Ucommune International (UK) Risk Analysis

If a U.S. Holder (as defined below in "Item 10. Additional Information - Taxation - Material U.S. Federal Income Taxation Considerations") is treated as owning, directly, indirectly or constructively, at least 10% of the value or voting power of our ordinary shares, such U.S. Holder may be treated as a "United States shareholder" with respect to each "controlled foreign corporation" in our group, if any. Generally, a non-U.S. corporation is deemed as a controlled foreign corporation if more than 50% of its stock (by voting power or value) of is owned (directly, indirectly or constructively) by United States shareholders. We will generally be classified as a controlled foreign corporation if more than 50% of our outstanding shares, measured by reference to voting power or value, are owned (directly, indirectly or by attribution) by United States shareholders. If our group includes one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries could be treated as controlled foreign corporations, regardless of whether we are treated as a controlled foreign corporation. In addition, we are likely classified as a controlled foreign corporation, in which case a United States shareholder of a controlled foreign corporation may be required to annually report and include in its U.S. taxable income its pro rata share of "Subpart F income," "global intangible low-taxed income" and investments in U.S. property by controlled foreign corporations, regardless of whether we make any distributions. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder of a U.S. corporation. Failure to comply with these reporting obligations may subject a United States shareholder to significant monetary penalties and may prevent the statute of limitations with respect to such shareholder's U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist our investors in determining whether any of our non-U.S. subsidiaries are treated as a controlled foreign corporation or whether such investor is treated as a United States shareholder with respect to any of such controlled foreign corporations. Further, we cannot provide any assurances that we will furnish to any United States shareholder information that may be necessary to comply with the reporting and tax paying obligations described in this risk factor. U.S. Holders should consult their tax advisors regarding the potential application of these rules to their investment in our Class A ordinary shares.

In general, a non-U.S. corporation is a PFIC for U.S. federal income tax purposes for any taxable year in which (1) 75% or more of its gross income consists of passive income (including interest income) or (2) 50% or more of the value of its assets (generally determined based on an average of the quarterly values of the assets) is attributable to assets that produce, or are held for the production of, passive income. For purposes of the above calculations, we will be treated as earning our proportionate share of the income of, and owning our proportionate share of the assets of, any other corporation in which we own, directly or indirectly, 25% (by value) of the stock. Based upon the manner in which we operate our business, the composition and characterization of our income and assets and the value of our assets, we believe that it is reasonable to take a position that we were not classified as a PFIC for our taxable year ended December 31, 2023. However, the application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you we will not be classified as a PFIC for the current taxable year or future taxable years. The value of the assets of our Parent for purposes of the PFIC determination will generally be determined by reference to the market price of our Class A ordinary shares, which could fluctuate significantly. Our market capitalization fluctuated significantly during the taxable year ended December 31, 2023. If our market capitalization does not increase or continues to decline, we may be or become classified as a PFIC for the current or future taxable years. If we are treated as a "controlled foreign corporation" (see "- If a U.S. Holder is treated as owning at least 10% of our ordinary shares, such U.S. Holder may be subject to adverse U.S. federal income tax consequences." below), the value of the assets owned by our subsidiaries and consolidated VIEs will be determined by reference to the adjusted tax basis of such assets for U.S. federal income tax purposes, which may increase the likelihood that we are a PFIC. Because we do not currently track adjusted tax basis for U.S. federal income tax purposes, we may not be able to determine whether we are a PFIC in future taxable years. In addition, our PFIC status depends on the manner in which we operate our workspace business (and the extent to which our income from workspace membership continues to qualify as active for PFIC purposes). The Internal Revenue Service (the "IRS") may challenge the composition and characterization of our assets or income or the valuation of our assets, goodwill and other unbooked intangibles, which may result in our company being, or becoming classified as, a PFIC for the current or future taxable years. Furthermore, it is not entirely clear how the contractual arrangements between us, the VIEs and their nominal shareholders are treated for purposes of the PFIC rules, and we may be or become a PFIC if the VIEs are not treated as owned by us. Because of these uncertainties, there can be no assurance we will not be classified as a PFIC for the current taxable year, or will not be classified as a PFIC in the future taxable years. If we were a PFIC for any taxable year during which a U.S. Holder (as defined below) owns our Class A ordinary shares or warrants, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. See "Item 10. Additional Information - Taxation - Material U.S. Federal Income Taxation Considerations - Passive Foreign Investment Company."

