| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of presentation The consolidated financial
statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.
GAAP”). (b) Principles of consolidation The accompanying consolidated
financial statements of the Group include the financial statements of the Company and its subsidiaries for which the Company is the ultimate
primary beneficiary. A subsidiary is an entity
in which the Company, directly or indirectly, controls more than one half of the voting power; has the power to appoint or remove the
majority of the members of the board of directors (the “Board”); and to cast a majority of the votes at the meeting of the
Board or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity
holders. All significant transactions
and balances between the Company and its subsidiaries have been eliminated in consolidation. The non-controlling interests in consolidated
subsidiaries are shown separately in the consolidated financial statements. (c) Use of estimates The preparation of 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 and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period. Significant accounting
estimates reflected in the Group’s consolidated financial statements mainly include the used
in the recognition of right-of-use assets and lease liabilities, inventory write-down, expected credit losses, the useful lives of property
and equipment and intangible assets, contingent (d) Functional currency
and foreign currency translation The Group uses Renminbi (“RMB”)
as its reporting currency. The functional currency of the Company and its overseas subsidiaries that are incorporated in the Cayman Islands
and British Virgin Islands is the U.S. Dollar (“US$”). The functional currency of the Company’s subsidiaries that are
incorporated in Hong Kong is Hong Kong Dollar (“HK$”). The functional currency of the Company’s subsidiaries
that are incorporated in the PRC is RMB. In the consolidated financial
statements, the financial information of the Company and other entities located outside of PRC has been translated into RMB. Assets
and liabilities are translated at the exchange rates on the balance sheet date, equity amounts are translated at historical exchange rates,
and revenues, expenses, gains and losses are translated using the average rate for the periods. Translation adjustments are reported as
foreign currency translation adjustments and are shown as a component of other comprehensive loss in the consolidated statements of operations
and comprehensive income (loss). There is nil foreign currency translation gain or loss recognized for the six months ended June 30, 2023
and 2024. Transactions denominated
in foreign currencies are re-measured into the functional currency at the exchange rates prevailing on the transaction dates. Financial
assets and liabilities denominated in foreign currencies are re-measured into the functional currency at the exchange rates prevailing
at the balance sheet date. (e) Convenience translation The Group’s business
is primarily conducted in China and all of the revenues are denominated in RMB. However, periodic reports made to shareholders will include
current period amounts translated into U.S. dollars using the exchange rate as of balance sheet date, for the convenience of the readers.
Translations of balances in the consolidated balance sheets, consolidated statements of comprehensive loss, change in equity and related
consolidated statements of cash flows from RMB into US$ as of and for the six months ended June 30, 2024 are solely for the convenience
of the reader and were calculated at the rate of US$1.00 to RMB7.2672, representing the noon buying rate in The City of New York for cable
transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York on June 30, 2024. No representation is made
that the RMB amounts represent or could have been, or could be, converted, realized or settled into US$ at that rate on June 30, 2024
or at any other rate. (f) Non-controlling
interest For certain subsidiaries,
a non-controlling interest is recognized to reflect the portion of their equity which is not attributable, directly or indirectly, to
the Group. Consolidated net loss or income on the consolidated statements of operations includes the net loss or income attributable to
non-controlling interests. Non-controlling interests are classified as a separate line item in the equity section of the Group’s
consolidated balance sheets and have been separately disclosed in the Group’s consolidated statements of operations to distinguish
the interests from that of the Company. (g) Cash and cash equivalents Cash and cash equivalents
represent cash on hand, time deposits and highly-liquid investments placed with banks or other financial institutions, which are unrestricted
as to withdrawal and use, and which have original maturities of three months or less. (h) Restricted cash Restricted cash represents
the cash that is not freely available to be spent nor re-invested to sustain future growth, which is legally or contractually restricted,
or only to be used for a specified purpose. The restrictions can be permanent or temporary. Failure to use the asset according to agreed
limitations will generate contractual or legal consequences. (i) Expected credit
losses Accounts receivable, advance
to suppliers and other current assets are recognized at the original invoiced amount. The Group measures all expected credit losses at
the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The Group reviews the
accounts receivable, advance to suppliers and other current assets, and recognizes the expected credit losses based on many factors, including
the customer’s payment history, its current credit-worthiness and current economic trends. Based on the result of the
Group’s estimation of collectability, the Group recognized RMB2,086 of expected credit losses for the six months ended June 30,
2023 and a reversal of RMB531 (US$73) of expected credit losses for the six months ended June 30, 2024. (j) Inventories Inventories, consisting of
raw materials and products available for sale, are stated at the lower of cost or net realizable value. Cost of inventory are determined
using the first-in-first-out method. The Group records inventory reserves for obsolete and slow-moving inventory. Inventory reserves are
based on inventory obsolescence trends, historical experience and application of the specific identification method. There was no inventory
impairment recognized for the six months ended June 30, 2023 and 2024, respectively. (k) Property, plant
and equipment, net Property, plant and equipment
are stated at cost less accumulated depreciation and impairment loss, if any. Property and equipment are depreciated at rates sufficient
to write off their costs less impairment and residual value, if any, over their estimated useful lives on a straight-line basis. Leasehold
improvements are amortized over the shorter of the lease term or the estimated useful lives of the related assets. Within the property,
plant and equipment, the value for construction in process is included within the manufacturing equipment.
