{"url_path":"/sec/xch/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-04-27","source_url":"https://www.sec.gov/Archives/edgar/data/1979887/0001193125-26-182198-index.html","accession_number":"0001193125-26-182198","cik":"0001979887","ticker":"XCH","issuer_name":"XCHG Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1979887/0001193125-26-182198-index.html","primary_entity_key":"0001979887","primary_entity_name":"XCHG Ltd"},"word_count":8875,"has_tables":true,"body_markdown":"## ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS\n\nYou should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements about our business and operations. Our actual results may differ materially from those we currently anticipate as a result of many factors, including those we describe under “Item 3. Key Information—Item 3.D. Risk Factors” and elsewhere in this annual report.\n\nThe following includes discussion of certain of our key performance metrics for the periods indicated. See “Introduction” in this annual report for the definition of these metrics and a description of how they are calculated.\n\n5.A. Operating Results\n\nFactors Affecting Our Performance\n\nOur business and results of operations are affected by the macroeconomic factors, including but not limited to overall economic growth rates globally, the penetration rate of EV chargers, regulatory, tax and geopolitical environments, the stability of our supply chain as well as costs of raw materials and components. Changes in any of these general factors may affect the sales of our products as well as our results of operations and financial condition. Besides these general factors, we believe the following specific factors may have a more direct impact and may continue to affect our operation and financial performance.\n\nIntroduction and commercialization of new products and services\n\nThe introduction and commercialization of new products and services are important to our results of operations and financial condition. For example, the NZS and GridLink chargers are anticipated to serve as a critical cornerstone of our future financial performance, and the continued promotion of NZS and GridLink chargers is expected to exert a material impact on our financial performance. As of the date of this annual report, we have begun the commercial deployment of our NZS solution in Europe and Asia. We have also begun the commercial deployment of our GridLink solution in the United States and Europe. Customers of NZS solutions and GridLink solutions include EV manufacturers, global energy players and charge point operators. The release of innovative products, such as the NZS and GridLink chargers, is poised to provide us with entry to previously untapped markets and clienteles, thereby fostering potential growth in our future revenue streams.\n\nRetention of existing customers and expansion of new customers\n\nOur capacity to sustain good business relationships with existing customers and attract new customers is crucial to our financial performance. We have formed business relationships and partnerships with global energy players. We expect to further enhance our relationships with existing customers and attract new customers with our expansive sales and marketing efforts, as well as our innovative products, such as NZS and GridLink.\n\nDiverse revenue sources and additional revenue streams\n\nWe have established multiple sources of revenue, which include the initial sales of products, and recurring revenue from accompanying services, including software system upgrades and hardware maintenance. As the number of installed chargers grows, we expect recurring revenue to account for an increasing portion of our total revenue. In addition, with the B2G function, our NZS and GridLink solutions have already begun generating revenue and are expected to continue contributing increased revenue going forward.\n\nOperating efficiency\n\nOur ability to attain operating efficiency, while scaling up our business, is critical to achieving profitability. We shall prioritize the optimization of our hiring plans and marketing activities to ensure long-term success without incurring excessive operating expenses that may have an adverse impact on our overall financial performance and profitability. Maintaining reasonable operating expenses is key to our success, and we shall continually strive to find the most efficient and cost-effective means of achieving our goals.\n\nForeign currency exchange fluctuation\n\nOur operations involve transactions denominated in different currencies. Consequently, fluctuations in foreign exchange rates could impact our financial performance. To achieve sustained financial success, managing foreign exchange risk is paramount for us. We shall remain vigilant in monitoring currency fluctuations and developing sound strategies to minimize the impact of such fluctuations on our operations.\n\n52\n\n \n\nKey Components of Results of Operations\n\nRevenues\n\nWe derive our revenues from two sources, namely (i) product revenues; and (ii) service revenues. In 2023, 2024 and 2025, our revenues amounted to US$38.5 million, US$42.2 million and US$25.1 million, respectively. The following table sets forth a breakdown of our revenues, in absolute amounts and as percentages of total revenues, for the periods indicated.\n\n \n\n \n\nFor the Years Ended December 31,\n\n \n\n \n\n2023\n\n \n\n \n\n2024\n\n \n\n \n\n2025\n\n \n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\nRevenues\n\n \n\n(in thousands, except for percentages)\n\n \n\nProduct revenues\n\n \n\n \n\n38,052\n\n \n\n \n\n \n\n98.8\n\n \n\n \n\n \n\n41,507\n\n \n\n \n\n \n\n98.3\n\n \n\n \n\n \n\n24,026\n\n \n\n \n\n \n\n95.7\n\n \n\nService revenues\n\n \n\n \n\n460\n\n \n\n \n\n \n\n1.2\n\n \n\n \n\n \n\n697\n\n \n\n \n\n \n\n1.7\n\n \n\n \n\n \n\n1,074\n\n \n\n \n\n \n\n4.3\n\n \n\nTotal\n\n \n\n \n\n38,512\n\n \n\n \n\n \n\n100.0\n\n \n\n \n\n \n\n42,204\n\n \n\n \n\n \n\n100.0\n\n \n\n \n\n \n\n25,100\n\n \n\n \n\n \n\n100.0\n\n \n\n \n\nProduct revenues. We generate revenues from the sales of our products. We typically recognize the revenue at a point in time when the products are accepted by customers. In 2023, 2024 and 2025, our product revenues amounted to US$38.1 million, US$41.5 million and US$24.0 million, respectively, representing 98.8%, 98.3% and 95.7% of our total revenues in the same periods, respectively. The year-over-year decrease in 2025 was mainly due to external policy dynamics, including trade policy turbulence and evolving renewable energy regulations. These factors led certain customers to temporarily delay procurement decisions, contributing to a softer order volume in 2025.\n\nService revenues. Complementary to the initial sales of products, we also offer accompanying services throughout the entire life cycle, including both software system upgrades and hardware maintenance. We start to charge our customers for the services after an inclusion period of one to three years following the sale. We typically recognize the revenue over the period of such services on a straight-line basis. In 2023, 2024 and 2025, most of our products sold were still within the inclusion period of one to three years following the sale. Our service revenues amounted to US$0.5 million, US$0.7 million and US$1.1 million in 2023, 2024 and 2025, respectively, representing 1.2%, 1.7% and 4.3% of our total revenues in the same periods, respectively. As the number of installed chargers grows, we expect recurring service revenues to account for an increasing portion of our total revenues in the long run.