As the Parent is an exempted company with limited liability incorporated in the Cayman Islands listed on Nasdaq, the Parent is subject to the Nasdaq corporate governance listing standards. However, Nasdaq rules permit a foreign private issuer like the Parent to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is its home country, may differ significantly from the Nasdaq corporate governance listing standards. The Parent has relied on home country practice with respect to its corporate governance. The Parent does not have a majority of independent directors serving on its Board of Directors, its audit committee composed entirely of only two independent directors and it has not established a nominating committee and a compensation committee composed entirely of independent directors. For details, please refer to "Management - Committees of our Board of Directors." As a result, the Parent's shareholders may be afforded less protection than they otherwise would enjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers.

Because the Parent qualifies as a foreign private issuer under the Securities Exchange Act of 1934, as amended (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 with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;- 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 half-year basis as press releases, distributed pursuant to the rules and regulations of Nasdaq. 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 will be less extensive and less timely compared to 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.

The Parent is an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 as long as the Parent remains an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.

The trading market for the Class A ordinary shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who covers us downgrades the Class A ordinary shares or publishes inaccurate or unfavorable research about our business, the market price for the Class A ordinary shares would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for the Class A ordinary shares to decline.

Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller's interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its prospects to create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market. Public companies that have substantially all of their operations in China have been the subject of short selling. Much of the scrutiny and negative publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the interim, are subject to shareholder lawsuits and/or SEC enforcement actions. It is not clear what effect such negative publicity could have on us. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we could have to expend significant resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation could be costly and time-consuming, and could distract our management from growing our business. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business, and any investment in the Class A ordinary shares could be greatly reduced or even rendered worthless.

Sales of substantial amounts of the Class A ordinary shares in the public market, or the perception that these sales could occur, could adversely affect the market price of the Class A ordinary shares and could materially impair our ability to raise capital through equity offerings in the future. Shares held by our existing shareholders may also be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the Securities Act and the applicable lockup agreements. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other holders or the availability of these securities for future sale will have on the market price of the Class A ordinary shares. See "Shares Eligible for Future Sale" for a more detailed description of the restrictions on selling our securities, which is in the registration statement on Form F-1 on Form F-3 (File No. 333-257664), as amended, filed with the SEC. In addition, certain holders of our existing shareholders are entitled to certain registration rights. Registration of these shares under the Securities Act of 1933 (the "Securities Act"), would result in 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 public market, or the perception that such sales could occur, could cause the price of our Class A ordinary shares to decline.

The trading prices of the Class A ordinary shares and the Prior Warrants are 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 operations located mainly in China that have listed their securities in the United States. In addition to market and industry factors, the price and trading volume for the Class A ordinary shares and the listed warrants may be highly volatile for factors specific to our own operations, including the following: - variations in our net revenue, earnings and cash flows;- announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors;- announcements of new offerings and expansions by us or our competitors;- changes in financial estimates by securities analysts;- detrimental adverse publicity about us, our shareholders, affiliates, directors, officers or employees, our business model, our services or our industry;- announcements of new regulations, rules or policies relevant for our business;- additions or departures of key personnel;- release of lock-up 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 Class A ordinary shares 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 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 materially and adversely affect our financial condition and results of operations.

