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(Mark One)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
☐
☒
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF
1934
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022.
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
Date of event requiring this shell company report
For the transition period from to
Commission file number: 001-38696
Niu Technologies
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
Cayman Islands
(Jurisdiction of incorporation or organization)
No.1 Building, No. 195 Huilongguan East Road,
Changping District, Beijing 102208
People’s Republic of China
(Address of principal executive offices)
Fion Wenjuan Zhou, Chief Financial Officer
Telephone: +8610-6432-1899
Email: ir@niu.com
No.1 Building, No. 195 Huilongguan East Road,
Changping District, Beijing 102208
People’s Republic of China
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
American depositary shares (one American depositary
share representing two Class A ordinary shares, par
value US$0.0001 per share)
Class A ordinary shares, par value US$0.0001 per
share*
Trading
Symbol (s)
NIU
Name of each exchange on which registered
The Nasdaq Stock Market LLC
(The Nasdaq Global Market)
The Nasdaq Stock Market LLC
(The Nasdaq Global Market)
* Not for trading, but only in connection with the listing on The Nasdaq Global Market of American depositary shares.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual
report.
137,719,542 Class A ordinary shares and 16,542,020 Class B ordinary
shares, par value US$0.0001 per share, as of December 31, 2022.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Yes ☐ No ☒
Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
from their obligations under those Sections.
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☒
Non-accelerated filer ☐
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not
to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act. ☐
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting
Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b))by the registered public accounting firm that prepared or issued
its audit report. Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☒
International Financial Reporting Standards as issued
by the International Accounting Standards Board ☐
Other ☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes ☐ No ☒
Yes ☐ No ☐
☐ Item 17 ☐ Item 18
Table of Contents
TABLE OF CONTENTS
INTRODUCTION
FORWARD-LOOKING INFORMATION
PART I
Item 1.
Item 2.
Item 3.
Item 4.
Item 4A.
Item 5.
Item 6.
Item 7.
Item 8.
Item 9.
Item 10.
Item 11.
Item 12.
Identity of Directors, Senior Management and Advisers
Offer Statistics and Expected Timetable
Key Information
Information on the Company
Unresolved Staff Comments
Operating and Financial Review and Prospects
Directors, Senior Management and Employees
Major Shareholders and Related Party Transactions
Financial Information
The Offer and Listing
Additional Information
Quantitative and Qualitative Disclosures about Market Risk
Description of Securities Other than Equity Securities
PART II
Item 13.
Defaults, Dividend Arrearages and Delinquencies
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
Item 15.
Controls and Procedures
Item 16.
[Reserved]
Item 16A.
Audit Committee Financial Expert
Item 16B.
Code of Ethics
Item 16C.
Principal Accountant Fees and Services
Item 16D.
Exemptions from the Listing Standards for Audit Committees
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Item 16F.
Change in Registrant’s Certifying Accountant
Corporate Governance
Item 16G.
Item 16H. Mine Safety Disclosure
Item 16I.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 17.
Item 18.
Item 19.
SIGNATURES
Financial Statements
Financial Statements
Exhibits
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INTRODUCTION
In this annual report, except where the context otherwise requires and for purposes of this annual report only:
● “ADRs” are to the American depositary receipts that evidence the ADSs;
● “ADSs” are to the American depositary shares, each of which represents two Class A ordinary shares;
● “Class A ordinary shares” are to our Class A ordinary shares, par value US$0.0001 per share;
● “Class B ordinary shares” are to our Class B ordinary shares, par value US$0.0001 per share;
● “NIU,” “we,” “us,” and “our” are to Niu Technologies, our Cayman Islands holding company, its subsidiaries, and, in the
context of describing our operations and consolidated financial information, the VIE and the subsidiaries of the VIE. The
VIE is a domestic company incorporated in mainland China in which we do not have any equity ownership but whose
financial results have been consolidated into our consolidated financial statements based solely on contractual
arrangements in accordance with U.S. GAAP. See “Item 4. Information on the Company—C. Organizational Structure” for
an illustrative diagram of our corporate structure;
● “ordinary shares” are to our Class A and Class B ordinary shares, par value US$0.0001 per share;
● “our company” is to Niu Technologies, our Cayman Islands holding company;
● “the variable interest entity” and “the VIE” are to Beijing Niudian Technology Co., Ltd., or Beijing Niudian;
● “our WFOE” are to Beijing Niudian Information Technology Co., Ltd., or Niudian Information;
● “RMB” and “Renminbi” are to the legal currency of mainland China; and
● “US$,” “U.S. dollars,” “$,” and “dollars” are to the legal currency of the United States.
Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this annual report
were made at a rate of RMB6.8972 to US$1.00, the exchange rate in effect as of December 30, 2022 as set forth in the H.10 statistical
release of the Board of Governors of the Federal Reserve System. We make no representation that any Renminbi or U.S. dollar amounts
could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, or at all.
FORWARD-LOOKING INFORMATION
This annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future
events. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You
can identify these forward-looking statements by terminology such as “may,” “will,” “expect,” “anticipate,” “future,” “intend,” “plan,”
“believe,” “estimate,” “is/are likely to” or other similar expressions. We have based these forward-looking statements largely on our
current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of
operations, business strategy and financial needs. These forward-looking statements include, but are not limited to:
● our mission, goals and strategies;
● our future business development, financial conditions and results of operations;
● the expected growth of smart electric two-wheeled vehicle industry;
● our expectations regarding demand for and market acceptance of our products and services;
● our expectations regarding our relationships with our users/customers, suppliers, strategic partners and other stakeholders;
● competition in our industry; and
● relevant government policies and regulations relating to our industry.
We would like to caution you not to place undue reliance on these forward-looking statements and you should read these
statements in conjunction with the risk factors disclosed in “Item 3 Key Information— D. Risk Factors.” Those risks are not exhaustive.
We operate in a rapidly evolving environment. New risks emerge from time to time and it is impossible for our management to predict all
risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may
cause actual results to differ from those contained in any forward-looking statement. We do not undertake any obligation to update or
revise the forward-looking statements except as required under applicable law.
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PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
Our Holding Company Structure and Contractual Arrangements with the VIE
Niu Technologies is not an operating company in mainland China but a Cayman Islands holding company with operations
primarily conducted through (i) our mainland China subsidiaries and (ii) contractual arrangements with the VIE based in mainland
China. The laws and regulations of mainland China restrict and impose conditions on foreign direct investment in internet content, value-
added telecommunication-based online marketing, audio and video services and mobile application distribution businesses. Accordingly,
we operate these businesses in mainland China through the VIE, and rely on contractual arrangements among our mainland China
subsidiaries, the VIE and its shareholders to conduct the business operations of the VIE. The VIE is consolidated for accounting
purposes, but is not an entity in which our Cayman Islands holding company, or our investors, own equity. Revenues contributed by the
VIE accounted for all of our total revenues for the year ended December 31, 2020, 2021 and 2022, respectively. As used in this annual
report, “our company” refers to Niu Technologies, whereas “NIU,” “we,” “us,” and “our” refer to Niu Technologies, its subsidiaries, and,
in the context of describing our operations and consolidated financial information, the VIE and its subsidiaries. Investors in our ADSs are
not purchasing equity interest in the VIE in mainland China, but instead are purchasing equity interest in a holding company incorporated
in the Cayman Islands.
A series of contractual agreements, including power of attorney, second amended and restated equity pledge agreement,
amended and restated exclusive business cooperation agreements, second amended and restated exclusive option agreements and spousal
consent letters, have been entered into by and among our subsidiaries, the VIE and its shareholders. Terms contained in each set of
contractual arrangements with the VIE and its shareholders are substantially similar. As a result of the contractual arrangements, we have
conducted the business operations and are considered the primary beneficiary of these companies, and we have consolidated financial
results of these companies in our consolidated financial statements. For more details of these contractual arrangements, see “Item 4.
Information on the Company—C. Organizational Structure—Contractual Arrangements with the VIE.”
However, the contractual arrangements may not be as effective as direct ownership in the VIE and we may incur substantial
costs to enforce the terms of the arrangements. If the VIE or its shareholders fail to perform their respective obligations under the
contractual arrangements, we could be limited in our ability to enforce the contractual arrangements with the VIE, and these agreements
have not been tested in courts of mainland China. Furthermore, if we lose our right to direct the activities of the VIE or our right to
receive substantially all the economic benefits and residual returns from the VIE and we are not able to restructure our ownership
structure and operations in a satisfactory manner, we would not be able to continue to consolidate the financial results of these entities in
our financial statements. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure— We rely on
contractual arrangements with the VIE and its shareholders for a large portion of our business operations, which may not be as effective
as direct ownership.” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—The shareholders of
the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.”
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The following diagram illustrates our corporate structure, including our principal subsidiaries, the VIE and its principal
subsidiaries, as of the date of this annual report:
(1) Token Yilin Hu, Yi’ nan Li, Yuqin Zhang and Changlong Sheng each holds 89.74%, 5.00%, 2.63% and 2.63% of the equity interest
in Beijing Niudian, respectively. All of the shareholders of Beijing Niudian are beneficial owners of the shares of our company. Mr.
Token Yilin Hu is also a director of our company.
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There are also substantial uncertainties regarding the interpretation and application of the current and future laws, regulations
and rules of mainland China regarding the status of the rights of our Cayman Islands holding company with respect to its contractual
arrangements with the VIE and its shareholders. It is uncertain whether any new laws or regulations of mainland China relating to
variable interest entity structures will be adopted or if adopted, what they would provide. If we or any of the VIE is found to be in
violation of any existing or future laws or regulations of mainland China, or fail to obtain or maintain any of the required permits or
approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures.
See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure—If the PRC government finds that the
agreements that establish the structure for operating some of our operations in mainland China do not comply with the regulations of
mainland China relating to the relevant industries, or if these regulations or the interpretation of existing regulations change or are
interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations”
and “—Uncertainties exist with respect to the interpretation and implementation of the newly enacted Foreign Investment Law of the
PRC and how it may impact the viability of our current corporate structure, corporate governance and business operations.”
Our corporate structure is subject to risks associated with our contractual arrangements with the VIE. Our company and its
investors may never have a direct ownership interest in the businesses that are conducted by the VIE. Uncertainties in the PRC legal
system could limit our ability to enforce these contractual arrangements, and these contractual arrangements have not been tested in a
court of law. If the PRC government finds that the agreements that establish the structure for operating our business in mainland China
do not comply with the laws and regulations of mainland China, or if these regulations or the interpretation of existing regulations
change or are interpreted differently in the future, we and the VIE could be subject to severe penalties or be forced to relinquish our
interests in those operations. This would result in the VIE being deconsolidated. The majority of our assets, including the necessary
licenses to conduct business in mainland China, are held by the VIE. A significant part of our revenues are generated by the VIE. An
event that results in the deconsolidation of the VIE would have a material effect on our operations and result in the value of the securities
of our company diminish substantially or even become worthless. Our company, our mainland China subsidiaries and the VIE, and
investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of
the contractual arrangements with the VIE and, consequently, significantly affect the financial performance of the VIE and our company
as a whole. Our company may not be able to repay its indebtedness, and the ADSs of our company may decline in value or become
worthless, if we are unable to assert contractual control over the assets of our mainland China subsidiaries and the VIE that conduct all or
substantially all of our operations. For a detailed description of the risks associated with our corporate structure, please refer to risks
disclosed under “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”
Our company and the VIE face various legal and operational risks and uncertainties associated with being based in or having the
majority of our operations in China and we are subject to the complex and evolving laws and regulations of mainland China. For
example, we face risks associated with regulatory approvals on offshore offerings, the use of the VIE, anti-monopoly regulatory actions,
and oversight on cybersecurity and data privacy. These risks could result in a material adverse change in our operations and the value of
our ADSs, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such
securities to significantly decline or become worthless. For a detailed description of risks related to doing business in China, see “Item 3.
Key Information—D. Risk Factors—Risks Related to Doing Business in China.”
PRC government’s significant authority in regulating our operations and its oversight and control over offerings conducted
overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue
to offer securities to investors. Implementation of industry-wide regulations, including data security or anti-monopoly related regulations,
in this nature may cause the value of such securities to significantly decline. For more details, see “Item 3. Key Information—D. Risk
Factors—Risks Related to Doing Business in China—The PRC government’s significant oversight over our business operation could
result in a material adverse change in our operations and the value of our ADSs.”
Risks and uncertainties arising from the PRC legal system, including risks and uncertainties regarding the enforcement of laws
and quickly evolving rules and regulations of mainland China, could result in a material adverse change in our operations and the value
of our ADSs. For more details, see “Item 3. Key Information—D. Risk Factors— Risks Related to Our Corporate Structure—
Uncertainties exist with respect to the interpretation and implementation of the newly enacted Foreign Investment Law of the PRC and
how it may impact the viability of our current corporate structure, corporate governance and business operations.”
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The Holding Foreign Companies Accountable Act
Pursuant to the Holding Foreign Companies Accountable Act, or the HFCAA, if the SEC determines that we have filed audit
reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years,
the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter trading
market in the United States. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB
was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong,
including our auditor. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the
filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021. On December 15, 2022, the PCAOB issued a
report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions
where it is unable to inspect or investigate completely registered public accounting firms. 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. 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
PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland
China and Hong Kong and we continue to use an accounting firm headquartered in one of these jurisdictions to issue an audit report on
our financial statements filed with the Securities and Exchange Commission, we would be identified as a Commission-Identified Issuer
following the filing of the annual report on Form 20-F for the relevant fiscal year. There can be no assurance that we would not be
identified as a Commission-Identified Issuer for any future fiscal year, and if we were so identified for two consecutive years, we would
become subject to the prohibition on trading under the HFCAA. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our
Business and Industry—The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our
financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the
benefits of such inspections.” And “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our
ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or
investigate completely auditors located in mainland China and Hong Kong. The delisting of the ADSs, or the threat of their being
delisted, may materially and adversely affect the value of your investment.”
Cash Flows through Our Organization
Niu Technologies is a holding company with no material operations of its own. We conduct our operations primarily through
our subsidiaries, the VIE and its subsidiaries in mainland China. As a result, although other means are available for us to obtain financing
at the holding company level, Niu Technologies’ ability to pay dividends to the shareholders and to service any debt it may incur may
depend upon dividends paid by our mainland China subsidiaries and license and service fees paid by the VIE. If any of our subsidiaries
incurs debt on its own behalf, the instruments governing such debt may restrict its ability to pay dividends to Niu Technologies. In
addition, each of our mainland China subsidiaries and the VIE is required to set aside at least 10% of its after-tax profits each year, if any,
to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entities in mainland China is also
required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if
any, is determined at the discretion of its board of directors. These reserves are not distributable as cash dividends. For more details, see
“Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Cash flows and working capital.”
We have established stringent controls and procedures for cash flows within our organization. Each transfer of cash between our
Cayman Islands holding company and a subsidiary, the VIE or the subsidiaries of the VIE is subject to internal approval. The cash
inflows of Niu Technologies were primarily generated from the proceeds received from Niu Technologies’ public offerings of ordinary
shares, other financing activities and cash generated from our operating activities. For the years ended December 31, 2020, 2021 and
2022, Niu Technologies did not provide any capital contributions or loans to our mainland China subsidiaries. For the years ended
December 31, 2020, 2021 and 2022, the VIE did not receive loans provided by Niu Technologies. For the years ended December 31,
2020, 2021 and 2022, no assets other than cash were transferred between Niu Technologies and a subsidiary, the VIE or its subsidiary, no
subsidiaries paid dividends or made other distributions to Niu Technologies, and no dividends or distributions were paid or made to U.S.
investors.
For the years ended December 31, 2020, 2021 and 2022, our subsidiaries did not provide capital contributions to the VIE. We
currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
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Pursuant to the Amended and Restated Exclusive Business Cooperation Agreements between our WFOE and the VIE, the VIE
agrees to pay our WFOE a monthly service fee at an amount that is equal to 100% of its net profits or an amount adjusted by our WFOE
in its sole discretion for the relevant month, which should be paid within seven business days upon receipt of invoice from our WFOE.
The VIE has paid RMB143.5 million, RMB203.4 million and RMB112.2 million (US$16.3 million) of service fee to our WFOE for the
years ended December 31, 2020, 2021 and 2022, respectively. We plan to continue to determine the amount of service fee and payment
method with the VIE and its shareholders through bona fide negotiation, and settle fees under the contractual arrangements accordingly
in the future.
As a Cayman Islands holding company, we may receive dividends from our mainland China subsidiaries. Under the Enterprise
Income Tax Law of the PRC, or the EIT Law, and related regulations, dividends, interests, rent or royalties payable by a foreign-invested
enterprise, such as our mainland China subsidiaries, to any of its foreign non-resident enterprise investors, and proceeds from any such
foreign enterprise investor’s disposition of assets (after deducting the net value of such assets) are subject to a 10% withholding tax,
unless the foreign enterprise investor’s jurisdiction of incorporation has a tax treaty with mainland China that provides for a reduced rate
of withholding tax. Undistributed profits earned by foreign-invested enterprises prior to January 1, 2008 are exempted from any
withholding tax. The Cayman Islands, where Niu Technologies, the direct parent company of our subsidiaries, is incorporated, does not
have such a tax treaty with mainland China. Hong Kong has a tax arrangement with mainland China that provides for a 5% withholding
tax on dividends subject to certain conditions and requirements, such as the requirement that the Hong Kong resident enterprise own at
least 25% of the mainland China enterprise distributing the dividend at all times within the 12-month period immediately preceding the
distribution of dividends and be a “beneficial owner” of the dividends. For example, Niu Technologies Group Limited, which directly
owns our mainland China subsidiary, Niudian Information, is incorporated in Hong Kong. However, if Niu Technologies Group Limited
is not considered to be the beneficial owner of the dividends paid to it by Niudian Information under the tax circulars promulgated in
February and October 2009, such dividends would be subject to withholding tax at a rate of 10%. If our mainland China subsidiaries
declare and distribute profits to us, such payments will be subject to withholding tax, which will increase our tax liability and reduce the
amount of cash available to our company. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—
We may rely on dividends and other distributions on equity paid by our mainland China subsidiaries to fund any cash and financing
requirements we may have, and any limitation on the ability of our mainland China subsidiaries to make payments to us could have a
material and adverse effect on our ability to conduct our business” for more details. If our holding company in the Cayman Islands or any
of our subsidiaries outside of mainland China were deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, it
would be subject to enterprise income tax on its worldwide income at a rate of 25%. See “Item 3. Key Information—D. Risk Factors—
Risks Related to Doing Business in China—If we are classified as a mainland China resident enterprise for mainland China income tax
purposes, such classification could result in unfavorable tax consequences to us and our non-mainland China shareholders or ADS
holders.”
For purposes of illustration, the following discussion reflects the hypothetical taxes that might be required to be paid within
mainland China, assuming that: (i) we have taxable earnings, and (ii) we determine to pay dividends in the future.
Hypothetical pre-tax earnings(2)
Tax on earnings at statutory rate of 25%(3)
Net earnings available for distribution
Withholding tax at standard rate of 10%(4)
Net distribution to Parent/Shareholders
Tax calculation (1)
100 %
(25)%
75 %
(7.5)%
67.5 %
Notes:
(1) For purposes of this example, the tax calculation has been simplified. The hypothetical book pre-tax earnings amount, not
considering timing differences, is assumed to equal taxable income in mainland China.
(2) Under the terms of VIE agreements, our mainland China subsidiaries may charge the VIE for services provided to VIE. These
service fees shall be recognized as expenses of the VIE, with a corresponding amount as service income by our mainland China
subsidiaries and eliminate in consolidation. For income tax purposes, our mainland China subsidiaries and the VIE file income tax
returns on a separate company basis. The service fees paid are recognized as a tax deduction by the VIE and as income by our
mainland China subsidiaries and are tax neutral.
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(3) Certain of our subsidiaries and the VIE qualifies for a 15% preferential income tax rate in mainland China. However, such rate is
subject to qualification, is temporary in nature, and may not be available in a future period when distributions are paid. For purposes
of this hypothetical example, the table above reflects a maximum tax scenario under which the full statutory rate would be effective.
(4) The PRC Enterprise Income Tax Law imposes a withholding income tax of 10% on dividends distributed by a foreign invested
enterprise, or FIE, to its immediate holding company outside of mainland China. A lower withholding income tax rate of 5% is
applied if the FIE’s immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement
with mainland China, subject to a qualification review at the time of the distribution. For purposes of this hypothetical example, the
table above assumes a maximum tax scenario under which the full withholding tax would be applied.
The table above has been prepared under the assumption that all profits of the VIE will be distributed as fees to our mainland
China subsidiaries under tax neutral contractual arrangements. If, in the future, the accumulated earnings of the VIE exceed the service
fees paid to our mainland China subsidiaries (or if the current and contemplated fee structure between the intercompany entities is
determined to be nonsubstantive and disallowed by Chinese tax authorities), the VIE could make a non-deductible transfer to our
mainland China subsidiaries for the amounts of the stranded cash in the VIE. This would result in such transfer being non-deductible
expenses for the VIE but still taxable income for the mainland China subsidiaries.
Under the laws and regulations of mainland China, we are subject to restrictions on foreign exchange and cross-border cash
transfers, including to U.S. investors. Our ability to distribute earnings to the holding company and U.S. investors is also limited. We are
a Cayman Islands holding company and we may rely on dividends and other distributions on equity paid by our mainland China
subsidiaries, which in turn relies on consulting and other fees paid to us by the VIE, for our cash and financing requirements, including
the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. When any of
our mainland China subsidiaries incurs debt on its own behalf, the instruments governing the debt may restrict its ability to pay dividends
or make other distributions to us.
In addition, our mainland China subsidiaries, the VIE and its subsidiaries generate their revenue primarily in Renminbi, which is
not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of our mainland China
subsidiaries to pay dividends to us. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business
in China—We may rely on dividends and other distributions on equity paid by our mainland China subsidiaries to fund any cash and
financing requirements we may have, and any limitation on the ability of our mainland China subsidiaries to make payments to us could
have a material and adverse effect on our ability to conduct our business” and “—Mainland China’s regulation of loans to and direct
investment in mainland China 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 mainland
China subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.”
7
Table of Contents
Permissions Required from the PRC Government Authorities for Our Operations
We conduct our business primarily through our subsidiaries and the VIE in mainland China. Our operations in mainland China
are governed by the laws and regulations of mainland China. As of the date of this annual report, our mainland China subsidiaries and the
VIE have obtained the requisite licenses and permits from the PRC government authorities that are material for the business operations
of our subsidiaries and the VIE in mainland China, including, among others, CCC certification and ICP License. Given the uncertainties
of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities,
we may be required to obtain additional licenses, permits, filings or approvals for the functions and services of our platform in the future.
For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business and Industry—We may
be adversely affected by the complexity, uncertainties and changes in the regulation on internet-related businesses and companies in
mainland China.”
Meanwhile, the PRC government has recently sought to exert more oversight and control over capital raising activities of listed
companies that are conducted overseas and/or foreign investment in China-based issuers. In December 2021, the Cyberspace
Administration of China, or the CAC, together with other authorities, jointly promulgated the Cybersecurity Review Measures, which
became effective on February 15, 2022 and replaced its predecessor regulation. Pursuant to the Cybersecurity Review Measures, critical
information infrastructure operators that procure internet products and services and network platform operators that conduct data process
activities must be subject to the cybersecurity review if their activities affect or may affect national security. The Cybersecurity Review
Measures further stipulates that network platform operators that hold personal information of over one million users shall apply with the
Cybersecurity Review Office for a cybersecurity review before any public offering at a foreign stock exchange. On February 17, 2023,
China Securities Regulatory Commission, or the CSRC, released several regulations regarding the filing requirements for overseas
offerings and listings by domestic companies, including the Trial Administrative Measures of Overseas Securities Offering and Listing
by Domestic Companies and five supporting guidelines (collectively, the “Overseas Listing Trial Measures”), which took effect on
March 31, 2023. According to the Overseas Listing Trial Measures, the overseas offering and listing by a mainland China domestic
company, whether directly or indirectly, shall be filed with the CSRC. Any failure to obtain or delay in obtaining such approval or
completing such procedures could subject us to restrictions and penalties imposed by the CSRC, the CAC or other PRC regulatory
authorities, which could include fines and penalties on our operations in China, delays of or restrictions on the repatriation of the
proceeds from our offshore offerings into China, or other actions that could materially and adversely affect our business, financial
condition, results of operations, and prospects, as well as the trading price of our ADSs. For more detailed information, see “Item 3. Key
Information—D. Risk Factors—Risks Related to Doing Business in China—The filing, approval or other administration requirements of
the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law, and, if
required, we cannot predict whether or for how long we will be able to complete such filing, obtain such approval or meet such
requirements.”
8
Table of Contents
Financial Information Related to Our Subsidiaries and the VIE
The following table presents the condensed consolidating schedule of results of operations for our subsidiaries and the VIE for
the periods presented.
Selected Condensed Consolidating Statements of Income/(loss) Information
Niu
Other
VIE and its
Technologies Subsidiaries WFOE Subsidiaries Eliminations
Consolidated
Total
For the Year Ended December 31, 2022
RMB
(In thousands)
Revenues (4)
Cost of revenues (4)
Gross profit
Selling and marketing expenses (4)
Research and development expenses (4)
General and administrative expenses (4)
Total operating expenses
Government grants
Share of income (loss) from subsidiaries, consolidated
VIE and VIE’s subsidiaries (3)
Interest expenses
Interest income
Investment income
Income (loss) before income taxes
Income tax benefit (expense)
Net income (loss)
—
—
—
—
—
(15,415)
(15,415)
—
(39,265)
—
5,217
—
(49,463)
—
(49,463)
43,448
(41,143)
2,305
(15,480)
—
(2,343)
(17,823)
—
—
—
13
221
(15,284)
(166)
(15,450)
105,328
(28,233)
77,095
(44,789)
(19,770)
(26,944)
(91,503)
—
3,187,990
(2,483,840)
704,150
(446,149)
(202,940)
(115,490)
(764,579)
16,385
(168,169)
54,300
(113,869)
66,009
46,232
1,731
113,972
—
3,168,597
(2,498,916)
669,681
(440,409)
(176,478)
(158,461)
(775,348)
16,385
—
—
2
—
(14,406)
(164)
(14,570)
—
(5,716)
7,628
10,697
(31,435)
22,087
(9,348)
39,265
—
—
—
39,368
—
39,368
—
(5,716)
12,860
10,918
(71,220)
21,757
(49,463)
Revenues (4)
Cost of revenues (4)
Gross profit
Selling and marketing expenses (4)
Research and development expenses (4)
General and administrative expenses (4)
Total operating expenses
Government grants
Share of income from subsidiaries, consolidated VIE
and VIE’s subsidiaries (3)
Interest expenses
Interest income
Investment income
Income (loss) before income taxes
Income tax expense
Net income (loss)
Niu
Other
VIE and its
Technologies Subsidiaries WFOE Subsidiaries Eliminations
Consolidated
Total
For the Year Ended December 31, 2021
RMB
(In thousands)
44,397
(37,772)
6,625
(11,035)
—
(2,688)
(13,723)
—
192,901
(69,322)
123,579
(44,394)
(23,920)
(24,605)
(92,919)
—
3,768,134
(2,879,594)
888,540
(358,394)
(200,603)
(137,474)
(696,471)
48,727
—
—
52
1,233
(5,813)
(410)
(6,223)
—
—
2
—
30,662
(2,588)
28,074
—
(6,168)
3,324
19,935
257,887
(44,039)
213,848
(300,895)
94,930
(205,965)
81,815
89,305
34,410
205,530
—
(235,265)
—
—
—
(235,700)
—
(235,700)
3,704,537
(2,891,758)
812,779
(332,008)
(135,218)
(141,799)
(609,025)
48,727
—
(6,168)
5,376
21,168
272,857
(47,037)
225,820
—
—
—
—
—
(11,442)
(11,442)
—
235,265
—
1,998
—
225,821
—
225,821
9
Table of Contents
Niu
Other
VIE and its
Technologies Subsidiaries WFOE Subsidiaries Eliminations
Consolidated
Total
For the Year Ended December 31, 2020
RMB
(In thousands)
Revenues (4)
Cost of revenues (4)
Gross profit
Selling and marketing expenses (4)
Research and development expenses (4)
General and administrative expenses (4)
Total operating expenses
Government grants
Share of income from subsidiaries, consolidated VIE
and VIE’s subsidiaries (3)
Interest expenses
Interest income
Investment income
Income (loss) before income taxes
Income tax expense
Net income (loss)
—
—
—
—
—
(7,308)
(7,308)
—
47,711
—
5,951
—
46,354
—
46,354
12,232
(9,436)
2,796
(9,982)
—
(3,124)
(13,106)
—
134,684
(55,084)
79,600
(40,804)
(14,897)
(20,804)
(76,505)
—
2,500,024
(1,877,070)
622,954
(210,861)
(173,465)
(75,581)
(459,907)
22,441
(202,611)
56,410
(146,201)
60,886
83,027
1,957
145,870
—
2,444,329
(1,885,180)
559,149
(200,761)
(105,335)
(104,860)
(410,956)
22,441
—
—
1,750
296
(8,264)
(199)
(8,463)
—
—
438
201
3,734
—
3,734
—
(7,381)
648
17,201
195,956
(20,887)
175,069
(47,711)
—
—
—
(48,042)
—
(48,042)
—
(7,381)
8,787
17,698
189,738
(21,086)
168,652
The following table presents the condensed consolidating schedule of financial position for our subsidiaries and the VIE as of
the dates presented.
10
Table of Contents
Selected Condensed Consolidating Balance Sheets Information
Niu
Other
As of December 31, 2022
VIE and its
Technologies Subsidiaries WFOE Subsidiaries Eliminations
Consolidated
Total
Cash and cash equivalents
Term deposit—current
Restricted cash
Short-term investments
Accounts receivable, net
Inventories (1)
Amounts due from inter-companies (2)
Prepayments and other current assets
Total current assets
Term deposits—non-current
Property, plant and equipment, net
Intangible assets, net
Operating lease right-of-use assets
Investment in and amount due from subsidiaries,
consolidated VIE and VIE’s subsidiaries (2)(3)
Deferred income tax assets
Other non-current assets
Total non-current assets
Total assets
Short-term bank borrowings
Notes payable
Accounts payable
Income taxes payable
Advances from customers
Deferred revenue—current
Amounts due to inter-companies (2)
Accrued expenses and other current liabilities
Total current liabilities
Deferred revenue—non-current
Deferred income tax liabilities
Operating lease liabilities
Other non-current liabilities
Amounts due to inter-companies (2)
Total non-current liabilities
Total liabilities
12,376
208,590
176,204
—
—
—
—
12,486
409,656
—
—
—
—
28,183
—
3,906
—
1,011
5,966
52,932
5,242
97,240
—
128
492
—
RMB
(In thousands)
493,570
158
—
—
—
6,230
— 160,406
— 298,732
— 411,955
24,252
187,577
1,582,722
423,025
391
423,574
—
2,607
48
—
20,000
394,622
1,318
86,597
— 534,287
— 208,590
— 186,340
— 160,406
— 299,743
417,009
—
— 205,696
2,012,071
(912)
(500,209)
(501,121)
—
20,000
— 397,357
1,858
—
86,597
—
906,299
—
1
906,300
1,315,956
219,317
—
5
219,942
317,182
—
—
7,000
9,655
433,229
— (1,125,616)
—
—
(1,125,616)
(1,626,737)
6,132
5,677
514,346
2,097,068
—
6,132
12,683
524,627
2,536,698
—
—
—
—
—
—
4,262
1,596
5,858
—
—
—
—
—
—
5,858
—
—
60
396
1,410
—
18,259
5,929
26,054
—
—
—
—
115,714
115,714
141,768
— 160,000
— 316,832
— 459,407
1,502
—
23,522
—
37,540
—
476,121
1,730
175,352
9,216
1,650,276
10,946
—
—
—
—
—
—
10,946
11,430
1,398
7,569
13,441
—
33,838
1,684,114
— 160,000
— 316,832
— 459,467
1,898
—
24,932
—
37,540
—
—
(500,372)
— 192,093
1,192,762
(500,372)
—
—
—
—
(115,714)
(115,714)
(616,086)
11,430
1,398
7,569
13,441
—
33,838
1,226,600
Total shareholders’ equity
Total liabilities and shareholders’ equity
1,310,098
1,315,956
175,414
317,182
422,283
433,229
412,954
2,097,068
(1,010,651)
(1,626,737)
1,310,098
2,536,698
11
Table of Contents
Cash and cash equivalents
Term deposit—current
Restricted cash
Short-term investments
Accounts receivable, net
Inventories (1)
Amounts due from inter-companies (2)
Prepayments and other current assets
Total current assets
Term deposits—non-current
Property, plant and equipment, net
Intangible assets, net
Operating lease right-of-use assets
Investment in and amount due from subsidiaries,
consolidated VIE and VIE’s subsidiaries (2)(3)
Deferred income tax assets
Other non-current assets
Total non-current assets
Total assets
Short-term bank borrowings
Notes payable
Accounts payable
Income taxes payable
Advances from customers
Deferred revenue—current
Amounts due to inter-companies (2)
Accrued expenses and other current liabilities
Total current liabilities
Deferred revenue—non-current
Deferred income tax liabilities
Operating lease liabilities
Other non-current liabilities
Amounts due to inter-companies (2)
Total non-current liabilities
Total liabilities
Niu
Other
As of December 31, 2021
VIE and its
Technologies Subsidiaries WFOE Subsidiaries Eliminations
Consolidated
Total
107,769
95,636
176,141
—
—
—
—
8,394
387,940
15,939
—
—
—
17,954
—
—
30,229
885
4,366
29,726
5,113
88,273
—
80
2,072
—
RMB
(In thousands)
82,464
187
—
—
—
47,830
— 743,449
— 267,672
— 266,292
23,235
38,715
1,469,657
455,990
3,840
460,017
—
3,022
63
—
20,000
394,114
1,533
94,201
—
—
—
—
—
(1,021)
(508,951)
—
(509,972)
—
—
—
—
865,698
—
—
881,637
1,269,577
219,317
—
—
221,469
309,742
—
—
—
3,085
463,102
— (1,085,015)
—
—
(1,085,015)
(1,594,987)
11,907
2,367
524,122
1,993,779
—
—
—
—
—
—
4,262
761
5,023
—
—
15,633
295
2,241
—
7,431
4,041
29,641
—
—
—
—
—
—
—
—
— 114,296
— 114,296
143,937
5,023
— 180,000
— 143,623
— 523,297
14,719
15,026
32,758
485,717
181,985
1,577,125
2,588
—
—
11,541
12,117
26,246
—
—
—
—
—
—
26,246
10,694
1,992
13,922
20,967
—
47,575
1,624,700
—
—
—
—
—
—
(508,951)
—
(508,951)
—
—
—
—
(114,296)
(114,296)
(623,247)
208,374
95,636
223,971
773,678
268,557
269,637
—
56,062
1,895,915
35,939
397,216
3,668
94,201
—
11,907
2,367
545,298
2,441,213
180,000
143,623
538,930
17,602
17,267
32,758
—
198,904
1,129,084
10,694
1,992
13,922
20,967
—
47,575
1,176,659
Total shareholders’ equity
Total liabilities and shareholders’ equity
1,264,554
1,269,577
165,805
309,742
436,856
463,102
369,079
1,993,779
(971,740)
(1,594,987)
1,264,554
2,441,213
The following table presents condensed consolidating schedule of cash flow data for our subsidiaries and the VIE for the years
ended presented.
12
Table of Contents
Selected Condensed Consolidating Cash Flows Information
Net cash provided by (used in) operating
activities
Cash flows from investing activities:
Cash paid for purchase of property, plant and
equipment
Investments in Other Subsidiaries (5)
Purchase of term deposits
Cash received from redemption of term deposits
Cash paid for purchase of short-term investments
Cash received from sale of short-term
investments
Prepayment for an investment
Others
Net cash provided by (used in) investing
Niu
Other
VIE and its
For the Year Ended December 31, 2022
Technologies Subsidiaries WFOE
Subsidiaries Eliminations
RMB
(In thousands)
Consolidated
Total
(23,565)
(29,111)
4,550
(74,417)
687
(121,856)
—
(12,263)
(635,471)
551,794
—
—
—
—
(98)
—
—
—
(20,000)
50,317
—
—
(134,672)
(579)
—
—
—
—
—
—
— (2,573,000)
(135,349)
—
—
12,263
(635,471)
—
—
551,794
— (2,593,000)
— 3,163,601
—
—
(4,000)
—
— 3,213,918
(4,000)
—
—
—
activities
(95,940)
30,219
(4,579)
455,929
12,263
397,892
Cash flows from financing activities:
Proceeds from the parent company (5)
Cash received from exercise of employee stock
options
Proceeds from short-term bank borrowings
Repayment for short-term bank borrowings
Net cash provided by financing activities
Effect of foreign currency exchange rate changes
on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash
equivalents and restricted cash
Cash, cash equivalents and restricted cash at the
—
12,263
2,203
—
—
2,203
—
—
—
12,263
21,972
764
—
—
—
—
—
—
—
(12,263)
—
—
340,000
(360,000)
(20,000)
—
—
—
(12,263)
2,203
340,000
(360,000)
(17,797)
7,994
(687)
30,043
(95,330)
14,135
(29)
369,506
beginning of the year
283,910
17,954
Cash, cash equivalents and restricted cash at
the end of the year
188,580
32,089
187
158
130,294
499,800
13
—
—
—
288,282
432,345
720,627
Table of Contents
Niu
Other
VIE and its
For the Year Ended December 31, 2021
Technologies Subsidiaries WFOE
Subsidiaries Eliminations
RMB
(In thousands)
Consolidated
Total
Net cash provided by (used in) operating
activities
Cash flows from investing activities:
Cash paid for purchase of property, plant and
equipment
Purchase of term deposits
Cash received from redemption of term deposits
Cash paid for purchase of short-term investments
Cash received from sale of short-term
investments
Prepayment for an investment
Others
Net cash provided by (used in) investing
25,840
(47,540)
1,200
354,675
—
334,175
—
(287,163)
303,296
(93)
—
—
— (205,000)
(1,523)
(284,129)
—
(70,000)
50,000
—
— (5,827,000)
—
—
—
225,232
—
—
— 5,801,935
—
—
(614)
—
—
(285,745)
—
(357,163)
353,296
—
— (6,032,000)
— 6,027,167
—
—
(614)
—
activities
16,133
20,139
(1,523)
(329,808)
—
(295,059)
Cash flows from financing activities:
Cash received from exercise of employee stock
options
Proceeds from short-term bank borrowings
Repayment for short-term bank borrowings
Net cash provided by financing activities
Effect of foreign currency exchange rate changes
on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash
equivalents and restricted cash
Cash, cash equivalents and restricted cash at the
6,246
—
—
6,246
—
—
—
—
(6,108)
(1,959)
—
—
—
—
—
—
340,000
(340,000)
—
(423)
42,111
(29,360)
(323)
24,444
beginning of the year
241,799
47,314
Cash, cash equivalents and restricted cash at
the end of the year
283,910
17,954
510
187
105,850
130,294
—
—
—
—
—
—
—
—
6,246
340,000
(340,000)
6,246
(8,490)
36,872
395,473
432,345
14
Table of Contents
Niu
Other
Technologies Subsidiaries WFOE
VIE and its
Subsidiaries Eliminations
Consolidated
Total
For the Year Ended December 31, 2020
RMB
(In thousands)
Net cash provided by (used in) operating
activities
Cash flows from investing activities:
Cash paid for purchase of property, plant and
equipment
Payment of land use rights
Purchase of intangible assets
Purchase of term deposits
Cash received from redemption of term deposits
Investments in WFOE (5)
Cash paid for purchase of short-term investments
Cash received from sale of short-term
investments
Prepayment for an investment
Others
Net cash provided by (used in) investing
(55,920)
53,903
(102,580)
570,196
—
465,599
(6)
—
—
—
—
—
(56,671)
(339,653)
56,671
374,156
—
(66,350)
— (147,000)
(2,404)
—
(86)
(15,000)
15,000
—
(41,940)
(109,336)
(39,750)
—
—
—
—
(2,537,560)
—
—
—
—
—
66,350
(111,746)
(39,750)
(86)
(411,324)
445,827
—
— (2,726,500)
—
—
—
98,295
—
—
42,141
—
—
2,167,911
—
—
— 2,308,347
—
—
—
—
activities
34,503
(115,061)
(2,289)
(518,735)
66,350
(535,232)
Cash flows from financing activities:
Cash received from exercise of employee stock
options
Proceeds from other subsidiaries of our company
(5)
Proceeds from short-term bank borrowings
Repayment for short-term bank borrowings
Net cash provided by (used in) financing
activities
Effect of foreign currency exchange rate changes
on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash
equivalents and restricted cash
Cash, cash equivalents and restricted cash at the
24,230
—
—
—
24,230
—
—
—
—
—
—
66,350
—
—
—
—
24,230
—
180,000
(217,394)
(66,350)
—
—
—
180,000
(217,394)
66,350
(37,394)
(66,350)
(13,164)
(16,693)
(4,874)
—
(1,765)
(13,880)
(66,032)
(38,519)
12,302
—
—
—
—
(23,332)
(106,129)
501,602
395,473
beginning of the year
255,679
113,346
39,029
93,548
Cash, cash equivalents and restricted cash at
the end of the year
241,799
47,314
510
105,850
Notes:
(1) It represents the elimination of the unrealized profit from inter-company sales.
(2) It represents the elimination of inter-company balances among our company, our WFOE, other subsidiaries of our company and the
VIE and its subsidiaries.
(3) It represents the elimination of the investment in the VIE and our subsidiaries.
(4) It represents the elimination of the inter-company technical services, marketing services, research and development services and
inter-company sales.
(5) It represents cash received as the investment in other subsidiaries from our company and our WFOE from other subsidiaries, which
was eliminated as inter-company transaction upon consolidation.
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B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Summary of Risk Factors
Investing in the ADSs involves significant risks. You should carefully consider all of the information in this annual report before
making an investment in the ADSs. Below please find a summary of the principal risks we face, organized under relevant headings.
Risks Related to Our Business and Industry
Risks and uncertainties related to our business and industry include, but are not limited to, the following:
● Our success depends upon the continued strength of our brand. If we are not able to maintain and enhance our brand, our
business and operating results may be adversely affected;
● Our success is dependent on the continued popularity of our existing products and services and our continued innovation
and successful launches of new products and services, and we may not be able to anticipate or make timely responses to
changes in the preferences of consumers;
● We rely heavily on city partners and franchised stores for sales and distribution of our products and our success depends on
our offline distribution network;
● We rely substantially on external suppliers for certain components and raw materials used in our products;
● We may not be able to maintain profitability;
● Our products and services may experience quality problems from time to time, which could result in decreased sales,
adversely affect our results of operations and harm our reputation;
● We may be compelled to undertake product recalls or take other actions, which could adversely affect our brand image and
results of operations;
● We may face intense competition in the electric two-wheeled vehicles industry;
● Our marketing strategy of appealing to and growing sales to a more diversified group of users may not continue to be
successful; and
● We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business
and competitive position.
Risks Related to Our Corporate Structure
● If the PRC government finds that the agreements that establish the structure for operating some of our operations in
mainland China do not comply with the regulations of mainland China relating to the relevant industries, or if these
regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be
subject to severe penalties or be forced to relinquish our interests in those operations;
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● Uncertainties exist with respect to the interpretation and implementation of the newly enacted Foreign Investment Law of
the PRC and how it may impact the viability of our current corporate structure, corporate governance and business
operations; and
● We rely on contractual arrangements with the VIE and its shareholders for a large portion of our business operations, which
may not be as effective as direct ownership.
Risks Related to Doing Business in China
● Changes in China’s economic, political or social conditions or government policies could have a material and adverse
effect on our business and results of operations;
● The filing, approval or other administration requirements of the CSRC or other PRC government authorities may be
required in connection with our offshore offerings under PRC law, and, if required, we cannot predict whether or for how
long we will be able to complete such filing, obtain such approval or meet such requirements;
● Uncertainties in the interpretation and enforcement of the laws and regulations of mainland China could limit the legal
protections available to you and us;
● The PRC government’s significant oversight over our business operation could result in a material adverse change in our
operations and the value of our securities;
● We may be adversely affected by the complexity, uncertainties and changes in the regulation on internet-related businesses
and companies in mainland China;
● The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial
statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with
the benefits of such inspections; and
● Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to
inspect or investigate completely auditors located in mainland China and Hong Kong. The delisting of the ADSs, or the
threat of their being delisted, may materially and adversely affect the value of your investment.
Risks Related to Our ADSs
● 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 publishes inaccurate or unfavorable research about our business,
or if they adversely change their recommendations regarding the ADSs, the market price for our ADSs and trading volume
could decline;
● The sale or availability for sale of substantial amounts of the ADSs could adversely affect their market price;
● Our dual-class voting structure 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 the ADSs may view as
beneficial; and
● The dual-class structure of our ordinary shares may adversely affect the trading market for the ADSs.
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Risks Related to Our Business and Industry
Our success depends upon the continued strength of our brand. If we are not able to maintain and enhance our brand, our business
and operating results may be adversely affected.
We believe that our brand has significantly contributed to the success of our business and that maintaining and enhancing the
brand is critical to retaining and expanding our customer base. Our marketing, design, research and products are aimed at reinforcing
consumer perceptions of our “NIU” brand as a premium smart e-scooter brand. Therefore, failure to protect our brand or to grow the
value of the “NIU” brand may have a material adverse effect on our business and results of operations, including losing our customers.
We focus on promoting awareness of our “NIU” brand generally and in particular as a premium brand for high-quality smart e-
scooters globally. We seek to maintain and strengthen our brand image through marketing initiatives, including advertising, consumer
promotions and trade promotions. Maintaining and strengthening our brand image depends on our ability to adapt to a rapidly changing
media environment and preferences of customers to receiving information, including our increasing reliance on social media and online
dissemination of advertising campaigns. If we do not continue to improve, maintain and strengthen our brand, we may lose the
opportunity to build a critical mass of customers. Additionally, promoting and positioning our brand will likely depend significantly on
our ability to provide high-quality products and services and engage with our customers as intended. If we are unsuccessful in doing so,
our business, financial condition, results of operations and prospects could be materially and adversely affected.
Our success is dependent on the continued popularity of our existing products and services and our continued innovation and
successful launches of new products and services, and we may not be able to anticipate or make timely responses to changes in the
preferences of consumers.
The success of our operations depends on our ability to introduce new or enhanced smart e-scooters, and other new products.
Consumer preferences differ across and within each of the regions in which we operate or plan to operate and may shift over time in
response to changes in demographic and social trends, economic circumstances and the marketing efforts of our competitors. There can
be no assurance that our existing products will continue to be favored by consumers or that we will be able to anticipate or respond to
changes in consumer preferences in a timely manner. Our failure to anticipate, identify or react to these particular preferences could
adversely affect our sales performance and our profitability. In addition, demand for many of our products, including accessories, are
closely linked to customers’ purchasing power and disposable income levels, which may be adversely affected by unfavorable economic
developments in the countries in which we operate.
We devote significant resources to product development. However, we may not be successful in developing innovative new
products, and our new products may not be commercially successful. To the extent that we are not able to effectively gauge the direction
of our key markets and successfully identify, develop and manufacture new or improved products in these changing markets, our
financial results and our competitive position may suffer. Moreover, there are inherent market risks associated with new product
introductions, including uncertainties about marketing and consumer preference, and there can be no assurance that we will be successful
in introducing new products. We may expend substantial resources developing and marketing new products that may not achieve
expected sales levels.
Additionally, our competitive advantage also depends on the smart features and data services we provide to our users. Our smart
e-scooters are connected to our NIU app. By using smart e-scooters’ built-in GPS, on-board computer, algorithms and cloud technology,
our NIU app enables riders to seamlessly receive real-time data including, among others, anti-theft alerts, daily riding habits and power
supply, real-time diagnostics and maintenance and service station directory. We cannot assure you that we will be able to continue to
innovate and develop new smart features and data services, which may jeopardize customer experience and affect both our sales of
scooters and provision of related services.
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We rely heavily on city, partners and franchised stores for sales and distribution of our products and our success depends on our
offline distribution network.
We have established a distinct omnichannel retail network to sell our products and services to our customers. In China, our
offline retail channels consist of city partners and franchised stores, whereas in European and other countries, we rely on overseas
distributors. Our unique “city partner” system plays an important role in our offline sales strategy in China. City partners are our
exclusive distributors who either open and operate franchised stores or sign up franchised stores. As of December 31, 2022, we had
338 city partners and 3,102 franchised stores in China. Our offline distribution network plays a crucial role in our omnichannel retail
system. We rely on these city partners and franchised stores in China to directly interact with and serve our users, but the interest of city
partners and franchised stores may not be entirely aligned with ours or with that of other city partners and franchised stores. As of
December 31, 2022, one distributor accounted for greater than 10% of our net accounts receivable. There can be no assurance that we
will be able to maintain our existing relationships with city partners and franchised stores. Additionally, our existing city partners and
franchised stores may not be able to maintain past levels of sales or expand their sales. In addition, as we seek to expand into new regions
in China, we cannot assure you that we will be able to successfully establish and maintain relationships with new city partners and
franchised stores in these regions on favorable terms or at all.
Furthermore, we manage our franchised stores in a real-time and interactive manner. We closely monitor their sales
performance, service levels and activities within the franchised stores through the store level management system that was implemented
by us in early 2018. However, we cannot assure you that we will be successful in managing our city partners and franchised stores and
detecting inconsistencies with our brand image or values or non-compliance with the provisions of our distribution agreements by them.
Any non-compliance by our city partners or franchised stores could, among other things, negatively affect our brand reputation, demands
for our products and our relationships with other city partners and franchised stores. Any of these could have a material and adverse
effect on our business, financial condition, results of operations and prospects.
We rely substantially on external suppliers for certain components and raw materials used in our products.
We purchase certain key components and raw material, such as batteries, motors, tires, battery chargers and controllers from
external suppliers for use in our operations and production of products, and a continuous and stable supply of these components and raw
materials that meet our standards is crucial to our operations and production. We normally enter into one-year procurement agreements
with our external suppliers. We expect to continue to rely on external suppliers for a substantial percentage of our production
requirements in the future. We had nil, one and one supplier accounting for greater than 10% of our total purchases in 2020, 2021 and
2022, respectively. We cannot assure you that we will be able to maintain our existing relationships with these suppliers and continue to
be able to source electric motors, batteries or other key components and raw materials we use in our products on a stable basis and at a
reasonable price or at all. For example, our suppliers may increase the prices for the components or materials we purchase and/or
experience disruptions in their production of the components or materials.
The supply chain also exposes us to multiple potential sources of delivery failure or component shortages. While we obtain
components from multiple sources whenever possible, similar to other scooter manufacturers, some of the components used in our
products are purchased by us from a single source. To date, we have not found qualified and cost-efficient alternative sources for most of
the single sourced components used in our products and we generally do not maintain long-term agreements with our single source
suppliers. We have integrated the suppliers’ technologies within our products such that having to change to an alternative supplier may
cause significant disruption to our operations. In the event that the supply of key components is interrupted for whatever reason or there
are significant increases in the prices of these key components, our business, financial condition, results of operations and prospects may
be materially and adversely affected. Additionally, changes in business conditions, force majeure, governmental changes and other
factors beyond our control or that we do not presently anticipate could also affect our suppliers’ ability to deliver components to us on a
timely basis.
We incur significant costs related to procuring components and raw materials required to manufacture and assemble our
products. The prices for the components and raw materials fluctuate depending on factors beyond our control including market
conditions and demand for these components and materials. Substantial increases in the prices for the components or raw materials we
use in producing our products would increase our costs and reduce our margins. Any of the foregoing could materially and adversely
affect our results of operations, financial condition and prospects.
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We may not be able to achieve or maintain profitability.
We have incurred net losses in the past. In 2018, we had a net loss of RMB349.0 million. In 2019, 2020 and 2021, we had a net
profit of RMB190.1 million, RMB168.7 million, RMB225.8 million, respectively. In 2022, we had a net loss of RMB49.5 million
(US$7.2 million). We had net cash provided by operating activities of RMB178.7 million, RMB465.6 million, RMB334.2 million in
2019, 2020 and 2021, respectively. We had net cash used in operating activities of RMB121.9 million (US$17.7 million) in 2022. We
cannot assure you that we will be able to achieve profitability again and maintain net profits or positive cash flow from operating
activities in the future. Our ability to maintain profitability depends in large part on our ability to increase sales of our products and
services, increase cost efficiency and manage operating expenses. We intend to continue to increase our sales of products, improve gross
margin, manage and further reduce our operating expenses as a proportion of our total revenues, but there can be no assurance that we
will achieve this goal and maintain profitability in the future.
Our products and services may experience quality problems from time to time, which could result in decreased sales, adversely affect
our results of operations and harm our reputation.
Our products and services can contain design and manufacturing defects. Sophisticated cloud electric central unit and software,
such as those developed by us, often contain “bugs” that can unexpectedly interfere with the software’s intended operation. Defects may
also occur in components and products that we purchase from third-party suppliers. There can be no assurance we will be able to detect
and fix all defects in the hardware, software and services we offer. Failure to do so could result in lost in revenue, significant warranty
and other expenses and harm to our reputation.
Additionally, we source and purchase key components or accessories in our operations and production of products from third-
party suppliers, such as batteries, motors, tires, battery chargers, helmets and controllers. We cannot assure that the quality and functions
of these key components or accessories supplied by third-party suppliers will be consistent with and maintained at our high standard.
Any defects or quality issues in these key components or accessories or any non-compliance incidents associated with these third-party
suppliers could result in quality issues with our products and hence compromise our brand image and results of operations.
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 consistently with customers’ expectations or with other scooters currently available on the
market. Any product defects or any other failure of our products to perform as expected could harm our reputation and result in adverse
publicity, lost revenue, delivery delays, product recalls, product liability claims, harm to our brand and reputation, and significant
warranty and other expenses, and could have a material adverse impact on our business, financial condition, operating results
and prospects.
On November 21, 2019, the State Administration for Market Regulation issued the Interim Provisions on the Administration of
Recall of Consumer Goods, or the Recall Provisions, which became effective on January 1, 2020. Pursuant to the Recall Provisions, if a
manufacturer is aware of any potential defect in its products, or receive such notice from relevant government authorities, it must
investigate in a timely manner and report the results of such investigation to the relevant authorities. Where any defect is found during
the investigation, the manufacturer must immediately cease to manufacture, sell, or import the relevant products and recall such products.
We have not received any such notice from authorities, or initiated, voluntarily or involuntarily, any product recalls in accordance with
the Recall Provisions.
In the future, we may at various times, voluntarily or involuntarily, initiate a recall if any of our products, including any systems
or parts sourced from our suppliers, prove to be defective or non-compliant with applicable laws and regulations. Such recalls, whether
voluntary or involuntary or caused by systems or components engineered or manufactured by us or our suppliers, could involve
significant expense and could adversely affect our brand image in our target markets, as well as our business, prospects, financial
condition and results of operations.
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We may face intense competition in the electric two-wheeled vehicles industry.
We operate in the electric two-wheeled vehicles industry and face competition. We expect additional competitors to enter this
market. Our future competitors may enjoy competitive advantages, such as (i) greater capacity to leverage their sales efforts and
marketing expenditures across a broader portfolio of products, (ii) more established relationships with a larger number of suppliers,
contract manufacturers and channel partners, (iii) access to larger and broader user bases, (iv) greater brand recognition, (v) greater
financial, research and development, marketing, distribution and other resources, (vi) more resources to make investments and
acquisitions and (vii) larger intellectual property portfolios. We may face potential competition from both domestic players and
established international electric scooter manufacturers.
Moreover, although we have developed our data analytics to our customers as a value-added service, some of the mass-market
electric scooter manufactures have been adopting lithium-ion battery and app connectivity technologies to enter the electric two-wheeled
vehicles market, which further intensifies direct competition. We believe our exclusive focus on smart electric scooters and the benefits
we receive by manufacturing in China are the basis on which we can compete in the electric two-wheeled vehicles market in spite of the
challenges posed by market competition. We believe that we are strategically positioned in the electric two-wheeled vehicles market,
given the quality, performance and unique design of our products. Nonetheless, increasing competition may lead to lower unit sales and
the subsequent increase in inventory may result in a further 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 our market share. There can be no assurance that we will be able to compete successfully in our
markets. If our competitors introduce new products or services that compete with or surpass the quality, price or performance of our
products or services, we may be unable to satisfy existing customers or attract new customers at the prices and levels that would allow us
to generate attractive rates of return on our investment.
Our marketing strategy of appealing to and growing sales to a more diversified group of users may not continue to be successful.
We have been successful in marketing our smart e-scooters in large part by promoting the NIU brand experience and lifestyle.
Our marketing, design, research and products are aimed to reinforcing customer perceptions of as a premium smart e-scooter brand. We
aim to provide users with a good user experience, including by providing our users with access to a full suite of services conveniently
through our NIU app and services stores. In addition, we seek to engage with our users on an ongoing basis using online and offline
channels, such as NIU community and clubs. We cannot assure you that our services, including NIU Care and NIU Cover, or our efforts
to engage with our users using both our online and offline channels, will be successful, which could impact our revenues as well as our
customer satisfaction and marketing.
To sustain and grow the business over the long term, we must continue to be successful in selling products and promoting the
NIU brand experience and lifestyle to a broader and more diverse set of users. We must also execute its diversification strategy without
adversely impacting the strength of the brand with core users. Failure to successfully drive demand for our smart e-scooters may have a
material adverse effect on our business and results of operations.
We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and
competitive position.
We consider our copyrights, trademarks, trade names, internet domain names, patents and other intellectual property rights
invaluable to our ability to continue to develop and enhance our brand recognition. We have invested significant resources to develop our
own intellectual property. Failure to maintain or protect these rights could harm our business. We rely on a combination of patents, patent
applications, trade secrets, including know-how, copyright laws, trademarks, intellectual property licenses, contractual rights and any
other agreements to establish and protect our proprietary rights in our technology. In addition, we enter into confidentiality and
nondisclosure agreements with our employees and business partners. See “Item 4. Information On the Company—B. Business Overview
—Intellectual Property.” Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied
consistently due to the lack of clear guidance on statutory interpretation. Contractual rights may be breached by counterparties, and there
may not be adequate remedies available to us for any such breach.
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The measures we take to protect our intellectual property rights may not be sufficient or adequate to prevent infringement on or
misuse of our intellectual property. Any unauthorized use of our intellectual property by third parties may adversely affect our current
and future revenues and our reputation. Preventing unauthorized uses of intellectual property rights could be difficult, costly and time-
consuming, particularly in China. Litigation may be necessary to enforce our intellectual property rights. Initiating infringement
proceedings against third parties can be expensive and time-consuming, and divert management’s attention from other business concerns.
We may not prevail in litigation to enforce our intellectual property rights against unauthorized use. Furthermore, the practice of
intellectual property rights enforcement by the PRC regulatory authorities is subject to significant uncertainty. We may have to resort to
litigation to protect our intellectual property rights. Failure to adequately protect our intellectual property could harm our brand name and
materially affect our business and results of operations.
We may need to defend ourselves against patent, trademark or other proprietary rights infringement claims, which may be time-
consuming and would cause us to incur substantial costs.
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, which could make it more
difficult for us to operate our business. From time to time, we may receive communications from holders of patents or trademarks
regarding their proprietary rights. Companies holding patents or other intellectual property rights may bring suits alleging infringement
of such rights or otherwise assert their rights and urge us to take licenses. Our applications and uses of trademarks relating to our design,
software or artificial intelligence technologies could be found to infringe upon existing trademark ownership and rights.
Additionally, we may fail to own or apply for key trademarks in a timely fashion, or at all, which may damage our reputation
and brand. Additionally, we receive from time to time letters alleging infringement of patents, trademarks or other intellectual property
rights by us.
As our patents may expire and may not be extended, our patent applications may not be granted and our patent rights may be
contested, circumvented, invalidated or limited in scope, our patent rights may not protect us effectively.
As of December 31, 2022, we owned 563 patents, 857 registered trademarks and 27 copyrights relating to various aspects of our
operations and 2 registered domain names, including www.niu.com. Of the 857 registered trademarks, 155 are registered in mainland
China and 702 in other countries and regions. As of the same date, we had 354 applications for patents and trademarks pending in
mainland China, Europe and other jurisdictions. For our pending applications, we cannot assure you that we will be granted patents
pursuant to our pending applications. Even if our patent applications succeed and we are issued patents in accordance with them, it is still
uncertain whether these patents will be contested, circumvented or invalidated in the future.
In addition, the rights granted under any issued patents may not provide us with proprietary protection or competitive
advantages. The claims under any patents that issue from our patent applications may not be broad enough to prevent others from
developing technologies that are similar or that achieve results similar to ours. It is also possible that the intellectual property rights of
others will bar us from licensing and from exploiting any patents that are issued from our pending applications. Numerous patents and
pending patent applications owned by others exist in the fields in which we have developed and are developing our technology. These
patents and patent applications might have priority over our patent applications and could subject our patent applications to invalidation.
Finally, in addition to those who may claim priority, any of our existing or pending patents may also be challenged by others on the basis
that they are otherwise invalid or unenforceable.
We may be materially and adversely affected by negative publicity.
We rely heavily on our brand image in selling our products. Negative publicity relating to our products and services,
shareholders, management, employees, operations, distributors, business partners, industry or products similar to ours, could materially
and adversely affect consumer perceptions of our brand and result in decreased demand for our products. There have been various
negative reports regarding our products and us in the past, in both online and traditional media, and there can be no assurance that we
will not experience negative publicity in the future or that such negative publicity will not have a material adverse effect on our business,
results of operations, financial condition or prospects.
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In particular, any actual or alleged illegal acts of our shareholders or management may undermine our brand image and
materially and adversely affect our business and results of operations. In June 2015, in connection with the trading of stock of a public
company listed on the Shenzhen Stock Exchange, Mr. Yi’nan Li, one of our beneficial owners at the time, as well as a shareholder of
Beijing Niudian, was convicted of one count of insider trading by the Guangdong Shenzhen Municipal Intermediate People’s Court in
January 2017, and his prison sentence ended in December 2017. Mr. Li is not a member of the board of directors or management team of
Niu Technologies, or otherwise involved in its operations in any capacity. Glory Achievement Fund Limited, one of our shareholders that
holds 28.0% of our outstanding shares and 21.2% of our total voting power, as of February 28, 2023, is ultimately and wholly held by a
trust, which has Mr. Li as the beneficiary and is administered by an independent trustee and initially by three individual protectors
unrelated to Mr. Li. Any decision making with respect to the voting or disposal of the shares held by Glory Achievement Fund Limited in
our company or other dealings in our securities is subject to approval by the protectors. Mr. Li will be able to replace the protectors with
persons appointed by himself in August 2028 or when the trust beneficially owns, through Glory Achievement Fund Limited or
otherwise, no more than 10% of our outstanding shares. Mr. Li has undertaken not to act as a member of our board of directors or the
management team of our company or any of its subsidiaries or variable interest entities, or otherwise be involved in our operations in any
capacity. Furthermore, we have adopted corporate governance measures to restrict his access to our non-public information. Any
negative publicity incident associated with our shareholders and management could materially and adversely affect the trading price of
the ADSs.
We may be subject to product liability or warranty claims that could result in significant direct or indirect costs, or we could
experience greater returns from retailers than expected, which could harm our business and operating results.
We may become subject to product liability claims, which could harm our business, prospects, operating results and financial
condition. The electric two-wheeled vehicles industry experiences significant product liability claims and we face inherent risk of
exposure to claims in the event our products do not perform as expected or malfunction resulting in property damage, personal injury or
death. 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
future products which would have material adverse effect on our brand, business, prospects and operating results. Any insurance
coverage might not be sufficient to cover all potential product liability claims. Any lawsuit seeking significant monetary damages may
have a material adverse effect on our reputation, business and financial condition.
We generally provide various warranties on different components and parts of our products and across different markets. In
China, we provide extended quality warranty to our users for terms varying from six months to three years, subject to certain conditions,
among others, including that warranty only applies to normal use and quality issues. The occurrence of any material defects in our
products could make us liable for damages and warranty claims in excess of our current reserves. In addition, we could incur significant
costs to correct any defects, warranty claims or other problems, including costs related to product recalls. Any negative publicity related
to the perceived quality of our products could affect our brand image, decrease retailer, distributor and customer demand, and adversely
affect our operating results and financial condition. While our warranty is limited to repairs and returns, warranty claims may result in
litigation, the occurrence of which could adversely affect our business and operating results.
We may fail to comply with legal or regulatory requirements or to obtain or adhere to requirements under relevant licenses, permits,
registrations or certificates.
Our manufacturing and other production facilities as well as the packaging, storage, distribution, advertising and labeling of our
products, are subject to extensive legal and regulatory requirements. For example, pursuant to the Regulation on the Administration of
Production Licenses for Industrial Products of the PRC and Measures for the Implementation of the Regulation on the Administration of
Production Licenses for Industrial Products of the PRC, we must maintain the Production License for National Industrial Products for the
production of our products. Loss of or failure to renew or obtain necessary permits, licenses, registrations or certificates could delay or
prevent us from meeting product demand, introducing new products, building new facilities or acquiring new businesses and could
materially and adversely affect our operating results. If we are found to be in violation of applicable laws and regulations, we could be
subject to administrative punishment, including fines, injunctions, recalls or asset seizures, as well as potential criminal sanctions, any of
which could have a material adverse effect on our business, financial condition, results of operations and prospects.