\n\nSee “Item 4. Information on the Company—4.B. Business Overview—Our Solutions” for details about how we generate our revenues.\n\nCost of Revenues\n\nOur cost of revenues consists of the costs and expenses that are directly related to providing our products and services to our customers. These costs and expenses include (i) cost of products sold, (ii) shipping costs, (iii) share-based compensation, and (iv) others. In 2023, 2024 and 2025, our cost of revenues amounted to US$20.9 million, US$21.0 million and US$13.5 million, respectively, representing 54.4%, 49.7% and 53.8% of our revenues in the same periods, respectively. The following table sets forth our cost of revenues, in absolute amounts and as percentages of total revenues, for the periods indicated.\n\n \n\n \n\nFor the Years Ended December 31,\n\n \n\n \n\n2023\n\n \n\n \n\n2024\n\n \n\n \n\n2025\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\nCost of revenues\n\n \n\n(in thousands, except for percentages)\n\n \n\nCost of products sold\n\n \n\n \n\n18,143\n\n \n\n \n\n \n\n47.1\n\n \n\n \n\n \n\n18,038\n\n \n\n \n\n \n\n42.7\n\n \n\n \n\n \n\n11,053\n\n \n\n \n\n \n\n44.0\n\n \n\nShipping costs\n\n \n\n \n\n964\n\n \n\n \n\n \n\n2.5\n\n \n\n \n\n \n\n855\n\n \n\n \n\n \n\n2.0\n\n \n\n \n\n \n\n864\n\n \n\n \n\n \n\n3.4\n\n \n\nShare-based compensation\n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n549\n\n \n\n \n\n \n\n1.3\n\n \n\n \n\n \n\n28\n\n \n\n \n\n \n\n0.1\n\n \n\nOthers(1)\n\n \n\n \n\n1,831\n\n \n\n \n\n \n\n4.8\n\n \n\n \n\n \n\n1,539\n\n \n\n \n\n \n\n3.7\n\n \n\n \n\n \n\n1,558\n\n \n\n \n\n \n\n6.3\n\n \n\nTotal\n\n \n\n \n\n20,938\n\n \n\n \n\n \n\n54.4\n\n \n\n \n\n \n\n20,981\n\n \n\n \n\n \n\n49.7\n\n \n\n \n\n \n\n13,503\n\n \n\n \n\n \n\n53.8\n\n \n\n \n\nNote:\n\n(1)\nPrimarily consist of warranty costs, write-downs of inventories and other costs.\n\nWe expect our cost of revenues to increase in absolute amount in line with our expansion of business and customer base growth, and to decrease as a percentage of our revenues in the long run through economies of scale and improvement of operating efficiency.\n\nGross Profit\n\n53\n\n \n\nGross profit is equal to our total revenues less cost of revenues. Gross profit as a percentage of our total revenues is referred to as gross margin. In 2023, 2024 and 2025, our gross profit was US$17.6 million, US$21.2 million and US$11.6 million, respectively, and our gross margin was 45.6%, 50.3% and 46.2%, respectively.\n\nOperating Expenses\n\nOur operating expenses consist of selling and marketing expenses, research and development expenses, general and administrative expenses. In 2023, 2024 and 2025, our operating expenses amounted to US$24.5 million, US$33.3 million and US$44.3 million, respectively, representing 63.7%, 78.9% and 176.6% of our revenues in the same periods, respectively. The following table sets forth a breakdown of our operating expenses, in absolute amounts and as percentages of our total revenues, for the periods indicated.\n\n \n\n \n\nFor the Years Ended December 31,\n\n \n\n \n\n2023\n\n \n\n \n\n2024\n\n \n\n \n\n2025\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\nOperating expenses\n\n \n\n(in thousands, except for percentages)\n\n \n\nSelling and marketing expenses\n\n \n\n \n\n6,433\n\n \n\n \n\n \n\n16.7\n\n \n\n \n\n \n\n10,343\n\n \n\n \n\n \n\n24.5\n\n \n\n \n\n \n\n10,704\n\n \n\n \n\n \n\n42.6\n\n \n\nResearch and development expenses\n\n \n\n \n\n4,061\n\n \n\n \n\n \n\n10.6\n\n \n\n \n\n \n\n12,159\n\n \n\n \n\n \n\n28.8\n\n \n\n \n\n \n\n7,071\n\n \n\n \n\n \n\n28.2\n\n \n\nGeneral and administrative expenses\n\n \n\n \n\n14,025\n\n \n\n \n\n \n\n36.4\n\n \n\n \n\n \n\n10,790\n\n \n\n \n\n \n\n25.6\n\n \n\n \n\n \n\n26,559\n\n \n\n \n\n \n\n105.8\n\n \n\nTotal\n\n \n\n \n\n24,519\n\n \n\n \n\n \n\n63.7\n\n \n\n \n\n \n\n33,292\n\n \n\n \n\n \n\n78.9\n\n \n\n \n\n \n\n44,334\n\n \n\n \n\n \n\n176.6\n\n \n\n \n\nSelling and marketing expenses. Selling and marketing expenses consist of (i) staff cost in relation to selling and marketing activities, (ii) share-based compensation, and (iii) other selling and marketing expenses. In 2023, 2024 and 2025, our selling and marketing expenses amounted to US$6.4 million, US$10.3 million and US$10.7 million, respectively, representing 16.7%, 24.5% and 42.6% of our revenues in the same periods, respectively. The following table sets forth a breakdown of our selling and marketing expenses, in absolute amounts and as percentages of our total revenues, for the periods indicated.\n\n \n\n \n\nFor the Years Ended December 31,\n\n \n\n \n\n2023\n\n \n\n \n\n2024\n\n \n\n \n\n2025\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\nSelling and marketing expenses\n\n \n\n(in thousands, except for percentages)\n\n \n\nStaff cost\n\n \n\n \n\n4,329\n\n \n\n \n\n \n\n11.2\n\n \n\n \n\n \n\n5,658\n\n \n\n \n\n \n\n13.4\n\n \n\n \n\n \n\n5,997\n\n \n\n \n\n \n\n23.9\n\n \n\nShare-based compensation\n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n1,767\n\n \n\n \n\n \n\n4.2\n\n \n\n \n\n \n\n255\n\n \n\n \n\n \n\n1.0\n\n \n\nOthers(1)\n\n \n\n \n\n2,104\n\n \n\n \n\n \n\n5.5\n\n \n\n \n\n \n\n2,918\n\n \n\n \n\n \n\n6.9\n\n \n\n \n\n \n\n4,452\n\n \n\n \n\n \n\n17.7\n\n \n\nTotal\n\n \n\n \n\n6,433\n\n \n\n \n\n \n\n16.7\n\n \n\n \n\n \n\n10,343\n\n \n\n \n\n \n\n24.5\n\n \n\n \n\n \n\n10,704\n\n \n\n \n\n \n\n42.6\n\n \n\n \n\nNote:\n\n(1)\nPrimarily consist of consulting service fees, advertising costs and promotion expenses, business entertainment expenses, traveling expenses, rental and depreciation in relation to selling and marketing functions, and other expenses. Consulting service fees mainly include a promotion service provided in 2025 amounting to US$1.8 million.\n\nResearch and development expenses. Research and development expenses consist of (i) staff cost in relation to research and development activities, (ii) outsourcing development expense, (iii) share-based compensation, and (iv) other research and development expenses. In 2023, 2024 and 2025, our research and development expenses amounted to US$4.1 million, US$12.2 million and US$7.1 million, respectively, representing 10.6%, 28.8% and 28.2% of our revenues in the same periods, respectively. The following table sets forth a breakdown of our research and development expenses, in absolute amounts and as percentages of our total revenues, for the periods indicated.\n\n \n\n \n\nFor the Years Ended December 31,\n\n \n\n \n\n2023\n\n \n\n \n\n2024\n\n \n\n \n\n2025\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\nResearch and development expenses\n\n \n\n(in thousands, except for percentages)\n\n \n\nStaff cost\n\n \n\n \n\n3,147\n\n \n\n \n\n \n\n8.2\n\n \n\n \n\n \n\n3,460\n\n \n\n \n\n \n\n8.2\n\n \n\n \n\n \n\n3,782\n\n \n\n \n\n \n\n15.1\n\n \n\nOutsourcing development expense\n\n \n\n \n\n—\n\n \n\n \n\n \n\n0.0\n\n \n\n \n\n \n\n5,593\n\n \n\n \n\n \n\n13.2\n\n \n\n \n\n \n\n1,621\n\n \n\n \n\n \n\n6.5\n\n \n\nShare-based compensation\n\n \n\n \n\n—\n\n \n\n \n\n \n\n0.0\n\n \n\n \n\n \n\n2,308\n\n \n\n \n\n \n\n5.5\n\n \n\n \n\n \n\n353\n\n \n\n \n\n \n\n1.4\n\n \n\nOthers(1)\n\n \n\n \n\n914\n\n \n\n \n\n \n\n2.4\n\n \n\n \n\n \n\n798\n\n \n\n \n\n \n\n1.9\n\n \n\n \n\n \n\n1,315\n\n \n\n \n\n \n\n5.2\n\n \n\nTotal\n\n \n\n \n\n4,061\n\n \n\n \n\n \n\n10.6\n\n \n\n \n\n \n\n12,159\n\n \n\n \n\n \n\n28.8\n\n \n\n \n\n \n\n7,071\n\n \n\n \n\n \n\n28.2\n\n \n\n \n\n54\n\n \n\n \n\nNote:\n\n(1)\nPrimarily consist of certification expenses, testing expenses, and other expenses.