers, a decrease of RMB1.3 million (US$0.2 million) in amount due from a related party, and an increase of RMB7.1 million (US$1.1 million) in contract liabilities, and an increase of RMB11.4 million (US$1.8 million) which was mainly due to an increase in employee benefits-related liabilities resulting from our increased employee headcount.
The changes in operating assets and liabilities primarily included an increase of RMB36.0 million in inventories in line with our business expansion, an increase of RMB13.0 million in prepayments, and a decrease of RMB7.7 million in accounts payable and offset mainly by a decrease of RMB39.3 million in accounts receivable resulting from our efforts in collections from customers, a decrease of RMB1.3 million in amount due from a related party, and an increase of RMB7.1 million in contract liabilities, and an increase of RMB11.4 million which was mainly due to an increase in employee benefits-related liabilities resulting from our increased employee headcount.
General and administrative expenses decreased by 19.4% from RMB187.4 million in 2021 to RMB151.1 million (US$21.9 million) in 2022, mainly due to decrease in share-based compensation expenses for a certain portion of share-based awards vested in 2021 by RMB32.7 million (US$4.7 million), decrease in provisions for accounts receivable byRMB13.3 million (US$1.9 million) while resulting in ending balance of allowance for doubtful accounts increasing from RMB69.4 million further to RMB115.4 million (US$16.7 million), as well as reduction in professional services fees by RMB3.4 million (US$0.5 million), while partially offset by increase in salaries and benefits costs for increased headcounts by RMB6.1 million (US$0.9 million).
General and administrative expenses decreased by 19.4% from RMB187.4 million in 2021 to RMB151.1 million in 2022, mainly due to decrease in share-based compensation expenses for a certain portion of share-based awards vested in 2021 by RMB32.7 million, decrease in provisions for accounts receivable byRMB13.3 million while resulting in ending balance of allowance for doubtful accounts increasing from RMB69.4 million further to RMB115.4 million, as well as reduction in professional services fees by RMB3.4 million, while partially offset by increase in salaries and benefits costs for increased headcounts by RMB6.1 million.
Material Modifications to the Rights of Security Holders and Use of Proceeds—Use of Proceeds.” 119 Table of Contents A majority of our revenues have been, and we expect they are likely to continue to be, in the form of Renminbi.
Material Modifications to the Rights of Security Holders and Use of Proceeds—Use of Proceeds.” A majority of our revenues have been, and we expect they are likely to continue to be, in the form of Renminbi.
Investing Activities Net cash provided by investing activities in 2022 was RMB56.4 million (US$8.2 million), mainly consisting of net proceeds of short-term investments of RMB74.6 million (US$10.8 million) and purchase of property and equipment of RMB12.2 million (US$1.8 million) for both Yunfu production facility and new headquarter office.
Net cash provided by investing activities in 2022 was RMB56.4 million, mainly consisting of net proceeds of short-term investments of RMB74.6 million and purchase of property and equipment of RMB12.2 million for both Yunfu production facility and new headquarter office.
Our revenues from air mobility solutions in 2022 were mainly derived from sales of the EH216 series AAVs to customers mainly operated on a limited trial basis in tourism locations in China for testing, training and demonstration purposes.
Our revenues from air mobility solutions were mainly derived from sales of the EH216 series products to customers mainly operated on a limited trial basis in tourism locations in China for testing, training, demonstration and trial operation purposes.
Our actual results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those we describe under “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report. A. Operating Results. Overview We are an autonomous aerial vehicle technology platform company.
Our actual results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those we describe under “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report. A. Operating Results. Overview We are an urban air mobility technology platform company.
For example, we had raised a total of US$50 million from the sale and issuance of our Class A ordinary shares in private placements as of the date of this annual report, including US$40 million in 2021 and US$10 million in 2023.
For example, we had raised a total of US$73 million from the sale and issuance of our Class A ordinary shares in private placements as of the date of this annual report, including US$40 million in 2021 and US$33 million in 2023.
Other operating income Other operating income decreased by 45.6% from RMB11.2 million in 2021 to RMB6.1 million (US$0.9 million) in 2022, primarily due to decrease in government subsidies.
Other operating income Other operating income decreased by 45.6% from RMB11.2 million in 2021 to RMB6.1 million in 2022, primarily due to decrease in government subsidies.
This amount was primarily attributable to net loss of RMB313.9 million (US$49.3 million), adjusted to add back certain non-cash expenses, principally share-based compensation of RMB121.1 million (US$19.0 million), allowance for doubtful amounts of RMB56.5 million (US$8.9 million) and depreciation and amortization of RMB7.8 million (US$1.2 million), and further adjusted upwards due to changes in operating assets and liabilities.
This amount was primarily attributable to net loss of RMB313.9 million, adjusted to add back certain non-cash expenses, principally share-based compensation of RMB121.1 million, allowance for doubtful amounts of RMB56.5 million and depreciation and amortization of RMB7.8 million, and further adjusted upwards due to changes in operating assets and liabilities.
Net cash used in investing activities in 2021 was RMB33.4 million, mainly consisting of net purchase of short-term investments of RMB17.0 million (US$2.7 million) and purchase of property and equipment of RMB15.6 million (US$2.5 million) for Yunfu production facility.
Net cash used in investing activities in 2021 was RMB33.4 million, mainly consisting of net purchase of short-term investments of RMB17.0 million and purchase of property and equipment of RMB15.6 million for Yunfu production facility.
This amount was primarily attributable to net loss of RMB329.3 million (US$47.8 million), adjusted to add back certain non-cash expenses, principally share-based compensation of RMB96.9 million (US$14.0 million), allowance for doubtful amounts of RMB47.8 million (US$6.9 million), amortization of right-of-use assets of RMB12.0 million (US$1.7 million)and depreciation of property and equipment of RMB8.5 million (US$1.2 million), and further adjusted upwards due to changes in operating assets and liabilities.
This amount was primarily attributable to net loss of RMB329.3 million, adjusted to add back certain non-cash expenses, principally share-based compensation of RMB96.9 million, allowance for doubtful amounts of RMB47.8 million, amortization of right-of-use assets of RMB12.0 million and depreciation of property and equipment of RMB8.5 million, and further adjusted upwards due to changes in operating assets and liabilities.
The decrease was mainly due to less expenditures on EH216 AAV’s hardware and software upgrades and focus more on type certification processes, while offset by increase in share-based compensation for new grant of share-based awards by RMB4.7 million (US$0.7 million) and salaries and benefits costs by RMB6.4 million (US$0.9 million).
The decrease was mainly due to less expenditures on EH216’s hardware and software upgrades and focus more on type certification processes, while offset by increase in share-based compensation for new grant of share-based awards by RMB4.7 million and salaries and benefits costs by RMB6.4 million.
Research and development expenses . Research and development expenses slightly decreased by 1.5% from RMB137.2 million in 2021 to RMB135.1 million (US$19.6 million) in 2022.
Research and development expenses . Research and development expenses slightly decreased by 1.5% from RMB137.2 million in 2021 to RMB135.1 million in 2022.
See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.” 120 Table of Contents Net cash used in operating activities in 2021 was RMB121.6 million.
See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.” Net cash used in operating activities in 2021 was RMB121.6 million.
Our sales and marketing expenses primarily consist of advertising and promotion expenses, payroll and related expenses for personnel in sales and marketing. 111 Table of Contents General and administrative expenses.
Our sales and marketing expenses primarily consist of advertising and promotion expenses, payroll and related expenses for personnel in sales and marketing. General and administrative expenses.
According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index for December 2020, 2021 and 2022 were increases of 0.2%, 1.5% and 1.8%, respectively.
According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index were increases of 1.5% and 1.8% for December 2021 and 2022, respectively, and decrease of 0.3% for December 2023.
Revenues from aerial media solutions increased by 21.9% from RMB1.1 million in 2021 to RMB1.3 million (US$0.2 million) in 2022. 115 Table of Contents Costs of revenues Our costs of revenues decreased by 27.3% from RMB20.8 million in 2021 to RMB15.1 million (US$2.2 million) in 2022, which resulted from and was in line with the total revenues.
Revenues from aerial media solutions increased by 21.9% from RMB1.1 million in 2021 to RMB1.3 million in 2022. Costs of revenues Our costs of revenues decreased by 27.3% from RMB20.8 million in 2021 to RMB15.1 million in 2022, which resulted from and was in line with the total revenues.
Significant judgment is required in determining the valuation allowance. In assessing the need for a valuation allowance, we consider all sources of taxable income, including projected future taxable income, reversing taxable temporary differences and ongoing tax planning strategies.
In assessing the need for a valuation allowance, we consider all sources of taxable income, including projected future taxable income, reversing taxable temporary differences and ongoing tax planning strategies.
Capital Expenditures Our capital expenditures were RMB9.1 million, RMB15.6 million and RMB13.8 million (US$2.0 million) in 2020, 2021 and 2022, respectively, which were mainly used for the purchase of property and equipment for the establishment and installation of equipment at our own and new manufacturing facility in Yunfu and decorations for the new offices of our headquarters.
Capital Expenditures Our capital expenditures were RMB15.7 million, RMB13.8 million and RMB9.1 million (US$1.3 million) in 2021, 2022 and 2023, respectively, which were mainly used for the purchase of property and equipment for the establishment and installation of equipment at our own and new manufacturing facility in Yunfu and decorations for the new offices of our headquarters.