Our Class A ordinary shares and the warrants to purchase up to 9,736 Class A ordinary shares at a price of US$2,760.00 per share expiring on November 17, 2025 (the "Prior Warrants") are listed on The Nasdaq Capital Market under the symbols "UK" and "UKOMW," respectively. The warrants to purchase up to 23,663 Class A ordinary shares at a price of US$972.00 per share expiring on February 2, 2026 (the "New Warrants"), unit purchase options (the "UPOs"), warrants to purchase Class A ordinary shares upon the exercise of the UPOs (the "UPO Warrants"), rights to convert to Class A ordinary shares upon the exercise of the UPOs (the "UPO Rights"), Debenture and JAK Warrants of the Parent (each as defined below) are not listed on Nasdaq or any national securities exchange or market. We cannot assure you that a liquid public market for our securities will develop. If a large, active public market for our securities does not develop, the market price and liquidity of our securities may be materially and adversely affected. As a result, investors in our securities may experience a significant decrease in the value of our securities.

The listing of the Parent's Class A ordinary shares on the Nasdaq Capital Market is contingent on the Parent's compliance with the Nasdaq Capital Market's conditions for continued listing. On July 21, 2023, we announced that Parent received written notification (the "Notification Letter") from the Nasdaq Stock Market LLC ("Nasdaq") that we were not in compliance with the minimum bid price requirement of US$1.00 per share under the Nasdaq Listing Rules. In accordance with Nasdaq Listing Rules, the Parent must regain compliance within 180 calendar days, or until January 17, 2024. To regain compliance, the Parent's Class A ordinary shares must have a closing bid price of at least US$1.00 for a minimum of 10 consecutive business days. In the event the Parent does not regain compliance by January 17, 2024, the Parent may be eligible for additional time to regain compliance or may face delisting. On November 29, 2023, the Parent effected a 12-to-1 share consolidation in order to cure the deficiency, and on December 14, 2023, the Parent regained compliance. See "Item 4. Information on the Company - A. History and Development of the Company - Nasdaq Notification Letter." The Parent cannot assure you that the Parent will not receive other deficiency notifications from Nasdaq in the future. A decline in the closing price of our Class A ordinary shares could result in a breach of the requirements for listing on the Nasdaq Capital Market. If the Parent does not maintain compliance, Nasdaq could commence suspension or delisting procedures in respect of our Class A ordinary shares. The commencement of suspension or delisting procedures by an exchange remains at the discretion of such exchange and would be publicly announced by the exchange. If a suspension or delisting were to occur, there would be significantly less liquidity in the suspended or delisted securities. In addition, our ability to raise additional necessary capital through equity or debt financing would be greatly impaired. Furthermore, with respect to any suspended or delisted ordinary shares, we would expect decreases in institutional and other investor demand, analyst coverage, market making activity and information available concerning trading prices and volume, and fewer broker-dealers would be willing to execute trades with respect to such ordinary shares. A suspension or delisting would likely decrease the attractiveness of our Class A ordinary shares to investors, may constitute a breach under certain of our credit facilities, constitute an event of default under certain of our securities (including our agreements with JAK Opportunities LLC) and cause the trading volume of our Class A ordinary shares to decline, which could result in a further decline in the market price of our Class A ordinary shares.

Trading in our securities on U.S. markets, including the over-the-counter market, may be prohibited under the HFCAA if the PCAOB determines that it is unable to inspect or investigate completely our auditor for two consecutive years. On December 16, 2021, the PCAOB issued the HFCAA Determination Report to notify the SEC of its determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong (the "2021 Determinations"). As of the date of this annual report, our auditor is not included in the 2021 Determinations. In August 2022, the PCAOB, the CSRC and the Ministry of Finance of the PRC signed the Statement of Protocol, which establishes a specific and accountable framework for the PCAOB to conduct inspections and investigations of PCAOB-governed accounting firms in mainland China and Hong Kong. On December 15, 2022, the PCAOB announced that it was able to conduct inspections and investigations completely of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022. The PCAOB vacated its previous 2021 Determinations accordingly. As a result, we do not expect to be identified as a "Commission-Identified Issuer" under the HFCAA for the fiscal year ended December 31, 2023 after we file our annual report on Form 20-F for such fiscal year. However, whether the PCAOB will continue to conduct inspections and investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor's, control, including positions taken by authorities of the PRC. The PCAOB is expected to continue to demand complete access to inspections and investigations against accounting firms headquartered in mainland China and Hong Kong in the future and states that it has already made plans to resume regular inspections. The PCAOB is required under the HFCAA to make its determination on an annual basis with regards to its ability to inspect and investigate completely accounting firms based in the mainland China and Hong Kong. The possibility of being a "Commission-Identified Issuer" and risk of delisting could continue to adversely affect the trading price of our securities. Should the PCAOB again encounter impediments to inspections and investigations in mainland China or Hong Kong as a result of positions taken by any authority in either jurisdiction, the PCAOB will make determinations under the HFCAA as and when appropriate. Our current auditor, Marcum Asia CPAs LLP, 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. Marcum Asia CPAs LLP is headquartered in Manhattan, New York, and has been inspected by the PCAOB on a regular basis. As of the date of this annual report, our current auditor is not among the firms listed on the 2021 Determinations. If, in the future, we have been identified by the SEC for two consecutive years as a "Commission-Identified Issuer" whose registered public accounting firm is determined by the PCAOB that it is unable to inspect or investigate completely because of a position taken by one or more authorities in China, the SEC may prohibit our securities from being traded on a national securities exchange or in the over-the-counter trading market in the United States. If our securities 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 securities will develop outside of the United States. Such a prohibition would substantially impair your ability to sell or purchase our securities when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our securities. 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.