\n\nGeneral and administrative expenses. Our general and administrative expenses consist of (i) share-based compensation, (ii) staff cost in relation to general and administrative activities, (iii) professional expenses paid to professional consultants, (iv) foreign currency exchange loss (gain) resulting from the exchange difference in remeasuring foreign currencies to the functional currency as of the relevant dates, (v) losses of credit impairment, (vi) issuance cost of the convertible debts, and (vii) other general corporate expenses. In 2023, 2024 and 2025, our general and administrative expenses amounted to US$14.0 million, US$10.8 million and US$26.6 million, respectively, representing 36.4%, 25.6% and 105.8% of our revenues in the same periods, respectively. The following table sets forth a breakdown of our general and administrative expenses, in absolute amounts and as percentages of our total revenues, for the periods indicated.\n\n \n\n \n\nFor the Years Ended December 31,\n\n \n\n \n\n2023\n\n \n\n \n\n2024\n\n \n\n \n\n2025\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\nGeneral and administrative expenses\n\n \n\n(in thousands, except for percentages)\n\n \n\nShare-based compensation\n\n \n\n \n\n7,457\n\n \n\n \n\n \n\n19.4\n\n \n\n \n\n \n\n2,406\n\n \n\n \n\n \n\n5.7\n\n \n\n \n\n \n\n20,306\n\n \n\n \n\n \n\n80.9\n\n \n\nStaff cost\n\n \n\n \n\n2,097\n\n \n\n \n\n \n\n5.4\n\n \n\n \n\n \n\n2,435\n\n \n\n \n\n \n\n5.8\n\n \n\n \n\n \n\n2,465\n\n \n\n \n\n \n\n9.8\n\n \n\nProfessional expenses\n\n \n\n \n\n2,989\n\n \n\n \n\n \n\n7.8\n\n \n\n \n\n \n\n3,628\n\n \n\n \n\n \n\n8.6\n\n \n\n \n\n \n\n2,342\n\n \n\n \n\n \n\n9.3\n\n \n\nLosses of credit impairment\n\n \n\n \n\n192\n\n \n\n \n\n \n\n0.5\n\n \n\n \n\n \n\n44\n\n \n\n \n\n \n\n0.1\n\n \n\n \n\n \n\n821\n\n \n\n \n\n \n\n3.3\n\n \n\nIssuance cost of the convertible debts\n\n \n\n \n\n429\n\n \n\n \n\n \n\n1.1\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\n \n\n \n\n—\n\n \n\nForeign currency exchange (gain) loss\n\n \n\n \n\n(481\n\n)\n\n \n\n \n\n(1.2\n\n)\n\n \n\n \n\n620\n\n \n\n \n\n \n\n1.5\n\n \n\n \n\n \n\n(1,173\n\n)\n\n \n\n \n\n(4.7\n\n)\n\nOther general corporate expenses\n\n \n\n \n\n1,342\n\n \n\n \n\n \n\n3.5\n\n \n\n \n\n \n\n1,657\n\n \n\n \n\n \n\n3.9\n\n \n\n \n\n \n\n1,798\n\n \n\n \n\n \n\n7.2\n\n \n\nTotal\n\n \n\n \n\n14,025\n\n \n\n \n\n \n\n36.4\n\n \n\n \n\n \n\n10,790\n\n \n\n \n\n \n\n25.6\n\n \n\n \n\n \n\n26,559\n\n \n\n \n\n \n\n105.8\n\n \n\n \n\nTaxation\n\nCayman Islands\n\nWe are incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, we are not subject to income, corporation or capital gains tax in the Cayman Islands. In addition, our payment of dividends, if any, is not subject to withholding tax in the Cayman Islands.\n\nPRC\n\nOur subsidiaries in China are companies incorporated under PRC laws and, as such, are subject to PRC enterprise income tax on their taxable income in accordance with the relevant PRC income tax laws. Pursuant to the PRC EIT Law, which became effective on January 1, 2008 and last amended on December 29, 2018, a uniform 25% enterprise income tax rate is generally applicable to both foreign-invested enterprises and domestic enterprises, except where a special preferential rate applies. The enterprise income tax is calculated based on the entity’s global income as determined under PRC tax laws and accounting standards.\n\nOur PRC subsidiaries are subject to VAT at a rate of 6% on the services we provide and 13% on goods sold. Our PRC subsidiaries are also subject to surcharges on VAT payments in accordance with PRC law.\n\nAs a Cayman Islands company, we may receive dividends from our PRC subsidiary through Xcharge HK Limited. The PRC EIT Law and its implementing rules provide that dividends paid by a PRC entity to a non-resident enterprise for income tax purposes is subject to PRC withholding tax at a rate of 10%, subject to reduction by an applicable tax treaty with China. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements (“SAT Circular 81”), a Hong Kong resident enterprise must meet the following conditions, among others, in order to apply the reduced withholding tax rate: (i) it must be a company; (ii) it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and (iii) it must have directly owned such required percentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends. In October 2019, the SAT issued Announcement of the State Taxation Administration on Issuing the Measures for Non-resident Taxpayers’ Enjoyment of Treaty Benefits (“SAT Circular 35”), which became effective on\n\n55\n\n \n\nJanuary 1, 2020. SAT Circular 35 provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. Accordingly, Xcharge HK Limited may be able to benefit from the 5% withholding tax rate for the dividends it receives from its PRC subsidiary, if it satisfies the conditions prescribed under SAT Circular 81 and other relevant tax rules and regulations. However, according to SAT Circular 81 and SAT Circular 35, if the relevant tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future.\n\nIf XCHG Limited or any of our subsidiaries outside China were deemed to be a “resident enterprise” under the PRC EIT Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%.\n\nGermany\n\nOur subsidiary in Germany is subject to German corporate income tax (Körperschaftsteuer) at a uniform rate of 15% plus the solidarity surcharge (Solidaritätszuschlag) of 5.5% thereon, resulting in a total tax rate of 15.825%. The current German corporate income tax rate shall be gradually reduced from 2028 onwards, from the current 15% to 14% in 2028, 13% in 2029, 12% in 2030, 11% in 2031, and 10% from 2032 onwards (in each case plus 5.5% solidarity surcharge on such tax).\n\nIn addition, our German subsidiary is subject to trade tax (Gewerbesteuer) with respect to our taxable trade profit (Gewerbeertrag) from permanent establishments of our German subsidiary in Germany (inländische gewerbesteuerliche Betriebsstätten). Trade tax is generally based on the taxable income as determined for corporate income tax purposes taking into account, however, certain add-backs and deductions. The trade tax rate depends on the local municipalities in which we maintain our permanent establishments. Dividends received from other corporations and capital gains from the sale of shares in other corporations are treated in principle in the same manner for trade tax purposes as for corporate income tax purposes. However, dividends received from domestic and foreign corporations (i.e., EU or non-EU corporations) are effectively 95% exempt from trade tax only if we hold at least 15% of the registered share capital of the distributing corporation at the beginning of the relevant tax assessment period.