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In addition, future material changes in industry standards, laws and regulations, such as increased restrictions on manufacturers,
could result in increased operating costs or affect our ordinary operations, which could also have a material adverse effect on our
operations and our financial results. See “Item 4. Information on the Company—B. Business Overview—Regulation” for additional
details regarding the permits, licenses, registrations and other requirements applicable to us, our subsidiaries and affiliates. We largely
rely on our own standards concerning the production and quality control of such products. While we are committed to producing high-
quality products, there can be no assurance that our current production or quality control standards will satisfy any applicable laws and
regulations that may come into effect in the future.
Our products are subject to safety standards and failure to satisfy such mandated standards would have a material adverse effect on
our business and operating results.
Our products must comply with the safety standards of the market where they are sold. In mainland China, electric bicycles and
electric motorcycles must meet or exceed all mandated safety standards, including national level and local level standards. It is required
under these standards to conduct rigorous testing and use approved materials and equipment.
Electric bicycles shall meet the safety requirements set out in the Safety Technical Specification for Electric Bicycle (GB17761-
2018), or the Electric Bicycle Standard, which was jointly issued by the State Administration for Market Regulation and the National
Standardization Administration of China on May 15, 2018 and came into effect on April 15, 2019. Besides, a technical resolution on the
interpretation and implement of the Electric Bicycle Standard was promulgated jointly by an expert group on TC12 motorcycle and
component technology of Certification and Accreditation Administration of the PRC and China National Motorcycle Testing Centre
(Tianjin) on March 25, 2019, which set some more specific and stricter requirements for the design of the electric bicycles. Although this
resolution has not been adopted by the PRC national government as a national regulation, such interpretations that may be promulgated
by the government authorities from time to time may still cause uncertainty regarding the compliance of our business. See “Item 4.
Information on the Company—B. Business Overview—Regulation” for further details.
Electric motorcycles, as one type of the power-driven vehicles, shall meet the safety requirements set out in the Technical
Specifications for Safety of Power-Driven Vehicles Operating on Roads (GB7258-2017), which was jointly issued by the AQSIQ and
National Standardization Administration of China on September 29, 2017 and took effect since January 1, 2018, and was amended on
July 29, 2019 and February 20, 2021. The latest version took effect on January 1, 2022. Furthermore, the Safety Specifications for
Electric Motorcycles and Electric Mopeds (GB24155-2020), which issued by the State Administration for Market Regulation and the
National Standardization Administration of China in May 2020 and became effective on January 1, 2021, also stipulates some specific
safety requirements for electric motorcycles.
There is no guarantee that our products will satisfy the relevant standard and requirements for electric bicycles or motorcycles,
and we may be required to satisfy additional industry standards and face regulation changes relating to electric bicycle and motorcycle
business in the future. If our models were found to be in non-compliance of relevant laws and regulations, the models in question would
be prohibited from being sold in the Chinese market, which would in turn materially and adversely affect our sales and revenue, and
cause damage to our brand and result in liabilities. See “Item 4. Information on the Company—B. Business Overview—Regulation—
Regulations Relating to Production of E-Scooter—Regulations on Production of Electric Bicycle” and “—Regulations on Qualification
of Production of Electric Motorcycle.”
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Furthermore, the electric bicycles and motorcycles must pass various tests, undergo a certification process and finally be affixed
with China Compulsory Certification, or CCC, prior to being delivered from the factory, being sold, or being used in any commercial
case, and such certification is also subject to periodic renewal. On March 14, 2019, the Opinions of the State Administration for Market
Regulation, the MITT and the Ministry of Public Security on Intensifying Supervision of the Execution of National Standards for
Electric Bicycles, or the Opinions, was promulgated. The Opinions provides that the market supervision department should strengthen
the management of CCC certification for electric bicycles, strengthen inspections of certification agencies and manufacture enterprises,
and should only allow vehicles that meet the Electric Bicycle Standards and obtained CCC certification flowing into the market. We have
obtained CCC certification for all of our current products, and will try to obtain CCC certification for our future products. There is no
guarantee, however, all series of our products will always comply with the CCC standard and satisfy the requirements of CCC
certification, or we will be able to renew our current certification or certify timely our new products in the future. If our products were
found to be in non-compliance of the CCC standard, we would be prohibited from selling such e-scooters in the Chinese market, which
would in turn materially and adversely affect our sales and revenue, and cause damage to our brand and result in liabilities. See “Item 4.
Information on the Company—B. Business Overview—Regulations— Regulations Relating to Production of E-Scooter—Regulations on
Product Quality.”
We retain certain personal information about our users and may be subject to various privacy and consumer protection laws.
We use our NIU Inspire system to log information about each smart e-scooter’s use in order to aid us in smart e-scooter
diagnostics, repair and maintenance, as well as to help us collect data regarding the user’s charge time, battery usage, mileage, efficiency
habits and location information. Our users may object to the use of these data, which may harm our business. Possession and use of
users’ personal information in conducting our business may subject us to regulatory burdens in mainland China and other jurisdictions,
such as the European Union, which would require us to obtain users’ consent, restrict our use of such personal information and hinder
our ability to expand our user base. In the event of a data breach or other unauthorized access to our user data, we may have obligations
to notify users about the incident and we may need to provide some form of remedy for the individuals affected by the incident. For
example, in May 2018 the European Union’s new regulation governing data practices and privacy called the General Data Protection
Regulation, or the GDPR, became effective and substantially replaced the data protection laws of the individual European Union member
states. The law requires companies to meet more stringent requirements regarding the handling of personal data of individuals in the EU
than were required under predecessor EU requirements. In the United Kingdom, a Data Protection Bill that substantially implements the
GDPR also became law in May 2018. The law also increases the penalties for non-compliance, which may result in monetary penalties
of up to 20.0 million Euros or 4% of a company’s worldwide turnover, whichever is higher. In the U.S., various federal, state and foreign
legislative and regulatory bodies, or self-regulatory organizations, may expand current laws or regulations, enact new laws or regulations
or issue revised rules or guidance regarding privacy, data protection, information security. For example, California enacted the California
Consumer Privacy Act, which, among other things, requires new disclosures to California consumers and afford such consumers new
abilities to opt out of certain sales of personal information. Outside of the European Union and the U.S., many countries and territories
have laws, regulations, or other requirements relating to privacy, data protection, information security, and consumer protection, and new
countries and territories are adopting such legislation or other obligations with increasing frequency.
If users allege that we have improperly used, released or disclosed their personal information, we could face legal claims and
reputational damage. We may incur significant expenses to comply with privacy, consumer protection and security standards and
protocols imposed by law, regulation, industry standards or contractual obligations. Additionally, we use third-party cloud services to
store the data collected. If third parties improperly obtain and use the personal information of our users, we may be required to expend
significant resources to resolve these problems. A major breach of our network security and systems could create serious negative
consequences for our businesses 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—Regulation” for further details.
We are subject to a variety of costs and risks due to our continued expansion internationally that may not be successful and could
adversely affect our profitability and operating results.
Our smart e-scooters have international models that are manufactured for sales and distribution in overseas markets.
International expansion represents a large opportunity to further grow our business and enhance our competitive position, and is one of
our core strategies.
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We may enter into new geographic markets where we have limited or no experience in marketing, selling, and localizing and
deploying our smart e-scooters. International expansion has required and will continue to require us to invest significant capital and other
resources and our efforts may not be successful. International sales and operations may be subject to risks such as:
● limited brand recognition (compared with our home market in China);
● costs associated with establishing new distribution networks;
● difficulty to find qualified partners for overseas distribution;
● inability to anticipate foreign consumers’ preferences and customs;
● difficulties in staffing and managing foreign operations;
● burdens of complying with a wide variety of local laws and regulations, including personal data protection, battery, motor,
packaging and labeling;
● political and economic instability;
● trade restrictions;
● 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.
The occurrence of any of these risks could negatively affect our international business and consequently our business and
operating results. In addition, the concern over these risks may also prevent us from entering into or releasing certain of our smart e-
scooters in certain markets.
We rely on third-party logistic service providers to deliver our online direct sales orders and certain overseas orders.
We typically rely on third-party logistic service providers to deliver our online direct sales orders and certain overseas orders.
Damage or disruption to our distribution logistics due to disputes, weather, natural disasters, fire, explosions, terrorism, pandemics,
geopolitical turmoil or labor strikes could impair our ability to distribute or sell our products. Inadequate third-party logistics services
could also potentially disrupt our distribution and sales and compromise our business reputation. Failure to take adequate steps to
mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our
business, financial condition and results of operations, as well as require additional resources to restore our supply chain.
Our operations may be interrupted by production difficulties due to mechanical failures, utility shortages or stoppages, fire, natural
disaster or other calamities at or near our facilities.
We are reliant on equipment and technology in our facilities for the production and quality control of our products, and our
operations are subject to production difficulties such as capacity constraints of our production facilities, mechanical and systems failures
and the need for construction and equipment upgrades, any of which may cause the suspension of production or/and reduced output.
There can be no assurance that we will not experience problems with our equipment or technology in the future or that we will be able to
address any such problems in a timely manner. Problems with key equipment or technology in one or more of our production facilities
may affect our ability to produce our products or cause us to incur significant expense to repair or replace such equipment or technology.
Also, scheduled and unscheduled maintenance programs may affect our production output. Any of these could have a material adverse
effect on our business, financial condition, results of operations and prospects.
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Furthermore, we depend on a continuous supply of utilities, such as electricity and water, to operate our production facilities.
Any disruption to the supply of electricity or other utilities to our production facilities may disrupt our production. 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, our operations are subject to operational risks. Fire, natural disasters, pandemics or extreme weather, including earthquakes,
droughts, floods, typhoons or other storms, or excessive cold or heat could cause power outages, fuel shortages, water shortages, damage
to our production facilities, any of which could impair or interfere with our operations. A fire accident happened at the warehouse in our
rented plant facility in Jiangsu Province of the PRC in April 2018, and we suffered a RMB21.8 million loss for the inventories damaged
and cost incurred to repair property and equipment in the second quarter of 2018. We cannot assure you that similar events will not
happen again in the future or that we will be able to take adequate measures to mitigate the likelihood or potential impact of similar
events, or to effectively respond to such events if they occur, which could materially and adversely affect our business, financial
condition and results of operations.
Our financial and operating performance may be adversely affected by epidemics or other public health crises.
Our financial and operating performance may be materially and adversely affected by the outbreak of epidemics or other public
health crises. For example, since late December 2019, an outbreak of a new type of severe pneumonia caused by novel coronavirus
(COVID-19) spread globally. During such epidemic outbreak, government-imposed measures such as travel restriction, extended
holidays and delay of business resumption, interrupted normal operation of businesses and adversely affected and slowed down the
economic development during the period.
Many aspects of our operations were harmed as a result of the ongoing epidemic of the novel coronavirus. We prioritized the
health and safety of our employees, and took various preventative and quarantine measures across our company soon after the outbreak.
Due to the strict measures in response to the outbreak, we had to reduce work resumption rate in February and March of 2020 after the
Chinese New Year holiday. Even after we resumed production activities, the efficiency was affected by the precautionary measures we
took. Transportation and logistics services were significantly affected as well, which delayed or suspended the delivery of our products
and the supply of our raw materials. As a result of the pandemic, we also suffered from shrinking market demand from China in the first
quarter of 2020 and overseas markets on an ongoing basis. Due to the decreasing demand as a result of the outbreak, our revenues of the
first quarter of 2020 saw a decrease of 34.4% year over year. In addition, we incurred fixed costs in operating expenses despite the
decrease in sales and level of operations. As a result, our net results was adversely affected in the first quarter of 2020. For the same
reason, our efforts on retail sales network expansion internationally was temporarily suspended. Our branding and marketing activities
were affected, as marketing activities were limited to online only.
In China, business activities have largely resumed, government emergency measures have been significantly relaxed, and the
general economy is gradually recovering. Beginning in the second quarter of 2020, we experienced recovery and growth in results of
operations propelled by the strong recovery in sales in China. However, our sales in international markets have been continuously
affected due to the ongoing pandemic in those markets. Given the uncertainty around the extent and timing of the potential future spread
or mitigation of the COVID-19 and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact
to our future results of operations, cash flows, or financial condition. We cannot assure you that the COVID-19 pandemic can be
eliminated or contained in the near future, or at all, or a similar outbreak will not occur again.
In late 2021, there had been a resurgence of COVID-19 cases, including the COVID-19 Delta and Omicron variant cases, in
multiple cities in China. The Chinese local authorities reinstated certain measures to keep COVID-19 in check, including travel
restrictions and stay-at-home orders, and we had to adjust various aspects of our operations. Any prolonged occurrence or recurrence of
these health epidemics or other adverse public health developments in China or any of the major markets in which we do business may
have a material adverse effect on our business and operations. Our business could also experience a slowdown or temporary suspension
in production in geographic locations impacted. Since December 2022, China began to modify restrictive measures associated with
COVID-19 and had downgraded its management of COVID-19 to Class-B on January 8, 2023 in accordance with the Law of the
People’s Republic of China on Prevention and Treatment of Infectious Disease. The extent to which the pandemic impacts our results of
operations going forward will depend on future developments which are highly uncertain and unpredictable, including the frequency,
duration and extent of outbreaks of COVID-19, the appearance of new variants with different characteristics, the effectiveness of efforts
to contain or treat cases, and future actions that may be taken in response to the developments. We, along with our customers, will need
time to recover from the economic effectives of the pandemic even after business conditions begin to return to normal. To the extent the
COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other
risks described in this annual report.
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If we fail to maintain an effective system of internal control over financial reporting, we may be unable to accurately report our
financial results or prevent fraud.
We are subject to reporting obligations under the U.S. securities laws. Among other things, the Securities and Exchange
Commission, or the SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, adopted rules requiring every
public company, including us, to include a management report on the company’s internal control over financial reporting in its annual
report, which contains management’s assessment of the effectiveness of the company’s internal control over financial reporting. In
addition, an independent registered public accounting firm must attest to and report on the effectiveness of the company’s internal control
over financial reporting. We have been subject to these requirements since the fiscal year ended December 31, 2022.
For the year end December 31, 2018, a material weakness was identified in our internal control over financial reporting. The
material weakness identified related to our lack of sufficient financial reporting and accounting personnel with appropriate knowledge of
U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues and to prepare and review our
consolidated financial statements and related disclosures to fulfill U.S. GAAP and SEC financial reporting requirements. As defined in
the standards established by the U.S. Public Company Accounting Oversight Board, a “material weakness” is a deficiency, or
combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
In 2019, we took measures to address the material weakness identified above. We have implemented measures to improve our
internal control over financial reporting, including: (i) hired an additional a reporting associate with appropriate knowledge and
experience in U.S. GAAP accounting and SEC reporting and one more internal audit associate with experience in internal control,
internal audit and SOX compliance; (ii) upgraded our financial system to enhance our effectiveness and enhance control of financial
analysis; (iii) established effective oversight and clarifying reporting requirements for non-recurring and complex transactions to ensure
consolidated financial statements and related disclosures are accurate, complete and in compliance with U.S. GAAP and SEC reporting
requirements; (iv) established a regular training program for our accounting staffs, especially training related to U.S. GAAP and SEC
reporting requirements; and (v) implemented and formalized comprehensive internal controls over financial reporting, including
developing a comprehensive policy and procedure manual, to allow for prevention, early detection and resolution of potential compliance
issues.
In connection with the preparation of our financial statements for the fiscal year ended December 31, 2022, we did not identify
any material weakness in our internal controls and our financial reporting. Our management has concluded that our internal control over
financial reporting was effective as of December 31, 2022. See “Item 15. Controls and Procedures.” In the future, however, if we fail to
maintain effective internal control over financial reporting, our management may not be able to conclude that we have effective internal
control over financial reporting at a reasonable assurance level. A failure to maintain effective internal controls over financial reporting
could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting
requirements and related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations and
prospects, as well as the trading price of our ADSs, may be materially and adversely affected. Moreover, ineffective internal control over
financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the
stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our
financial statements from prior periods.
Furthermore, even if our management concludes that our internal control over financial reporting is effective, our independent
registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied
with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the
relevant requirements differently from us. In addition, since we have been a public company, our reporting obligations may place a
significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to
timely complete our evaluation testing and any required remediation. If we fail to maintain an effective internal control environment, we
could suffer material misstatements in our consolidated financial statements and fail to meet our reporting obligations, which would
likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets,
harm our results of operations, and lead to a decline in the trading price of the ADSs. Additionally, ineffective internal control over
financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the
stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our
consolidated financial statements for prior periods.
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If our suppliers or distributors fail to use ethical business practices and comply with applicable laws and regulations, our brand
image could be harmed due to negative publicity.
Our core values, which include developing high-quality smart e-scooters while operating with integrity, are an important
component of our brand image, which makes our reputation sensitive to allegations of unethical business practices. We do not control the
business practices of our suppliers or distributors. Accordingly, we cannot guarantee their compliance with ethical business practices,
such as environmental responsibilities, fair wage practices and compliance with child labor laws, among others. A lack of demonstrated
compliance could lead us to seek alternative suppliers or distributors which could increase our costs and results in delayed delivery of our
products or other disruptions of our operations.
Violation of labor or other laws by our suppliers or distributors 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 for us and our brand. This could
diminish the value of our brand image and reduce demand for our products if, as a result of such violation, we were to attract negative
publicity. If we, or other players in our industry, encounter similar problems in the future, it could harm our brand image, business,
prospects, results of operations and financial condition.
Any significant cybersecurity incident or disruption of our information technology systems or those of third-party partners could
materially damage user relationships and subject us to significant reputational, financial, legal and operation consequences.
We depend on our information technology systems, as well as those of third parties, to develop new products and services, host
and manage our services, store data, process transactions, respond to user inquiries, and manage inventory and our supply chain. Any
material disruption or slowdown of our systems or those of third parties whom we depend upon could cause outages or delays in our
services, particularly in the form of interruption of services delivered by our mobile app, which could harm our brand and adversely
affect our operating results. We rely on cloud servers maintained by cloud service providers to store our data, and all of the data we
collected are hosted at third-party cloud service providers.
Problems with our cloud service providers or the telecommunications network providers with whom they contract could
adversely affect the user experience delivered by us. Our cloud service providers could decide to cease providing us services without
adequate notice. Any change in service levels at our cloud servers or any errors, defects, disruptions or other performance problems with
our information technology systems could harm our brand and may damage the data of our users. If changes in technology cause our
information technology systems, or those of third parties whom we depend upon, to become obsolete, or if our or their information
systems are inadequate to handle our growth, we could lose users, and our business and operating results could be adversely affected.
Our success depends on our ability to retain our core management team and other key personnel.
Our performance depends on the continued service and performance of our directors and senior management as they are
expected to play an important role in guiding the implementation of our business strategies and future plans. If any of our directors or
any members of our senior management were to terminate their service or employment, there can be no assurance that we would be able
to find suitable replacements in a timely manner, at acceptable cost or at all. The loss of services of key personnel or the inability to
identify, hire, train and retain other qualified and managerial personnel in the future may materially and adversely affect our business,
financial condition, results of operations and prospects. Additionally, we rely on our research and development personnel for product
development and technology innovation. If any of our key research and development personnel were to leave us, we cannot assure you
that we can secure equally competent research and development personnel in a timely manner, or at all.
We are a relatively young company, and we may not be able to sustain our rapid growth, effectively manage our growth or implement
our business strategies.
We have a limited operating history. We are formed in September 2014, and we launched our first product, the NQi
Series scooter, in June 2015. Although we have experienced significant growth since our inception, our historical growth rate may not be
indicative of our future performance due to our limited operating history.
You should consider our business and future prospects in light of the risks and challenges we face as a new entrant into our
industry, including, among other things, with respect to our ability to:
● produce safe, reliable and quality smart e-scooters;
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● build a well-recognized brand;
● establish and expand our customer base;
● successfully market our products and services;
● improve and maintain our operational efficiency;
● maintain a reliable, secure, high-performance and scalable technology infrastructure;
● attract, retain and motivate talented employees;
● anticipate and adapt to changing market conditions, including technological developments and changes in competitive
landscape;
● navigate an evolving and complex regulatory environment; and
● identify suitable facilities to expand manufacturing capacity.
If we fail to address any or all of these risks and challenges, our business may be materially and adversely affected.
We have limited experience to date in high volume manufacturing of our smart e-scooters. We cannot assure you that we will be
able to develop or ensure efficient, automated, low-cost manufacturing capability and processes, and reliable sources of component
supply that will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes
required to successfully mass-market our currently available products and future scooters. We may not be able to achieve similar results
or grow at the same rate as we had in the past. As our business grows, we may adjust our product and service offerings. These
adjustments may not achieve expected results and may have a material and adverse impact on our financial conditions and results
of operations.
In addition, our rapid growth and expansion have placed, and continue to place, significant strain on our management and
resources. This level of significant growth may not be sustainable or achievable at all in the future. We believe that our continued growth
will depend on many factors, including continued launch of new products, effective marketing, successful entry into other overseas
market and operating efficiency. We cannot assure you that we will achieve any of the above, and our failure to do so may materially and
adversely affect our business and results of operations.
Higher employee costs and inflation may adversely affect our business and our ability to achieve or maintain profitability.
China’s overall economy and the average wage in mainland China have increased in recent years and are expected to grow. The
average wage level for our employees has also increased in recent years. We expect that our employee costs, including wages and
employee benefits, will increase. Unless we are able to pass on these increased employee costs to those who pay for our products and
services, our ability to achieve or maintain profitability and our results of operations may be materially and adversely affected.
We outsource our production labor needs to third-party labor service companies. Typically, we enter into agreements with labor
service companies, pursuant to which labor service companies send their employees to work on our assembly and production lines. The
labor service companies are responsible for entering into labor contracts with their employees and provide, among others, social benefits
and bear costs relating to accidents or injuries happened at the work place in accordance with the laws and regulations of mainland
China. We may be unable to enter into new agreements or extend existing agreements with them on terms and conditions acceptable to
us, and therefore may need to contract with other third parties and incur additional labor costs. Despite our price resilience, the rising
employee costs as a result of higher labor cost of our contract manufacturers and operation staff and increasing raw material price cannot
be easily passed to end consumers in the form of higher retail prices due to competition in the electric two-wheeled vehicles market. Our
ability to achieve or maintain profitability therefore may be adversely affected if labor cost and inflation continue to rise in the future.
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We may need additional capital, and financing may not be available on terms acceptable to us, or at all.
We believe our cash on hand will be sufficient to meet our current and anticipated needs for general corporate purposes for at
least the next 12 months. We may, however, need additional cash resources in the future if we experience changes in business conditions
or other developments. We may also need additional cash resources in the future if we find and wish to pursue opportunities for
investment, acquisition, capital expenditure or similar actions. If we determine in the future that our cash requirements exceed the
amount of cash and cash equivalents we have on hand, we may seek to issue equity or equity linked securities or obtain debt financing.
The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would
result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that
financing will be available in amounts or on terms acceptable to us, if at all.
Our business is subject to seasonal and quarterly fluctuations, and if our sales fall below our forecasts, our overall financial
condition and results of operations could be adversely affected.
Our revenues and operating results have fluctuated in the past from quarter to quarter, due to, among others, seasonal factors.
Our revenues have been higher in the third quarter each year primarily as a result of ideal weather conditions for riding e-scooters and
have been lower in the first quarter each year primarily as a result of unideal weather condition. Accordingly, any shortfall in expected
third-quarter revenues would adversely affect our annual operating results. Our advertising and promotion expenses tend to be event-
driven. We typically conduct various advertising and promotional events when we launch new products. As a result, the costs relating to
such marketing and promotional events may increase significantly in the relevant quarter, which may cause our results of operations and
financial performance to fluctuate from quarter to quarter.
We note that, in general, scooter sales tend to decline over the winter season and we anticipate that our sales of currently
available e-scooters and the upcoming new products may have similar seasonality. However, our rapid growth may obscure the extent to
which seasonality trends have affected our business and our limited operating history makes it difficult for us to assess the exact nature or
extent of the seasonality of our business. Our operating results could also suffer if we do not generate revenues consistent with our
expectations for this seasonal demand because many of our procurement are based on anticipated levels of annual revenues and past
years’ pattern of reasonability. Accordingly, yearly or quarterly comparisons of our operating results may not be useful and our operating
results in any particular period will not necessarily be indicative of the results to be expected for any future period.
An economic downturn or economic uncertainty, may adversely affect consumer discretionary spending and demand for our products
and services.
Our products and services may be considered discretionary items for some consumers. Factors affecting the level of consumer
spending for such discretionary items include general economic conditions, and other factors, such as consumer confidence in future
economic conditions, fears of recession, the availability and cost of consumer credit, levels of unemployment and tax rates. As global
economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable and subject to reductions.
Unfavorable economic conditions may lead consumers to delay or reduce purchases of our products and services and consumer demand
for our products and services may not grow as we expect. Our sensitivity to economic cycles and any related fluctuation in consumer
demand for our products and services may have an adverse effect on our operating results and financial condition.
We have limited insurance coverage, which could expose us to significant costs.
We maintain certain insurance policies to safeguard against various risks associated with our business and operations, including
mainly property insurance and product liability insurance for models in the overseas markets and public liability insurance for models in
the China market. However, we cannot assure you that our insurance coverage is sufficient to prevent us from any loss or that we will be
able to successfully claim our losses under our current insurance policy on a timely basis, or at all, which may adversely affect our
financial condition and results of operations.
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We have granted, and may continue to grant, options and other types of awards under our share incentive plan, which may result in
increased share-based compensation expenses.
In January 2016 and September 2018, our shareholders and board of directors approved the 2016 Global Share Incentive Plan
and the 2018 Share Incentive Plan, respectively, to attract and retain the best available personnel, provide additional incentives to
employees, directors and consultants, and promote the success of our business. The maximum aggregate number of ordinary shares that
may be issued under the 2016 Global Share Incentive Plan, as amended in March 2018, or the Amended and Restated 2016 Plan, is
5,861,480 Class A ordinary shares. Under the 2018 Share Incentive Plan, the maximum aggregate number of ordinary shares available
for issuance is 6,733,703 Class A ordinary shares, subject to certain annual increases. As of December 31, 2022, options to purchase
1,801,680 Class A ordinary shares and 3,750 restricted share units had been granted and were outstanding under the Amended and
Restated 2016 Plan, excluding options or restricted share units that were forfeited or canceled after the relevant grant dates. As of
December 31, 2022, options to purchase 2,612,928 Class A ordinary shares and 3,886,908 restricted share units had been granted and
were outstanding under the 2018 Share Incentive Plan. In 2020, 2021 and 2022, we recorded RMB39.6 million, RMB47.2 million and
RMB58.2 million (US$8.4 million) in share-based compensation expenses, respectively.
We believe the granting of share-based awards is of significant importance to our ability to attract and retain key personnel and
employees, and we will continue to grant share-based compensation to employees in the future. As a result, our expenses associated with
share-based compensation may increase, which may have an adverse effect on our results of operations.
Competition for highly skilled personnel is often intense and we may incur significant costs or be unsuccessful in attracting,
integrating, or retaining qualified personnel to fulfill our current or future needs.
We have, from time to time, experienced, and we expect to continue to experience, difficulty in hiring and retaining highly
skilled employees with appropriate qualifications. In addition, if any of our senior management or key personnel joins a competitor or
engages in a competing business, we may lose business, knowhow, trade secrets, business partners and key personnel. Furthermore,
prospective candidates and existing employees often consider the value of the equity awards they receive in connection with their
employment. Thus, our ability to attract or retain highly skilled employees may be adversely affected by declines in the perceived value
of our equity or equity awards. Furthermore, there are no assurances that the number of shares reserved for issuance under our share
incentive plans will be sufficient to grant equity awards adequate to recruit new employees and to compensate existing employees.
We are or may be subject to risks associated with strategic alliances or acquisitions.
We have entered into and may in the future enter into joint research and development agreements, co-branding agreements and
strategic alliances with various third parties to further our business purpose from time to time. These alliances could subject us to a
number of risks, including risks associated with sharing proprietary information, non-performance by the third party and increased
expenses in establishing new strategic alliances, any of which may materially and adversely affect our business. We may have limited
ability to monitor or control the actions of these third parties and, to the extent 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.
In addition, although we have no current acquisition plans, if appropriate opportunities arise, we may acquire additional assets,
products, technologies or businesses that are complementary to our existing business. In addition to possible shareholders’ approval, we
may also have to obtain approvals and licenses from relevant government authorities for the acquisitions and to comply with any
applicable laws and regulations of mainland China, which could result in increased delay and costs, and may derail our business strategy
if we fail to do so. Furthermore, past and future acquisitions and the subsequent integration of new assets and businesses into our own
require significant attention from our management and could result in a diversion of resources from our existing business, which in turn
could have an adverse effect on our business operations. Acquired assets or businesses may not generate the financial results we expect.
Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of
significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities
of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.
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Our business could be adversely affected by trade tariffs or other trade barriers.
Our products are exported to a number of geographical markets, such as Europe, the U.S. and Southeast Asia, and we plan to
further expand our overseas sales in the future. Our ability to sell our products to overseas markets may be affected by trade tariffs or
other trade barriers. Moreover, a discord in international trade relations and the implementation of new tariff or trade barriers, particularly
between the United States and China, but also as a result of the war in Ukraine and sanctions on Russia, could negatively affect our
global sales. Starting from early 2018, the U.S. government imposed several rounds of tariffs on Chinese goods, the categories of which
include our e-scooters and accessories. While the two parties singed a phrase one agreement in January 2020, the tariffs on our products
have yet been lifted. In addition, the European Union imposed tariffs on imports of e-bikes, which are defined as cycle with pedal
assistance and an ancillary electric motor, originating in mainland China. Any of the existing tariffs and trade barriers and any future
ones could have a material adverse effect on our business, financial condition and results of operations.
We are subject to changing laws and regulations regarding regulatory matters, corporate governance and public disclosure that have
increased both our costs and the risk of non-compliance.
We are subject to rules and regulations by various governing bodies, including, for example, the Securities and Exchange
Commission, which is charged with the protection of investors and the oversight of companies whose securities are publicly traded, and
the various regulatory authorities in China and the Cayman Islands, and to new and evolving regulatory measures under applicable law.
Our efforts to comply with new and changing laws and regulations have resulted in and are likely to continue to result in, increased
general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance
activities.
We operate in the electric two-wheeled vehicles industry. We are subject to the laws of mainland China in addition to the laws of
the foreign countries in which we operate and to which we sell our products. Changing laws and regulations regarding regulatory
matters, corporate governance and public disclosure may result in continuing uncertainty regarding compliance matters and additional
costs necessitated by ongoing revisions to our disclosure and governance practices. In addition, we may face operational issues that could
have a material adverse effect on our reputation, business and results of operations, if we fail to address certain factors, including but not
limited to the following:
● the need for increased resources to manage regulatory compliance across our international businesses;
● compliance with privacy laws and data security laws and compliance costs across different legal systems;
● heightened restrictions and barriers on the transfer of data between different jurisdictions; and
● differing, complex and potentially adverse customs, import/export laws, tax rules and regulations or other trade barriers or
restrictions related compliance obligations and consequences of non-compliance, and any new developments in these areas.
If any of our overseas operations, or our associates or agents, violate such laws and regulations, we could become subject to
sanctions or other penalties, which could have a material and adverse effect on our business, financial condition, results of operations and
prospects.
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Our business is subject to complex and evolving Chinese and international laws and regulations regarding data privacy and
cybersecurity. Failure to protect confidential information of our customers and network against security breaches could damage our
reputation and brand and substantially harm our business and results of operations.
Personally identifiable and other confidential information is increasingly subject to legislation and regulations in China and
numerous foreign jurisdictions. The PRC governmental authorities have enacted a series of laws and regulations relating to the protection
of personal information and/or the supervision over data processing activities, under which relevant information or data processors are
required to comply with an array of personal information and data protection requirements, including for example, to clearly indicate the
purposes, methods and scope of any information collection and usage, to obtain appropriate user consent and to establish user
information protection systems with appropriate remedial measures. However, this regulatory framework for privacy issues in China and
worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. For example, on June 10, 2021, the Standing
Committee of the PRC National People’s Congress issued the Data Security Law to regulate data processing activities and security
supervision in mainland China, which came into effect on September 1, 2021. The Data Security Law provides a national data security
review system, under which data processing activities that affect or may affect national security shall be reviewed. Moreover, on August
20, 2021, the Standing Committee of the PRC National People’s Congress promulgated the Personal Information Protection Law,
effective on November 1, 2021, which further detailed the general rules and principles on personal data processing and further increase
the potential liability of personal data processor. Given that many of the laws and regulations of mainland China regarding data privacy
and cybersecurity are constantly evolving , it is uncertain how they will be interpreted or enforced. For more information, see “Item 4.
Information on the Company—B. Business Overview—Regulations.”
Furthermore, the PRC government has taken steps to limit the method and manner that the internet companies may apply when
using the algorithms. For instance, the CAC, together with eight other government authorities, jointly issued the Guidelines on
Strengthening the Comprehensive Regulation of Algorithms for Internet Information Services on September 17, 2021, which provides
that daily monitoring of data use, application scenarios and effects of algorithms shall be carried out by the relevant regulators, and
security assessments of algorithms shall be conducted by the relevant regulators. The guidelines also provide that an algorithm filing
system shall be established, and classified security management of algorithms shall be promoted. In addition, on December 31, 2021, the
CAC, the Ministry of Industry and Information Technology, the Ministry of Public Security, the Ministry of State Security promulgated
the Administrative Provisions on Internet Information Service Algorithm Recommendation, which came into effect on March 1, 2022.
The Administrative Provisions on Internet Information Service Algorithm Recommendation stipulates that algorithm recommendation
service providers shall inform users of their provision of algorithm recommendation services in a conspicuous manner, and publicize the
basic principles, purpose intentions, and main operating mechanisms of algorithm recommendation services in an appropriate manner.
For more information, see “Item 4. Information on the Company—B. Business Overview—Regulations.”
In addition, on November 14, 2021, the CAC released the Regulations on the Network Data Security, or the Draft Regulations,
for public comments, which stipulates, among others, that a prior cybersecurity review is required for listing abroad of data processors
which process over one million users’ personal information, and the listing of data processors in Hong Kong which affects or may affect
national security. On December 28, 2021, the CAC and other twelve PRC regulatory authorities jointly revised and promulgated the
Measures for Cybersecurity Review, or the Cybersecurity Review Measures, which came into effect on February 15, 2022. Pursuant to
the Cybersecurity Review Measures, besides the procurement of network products and services by critical information infrastructure
operators, any data processing activities by network platform operators that affects or may affect national security shall be subject to the
cybersecurity review as well. In accordance with the Cybersecurity Review Measures, operators mastering personal information of more
than one million users must apply to the Cybersecurity Review Office for cybersecurity review when they seek for listing in a foreign
country. However, the Cybersecurity Review Measures and the Draft Regulations remain unclear on whether the relevant requirements
will be applicable to companies that have been listed in the United States. We cannot predict the impact of the Cybersecurity Review
Measures and the Draft Regulations, if any, at this stage, and we will closely monitor and assess any development in the rule-making
process. Furthermore, on July 7, 2022, the CAC promulgated the Measures on Security Assessment of Cross-border Data Transfer, or the
Data Export Measures, which became effective on September 1, 2022. The Data Export Measures require that any data processor which
processes or exports personal information exceeding certain volume threshold under such measures shall apply for security assessment
by the CAC before transferring any personal information abroad. The security assessment requirement also applies to any transfer of
important data outside of China. As of the date of this document, we have not been involved in any investigations, security assessment or
cybersecurity reviews by the CAC, and we had not received any inquiry, notice, warning, or sanction in such respect. If a cybersecurity
review for any of our activities is required, we will actively cooperate with the CAC to conduct such cybersecurity review.
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Any failure, or perceived failure, by us, or by our employees or partners, to maintain the security of our user data or to comply
with applicable PRC or foreign privacy, data security and personal information protection laws, regulations, policies, contractual
provisions, industry requirements and other requirements may result in civil or regulatory liability, including governmental or data
protection authority enforcement actions and investigations, fines, penalties, enforcement orders requiring us to cease operating in a
certain way, revoking our business permits or business licenses, litigation or adverse publicity, and may require us to expend significant
resources in responding to and defending allegations and claims. Furthermore, claims or allegations that we have failed to adequately
protect our users’ data, or otherwise violated applicable privacy and data security laws, regulations, policies, contractual provisions,
industry standards or other requirements, may result in damage to our reputation and a loss of confidence in us by our users or our
partners, potentially causing us to lose users, other business partners and revenues, which could have a material adverse effect on our
business, financial condition and results of operations.
As we gradually expand into overseas markets, we may be subject to laws and regulations of other countries regarding
cybersecurity, information security, privacy and data protection. We strive to comply with local laws and regulations in markets where
we have operations. For example, the General Data Protection Regulation, or the GDPR, of the European Union imposes obligations on
companies regarding the handling of personal data and provides certain individual privacy rights to persons whose data is stored. The
GDPR requires companies to submit personal data breach notifications to designated European privacy regulator in each country they
have business operations, and includes significant penalties for non-compliance with the notification obligation as well as other
requirements of the regulation. For another instance, some countries are considering or have passed legislation implementing data
protection requirements or requiring local storage and processing of data or similar requirements, which, if adopted and implemented,
could increase the cost and complexity of delivering our services. In addition, wherever we operate, we could be subject to new laws or
regulations or the interpretation and application of existing consumer and data protection laws or regulations. These new laws,
regulations and interpretations are often uncertain and in flux and may be inconsistent with our practices. We cannot guarantee that we
will be able to maintain compliance at all times, especially in light of the fact that laws and regulations on cybersecurity and data
protection are evolving. Our launch of new products that we may take may also subject us to additional laws, regulations, or other
government scrutiny. Complying with these new or additional laws, regulations and requirements could cause us to incur substantial
costs or require us to change our business practices in a manner materially adverse to our business.
Risks Related to Our Corporate Structure
If the PRC government finds that the agreements that establish the structure for operating some of our operations in mainland China
do not comply with the regulations of mainland China relating to the relevant industries, or if these regulations or the interpretation
of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to
relinquish our interests in those operations.
We are a Cayman Islands exempted company and our mainland China subsidiaries are considered foreign-invested enterprises.
In May 2015, Niu Technologies Group Limited established a wholly owned subsidiary in mainland China, Beijing Niudian Information
Technology Co., Ltd., our WFOE. In May 2015, we began to conduct the business operations of Beijing Niudian, through our WFOE by
entering into a series of contractual arrangements with Beijing Niudian, the VIE, and its shareholders.
We entered into a series of contractual arrangements with the VIE and its shareholders, which enable us to (i) conduct the
business operations of the VIE, (ii) receive substantially all of the economic benefits of the VIE, and (iii) have an exclusive option to or
designate any third party to purchase all or part of the equity interests and assets in the VIE to the extent permitted by the laws of
mainland China. As a result of these contractual arrangements, we conduct the business operations and are the primary beneficiary of the
VIE and hence consolidate its financial results and its subsidiaries into our consolidated financial statements under U.S. GAAP. See
“Item 4. Information on the Company—C. Organizational Structure” for further details.
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Investors in our ADSs are not purchasing equity interest in the VIE in mainland China but instead are purchasing equity interest
in a Cayman Islands holding company. If the PRC government deems that our contractual arrangements with the variable interest entity
do not comply with the regulatory restrictions on foreign investment in the relevant industries in mainland China, or if these regulations
or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or
be forced to relinquish our interests in those operations, and our ADSs may decline in value or become worthless, if we are unable to
assert contractual control over the assets of the VIE which contribute to all of our revenues in 2021. Our holding company in the Cayman
Islands, the variable interest entity, and investors of our company face uncertainty about potential future actions by the PRC government
that could affect the enforceability of the contractual arrangements with the variable interest entity and, consequently, significantly affect
the financial performance of the variable interest entity and our company as a group.
In the opinion of our PRC legal counsel, (i) the ownership structures of the VIE in mainland China and our WFOE are not in
violation of applicable laws and regulations of mainland China currently in effect; and (ii) the contractual arrangements between our
WFOE, the VIE and its shareholders governed by the laws of mainland China are valid, binding and enforceable, and will not result in
any violation of applicable laws and regulations of mainland China currently in effect. However, our PRC legal counsel has also advised
us that there are substantial uncertainties regarding the interpretation and application of current and future laws, regulations and rules of
mainland China. Accordingly, the PRC regulatory authorities may take a view that is contrary to the opinion of our PRC legal counsel. It
is uncertain whether any new laws or regulations of mainland China relating to variable interest entity structures will be adopted or, if
adopted, what they would provide. If we or the VIE are found to be in violation of any existing or future laws or regulations of mainland
China, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad
discretion to take action in dealing with such violations or failures, including:
● revoking the business license and/or operating licenses of such entities;
● discontinuing or placing restrictions or onerous conditions on our operations;
● imposing fines, confiscating the income from the VIE, or imposing other requirements with which we or the VIE may not
be able to comply;
● requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with
the VIE and deregistering the equity pledges of the VIE, which in turn would affect our ability to consolidate, derive
economic interests from, or conduct the business operations of the VIE; or
● restricting or prohibiting our ability to finance our business and operations in mainland China.
The imposition of any of these penalties would result in a material and adverse effect on our ability to conduct our business. In
addition, it is unclear what impact the PRC government actions would have on us and on our ability to consolidate the financial results of
the VIE in our consolidated financial statements, if the PRC government authorities were to find our legal structure and contractual
arrangements to be in violation of the laws and regulations of mainland China. If the imposition of any of these government actions
causes us to lose our right to direct the activities of the VIE or our right to receive the economic benefits and residual returns from the
VIE and we are not able to restructure our ownership structure and operations in a satisfactory manner, we would no longer be able to
consolidate the financial results of the VIE in our consolidated financial statements. Either of these results, or any other significant
penalties that might be imposed on us in this event, would have a material adverse effect on our financial condition and results of
operations.
Uncertainties exist with respect to the interpretation and implementation of the newly enacted Foreign Investment Law of the PRC
and how it may impact the viability of our current corporate structure, corporate governance and business operations.
On March 15, 2019, the National People’s Congress adopted the Foreign Investment Law of the PRC, or the FIL, which became
effective on January 1, 2020 and replaced the Wholly Foreign-Invested Enterprise Law of the PRC, the Sino-Foreign Cooperative Joint
Venture Enterprise Law of the PRC and the Sino-Foreign Equity Joint Venture Enterprise Law of the PRC, together with their
implementation rules and ancillary regulations. On December 31, 2019, the State Council published the Implementation Rules of the
Foreign Investment Law, or the FIL Implementation Rules, which took effect on January 1, 2020.
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The FIL embodies an expected regulatory trend in mainland China to rationalize its foreign investment regulatory regime in line
with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic
investments. However, since it is relatively new, uncertainties still exist in relation to its interpretation and implementation. For example,
the FIL removes all references to the terms of “de facto control” or “contractual control” as defined in the draft published in 2015 by the
Ministry of Commerce, or the MOFCOM, and adds a catch-all clause to the definition of “foreign investment” so that foreign
investment, by its definition, includes “investments made by foreign investors in China through other means defined by other laws or
administrative regulations or provisions promulgated by the State Council” without further elaboration on the meaning of “other means.”
The FIL Implementation Rules also remain silent on contractual arrangements. It leaves leeway for the future legislations promulgated
by the State Council to provide for contractual arrangements as a form of foreign investment. It is therefore uncertain whether our
corporate structure will be seen as violating the foreign investment rules as we are currently leverage the contractual arrangement to
operate certain businesses in which foreign investors are prohibited from or restricted to investing.
In addition, the FIL grants national treatment to foreign invested entities, except for those foreign invested entities that operate
in industries deemed to be either “restricted” or “prohibited” in the “negative list.” The current Special Administrative Measures for
Market Access of Foreign Investment (Negative List) (2021 Edition) was issued by the National Development and Reform Commission,
or the NDRC, and the MOFCOM on December 27, 2021 and took effective on January 1, 2022. Furthermore, on December 19, 2020, the
NDRC and the MOFCOM jointly issued the Measures for Security Review of Foreign Investment, effective on January 18, 2021, which
provides detailed guidance regarding security review of foreign investment that has a potential impact on national security. However,
there remain a number of unclear issues under the Measures, including but not limited to its view towards contractual arrangements. As
the Measures was only recently issued, there are very few interpretations, implementation guidance or precedents to follow in practice. If
future legislations prescribed by the State Council mandate further actions to be taken by companies with respect to existing contractual
arrangement, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to
take timely and appropriate measures to comply with any of these or similar regulatory compliance requirements could materially and
adversely affect our current corporate structure, corporate governance and business operations.
We rely on contractual arrangements with the VIE and its shareholders for a large portion of our business operations, which may not
be as effective as direct ownership.
The VIE contributed substantially all of our consolidated total revenues in 2020, 2021 and 2022. We have relied and expect to
continue to rely on contractual arrangements with the VIE and its shareholders to conduct our business. These contractual arrangements
may not be as effective as direct ownership in the VIE. For example, the VIE and its shareholders could breach their contractual
arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are
detrimental to our interests. The shareholders of the VIE have pledged all of their equity interests in the VIE to our WFOE pursuant to
the equity pledge agreement under the contractual arrangements. An equity pledge agreement becomes effective between the parties
upon execution. In February 2021, we completed the registration of the equity pledge under the second amended and restated equity
pledge agreement with the relevant local office of the State Administration of Market Regulation in accordance with the PRC Property
Rights Law.
If we had direct ownership of the VIE, we would be able to exercise our rights as a shareholder to effect changes in the board of
directors of the VIE, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and
operational level. However, under the current contractual arrangements, we rely on the performance by the VIE and its shareholders of
their obligations under the contracts to conduct the business operations of the VIE. However, the shareholders of the VIE may not act in
the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in
which we intend to operate certain portions of our business through the contractual arrangements with the VIE. If any disputes relating to
these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations of law and arbitration,
litigation and other legal proceedings in mainland China and therefore will be subject to uncertainties in the PRC legal system. See “—
Any failure by the VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a
material and adverse effect on our business.” Meanwhile, there are very few precedents and little formal guidance as to how contractual
arrangements in the context of a VIE should be interpreted or enforced by the courts of mainland China. Should legal actions become
necessary, we cannot guarantee that the court will rule in favor of the enforceability of the VIE contractual arrangements. In the event we
are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these
contractual arrangements, we may not be able to conduct the business operations of the VIE, and our ability to conduct our business may
be materially adversely affected. Therefore, our contractual arrangements with the VIE may not be as effective as direct ownership.
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We may lose the ability to use and enjoy assets held by the VIE and its subsidiaries that are important to our business if the VIE and
its subsidiaries declare bankruptcy or become subject to a dissolution or liquidation proceeding.
The VIE and its subsidiaries hold assets that are important to our operations, and they contributed substantially all of our
consolidated total revenues in 2020, 2021 and 2022. Under our contractual arrangements, the shareholders of the VIE may not
voluntarily liquidate the VIE or approve it to sell, transfer, mortgage or dispose of its assets or legal or beneficial interests exceeding
certain threshold in the business in any manner without our prior consent. However, in the event that the shareholders breach this
obligation and voluntarily liquidate the VIE, or the VIE declares bankruptcy, or all or part of its assets become subject to liens or rights of
third-party creditors, we may be unable to continue some or all of our operations, which would materially and adversely affect our
business, financial condition and results of operations. Furthermore, if the VIE or its subsidiaries undergo a voluntary or involuntary
liquidation proceeding, their shareholders or unrelated third-party creditors may claim rights to some or all of its assets, hindering our
ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.
Any failure by the VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a
material and adverse effect on our business.
We refer to the shareholders of the VIE as its nominee shareholders because although they remain the holders of equity interests
on record in each of the VIE, pursuant to the terms of the relevant power of attorney, each of such shareholders has irrevocably
authorized the Company to exercise his, her or its rights as a shareholder of the VIE. However, if the VIE or its shareholders fail to
perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional
resources to enforce such arrangements. We may also have to rely on legal remedies under the laws of mainland China, including seeking
specific performance or injunctive relief, and claiming damages, which may not be enforceable under the laws of mainland China. For
example, if the shareholders of the VIE refuse to transfer their equity interest in the VIE to us or our designee if we exercise the purchase
option pursuant to these contractual arrangements, or if they otherwise act in bad faith toward us, then we may have to take legal actions
to compel them to perform their contractual obligations.
All of the agreements under our contractual arrangements are governed by the laws of mainland China and provide for the
resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with the laws of
mainland China and any disputes would be resolved in accordance with the legal procedures of mainland China. The legal system in the
PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could
limit our ability to enforce these contractual arrangements. See “—Risks Related to Doing Business in China—Uncertainties in the
interpretation and enforcement of the laws and regulations of mainland China could limit the legal protections available to you and us.”
Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a VIE should
be interpreted or enforced under the laws of mainland China. There remain significant uncertainties regarding the ultimate outcome of
such arbitration should legal action becomes necessary. In addition, under the laws of mainland China, rulings by arbitrators are final,
parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within a prescribed
time limit, the prevailing parties may only enforce the arbitration awards in the courts of mainland China through arbitration award
recognition proceedings, which would require additional expenses and delay. In the event we are unable to enforce these contractual
arrangements, or if we suffer significant delays or other obstacles in the process of enforcing these contractual arrangements, we may not
be able to conduct the business operations of the VIE, and our ability to conduct our business may be negatively affected.
The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business
and financial condition.
Currently, Token Yilin Hu, Yi’nan Li, Yuqin Zhang and Changlong Sheng each hold 89.74%, 5.00%, 2.63% and 2.63% of the
equity interest in the VIE, respectively. The shareholders of the VIE may have potential conflicts of interest with us. These shareholders
may breach, or cause the VIE to breach, or refuse to renew, the existing contractual arrangements we have with them and the VIE, which
would have a material and adverse effect on our ability to conduct the business operations of the VIE and receive economic benefits from
them. For example, the shareholders may be able to cause our agreements with the VIE to be performed in a manner adverse to us by,
among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that
when conflicts of interest arise any or all of these shareholders will act in the best interests of our company or such conflicts will be
resolved in our favor.
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Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our
company, except that we could exercise our purchase option under the second amended and restated exclusive option agreements with
these shareholders to request them to transfer all of their equity interests in the VIE to a mainland China entity or individual designated
by us, to the extent permitted by the laws of mainland China. For individuals who are also our directors and officers, we rely on them to
abide by the laws of the Cayman Islands, which provide that directors and officers owe a fiduciary duty to the company that requires
them to act in good faith and in what they believe to be the best interests of the company and not to use their position for personal gains.
The shareholders of the VIE have executed powers of attorney to appoint the Company to vote on their behalf and exercise voting rights
as shareholders of the VIE. If we cannot resolve any conflict of interest or dispute between us and the shareholders of the VIE, we would
have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the
outcome of any such legal proceedings.
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 its
shareholders. For example, in the event that any of the shareholders of the VIE divorces his or her spouse, the spouse may claim that the
equity interest of the VIE held by such shareholder is part of their community property and should be divided between such shareholder
and his or her spouse. If such claim is supported by the court, the relevant equity interest may be obtained by the shareholder’s spouse or
another third party who is not subject to obligations under our contractual arrangements, which could affect our ability to conduct the
business operations of the VIE. Similarly, if any of the equity interests of the VIE is inherited by a third party with whom the current
contractual arrangements are not binding, we could lose our ability to conduct the business operations of the VIE or have to maintain
such ability by incurring unpredictable costs, which could cause significant disruption to our business and operations and harm our
financial condition and results of operations.
Although under our current contractual arrangements, (i) the spouse of each of the shareholders of the VIE has executed a
spousal consent letter, under which the spouse agrees that he or she will not raise any claims against the equity interest, and will take
every action to ensure the performance of the contractual arrangements, and (ii) it is expressly provided that the rights and obligations
under the contractual agreements shall be equally effective and binding on the heirs and successors of the parties thereto, and the VIE
shall not assign or delegate its rights and obligations under the contractual agreements to third parties without our prior consent, we
cannot assure you that these undertakings and arrangements will be complied with or effectively enforced. In the case any of them is
breached or becomes unenforceable and leads to legal proceedings, it could disrupt our business, distract our management’s attention and
subject us to substantial uncertainties as to the outcome of any such legal proceedings.
Contractual arrangements in relation to the VIE may be subject to scrutiny by the PRC tax authorities and they may determine that
we or the VIE owes additional taxes, which could negatively affect our financial condition and the value of your investment.
Under applicable laws and regulations of mainland China, arrangements and transactions among related parties may be subject
to audit or challenge by the PRC tax authorities. We could face material and adverse tax consequences if the PRC tax authorities
determine that the VIE contractual arrangements were not entered into on an arm’s length basis in such a way as to result in an
impermissible reduction in taxes under applicable laws, rules and regulations of mainland China, and adjust the income of the VIE in the
form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense
deductions recorded by the VIE for mainland China tax purposes, which could increase our tax expenses. In addition, the PRC tax
authorities may impose late payment fees and other penalties on the VIE for the adjusted but unpaid taxes according to the applicable
regulations. Our financial position could be materially and adversely affected if the VIE’s tax liabilities increase or if it is required to pay
late payment fees and other penalties.
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If the chops of our mainland China subsidiaries and the VIE are not kept safely, are stolen or are used by unauthorized persons or
for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised.
In mainland China, a company chop or seal serves as the legal representation of the company towards third parties even when
unaccompanied by a signature. Each legally registered company in mainland China is required to maintain a company chop, which must
be registered with the local Public Security Bureau. In addition to this mandatory company chop, companies may have several other
chops which can be used for specific purposes. The chops of our mainland China subsidiaries and the VIE are generally held securely by
personnel designated or approved by us in accordance with our internal control procedures. To the extent those chops are not kept safely,
are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely
and adversely compromised and those corporate entities may be bound to abide by the terms of any documents so chopped, even if they
were chopped by an individual who lacked the requisite power and authority to do so. In addition, if the chops are misused by
unauthorized persons, we could experience disruption to our normal business operations. We may have to take corporate or legal action,
which could involve significant time and resources to resolve while distracting management from our operations.
Risks Related to Doing Business in China
Changes in China’s economic, political or social conditions or government policies could have a material and adverse effect on our
business and results of operations.
Substantially all of our revenues are expected to be derived in mainland China in the near future and most of our operations,
including all of our manufacturing, is conducted in mainland China. Accordingly, our results of operations, financial condition and
prospects are influenced by economic, political and legal developments in China. China’s economy differs from the economies of most
developed countries in many respects, including with respect to the amount of government involvement, level of development, growth
rate, control of foreign exchange and allocation of resources. The PRC government has significant authority to exert influence on the
ability of a China-based company, such as us, to conduct its business. Therefore, investors of our company and our business face
potential uncertainty from China.
The PRC government also exercises significant control over China’s economic growth through strategically allocating
resources, controlling the payment of foreign currency-denominated obligations, setting monetary policy and providing preferential
treatment to particular industries or companies. While the PRC economy has experienced significant growth over the past decades, that
growth has been uneven across different regions and between economic sectors and may not continue, as evidenced by the slowing of the
growth of the Chinese economy since 2012. The growth rate of the Chinese economy has gradually slowed since 2010, and COVID-19
has had a severe and negative impact on the Chinese and global economy since early 2020. In addition, COVID-19 will likely have
significant impact on the Chinese economy in 2023 as the PRC government began to modify restrictive measures associated with
COVID-19 in December 2022 and downgraded its management of COVID-19 to Class-B on January 8, 2023 in accordance with the Law
of the People’s Republic of China on Prevention and Treatment of Infectious Disease. Even before the outbreak of COVID-19, the global
macroeconomic environment was facing numerous challenges. The growth rate of the Chinese economy had already been slowing since
2010. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies which had been
adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China,
even before 2021. The war in Ukraine and the imposition of broad economic sanctions on Russia could raise energy prices and disrupt
global markets. Unrest, terrorist threats and the potential for war in the Middle East and elsewhere may increase market volatility across
the globe. There have also been concerns about the relationship between China and other countries, including the surrounding Asian
countries, which may potentially have economic effects. In particular, there is significant uncertainty about the future relationship
between the United States and China with respect to trade policies, treaties, government regulations and tariffs. Economic conditions in
China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or
perceived overall economic growth rate in China. Any severe or prolonged slowdown in the global or Chinese economy may materially
and adversely affect our business, results of operations and financial condition.
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The filing, approval or other administration requirements of the CSRC or other PRC government authorities may be required in
connection with our offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to
complete such filing, obtain such approval or meet such requirements.
The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six
PRC regulatory agencies in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through
acquisitions of mainland China domestic companies and controlled by mainland China persons or entities to obtain the approval of the
CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. The interpretation and
application of the regulations remain unclear, and our offshore offerings may ultimately require approval of the CSRC. If the CSRC
approval is required, it is uncertain whether we can or how long it will take us to obtain the approval and, even if we obtain such CSRC
approval, the approval could be rescinded. Any failure to obtain or delay in obtaining the CSRC approval for any of our offshore
offerings, or a rescission of such approval if obtained by us, would subject us to sanctions imposed by the CSRC or other PRC regulatory
authorities, which could include fines and penalties on our operations in mainland China, restrictions or limitations on our ability to pay
dividends outside of mainland China, and other forms of sanctions that may materially and adversely affect our business, financial
condition, and results of operations.
On July 6, 2021, the relevant PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities
Activities in Accordance with the Law. These opinions emphasized the need to strengthen the administration over illegal securities
activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting
the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. As a
follow-up, on December 24, 2021, the State Council issued a draft of the Provisions of the State Council on the Administration of
Overseas Securities Offering and Listing by Domestic Companies, or the Draft Provisions, and the CSRC issued a draft of
Administration Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies, or the Draft Administration
Measures, for public comments.
On February 17, 2023, the CSRC promulgated Trial Administrative Measures of the Overseas Securities Offering and Listing
by Domestic Companies and relevant five guidelines (collectively, the “Overseas Listing Trial Measures”), which became effective on
March 31, 2023. The Overseas Listing Trial Measures comprehensively improve and reform the existing regulatory regime for overseas
offering and listing of mainland China domestic companies’ securities and regulates both direct and indirect overseas offering and listing
of mainland China domestic companies’ securities by adopting a filing-based regulatory regime.
According to the Overseas Listing Trial Measures, (i) mainland China domestic companies that seek to offer or list securities
overseas, both directly and indirectly, should fulfill the filing procedure and report relevant information to the CSRC; if a mainland China
domestic company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing
documents, such mainland China domestic company may be subject to administrative penalties, such as order to rectify, warnings, fines,
and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to
administrative penalties, such as warnings and fines; (ii) if the issuer meets both of the following conditions, the overseas offering and
listing shall be determined as an indirect overseas offering and listing by a mainland China domestic company: (a) any of the total assets,
net assets, revenues or profits of the domestic operating entities of the issuer in the most recent accounting year accounts for more than
50% of the corresponding figure in the issuer’s audited consolidated financial statements for the same period; (b) its major operational
activities are carried out in mainland China or its main places of business are located in mainland China, or the senior managers in charge
of operation and management of the issuer are mostly PRC citizens or have their usual place(s) of residence located in mainland China.
The Overseas Listing Trial Measures require subsequent reports to be filed with the CSRC on material events, such as change of control
or voluntary or forced delisting of the issuers who have completed overseas offerings and listings.
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On the same day, the CSRC also held a press conference for the release of the Overseas Listing Trial Measures and issued the
Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies , which, among others, clarifies that (i)
prior to the effective date of the Overseas Listing Trial Measures, mainland China domestic companies that have already completed
overseas listing shall be regarded as “existing companies”, which are not required to fulfill filing procedure immediately but shall be
required to complete the filing if such existing companies conduct refinancing in the future; and (ii) the CSRC will solicit opinions from
relevant regulatory authorities and complete the filing of the overseas listing of companies with contractual arrangements which duly
meet the compliance requirements, and support the development and growth of these companies by enabling them to utilize two markets
and two kinds of resources. However, since the Overseas Listing Trial Measures was newly promulgated, the interpretation, application
and enforcement of Overseas Listing Trial Measures remain unclear.
Given the substantial uncertainties surrounding the latest CSRC filing requirements at this stage, we cannot assure you that we
will be able to complete the filings and fully comply with the relevant new rules on a timely basis, if at all.
Relatedly, on December 27, 2021, the NDRC and the Ministry of Finance, or the MOC, jointly issued the Special
Administrative Measures (Negative List) for Foreign Investment Access (2021 Version), or the 2021 Negative List, which will become
effective on January 1, 2022. Pursuant to such Special Administrative Measures, if a domestic company engaging in the prohibited
business stipulated in the 2021 Negative List seeks an overseas offering and listing, it shall obtain the approval from the competent
government authorities. Besides, the foreign investors of the company shall not be involved in the company’s operation and management,
and their shareholding percentage shall be subject, mutatis mutandis, to the relevant regulations on the domestic securities investments
by foreign investors. As the 2021 Negative List is relatively new, there remain substantial uncertainties as to the interpretation and
implementation of these new requirements, and it is unclear as to whether and to what extent listed companies like us will be subject to
these new requirements. If we are required to comply with these requirements and fail to do so on a timely basis, if at all, our business
operation, financial conditions and business prospect may be adversely and materially affected.
On February 24, 2023, the CSRC released the Provisions on Strengthening the Confidentiality and Archives Administration
Related to the Overseas Securities Offering and Listing by Domestic Enterprises, or the Confidentiality and Archives Administration
Provisions, which took effect on March 31, 2023. The Confidentiality and Archives Administration Provisions require, among others,
that PRC domestic enterprises that seek to offer and list securities in overseas markets, either directly or indirectly, complete approval
and filing procedures to competent authorities, if such PRC domestic enterprises or its overseas listing entities provide or publicly
disclose documents or materials involving state secrets and work secrets of PRC government agencies to relevant securities companies,
securities service institutions, overseas regulatory agencies and other entities and individuals. It further stipulates that providing or
publicly disclosing documents and materials which may adversely affect national security or public interests, and accounting files or
copies shall be subject to corresponding procedures in accordance with relevant laws and regulations. Under the Confidentiality and
Archives Administration Provisions, we may be required to complete relevant approval or filing procedures, or expend additional
resources to comply with the Confidentiality and Archives Administration Provisions if we are recognized to fall within any of the
foregoing circumstances. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring
that we obtain their approvals or accomplish the required filing or other regulatory procedures for future capital-raising activities, we
may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver.
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In addition, we cannot assure you that any new rules or regulations promulgated in the future will not impose additional
requirements on us. If it is determined in the future that approval and filing from the CSRC or other regulatory authorities or other
procedures, including the cybersecurity review under the enacted version of the revised Measures for Cybersecurity Review and the draft
of Regulations on the Network Data Security, are required for our offshore offerings, it is uncertain whether we can or how long it will
take us to obtain such approval or complete such filing procedures and any such approval or filing could be rescinded or rejected. Any
failure to obtain or delay in obtaining such approval or completing such filing procedures for our offshore offerings, or a rescission of
any such approval or filing if obtained by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities for failure
to seek CSRC approval or filing or other government authorization for our offshore offerings. These regulatory authorities may impose
fines and penalties on our operations in mainland China, limit our ability to pay dividends outside of mainland China, limit our operating
privileges in mainland China, delay or restrict the repatriation of the proceeds from our offshore offerings into mainland China or take
other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as
the trading price of our listed securities. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it
advisable for us, to halt our offshore offerings before settlement and delivery of the shares offered. Consequently, if investors engage in
market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery
may not occur. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we
obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable
to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or
negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition,
reputation, and the trading price of our listed securities.
Uncertainties in the interpretation and enforcement of the laws and regulations of mainland China could limit the legal protections
available to you and us.
The legal system of mainland China is a civil law system based on written statutes. Unlike the common law system, prior court
decisions may be cited for reference but have limited precedential value.
Our mainland China subsidiaries are foreign-invested enterprises and are subject to laws and regulations applicable to foreign-
invested enterprises as well as various laws and regulations of mainland China generally applicable to companies incorporated in
mainland China. However, since these laws and regulations are relatively new and the legal system of mainland China continues to
rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations
and rules involves uncertainties.
From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since
administrative and court authorities of mainland China have significant discretion in interpreting and implementing statutory and
contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of protection we
enjoy than in more developed legal systems. Furthermore, the legal system of mainland China is based in part on government policies
and internal rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. As a result, we
may not be aware of our violation of any of these policies and rules until sometime after the violation. Such uncertainties, including
uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure
to respond to changes in the regulatory environment in mainland China could materially and adversely affect our business and impede
our ability to continue our operations.
The PRC government’s significant oversight over our business operation could result in a material adverse change in our operations
and the value of our ADSs.