Our ultimate holding company is incorporated under the laws of the Cayman Islands. We have most of our operations in China and substantially all of our operations are outside of the United States. Most of our assets are located in China, and substantially all of our assets are located outside of the United States. In addition, all our senior executive officers reside within China for a significant portion of the time and most are PRC nationals. 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 if 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 China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the Cayman Islands and China, see "Enforceability of Civil Liabilities." section, which is in the registration statement on Form F-1 on Form F-3 (File No. 333-257664), as amended, filed with the SEC.

Our ultimate holding company is the Parent which is an exempted company incorporated under the laws of the Cayman Islands. The Parent's corporate affairs are governed by its memorandum and articles of association, as amended and restated from time to time, the Companies Act (As Revised) of the Cayman Islands (the "Companies Act") 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. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standings to initiate a shareholder derivative action in a federal court of the United States. Shareholders of Cayman Islands exempted companies such as ours have no general rights under Cayman Islands law to inspect corporate records (except for our memorandum and articles of association, special resolutions which have been passed by our shareholders, our register of mortgages and charges, and a list of our current directors) 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 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. Our Class A ordinary shares are listed in Nasdaq Capital Market. As a result, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, users of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Act and the laws applicable to companies incorporated in the United States and their shareholders, see "Item 10. Additional Information - B. Memorandum and Articles of Association - Differences in Corporate Law."

Dr. Daqing Mao, our founder, and his wife, Angela Bai, together hold approximately 91.55% of the voting power of our company as of March 31, 2024 due to the Parent's dual-class share structure. For more information, see "Item 6. Directors, Senior Management and Employees - E. Share Ownership." Dr. Mao is expected to retain significant influence over our business, including decisions regarding mergers, consolidations, liquidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. This concentration of ownership may also discourage, delay or prevent a future change of control, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our Class A ordinary shares. Dr. Mao may pursue corporate opportunities independent of us, and the sale of his shares could constitute a change of control under our debt instruments.

The Parent has adopted a dual-class share structure such that our ordinary shares consist of Class A ordinary shares and Class B ordinary shares. In respect of matters requiring the votes of shareholders, each Class A ordinary share is entitled to one vote and each Class B ordinary share is entitled to 55 votes. 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. The Parent's dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that you, as the holders of the Parent's Class A ordinary shares, may view as beneficial.

We cannot predict whether the Parent's dual-class share structure with different voting rights will result in a lower or more volatile market price of the Class A ordinary shares, in adverse publicity, or other adverse consequences. Certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indices. For example, in July 2017, FTSE Russell announced that it plans to require new constituents of its indices to have greater than 5% of the company's voting rights in the hands of public stockholders, and S&P Dow Jones announced that it will no longer admit companies with multiple-class share structures to certain of its indices. In 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices. In October 2018, MSCI announced its decision to include equity securities "with unequal voting structures" in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria. Because of the Parent's dual-class structure, we will likely be excluded from these indices and other stock indices that take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and could make our Class A ordinary shares less attractive to investors. In addition, several shareholder advisory firms have announced their opposition to the use of multiple class structures and the Parent's dual-class structure may cause shareholder advisory firms to publish negative commentary about our corporate governance, adversely affecting the market price and liquidity of the Class A ordinary shares.