\n\nThe interest expenses of our German subsidiary are subject to the “interest barrier” (Zinsschranke) rules. When calculating taxable income of our German subsidiary, the interest barrier rules generally prevent our German subsidiary from deducting certain net interest expenses (including certain similar expenses) from our taxable income (i.e., the excess of interest expenses over interest income for a given fiscal year) to the extent such interest expenses exceed 30% of the current taxable EBITDA of the respective entity (taxable earnings adjusted for interest expense, interest income and certain depreciation/amortization and other reductions) if the net interest expense of our German subsidiary is equal to, or exceeds, €3 million (Freigrenze) and no other exceptions apply. Interest expenses that are not deductible in a given year may be carried forward to our subsequent fiscal years (interest carryforward) and will increase the interest expense in those subsequent years. EBITDA amounts that could not be utilized may, under certain conditions, be carried forward into future fiscal years. If such EBITDA carryforward is not used within five fiscal years it will be forfeited. An EBITDA carryforward that arose in an earlier year must be used before a carryforward that arose in a later year is used. For the purpose of trade tax, however, the deductibility of interest expenses is further restricted to the extent that the sum of interest expenses plus certain other trade tax add back items exceeds €200,000.00. In such cases, 25% of the interest expenses, to the extent they were deducted for corporate income tax purposes, are added back for purposes of the determination of the trade tax base.\n\nTax-loss carryforwards can be fully offset against taxable income for corporate income tax and trade tax purposes up to an amount of €1 million of such income. If the taxable profit for the year or taxable profit subject to trade taxation exceeds this threshold, only up to 70% of the amount exceeding the threshold may be offset against tax-loss carryforwards. The remaining 30% is subject to tax (minimum taxation) (Mindestbesteuerung). The rules also provide for a tax carryback to the previous year with regard to corporate income tax up to an amount of €1 million. Unused tax-loss carryforwards may be generally carried forward indefinitely and used in subsequent assessment periods to be offset against future taxable income in accordance with this rule. Alternatively, tax losses can be carried back to previous years under certain conditions.\n\nIf more than 50% of the subscribed capital or voting rights in a corporation are directly or indirectly transferred to an acquirer (including parties related to the acquirer) within five years or if comparable circumstances (including a capital increase of the subscribed capital to the extent that it causes a change of the interest ratio in the capital of the corporation), all tax loss carryforwards and interest carryforwards are generally forfeited. A group of acquirers with aligned interests is also considered to be an acquirer for these purposes. In addition, any current annual losses incurred prior to the acquisition will not be deductible. The forfeiture of tax loss carryforward pursuant to the preceding rules does not apply to share transfers if the acquirer directly or indirectly holds a participation of 100% in the transferring entity, (ii) the transferor indirectly or directly holds a participation of 100% in the receiving entity, or (iii) the same individual or legal entity or commercial partnership directly or indirectly holds a participation of 100% in the transferring and the receiving entity.\n\n56\n\n \n\nFurthermore, tax loss carryforwards, unused current losses and interest carryforwards taxable in Germany will not expire to the extent that they are covered by built in gains taxable in Germany at the time of such acquisition.\n\nThe full amount of a dividend distributed by our German subsidiary to us is generally subject to (final) German withholding tax at an aggregate rate of 26.375%. In case a tax treaty applies, the German withholding tax may not exceed the tax rate applicable to the treaty on the gross amount of the dividends received by us. The excess of the total withholding tax, including the solidarity surcharge (Solidaritätszuschlag) over the maximum rate of withholding tax permitted by an applicable tax treaty can be refunded to us, provided that the requirements under the applicable treaty are fulfilled. Further, such refund is subject to the German anti-avoidance treaty shopping rules. However, if and to the extent our German subsidiary pays dividends sourced out of a tax recognized contribution account (steuerliches Einlagekonto), such dividends may not be subject to withholding tax (including the solidarity surcharge).\n\nUnited States\n\nUnder the current U.S. federal corporate income tax law, our subsidiary in the United States is subject to 21% income tax on its taxable income generated from operations in the United States. Our subsidiary in the United States did not have any taxable income for all periods presented.\n\nOn July 4, 2025, OBBBA was enacted, significantly amending U.S. federal tax law, including changes to international tax provisions, expensing of research and experimental expenditures, depreciation, and interest deduction rules. The company does not expect the OBBBA to have a material impact on its effective tax rate.\n\nResults of Operations\n\nThe following table summarizes our consolidated results of operations and as percentages of our total revenues for the periods indicated. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report.\n\n \n\n \n\nFor the Years Ended December 31,\n\n \n\n \n\n2023\n\n \n\n \n\n2024\n\n \n\n \n\n2025\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\n \n\nUS$\n\n \n\n \n\n%\n\n \n\n \n\n(in thousands, except for percentages)\n\n \n\nRevenues\n\n \n\n \n\n38,512\n\n \n\n \n\n \n\n100.0\n\n \n\n \n\n \n\n42,204\n\n \n\n \n\n \n\n100.0\n\n \n\n \n\n \n\n25,100\n\n \n\n \n\n \n\n100.0\n\n \n\nCost of revenues\n\n \n\n \n\n(20,938\n\n)\n\n \n\n \n\n(54.4\n\n)\n\n \n\n \n\n(20,981\n\n)\n\n \n\n \n\n(49.7\n\n)\n\n \n\n \n\n(13,503\n\n)\n\n \n\n \n\n(53.8\n\n)\n\nGross profit\n\n \n\n \n\n17,574\n\n \n\n \n\n \n\n45.6\n\n \n\n \n\n \n\n21,223\n\n \n\n \n\n \n\n50.3\n\n \n\n \n\n \n\n11,597\n\n \n\n \n\n \n\n46.2\n\n \n\nOperating expenses:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nSelling and marketing expenses\n\n \n\n \n\n(6,433\n\n)\n\n \n\n \n\n(16.7\n\n)\n\n \n\n \n\n(10,343\n\n)\n\n \n\n \n\n(24.5\n\n)\n\n \n\n \n\n(10,704\n\n)\n\n \n\n \n\n(42.6\n\n)\n\nResearch and development expenses\n\n \n\n \n\n(4,061\n\n)\n\n \n\n \n\n(10.6\n\n)\n\n \n\n \n\n(12,159\n\n)\n\n \n\n \n\n(28.8\n\n)\n\n \n\n \n\n(7,071\n\n)\n\n \n\n \n\n(28.2\n\n)\n\nGeneral and administrative expenses\n\n \n\n \n\n(14,025\n\n)\n\n \n\n \n\n(36.4\n\n)\n\n \n\n \n\n(10,790\n\n)\n\n \n\n \n\n(25.6\n\n)\n\n \n\n \n\n(26,559\n\n)\n\n \n\n \n\n(105.8\n\n)\n\nTotal operating expenses\n\n \n\n \n\n(24,519\n\n)\n\n \n\n \n\n(63.7\n\n)\n\n \n\n \n\n(33,292\n\n)\n\n \n\n \n\n(78.9\n\n)\n\n \n\n \n\n(44,334\n\n)\n\n \n\n \n\n(176.6\n\n)\n\nOperating loss\n\n \n\n \n\n(6,518\n\n)\n\n \n\n \n\n(16.9\n\n)\n\n \n\n \n\n(12,031\n\n)\n\n \n\n \n\n(28.5\n\n)\n\n \n\n \n\n(32,616\n\n)\n\n \n\n \n\n(129.9\n\n)\n\nLoss before income taxes\n\n \n\n \n\n(8,084\n\n)\n\n \n\n \n\n(21.0\n\n)\n\n \n\n \n\n(11,941\n\n)\n\n \n\n \n\n(28.3\n\n)\n\n \n\n \n\n(32,503\n\n)\n\n \n\n \n\n(129.5\n\n)\n\nNet loss\n\n \n\n \n\n(8,084\n\n)\n\n \n\n \n\n(21.0\n\n)\n\n \n\n \n\n(11,941\n\n)\n\n \n\n \n\n(28.3\n\n)\n\n \n\n \n\n(32,503\n\n)\n\n \n\n \n\n(129.5\n\n)\n\nComprehensive loss\n\n \n\n \n\n(7,040\n\n)\n\n \n\n \n\n(18.3\n\n)\n\n \n\n \n\n(11,789\n\n)\n\n \n\n \n\n(27.9\n\n)\n\n \n\n \n\n(32,585\n\n)\n\n \n\n \n\n(129.8\n\n)\n\n \n\nYear Ended December 31, 2025 Compared to the Year Ended December 31, 2024\n\nRevenues\n\nOur revenues decreased by 40.5% from US$42.2 million in 2024 to US$25.1 million in 2025, primarily driven by external policy dynamics, including trade policy turbulence and evolving renewable energy regulations. These factors led certain customers to temporarily delay procurement decisions, contributing to a softer order volume in 2025.