Category Estimated useful life
Leasehold improvements 1-3 years
Manufacturing equipment 3 – 10 years
Computer and electronic equipment 3 – 5 years
Office equipment 2 – 4 years
Motor vehicles 3 – 4 years (l) Intangible assets,
net Intangible assets are carried
at cost less accumulated amortization and impairment, if any. Intangible assets are amortized using the straight-line method over the
estimated useful lives from 3 to 5 years. The estimated useful lives of amortized intangible assets are reassessed if circumstances occur
that indicate the original estimated useful lives have changed. (m) Impairment of long-lived
assets The Group evaluates its long-lived
assets, including property, equipment and software and right-of-use assets with finite lives, for impairment whenever events or changes
in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that
the carrying amount of an asset may not be fully recoverable. When these events occur, the Group evaluates the recoverability of long-lived
assets by comparing the carrying amounts of the assets to the future undiscounted cash flows expected to result from the use of the assets
and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amounts of the assets, the
Group recognizes an impairment loss based on the excess of the carrying amounts of the assets over their fair value. Fair value is generally
determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available. There
was no impairment of long-lived assets recognized for the six months ended June 30, 2023 and 2024, respectively. (n) Long-term investments The Group’s long-term
investments mainly include equity investments in entities. Investments in entities in which the Group can exercise significant influence
and holds an investment in voting common stock or in-substance common stock (or both) of the investee but does not own a majority equity
interest or control are accounted for using the equity method of accounting in accordance with ASC topic 323, Investments - Equity
Method and Joint Ventures (“ASC 323”) (o) Fair value of financial
instruments Fair value is defined as
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. When determining the fair value measurements for assets and liabilities required or permitted to be either recorded
or disclosed at fair value, the Group considers the principal or most advantageous market in which it would transact, and it also considers
assumptions that market participants would use when pricing the asset or liability. Accounting guidance establishes
a fair value hierarchy that 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. Accounting guidance establishes three levels of inputs that may be used to measure
fair value: Level 1 - Observable inputs
that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 - Other inputs that
are directly or indirectly observable in the marketplace. Level 3 - Unobservable inputs
which are supported by little or no market activity. Financial assets and liabilities
of the Group primarily consist of cash and cash equivalents, accounts receivable, amounts due from related parties, deposits and other
receivables, accounts payable, amounts due to related parties, other payables, short-term bank and other borrowings and loan payables.
As of June 30, 2024, the carrying values of these financial instruments are approximated to their fair values. (p) Revenue recognition Under ASC 606, Revenue from
Contracts with Customers, the Group recognizes revenue when a customer obtains control of promised goods or services and recognizes in
an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The Group recognized revenue
according to the following five-step revenue recognition criteria based on ASC 606: (1) identify the contract with a customer; (2) identify
the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price; and (5) recognize
revenue when or as the entity satisfies a performance obligation. The Group recognized revenue
when or as the control of the goods or services is transferred to a customer. Depending on the terms of the contract and the laws that
apply to the contract, control of the goods and services may be transferred over time or at a point in time. Control of the goods and
services is transferred over time if the Group’s performance:
(i) provides all of the benefits received and consumed simultaneously by the customer;
(ii) creates and enhances an asset that the customer controls as the Group performs; or
(iii) does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. If control of the goods and services transfers over time, revenue is recognized over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of the goods and services. If control of the goods and
services transfers over time, revenue is recognized over the period of the contract by reference to the progress towards complete satisfaction
of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of the goods and
services. Contracts with customers
may include multiple performance obligations. For such arrangements, the Group allocates revenue to each performance obligation based
on its relative standalone selling price. The Group generally determines standalone selling prices based on the prices charged to customers.
If the standalone selling price is not directly observable, it is estimated using expected cost plus a margin or adjusted market assessment
approach, depending on the availability of observable information. Assumptions and estimations have been made in estimating the relative
selling price of each distinct performance obligation, and changes in judgments on these assumptions and estimates may impact the revenue
recognition. When either party to a contract
has performed, the Group presents the contract in the consolidated balance sheets as a contract asset or a contract liability, depending
on the relationship between the entity’s performance and the customer’s payment. A contract asset is the Group’s
right to consideration in exchange for goods and services that the Group has transferred to a customer. A receivable is recorded when
the Group has an unconditional right to consideration. A right to consideration is unconditional if only the passage of time is required
before payment of that consideration is due. If a customer pays consideration
or the Group has a right to an amount of consideration that is unconditional, before the Group transfers a good or service to the customer,
the Group presents the contract liability when the payment is made, or a receivable is recorded (whichever is earlier). A contract liability
is the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount
of consideration is due) from the customer. The following table sets
forth a breakdown of our revenues, in absolute amounts and percentages of total revenues for the six months ended June 30, 2023 and 2024,
For the Six Months Ended June 30,
2023 2024
RMB % RMB US$ %
(in thousands, except for percentages)
(Unaudited)
Sourcing services 1,435 75.7 75 10 0.6
Product sales - - 12,389 1,705 93.9
Battery-swapping services 461 24.3 726 100 5.5
Total revenues 1,896 100.0 13,190 1,815 100.0 Sourcing services The Group generates revenue
from the vehicle sourcing business, where the Group is generally acting as an agent and its performance obligation is to purchase the
specified vehicles for its customers. The Group charges customers a commission that is calculated based on the purchase price of each
purchase order. Vehicle sourcing service revenues are recognized on a net basis at the point in time when the service of purchase of the
specified vehicles for the Group’s customers is completed, i.e., the specified vehicle for the Group’s customers is delivered.