Revenues from air mobility solutions decreased by 16.1% from RMB48.2 million in 2021 to RMB40.4 million (US$5.9 million) in 2022. We sold 21 units of the EH216 series AAVs in 2022, compared with 30 units in 2021. Revenues from smart city management solutions decreased by 70.1% from RMB7.1 million in 2021 to RMB2.1 million (US$0.3 million) in 2022.
Revenues from air mobility solutions decreased by 16.1% from RMB48.2 million in 2021 to RMB40.4 million in 2022. We sold 21 units of the EH216 series products in 2022, compared with 30 units in 2021. Revenues from smart city management solutions decreased by 70.1% from RMB7.1 million in 2021 to RMB2.1 million in 2022.
Sales and marketing expenses increased by 22.9% from RMB43.2 million in 2021 to RMB53.1 million (US$7.7 million) in 2022, primarily due to increase in share-based compensation expenses for new grant of share-based awards by RMB3.8 million (US$0.6 million) and salaries and benefits costs for increased headcounts by RMB2.9 million (US$0.4 million) as well as increase in marketing expenses for promotional activities in China and overseas markets by RMB2.7 million (US$0.4 million).
Sales and marketing expenses increased by 22.9% from RMB43.2 million in 2021 to RMB53.1 million in 2022, primarily due to increase in share-based compensation expenses for new grant of share-based awards by RMB3.8 million and salaries and benefits costs for increased headcounts by RMB2.9 million as well as increase in marketing expenses for promotional activities in China and overseas markets by RMB2.7 million. 119 Table of Contents General and administrative expenses .
We are pioneering the future of transportation through our proprietarily developed AAVs, related commercial solutions and services. We, the VIE and the VIE’s subsidiaries design, develop, manufacture, sell and operate AAVs and their supporting systems and infrastructure for a broad range of industries and applications, including passenger transportation, logistics, smart city management and aerial media solutions.
We are pioneering the future of transportation through our proprietarily developed pilotless eVTOL aircraft and other UAVs, related commercial solutions and services. 111 Table of Contents We, the VIE and the VIE’s subsidiaries design, develop, manufacture, sell and operate UAVs and their supporting systems and infrastructure for a broad range of industries and applications, including passenger transportation, logistics, smart city management and aerial media solutions.
Operating expenses Our operating expenses decreased by 7.8% from RMB367.8 million in 2021 to RMB339.3 million (US$49.2 million) in 2022, primarily due to a decrease in share-based compensation expenses by RMB24.2 million (US$3.5 million), decrease in provisions for accounts receivable by RMB13.3 million (US$1.9 million) as well as decrease in professional services fees by RMB3.4 million (US$0.5 million).
Operating expenses Our operating expenses decreased by 7.8% from RMB367.8 million in 2021 to RMB339.3 million in 2022, primarily due to a decrease in share-based compensation expenses by RMB24.2 million, decrease in provisions for accounts receivable by RMB13.3 million as well as decrease in professional services fees by RMB3.4 million. Sales and marketing expenses.
Year ended December 31, 2021 compared with year ended December 31, 2020 Revenues Our total revenues decreased by 68.5% from RMB180.1 million in 2020 to RMB56.8 (US$8.9 million) in 2021, as we have been strategically transitioning from a product sales centric model into an integrated model of both product sales and AAV operational flight services, and we have been progressing the certification process for EH216-S.
Year ended December 31, 2022 compared with year ended December 31, 2021 Revenues Our total revenues decreased by 22.0% from RMB56.8 million in 2021 to RMB44.3 in 2022, as we have been strategically transitioning from a product sales centric model into an integrated model of both product sales and operational flight services, and we have been progressing the certification process for EH216-S.
The significant increase was based on our assessment as of December 31, 2022, with our judgments and estimates that the impacts from the continuous COVID-19 epidemic and control measures in China adversely affected the business of customers and the ability to collect from the customers.
The significant increase was based on our assessment as of December 31, 2023, with our judgments and estimates that the impacts from the continuous COVID-19 epidemic and control measures in China adversely affected the business of customers and the ability to collect from the customers. Changes in these estimates and assumptions could materially affect the allowance losses.
As of December 31, 2022, the total registered capital of the WFOE, the VIE and their respective subsidiaries in China amounted to RMB1,192.2 million (US$173.0 million), implying a maximum total amount of RMB596.1 million (US$86.5 million) in statutory reserve funds to be set aside from their after-tax profits, if any.
As of December 31, 2023, the total registered capital of the WFOE, the VIE and their respective subsidiaries in China amounted to RMB1,242.8 million (US$175.0 million), implying a maximum total amount of RMB621.4 million (US$87.5 million) in statutory reserve funds to be set aside from their after-tax profits, if any.
We aim to make it safe and convenient for both passengers and goods to take to the air. 109 Table of Contents We delivered our first passenger-carrying AAV to a customer in March 2018. Since then, we and the VIE had delivered 185 units of the EH216 series AAVs as of December 31, 2022.
We aim to make it safe and convenient for both passengers and goods to take to the air. We delivered our first passenger-carrying pilotless eVTOL aircraft to a customer in March 2018. Since then, we and the VIE had delivered 237 units of the EH216 series products as of December 31, 2023.
Dividends, interests, rent or royalties payable by our PRC subsidiaries, to non-PRC resident enterprises, and proceeds from any such non-resident enterprise investor’s disposition of assets (after deducting the net value of such assets) shall be subject to 10% withholding tax, unless the respective non-PRC resident enterprise’s jurisdiction of incorporation has a tax treaty or arrangements with PRC that provides for a reduced withholding tax rate or an exemption from withholding tax. 113 Table of Contents Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods presented, both in absolute amounts and as percentages of our total revenues, for the periods presented.
Dividends, interests, rent or royalties payable by our PRC subsidiaries, to non-PRC resident enterprises, and proceeds from any such non-resident enterprise investor’s disposition of assets (after deducting the net value of such assets) shall be subject to 10% withholding tax, unless the respective non-PRC resident enterprise’s jurisdiction of incorporation has a tax treaty or arrangements with PRC that provides for a reduced withholding tax rate or an exemption from withholding tax.
Risk Factors—Risks Relating to Doing Business in China—PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of our offshore offerings to make loans to or make additional capital contributions to our PRC subsidiaries, the VIE and the VIE’s subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” The following table sets forth a summary of our cash flows for the periods presented: For the Year Ended December 31, 2020 2021 2022 RMB RMB RMB US$ (in thousands) Net cash used in operating activities (151,696 ) (121,629 ) (173,458 ) (25,148 ) Net cash (used in) provided by investing activities (66,209 ) (33,401 ) 56,400 8,176 Net cash provided by financing activities 42,680 266,947 106,740 15,475 Effect of exchange rate changes on cash, cash equivalents and restricted cash (6,264 ) (5,067 ) 12,605 1,828 Net increase (decrease) in cash, cash equivalents and restricted cash (181,489 ) 106,850 2,287 332 Cash, cash equivalents and restricted cash at the beginning of the year 321,662 140,173 247,023 35,815 Cash, cash equivalents and restricted cash at the end of the year 140,173 247,023 249,310 36,147 Operating Activities Net cash used in operating activities in 2022 was RMB173.5 million (US$25.1 million).
Risk Factors—Risks Relating to Doing Business in China—PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of our offshore offerings to make loans to or make additional capital contributions to our PRC subsidiaries, the VIE and the VIE’s subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” The following table sets forth a summary of our cash flows for the periods presented: For the Year Ended December 31, 2021 2022 2023 RMB RMB RMB US$ (in thousands) Net cash used in operating activities (121,629 ) (173,458 ) (88,410 ) (12,452 ) Net cash (used in) provided by investing activities (33,401 ) 56,400 (128,692 ) (18,127 ) Net cash provided by financing activities 266,947 106,740 195,480 27,532 Effect of exchange rate changes on cash, cash equivalents and restricted cash (5,067 ) 12,605 562 80 Net increase (decrease) in cash, cash equivalents and restricted cash 106,850 2,287 (21,060 ) (2,967 ) Cash, cash equivalents and restricted cash at the beginning of the year 140,173 247,023 249,310 35,115 Cash, cash equivalents and restricted cash at the end of the year 247,023 249,310 228,250 32,148 Operating Activities Net cash used in operating activities in 2023 was RMB88.4 million (US$12.5 million).
In 2022, revenues generated by air mobility solutions, smart city management solutions and aerial media solutions were RMB40.4 million (US$5.9 million), RMB2.1 million (US$0.3 million) and RMB1.3 million (US$0.2 million), representing 91.2%, 4.8% and 3.0% of our total revenues, respectively.
In 2023, revenues generated by air mobility solutions, smart city management solutions and aerial media solutions were RMB104.7 million (US$14.8 million), RMB1.3 million (US$0.2 million) and RMB11.1 million (US$1.6 million), representing 89.2%, 1.1% and 9.4% of our total revenues, respectively.
We are not able to hedge our exposure to higher inflation in mainland China. C. Research and Development, Patents and Licenses, etc. See “Item 4. Information on the Company—B. Business Overview—Research and Development Capabilities” and “—Intellectual Property.” D. Trend Information.
We are not able to hedge our exposure to higher inflation in mainland China. 125 Table of Contents C. Research and Development, Patents and Licenses, etc. See “Item 4. Information on the Company—B. Business Overview—Research and Development Capabilities” and “—Intellectual Property.” D. Trend Information. Prior to January 1, 2023, accounts receivable are carried at net realizable value.