\n\nProduct revenues\n\nOur revenues generated from sales of products decreased by 42.1% from US$41.5 million in 2024 to US$24.0 million in 2025, mainly driven by external policy dynamics, including trade policy turbulence and evolving renewable energy regulations. These factors led certain customers to temporarily delay procurement decisions, contributing to a softer order volume in 2025.\n\nService revenues\n\n57\n\n \n\nOur revenues generated from services were US$0.7 million and US$1.1 million in 2024 and 2025, respectively.\n\nCost of Revenues\n\nOur cost of revenues decreased by 35.6% from US$21.0 million in 2024 to US$13.5 million in 2025. The year-over-year decrease was largely in line with the decrease in revenue.\n\nGross Profit\n\nAs a result of the foregoing, our gross profit decreased by 45.4% from US$21.2 million in 2024 to US$11.6 million in 2025. The year-over-year decrease in gross margin was mainly driven by the increased sales volume of relative spare parts, which have a lower margin than EV chargers.\n\nOperating Expenses\n\nOur operating expenses increased by 33.2% from US$33.3 million in 2024 to US$44.3 million in 2025, primarily reflecting the increases in our selling and marketing expenses and general and administrative expenses, partially offset by a decrease in research and development.\n\nSelling and marketing expenses\n\nOur selling and marketing expenses increased by 3.5% from US$10.3 million in 2024 to US$10.7 million in 2025. The increase was mainly attributable to the increase in expenses for product promotion, partially offset by share-based compensation. Our selling and marketing expenses as percentages of total revenues increased from 24.5% in 2024 to 42.6% in 2025, reflecting the increase in expenses for product promotion.\n\nResearch and development expenses\n\nOur research and development expenses decreased by 41.8% from US$12.2 million in 2024 to US$7.1 million in 2025. The decrease was mainly attributable to (i) the decrease in outsourcing development expense of US$4.0 million for the advanced charging system due to the gradual completion of this project, and (ii) the decrease in share-based compensation of US$2.0 million for key research and development employees. Despite the decrease in absolute amount, our research and development expenses as percentages of total revenue remained relatively stable, moving from 28.8% in 2024 to 28.2% in 2025, which indicates that we have continued to maintain our strategic commitment to research and development activities amid changes in revenue scale.\n\nGeneral and administrative expenses\n\nOur general and administrative expenses increased by 146.1% from US$10.8 million in 2024 to US$26.6 million in 2025, mainly attributable to the increase in share-based compensation of US$17.9 million for directors, executives, certain employees and non-employee consultants, partially offset by foreign currency exchange loss (gain) and professional expenses. Our general and administrative expenses as percentages of total revenues increased from 25.6% in 2024 to 105.8% in 2025, mainly resulting from the increase in the absolute amount in general and administrative expenses due to the aforementioned reasons.\n\nChanges in Fair Value of Financial Instruments\n\nOur changes in fair value of financial instruments changed from a loss of US$87.8 thousand in 2024 to a gain of US$127.9 thousand in 2025, mainly due to the decreased fair value of warrants.\n\nInterest Expenses\n\nWe recorded interest expenses of US$0.2 million and US$0.2 million in 2024 and 2025, respectively.\n\nInterest Income\n\nWe recorded interest income of US$0.2 million and US$0.2 million in 2024 and 2025, respectively.\n\nIncome Tax Expense\n\nWe recorded nil income tax expense in 2024 and 2025, respectively.\n\n58\n\n \n\nNet Loss\n\nAs a result of the foregoing, we recorded net loss of US$32.5 million in 2025, as compared to net loss of US$11.9 million in 2024.\n\nYear Ended December 31, 2024 Compared to the Year Ended December 31, 2023\n\nRevenues\n\nOur revenues increased by 9.6% from US$38.5 million in 2023 to US$42.2 million in 2024, primarily driven by the increase in revenues generated from sales of products.\n\nProduct revenues\n\nOur revenues generated from sales of products increased by 9.1% from US$38.1 million in 2023 to US$41.5 million in 2024, mainly driven by the increase in the sales revenue from DC chargers.\n\nService revenues\n\nOur revenues generated from services were US$0.5 million and US$0.7 million in 2023 and 2024, respectively.\n\nCost of Revenues\n\nOur cost of revenues increased by 0.2% from US$20.9 million in 2023 to US$21.0 million in 2024, growing at a much slower pace than our revenues, primarily benefiting from economies of scale and our enhanced cost control measures.\n\nGross Profit\n\nAs a result of the foregoing, our gross profit increased by 20.8% from US$17.6 million in 2023 to US$21.2 million in 2024, which grew much faster than our business growth. Our overall gross margin increased from 45.6% in 2023 to 50.3% in 2024, benefiting from economies of scale and our enhanced cost control measures.\n\nOperating Expenses\n\nOur operating expenses increased by 35.8% from US$24.5 million in 2023 to US$33.3 million in 2024, primarily reflecting the increases in our selling and marketing expenses, research and development expenses and general and administrative expenses.\n\nSelling and marketing expenses\n\nOur selling and marketing expenses increased by 60.8% from US$6.4 million in 2023 to US$10.3 million in 2024. The increase was mainly attributable to (i) the increase in share based compensation of US$1.8 million for key selling and marketing employees, and (ii) the increase in staff cost of US$1.3 million, primarily due to the increased bonus resulting from improved selling performance and the growth of the team. Our selling and marketing expenses as percentages of total revenues increased from 16.7% in 2023 to 24.5% in 2024, reflecting our enhanced efforts in selling and marketing to press ahead with our global expansion.\n\nResearch and development expenses\n\nOur research and development expenses increased by 199.4% from US$4.1 million in 2023 to US$12.2 million in 2024. The increase was mainly attributable to (i) the increase in outsourcing development expense of US$5.6 million to develop advanced charging system, and (ii) the increase in share based compensation of US$2.3 million for key research and development employees. Our research and development expenses as percentages of total revenue increased from 10.6% in 2023 to 28.8% in 2024, which was primarily driven by our enhanced investment in research and development.\n\nGeneral and administrative expenses\n\nOur general and administrative expenses decreased by 23.1% from US$14.0 million in 2023 to US$10.8 million in 2024, mainly attributable to (i) the decrease in share based compensation of US$5.1 million for directors, executives, certain employees and non-employee consultants, and (ii) the increase in foreign currency exchange loss of US$1.1 million, primarily due to the depreciation of the Euro relative to the RMB in 2024. Our general and administrative expenses as percentages of total revenues decreased from 36.4% in 2023 to 25.6% in 2024, mainly resulting from the decrease in the absolute amount in general and administrative expenses due to the aforementioned reasons.\n\n59\n\n \n\nChanges in Fair Value of Financial Instruments\n\nOur changes in fair value of financial instruments decreased by 94.0% from US$1.5 million in 2023 to US$87.8 thousand in 2024, mainly due to the extinguishment of convertible debts.