Payments are typically received in advance and are accounted for as contract liabilities until delivery, at which point the receipt in
advance from customers is offset with the prepayment to the supplier and the difference representing the commission is recognized as revenue. Product sales The Group generates revenues
from sales of battery swapping stations. The Group identifies those who purchase battery swapping stations as its customers. The revenue
for battery swapping station sales is recognized at a point in time when the control of the product is transferred to the customer. Battery swapping services The Group also generates
revenues from providing battery swapping services to vehicle drivers and the station control system upgrading services to battery-swapping
station owners. The Group identifies the vehicle drivers who need the services of battery swapping and the owners of battery swapping
stations who require station control system upgrading services as its customers. The Group charges the battery
swapping service fees from its customers based on vehicle miles traveled. However, as usually, the swapped battery will be immediately
used after the payment by customers for driving and the power consumption of vehicles will be fast, the Group ignores the time interval
between the timing of payment in advance by customers and the usage life of the swapped battery. The revenue generated from battery swapping
services to vehicle drivers is recognized at a point in time when the Group received the payment from vehicle drivers. The revenue generated from
the station control system upgrading service is recognized over time based on a straight-line method. (q) Cost of revenues Cost of sales of battery-swapping
stations primarily includes semi-finished goods purchased from suppliers, labor costs and manufacturing including depreciation of assets
associated with production. Costs of battery-swapping services mainly include the electric charge costs and the rental costs of batteries
for battery swapping services. (r) Sales and marketing
expenses Sales and marketing expenses
consist primarily of (i) compensation to selling personnel, including the salaries, performance-based bonus, and other benefits; (ii)
travel cost related to the sales and marketing function; and (iii) bid, advertising, marketing, and brand promotion expenses. (s) Research and development
expenses Research and development
expenses consist primarily of personnel-related costs directly associated with research and development organization. The Group’s
research and development expenses are related to enhancing and developing UOTTA technology for its existing products and new product development.
The Group expenses research and development costs as incurred. (t) General and administrative
expenses General and administrative
expenses consist primarily of salaries, bonuses and benefits for employees involved in general corporate functions, and those not specifically
dedicated to research and development activities, such as depreciation and amortization of fixed assets which are not used in research
and development activities, legal and other professional services fees, rental and other general corporate related expenses. (u) Employee benefits Full time employees of the
Group in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care,
employee housing fund and other welfare benefits are provided to the employees. Chinese labor regulations require that the PRC subsidiaries
of the Group make contributions to the government for these benefits based on certain percentages of the employees’ salaries, up
to a maximum amount specified by the local government. The Group has no legal obligation for the benefits beyond the contributions made. (v) Government grants The Group’s PRC-based
subsidiaries received government subsidies from certain local governments. The Group’s government subsidies consisted of specific
subsidies and other subsidies. Specific subsidies are subsidies that the local government has provided for a specific purpose, such as
product development and renewal of production facilities. Other subsidies are the subsidies that the local government has not specified
its purpose for and are not tied to future trends or performance of the Group. Receipt of such subsidy income is not contingent upon any
further actions or performance of the Group and the amounts do not have to be refunded under any circumstances. The Group recorded specific
purpose subsidies as advances payable when received. For specific subsidies, upon government acceptance of the related project development
or asset acquisition, the specific purpose subsidies are recognized to reduce related R&D expenses or the cost of asset acquisition.
Other subsidies are recognized as other operating income upon receipt as further performance by the Group is not required. (w) Taxation Income Taxes Current income taxes are
provided on the basis of income/(loss) for financial reporting purposes, 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 assets and liabilities method. Under this method, deferred income taxes are recognized for the tax consequences of
temporary differences by applying enacted statutory rates applicable to future years to differences between the financial statement carrying
amounts and the tax bases of existing assets and liabilities. The tax base of an asset or liability is the amount attributed to that asset
or liability for tax purposes. The effect on deferred taxes of a change in tax rates is recognized in the consolidated statement of income
and comprehensive income in the period of change. A valuation allowance is provided to reduce the amount of deferred tax assets if it
is considered more-likely-than-not that some portion of, or all of the deferred tax assets will not be realized. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The Group considers positive and negative evidence when determining whether a portion or all of its deferred tax
assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of current
and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, its experience with tax attributes
expiring unused, and its tax planning strategies. The ultimate realization of deferred tax assets is dependent upon its ability to generate
sufficient future taxable income within the carry-forward periods provided for in the tax law and during the periods in which the temporary
differences become deductible. When assessing the realization of deferred tax assets, the Group considers possible sources of taxable
income including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversing temporary
differences and carry-forwards, (iii) future taxable income arising from implementing tax planning strategies, and (iv) specific known
trend of profits expected to be reflected within the industry. Value added tax Revenue represents the invoiced
value of goods and services, net of value added tax (“VAT”). The VAT is based on gross sales price with VAT rates of 6% and
13%, depending on the type of products sold or service provided. Entities that are VAT general taxpayers are allowed to offset qualified
input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in taxes
payable. All of the VAT returns filed by the Company’s subsidiaries in PRC remain subject to examination by the tax authorities