The Parent adopted share incentive plans in August 2019 and November 2020, which we respectively refer to as 2019 Plan and 2020 Plan in this annual report, to enhance our ability to attract and retain qualified individuals and align their interests with our growth and performance. The maximum aggregate numbers of ordinary shares we are authorized to issue pursuant to all awards under 2019 Plan are 15,028,567 ordinary shares (62,620 ordinary shares after retroactively adjusted to reflect the 20-to-1 share consolidation effected on April 21, 2022 and the 12-to-1 share consolidation effected on November 29, 2023). In November 2020, the Parent adopted the 2020 Plan, under which the Parent is authorized to issue a maximum number of 7,188,661 Class A ordinary shares (29,953 Class A ordinary shares after retroactively adjusted to reflect the 20-to-1 share consolidation effected on April 21, 2022 and the 12-to-1 share consolidation effected on November 29, 2023). Pursuant to the 2020 Plan, as amended and restated on May 6, 2021, August 2022, December 2023, and February 2024, the maximum aggregate number of shares that may be issued is 4,071,620 Class A ordinary shares. As of the date of this annual report, options to purchase an aggregate number of 783,366 Class A ordinary shares were granted and outstanding, including awards to purchase 28,625 Class A ordinary shares granted to replace the granted and outstanding awards under 2019 Plan. We believe the granting of share-based awards helps us attract and retain key personnel and employees, and we expect 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.

Certain of our officers and directors are now or may in the future lease the building spaces they own to us or have other transactions with us. For example, we lease certain spaces from Youxiang Group, an affiliate of Dr. Daqing Mao, our founder. See "Item 7. Major Shareholders and Related Party Transactions - B. Related Party Transactions." Those related parties negotiated satisfactory terms that are in the best interests of their businesses as a whole. Although our audit committee, consisting of independent non-executive directors, reviews and approves all proposed related party transactions, we may not resolve all potential conflicts of interest in this regard.

As of December 31, 2023, there were outstanding warrants (including Prior Warrants, New Warrants and JAK Warrants) to purchase up to an aggregate of 12,273,757 Class A ordinary shares at exercise prices, which were immediately exercisable. As of December 31, 2023, there were outstanding 333,002 UPOs exercisable for 1,388 Class A ordinary shares, 333,002 UPO Warrants to purchase an additional 694 Class A ordinary shares, and 333,002 UPO Rights to convert to an additional 139 Class A ordinary shares. As of March 31, 2024, there were outstanding warrants (including Prior Warrants, New Warrants and JAK Warrants) to purchase up to an aggregate of 12,248,757 Class A ordinary shares, which were immediately exercisable. As of March 31, 2024, there were outstanding 333,002 UPOs exercisable for 1,388 Class A ordinary shares, 333,002 UPO Warrants to purchase an additional 694 Class A ordinary shares, and 333,002 UPO Rights to convert to an additional 139 Class A ordinary shares. The Parent may offer and issue additional shares, warrants, rights, units and other securities in the future. To the extent the outstanding warrants or UPOs or future warrants are exercised, or the outstanding UPO Rights or Debenture or future rights or units are converted, additional Class A ordinary shares will be issued, which will result in dilution to holders of our Class A ordinary shares and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants or UPOs may be exercised could adversely affect the market price of our Class A ordinary shares.

The Parent has adopted an amended and restated memorandum and articles of association that contains provisions to limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could deprive our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. Our Board of Directors has the authority, subject to any resolution of the shareholders to the contrary, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our Class A ordinary shares. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our Board of Directors decides to issue preferred shares, the price of our Class A ordinary shares may fall and the voting and other rights of the holders of our Class A ordinary shares may be materially and adversely affected.