\n\nInterest Expenses\n\nWe recorded interest expenses of US$0.2 million and US$0.2 million in 2023 and 2024, respectively.\n\nInterest Income\n\nWe recorded interest income of US$0.2 million in 2024, as compared to US$0.1 million in 2023.\n\nIncome Tax Expense\n\nWe recorded nil income tax expense in 2023 and 2024, respectively.\n\nNet Loss\n\nAs a result of the foregoing, we recorded net loss of US$11.9 million in 2024, as compared to net loss of US$8.1 million in 2023.\n\nNon-GAAP Financial Measures\n\nWe consider adjusted net income (loss), a non-GAAP financial measure as a supplemental measure to review and assess our operating performance. The presentation of this non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. We believe that the use of this non-GAAP measure facilitates investors’ assessment of our operating performance.\n\nThis non-GAAP financial measure is not defined under U.S. GAAP and is not presented in accordance with U.S. GAAP. This non-GAAP financial measure has limitations as an analytical tool. One of the key limitations of using this non-GAAP financial measure is that it does not reflect all items of income and expense that affect our operations. Further, this non-GAAP measure may differ from the non-GAAP information used by other companies, including peer companies, and therefore its comparability may be limited. We compensate for these limitations by reconciling this non-GAAP financial measures to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating our performance.\n\nWe encourage you to review our financial information in its entirety and not rely on a single financial measure.\n\nAdjusted Net Income (Loss)\n\nWe define adjusted net income (loss) as net income (loss) excluding share-based compensation, changes in fair value of financial instruments and gain on extinguishment of convertible debts.\n\nThe following table reconciles our adjusted net income (loss) for the periods indicated to the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, which is net income (loss):\n\n \n\n \n\nFor the Years Ended December 31,\n\n \n\n \n\n2023\n\n \n\n \n\n2024\n\n \n\n \n\n2025\n\n \n\n \n\nUS$\n\n \n\n \n\nUS$\n\n \n\n \n\nUS$\n\n \n\n \n\n(in thousands)\n\n \n\nNet loss\n\n \n\n \n\n(8,084\n\n)\n\n \n\n \n\n(11,941\n\n)\n\n \n\n \n\n(32,503\n\n)\n\nAdd:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nShare-based compensation\n\n \n\n \n\n7,457\n\n \n\n \n\n \n\n7,031\n\n \n\n \n\n \n\n20,942\n\n \n\nChanges in fair value of financial instruments\n\n \n\n \n\n1,472\n\n \n\n \n\n \n\n88\n\n \n\n \n\n \n\n(128\n\n)\n\nGain on extinguishment of convertible debts\n\n \n\n \n\n—\n\n \n\n \n\n \n\n(233\n\n)\n\n \n\n \n\n—\n\n \n\nAdjusted net income (loss)\n\n \n\n \n\n845\n\n \n\n \n\n \n\n(5,055\n\n)\n\n \n\n \n\n(11,689\n\n)\n\n \n\n60\n\n \n\n5.B. Liquidity and Capital Resources\n\nCash Flows and Working Capital\n\nOur principal sources of liquidity have been cash generated from financing activities and operating activities. As of December 31, 2025, we had US$11.4 million in cash and cash equivalents. Our cash and cash equivalents are primarily denominated in Renminbi, Euros and US dollars, which amounted to US$1.8 million, US$3.4 million and US$6.2 million as of December 31, 2025, respectively. As of December 31, 2025, all of our cash and cash equivalents denominated in Renminbi are located in the PRC, while our cash and cash equivalents denominated in Euros and US dollars located in the PRC amounted to US$1.6 million and US$7.4 thousand, respectively, and those held outside the PRC amounted to US$1.8 million and US$6.1 million, respectively. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of SAFE by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our subsidiaries in China may be used to pay dividends to our company. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of our PRC subsidiaries to pay off their respective debt in a currency other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than Renminbi. For details, see “Item 3. Key Information—3.D. Risk Factors—Risks Related to Regulations—Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.” We do not believe that such restrictions on foreign exchange would have a material impact on the net assets and liquidity of our company or any of our subsidiaries. We believe that our current cash and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs, including our cash needs for working capital and capital expenditures, for at least the next 12 months.\n\nOn January 30, 2026, we entered into a sales agreement with A.G.P./Alliance Global Partners (the “Sales Agent”), pursuant to which we may offer and sell, from time to time, our American depositary shares, each representing 40 Class A ordinary shares. Any such offers and sales would be made pursuant to our effective shelf registration statement on Form F-3 and prospectus supplement, relating to the offer and sale of up to an aggregate of US$12,800,000 in ADSs (the “ATM Program”). Under the sales agreement, the Sales Agent may sell the ADSs by any method permitted by law deemed to be an “at-the-market offering,” and is required to use commercially reasonable efforts consistent with its normal trading and sales practices. We are not obligated to sell any ADSs under the agreement. We intend to use any proceeds from such sales for working capital and general corporate purposes, including financing our research and development, operations and capital expenditures. As of March 31, 2026, we have sold a nominal amount of ADSs under the ATM Program for gross proceeds of approximately $25,000.\n\nWe are evaluating strategies to obtain additional funding for future operations. These strategies may include, but are not limited to, obtaining equity financing, issuing debt or entering into other financing arrangements. However, we may be unable to access future equity or debt financing when needed. As such, there can be no assurance that we will be able to obtain additional liquidity when needed or under acceptable terms, if at all.\n\nThe following table presents our consolidated cash flow data for the periods indicated.\n\n \n\n \n\nFor the Years Ended December 31,\n\n \n\n \n\n2023\n\n \n\n \n\n2024\n\n \n\n \n\n2025\n\n \n\n \n\nUS$\n\n \n\n \n\nUS$\n\n \n\n \n\nUS$\n\n \n\n \n\n(in thousands)\n\n \n\nNet cash used in operating activities\n\n \n\n \n\n(5,576\n\n)\n\n \n\n \n\n(7,202\n\n)\n\n \n\n \n\n(7,527\n\n)\n\nNet cash provided by (used in) investing activities\n\n \n\n \n\n2,266\n\n \n\n \n\n \n\n(534\n\n)\n\n \n\n \n\n(1,499\n\n)\n\nNet cash provided by (used in) financing activities\n\n \n\n \n\n10,743\n\n \n\n \n\n \n\n19,150\n\n \n\n \n\n \n\n(4,327\n\n)\n\nEffect of foreign currency exchange rate changes on cash and cash equivalents and restricted cash\n\n \n\n \n\n(411\n\n)\n\n \n\n \n\n(333\n\n)\n\n \n\n \n\n487\n\n \n\nNet increase (decrease) in cash, cash equivalents and restricted cash\n\n \n\n \n\n7,022\n\n \n\n \n\n \n\n11,081\n\n \n\n \n\n \n\n(12,866\n\n)\n\nCash, cash equivalents and restricted cash at the beginning of the year\n\n \n\n \n\n8,670\n\n \n\n \n\n \n\n15,693\n\n \n\n \n\n \n\n26,774\n\n \n\nCash, cash equivalents and restricted cash at the end of the year\n\n \n\n \n\n15,693\n\n \n\n \n\n \n\n26,774\n\n \n\n \n\n \n\n13,908\n\n \n\n \n\nOperating activities\n\nNet cash used in operating activities was US$7.5 million in 2025. The difference between our net loss of US$32.5 million and the net cash used in operating activities was mainly due to (i) share-based compensation expenses of US$20.9 million in relation to the 15,517,965 ADSs we granted in 2025 under the 2023 Share Plan II and 2025 Share Plan and the amortization of the shares we granted in December 2024 under the 2023 Share Plan II, (ii) a decrease in accounts receivable of US$4.7 million, primarily attributable to our\n\n61\n\n \n\nmeasures to accelerate collection of payments, (iii) a decrease in prepayments and other assets of US$2.9 million, primarily attributable to less prepayments to vendors; partially offset by (i) a decrease in accounts payable of US$2.1 million, primarily attributable to faster payment to suppliers, and (ii) an increase in inventories of US$1.8 million, reflecting stockpiling in preparation for upcoming customer orders.