Ucommune's VIE Structure Remains Central Amid Shifting Asset & Revenue Mix

TL;DR

**UK's entire business model hinges on a precarious VIE structure, making it a high-stakes bet on Beijing's regulatory whims.**

AI Summary

Ucommune International Ltd (UK) operates as a Cayman Islands holding company, conducting its business in China through Variable Interest Entities (VIEs) due to PRC regulatory restrictions on foreign investment in value-added telecommunications services. For the fiscal year ended December 31, 2025, the consolidated VIEs accounted for 58.8% of Ucommune's consolidated total assets, a decrease from 90.4% in 2023 and 46.9% in 2024. Consolidated total liabilities attributable to VIEs were 47.0% in 2025, down from 96.2% in 2023 and 75.8% in 2024. Critically, the consolidated VIEs generated 92.0% of Ucommune's consolidated total net revenue in 2025, a slight decrease from 99.8% in 2024 and 100.0% in 2023. The company's structure relies on contractual arrangements, including an executive business cooperation agreement, equity pledge agreement, exclusive option agreement, and shareholders' voting rights proxy agreement, to consolidate financial results and receive economic benefits from Beijing U Bazaar. The company reported 4,555,930 ordinary shares outstanding as of December 31, 2025, including 4,436,543 Class A ordinary shares and 119,387 Class B ordinary shares.

Why It Matters

Ucommune's reliance on its Variable Interest Entity (VIE) structure is a critical factor for investors, as it exposes them to significant regulatory risk from the PRC government. Any change in PRC laws or their interpretation regarding foreign investment in VATS could severely impact the company's operations and the value of UK shares, potentially rendering them worthless. This structure also creates competitive challenges, as direct foreign competitors might face different regulatory hurdles. For employees and customers, the stability of the VIE structure directly affects the company's long-term viability and service continuity in the Chinese market. The broader market watches these structures closely as a bellwether for foreign investment sentiment in China.

Risk Assessment

Risk Level: high — The risk level is high due to Ucommune's complete reliance on its VIE structure for its core operations in China. The filing explicitly states, "The Parent is not a Chinese operating company but a Cayman Islands holding company with no equity ownership in the VIEs and no material operations of its own." Furthermore, the consolidated VIEs accounted for 92.0% of consolidated total net revenue in 2025, demonstrating the critical dependence. The risk is amplified by the statement, "Chinese regulatory authorities could disallow this structure, which would likely result in a material change in our operations and/or a material change in the value of the securities we are registering for sale, including that it could cause the value of such securities to significantly decline or become worthless."

Analyst Insight

Investors should exercise extreme caution and thoroughly understand the regulatory risks associated with Ucommune's VIE structure before investing. Given the explicit warning that shares could become "worthless" if the PRC government disallows the structure, this stock is suitable only for investors with a high-risk tolerance who are comfortable with significant regulatory uncertainty.

Revenue Breakdown

Key Numbers

• 58.8% — Consolidated total assets from VIEs (Decreased from 90.4% in 2023 and 46.9% in 2024, indicating a shift in asset composition.)
• 47.0% — Consolidated total liabilities from VIEs (Decreased from 96.2% in 2023 and 75.8% in 2024, showing reduced VIE liability proportion.)
• 92.0% — Consolidated total net revenue from VIEs (Slightly decreased from 99.8% in 2024 and 100.0% in 2023, still representing the vast majority of revenue.)
• 4,555,930 — Ordinary shares outstanding (As of December 31, 2025, including Class A and Class B shares.)
• RMB6.9931 to US$1.00 — Exchange rate (Used for translations as of December 31, 2025.)

Key Players & Entities

• Ucommune International Ltd (company) — Parent holding company, Nasdaq-listed
• Beijing U Bazaar (company) — Primary Variable Interest Entity (VIE) for VATS business
• Youshenghengtong Technology (company) — Wholly Foreign-Owned Enterprise (WFOE) party to VIE agreements
• PRC government (regulator) — Source of regulatory risk for VIE structures
• Zirui Wang (person) — Chief Executive Officer of Ucommune International Ltd
• Cayman Islands (regulator) — Jurisdiction of incorporation for Ucommune International Ltd
• Nasdaq Stock Market LLC (regulator) — Exchange where Class A ordinary shares are registered
• US$60.9 million (dollar_amount) — PIPE investment in connection with Business Combination