We conduct our business primarily in mainland China. Our operations in mainland China are governed by the laws and
regulations of mainland China. The PRC government has significant oversight over the conduct of our business, and may intervene or
influence our operations as the government deems appropriate to advance regulatory and societal goals and policy positions. The PRC
government has recently published new policies that significantly affected certain industries and we cannot rule out the possibility that it
will in the future release regulations or policies that directly or indirectly affect our industry or require us to seek additional permission to
continue our operations, which could result in a material adverse change in our operation and/or the value of our ADSs. Therefore,
investors of our company and our business face potential uncertainty from actions taken by the PRC government affecting our business.
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We may be adversely affected by the complexity, uncertainties and changes in the regulation on internet-related businesses and
companies in mainland China.
We design, manufacture and sell smart e-scooters. Certain aspects of our business operations may be deemed as provision of
value-added telecommunication services, which is subject to regulation by the PRC government. For example, the PRC government
imposes foreign ownership restriction and the licensing and permit requirements for companies in the Internet industry. See “Item 4.
Information on the Company—B. Business Overview—Regulation—Regulations Relating to Foreign Investment” and “Item 4.
Information on the Company—B. Business Overview—Regulation—Regulations Relating to Value-Added Telecommunication
Services.” These laws and regulations are relatively new and evolving, and their interpretation and enforcement involve significant
uncertainties. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in
violation of applicable laws and regulations.
In addition, our mobile app is also regulated by the Administrative Provisions on Mobile Internet Applications Information
Services, or the App Provisions, promulgated by the Cyberspace Administration of China, the latest version of which became effective
on August 1, 2022. According to the App Provisions, the providers of mobile apps shall not create, copy, publish or distribute
information and content that is prohibited by laws and regulations. However, we cannot assure that all the information or content
displayed on, retrieved from or linked to our mobile app complies with the requirements of the App Provisions at all times. If our mobile
app were found to be violating the App Provisions, we may be subject to administrative penalties, including warning, service suspension
or removal of our mobile app from the relevant mobile app store, which may materially and adversely affect our business and operating
results.
The interpretation and application of the existing laws, regulations and policies of mainland China and possible new laws,
regulations or policies of mainland China relating to the Internet industry have created substantial uncertainties regarding the legality of
existing and future foreign investments in, and the businesses and activities of, Internet businesses in mainland China, including our
business. We cannot assure you that we have obtained all the permits or licenses required for conducting our business in mainland China
or will be able to maintain or renew our existing licenses or obtain new ones.
The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements
and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such
inspections.
Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this annual
report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws
in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional
standards. The auditor is located in mainland China, a jurisdiction where the PCAOB was historically unable to conduct inspections and
investigations completely before 2022. As a result, we and investors in the ADSs were deprived of the benefits of such PCAOB
inspections. The inability of the PCAOB to conduct inspections of auditors in mainland China and Hong Kong in the past has made it
more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control
procedures as compared to auditors outside of mainland China and Hong Kong that are subject to the PCAOB inspections. On December
15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong
from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. However, if the
PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland
China and Hong Kong, and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial
statements filed with the Securities and Exchange Commission, we and investors in our ADSs would be deprived of the benefits of such
PCAOB inspections again, which could cause investors and potential investors in the ADSs to lose confidence in our audit procedures
and reported financial information and the quality of our financial statements.
Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or
investigate completely auditors located in mainland China and Hong Kong. The delisting of the ADSs, or the threat of their being
delisted, may materially and adversely affect the value of your investment.
Pursuant to the HFCAA, if the SEC determines that we have filed audit reports issued by a registered public accounting firm
that has not been subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or ADSs from being
traded on a national securities exchange or in the over-the-counter trading market in the United States.
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On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to
inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong and our auditor
was subject to that determination. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA
following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021. On December 15, 2022, the
PCAOB removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely
registered public accounting firms. 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. If the PCAOB determines in the future that it no longer has full access to inspect and investigate
completely accounting firms in mainland China and Hong Kong and we use an accounting firm headquartered in one of these
jurisdictions to issue an audit report on our financial statements filed with the Securities and Exchange Commission, we would be
identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. In
accordance with the HFCAA, our securities would be prohibited from being traded on a national securities exchange or in the over-the-
counter trading market in the United States if we are identified as a Commission-Identified Issuer for two consecutive years in the future.
For U.S. single listing issuer: If our shares and ADSs are prohibited from trading in the United States, there is no certainty that we will be
able to list on a non-U.S. exchange or that a market for our shares will develop outside of the United States. A prohibition of being able
to trade in the United States would substantially impair your ability to sell or purchase our ADSs when you wish to do so, and the risk
and uncertainty associated with delisting would have a negative impact on the price of our ADSs. 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.
We may rely on dividends and other distributions on equity paid by our mainland China subsidiaries to fund any cash and financing
requirements we may have, and any limitation on the ability of our mainland China subsidiaries to make payments to us could have a
material and adverse effect on our ability to conduct our business.
We are a holding company, and we may rely on dividends and other distributions on equity paid by our mainland China
subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our
shareholders and service any debt we may incur. Current regulations of mainland China permit our mainland China subsidiaries to pay
dividends to us only out of their accumulated after-tax profits upon satisfaction of relevant statutory conditions and procedures, if any,
determined in accordance with Chinese accounting standards and regulations. In addition, each of our mainland China subsidiaries is
required to set aside at least 10% of its accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside
reaches 50% of its registered capital. For a detailed discussion of applicable regulations of mainland China governing distribution of
dividends, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Dividend
Distribution.” Additionally, if our mainland China subsidiaries incur debt on their own behalf in the future, the instruments governing
their debt may restrict their ability to pay dividends or make other distributions to us. Furthermore, the PRC tax authorities may require
our WFOE to adjust its taxable income under the contractual arrangements it currently has in place with the variable interest entity in a
manner that would materially and adversely affect its ability to pay dividends and other distributions to us. See “—Risks Relating to Our
Corporate Structure—Contractual arrangements in relation to the VIE may be subject to scrutiny by the PRC tax authorities and they
may determine that we or the VIE owes additional taxes, which could negatively affect our financial condition and the value of your
investment.”
Any limitation on the ability of our mainland China subsidiaries to pay dividends or make other distributions to us could
materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay
dividends, or otherwise fund and conduct our business. See “—If we are classified as a mainland China resident enterprise for mainland
China income tax purposes, such classification could result in unfavorable tax consequences to us and our non-mainland China
shareholders or ADS holders.”
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Mainland China’s regulation of loans to and direct investment in entities in mainland China 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 mainland China subsidiaries, which could materially and adversely affect our
liquidity and our ability to fund and expand our business.
Under the laws and regulations of mainland China, we are permitted to utilize the proceeds of any financing outside of mainland
China to fund our mainland China subsidiaries by making loans to or additional capital contributions to our mainland China subsidiaries,
subject to applicable government registration, statutory limitations on amount and approval requirements. The amount of capital
contributions that we may make to the WFOE is RMB220.0 million, without obtaining approvals from SAFE or other government
authorities. Additionally, the WFOE may increase its registered capital to receive additional capital contributions from us and currently
there is no statutory limit to increasing its registered capital, subject to satisfaction of applicable government registration and filing
requirements. Pursuant to relevant regulations of mainland China, we may provide loans to the WFOE up to the larger amount of (i) the
balance between the registered total investment amount and registered capital of the WFOE, or (ii) twice the amount of the net assets of
the WFOE calculated in accordance with PRC GAAP, and we may provide loans to the VIE up to twice the amount of the net assets of
the VIE calculated in accordance with PRC GAAP, each subject to satisfaction of applicable government registration or approval
requirements. For any amount of loans that we may extend to the WFOE or the VIE, such loans must be registered with the local
counterpart of SAFE. Medium- or long-term loans extended by the Company to the VIE must also be approved by the NDRC. For more
details, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Foreign Exchange—
Regulations on Foreign Currency Exchange.” These laws and regulations of mainland China may significantly limit our ability to use
Renminbi converted from the net proceeds of any financing outside of mainland China to fund the establishment of new entities in
mainland China by our mainland China subsidiaries, to invest in or acquire any other mainland China companies through our mainland
China subsidiaries, or to establish new variable interest entities in mainland China. Moreover, we cannot assure you that we will be able
to complete the necessary registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future
loans to our mainland China subsidiaries or future capital contributions by us to our mainland China subsidiaries. If we fail to complete
such registrations or obtain such approvals, our ability to use the proceeds we received or expect to receive from our offshore offerings
and to capitalize or otherwise fund our operations in mainland China may be negatively affected, which could materially and adversely
affect our liquidity and our ability to fund and expand our business.
On December 26, 2017, the NDRC issued the Management Rules for Overseas Investment by Enterprises, or the NDRC Order
11. On January 31, 2018, the Catalog on Overseas Investment in Sensitive Industries (2018 Edition), or the Sensitive Industries List, was
promulgated. “Overseas investment” as defined in the NDRC Order 11 refers to the investment activities conducted by an enterprise
located in the territory of mainland China either directly or through an overseas enterprise under its control by making investment with
assets and equities or providing financing or guarantee in order to obtain overseas ownership, control, management rights and other
related interests. Overseas investment by a Chinese individual through overseas enterprises under his/her control is also subject to the
NDRC Order 11. According to the NDRC Order 11, (i) direct overseas investment by Chinese enterprises or indirect overseas investment
by Chinese enterprises or individuals in sensitive industries or sensitive countries and regions requires prior approval by the NDRC; (ii)
direct overseas investment by Chinese enterprises in non-sensitive industries and non-sensitive countries and regions requires prior filing
with the NDRC; and (iii) indirect overseas investment of over US$300 million by Chinese enterprises or individuals in non-sensitive
industries and non-sensitive countries and regions requires reporting with the NDRC. Uncertainties remain with respect to the application
of the NDRC Order 11. We are not sure if we were to use a portion of the proceeds raised from our financing actibities to fund
investments in and acquisitions of complementary business and assets outside of mainland China, such use of U.S. dollars funds held
outside of mainland China would be subject to the NDRC Order 11. There are very few interpretations, implementation guidance or
precedents regarding NDRC Order 11 to follow in practice. We will continue to monitor any new rules, interpretation and guidance
promulgated by the NDRC and communicate with the NDRC and its local branches to seek their opinions, when necessary. If it turns out
that the NDRC Order 11 applies to our use of proceeds from the offering mentioned above and we fail to obtain the approval, complete
the filing or report our overseas investment using the offering proceeds, as the case may be, in a timely manner as provided under the
NDRC Order 11, we may be forced to suspend or cease our investment, or be subject to penalties or other liabilities, which may
materially and adversely affect our business, financial condition and prospects.
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Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your
investment.
The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the
remittance of currency out of mainland China. Under the existing foreign exchange regulations of mainland China, payments of current
account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies
without prior approval from the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural
requirements. However, approval from or registration with appropriate government authorities is required where Renminbi is to be
converted into foreign currency and remitted out of mainland China to pay capital expenses such as the repayment of loans denominated
in foreign currencies. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Foreign
Exchange—Regulations on Foreign Currency Exchange.”
Since 2016, the PRC government has tightened its foreign exchange policies again and stepped up scrutiny of major outbound
capital movement. More restrictions and a substantial vetting process have been put in place by SAFE to regulate cross-border
transactions falling under the capital account. The PRC government may also restrict access in the future to foreign currencies for current
account transactions, at its discretion. We receive substantially all of our revenues in RMB. If the foreign exchange control system
prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in
foreign currencies to our shareholders, including holders of the ADSs.
Regulations of mainland China relating to offshore investment activities by mainland China residents may limit our mainland China
subsidiaries’ ability to increase their registered capital or distribute profits to us or otherwise expose us or our mainland China
resident beneficial owners to liability and penalties under the laws of mainland China.
SAFE requires mainland China residents or entities to register with SAFE or its local branch in connection with their
establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition, such mainland
China residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes certain material
events. According to the Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct
Investment released on February 13, 2015 by the SAFE, local banks will examine and handle foreign exchange registration for overseas
direct investment, including the initial foreign exchange registration and amendment registration, under SAFE Circular 37 from June 1,
2015. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Foreign Exchange—
Regulations on Foreign Currency Exchange.”
If our shareholders who are mainland China residents or entities do not complete their registration with the local SAFE
branches, our mainland China subsidiaries may be prohibited from distributing their profits and any proceeds from any reduction in
capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our mainland China
subsidiaries. Moreover, failure to comply with SAFE registration requirements could result in liability under the laws of mainland China
for evasion of applicable foreign exchange restrictions. Mr. Yi’nan Li, Mr. Token Yilin Hu and Ms. Yuqin Zhang who directly or
indirectly hold shares in our Cayman Islands holding company and who are known to us as being mainland China residents have
completed the initial foreign exchange registrations and have updated their registrations required in connection with our corporate
restructuring.
However, we may not be informed of the identities of all the mainland China residents or entities holding direct or indirect
interests in our company, nor can we compel our beneficial owners to comply with SAFE registration requirements. As a result, we
cannot assure you that all of our shareholders or beneficial owners who are mainland China residents or entities have complied with, and
will in the future make or obtain any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or
beneficial owners to comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our mainland China
subsidiaries, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our mainland
China subsidiaries’ ability to make distributions or pay dividends to us or affect our ownership structure, which could adversely affect
our business and prospects.
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Mainland China’s M&A Rules and certain other regulations of mainland China establish complex procedures for certain
acquisitions of mainland China companies by foreign investors, which could make it more difficult for us to pursue growth through
acquisitions in mainland China.
A number of laws and regulations in mainland China have established procedures and requirements that could make merger and
acquisition activities in mainland China by foreign investors more time consuming and complex. In addition to the Anti-monopoly Law
itself, these include the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules,
adopted by six PRC regulatory agencies in 2006, which was amended in 2009, and the Rules of the Ministry of Commerce on
Implementation of Security Review System of Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the Security
Review Rules, promulgated in 2011. These laws and regulations impose requirements in some instances that MOFCOM be notified in
advance of any change-of-control transaction in which a foreign investor takes control of a mainland China domestic enterprise. In
addition, the Anti-Monopoly Law requires that MOFCOM be notified in advance of any concentration of undertaking if certain
thresholds are triggered. Moreover, the Security Review Rules specify that mergers and acquisitions by foreign investors that raise
“national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over
domestic enterprises that raise “national security” concerns are subject to strict review by MOFCOM, and prohibit any attempt to bypass
a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may
grow our business by acquiring complementary businesses. Complying with the requirements of the relevant regulations to complete
such transactions could be time consuming, and any required approval processes, including approval from MOFCOM, may delay or
inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.
It may be difficult for overseas regulators to conduct investigation or collect evidence within mainland China.
Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter
of law or practicality in mainland China. For example, in mainland China, there are significant legal and other obstacles to providing
information needed for regulatory investigations or litigation initiated outside of mainland China. Although the authorities in mainland
China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to
implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States
may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC
Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct
investigation or evidence collection activities within the territory of mainland China and without the consent by the Chinese securities
regulatory authorities and the other competent governmental agencies, no entity or individual may provide documents or materials
related to securities business overseas. In addition, the Data Security Law and the PIPL provide that no entity or individual within the
territory of mainland China shall provide any foreign judicial body and law enforcement body with any data or any personal information
stored within the territory of mainland China without the approval of the competent government authority of the PRC. While detailed
interpretation of or implementation rules under these laws have yet to be promulgated, the inability for an overseas securities regulator to
directly conduct investigation or evidence collection activities within mainland China, and restrictions on the provision of documents,
materials, data and personal information by mainland China entities and individuals to an overseas securities regulator, foreign judicial
body or foreign law enforcement body may further increase difficulties faced by you in protecting your interests.
Any failure to comply with the regulations of mainland China regarding the registration requirements for employee stock incentive
plans may subject the mainland China plan participants or us to fines and other legal or administrative sanctions.
Under SAFE regulations, mainland China residents who participate in a stock incentive plan in an overseas publicly listed
company are required to register with SAFE or its local branches and complete certain other procedures. See “Item 4. Information on the
Company—B. Business Overview—Regulation—Regulations Relating to Foreign Exchange—Regulations on Stock Incentive Plans.”
We and our mainland China resident employees who participate in our share incentive plans will be subject to these regulations when our
company becomes publicly listed in the United States. If we or any of these mainland China resident employees fail to comply with these
regulations, we or such employees may be subject to fines and other legal or administrative sanctions. We also face regulatory
uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under
the laws of mainland China.
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Failure to make adequate contributions to various employee benefit plans as required by the regulations of mainland China may
subject us to penalties.
Companies operating in mainland China are required to participate in various government-sponsored employee benefit plans,
including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts
equal to certain percentages of salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the
local government from time to time at locations where we operate our businesses. The requirement of employee benefit plans has not
been implemented consistently by the local governments in mainland China given the different levels of economic development in
different locations. We have previously received payment notices from the relevant government authorities for inadequate contribution to
employee benefit plans, and we have made the payments and penalty. We may be required to make up the contributions for these plans as
well as to pay late fees and fines. If we are subject to late fees or fines in relation to the underpaid employee benefits, our financial
condition and results of operations may be adversely affected. Going forward, we will comply with the regulations of mainland China
and distribute the outstanding employee benefit payment accordingly.
Increases in labor costs and enforcement of stricter labor laws and regulations of mainland China may adversely affect our business
and our profitability.
China’s overall economy and the average wage in mainland China have increased in recent years and are expected to continue to
grow. The average wage level for our employees has also increased in recent years. We expect that our labor costs, including wages and
employee benefits, will continue to increase. Unless we are able to pass on these increased labor costs to those who pay for our services,
our profitability and results of operations may be materially and adversely affected.
In addition, we have been subject to stricter regulatory requirements in terms of entering into labor contracts with our employees
and paying various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance,
unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. Pursuant to the
PRC Labor Contract Law and its implementation rules, employers are subject to stricter requirements in terms of signing labor contracts,
minimum wages, paying remuneration, determining the term of employee’s probation and unilaterally terminating labor contracts. In the
event that we decide to terminate some of our employees or otherwise change our employment or labor practices, the PRC Labor
Contract Law and its implementation rules may limit our ability to effect those changes in a desirable or cost-effective manner, which
could adversely affect our business and results of operations.
In October 2010, the Standing Committee of the National People’s Congress promulgated the PRC Social Insurance Law,
effective on July 1, 2011 and amended on December 29, 2018. On April 3, 1999, the State Council promulgated the Regulations on the
Administration of Housing Funds, which was amended on March 24, 2002 and March 24, 2019. Companies registered and operating in
mainland China are required under the Social Insurance Law and the Regulations on the Administration of Housing Funds to apply for
social insurance registration and housing fund deposit registration within 30 days of their establishment and to pay for their employees
different social insurance including pension insurance, medical insurance, work-related injury insurance, unemployment insurance and
maternity insurance to the extent required by law. We could be subject to orders by the competent labor authorities for rectification and
failure to comply with the orders may further subject us to administrative fines.
As the interpretation and implementation of labor-related laws and regulations are still evolving, we cannot assure you that our
employment practices do not and will not violate labor-related laws and regulations in mainland China, which may subject us to labor
disputes or government investigations. We cannot assure you that we have complied or will be able to comply with all labor-related law
and regulations including those relating to obligations to make social insurance payments and contribute to the housing provident funds.
If we are deemed to have violated relevant labor laws and regulations, we could be required to provide additional compensation to our
employees and our business, financial condition and results of operations will be adversely affected.
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Fluctuations in exchange rates could have a material and adverse effect on our results of operations and the value of your
investment.
Our operations are subject to risks arising from fluctuations in exchange rates with reference to countries in which we operate
and to which we sell our products. We sell our products to various countries, and therefore, our revenues have significant exposure to the
relative movements of currencies of those countries. Any significant appreciation or depreciation of Renminbi may materially and
adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollars.
For example, to the extent that we need to convert U.S. dollars we receive into Renminbi to make capital contributions or pay our
operating expenses, appreciation of Renminbi against the U.S. dollar would have an adverse effect on the RMB amount we would
receive from the conversion. Conversely, a significant depreciation of Renminbi against the U.S. dollar may significantly reduce the U.S.
dollar equivalent of our earnings, which in turn could adversely affect the price of our ADSs.
The conversion of Renminbi into foreign currencies is based on rates set by the People’s Bank of China. The value of Renminbi
against foreign currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange policies,
among other things. We cannot assure you that Renminbi will not appreciate or depreciate significantly in value against foreign
currencies in the future.
Very limited hedging options are available in mainland China to reduce our exposure to exchange rate fluctuations. To date, we
have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may
decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not
be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by the exchange control
regulations of mainland China that restrict our ability to convert Renminbi into foreign currency. As a result, fluctuations in exchange
rates may have a material adverse effect on your investment.
Discontinuation of any of the government subsidies or imposition of any additional taxes and surcharges could adversely affect our
financial condition and results of operations.
Our mainland China subsidiaries have received various financial subsidies from PRC local government authorities. The
financial subsidies result from discretionary incentives and policies adopted by PRC local government authorities. Local governments
may decide to change or discontinue such financial subsidies at any time. The discontinuation of such financial subsidies or imposition of
any additional taxes could adversely affect our financial condition and results of operations.
If we are classified as a mainland China resident enterprise for mainland China income tax purposes, such classification could result
in unfavorable tax consequences to us and our non-mainland China shareholders or ADS holders.
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of mainland China
with a “de facto management body” within mainland China is considered a mainland China resident enterprise. The implementation rules
define the term “de facto management body” as the body that exercises full and substantial control over and overall management of the
business, productions, personnel, accounts and properties of an enterprise. In 2009, the State Administration of Taxation, or the SAT
issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the “de facto management body”
of a PRC-controlled enterprise that is incorporated offshore is located in mainland China. Although Circular 82 only applies to offshore
enterprises controlled by mainland China enterprises or mainland China enterprise groups, not those controlled by mainland China
individuals or foreigners like us, the criteria set forth in the circular may reflect the SAT’s general position on how the “de facto
management body” test should be applied in determining the tax resident status of all offshore enterprises. According to Circular 82, an
offshore incorporated enterprise controlled by a mainland China enterprise or a mainland China enterprise group will be regarded as a
mainland China tax resident by virtue of having its “de facto management body” in mainland China and will be subject to mainland
China enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day
operational management is in mainland China; (ii) decisions relating to the enterprise’s financial and human resource matters are made or
are subject to approval by organizations or personnel in mainland China; (iii) the enterprise’s primary assets, accounting books and
records, company seals, and board and shareholder resolutions, are located or maintained in mainland China; and (iv) at least 50% of
voting board members or senior executives habitually reside in mainland China.
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We believe that none of our entities outside of mainland China is a mainland China resident enterprise for mainland China tax
purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain
with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that we are a mainland
China resident enterprise for enterprise income tax purposes, we will be subject to the enterprise income tax on our global income at the
rate of 25% and we will be required to comply with mainland China enterprise income tax reporting obligations. In addition, gains
realized on the sale or other disposition of the ADSs or our Class A ordinary shares may be subject to mainland China tax, at a rate of
10% in the case of non-mainland China enterprises or 20% in the case of non-mainland China individuals (in each case, subject to the
provisions of any applicable tax treaty), if such gains are deemed to be from mainland China sources. It is unclear whether non-mainland
China shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and
mainland China in the event that we are treated as a mainland China resident enterprise. Any such tax may reduce the returns on your
investment in the ADSs.
Any failure or perceived failure by us to comply with the anti-monopoly and anti-unfair competition laws and regulations may result
in governmental investigations or enforcement actions, litigation, or claims or fines against us, and could have an adverse effect on
our business, financial condition and results of operations.
The PRC government has adopted a series of anti-monopoly and anti-unfair competition laws and regulations and has recently
enhanced its enforcement of such laws and regulations. The PRC Anti-monopoly Law (revised in 2022) and the relevant implementing
rules (i) require that where the concentration of undertakings reaches the filing threshold stipulated by the State Council, a filing must be
made with the anti-monopoly authority before the parties implement the concentration, but even if the concentration of undertakings fails
to meet the filing threshold, if there is any evidence that the concentration of undertakings has or may have the effect of eliminating or
restricting competition, the anti-monopoly authority may require the parties to file, (ii) prohibit a business operator with a dominant
market position from abusing such position, such as by selling commodities at unfairly high prices or buying commodities at unfairly low
prices, selling products at prices below cost without any justifiable cause, or refusing to trade with a trading party without any justifiable
cause, and (iii) prohibit business operators from entering into monopoly agreements, which refer to agreements that eliminate or restrict
competition with competing business operators or transaction counterparties, such as by boycotting transactions, fixing or changing the
price of commodities, limiting the output of commodities or fixing the price of commodities for resale to third parties, unless the
agreements satisfy certain exemptions under the PRC Anti-monopoly Law. Furthermore, in February 2021, the Anti-monopoly
Commission of the State Council officially promulgated the Anti-Monopoly Guidelines for the Internet Platform Economy Sector, or the
Anti-Monopoly Guidelines. The Anti-Monopoly Guidelines prohibit certain monopolistic acts of internet platforms so as to protect
market competition and safeguard the interests of users and undertakings participating in the internet platform economy, including
without limitation, prohibiting platforms with a dominant position from abusing their market dominance (such as discriminating against
customers in terms of pricing and other transactional conditions using big data and analytics, coercing counterparties into exclusivity
arrangements, using technology to block competitors’ interfaces, favorable positioning in search results of goods displays, using bundle
services to sell services or products, compulsory collection of unnecessary user data). In addition, the Anti-Monopoly Guidelines also
reinforce antitrust merger review for internet platform related transactions to safeguard market competition. Meanwhile, on March 10,
2023, the SAMR issued the Provisions on Prohibiting the Abuse of Administrative Power to Eliminate and Restrict Competition, the
Provisions on Anti-Monopoly Agreements, the Provisions on Prohibition of Abuse of Dominant Market Position, and the Regulations on
the Review of Concentration of Undertakings (collectively, the “Provisions on Anti-Monopoly”), all of which came into effect on April
15, 2023. These Provisions on Anti-Monopoly are promulgated to implement the Anti-Monopoly Law of the PRC, and further strengthen
the anti-monopoly legal system. As these Provisions on Anti-Monopoly and the Anti-Monopoly Guidelines were newly promulgated, it
is still uncertain how they will impact on our business, financial condition, results of operations and prospects.
According to the PRC Anti-unfair Competition Law, unfair competition, which refers to the production and operating activities
where the operator disrupts the market competition order and damages the legitimate rights and interests of other operators or consumers
in violation of the provisions of the PRC Anti-unfair Competition Law, shall be prohibited. Pursuant to the PRC Anti-unfair Competition
Law, operators shall abide by the principle of voluntariness, equality, impartiality, integrity and adhere to laws and business ethics during
market transactions. Operators in violation of the PRC Anti-unfair Competition Law may be subject to civil, administrative or criminal
liabilities depending on the specific circumstances.
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In March 2018, the SAMR was formed as a new governmental agency to take over, among other things, the anti-monopoly
enforcement functions from the relevant departments under the MOFCOM, the NDRC, and the former State Administration for Industry
and Commerce, respectively. Since its inception, the SAMR has continued to strengthen anti-monopoly enforcement. In December 2018,
the SAMR issued the Notice on Anti-monopoly Enforcement Authorization, which grants authorities to its provincial branches to
conduct anti-monopoly enforcement within their respective jurisdictions. In September 2020, the SAMR issued Anti-monopoly
Compliance Guideline for Operators, which requires operators to establish anti-monopoly compliance management systems to prevent
anti-monopoly compliance risks. In particular, the PRC regulators have been increasingly focused on inspection and regulation on
potential noncompliance with anti-unfair competition and anti-monopoly related laws recently. For example, in April 2021, the SAMR,
the Cyberspace Administration of China and the SAT, held an administrative guidance meeting for internet platform enterprises. During
the meeting, it was pointed out that illegal activities including, among others, forcing the implementation of “choose one” among the
enterprise and its competitors, abusing dominant market position, “cash burning” to seize the “community group buying” market, making
use of big data analysis to the disadvantage of existing customers, etc., shall be prohibited and rectified. In addition, many platforms,
including 34 enterprises which attended such administrative guidance meeting as representatives of internet platform enterprises, are
required to conduct a comprehensive self-inspection and make necessary rectification accordingly. The competent administration for
market regulation will organize and conduct inspections on the platforms’ rectification results. If the platforms are found to conduct
illegal activities including forcing the implementation of “choose one” among them and their competitors, abusing dominant market
position, infringing consumers rights and interests, etc., they will be imposed with more severe penalties in accordance with the laws. We
have been conducting necessary self-inspection and rectifications in accordance with such guidance and are working on some of the
rectification procedures, such as concentration notification for past deals. We cannot guarantee you that we will not be subject to more
similar or even stricter rectification requests from the government authorities or that we will fully comply with all applicable rules and
regulations at all times. As a result of the regulators’ focus on anti-monopoly and anti-unfair competition compliance and enhanced
regulation of platform enterprises, our business practice and expansion strategy may be subject to heightened regulatory scrutiny. In order
to comply with existing laws and regulations and new laws and regulations that may be enacted in the future, we may need to devote
significant resources and efforts, including restructuring affected businesses and adjusting investment activities, which may adversely
affect our business operation, growth prospects and reputation. In addition, we cannot assure you that our efforts are sufficient to comply
with all the applicable laws and regulations on anti-monopoly and anti-unfair competition and the authorities’ requirements in all
respects. Any anti-monopoly or anti-unfair competition related lawsuit, regulatory investigations or administrative proceedings initiated
against us could also result in our being subject to regulatory actions and constraints on our investments and acquisitions, which could
include forced termination of any agreements or transactions, required divestitures, limitations on certain pricing and business practices
or significant fines. As a result, we may be subject to significant difficulties in operating our current business and pursuing our
investment and acquisition strategy.
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We may not be able to obtain certain benefits under relevant tax treaty, on dividends paid by our mainland China subsidiaries to us
through our Hong Kong subsidiary.
We are a holding company incorporated under the laws of the Cayman Islands and as such rely on dividends and other
distributions on equity from our mainland China subsidiaries to satisfy part of our liquidity requirements. Pursuant to the PRC Enterprise
Income Tax Law, a withholding tax rate of 10% currently applies to dividends paid by a mainland China “resident enterprise” to a
foreign enterprise investor, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with mainland China that
provides for preferential tax treatment. Pursuant to the Arrangement between the Mainland China and the Hong Kong Special
Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Taxation Avoidance and the Tax
Evasion Arrangement, effective from December 8, 2006, such withholding tax rate may be lowered to 5% if a Hong Kong resident
enterprise owns no less than 25% of a mainland China enterprise. According to the Announcement of the State Administration of
Taxation on Issues concerning the “Beneficial Owner” in Tax Treaties, which became effective in April 2018, whether a resident
enterprise is a “beneficial owner” that can apply for a low tax rate under tax treaties depends on an overall assessment of several factors,
which may bring uncertainties to the applicability of preferential tax treatment under the tax treaties. Furthermore, the Administrative
Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, which became effective on January 1, 2020, requires
non-resident taxpayers (including non-resident enterprises and individuals) to determine whether they are qualified to enjoy the
preferential tax treatment under the tax treaties and file relevant report and materials with the tax authorities. Where a non-resident
taxpayer self-assesses and concludes that it/he/she satisfies the criteria for claiming preferential tax treatment, it/he/she may enjoy treaty
benefits at the time of tax declaration or at the time of withholding through the withholding agent, simultaneously gather and retain the
relevant materials for future inspection, and accept follow-up administration by the tax authorities. There are also other conditions for
enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. See “Item 5. Operating and Financial
Review and Prospects—Taxation.” In the future we intend to re-invest all earnings, if any, generated from our mainland China
subsidiaries for the operation and expansion of our business in mainland China. Should our tax policy change to allow for offshore
distribution of our earnings, we would be subject to a significant withholding tax. We cannot assure you that our determination regarding
our qualification to enjoy the preferential tax treatment will not be challenged by the relevant tax authority or we will be able to complete
the necessary filings with the relevant tax authority and enjoy the preferential withholding tax rate of 5% under the arrangement with
respect to dividends to be paid by our mainland China subsidiaries to our Hong Kong subsidiary.
We face uncertainty with respect to indirect transfers of equity interests in mainland China resident enterprises by their non-
mainland China holding companies.
In February 2015, SAT issued the Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of
Properties by Non-Resident Enterprises, or SAT Public Notice 7. SAT Public Notice 7 extends its tax jurisdiction to not only indirect
transfers but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding
company. In addition, SAT Public Notice 7 provides certain criteria on how to assess reasonable commercial purposes and has introduced
safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. SAT Public Notice 7
also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer) of the taxable
assets. Where a non-resident enterprise conducts an “indirect transfer” by transferring the taxable assets indirectly by disposing of the
equity interests of an overseas holding company, the non-resident enterprise being the transferor, or the transferee, or the mainland China
entity which directly owned the taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance over
form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial
purpose and was established for the purpose of reducing, avoiding or deferring mainland China tax. As a result, gains derived from such
indirect transfer may be subject to mainland China enterprise income tax, and the transferee or other person who is obligated to pay for
the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a mainland China
resident enterprise. On October 17, 2017, SAT issued the Announcement of the State Administration of Taxation on Issues Concerning
the Withholding of Nonresident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017 and
was amended on June 15, 2018. The SAT Bulletin 37 further clarifies the practice and procedure of the withholding of nonresident
enterprise income tax.
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We face uncertainties on the reporting and consequences of future private equity financing transactions, share exchanges or
other transactions involving the transfer of shares in our company by investors that are non-mainland China resident enterprises. The
PRC tax authorities may pursue such non-resident enterprises with respect to a filing or the transferees with respect to withholding
obligation, and request our mainland China subsidiaries to assist in the filing. As a result, we and non-resident enterprises in such
transactions may become at risk of being subject to filing obligations or being taxed under SAT Public Notice 7 and SAT Bulletin 37, and
may be required to expend valuable resources to comply with them or to establish that we and our non-resident enterprises should not be
taxed under these regulations, which may have a material adverse effect on our financial condition and results of operations.
If the custodians or authorized users of controlling non-tangible assets of our company, including our corporate chops and seals, fail
to fulfill their responsibilities, or misappropriate or misuse these assets, our business and operations could be materially and
adversely affected.
Under the laws of mainland China, legal documents for corporate transactions are executed using the chops or seal of the
signing entity or with the signature of a legal representative whose designation is registered and filed with the relevant branch of the
Administration of Industry and Commerce.
Although we usually utilize chops to enter into contracts, the designated legal representatives of each of our mainland China
subsidiaries, the VIE and its subsidiaries have the apparent authority to enter into contracts on behalf of such entities without chops and
bind such entities. All designated legal representatives of our mainland China subsidiaries, the VIE and its subsidiaries are members of
our senior management team who have signed employment agreements with us or our mainland China subsidiaries, the VIE and its
subsidiaries under which they agree to abide by various duties they owe to us. In order to maintain the physical security of our chops and
chops of our mainland China entities, we generally store these items in secured locations accessible only by the authorized personnel in
the legal or finance department of each of our subsidiaries, the VIE and its subsidiaries. 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. If a designated legal representative obtains control of the chops in an effort to
obtain control over any of our mainland China subsidiaries, the VIE or its subsidiaries, we or our mainland China subsidiaries, the VIE
and its subsidiaries would need to pass a new shareholder or board resolution to designate a new legal representative and we would need
to take legal action to seek the return of the chops, apply for new chops with the relevant authorities, or otherwise seek legal redress for
the violation of the representative’s fiduciary duties to us, which could involve significant time and resources and divert management
attention away from our regular business. In addition, the affected entity may not be able to recover corporate assets that are sold or
transferred out of our control in the event of such a misappropriation if a transferee relies on the apparent authority of the representative
and acts in good faith.
Our leased property interest may be defective and our right to lease the properties may be affected by such defects challenged, which
could cause significant disruption to our business.
Under the laws of mainland China, all lease agreements are required to be registered with the local housing authorities. We
presently lease six premises in China, and the landlords of these premises have not completed the registration of their ownership rights or
the registration of our leases with the relevant authorities. Failure to complete these required registrations may expose our landlords,
lessors and us to potential monetary fines. If these registrations are not obtained in a timely manner or at all, we may be subject to
monetary fines or may have to relocate our offices and incur the associated losses.
Risks Related to Our ADSs
The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors.
The trading price of the ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control. This may
happen because of broad market and industry factors, including the performance and fluctuation of the market prices of other companies
with business operations located mainly in China that have listed their securities in the United States. The securities of some of these
companies, including internet-based companies, have experienced significant volatility since their initial public offerings, including, in
some cases, substantial price declines in their trading prices. The trading performances of other Chinese companies’ securities after their
offerings may affect the attitudes of investors toward Chinese companies listed in the United States in general and consequently may
impact the trading performance of the ADSs, regardless of our actual operating performance.
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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 flow;
● announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors;
● announcements of new offerings, solutions and expansions by us or our competitors;
● changes in financial estimates by securities analysts;
● detrimental adverse publicity about us, our services or our industry;
● additions or departures of key personnel;
● release of lockup or other transfer restrictions on our outstanding equity securities or sales of additional equity
securities; and
● potential litigation or regulatory investigations.
Any of these factors may result in large and sudden changes in the volume and price at which the ADSs will trade.
In the past, shareholders of public companies have often brought securities class action suits against those companies following
periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount
of our management’s attention and other resources from our business and operations and require us to incur significant expenses to
defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our
reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required
to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.
If securities or industry analysts do not publish research or publishes inaccurate or unfavorable research about our business, or if
they adversely change their recommendations regarding the ADSs, the market price for our ADSs and trading volume could decline.
The trading market for the ADSs will be influenced by research or reports that industry or securities analysts publish about our
business. If one or more analysts who cover us downgrade the ADSs or publishes inaccurate or unfavorable research about our business,
the market price for the ADSs would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports
on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for the ADSs to fall.
The sale or availability for sale of substantial amounts of the ADSs could adversely affect their market price.
Sales of substantial amounts of the ADSs in the public market, or the perception that these sales could occur, could adversely
affect the market price of the ADSs and could materially impair our ability to raise capital through equity offerings in the future. We
cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the
availability of these securities for future sale will have on the market price of the ADSs. As of February 28, 2023, we had 154,277,834
ordinary shares issued and outstanding, comprising of (i) 137,735,814 Class A ordinary shares, and (ii) 16,542,020 Class B ordinary
shares, among which 94,553,872 Class A ordinary shares are in the form of ADSs, which are freely transferable without restriction or
additional registration under the Securities Act. The remaining Class A ordinary shares outstanding and the Class B ordinary shares will
be available for sale, subject to volume and other restrictions as applicable under Rules 144 and 701 under the Securities Act. Certain
holders of our ordinary shares may cause us to register under the Securities Act the sale of their shares, subject to the applicable lock-up
period. Registration of these shares under the Securities Act would result in ADSs representing these shares becoming freely tradable
without restriction under the Securities Act immediately upon the effectiveness of the registration. Sales of these registered shares in the
form of ADSs in the public market could cause the price of our ADSs to decline.
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Our dual-class voting structure 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 the ADSs may view as beneficial.
We have a dual-class ordinary share structure. Our ordinary shares are divided into Class A ordinary shares and Class B
ordinary shares. Holders of Class A ordinary shares are entitled to one vote per share, while holders of Class B ordinary shares will be
entitled to four votes per share. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder
thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any direct or
indirect sale, transfer, assignment or disposition of Class B ordinary shares by a holder thereof or the direct or indirect transfer or
assignment of the voting power attached to such number of Class B ordinary shares through voting proxy or otherwise to any person or
entity that is not an affiliate of such holder, such Class B ordinary shares shall be automatically and immediately converted into an equal
number of Class A ordinary shares.
All of the 6,615,000 ordinary shares held by ELLY Holdings Limited, an entity wholly owned by Dr. Yan Li, the chairman of
our board of directors and our chief executive officer, and the 9,927,020 ordinary shares held by Niu Holding Inc., an entity 82.7%
owned by Mr. Token Yilin Hu, our director, and 17.3% owned by Mr. Carl Chuankai Liu, are Class B ordinary shares. Messrs. Yan Li,
Token Yilin Hu and Carl Chuankai Liu collectively beneficially own an aggregate of 16,542,020 Class B ordinary shares, which
represented 32.5% of our total voting power as of February 28, 2023. Therefore, Messrs. Yan Li, Token Yilin Hu and Carl Chuankai Liu
have significant influence over matters requiring shareholders’ approval, including election of directors and significant corporate
transactions, such as a merger or sale of our company or our assets. This concentration in voting power will limit your ability to influence
corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that
holders of our Class A ordinary shares and the ADSs may view as beneficial.
The dual-class structure of our ordinary shares may adversely affect the trading market for the ADSs.
S&P Dow Jones and FTSE Russell have changed their eligibility criteria for inclusion of shares of public companies on certain
indices, including the S&P 500, to exclude companies with multiple classes of shares and companies whose public shareholders hold no
more than 5% of total voting power from being added to such indices. In addition, several shareholder advisory firms have announced
their opposition to the use of multiple class structures. As a result, the dual-class structure of our ordinary shares may prevent the
inclusion of the ADSs representing our Class A ordinary shares in such indices and may cause shareholder advisory firms to publish
negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any such
exclusion from indices could result in a less active trading market for the ADSs representing our Class A ordinary shares. Any actions or
publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect
the value of the ADSs.
Because we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of the ADSs for a return
on your investment.
We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth
of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an
investment in the ADSs as a source for any future dividend income.
Our board of directors has discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands
law. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended
by our directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium
account provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as
they fall due in the ordinary course of business. Even if our board of directors decides to declare and pay dividends, the timing, amount
and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus,
the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors
deemed relevant by our board of directors. Accordingly, the return on your investment in the ADSs will likely depend entirely upon any
future price appreciation of our ADSs. There is no guarantee that the ADSs will appreciate in value or even maintain the price at which
you purchased the ADSs. You may not realize a return on your investment in the ADSs, and you may even lose your entire investment in
the ADSs.
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There can be no assurance that we will not be classified as a passive foreign investment company, or PFIC, for U.S. federal income
tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. holders of the ADSs or
our Class A ordinary shares.
A non-U.S. corporation will be classified as a passive foreign investment company, or PFIC, for any taxable year if either (i) at
least 75% of its gross income for such year consists of certain types of “passive” income; or (ii) at least 50% of the value of its assets
(generally determined on the basis of a quarterly average) during such year is attributable to assets that produce passive income or are
held for the production of passive income. Although the law in this regard is unclear, we intend to treat the VIE (and its subsidiaries) as
being owned by us for United States federal income tax purposes, not only because we conduct the business operations of such entity but
also because we are entitled to substantially all of its economic benefits, and, as a result, we consolidate its result of operations in our
consolidated financial statements. Assuming that we are the owner of the VIE (including its respective subsidiaries, if any) for United
States federal income tax purposes, we do not believe we were a PFIC for the taxable year ended December 31, 2022 and we do not
presently expect to be a PFIC for the current taxable year or the foreseeable future.
While we do not expect to become a PFIC, because the value of our assets for purposes of the asset test may be determined by
reference to the market price of the ADSs, fluctuations in the market price of the ADSs may cause us to become a PFIC for the current or
subsequent taxable years. In addition, the composition of our income and assets will also be affected by how, and how quickly, we use
our liquid assets. If we determine not to deploy significant amounts of cash for active purposes or if it were determined that we do not
own the stock of the VIE for United States federal income tax purposes, our risk of being a PFIC may substantially increase. Because
PFIC status is a factual determination made annually after the dose of each taxable year, there can be no assurance that we will not be a
PFIC for the current taxable year or any future taxable year.
If we are a PFIC in any taxable year during which a U.S. Holder (as defined in “Item 10. Additional Information—E. Taxation
—United States Federal Income Tax Considerations”) holds the ADSs or our Class A ordinary shares, certain adverse U.S. federal
income tax consequences could apply to such U.S. Holder. See “Item 10. Additional Information—E. Taxation—Passive Foreign
Investment Company Considerations.”
Our sixth amended and restated memorandum and articles of association contain anti-takeover provisions that could have a material
adverse effect on the rights of holders of our Class A ordinary shares and ADSs.
Our sixth amended and restated memorandum and articles of association contain certain provisions to limit the ability of others
to acquire control of our company or cause us to engage in change-of-control transactions, including a provision that grants authority to
our board of directors to establish and issue from time to time one or more series of preferred shares without action by our shareholders
and to determine, with respect to any series of preferred shares, the terms and rights of that series, any or all of which may be greater than
the rights associated with our Class A ordinary shares in the form of ADSs. These provisions could have the effect of depriving our
shareholders of the opportunity to sell their shares at a premium over the prevailing market price by discouraging third parties from
seeking to obtain control of our company in a tender offer or similar transactions.
You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited,
because we are incorporated under Cayman Islands law.
We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our
sixth amended and restated memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands and the
common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by our minority shareholders
and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the
Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman
Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a
court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as
clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the
Cayman Islands have a less developed body of securities laws than the United States. In addition, Cayman Islands companies may not
have standing to initiate a shareholder derivative action in a federal court of the United States.
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Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect
corporate records (other than the memorandum and articles of association and any special resolutions passed by such companies, and the
registers of mortgages and charges of such companies) or to obtain copies of lists of shareholders of these companies. Our directors have
discretion under our articles of association, to determine whether or not, and under what conditions, our corporate records may be
inspected by our shareholders, but our directors are not obliged to make them available to our shareholders. This may make it more
difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other
shareholders in connection with a proxy contest.
Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from
requirements for companies incorporated in other jurisdictions such as the United States. As a result of all of the above, our public
shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of our board
of directors or our controlling shareholders than they would as public shareholders of a company incorporated in the United States.
Certain judgments obtained against us by our shareholders may not be enforceable.
We are a Cayman Islands exempted company and all of our assets are located outside of the United States. All of our current
operations are conducted in mainland China. In addition, all of our current directors and officers are nationals and residents of countries
other than the United States. Substantially all of the assets of these persons are located outside the United States. As a result, it may be
difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe
that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action
of this kind, the laws of the Cayman Islands and of mainland China may render you unable to enforce a judgment against our assets or
the assets of our directors and officers.
You may experience dilution of your holdings due to inability to participate in rights offerings.
We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit
agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to
which these rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs or are registered
under the provisions of the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed rights to third
parties, and may allow the rights to lapse. We may be unable to establish an exemption from registration under the Securities Act, and we
are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a
registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may
experience dilution of their holdings as a result.
You may be subject to limitations on transfer of your ADSs.
Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from
time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to
time for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary
needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in
emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of the ADSs
generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to
do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement,
or for any other reason.
We incur increased costs as a result of being a public company.
As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. The
Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and Nasdaq, impose various requirements on the
corporate governance practices of public companies.
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These rules and regulations increase our legal and financial compliance costs and make some corporate activities more time-
consuming and costly. We have also incurred additional costs in obtaining director and officer liability insurance. In addition, we will
incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified
persons to serve on our board of directors or as executive officers. We regularly evaluate and monitor developments with respect to these
rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the
timing of such costs.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain
provisions applicable to United States domestic public companies.
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.
We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend
to publish our results on a quarterly basis through press releases, distributed pursuant to the rules and regulations of the SEC. Press
releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are
required to file with or furnish to the SEC is less extensive and less timely than that required to be filed with the SEC by U.S. domestic
issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing
in a U.S. domestic issuer.
As an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to
corporate governance matters that differ significantly from the Nasdaq listing standards; these practices may afford less protection to
shareholders than they would enjoy if we complied fully with such corporate governance listing standards.
As a Cayman Islands exempted company listed on the Nasdaq Stock Market, we are subject to the Nasdaq listing standards.
Rule 5620(a) requires that each company listing common stock or voting preferred stock, and their equivalents, must hold an annual
meeting of shareholders no later than one year after the end of the company’s fiscal year-end. However, the Nasdaq Stock Market Rules
permit a foreign private issuer like us to follow the corporate governance practices of its home country. We have informed Nasdaq that
we will follow home country practice, that is, the provisions of our Sixth Amended and Restated Memorandum and Articles of
Association, with respect to the annual meeting of shareholders, which provides that our company may (but shall not be obliged to) in
each calendar year hold a general meeting as our annual general meeting. Our shareholders may be afforded less protection than they
would otherwise enjoy under the Nasdaq listing standards applicable to U.S. domestic issuers given our reliance on the home country
practice exception.
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The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right
to direct how the Class A ordinary shares which are represented by your ADSs are voted.
Holders of ADSs do not have the same rights as our registered shareholders. As a holder of the ADSs, you will not have any
direct right to attend general meetings of our shareholders or to cast any votes at such meetings. You will only be able to exercise the
voting rights that are carried by the underlying Class A ordinary shares represented by your ADSs indirectly in accordance with the
provisions of the deposit agreement. Under the deposit agreement, you may vote only by giving voting instructions to the depositary.
Upon receipt of your voting instructions, the depositary will try, as far as is practicable, to vote the underlying Class A ordinary shares
represented by your ADSs in accordance with your instructions. You will not be able to directly exercise your right to vote with respect
to the underlying Class A ordinary shares unless you withdraw the shares and become the registered holder of such shares prior to the
record date for the general meeting.
Under our articles of association, the minimum notice period required to convene a general meeting is seven calendar days.
When a general meeting is convened, you may not receive sufficient advance notice of the meeting to withdraw the underlying Class A
ordinary shares represented by your ADSs and become the registered holder of such shares to allow you to attend the general meeting
and to vote directly with respect to any specific matter or resolution to be considered and voted upon at the general meeting. In addition,
under our articles of association, for the purposes of determining those shareholders who are entitled to attend and vote at any general
meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure of our
register of members or the setting of such a record date may prevent you from withdrawing the underlying Class A ordinary shares
represented by your ADSs and becoming the registered holder of such shares prior to the record date, so that you would not be able to
attend the general meeting or to vote directly. If we ask for your instructions, the depositary will notify you of the upcoming vote and will
arrange to deliver voting materials to you. We have agreed to give the depositary at least 30 days’ prior notice of shareholder meetings.
Nevertheless, we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to
vote the underlying Class A ordinary shares represented by your ADSs. In addition, the depositary and its agents are not responsible for
failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able
to exercise your right to direct how the underlying Class A ordinary shares represented by your ADSs are voted, and you may have no
legal remedy if the underlying Class A ordinary shares represented by your ADSs are not voted as you requested.
We are entitled to amend the deposit agreement and to change the rights of ADS holders under the terms of such agreement, or to
terminate the deposit agreement, without the prior consent of the ADS holders.
We are entitled to amend the deposit agreement and to change the rights of the ADS holders under the terms of such agreement,
without the prior consent of the ADS holders. We and the depositary may agree to amend the deposit agreement in any way we decide is
necessary or advantageous to us. Amendments may reflect, among other things, operational changes in the ADS program, legal
developments affecting ADSs or changes in the terms of our business relationship with the depositary. In the event that the terms of an
amendment impose or increase fees or charges (other than in connection with foreign exchange control regulations, and taxes and other
governmental charges, delivery and other such expenses) or materially prejudice an existing substantial right of the ADS holders, ADS
holders will only receive 30 days’ advance notice of the amendment, and no prior consent of the ADS holders is required under the
deposit agreement. Furthermore, we may decide to terminate the ADS facility at any time for any reason. For example, terminations may
occur when we decide to list our shares on a non-U.S. securities exchange and determine not to continue to sponsor an ADS facility or
when we become the subject of a takeover or a going-private transaction. If the ADS facility will terminate, ADS holders will receive at
least 30 days’ prior notice, but no prior consent is required from them. Under the circumstances that we decide to make an amendment to
the deposit agreement that is disadvantageous to ADS holders or terminate the deposit agreement, the ADS holders may choose to sell
their ADSs or surrender their ADSs and become direct holders of the underlying common shares, but will have no right to any
compensation whatsoever.
ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less
favorable outcomes to the plaintiff(s) in any such action.
The deposit agreement governing the ADSs representing our Class A ordinary shares provides that, the federal or state courts in
the City of New York have non-exclusive jurisdiction to hear and determine claims arising under the deposit agreement and in that
regard, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against us or the
depositary arising out of or relating to our Class A ordinary shares, the ADSs or the deposit agreement, including any claim under the
U.S. federal securities laws.
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If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was
enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge,
the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not
been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver
provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement. In
determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party
knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit
agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before investing in the ADSs.
If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters
arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial
owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits
against us and / or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard
only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result
in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such
action.
Nevertheless, if this jury trial waiver provision is not enforced, to the extent a court action proceeds, it would proceed under the
terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a
waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S.
federal securities laws and the rules and regulations promulgated thereunder.
The depositary for the ADSs will give us a discretionary proxy to vote our Class A ordinary shares underlying your ADSs if you do
not vote at shareholders’ meetings, except in limited circumstances, which could adversely affect your interests.
Under the deposit agreement for the ADSs, if you do not vote, the depositary will give us a discretionary proxy to vote our
Class A ordinary shares underlying your ADSs at shareholders’ meetings unless:
● we have instructed the depositary that we do not wish a discretionary proxy to be given;
● we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting;
● a matter to be voted on at the meeting may have a material adverse impact on shareholders; or
● the voting at the meeting is to be made on a show of hands.
The effect of this discretionary proxy is that if you do not vote at shareholders’ meetings, you cannot prevent our 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. Holders of our ordinary shares are not subject to this discretionary proxy.
Item 4. Information on the Company
A.
History and Development of the Company
We commenced operations in September 2014 through Beijing Niudian, and launched our NQi-series smart e-scooters in
June 2015.
In November 2014, we incorporated Niu Technologies in the Cayman Islands as our offshore holding company to facilitate
financing and offshore listing. Shortly following its incorporation, Niu Technologies established a wholly-owned subsidiary in Hong
Kong, Niu Technologies Group Limited.
In May 2015, Niu Technologies Group Limited established a wholly-owned subsidiary in mainland China, Niudian Information.
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Due to the legal restrictions on foreign ownership in companies in mainland China that provide value-added
telecommunications services in mainland China, we operate our NIU app, our website www.niu.com and other related business through
Beijing Niudian, a mainland China company in which the equity interests are held by mainland China citizens. In May 2015, we began to
conduct the business operations of Beijing Niudian and its subsidiaries through Niudian Information by entering into a series of
contractual arrangements with Beijing Niudian and its shareholders.
We refer to Niudian Information as our WFOE, and to Beijing Niudian as the VIE in this annual report. Our contractual
arrangements with the VIE and its shareholders allow us to (i) conduct the business operations of the VIE, (ii) receive substantially all of
the economic benefits of the VIE, and (iii) have an exclusive option to purchase or designate any third party to purchase all or part of the
equity interests in and assets of the VIE when and to the extent permitted by the laws of mainland China.
As a result of our direct ownership in our WFOE and the contractual arrangements with the VIE, we are regarded as the primary
beneficiary of the VIE, and we treat the VIE as the consolidated variable interest entity under U.S. GAAP, which generally refers to an
entity in which we do not have any equity interests but whose financial results are consolidated into our consolidated financial statements
in accordance with U.S. GAAP because we have a controlling financial interest in, and thus are the primary beneficiary of, that entity.
We have consolidated the financial results of the VIE and its subsidiaries in our consolidated financial statements in accordance with
U.S. GAAP.
On October 19, 2018, the ADSs representing our Class A ordinary shares commenced trading on Nasdaq under the symbol
“NIU.” We raised from our initial public offering approximately US$55.2 million in net proceeds after deducting underwriting
commissions and discounts and the offering expenses payable by us.
B.
Business Overview
Our mission is to redefine urban mobility and make life better.
We are the world’s leading provider of smart urban mobility solutions We have created a new market category—smart electric
two-wheeled vehicles—to redefine urban mobility. Before NIU, smart electric two-wheeled vehicles did not exist in mainland China, and
two-wheeled vehicles were perceived low-end. We have changed that perception with our smart e-scooters and premium brand “NIU.”
We currently design, manufacture and sell high-performance motorcycles, scooters, kick-scooters and e-bikes. We have a
diversified product portfolio that caters to the various demands of our users and addresses different urban travel scenarios. Currently, we
offer eight product series across a number of different vehicle types. Our product portfolio comprises our (i) six electric scooter and
motorcycle series, RQi, NQi, MQi, SQi, UQi, and Gova, (ii) one kick-scooter series, KQi, (iii) one e-bike series, BQi. We have adopted
an omnichannel retail model, integrating the offline and online channels, to sell our products and provide services. We sold 831,593
units, including our e-motorcycles, e-scooters, kick-scooters and e-bikes, in 2022. The number of units sold in China market and
international markets were 710,540 and 121,053, respectively. We sell and service our products through a unique “city partner” system in
China, which consisted of 338 city partners with 3,102 franchised stores in 239 cities in China, and 53 distributors in 52 countries
overseas as of December 31, 2022, as well as on our own online store and third-party e-commerce platforms.
Our award-winning products represent style, freedom and technology. Our brand “NIU” has inspired many followers and has
enabled us to build a loyal user base. We offer the NIU app as an integral part of the user experience and will continue to develop new
features within the app to enhance user loyalty. NIU fan clubs are established in over 30 cities in China, where fans actively organize
NIU scooter-related events. Capitalizing on our premium brand, we have also been able to sell lifestyle accessories, which are well
received by customers.
We have adopted a user-centric philosophy to design our products. We collect user feedback and product performance data to
develop new products or functionalities to satisfy the unmet demand. All of our products are designed to embody the themes of style,
freedom and technology through their unique design languages. Our smart e-scooters have amassed strong international recognition for
innovation and design. We have built our smart e-scooters based on our advanced and innovative technologies, including smart
technologies, powertrain and battery technologies and automotive inspired functionalities. We integrate cutting-edge technologies from
industry leaders and our own technologies into a proprietary system that delivers an excellent user experience and optimal performance.
Our smart e-scooters are the first in the industry to provide updates to firmware regularly over-the-air (OTA) to fine-tune the
performance, and such OTA function has only been seen in high-end electric cars.
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To meet the diversified market demand, in 2021 we entered the category of micro-mobility through kick-scooter and e-bike
products in the International markets. Our kick-scooters and e-bikes product portfolio are designed to cover a wide range of urban
mobility needs from last-mile commuting to entertainment purposes. Since the launch of the first kick-scooter product, we have
strategically rolled out micro-mobility products to cover a wide range of market needs.
We provide connectivity solutions and value-added services to our users. Our NIU app synchronizes with the smart e-scooters
and communicates with our cloud system. Through the app, our users receive real-time information relating to their smart e-scooters. We
use the data collected to provide smart maintenance and services, and guide the users on when and how to properly maintain our products
to extend their service life and achieve better performance. We also analyze this data to help us improve our products and create new
services. In addition, we collect and analyze user behavioral data from our NIU app and our website, from which we derive insights to
further engage our customers and strengthen brand loyalty.
Our Products
We have a diversified product portfolio that caters to the various demands of our users and addresses different urban travel
scenarios. Currently, we offer eight product series across a number of different vehicle types. Our product portfolio comprises our (i) six
electric scooter and motorcycle series, RQi, NQi, MQi, SQi, UQi, and Gova, (ii) one kick-scooter series, KQi, (iii) one e-bike series,
BQi. We plan to launch two or more product series or models each year in the near and medium term, aiming to cover the full spectrum
of the urban mobility solutions. We will keep introducing upgrades and mid-cycle refreshes to our existing models on an ongoing basis.
RQi Series
Our RQi series is a line of high-performance straddle motorcycles designed for city-oriented riding with enough speed to be
safely ridden on major roads in urban areas. The RQi model is equipped with several features that enhance its performance, safety, and
convenience, including removable batteries, front and rear recording cameras, a 5kW mid-mounted motor to provide acceleration, and a
TFT dash containing a GPS tracker for real-time location information. With its focus on urban riding and its advanced features, the NIU
RQi series stands out as a technologically advanced option for riders who value riding experiences.
NQi Series
Our NQi series smart e-scooters consists of the NQi, NQi-GT and NQi-GTS models. The NQi series is built to be high-
performance, well balanced, and with a minimalistic aesthetic. Its design language is modern and minimalistic. The NQi series is
equipped with advanced powertrain consisting of the removable lithium-ion battery pack with our proprietary battery management
system, the BOSCH motor or NIU motor, and our proprietary Field Oriented Control, or the FOC, system that controls the electric
motors. The NQi series utilizes a state-of-the-art lithium-ion battery pack that achieves extended range with light weight.
MQi Series
Our MQi series smart e-scooters consists of the MQiS, MQi2, MQi+, MQi-GT and MQi-GT EVO models. The MQi series is a
cool and fresh-looking smart e-scooter designed for young urban users. Most of the MQi series models are smaller, lighter and more agile
when cruising through urban traffic than that of the NQi series. The MQi series carries the NIU design language that puts a modem twist
on the classic e-scooter design. The MQi series is designed to be ergonomic, bolstering natural and comfortable sitting posture and
intuitive dashboard and switches layout.
SQi Series
Our SQi series was positioned as our most high-end product series in China electric bicycle product category with its innovative
design and cutting-edge technologies in materials. The SQi has a futuristic straddle motorcycle-like look. With a clear-cut geometric
body frame and large 17-inch wheels, it presents an unconventional design for electric bicycles yet still meeting the Chinese New
National Standards. The body frame of the SQi has adopted a high performing aerospace magnesium alloys material in order to meet the
weight requirements.
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UQi Series
Our UQi series smart e-scooters consists of the UQi, UQiM, UQi+, UQiS and UQi-GT models. The UQi series is smaller and
lighter than the NQi-Series and MQi-Series and carries the same NIU design language. The UQi series is designed to be ultra-light and
ultra-compact.
Gova Series
While our root is deeply planted in the premium smart e-scooter segment, the Gova series is our line of products targeted at the
mid-level e-scooter market, representing good value for money and high quality. The design language is differentiated from our main e-
scooter lines. Selective models in the Gova series do not have smart functions as standard but instead offer them as options to achieve the
compelling price range. In addition to the optional advanced technologies such as Cloud ECU, most Gova models will be equipped with
blue-tooth unlock features that make riding experience even more convenient. The Gova series currently consist of G0, G1,G2, G3, G5,
G6, G6t, B0, B2, C0, C3, F0, F2, and F4.
BQi Series
The BQi e-bike series is our most recent addition to our product portfolio. These e-bikes feature a stylish and practical
lightweight frame design, combined with pedal assist and throttle control, making them easy and comfortable for city commutes. The
BQi e-bike was exhibited during CES in 2022, where it was well received by audiences.
Accessories and spare parts
In addition to our e-scooters, urban commuter electric motorcycles, and performance bicycle series, we also offer a
comprehensive line of NIU-branded accessories and spare parts.
Scooter Accessories. Our scooter accessories include riding gears, such as raincoats, gloves, and knee pads and accessories to
be installed on our e-scooters to expand functionalities, such as storage baskets and tail boxes, smart phone holders, backrests and locks.
Lifestyle accessories. Our NIU POWER line of lifestyle accessories includes branding apparel, such as t-shirts, coats, jeans,
hats, bags, and jewelry, and souvenirs such as notebook, badges, key chain and mugs. In November 2019, we promoted the new autumn
collection of NIU POWER lifestyle apparels including sweaters and hoodies.
Performance Upgrades. Our NIU POWER Performance line of high-performance upgrade components include upgraded
wheels, shock absorbers, and brake calipers, and carbon fiber body panels.
Our NIU App
Our NIU app serves as an integrated platform and supplemental tool to our smart e-scooters. The app includes a suite of
functions that primarily focus on the connection with our smart e-scooters as well as other services and value propositions. Depending on
vehicle models and geographical areas, the App includes:
NIU Dashboard
Through communications with the Cloud ECU, multiple sensors, positioning module and communication modules onboard each
smart e-scooter, the NIU app presents various key information about the smart e-scooter on the dashboard, including:
● scooter status, such as the location of the scooter and anti-theft alerts;
● historical riding data such as past routes and riding statistics; and
● key diagnostics, such as the real-time status of the battery and the battery health score.
The dashboard features a card-based interface to present the most useful and relevant information to the users based on users’
preferences, which is both intuitive and has great potential for customization and expandability.
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NIU Services
Through the NIU app, users can access a variety of services.
● Online repair request. Users can request repair services with one click, after which the app will intelligently recommend the
nearest service station for the services.
● Smart check. The function checks common failures which may occur in various components. Users can directly seek
solution through the fault tags.
● Service station locator. Users can access comprehensive information about nearby service stations.
● NIU Cover. Users can query and activate NIU Cover insurance services within the app.
● Smart service. Users can check the status of the smart connection services and can renew the service.
● Theft reporting. Users can report theft of the smart e-scooter and battery within the app.
NIU Store
We have established a built-in e-commerce platform in our NIU app, where our users can purchase our e-scooters and NIU-
branded accessories.
NIU Social
The social tab is the forum for NIU users to post photos, chat, set up a gathering, and share fun in riding and daily life.
NIU Points
It is a user loyalty program designed to enhance user engagement and activity. The NIU Points are earned through joining
special events, purchasing specific accessories, publishing original content, interacting with other users, among others. NIU users can
redeem the earned points for exclusive NIU badges, NIU accessories, and coupons.
Our NIU Brand
Our brand represents style, freedom and technology. We design and market our products purposefully to reinforce consumer
perception of “NIU” as a premium smart e-scooter brand.