for five years from the date of filing. Uncertain tax positions The Group applies the provisions
of ASC topic 740 (“ASC 740”), Accounting for Income Taxes, to account for uncertainty in income taxes. ASC 740 prescribes
a recognition threshold a tax position is required to meet before being recognized in the financial statements. The benefit of a tax position
is recognized if a tax return position or future tax position is “more likely than not” to be sustained under examination
based solely on the technical merits of the position. Tax positions that meet the “more likely than not” recognition threshold
is measured, using a cumulative probability approach, at the largest amount of tax benefit that has a greater than fifty percent likelihood
of being realized upon settlement. The estimated liability for unrecognized tax benefits is periodically assessed for adequacy and may
be affected by changing interpretations of laws, rulings by tax authorities, changes and or developments with respect to tax audits, and
the expiration of the statute of limitations. Additionally, in future periods, changes in facts and circumstances, and new information
may require the Group to adjust the recognition and measurement of estimates with regards to changes in individual tax position. Changes
in recognition and measurement of estimates are recognized in the period in which the change occurs. The Group’s operating
subsidiaries in the PRC are subject to examination by the relevant tax authorities. According to the PRC Tax Administration and Collection
Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the
withholding agent. The statute of limitations is extended to five years under special circumstances, where the underpayment of taxes is
more than RMB100 (US$15). In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation
in the case of tax evasion. Penalties and interests incurred related to underpayment of income tax are classified as income tax expense
in the period incurred. (x) Comprehensive loss The Group has adopted FASB
Accounting Standard Codification Topic 220 (“ASC 220”) “Comprehensive income”, which establishes standards for
reporting and the presentation of comprehensive income (loss), its components and accumulated balances. There was nil (y) Leases The Group accounts for lease
under ASC Topic 842, Leases. The Group determines if an arrangement is or contains a lease at inception. Right-of-use assets and liabilities
are recognized at lease commencement date based on the present value of remaining lease payments over the lease terms. The Group considers
only payments that are fixed and determinable at the time of lease commencement. At the commencement date,
the lease liability is recognized at the present value of the lease payments not yet paid, discounted using the interest rate implicit
in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate for the same term as the underlying
lease. The right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus
any initial direct costs incurred. All right-of-use assets are reviewed for impairment annually. There was no impairment for right-of-use
lease assets for the six months ended June 30, 2023 and 2024, respectively. Operating lease assets are
included within “right-of-use assets - operating lease”, and the corresponding operating lease liabilities are included within
“operating lease liabilities” on the consolidated balance sheets as of December 31, 2023 and June 30, 2024, respectively. (z) Commitments and
contingencies In the normal course of business,
the Group is subject to contingencies, such as legal proceedings and claims arising out of its business, which cover a wide range of matters.
Liabilities for contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment can
be reasonably estimated. If the assessment of a contingency
indicates that it is probable that a loss is incurred and the amount of the liability can be estimated, then the estimated liability is
accrued in the consolidated financial statements. If the assessment indicates that a potential 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, would be disclosed. The Group recognized RMB3,507
and nil (aa) Segment reporting ASC 280, Segment Reporting Based on the criteria established
by ASC 280, the Group’s chief operating decision maker (“CODM”) has been identified as the Group’s Chief Executive
Officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Group. As
a whole and hence, the Group has only one reportable segment. The Group does not distinguish between markets or segments for the purpose
of internal reporting. As the Group’s long-lived assets are substantially located in the PRC, no geographical segments are presented. (ab) Recent accounting
pronouncements In March 2023, the FASB issued
ASU 2023-03, which amends various SEC paragraphs in the Accounting Standards Codification. This includes amendments to Presentation of
Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity
(Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718). The amendments are in response to SEC Staff Accounting
Bulletin No. 120 and other SEC staff announcements and guidance. This ASU does not introduce new guidance and therefore does not have
a specified transition or effective date. However, for smaller reporting companies, the ASU is effective for fiscal years beginning after
December 15, 2023. The adoption of this ASU did not have any material impact on the Group’s unaudited condensed consolidated interim
financial statements and disclosure. In June 2022, the FASB issued
ASU 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.
The update clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of
the equity security and, therefore, is not considered in measuring fair value. The update also clarifies that an entity cannot, as a separate
unit of account, recognize and measure a contractual sale restriction. The update also requires certain additional disclosures for equity
securities subject to contractual sale restrictions. For public business entities, the amendments in this Update are effective for fiscal
years beginning after December 15, 2023, and interim periods within those fiscal years. For all other entities, the amendments are effective
for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. Early adoption is permitted for both
interim and annual financial statements that have not yet been issued or made available for issuance. As an emerging growth company, the
standard is effective for the Group for the year ended December 31, 2025. The Group is in the process of evaluating the impact of the
new guidance on its unaudited condensed consolidated unaudited condensed financial statements. In November 2023, the Financial
Accounting Standards Board (“FASB”) issued ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU
updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly
provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit
or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how
the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate
resources. The ASU is effective for annual periods beginning after December 15, 2024, and interim periods within | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of presentation The consolidated financial
statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.