\n\nNet cash used in operating activities was US$7.2 million in 2024. The difference between our net loss of US$11.9 million and the net cash used in operating activities was mainly due to (i) share-based compensation expenses of US$7.0 million in relation to the 171,995,643 shares we granted in December 2024 under the 2023 Share Plan II, (ii) an increase in accounts payable of US$2.4 million, primarily attributable to our efforts in obtaining longer credit terms from suppliers and our business growth in general, and (iii) an increase in contract liabilities of US$2.0 million, primarily attributable to our business growth in general; partially offset by (i) an increase in prepayments and other current assets of US$4.7 million, primarily attributable to prepayment to service vendors, (ii) an increase in amounts due from related parties of US$1.3 million, and (iii) inventories of US$1.3 million, primarily attributable to the increased demand of our products.\n\nNet cash used in operating activities was US$5.6 million in 2023. The difference between our net loss of US$8.0 million and the net cash used in operating activities was mainly due to (i) share-based compensation expenses of US$7.5 million in relation to the 150,000,000 shares we granted in August 2023 under the 2023 Share Plan, (ii) a loss in changes in fair value of financial instruments of US$1.5 million, mainly due to the issuance of convertible debts to certain investors in 2023 and the changes in fair value of these convertible debts, and (iii) an increase in accrued expenses and other current liabilities of US$1.6 million, primarily attributable to the increase in accrued payroll and social insurance due to the growth of the team and the increase in accrued service expenses to professional parties; partially offset by (i) an increase in accounts receivable of US$5.1 million, primarily attributable to our business growth in general, and (ii) a decrease in contract liabilities of US$1.5 million, primarily attributable to the satisfaction of our performance obligation under such contract liabilities in the ordinary course of business.\n\nInvesting activities\n\nNet cash used in investing activities was US$1.5 million in 2025, which was primarily attributable to loans provided to third parties and cash paid for purchase of property and equipment and intangible assets.\n\nNet cash used in investing activities was US$0.5 million in 2024, which was primarily attributable to cash paid for purchase of property and equipment and intangible assets.\n\nNet cash provided by investing activities was US$2.3 million in 2023, which was primarily attributable to proceeds from collection of loans to a related party of a preference shareholder of US$2.9 million, partially offset by cash paid for purchase of property and equipment and intangible assets of US$0.5 million.\n\nFinancing activities\n\nNet cash provided by financing activities was US$4.3 million in 2025, which was primarily attributable to (i) repayment of short-term bank borrowings of US$6.8 million, (ii) payment for initial public offering (“IPO”) costs and follow-on financing of US$1.8 million; partially offset by proceeds from short-term bank borrowings of US$4.2 million.\n\nNet cash provided by financing activities was US$19.1 million in 2024, which was primarily attributable to (i) proceeds from sale of ordinary shares through public offering of US$19.1 million, (ii) proceeds from short-term bank borrowings of US$8.5 million, and (iii) cash received from the convertible debt holders of Beijing X-Charge Technology in connection with the conversion of convertible debts of US$7.0 million; partially offset by (i) repayment of short-term bank borrowings of US$7.3 million, (ii) cash paid to convertible debts holders of Beijing X-Charge Technology in connection with the conversion of convertible debts of US$7.0 million, and (iii) payments of initial public offering costs of US$1.9 million.\n\nNet cash provided by financing activities was US$10.7 million in 2023, which was primarily attributable to (i) proceeds from issuance of the convertible debts of US$11.1 million, and (ii) proceeds from short-term bank borrowings of US$6.3 million; partially offset by (i) repayment of short-term bank borrowings of US$4.6 million, and (ii) payments of initial public offering cost of US$1.5 million.\n\nIn October 2020, X-Charge Technology entered into a loan agreement with SPD Silicon Valley Bank to borrow up to RMB10.0 million (US$1.4 million). In October 2020, in connection with the loan agreement, X-Charge Technology issued warrants to an affiliate of SPD Silicon Valley Bank to purchase 0.542% of X-Charge Technology’s equity interest at an exercise price at RMB2.0 million (US$0.3 million) in aggregate or purchase 8,786,150 ordinary shares of the company at the option of the holder of such warrants on a fully diluted basis. The warrants are exercisable upon issuance and expires in October 2027. The warrants have not been exercised as of\n\n62\n\n \n\nDecember 31, 2025. See Note 11 to the Consolidated Financial Statements appended to this annual report for details.\n\nMaterial Cash Requirements\n\nOur material cash requirements as of December 31, 2025 primarily include our operating lease commitments, capital expenditures, and working capital requirements.\n\nOur operating lease commitments consist of the commitments under the lease agreements for our office premises. We lease our office facilities under non-cancelable operating leases with various expiration dates. The majority of our operating lease commitments are related to our office lease agreements.\n\nThe following table sets forth our contractual obligations as of December 31, 2025:\n\n \n\n \n\nPayment Due by Period\n\n \n\n \n\nTotal\n\n \n\n \n\nLess than 1 Year\n\n \n\n \n\n1-3 Years\n\n \n\n \n\n3-5 Years\n\n \n\n \n\nMore than 5 Years\n\n \n\n \n\n(US$ in thousands)\n\n \n\nOperating lease commitments(1)\n\n \n\n \n\n1,957\n\n \n\n \n\n \n\n642\n\n \n\n \n\n \n\n613\n\n \n\n \n\n \n\n220\n\n \n\n \n\n \n\n482\n\n \n\n \n\nNote:\n\n(1)\nRepresents obligations under lease agreements for our office premises.\n\nOur capital expenditures are incurred primarily in connection with purchase and improvement in property and equipment. We recorded capital expenditures of US$526 thousand, US$614 thousand and US$677 thousand in 2023, 2024 and 2025, respectively. We intend to fund our future capital expenditures with our existing cash balance and proceeds from our initial public offering and follow-on offering. We will continue to make capital expenditures to meet the expected growth of our business.