We conduct various marketing and branding activities to establish NIU as a premium brand. For example, in April 2022, we
launched the global “Green Riding” cycling campaign online and offline in 12 cities worldwide on the Earth Day, promoting
environmentally friendly travel and encouraging more people to join the green cycling movement and contributing towards sustainable
development to fulfill our social responsibility as a leading provider of smart urban mobility solutions. In August 2022, our SQi series
collaborated with Razer, the world’s top gaming hardware brand, on a joint product event that received widespread recognition and praise
in the gaming community and on social media, especially among the young people. During the Lunar New Year of the Ox, we
collaborated with Tengger, a renowned Chinese artist, to launch a Lunar New Year holiday special song titled “A Little Bit of Niu in the
Year of the Ox” (牛年牛一点), which echoes the brand spirit of “Little Pursuit” (小追求). In October 2021, in order to celebrate our
important milestone in becoming the first electric two-wheel brand in the world to have covered 10 billion kilometers of riding distance
by its global users, we launched a large-scale communication campaign “Make Life Electric” (你有点小牛), which gained popularity on
Weibo, TikTok and WeChat, achieving over 1.4 billion views. During 2020 Singles’ Day shopping festival, we conducted an online
campaign to sell a limited edition of smart e-scooter with special painting of a popular anime series. In September 2020, we sponsored an
online dance competition show called “Street Dance of China” and featured distinct advertisement to enhance the brand image as a cool
lifestyle brand.
Capitalizing on our premium NIU brand, we have also been able to sell lifestyle accessories, such as apparel, which are well
received by customers.
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NIU Community
We have cultivated a highly dedicated and growing base of NIU fans. Our users are proud owners of NIU smart e-scooters with
high engagement. Based on the e-scooter activity data we collected, more than 75% of our users rode their e-scooters on a monthly basis
in the twelve months ended December 31, 2022.
We endeavor to build an interactive and dynamic social community to further convey and brand image as a fashionable urban
lifestyle. NIU clubs are one of the core components of NIU community, and there were over 30 of NIU clubs as of December 31, 2022.
Formed and run by the enthusiastic NIU fans, these NIU dubs organize various events, such as new product test drives, riding for good
causes, and scooter parades. We support the NIU clubs with products, designs and announcement channels. To further expand the NIU
community and increase brand loyalty, we have facilitated our users to create virtual NIU communities via social media, such as WeChat,
to bring together our users from all walks of life. We have a dedicated user interaction team, which closely monitors and actively
participates in different interest groups such as photography group, accessories group, social responsibility group, etc. and interacts with
users online.
In these groups, our users share user-generated content, such as video clips or pictures. To boost the content contribution from
our users, our city partners through their distribution network reward them with discounts from local businesses such as restaurants.
Owning a NIU scooter thus opens up opportunities for users to participate in more local interest groups and local businesses discounts,
leading to a truly better urban life. Our virtual community and NIU clubs create a beneficial network effect for the brand.
Data Analytics—NIU Big Data
We have developed our user and scooter data analytics capabilities, which enable us to collect and analyze massive relevant data
to deepen our understanding of the smart e-scooter performance, user behavior and operational insights.
We have accumulated massive amount of data from multiple sources. We currently collect 462 types of data points covering 72
dimensions such as humidity, lighting and temperature, from our Cloud ECU and up to 32 sensors installed on each smart e-scooter. As
of December 31, 2022, our NIU app had been connected with approximately 1,843,000 smart e-scooters, which had accumulated
approximately 15 billion kilometers of riding distance of data. We also collect data from our NIU app, company’s websites, e-commerce
platforms, as well as through providing repair and maintenance services. In particular, we collect the following three types of data to
improve our smart e-scooters’ performance and customer experience: (i) riding behavior, including, among others, riding speed, average
distance, acceleration, use of brakes to improve the battery management system and balance control of our e-scooters, (ii) operational
and functional performance of various parts of the smart e-scooter to examine the status of the smart e-scooters and suggest maintenance
or repair services, (iii) NIU app user behaviors to fine tune our app functions to improve their experience with our services.
Our cloud system utilizes a robust, multilayer database structure that can handle over a million persistent connections
concurrently. Our parallel database servers to support quick multiple queries in a TB level database. Our cloud system monitors the
servers and automatically regenerates a new virtual server if any server goes offline. The above features ensure that our smart e-scooters
maintain constant, reliable, and responsive connections with our cloud. In addition, our cloud’s open API platform allows connection
with third parties to support functions such as fleet management and smart e-scooter sharing program.
Our data analytics team leverages our proprietary big data platform and analytical tools, NIU Inspire to analyze the collected
data to deepen our understanding of user behavior and product performance and gain operational insights, enabling us to: (i) guide the
upgrade of the existing models and development of new ones; (ii) fine tune the firmware in our existing scooters to improve
performance, such as the self-adaptive state of charge algorithms for better battery utilization or the FOC controller software for better
electric motor efficiency; (iii) achieve more intelligent retail and service shop planning; (iv) generate scooter diagnosis reports and
provide smart maintenance suggestions; and (v) conduct accurate targeted marketing.
We collect user-related data after receiving users’ consent. Users in Europe have the option to choose whether or not to send
the GPS related data to us due to different data privacy regulations in these regions.
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After-Sales Services
We offer comprehensive after-sale services including value-added services. Our warranty is complemented by value-added
services such as NIU Care and NIU Cover, which can be conveniently ordered through NIU app, service hotline, or at our franchised
stores. In addition, we provide various value-added services through our NIU app, including DIY repairs and location of our service
centers, and theft reporting. We believe all these services together will create a satisfying user experience throughout the e-scooter life
cycle. Through these services, we aim to make ownership “worry free” and allow our users to truly enjoy riding and owning our e-
scooters.
Warranty Policy
We provide limited warranty to our users for terms varying from six months to three years, subject to certain conditions, such as
normal use. For the electric motor, we provide a 24-month or 30,000-kilometer warranty. For lithium-ion battery packs we provide a 24-
month or 20,000-kilometer warranty or a 36-month or 30,000-kilometer warranty.
For other parts of our e-scooters, we provide quality warranty varying from six months to 24 months depending on the parts.
We are responsible for replacing or repairing the faulty products during their respective warranty terms. The warranty on certain parts of
our e-scooters is covered by our suppliers’ back-to-back warranty and thus we are entitled to have the suppliers replace or repair the
faulty parts.
NIU Care
Our e-scooters are primarily serviced through our franchised stores and our authorized service centers, which provide repair,
maintenance and bodywork services.
We launched our NIU Care program in August 2018 to provide regular after-sales maintenance service to our e-scooters. Our
regular maintenance services include scooter exterior check, mechanical structure service, motor system check, electrification service,
battery maintenance service, tire pressure check and cleaning services. Based on user’s driving behavior and mileage.
NIU Cover
In November 2015, we launched NIU Cover to facilitate the sale of insurance coverage provided by third-party insurance
companies relating to accident injury, loss of scooters and third-party liability.
Technologies
Behind our lineup of smart, efficient and high-performance smart e-scooters are the suite of advanced technologies we have
developed or adopted, such as NIU Energy smart power technology, the Cloud ECU, electric motors, FOC, advanced braking systems,
driver assistance and system integration, among others.
NIU Energy Smart Power Technology
Our NIU Energy smart power technology, currently in its seventh generation, combines reliable and proven cell components,
innovative hardware system design and an intelligent battery management system, or the BMS. We adapted the technology to create a
portable, lightweight, safe and reliable battery pack that is suitable for e-scooters. We analyze the riding data from our smart e-scooters to
locate and refine the critical point of discharge within the safe range of the battery, develop our proprietary energy efficiency matrix
PACK, dynamically calibrate the intelligent BMS chips, optimize the charging dynamic balance algorithms, and integrate our EBS
kinetic energy recovery system, motor, and power control unit.
Hardware Component and Design
We use the Lithium-ion battery cells as the building blocks of our battery pack. A matrix of battery cells is connected in parallel
to produce a robust battery pack.
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Our battery packs incorporate PACK technology, which is adopted by global automakers globally. The PACK technology
protects the battery cells from impact and regulates battery temperature, and use voltage, temperature, current, or PTC, technology to
compartmentalize each cell, thereby ensuring the integrity of the battery pack.
Our battery packs can be charged either standalone or when installed on the e-scooter, both of which can be through a home
wall plug. They use proprietary charging connectors and ports for simultaneous safe charging and BMS data communications. We have
also developed our proprietary NIU Flash Charger that effectively doubles the charging speed of our battery pack as compared to regular
chargers.
BMS
In addition to robust hardware, our battery packs feature an intelligent battery management system, or BMS. The BMS monitors
the voltage, current and temperature of the battery in real-time, and regulates power consumption.
The core of our proprietary BMS is the self-adaptive SoC algorithms that optimizes the balance between performance and
battery life and provides accurate range predictions based on the data and analysis of the riding behavior of the users and the discharging
characteristics of the battery cells.
Cloud Electronic Control Unit
At the core of each NIU smart e-scooter lies the Cloud Electronic Control Unit, or the Cloud ECU. The Cloud ECU serves as
both a control center and communications center for the smart e-scooter. In particular, the Cloud ECU serves a wide range of functions
including, among others, scooter control, motion monitoring, positioning, connectivity and data transmission from the smart e-scooter to
our cloud server.
Scooter Control. The Cloud ECU serves as the smart e-scooter’s master control center, coordinating the smart e-scooter’s
complex systems. The Cloud ECU controls, among others, the smart e-scooter battery, electric motor, Field Oriented Control system,
electronic lock and light systems.
Motion Monitoring. The Cloud ECU monitors various physical aspects of our smart e-scooters with its built-in triaxial gyro
sensor. The gyro sensor detects acceleration and changes in rotational motion or orientation. Thus, the Cloud ECU is able to monitor the
posture and dynamics of the smart e-scooter in real-time and accordingly adjust the motor’s power output, ensuring the smart e-scooter’s
performance and efficiency.
Positioning. The Cloud ECU currently supports two major global satellite geolocation systems: (1) the American Global
Positioning System, or the GPS, (2) the Chinese COMPASS, also known as the BeiDou Navigation Satellite System. Together, these
systems constitute the technical backbone of our position-based anti-theft systems as well as functions such as riding map and smart e-
scooter sharing, which are capable of detecting unauthorized movements of our smart e-scooters.
Connectivity and Data Transmission. The Cloud ECU facilitates the connectivity of our smart e-scooters, which are able to
access the complete spectrum of mobile network standards. Via these mobile networks, the Cloud ECU upload data about a smart e-
scooter’s position and its condition every 3 to 15 seconds, depending on the smart e-scooter’s start up conditions. The transmittance of
this data also serves as the foundation of our Assisted Global Positioning System, or the AGPS, that, when coupled with our GPS
systems, allows for precise geolocation of our smart e-scooters. In addition, our smart e-scooters are also equipped with dual-mode
Bluetooth chips, which allow owners of our smart e-scooters to use their smartphones to directly communicate with our e-scooters.
Owners can, among others, query the smart e-scooter’s status and change certain settings such as adjusting the sensitivity level of the
anti-theft alert.
OM Updates. Our smart e-scooters are the first in the industry with OTA update capability, which is normally only seen on
high-end electric cars. The OTA update is supported by the Cloud ECU and rewriteable firmware of various electronic components. The
OTA allows users to effortlessly update the e-scooters to the most recent firmware updates, so the users can benefit from all future
performance improvements and feature enhancements on a regular basis.
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In addition to constantly improving and upgrading our Cloud ECU, we have developed our own System-on-Chip module, which
to our knowledge is the first chip module specially designed and customized for smart urban mobility products. We have applied the C35
System-on-Chip module to the latest V35 version of Cloud ECU to replace the current version of Cloud ECU since August 2019, which
provides higher performance and better reliability with lower power consumption and more compact packaging. In addition, the
customized chip module will make it more difficult for competitors to replicate our Cloud ECU. In the meantime, we are adopting Long-
Term Evolution Category 1 (LTE Cat-1) data connection technology and applying to mass production since July 2021. Compared with
Narrowband IoT (NB-IoT), LTE Cat-1 supports higher bandwidth needs since it offers better performance and much lower latency than
its counterpart.
Motors
We purchase motors from various suppliers and we have also designed our NIU motors, which are energy efficient and cost-
efficient. We have been constantly increasing the conversion ratio and refining the calibration of the FOC of the motors.
Field Oriented Control
Using big data analytics, we have developed the proprietary FOC system that controls the electric motors. The FOC is the
intelligence behind the powertrains of our entire lineup of smart e-scooters, and helps our smart e-scooters strike the balance between
performance and power consumption.
The FOC controls the motor in real-time by recognizing riding conditions and continuously adjusting the torque of the motor
for optimal performance. The FOC taps into the performance of a vector controller, which is superior to the square-wave controllers
common on the market because a vector controller controls the power and torque output of the motor as opposed to simply adjusting the
revolutions per minute, achieving a much smoother ride.
Braking System
Our smart e-scooters are equipped with hydraulic disc brakes made from special alloys. The brake discs are slotted to extend the
life of the system. The hardware of the brakes is complemented by the Electronic Braking System, or the EBS, which provides for
intelligent braking and recycling kinetic energy. Certain of our models also employ the combined braking system, or CBS, which
intelligently splits braking force between the front and rear discs to shorten the braking distance at higher speeds.
Driver Assistance
We have developed various driver assistance technologies to enhance the rider experience of our smart e-scooters such as
automatic headlight, automatic return indicators, cruise control and smart self-diagnosis systems.
We continue to look for ways to enhance the user experience. We have developed adaptive responses to road conditions, active
safety systems, and applied them to our latest version of Cloud ECU. We are currently working on the development of, among others,
active safety systems, self-balancing systems and L2 autonomous driving systems. These advanced systems are developed in tandem
with the new product series.
System Integration
The NIU systems draw from a diverse range of industries and technologies. For example, we use gyroscope, satellite navigation
and mobile communication chipsets that originate from the mobile phone industry; temperature sensors, humidity sensors and
communication protocols that originate from the industrial control systems; and cloud and big data technologies that originate from
internet industry. These diverse technologies and components operate under diverse conditions, such as different working electrical
currents and temperatures. We have developed a system that uses a single master control with multi-channel protocols to ensure that all
components in the vehicle can be upgraded to the latest version.
Design and Engineering
We have significant in-house design and engineering capabilities, which cover all areas of scooter engineering from concept
to completion.
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User-Centric Philosophy
We adopt a user-centric approach in our product design and development. All of our products are designed based on the
quantitative data and qualitative feedback we collect from the smart e-scooters and users. We have developed an instant user feedback
loop based on our continuous connection with smart e-scooters and proactive interaction with users and achieved an agile product
development process. We collect and analyze large amounts of product performance data and user behavioral data generated by the smart
e-scooters running on the road and collected from our NIU app and website. We also conduct comprehensive surveys and collect
feedback and comments from online virtual communities to understand the drawbacks of existing scooters and aim to develop new
products and functionalities to satisfy the user demand. Utilizing the insights gained from the data and feedback collected, we have
developed various new products and functionalities, such as cruise control and automatic headlight. We also utilize the data and feedback
to provide updates to our firmware regularly over-the-air (OTA) to fine-tune the performance of our smart e-scooters and improve overall
user experience.
Our research and development team comprises motorbike enthusiasts with years of motor biking experience. Their enthusiasm,
experience and expertise, together with our user-centric product development philosophy, have allowed us to design and deliver high-
performance smart e-scooters and made us the pioneer in urban mobility solutions we are today.
Platform-based Engineering System
We have developed a platform-based engineering system. The system is based on the same in-scooter control and data
connection systems. Accordingly, we can develop different product lines with the same voltage requirement. As a result, our existing
production lines can be easily adapted to new products. For example, our MQi and UQi series, which are all based on the 48V platform,
adopt the same battery pack solution, battery management system, and FOC, BOSCH motor and EBS. By doing so, we can shorten our
design timeline, accelerate time-to-market and lower manufacturing costs.
Industrial Design
Industrial design plays a crucial role at NIU. Utilizing the power of design and design thinking, the team is able to identify
critical pain points from users and then to provide the best solutions to daily urban commute. For example, we chose lithium-ion battery
over lead-acid battery because lithium-ion battery is not only more ecofriendly, but also safer, lighter and more compact so that the users
can easily bring the batteries home for charging.
Our well-designed product lines speak a distinctive and consistent family design language. Our industrial design philosophy
combines minimalist aesthetics with thoughtful functionality. Under that philosophy, we desire to create an exceptional riding experience
while maintaining a smart and simple design. For example, the iconic “Halo” headlamp, equipped on all of our smart e-scooters
integrates a daytime running light with our LED head lamps, providing an ultra-wide arc of light for improved vision and safety at night.
Another example is the MQi Series—a cool and fresh-looking smart e-scooter designed for young urban users. Slim, modem, chic and
intuitive are the core design attributes of MQi Series from inside out. We believe a good design should bring people joyful experience.
Therefore, the team has done intensive testing and mock-ups for ergonomics study, as a result of which the MQi Series features a
comfortable and ergonomic seating posture as well as intuitive and easy-to-use control layout. The hidden shock absorber and the high
strength aluminum alloy swing arm not only speak the same minimalistic design language, but also ensure excellent riding experience as
well as safety and comfort.
NIU Innovation Lab
Our NIU Innovation Lab hosts our research and development teams of 224 members, which include, among others, our user
experience design team, smart electronic research team, powertrain design team and industrial design team.
The Lab focuses on industrial design, structural design, smart electronics research, power electronics research, user data
analysis, business intelligence system development and user experience research. The Lab and our research and development team
played a crucial role in the creation of the 563 patents we held as of December 31, 2022. We also entered into a definitive Development
Collaboration Agreement in March 2019 with one of the world’s leading automobile manufacturers regarding joint development of
Micro-mobility solutions, which was carried out by the Lab.
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Global R&D and Manufacturing Base
Our new global R&D and manufacturing base commenced operation in December 2019. Located in Changzhou, China, the new
facility hosts, among others, our proprietary R&D laboratories for our BMS intelligent battery management system, FOC magnetic field-
oriented control system, EBS electronic brake system, Cloud ECU intelligent central controller and NIU Inspire big data analysis system,
as well as a quality laboratory for comprehensive and standardized testing of the raw materials and vehicles.
Manufacturing and Fulfillment
We design, manufacture and sell high-performance electric bicycles and motorcycles. We view the manufacturers and suppliers
we work with as key partners through our product development process and leverages their industry expertise to ensure that each product
that we produce meets our strict quality standards.
Production facility
We keep the majority of the assembly of our electric bicycles,electric motorcycles and electric kick-scooters in our own
production facility, while cooperating with a motorcycle manufacturer with required qualifications to manufacture the certain electric
motorcycles models. We operate two manufacturing facilities in Changzhou, China. Our global R&D and manufacturing base includes
two phases of construction. Phase I facility commenced operation in December 2019, and covers around 50,000 square meters. Phase I
layout includes four semi-automatic assembly lines, a highly efficient double-decker logistics facility, a products showroom, and a
dedicated quality control laboratory. The designed production capacity under Phase I is 700,000 units per annum, which increased our
total production capacity to over 1,000,000 units per annum. Phase II facility covers around 61,000 square meters and started production
from September 2021, which increased our total production capacity to over 2,000,000 units per annum.
Supply Chain Management
We purchase key components from our suppliers, such as batteries, motors, tires, battery chargers and controllers. We
strategically select our suppliers to avoid over-concentration, control our cost and maintain a good relationship with our suppliers.
To avoid over-concentration of supply and manage costs and product quality, we generally engage more than two suppliers for
each of our key components. For example, we source motors from other suppliers in addition to BOSCH, and source battery cells from
multiple suppliers. We select our suppliers based on a variety of criteria, including, among others, production capacity, technological
sophistication, quality assurance, professional certification, manpower adequacy, financial position and environmental compliance. In
addition, we review the performance of our suppliers quarterly, and make necessary adjustments to our supply chain, including
termination of under-performing suppliers. We have been able to maintain good and long-lasting relationships with our suppliers.
We also have strong bargaining power on procuring raw materials, which enables us to effectively defend ourselves against
price increases and fluctuations. We diversify our source of each type of raw material from at least two suppliers. Typically, we enter into
a supply framework agreement with each of our raw material suppliers, under which our procurement price is generally set as the
predefined standard cost of the supplier plus a specified mark-up, subject to quarterly or semi-annual renegotiation.
We have been able to effectively manage our inventory level. We formulate holistic plans for our production, warehousing and
logistics, by tracking a variety of factors, including, among others, historical sales data, sales forecasts and customization requests. With
smooth turnover between production and logistics, we are able to maintain an optimal inventory level, to fulfill our orders and avoid
over-stock at the same time. Our inventory turnover days were 31, 26 and 50 for 2020, 2021 and 2022, respectively. For the calculation
of inventory turnover days, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Cash
flows and working capital.”
Quality Control
We believe that the quality of our products is crucial to our continued growth. We place great emphasis on quality control, set up
dedicated team and implemented stringent monitoring and quality control systems to manage our operations.
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Our quality control system starts from procurement. Before entering our production flow, the raw materials must be certified for
quality. We also perform quality reexaminations and unannounced inspections on raw materials in the mass production flow. We review
the performance of our suppliers based on the defective percentage of their supplies, and adjust the amount of procurement from them
accordingly. We typically enter into a quality control agreement with each of our suppliers, under which we may seek remedies against
our suppliers, such as damages and rectification, in the event the supplies fall below the quality standard or exceed minimum defective
percentage.
Our quality control system covers each stage of our production process. When we establish or adapt an assembly line for a new
product or model, we trial-run the assembly line to produce a sample for quality examination. The assembly line can start mass
production only if the produced sample is of adequate quality. When the in-progress product moves from one section to another along the
assembly line, it must be checked for quality by the responsible assembly specialists in both sections. After completion of assembly, our
quality control personnel will perform overall quality inspection and road-test on the products in accordance with relevant protocols. A
product may be shipped out of manufacturing facility only after it passes all quality control examinations and is properly documented as
such. We also track the acceptance status of our products when they reach our distributors or customers. By logging and breaking down
the pass rates along our products in the production process, we are able to identify our quality control weak spots, and improve our
operation accordingly.
Our new global R&D and manufacturing base includes a dedicated quality control laboratory equipped with full-automatic and
semi-automatic instruments for components testing, and self-developed inspection systems for battery cell quality testing.
We have not experienced any massive product recall, massive refunds or other quality control outbreak since we started to sell
e-scooters.
Fulfilment
Leveraging our excellent production and big data capabilities, we are able to achieve fast turnaround time fulfilling orders
placements. We ship our products generally 7 to 15 days following placement of order and receipt of payment from our city partners in
China. For overseas distributors, it generally takes 30 to 60 days following the receipt of down payment. Orders from niu.com or other e-
commerce platforms are faster to fulfill, usually within two days.
Through proactive planning, we are able to estimate the distribution of orders in a certain period of time and improve the
predictability of our order fulfillment. For example, our franchised stores must timely submit their revolving order plans for the period of
the following two weeks and following three months. We incorporate such order plans, in addition to other information, into our holistic
planning of production, warehousing and logistics, which in turn helps us achieve fast turnaround to fulfill order placements. Similarly,
in a one-year time span, we take into consideration of the capacity constraint of the factories and frontload the productions ahead of the
peak sales season.
We have different shipping methods for our finished products depending on the type of the distribution channel: (i) for our
offline domestic distribution channels, our city partners and franchised stores are responsible for logistics from the moment products are
rolled out of the factory; (ii) for local distributors in overseas markets, we ship our products mainly under FOB terms; and (iii) for online
shopping platforms such as our official website and third-party platforms such as JD.com and Tmall, we ship our products through third-
party delivery services.
Omnichannel Retail Model
We have established a distinct omnichannel retail model network to sell our products and provide service to our customers. As
of December 31, 2022, we sold our products through 3,102 franchised stores in 239 cities in China and 53 distributors in 52 countries
overseas, as well as on our own online store and third-party leading e-commerce platforms. We also leverage our omnichannel retail
network to deliver peripheral services such as maintenance and repair, and to collect data for business insights.
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Offline Distribution Network
City partners and franchised stores
In China, our offline retail channels consist of city partners and franchised stores. Our unique “city partner” system plays an
important role in our offline sales strategy. City partners are our exclusive distributors who either open and operate franchised stores or
sign up franchised stores. Leveraging our data analytics and their local knowledge, the city partners select store location and manage the
franchised stores. The city partner system allows us to optimize store location selection, manage stores efficiently, and maintain our
inventory at a low level.
To become our city partner and run our franchised stores, a potential business partner must meet certain qualifications and
possess the prerequisite capabilities specified in the standard franchise agreement, including, among others, adequate and relevant
experience, minimum working capital and sound knowledge of local business environment. The stores also have to meet certain
requirements that we formulate and adjust from time to time, such as being in a location reasonably accessible and convenient for our
targeted users, having adequate square footage, having at least two years of lease term if under leasehold, and having a layout and
decorative style that conform to the architectural specifications.
Our city partners and franchised stores are an extension of our brand. Our franchised stores adopt a consistent design and layout
and provide consistent shopping experience. We enter into a standard distribution agreement with each of our city partners. Each city
partner may only offer such products and services, in the specified region and manner, as provided under its respective distribution
agreement. The city partners also have to comply with our internal policies regarding performance review, branding and confidentiality.
To ensure orderly allocation of customer resources between the city partners, we maintain a zoning segregation system, under which all
the city partners must sell at or above the guidance retail price we set, and may not cross-sell to other regions allocated to other city
partners. The city partners purchase the products from us, and are responsible for the logistics, warehousing, and distribution to
franchised stores. We do not charge any initial fees or continuing fees to our city partners or franchised stores.
We closely monitor the sales performance, service level and activities within the franchised stores through the store level
management system that was implemented in early 2018. We will continue to upgrade such system to collect more store operation data
such as consumer traffic flow and traffic flow sources, test drive frequencies and sales conversion rate. We also use data collected by
other means to improve the performance of our stores. This information helps us adjust store-specific retailing and marketing strategies,
thereby increasing per store sales.
In addition to offering smart e-scooters, our stores also serve as our service stations to provide after-sales services such as
inspection, maintenance and repair services. Under our standard franchise agreement with the city partners and franchised stores, if a
customer requests a franchised store to repair one of our products within the term of the warranty, we will reimburse the franchised store
for all reasonable labor cost incurred from the repair and also provide them with the necessary spare parts. By offering after-sales
services, we aim to establish one-stop solution experience for our customers, continue to increase traffic flow to our stores and enhance
user loyalty.
The majority of our city partners make full payments upfront for their orders, which helps us improve cash flow management.
Overseas Distribution
We export our products to distributors in over 50 countries overseas, with Europe being our largest export market. We
manufacture and customize our products based on the requirements of our international customers and we ensure our exported products
are in compliance with the standards of the local markets.
For overseas markets, we cooperate with local distributors, who serve as our exclusive distributors in their respective regions.
To be eligible for our local distributor in an overseas market, a potential business partner must meet certain qualifications and possess
certain prerequisite capabilities, including, among others, preexisting business presence in motorcycles or consumer electronics and
comprehensive sales and service network. In addition, our local distributors must share our vision in the promising future of smart and
eco-friendly transportation products, and embrace our innovative marketing models.
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Typically, we enter into a distribution agreement with each of our local distributors, under which the local distributor will
commit to a minimum annual purchase amount from us, for a period of one to three years. Our shipping arrangements with local
distributors mainly under FOB terms.
We position smart e-scooters as a fashionable, premium urban transportation in overseas markets. Our distributors sell our
products primarily in the following three types of stores in overseas markets:
● branded flagship stores, which are located in the core business areas in major cities, have a space of over 100 square
meters, and carry our smart e-scooters exclusively.
● shop-in-shop stores, which are located in downtowns in major cities, where the entire store has a space of over 100 square
meters, and have a designated section for our smart e-scooters with a space of over 30 square meters.
● other point of sales, which are licensed to carry our smart e-scooters on a non-exclusive basis.
Scooter Sharing Program. We have supported local operators in certain overseas markets to implement dockless scooter sharing
programs powered by our internet-of-things, or IoT, technology. These scooter sharing programs were officially launched in more than
20 major cities across the world, such as New York, Washington DC, San Francisco, Miami, Amsterdam, Rotterdam, Berlin, Frankfurt,
Hamburg, Madrid, Barcelona, Brussels, Milano, Mexico City and more.
Online Distribution Network
We sell smart e-scooters and accessories online through third-party e-commerce platforms and on our own online store.
We have adopted the online to offline model, seamlessly integrating the online and offline networks to provide a seamless,
consistent experience for our customers. These online platforms act as conduits for influencing customers and directing sales to physical
stores. Our customers can conveniently place orders online and pick up their scooters at the franchised stores.
We entered into standard cooperation agreements with third-party e-commerce platforms, pursuant to which the e-commerce
platforms provide us sales and price settlement services, and charge us commission fees and technical support annual fees. We are
responsible for the logistics, customer services and after-sale services for the products sold on these platforms.
Marketing
We focus on promoting awareness of our brand generally and in particular as a lifestyle brand with high-quality smart e-scooters
globally. Our brand and our e-scooters are marketed to retail customers through digital and experiential activities as well as through more
traditional promotional and advertising activities. We aim to engage in cost-effective marketing activities by taking advantage of social
media and to build an online and offline ecosystem of users that will promote awareness of our brand. To a lesser extent, we engage out-
of-home advertising, such as through billboard advertising in cities and advertising on buses. Our marketing efforts include
the following:
Profile-based online marketing
Leveraging our sophisticated data analytics capabilities, we are able to gain a deep understanding of our target customer
profiles, such as demographics and interests. With this knowledge, we precisely direct our marketing efforts through targeted online
channels to efficiently reach new customers with matching profiles or existing customers for repeat purchases. We conduct online
marketing through channels such as search portals, social media, online video platforms, and e-commerce platforms. We also leverage
the key major media popular with our target groups to regularly publish news and updates about our company, such as our product
launch events. We conduct joint marketing activities with other brands. We also utilize our official bulletin board system (BBS), the NIU
app and our social media accounts to distribute original content to, and interact with, our followers and existing users. Through the right
channels, we deliver the right key messages and original contents to achieve effective marketing.
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Location-based offline marketing
We conduct offline marketing and advertising through LCD billboard ads, elevators ads, bus ads, product roadshows,
exhibitions in music festivals, among others. To achieve higher efficiency on offline marketing, we leverage riding data collected from
our smart e-scooters. For example, in each city, we have a heat map showing anonymously where NIU users ride and park our e-scooters,
a good indicator of locations of where potential users concentrate. The heat map allows us to select the optimal offline ads locations
(such as LCD billboard, or bus routes or residential buildings) to reach our targeted consumer groups, or organize product roadshows in
the most relevant venue.
Viral marketing via NIU community
Leveraging our excellent product quality, fashionable brand image and strong customer loyalty, we are able to utilize viral
marketing strategies to achieve the word-of-mouth marketing. For example, in April 2022, we launched the global “Green Riding”
cycling campaign online and offline in 12 cities worldwide on the Earth Day, promoting environmentally friendly travel and encouraging
more people to join the green cycling movement and contributing towards sustainable development to fulfill our social responsibility as a
leading provider of smart urban mobility solutions. In August 2022, our SQi series collaborated with Razer, the world’s top gaming
hardware brand, on a joint product event that received widespread recognition and praise in the gaming community and on social media,
especially among the young people. In October 2021, to celebrate the milestone in covering 10 billion kilometers of riding distance by
our global users, we invited 16 of our domestic and global users to share their “Make Life Electric” (你有点小牛) stories and paid tribute
to those who had been a role model and inspired more people to pursue a better life. In August 2021, we launched the “Your Life, A
Little Niu” (你的生活, 有点小牛) bus stop billboard in 23 cities across China, accumulating 620 million exposures and drawing more
potential customers’ attention to our products. In the third quarter of 2021, we started a “NIU clubs” campaign across 10 cities in China,
where users initiated wishes and we helped make them come true, such as riding in the desert, helping elderly users with their weddings
and island hopping, to deepen the link between our brand and our users. In 2021, we also created NIU’s exclusive song list “NIU Tunes”
on Spotify to provide users with more music resources while riding. In July 2020, to promote safe riding, we launched the “No Helmet,
No Ride” campaign together with traffic administrative agency across different provinces and cities. In the third quarter of 2020, we
kicked off the “Back to Street, This is NIU” campaign, partnering with “Street Dance of China”, a hot online dance competition show.
We promoted two featured advertisings in the semi-final and final of the competition show as well as an offline advertising campaign. In
March 2020, we launched the NIU Forest campaign to further reinforce our image as a socially responsible brand. Our users posted their
mileage and NIU story on social media, such as Douyin and Weibo to obtain the opportunity to claim one pine tree planted in Inner-
Mongolia sponsored by NIU.
Event-driven marketing
In addition to our day-to-day marketing operation, we organize event-driven marketing activities, such as new product launches,
company key milestone media events and monthly offline marketing events.
New product launches are typically our largest events of the year. Starting in 2015, we have organized product launch events
every year, joined by a large group of live audience including our users and partners, with extensive media coverage. In June 2018, we
launched our NGT and MQi+ smart e-scooters at Carrousel de Louvre, Paris, with nearly 300 media covering the launch. In August
2018, we launched our UM model in Shanghai during the co-branding event with McLaren GT Customer Racing. In April 2019, we
launched our UQi+ and US models and new lifestyle category, NIU AERO Sports Bicycles, in Beijing, and organized a two-day NIU
Brand event for our fans. In November 2019, we launched our expanded GT line led by newly designed MQi-GT with upgraded NQi-GT
and UQi-GT on the EICMA show in Milan, Italy, and we also released our first power-assisted electric bicycle, NIU Aero EUB-01. Due
to the impact of COVID-19, our new product launch was switched to online and we released MQi2, MQiS and G0 in the second quarter
of 2020. In November 2021, we released an electric scooter, the MQi-GT EVO, two kick scooters, the KQi2 and KQi3 Max, and an
upcoming e-bike, BQi, on the 2021 EICMA show. The year of 2022 was marked by a series of new product releases, starting with the
Gova C3 in March. We released the jungle green special edition of UQi, which became the color of the season. In August, we released
the SQi, followed by the new UQi+, Gova B2, BQi-C3, and KQi1.We organize product roadshows and marketing events across many
cities in China, typically after we announce new products. Users riding distance reached 100 million kilometers in October 2016, 1
billion kilometers in April 2018, and 10 billion kilometers in October 2021, respectively. We organized media events for these
milestones.
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We have participated in festivals or product exhibitions popular among our targeted groups, such as Strawberry Music Festival
and Innersect Show. Through participation in such events, we not only interact with our users and enhance our connections with our
users, but also reinforce our users’ perception of “NIU” brand as a premium lifestyle brand.
We sponsor and participate in non-profit social activities such as marathons, through which we exemplify green and lifestyle,
and it has been positively received by runners and spectators nationwide.
Overseas marketing
We invest in overseas marketing with a view to raise our brand awareness in the international markets. We adopted a dynamic
marketing strategy that combines traditional public relations, tactical digital marketing, and strategic retail and event marketing.
We have engaged leading consumer technology public relations firms to assist us in building trust, awareness and thought
leadership in the e-mobility space.
Competition
We operate in the lithium-ion battery-powered electric two-wheeled vehicles market, which is a segment of the electric two-
wheeled vehicles market. The segment is growing rapidly, and we believe we maintain competitive advantages in a number of areas,
including brand, product design and quality, smart features, omnichannel retail model, customer satisfaction, and a loyal customer base.
See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—We may face intense competition in the
electric two-wheeled vehicles industry.”
Intellectual Property
Our success depends, at least in part, on our ability to protect our core technology and intellectual property. We rely on a
combination of patents, patent applications, trade secrets, including know-how, copyright laws, trademarks, intellectual property licenses
and other contractual rights to establish and protect our proprietary rights in our technology. In addition, we enter into confidentiality and
non-disclosure agreements with our employees and business partners. The agreements we entered into with our employees also provide
that all software, inventions, developments, works of authorship and trade secrets created by them during the course of their employment
are our property.
Our intellectual property rights are critical to our business. As of December 31, 2022, we owned 563 patents, 857 registered
trademarks and 27 copyrights relating to various aspects of our operations and 2 registered domain names, including www.niu.com. Of
the 857 registered trademarks, 155 are registered in mainland China and 702 in other countries and regions. As of the same date, we had
354 applications for patents and trademarks pending in mainland China, Europe and other jurisdictions.
Regulations
This section sets forth a summary of the most significant laws, regulations and rules that affect our business activities in
mainland China and our shareholders’ rights to receive dividends and other distributions from us.
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Regulations on Production of Electric Bicycles
On July 9, 2005, the State Council of the PRC promulgated the Regulation of the PRC on the Administration of Production
License for Industrial Products, or the Production License Regulations. On April 21, 2014, the General Administration of Quality
Supervision, Inspection and Quarantine, or the AQSIQ, issued the Measures for the Implementation of the Regulations of the PRC
Administration of Production Licenses for Industrial Products, or the Measures, which was revised by the State Administration for
Market Regulation on September 29, 2022. The latest version took effect on November 1, 2022. According to the Production License
Regulations and the Measures, any enterprise that has not obtained a production license for a product listed in the Announcement of the
Product Catalog Implementing the Production Licensing System, or the Production Catalog, which was issued by the General
Administration of Quality Supervision, Inspection and Quarantine (abolished), or the AQSIQ on November 20, 2012, must not produce
the relevant product. An enterprise must file an application to the provincial administration of quality and technology supervision for the
license of producing the products listed in the Production Catalog. Otherwise, relevant authorities can impose fines and other
administrative sanctions, and serious violations may result in criminal liabilities. According to the Production Catalog, most of our
products are classified as electric bicycles, which are industrial products that fall within the scope of Production License Regulations and
Measures. Thus, we have obtained the appropriate production license thereof. On June 24, 2017, the State Council issued the Decision on
Adjusting the Catalog for the Administration of Production Permits for Industrial Products and on Trying out the Simplification of
Approval Procedures, or the Decision. Pursuant to the Decision, the production license for electric bicycle was canceled and was
changed to implement mandatory product certification management. However, on October 11, 2017, AQSIQ announced that the
production of the electric bicycles is still under the production licensing system. According to this announcement, the production license
regulatory regime is implemented pursuant to the new electric bicycle technical standard, which is the Safety and Technical Specification
for Electric Bicycle (GB 17761-2018), or the Electric Bicycle Standard, promulgated by the State Administration for Market Regulation
and the National Standardization Management Committee on May 15, 2018 and became effective on April 15, 2019. The Electric
Bicycle Standard replaced the General Technical Requirements for Electric Bicycles (GB 17761-1999), or the Old Standard, which were
issued by the Quality and Technology Supervision Bureau on May 28, 1999 and became effective from October 1, 1999. See “Item 3.
Key Information—D. Risk Factors—Risks Relating to Our Business—Our products are subject to safety standards and failure to satisfy
such mandated standards would have a material adverse effect on our business and operating results.”
Regulations on Qualification of Production of Electric Motorcycles
Pursuant to the Administration Measures for Access of Motorcycle Manufacturing, or the Motorcycle Manufacturing Measures,
issued on November 30, 2002 and the Implementing Rules of the Administration Measures for Access of Motorcycle Manufacturing, or
the Motorcycle Manufacturing Rules, issued on December 31, 2002, enterprises must pass the production access examination and obtain
the Motorcycle Production Access Certificate before manufacturing motorcycles in mainland China, and if an enterprise conducts a
motorcycle manufacturing consignment, both the consignee and the consignor are required to obtain the Motorcycle Production Access
Certificate. Pursuant to the General Specifications for Electric Motorcycles and Electric Mopeds, or the General Specifications, which
was issued on June 25, 2009 and effective on January 1, 2010, the General Specifications applies to electric motorcycles and electric
mopeds. On January 14, 2010, the Ministry of Industry and Information Technology, or the MITT, issued the Circular on Matters Related
to Electric Motorcycle Production Enterprises and Product Access Management, or the Circular, which imposes production restrictions
on enterprises who currently produce or intend to produce electric motorcycles. Such enterprises must satisfy the MIIT’s access
requirements and be on the list of the Announcement on Vehicle Manufacturers and Products before continuing or commencing
production. On November 27, 2018, the MITT promulgated the Administration Measures for Access of the Road Motor Vehicle
Manufacturing Enterprises and Products, which became effective on June 1, 2019 and replaced the Motorcycle Manufacturing Measures
and the Motorcycle Manufacturing Rules. According to the Administration Measures for Access of the Road Motor Vehicle
Manufacturing Enterprises and Products, the authorities will continue to implement a classified access administration of enterprises
engaged in the manufacturing of road motor vehicles and road motor vehicle products, and road motor vehicle design enterprises are
encouraged to cooperate with or consign to licensed road motor vehicle manufacturing enterprises in manufacturing process. We entered
into a manufacturing cooperation agreement with a motorcycle manufacturer with required qualifications to manufacture certain models
classified as electric motorcycles. Besides, Jiangsu Xiaoniu has been listed in the Road Motor Vehicle Manufacturers and Products List
(batch 327) issued by MITT on January 13, 2020 as an enterprise permitted to manufacture motorcycles and we have obtained the World
Manufacturer Identifier (WMI) and Vehicle Identification Number (VIN). See “Item 3. Key Information—D. Risk Factors—Risks
Relating to Our Business—Our products are subject to safety standards and failure to satisfy such mandated standards would have a
material adverse effect on our business and operating results.”
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Regulations on Registration of Electric Bicycles
Pursuant to the Road Traffic Safety Law of the PRC (Revised in 2021), a non-motorized vehicle which ought to be lawfully
registered shall be deemed street-illegal until it has been registered with the local traffic administrative department. In addition, the
categories of such non-motorized vehicles shall be determined by provincial governments in light of their respective actual local situation
and shall consist of technical standards in terms of overall weight, braking performance, overall size and reflectors, which all non-
motorized vehicles should abide by. We have obtained the production license for electric bicycles according to relevant regulations. We
will adjust the technical standards of our e-scooters to be sold at local markets until the technical standards meet local requirements and
our e-scooter is listed on the local catalog which indicates the e-scooters on it are permitted to be lawfully registered.
Pursuant to the Circular on Strengthening the Management of Electric Bicycles, jointly promulgated by the State Administration
for Industry and Commerce, the AQSIQ, the Ministry of Public Security, or the MPS, and the MIIT on March 18, 2011, any non-
compliant vehicle may not be registered as a non-motorized vehicle, which in turn means it shall be deemed street-illegal.
Therefore, some PRC local governments issued restrictive provisions on electric bicycles. Some local governments (such as
Beijing, Shanghai, Anhui province, Jiangsu province, Guangxi province, Zhejiang province and Gansu province) implemented a catalog
management system requiring (i) restricting and prohibiting sales and/or use of electric two-wheeled vehicles that do not meet the
required standards; and/or (ii) end users to register electric two-wheeled vehicles. For example, on October 20, 2013, the Shanghai
Municipal People’s Congress promulgated the Measures for the Management of Non-motorized Vehicles in Shanghai, which stipulates
that any non-motorized vehicle that is sold in Shanghai must be registered with relevant department. Most of our products have obtained
sales approval in Beijing, Shanghai, Anhui province, Jiangsu province, Guangxi province, Zhejiang province, Gansu province and other
major provinces and cities. In addition, we will cooperate with local governments that require us to obtain approval of sales. On the other
hand, several local municipal governments (such as Xiamen, Shenzhen and Dongguan) have promulgated rules and regulations
prohibiting the riding of electric bicycles/electric scooters in specific districts, and also restricting the use of registered electric two-
wheeled vehicles. Due to the limited number of such districts, which are not our major source of revenue, the regulations of prohibiting
and restricting do not have substantial effect on our revenue.
Regulations on Registration of Motorcycles
Pursuant to the Provisions on the Registration of Motor Vehicles of the PRC promulgated on May 27, 2008, amended on
December 17, 2021 and will come into effect on May 1, 2022, the owner of a motor vehicle, including motorcycles, shall apply for
registration of such motor vehicle after obtaining the certificate of qualified motor vehicle safety technical inspection from a local motor
vehicle safety technical inspection institution. On October 18, 2014, the Circular of the Ministry of Industry and Information Technology
and the Ministry of Public Security on Strengthening the Production and Registration Management of Minibuses and Motorcycles was
issued, which reiterates that motorcycles must be registered, and in order to simplify the motorcycle registration procedures in rural
areas, motorcycles may gradually be sold with license, and motorcycle sales enterprises may be entrusted to register motorcycles before
motorcycles are sold.
In recent years, in order to control the number of motor vehicles on the road, certain local governments have issued restrictions
on the issuance of vehicle license plates, but these restrictions generally do not apply to the issuance of license plates for new energy
vehicles, which makes it easier for purchasers of new energy vehicles to obtain automobile license plates. For example, pursuant to the
Implementation Measures on Encouraging Purchase and Use of New Energy Vehicles in Shanghai, local authorities will issue new
automobile license plates to qualified purchasers of new energy vehicles without requiring such qualified purchasers to go through
certain license-plate bidding processes and to pay license-plate purchase fees.
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Regulations on Production Safety,
Pursuant to the Production Safety Law of the PRC, or the Production Safety Law, which took effect on November 1, 2002 and
was amended on August 31, 2014, the entities that are engaged in production and business operation activities must implement national
industrial standards which guarantee the production safety and comply with production safety requirements provided by the laws,
administrative regulations and national or industrial standards. An entity must take effective measures for safety production, maintain
safety facilities, examine the safety production procedures, educate and train employees and take any other measures to ensure the safety
of its employees and the public. An entity or its relevant persons-in-charge which has failed to perform such safety production liabilities
will be required to make amends within a time limit or face administrative penalties. If it fails to amend within the prescribed time limit,
the production and business operation entity may be ordered to suspend business for rectification, and serious violations may result in
criminal liabilities. Our production behaviors are compliant with the Production Safety Law so far.
Regulations on Product Quality
The Product Quality Law of the PRC, or the Product Quality Law, was adopted on February 22, 1993 and amended on July 8,
2000, August 27, 2009 and December 29, 2018. The Product Quality Law applies to anyone who manufactures or sells any product
within the territory of mainland China. It is prohibited from producing or selling counterfeit products in any form, including counterfeit
brands, or providing false information about the product manufacturers. Violation of national or industrial standards may result in civil
liability and administrative penalties such as compensation, fines, suspension of business and confiscation of illegal income, and serious
violations may result in criminal liabilities. We are in compliance with any of provisions of the Product Quality Law.
Under the Application Scope of the First Batch of Products Implementing Mandatory Product Certification Catalogue effective
on July 1, 2002, motorcycles and bicycles with gasoline and other engines were within the product catalogue that must apply the
compulsory product certification. The Administrative Regulations for Compulsory Product Certification was promulgated on July 3,
2009, amended on September 29, 2022, and took effect on November 1, 2022, pursuant to which that several specified products must not
be delivered, sold, imported or used in other business activities until they complete the compulsory product certification and be labeled
with certification mark. According to the Announcement on the Transition Period Arrangement for the Management of Mandatory
Product Certification of Motorcycle Crew Helmets, Electric Blankets and Motorcycle Products, promulgated by the AQSIQ and the
Certification and Accreditation Administration of the PRC on October 11, 2017, motorcycle and bicycle productions must still be under a
license administration. On March 14, 2019, the Opinions of the State Administration for Market Regulation, the MIIT and the Ministry
of Public Security on Intensifying Supervision of the Execution of National Standards for Electric Bicycles, or the Opinions, was
promulgated. The Opinions provides that the market supervision department shall strengthen the management of CCC certification for
electric bicycles, strengthen inspections of certification agencies and manufacture enterprises, and shall only allow vehicles that meet the
Electric Bicycle Standard and obtained CCC certification flowing into the market. We have obtained CCC certification for all of our
current for-sale products, and will try to obtain CCC certification for our future products. See “Item 3. Key Information— D. Risk
Factors—Risks Relating to Our Business— Our products are subject to safety standards and failure to satisfy such mandated standards
would have a material adverse effect on our business and operating results.”
Pursuant to the Civil Code of the PRC, promulgated by the National People’s Congress on May 28, 2020 and became effective
on January 1, 2021, in the event of damages caused to other party due to product defect, the infringed party may seek compensation from
the manufacturer of the products or from the seller of the products and shall have the right to request the manufacturer and the seller to
bear tortious liability such as cessation of infringement, removal of obstruction, elimination of danger, etc.
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Regulations Relating to Product Recall
The State Administration for Market Regulation issued the Interim Provisions on the Administration of Recall of Consumer
Goods on November 21, 2019, which took effect on January 1, 2020. Our products, accordingly, as one kind of customer goods, are
subject to the requirements set out thereunder. Pursuant to the Recall Provisions, if a manufacturer is aware of any potential defect in its
products, or receive such notice from relevant government authorities, it must investigate in a timely manner and report the results of
such investigation to the relevant authorities. Where any defect is found during the investigation, the manufacturer must immediately
cease to manufacture, sell, or import the relevant products and recall such products. We have not received any such notice from
authorities, or initiated, voluntarily or involuntarily, any product recalls in accordance with the Recall Provisions. See “Item 3. Key
Information—D. Risk Factors—Risks Relating to Our Business—We may be compelled to undertake product recalls or take other
actions, which could adversely affect our brand image and results of operations.”
Regulations Relating to Foreign Trade
Pursuant to the Foreign Trade Law of the PRC, promulgated on May 12, 1994 and amended on April 6, 2004, November 7,
2016, and December 30, 2022, respectively, and the Measures for the Record Filing and Registration of Foreign Trade Business
Operators promulgated by MOFCOM on June 25, 2004, effective on July 1, 2004, and amended on August 18, 2016, November 30, 2019
and May 10, 2021, respectively, foreign trade operators engaged in the import and export of goods or the import and export of
technology must register with MOFCOM or its authorized institution. In addition, if an entity imports or exports goods as consignee or
consignor, it shall file with customs according to the Provisions of the People’s Republic of China on the Administration of Recordation
of Customs Declaration Entities, promulgated on November 19, 2021 and came into effect on January 1, 2022. We have made filings
with authorities pursuant to the applicable provisions.
Regulations Relating to Foreign Investment
Pursuant to the Special Administrative Measures for Market Access of Foreign Investment (Negative List) (2021 Edition), or
the 2021 Negative List, jointly issued by the NDRC and the MOFCOM on December 27, 2021 and enforced on January 1, 2022, the
foreign investment related to design, manufacture and sale of electricity bicycles does not fall within the category of industries in which
foreign investment is restricted or prohibited. The 2021 Negative List enumerates the restricted industries and the prohibited industries in
relation to foreign investment, and the industries which do not fall within the 2021 Negative List, shall be administered under the
principle of equal treatment to domestic and foreign investment. On March 15, 2019, the Foreign Investment Law of PRC, or the FIL,
was issued by the National People’s Congress and took effect on January 1, 2020, which also provides that the industries in which
foreign investment is not restricted and prohibited shall be administered under the principle of equal treatment to domestic investment.
On December 26, 2019, the State Council published the FIL Implementation Rules, which took effect on January 1, 2020. Furthermore,
on December 19, 2020, the NDRC and the MOFCOM jointly issued the Measures for Security Review of Foreign Investment, effective
on January 18, 2021, which provides detailed guidance regarding security review of foreign investment that has a potential impact on
national security.
Foreign investment in telecommunications companies in mainland China is governed by the Provisions on Administration of
Foreign-Invested Telecommunications Enterprises, or the Foreign-Invested Telecommunications Enterprises Provisions, which were
promulgated by the State Council on December 11, 2001, and amended on September 10, 2008 and February 6, 2016. The Foreign-
Invested Telecommunications Enterprises Provisions prohibits a foreign investor from holding over 50% of the total equity interest in
any value-added telecommunications service business in mainland China. On March 29, 2022, the State Council published the Decision
of the State Council to Amend and Repeal Certain Administrative Regulations, among which the Foreign-Invested Telecommunications
Enterprises Provisions is further amended. The latest version removes certain requirements for foreign-invested telecommunications
enterprises and came into effect on May 1, 2022. We operate our website www.niu.com and our NIU app through Beijing Niudian and
sell our e-scooters and peripheral products on the website.
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Regulations Relating to Overseas Investment
On December 26, 2017, the NDRC issued the Management Rules for Overseas Investment by Enterprises, or the NDRC Order
11. As defined in the NDRC Order 11, “overseas investment” refers to the investment activities conducted by an enterprise located in the
territory of mainland China, either directly or through an offshore enterprise under its control, by making investment with assets and
equities or providing financing or a guarantee in order to acquire overseas ownership, control, management rights and other related
interests. Furthermore, overseas investment by a Chinese individual through overseas enterprises under his/her control is also subject to
the NDRC Order 11. According to the NDRC Order 11, (i) direct overseas investment by Chinese enterprises or indirect overseas
investment by Chinese enterprises or individuals in sensitive industries or sensitive countries and regions requires prior approval by the
NDRC; (ii) direct overseas investment by Chinese enterprises in non-sensitive industries and non-sensitive countries and regions requires
prior filing with the NDRC; and (iii) indirect overseas investment of over US$300 million by Chinese enterprises or individuals in non-
sensitive industries and non-sensitive countries and regions requires reporting with the NDRC. Uncertainties remain with respect to the
application of the NDRC Order 11. We are not sure if we were to use a portion of the proceeds raised from our financing activities to
fund investments in and acquisitions of complementary business and assets outside of mainland China, such use of U.S. dollars funds
held outside of mainland China would be subject to the NDRC Order 11. There are very few interpretations, implementation guidance or
precedents to follow in practice. We will continue to monitor any new rules, interpretation and guidance promulgated by the NDRC and
communicate with the NDRC and its local branches to seek their opinions, when necessary.
Regulations Relating to Foreign Debt
On January 8, 2003, the NDRC, Ministry of Finance and SAFE promulgated the Interim Provisions on the Management of
Foreign Debts, which was amended on July 26, 2022 and became effective on September 1, 2022, pursuant to which the summation of
the accumulated medium-term and long-term debts borrowed by foreign-invested entities and the balance of short-term debts shall not
exceed the surplus between the total investment in projects approved by the verifying departments and the registered capital, or the
Surplus Limit. Within the range of the Surplus Limit foreign-invested entities may borrow foreign loans at their own will. If the loans
exceed the Surplus Limit, the total investment in projects shall be reexamined by the original examination and approval departments. In
addition, on January 11, 2017, PBOC promulgated the Notice of the People’s Bank of China on Full-coverage Macro-prudent
Management of Cross-border Financing, or PBOC Circular 9, which sets out an upper limit for mainland China entities, including
foreign-invested entities and domestic-invested entities, regarding their foreign debts, or the Financing Limit. Pursuant to PBOC Circular
9, the Financing Limit for entities shall be calculated based on the following formula: the Financing Limit = net assets * cross-border
financing leverage ratio * macro-prudent regulation parameter. As to net assets, entities shall take the net assets value stated in their
respective latest audited financial statement in calculation; the cross-border financing leverage ratio for enterprises is two (2); the macro-
prudent regulation parameter is one (1). The PBOC Circular 9 does not supersede the Interim Provisions on the Management of Foreign
Debts. PBOC Circular 9 stipulates a one-year transitional period, or Transitional Period, from its promulgation date for foreign-invested
entities, during which they could choose the calculation method of foreign debt upper limit based on either (i) the Surplus Limit, or (ii)
the Financing Limit. After the Transition Period, the method applicable to foreign-invested entities shall be determined by the PBOC and
the SAFE separately. On March 11, 2020, the PBOC and the SAFE issued the Notice of Adjusting the Macro-prudent Regulation
Parameter for Full-covered Cross-border Financing, which adjusted the macro-prudent regulation parameter as set forth in the Circular 9
from 1 to 1.25. However, although the Transitional Period ended on January 10, 2018, as of December 31, 2022, PBOC or SAFE has not
issued any new regulations regarding the application calculation method of foreign debt upper limit for foreign-invested entities. As to
domestic-invested entities, they are only subject to the Financing Limit from the date of promulgation of PBOC Circular 9 regardless of
the Transitional Period. On January 5, 2023, the NDRC issued the Administrative Measures for the Examination and Registration of
Medium and Long-term Foreign Debts of Enterprises, which took effect on February 10, 2023, setting out regulatory standards and
procedures for enterprises when issuing foreign debts that over one year.
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Regulations Relating to Internet Information Security and Privacy Protection
Internet information in mainland China is heavily regulated and restricted as a national security issue. The SCNPC enacted the
Decisions on Maintaining Internet Security in December 2000, as further amended in August 2009, which impose criminal liabilities on
persons or entities that: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive
information; (iii) leak state secrets; (iv) spread false commercial information; or (v) infringe intellectual property rights. The MPS has
promulgated measures that prohibit the use of the internet in ways that would result in the leakage of state secrets or dissemination of
socially destabilizing content. If an internet information service provider violates these measures, the MPS and the local security bureaus
may revoke its operating license and shut down its websites.
Under the Several Provisions on Regulating the Market Order of Internet Information Services issued by the MIIT in December
2011, an Internet information service provider may not collect any user’s personal information or provide any such information to third
parties without that user’s consent. It must also expressly inform that user of the method, content and purpose of the collection and
processing of such user’s personal information and may only collect such information as necessary for the provision of its services. In
addition, pursuant to the Decision on Strengthening the Protection of Online Information issued by the SCNPC in December 2012 and
the Order for the Protection of Telecommunication and Internet User’s Personal Information issued by the MITT in July 2013, any
collection and use of a user’s personal information must be subject to the consent of the user, abide by the principles of legality,
rationality and necessity and be within the specified purposes, methods and scopes.
In November 2016, the SCNPC promulgated the Network Security Law of the PRC, or the Network Security Law, which took
effect on June 1, 2017. Pursuant to the Network Security Law, a network operator, including, without limitation, Internet information
service providers, must take technical measures and other necessary measures in accordance with the provisions of applicable laws and
regulations as well as the compulsory requirements of the national and industrial standards to safeguard the safe and stable operation of
networks, effectively respond to network security incidents, prevent illegal and criminal activities and maintain the integrity,
confidentiality and availability of network data. Any violation of the provisions and requirements under the Network Security Law may
subject an Internet service provider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancelation of filings,
closedown of websites or even criminal liabilities. On December 28, 2021, the Cyberspace Administration of China, together with other
twelve government authorities, jointly released the Cybersecurity Review Measures, which came into effect on February 15, 2022. The
Measures require operators of critical information infrastructure to go through cybersecurity review when purchasing any network
products and services with a potential impact on national security.
In November 2019, the Secretariat of the Cyberspace Administration of China, the General Office of the MITT, the General
Office of the Ministry of Public Security and the State Administration for Market Regulation jointly promulgated the Circular on Issuing
the Methods for Identifying Unlawful Collection and Use of Personal Information of Applications (“App(s)”), which defines actions that
may be regarded as violating the Network Security Law and other personal information protection related regulations, including, among
other things, failure to publicize the rules for collection and use of personal information, failure to expressly state the purpose, manner
and scope of collecting and using personal information, collection and use of personal information without consent of users, provision of
personal information to others without consent, and failure to provide the function of deleting or correcting personal information as
required by law. Furthermore, on August 20, 2021, the SCNPC promulgated the Personal Information Protection Law, which came into
effect on November 1, 2021. The Personal Information Protection Law integrates the scattered rules with respect to personal information
rights and privacy protection and aims at protecting the personal information rights and interests, regulating the processing of personal
information and promoting the reasonable use of personal information. Personal information, as defined in the Personal Information
Protection Law, refers to information related to identified or identifiable natural persons and recorded by electronic or other means, but
excluding the anonymized information. The Personal Information Protection law provides the circumstances under which a personal
information processor could process personal information, which include but not limited to, where the consent of the individual
concerned is obtained and where it is necessary for the conclusion or performance of a contract to which the individual is a contractual
party. It also stipulates certain specific rules with respect to the obligations of a personal information processor, such as to inform the
purpose and method of processing to the individuals, and the obligation of the third party who has access to the personal information by
way of co-processing or delegation.
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The Data Security Law of the People’s Republic of China, or the Data Security Law, was passed on June 10, 2021 and came into
effect on September 1, 2021. The Data Security Law requires the data processor to establish and improve a whole-process data security
management system, organize data security education and training, and take corresponding technical measures and other necessary
measures to safeguard data security. In conducting data processing activities by using the Internet or any other information network, the
data processor shall perform the above data security protection obligations on the basis of the hierarchical cybersecurity protection
system. Any violation of the provisions and requirements under the Data Security Law may subject a data processor to rectifications,
warnings, fines, suspension of the related business, revocation of licenses or even criminal liabilities.
In addition, on November 14, 2021, the CAC released the Regulations on the Network Data Security, or the Draft Regulations,
for public comments, which stipulates, among others, that a prior cybersecurity review is required for listing abroad of data processors
which process over one million users’ personal information, and the listing of data processors in Hong Kong which affects or may affect
national security. On December 28, 2021, the CAC and other twelve PRC regulatory authorities jointly revised and promulgated the
Measures for Cybersecurity Review, or the Cybersecurity Review Measures, which came into effect on February 15, 2022. Pursuant to
the Cybersecurity Review Measures, besides the procurement of network products and services by critical information infrastructure
operators, any data processing activities by network platform operators that affects or may affect national security shall be subject to the
cybersecurity review as well. In accordance with the Cybersecurity Review Measures, operators mastering personal information of more
than one million users must apply to the Cybersecurity Review Office for cybersecurity review when they seek for listing in a foreign
country. However, the Cybersecurity Review Measures and the Draft Regulations remain unclear on whether the relevant requirements
will be applicable to companies that have been listed in the United States.
Furthermore, the Data Export Measures were released by the CAC on July 7, 2022 and came into effect on September 1, 2022.
The Data Export Measures require that any data processor which processes or exports personal information exceeding certain volume
threshold under such measures shall apply for security assessment by the CAC before transferring any personal information abroad. The
security assessment requirement also applies to any transfer of important data outside of China.
In December 2022, the MIIT released the Administrative Measures for Data Security in the Field of Industry and Information
Technology (for Trial Implementation), which came into effect on January 1, 2023. The Administrative Measures for Data Security in the
Field of Industry and Information Technology (for Trial Implementation) requires the data processor in the field of industry and
information technology to review data on a periodical basis, identify important data and core data in accordance with the relevant
standards and specifications, and form its specific catalogue.
On February 22, 2023, the CAC issued the Measures for the Standard Contract for the Outbound Transfer of Personal
Information, or the Standard Contract Measures, which will take effect on June 1, 2023. The Standard Contract Measures apply to the
provision of personal information to overseas recipients through standard contract and set out detailed criteria relating to the formality
and terms of such contracts. The Standard Contract Measures also requires the personal information processor to file such contract with
relevant authorities within 10 business days after the contract is effective.
Regulations Relating to Value-Added Telecommunication Services
Pursuant to the Telecommunications Regulations of the PRC, or the Telecommunications Regulations, promulgated by the State
Council on September 25, 2000 and amended on July 29, 2014 and February 6, 2016, telecommunication service providers must obtain
an operating license prior to the commencement operations. The Telecommunications Regulations categorize telecommunication services
into basic telecommunication services and value-added telecommunication services. According to the Catalog of Telecommunications
Business, attached to the Telecommunications Regulations, information services provided via fixed network, mobile network and
Internet fall within value-added telecommunication services.
In July 2017, the MIIT promulgated the Administrative Measures on Telecommunications Business Operating Licenses. Under
these regulations, a commercial operator of value-added telecommunication services must first obtain a license for value-added
telecommunications business, or ICP License, from the MITT or its provincial level counterparts. The VIE, Beijing Niudian, the main
operating entity which sells our products to third-parties, has obtained an ICP License for information service business.
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Regulations Relating to Mobile Internet Applications Information Services
In addition to the Telecommunications Regulations and other regulations above, mobile app information service providers are
especially regulated by the Administrative Provisions on Mobile Internet Applications Information Services, or the App Provisions,
which were promulgated by the Cyberspace Administration of China on June 28, 2016 and amended in 2022. The latest version became
effective on August 1, 2022.
Under the App Provisions, mobile app information service providers are required to obtain relevant qualifications prescribed by
laws and regulations, take responsibility for the supervision and administration of mobile app information as required by laws and
regulations and implement the information security management responsibilities.
We have implemented the necessary programs in our mobile app, including programs for data collection notification and for
preventing data breach, damage and loss, to make sure the collection, protection and preservation of user information are in compliance
with the App Provisions in all material aspects. See “Item 3. Key Information— D. Risk Factors—Risks Relating to Our Business—We
retain certain personal information about our users and may be subject to various privacy and consumer protection laws.”
Regulations Relating to Intellectual Property Rights
Mainland China has adopted comprehensive legislation governing intellectual property rights, including copyrights, patents,
trademarks and domain names.
Regulations on Copyright
Pursuant to the Copyright Law of the PRC revised by the Standing Committee of the National People’s Congress on November
11, 2020 and came into effect on June 1, 2021, copyrights include personal rights such as the right of publication and that of attribution
as well as property rights such as the right of production and that of distribution. Reproducing, distributing, performing, projecting,
broadcasting or compiling a work or communicating the same to the public via an information network without permission from the
owner of the copyright therein, unless otherwise provided in the Copyright Law of the PRC, constitutes an infringement of copyright.