The EIT law also imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise, or FIE, to its immediate holding company outside China, if such immediate holding company is considered as a non-resident enterprise without any establishment or place within China or if the received dividends have no connection with the establishment or place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement.
The WFOE and the VIE have each been qualified as a high and new technology enterprise, or HNTE, and are eligible for a 15% preferential tax rate, from 2020 to 2025, and from 2019 to 2024, respectively. 114 Table of Contents The EIT law also imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise, or FIE, to its immediate holding company outside China, if such immediate holding company is considered as a non-resident enterprise without any establishment or place within China or if the received dividends have no connection with the establishment or place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement.
Interest expenses We recorded interest expenses of RMB3.8 million (US$0.6 million) in 2022 and RMB1.8 million in 2021, both of which were primarily related to bank loans and loans from third parties.
Interest expenses We recorded interest expenses of RMB2.9 million (US$0.4 million) in 2023 and RMB2.1 million in 2022, both of which were primarily related to bank loans and loans from third parties.
Changes in these estimates and assumptions could materially affect the allowance losses. 124 Table of Contents Valuation allowance for deferred tax assets We record a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized.
Valuation allowance for deferred tax assets We record a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. Significant judgment is required in determining the valuation allowance.
Financing Activities Net cash provided by financing activities in 2022 was RMB106.7 million (US$15.5 million), primarily attributable to RMB69.9 million (US$10.1 million) from an investor in connection with a private placement of our Class A ordinary shares which had closed in the first quarter of 2023, and net proceeds of RMB36.8 million (US$5.3 million) from bank loans. 121 Table of Contents Net cash provided by financing activities in 2021 was RMB266.9 million, primarily attributable to proceeds of RMB257.0 million (US$40.3 million) from issuance of Class A ordinary shares to a European asset management company in a private placement and net proceeds of RMB15.0 million (US$2.4 million) from bank loans.
Financing Activities Net cash provided by financing activities in 2023 was RMB195.5 million (US$27.5 million), primarily attributable to RMB250.2 million (US$35.2 million) from issuance of Class A ordinary shares, including to several strategic investors in connection with a US$23.0 million private placement which had closed in the third quarter of 2023, and net proceeds of RMB69.1 million (US$9.7 million) from short-term bank loans. 123 Table of Contents Net cash provided by financing activities in 2022 was RMB106.7 million, primarily attributable to RMB69.9 million from an investor in connection with a private placement of our Class A ordinary shares which had closed in the first quarter of 2023, and net proceeds of RMB36.8 million from bank loans.
The following table sets forth a breakdown of our total revenues in absolute amounts and percentages of our total revenues for the periods presented: For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in thousands, except for percentages) Revenues: Air mobility solutions 105,969 58.8 48,156 84.8 40,387 5,856 91.2 Smart city management solutions 8,282 4.6 7,135 12.6 2,133 309 4.8 Aerial media solutions 65,656 36.5 1,100 1.9 1,341 194 3.0 Others 186 0.1 416 0.7 456 66 1.0 Total 180,093 100.0 56,807 100.0 44,317 6,425 100.0 Air mobility solutions.
The following table sets forth a breakdown of our total revenues in absolute amounts and percentages of our total revenues for the periods presented: For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (in thousands, except for percentages) Revenues: Air mobility solutions 48,156 84.8 40,387 91.2 104,729 14,751 89.2 Smart city management solutions 7,135 12.6 2,133 4.8 1,300 183 1.1 Aerial media solutions 1,100 1.9 1,341 3.0 11,094 1,562 9.4 Others 416 0.7 456 1.0 303 43 0.3 Total 56,807 100.0 44,317 100.0 117,426 16,539 100.0 Air mobility solutions.
We expect that our revenues will increase after obtaining required certificates and approvals in China as we will continue to fulfill existing orders and pre-orders for the EH216 series AAVs, secure new orders for our air mobility solutions, provide air mobility operational services, offer smart city management and aerial media solutions and expand our commercial solutions and sales network.
As we have obtained the type certificate and standard airworthiness certificate for EH216-S from the CAAC in 2023 and further obtained the production certificate from the CAAC in April 2024, we expect that our revenues will increase in China and we will continue to fulfill existing orders and pre-orders for the EH216 series products, secure new orders for our air mobility solutions, provide air mobility operational services, offer smart city management and aerial media solutions and expand our commercial solutions and sales network.
The following table sets forth the components of our total operating expenses by amounts and percentages of operating expenses for the periods presented: For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in thousands, except for percentages) Sales and marketing expenses 37,186 18.2 43,229 11.7 53,116 7,701 15.7 General and administrative expenses 61,613 30.2 187,388 51.0 151,065 21,902 44.5 Research and development expenses 105,252 51.6 137,148 37.3 135,082 19,585 39.8 Total operating expenses 204,051 100.0 367,765 100.0 339,263 49,188 100.0 Sales and marketing expenses .
The following table sets forth the components of our total operating expenses by amounts and percentages of operating expenses for the periods presented: For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (in thousands, except for percentages) Sales and marketing expenses 43,229 11.7 53,116 15.7 60,389 8,506 16.0 General and administrative expenses 187,388 51.0 151,065 44.5 150,092 21,140 39.7 Research and development expenses 137,148 37.3 135,082 39.8 167,315 23,566 44.3 Total operating expenses 367,765 100.0 339,263 100.0 377,796 53,212 100.0 113 Table of Contents Sales and marketing expenses .
The increases in inventories and prepayments and other current assets were all primarily due to the growth of our business. Net cash used in operating activities in 2020 was RMB151.7 million.
The increases in inventories and prepayments and other current assets were all primarily due to the growth of our business.
As we provide smart city management solutions on a project basis with high individual transaction values, revenues from smart city management solutions may be more concentrated in certain years or periods, and therefore are subject to greater period-to-period fluctuations. 110 Table of Contents Aerial media solutions .
We typically enter into project contracts with customers, according to which they pay project fees based on the agreed schedule. As we provide smart city management solutions on a project basis with high individual transaction values, revenues from smart city management solutions may be more concentrated in certain years or periods, and therefore are subject to greater period-to-period fluctuations.
As of December 31, 2022, we had RMB249.3 million (US$36.1 million) in cash and cash equivalents and short-term investments, of which 53.6% were held in Renminbi and the remainder was held in U.S. dollars and other currencies, and of which 96.5% were held in the PRC.
As of December 31, 2023, we had RMB334.1 million (US$47.0 million) in cash and cash equivalents, short-term deposits, short-term investments and restricted short-term deposits, of which 49.8% were held in Renminbi and the remainder was held in U.S. dollars and other currencies, and of which 47.7% were held in the PRC.
As of December 31, 2021 and 2022, we had an accumulated deficit of RMB1,122.2 million and RMB1,450.4 million (US$210.3 million).
As of December 31, 2022 and 2023, we had an accumulated deficit of RMB1,450.4 million and RMB1,754.5 million (US$247.1 million).
As a Cayman Islands exempted company and offshore holding company, we are permitted under PRC laws and regulations to provide funding to our PRC subsidiaries only through loans or capital contributions, subject to the approval of government authorities and limits on the amount of capital contributions and loans.
Furthermore, capital account transactions, which include foreign direct investment and loans, must be approved by and/or registered with SAFE, its local branches and certain local banks. 121 Table of Contents As a Cayman Islands exempted company and offshore holding company, we are permitted under PRC laws and regulations to provide funding to our PRC subsidiaries only through loans or capital contributions, subject to the approval of government authorities and limits on the amount of capital contributions and loans.
Other expenses in 2022 were mainly attributable to the estimated provision of US$3.375 million for an employment dispute. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.” Income tax expenses Our income tax expenses decreased from RMB0.1 million in 2021 to RMB0.08 million (US$0.01 million) in 2022.
Other non-operating income Other non-operating income was RMB1.9 million in 2022 and RMB6.1 million in 2021. Other non-operating expenses Other non-operating expenses increased from RMB1.5 million in 2021 to RMB26.8 million in 2022. Other non-operating expenses in 2022 were mainly attributable to the estimated provision of US$3.375 million for an employment dispute. See “Item 8. Financial Information—A.
For the years ended December 31, 2020, 2021 and 2022, we incurred net loss of RMB92.0 million, RMB313.9 million and RMB329.3 million (US$47.7 million) and had net cash used in operating activities of RMB151.7 million, RMB121.6 million and RMB173.5 million (US$25.1 million). As of December 31, 2022, our cash and cash equivalents balance were RMB249.3 million (US$36.1 million).
For the years ended December 31, 2021, 2022 and 2023, we incurred net loss of RMB313.9 million, RMB329.3 million and RMB302.3 million (US$42.6 million) and had net cash used in operating activities of RMB121.6 million, RMB173.5 million and RMB88.4 million (US$12.5 million).
This amount was primarily attributable to net loss of RMB92.0 million, adjusted to add back certain non-cash expenses, principally share-based compensation of RMB54.9 million and depreciation and amortization of RMB6.2 million, allowance for doubtful accounts of RMB13.3 million, and further adjusted downwards due to changes in operating assets and liabilities.
This amount was primarily attributable to net loss of RMB302.3 million (US$42.6 million), adjusted to add back certain non-cash expenses, principally share-based compensation of RMB151.5 million (US$21.3 million), allowance for doubtful amounts of RMB13.7 million (US$1.9 million), depreciation of property and equipment of RMB12.4 million (US$1.8 million) and amortization of right-of-use assets of RMB8.1 million (US$1.1 million), and further adjusted upwards due to changes in operating assets and liabilities.