GAAP”). (b) Principles
of consolidation The accompanying consolidated
financial statements of the Group include the financial statements of the Company and its subsidiaries for which the Company is the ultimate
primary beneficiary. A subsidiary is an entity in
which the Company, directly or indirectly, controls more than one half of the voting power; has the power to appoint or remove the majority
of the members of the board of directors (the “Board”); and to cast majority of votes at the meeting of the Board or to govern
the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders. All significant transactions
and balances between the Company and its subsidiaries have been eliminated in consolidation. The non-controlling interests in consolidated
subsidiaries are shown separately in the consolidated financial statements. (c) Use of
estimates The preparation of 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 and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period. Significant accounting
estimates reflected in the Group’s consolidated financial statements mainly include the used
in the recognition of right-of-use assets and lease liabilities, inventory write-down, allowance for doubtful accounts, the useful lives
of property, plant and equipment and intangible assets, contingent (d) Functional
currency and foreign currency translation The Group uses Renminbi (“RMB”)
as its reporting currency. The functional currency of the Company and its overseas subsidiaries which incorporated in the Cayman Islands
and British Virgin Islands is US Dollar (“US$”). The functional currency of the Company’s subsidiaries which incorporated
in Hong Kong is Hong Kong Dollar (“HK$”). The functional currency of the Company’s subsidiaries which incorporated
in PRC is RMB. In the consolidated financial
statements, the financial information of the Company and other entities located outside of PRC has been translated into RMB. Assets
and liabilities are translated at the exchange rates on the balance sheet date, equity amounts are translated at historical exchange rates,
and revenues, expenses, gains and losses are translated using the average rate for the periods. Translation adjustments are reported as
foreign currency translation adjustments and are shown as a component of other comprehensive loss in the consolidated statements of operations
and comprehensive income (loss). There is nil Transactions denominated
in foreign currencies are re-measured into the functional currency at the exchange rates prevailing on the transaction dates. Financial
assets and liabilities denominated in foreign currencies are re-measured into the functional currency at the exchange rates prevailing
at the balance sheet date. (e) Convenience
translation The Group’s business
is primarily conducted in China and all of the revenues are denominated in RMB. However, periodic reports made to shareholders will include
current period amounts translated into US dollars using the exchange rate as of balance sheet date, for the convenience of the readers.
Translations of balances in the consolidated balance sheets, consolidated statements of comprehensive loss, change in equity and related
consolidated statements of cash flows from RMB into US$ as of and for the year ended December 31, 2023 are solely for the convenience
of the reader and were calculated at the rate of US$1.00 to RMB7.0999, representing the noon buying rate in The City of New York for cable
transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2023. No representation is
made that the RMB amounts represent or could have been, or could be, converted, realized or settled into US$ at that rate on December
31, 2023 or at any other rate. (f) Non-controlling
interest For certain subsidiaries,
a non-controlling interest is recognized to reflect the portion of their equity which is not attributable, directly or indirectly, to
the Group. Consolidated net loss or income on the consolidated statements of operations includes the net loss or income attributable to
non-controlling interests. Non-controlling interests are classified as a separate line item in the equity section of the Group’s
consolidated balance sheets and have been separately disclosed in the Group’s consolidated statements of operations to distinguish
the interests from that of the Company. (g) Cash and
cash equivalents Cash and cash equivalents represent
cash on hand, time deposits and highly-liquid investments placed with banks or other financial institutions, which are unrestricted as
to withdrawal and use, and which have original maturities of three months or less. (h) Restricted
cash Restricted cash represents
the cash that is not freely available to be spent nor re-invested to sustain future growth, which is legally or contractually restricted,
or only to be used for a specified purpose. The restrictions can be permanent or temporary. Failure to use the asset according to agreed
limitations will generate contractual or legal consequences. (i) Allowance
for doubtful accounts Accounts receivable, advance
to suppliers and other current assets are recognized at original invoiced amount. The Group measures all expected credit losses at the
reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The Group reviews the accounts
receivable, advance to suppliers and other current assets periodically, and recognizes the expected credit losses based on many factors,
including the customer’s payment history, its current credit-worthiness and current economic trends. Based on the result
of the Group’s estimation of collectability, the Group recognized RMB9,801 and RMB1,196 (US$168) of allowances for doubtful accounts
for the years ended December 31, 2022 and 2023, respectively. (j) Inventories Inventories, consisting of
raw materials and products available for sale, are stated at the lower of cost or net realizable value. Cost of inventory are determined
using the first-in-first-out method. The Group records inventory reserves for obsolete and slow-moving inventory. Inventory reserves are
based on inventory obsolescence trends, historical experience and application of the specific identification method. The Group recognized
RMB180 and nil (k) Property,
plant and equipment, net Property, plant and equipment
are stated at cost less accumulated depreciation and impairment loss, if any. Property, plant and equipment are depreciated at rates sufficient
to write off their costs less impairment and residual value, if any, over their estimated useful lives on a straight-line basis. Leasehold
improvements are amortized over the shorter of the lease term or the estimated useful lives of the related assets. Within the property,
plant and equipment, the value for construction in process is included within the manufacturing equipment.