The infringer shall, among others, according to the circumstances of the case, undertake to cease the infringement, take remedial action,
offer an apology and pay damages. We have registered our copyright on 27 sets of software codes regarding our BMS and other control
or management systems.
Regulations on Patent
The Patent Law of the PRC promulgated by the Standing Committee of the National People’s Congress and revised on October
17, 2020 which took effect on June 1, 2021, the Detailed Rules for the Implementation of the Patent Law of the PRC (revised in 2010)
promulgated by the State Council provide for patentable inventions, utility models and designs, which must meet three conditions:
novelty, inventiveness and practical applicability. The State Intellectual Property Office under the State Council is responsible for
examining and approving patent applications. The duration of a patent right is respectively 10 years for utility model, 15 years for design,
and 20 years for invention, all of which shall commence from the date of application.
Regulations on Trademark
Pursuant to the Trademark Law of the PRC promulgated by the Standing Committee of the National People’s Congress on
August 23, 1982 and respectively revised on February 22, 1993, October 27, 2001, August 30, 2013 and April 23, 2019, and the
Regulation on the Implementation of the Trademark Law of the PRC (revised in 2014) promulgated by the State Council on August 3,
2002 and revised on April 29, 2014, the right to the exclusive use of a registered trademark is limited to trademarks which have been
approved for registration and to goods for which the use of such trademark has been approved. The period of validity of a registered
trademark is ten years, counted from the day that the registration is approved. According to this law, using a trademark that is identical to
or similar to a registered trademark in connection with the same or similar goods without the authorization of the owner of the registered
trademark constitutes an infringement of the exclusive right to use a registered trademark. The infringer shall, in accordance with the
regulations, undertake to cease the infringement, remedial action, or pay damages. We have submitted several trademark invalidation
applications against certain third-party infringers, which are still under administrative or legal proceedings. See “Item 3. Key Information
— D. Risk Factors—Risks Relating to Our Business—We may need to defend ourselves against patent, trademark or other intellectual
property rights infringement claims, which may be time-consuming and would cause us to incur substantial costs.”
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Regulations on Domain Name
Internet domain name registration and related matters are primarily regulated by the Measures on Administration of Internet
Domain Names promulgated by the MIIT on August 24, 2017 and came into effect on November 1, 2017, and the Implementing Rules of
China ccTLD Registration issued by China Internet Network Information Center on June 18, 2019. Domain name registrations are
handled through domain name service agencies established under the relevant regulations, and the applicants become domain name
holders upon successful registration.
Regulations Relating to Employment
Pursuant to the Labor Law of the PRC, the Labor Contract Law of the PRC, or the Labor Contract Law, and the Implementing
Regulations of the PRC Labor Contract Law, labor relationships between employers and employees must be executed in written form.
Wages may not be lower than the local minimum wage. Employers must establish a system for labor safety and sanitation, strictly abide
by state standards and provide relevant education to their employees. Employees are also required to be able to work in safe and sanitary
conditions.
According to the Social Insurance Law of the PRC, promulgated by the SCNPC and effective from July 1, 2011 and amended
on December 29, 2018, the Regulation of Insurance for Work-Related Injury, the Provisional Measures on Insurance for Maternity of
Employees, the Regulation of Unemployment Insurance, and the Interim Regulation on the Collection and Payment of Social Insurance
Premiums, an employer is required to contribute social insurance for its employees in mainland China, including basic pension insurance,
basic medical insurance, unemployment insurance, maternity insurance and injury insurance. Under the Regulations on the
Administration of Housing Funds, promulgated by the State Council on April 3, 1999 and as amended on March 24, 2002 and March 24,
2019, an employer is required to make contributions to a housing fund for its employees. See “Item 3. Key Information— D. Risk
Factors—Risks Related to Doing Business in China—Increases in labor costs and enforcement of stricter labor laws and regulations of
mainland China may adversely affect our business and our profitability.”
Regulations Relating to Foreign Exchange
Regulations on Foreign Currency Exchange
The SAFE promulgated the Circular on Issues Relating to the Administration of Foreign Exchange of Offshore Investment and
Financing through Special Purpose Vehicles and Round-Tripping Investment by mainland China Resident, or SAFE Circular 37, on July
4, 2014, which replaced the former circular commonly known as “SAFE Circular 75.” SAFE Circular 37 requires mainland China
residents to register with local branches of the SAFE in connection with their direct establishment or indirect control of an offshore
entity, for the purpose of offshore investment and financing, with such mainland China residents’ legally owned assets or equity interests
in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle.” SAFE Circular 37
further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as
increase or decrease of capital contributed by mainland China residents, share transfer or exchange, merger, division or other material
event. In the event that a mainland China shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE
registration, the mainland China subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the
offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be
restricted in its ability to contribute additional capital into its mainland China subsidiaries. Furthermore, failure to comply with the
various SAFE registration requirements described above could result in liability under the laws of mainland China for evasion of foreign
exchange controls.
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Regulations on Stock Incentive Plans
In February 2012, SAFE promulgated the Circular on Foreign Exchange Administration of PRC Residents Participating in
Share Incentive Plans of Offshore Listed Companies, or the Stock Option Rules, replacing the previous rules issued by SAFE in March
2007. Under the Stock Option Rules and other relevant rules and regulations, mainland China residents who participate in a stock
incentive plan in an overseas publicly-listed company are required to register with SAFE or its local branches and complete certain other
procedures. Participants of a stock incentive plan who are mainland China residents must retain a qualified mainland China agent, which
could be a mainland China subsidiary of the overseas publicly-listed company or another qualified institution selected by the mainland
China subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its
participants. The participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of
stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the mainland China agent is
required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive
plan, the mainland China agent or the overseas entrusted institution or other material changes. The mainland China agents must, on
behalf of the mainland China residents who have the right to exercise the employee share options, apply to SAFE or its local branches for
an annual quota for the payment of foreign currencies in connection with the mainland China residents’ exercise of the employee share
options. The foreign exchange proceeds received by mainland China residents from the sale of shares under the stock incentive plans
granted and dividends distributed by overseas listed companies must be remitted into the bank accounts in mainland China opened by
mainland China agents before distribution to such mainland China residents. In addition, the Circular of the State Administration of
Foreign Exchange on Issues concerning Foreign Exchange Administration over the Overseas Investment and Financing and Round-trip
Investment by Domestic Residents via Special Purpose Vehicles promulgated on July 4, 2014 provides that mainland China residents
who participate in a share incentive plan of an overseas unlisted special purpose company must register with SAFE or its local branches
before exercising such rights.
Regulations Relating to Dividend Distribution
The principal regulations governing distribution of dividends of foreign-invested enterprises include the PRC Company Law,
the FIL, and the FIL Implementation Rules. Under these laws and regulations, foreign-invested enterprises in mainland China may pay
dividends only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and
regulations. In addition, foreign-invested enterprises in mainland China are required to allocate 10% of their respective after-tax profits
as the statutory common reserve when it distributes its after-tax profit for the current fiscal year, if any, to fund certain reserve funds until
these reserves have reached 50% of the registered capital of the enterprises.
Regulations Relating to Taxation
Regulations on Enterprise Income Tax
Under the Enterprise Income Tax Law of the PRC, or the EIT Law, which was promulgated on March 16, 2007, amended on
February 24, 2017 and December 29, 2018, and its implementing rules, enterprises are classified as resident enterprises and non-resident
enterprises. Mainland China resident enterprises typically pay enterprise income tax at the rate of 25%, while non-mainland China
resident enterprises without any branches in mainland China pay an enterprise income tax in connection with their income from mainland
China at the tax rate of 10%. An enterprise established outside of mainland China but with its “de facto management body” located
within mainland China is considered a “resident enterprise,” which means that it is treated in a manner similar to a mainland China
domestic enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define “de facto management body” as a
managing body that in practice exercises “substantial and overall management and control over the production and operations, personnel,
accounting and properties” of the enterprise.
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The EIT Law and the implementation rules provide that an income tax rate of 10% will normally be applicable to dividends
payable to investors that are “non-resident enterprises,” and gains derived by such investors, which (i) do not have an establishment or
place of business in mainland China or (ii) have an establishment or place of business in mainland China, but the relevant income is not
effectively connected with the establishment or place of business to the extent that such dividends and gains are derived from sources
within mainland China. Such income tax on the dividends may be reduced pursuant to a tax treaty between mainland China and other
jurisdictions. Pursuant to the Double Taxation Avoidance and the Tax Evasion Arrangement, and other applicable laws of mainland
China, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and
requirements under the Double Taxation Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends
the Hong Kong resident enterprise receives from a mainland China resident enterprise may be reduced to 5% upon receiving approval
from in-charge tax authority. However, based on the Circular on Certain Issues with Respect to the Enforcement of Dividend Provisions
in Tax Treaties issued on February 20, 2009 by SAT, if the relevant PRC tax authorities determine, in their discretion, that a company
benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may
adjust the preferential tax treatment. According to Announcement of the State Administration of Taxation on Issues Concerning the
Recognition of Beneficial Owners in Entrusted Investments, effective on June 1, 2014, non-residents may be recognized as “beneficial
owners” and enjoy the treaty benefits for the income derived from mainland China from certain investments. According to the
Announcement of the State Administration of Taxation on Issues concerning the “Beneficial Owner” in Tax Treaties, which became
effective in April 2018, a resident enterprise is determined as a “beneficial owner” that can apply for a low tax rate under tax treaties
based on an overall assessment of several factors. Furthermore, the Administrative Measures for Non-Resident Taxpayers to Enjoy
Treatments under Tax Treaties, which became effective on January 1, 2020, requires non-resident enterprises to determine whether they
are qualified to enjoy the preferential tax treatment under the tax treaties and file relevant report and materials with the tax authorities.
We may be classified as mainland China resident tax payers. See “Item 3. Key Information— D. Risk Factors—Risks Related to Doing
Business in China—If we are classified as a mainland China resident enterprise for mainland China income tax purposes, such
classification could result in unfavorable tax consequences to us and our non-mainland China shareholders or ADS holders.”
Regulations on Value-Added Tax
Pursuant to the Provisional Regulation of the PRC on Value-Added Tax issued by the State Council, effective on January 1,
1994, which was amended on November 10, 2008, February 6, 2016 and on November 19, 2017, or the Provisional Regulation, and its
Implementing Rules, all entities and individuals that are engaged in the sale of goods, the provision of processing, repairs and installation
services and the importation of goods in mainland China are required to pay a valued-added tax, or VAT. According to the Provisional
Regulation, gross proceeds from sales and importation of goods and provision of services are generally subject to a VAT rate of 17% with
exceptions for certain categories of goods that are taxed at a VAT rate of 11%. On April 4, 2018, the Circular of the Ministry of Finance
and the SAT on Adjusting Value-Added Tax Rates was promulgated, which provides that effective from the date of May 1, 2018, gross
proceeds from sales and importation of goods and provision of services are generally subject to a VAT rate of 16%, with exceptions for
certain categories of goods that are taxed at a VAT rate of 10%. On March 20, 2019, the Announcement on Relevant Policies for
Deepening Value-Added Tax Reform was jointly promulgated the Ministry of Finance, the SAT and the General Administration of
Customs, which further provides that effective from the date of April 1, 2019, the VAT rate of gross proceeds from sales and importation
of goods and provision of services shall be adjusted from 16% to 13%, with the VAT rate of certain categories of goods shall be adjusted
from 10% to 9%. In addition, under the Provisional Regulation, the input VAT for the purchase of fixed assets is deductible from the
output VAT, except for goods or services that are used in non-VAT taxable items, VAT exempted items and welfare activities, or for
personal consumption.
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C.
Organizational Structure
The following diagram illustrates our corporate structure, including our principal subsidiaries, the VIE and its principal
subsidiaries, as of the date of this annual report:
(1) Token Yilin Hu, Yi’ nan Li, Yuqin Zhang and Changlong Sheng each holds 89.74%, 5.00%, 2.63% and 2.63% of the equity interest
in Beijing Niudian, respectively. All of the shareholders of Beijing Niudian are beneficial owners of the shares of our company. Mr.
Token Yilin Hu is also a director of our company.
Contractual Arrangements with the VIE
The following is a summary of the currently effective contractual arrangements relating to Beijing Niudian.
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Agreements that allow us to conduct the business operations of the VIE
Powers of Attorney. Each of the shareholders of Beijing Niudian has executed a power of attorney to irrevocably authorize our
company to act as his or her attorney-in-fact to exercise all of his or her rights as a shareholder of Beijing Niudian, including, but not
limited to, the right to convene and attend shareholders’ meetings, vote on any resolution that requires a shareholder vote, such as the
appointment and removal of directors, supervisors and officers, as well as the sale, transfer and disposal of all or part of the equity
interests owned by such shareholder. The powers of attorney will remain effective, as long as the shareholders of Beijing Niudian remain
as registered shareholders of Beijing Niudian, unless otherwise instructed by our company.
Second Amended and Restated Equity Pledge Agreement. Pursuant to the second amended and restated equity pledge
agreement, dated February 27, 2020, among our WFOE, Beijing Niudian and each of the shareholders of Beijing Niudian, the
shareholders of Beijing Niudian have pledged the 100% equity interests in Beijing Niudian to our WFOE to guarantee performance by
the shareholders of their obligations under the second amended and restated exclusive option agreement and powers of attorney, as well
as the performance by Beijing Niudian of its obligations under the amended and restated exclusive business cooperation agreement and
the second amended and restated exclusive option agreement. In the event of a breach by Beijing Niudian or any of its shareholders of
contractual obligations under the second amended and restated equity pledge agreement, our WFOE, as pledgee, will have the right to
dispose of the pledged equity interests in Beijing Niudian and will have priority in receiving the proceeds from such disposal. The
shareholders of Beijing Niudian also undertake that, without the prior written consent of our WFOE, they will not dispose of, create or
allow any encumbrance on the pledged equity interests. Beijing Niudian undertakes that, without the prior written consent of our WFOE,
it will not assist or allow any encumbrance to be created on the pledged equity interests. In February 2021, we completed the registration
of the equity pledge under the second amended and restated equity pledge agreement with the relevant local office of the State
Administration of Market Regulation in accordance with the PRC Property Rights Law.
Spousal Consent Letters. The spouses of the shareholders of Beijing Niudian have each signed a spousal consent letter
agreeing that the equity interests in Beijing Niudian held by and registered under the name of the respective shareholders will be
disposed of pursuant to the VIE Agreements. These spouses agreed not to assert any rights over the equity interest in Beijing Niudian
held by their spouses.
Agreements that allow us to receive economic benefits from the VIE
Amended and Restated Exclusive Business Cooperation Agreements. Pursuant to the amended and restated exclusive business
cooperation agreement, dated July 20, 2018, between our WFOE and Beijing Niudian, our WFOE has the exclusive right to provide
Beijing Niudian with operational supports as well as consulting and technical services required by Beijing Niudian’s business. Without
our WFOE’s prior written consent, Beijing Niudian may not accept any services subject to this agreement from any third party. Beijing
Niudian agrees to pay our WFOE a monthly service fee at an amount that is equal to 100% of its net profits or an amount adjusted by our
WFOE in its sole discretion for the relevant month, which should be paid within seven business days upon receipt of invoice from our
WFOE. Our WFOE has the exclusive ownership of all the intellectual property rights created as a result of the performance of the
amended and restated exclusive business cooperation agreement to the extent permitted by applicable laws of mainland China. To
guarantee Beijing Niudian’s performance of its obligations thereunder, the shareholders of Beijing Niudian shall pledge all of their equity
interests in Beijing Niudian to our WFOE pursuant to the second amended and restated equity pledge agreement. The amended and
restated exclusive business cooperation agreement will remain effective for a term equal to Beijing Niudian’s operating period, unless
otherwise terminated by our WFOE in writing or in accordance with applicable laws of mainland China.
In June 2018, our WFOE and Jiangsu Xiaoniu entered into the amended and restated exclusive business cooperation agreement,
which contains terms substantially similar to the amended and restated exclusive business cooperation agreement between our WFOE
and Beijing Niudian described above.
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Agreements that provide us with the option to purchase the equity interests in and assets of the VIE
Second Amended and Restated Exclusive Option Agreements. Pursuant to the second amended and restated exclusive option
agreement, dated February 27, 2020, among our company, our WFOE, Beijing Niudian and each of the shareholders of Beijing Niudian
has irrevocably granted our company an exclusive option to purchase all or part of his or her equity interests in Beijing Niudian. Our
company or our designated person may exercise such options at the price of RMB100 or the lowest price permitted under applicable laws
of mainland China. The shareholders of Beijing Niudian undertake that, without our company’s prior written consent, they will not,
among other things, (i) create any pledge or encumbrance on their equity interests in Beijing Niudian, (ii) transfer or otherwise dispose of
their equity interests in Beijing Niudian, (iii) change Beijing Niudian’s registered capital, (iv) amend Beijing Niudian’s articles of
association, (v) dispose of Beijing Niudian’s material assets or enter into any material contract with a value of over RMB100,000 (except
in the ordinary course of business), or (vi) merge Beijing Niudian with any other entity. In addition, Beijing Niudian undertakes that,
without our company’s prior written consent, it will not, among other things, create any pledge or encumbrance on any of its assets, or
transfer or otherwise dispose of its material assets (except in the ordinary course of business). The second amended and restated
exclusive option agreement will remain effective until all equity interests in and all the assets of Beijing Niudian have been transferred to
our company or our designated person.
In the opinion of DaHui Lawyers, our PRC legal counsel:
● the ownership structures of the VIE in mainland China and our WFOE, are not in violation of applicable laws and
regulations of mainland China currently in effect; and
● the contractual arrangements between our company, our WFOE, the VIE and its shareholders governed by the laws of
mainland China are valid, binding and enforceable, and will not result in any violation of applicable laws and regulations of
mainland China currently in effect.
However, our PRC legal counsel has also advised us that there are substantial uncertainties regarding the interpretation and
application of current and future laws, regulations and rules of mainland China. Accordingly, the PRC regulatory authorities may take a
view that is contrary to the opinion of our PRC legal counsel. It is uncertain whether any new laws or regulations of mainland China
relating to variable interest entity structures will be adopted or if adopted, what they would provide. If we or any of the VIE are found to
be in violation of any existing or future laws or regulations of mainland China, or fail to obtain or maintain any of the required permits or
approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures.
We have been further advised by our PRC legal counsel that if the PRC government finds that the agreements in connection with the VIE
structure do not comply with the laws of mainland China, we could be subject to severe penalties, including being prohibited from
continuing operations. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure—If the PRC
government finds that the agreements that establish the structure for operating some of our operations in mainland China do not comply
with the regulations of mainland China relating to the relevant industries, or if these regulations or the interpretation of existing
regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our
interests in those operations” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—
Uncertainties in the interpretation and enforcement of the laws and regulations of mainland China could limit the legal protections
available to you and us.”
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D.
Property, Plants and Equipment
Our headquarters is located in Beijing, China, where we lease and occupy our office space with an aggregate floor area of
approximately 1,400 square meters. Our Niu Innovation Lab is located in Shanghai, China, where we lease and occupy our office space
with an aggregate floor area of approximately 1,700 square meters. Our manufacturing facility and after sales services facilities are in
Changzhou, China, where we have both owned and leased facilities with a combined building area of approximately 123,500 square
meters. In May 2020, we made prepayment of RMB39.4 million in addition to prepayment of RMB2 million in 2019 to acquire land use
rights of a piece of land with total area of 61,148 square meters. In January 2021, we obtained the land use rights certificate. We built a
new manufacturing facility on this piece of land to expand the production capacity in order to meet the expected increasing demand of
our e-scooters. Construction of the new facility was completed in August 2021 and we have commenced production from September
2021.
The following table sets forth the location, approximate size and primary use of facilities that we own or we lease, as of
December 31, 2022:
Our Own Facility
Approximate Size
(Building) in
Square Meters
Primary Use
111,467 Manufacturing and Maintenance Facility
Approximate Size
(Building) in
Square Meters
Primary Use
1,394 Office
1,720 Office
Lease Expiration Date
December 31, 2024
April 30, 2026
12,000 Manufacturing Facility
December 31, 2024
Location
Changzhou
Location
Beijing
Shanghai
Changzhou
Item 4A.Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects
The following discussion of our financial condition and results of operations is based upon, and should be read in conjunction
with, our audited consolidated financial statements and the related notes included in this annual report on Form 20-F. This report contains
forward-looking statements. See “Forward-Looking Information.” In evaluating our business, you should carefully consider the
information provided under the caption “Item 3. Key Information— D. Risk Factors” in this annual report on Form 20-F. We caution you
that our businesses and financial performance are subject to substantial risks and uncertainties.
A.
Operating Results
Overview
We currently design, manufacture and sell high-performance motorcycles, scooters, kick-scooters and e-bikes. We have a
diversified product portfolio that caters to the various demands of our users and addresses different urban travel scenarios. Currently, we
offer eight product series across a number of different vehicle types. Our product portfolio comprises our (i) six electric scooter and
motorcycle series, RQi, NQi, MQi, SQi, UQi, and Gova, (ii) one kick-scooter series, KQi, (iii) one e-bike series, BQi. We have adopted
an omnichannel retail model, integrating the offline and online channels, to sell our products and provide services. We sold 831,593
units, including our e-motorcycles, e-scooters, kick-scooters and e-bikes, in 2022. The number of units sold in China market and
international markets were 710,540 and 121,053, respectively. We sell and service our products through a unique “city partner” system in
China, which consisted of 338 city partners with 3,102 franchised stores in 239 cities in China, and 53 distributors in 52 countries
overseas as of December 31, 2022, as well as on our own online store and third-party e-commerce platforms.
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Our brand “NIU,” representing style, freedom and technology, has inspired many followers and also enabled us to build a loyal
user base. We also offer the NIU app as an integral part of the user experience. Capitalizing on our premium brand, we have also been
able to sell lifestyle accessories, which are well received by customers.
We currently generate a majority of our revenues from sales of e-scooters to our distributors offline or to individual consumers
online. We also generate revenues by selling accessories and spare parts and providing mobile app and other services.
Our revenues were RMB3,168.6 million (US$459.4 million) in 2022, representing a decrease of 14.5% from RMB3,704.5
million in 2021.
Key Factors Affecting Our Results of Operations
Our results of operations and financial condition are affected by the general factors driving China’s electric two-wheeled
vehicles industry, including, among others, China’s overall economic growth, the increase in per capita disposable income, the expansion
of urbanization, the growth in consumer spending and consumption upgrades, the competitive environment, governmental policies and
initiatives towards electric two-wheeled vehicles, as well as the general factors affecting the electric two-wheeled vehicles industry in
overseas markets. Unfavorable changes in any of these general industry conditions could negatively affect demand for our products and
materially and adversely affect our results of operations.
Our results of operations and financial condition have been affected by the spread of COVID-19 since the first quarter of 2020.
The COVID-19 pandemic has impact on electric two-wheeled vehicles in general and the production and delivery of vehicles of our
company. Our operations experienced disruptions in 2020, 2021 and 2022, such as temporary closure of our offline stores and/or those of
our distributors and suspension of our operations, resulting in a reduction of sales volume, which affected our business, financial
condition, results of operations and cash flow.
There has been an easing of the travel restrictions and quarantine requirements related to COVID-19 in China since December
2022. However, there remains uncertainty as to the future impact of the virus. The extent to which the pandemic impacts our results of
operations going forward will depend on future developments which are highly uncertain and unpredictable, including the frequency,
duration and extent of outbreaks of COVID-19, the appearance of new variants with different characteristics, the success or failure of
efforts to contain or treat cases, and future actions we or the authorities may take in response to these developments. In addition, our
financial position, results of operations and cash flows could be adversely affected to the extent that the pandemic harms the Chinese
economy in general. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Business—Our financial and operating
performance may be adversely affected by epidemics or other public health crises.”
While our business is influenced by these general factors, our results of operations are more directly affected by company
specific factors, including the following major factors:
● our ability to increase e-scooter sales volume;
● our ability to develop and sell more accessories and spare parts and services;
● our ability to manage our supply chain and manufacturing;
● our ability to enhance our operational efficiency; and
● our ability to expand into international markets.
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Our ability to increase e-scooter sales volume
Our results of operations depend significantly on our ability to increase sales volume of our e-scooter. Our revenues increased
by 51.6% from RMB2,444.3 million in 2020 to RMB3,704.5 million in 2021, but decreased by 14.5% to RMB3,168.6 million
(US$459.4 million) in 2022. The number of e-scooters sold increased by 72.5% from 601,652 in 2020 to 1,037,914 in 2021, but
decreased by 19.9% to 831,593 in 2022. We experienced external challenges from COVID-19-related lockdowns and higher lithium-ion
battery costs in 2022, which affected the retail traffic and our results of operations, COVID-19 resurgence across the country also
disrupted manufacturing, logistics and offline store operations. In light of the volatile environment, we have been committed to the
strategy of focusing on premium and mid-end segments since mid-2022. Although we still face uncertainties and pressures, we are
confident that our domestic sales will return to the growth track in 2023 with the launches of our new products. The following table
shows the number of e-scooters we sold in the years presented:
NQi Series1
MQi Series
UQi Series
Gova Series
KQi Series
Others2
Total
2020
For the Year ended December 31,
2021
2022
Units
103,345
136,032
193,718
168,537
—
20
601,652
%
17.2
22.6
32.2
28.0
—
0.0
100.0
Units
100,111
106,914
180,491
634,853
15,413
132
1,037,914
%
9.7
10.3
17.4
61.1
1.5
0.0
100.0
Units
55,161
41,906
208,360
423,582
102,466
118
831,593
%
6.7
5.0
25.1
50.9
12.3
0.0
100.0
Note:
1. Number of e-scooters sold including SQi series.
2. Others include BQi series, Niu Aero Sports Bicycles and power-assist e-bike EUB-01 launched in previous years. As of the date of
this annual report, we have not officially commenced the delivery of ROi series.
Our ability to increase e-scooters sales volume depends on our ability to innovate in design and technology and offer e-scooter
products that meet our users’ demand. We have a diversified product portfolio that caters to the various demands of our users and
addresses different urban travel scenarios. Currently, we offer eight product series across a number of different vehicle types. Our product
portfolio comprises our (i) six electric scooter and motorcycle series, RQi, NQi, MQi, SQi, UQi, and Gova, (ii) one kick-scooter series,
KQi, (iii) one e-bike series, BQi. We have launched two or more series or models each year since 2018 and plan to continue the practice
in the near and medium term, aiming to cover the full spectrum of the urban mobility solutions. Moreover, our ability to increase the
sales volume also depends on our ability to continually enhance our brand to attract users and purchases, as well as our ability to
successfully execute our omnichannel retail model and expand our sales network both domestically and globally.
Our ability to develop and sell more accessories and spare parts and services
Our results of operations are affected by our ability to develop and sell more accessories and spare parts. Leveraging our strong
lifestyle brand, we have been able to generate revenues from selling accessories and spare parts. Revenues generated from selling
accessories and spare parts represented 10.6%, 10.7% and 7.6% of our net revenues in 2020, 2021 and 2022, respectively. We will
continue to enhance our brand and capitalize on our premium brand to develop and sell more accessories to capture more business
opportunities.
Our results of operations are also affected by our ability to sell more services. We generate revenue from the NIU app by
providing subscription-based mobile app services. Users will need to subscribe for the mobile app service by paying a fee after an initial
period of one or two years. Revenues generated from providing services 1.7%, 1.5% and 2.3% of our revenues in 2020, 2021 and 2022,
respectively. We will continue to further enhance the connectivity and other smart functionalities of our e-scooters and the NIU app and
improve the user experience. This not only provides us with additional revenue streams but also improves our gross margin.
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Our ability to manage our supply chain and manufacturing
Material and manufacturing costs of our e-scooters have historically accounted for a majority of our cost of revenues. Our future
profitability is significantly dependent on our ability to control those costs as a percentage of our revenues, which in turn depends on our
ability to effectively manage our supply chain and manufacturing process. Raw materials and components used in the production of our
e-scooters are sourced from domestic suppliers as well as international suppliers, and their prices are dependent on various factors in
addition to supply and demand. We generally engage multiple suppliers for the key components to minimize the dependency on any
single supplier. We will continue to collaborate with our suppliers to manage the cost, capacity and quality of the raw materials and
components. As our business grows in scale, we have obtained more bargaining power and hence more favorable terms from suppliers,
including pricing terms. Our gross margin remained stable at 22.9%, 21.9% and 21.1% in 2020, 2021 and 2022, respectively, despite the
impact from COVID-19, mainly due to the change in product mix as a result of the launch of various new products. Our ability to control
cost of products sold also depends on our successful adoption of automatic and intelligent manufacturing equipment and procedures, and
effective utilization of our platform-based engineering system, through which designs of new models may be easily adaptable to our
existing production lines.
Our ability to enhance our operational efficiency
Our ability to achieve profitability is dependent on our ability to further improve our operational efficiency and reduce the total
operating expenses as a percentage of our revenues. Excluding share-based compensation expense, selling and marketing expenses have
historically represented the largest portion of our total operating expenses. The advertising and promotion expenses, consisting primarily
of online and offline advertisements, are event-driven, and tend to be higher when we launch new products. Our selling and marketing
expenses as a percentage of our revenues was 8.2%, 9.0% and 13.9% in 2020, 2021 and 2022, respectively. The increase of our selling
and marketing expenses as a percentage of our revenues in 2022 was mainly due to the growth of international sales, especially kick-
scooters, and the increase in depreciation and amortization expense as a result of opening new franchised stores.
Our ability to lower our selling and marketing expenses as a percentage of revenues depends on our ability to manage our
branding and promotion efforts, and improve selling and marketing efficiency. We have adopted an omnichannel retail model, integrating
the offline and online channels, to sell our products and provide services. In addition to online channels, we sell and service our products
through distribution channels, which consisted of 338 city partners with 3,102 franchised stores in 239 cities in China and 53 distributors
in 52 countries overseas as of December 31, 2022. These distributors promote our brand and market our products and services at their
own cost. We will continue to expand and leverage our sales network to enhance our brand and improve sales efficiency. In addition, as
our business grows, we expect to achieve greater operating leverage, increase the productivity of our personnel, and obtain more
favorable terms from our suppliers.
Our ability to expand to international markets
We have experienced significant growth in our sales in international markets. As of December 31, 2022, we sold our smart e-
scooters through 53 distributors in 52 countries overseas. In 2020, 2021 and 2022, 16.6%, 14.7% and 18.5% of our revenues were
derived from sales in overseas markets. We believe that our well-recognized NIU brand, together with our innovative design and
continual expansion of product offerings, position us favorably to capture the enormous growth potential in the global market, and we
will enter into selected overseas markets that offer identified growth opportunities and favorable government policies. In Europe, the
U.S. and Southeast Asia, we will continue to expand our distribution network, launch new products suitable for local markets, partner
with global leading companies to co-brand premium smart e-scooter models, and are exploring additional business opportunities to drive
the growth beyond retail. We will pursue differentiated international strategies for different overseas markets, such as South America and
India. We believe that our expansion into selected international markets will not only drive our revenue growth but also enhance our
brand awareness.
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Key Components of Results of Operations
Revenues
We generate revenues from sales of e-scooters, sales of accessories and spare parts, and provision of mobile app and other
services. The following table sets forth the break-down of our revenues, in amounts and as percentages of revenues for the years
presented:
Revenues:
E-scooter sales
Accessories and spare parts sales
Service revenues
Total
2020
RMB
%
For the Year Ended December 31,
2021
RMB
RMB
%
(in thousands, except percentage data)
2022
US$
%
2,143,292
258,929
42,108
2,444,329
87.7
10.6
1.7
100.0
3,252,989
397,088
54,460
3,704,537
87.8
10.7
1.5
100.0
2,853,895
242,297
72,405
3,168,597
413,776
35,130
10,498
459,404
90.1
7.6
2.3
100.0
We recognize revenues upon the satisfaction of our performance obligation (upon transfer of control of promised goods or
services to customers) in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or
services, excluding amounts collected on behalf of third parties (for example, value added taxes), sales volume rebates provided to
qualified distributors based on the volume sold to such distributors in a certain period and sales return estimated based on historical
experiences.
E-scooter sales. We generate a majority of our revenues from sales of e-scooters to our distributors offline or directly to
individual consumers online.
We have adopted an omnichannel retail model, integrating the offline and online channels, to sell our e-scooters. In China, we
have a unique “city partner” system, and sell e-scooters to the city partners. City partners are our distributors, who either open and
operate franchised stores or sign up franchised stores, and the franchised stores sell our products and provide services to individual
consumers. In overseas markets, we sell to distributors. We generate revenues by selling e-scooters to our city partners in China and
overseas distributors at a discount to the retail price. In addition, we incentivize them by providing sales volume rebate. We also sell
directly to individual consumers through third-party e-commerce platforms, as well as on our own online store. We treat distributors
offline and individual consumers online as our customers.
Accessories and spare parts sales. We sell proprietary accessories and spare parts to be installed on or used with our e-scooters,
such as rear storage boxes and front baskets. We also offer NIU-branded accessories and general merchandise, such as decorative car
plates, key chains, bicycles and apparel.
Service revenues. Our service revenues primarily relate to our services associated with NIU app, NIU Cover and R&D services
to strategic partner.
● NIU app. We generate revenues from the NIU app by providing subscription-based mobile app services. The subscription
fee for the initial one to two years is included in the retail price of our smart e-scooters, and after the initial period, users
will need to pay a fee to renew the subscription.
● NIU Cover. We facilitate the sale of insurance policies for our e-scooters to individual customers, which are provided by
third-party insurance companies.
● R&D services. We collaborate with a strategic partner for a joint R&D project and we earn revenues from the R&D
services we provided.
In 2020, 2021 and 2022, we generated 83.4%, 85.3% and 81.5% of our revenues from PRC market, respectively, and the rest
from overseas markets.
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We expect our revenues will continue to increase in the foreseeable future as we launch more products, expand sales network
and retail channels, and further expand our business. While sales of e-scooters will continue to contribute a majority of our revenues, we
expect that the revenues generated from selling accessories and spare parts and providing services will increase in absolute amounts in
the foreseeable future.
Cost of revenues
Cost of products sold represents a majority of our cost of revenues, and the other components of cost of revenues include write-
downs of inventory, logistics costs and warranty costs.
Cost of products sold mainly consists of the cost for purchasing raw materials and components, the labor cost and other costs for
manufacturing e-scooters. We purchase raw materials and main components, such as batteries, motors, tires, battery chargers and
controllers, from suppliers and assemble e-scooters in our own production facility.
We expect that our cost of revenues will increase in the foreseeable future as we increase our e-scooter and other products sales
volume and further expand our business.
Gross margin
Our gross margin is mainly affected by the retail price, product mix change, sales volume rebate and the cost of revenue per e-
scooter. The following table shows our gross profit and gross margin for each of the years presented:
Gross profit
Gross margin
Operating expenses
For the Year Ended December 31,
2020
2022
(in thousands, except for percentage data)
2021
RMB
559,149
RMB
812,779
RMB
669,681
US$
97,095
22.9 %
21.9 %
21.1 %
21.1 %
Our operating expenses consist of selling and marketing expenses, research and development expenses, and general and
administrative expenses. The following table sets forth the break-down of our total operating expenses, in amounts and as percentages of
total operating expenses for each of the years presented:
2020
RMB
%
For the Year Ended December 31,
2021
RMB
%
(in thousands except for percentage data)
RMB
2022
US$
Operating expenses:
Selling and marketing expenses
Research and development expenses
General and administrative expenses
Total
200,761
105,335
104,860
410,956
48.9
25.6
25.5
100.0
332,008
135,218
141,799
609,025
54.5
22.2
23.3
100.0
440,409
176,478
158,461
775,348
63,853
25,587
22,975
112,415
%
56.8
22.8
20.4
100.0
Selling and marketing expenses. Our selling and marketing expenses primarily consist of advertising and promotion expenses,
payroll and related expenses for personnel engaged in selling and marketing activities.
The advertising and promotion expenses, consisting primarily of online and offline advertisements. Our advertising and
promotions spending is event-driven, we tend to incur more advertising and promotion expenses when we launch new products.
We expect that our selling and marketing expenses will continue to increase in absolute amounts in the foreseeable future, as we
remain committed to becoming a global urban mobility provider. We will further expand our new e-scooter product portfolio and sales
network and retail channels, and engage in more selling and marketing activities to enhance our brand awareness and attract more
purchases from new and existing customers in different geographic markets.
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Research and development expenses. Our research and development expenses mainly consist of payroll and related costs for
employees involved in researching and developing new products and technologies, expenses associated with the use by these functions of
our facilities and equipment, such as depreciation and rental expenses, and expenses for outsourced engineering. We expect that our
research and development expenses (excluding share-based compensation expenses) will continue to increase in absolute amounts in the
foreseeable future, as we continue our innovation in design and technology and further grow our product portfolio.
General and administrative expenses. Our general and administrative expenses mainly consist of payroll and related costs for
employees engaging in general corporate functions, professional fees, current expected credit losses, foreign currency exchange gains
(losses) and other general corporate expenses, as well as expenses associated with the use by these functions of facilities and equipment,
such as depreciation and rental expenses. As we continue to scale up our business, we expect that our general and administrative
expenses (excluding share-based compensation expenses) will increase in absolute amounts in the foreseeable future, in line with our
global business growth.
Taxation
Cayman Islands
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation
and there is no taxation in the nature of inheritance or estate duty. In addition, the Cayman Islands does not impose withholding tax on
dividend payments.
Hong Kong
Our subsidiary incorporated in Hong Kong, Niu Technologies Group Limited, is subject to 16.5% Hong Kong profit tax on its
taxable income generated from operations in Hong Kong for the years of assessment 2017/2018 and 2019/2020. Commencing from the
year of assessment 2018/2019, the first HK$2 million of profits earned by Niu Technologies Group Limited is taxed at half the current
tax rate (i.e. 8.25)% while the remaining profits continues to be taxed at the existing 16.5% tax rate. Niu Technologies Group Limited is
exempted from the Hong Kong income tax on its foreign-derived income. In addition, payments of dividends from Niu Technologies
Group Limited 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 2020, 2021 or 2022.
Mainland China
Our mainland China subsidiaries, the VIE, and VIE’s subsidiaries are subject to the PRC Enterprise Income Tax Law, or the EIT
Law, and are generally subject to a statutory income tax rate of 25%. Under the PRC Corporate Income Tax Law, preferential tax
treatments will be granted to entities which conduct businesses in certain encouraged sectors and to entities otherwise classified as “High
and New Technology Enterprises” (“HNTE”). Jiangsu Xiaoniu qualified as a HNTE and enjoyed a preferential income tax rate of 15%
for the fiscal year ended December 31, 2021 and 2022. Jiangsu Xiaoniu’s HNTE qualification has been renewed in December 2022 and
set to expire by December 2023.
The EIT law also imposes a withholding income tax of 10% on dividends distributed by a foreign investment enterprise, or FIE,
to its immediate holding company outside of mainland China, if such immediate holding company is considered as a non-resident
enterprise without any establishment or place within mainland China or if the received dividends have no connection with the
establishment or place of such immediate holding company within mainland China, unless such immediate holding company’s
jurisdiction of incorporation has a tax treaty with mainland China that provides for a different withholding arrangement. The Cayman
Islands, where Niu Technologies is incorporated, does not have such tax treaty with mainland China. According to the Double Taxation
Avoidance and the Tax Evasion Arrangement, dividends paid by an FIE in mainland China to its immediate holding company in Hong
Kong will be subject to withholding tax at a rate of no more than 5%, if the immediate holding company owns at least 25% of the equity
interest of the FIE and satisfies all other requirements under the tax arrangement and receives approval from the relevant tax authority.
We did not record any dividend withholding tax, as our mainland China entities have no retained earnings in the periods presented. See
“Item 3. Key Information— D. Risk Factors—Risks Related to Doing Business in China—We may not be able to obtain certain benefits
under relevant tax treaty on dividends paid by our mainland China subsidiaries to us through our Hong Kong subsidiary.”
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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 mainland China be treated as a resident enterprise for mainland China tax purposes and consequently be
subject to the mainland China income tax at the rate of 25% for its global income. The implementing rules of the EIT Law define the
location of the “de facto management body” as “the place where the exercising, in substance, of the overall management and control of
the production and business operation, personnel, accounting, property, etc., of a non-mainland China company is located.” Based on a
review of surrounding facts and circumstances, we do not believe that it is likely that our operations outside of mainland China should be
considered a resident enterprise for mainland China tax purposes. If our holding company in the Cayman Islands or any of our
subsidiaries outside of mainland China were deemed to be a “resident enterprise” under the PRC EIT Law, it would be subject to
enterprise income tax on its worldwide income at a rate of 25%. See “Item 3. Key Information— D. Risk Factors—Risks Related to
Doing Business in China—If we are classified as a mainland China resident enterprise for mainland China income tax purposes, such
classification could result in unfavorable tax consequences to us and our non-mainland China shareholders or ADS holders.”
Results of Operations
The following table sets forth a summary of our consolidated results of operations for the years presented, both in absolute
amount and as a percentage of our net revenues for the years presented. Our business has grown rapidly in recent years. Year-to-year
comparisons of historical results of operations should not be relied upon as indicative of future performance.
Revenues
Cost of revenues(1)
Gross profit
Operating expenses(1)
Selling and marketing expenses
Research and development expenses
General and administrative expenses
Total operating expenses
Government grants
Operating income (loss)
Interest expenses
Interest income
Investment income
Income (loss) before income taxes
Income tax benefit (expense)
Net income (loss)
2020
RMB
%
2,444,329
(1,885,180)
559,149
100.0
(77.1)
22.9
For the Year Ended December 31,
2021
RMB
RMB
%
(in thousands except for percentage data)
3,704,537
(2,891,758)
812,779
3,168,597
(2,498,916)
669,681
100.0
(78.1)
21.9
2022
US$
%
459,404
(362,309)
97,095
100.0
(78.9)
21.1
(200,761)
(105,335)
(104,860)
(410,956)
22,441
170,634
(7,381)
8,787
17,698
189,738
(21,086)
168,652
(8.2)
(4.3)
(4.3)
(16.8)
0.9
7.0
(0.3)
0.4
0.7
7.8
(0.9)
6.9
(332,008)
(135,218)
(141,799)
(609,025)
48,727
252,481
(6,168)
5,376
21,168
272,857
(47,037)
225,820
(9.0)
(3.7)
(3.8)
(16.4)
1.3
6.8
(0.2)
0.1
0.6
7.4
(1.3)
6.1
(440,409)
(176,478)
(158,461)
(775,348)
16,385
(89,282)
(5,716)
12,860
10,918
(71,220)
21,757
(49,463)
(63,853)
(25,587)
(22,975)
(112,415)
2,376
(12,944)
(829)
1,865
1,583
(10,325)
3,154
(7,171)
(13.9)
(5.6)
(5.0)
(24.5)
0.5
(2.8)
(0.2)
0.4
0.3
(2.2)
0.7
(1.6)
(1) Share-based compensation expenses are allocated in cost of revenues and operating expenses items as follows:
Cost of revenues
Selling and marketing expenses
Research and development expenses
General and administrative expenses
Total
2020
RMB
644
9,945
10,918
18,102
39,609
For the Year Ended December 31,
2021
RMB
2022
RMB
US$
(in thousands)
847
13,293
17,061
16,017
47,218
1,225
15,433
22,362
19,199
58,219
178
2,237
3,242
2,784
8,441
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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
Revenues
Our revenues decreased by 14.5% from RMB3,704.5 million in 2021 to RMB3,168.6 million (US$459.4 million) in 2022,
which was primarily due to a decrease in e-scooter sales volume.
The revenues from e-scooter sales decreased by 12.3% from RMB3,253.0 million in 2021 to RMB2,853.9 million (US$413.8
million) in 2022, which was mainly due to a decrease in the sales volume of e-scooters by 19.9% from 1,037,914 in 2021 to 831,593 in
2022. The decrease in the sales volume of e-scooters was driven by the increase in raw materials and the impact of the COVID-19, which
resulted in a decrease in sales in the domestic market.
The revenues per e-scooter increased from RMB3,569.2 in 2021 to RMB3,810.3 (US$552.4) in 2022, mainly due to better
premium product mix and price increase. The respective impact from the change in sales volume of e-scooters and revenues per e-scooter
on our revenues in 2022, as compared to 2021, was RMB736.4 million (calculated by assuming the revenues per e-scooter in 2022 was
the same as that in 2021) and RMB250.2 million (calculated by assuming the sales volume of e-scooters in 2022 was the same as that in
2021).
The revenues from accessory and spare parts sales decreased from RMB397.1 million in 2021 to RMB242.3 million (US$35.1
million) in 2022, mainly due to the battery pack sales reduction from overseas shared mobility operators, and the decrease in the sales
volume of e-scooters in China, with which purchases of accessories and spare parts usually correlate. The service revenues increased
from RMB54.5 million in 2021 to RMB72.4 million (US$10.5 million) in 2022, mainly attributable to the continued growth of our user
base.
Cost of revenues
Our cost of revenues decreased by 13.6% from RMB2,891.8 million in 2021 to RMB2,498.9 million (US$362.3 million) in
2022. The decrease was primarily attributable to a decrease in cost of products from RMB2,826.6 million in 2021 to RMB2,376.8
million (US$344.6 million) in 2022, which was primarily due to a decrease in e-scooter sales volume.
The cost per e-scooter, defined as cost of revenues divided by the number of e-scooters sold in a specified period, increased
from RMB2,786.1 in 2021 to RMB3005.0 (US$435.7) in 2022, which was primarily due to higher raw material costs and product mix
change.
Gross profit
We generated a gross profit of RMB669.7 million (US$97.1 million) in 2022, as compared to a gross profit of RMB812.8
million in 2021. Our gross margin slightly decreased from 21.9% in 2021 to 21.1% in 2022, which was mainly due to higher raw
material cost and change in product mix as a result of the launch of various new products.
Selling and marketing expenses
Our selling and marketing expenses increased by 32.7% from RMB332.0 million in 2021 to RMB440.4 million (US$63.9
million) in 2022. The increase was primarily due to an increase of RMB31.4 million in advertising and promotion expenses, an increase
of RMB41.8 million in depreciation and amortization, an increase of RMB10.2 million in staff cost, an increase of RMB2.1 million in
share-based compensation, an increase of RMB6.3 million in rental expenses and an increase of RMB14.7 million in other selling
expenses. The increase in advertising and promotion expenses was mainly due to increased advertising and marketing activities
especially in international markets. The increase in depreciation and amortization was due to higher depreciation of furniture and
decoration expenditures of the franchised stores as a result of the increased number of stores in China. The increase in staff cost and
share-based compensation was due to an increase in the number of sales staff and additional share incentive grants. The increase in rental
expenses and other selling expenses was due to the growth of kick-scooters sales in overseas market. Excluding advertising and
promotion expenses, our selling and marketing expenses as a percentage of our revenues was 7.8% in 2022, as compared to 4.6% in
2021.
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Research and development expenses
Our research and development expenses increased by 30.5% from RMB135.2 million in 2021 to RMB176.5 million (US$25.6
million) in 2022. The increase was mainly attributable to an increase of RMB22.4 million in staff cost, an increase of RMB5.3 million in
share-based compensation, and an increase of RMB21.0 million in design and testing expenses. The increase in staff cost and share-
based compensation was mainly due to an increase in the number of staff and additional share incentive grants. The increase of design
and testing expenses was due to the research and development of new products, especially in micro-mobility sector. Our research and
development expenses as a percentage of our revenues increased from 3.7% in 2021 to 5.6% in 2022.
General and administrative expenses
Our general and administrative expenses increased by 11.8% from RMB141.8 million in 2021 to RMB158.5 million (US$23.0
million) in 2022. The increase was primarily due to an increase of RMB14.7 million in staff cost, an increase of RMB3.2 million in
share-based compensation, an increase of RMB23.8 million in provision for credit losses and a decrease of RMB24.6 million in foreign
currency exchange gain. The increase in staff cost and share-based compensation was mainly due to an increase in the number of staff
and additional share incentive grants. The increase in provision for credit losses was mainly due to overseas accounts receivable. The
decrease in foreign currency exchange gain was mainly because of the appreciation of US dollar. Our general and administrative
expenses as a percentage of our revenues increased from 3.8% in 2021 to 5.0% in 2022.
Government grants
Our government grants decreased from RMB48.7 million in 2021 to RMB16.4 million (US$2.4 million) in 2022, mainly
consisting of various incentives from local government authorities. Those grants were for the purpose of giving immediate financial
support from local government authorities with no future related costs or obligations.
Net loss
As a result of the foregoing, we generated a net loss of RMB49.5 million (US$7.2 million) in 2022, compared to a net income of
RMB225.8 million in 2021.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
Revenues
Our revenues increased by 51.6% from RMB2,444.3 million in 2020 to RMB3,704.5 million (US$581.3 million) in 2021,
which was primarily due to an increase in e-scooter sales volume.
The revenues from e-scooter sales increased by 51.8% from RMB2,143.3 million in 2020 to RMB3,253.0 million (US$510.5
million) in 2021, which was mainly due to an increase in the sales volume of e-scooters by 72.5% from 601,652 in 2020 to 1,037,914 in
2021. The increase in the sales volume of e-scooters was driven by the expansion of our sales network in China from 1,616 franchised
stores as of December 31, 2020 to 3,108 franchised stores as of December 31, 2021 and an increase in the number of distributors in the
overseas markets from 36 as of December 31, 2020 to 42 as of December 31, 2021.
The revenues per e-scooter decreased from RMB4,062.7 in 2020 to RMB3,569.2 (US$560.1) in 2021, mainly due to a change in
product mix. The respective impact from the change in sales volume of e-scooters and revenues per e-scooter on our revenues in 2021, as
compared to 2020, was RMB1,772.4 million (calculated by assuming the revenues per e-scooter in 2021 was the same as that in 2020)
and RMB296.9 million (calculated by assuming the sales volume of e-scooters in 2021 was the same as that in 2020).
The growth of accessories and spare parts sales and service revenues also contributed, to a lesser extent, to the increase in our
revenues. The revenues from accessory and spare parts sales increased from RMB258.9 million in 2020 to RMB397.1 million (US$62.3
million) in 2021, mainly due to an increase in the sales volume of e-scooters in China, with which purchases of accessories and spare
parts usually correlate. The service revenues increased from RMB42.1 million in 2020 to RMB54.5 million (US$8.5 million) in 2021,
mainly attributable to the continued growth of our user base.
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Cost of revenues
Our cost of revenues increased by 53.4% from RMB1,885.2 million in 2020 to RMB2,891.8 million (US$453.8 million) in
2021, along with the growth of our business. The increase was primarily attributable to an increase in cost of products from RMB1,817.1
million in 2020 to RMB2,826.6 million (US$443.6 million) in 2021, which was primarily due to an increase in e-scooter sales volume.
The cost per e-scooter, defined as cost of revenues divided by the number of e-scooters sold in a specified period, decreased
from RMB3,133.3 in 2020 to RMB2,786.1 (US$437.2) in 2021, which was primarily due to a change in product mix.
Gross profit
We generated a gross profit of RMB812.8 million (US$127.5 million) in 2021, as compared to a gross profit of RMB559.1
million in 2020. Our gross margin slightly decreased from 22.9% in 2020 to 21.9% in 2021, which was mainly due to higher raw
material cost and change in product mix as a result of the launch of various new products.
Selling and marketing expenses
Our selling and marketing expenses increased by 65.4% from RMB200.8 million in 2020 to RMB332.0 million (US$52.1
million) in 2021. The increase was primarily due to an increase of RMB73.7 million in advertising and promotion expenses, an increase
of RMB35.3 million in depreciation and amortization, an increase of RMB25.7 million in staff cost, an increase of RMB3.3 million in
share-based compensation, and a decrease of RMB2.4 million in travel expenses. The increase in advertising and promotion expenses
was due to enhanced advertising and promotional events and branding and marketing activities. The increase in depreciation and
amortization was due to higher depreciation of furniture and decoration expenditures of the franchised stores as a result of the increased
number of stores. The increase in staff cost and share-based compensation was due to an increase in the number of sales staff and
additional share incentive grants. The decrease in travel expenses was due to reduced travel frequency during COVID-19. Excluding
advertising and promotion expenses, our selling and marketing expenses as a percentage of our revenues was 4.6% in 2021, as compared
to 4.7% in 2020.
Research and development expenses
Our research and development expenses increased by 28.4% from RMB105.3 million in 2020 to RMB135.2 million (US$21.2
million) in 2021. The increase was mainly attributable to an increase of RMB20.4 million in staff cost, an increase of RMB6.1 million in
share-based compensation, and an increase of RMB1.3 million in depreciation and amortization and rental expenses. The increase in staff
cost and share-based compensation was mainly due to an increase in the number of staff and additional share incentive grants. The
increase of depreciation and amortization and rental expenses was due to our efforts to expand our product portfolio. Our research and
development expenses as a percentage of our revenues decreased from 4.3% in 2020 to 3.7% in 2021.
General and administrative expenses
Our general and administrative expenses increased by 35.2% from RMB104.9 million in 2020 to RMB141.8 million (US$22.3
million) in 2021. The increase was primarily due to an increase of RMB11.9 million in staff cost, an increase of RMB9.7 million in
financial service fee, an increase of RMB4.1 million in foreign currency exchange loss, an increase of RMB3.2 million in depreciation
and amortization, an increase of RMB3.1 million in professional fee and an increase of RMB3.0 million in tax and surcharge. The
increase in staff cost was mainly due to an increase in the number of staff. The increase in financial service fee was mainly because of the
increase in sales from online channels. The increase in foreign currency exchange loss was mainly because of the depreciation of US
dollar. The increase in professional fee was mainly due to the increase of audit fee. The increase in tax and surcharges is mainly due to
higher revenues. Our general and administrative expenses as a percentage of our revenues decreased from 4.3% in 2020 to 3.8% in 2021.
Government grants
Our government grants increased from RMB22.4 million in 2020 to RMB48.7 million (US$7.6 million) in 2021, mainly
consisting of various incentives from local government authorities. Those grants were for the purpose of giving immediate financial
support from local government authorities with no future related costs or obligations.
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Net income
As a result of the foregoing, our net income was RMB225.8 million (US$35.4 million) in 2021, compared to RMB168.7 million
in 2020.
B.
Liquidity and Capital Resources
Cash flows and working capital
We had net cash provided by operating activities of RMB465.6 million, RMB334.2 million and net cash used in operating
activities of RMB121.9 million (US$17.7 million) in 2020, 2021 and 2022, respectively.
Our primary sources of liquidity have been cash provided by operating activities and financing activities. As of December 31,
2022, we had RMB720.6 million (US$104.5 million) in cash, cash equivalents and restricted cash, of which approximately 39.6% were
held in Renminbi and the remainder was mainly held in U.S. dollars.
After considering all facts available to us as of the date of this annual report, we believe our cash on hand will be sufficient to
meet our current and anticipated needs for general corporate purposes for at least the next 12 months. We may, however, need additional
cash resources in the future if we experience changes in business conditions or other developments. We may also need additional cash
resources in the future if we find and wish to pursue opportunities for investment, acquisition, capital expenditure or similar actions. If
we determine that our cash requirements exceed the amount of cash we have on hand, we may seek to issue equity or equity linked
securities or obtain debt financing. The issuance and sale of additional equity would result in further dilution to our shareholders. The
incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our
operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
Our accounts receivable represent primarily accounts receivable from the distributors that purchased our e-scooters and
accessories and spare parts. As of December 31, 2021 and 2022, our accounts receivable, net of allowance for doubtful accounts, were
RMB268.6 million and RMB299.7 million (US$43.5 million), respectively. Our accounts receivable turnover days increased from 16
days in 2020 to 18 days in 2021, and further to 33 days in 2022 mainly due to our change of credit policies for distributors where selected
qualified distributors enjoy credit terms. Accounts receivable turnover days for a given period are equal to average balances of accounts
receivable, net of allowance for doubtful accounts, at the beginning and the end of the period divided by revenues during the period and
multiplied by the number of days during the period.
Our accounts payable and notes payable represent primarily payable to suppliers from whom we purchased raw materials and
components for our products. As of December 31, 2021 and 2022, our accounts payable were RMB538.9 million and RMB459.5 million
(US$66.6 million), respectively. Our notes payable were RMB143.6 million and RMB316.8 million (US$45.9 million), respectively. The
increase was primarily due to our choice to use payable notes with longer payment terms. Our accounts payable turnover days increased
from 63 days in 2020 to 68 days in 2021 and further to 107 days in 2022, which was primarily due to the change in our supplier mix and
longer payment terms from selected suppliers. Accounts payable turnover days for a given period are equal to average accounts payable
balances at the beginning and the end of the period divided by total cost of revenues during the period and multiplied by the number of
days during the period.
Our advances from customers represent primarily the pre-paid sales price from the distributors that purchased our e-scooters and
accessories and spare parts. As of December 31, 2021 and 2022, our advances from customers were RMB17.3 million and RMB24.9
million (US$3.6 million), respectively. Our advances from customer turnover days decreased from 3.5 days in 2020 to 2.8 days in 2021
and further to 2.4 days in 2022. The changes in our advances from customers and the turnover days were primarily due to the fluctuations
in pre-sales orders received from distributors. Advance from customers turnover days for a given period are equal to average advances
from customers balances at the beginning and the end of the period divided by revenues during the period and multiplied by the number
of days during the period.
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Our inventories primarily include our raw materials, work in progress and finished goods for our e-scooters and accessories and
spare parts. As of December 31, 2021 and 2022, our inventories were RMB269.6 million and RMB417.0 million (US$60.5 million),
respectively. The increase was primarily due to the advance stockpiling of finished goods in international markets in anticipation of
higher demand. Our inventory turnover days decreased from 31 days in 2020 to 26 days in 2021 and increase to 50 days in 2022, which
was primarily due to the fluctuations in fulfilment and sales order forecast. Inventory turnover days for a given period are equal to
average of the balances of inventories, at the beginning and the end of the period divided by cost of revenues during the period and
multiplied by the number of days during the period.
We have the following short-term bank borrowings:
● In June 2019, Jiangsu Xiaoniu, Beijing Niudian and Changzhou Niudian jointly entered into a facility agreement with SPD
Silicon Valley Bank that provided a credit facility of up to RMB120.0 million with tenor period of twelve months. The
interest rate for each drawdown was at base interest rate of People’s Bank of China. In June 2020, Jiangsu Xiaoniu entered
into an amendment agreement to (i) change the credit facility to RMB160.0 million, and (ii) change the collateral to deposit
US Dollar in equivalent to RMB176.0 million at the time of drawdown. In June 2020, Jiangsu Xiaoniu and Changzhou
Niudian fully repaid the loans of RMB60.0 million and RMB60.0 million borrowed in June 2019, respectively. Also in
June 2020, Jiangsu Xiaoniu and Changzhou Niudian obtained new loans from SPD Silicon Valley Bank under the
amendment agreement in amounts of RMB80.0 million and RMB80.0 million, respectively. In June 2021, Jiangsu Xiaoniu
and Changzhou Niudian fully repaid the loans. Also In June 2021, Jiangsu Xiaoniu entered into an amendment agreement
to (i) extend the maturity date, which was June 12, 2023, (ii) change the interest rate to a fixed rate of 3.5% per annum,
which was further changed to 3.2% per annum in December 2021. Also in June 2021, Jiangsu Xiaoniu and Changzhou
Niudian obtained new loans from SPD Silicon Valley Bank under the new amended facility agreement in amounts of
RMB120.0 million and RMB40.0 million, respectively. In September and December 2021, Changzhou Niudian and
Jiangsu Xiaoniu repaid loans of RMB40.0 million and RMB120.0 million, respectively. In December 2021, Jiangsu
Xiaoniu obtained new loans from SPD Silicon Valley Bank of RMB160.0 million. In June 2022, Jiangsu Xiaoniu fully
repaid the loans. In June 2022, Jiangsu Xiaoniu entered into an amendment agreement to change the fixed interest rate to
3.0% per annum and obtained a loan from SPD Silicon Valley Bank in amount of RMB160.0 million with the maturity date
in December 2022. In December 2022, Jiangsu Xiaoniu repaid the loan of RMB160.0 million and obtained a new loan
from SPD Silicon Valley Bank in amount of RMB160.0 million with the maturity date in January 2023. As of December
31, 2022, the outstanding balance under this facility was RMB160.0 million bearing interest at 3.0% per annum.
● In December 2019, Jiangsu Xiaoniu obtained a one-year short-term bank borrowing of RMB20.0 million, which bears
interest at a rate of 4.5675% per annum, from Bank of China, which are jointly guaranteed by Beijing Niudian Technology
Co., Ltd. and Changzhou Niudian International Trading Technology Co., Ltd. In July 2020, the loan was fully repaid and
Jiangsu Xiaoniu obtained a new one-year short-term bank borrowing of RMB20.0 million, which bears interest at a rate of
3.85% per annum, from Bank of China. In July 2021, the loan was fully repaid. In April 2022, Jiangsu Xiaoniu entered into
a facility agreement with Bank of China that provides credit facility of up to RMB300.0 million with a one-year term.
● In November 2020, Jiangsu Xiaoniu entered into a line-of-credit agreement with China Merchants Bank that provide
revolving credit facility, in aggregate, for up to RMB100.0 million with a one-year term. In July 2021, Jiangsu Xiaoniu
obtained a ten-month short-term borrowing of RMB20.0 million which bears interest at a rate of 3.5% per annum, from
China Merchants Bank, to refinance the loan with Bank of China. In December 2021, Jiangsu Xiaoniu entered into a line-
of-credit agreement with China Merchants Bank that provide revolving credit facility, in aggregate, for up to RMB200.0
million with a one-year term. In May 2022, Jiangsu Xiaoniu fully repaid the loan of RMB20.0 million borrowed in July
2021, and obtained a new one-year short-term borrowing of RMB20.0 million which bears interest at a rate of 3.3% per
annum, from China Merchants Bank. In November 2022, the loan was fully repaid. As of December 31, 2022, the
outstanding balance of this loan was nil.
Although we consolidate the results of the VIE, we only have access to the assets or earnings of the VIE through our contractual
arrangements with the VIE and its shareholders. See “Item 4. Information on the Company—C. Organizational Structure” For
restrictions and limitations on liquidity and capital resources as a result of our corporate structure, see “—Holding Company Structure.”
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A substantial majority of our revenues have been, and we expect they are likely to continue to be, in the form of Renminbi.
Under existing foreign exchange regulations of mainland China, payments of current account items, including profit distributions,
interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE
approval as long as certain routine procedural requirements are fulfilled. Therefore, our mainland China subsidiaries are allowed to pay
dividends in foreign currencies to us without prior SAFE approval by following certain routine procedural requirements. However,
current regulations of mainland China permit our mainland China subsidiaries to pay dividends to us only out of its accumulated profits,
if any, determined in accordance with Chinese accounting standards and regulations. Our mainland China 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.
Historically, our mainland China subsidiaries have not paid dividends to us. 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.
The following table sets forth the movements of our cash flows for the years presented:
Selected Consolidated Cash Flow Data:
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Effect of foreign currency exchange rate changes on cash, cash equivalents
and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at the beginning of the year
Cash, cash equivalents and restricted cash at the end of the year
Operating activities
For the Year Ended December 31,
2020
RMB
2021
RMB
2022
RMB
US$
(in thousands)
465,599
(535,232)
(13,164)
334,175
(295,059)
6,246
(121,856)
397,892
(17,797)
(17,668)
57,689
(2,580)
(23,332)
(106,129)
501,602
395,473
(8,490)
36,872
395,473
432,345
30,043
288,282
432,345
720,627
4,356
41,797
62,684
104,481
Net cash used in operating activities in 2022 was RMB121.9 million (US$17.7 million). This amount was primarily attributable
to net loss of RMB49.5 million (US$7.2 million), adjusted for certain non-cash expenses, principally depreciation and amortization
expenses of RMB142.7 million (US$20.7 million) and share-based compensation expenses of RMB58.2 million (US$8.4 million), and
changes in certain working capital accounts that affected operating cash flow, primarily (i) a RMB156.1 million (US$22.6 million)
increase in inventories and (ii) a RMB125.9 million (US$18.3 million) increase in prepayments and other current assets. The increase in
inventories and prepayments and other current assets was primarily due to the growth of our business and operation.
Net cash provided by operating activities in 2021 was RMB334.2 million (US$52.4 million). This amount was primarily
attributable to net income of RMB225.8 million (US$35.4 million), adjusted for certain non-cash expenses, principally depreciation and
amortization expenses of RMB95.5 million (US$15.0 million) and share-based compensation expenses of RMB47.2 million (US$7.4
million), and changes in certain working capital accounts that affected operating cash flow, primarily (i) a RMB286.7 million (US$45.0
million) increase in accounts payable and notes payable, (ii) a RMB168.5 million (US$26.4 million) increase in accounts receivable and
(iii) a RMB131.2 million (US$20.6 million) increase in inventories. The increase in accounts payable and notes payable, accounts
receivable and inventories was primarily due to the growth of our business and operation.