Interest and investment income We recorded interest and investment income of RMB5.1 million (US$0.8 million) in 2021 and 3.8 million in 2020, both of which consisted primarily of interest earned from our cash and cash equivalents, short-term investments and long-term loans receivable.
Interest and investment income We recorded interest and investment income of RMB8.5 million (US$1.2 million) in 2023 and RMB4.7 million in 2022, both of which consisted primarily of interest earned from our cash and cash equivalents, short-term deposits, restricted short-term deposits and short-term investments.
Costs of revenues Our costs of revenues decreased by 71.9% from RMB73.9 million in 2020 to RMB20.8 million (US$3.3 million) in 2021, which resulted from and was in line with the total revenues. 117 Table of Contents Gross profit and gross profit margin As a result of the foregoing, our gross profit decreased by 66.1% from RMB106.2 million in 2020 to RMB36.0 million (US$5.6 million) in 2021.
Costs of revenues Our costs of revenues increased by 178.9% from RMB15.1 million in 2022 to RMB42.1 million (US$5.9 million) in 2023, which was in line with the increase of total revenues as we sold more EH216 series products in 2023. 117 Table of Contents Gross profit and gross profit margin As a result of the foregoing, our gross profit increased by 157.7% from RMB29.2 million in 2022 to RMB75.3 million (US$10.6 million) in 2023.
As we continue to refine and commercialize our AAVs and air mobility solutions, we believe we will be able to capture addressable markets across multiple industries and develop AAV commercial applications in new industries. Our revenues decreased by 68.5% from RMB180.1 million in 2020 to RMB56.8 million in 2021, and decreased by 22% to RMB44.3 million (US$6.4 million) in 2022.
As we continue to refine and commercialize our products and air mobility solutions, we believe we will be able to capture addressable markets across multiple industries and develop UAM commercial applications in new industries.
Revenues from air mobility solutions decreased by 54.6% from RMB106.0 million in 2020 to RMB48.2 million (US$7.5 million) in 2021. We sold 30 units of the EH216 series AAVs in 2021, compared with 70 units in 2020. Revenues from smart city management solutions decreased by 13.8% from RMB8.3 million in 2020 to RMB7.1 million (US$1.1 million) in 2021.
Revenues from air mobility solutions increased by 159.3% from RMB40.4 million in 2022 to RMB104.7 million (US$14.8 million) in 2023. We sold 52 units of the EH216 series products in 2023, compared with 21 units in 2022. Revenues from smart city management solutions decreased by 39.1% from RMB2.1 million in 2022 to RMB1.3 million (US$0.2 million) in 2023.
However, there is uncertainty as to when we will obtain the type certificate of its EH216-S in the near term, which may materially and adversely affect the execution of our business plan. Our primary sources of liquidity have been proceeds from issuance of equity securities offerings, including private placements, as well as customer advances, short-term and long-term bank loans.
Our primary sources of liquidity have been proceeds from issuance of equity securities offerings, including private placements, as well as customer advances, short-term and long-term bank loans.
In 2022, we recognized interest expenses RMB1.7 million (US$0.2 million) as the amortization of debt discounts for the private placement transaction. 116 Table of Contents Other income Other income was RMB1.9 million (US$0.3 million) in 2022 and RMB6.1 million in 2021. Other expense Other expenses increased from RMB1.5 million in 2021 to RMB26.8 million (US$3.9 million) in 2022.
Amortization of debt discounts We recognized amortization of debt discounts of RMB12.0 million (US$1.7 million) in 2023 and RMB1.7 million and in 2022, both of which were related to the private placement transaction. Other non-operating income Other non-operating income was RMB2.0 million (US$0.3 million) in 2023 and RMB1.9 million in 2022.
We did not have significant income tax expenses because most of our subsidiaries and consolidated affiliated entities were loss making in 2021 and 2022. Net loss As a result of the foregoing, our net loss slightly increased by 4.9% from RMB313.9 million in 2021 to RMB329.3 million (US$47.7 million) in 2022.
Consolidated Statements and Other Financial Information—Legal Proceedings.” Income tax expenses Our income tax expenses decreased from RMB0.1 million in 2021 to RMB0.08 million in 2022. We did not have significant income tax expenses because most of our subsidiaries and consolidated affiliated entities were loss making in 2021 and 2022.
This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The results of operations in any particular period are not necessarily indicative of our future trends.
Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods presented, both in absolute amounts and as percentages of our total revenues, for the periods presented. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report.
Historically, our PRC subsidiaries have not paid dividends to us, and it will not be able to pay dividends until it generates accumulated profits. Furthermore, capital account transactions, which include foreign direct investment and loans, must be approved by and/or registered with SAFE, its local branches and certain local banks.
Historically, our PRC subsidiaries have not paid dividends to us, and it will not be able to pay dividends until it generates accumulated profits.
Our net loss increased by 241.0% from RMB92.0 million in 2020 to RMB313.9 million in 2021, and increased by 4.9% to RMB329.3 million (US$47.7 million) in 2022.
Our revenues decreased by 22% from RMB56.8 million in 2021 to RMB44.3 million in 2022, and then increased by 165.0% to RMB117.4 million (US$16.5 million) in 2023. Our net loss increased by 4.9% from RMB313.9 million in 2021 to RMB329.3 million in 2022, and then decreased by 8.2% to RMB302.3 million (US$42.6 million) in 2023.
Losses on allowance for doubtful accounts are recorded as general and administrative expenses on the consolidated statements of comprehensive income. We apply management’s judgments and estimates when determining the allowance for doubtful accounts to be recognized. We reassess the allowance at each balance sheet date.
For the year ended December 31, 2023, we recorded RMB13.7 million (US$1.9 million) of expected credit loss in general and administrative expenses. 126 Table of Contents We apply management’s judgments and estimates when determining the expected credit loss to be recognized. We reassess the allowance at each balance sheet date.
We believe that our current cash and cash equivalents and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements and material cash requirements for at least the next 12 months.
We believe that our balances of cash and cash equivalents, fund available from maturity of short-term deposit, short-term investments and restricted short-term deposits as of December 31, 2023 will be sufficient to meet our sustainable operations and material cash requirements for at least the next 12 months after the date of this annual report.
Where the basis of judgments and estimates is different from the initial assessment, such differences will impact the allowance for doubtful accounts and the carrying values of the accounts receivable in the year. As of December 31, 2021 and 2022, we assessed the ending balance of allowance for doubtful accounts to be RMB69.4 million and RMB115.4 million (US$16.7 million), respectively.
Where the basis of judgments and estimates is different from the initial assessment, such differences will impact the expected credit loss and the carrying values of the accounts receivable in the year.
Interest expenses We recorded interest expenses of RMB1.8 million (US$0.3 million) in 2021 and RMB2.3 million in 2020, both of which were related to bank loans and loans from third parties. Other income Other income was RMB6.1 million (US$1.0 million) in 2021 and RMB1.2 million in 2020.
Interest expenses We recorded interest expenses of RMB3.8 million in 2022 and RMB1.8 million in 2021, both of which were primarily related to bank loans and loans from third parties. In 2022, we recognized interest expenses RMB1.7 million as the amortization of debt discounts for the private placement transaction.
We did not have significant income tax expenses because most of our subsidiaries and consolidated affiliated entities were loss making in 2020 and 2021. Net loss As a result of the foregoing, our net loss increased by 241.0% from 92.0 million in 2020 to RMB313.9 million (US$49.3 million) in 2021. B. Liquidity and Capital Resources.
Net loss As a result of the foregoing, our net loss slightly increased by 4.9% from RMB313.9 million in 2021 to RMB329.3 million in 2022. 120 Table of Contents B. Liquidity and Capital Resources.

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Biggest changeName Class A Ordinary Shares underlying Equity Awards Date of Grant Date of Expiration Huazhi Hu * January 4, 2021 January 3, 2031 Conor Chia-hung Yang * December 16, 2019 January 4, 2021 December 15, 2029 January 3, 2031 Dongming Wu * June 1, 2020 January 4, 2021 May 31, 2030 January 3, 2031 Haoxiang Hou * January 4, 2021 January 3, 2031 Richard Jian Liu * January 4, 2021 January 3, 2031 Nick Ning Yang * March 27, 2023 March 26, 2033 All directors and officers as a group 2,303,737 Various dates from December 16, 2019 to January 4, 2021 Various dates from December 15, 2029 to January 3, 2031 * Less than 1% of our total outstanding ordinary shares on an as-converted basis.
Biggest changeName Class A Ordinary Shares underlying Equity Awards Date of Grant Date of Expiration Huazhi Hu * January 4, 2021 January 1, 2024 January 3, 2031 December 31, 2034 Conor Chia-hung Yang * January 4, 2021 August 1, 2023 January 1, 2024 January 3, 2031 July 31, 2033 December 31, 2034 Xin Fang * January 1, 2024 December 31, 2034 Dongming Wu * June 1, 2020 January 4, 2021 May 31, 2030 January 3, 2031 Haoxiang Hou * January 4, 2021 January 3, 2031 Nick Ning Yang * March 27, 2023 March 26, 2033 Wing Kee Lau * August 16, 2023 August 15, 2033 Zhao Wang — — — All directors and officers as a group 5,589,737 Various dates from June 1, 2020 to January 1, 2024 Various dates from May 31, 2030 to December 31, 2034 * Vested equity awards less than 1% of our total outstanding ordinary shares on an as-converted basis.