FAQ

Risk Factors

• Reliance on VIE Structure [high — regulatory]: The company's operations in China are conducted through Variable Interest Entities (VIEs) due to PRC regulatory restrictions on foreign investment in value-added telecommunications services. This structure relies on contractual arrangements, which may be subject to interpretation and enforcement challenges by PRC authorities.
• Changes in PRC Regulations [high — regulatory]: The PRC government has significant oversight over the Chinese economy and may enact new laws or regulations that could affect the company's business, operations, or the enforceability of its VIE agreements. The shift in VIE asset and liability percentages (58.8% assets, 47.0% liabilities in 2025) suggests potential adjustments or scrutiny related to these regulations.
• Dependence on Beijing U Bazaar [medium — operational]: The company's financial results are consolidated through contractual arrangements with Beijing U Bazaar. Any disruption to Beijing U Bazaar's operations or its ability to fulfill its contractual obligations could materially impact Ucommune's reported financial performance.
• Foreign Exchange Rate Fluctuations [medium — financial]: The company's financial statements are presented in U.S. dollars, but its primary operations are in China, generating revenue in RMB. The exchange rate of RMB6.9931 to US$1.00 as of December 31, 2025, indicates potential for currency fluctuations to impact reported financial results.
• Enforceability of Contractual Arrangements [high — legal]: The VIE structure relies on a series of contractual agreements, including an executive business cooperation agreement, equity pledge agreement, exclusive option agreement, and shareholders' voting rights proxy agreement. The enforceability of these contracts under PRC law is critical and could be challenged.

Industry Context

Ucommune operates in the co-working and flexible office space industry, which has seen significant growth driven by demand for agile work solutions. However, the industry is also highly competitive, with numerous players ranging from global giants to local providers. Trends include increased adoption of technology for space management, a focus on community building, and hybrid work models influencing space design and utilization.

Regulatory Implications

The company's reliance on the VIE structure to operate in China exposes it to significant regulatory risks. Changes in PRC laws or enforcement of existing regulations concerning foreign investment and VIEs could materially impact Ucommune's business, financial condition, and ability to repatriate profits. The decreasing proportion of VIE assets and liabilities may indicate strategic shifts or regulatory pressures.

What Investors Should Do

1. Monitor regulatory developments in China related to VIE structures and foreign investment in the telecommunications and technology sectors.
2. Scrutinize the financial health and operational stability of Beijing U Bazaar and other key VIE entities.
3. Assess the company's strategy for managing its exposure to the Chinese market and potential diversification efforts.

Glossary

Variable Interest Entities (VIEs)

A corporate structure used by foreign companies to comply with PRC regulations that restrict or prohibit foreign ownership in certain industries. It involves a contractual arrangement between a foreign-invested enterprise and domestic operating companies. (Ucommune relies heavily on VIEs to conduct its business in China, making this structure central to its operations and financial reporting.)

Beijing U Bazaar

A PRC entity through which Ucommune consolidates its financial results and receives economic benefits, operating under contractual arrangements with the holding company. (This entity is the core of Ucommune's VIE structure and generates the vast majority of its revenue.)

Class A ordinary shares

Ordinary shares of Ucommune International Ltd with one vote per share. (These shares represent the majority of the company's outstanding shares (4,436,543 out of 4,555,930 as of Dec 31, 2025).)

Class B ordinary shares

Ordinary shares of Ucommune International Ltd with 170 votes per share. (These shares carry significantly more voting power, despite a smaller number of outstanding shares (119,387 as of Dec 31, 2025).)

Executive business cooperation agreement

A contractual agreement that allows the VIE to consolidate financial results and receive economic benefits. (This is one of the key agreements underpinning Ucommune's VIE structure.)

Equity pledge agreement

An agreement where the equity interests in the VIE are pledged as security. (This agreement is part of the contractual framework for the VIE structure, providing security to the foreign-invested enterprise.)

Exclusive option agreement

An agreement granting the foreign-invested enterprise the option to purchase equity interests in the VIE. (This agreement is crucial for maintaining control and economic benefits within the VIE structure.)

Shareholders' voting rights proxy agreement

An agreement where shareholders of the VIE grant their voting rights to the foreign-invested enterprise. (This agreement ensures the foreign-invested enterprise can control the VIE's operations and decisions.)

Year-Over-Year Comparison

The provided text focuses on the fiscal year ended December 31, 2025, and does not contain comparative data from the previous year's filing (2024). Therefore, a direct comparison of key metrics like revenue growth, margin changes, or new risks cannot be made based solely on this excerpt. The shift in VIE asset and liability percentages from 2023 and 2024 to 2025 indicates a changing financial structure, but the specific drivers and implications require data from prior filings.