Net cash provided by operating activities in 2020 was RMB465.6 million (US$71.4 million). This amount was primarily
attributable to net income of RMB168.7 million (US$25.8 million), adjusted for certain non-cash expenses, principally depreciation and
amortization expenses of RMB50.2 million (US$7.7 million) and share-based compensation expenses of RMB39.6 million (US$6.1
million), and changes in certain working capital accounts that affected operating cash flow, primarily (i) a RMB136.8 million (US$21.0
million) increase in accounts payable, (ii) a RMB30.6 million (US$4.7 million) decrease in inventories and (iii) a RMB32.7 million
(US$5.0 million) increase in advance from customers. The increase in accounts payable was primarily due to the growth of our business
and operation. The increase in advance from customers was mainly due to the fluctuations in pre-sale orders received from distributors.
The decrease in inventories is primarily due to higher efficiency and faster fulfillment.
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Investing activities
Net cash provided by investing activities in 2022 was RMB397.9 million (US$57.7 million), consisting primarily of cash
received from sale of short-term investments and withdrawal from term deposits, partially offset by cash paid for purchases of term
deposits, short-term investments, and property, plant and equipment.
Net cash used in investing activities in 2021 was RMB295.1 million (US$46.3 million), consisting primarily of cash paid for
purchases of term deposits, short-term investments, and property, plant and equipment, partially offset by cash received from sale of
short-term investments and withdrawal from term deposits.
Net cash used in investing activities in 2020 was RMB535.2 million (US$82.0 million), consisting primarily of cash paid for
purchases of term deposits, short-term investments, land use right, and property, plant and equipment, partially offset by cash received
from sale of short-term investments and withdrawal from term deposits.
Financing activities
Net cash used in financing activities in 2022 was RMB17.8 million (US$2.6 million), consisting primarily of repayments for
short-term bank borrowings, partially offset by the proceeds from short-term bank borrowings and exercise of employee stock option.
Net cash provided by financing activities in 2021 was RMB6.2 million (US$1.0 million), consisting primarily of proceeds from
short-term bank borrowings and exercise of employee stock option, partially offset by repayments for short-term bank borrowings.
Net cash used in financing activities in 2020 was RMB13.2 million (US$2.0 million), consisting primarily of repayments of
short-term bank borrowings, partially offset by the proceeds from exercise of employee stock option.
Material Cash requirements
Our material cash requirements as of December 31, 2022 and any subsequent interim period primarily include our capital
expenditures, operating lease obligations and purchase obligations.
We made capital expenditures of RMB151.6 million, RMB285.7 million and RMB135.3 million (US$19.6 million) in 2020,
2021 and 2022, respectively. Capital expenditures represent cash paid for purchase of property, plant and equipment, intangible assets
and land use right. We will continue to make such capital expenditures to support the expected growth of our business.
We intend to fund our existing and future material cash requirements primarily with anticipated cash flows from operations, our
existing cash balance and other financing alternatives.
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third
parties. We have not entered into any off-balance sheet derivative instruments. Furthermore, we do not have any retained or contingent
interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not
have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in
leasing, hedging or research and development services with us.
We did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2022.
Holding Company Structure
Our company, Niu Technologies, is a holding company with no material operations of its own. We conduct our operations
primarily through our WFOE and the VIE. As a result, Niu Technologies’ ability to pay dividends depends upon dividends paid by our
WFOE.
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If our WFOE or any newly formed mainland China subsidiaries incur debt on their own behalf in the future, the instruments
governing their debt may restrict their ability to pay dividends to us. In addition, our WFOE is permitted to pay dividends to us only out
of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under the laws of mainland
China, each of our WFOE and the VIE is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain
statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, our WFOE may allocate a portion of its
after-tax profits based on PRC accounting standards to enterprise expansion funds and staff bonus and welfare funds at its discretion, and
the VIE may allocate a portion of their after-tax profits based on PRC accounting standards to a discretionary surplus fund at its
discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a
wholly foreign-owned company out of mainland China is subject to examination by the banks designated by SAFE. As of December 31,
2022, as our WFOE, Beijing Niudian, Shanghai Xiaoniu Internet Technology Co., Ltd. and Changzhou Niudian International Trading
Technology Co., Ltd. are in an accumulated loss position, no statutory reserve was appropriated. 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.
C.
Research and Development
See “Item 4. Information On the Company—B. Business Overview— NIU Innovation Lab” and “—Intellectual Property.”
D.
Trend Information
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or
events for the year ended December 31, 2022 that are reasonably likely to have a material and adverse effect on our revenues, income,
profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of
future results of operations or financial conditions.
E.
Critical Accounting Policies and Estimates
We prepare our financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and
assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own
historical experiences and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates
is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our
estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make
significant accounting estimates.
The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the
sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our
financial statements. We believe the following accounting policies involve the most significant judgments and estimates used in the
preparation of our financial statements. You should read the following descriptions of critical accounting policies, judgments and
estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this annual report.
Consolidation of variable interest entity (“VIE”)
We account for entities qualifying as VIE in accordance with Financial Accounting Standards Boards, or FASB, Accounting
Standards Codification Topic 810, Consolidation, or ASC 810. We operate our online e-commerce platform in mainland China through
the VIE, Beijing Niudian, to ensure that our internet operations comply with applicable laws and regulations of mainland China. Beijing
Niudian holds the necessary mainland China operating licenses for the online business. Individuals acting as nominee equity holders hold
the legal equity interests of Beijing Niudian on our behalf. A series of contractual arrangements were entered into among the Company,
Niudian Information, Beijing Niudian, and the nominee equity holders of Beijing Niudian in May 2015 and were subsequently amended
in June 2018 and February 2020. As a result of the contractual agreements, which include Powers of Attorney, an Exclusive Business
Cooperation Agreement, an Equity Pledge Agreement, an Exclusive Option to Agreement and Spousal Consent Letters, we have the
ability to conduct the business operations of Beijing Niudian, direct its activities, receive substantially all of its economic benefits and
have an option to purchase all of the equity interests and assets in Beijing Niudian when and to the extent permitted by the laws of
mainland China at RMB100 or a lowest price. In accordance with ASC 810, we consider that Niu Technologies is the primary
beneficiary of Beijing Niudian, and accordingly, Beijing Niudian is the VIE under U.S. GAAP. As such, we consolidate the financial
results and position of Beijing Niudian in our consolidated financial statements.
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Any changes in the laws and regulations of mainland China that affect our ability to conduct the business operations of Beijing
Niudian might preclude us from consolidating the entities in the future. We will continually evaluate whether we are the primary
beneficiary of the VIE as facts and circumstances change.
Revenue recognition
We generate substantially all of our revenues from sales of electric scooters, accessories and spare parts to our mainland China
domestic offline distributors and overseas offline distributors or directly to individual customers online. We also generate our revenues
from our subscription-based mobile app services, as well as insurance service as an agent.
We recognize revenues upon the satisfaction of our performance obligation (upon transfer of control of promised goods or
services to customers) in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or
services, excluding amounts collected on behalf of third parties (for example, value added taxes). For each performance obligation
satisfied over time, we recognize revenue over time by measuring the progress toward complete satisfaction of that performance
obligation. If a performance obligation is not satisfied over time, it is satisfied at a point in time.
To achieve that core principle, we perform the five steps defined under Topic 606: (i) identify the contract(s) with a customer,
(ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the
performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We assess
our revenue arrangements against specific criteria in order to determine whether we act as principal or agent. Revenue arrangements with
multiple performance obligations are divided into separate distinct goods or services. A performance obligation is considered distinct
from other obligations in a contract when it (a) provides a benefit to the customer either on its own or together with other resources that
are readily available to the customer and (b) is separately identified in the contract. We allocate the transaction price to each performance
obligation based on the relative SSP of the goods or services provided. Revenue is recognized upon the transfer of control of promised
goods or services to a customer.
We identify one performance obligation which is to sell products, such as smart electric scooters, accessories and spare parts, to
our mainland China domestic offline distributors and overseas offline distributors or directly to individual customers online. For all sales
of products, we require a signed contract or purchase order, which specifies pricing, quantity and product specifications. Revenue of
product sales is recognized on a gross basis upon the satisfaction of its performance obligation, which is to transfer the control of the
promised products to customers.
The transfer of control of the products is satisfied at a point in time, which occurs when the products are accepted by the
domestic offline distributors, overseas offline distributors or individual customers. When we sell products to our domestic offline
distributors for domestic sales, acceptance of the products by the domestic offline distributors is evidenced by goods receipt notes signed
by the domestic offline distributors, which is generally at our warehouse. When we sell products to our overseas offline distributors for
oversea sales, acceptance of the products by overseas offline distributors is evidenced by shipping documents dependent upon the terms
of the underlying contract. When we sell products to individual customers through its own online store and third-party e-commerce
platform, we are responsible for the delivery to individual customers. Acceptance of the products is evidenced by goods receipt notes
signed by individual customers.
We provide sales volume rebate to qualified distributors based on the volume sold to such distributors in a certain period and
grant online individual customers unconditional right to return the products within 7 days after their acceptance.
Revenues are measured as the amount of consideration we expect to receive in exchange for transferring products to domestic
offline distributors, overseas offline distributors or individual customers. Consideration is recorded net of sales volume rebate, sales
returns and VAT. Sales returns is estimated based on historical experiences, which were insignificant for the years ended December 31,
2020, 2021 and 2022.
We utilize delivery service providers to deliver products to overseas offline distributors and individual customers (the “shipping
activities”), but the delivery service is not considered as a separate obligation as the shipping activities are performed before the overseas
offline distributors and individual customers obtain control of the products. Therefore, shipping activities are not considered a separate
promised service to them but rather are activities to fulfill our promise to transfer the products. Outbound shipping charges to overseas
offline distributors and individual customers are included as a part of the revenues, and outbound shipping-related costs are recorded as
cost of revenues.
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Income taxes
Our current income taxes are provided on the basis of net income (loss) for financial reporting purposes, and adjusted for
income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the
relevant tax jurisdictions. Our deferred income taxes are provided using the liability method. Under this method, deferred income tax
assets and liabilities are recognized for the tax effects of temporary differences and are determined by applying enacted statutory tax rates
that will be in effect in the period in which the temporary differences are expected to reverse to the temporary differences between the
financial statements’ carrying amounts and the tax bases of assets and liabilities. Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset deferred tax liabilities and assets, and they relate to income taxes levied by the same tax authority on
the same taxable entity, or on different tax entities, but they intend to settle deferred tax liabilities and assets on a net basis or their
deferred tax assets and liabilities will be realized simultaneously.
A valuation allowance is provided to reduce the amount of deferred income tax assets if based on the weight of available
evidence, it is more likely than not that some portion, or all, of the deferred income tax assets will not be realized. The effect on deferred
income taxes arising from a change in tax rates is recognized in the consolidated statements of comprehensive income in the period of
change.
We apply a “more likely than not” recognition threshold in the evaluation of uncertain tax positions. We recognize the benefit of
a tax position in our consolidated financial statements if the tax position is “more likely than not” to prevail based on the facts and
technical merits of the position. Tax positions that meet the “more likely than not” recognition threshold are measured at the largest
amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. Unrecognized tax benefits may be
affected by changes in interpretation of laws, rulings of tax authorities, tax audits, and expiry of statutory limitations. In addition,
changes in facts, circumstances and new information may require us to adjust the recognition and measurement estimates with regard to
individual tax positions. Accordingly, unrecognized tax benefits are periodically reviewed and re-assessed. Adjustments, if required, are
recorded in our consolidated financial statements in the period in which the change that necessitates the adjustments occurs. The ultimate
outcome for a particular tax position may not be determined with certainty prior to the conclusion of a tax audit and, in certain
circumstances, a tax appeal or litigation process. We records interest and penalties related to unrecognized tax benefits (if any) in interest
expenses and general and administrative expenses, respectively. As of December 31, 2021 and 2022, the Group did not have any
significant unrecognized uncertain tax positions.
Recent Accounting Pronouncements
We discuss recently adopted and issued accounting standards in Note 2, “Summary of Significant Accounting Policies—Recent
Accounting Pronouncements” of the notes to our consolidated financial statements included elsewhere in this annual report.
Item 6. Directors, Senior Management and Employees
A.
Directors and Senior Management
The following table sets forth information regarding our directors and executive officers as of the date of this annual report.
Directors and Executive Officers
Yan Li
Token Yilin Hu
Changqing Ye
Mei-Wei Cheng
Julian Juul Wolhardt
John Jinshu Zhang
Fion Wenjuan Zhou
Age
44
38
52
73
49
63
39
Position/Title
Chairman of the Board of Directors and Chief Executive Officer
Director
Independent Director
Independent Director
Independent Director
Independent Director
Chief Financial Officer
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Dr. Yan Li has served as the chairman of our board of directors since March 2018, our chief executive officer since
December 2017 and our chief operating officer since January 2016. Prior to joining our company in 2016, Dr. Li was a principal at KKR
Capstone Limited from 2009 to 2015 and he oversaw KKR Capstone Limited’s portfolio operation in China, including Qingdao Haier
Group, a home appliance manufacturer listed on the Shanghai Stock Exchange, China Modern Diary, a milk producer listed on the
Hong Kong Stock Exchange, China Cord Blood Corporation, a provider of cord blood banking services in China listed on the New York
Stock Exchange and United Envirotech, an environmental engineering and consulting solutions provider listed on the Singapore Stock
Exchange. Dr. Li was awarded the Operational Excellence Award by Private Equity International in 2012. Prior to KKR Capstone
Limited, Dr. Li worked for McKinsey & Company from 2008 to 2009, where he advised various companies in high-tech, industrial
goods and retail sectors. Prior to McKinsey, Dr. Li worked as a senior research engineer at Qualcomm Inc. in San Diego, CA from 2006
to 2008, focusing on the development of 3G and 4G communications technology. Dr. Li holds three patents on 3G communications.
Dr. Li received a bachelor’s degree from the University of California at Berkeley in 2001 and a Ph.D. from Stanford University in 2005,
both in electronics and electrical engineering.
Mr. Token Yilin Hu has served as our director since our inception. Mr. Hu has served as our vice president of research and
development from September 2014 to October 2022. Mr. Hu has over 15 years of experience in design spanning a variety of products
and industries, such as consumer electronics, fashion, autos and smart hardware. Mr. Hu co-founded UTLAB in November 2011, whose
use of high-tech materials in the aerospace and auto sectors to create ultimate wearing experience in America and Europe. Prior to
UTLAB, Mr. Hu was with Frog Design, a globally renowned design firm, from March 2009 to October 2011, where he led a team of
designers to help multinational clients create innovative products and experiences. Prior to that, Mr. Hu worked at Microsoft China from
March 2008 to January 2009.
Mr. Changqing Ye has served as our director since October 2018. He currently also serves as an independent director of Baozun
Inc., a company listed on Nasdaq, Ascentage Pharma Group International, a company listed on the Hong Kong Stock Exchange, Jinxin
Fertility Group Limited, a company listed on the Hong Kong Stock Exchange, Hygeia Healthcare Holdings Limited, a company listed on
the Hong Kong Stock Exchange, VNET Group Inc., a company listed on Nasdaq, and NWTN Inc., a company listed on Nasdaq. From
October 2018 to September 2022, he served as an independent director of Luzhou Bank, a company listed on the Hong Kong Stock
Exchange. From February 2011 to December 2015, Mr. Ye served as an investment committee member and then group chief financial
officer and managing director of CITIC PE Group. Prior to that, Mr. Ye worked at PricewaterhouseCoopers’ China and UK offices from
July 1992 to January 2011. Mr. Ye received his bachelor’s degree in journalism from Huazhong University of Science and Technology in
China in 1992 and an MBA from Warwick University in 1999. Mr. Ye is a certified public accountant in China.
Mr. Mei-Wei Cheng has served as our director since October 2018. Mr. Cheng currently serves as a director of LEAR
Corporation, and serves as non-executive chairman of the board of directors of HCP Packaging and INTERPLEX Holdings, both
portfolio companies of Baring Private Equity Asia. Mr. Cheng served as a member of the audit committee and finance committee of the
board of directors of Seagate Technology, a company listed on Nasdaq, from 2013 to 2018. From 2010 to 2014, Mr. Cheng served as
board member and audit committee member of Diebold Nixdorf, a company listed on NYSE. From February 2015 to January 2017,
Mr. Cheng served as the chairman of the board of directors of Pactera Technology International Ltd., a portfolio company of Blackstone
Group. From July 2010 to April 2014, Mr. Cheng was the chief executive officer of Siemens Northeast Asia and president and chief
executive officer of Siemens China. Prior to joining Siemens, Mr. Cheng served as the chairman and chief executive officer of Ford
Motor (China) Ltd. And as a corporate vice president of Ford Motor Company from 1998 to 2008 and as the executive chairman at Ford
Motor Company (China) Ltd. And as a group vice president of Ford Motor Company from 2009 to 2010. Prior to joining Ford,
Mr. Cheng held several executive positions at General Electric Corporation and AT&T. Mr. Cheng received a bachelor’s degree in
industrial engineering/operations research from Cornell University in 1972 and an MBA from Rutgers University in 1999.
Mr. Julian Juul Wolhardt has served as our director since October 2018. Mr. Wolhardt is currently chief executive officer of
DCP Advisors Limited. From August 2006 to December 2016, Mr. Wolhardt was a partner focused on Greater China at KKR Asia
Limited. Prior to joining KKR Asia Limited, Mr. Wolhardt served as executive director at Morgan Stanley Private Equity Asia from 1998
to 2006. Mr. Wolhardt was an analyst at Lazard Freres & Co from 1996 to 1997 and worked at Coopers & Lybrand from 1995 to 1996.
Mr. Wolhardt received his bachelor’s degree in accounting from the University of Illinois (Urbana-Champaign) in 1995. Mr. Wolhardt is
a certified public accountant and certified management accountant in the U.S.
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Mr. John Jinshu Zhang has served as our director since October 2018. Mr. Zhang is currently general counsel of Blue
California. From October 2000 to May 2021, Mr. Zhang was a partner at Dentons LLP, Edwards Wildman LLP, Reed Smith LLP, and
Greenberg Traurig, LLP successively. Mr. Zhang worked as an associate of Jones Day LLP and Graham & James, LLP from November
1993 to November 1999. Mr. Zhang received his bachelor’s degree in literature from Peking University in 1982, master’s degree in Asian
studies from University of Hawaii at Manoa in 1989, master’s degree in intellectual history from University of California, Los Angeles in
1990 and Juris doctor degree from University of California, Berkeley in 1993.
Ms. Fion Wenjuan Zhou has served as our chief financial officer since November 2021. She is responsible for overseeing
investor relations, strategic investment, finance, legal, internal controls and ESG compliance of our company. Prior to joining us, Ms.
Zhou served as the chief financial officer of Sogou Inc. (NYSE: SOGO) from July 2020 to October 2021. Between 2015 and 2019, Ms.
Zhou served as a finance director of Alibaba Group (NYSE: BABA) and as chief financial officer of Yidian Zixun, a leading mobile
news aggregator in China. Prior to that, Ms. Zhou also held senior finance roles at Viadeo S.A. and Concord Medical Services Holdings
Limited (NYSE: CCM). Ms. Zhou started her career as an auditor at PricewaterhouseCoopers Zhong Tian in 2006. Ms. Zhou received a
bachelor’s degree in Financial Management from the University of International Business and Economics in 2006 and an Executive
MBA from HEC Paris in 2016. Ms. Zhou is a member of the American Institute of Certified Public Accountants and a Chartered Global
Management Accountant.
B.
Compensation
In 2022, we paid an aggregate of approximately RMB4.46 million (US$0.65 million) in cash to our executive officers, and
approximately RMB1.03 million (US$0.15 million) in cash to our non-executive directors. We have not set aside or accrued any amount
to provide pension, retirement or other similar benefits to our directors and executive officers.
Share Incentive Plans
In January 2016, our shareholders and board of directors approved the 2016 Global Share Incentive Plan to attract and retain the
best available personnel, provide additional incentives to employees, directors and consultants, and promote the success of our business.
In March 2018, we amended the 2016 Global Share Incentive Plan, or the Amended and Restated 2016 Plan, so that the maximum
aggregate number of ordinary shares that may be issued under the Amended and Restated 2016 Plan is 5,861,480 ordinary shares. As of
December 31, 2022, options to purchase 1,801,680 ordinary shares and 3,750 restricted share units had been granted and were
outstanding, excluding options or restricted share units that were forfeited or canceled after the relevant grant dates.
In September 2018, our shareholders and board of directors approved the 2018 Share Incentive Plan to promote the success and
enhance the value of our company, which became effective immediately prior to the completion of our initial public offering. Under the
2018 Share Incentive Plan, or the 2018 Plan, the maximum aggregate number of ordinary shares available for issuance is 6,733,703
ordinary shares, which shall be increased by a number equal to 1.5% of the total number of ordinary shares issued and outstanding on the
last day of the immediately preceding fiscal year, each fiscal year during the term of the 2018 Plan commencing with the fiscal year
ended December 31, 2019, if determined and approved by the board of directors for the relevant fiscal year. Our board of directors has
approved annual increases of 2,241,253, 2,285,407, and 2,305,212 ordinary shares for the years ended December 31, 2020, 2021 and
2022, representing 1.5% of total issued and outstanding shares as of December 31, 2019, 2020 and 2021, respectively, pursuant to the
2018 Share Incentive Plan. As of December 31, 2022, options to purchase 2,612,928 ordinary shares and 3,886,908 restricted share units
had been granted and were outstanding, excluding options or restricted share units that were forfeited or canceled after the relevant grant
dates. The following paragraphs describe the principal terms of the Amended and Restated 2016 Plan and 2018 Plan:
Type of Awards. The Amended and Restated 2016 plan permits the awards of options, restricted share units, restricted shares,
share appreciation rights, dividend equivalents and share payments. The 2018 plan permits the awards of options, restricted shares,
restricted share units or other types of awards approved by the board of directors or a committee of one or more members of the board of
directors.
Plan Administration. Our board of directors or a committee appointed by the board of directors will administer the plan. The
committee or the 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 grant.
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Award Agreement. Awards granted under the plan are evidenced by an award agreement that sets forth the terms, conditions and
limitations for each award, which may include the term of the award, the provisions applicable in the event that the grantee’s
employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.
Eligibility. We may grant awards to our employees, consultants and directors.
Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award
agreement.
Exercise of Options. The plan administrator determines the exercise price for each award, which is stated in the relevant award
agreement. Options that are vested and exercisable will terminate if they are not exercised prior to the time as the plan administrator
determines at the time of grant. However, the maximum exercisable term is ten years from the date of grant.
Transfer Restrictions. Awards may not be transferred in any manner by the participant other than in accordance with the
exceptions provided in the 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 Plan. Unless terminated earlier, the plan has a term of ten years. Our board of directors has
the authority to terminate, amend, suspend or modify the plan in accordance with our articles of association. 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
plan.
The following table summarizes, as of December 31, 2022, the options granted and outstanding under the Amended and
Restated 2016 Plan and Amended and Restated 2018 Plan to our directors and executive officers and our other employees, excluding
options that were forfeited or canceled after the relevant grant dates.
Name
Yan Li
Token Yilin Hu
Other employees
Ordinary Shares
Underlying
Options
Exercise
Price
(US$/Share)
*
*
3.425
3.425
2,929,808 0.2 and 3.425
Date of Grant
August 1, 2019
August 1, 2019
February 1, 2018~
August 1, 2019
Date of
Expiration
July 31, 2029
July 31, 2029
January 31, 2028~ July
31, 2029
(1) * Less than 1% of our total ordinary shares outstanding as of December 31, 2022.
The following table summarizes, as of December 31, 2022, the restricted share units granted and outstanding under the
Amended and Restated 2016 Plan and the Amended and Restated 2018 Plan to our directors and executive officers and our other
employees, excluding restricted share units that were forfeited or canceled after the relevant grant dates.
Name
Changqing Ye
Mei-Wei Cheng
Julian Juul Wolhardt
John Jinshu Zhang
Fion Wenjuan Zhou
Yan Li
Token Yilin Hu
Other employees
Ordinary Shares
Underlying
Restricted Share
Units
*
*
*
*
*
*
*
Date of Grant
October 19, 2022
October 19, 2022
October 19, 2022
October 19, 2022
March 15, 2022
August 1, 2019
August 1, 2019
3,290,158 February 1, 2019~October 1, 2022
Date of
Expiration
October 18, 2032
October 18, 2032
October 18, 2032
October 18, 2032
March 14, 2032
July 31, 2029
July 31, 2029
January 31, 2029 ~ September 30, 2032
* Less than 1% of our total ordinary shares outstanding as of December 31, 2022.
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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. A director who is in any way, whether directly or indirectly, interested in a contract or transaction or proposed contract or
transaction with our company is required to declare the nature of his interest at a meeting of our directors. Subject to the Nasdaq Global
Market rules and disqualification by the chairman of the relevant board meeting, a director may vote in respect of any contract or
transaction or proposed contract or transaction notwithstanding that he may be interested therein, and if he does so his vote shall be
counted and he shall be counted in the quorum at any meeting of our directors at which any such contract or transaction or proposed
contract or transaction is considered. Our directors may exercise all the powers of our company to raise or borrow money and to
mortgage or charge its undertaking, property and assets (present and future) and uncalled capital or any part thereof, to issue debentures,
debenture stock, bonds and other securities, whether outright or as collateral security for any debt, liability or obligation of our company
or of any third party. None of our non-executive directors has a service contract with us that provides for benefits upon termination of
service.
Committees of the Board of Directors
We have established three committees under the board of directors: an audit committee, a compensation committee and a
nominating and corporate governance committee. We have adopted a charter for each of the three committees. Each committee’s
members and functions are described below.
Audit Committee. Our audit committee consists of Mr. Changqing Ye, Mr. John Jinshu Zhang and Mr. Mei-Wei Cheng. Mr.
Changqing Ye is the chairman of our audit committee. We have determined that Mr. Changqing Ye, Mr. John Jinshu Zhang and Mr. Mei-
Wei Cheng satisfy the “independence” requirements of Rule 5605 of the Nasdaq Stock Market Rules and Rule 10A-3 under the
Exchange Act. We have determined that Mr. Changqing Ye 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. The audit committee
is responsible for, among other things:
● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by
the independent auditors;
● reviewing with the independent auditors any audit problems or difficulties and management’s response;
● discussing the annual audited financial statements with management and the independent auditors;
● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps
taken to monitor and control major financial risk exposures;
● reviewing and approving all proposed related party transactions;
● meeting separately and periodically with management and the independent auditors; and
● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness
of our procedures to ensure proper compliance.
Compensation Committee. Our compensation committee consists of Mr. John Jinshu Zhang and Mr. Julian Juul Wolhardt.
Mr. John Jinshu Zhang is the chairman of our compensation committee. We have determined that Mr. John Jinshu Zhang and Mr. Julian
Juul Wolhardt satisfy the “independence” requirements of Rule 5605 of the Nasdaq Stock Market Rules. The compensation committee
assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors
and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is
deliberated. 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;
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● 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.
Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Mr. John
Jinshu Zhang, Mr. Changqing Ye and Mr. Mei-Wei Cheng. Mr. John Jinshu Zhang is the chairperson of our nominating and corporate
governance committee. We have determined that Mr. John Jinshu Zhang, Mr. Changqing Ye and Mr. Mei-Wei Cheng satisfy the
“independence” requirements of Rule 5605 of the Nasdaq Stock Market Rules. The nominating and corporate governance committee
assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board
and its committees. The nominating and corporate governance committee will be responsible for, among other things:
● selecting and recommending to the board nominees for election by the shareholders or appointment by the board;
● reviewing annually with the board the current composition of the board with regards to characteristics such as
independence, knowledge, skills, experience and diversity;
● making recommendations on the frequency and structure of board meetings and monitoring the functioning of the
committees of the board; and
● advising the board periodically with regards to significant developments in the law and practice of corporate governance as
well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of
corporate governance and on any remedial action to be taken.
Duties of Directors
Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly
and a duty to act in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a
proper purpose. Our directors also have a duty to exercise skills they actually possess and such care and diligence that a reasonably
prudent person would exercise in comparable circumstances. It was previously considered that a director need not exhibit in the
performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience.
However, English and Commonwealth Courts have moved toward an objective standard with regard to the required skill and care and
these authorities are likely to be followed in the Cayman Islands. In fulfilling their duty of care to us, our directors must ensure
compliance with our sixth amended and restated memorandum and articles of association, as amended and restated from time to time,
and the class rights vested thereunder in the holders of the shares. In certain limited exceptional circumstances, a shareholder may have
the right to seek damages in our name if a duty owed by our directors is breached.
Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs. 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.
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Terms of Directors and Officers
Our directors may be appointed by an ordinary resolution of our shareholders. Alternatively, our board of directors may, by the
affirmative vote of a simple majority of the directors present and voting at a board meeting appoint any person as a director to fill a
casual vacancy on our board or as an addition to the existing board. Our directors may be appointed on terms that the Director shall
automatically retire from office (unless he has sooner vacated office) at the next or a subsequent annual general meeting or upon any
specified event or after any specified period in a written agreement between our company and the Director, if any; but no such term shall
be implied in the absence of express provision and our Directors hold office until such time as they are removed from office by an
ordinary resolution of our shareholders (or where they have sooner vacated office). In addition, a director will cease to be a director if he
(i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found to be or becomes of unsound
mind; (iii) resigns his office by notice in writing; (iv) without special leave of absence from our board, is absent from meetings of our
board for three consecutive meetings and our board resolves that his office be vacated; or (v) is removed from office pursuant to any
other provision of our articles of association.
Our officers are appointed by and serve at the discretion of the board of directors, and may be removed by our board of
directors.
Employment Agreements and Indemnification Agreements
We have entered into employment agreements with each of our executive officers. Under these agreements, each of our
executive officers is employed for a specified time period. We may terminate employment for cause, at any time, for certain acts of the
executive officer, such as continued failure to satisfactorily perform, willful misconduct or gross negligence in the performance of agreed
duties, conviction or entry of a guilty or nolo contendere plea of any felony or any misdemeanor involving moral turpitude, or dishonest
act that results in material to our detriment or material of the employment agreement. We may also terminate an executive officer’s
employment without cause upon 60-day advance written notice. In such case of termination by us, we will provide severance payments
to the executive officer as may be agreed between the executive officer and us. The executive officer may resign at any time with a 60-
day advance written notice.
Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement,
in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment or
pursuant to applicable law, any of our confidential information or trade secrets, any confidential information or trade secrets of our
clients or prospective clients, or the confidential or proprietary information of any third party received by us and for which we have
confidential obligations. The executive officers have also agreed to disclose in confidence to us all inventions, designs and trade secrets
which they conceive, develop or reduce to practice during the executive officer’s employment with us and to assign all right, title and
interest in them to us, and assist us in obtaining and enforcing patents, copyrights and other legal rights for these inventions, designs and
trade secrets.
In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term
of his or her employment and typically for one year following the last date of employment. Specifically, each executive officer has
agreed not to (i) solicit from any customer doing business with us during the effective term of the employment agreement business of the
same or of a similar nature to our business; (ii) solicit from any of our known potential customer business of the same or of a similar
nature to that which has been the subject of our known written or oral bid, offer or proposal, or of substantial preparation with a view to
making such a bid, proposal or offer; (iii) solicit the employment or services of, or hire or engage, any person who is known to be
employed or engaged by us; or (iv) otherwise interfere with our business or accounts, including, but not limited to, with respect to any
relationship or agreement between any vendor or supplier and us.
We have also entered into indemnification agreements with each of our directors and executive officers. 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.
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Board Diversity Matrix
Country of Principal Executive Offices
Foreign Private Issuer
Disclosure Prohibited Under Home Country Law
Total Number of Directors
Board Diversity Matrix (As of February 28, 2023)
Part I: Gender Identity
Directors
Part II: Demographic Background
Underrepresented Individual in Home Country Jurisdiction
LGBTQ+
Did Not Disclose Demographic Background
D.
Employees
Female
0
Male
6
PRC
Yes
No
6
0
0
0
Non-
Binary
N/A
Did Not
Disclose
Gender
N/A
As of December 31, 2022, we had 641 full-time employees. We had a total of 623 employees as of December 31, 2021 and 702
employees as of December 31, 2022. The following table sets forth the numbers of our employees categorized by function as of
December 31, 2022.
Function
Sales and marketing
Research and Development
Supply chain management and general administration
Total number of employees
Number
262
192
187
641
% of Total
Employees
40.9
29.9
29.2
100.0
A substantial majority of the personnel in our manufacturing facility, mainly the personnel working on the assembly and
production lines, are outsourced from third parties, and are not our employees.
Our success depends on our ability to attract, retain and motivate qualified employees that share our values and vision. We offer
employees competitive salaries, which are potentially adjusted twice a year based on the employee’s performance. We believe that we
maintain a good working relationship with our employees.
Under the regulations of mainland China, we are required to participate in and make contributions to housing funds and various
employee social security plans that are organized by applicable local municipal and provincial governments, including pension, medical,
work-related injury and unemployment benefit plans. See “Item 3. Key Information— D. Risks Related to Doing Business in China—
Failure to make adequate contributions to various employee benefit plans as required by the regulations of mainland China may subject
us to penalties.”
E.
Share Ownership
Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary
shares as of February 28, 2023 by:
● each of our directors and executive officers; and
● each of our principal shareholders who beneficially own more than 5% of our total outstanding shares on an as-converted
basis.
The calculations in the table below are based on 154,277,834 ordinary shares, consisting of 137,735,814 Class A ordinary
shares and 16,542,020 Class B ordinary shares, as of February 28, 2023.
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Beneficial ownership is determined in accordance with the rules and regulations of the SEC. 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, including through the exercise of any option, warrant or other right or the conversion of any other security. These
shares, however, are not included in the computation of the percentage ownership of any other person.
Directors and Executive Officers**:
Yan Li(1)
Token Yilin Hu(2)
Changqing Ye
Mei-Wei Cheng
Julian Juul Wolhardt
John Jinshu Zhang
Fion Wenjuan Zhou
All Directors and Executive Officers as a Group
Principal Shareholders:
Glory Achievement Fund Limited(3)
Niu Holding Inc.(4)
Ordinary Shares Beneficially Owned
Class A
ordinary
shares
Class B
ordinary
shares
% of
total
ordinary
shares
% of
aggregate
voting
power***
767,500
—
—
*
*
*
*
860,300
6,615,000
8,207,020
—
—
—
—
—
14,822,020
43,181,935
—
—
9,927,020
4.8
5.3
—
*
*
*
*
10.2
28.0
6.4
13.4
16.1
—
*
*
*
*
29.5
21.2
19.5
* Less than 1% of our total ordinary shares outstanding as of February 28, 2023.
** The business address of Messrs. Yan Li, Token Yilin Hu, and Fion Wenjuan Zhou is No.1 Building, No. 195 Huilongguan East Road,
Changping District, Beijing 102208, People’s Republic of China. The business address of Mr. Changqing Ye is Flat B, 36/F, Harbour
Green, 8 Sham Mong Road, Tai Kok Tsui, Kowloon, Hong Kong. The business address of Mr. Mei-Wei Cheng is 1202 Building 10,
Green Court, 777 Biyun Road, Pudong, Shanghai, 201206, People’s Republic of China. The business address of Mr. Julian Juul
Wolhardt is 21F, York House, The Landmark, 15 Queen’s Road Central, Hong Kong. The business address of Mr. John Jinshu Zhang
is 749 Via del Monte, Palos Verdes Estates, California 90274, the United States of America.
*** For each person or group included in this column, percentage of total voting power represents voting power based on both Class A
and Class B ordinary shares held by such person or group with respect to all outstanding shares of our Class A and Class B ordinary
shares as a single class. Each holder of our Class A ordinary shares is entitled to one vote per share. Each holder of our Class B
ordinary shares is entitled to four votes per share. Our Class B ordinary shares are convertible at any time by the holder into Class A
ordinary shares on a one-for-one basis.
(1) Represents 6,615,000 Class B ordinary shares held by ELLY Holdings Limited, a BVI business company. ELLY Holdings Limited is
wholly owned by Dr. Yan Li. The registered address of ELLY Holdings Limited is Vistra Corporate Services Centre, Wickhams Cay
II, Road Town, Tortola, British Virgin Islands VG1110.
(2) Represents 8,207,020 Class B ordinary shares out of the 9,927,020 Class B ordinary shares held by Niu Holding Inc., a BVI business
company, which is 82.7% owned by LUCK GENIE HOLDINGS LIMITED, a BVI business company, and 17.3% owned by
WEALTH ERUPT HOLDINGS LIMITED, a BVI business company. LUCK GENIE HOLDINGS LIMITED is wholly owned by
Legend Champ Investment Limited, a BVI business company. Legend Champ Investment Limited is wholly owned by Token Who
Cares Trust. The settlor and beneficiary of Token Who Cares Trust is Mr. Token Yilin Hu, our director. WEALTH ERUPT
HOLDINGS LIMITED is beneficially owned by Mr. Carl Chuankai Liu. According to the arrangement between two shareholders of
Niu Holding Inc., Mr. Token Yilin Hu beneficially owned 8,207,020 Class B ordinary shares out of the 9,927,020 Class B ordinary
shares held by Niu Holding Inc., and Mr. Carl Chuankai Liu beneficially owned the remaining Class B ordinary shares out of those
held by Niu Holding Inc. The registered address of Niu Holding Inc. is Vistra Corporate Services Centre, Wickhams Cay II, Road
Town, Tortola, British Virgin Islands VG1110.
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(3) Represents 43,181,935 Class A ordinary shares held by Glory Achievement Fund Limited, a Cayman Islands company, and its
affiliated parties. Glory Achievement Fund Limited is ultimately and wholly held by a trust, which has Mr. Yi’nan Li as the
beneficiary and is administered by an independent trustee and initially by three individual protectors unrelated to Mr. Yi’nan Li. The
registered address of Glory Achievement Fund Limited is P.O. Box 2075, George Town, Grand Cayman KY1-1105, Cayman
Islands.
(4) Represents 9,927,020 Class B ordinary shares held by Niu Holding Inc., a BVI business company, which is 82.7% owned by LUCK
GENIE HOLDINGS LIMITED, a BVI business company, and 17.3% owned by WEALTH ERUPT HOLDINGS LIMITED, a BVI
business company. LUCK GENIE HOLDINGS LIMITED is wholly owned by Legend Champ Investment Limited, a BVI business
company. Legend Champ Investment Limited is wholly owned by Token Who Cares Trust. The settlor and beneficiary of Token
Who Cares Trust is Mr. Token Yilin Hu, our director and vice president. WEALTH ERUPT HOLDINGS LIMITED is beneficially
owned by Mr. Carl Chuankai Liu. The registered address of Niu Holding Inc. is Vistra Corporate Services Centre, Wickhams Cay II,
Road Town, Tortola, British Virgin Islands VG1110.
To our knowledge, as of February 28, 2023, a total of 101,545,278 Class A ordinary shares were held by one record holder in
the United States, representing approximately 65.8% of our total outstanding shares on an as-converted basis. The record holder is
Citibank, N.A., the depositary of our ADS program. None of our outstanding Class B ordinary shares were held by record holders in the
United States as of February 28 2023. The number of beneficial owners of our ADSs in the United States is likely to be much larger than
the number of record holders of our ordinary shares in the United States. We are not aware of any arrangement that may, at a subsequent
date, result in a change of control of our company.
Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares
are entitled to one vote per share, while holders of Class B ordinary shares are entitled to four votes per share. Holders of Class A and
Class B ordinary shares vote together as one class on all matters subject to a shareholders’ vote. Each Class B ordinary share is
convertible into one Class A ordinary share at any time by the holder thereof, while Class A ordinary shares are not convertible into
Class B ordinary shares under any circumstance. See “Item 10.B. Additional Information—Memorandum and Articles of Association”
for a more detailed description of our Class A ordinary shares and Class B ordinary shares.
F.
Disclosure of Registrant’s Action to Recover Erroneously Awarded Compensation
Not applicable.
Item 7. Major Shareholders and Related Party Transactions
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
See “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with the VIE.”
Shareholders Agreement
We entered into our fourth amended and restated shareholders agreement on August 22, 2018 with our shareholders, which
consist of holders of ordinary shares and preferred shares. The shareholders agreement provides for certain shareholders’ rights,
including right of participation, right of first refusal and co-sale rights, and contains provisions governing the board of directors and other
corporate governance matters. The special rights, as well as the corporate governance provisions, have automatically terminated upon the
completion of our initial public offering.
Registration Rights
We have granted certain registration rights to our shareholders. Set forth below is a description of the registration rights granted
under the shareholders agreement.
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Demand Registration Rights. Holders of at least 10% of the registrable securities (including preferred shares and ordinary
shares issued upon conversion of preferred shares) then outstanding have the right to demand that we file a registration statement of all
registrable securities that the holders request to be registered and included in such registration by written notice. Other than required by
the underwriter(s) in connection with our initial public offering, at least fifty percent (50)% of the registrable securities requested by the
holders to be included in such underwriting and registration shall be so included. We have the right to defer filing of a registration
statement for a period of not more than 90 days after the receipt of the request of the initiating holders if we furnish to the holders
requesting registration a certificate signed by our president or chief executive officer stating that in the good faith judgment of our board
of directors, it would be materially detrimental to us and our shareholders for such registration statement to be filed at such time.
However, we cannot exercise the deferral right more than once in any twelve-month period. We are obligated to effect no more than three
demand registrations, other than demand registration to be effected pursuant to registration statement on Form F-3, for which an
unlimited number of demand registrations shall be permitted.
Piggyback Registration Rights. If we propose to file a registration statement for a public offering of our securities, we must offer
shareholders an opportunity to include in the registration all or any part of the registrable securities held by such holders. If the managing
underwriters of any underwritten offering determine in good faith that marketing factors require a limitation of the number of shares to
be underwritten, and the number of shares that may be included in the registration and the underwriting shall be allocated (i) first, to us,
(ii) second, to each holder requesting inclusion of its registrable securities in such registration statement on a pro rata basis based on the
total number of registrable securities then held by each such holder, (iii) third, to holders of other securities of us.
Form F-3 Registration Rights. Our shareholders may request us in writing to file an unlimited number of registration statements
on Form F-3. We shall effect the registration of the securities on Form F-3 as soon as practicable, except in certain circumstances.
Expenses of Registration. We will bear all registration expenses, other than underwriting discounts and selling commissions.
Termination of Registration Rights. Our shareholders’ registration rights will terminate upon the earlier of (i) the fifth
anniversary of the completion of our 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 promulgated under the Securities Act without transfer
restrictions, and (iii) the consummation of a liquidation event.
Employment Agreements and Indemnification Agreements
See “Item 6—Directors, Senior Management and Employees—B. Compensation.”
Share Options and Restricted Shares Grants
Please refer to “Item 6. Directors, Senior Management and Employees— B. Compensation.”
C.
Interests of Experts and Counsel
Not applicable.
Item 8.
Financial Information
A.
Consolidated Statements and Other Financial Information
We have appended consolidated financial statements filed as part of this annual report.
Legal Proceedings
We are currently not a party to any material legal or administrative proceedings. We may from time to time be subject to various
legal or administrative claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative
proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s
time and attention.
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Dividend Policy
Our board of directors has discretion on whether to distribute dividends, subject to certain requirements of Cayman Islands law.
In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by
our board of directors. In either case, all dividends are subject to certain restrictions under Cayman Islands law, namely that our company
may only pay dividends out of profits or share premium, and always that in no circumstances may a dividend be paid if this would result
in our company being unable to pay its debts as they fall due in the ordinary course of business. Even if we decide to pay dividends, the
form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial
condition, contractual restrictions and other factors that the board of directors may deem relevant.
We do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend
to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
We are a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiaries in mainland
China for our cash requirements, including any payment of dividends to our shareholders. Regulations of mainland China may restrict
the ability of our mainland China subsidiaries to pay dividends to us. See “Item 4. Information on the Company—B. Business Overview
—Regulation—Regulations Relating to Dividend Distribution.”
If we pay any dividends on our ordinary shares, we will pay those dividends which are payable in respect of the Class A
ordinary shares underlying the ADSs to the depositary, as the registered holder of such Class A ordinary shares, and the depositary then
will pay such amounts to the ADS holders in proportion to the Class A ordinary shares underlying the ADSs held by such ADS holders,
subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. Cash dividends on our ordinary shares,
if any, will be paid in U.S. dollars.
B.
Significant Changes
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our
audited consolidated financial statements included in this annual report.
Item 9. The Offer and Listing
A.
Offering and Listing Details
Our ADSs, each representing two Class A ordinary shares, have been listed on The Nasdaq Global Market since October 19,
2018 under the symbol “NIU.”
B.
Plan of Distribution
Not applicable.
C.
Markets
The ADSs have been listed on Nasdaq since October 19, 2018 under the symbol “NIU”.
D.
Selling Shareholders
Not applicable.
E.
Dilution
Not applicable.
F.
Expenses of the Issue
Not applicable.
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Item 10. Additional Information
A.
Share Capital
Not applicable.
B.
Memorandum and Articles of Association
The following are summaries of material provisions of our current (sixth amended and restated) memorandum and articles of
association, as well as the Companies Act (As Revised) insofar as they relate to the material terms of our ordinary shares. The
information set forth in Exhibits 2.5 and 2.6 to this Annual Report on Form 20-F is incorporated herein by reference.
Registered Office and Objects
Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited at PO Box 309,
Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The objects for which our company is established are unrestricted and we
have the full power and authority to carry out any object not prohibited by the laws of the Cayman Islands.
Board of Directors
See “Item 6. Directors, Senior Management and Employees— C. Board Practices—Board of Directors.”
Ordinary Shares
Ordinary Shares. Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of our
Class A ordinary shares and Class B ordinary shares will have the same rights except for voting and conversion rights. Each Class A
ordinary share shall entitle the holder thereof to one vote on all matters subject to vote at our general meetings, and each Class B ordinary
share shall entitle the holder thereof to four votes on all matters subject to vote at our general meetings. Our ordinary shares are issued in
registered form and are issued when registered in our register of members. We may not issue shares to bearer. Our shareholders who are
non-residents of the Cayman Islands may freely hold and vote their shares.
Conversion. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof.
Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Any number of Class B ordinary
shares held by a holder thereof will be automatically and immediately converted into an equal number of Class A ordinary shares upon
the occurrence of (i) any direct or indirect sale, transfer, assignment or disposition of such number of Class B ordinary shares by the
holder thereof or the direct or indirect transfer or assignment of the voting power attached to such number of Class B ordinary shares
through voting proxy or otherwise to any person that is not an affiliate of such holder or (ii) the direct or indirect sale, transfer,
assignment or disposition of a majority of the issued and outstanding voting securities of, or the direct or indirect transfer or assignment
of the voting power attached to such voting securities through voting proxy or otherwise, or the direct or indirect sale, transfer,
assignment or disposition of all or substantially all of the assets of, a holder of Class B ordinary shares that is an entity to any person that
is not an affiliate of such holder.
Dividends. Our directors may from time to time declare dividends (including interim dividends) and other distributions on our
shares in issue and authorize payment of the same out of the funds of our company lawfully available therefor. In addition, our
shareholders may declare dividends by ordinary resolution, but no dividend shall exceed the amount recommended by our directors. Our
memorandum and articles of association provide that dividends may be declared and paid out of the funds of our company lawfully
available therefor. Under the laws of the Cayman Islands, our company may pay a dividend out of either profits or share premium
account; provided that in no circumstances may a dividend be paid if this would result in our company being unable to pay its debts as
they fall due in the ordinary course of business.
Voting Rights. Holders of our Class A ordinary shares and our Class B ordinary shares shall, at all times, vote together as one
class on all matters submitted to a vote by our shareholders at any general meeting of our company. Each Class A ordinary share shall be
entitled to one vote, and each Class B ordinary share shall be entitled to four votes, on all matters subject to a vote at general meetings of
our company. Voting at any meeting of shareholders is by show of hands unless a poll (before or on the declaration of the result of the
show of hands) is demanded. A poll may be demanded by the chairman of such meeting or any one shareholder holding not less than
10% of the votes attaching to the shares present in person or by proxy.
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An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the
votes attaching to the ordinary shares cast at a meeting, while a special resolution requires the affirmative vote of no less than two-thirds
of the votes cast attaching to the issued and outstanding ordinary shares at a meeting. A special resolution will be required for important
matters such as a change of name or making changes to our memorandum and articles of association. Our shareholders may, among other
things, divide or combine their shares by ordinary resolution.
General Meetings of Shareholders. As a Cayman Islands exempted company, we are not obliged by the Companies Act to call
shareholders’ annual general meetings. Our memorandum and articles of association provide that we may (but are not obliged to) in each
year hold a general meeting as our annual general meeting in which case we shall specify the meeting as such in the notices calling it,
and the annual general meeting shall be held at such time and place as may be determined by our directors.
Shareholders’ general meetings may be convened by the chairman of our board of directors or by our directors (acting by a
resolution of our board). Advance notice of at least seven calendar days is required for the convening of our annual general shareholders’
meeting (if any) and any other general meeting of our shareholders. A quorum required for any general meeting of shareholders consists
of, at the time when the meeting proceeds to business, one or more of our shareholders holding shares which carry in aggregate (or
representing by proxy) not less than one-third of all votes attaching to all of our shares in issue and entitled to vote at such general
meeting.
The Companies Act provides shareholders with only limited rights to requisition a general meeting, and does not provide
shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles
of association. Our memorandum and articles of association provide that upon the requisition of any one or more of our shareholders
holding shares which carry in aggregate not less than one-third of all votes attaching to all issued and outstanding shares of our company
entitled to vote at general meetings, our board will convene an extraordinary general meeting and put the resolutions so requisitioned to a
vote at such meeting. However, our memorandum and articles of association do not provide our shareholders with any right to put any
proposals before annual general meetings or extraordinary general meetings not called by such shareholders.
Transfer of Ordinary Shares. Subject to the restrictions set out below, any of our shareholders may transfer all or any of his or
her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board of directors.
Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully
paid up or on which we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:
● the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and
such other evidence as our board of directors may reasonably require to show the right of the transferor to make
the transfer;
● the instrument of transfer is in respect of only one class of ordinary shares;
● the instrument of transfer is properly stamped, if required;
● in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does
not exceed four; and
● a fee of such maximum sum as the Nasdaq Global Market may determine to be payable or such lesser sum as our directors
may from time to time require is paid to us in respect thereof.
If our directors refuse to register a transfer they shall, within three months after the date on which the instrument of transfer was
lodged, send to each of the transferor and the transferee notice of such refusal.
The registration of transfers may, on ten calendar days’ notice being given by advertisement in such one or more newspapers, by
electronic means or by any other means in accordance with the rules of the Nasdaq Global Market be suspended and the register closed at
such times and for such periods as our board of directors may from time to time determine; provided, however, that the registration of
transfers shall not be suspended nor the register closed for more than 30 days in any year as our board may determine.
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Liquidation. On the winding up of our company, if the assets available for distribution amongst our shareholders shall be more
than sufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst
our shareholders in proportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction
from those shares in respect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our
assets available for distribution are insufficient to repay all of the paid-up capital, such the assets will be distributed so that, as nearly as
may be, the losses are home by our shareholders in proportion to the par value of the shares held by them.
Calls on Shares and Forfeiture of Shares. Our board of directors may from time to time make calls upon shareholders for any
amounts unpaid on their shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment.
The shares that have been called upon and remain unpaid are subject to forfeiture.
Redemption, Repurchase and Surrender of Shares. We may issue shares on terms that such shares are subject to redemption, at
our option or at the option of the holders of these shares, on such terms and in such manner as may be determined, before the issue of
such shares, by our board of directors or by our shareholders by special resolution. Our company may also repurchase any of our shares
on such terms and in such manner as have been approved by our board of directors or by an ordinary resolution of our shareholders.
Under the Companies Act, the redemption or repurchase of any share may be paid out of our company’s profits or out of the proceeds of
a new issue of shares made for the purpose of such redemption or repurchase, or out of capital (including share premium account and
capital redemption reserve) if our company can, immediately following such payment, pay its debts as they fall due in the ordinary
course of business. In addition, under the Companies Act no such share may be redeemed or repurchased (a) unless it is fully paid up,
(b) if such redemption or repurchase would result in there being no shares outstanding or (c) if the company has commenced liquidation.
In addition, our company may accept the surrender of any fully paid share for no consideration.
Variations of Rights of Shares. Whenever the capital of our company is divided into different classes the rights attached to any
such class may, subject to any rights or restrictions for the time being attached to any class, only be materially adversely varied with the
consent in writing of the holders of all of the issued shares of that class or with the sanction of an ordinary resolution passed at a separate
meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class issued with preferred or
other rights shall not, subject to any rights or restrictions for the time being attached to the shares of that class, be deemed to be
materially adversely varied by the creation, allotment or issue of further shares ranking pari passu with or subsequent to them or the
redemption or purchase of any shares of any class by our company. The rights of the holders of shares shall not be deemed to be
materially adversely varied by the creation or issue of shares with preferred or other rights including, without limitation, the creation of
shares with enhanced or weighted voting rights.
Issuance of Additional Shares. Our memorandum of association authorizes our board of directors to issue additional ordinary
shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.
Our memorandum of association also authorizes our board of directors to establish from time to time one or more series of
preference shares and to determine, with respect to any series of preference shares, the terms and rights of that series, including:
● the designation of the series;
● the number of shares of the series;
● the dividend rights, dividend rates, conversion rights, voting rights; and
● the rights and terms of redemption and liquidation preferences.
Our board of directors may issue preference shares without action by our shareholders to the extent authorized but unissued.
Issuance of these shares may dilute the voting power of holders of ordinary shares.
Inspection of Books and Records. Holders of our ordinary shares will have no general right under Cayman Islands law to inspect
or obtain copies of our list of shareholders or our corporate records (save for our memorandum and articles of association, our register of
mortgages and charges and special resolutions of our shareholders). However, we intend to provide our shareholders with our annual
audited financial statements.
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Anti-Takeover Provisions. Some provisions of our memorandum and articles of association may discourage, delay or prevent a
change of control of our company or management that shareholders may consider favorable, including provisions that:
● authorize our board of directors to issue preference shares in one or more series and to designate the price, rights,
preferences, privileges and restrictions of such preference shares without any further vote or action by our
shareholders; and
● limit the ability of shareholders to requisition and convene general meetings of shareholders.
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our
memorandum and articles of association for a proper purpose and for what they believe in good faith to be in the best interests of
our company.
Exempted Company. We are an exempted company with limited liability under the Companies Act. The Companies Act
distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but
conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an
exempted company are essentially the same as for an ordinary company except that an exempted company:
● does not have to file an annual return of its shareholders with the Registrar of Companies;
● is not required to open its register of members for inspection;
● does not have to hold an annual general meeting;
● may issue shares with no par value;
● may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years
in the first instance);
● may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
● may register as a limited duration company; and
● may register as a segregated portfolio company.
“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares
of the company (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or
improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).
C.
Material Contracts
We have not entered into any material contracts other than in the ordinary course of business and other than those described in
“Item 4. Information on the Company,” “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions,” or
elsewhere in this annual report on Form 20-F.
D.
Exchange Controls
See “Item 4.B. Information on the Company—Business Overview—Regulations—Regulations Relating to Foreign Exchange.”
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E.
Taxation
The following summary of the material Cayman Islands, mainland China and U.S. federal income tax consequences of an
investment in the ADSs or ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this
registration statement, all of which are subject to change. This summary does not deal with all possible tax consequences relating to an
investment in the ADSs or ordinary shares, such as the tax consequences under U.S. state and local tax laws or under the tax laws of
jurisdictions other than the Cayman Islands, mainland China and the United States.
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation
and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the
government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or, after execution,
brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to
any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect of our ordinary shares and ADSs will not be subject to taxation in the Cayman
Islands and no withholding will be required on the payment of a dividend or capital to any holder of our ordinary shares or the ADSs, nor
will gains derived from the disposal of our ordinary shares or the ADSs be subject to Cayman Islands income or corporation tax.
Mainland China Taxation
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of mainland China
with a “de facto management body” within mainland China is considered a resident enterprise and will be subject to the enterprise
income tax at the rate of 25% on its global income. The implementation rules define the term “de facto management body” as the body
that exercises full and substantial control over and overall management of the business, production, personnel, accounts and properties of
an enterprise. In April 2009, the State Administration of Taxation issued a circular, known as Circular 82, which provides certain specific
criteria for determining whether the “de facto management body” of a mainland China-controlled enterprise that is incorporated offshore
is located in mainland China. Although this circular only applies to offshore enterprises controlled by mainland China enterprises or
mainland China enterprise groups, not those controlled by mainland China individuals or foreigners, the criteria set forth in the circular
may reflect the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in
determining the tax resident status of all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by
a mainland China enterprise or a mainland China enterprise group will be regarded as a mainland China tax resident by virtue of having
its “de facto management body” in mainland China only if all of the following conditions are met: (i) the primary location of the day-to-
day operational management is in mainland China; (ii) decisions relating to the enterprise’s financial and human resource matters are
made or are subject to approval by organizations or personnel in mainland China; (iii) the enterprise’s primary assets, accounting books
and records, company seals and board and shareholder resolutions are located or maintained in mainland China; and (iv) at least 50% of
voting board members or senior executives habitually reside in mainland China.
We believe that Niu Technologies is not a mainland China resident enterprise for mainland China tax purposes. Niu
Technologies is not controlled by a mainland China enterprise or mainland China enterprise group and we do not believe that Niu
Technologies meets all of the conditions above. Niu Technologies is a company incorporated outside of mainland China. As a holding
company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including the
resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside of mainland China. For the same
reasons, we believe our other entities outside of mainland China are not mainland China resident enterprises either. However, the tax
resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the
interpretation of the term “de facto management body.” There can be no assurance that the PRC government will ultimately take a view
that is consistent with us.
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If the PRC tax authorities determine that Niu Technologies is a mainland China resident enterprise for enterprise income tax
purposes, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident
enterprises, including the holders of the ADSs. In addition, non-resident enterprise shareholders (including the ADS holders) may be
subject to a 10% mainland China tax on gains realized on the sale or other disposition of ADSs or ordinary shares, if such income is
treated as sourced from within mainland China. It is unclear whether our non-mainland China individual shareholders (including the
ADS holders) would be subject to any mainland China tax on dividends or gains obtained by such non-mainland China individual
shareholders in the event we are determined to be a mainland China resident enterprise. If any mainland China tax were to apply to such
dividends or gains, it would generally apply at a rate of 20% unless a reduced rate is available under an applicable tax treaty. It is also
unclear whether non-mainland China shareholders of Niu Technologies would be able to claim the benefits of any tax treaties between
their country of tax residence and mainland China in the event that Niu Technologies is treated as a mainland China resident enterprise.
Provided that our Cayman Islands holding company, Niu Technologies, is not deemed to be a mainland China resident
enterprise, holders of the ADSs and ordinary shares who are not mainland China residents will not be subject to mainland China income
tax on dividends distributed by us or gains realized from the sale or other disposition of our shares or ADSs. However, under SAT Public
Notice 7 and SAT Bulletin 37, where a non-resident enterprise conducts an “indirect transfer” by transferring taxable assets, including, in
particular, equity interests in a mainland China resident enterprise, indirectly by disposing of the equity interests of an overseas holding
company, the non-resident enterprise, being the transferor, or the transferee or the mainland China entity which directly owned such
taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance over form” principle, the PRC tax
authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established
for the purpose of reducing, avoiding or deferring mainland China tax. As a result, gains derived from such indirect transfer may be
subject to mainland China enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to
withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a mainland China resident enterprise. We
and our non-mainland China resident investors may be at risk of being required to file a return and being taxed under SAT Public Notice
7 and SAT Bulletin 37, and we may be required to expend valuable resources to comply with SAT Public Notice 7 and SAT Bulletin 37,
or to establish that we should not be taxed under these circulars. See “Item 3. Key Information— D. Risk Factors—Risks Related to
Doing Business in China—We face uncertainty with respect to indirect transfers of equity interests in mainland China resident
enterprises by their non-mainland China holding companies.”
United States Federal Income Tax Considerations
The following discussion is a summary of U.S. federal income tax considerations generally applicable to the ownership and
disposition of the ADSs or ordinary shares by a U.S. Holder (as defined below) that holds the ADSs or ordinary shares as “capital
assets”(generally, property held for investment) under the U.S. Internal Revenue Code of 1986, as amended, or the Code. This discussion
is based upon existing U.S. federal tax law, which is subject to differing interpretations or change, possibly with retroactive effect. There
can be no assurance that the IRS or a court will not take a contrary position. This discussion, moreover, does not address the U.S. federal
estate, gift, Medicare and alternative minimum tax considerations, or any state, local and non-U.S. tax considerations, relating to the
ownership or disposition of the ADSs or ordinary shares. The following summary does not address all aspects of U.S. federal income
taxation that may be important to particular investors in light of their individual circumstances or to persons in special tax situations
such as:
● banks and other financial institutions;
● insurance companies;
● pension plans;
● cooperatives;
● regulated investment companies;
● real estate investment trusts;
● broker-dealers;
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● traders that elect to use a mark-to-market method of accounting;
● certain former U.S. citizens or long-term residents;
● tax-exempt entities (including private foundations);
● holders who acquire their ADSs or ordinary shares pursuant to any employee share option or otherwise as compensation;
● investors that will hold their ADSs or ordinary shares as part of a straddle, hedge, conversion, constructive sale or other
integrated transaction for U.S. federal income tax purposes;
● investors that have a functional currency other than the U.S. dollar;
● persons that actually or constructively own 10% or more of our stock (by vote or value); or
● partnerships or other entities taxable as partnerships for U.S. federal income tax purposes, or persons holding the ADSs or
ordinary shares through such entities.
all of whom may be subject to tax rules that differ significantly from those discussed below.
Each U.S. Holder is urged to consult its tax advisor regarding the application of U.S. federal taxation to its particular
circumstances, and the state, local, non-U.S. and other tax considerations of the ownership and disposition of the ADSs or ordinary
shares.
General
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of the ADSs or ordinary shares that is, for U.S. federal
income tax purposes:
● an individual who is a citizen or resident of the United States;
● a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created in or organized under
the law of the United States or any state thereof or the District of Columbia;
● an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
● a trust (A) the administration of which is subject to the primary supervision of a U.S. court and which has one or more
U.S. persons who have the authority to control all substantial decisions of the trust or (B) that has otherwise validly elected
to be treated as a U.S. person under the Code.
If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of the ADSs
or ordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities
of the partnership. Partnerships holding the ADSs or ordinary shares and their partners are urged to consult their tax advisors regarding
an investment in the ADSs or ordinary shares.
For U.S. federal income tax purposes, a U.S. Holder of ADSs will generally be treated as the beneficial owner of the underlying
shares represented by the ADSs. The remainder of this discussion assumes that a U.S. Holder of the ADSs will be treated in this manner.
Accordingly, deposits or withdrawals of ordinary shares for ADSs will generally not be subject to U.S. federal income tax.
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Passive Foreign Investment Company Considerations
A non-U.S. corporation, such as our company, will be classified as a PFIC, for U.S. federal income tax purposes for any taxable
year, if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the
value of its assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce or are
held for the production of passive income. For this purpose, cash and assets readily convertible into cash are categorized as a passive
asset and the company’s goodwill and other unbooked intangibles are taken into account. Passive income generally includes, among
other things, dividends, interest, rents, royalties and gains from the disposition of passive assets. We will be treated as owning a
proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or
indirectly, 25% or more (by value) of the stock.
Although the law in this regard is not entirely clear, we treat the VIE and its subsidiaries as being owned by us for U.S. federal
income tax purposes because we conduct the business operations of the VIE and are entitled to substantially all of the economic benefits
associated with it. As a result, we consolidate its result of operations in our consolidated U.S. GAAP financial statements. If it were
determined, however, that we are not the owner of the VIE for U.S. federal income tax purposes, we may be treated as a PFIC for the
current taxable year and any subsequent taxable year.
Assuming that we are the owner of the VIE and its subsidiaries for U.S. federal income tax purposes, and based upon our
current and projected income and assets, we do not believe we were a PFIC for the taxable year ended December 31, 2022 and we do not
presently expect to be a PFIC for the current taxable year or the foreseeable future. While we do not expect to be or become a PFIC, no
assurance can be given in this regard because the determination of whether we are or will become a PFIC for any taxable year is a fact-
intensive determination made annually that will depend, in part, upon the composition of our income and assets. Fluctuations in the
market price of the ADSs may cause us to be or become a PFIC for the current or future taxable years because the value of our assets for
purposes of the asset test, including the value of our goodwill and unbooked intangibles, may be determined by reference to the market
price of the ADSs from time to time (which may be volatile). In estimating the value of our goodwill and other unbooked intangibles, we
have taken into account our current market capitalization. If our market capitalization subsequently declines, we may be or become
classified as a PFIC for the current taxable year or future taxable years. Furthermore, the composition of our income and assets may also
be affected by how, and how quickly, we use our liquid assets. Under circumstances where our revenue from activities that produce
passive income significantly increases relative to our revenue from activities that produce non-passive income, or where we determine
not to deploy significant amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase.
If we are a PFIC for any year during which a U.S. Holder holds the ADSs or ordinary shares, we will generally continue to be
treated as a PFIC for all succeeding years during which such U.S. Holder holds the ADSs or ordinary shares.