Category Estimated useful life
Leasehold improvements 1-3 years
Manufacturing equipment 3 – 10 years
Computer and electronic equipment 3 – 5 years
Office equipment 2 – 4 years
Motor vehicles 3 – 4 years (l) Intangible assets,
net Intangible assets are carried
at cost less accumulated amortization and impairment, if any. Intangible assets are amortized using the straight-line method over the
estimated useful lives from 3 to 5 years. The estimated useful lives of amortized intangible assets are reassessed if circumstances occur
that indicate the original estimated useful lives have changed. (m) Impairment
of long-lived assets The Group evaluates
its long-lived assets, including property, plant and equipment and software and right-of-use assets with finite lives, for impairment
whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use
of the assets, indicate that the carrying amount of an asset may not be fully recoverable. When these events occur, the Group evaluates
the recoverability of long-lived assets by comparing the carrying amounts of the assets to the future undiscounted cash flows expected
to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the
carrying amounts of the assets, the Group recognizes an impairment loss based on the excess of the carrying amounts of the assets over
their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market
prices are not readily available. The Group recognized nil (n) Long-term
investments The Group’s long-term investments mainly include equity investments
in entities. Investments in entities in which the Group can exercise significant influence and holds an investment in voting common stock
or in-substance common stock (or both) of the investee but does not own a majority equity interest or control are accounted for using
the equity method of accounting in accordance with ASC topic 323, Investments - Equity Method and Joint Ventures (“ASC 323”) nil (o) Fair value
of financial instruments Fair value is defined as 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. When determining the fair value measurements for assets and liabilities required or permitted to be either recorded
or disclosed at fair value, the Group considers the principal or most advantageous market in which it would transact, and it also considers
assumptions that market participants would use when pricing the asset or liability. Accounting guidance establishes
a fair value hierarchy that 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. Accounting guidance establishes three levels of inputs that may be used to measure
fair value: Level 1 - Observable inputs
that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 - Other inputs that
are directly or indirectly observable in the marketplace. Level 3 - Unobservable inputs
which are supported by little or no market activity. Financial assets and liabilities
of the Group primarily consist of cash and cash equivalents, accounts receivable, amounts due from related parties, deposits and other
receivables, accounts payable, amounts due to related parties, other payables, short-term bank and other borrowings and loan payables.
As of December 31, 2023, the carrying values of these financial instruments are approximated to their fair values. (p) Revenue
recognition Under ASC 606,
Revenue from Contracts with Customers, the Group recognizes revenue when a customer obtains control of promised goods or services and
recognizes in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The Group recognized
revenue according to the following five-step revenue recognition criteria based on ASC 606: (1) identify the contract with a customer;
(2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price; and
(5) recognize revenue when or as the entity satisfies a performance obligation. The Group recognized revenue
when or as the control of the goods or services is transferred to a customer. Depending on the terms of the contract and the laws that
apply to the contract, control of the goods and services may be transferred over time or at a point in time. Control of the goods and
services is transferred over time if the Group’s performance:
(i) provides all of the benefits received and consumed simultaneously by the customer;
(ii) creates and enhances an asset that the customer controls as the Group performs; or
(iii) does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. If control of the goods and services transfers over time, revenue is recognized over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of the goods and services. If control of the goods and
services transfers over time, revenue is recognized over the period of the contract by reference to the progress towards complete satisfaction
of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of the goods and
services. Contracts with customers may
include multiple performance obligations. For such arrangements, the Group allocates revenue to each performance obligation based on its
relative standalone selling price. The Group generally determines standalone selling prices based on the prices charged to customers.
If the standalone selling price is not directly observable, it is estimated using expected cost plus a margin or adjusted market assessment
approach, depending on the availability of observable information. Assumptions and estimations have been made in estimating the relative
selling price of each distinct performance obligation, and changes in judgments on these assumptions and estimates may impact the revenue
recognition. When either party to a contract
has performed, the Group presents the contract in the consolidated balance sheets as a contract asset or a contract liability, depending
on the relationship between the entity’s performance and the customer’s payment. A contract asset is the Group’s
right to consideration in exchange for goods and services that the Group has transferred to a customer. A receivable is recorded when
the Group has an unconditional right to consideration. A right to consideration is unconditional if only the passage of time is required
before payment of that consideration is due. If a customer pays consideration
or the Group has a right to an amount of consideration that is unconditional, before the Group transfers a good or service to the customer,
the Group presents the contract liability when the payment is made, or a receivable is recorded (whichever is earlier). A contract liability
is the Group’s obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount
of consideration is due) from the customer. The following table sets forth