Key Financial Figures

• $0.024 — registered Class A ordinary shares, US$0.024 par value per share UK The Nasdaq Stock
• $60.9 million — "PIPE" refers to the investment of US$60.9 million in by certain backstop investors in con
• $ — ing) Venture Investment Co., Ltd.; "US$," "dollars" or "U.S. dollars" refers to
• $1 — nnual report are made at RMB6.9931 to US$1.00, the exchange rate set forth in the

Filing Documents

• ea0282756-20f_ucommune.htm (20-F) — 3536KB
• ea028275601ex2-19.htm (EX-2.19) — 77KB
• ea028275601ex8-1.htm (EX-8.1) — 5KB
• ea028275601ex12-1.htm (EX-12.1) — 12KB
• ea028275601ex12-2.htm (EX-12.2) — 12KB
• ea028275601ex13-1.htm (EX-13.1) — 4KB
• ea028275601ex13-2.htm (EX-13.2) — 4KB
• ea028275601ex15-1.htm (EX-15.1) — 3KB
• ea028275601ex15-2.htm (EX-15.2) — 5KB
• ea028275601ex15-3.htm (EX-15.3) — 5KB
• ea028275601_img1.jpg (GRAPHIC) — 117KB
• ea028275601_img2.jpg (GRAPHIC) — 129KB
• ea028275601_ex15-1img1.jpg (GRAPHIC) — 35KB
• ea028275601_ex15-2img1.jpg (GRAPHIC) — 6KB
• 0001213900-26-033208.txt ( ) — 16413KB
• uk-20251231.xsd (EX-101.SCH) — 137KB
• uk-20251231_cal.xml (EX-101.CAL) — 112KB
• uk-20251231_def.xml (EX-101.DEF) — 663KB
• uk-20251231_lab.xml (EX-101.LAB) — 1169KB
• uk-20251231_pre.xml (EX-101.PRE) — 695KB
• ea0282756-20f_ucommune_htm.xml (XML) — 2028KB

INFORMATION ON THE COMPANY

ITEM 4. INFORMATION ON THE COMPANY 67 ITEM 4A. UNRESOLVED STAFF COMMENTS 104 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 104 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 124 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 133 ITEM 8. FINANCIAL INFORMATION 134 ITEM 9. THE OFFER AND LISTING 135 ITEM 10. ADDITIONAL INFORMATION 135 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 152 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 152 PART II 153 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES 153 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 153 ITEM 15. CONTROLS AND PROCEDURES 154 ITEM 16. [RESERVED] 156 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT 156 ITEM 16B. CODE OF ETHICS 156 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES 157 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES 157 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS 157 ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT 157 ITEM 16G. CORPORATE GOVERNANCE 158 ITEM 16H. MINE SAFETY DISCLOSURE 158 ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 158 ITEM 16J. INSIDER TRADING POLICIES 158 ITEM 16K. CYBERSECURITY 158 PART III 160 ITEM 17. FINANCIAL STATEMENTS 160 ITEM 18. FINANCIAL STATEMENTS 160 ITEM 19. EXHIBITS 160 i Introduction Except where the context otherwise requires and for purposes of this annual report only: "AI" refers to artificial intelligence; "app" refers to mobile app; "Beijing Melo" refers to Beijing Melo Technology Co., Ltd.; "Beijing U Bazaar" refers to Beijing Ubazaar Technology Co., Ltd.; "Business Combination" refers to (1) reincorporation of Orisun Acquisition Corp in the Cayman Islands by merging with and into our company; and (2) merger of Everstone International Ltd, a Cayman Islands exempt

forward-looking statements by these cautionary statements

forward-looking statements by these cautionary statements. You should not rely upon forward-looking a result of new information, future events or otherwise. This annual report also contains statistical data and estimates that we obtained from industry publications and reports generated by third-party providers of market intelligence. These industry publications and reports generally indicate that the information contained therein was obtained from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. v part I

IDENTITY

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not applicable.

OFFER

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not Applicable.

KEY

ITEM 3. KEY INFORMATION Implications of Being a Company with the Holding Company Structure and the VIE Structures The VIE Structures and Associated Risks Ucommune International Ltd, the Parent, is not a Chinese operating company but a Cayman Islands holding company with no equity ownership in the VIEs and no material operations of its own. The Parent carries out its business in China through the WFOEs and their respective contractual arrangements, commonly known as the VIE structures, with the VIEs based in China and their respective shareholders, due to the PRC regulatory restrictions on direct foreign investment in value-added telecommunications services ("VATSs") and certain other businesses. Investors in our securities are purchasing the equity securities of Ucommune International Ltd, the Cayman Islands holding company, rather than the equity securities of the VIEs in which our operations are conducted. The VIE structures are established through a series of agreements, including those by and among Youshenghengtong Technology, Beijing U Bazaar and the shareholder of Beijing U Bazaar. The series of agreements generally comprises executive business cooperation agreement, equity pledge agreement, exclusive option agreement and shareholders' voting rights proxy agreement. The contractual arrangements allow us to (1) be considered as the primary beneficiary of the VIEs for accounting purposes and consolidate the financial results of the VIEs, (2) receive substantially all of the economic benefits of the VIEs, (3) have the pledge right over the equity interests in the VIEs as the pledgee, and (4) have an exclusive option to purchase all or part of the equity interests in the VIEs when and to the extent permitted by PRC law. For details, see "Item 4. Information on the Company — C. Organizational Structure — Contractual Arrangements with the VIEs and Their Respective Shareholders." 1 The following chart shows our corporate structure as of February 28, 2026, in

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