Ucommune(UK) - 2021 Q4 - Annual Report

Financial Position - As of December 31, 2021, the company had cash and cash equivalents of RMB165.8 million (US$26.0 million) and an accumulated deficit of RMB4,237.6 million (US$665.0 million) [675][676] - The company incurred operating losses of RMB2,162.8 million (US$333.7 million) in 2021, with negative cash flows from operating activities of RMB199.1 million (US$31.2 million) [676][687] - The company has a working capital deficit of RMB454.0 million (US$71.2 million) as of December 31, 2021, raising concerns about its ability to continue as a going concern [676][681] - The company has short-term borrowings of RMB47.8 million (US$7.5 million) and current portion of long-term borrowings of RMB15.1 million (US$2.4 million) as of December 31, 2021 [676] Cash Flow Activities - The net cash used in investing activities in 2021 was RMB59.1 million (US$9.3 million), primarily due to purchases of property and equipment and short-term investments [690] - Net cash provided by financing activities in 2021 was RMB78.9 million (US$12.4 million), mainly from an underwritten public offering and loans received [692] - The company plans to explore new business opportunities and optimize operational efficiency to improve cash flow from operations [680] - The company intends to finance future capital expenditures through existing cash balances and proceeds from securities offerings [682] Regulatory and Compliance Issues - The Parent is restricted by PRC laws from making direct capital contributions to VIEs, and must comply with government registration and approval for any funding [699] - The ability to provide financial support to PRC subsidiaries and VIEs is uncertain due to regulatory constraints on currency conversion and cash transfers [699] - The company is subject to restrictions on foreign exchange and must obtain SAFE approval for certain capital expenditures outside China [700] - Cash transfers within the organization require internal approval and are subject to stringent controls and procedures [700] Revenue Recognition - The company recognized workspace membership revenue under ASC 842, with revenue primarily generated from monthly rent in the form of membership service fees or workstation rental fees [721] - Workspace membership revenue is recognized ratably on a monthly basis over the lease term, with most membership services having a lease term of less than one year [722] - The company generates other services revenue from interior design and construction, coworking space management fees, SaaS services, and ancillary services, with revenue recognized based on the service provided [726] - The company’s revenue recognition follows a five-step approach under Topic 606, ensuring control of promised goods or services is transferred to customers [724] Goodwill and Impairment - The company recorded a goodwill impairment loss of RMB 1,504.5 million (US$236.1 million) for the year ended December 31, 2021, as the fair value of the reporting units was less than their carrying value [733] - The company has three reporting units for monitoring goodwill, and it adopted ASU 2017-04 to simplify the accounting for goodwill impairment [731] Employee and Compensation Information - As of December 31, 2021, the company had a total of 513 employees, a decrease from 560 in 2020 and 766 in 2019 [778] - Approximately 71% of employees held a bachelor's degree or above as of December 31, 2021 [778] - The total number of options granted to all directors and executive officers as a group is 1,290,500 [761] - The total number of options granted to all non-executive employees as a group is 5,897,191 [761] - The company has not set aside or accrued any amount for pension or retirement benefits for its directors and executive officers [750] Shareholder Information - The company had 87,390,114 ordinary shares issued and outstanding as of March 31, 2022, including 77,937,707 Class A and 9,452,407 Class B ordinary shares [780] - Daqing Mao holds 490,622 ordinary shares, representing 11.2% of beneficial ownership and 64.7% of aggregate voting power [783] - JAK Opportunities LLC is the largest shareholder with 4,875,000 ordinary shares, accounting for 52.7% of beneficial ownership and 30.7% of voting power [783] - The total number of ordinary shares beneficially owned by all executive officers and directors is 626,528, which is 14.2% of beneficial ownership and 65.6% of voting power [783] Corporate Governance - The audit committee consists of Jian Zhang and Jinghong Xu, with Jian Zhang qualifying as an "audit committee financial expert" [768] - The compensation committee includes Cheong Kwok Mun and Xianhao Gu, responsible for reviewing and approving the compensation structure for directors and executive officers [771] - The nominating and corporate governance committee is chaired by Jinghong Xu and includes Daqing Mao and Zhimo Zhao, focusing on selecting qualified individuals for the Board of Directors [772] - Each executive officer has agreed to hold confidential information and is bound by non-compete and non-solicitation restrictions for 24 months post-employment [752]