The compensation committee is responsible for, among other things: • reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers; • reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; • reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and 130 Table of Contents • selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management.
The compensation committee is responsible for, among other things: • reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers; 133 Table of Contents • reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors; • reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and • selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management.
Board Diversity Disclosure Board Diversity Board Diversity Matrix (As of March 31, 2023) Country of Principal Executive Offices: People’s Republic of China Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Directors 5 Female Male Non- Binary Did Not Disclose Gender Part I: Gender Identity Directors 0 5 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Disclosure Pursuant to Rule 5605(f)(3) of the Nasdaq Listing Rules Rule 5605(f)(2)(B) of the Nasdaq Listing Rules requires us to have, or to explain why we do not have, at least two members of our Board of Directors who are “Diverse” directors, at least one of whom self- identifies as “Female,” subject to transition periods specified by Rule 5605(f)(7) of the Nasdaq Listing Rules.
Board Diversity Disclosure Board Diversity Board Diversity Matrix (As of March 31, 2024) Country of Principal Executive Offices: People’s Republic of China Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Directors 6 Female Male Non- Binary Did Not Disclose Gender Part I: Gender Identity Directors 0 6 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Disclosure Pursuant to Rule 5605(f)(3) of the Nasdaq Listing Rules Rule 5605(f)(2)(B) of the Nasdaq Listing Rules requires us to have, or to explain why we do not have, at least two members of our Board of Directors who are “Diverse” directors, at least one of whom self- identifies as “Female,” subject to transition periods specified by Rule 5605(f)(7) of the Nasdaq Listing Rules.
None of our non-executive directors has a service contract with us that provides for benefits upon termination of service. 129 Table of Contents Committees of the Board of Directors A company of which more than 50% of the voting power is held by a single entity is considered a “controlled company” under the Nasdaq Stock Market Rules.
None of our non-executive directors has a service contract with us that provides for benefits upon termination of service. 132 Table of Contents Committees of the Board of Directors A company of which more than 50% of the voting power is held by a single entity is considered a “controlled company” under the Nasdaq Stock Market Rules.
The following table summarizes, as of March 31, 2023, the number of Class A ordinary shares under outstanding options, restricted share units and other equity awards that we granted to our directors and executive officers, excluding awards that were settled, forfeited or cancelled after the relevant grant dates.
The following table summarizes, as of March 31, 2024, the number of Class A ordinary shares under outstanding options, restricted share units and other equity awards that we granted to our directors and executive officers, excluding awards that were settled, forfeited or cancelled after the relevant grant dates.
In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days after March 31, 2023, including through the exercise of any restricted share unit, option, warrant or other right or the conversion of any other security.
In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days after March 31, 2024, including through the exercise of any restricted share unit, option, warrant or other right or the conversion of any other security.
Under these agreements, we agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our company. 2015 Share Incentive Plan Our board of directors approved the 2015 Share Incentive Plan, or the 2015 Plan, to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants, and promote the success of our business.
Under these agreements, we agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our company. 129 Table of Contents 2015 Share Incentive Plan Our board of directors approved the 2015 Share Incentive Plan, or the 2015 Plan, to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants, and promote the success of our business.
The following paragraphs describe the principal terms of the 2019 Plan. Types of Awards. The 2019 Plan permits the awards of options, restricted shares and restricted share units. Plan Administration . Our board of directors or a committee of one or more members of the board of directors will administer the 2019 Plan.
The following paragraphs describe the principal terms of the 2023 Plan. Types of Awards. The 2023 Plan permits the awards of options, restricted shares and restricted share units. Plan Administration . Our board of directors or a committee of one or more members of the board of directors will administer the 2023 Plan.
Box 2221, Road Town, Tortola, British Virgin Islands. 134 Table of Contents (2) Represents Class A ordinary shares beneficially owned by Mr. Haoxiang Hou. (3) Represents Class A ordinary shares beneficially owned by Mr. Conor Chia-Hung Yang. (4) Represents Class A Ordinary Shares beneficially owned by Mr.
Box 2221, Road Town, Tortola, British Virgin Islands. (2) Represents Class A ordinary shares beneficially owned by Mr. Haoxiang Hou. (3) Represents Class A ordinary shares beneficially owned by Mr. Conor Chia-Hung Yang. 137 Table of Contents (4) Represents Class A ordinary shares beneficially owned by Mr.
Hu is a recipient of the Technology Innovation Award presented at the Living Legends of Aviation event in 2019. Mr. Hu attended Tsinghua University where he studied computer science between 1992 and 1997. Mr. Haoxiang Hou has served as our director since August 2015. Mr.
Hu is a recipient of the Technology Innovation Award presented at the Living Legends of Aviation event in 2019. Mr. Hu attended Tsinghua University where he studied computer science between 1992 and 1997. 127 Table of Contents Mr. Haoxiang Hou has served as our director since August 2015. Mr.
We may grant awards to our employees, consultants and directors, as determined by our board of directors or a committee of one or more members of the board of directors. Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement. 128 Table of Contents Transfer Restrictions.
We may grant awards to our employees, consultants and directors, as determined by our board of directors or a committee of one or more members of the board of directors. Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement. Transfer Restrictions.
However, without the prior written consent of the participant, no such action may adversely affect in any material way any award previously granted pursuant to the 2019 Plan.
However, without the prior written consent of the participant, no such action may adversely affect in any material way any award previously granted pursuant to the 2023 Plan.
We intend to continually assess our industry and the status of our business and may decide in the future, should future circumstances make it appropriate, to seek to meet the diversity objectives contemplated by Rule 5606(f)(2)(B) of the Nasdaq Listing Rules. D. Employees. We had 227, 326 and 341 employees as of December 31, 2020, 2021 and 2022, respectively.
We intend to continually assess our industry and the status of our business and may decide in the future, should future circumstances make it appropriate, to seek to meet the diversity objectives contemplated by Rule 5606(f)(2)(B) of the Nasdaq Listing Rules. D. Employees. We had 326, 341 and 367 employees as of December 31, 2021, 2022 and 2023, respectively.
Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary shares as of March 31, 2023 by: • each of our directors and executive officers; and 133 Table of Contents • each person known to us to beneficially own more than 5% of our ordinary shares on an as-converted basis.
Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary shares as of March 31, 2024 by: • each of our directors and executive officers; and 136 Table of Contents • each person known to us to beneficially own more than 5% of our ordinary shares on an as-converted basis.
The committee or the full board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each award grant. 127 Table of Contents Award Agreement.
The committee or the full board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each award grant. Award Agreement.
Dongming Wu, including Class A ordinary shares underlying share options and restricted share units held by Mr. Dongming Wu that have vested as of March 31, 2023 or will vest within 60 days after March 31, 2023.
Dongming Wu, including Class A ordinary shares underlying share options and restricted share units held by Mr. Dongming Wu that have vested as of March 31, 2024 or will vest within 60 days after March 31, 2024. (5) Represents Class A ordinary shares underlying restricted share units held by Mr.
As of March 31, 2023, 119,500 restricted share units and 53,737 share options were outstanding under the 2015 Plan, excluding awards that were forfeited or cancelled after the relevant grant dates. The following paragraphs describe the principal terms of the 2015 Plan. Types of Awards. The 2015 Plan permits the awards of options, restricted shares and restricted share units.
As of March 31, 2024, 36,000 restricted share units and 53,737 share options were outstanding under the 2015 Plan, excluding awards that were forfeited or cancelled after the relevant grant dates. The following paragraphs describe the principal terms of the 2015 Plan. Types of Awards. The 2015 Plan permits the awards of options, restricted shares and restricted share units.
The calculations in the table below are based on 81,758,341 Class A ordinary shares (excluding Class A ordinary shares issued to the depositary bank for bulk issuance of ADSs reserved for future issuances upon the exercise or vesting of awards granted under our share incentive plans) and 39,026,560 Class B ordinary shares outstanding as of March 31, 2023.
The calculations in the table below are based on 88,084,921 Class A ordinary shares (excluding Class A ordinary shares issued to the depositary bank for bulk issuance of ADSs reserved for future issuances upon the exercise or vesting of awards granted under our share incentive plans) and 39,026,560 Class B ordinary shares outstanding as of March 31, 2024.
We have determined that each of Conor Chia-hung Yang, Dongming Wu and Haoxiang Hou satisfies the “independence” requirements of Rule 5605(c)(2) of the Listing Rules of the Nasdaq Stock Market and Rule 10A-3 under the Exchange Act, as amended.
We have determined that each of Wing Kee Lau, Dongming Wu and Haoxiang Hou satisfies the “independence” requirements of Rule 5605(c)(2) of the Listing Rules of the Nasdaq Stock Market and Rule 10A-3 under the Exchange Act, as amended.
Compensation Committee. Our compensation committee consists of Haoxiang Hou and Conor Chia-hung Yang. Haoxiang Hou is the chairman of our compensation committee. We have determined that each of Haoxiang Hou and Conor Chia-hung Yang satisfies the “independence” requirements of Rule 5605(c)(2) of the Listing Rules of the Nasdaq Stock Market.
Compensation Committee. Our compensation committee consists of Haoxiang Hou and Wing Kee Lau. Haoxiang Hou is the chairman of our compensation committee. We have determined that each of Haoxiang Hou and Wing Kee Lau satisfies the “independence” requirements of Rule 5605(c)(2) of the Listing Rules of the Nasdaq Stock Market.