a breakdown of the Group’s revenues, in absolute amounts and percentages of total revenues for the years presented:
For the Years Ended December 31,
2021 2022 2023
RMB % RMB % RMB US$ %
Sourcing services 1,394 17.4 4,428 56.8 1,513 213 7.7
Product sales 6,616 82.6 3,061 39.3 17,062 2,403 86.3
Battery-swapping services - - 307 3.9 1,189 167 6.0
Total revenues 8,010 100.0 7,796 100.0 19,764 2,783 100.0 Sourcing services The Group generates revenue
from the vehicle sourcing business and battery sourcing business. Regarding to battery sourcing
business, the Group acts as a principal as of being able to fully control relevant risks and benefits during the whole business, indicated
by that can decide the selling price, has a right to recall the product and cease the transaction, and bear relevant risk of damage and
loss prior to the delivery of battery to the customer. The sales of battery sourcing revenues are recognized on a gross basis at a point
in time when the control of the battery pack is transferred to the customer. For vehicle sourcing business,
the Group charges service fees from its customers for their purchase of vehicles, where the Group is generally acting as an agent and
its performance obligation is to purchase the specified vehicles for its customers. The Group charges the customers a commission that
is calculated based on the purchase price of each purchase order. Vehicle sourcing service revenues are recognized on a net basis at the
point in time when the service of purchase of the specified vehicles for the Group’s customers is completed, i.e., the specified
vehicle for the Group’s customers is delivered. Payments are typically received in advance and are accounted for as contract liabilities
until delivery, at which point the receipt in advance from customers is offset with the prepayment to the supplier and the difference
representing the commission is recognized as revenue. Product sales The Group generates revenues
from sales of battery swapping stations. The Group identifies the users who purchase battery swapping stations as its customers. The revenue
for battery swapping station sales is recognized at a point in time when the control of the product is transferred to the customer. Battery swapping services The Group also generates revenues
from providing battery swapping services to vehicle drivers and the station control system upgrading services to the battery-swapping
station owners. The Group identifies the vehicle drivers who need the services of battery swapping and the owners of battery swapping
station that the Group has sold to who have demand for the station control system upgrading services as its customers. The Group charges the battery
swapping service fees from its customers based on vehicle miles traveled. However, as usually, the swapped battery will be immediately
used after the payment by customers for driving and the power consumption of vehicles will be fast, the Group ignores the time interval
between the timing of payment in advance by customers and the usage life of the swapped battery. The revenue generated from battery swapping
services to vehicle drivers is recognized at a point in time when the Group received the payment from vehicle drivers. The revenue generated from
the station control system upgrading service is recognized over time based on a straight-line method. (q) Cost of
revenues Cost of sales of battery-swapping stations primarily includes
semi-finished goods purchased from suppliers, labor costs and manufacturing including depreciation of assets associated with
production. (r) Sales and
marketing expenses Sales and marketing expenses consist primarily of (i) compensation
to selling personnel, including the salaries, performance-based bonus, and other benefits; (ii) travel cost related to the sales and marketing
function; (iii) advertising, marketing and brand promotion expenses; and (iv) other expenses in relation to the selling and marketing
activities. Advertising expenses consist primarily of costs for the promotion of corporate image and product marketing. The Group expenses
all advertising costs of RMB2,447 (US$349) as incurred and classifies these costs under sales and marketing expenses. (s) Research
and development expenses Research and development expenses
consist primarily of personnel-related costs directly associated with research and development organization. The Group’s research
and development expenses are related to enhancing and developing UOTTA technology for its existing products and new product development.
The Group expenses research and development costs as incurred. (t) General
and administrative expenses General and administrative
expenses consist primarily of salaries, bonuses and benefits for employees involved in general corporate functions, and those not specifically
dedicated to research and development activities, such as depreciation and amortization of fixed assets which are not used in research
and development activities, legal and other professional services fees, rental and other general corporate related expenses. (u) Employee
benefits Full time employees of the
Group in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care,
employee housing fund and other welfare benefits are provided to the employees. Chinese labor regulations require that the PRC subsidiaries
of the Group make contributions to the government for these benefits based on certain percentages of the employees’ salaries, up
to a maximum amount specified by the local government. The Group has no legal obligation for the benefits beyond the contributions made. (v) Government
grants The Group’s PRC-based
subsidiaries received government subsidies from certain local governments. The Group’s government subsidies consisted of specific
subsidies and other subsidies. Specific subsidies are subsidies that the local government has provided for a specific purpose, such as
product development and renewal of production facilities. Other subsidies are the subsidies that the local government has not specified
its purpose for and are not tied to future trends or performance of the Group. Receipt of such subsidy income is not contingent upon any
further actions or performance of the Group and the amounts do not have to be refunded under any circumstances. The Group recorded specific
purpose subsidies as advances payable when received. For specific subsidies, upon government acceptance of the related project development
or asset acquisition, the specific purpose subsidies are recognized to reduce related R&D expenses or the cost of asset acquisition.