The discussion below under “—Dividends” and “—Sale or Other Disposition” is written on the basis that we will not be or
become classified as a PFIC for U.S. federal income tax purposes. The U.S. federal income tax rules that apply generally if we are
treated as a PFIC are discussed below under “—Passive Foreign Investment Company Rules.”
Dividends
Any cash distributions paid on the ADSs or ordinary shares (including the amount of any mainland China tax withheld) out of
our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, will generally be includible in
the gross income of a U.S. Holder as dividend income on the day actually or constructively received by the U.S. Holder, in the case of
ordinary shares, or by the depositary, in the case of ADSs. Because we do not intend to determine our earnings and profits on the basis of
U.S. federal income tax principles, any distribution we pay will generally be treated as a “dividend” for U.S. federal income tax
purposes. Dividends received on the ADSs or ordinary shares will not be eligible for the dividends-received deduction allowed to
corporations in respect of dividends received from U.S. corporations.
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Individuals and other non-corporate U.S. Holders will be subject to tax at the lower capital gain tax rate applicable to “qualified
dividend income”; provided that certain conditions are satisfied, including that (i) the ADSs or ordinary shares on which the dividends
are paid are readily tradable on an established securities market in the United States, or, in the event that we are deemed to be a mainland
China resident enterprise under the mainland China tax law, we are eligible for the benefit of the United States-mainland China income
tax treaty (the “Treaty”), (ii) we are neither a PFIC nor treated as such with respect to a U.S. Holder (as discussed below) for the taxable
year in which the dividend is paid and the preceding taxable year, and (iii) certain holding period requirements are met. Our ADSs are
considered to be readily tradable on the Nasdaq Global Market, which is an established securities market in the United States. There can
be no assurance that the ADSs will continue to be considered readily tradable on an established securities market in later years. Because
the ordinary shares will not be listed on a U.S. exchange, we do not believe that dividends received with respect to ordinary shares that
are not represented by ADSs will be treated as qualified dividends. U.S. Holders are urged to consult their tax advisors regarding the
availability of the lower rate for dividends paid with respect to the ADSs or ordinary shares.
In the event that we are deemed to be a mainland China resident enterprise under the PRC Enterprise Income Tax Law (see “—
Mainland China Taxation”), we may be eligible for the benefits of the Treaty. If we are eligible for such benefits, dividends we pay on
our ordinary shares, regardless of whether such shares are represented by the ADSs, and regardless of whether the ADSs are readily
tradable on an established securities market in the United States, would be eligible for the reduced rates of taxation described in the
preceding paragraph.
For U.S. foreign tax credit purposes, dividends paid on the ADSs or ordinary shares will generally be treated as income from
foreign sources and will generally constitute passive category income. In the event that we are deemed to be a mainland China resident
enterprise under the PRC Enterprise Income Tax Law, a U.S. Holder may be subject to mainland China withholding taxes on dividends
paid on the ADSs or ordinary shares (see “—Mainland China Taxation”). Depending on the U.S. Holder’s particular facts and
circumstances and subject to a number of complex conditions and limitations, mainland China withholding taxes on dividends that are
non-refundable under the Treaty may be treated as foreign taxes eligible for credit against a U.S. Holder’s U.S. federal income tax
liability. A U.S. Holder who does not elect to claim a foreign tax credit for foreign tax withheld may instead claim a deduction for U.S.
federal income tax purposes, in respect of such withholding, but only for a year in which such holder elects to do so for all creditable
foreign income taxes. The rules governing the foreign tax credit are complex and U.S. Holders are urged to consult their tax advisors
regarding the availability of the foreign tax credit under their particular circumstances.
Sale or Other Disposition
A U.S. Holder will generally recognize gain or loss upon the sale or other disposition of ADSs or ordinary shares in an amount
equal to the difference between the amount realized upon the disposition and the holder’s adjusted tax basis in such ADSs or ordinary
shares. The gain or loss will generally be capital gain or loss. Any capital gain or loss will be long term if the ADSs or ordinary shares
have been held for more than one year. The deductibility of a capital loss may be subject to limitations. Any such gain or loss that the
U.S. Holder recognizes will generally be treated as U.S. source income or loss for foreign tax credit limitation purposes, which will
generally limit the availability of foreign tax credits. However, in the event we are deemed to be a mainland China resident enterprise
under the PRC Enterprise Income Tax Law, we may be eligible for the benefits of the Treaty. In such event, if mainland China tax were
to be imposed on any gain from the disposition of the ADSs or ordinary shares, a U.S. Holder that is eligible for the benefits of the
Treaty may elect to treat such gain as mainland China source income. Pursuant to recently issued Treasury Regulations, however, if a
U.S. Holder is not eligible for the benefits of the Treaty or does not elect to apply the Treaty, then such holder may not be able to claim a
foreign tax credit arising from any mainland China tax imposed on the disposition of the ADSs or ordinary shares. Each U.S. Holder is
advised to consult its tax advisor regarding the tax consequences if a foreign tax is imposed on a disposition of the ADSs or ordinary
shares, including the availability of the foreign tax credit or deduction under its particular circumstances, their eligibility for benefits
under the Treaty and the potential impact of the recently issued Treasury Regulations.
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Passive Foreign Investment Company Rules
If we are classified as a PFIC for any taxable year during which a U.S. Holder holds the ADSs or ordinary shares, and unless the
U.S. Holder makes a mark-to-market election (as described below), the U.S. Holder will generally be subject to special tax rules on
(i) any excess distribution that we make to the U.S. Holder (which generally means any distribution paid during a taxable year to a
U.S. Holder that is greater than 125 percent of the average annual distributions paid in the three preceding taxable years or, if shorter, the
U.S. Holder’s holding period for the ADSs or ordinary shares), and (ii) any gain realized on the sale or other disposition including, under
certain circumstances, a pledge, of ADSs or ordinary shares. Under the PFIC rules:
● the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or ordinary
shares;
● the amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first
taxable year in which we are classified as a PFIC (each, a “pre-PFIC year”) will be taxable as ordinary income; and
● the amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in
effect for individuals or corporations, as appropriate, for that year, increased by an additional tax equal to the interest on the
resulting tax deemed deferred with respect to each such taxable year.
If we are a PFIC for any taxable year during which a U.S. Holder holds the ADSs or ordinary shares, and any of our
subsidiaries, the VIE or any of the subsidiaries of the VIE entity is also a PFIC, such U.S. Holder would be treated as owning a
proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. U.S. Holders are urged
to consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries, the VIE or any of the subsidiaries of
the VIE.
As an alternative to the foregoing rules, a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-
market election with respect to such stock. If a U.S. Holder makes this election with respect to the ADSs, the holder will generally
(i) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value of ADSs held at the
end of the taxable year over the adjusted tax basis of such ADSs and (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax
basis of the ADSs over the fair market value of such ADSs held at the end of the taxable year, but such deduction will only be allowed to
the extent of the amount previously included in income as a result of the mark-to-market election. The U.S. Holder’s adjusted tax basis in
the ADSs would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder makes a mark-to-
market election in respect of the ADSs and we cease to be classified as a PFIC, the holder will not be required to take into account the
gain or loss described above during any period that we are not classified as a PFIC. If a U.S. Holder makes a mark-to-market election,
any gain such U.S. Holder recognizes upon the sale or other disposition of the ADSs in a year when we are a PFIC will be treated as
ordinary income and any loss will be treated as ordinary loss, but such loss will only be treated as ordinary loss to the extent of the net
amount previously included in income as a result of the mark-to-market election.
The mark-to-market election is available only for “marketable stock,” which is stock that is traded in other than de minimis
quantities on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market, as defined in
applicable United States Treasury regulations. Our ADSs are listed on the Nasdaq Global Market, which is an established securities
market in the United States. Consequently, if our ADSs continue to be listed on the Nasdaq Global Market and are regularly traded, we
expect that the mark-to-market election would be available to a U.S. Holder that holds our ADSs were we to be or become a PFIC. Our
ADSs are expected to qualify as being regularly traded, but no assurance may be given in this regard.
Because a mark-to-market election cannot technically be made for any lower-tier PFICs that we may own, a U.S. Holder may
continue to be subject to the PFIC rules with respect to such U.S. Holder’s indirect interest in any investments held by us that are treated
as an equity interest in a PFIC for U.S. federal income tax purposes.
We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections which, if
available, would result in tax treatment different from (and generally less adverse than) the general tax treatment for PFICs described
above.
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If a U.S. Holder owns the ADSs or ordinary shares during any taxable year that we are a PFIC, the holder must generally file an
annual IRS Form 8621. You should consult your tax advisor regarding the U.S. federal income tax consequences of owning and
disposing of the ADSs or ordinary shares if we are or become a PFIC.
F.
Dividends and Paying Agents
Not applicable.
G.
Statement by Experts
Not applicable.
H.
Documents on Display
We previously filed with the SEC our registration statement on Form F-1 (Registration No. 333-227497), as amended, including
the prospectus contained therein, to register the issuance and sale of our ordinary shares represented by ADSs in relation to our initial
public offering. We have also filed with the SEC the registration statement on Form F-6 (Registration No. 333-227702) to register the
ADSs.
We are subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private
issuers, and are required to file reports and other information with the SEC. Specifically, we are required to file annually an annual report
on Form 20-F within four months after the end of each fiscal year, which is December 31. All information filed with the SEC can be
obtained over the Internet at the SEC’s website at www.sec.gov. As a foreign private issuer, we are exempt from the rules under the
Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal
shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
We will furnish the Citibank, N.A., the depositary of the ADSs, with our annual reports, which will include a review of
operations and annual audited consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’
meetings and other reports and communications that are made generally available to our shareholders. The depositary will make such
notices, reports and communications available to holders of ADSs and, upon our request, will mail to all record holders of ADSs the
information contained in any notice of a shareholders’ meeting received by the depositary from us.
In accordance with NASDAQ Stock Market Rule 5250(d), we will post this annual report on Form 20-F on our website at
http://ir.niu.com. In addition, we will provide hardcopies of our annual report free of charge to shareholders and ADS holders upon
request.
I.
J.
Subsidiary Information
Not applicable.
Annual Report to Security Holders
Not applicable.
Item 11. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
Our exposure to interest rate risk primarily relates to the interest expenses on our short term bank borrowings. Our short term
bank borrowing bears interests at fixed rates. We have not been exposed to, nor do we anticipate being exposed to, material risks due to
changes in market interest rates. However, our future interest expenses may exceeds expectations due to changes in market interest rates.
If we were to renew these short term bank borrowings, we might be subject to interest rate risk.
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Foreign Exchange Risk
A substantial majority of all of our revenues and expenses are denominated in Renminbi. We do not believe that we currently
have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk.
Although our exposure to foreign exchange risks should be limited in general, the value of your investment in the ADSs will be affected
by the exchange rate between U.S. dollar and Renminbi because the value of our business is effectively denominated in RMB, while the
ADSs will be traded in U.S. dollars. In addition, as our business and operation expand in European and other overseas markets, we are
exposed to increased foreign exchange risks for U.S. dollar and other currencies.
Substantially all of our revenues and expenses are denominated in RMB. The value of the Renminbi against the U.S. dollar and
other currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange policies, among
other things. After the PRC government changed its policy of pegging the value of RMB to the U.S. dollar in 2005, the RMB has
fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or
U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.
Any significant depreciation of the Renminbi may materially and adversely affect our revenues, earnings and financial position
as reported in U.S. dollars. To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the
Renminbi against the U.S. dollar would have an adverse effect on the RMB amount we receive from the conversion. Conversely, if we
decide to convert Renminbi into U.S. dollars for the purpose of making payments for dividends on our shares or ADSs or for other
business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available
to us.
Inflation
Since our inception, inflation in China has not materially affected our results of operations. According to the National Bureau of
Statistics of China, the year-over-year percent changes in the consumer price index for December 2020, December 2021 and December
2022 were increases of 2.5%, 0.9% and 1.8%, respectively. Although we have not been materially affected by inflation, we may be
affected if China experiences higher rates of inflation in the future.
Item 12. Description of Securities Other than Equity Securities
A.
Debt Securities
Not applicable.
B.
Warrants and Rights
Not applicable.
C.
Other Securities
Not applicable.
D.
American Depositary Shares
Fees and Charges Our ADS holders May Have to Pay
Citibank, N.A. acts as the depositary bank for the American Depositary Shares. Citibank’s depositary offices are located at 388
Greenwich Street, New York, New York 10013. American Depositary Shares are frequently referred to as “ADSs” and represent
ownership interests in securities that are on deposit with the depositary bank. ADSs may be represented by certificates that are commonly
known as “American Depositary Receipts” or “ADRs.” The depositary bank typically appoints a custodian to safekeep the securities on
deposit. In this case, the custodian is Citibank, N.A.—Hong Kong, located at 9/F, Citi Tower, One Bay East, 83 Hoi Bun Road, Kwun
Tong, Kowloon, Hong Kong.
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An ADS holder will be required to pay the following fees under the terms of the deposit agreement:
Service
· Issuance of ADSs (e.g., an issuance of ADS upon a deposit of
Class A ordinary shares, upon a change in the ADS(s)-to Class A
ordinary share(s) ratio, or for any other reason), excluding ADS
issuances as a result of distributions of Class A ordinary shares
· Cancellation of ADSs (e.g., a cancellation of ADSs for delivery
of deposited property, upon a change in the ADS(s)-to Class A
ordinary share(s) ratio, or for any other reason)
Fees
Up to U.S. 5₵ per ADS issued
Up to U.S. 5₵ per ADS cancelled
· Distribution of cash dividends or other cash distributions
Up to U.S. 5₵ per ADS held
(e.g., upon a sale of rights and other entitlements)
· Distribution of ADSs pursuant to (i) stock dividends or other free
Up to U.S. 5₵ per ADS held
stock distributions, or (ii) exercise of rights to purchase
additional ADSs
· Distribution of securities other than ADSs or rights to purchase
Up to U.S. 5₵ per ADS held
additional ADSs (e.g., upon a spin-off)
· ADS Services
Up to U.S. 5₵ per ADS held on the applicable record
date(s) established by the depositary bank
An ADS holder will also be responsible to pay certain charges such as:
● taxes (including applicable interest and penalties) and other governmental charges;
● the registration fees as may from time to time be in effect for the registration of Class A ordinary shares on the share
register and applicable to transfers of Class A ordinary shares to or from the name of the custodian, the depositary bank or
any nominees upon the making of deposits and withdrawals, respectively;
● certain cable, telex and facsimile transmission and delivery expenses;
● the expenses and charges incurred by the depositary bank in the conversion of foreign currency;
● the fees and expenses incurred by the depositary bank in connection with compliance with exchange control regulations
and other regulatory requirements applicable to Class A ordinary shares, ADSs and ADRs; and
● the fees and expenses incurred by the depositary bank, the custodian, or any nominee in connection with the servicing or
delivery of deposited property.
ADS fees and charges for (i) the issuance of ADSs, and (ii) the cancellation of ADSs are charged to the person for whom the
ADSs are issued (in the case of ADS issuances) and to the person for whom ADSs are cancelled (in the case of ADS cancellations). In
the case of ADSs issued by the depositary bank into DTC, the ADS issuance and cancellation fees and charges may be deducted from
distributions made through DTC, and may be charged to the DTC participant(s) receiving the ADSs being issued or the DTC
participant(s) holding the ADSs being cancelled, as the case may be, on behalf of the beneficial owner(s) and will be charged by the DTC
participant(s) to the account of the applicable beneficial owner(s) in accordance with the procedures and practices of the DTC
participants as in effect at the time. ADS fees and charges in respect of distributions and the ADS service fee are charged to the holders
as of the applicable ADS record date. In the case of distributions of cash, the amount of the applicable ADS fees and charges is deducted
from the funds being distributed. In the case of (i) distributions other than cash and (ii) the ADS service fee, holders as of the ADS record
date will be invoiced for the amount of the ADS fees and charges and such ADS fees and charges may be deducted from distributions
made to holders of ADSs. For ADSs held through DTC, the ADS fees and charges for distributions other than cash and the ADS service
fee may be deducted from distributions made through DTC, and may be charged to the DTC participants in accordance with the
procedures and practices prescribed by DTC and the DTC participants in turn charge the amount of such ADS fees and charges to the
beneficial owners for whom they hold ADSs.
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In the event of refusal to pay the depositary bank fees, the depositary bank may, under the terms of the deposit agreement,
refuse the requested service until payment is received or may set off the amount of the depositary bank fees from any distribution to be
made to the ADS holder. Certain depositary fees and charges (such as the ADS services fee) may become payable shortly after the
closing of the ADS offering. Note that the fees and charges an ADS holder may be required to pay may vary over time and may be
changed by us and by the depositary bank. An ADS holder will receive prior notice of such changes.
Fees and Other Payments Made by the Depositary to Us
The depositary bank may reimburse us for certain expenses incurred by us in respect of the ADR program, by making available
a portion of the ADS fees charged in respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary
bank agree from time to time. In 2022, we received approximately US$4,500 as reimbursement from the depositary.
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Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
PART II
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
See “Item 10. Additional Information—B. Memorandum and Articles of Association—Ordinary Shares” for a description of the
rights of securities holders, which remain unchanged.
Item 15. Controls and Procedures
A.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of
the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the
period covered by this report, as required by Rule 13a-15(b) under the Exchange Act.
Based upon that evaluation, our management has concluded that, as of December 31, 2022, our disclosure controls and
procedures were effective in ensuring that the information required to be disclosed by us in the reports that we file and furnish under the
Exchange Act was recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and
that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and
communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding
required disclosure.
B.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes
those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of our assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures
are being made only in accordance with authorizations of our management and directors, and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the
financial statements. As required by Section 404 of the Sarbanes-Oxley Act and related rules as promulgated by the SEC, our
management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022 using criteria established
in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”).
Based on this assessment, our management, with the participation of our chief executive officer and chief financial officer,
concluded that our internal control over financial reporting was effective as of December 31, 2022.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risks that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
C.
Attestation Report of the Registered Public Accounting Firm
Our independent registered public accounting firm, KPMG Huazhen LLP, has audited the effectiveness of our company’s
internal control over financial reporting as of December 31, 2022.
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Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Niu Technologies:
Opinion on Internal Control Over Financial Reporting
We have audited Niu Technologies and subsidiaries’ (the Company) internal control over financial reporting as of December 31,
2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2022, the related consolidated statements of
comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended
December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated April 21, 2023
expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG Huazhen LLP
Beijing, China
April 21, 2023
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D.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual
report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
Item 16. [Reserved]
Item 16A. Audit Committee Financial Expert
Our board of directors has determined that Mr. Changqing Ye, an independent director (under the standards set forth in Nasdaq
Stock Market Rule 5605 and Rule 10A-3 under the Exchange Act) and chairman of our audit committee, is an audit committee financial
expert.
Item 16B. Code of Ethics
Our board of directors adopted a code of business conduct and ethics that applies to our directors, officers, employees and
advisors in September 2018. We have posted a copy of our code of business conduct and ethics on our website at http://ir.niu.com.
Item 16C. Principal Accountant Fees and Services
The following table sets forth the aggregate fees by categories specified below in connection with certain professional services
rendered by KPMG Huazhen LLP, our principal external auditors, for the periods indicated.
Audit fees(1)
Tax fees(2)
2021
US$ 1,296,108
Nil
2022
US$ 1,267,526
83,498
US$
(1) “Audit fees” in 2022 represent the aggregate fees billed or payable for professional services rendered by our principal auditors for
the audit of the 2022 consolidated financial statements and internal control over financial reporting as of December 31, 2022 and
assistance with and review of documents filed with the SEC.
(2) “Tax fees” mean the aggregate fees billed for services rendered by independent registered public accounting firm for tax compliance
services and tax advisory services.
The policy of our audit committee or our board of directors is to pre-approve all audit and non-audit services provided by
KPMG Huazhen LLP, including as described above.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 16F. Change in Registrant’s Certifying Accountant
Not applicable.
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Item 16G. Corporate Governance
As a Cayman Islands exempted company listed on Nasdaq, we are subject to the Nasdaq corporate governance listing standards.
Rule 5620(a) requires that each company listing common stock or voting preferred stock, and their equivalents, must hold an annual
meeting of shareholders no later than one year after the end of the company’s fiscal year-end. However, Nasdaq rules permit a foreign
private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the
Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such
as the United States. We have informed Nasdaq that we will follow home country practice with respect to the annual meeting of
shareholders. Our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq listing standards
applicable to U.S. domestic issuers given our reliance on the home country practice exception. See “Item 3. Key Information—D. Risk
Factors— Risks Related to the American Depositary Shares—We are a foreign private issuer within the meaning of the rules under the
Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.”
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to
inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, and our auditor
was subject to that determination. In May 2022, Niu Technologies was conclusively listed by the SEC as a Commission-Identified Issuer
under the HFCAA following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021. On December 15,
2022, the PCAOB removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate
completely registered public accounting firms. For this reason, we do not expect to be identified as a Commission-Identified Issuer under
the HFCAA after we file this annual report.
As of the date of this annual report and to our knowledge:
(i)
(ii)
(iii)
(iv)
no governmental entities in the Cayman Islands own shares of Niu Technologies, and no governmental entities in
China own shares of Niu Technologies or the VIE;
the governmental entities in China do not have a controlling financial interest in Niu Technologies or the VIE;
none of the members of the board of directors of Niu Technologies or our operating entities, including the VIE, is an
official of the Chinese Communist Party; and
none of the currently effective memorandum and articles of association (or equivalent organizing document) of Niu
Technologies or the VIE contains any charter of the Chinese Communist Party.
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PART III
Item 17. Financial Statements
We have elected to provide financial statements pursuant to Item 18.
Item 18. Financial Statements
The consolidated financial statements of Niu Technologies, its subsidiaries and the variable interest entity are included at the
end of this annual report.
Item 19. Exhibits
Exhibit
Number
Description of Document
1.1
2.1
2.2
2.3
2.4
2.5
2.6
4.1
4.2
4.3
Sixth Amended and Restated Memorandum and Articles of Association of the Registrant, effective October 23, 2018
(incorporated by reference to Exhibit 3.2 of the Registrant’s registration statement on Form F-1 (file no. 333-227497),
filed with the Securities and Exchange Commission on September 24, 2018)
Registrant’s Specimen American Depositary Receipt (incorporated by reference to Exhibit 4.3 of the Registrant’s
registration statement on Form F-1 (file no. 333-227497), filed with the Securities and Exchange Commission on
September 24, 2018)
Registrant’s Specimen Certificate for Ordinary Shares (incorporated by reference to Exhibit 4.2 of the Registrant’s
registration statement on Form F-1 (file no. 333-227497), as amended, filed with the Securities and Exchange
Commission on October 9, 2018)
Deposit Agreement dated October 18, 2018 among the Registrant, the depositary and holder of the American
Depositary Receipts (incorporated by reference to Exhibit 4.3 of the Registrant’s registration statement on Form S-8
(file no. 333229190), as amended, filed with the Securities and Exchange Commission on January 11, 2019)
Fourth Amended and Restated Shareholders Agreement between the Registrant and other parties thereto dated
August 22, 2018(incorporated by reference to Exhibit 4.4 of the Registrant’s registration statement on Form F-1 (file
no. 333-227497), filed with the Securities and Exchange Commission on September 24, 2018)
Description of American Depositary Shares of the Registrant (incorporated herein by reference to Exhibit 2.5 to the
annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on April 24, 2020)
Description of Ordinary Shares of the Registrant (incorporated herein by reference to Exhibit 2.6 to the annual report
on Form 20-F filed by the Registrant with the Securities and Exchange Commission on April 24, 2020)
Amended and Restated 2016 Global Share Incentive Plan of the Registrant (incorporated by reference to Exhibit 10.1
of the Registrant’s Registration Statement on Form F-1 (file no. 333-227497) filed with the Securities and Exchange
Commission on September 24, 2018)
2018 Share Incentive Plan of the Registrant (incorporated by reference to Exhibit 10.2 of the Registrant’s Registration
Statement on Form F-1 (file no. 333-227497) filed with the Securities and Exchange Commission on September 24,
2018)
Form of Employment Agreement between the Registrant and its executive officers (incorporated by reference to
Exhibit 10.4 of the Registrant’s registration statement on Form F-1 (file no. 333-227497), filed with the Securities and
Exchange Commission on September 24, 2018)
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4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
8.1*
11.1
12.1*
12.2*
13.1**
13.2**
15.1*
15.2*
Form of Indemnification Agreement between the Registrant and its directors and executive officers (incorporated by
reference to Exhibit 10.3 of the Registrant’s registration statement on Form F-1 (file no. 333-227497), filed with the
Securities and Exchange Commission on September 24, 2018)
English translation of the Powers of Attorney among the Registrant’s WFOE, Beijing Niudian and shareholders of
Beijing Niudian (incorporated by reference to Exhibit 4.5 of the Registrant’s Annual Report on Form 20-F filed with
the Securities and Exchange Commission on April 24, 2020)
English translation of the Second Amended and Restated Equity Pledge Agreement among the Registrant’s WFOE,
Beijing Niudian and shareholders of Beijing Niudian dated February 27, 2020 (incorporated by reference to Exhibit
4.6 of the Registrant’s Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 24,
2020)
English translation of the Amended and Restated Exclusive Business Cooperation Agreement among the Registrant’s
WFOE, Beijing Niudian and shareholders of Beijing Niudian dated July 20, 2018 (incorporated by reference to
Exhibit 10.7 of the Registrant’s registration statement on Form F-1 (file no. 333-227497), filed with the Securities and
Exchange Commission on September 24, 2018)
English translation of the Second Amended and Restated Exclusive Option Agreement among the Registrant’s
WFOE, Beijing Niudian and shareholders of Beijing Niudian dated February 27, 2020 (incorporated by reference to
Exhibit 4.8 of the Registrant’s Annual Report on Form 20-F filed with the Securities and Exchange Commission on
April 24, 2020)
Motor Purchase and Sales Contract between Bosch (Ningbo) E-scooter Motor Co., Ltd. and Jiangsu Xiaoniu Electric
Technology Co., Ltd. dated March 21, 2017 (incorporated by reference to Exhibit 10.12 of the Registrant’s
Registration Statement on Form F-1 (file no. 333-227497) filed with the Securities and Exchange Commission on
September 24, 2018)
Manufacturing Cooperation Agreement Between Jiangsu Xiaoniu Diandong Technology Co., Ltd. and Changzhou
Shanqi Motorcycle Co., Ltd. dated December 1, 2018 (incorporated by reference to Exhibit 4.13 of the Registrant’s
Annual Report on Form 20-F (file no. 001-38696) filed with the Securities and Exchange Commission on April 25,
2019)
Development Collaboration Agreement Between the Registrant and Volkswagen Aktiengesellschaft dated March 15,
2019 (incorporated by reference to Exhibit 4.14 of the Registrant’s Annual Report on Form 20-F (file no. 001-38696)
filed with the Securities and Exchange Commission on April 25, 2019)
List of Principal Subsidiaries and the variable interest entity
Code of Business Conduct and Ethics (incorporated by reference to Exhibit 99.1 of the Registrant’s Registration
Statement on Form F-1 (file no. 333-227497) filed with the Securities and Exchange Commission on September 24,
2018)
Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification by Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Consent of KPMG Huazhen LLP
Consent of DaHui Lawyers
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101.INS*
XBRL Instance Document
101.SCH*
XBRL Taxonomy Extension Schema Document
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
104*
Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed herewith
** Furnished herewith
140
Table of Contents
The registrant hereby certifies that it meets all of the requirements for filing its annual report on Form 20-F and that it has duly
caused and authorized the undersigned to sign this annual report on its behalf.
SIGNATURES
Date: April 21, 2023
Niu Technologies
By:
/s/ YAN LI
Name: Yan Li
Title: Chairman of the Board of Directors and Chief
Executive Officer
141
Table of Contents
NIU TECHNOLOGIES
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 1186)
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2021 AND 2022
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED
DECEMBER 31, 2020, 2021 AND 2022
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED
DECEMBER 31, 2020, 2021 AND 2022
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020, 2021 AND
2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
PAGE(S)
F-2 – F-3
F-4 – F-5
F-6
F-7
F-8
F-9 – F-39
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Niu Technologies:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Niu Technologies and subsidiaries (the Company) as of December 31,
2021 and 2022, the related consolidated statements of comprehensive income (loss), changes in shareholders’ equity, and cash flows for
each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial
statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2021 and 2022, and the results of its operations and its cash flows for each of the years in the three-year
period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated
April 21, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of
January 1, 2021, due to the adoption of Accounting Standards Codification Topic 842, Leases.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error
or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
F-2
Table of Contents
Critical Audit Matter
Report of Independent Registered Public Accounting Firm
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are
material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matter or on the
accounts or disclosures to which it relates.
Revenue recognition for electric scooter sales
As discussed in Note 2(q) and 19 to the consolidated financial statements, the Company recorded RMB2,853,895,423 of revenues related
to electric scooter sales for the year ended December 31, 2022, which included revenue generated from electric scooter sales to its PRC
domestic offline distributors and overseas offline distributors. The transfer of control of the products is satisfied at a point in time, which
occurs when the products are accepted by the domestic offline distributors, overseas offline distributors or individual customers. When
the Company sells its products to its domestic offline distributors for domestic sales in the PRC, acceptance of the products by the
domestic offline distributors is evidenced by goods receipt notes signed by the domestic offline distributors, which is generally at the
Company’s warehouse. When the Company sells its products to overseas offline distributors for oversea sales, acceptance of the products
by the overseas offline distributors is evidenced by shipping documents dependent upon the terms of the underlying contract.
We identified the evaluation of timing of revenue recognition for electric scooter sales to domestic offline distributors and overseas
offline distributors as a critical audit matter. Significant audit effort was required in evaluation the proper timing of revenue recognition
for electric scooter sales to domestic offline distributors and overseas offline distributors.
The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine
the nature and extent of procedures to be performed over the evaluation of timing of revenue recognition for electric scooter sales to
domestic offline distributors and overseas offline distributors. We evaluated the design and tested the operating effectiveness of certain
internal controls related to timing of revenue recognition for electric scooter sales to domestic offline distributors and overseas offline
distributors. This included controls over the Company’s review of goods receipt notes and underlying contracts related to electric scooter
sales to domestic offline distributors, shipping documents and underlying contracts related to electric scooter sales to overseas offline
distributors, and the accurate timing of recording revenues. For a selection of electric scooter sales contracts with domestic offline
distributors and overseas offline distributors, we read the contracts and evaluated the Company’s assessment of the contract terms
impacting the timing of revenue recognition. For a sample of electric scooter sales to domestic offline distributors, we evaluated the
proper timing of revenue recognized by inspecting (1) the underlying contracts, (2) purchase orders, and (3) goods receipt notes signed
by the domestic offline distributors. For a sample of electric scooter sales to overseas offline distributors, we evaluated the proper timing
of revenue recognized by inspecting (1) the underlying contracts, (2) purchase orders, and (3) shipping documents for the overseas
offline distributors. In addition, we evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed.
/s/ KPMG Huazhen LLP
We have served as the Company’s auditor since 2018.
Beijing, China
April 21,2023
F-3
NIU TECHNOLOGIES
CONSOLIDATED BALANCE SHEETS
Table of Contents
ASSETS
Current assets
Cash and cash equivalents
Term deposits—current
Restricted cash
Short-term investments
Accounts receivable, net
Inventories
Prepayments and other current assets
Total current assets
Non-current assets
Term deposits—non-current
Property, plant and equipment, net
Intangible assets, net
Operating lease right-of-use assets
Deferred income tax assets
Other non-current assets
Total non-current assets
Total assets
Note
2(f)
2(g)
2(h)
3
4
5
6
2(g)
7
8
20
17(b)
9
10
11
2(r)
2(r)
12
2021
RMB
As of December 31,
2022
RMB
US$
(Note 2(d))
208,373,759
95,635,500
223,971,197
773,678,455
268,557,176
269,637,042
56,061,263
1,895,914,392
534,286,849
208,589,770
186,340,321
160,406,301
299,742,923
417,009,148
205,695,717
2,012,071,029
35,939,250
397,215,911
3,668,189
94,201,263
11,907,344
2,367,064
545,299,021
20,000,000
397,356,795
1,857,320
86,597,121
6,132,499
12,683,090
524,626,825
77,464,311
30,242,674
27,016,807
23,256,728
43,458,639
60,460,643
29,823,076
291,722,878
2,899,727
57,611,320
269,286
12,555,402
889,129
1,838,875
76,063,739
2,441,213,413
2,536,697,854
367,786,617
180,000,000
160,000,000
23,197,819
143,622,874
316,832,113
45,936,338
538,930,163
459,466,937
66,616,444
17,601,525
1,898,065
275,194
17,266,994
24,931,897
3,614,785
32,757,740
37,539,733
5,442,750
198,904,558
1,129,083,854
192,092,943
1,192,761,688
27,850,859
172,934,189
LIABILITIES
Current liabilities
Short-term bank borrowings (including short-term bank borrowings of VIE without recourse to
the Company of RMB180,000,000 and RMB160,000,000 as of December 31, 2021 and 2022,
respectively)
Notes payable (including notes payable of VIE without recourse to the Company were
RMB143,622,874 and RMB316,832,113 as of December 31, 2021 and 2022, respectively)
Accounts payable (including accounts payable of VIE without recourse to the Company of
RMB523,296,506 and RMB 459,406,790 as of December 31, 2021 and 2022, respectively)
Income taxes payable (including income taxes payable of VIE without recourse to the Company
of RMB14,718,748 and RMB1,501,992 as of December 31, 2021 and 2022, respectively)
Advances from customers (including advances from customers of VIE without recourse to the
Company of RMB15,026,392 and RMB23,522,149 as of December 31, 2021 and 2022,
respectively)
Deferred revenue—current (including deferred revenue-current of VIE without recourse to the
Company of RMB32,757,740 and RMB37,539,733 as of December 31, 2021 and 2022,
respectively)
Accrued expenses and other current liabilities (including accrued expenses and other current
liabilities of VIE without recourse to the Company of RMB181,985,323 and RMB175,352,229
as of December 31, 2021 and 2022, respectively)
Total current liabilities
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
Note
2021
As of December 31,
2022
Non-current liabilities
Deferred revenue—non-current (including deferred revenue non-current of VIE without recourse
to the Company of RMB10,693,692 and RMB11,429,500 as of December 31, 2021 and 2022,
respectively)
Deferred income tax liabilities (including deferred income tax liabilities of VIE without recourse
to the Company of RMB1,992,388 and RMB1,398,279 as of December 31, 2021 and 2022,
respectively)
Operating lease liabilities (including operating lease liabilities of VIE without recourse to the
Company were RMB13,921,859 and RMB7,569,128 as of December 31, 2021 and 2022,
respectively)
Other non-current liabilities (including other non-current liabilities of VIE without recourse to
the Company of RMB20,967,430 and RMB13,441,382 as of December 31, 2021 and 2022,
respectively)
Total non-current liabilities
Total liabilities
Commitments and contingencies
SHAREHOLDERS’ EQUITY:
Class A Ordinary Shares (US$0.0001 par value, 4,900,000,000 shares authorized as of
December 31, 2021 and 2022; 137,138,810 and 137,719,542 shares issued and outstanding as
of December 31, 2021 and 2022)
Class B Ordinary Shares (US$0.0001 par value, 50,000,000 shares authorized as of December
31, 2021 and 2022; 16,542,020 shares issued and outstanding as of December 31, 2021 and
2022)
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total shareholders’ equity
Total liabilities and shareholders’ equity
2(r)
10,693,692
11,429,500
1,657,122
17(b)
1,992,388
1,398,279
202,731
20
13
21
14
14
13,921,859
7,569,128
1,097,420
20,967,430
47,575,369
13,441,382
33,838,289
1,948,817
4,906,090
1,176,659,223
1,226,599,977 177,840,279
89,038
89,428
12,966
10,316
1,855,403,759
(51,121,030)
(539,827,893)
1,264,554,190
10,316
1,915,825,641
(16,536,686)
(589,290,822)
1,310,097,877
1,496
277,768,608
(2,397,594)
(85,439,138)
189,946,338
2,441,213,413
2,536,697,854 367,786,617
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
NIU TECHNOLOGIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Revenues
Cost of revenues
Gross profit
Operating expenses:
Selling and marketing expenses
Research and development expenses
General and administrative expenses
Total operating expenses
Government grants
Operating income (loss)
Interest expenses
Interest income
Investment income
Income (loss) before income taxes
Income tax benefit (expense)
Net income (loss)
Other comprehensive income (loss)
Foreign currency translation adjustment, net of nil
income taxes
Unrealized gain on available for sale securities, net
income taxes of RMB4,254,339, RMB5,809,288 and
RMB1,184,686 for the year 2020, 2021 and 2022,
respectively
Less: reclassification adjustment for gain on available
for sale securities realized in net income, net income
taxes of RMB4,424,450, RMB5,291,894 and
RMB1,698,460 for the year 2020, 2021 and 2022,
respectively
Comprehensive income (loss)
Net income (loss) per ordinary share
—Basic
—Diluted
Weighted average number of ordinary shares and
ordinary shares equivalents outstanding used in
computing net income (loss) per ordinary share
—Basic
—Diluted
Note
2020
2021
2022
For the Year Ended December 31,
19
RMB
2,444,328,764
(1,885,180,256)
559,148,508
RMB
3,704,537,419
(2,891,758,188)
812,779,231
RMB
3,168,597,334
(2,498,916,443)
669,680,891
US$
(Note 2(d))
459,403,430
(362,308,827)
97,094,603
(200,761,383)
(105,335,357)
(104,858,814)
(410,955,554)
22,441,492
170,634,446
(7,380,833)
8,787,309
17,697,800
189,738,722
(21,086,256)
168,652,466
(332,007,462)
(440,408,982)
(135,218,399)
(176,478,130)
(141,798,910)
(158,460,764)
(609,024,771)
(775,347,876)
48,726,818
16,385,038
252,481,278 (89,281,947)
(63,853,300)
(25,586,924)
(22,974,651)
(112,414,875)
2,375,607
(12,944,665)
(6,167,805)
5,375,969
21,167,575
272,857,017
(47,036,608)
225,820,409
(5,715,878)
12,860,216
10,917,736
(71,219,873)
21,756,944
(49,462,929)
(828,724)
1,864,556
1,582,923
(10,325,910)
3,154,460
(7,171,450)
17(a)
(30,137,470)
(9,657,187)
37,342,724
5,414,186
12,763,017
17,427,865
6,460,896
936,741
(13,273,350)
138,004,663
(15,875,681)
217,715,406
(9,219,276)
(14,878,585)
(1,336,669)
(2,157,192)
18
18
1.12
1.07
1.47
1.41
(0.32)
(0.32)
(0.05)
(0.05)
18
18
155,176,922
153,672,358
150,897,412
157,835,868 160,460,976 155,176,922
155,176,922
155,176,922
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
NIU TECHNOLOGIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2020, 2021 AND 2022
Ordinary shares
Shares
149,416,898
RMB
96,471
Additional
paid-in
capital
RMB
1,738,102,741
Accumulated
other
comprehensive
loss
RMB
Balance as of January 1, 2020
Net income
Foreign currency translation adjustment, net of nil income taxes
Unrealized holding gains on available-for-sale security, net of
RMB4,254,339 income taxes
Reclassification adjustment for gains on available-for-sale
securities realized in net income, net of RMB4,424,450 income
taxes
Share-based compensation
Exercise of share-based awards
Balance as of December 31, 2020
Net income
Foreign currency translation adjustment, net of nil income taxes
Unrealized holding gains on available-for- sale security, net of
RMB5,809,288 income taxes
Reclassification adjustment for gains on available-for-sale
securities realized in net income, net of RMB5,291,894
income taxes
Share-based compensation
Exercise of share-based awards
Balance as of December 31, 2021
Net loss
Foreign currency translation adjustment, net of nil income taxes
Unrealized holding gains on available-for- sale security, net of
RMB1,184,686 income taxes
Reclassification adjustment for gains on available-for-sale
securities realized in net income, net of RMB1,698,460 income
taxes
Share-based compensation
Exercise of share-based awards
Balance as of December 31, 2022
Balance as of December 31, 2022 — US$ (Note 2(d))
—
—
—
—
—
2,943,554
152,360,452
—
—
—
—
—
1,320,378
—
—
—
—
—
580,732
154,261,562
153,680,830
99,354
—
—
—
—
—
2,031
—
—
—
—
39,608,915
24,228,415
98,502
—
—
1,801,940,071
—
—
(12,368,224)
—
(30,137,470)
12,763,017
(13,273,350)
—
—
(43,016,027)
—
(9,657,187)
—
—
—
852
—
—
—
—
—
390
—
17,427,865
—
47,218,156
6,245,532
1,855,403,759
—
—
(15,875,681)
—
—
(51,121,030)
—
37,342,724
—
6,460,896
—
58,219,186
2,202,696
(9,219,276)
—
—
Accumulated
deficit
RMB
(934,300,768)
168,652,466
—
Total
shareholders’
equity
RMB
791,530,220
168,652,466
(30,137,470)
—
12,763,017
—
—
—
(13,273,350)
39,608,915
24,230,446
(765,648,302)
225,820,409
—
993,374,244
225,820,409
(9,657,187)
—
—
—
—
17,427,865
(15,875,681)
47,218,156
6,246,384
(539,827,893)
(49,462,929)
—
1,264,554,190
(49,462,929)
37,342,724
—
—
—
—
6,460,896
(9,219,276)
58,219,186
2,203,086
99,744
14,462
1,915,825,641
277,768,608
(16,536,686)
(2,397,594)
(589,290,822)
(85,439,138)
1,310,097,877
189,946,338
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
NIU TECHNOLOGIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Allowance for doubtful accounts
Share-based compensation
Depreciation and amortization
Reduction in the carrying amount of right-of-use assets
Investment income
Unrealized foreign exchange loss (gain)
Deferred income tax expense (benefit)
Loss on disposal of property, plant and equipment
Write-down of inventories
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepayments and other current assets
Other non-current assets
Accounts payable and notes payable
Advances from customers
Deferred revenue
Other non-current liabilities
Income tax receivable
Income taxes payable
Accrued expenses and other current liabilities
Operating lease liabilities, current and non-current
Net cash provided by (used in) operating activities
Investing activities:
Cash paid for purchase of property, plant and equipment
Payment of land use rights
Purchase of intangible assets
Purchase of term deposits
Cash received from redemption of term deposits
Cash paid for purchase of short-term investments
Cash received from sale of short-term investments
Prepayment for an investment
Others
Net cash provided by (used in) investing activities
Financing activities:
Cash received from exercise of employee stock options
Proceeds from short-term bank borrowings
Repayment for short-term bank borrowings
Net cash provided by (used in) financing activities
Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at the beginning of the year
Cash, cash equivalents and restricted cash at the end of the year
Supplemental information
Interest paid
Income tax paid
Payable for property, plant and equipment
Prepayment for a service in previous year to purchase of an investment
For the Year Ended December 31,
2020
RMB
2021
RMB
2022
RMB
US$
(Note 2(d))
168,652,466
225,820,409
(49,462,929)
(7,171,450)
505,912
39,608,915
50,239,037
—
(17,697,800)
3,358,752
(18,150,489)
17,160
5,809,583
13,402,725
30,565,820
1,080,721
(391,736)
136,838,756
32,655,527
(7,944,641)
5,846,549
—
11,541,289
9,660,165
—
465,598,711
1,272,454
47,218,156
95,473,048
10,730,213
(21,167,575)
1,882,626
4,321,601
235,581
3,679,669
(168,520,346)
(131,185,130)
(24,763,588)
1,520,050
286,726,602
(22,764,635)
18,119,340
(4,374,815)
—
3,046,431
15,256,165
(8,351,554)
334,174,702
25,044,327
58,219,186
142,711,409
8,525,547
(10,917,736)
(7,508,084)
(6,079,533)
478,457
8,991,793
(56,145,868)
(156,107,463)
(125,888,562)
(1,834,238)
93,747,996
7,545,887
5,517,801
(9,365,449)
(13,349,602)
(15,703,460)
(13,056,147)
(7,219,675)
(121,856,343)
(111,745,878)
(39,749,734)
(86,358)
(411,324,241)
445,826,800
(2,726,500,000)
2,308,347,800
—
—
(535,231,611)
(285,745,233)
—
—
(357,162,950)
353,295,700
(6,032,000,000)
6,027,167,575
—
(614,066)
(295,058,974)
(135,349,387)
—
—
(635,470,550)
551,794,100
(2,593,000,000)
3,213,917,736
(4,000,000)
—
397,891,899
24,230,446
180,000,000
(217,394,132)
(13,163,686)
(23,332,213)
(106,128,799)
501,602,013
395,473,214
6,246,384
340,000,000
(340,000,000)
6,246,384
(8,490,370)
36,871,742
395,473,214
432,344,956
2,203,086
340,000,000
(360,000,000)
(17,796,914)
30,043,572
288,282,214
432,344,956
720,627,170
3,631,086
8,440,989
20,691,209
1,236,088
(1,582,923)
(1,088,570)
(881,449)
69,370
1,303,687
(8,140,386)
(22,633,455)
(18,252,126)
(265,940)
13,592,182
1,094,051
800,006
(1,357,862)
(1,935,510)
(2,276,788)
(1,892,963)
(1,046,754)
(17,667,508)
(19,623,816)
—
—
(92,134,569)
80,002,624
(375,949,661)
465,974,270
(579,945)
—
57,688,903
319,417
49,295,367
(52,195,094)
(2,580,310)
4,355,907
41,796,992
62,684,126
104,481,118
8,937,637
27,695,456
6,313,746
—
6,346,189
39,668,576
11,279,464
—
5,711,056
13,374,909
7,522,480
3,000,000
828,025
1,939,180
1,090,657
434,959
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Table of Contents
NIU TECHNOLOGIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF ORGANIZATION AND PRINCIPAL ACTIVITIES
Organization and principal activities
Niu Technologies (“the Company”), through its wholly-owned subsidiaries, consolidated variable interest entity (“VIE”) and VIE’s
subsidiaries (collectively referred to as “the Group”), is principally engaged in designing, manufacturing and selling of electric scooters
and its accessories under the brand name of “NIU”. The Group’s principal operations and geographic markets are mainly in the People’s
Republic of China (“PRC”).
The accompanying consolidated financial statements include the financial statements of the Company, its wholly-owned
subsidiaries, consolidated VIE and VIE’s subsidiaries.
The VIE arrangements
The Group operates its online business in the PRC through Beijing Niudian Technologies Co., Ltd. (“Beijing Niudian”, or the
“VIE”), a limited liability company established under the laws of the PRC on September 18, 2014. Beijing Niudian holds the necessary
PRC operating licenses for the online business. The equity interests of Beijing Niudian are legally held by individuals who act as
nominee equity holders of the VIE on behalf of Beijing Niudian Information Technology Co., Ltd. (“Niudian Information”), the
Company’s wholly owned subsidiary. A series of contractual agreements, including Powers of Attorney, Exclusive Business Cooperation
Agreement, Equity Pledge Agreement, Exclusive Option Agreement and Spousal Consent Letters (collectively, the “VIE Agreements”),
were entered among the Company, Niudian Information, Beijing Niudian and its nominee equity holders on May 27, 2015 and were
subsequently amended to include registration of the Equity Pledge Agreement with the relevant registration authority on June 11, 2018,
amended when an equity holder transferred certain equity interests to another equity holder on July 20, 2018.
The contractual agreements were further amended when two equity holders transferred certain equity interests to another equity
holder on March 10, 2020.
Pursuant to the VIE Agreements, the Company is able to exercise effective control over, bears the risks of, enjoys substantially all of
the economic benefits of the VIE, and has an exclusive option to purchase all or part of the equity interests in the VIE when and to the
extent permitted by PRC law at the lowest price possible. The Company’s management concluded that Beijing Niudian is a VIE and the
Company is its primary beneficiary. As such, the consolidated financial statements of the VIE are included in the consolidated financial
statements of the Company.
The principal terms of the VIE Agreements are further described below.
1) Powers of Attorney
The Company and each of the equity holders of Beijing Niudian entered into Powers of Attorney. Pursuant to the Powers of
Attorney, the equity holders of Beijing Niudian irrevocably appointed the Company as their attorney-in-fact to exercise all equity holder
rights, including, but not limited to, convening and attending in the equity holders’ meeting, appointing or removing directors, executive
officers and senior management, disposing of all or part of the equity holder’s interests in Beijing Niudian, casting equity holder’s vote
on matters requiring equity holders’ approval and doing all other acts in the capacity of equity holder as permitted by Beijing Niudian’s
Memorandum and Articles of Association. In addition, the Company has a right to assign its rights and benefits under the Powers of
Attorney to any other parties without an advance notice to the equity holders of Beijing Niudian. The Powers of Attorney shall continue
in force and be irrevocable as long as the equity holders of Beijing Niudian remain as the equity holders of Beijing Niudian.
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Table of Contents
2) Exclusive Business Cooperation Agreement
Niudian Information and Beijing Niudian entered into an Exclusive Business Cooperation Agreement, whereby Niudian Information
is appointed as the exclusive service provider for the provision of business support, technology and consulting services to Beijing
Niudian. Unless a written consent is given by Niudian Information, Beijing Niudian is not allowed to engage a third party to provide
such services, while Niudian Information is able to designate another party to render such services to Beijing Niudian. Beijing Niudian
shall pay Niudian Information on a monthly basis a service fee, which shall equal to 100% of the monthly net profits of Beijing Niudian,
and Niudian Information has the sole discretion to adjust the basis of calculation of the service fee amount according to service provided
to Beijing Niudian. Niudian Information owns the exclusive intellectual property rights, whether created by Niudian Information or
Beijing Niudian, as a result of the performance of the Exclusive Business Cooperation Agreement unless terminated in writing by
Niudian Information. The Exclusive Business Cooperation Agreement will be in effect until September 17, 2044 which represents the
end of operation term of Beijing Niudian.
3) Equity Pledge Agreement
An Equity Pledge Agreement was entered into by and among Niudian Information, Beijing Niudian and equity holders of Beijing
Niudian. To guarantee payment from Beijing Niudian, including but not limited to the service fee pursuant to the Exclusive Business
Cooperation Agreement, and the performance of Beijing Niudian and the nominee equity holders’ obligations under the contractual
arrangements including the Exclusive Business Cooperation Agreement, Exclusive Option Agreement and Powers of Attorney, the
equity holders of Beijing Niudian pledged their respective equity in Niudian Information under the Equity Pledge Agreement to Niudian
Information as collateral. In the event Beijing Niudian fails to pay Niudian Information its service fee, Niudian Information will have the
right to sell the pledged equity and apply the proceeds received to pay any outstanding service fees due by Beijing Niudian to Niudian
Information. The equity holders of Beijing Niudian agree that, during the term of the Equity Pledge Agreement, they will not dispose of
the pledged equity or create or allow any encumbrance on the pledged equity, and they also agree that Niudian Information’s rights
relating to the equity pledges shall not be prejudiced by any legal actions of the equity holders of Beijing Niudian, their successors or
their designees. The equity pledges have been registered with the relevant registration authority and became effective and enforceable
since registration. The Equity Pledge Agreement may only be terminated upon the fulfillment of all contractual obligations under the
Exclusive Business Cooperation Agreement, Exclusive Option Agreement and Powers of Attorney. During the term of the Equity Pledge
Agreement, Niudian Information is entitled to receive dividends attributable to the pledged Beijing Niudian equity.
4) Exclusive Option Agreement
Each of the equity holders of Beijing Niudian entered into an Exclusive Option Agreement with the Company, Niudian Information,
and Beijing Niudian, pursuant to which the equity holders of Beijing Niudian granted the Company, and Niudian Information or other
person upon the designation by the Company, an irrevocable and exclusive option to purchase, at its discretion and to the extent
permitted under the PRC law, all or part of the equity holders’ interests in Beijing Niudian at RMB100 or the lowest price that the PRC
law permits at the time unless a valuation of the equity is required by the PRC law. The equity holders of Beijing Niudian commit that
without the prior written consent of the Company, the equity holders of Beijing Niudian will not, among other things, (i) create any
pledge or encumbrance on their equity interests in Beijing Niudian, (ii) transfer or otherwise dispose of their equity interests in Beijing
Niudian, (iii) change Beijing Niudian’s registered capital, (iv) amend Beijing Niudian’s articles of association, (v) dispose of Beijing
Niudian’s material assets or enter into any material contract with a value of over RMB100,000 (except in the ordinary course of
business), or (vi) merge Beijing Niudian with any other entity. In addition, Beijing Niudian undertakes that, without the Company’s prior
written consent, it will not, among other things, create any pledge or encumbrance on any of its assets, or transfer or otherwise dispose of
its material assets (except in the ordinary course of business). Beijing Niudian and its equity holders shall appoint those individuals
recommended by the Company as directors of Beijing Niudian. Beijing Niudian shall provide operating and financial information to the
Company at the request of the Company and ensure the continuance of the business. The Exclusive Option Agreement will remain
effective until all equity interests in Beijing Niudian held by its equity holders are transferred or assigned to the Company or its designee.
Beijing Niudian and its equity holders shall not have any right to terminate the Exclusive Option Agreement.
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Table of Contents
5) Spousal Consent Letters
The spouses of each of nominee equity holders signed Spousal Consent Letters to consent that the equity interests in Beijing Niudian
held by and registered in the name of the respective nominee equity holders will be disposed of pursuant to the VIE Agreements. These
spouses agreed not to assert any rights over the equity interest in Beijing Niudian held by their spouses. In addition, in the event that the
spouses obtain any equity interests in Beijing Niudian held by their spouses for any reason, they agreed to be bound by the
VIE Agreements.
Risks in relation to the VIE structure
In the opinion of the Company’s management, the VIE Agreements have resulted in the Company having the power to direct
activities that most significantly impact the VIE, including appointing key management, setting up operating policies, exerting financial
controls and transferring profit or assets out of the VIE at its discretion. The Company considers that it has the right to receive all the
benefits and assets of the VIE. As the VIE was established as a limited liability company under the PRC law, its creditors do not have
recourse to the general credit of the Company for the liabilities of the VIE, and the Company does not have the obligation to assume the
liabilities of the VIE.
The Company has determined that the VIE Agreements are in compliance with PRC laws and are legally enforceable. However,
uncertainties in the PRC legal system could limit the Company’s ability to enforce the VIE Agreements; and if the equity holders of the
VIE were to reduce their interest in the Company, their interests may diverge from that of the Company and that may potentially increase
the risk that they would seek to act contrary to the contractual terms.
The Company’s ability to control the VIE also depends on the rights provided to the Company under the Powers of Attorney to vote
on all matters requiring equity holders’ approval in the respective VIE. As noted above, the Company believes these Powers of Attorney
are legally enforceable but yet they may not be as effective as direct equity ownership. In addition, if the corporate structure of the Group
or the contractual arrangements between the Company, Niudian Information, the VIE and its respective equity holders were found to be
in violation of any existing PRC laws and regulations, the relevant PRC regulatory authorities could:
● revoke the business license and/or operating licenses of such entities;
● discontinue or place restrictions or onerous conditions on the Group’s operations;
● impose fines, confiscate the income from the VIE, or impose other requirements with which the Group may not be able to
comply;
● require the Group to restructure its ownership structure or operations, including terminating the contractual arrangements with
the VIE and deregistering the equity pledges of the VIE, which in turn would affect the Company’s ability to consolidate, derive
economic interests from, or exert effective control over the VIE; or
● restrict or prohibit our use of the proceeds of this offering to finance our business and operations in China.
The imposition of any of the above restrictions or actions may result in a material and adverse effect on the Group’s ability to
conduct its business. In addition, if the imposition of any of these restrictions causes the Company to lose the right to direct the activities
of the VIE or the right to receive its economic benefits, the Company would no longer be able to consolidate the VIE. The Company’s
management believes that the likelihood to lose the Company’s current ownership structure or the contractual arrangements with the VIE
is remote based on the current facts and circumstances.
There is no VIE in which the Company has a variable interest but is not the primary beneficiary. Currently there is no contractual
arrangement that could require the Company to provide additional financial support to the VIE.
F-11
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The following consolidated assets and liabilities information of the Group’s VIE as of December 31, 2021 and 2022, and
consolidated revenues, net income and cash flow information for the years ended December 31, 2020, 2021 and 2022, have been
included in the accompanying consolidated financial statements. All intercompany transactions and balances with the Company and its
wholly-owned subsidiaries have been eliminated upon consolidation.
Cash
Restricted cash
Short-term investments
Accounts receivable, net
Inventories
Prepayments and other current assets
Amounts due from inter-companies
As of December 31,
2021
RMB
82,463,740
47,829,733
743,448,951
267,671,920
266,291,644
38,715,248
23,235,199
2022
RMB
493,570,803
6,229,605
160,406,301
298,732,239
411,954,893
187,576,865
24,251,018
Total current assets
1,469,656,435
1,582,721,724
Term deposits-non-current
Property, plant and equipment, net
Intangible assets, net
Operating lease right-of-use assets
Deferred income tax assets
Other non-current assets
20,000,000
394,114,176
1,532,700
94,201,263
11,907,344
2,367,064
20,000,000
394,621,585
1,317,785
86,597,121
6,132,499
5,677,414
Total assets
1,993,778,982
2,097,068,128
Short-term bank borrowings
Notes payable
Accounts payable
Amounts due to inter-companies
Income taxes payable
Advances from customers
Deferred revenue—current
Accrued expenses and other current liabilities
Total current liabilities
Deferred revenue-non-current
Deferred income tax liabilities
Operating lease liabilities
Other non-current liabilities
Total liabilities
Revenues
Net income (loss)
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Net cash used in financing activities
Effect of foreign currency exchange rate changes on cash and restricted cash
Net increase in cash and restricted cash
Cash and restricted cash at the beginning of the year
Cash and restricted cash at the end of the year
F-12
180,000,000
143,622,874
523,296,506
485,716,726
14,718,748
15,026,392
32,757,740
181,985,323
160,000,000
316,832,113
459,406,790
476,120,909
1,501,992
23,522,149
37,539,733
175,352,229
1,577,124,309
10,693,692
1,992,388
13,921,859
20,967,430
1,650,275,915
11,429,500
1,398,279
7,569,128
13,441,382
1,624,699,678
1,684,114,204
For the Year Ended December 31,
2021
RMB
2022
RMB
2020
RMB
2,500,023,611
175,070,451
570,195,979
(518,734,956)
(37,394,132)
(1,765,646)
12,301,245
93,548,349
105,849,594
3,768,134,434 3,187,989,945
(9,347,980)
(74,417,318)
455,930,283
(20,000,000)
7,993,970
369,506,935
130,293,473
499,800,408
213,848,471
354,675,219
(329,808,349)
—
(422,991)
24,443,879
105,849,594
130,293,473
Table of Contents
The unrecognized revenue-producing assets that are held by the VIE primarily consist of ICP License, Production License for
National Industrial Products, trademarks, patents, know-how and customer relationships. None of the assets of the VIE can be used only
to settle obligations of VIE. None of the assets of the VIE has been pledged or collateralized. The creditors of the VIE do not have
recourse to the general credit of the Company or its consolidated subsidiaries.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
The accompanying consolidated financial statements of the Group have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”).
(b) Principles of consolidation
The consolidated financial statements of the Group have been prepared in accordance with U.S. GAAP. The consolidated financial
statements include the financial statements of the Company, its subsidiaries, the VIE for which the Company or its subsidiary is the
primary beneficiary, and the VIE’s subsidiaries.
Subsidiaries are those entities in which the Company, directly or indirectly, controls more than one half of the voting power or has
the power to govern the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to
cast a majority of votes at the meeting of directors. A VIE is an entity in which the Company, or its subsidiary, through contractual
arrangements, exercises effective control over the activities that most impact the economic performance, bears the risks of, and enjoys
the rewards normally associated with ownership of the entity, and therefore the Company or its subsidiary is the primary beneficiary of
the entity.
All intercompany transactions and balances among the Company, its subsidiaries, the VIE and the VIE’s subsidiaries have been
eliminated upon consolidation.
(c) Use of estimates
The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance
sheet date, and the reported revenues and expenses during the reported period in the consolidated financial statements and accompanying
notes. Significant accounting estimates include, but not limited to, depreciable lives of property, plant and equipment and intangible
assets, the realization of deferred income tax assets, future warranty expenses, current expected credit loss and discount rate for operating
leases. Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such,
differences may be material to the consolidated financial statements.
(d) Convenience translation
Translations of balances in the consolidated financial statements from RMB into US$ as of and for the year ended December 31,
2022 are solely for the convenience of the readers and were calculated at the rate of US$1.00=RMB6.8972, representing the noon buying
rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York on
December 30, 2022. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into
US$ at that rate on December 30, 2022, or at any other rate. The US$ convenience translation is not required under U.S. GAAP and all
US$convenience translation amounts in the accompanying consolidated financial statements are unaudited.
(e) Commitments and contingencies
In the normal course of business, the Group is subject to loss contingencies, such as legal proceedings and claims arising out of its
business, that cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, and non-income
tax matters. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss
can be reasonably estimated. If a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot
be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and
material, is disclosed.
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(f) Cash and cash equivalents
Cash consists of cash on hand and cash at bank. Cash equivalents represent term deposits with original maturities of three months or
less, which are readily convertible to known amounts of cash. The Group believes it is not exposed to significant credit risk on cash and
cash equivalents, term deposits and restricted cash. Cash at bank and term deposits are deposited in financial institutions at the following
locations:
Financial institutions in the mainland of the PRC
—Denominated in EUR
—Denominated in RMB
—Denominated in GPB
—Denominated in USD
As of December 31,
2021
RMB
2022
RMB
322,563
81,007,725
938
106,696,922
5,986,595
278,917,866
244,790
220,296,524
Total cash and cash equivalents balances held at mainland PRC
financial institutions
188,028,148
505,445,775
Financial institutions in the United States
—Denominated in USD
2,186,796
10,087,973
Total cash balances held at United States financial institutions
2,186,796
10,087,973
Financial institutions in the Hong Kong S.A.R.
—Denominated in HKD
—Denominated in USD
6,426,737
10,815,999
78,206
14,631,590
Total cash balances held at Hong Kong S.A.R. financial institutions
17,242,736
14,709,796
Financial institutions in Indonesia
—Denominated in IDR
—Denominated in USD
77,198
591,480
707,035
2,746,479
Total cash balances held at Indonesia financial institutions
668,678
3,453,514
Total cash and cash equivalents balances held at financial institutions
208,126,358
533,697,058
Financial institutions in the mainland of the PRC
—Denominated in RMB
—Denominated in USD
20,000,000
111,574,750
20,000,000
208,589,770
Total term deposits held at mainland PRC financial institutions
131,574,750
228,589,770
(g) Term deposits
Term deposits include current and non-current term deposits. Current term deposits represent deposits placed with bank with original
maturities of more than three months but less than one year. Non-current term deposits represent deposits placed with bank with original
maturities of more than one year.
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(h) Restricted cash
Restricted cash is an amount of cash deposited with banks in conjunction with borrowings from banks and notes payable. Restriction
on the use of such cash and the interest earned thereon is imposed by the banks and remains effective throughout the terms of the bank
borrowings and notes payable. Restricted cash is classified as current asset on the Company’s consolidated balance sheets, as all the
balance are expected to be released to cash within the next 12 months from December 31, 2022. The Group’s restricted cash are
denominated in RMB and USD and are deposited at financial institutions in the mainland of the PRC.
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated
balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows.
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash
(i) Short-term investments
As of December 31,
2021
RMB
2022
RMB
208,373,759 534,286,849
186,340,321
223,971,197
720,627,170
432,344,956
The Group’s short-term investments represent the Group’s investments in financial products managed by financial institutions in the
PRC which are redeemable at the option of the Group on any working day or have the original maturities of less than twelve months,
which are classified as available-for-sale securities. Short-term investments are reported at fair value, with unrealized holding gains or
losses, net of the related tax effect, excluded from earnings and recorded as a separate component of accumulated other comprehensive
income (loss) until realized. Realized gains or losses from the sale of short-term investments are determined on a specific identification
basis and are recorded as investment income when earned.
(j) Inventories
Inventories, consisting of raw materials, work in progress and finished goods, are stated at the lower of cost or net realizable value.
The cost of inventory is determined using the weighted average cost method. Cost of work-in-process and finished goods comprise direct
materials, direct production costs and an allocation of production overheads based on normal operating capacity. The Group takes
ownership, risks and rewards of the products purchased. Inventory is written down for damaged and slow-moving goods, which is
dependent upon factors such as historical and forecasted consumer demand. When appropriate, write downs to inventory are recorded to
write down the cost of inventories to their net realizable value.
(k) Property, plant and equipment, net
Property, plant and equipment are stated at cost less accumulated depreciation and any recorded impairment.
Costs incurred in the construction of property, plant and equipment, including down payments and progress payments, are initially
capitalized as construction in progress and transferred into their respective asset categories when the assets are ready for their intended
use, at which time depreciation commences. Construction in progress is not depreciated until such time when the asset is substantially
completed and ready for its intended use. All construction in progress has been transferred into respective asset categories and the
balance was nil as of December 31, 2021 and 2022.