The functions and powers of our board of directors include, among others: • convening shareholders’ annual and extraordinary general meetings and reporting its work to shareholders at such meetings; • declaring dividends and distributions; • appointing officers and determining the term of office of the officers; • exercising the borrowing powers of our company and mortgaging the property of our company; and • approving the transfer of shares in our company, including the registration of such shares in our share register. 131 Table of Contents Terms of Directors and Officers Our directors may be elected by a resolution of our board of directors or by an ordinary resolution of our shareholders.
The functions and powers of our board of directors include, among others: • convening shareholders’ annual and extraordinary general meetings and reporting its work to shareholders at such meetings; • declaring dividends and distributions; 134 Table of Contents • appointing officers and determining the term of office of the officers; • exercising the borrowing powers of our company and mortgaging the property of our company; and • approving the transfer of shares in our company, including the registration of such shares in our share register.
Huazhi Hu, Richard Jian Liu, and Xin Fang’s business address is 11/F Building One, EHang Technology Park, No. 29 Bishan Blvd., Huangpu District, Guangzhou, Guangdong Province, 510700, PRC. Mr. Haoxiang Hou’s business address is No. 151 Mao Jia Yuan Rd, Huangpu District, Shanghai, PRC. Mr.
Huazhi Hu, Conor Chia-Hung Yang, Zhao Wang and Xin Fang’s business address is 11/F Building One, EHang Technology Park, No. 29 Bishan Blvd., Huangpu District, Guangzhou, Guangdong Province, 510700, PRC. Mr. Haoxiang Hou’s business address is No. 151 Mao Jia Yuan Rd, Huangpu District, Shanghai, PRC. Mr.
We have determined that Conor Chia-hung Yang qualifies as an “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.
We have determined that Wing Kee Lau qualifies as an “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.
Each committee’s members and functions are described below. Audit Committee . Our audit committee consists of Conor Chia-hung Yang, Dongming Wu and Haoxiang Hou. Conor Chia-hung Yang is the chairman of our audit committee.
Each committee’s members and functions are described below. Audit Committee . Our audit committee consists of Wing Kee Lau, Dongming Wu and Haoxiang Hou. Wing Kee Lau is the chairman of our audit committee.
Class A Ordinary Shares Class B Ordinary Shares Total Ordinary Shares on an as- Converted Basis % of Beneficial Ownership % of Aggregate Voting Power*** Directors and Executive Officers:** Huazhi Hu (1) 670,258 39,026,560 39,696,818 32.9 % 82.8 % Haoxiang Hou (2) * — * * * Conor Chia-Hung Yang (3) * — * * * Dongming Wu (4) * — * * * Nick Ning Yang — — — — — Richard Jian Liu (5) 1,762,500 — 1,762,500 1.5 % 0.4 % Xin Fang — — — — — All Directors and Executive Officers as a Group 2,583,995 39,026,560 41,610,555 34.4 % 83.2 % Principal Shareholder: Genesis Rising Limited (6) — 39,026,560 39,026,560 32.3 % 82.7 % Notes: * Less than 1% of our total outstanding shares. ** Messrs.
Class A Ordinary Shares Class B Ordinary Shares Total Ordinary Shares on an as- Converted Basis % of Beneficial Ownership % of Aggregate Voting Power*** Directors and Executive Officers:** Huazhi Hu (1) 670,258 39,026,560 39,696,818 31.2 % 81.7 % Haoxiang Hou (2) * — * * * Conor Chia-Hung Yang (3) * — * * * Dongming Wu (4) * — * * * Nick Ning Yang (5) * — * * * Wing Kee Lau — — — — — Xin Fang — — — — — Zhao Wang — — — — — All Directors and Executive Officers as a Group 868,995 39,026,560 39,895,555 31.4 % 81.8 % Principal Shareholder: Genesis Rising Limited (6) — 39,026,560 39,026,560 30.7 % 81.6 % Notes: * Less than 1% of our total outstanding shares. ** Messrs.
Directors and Executive Officers Age Position/Title Huazhi Hu 46 Chairman and Chief Executive Officer Haoxiang Hou 34 Independent Director Conor Chia-hung Yang 60 Independent Director Dongming Wu 59 Independent Director Nick Ning Yang 47 Independent Director Richard Jian Liu 48 Chief Financial Officer Xin Fang 48 Chief Operating Officer Mr.
Directors and Executive Officers Age Position/Title Huazhi Hu 47 Chairman and Chief Executive Officer Haoxiang Hou 35 Independent Director Conor Chia-hung Yang 61 Director and Chief Financial Officer Dongming Wu 60 Independent Director Nick Ning Yang 48 Independent Director Wing Kee Lau 59 Independent Director Zhao Wang 46 Co-Chief Operating Officer Xin Fang 49 Co-Chief Operating Officer Mr.
He also currently serves as the Chief Executive Officer of DHL Express China and a Global Management Board Member of DHL Express. DHL-Sinotrans, a leading international express company in China, is a joint venture between the global delivery and logistics giant DHL and Sinotrans. Mr. Wu has over 30 years of experience in the global delivery and logistics industry.
DHL-Sinotrans, a leading international express company in China, is a joint venture between the global delivery and logistics giant DHL and Sinotrans. Mr. Wu has over 30 years of experience in the global delivery and logistics industry.
Yang served as Chief Technology Officer of ChinaRen.com, a company he co-founded. Mr. Yang received a bachelor’s degree in electrical engineering from the University of Michigan in 1997 and a master’s degree in electrical engineering from the Stanford University in 1999. Mr. Richard Jian Liu has served as our chief financial officer since May 2017. Mr.
Yang served as Chief Technology Officer of ChinaRen.com, a company he co-founded. Mr. Yang received a bachelor’s degree in electrical engineering from the University of Michigan in 1997 and a master’s degree in electrical engineering from the Stanford University in 1999. Mr. Wing Kee Lau has served as our independent director since August 2023. Mr.
As of March 31, 2023, our employees other than members of our senior management as a group held 1,983,750 restricted share units. C. Board Practices. Board of Directors Our board of directors consists of five directors. A director is not required to hold any shares in our company by way of qualification.
As of March 31, 2024, our employees other than members of our senior management as a group held 531,680 restricted share units and 3,333,820 options. C. Board Practices. Board of Directors Our board of directors consists of six directors. A director is not required to hold any shares in our company by way of qualification.
He has a track record of success in the fields of sales of IT product and system integration solutions, tourism operation and management, tourism real estate development, etc. Mr. Fang obtained his master’s degree in business administration from Nanchang University in 2013. 126 Table of Contents B. Compensation.
Mr. Fang is a seasoned business leader with more than 20 years of business administration and operational experience. He has a track record of success in the fields of sales of IT product and system integration solutions, tourism operation and management, tourism real estate development, etc. Mr. Fang obtained his master’s degree in business administration from Nanchang University in 2013.
Unless otherwise determined by our company in general meeting, our company shall have not less than three (3) directors, and there shall be no maximum number of directors.
Terms of Directors and Officers Our directors may be elected by a resolution of our board of directors or by an ordinary resolution of our shareholders. Unless otherwise determined by our company in general meeting, our company shall have not less than three (3) directors, and there shall be no maximum number of directors.
As of the date of this annual report, the maximum aggregate number of ordinary shares that may be issued under the 2019 Plan is 8,266,949. As of March 31, 2023, 2,759,250 restricted share units were outstanding under the 2019 Plan, excluding awards that were forfeited or cancelled after the relevant grant dates.
As of the date of this annual report, the maximum aggregate number of ordinary shares that may be issued under the 2019 Plan is 13,941,558. As of March 31, 2024, 6,134,180 restricted share units and 394,820 options were outstanding under the 2019 Plan, excluding awards that were forfeited or cancelled after the relevant grant dates.
For purposes of Rule 5605(f)(2)(B), the term “Diverse” means an individual who self-identifies as one or more of Female, LGBTQ+, or an underrepresented individual based on national, racial, ethnic, indigenous, cultural, religious or linguistic identity in the country of our principal executive offices; and the term “Female” means an individual who self-identifies her gender as a woman, without regard to the individual’s designated sex at birth.
For purposes of Rule 5605(f)(2)(B), the term “Diverse” means an individual who self-identifies as one or more of Female, LGBTQ+, or an underrepresented individual based on national, racial, ethnic, indigenous, cultural, religious or linguistic identity in the country of our principal executive offices; and the term “Female” means an individual who self-identifies her gender as a woman, without regard to the individual’s designated sex at birth. 135 Table of Contents Rule 5605(f)(7) of the Nasdaq Listing Rules requires us to have, or explain why we do not have, (i) by December 31, 2023, at least one Diverse director and (ii) by December 31, 2025, at least two Diverse directors, at least one of whom self-identifies as Female.
The following table sets forth the number of our employees categorized by function as of December 31, 2022: Function Number % of Total Employees Research and product development department 190 55.7 % Marketing and sales department 62 18.2 % General administration department 89 26.1 % Total number of employees 341 100 % We also had 68, 113 and 115 full-time contractors who are involved in the manufacturing of our AAVs as of December 31, 2020, 2021 and 2022, respectively.
The following table sets forth the number of our employees categorized by function as of December 31, 2023: Function Number % of Total Employees Research and product development department 194 52.9 % Marketing and sales department 75 20.4 % General administration department 98 26.7 % Total number of employees 367 100.0 % We also had 113, 115 and 153 full-time contractors who are involved in the manufacturing of our products as of December 31, 2021, 2022 and 2023, respectively.