Other subsidies are recognized as other operating income upon receipt as further performance by the Group is not required. (w) Taxation Income Taxes Current income taxes are
provided on the basis of income/(loss) for financial reporting purposes, 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 assets and liabilities method. Under this method, deferred income taxes are recognized for the tax consequences of
temporary differences by applying enacted statutory rates applicable to future years to differences between the financial statement carrying
amounts and the tax bases of existing assets and liabilities. The tax base of an asset or liability is the amount attributed to that asset
or liability for tax purposes. The effect on deferred taxes of a change in tax rates is recognized in the consolidated statement of income
and comprehensive income in the period of change. A valuation allowance is provided to reduce the amount of deferred tax assets if it
is considered more-likely-than-not that some portion of, or all of the deferred tax assets will not be realized. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The Group considers positive and negative evidence when determining whether a portion or all of its deferred tax
assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of current
and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, its experience with tax attributes
expiring unused, and its tax planning strategies. The ultimate realization of deferred tax assets is dependent upon its ability to generate
sufficient future taxable income within the carry-forward periods provided for in the tax law and during the periods in which the temporary
differences become deductible. When assessing the realization of deferred tax assets, the Group considers possible sources of taxable
income including (i) future reversals of existing taxable temporary differences, (ii) future taxable income exclusive of reversing temporary
differences and carry-forwards, (iii) future taxable income arising from implementing tax planning strategies, and (iv) specific known
trend of profits expected to be reflected within the industry. Value added tax Revenue represents the invoiced
value of goods and services, net of value added tax (“VAT”). The VAT is based on gross sales price with VAT rates of 6% and
13%, depending on the type of products sold or service provided. Entities that are VAT general taxpayers are allowed to offset qualified
input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in taxes
payable. All of the VAT returns filed by the Company’s subsidiaries in PRC remain subject to examination by the tax authorities
for five years from the date of filing. Uncertain tax positions The Group applies the provisions
of ASC topic 740 (“ASC 740”), Accounting for Income Taxes, to account for uncertainty in income taxes. ASC 740 prescribes
a recognition threshold a tax position is required to meet before being recognized in the financial statements. The benefit of a tax position
is recognized if a tax return position or future tax position is “more likely than not” to be sustained under examination
based solely on the technical merits of the position. Tax positions that meet the “more likely than not” recognition threshold
is measured, using a cumulative probability approach, at the largest amount of tax benefit that has a greater than fifty percent likelihood
of being realized upon settlement. The estimated liability for unrecognized tax benefits is periodically assessed for adequacy and may
be affected by changing interpretations of laws, rulings by tax authorities, changes and or developments with respect to tax audits, and
the expiration of the statute of limitations. Additionally, in future periods, changes in facts and circumstances, and new information
may require the Group to adjust the recognition and measurement of estimates with regards to changes in individual tax position. Changes
in recognition and measurement of estimates are recognized in the period in which the change occurs. The Group’s operating
subsidiaries in PRC are subject to examination by the relevant tax authorities. According to the PRC Tax Administration and Collection
Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the
withholding agent. The statute of limitations is extended to five years under special circumstances, where the underpayment of taxes is
more than RMB100 (US$15). In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation
in the case of tax evasion. Penalties and interests incurred related to underpayment of income tax are classified as income tax expense
in the period incurred. (x)
Comprehensive income The Group has adopted FASB
Accounting Standard Codification Topic 220 (“ASC 220”) “Comprehensive income”, which establishes standards for
reporting and the presentation of comprehensive income (loss), its components and accumulated balances. There
was nil (y) Leases The Group accounts for lease
under ASC Topic 842, Leases. The Group determines if an arrangement is or contains a lease at inception. Right-of-use assets and liabilities
are recognized at lease commencement date based on the present value of remaining lease payments over the lease terms. The Group considers
only payments that are fixed and determinable at the time of lease commencement. At the commencement date, the
lease liability is recognized at the present value of the lease payments not yet paid, discounted using the interest rate implicit in
the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate for the same term as the underlying
lease. The right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus
any initial direct costs incurred. All right-of-use assets are reviewed for impairment annually. There was no impairment for right-of-use
lease assets as of December 31, 2022 and 2023. The Group recorded a loss on lease termination of right-of-use assets of RMB1,750 and nil Operating lease assets are
included within “right-of-use assets - operating lease”, and the corresponding operating lease liabilities are included within
“operating lease liabilities” on the consolidated balance sheets as of December 31, 2022 and 2023, respectively. (z) Commitments and contingencies In the normal course of business,
the Group is subject to contingencies, such as legal proceedings and claims arising out of its business, which cover a wide range of matters.
Liabilities for contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment can
be reasonably estimated. If the assessment of a contingency
indicates that it is probable that a loss is incurred and the amount of the liability can be estimated, then the estimated liability is
accrued in the consolidated financial statements. If the assessment indicates that a potential 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, would be disclosed. The Group recognized RMB2,900
and RMB3,507 (US$494) of commitments and contingencies as of the years ended December 31, 2022 and 2023, respectively. (aa) Segment reporting ASC 280, Segment Reporting Based on the criteria established
by ASC 280, the Company’s chief operating decision maker (“CODM”) has been identified as the Company’s Chief Executive
Officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. As
a whole and hence, the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose
of internal reporting. As the Company’s long-lived assets are substantially located in the PRC, no geographical segments are presented. (ab) Recent adopted
standards In October 2021, the FASB
issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with
Customers. This ASU requires acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in
a business combination. This guidance is effective for public entities for fiscal years beginning after December 15, 2022, including interim
periods within those fiscal years. The Group adopted ASU No. 2021-08 since January 1, 2023, and the impact of adopting this guidance on
the Group’s consolidated financial statements was minimal. In June 2016, the FASB issued
ASU No. 2016-13, “Financial Instruments – Credit Losses”, which will require the measurement of all expected credit
losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable
forecasts. Subsequently, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, to clarify that receivables arising
from operating leases are within the scope of lease accounting standards. Further, the FASB issued ASU No. 2019-04, ASU 2019-05, ASU 2019-10,
ASU 2019-11 and ASU 2020-02 to provide additional guidance on the credit losses standard, which defers the effective date of ASU No. 2016-13
for smaller reporting companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The impact of the adoption on the consolidated
balance sheets, statements of operations, and statements of cash flows was immaterial. (ac) Recent accounting pronouncements In June 2022, the FASB issued
ASU 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.
The update clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of
the equity security and, therefore, is not considered in measuring fair value. The update also clarifies that an entity cannot, as a separate
unit of account, recognize and measure a contractual sale restriction. The update also requires certain additional disclosures for equity
securities subject to contractual sale res |