The estimated useful lives are as follows:
Building
Machinery and equipment
Furniture
Leasehold improvements
Office and electronic equipment
Motor vehicles
F-15
50 years
3 - 10 years
3 - 5 years
3 - 5 years
2 - 5 years
3 - 4 years
Table of Contents
Depreciation on property, plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets.
Depreciation of property, plant and equipment attributable to manufacturing activities is capitalized as part of inventories, and
recognized as cost of revenues when the inventory is sold.
When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and the
proceeds received thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are
capitalized and amortized over the remaining useful life.
(l) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets with
finite lives are carried at cost less any accumulated amortization and any accumulated impairment losses.
Intangible assets with finite lives are amortized over the useful economic life on straight-line basis and assessed for impairment
whenever there is an indication that the intangible assets may be impaired.
(m) Leases
Prior to January 1, 2021, payments made under operating lease were charged to the consolidated statements of comprehensive
income (loss) on a straight-line basis over the term of underlying lease. Leases with escalated rent provisions are recognized on a
straight-line basis commencing with the beginning of the lease term. There are no capital improvement funding, lease concessions or
contingent rent in the lease agreements. The Group has no legal or contractual asset retirement obligations at the end of the lease term.
The Group adopted Accounting Standards Codification Topic 842, Leases (“ASC 842”) as of January 1, 2021, using a modified
retrospective method for leases that exist at, or are entered into after, January 1, 2021, and has not recast the comparative periods
presented in the consolidated financial statements. The Group elected the package of practical expedients that not to reassess:(1) whether
any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases, and (3) initial direct
costs for any expired or existing leases. The Group also elected the practical expedient of the short-term lease exemption for contracts
with lease terms of 12 months or less. The Group categorizes leases with contractual terms longer than twelve months as either operating
or finance lease. However, the Group has no finance leases for any of the periods presented.
The Group determines if an arrangement is a lease or contains a lease at lease inception. For operating leases, the Group recognizes a
right-of-use asset and a lease liability based on the present value of the lease payments over the lease term, reduced by lease incentives
received, plus any initial direct costs, using the discount rate for the lease at the commencement date. Variable lease payments not
dependent on an index or rate are excluded from the right-of-use asset and lease liability calculations and are recognized in expense in
the period which the obligation for those payments is incurred. As the rate implicit in the Group’s lease is not typically readily available,
the Group uses an incremental borrowing rate based on the information available at the lease commencement date in determining the
present value of lease payments. This incremental borrowing rate reflects the fixed rate at which the Group could borrow on a
collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. The
Group’s lease terms may include options to extend or terminate the lease. Such options are accounted for only when it is reasonably
certain that the Group will exercise the options. Lease expense for lease payments is recognized on a straight-line basis over the lease
term.
From time to time, the Group purchases the rights to use government-owned land for a fixed period of time. Prior to the adoption of
ASC 842, these land use rights were recorded at cost less accumulated amortization and any accumulated impairment losses in land use
right, net in the consolidated balance sheets. Amortization is provided on a straight-line basis over the estimated useful lives, which is 50
years and represents the shorter of the estimated usage years or the terms of the land use rights certificate. Upon the adoption of ASC 842
on January 1, 2021, land use rights acquired assessed in accordance with ASC 842 and recognized in operating right-of-use assets if they
meet the definition of lease.
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(n) Impairment of long-lived assets
Long-lived assets such as property, plant and equipment, intangible assets and operating lease right-of-use assets with finite lives are
evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully
recoverable or that the useful life is shorter than the Group had originally estimated. When these events occur, the Group evaluates the
impairment for the long-lived assets by comparing the carrying value of the assets with an estimate of future undiscounted cash flows
expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash
flows is less than the carrying value of the assets, the Group recognizes an impairment loss based on the excess of the carrying value of
the assets over the fair value of the assets. No impairment of long-lived assets was recognized for the years ended December 31, 2020,
2021 and 2022.
(o) Value added taxes
The Company’s PRC subsidiaries are subject to value added tax (“VAT”). Revenues from sales of products are generally subject to
VAT at the rate of 13%. Revenues from services are generally subject to VAT at the rate of 6%. VAT are subsequently paid to PRC tax
authorities after netting input VAT on purchases and VAT export rebates. The excess of output VAT over input VAT and VAT export
rebates is reflected in Accrued expenses and other current liabilities, and the excess of input VAT and VAT export rebates over output
VAT is reflected in prepayments and other current assets in the consolidated balance sheets.
(p) Fair value measurements
Fair value represents the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined
based on assumptions that market participants would use in pricing an asset or a liability.
Accounting guidance defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value
measurements. Accounting guidance establishes a three-level fair value hierarchy and requires an entity to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within
the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of
inputs are:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Include other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs which are supported by little or no market activity.
Accounting guidance also describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach;
(2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market
transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future
amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those
future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
Financial assets and liabilities of the Group primarily consist of cash and cash equivalents, term deposits, restricted cash, short-term
investments, accounts receivable, short-term bank borrowings, notes payable and accounts payable. The Group measures short-term
investments at fair value on a recurring basis. Short-term investments include financial products issued by financial institutions, which
are valued based on prices per unit quoted by issuers. They are categorized in Level 2 of the fair value hierarchy.
As of December 31, 2021 and 2022, the carrying values of other financial instruments approximated to their fair values as their
interest rates are comparable to the prevailing interest rates in the market.
The Group’s non-financial assets, such as property, plant and equipment, intangible assets and operating lease right-of-use assets,
would be measured at fair value only if they were determined to be impaired.
(q) Revenue recognition
The Group generates substantially all of its revenues from sales of electric scooters, accessories and spare parts to the Group’s PRC
domestic offline distributors and overseas offline distributors or directly to individual customers online. The Group also generates its
revenues from its subscription-based mobile application services, as well as insurance service as an agent.
F-17
Table of Contents
The Group recognizes revenues upon the satisfaction of its performance obligation (upon transfer of control of promised goods or
services to customers) in an amount that reflects the consideration to which the Group expects to be entitled to in exchange for those
goods or services, excluding amounts collected on behalf of third parties (for example, value added taxes). For each performance
obligation satisfied over time, the Group recognizes revenue over time by measuring the progress toward complete satisfaction of that
performance obligation. If the Group does not satisfy a performance obligation over time, the performance obligation is satisfied at a
point in time.
To achieve that core principle, the Group applies the five steps defined under Accounting Standards Codification Topic 606: (i)
identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv)
allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a
performance obligation. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as
principal or agent. Revenue arrangements with multiple performance obligations are divided into separate distinct goods or services. A
performance obligation is considered distinct from other obligations in a contract when it (a) provides a benefit to the customer either on
its own or together with other resources that are readily available to the customer and (b) is separately identified in the contract. The
Group allocates the transaction price to each performance obligation based on the relative SSP of the goods or services provided.
Revenue is recognized upon the transfer of control of promised goods or services to a customer.
Products
The Group identified one performance obligation which is to sell products, such as electric scooters, accessories and spare parts, to
the Group’s PRC domestic offline distributors and overseas offline distributors or directly to individual customers online. For all sales of
products, the Group requires a signed contract or purchase order, which specifies pricing, quantity and product specifications. Revenue of
product sales is recognized on a gross basis upon the satisfaction of its performance obligation, which is to transfer the control of the
promised products to customers.
The transfer of control of the products is satisfied at a point in time, which occurs when the products are accepted by the domestic
offline distributors, overseas offline distributors or individual customers. When the Group sells its products to its domestic offline
distributors for domestic sales in PRC, acceptance of the products by the domestic offline distributors is evidenced by goods receipt notes
signed by the domestic offline distributors, which is generally at the Group’s warehouse. When the Group sells its products to overseas
offline distributors for oversea sales, acceptance of the products by overseas offline distributors is evidenced by shipping documents
dependent upon the terms of the underlying contract. When the Group sells its products to individual customers through its own online
store and third-party e-commerce platform, the Group is responsible for the delivery to individual customers. Acceptance of the products
is evidenced by goods receipt notes signed by individual customers.
The Group provides sales volume rebate to qualified distributors based on the volume sold to such distributors in a certain period
and grants online individual customers unconditional right to return the products within 7 days after their acceptance.
Revenues are measured as the amount of consideration the Group expects to receive in exchange for transferring products to
domestic offline distributors, overseas offline distributors or individual customers. Consideration is recorded net of sales volume rebate,
sales returns and VAT. Sales returns is estimated based on historical experiences, which were insignificant for the years ended December
31, 2020, 2021 and 2022.
F-18
Table of Contents
The Group utilizes delivery service providers to deliver products to overseas offline distributors and individual customers (“shipping
activities”), but the delivery service is not considered as a separate obligation as the shipping activities are performed before the overseas
offline distributors and individual customers obtain control of the products. Therefore, shipping activities are not considered a separate
promised service to them but rather are activities to fulfill the Group’s promise to transfer the products. Outbound shipping charges to
overseas offline distributors and individual customers are included as a part of the revenues, and outbound shipping-related costs are
recorded as cost of revenues. Shipping costs incurred for sales of products and recognized as cost of revenues were RMB43,743,258,
RMB49,456,660 and RMB101,970,407 for the years ended December 31, 2020, 2021 and 2022, respectively.
For some sales, the Group collects cash before delivery. Cash collected before product delivery is recognized as advances from
customers.
Service
When the Group sells its smart electric scooters to its customers, it also provides mobile application services for free for one to two
years (the “free service period”). Customers are able to locate their smart electric scooters, as well as obtain the operating status (e.g.
battery status), and claim online repair and maintenance requests of their smart electric scooters, upon their registration of their smart
electric scooters on the Group’s mobile application. Customers may subscribe to such service after the free service period if they want to
continue using aforementioned functions.
Such revenue arrangements are divided into separate distinct performance obligations, including electric scooters and mobile
application services. The Group determines the SSP for electric scooters and mobile application services based on their relative selling
prices.
The allocated revenue to mobile application services of free service period and subscribed mobile application service revenue is
deferred and recognized on a straight-line basis over the service period, as the Group determines that the customer simultaneously
receives and consumes benefits provided by the Group as the Group performs during the free service period or the subscription period.
The deferred revenue that will be recognized in the next twelve months is classified as current portion, and the remaining balance of
deferred revenue is classified as non-current portion.
The Group also sells insurance plan for electric scooters (“NIU Cover”) to individual customers at their option. The insurance is
provided by third party insurance companies. The Group determines that it acts as an agent for the NIU Cover service because it does not
obtain control of the service before the service is transferred to the customers. The Group recognizes revenue on net basis when the
insurance agreement is entered into between individual customers and insurance providers.
Remaining performance obligations
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as of
the end of the reporting period and an explanation as to when the Group expects to recognize these amounts in revenue. Additionally, as
a practical expedient, the Group does not disclose the remaining performance obligations of contracts that have an original duration of
one year or less.
As of December 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations that are
unsatisfied or partially unsatisfied was RMB73,901,130. Given the profile of contract terms, RMB62,471,630 of the remaining
performance obligation is expected to be recognized as revenue within the next 12 months and RMB11,429,500 is expected to be
recognized as revenue between next 12 to 36 months.
(r) Contract Balances
Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable are recorded at the
invoiced amount and do not bear interest. Amounts collected on accounts receivable are included in net cash provided by operating
activities in the consolidated statements of cash flows.
F-19
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Prior to the adoption of ASC 326, Financial Instruments - Credit Loss, an allowance for doubtful accounts is made and recorded into
general and administrative expenses based on aging of accounts receivable and on any specifically identified accounts receivable that
may become uncollectible. Management considers the following factors when determining the collectability of specific accounts:
historical experience, credit worthiness of the clients, aging of the receivables and other specific circumstances related to the accounts.
Accounts receivable which are deemed to be uncollectible are charged off against the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote. There is a time lag between when the Group estimates a portion of or the
entire account balances to be uncollectible and when a write off of the account balances is taken. The Group does not have any off-
balance sheet credit exposure related to its customers.
The Group adopted ASU 2016-13, Financial Instruments - Credit Losses, Measurement of Credit Losses on Financial Instruments,
and subsequent amendments to the initial guidance within ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11 and ASU 2020-02,
collectively referred to as “ASC 326” on January 1, 2021 using the modified retrospective approach. Upon adoption of ASC 326 starting
from January 1, 2021, the provision of credit losses for accounts receivable is based upon the current expected credit losses (“CECL”)
model. The CECL model requires an estimate of the credit losses expected over the life of accounts receivable since initial recognition,
and accounts receivable with similar risk characteristics are grouped together when estimating CECL. In assessing the CECL, the Group
considers both quantitative and qualitative information that is reasonable and supportable, including historical credit loss experience,
adjusted for relevant factors impacting collectability and forward-looking information indicative of external market conditions. While the
Group uses the best information available in making determination, the ultimate recovery of recorded receivables is also dependent upon
future economic events and other conditions that may be beyond the Group’s control. Accounts receivable which are deemed to be
uncollectible are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is
considered remote. There is a time lag between when the Group estimates a portion of or the entire account balances to be uncollectible
and when a write off of the account balances is taken. The Group does not have any off-balance sheet credit exposure related to its
customers. This adoption did not have material impact on the Company’s consolidated financial statements.
A contract liability is recognized when the Group has an obligation to transfer products or services to a customer for which the
Group has received consideration from the customer, or for which an amount of consideration is due from the customer. Contract
liabilities are included in advances from customers and deferred revenue on the consolidated balance sheets.
Changes in the Group’s contract liabilities (advances from customers and deferred revenue) are presented in the following table for
the years ended December 31, 2021 and 2022:
Contract liabilities as of January 1, 2021
Cash received in advance, excluding VAT
Revenue recognized from opening balance of contract liabilities
Revenue recognized from contract liabilities arising during 2021
Contract liabilities as of December 31, 2021
Cash received in advance, excluding VAT
Revenue recognized from opening balance of contract liabilities
Revenue recognized from contract liabilities arising during 2022
Contract liabilities as of December 31, 2022
65,394,281
3,426,755,022
(61,217,823)
(3,370,213,054)
60,718,426
2,852,443,422
(50,024,734)
(2,789,235,984)
73,901,130
(s) Warranties
The Group provides for the estimated costs of warranties at the time when revenue is recognized. The specific terms and conditions
of those warranties vary among different parts of electric scooters. Factors that affect the Group’s warranty obligation include product
defect rates and costs of repair or replacement. These factors are estimates that may change based on new information that becomes
available each period. The portion of the warranty reserve expected to be incurred within the next 12 months is included within accrued
expenses and other current liabilities while the remaining balance is included within other non-current liabilities on the consolidated
balance sheets.
(t) Cost of Revenues
Cost of revenues mainly consists of the cost of products sold, write-downs of inventories, logistics costs and warranty costs.
F-20
Table of Contents
(u) Selling and Marketing Expenses
Selling and marketing expenses mainly consist of advertising expenses, promotion expenses and payroll and related expenses for
personnel engaged in selling and marketing activities. Advertising expenses, which consist primarily of online and offline
advertisements, are expensed when the services are received. The advertising expenses were RMB86,763,367, RMB160,415,978 and
RMB191,776,905 for the years ended December 31, 2020, 2021 and 2022, respectively.
(v) General and Administrative Expenses
General and administrative expenses mainly consist of payroll and related costs for employees involved in general corporate
functions, professional fees, current expected credit losses, foreign currency exchange gains (losses) and other general corporate
expenses, as well as expenses associated with the use by these functions of facilities and equipment, such as rental and depreciation
expenses.
(w) Research and Development Expenses
Research and development expenses mainly consist of payroll and related costs for employees involved in researching and
developing new products and technologies, and outsourced design expenses as well as expenses associated with the use by these
functions of facilities and equipment, such as rental and depreciation expenses. Research and development expenses are expensed
as incurred.
(x) Government Grants
Government grants are recognized when there is reasonable assurance that the Group will comply with the conditions attached to it
and the grant will be received. Grants that compensate the Group for expenses incurred are recognized in the Group’s consolidated
statements of comprehensive income (loss) on a systematic basis in the same periods in which the expenses are incurred. Grants that
compensate the acquisition cost of an asset are recorded as a liability in the Group’s consolidated balance sheets and are recognized in
the Group’s consolidated statements of comprehensive income (loss) over the useful life of the asset. As of December 31, 2021 and 2022,
nil of liability was related to the government grants that compensate the acquisition cost of an asset.
The Group’s government grants mainly consist of certain subsidies or tax refund from local government or industrial parks where its
offices locate. For the years ended December 31, 2020, 2021 and 2022, RMB22,441,492, RMB48,726,818 and RMB16,385,038 of
government grants are recognized in the consolidated statements of comprehensive income (loss), respectively. There were no significant
commitment, contingencies or provision for recapture conditions for the government grants received for the years ended December 31,
2020, 2021 and 2022.
(y) Share-based Compensation
The Company periodically grants share-based awards, including but not limited to, restricted share units and share options to eligible
employees and directors.
Share-based awards granted to employees and directors are measured at the grant date fair value of the awards, and are recognized as
compensation expense using the straight-line method over the requisite service period, which is generally the vesting period. Forfeitures
are accounted when they occur.
A change in any of the terms or conditions of share-based awards is accounted for as a modification of the awards. The Group
calculates incremental compensation cost of a modification as the excess of the fair value of the modified awards over the fair value of
the original awards immediately before its terms are modified at the modification date. For vested awards, the Group recognizes
incremental compensation cost in the period the modification occurs. For awards not being fully vested, the Group recognizes the sum of
the incremental compensation cost and the remaining unrecognized compensation cost for the original awards over the remaining
requisite service period after modification.
F-21
Table of Contents
Share-based compensation in relation to the restricted share units is measured based on the fair value of the Company’s ordinary
shares at the grant date of the award. The fair value is the closing prices of the Company’s stock traded in the open market as of the grant
date. Share-based compensation in relation to the share options is estimated using the Binominal Option Pricing Model. The
determination of the fair value of share options is affected by the share price of the Company’s ordinary shares as well as the assumptions
regarding a number of complex and subjective variables, including the expected share price volatility (estimated based on the historical
volatility of the Company and comparable peer public companies with a time horizon close to the expected term of the Company’s
options), risk-free interest rate, exercise multiple and expected dividend yield. The fair value of these awards was determined with the
assistance from a valuation report prepared by an independent valuation firm using management’s estimates and assumptions.
(z) Employee Benefits
The Company’s subsidiaries and the VIE and VIE’s subsidiaries in PRC participate in a government mandated, multiemployer,
defined contribution plan, pursuant to which certain retirement, medical, housing and other welfare benefits are provided to employees.
PRC labor laws require the entities incorporated in China to pay to the local labor bureau a monthly contribution calculated at a stated
contribution rate on the monthly basic compensation of qualified employees. The Group has no further commitments beyond its monthly
contribution. Employee social benefits included as cost of products and expenses in the accompanying consolidated statements of
comprehensive income (loss) amounted to RMB13,248,094, RMB31,122,424 and RMB42,637,403 for the years ended December 31,
2020, 2021 and 2022, respectively.
(aa) Income Taxes
Current income taxes are provided on the basis of net income (loss) for financial reporting purposes, and adjusted for income and
expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax
jurisdictions. Deferred income taxes are provided using the liability method. Under this method, deferred income tax assets and liabilities
are recognized for the tax effects of temporary differences and are determined by applying enacted statutory tax rates that will be in effect
in the period in which the temporary differences are expected to reverse to the temporary differences between the financial statements’
carrying amounts and the tax bases of assets and liabilities. Deferred tax assets and liabilities are offset if there is a legally enforceable
right to offset deferred tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable
entity, or on different tax entities, but they intend to settle deferred tax liabilities and assets on a net basis or their deferred tax assets and
liabilities will be realized simultaneously.
A valuation allowance is provided to reduce the amount of deferred income tax assets if based on the weight of available evidence, it
is more-likely-than-not that some portion, or all, of the deferred income tax assets will not be realized. The effect on deferred income
taxes arising from a change in tax rates is recognized in the consolidated statements of comprehensive income (loss) in the period
of change.
The Group applies a “more likely than not” recognition threshold in the evaluation of uncertain tax positions. The Group recognizes
the benefit of a tax position in its consolidated financial statements if the tax position is “more likely than not” to prevail based on the
facts and technical merits of the position. Tax positions that meet the “more likely than not” recognition threshold are measured at the
largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. Unrecognized tax benefits
may be affected by changes in interpretation of laws, rulings of tax authorities, tax audits, and expiry of statutory limitations. In addition,
changes in facts, circumstances and new information may require the Group to adjust the recognition and measurement estimates with
regard to individual tax positions. Accordingly, unrecognized tax benefits are periodically reviewed and re-assessed. Adjustments, if
required, are recorded in the Group’s consolidated financial statements in the period in which the change that necessities the adjustments
occur. The ultimate outcome for a particular tax position may not be determined with certainty prior to the conclusion of a tax audit and,
in certain circumstances, a tax appeal or litigation process. The Group records interest and penalties related to unrecognized tax benefits
(if any) in interest expenses and general and administrative expenses, respectively. As of December 31, 2021 and 2022, the Group did not
have any significant unrecognized uncertain tax positions.
(bb) Foreign currency translation and foreign currency risks
The Company’s reporting currency is Renminbi (“RMB”). The functional currency of the Company and its subsidiary incorporated
at Hong Kong S.A.R. are the United States dollars (“US$”). The functional currency of the Company’s subsidiary incorporated in
Indonesia is Indonesia Rupiah (“IDR”).
The functional currency of the Company’s PRC subsidiaries, VIE and VIE’s subsidiaries is RMB.
F-22
Table of Contents
Transactions denominated in currencies other than the functional currency are remeasured into the functional currency at the
exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in a foreign currency are
remeasured into the functional currency using the applicable exchange rate at the balance sheet date. The resulted exchange differences
are recorded as foreign currency exchange gain or losses in the consolidated statements of comprehensive income (loss).
The financial statements of the Company, its subsidiaries incorporated at Hong Kong S.A.R. and Indonesia are translated from the
functional currency into RMB. Assets and liabilities are translated into RMB using the applicable exchange rates at the balance sheet
date. Equity accounts other than earnings generated in the current period are translated into RMB using the appropriate historical rates.
Revenues, expenses, gains and losses are translated into RMB using the average exchange rates for the relevant period. The resulted
foreign currency translation adjustments are recorded as a component of other comprehensive loss in the consolidated statements of
comprehensive income (loss) and the accumulated foreign currency translation adjustments are recorded as a component of accumulated
other comprehensive loss in the consolidated statements of changes in shareholders’ equity.
The RMB is not a freely convertible currency. The PRC State Administration for Foreign Exchange, under the authority of the PRC
government, controls the conversion of RMB to foreign currencies. The value of the RMB is subject to changes of central government
policies and international economic and political developments affecting supply and demand in the China foreign exchange trading
system market.
(cc) Concentration and risk
Concentration of customers and suppliers
No customers individually represent greater than 10% of total revenues of the Group for the years ended December 31, 2020, 2021
and 2022.
A supplier from whom individually represents greater than 10% of total purchases of the Group for the years ended December 31,
2020, 2021 and 2022, is as follows:
For the Year Ended December 31,
Supplier A
2020
RMB %
*
*
2021
RMB
298,264,146
A customer accounting for 10% or more of accounts receivable, net is as follows:
2021
%
2022
RMB
%
12 % 354,980,995
13 %
As of December 31,
RMB
117,742,621
%
44 % 135,105,131
45 %
2022
RMB
%
Customer X
A customer accounting for 10% or more of advances from customers is as follows:
Customer Y
As of December 31,
2021
RMB %
*
*
2022
RMB
2,787,482
%
11 %
No suppliers individually represent greater than 10% of accounts payable of the Group as of December 31, 2021 and 2022.
*
The amount was less than 10% of total balance.
Concentration of credit risk
Financial instruments that potentially expose the Group to concentrations of credit risk consist principally of cash and cash
equivalents, term deposits, restricted cash, short-term investments and accounts receivable, net.
F-23
Table of Contents
The Group’s investment policy requires cash and cash equivalents, term deposits, restricted cash and short-term investments to be
placed with high-quality financial institutions and to limit the amount of credit risk from any one issuer. The Group regularly evaluates
the credit standing of the counterparties or financial institutions.
The Group conducts credit evaluations on its customers prior to delivery of goods or services. The assessment of customer
creditworthiness is primarily based on historical collection records, research of publicly available information and customer on-site visits
by senior management. Based on this analysis, the Group determines what credit terms, if any, to offer to each customer individually. If
the assessment indicates a likelihood of collection risk, the Company will not deliver the services or sell the products to the customer or
require the customer to pay cash, post letters of credit to secure payment or to make significant down payments.
Interest rate risk
The Group’s short-term bank borrowing bears interests at fixed rates. If the Group were to renew these loans, the Group might be
subject to interest rate risk.
(dd) Earnings (Loss) per Share
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to holders of ordinary shares by the weighted
average number of ordinary shares or ordinary share equivalents outstanding during the year using the two-class method. Vested share
options, which are exercisable for nominal consideration, and vested restricted share units are included in the calculation of the weighted-
average number of shares of ordinary shares as ordinary share equivalents. Under the two-class method, any net income is allocated
between ordinary shares and other participating securities based on their participating rights. A net loss is not allocated to participating
securities when the participating securities does not have contractual obligation to share losses.
Diluted earnings (loss) per share is calculated by dividing net income (loss) attributable to ordinary shareholders by the weighted
average number of ordinary shares used in calculating basic net earnings (loss) per ordinary share and dilutive ordinary equivalent shares
outstanding during the period. Ordinary equivalent shares consist of ordinary shares issuable upon the exercise of outstanding share
option with the exception of vested share options with nominal exercise consideration and unvested restricted share units (using the
treasury stock method). Ordinary equivalent shares are calculated based on the most advantageous conversion rate or exercise price from
the standpoint of the security holder. Ordinary equivalent shares are not included in the denominator of the diluted earnings (loss)per
share calculation when inclusion of such shares would be anti-dilutive.
(ee) Segment Reporting
The Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews consolidated results
when making decisions about allocating resources and assessing performance of the Group. For the purpose of internal reporting and
management’s operation review, the Company’s Chief Executive Officer and management personnel do not segregate the Group’s
business by product. All products and services are viewed as in one and the only operating segment.
(ff) Statutory Reserves
In accordance with the PRC Company Laws, the Group’s PRC subsidiaries, VIE and VIE’s subsidiaries must make appropriations
from their after-tax profits as determined under the Generally Accepted Accounting Principles in the PRC (“PRC GAAP”) to non-
distributable reserve funds including statutory surplus fund and discretionary surplus fund. The appropriation to the statutory surplus
fund must be 10% of the after-tax profits as determined under PRC GAAP. Appropriation is not required if the statutory surplus fund has
reached 50% of the registered capital of the PRC companies. Appropriation to the discretionary surplus fund is made at the discretion of
the PRC companies.
The statutory surplus fund and discretionary surplus fund are restricted for use. They may only be applied to offset losses or increase
the registered capital of the respective companies. These reserves are not allowed to be transferred to the Company by way of cash
dividends, loans or advances, nor can they be distributed except for liquidation.
For the years ended December 31, 2020, 2021 and 2022, the Group’s PRC subsidiaries made appropriations to the statutory reserves
of RMB22,208,130, RMB20,875,864 and RMB42,654, respectively.
F-24
Table of Contents
(gg) Recent Accounting Pronouncements
In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about
Government Assistance, requiring annual disclosures about transactions with a government that are accounted for by analogizing to a
grant or contribution accounting model. The disclosure requirements include the nature of the transaction and the related accounting
policy used, the line items on the balance sheets and statements of operations that are affected and the amounts applicable to each
financial statement line item and the significant terms and conditions of the transactions. The ASU is effective for annual periods
beginning after December 15, 2021. The disclosure requirements can be applied either retrospectively or prospectively to all transactions
in the scope of the amendments that are reflected in the financial statements at the date of initial application and new transactions that are
entered into after the date of initial application. The Group adopted the new standard on January 1, 2022, which had no material impact
on the consolidated financial statements.
3. SHORT-TERM INVESTMENTS
Short-term investments consisted of the following:
Aggregate cost basis
Gross unrealized holding gain
Aggregate fair value
As of December 31,
2021
RMB
2022
RMB
770,000,000 160,000,000
406,301
3,678,455
773,678,455 160,406,301
The Group’s short-term investments represent wealth management products issued by commercial banks in the PRC which are
redeemed upon demand of the Group. The wealth management products are invested in debt securities issued by the PRC government,
corporate debt securities, bank deposits, central bank bills and other securities issued by other financial institutions. As of December 31,
2021 and 2022, there were no gross unrealized holding losses.
4. ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consisted of the following:
Accounts receivable
Allowance for doubtful accounts
Accounts receivable, net
The movement of the allowance for doubtful accounts is as follows:
Balance at the beginning of the year
Additions
Write-off
Balance at the end of the year
F-25
As of December 31,
2021
RMB
273,106,542
(4,549,366)
2022
RMB
329,336,616
(29,593,693)
268,557,176
299,742,923
2020
RMB
3,288,535
505,912
(487,066)
3,307,381
For the Year Ended
December 31,
2021
RMB
3,307,381
1,272,454
(30,469)
4,549,366
2022
RMB
4,549,366
25,044,327
—
29,593,693
Table of Contents
5. INVENTORIES
Inventories consisted of the following:
Raw materials
Works in progress
Finished goods
Inventories
As of December 31,
2021
RMB
194,707,940
27,802
74,901,300
2022
RMB
149,903,238
69,290
267,036,620
269,637,042
417,009,148
Write-downs of inventories from the carrying amount to its estimated net realizable value amounted to RMB5,809,583,
RMB3,679,669 and RMB8,991,793 were made for the years ended December 31, 2020, 2021 and 2022, and were recorded as cost of
revenues.
6. PREPAYMENTS AND OTHER CURRENT ASSETS
Prepayments and other current assets consisted of the following:
Deductible input VAT and VAT rebates receivable
Advances to suppliers
Deferred charge
Income tax receivable
Receivable from online platforms
Interest receivable
Others*
2021
RMB
As of December 31,
2022
RMB
104,391,993
54,722,157
14,359,452
13,349,602
11,555,500
1,916,240
5,400,773
15,509,025
35,620,903
2,300,871
—
591,388
995,789
1,043,286
Prepayments and other current assets
56,061,263
205,695,717
* Others mainly include deposits receivable.
7. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consisted of the following:
Furniture
Building
Machinery and equipment
Office and electronic equipment
Leasehold improvement
Motor vehicles
Property, plant and equipment
As of December 31,
2021
RMB
301,967,565
138,365,906
113,720,676
29,067,529
10,753,230
3,674,913
597,549,819
2022
RMB
380,987,667
148,449,403
135,365,960
31,868,495
10,778,718
3,811,160
711,261,403
Less: Accumulated depreciation
(200,333,908)
(313,904,608)
Property, plant and equipment, net
397,215,911
397,356,795
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Table of Contents
Depreciation expense on property, plant and equipment was allocated to the following expense items:
Cost of revenues
General and administrative expenses
Selling and marketing expenses
Research and development expenses
Total depreciation expense
8. INTANGIBLE ASSETS, NET
Intangible assets consisted of the following:
RMB
Trademarks
Domain name
License
Total
RMB
Trademarks
Domain name
License
Total
2020
RMB
11,942,414
5,237,258
27,665,201
2,695,347
For the Year Ended December 31,
2021
RMB
19,702,392
7,856,968
62,949,248
3,092,290
2022
RMB
23,554,266
8,113,535
104,721,594
4,381,707
47,540,220
93,600,898
140,771,102
Amortization
period
5-10 years
5-10 years
10 years
As of December 31, 2021
Gross
carrying
amount
8,248,272
3,792,424
1,943,396
Accumulated
amortization
(6,165,790)
(3,576,528)
(573,585)
Net
carrying
amount
2,082,482
215,896
1,369,811
Amortization
period
5-10 years
5-10 years
10 years
13,984,092
(10,315,903)
3,668,189
As of December 31, 2022
Gross
carrying
amount
8,983,153
3,820,913
1,943,396
Accumulated
amortization
(8,503,451)
(3,618,766)
(767,925)
Net
carrying
amount
479,702
202,147
1,175,471
14,747,462
(12,890,142)
1,857,320
Amortization expense on intangible assets was allocated to the following expense items:
Cost of revenues
General and administrative expenses
Total amortization expense
For the Year Ended December 31,
2021
RMB
194,340
1,677,810
2020
RMB
194,340
1,783,927
2022
RMB
194,340
1,745,967
1,978,267
1,872,150
1,940,307
As of December 31, 2022, estimated amortization expense of the existing intangible assets for each of the next five years is
RMB542,464, RMB262,895, RMB262,895, RMB248,717 and RMB247,428.
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Table of Contents
9. OTHER NON-CURRENT ASSETS
Other non-current assets consisted of the following:
Prepayment for an investment
Deposits
Prepayment for property, plant and equipment
Others
2021
RMB
As of December 31,
2022
RMB
7,000,000
2,376,350
1,914,411
1,392,329
—
1,934,441
432,623
—
Other non-current assets
2,367,064
12,683,090
10. SHORT-TERM BANK BORROWINGS
China Merchants Bank loan
SPD Silicon Valley Bank loan
Short-term bank borrowings
As of December 31,
2021
RMB
20,000,000
160,000,000
2022
RMB
—
160,000,000
180,000,000
160,000,000
On July 23, 2021, China Merchants Bank provided Jiangsu Xiaoniu with a 10-month short-term credit bank borrowing of
RMB20,000,000 bearing interest of 3.5% per annum. In May 2022, Jiangsu Xiaoniu fully repaid the borrowing, and obtained a 12-month
short-term bank borrowing from China Merchants Bank in amounts of RMB20,000,000 bearing interest of 3.3% per annum. In
November 2022, Jiangsu Xiaoniu repaid the borrowing. As of December 31, 2022, outstanding balances of the borrowing was nil.
On June 12, 2019, Jiangsu Xiaoniu, Beijing Niudian and Changzhou Niudian jointly entered into a facility agreement with SPD
Silicon Valley Bank that provided a credit facility of up to RMB120,000,000 with tenor period of twelve months. The interest rate for
each drawdown was at base interest rate of People’s Bank of China. In June 2020, Jiangsu Xiaoniu entered into an amendment agreement
to (i) change the facility amount up to RMB160,000,000 and (ii) change the cash security to equivalent amount of RMB176,000,000 at
the time of drawdown. In June 2020, Jiangsu Xiaoniu and Changzhou Niudian fully repaid the loans of RMB60,000,000 and
RMB60,000,000 borrowed in June 2019, respectively, and the restricted cash in US dollar deposit equivalent to RMB132,000,000 was
released. Also in June 2020, Jiangsu Xiaoniu and Changzhou Niudian obtained new loans from SPD Silicon Valley Bank under the
amendment agreement in amounts of RMB80,000,000 and RMB80,000,000, respectively. The Company provided cash security with US
dollar deposit equivalent to RMB176,000,000 at the bank. In June 2021, Jiangsu Xiaoniu and Changzhou Niudian fully repaid the loans
and the restricted cash was released. Also in June 2021, Jiangsu Xiaoniu entered into an amended facility agreement to (i) extend the
facility maturity date to June 12, 2023, and (ii) change the interest rate to a fixed rate of 3.5% per annum, which was further changed to
3.2% per annum in December 2021. Also in June 2021, Jiangsu Xiaoniu and Changzhou Niudian obtained new loans from SPD Silicon
Valley Bank under the new amended facility agreement in amounts of RMB120,000,000 and RMB40,000,000, respectively. The
Company provided cash security with US dollar deposit equivalent to RMB176,000,000 at the bank. In September and December 2021,
Changzhou Niudian and Jiangsu Xiaoniu repaid loans of RMB40,000,000 and RMB120,000,000, respectively, and the restricted cash
was released. In December 2021, Jiangsu Xiaoniu obtained a new loan from SPD Silicon Valley Bank under the amendment agreement
in amounts of RMB160,000,000. In June 2022, Jiangsu Xiaoniu fully repaid the loan and the restricted cash was released and Jiangsu
Xiaoniu entered into an amended facility agreement to change the interest rate to 3.0% per annum, and obtained a loan from SPD Silicon
Valley Bank in amount of RMB160,000,000 with the maturity date in December 2022. In December 2022, Jiangsu Xiaoniu repaid such
loan and obtained a loan from SPD Silicon Valley Bank in amount of RMB160,000,000 with the maturity date in January 2023. As of
December 31, 2021 and 2022, total outstanding balance of these loans were RMB160,000,000 and RMB160,000,000, respectively, and
total outstanding balance of restricted cash were equivalent to RMB176,141,464 and RMB176,204,380, respectively. In January 2023,
Jiangsu Xiaoniu fully repaid the loan and the restricted cash was released.
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Table of Contents
11. NOTES PAYABLE
On December 31, 2021 and 2022, Jiangsu Xiaoniu obtained credit facility of up to RMB200,000,000 from China Merchants Bank
and RMB300,000,000 from Bank of China, respectively, for both bank borrowings and notes payable with tenor period of twelve
months. As of December 31, 2021 and 2022, notes payable represent bank acceptance notes with non-interest bearing, issued to suppliers
by the Group, which are due within twelve months.
12. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Refundable payment—current
Accrued payroll and social insurance
Warranty—current
Other taxes payable
Construction payable
Sales rebate
Operating lease liabilities—current
Interest payable
Others*
As of December 31,
2021
RMB
36,977,756
34,931,618
29,854,144
17,056,573
10,829,465
36,275,780
7,689,187
275,178
25,014,857
2022
RMB
41,735,515
28,508,469
24,797,169
18,813,540
16,512,545
13,878,273
7,743,648
280,000
39,823,784
Accrued expenses and other current liabilities
198,904,558 192,092,943
* Others mainly include accrued marketing expenses, accrued professional fees and other general corporate expenses.
The Group provides limited warranty to its end customers for terms varying from six months to three years, subject to certain
conditions, such as normal use. For the electric motor, the Group provides a 24-month or 30,000-kilometer warranty. For lithium-ion
battery packs, the Group provides 24-month or 20,000-kilometer warranty or a 36-month or 30,000-kilometer warranty, depending on
the model.
For other parts of the Group’s electric scooters, the Group provides quality warranty varying from six months to 24 months
depending on the parts. The Group is responsible for replacing or repairing the faulty products during their respective warranty terms.
The Group provides for the estimated costs of warranties at the time revenue is recognized. Factors that affect the Group’s warranty
obligation include product defect rates and costs of repair or replacement.
Movement of provision for warranty is as follows:
Accrued warranty—beginning of year
Accrual for warranties issued during the year
Warranty claims paid
Pre-existing warranty expired
Accrued warranty—end of year
F-29
2020
59,951,866
35,197,541
(18,590,107)
(17,363,404)
59,195,896
For the Year Ended December 31,
2021
59,195,896
35,181,557
(22,554,689)
(24,034,642)
47,788,122
2022
47,788,122
20,355,810
(23,894,070)
(10,437,572)
33,812,290
Table of Contents
13. OTHER NON-CURRENT LIABILITIES
Other non-current liabilities consisted of the following:
Warranty—non-current
Refundable payment from franchised stores—non-current
Others
Other non-current liabilities
14. ORDINARY SHARE
As of December 31,
2021
RMB
2022
RMB
17,933,978 9,015,121
1,233,466
3,192,795
1,680,058
1,353,394
20,967,430
13,441,382
The Company’s authorized share capital is US$500,000 divided into 5,000,000,000 shares comprising of (i) 4,900,000,000 Class A
ordinary shares with a par value of US$0.0001 each, (ii) 50,000,000 Class B ordinary shares with a par value of US$0.0001 each and (iii)
50,000,000 shares with a par value of US$0.0001 each of such class or classes (however designated) as the board of directors may
determine in accordance with the Company’s Memorandum and Articles of Association.
Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. Each
Class A ordinary share entitles the holder to one vote on all matters subject to vote at general meetings of the Company, and each Class B
ordinary share entitles the holder to four votes on all matters subject to vote at general meetings of the Company. Class A ordinary shares
are not convertible into Class B ordinary shares under any circumstances.
On August 18, 2020, a Class B ordinary shareholder converted 1,260,000 Class B ordinary shares to Class A ordinary shares.
On May 17, 2021, a Class B ordinary shareholder converted 1,440,000 Class B ordinary shares to Class A ordinary shares.
As of December 31, 2022, there were 137,719,542 Class A ordinary shares and 16,542,020 Class B ordinary shares outstanding.
15. SHARE-BASED COMPENSATION
Share options and restricted share units
a)
2016 Global Incentive Plan
In January 2016, the Company’s Shareholders and Board of Directors approved 2016 Global Share Incentive Plan and amended it in
March 2018 (the “Amended 2016 Plan”). Under the Amended 2016 Plan, a maximum aggregate number of 5,861,480 ordinary shares
may be issued pursuant to all awards granted. Share options or restricted share unites expire 10 years from the grant date.
b) 2018 Share Incentive Plan
In September 2018, the Company’s Shareholders and Board of Directors approved the 2018 Share Incentive Plan (the “2018 Plan”).
Under the 2018 Plan, the maximum aggregate number of ordinary shares available for issuance is 6,733,703 ordinary shares, which shall
be increased by a number equal to 1.5% of the total number of ordinary shares issued and outstanding on the last day of the immediately
preceding fiscal year, each fiscal year during the term of the 2018 Plan, if determined and approved by the board of directors for the
relevant fiscal year. The board of directors has approved annual increases of 2,241,253, 2,285,407, and 2,305,212 ordinary shares for the
years ended December 31, 2020, 2021 and 2022, representing 1.5% of total issued and outstanding shares as of December 31, 2019, 2020
and 2021, respectively, pursuant to the 2018 Share Incentive Plan.
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A summary of the share options activities under the Amended 2016 Plan and the 2018 Plan for the year ended December 31, 2022 is
presented below:
Outstanding at January 1, 2022
Granted
Exercised
Forfeited
Outstanding at December 31, 2022
Exercisable as of December 31, 2022
Number of
share
Weighted
average
exercise
price
US$
Weighted
remaining
contractual
years
Aggregate
intrinsic
value
US$
4,655,428
—
(228,020)
(12,800)
4,414,608
3,669,818
2.07
—
1.44
0.20
2.11
1.86
5.38
5.13
4,351,057
4,305,679
Compensation costs recognized for share options for the years ended December 31, 2020, 2021 and 2022 were allocated to the
following expense items:
Cost of revenues
Selling and marketing expenses
Research and development expenses
General and administrative expenses
Total share options compensation expense
2020
RMB
171,501
3,012,857
4,895,748
9,614,592
17,694,698
For the Year Ended
December 31,
2021
RMB
8,318
2,235,102
4,018,126
6,649,255
12,910,801
2022
RMB
—
1,936,414
3,862,189
5,008,382
10,806,985
As of December 31, 2022, RMB6,049,531 of total unrecognized compensation expense related to share options is expected to be
recognized over a weighted average period of approximately 0.59 years.
A summary of the restricted share units activities for the year ended December 31, 2022 is presented below:
Unvested as of January 1, 2022
Granted
Vested
Forfeited
Cancelled
Unvested as of December 31, 2022
Number of
shares
3,019,048
2,683,756
(972,642)
(638,754)
(200,750)
3,890,658
Weighted
average grant
date fair
value
US$
6.32
3.98
5.97
5.85
11.77
4.59
For the year ended December 31, 2022, 2,555,756 restricted share units, including 790,756 restricted share units granted for
replacement as mentioned below, were granted with vesting in four equal annual installments and 128,000 restricted share units were
granted with vesting in two equal annual installments under the 2018 Plan.
In March 2022, the Company entered into an arrangement with four grantees, whereby all of their unvested 120,750 restricted share
units were cancelled and with the concurrent grant of 790,756 restricted share units with vesting in four equal annual installments under
the 2018 Plan. The total compensation costs in amount of RMB27,615,088 relating to the modified award, including the unrecognized
compensation cost remaining from the original awards and the incremental compensation cost resulting from the modification , were
recognized ratably over the grantees’ remaining requisite service period of the modified award.
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Table of Contents
In December 2022, the Company entered into agreements with two grantees, whereby all of their unvested 80,000 restricted share
units were cancelled and the unrecognized compensation cost of RMB1,562,099 was recognized as compensation costs immediately in
the consolidated statement of comprehensive loss for the year ended December 31, 2022.
Compensation costs recognized for restricted share units for the years ended December 31, 2020, 2021 and 2022 were allocated to
the following expense items:
Cost of revenues
Selling and marketing expenses
Research and development expenses
General and administrative expenses
Total restricted share units compensation expense
2020
RMB
472,182
6,932,616
6,021,889
8,487,530
21,914,217
For the Year Ended
December 31,
2021
RMB
838,515
11,057,530
13,043,898
9,367,412
34,307,355
2022
RMB
1,224,796
13,497,270
18,499,553
14,190,582
47,412,201
As of December 31, 2022, RMB99,977,753 of total unrecognized compensation expense related to restricted share units is expected
to be recognized over a weighted average period of approximately 2.62 years.
Total share-based compensation expenses recognized for the years ended December 31, 2020, 2021 and 2022 were allocated to the
following expense items:
Cost of revenues
Selling and marketing expenses
Research and development expenses
General and administrative expenses
Total share-based compensation expense
16. FAIR VALUE MEASUREMENT
2020
RMB
643,683
9,945,473
10,917,637
18,102,122
39,608,915
For the Year Ended
December 31,
2021
RMB
846,833
13,292,632
17,062,024
16,016,667
47,218,156
2022
RMB
1,224,796
15,433,684
22,361,742
19,198,964
58,219,186
The following tables present the fair value hierarchy for those assets measured at fair value on a recurring basis as of December 31,
2021 and 2022, respectively:
RMB
Short-term investments (Note 3)
RMB
Short-term investments (Note 3)
17. INCOME TAX
a) Income tax
Cayman Islands
Level 1
—
December 31, 2022
Level 2
160,406,301
Level 3
—
Total
Fair Value
160,406,301
Level 1
—
December 31, 2021
Level 2
773,678,455
Level 3
—
Total
Fair Value
773,678,455
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, the
Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.
No stamp duty is payable in respect of the issue of the shares or on an instrument of transfer in respect of a share.
F-32
Table of Contents
United States
Under the current U.S. federal corporate income tax, the Company’s subsidiary in United States are subject to 21% income tax on its
taxable income generated from operations in United States. The company’s subsidiaries have no taxable income for all periods presented.
British Virgin Islands
Under the current laws of the British Virgin Islands (“B.V.I.”), entities incorporated in the B.V.I. are not subject to tax on their
income or capital gains.
Indonesia
Under the current laws of the Republic of Indonesia, the Company’s subsidiaries in Indonesia are subject to 25% income tax on its
taxable income generated from operations in Indonesia.
Hong Kong
Under the Hong Kong tax laws, subsidiaries in Hong Kong are subject to the Hong Kong profits tax rate at 16.5% and they are
exempted from income tax on their foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.
A two-tiered profits tax rates regime was introduced in 2018 where the first HK$2 million of assessable profits earned by a company will
be taxed at half of the current tax rate (8.25%) whilst the remaining profits will continue to be taxed at 16.5%. There is an anti-
fragmentation measure where each group will have to nominate only one company in the group to benefit from the progressive rates. The
Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong
Kong for any of the periods presented.
PRC
Under the PRC Corporate Income Tax Law (“CIT Law”), preferential tax treatments will be granted to entities which conduct
businesses in certain encouraged sectors and to entities otherwise classified as “High and New Technology Enterprises” (“HNTE”).
Jiangsu Xiaoniu has been qualified as a HNTE and enjoys a preferential income tax rate of 15% for the fiscal years from 2021 to 2023.
An entity could re-apply for the HNTE certificate when the prior certificate expires. The Group’s other PRC subsidiaries, the VIE, and
VIE’s other subsidiaries are subject to the statutory income tax rate of 25%.
The CIT 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. The Implementing Rules of the CIT Law define the location of the “de facto
management body” as “the place where the exercising, in substance, of the overall management and control of the production and
business operation, personnel, accounting, property, etc., of a non-PRC company is located.” Based on a review of surrounding facts and
circumstances, the Group does not believe that it is likely that its operations outside the PRC should be considered a resident enterprise
for PRC tax purposes.
The components of income (loss) before income taxes are as follows:
Cayman
Indonesia
Hong Kong S.A.R.
B.V.I.
PRC, excluding Hong Kong S.A.R.
Total
For the Year Ended
December 31,
2021
RMB
(9,397,404)
(881,810)
(6,700,069)
—
2020
RMB
(1,356,797)
(1,124,698)
(7,773,553)
—
199,993,770 289,836,300
189,738,722 272,857,017
2022
RMB
(10,448,513)
(984,230)
(14,613,793)
(278,774)
(44,894,563)
(71,219,873)
F-33
Table of Contents
Income tax expense (benefit) consists of the following:
Current income tax expense (benefit)
Deferred income tax expense (benefit)
Total
39,236,745 42,715,007
4,321,601
(18,150,489)
21,086,256 47,036,608
For the Year Ended December 31,
2021
RMB
2020
RMB
2022
RMB
(15,677,411)
(6,079,533)
(21,756,944)
Withholding tax on undistributed dividends
The CIT law also imposes a withholding income tax of 10% on dividends distributed by a foreign investment enterprise (“FIE”) to
its immediate holding company outside of 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 Cayman Islands, where the Company is incorporated, does not have
such tax treaty with China. According to the arrangement between Mainland China and Hong Kong Special Administrative Region on
the Avoidance of Double Taxation and Prevention of Fiscal Evasion in August 2006, dividends paid by an FIE in China to its immediate
holding company in Hong Kong will be subject to withholding tax at a rate of no more than 5% (if the foreign investor owns directly at
least 25% of the shares of the FIE). The Group plans to indefinitely reinvest the undistributed earnings of the Group’s PRC entities, and
therefore, no provision for PRC dividend withholding tax was accrued.
Reconciliation of the differences between PRC statutory income tax rate and the Group’s effective income tax rate for the years
ended December 31, 2020, 2021 and 2022 are as follows:
Computed expected income tax expense (benefit)
Non-PRC entities not subject to income tax
Research and development expenses bonus deduction
Non-deductible share-based compensation expenses
Other non-deductible expenses
Preferential tax rate difference
Tax filing differences
Change in valuation allowance
Actual income tax expense (benefit)
Effect of preferential tax rates on basic earnings per Class A and Class B ordinary
share
Effect of preferential tax rates on diluted earnings per Class A and Class B ordinary
share
F-34
For the Year Ended
December 31,
2021
RMB
68,214,254
4,244,821
(23,328,287)
11,015,406
723,768
—
2,682,378
(16,515,732)
2020
RMB
47,434,681
2,563,762
(18,776,104)
9,453,660
446,051
—
267,137
(20,302,931)
2022
RMB
(17,804,968)
6,581,327
(34,910,421)
13,866,734
638,898
(3,075,033)
(3,770,720)
16,717,239
21,086,256
47,036,608
(21,756,944)
—
—
—
—
0.02
0.02
Table of Contents
b) Deferred income tax assets and deferred income tax liabilities
Deferred income tax assets
Net operating loss carry forwards
Accrued warranty
Accrued payroll and social insurance
Deferred revenue
Allowance for doubtful accounts
Write-downs for inventories
Less: Valuation allowance
As of December 31,
2021
RMB
2022
RMB
22,656,515
11,947,031
986,755
12,131,023
1,136,674
1,793,858
(24,508,473)
33,325,461
5,071,844
—
8,470,357
7,037,684
825,208
(40,764,285)
Total deferred income tax assets, net
26,143,383
13,966,269
Deferred income tax liabilities
Short-term investments
Property, plant and equipment
Total deferred income tax liabilities
Net deferred income tax assets
Net deferred income tax liabilities
859,258
15,369,169
60,946
9,171,103
16,228,427
9,232,049
11,907,344
1,992,388
6,132,499
1,398,279
As of December 31, 2022, the Group had net operating loss carry forwards of RMB133,301,844 attributable to the PRC subsidiaries,
the VIE and VIE’s subsidiaries. Tax losses of RMB6,303,283, nil, RMB29,986,636, RMB21,713,526 and RMB75,298,399 will expire, if
unused, by 2023, 2024, 2025, 2026 and 2027, respectively.
A valuation allowance is provided against deferred income tax assets when the Group determines that it is more likely than not that
some portion or all of the deferred income tax assets will not be utilized in the foreseeable future. The valuation allowance as of
December 31, 2021 and 2022 was primarily provided for the deferred income tax assets of certain PRC subsidiaries, VIE and VIE’s
subsidiaries. In making such determination, the Group evaluates a variety of factors including the Group’s operating history, accumulated
deficit, existence of taxable temporary differences and reversal periods. The ultimate realization of deferred income tax assets is
dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible or
utilizable. Management considers projected future taxable income and tax planning strategies in making this assessment.
Changes in valuation allowance are as follows:
Balance at the beginning of the year
Additions (Reversals)
Decrease relating to expiration of loss carry forwards
Balance at the end of the year
2020
RMB
62,864,281
(20,302,931)
(1,342,298)
For the Year Ended
December 31,
2021
RMB
41,219,052
(16,515,732)
(194,847)
2022
RMB
24,508,473
16,717,239
(461,427)
41,219,052
24,508,473
40,764,285
According to the PRC Tax Administration and Collection Law, the statute of limitation is three years if the underpayment of taxes is
due to computational errors made by the taxpayer or the withholding agent. The statute of limitation is extended to five years under
special circumstances where the underpayment of taxes is more than RMB100,000. In the case of transfer pricing issues, the statute of
limitation is 10 years. There is no statute of limitation in the case of tax evasion. The income tax returns of the Company’s PRC
subsidiaries, consolidated VIE and VIE’s subsidiaries for the years from 2018 to 2022 are open to examination by the PRC tax
authorities.
F-35
Table of Contents
18. NET INCOME (LOSS) PER ORDINARY SHARE
The following table sets forth the basic and diluted net income (loss) per ordinary share computation and provides a reconciliation of
the numerator and denominator for the years presented:
Numerator:
Net income (loss) attributable to ordinary shareholders
Denominator:
Weighted average number of ordinary shares outstanding
Weighted average number of ordinary shares equivalents outstanding
Denominator for basic net income (loss) per ordinary share
Dilutive effect of outstanding share options
Dilutive effect of unvested restricted share units
For the Year Ended
December 31,
2021
RMB
2020
RMB
2022
RMB
168,652,466
225,820,409
(49,462,929)
150,775,447
121,965
153,174,715
497,643
154,109,051
1,067,871
150,897,412
4,900,551
2,037,905
153,672,358
4,366,690
2,421,928
155,176,922
—
—
Denominator for diluted net income (loss) per ordinary share
157,835,868
160,460,976
155,176,922
Net income (loss) per ordinary share
—Basic
—Diluted
1.12
1.07
1.47
1.41
(0.32)
(0.32)
Securities that could potentially dilute basic net income per share in the future that were not included in the computation of diluted
net income (loss) per share because to do so would have been antidilutive for the years ended December 31, 2020, 2021 and 2022 are as
follow:
Share options
Unvested restricted share units
19. REVENUE INFORMATION
Revenues consist of the following:
Electric scooter sales
Accessory and spare parts sales
Service revenues
Revenues
For the Year Ended
December 31,
2021
—
—
2020
—
66,800
2022
4,414,608
3,890,658
2020
RMB
2,143,292,397
258,928,790
42,107,577
2,444,328,764
For the Year Ended
December 31,
2021
RMB
3,252,988,512
397,088,122
54,460,785
3,704,537,419
2022
RMB
2,853,895,423
242,296,734
72,405,177
3,168,597,334
F-36
Table of Contents
The following summarizes the Group’s revenue from the following geographic areas (based on the location of customers):
For the Year Ended
December 31,
2021
RMB
2022
RMB
2020
RMB
PRC
Europe
Others
Revenues
20. OPERATING LEASES
2,039,210,587 3,158,966,932 2,583,843,616
343,157,877
241,595,841
2,444,328,764 3,704,537,419 3,168,597,334
430,201,301
115,369,186
305,244,466
99,873,711
The Group leases its facilities and offices under non-cancelable operating lease agreements. For the year ended December 31, 2021,
the operating lease cost and short-term lease cost were RMB11,947,682 and RMB1,357,660, respectively. For the year ended December
31, 2022, the operating lease cost and short-term lease cost were RMB9,352,700 and RMB847,735, respectively. There were no leasing
costs other than operating lease costs and short-term lease costs for the years ended December 31, 2021 and 2022.
A summary of supplemental information related to operating leases as of December 31, 2021 and 2022 is as follows:
Operating lease right-of-use assets
Operating lease liabilities—current
Operating lease liabilities—non-current
Total operating lease liabilities
Cash paid for amounts included in the measurement of operating lease liabilities
Right-of-use assets obtained in exchange for new operating lease liabilities
Right-of-use assets obtained in exchange for prepayment for land use right
Modification to operating lease liabilities
As of December 31,
2021
RMB
94,201,263
7,689,187
13,921,859
21,611,046
2022
RMB
86,597,121
7,743,648
7,569,128
15,312,776
For the Year Ended December 31,
2022
2021
RMB
RMB
9,569,023
10,201,553
26,550,000
(11,469,923)
8,046,828
921,405
—
—
The weighted average remaining lease term as of December 31, 2022 were 2.5 years, and the weighted average discount rate of the
operating leases were 4.60%.
Maturities of lease liabilities under the Group’s non-cancellable operating leases as of December 31, 2022 were as follows:
Within 1 year
After 1 year but within 2 years
After 2 years but within 3 years
After 3 years but within 4 years
Total undiscounted lease payment
less: Imputed interest
Present value of lease liabilities
As of December 31, 2022
RMB
8,271,447
5,130,512
2,197,223
555,785
16,154,967
(842,191)
15,312,776
As of December 31, 2022, the Group has no significant lease contract that has been entered into but not yet commenced.
Rental expenses were RMB14,034,591 for the year ended December 31, 2020.
F-37
Table of Contents
21. COMMITMENTS AND CONTINGENCIES
The Group did not have any significant capital or other commitments or guarantees or contingencies as of December 31, 2022.
22. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
For the presentation of the parent company only condensed financial information, the Company records its investment in
subsidiaries, consolidated VIE and VIE’s subsidiaries, under the equity method of accounting as prescribed in ASC 323, “Investments-
Equity Method and Joint Ventures”. Such investments are presented on the condensed balance sheets as “Investment in subsidiaries,
consolidated VIE and VIE’s subsidiaries” and the subsidiaries, consolidated VIE and VIE’s subsidiaries’ income as “Share of income
from subsidiaries, consolidated VIE and VIE’s subsidiaries” on the condensed statements of results of operations. The parent company
only condensed financial information should be read in conjunction with the Company’s consolidated financial statements. As of
December 31, 2022, there were no material contingencies, significant provisions of long-term obligations, mandatory dividend or
redemption requirements of redeemable stocks or guarantees of Niu Technologies, except for those, which have been separately
disclosed in the consolidated financial statements.
(a) Condensed Balance Sheets
Assets
Current assets
Cash and cash equivalents
Term deposits-current
Restricted cash
Prepayments and other current assets
Total current assets
Non-current assets
Investment in and amount due from subsidiaries, consolidated VIE and VIE’s subsidiaries
Term deposits—non-current
Other non-current assets
Total assets
Liabilities
Current liabilities
Amount due to subsidiaries, consolidated VIE and VIE’s subsidiaries
Accrued expenses and other current liabilities
Total current liabilities and total liabilities
Shareholders’ equity:
Class A ordinary shares
Class B ordinary shares
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total shareholders’ equity
Total liabilities and shareholders’ equity
F-38
As of December 31,
2021
RMB
2022
RMB
107,768,887
95,635,500
176,141,464
8,394,159
12,375,894
208,589,770
176,204,380
12,486,238
387,940,010
409,656,282
865,698,047
15,939,250
—
906,298,879
—
1,219
1,269,577,307
1,315,956,380
4,262,270
760,847
4,262,270
1,596,233
5,023,117
5,858,503
89,038
10,316
1,855,403,759
(51,121,030)
(539,827,893)
89,428
10,316
1,915,825,641
(16,536,686)
(589,290,822)
1,264,554,190
1,310,097,877
1,269,577,307
1,315,956,380
Table of Contents
(b) Condensed Statements of Results of Operations
Total operating expenses
Share of income (loss) from subsidiaries, consolidated VIE and VIE’s subsidiaries
Interest income
Income (loss) before income taxes
Income tax expense
Net income (loss)
(c) Condensed Statements of Cash Flows
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Net cash provided by financing activities
Effect of foreign currency exchange rate changes on cash, cash equivalents and
2020
RMB
For the Year Ended December 31,
2021
RMB
(11,441,931)
235,264,719
1,997,621
2022
RMB
(15,414,575)
(39,264,560)
5,216,206
(7,308,201)
47,710,647
5,951,405
46,353,851
—
225,820,409
—
(49,462,929)
—
46,353,851
225,820,409
(49,462,929)
2020
RMB
(55,920,062)
34,502,559
24,230,446
For the Year Ended December 31,
2021
RMB
25,839,822
16,132,750
6,246,384
2022
RMB
(23,565,305)
(95,940,040)
2,203,086
restricted cash
(16,693,391)
(6,107,381)
21,972,182
Net increase (decrease) in cash, cash equivalents and restricted cash
(13,880,448)
42,111,575
(95,330,077)
Cash, cash equivalents and restricted cash at the beginning of the year
255,679,224
241,798,776
283,910,351
Cash, cash equivalents and restricted cash at the end of the year
241,798,776
283,910,351
188,580,274
F-39
List of Principal Subsidiaries and Consolidated Affiliated Entity
Exhibit 8.1
Subsidiaries
Niu Technologies Group Limited
Niu Innovation Limited
PT Niu Technologies Indonesia
Beijing Niudian Information Technology Co., Ltd.
Changzhou Niudian Information Technology Co., Ltd.
Consolidated Variable Interest Entity
Beijing Niudian Technology Co., Ltd.
Subsidiaries of Consolidated Variable Interest Entity
Jiangsu Xiaoniu Diandong Technology Co., Ltd.
Shanghai Xiaoniu Internet Technology Co., Ltd.
Changzhou Niudian International Trading Technology Co., Ltd.
Changzhou Niudian Electric Technology Co., Ltd.
Place of Incorporation
Hong Kong
Hong Kong
Indonesia
PRC
PRC
Place of Incorporation
PRC
Place of Incorporation
PRC
PRC
PRC
PRC
Exhibit 12.1
Certification by the Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Yan Li, certify that:
1.
I have reviewed this annual report on Form 20-F of Niu Technologies;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in
this report;
4.
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d)
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the
period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal
control over financial reporting; and
5.
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing
the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial
information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
company’s internal control over financial reporting.
Date:April 21, 2023
By:
/s/ Yan Li
Name:Yan Li
Title: Chairman of the Board of Directors
and Chief Executive Officer
Exhibit 12.2
Certification by the Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Fion Wenjuan Zhou, certify that:
1.
I have reviewed this annual report on Form 20-F of Niu Technologies;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in
this report;
4.
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d)
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the
period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal
control over financial reporting; and
6.
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing
the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial
information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
company’s internal control over financial reporting.
Date:April 21, 2023
By:
/s/ Fion Wenjuan Zhou
Name:Fion Wenjuan Zhou
Title: Chief Financial Officer
Certification by the Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 13.1
In connection with the Annual Report of Niu Technologies (the “Company”) on Form 20-F for the year ended December 31,
2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Yan Li, Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my
knowledge:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date:April 21, 2023
By:
/s/ Yan Li
Name:Yan Li
Title: Chairman of the Board of Directors
and Chief Executive Officer
Certification by the Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 13.2
In connection with the Annual Report of Niu Technologies (the “Company”) on Form 20-F for the year ended December 31,
2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fion Wenjuan Zhou, Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that to my knowledge:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date:April 21, 2023
By:
/s/ Fion Wenjuan Zhou
Name:Fion Wenjuan Zhou
Title: Chief Financial Officer
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statement (No. 333-229190) on Form S-8 of our reports dated April 21,
2023, with respect to the consolidated financial statements of Niu Technologies and the effectiveness of internal control over financial
reporting.
Exhibit 15.1
/s/ KPMG Huazhen LLP
Beijing, China
April 21, 2023
EXHIBIT 15.2
Date: April 21, 2023
Niu Technologies
No.1 Building, No. 195 Huilongguan East Road,
Changping District, Beijing 102208
People’s Republic of China
Dear Sir/Madam:
We hereby consent to the use of our name and the summary of our opinion under the headings, “Item 3. Key Information—D. Risk
Factors—Risks Related to Our Corporate Structure” and “Item 4. Information on the Company—C. Organizational Structure”, included
in Niu Technologies’ Annual Report on Form 20-F for the year ended December 31, 2022 (“Annual Report”), which will be filed with
the Securities and Exchange Commission (“SEC”) in the month of April 2023, and further consent to the incorporation by reference into
the Registration Statement (Form S-8 No. 333-229190) pertaining to Niu Technologies’ Amended and Restated 2016 Global Share
Incentive Plan and 2018 Share Incentive Plan. We also consent to the filing of this consent letter with the SEC as an exhibit to the Annual
Report.
In giving such consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated
thereunder.
Yours Sincerely,
/s/ DaHui Lawyers
/s/ DaHui Lawyers