Rule 5605(f)(7) of the Nasdaq Listing Rules requires us to have, or explain why we do not have, (i) by December 31, 2023, at least one Diverse director and (ii) by December 31, 2025, at least two Diverse directors, at least one of whom self-identifies as Female. 132 Table of Contents As of the date of this annual report, our Board of Directors has determined that we will satisfy the requirements of Rule 5605(f)(2)(B) of the Nasdaq Listing Rules by explaining why we will not have any Diverse directors by either December 31, 2023 or December 31, 2025.
As of the date of this annual report, our Board of Directors has determined that we will satisfy the requirements of Rule 5605(f)(2)(B) of the Nasdaq Listing Rules by explaining why we will not have any Diverse directors by either December 31, 2023 or December 31, 2025.
(6) Represents 39,026,560 Class B ordinary shares held by Genesis Rising Limited, a British Virgin Islands company that is wholly owned by Mr. Huazhi Hu. The registered address of Genesis Rising Limited is Start Chambers, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, British Virgin Islands.
Nick Ning Yang that have vested as of March 31, 2024 or will vest within 60 days after March 31, 2024. (6) Represents 39,026,560 Class B ordinary shares held by Genesis Rising Limited, a British Virgin Islands company that is wholly owned by Mr. Huazhi Hu. The registered address of Genesis Rising Limited is Start Chambers, Wickham’s Cay II, P.O.
Compensation of Directors and Executive Officers For the fiscal year ended December 31, 2022, we paid an aggregate of approximately RMB3.7 million (US$0.5 million) in cash to our directors and executive officers. We are not required under Cayman Islands law to disclose, and we have not otherwise disclosed, the compensation of our directors and executive officers on an individual basis.
B. Compensation. Compensation of Directors and Executive Officers For the fiscal year ended December 31, 2023, we paid an aggregate of approximately RMB3.6 million (US$0.5 million) in cash to our directors and executive officers.
To our knowledge, as of March 31, 2023, 82,266,591 of our Class A ordinary shares were held by six record holders in the United States, including a total of 508,250 Class A ordinary shares held by The Bank of New York Mellon, the depositary of the ADS program.
Box 2221, Road Town, Tortola, British Virgin Islands. To our knowledge, as of March 31, 2024, 81,858,692 of our Class A ordinary shares were held by five record holders in the United States, including a total of 81,858,688 Class A ordinary shares held by The Bank of New York Mellon, the depositary of the ADS program.
We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers.
We are not required under Cayman Islands law to disclose, and we have not otherwise disclosed, the compensation of our directors and executive officers on an individual basis. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers.
As of December 31, 2022, we had 315 employees in Guangzhou, 14 employees in Yunfu, 2 employees in Beijing and 10 employees outside China.
As of December 31, 2023, we had 340 employees in Guangzhou, 18 employees in Yunfu, one employee in Beijing and eight employees outside China.
Hou was named on the list of “China Top 30 Venture Capitalists Under the Age of 30 in 2018” by Forbes. Mr. Hou received his bachelor’s degree in information security and international finance and his master’s degree in business administration from Shanghai Jiao Tong University in 2011 and 2015, respectively. 125 Table of Contents Mr.
Hou was named on the list of “Forbes China Top 100 Venture Capitalists” in 2023. Mr. Hou received his dual bachelor’s degree in electrical engineering and international finance and his master’s degree in business administration from Shanghai Jiao Tong University in 2011 and 2015, respectively. Mr. Hou is also a CFA charterholder. Mr.
(Nasdaq: IQ), Tongcheng Travel Holdings Limited (HKSE: 0780) and UP Fintech Holding Ltd (Nasdaq: TIGR). Mr. Yang received his master’s degree in business administration from the University of California, Los Angeles. Mr. Dongming Wu has served as our director since June 2020. Mr. Wu has served as a Managing Director of DHL-Sinotrans since May 2003.
Yang currently also serves as an independent director of I-Mab (Nasdaq: IMAB), iQIYI, Inc. (Nasdaq: IQ), Tongcheng Travel Holdings Limited (HKSE: 0780), UP Fintech Holding Ltd (Nasdaq: TIGR) and Smart Share Global Limited (Nasdaq: EM). Mr. Yang received his master’s degree in business administration from the University of California, Los Angeles (UCLA). Mr.
Yang served in several chief financial officer positions at US-listed companies including Tuniu Corporation (Nasdaq: TOUR), E-Commerce China Dangdang Inc., and AirMedia Group Inc. Mr. Yang was the chief executive officer of Rock Mobile Corporation from 2004 to 2007, and the chief financial officer of the Asia Pacific region for CellStar Asia Corporation from 1999 to 2004.
Conor Chia-hung Yang has served as our director since December 2019 and as our chief financial officer since September 2023. From 2007 to 2023, Mr. Yang served in several chief financial officer positions, including at Tuniu Corporation (Nasdaq: TOUR), E-Commerce China Dangdang Inc., and AirMedia Group Inc. Mr.
Xin Fang has served as our chief operating officer since February 2022. Prior to joining us, Mr. Fang served as the Chairman of the Board of Directors of Wuning Xinyihang Investment Development Co., Ltd. Mr. Fang is a seasoned business leader with more than 20 years of business administration and operational experience.
Wang holds a Bachelor’s degree in computer science and technology from Tsinghua University. 128 Table of Contents Mr. Xin Fang joined us in February 2022 as our chief operating officer, and currently serves as our co-chief operating officer. Prior to joining us, Mr. Fang served as the Chairman of the Board of Directors of Wuning Xinyihang Investment Development Co., Ltd.
Prior to that, Mr. Yang was a senior banker at Goldman Sachs (Asia) L.L.C., Lehman Brothers Asia Limited and Morgan Stanley Asia Limited from 1992 to 1999. Mr. Yang currently also serves as an independent director of EHang Holdings Limited (Nasdaq: EH), I-Mab (Nasdaq: IMAB), iQIYI, Inc.
Yang was the chief executive officer of Rock Mobile Corporation from 2004 to 2007, and the chief financial officer of the Asia Pacific region for CellStar Asia Corporation from 1999 to 2004. Prior to that, Mr. Yang was a senior banker at Goldman Sachs (Asia) L.L.C., Lehman Brothers Asia Limited and Morgan Stanley Asia Limited from 1992 to 1999. Mr.
Hou has served as a senior partner, managing director and member of the investment committee of GP Lingang Hi-tech Fund since January 2017, where he plays a key role in fundraising and investment in new energy and new material sectors. Prior to that, he served as a vice president of investment at GP TMT Fund from 2015 to 2016. Mr.
Hou has been the founder and the chief investment officer of Houxue Capital since July 2022. He has served as the managing partner and investment committee head of GP Venture Capital, senior partner and investment committee member of GP Hi-Tech Capital, and vice president of investments at GP Xincheng Capital from April 2015 to June 2022. Mr.
Conor Chia-Hung Yang’s business address is Unit EF, 12th Floor, Lujiazui Finance Plaza, No. 1217 Dongfang Road, Pudong District, Shanghai, PRC. Mr. Dongming Wu’s business address is No. 18 Rong Hua South Road, Beijing Economic-Technological Development Area, Daxing District, Beijing, PRC. Mr.
Wing Kee Lau’s business address is Building 9, Block 2, Zhongguan Honghualing Industry Southern District, 1213 Liuxian Avenue, Taoyuan Street, Nanshan District, Shenzhen, Guangdong Province, PRC. Mr. Dongming Wu’s business address is No. 18 Rong Hua South Road, Beijing Economic-Technological Development Area, Daxing District, Beijing, PRC. Mr.
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Conor Chia-hung Yang has served as our director since December 2019. Mr. Yang is the chief financial officer of Sunrate Holdings Limited since February 2023. Mr. Yang was a co-founder and president of Black Fish Group Limited from 2017 to 2021. From 2007 to 2017, Mr.
Added
Dongming Wu has served as our director since June 2020. Mr. Wu has served as a Managing Director of DHL-Sinotrans since May 2003. He also currently serves as the Chief Executive Officer of DHL Express China and a Global Management Board Member of DHL Express.
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Liu joined our company as a vice president of finance in August 2015. Prior to joining us, Mr. Liu served as group vice president of finance and chief financial officer of the New Business Group at 21Vianet Group, Inc. (Nasdaq: VNET) from May 2014 to August 2015.
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Lau has served as the chief financial Officer of RoboSense Technology Co., Ltd. (HKSE: 2498) since August 2022. He served as an independent director of Genetron Holdings Limited (NASDAQ: GTH) from June 2020 to March 2024. Mr. Lau served as the chief financial Officer in Tarena International Inc.
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From March 2008 to May 2014, he also served as the chief financial officer at several industry-leading companies, including Ecoplast Technologies Inc., China Polypeptide Group, Inc. and China Energy Recovery, Inc. Prior to that, he worked as a senior consultant at Arthur Andersen LLP, a public accounting firm, in its China offices between 1996 to 2000. Mr.
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(NASDAQ: TEDU) from March 2020 to July 2022, the chief financial officer in Square Panda Inc. from July 2018 to August 2019, the chief financial officer in Perfect World Co., Ltd. (SHE: 002624) from March 2007 to June 2018, the chief financial officer and company secretary in Beijing Media Corporation Ltd.