\n\nIn addition, on June 20, 2023, X-Charge Technology entered into a convertible loan investment agreement with Shell Ventures Company Limited (“Shell Ventures”), where Shell Ventures provided X-Charge Technology a convertible loan in a total principal amount of RMB15,000,000 with a simple interest computed at a rate of 10% per annum. Pursuant to an adjustment agreement dated May 27, 2024, the loan was to become due and payable 180 days following the consummation of a qualified IPO (as defined in the Investors’ Rights Agreement). The Company’s IPO in September 2024, with proceeds of not less than US$20 million, constituted a qualified IPO, and accordingly the loan became due and payable on March 9, 2025. As of the date of this annual report, the loan has not been repaid and remains outstanding in the aggregate amount of RMB17.6 million (approximately US$2.5 million), including accrued interest. The outstanding principal amount has been accruing interest at a simple rate of 12% per annum since March 9, 2025 (the date of default) and will continue to do so until full repayment is made.\n\nAs detailed in Notes 8 and 9 to the consolidated financial statements appended to this annual report, on October 28, 2025, X-Charge Technology received a formal notice of arbitration from the China International Economic and Trade Arbitration Commission. The notice states that a claim was filed by Shell Ventures seeking repayment of the outstanding principal and interest totaling RMB16.71 million (equivalent to US$2.33 million), plus default interest accruing at an annual rate of 12% from March 10, 2025, as well as recovery of its legal fees and arbitration costs. The claim also demands joint and several liability from us, our German subsidiary, and our founders, Mr. Ding Rui and Mr. Hou Yifei. In connection with this matter, as of December 31, 2025, the Group had recognized a provision of RMB17.6 million (approximately US$2.5 million) for outstanding principal, accrued interest, and default interest accrued up to the balance sheet date, and had restricted cash of RMB16.9 million (approximately US$2.4 million) due to asset preservation measures on certain bank accounts. As of the date hereof, the arbitration is pending, and no hearing has been scheduled. The Group concluded that the ultimate outcome of this arbitration would not have a material adverse effect on the Group's results of operations, consolidated financial condition, or cash flows.\n\nWe have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk, or credit support to us or engages in leasing, hedging, or product development services with us.\n\nOther than those shown above, we did not have any significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2025.\n\n63\n\n \n\nHolding Company Structure\n\nSee “Item 3. Key Information—Holding Company Structure.”\n\n5.C. Research and Development, Patents and Licenses, etc.\n\nWe have developed a plethora of proprietary technologies that differentiate us from our peers. For example, we have developed the advanced energy management system (“EMS”), which encompasses the full range of energy-related functions, including energy storage and B2G technology, integrating energy generation, conversion and bi-directional utilization in one system. In addition, EMS intelligently adapts to different charging scenarios and automatically adjusts the charging and discharging settings. We have obtained and maintained intellectual property protection for our products and technologies, which we believe is fundamental to our long-term success. Our R&D focus remains on innovating and optimizing charging technology to maintain our competitive edge. We follow a market-oriented research and development approach to optimize our existing solutions and develop advanced solutions. See “Item 4. Information on the Company—4.B. Business Overview—Research and Development,” “Item 4. Information on the Company—4.B. Business Overview—Intellectual Property,” and “Item 5. Operating and Financial Review and Prospects—Key Components of Results of Operations—Operating Expenses—Research and Development Expenses.”\n\n5.D. Trend Information\n\nOther than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2025 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition.\n\n5.E. Critical Accounting Estimates\n\nWe prepare our consolidated financial statements in accordance with U.S. GAAP. In doing so, we have to make estimates and assumptions. Our critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in them have had or are reasonably likely to have a material effect on our financial condition or results of operations. Accordingly, actual results could differ materially from our estimates. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.\n\nFair value of our ordinary shares\n\nPrior to the initial public offering, we have been a private company with no quoted market prices for our ordinary shares. We therefore needed to make estimates of the fair value of our ordinary shares at various dates for the following purpose:\n\n•\ndetermining the fair value of our ordinary shares at the date of issuance of redeemable preference shares as one of the inputs into determining the intrinsic value of the beneficial conversion feature, if any;\n\n•\ndetermining the fair value of our financial liability at the issuance date and each period end.\n\n•\ndetermining the fair value of our share awards to our directors, executive officers and certain employees at the grant date.\n\n•\ndetermining the fair value of our convertible debts at the issuance date and each period end.\n\nIn determining the fair value of our ordinary shares, we applied the income approach based on our discounted future cash flow using our best estimate as of the valuation date. The determination of the fair value of our ordinary shares requires complex and subjective judgments to be made regarding our future financial and operating results, our unique business risks, the liquidity of our shares and our operating history and prospects at the time of valuation.\n\nThe option-pricing method was used to allocate equity value of our company to ordinary shares, taking into account the guidance prescribed by the AICPA Audit and Accounting Practice Aid. This method requires making estimates of the anticipated timing of a potential liquidity event, such as a sale of our company or an initial public offering, and estimates of the volatility of our equity securities. The anticipated timing is based on the plans of our board and management.\n\nThe major assumptions used in calculating the fair value of our ordinary shares include:\n\n•\nDiscount rate: The discount rate was based on the weighted average cost of capital, which was determined based on a consideration of the factors including risk-free rate, macroeconomic risk, comparative industry risk, market risk premium, geographic risk, company size and non-systemic risk factors.\n\n64\n\n \n\n•\nComparable companies: In deriving the WACCs, which are used as the discount rates under the income approach, certain publicly traded companies engaged in EV charger businesses were selected for reference as our guideline companies.\n\n•\nDiscount for lack of marketability (“DLOM”): DLOM was quantified by the Finnerty’s Average-Strike put options model. Under this option-pricing method, which assumed that the put option is struck at the average price of the stock before the privately held shares can be sold, the cost of the put option was considered as a basis to determine the DLOM.\n\nThe income approach involves applying appropriate WACCs to estimated cash flows that are based on our projected earnings and cash flows. However, the determination of the fair value of our ordinary shares requires complex and subjective judgments to be made, which will not be necessary once the ADSs begin trading."}