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Liu received his bachelor’s degree in engineering from Shanghai Jiao Tong University in 1996 and his master’s degree in business administration from the Anderson Graduate School of Management at the University of California, Los Angeles in 2003. Mr. Liu is a member of Chinese Institute of Certified Public Accountants. Mr.
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(HKSE: 1000) from November 2004 to February 2007, and a financial director in Ogilvy & Mather Advertising Ltd. Beijing Branch from July 2000 to October 2004. Prior to that, Mr. Lau worked in PricewaterhouseCoopers from January 1994 to July 2000. Mr.
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(5) Represents 1,762,500 Class A ordinary shares beneficially owned by JM Elegance Holdings Limited, a British Virgin Island company that is wholly owned by Mr. Richard Jian Liu. The registered address of JM Elegance Holdings Limited is Drake Chambers, P.O. Box 3321, Road Town, Tortola, British Virgin Islands.
Added
Lau obtained a bachelor’s degree in business administration (finance) from the Hong Kong Baptist University in Hong Kong in November 1990, and an executive master of business administration degree from Cheung Kong Graduate School of Business in China in September 2011. Mr.
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Lau is an associate of both of The Association of Chartered Certified Accountants and The Hong Kong Institute of Certified Public Accountants. Mr. Zhao Wang has served as our co-chief operating officer since April 2024. Prior to joining us, Mr.
Added
Wang worked for Antaeus Group, a Chinese group enterprise with cross-industry services in resort, film and art, as the chief executive officer of Mangrove Tree Technology Group from June 2020 to March 2024.
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He played a pivotal role in driving digital transformation initiatives and planning business operations for several super-large-scale resorts in China, including the deployment of intelligent operational and management system platforms and introducing self-driving vehicles in air as well as on the ground and water to resorts. Prior to that, Mr.
Added
Wang was the chief executive officer at Beijing Ganlan Technology Development Co., Ltd., an IT consulting firm, from August 2017 to June 2020. Between October 2008 and August 2017, Mr. Wang served in several executive positions at Antaeus Investment Group and was in charge of platform development, operation and management for cultural tourism projects and digital film industries.
Added
From December 2006 to October 2008, Mr. Wang served as technology manager in Sohu.com and led the architecture design of the website information system for the 2008 Summer Olympic Games in Beijing. Mr. Wang also participated in the development of information system for the 2004 Summer Olympic Games in Athens. Mr.
Added
The following paragraphs describe the principal terms of the 2019 Plan. Types of Awards. The 2019 Plan permits the awards of options, restricted shares and restricted share units. 130 Table of Contents Plan Administration . Our board of directors or a committee of one or more members of the board of directors will administer the 2019 Plan.
Added
However, without the prior written consent of the participant, no such action may adversely affect in any material way any award previously granted pursuant to the 2019 Plan. 2023 Share Incentive Plan Our board of directors approved the 2023 Share Incentive Plan, or the 2023 Plan, to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants, and promote the success of our business.
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The 2023 Plan became effective on December 22, 2023. The maximum aggregate number of ordinary shares that may be issued under the 2023 Plan is initially 3,782,555 (the “Maximum Number”).
Added
On the first day of each of the subsequent fiscal years during the term of the 2023 Plan starting from January 1, 2024, the Maximum Number shall automatically increase by an amount determined by the Board that is equal to no more than 3% of the total number of shares outstanding on the last day of the immediately preceding fiscal year.
Added
If the Board does not determine such amount of increase by the first day of each of the subsequent fiscal years, the Maximum Number shall automatically increase by 3% of the total number of shares outstanding on the last day of the immediately preceding fiscal year.
Added
As of the date of this annual report, the maximum aggregate number of ordinary shares that may be issued under the 2023 Plan is 7,592,899. As of March 31, 2024, 4,289,000 options were outstanding under the 2023 Plan, excluding awards that were forfeited or cancelled after the relevant grant dates.
Added
The committee or the full board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each award grant. Award Agreement.
Added
Awards granted under the 2023 Plan are evidenced by an award agreement that sets forth the terms, conditions and limitations for each award which may include the term of an award, the provisions applicable in the event the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an award. 131 Table of Contents Eligibility.
Added
We may grant awards to our employees, consultants and directors, as determined by our board of directors or a committee of one or more members of the board of directors. Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement. Transfer Restrictions.
Added
Awards may not be transferred in any manner by the participant other than in accordance with the exceptions provided in the 2023 Plan or the relevant award agreement or otherwise determined by the plan administrator, such as transfers by will or the laws of descent and distribution. Termination and Amendment of the 2023 Plan.
Added
Unless terminated earlier, the 2023 Plan has a term of ten years. With the approval of our board of directors, the plan administrator has the authority to terminate, amend or modify the 2023 Plan.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

6 edited+2 added−0 removed13 unchanged
Biggest changeAs of December 31, 2021, we had amount due from a related party of RMB1.4 million (US$0.2 million). The amount represented receivables relating to sale of autonomous aerial vehicles owed by Guangzhou Yitong Zhihang Technology Co., Ltd., an equity investee over whom we have significant influence.
Biggest changeEach of Yitong Zhihang and Xiyu Qingniao is an equity investee of our company and we have significant influence over them. As of December 31, 2023, we had amount due from Yitong Zhihang of RMB1.7 million (US$0.2 million) and contract liabilities to Xiyu Qingniao of RMB2.0 million (US$0.3 million) relating such sales.
Item 7. Major Shareholders and Related Party Transaction A. Major Shareholders. Please refer to “Item 6. Directors, Senior Management and Employees—E. Directors, Senior Management and Employees—Share Ownership.” B. Related Party Transactions. Contractual Arrangements with the VIE and its Shareholders Please refer to “Item 4. Information on the Company—C.
Item 7. Major Shareholders and Related Party Transaction A. Major Shareholders. Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” B. Related Party Transactions. Contractual Arrangements with the VIE and its Shareholders Please refer to “Item 4. Information on the Company—C.
Our shareholders’ registration rights will terminate upon the earlier of (i) the fifth (5th) anniversary of a qualified initial public offering, (ii) as to any shareholder when the shareholder together with its affiliates can sell all of its shares subject to registration rights in reliance on Rule 144 without transfer restrictions, and (iii) after the consummation of any liquidation, dissolution or winding up of us. 136 Table of Contents Employment Agreements and Indemnification Agreements Please refer to “Item 6.
Our shareholders’ registration rights will terminate upon the earlier of (i) the fifth (5th) anniversary of a qualified initial public offering, (ii) as to any shareholder when the shareholder together with its affiliates can sell all of its shares subject to registration rights in reliance on Rule 144 without transfer restrictions, and (iii) after the consummation of any liquidation, dissolution or winding up of us. 139 Table of Contents Employment Agreements and Indemnification Agreements Please refer to “Item 6.
Directors, Senior Management and Employees—B. Compensation—Employment Agreements and Indemnification Agreements.” Share Incentive Plans Please refer to “Item 6. Directors, Senior Management and Employees—B. Compensation—2015 Share Incentive Plan” and “Item 6. Directors, Senior Management and Employees—B. Compensation—2019 Share Incentive Plan.” C. Interests of Experts and Counsel. Not applicable.
Directors, Senior Management and Employees—B. Compensation—Employment Agreements and Indemnification Agreements.” Share Incentive Plans Please refer to “Item 6. Directors, Senior Management and Employees—B. Compensation—2015 Share Incentive Plan,” “Item 6. Directors, Senior Management and Employees—B. Compensation—2019 Share Incentive Plan” and “Item 6. Directors, Senior Management and Employees—B. Compensation—2023 Share Incentive Plan.” C. Interests of Experts and Counsel. Not applicable.
The judicial freeze was placed in connection with an arbitration in which Mr. Hu was named as a party. As of December 31, 2021, the judicial freeze had been lifted and the VIE has collected the deposit. Transactions with Related Parties In 2022, there was no transaction with related parties.
The judicial freeze was placed in connection with an arbitration in which Mr. Hu was named as a party. As of December 31, 2021, the judicial freeze had been lifted and the VIE has collected the deposit.
As of December 31, 2022, we had no amount due from related parties. 135 Table of Contents Shareholders Agreement and Registration Rights Shareholders Agreement We entered into our second amended and restated shareholders agreement on December 27, 2016 with our shareholders, which consisted of holders of ordinary shares and preferred shares.
As of December 31, 2022, RMB49.8 million short-term bank loans and RMB17.0 million long-term bank loans were guaranteed by Mr. Huazhi Hu. 138 Table of Contents Shareholders Agreement and Registration Rights Shareholders Agreement We entered into our second amended and restated shareholders agreement on December 27, 2016 with our shareholders, which consisted of holders of ordinary shares and preferred shares.
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Transactions with Related Parties In 2023, we generated revenue of RMB3.0 million (US$0.4 million) and RMB8.9 million (US$1.2 million) from Guangzhou Yitong Zhihang Technology Co., Ltd., or Yitong Zhihang, and Xinjiang Xiyu Qingniao General Aviation Co., Ltd., or Xiyu Qingniao, respectively, through our sales of pilotless eVTOL aircraft.
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In 2022, there was no transaction with related parties. As of December 31, 2022, we had no amount due from related parties. As of December 31, 2023, RMB40.0 million (US$5.6 million) short-term bank loans and RMB12.8 million (US$1.8 million) long-term bank loans were guaranteed by Mr. Huazhi Hu, our founder and director.