Table of Contents

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 20-F/A

 

(Amendment No. 1)

 

(Mark One)

 

o            REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

x          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2018.

 

OR

 

¨            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to

 

OR

 

¨           SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report  . . . . . . . . . . . . . . . . . . .

Commission file number: 001-36450

 

JD.com, Inc.
(Exact name of Registrant as specified in its charter)

 

N/A
(Translation of Registrant’s name into English)

 

Cayman Islands
(Jurisdiction of incorporation or organization)

 

20th Floor, Building A, No. 18 Kechuang 11 Street
Yizhuang Economic and Technological Development Zone
Daxing District, Beijing 101111
People’s Republic of China
(Address of principal executive offices)

 

Sidney Xuande Huang, Chief Financial Officer
Telephone: +86 10 8911-8888
Email: ir@jd.com

20th Floor, Building A, No. 18 Kechuang 11 Street
Yizhuang Economic and Technological Development Zone
Daxing District, Beijing 101111
People’s Republic of China

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Name of each exchange on which
registered

 

Trading Symbol

American depositary shares (one American depositary share representing two Class A ordinary shares, par value US$0.00002 per share)

 

The NASDAQ Stock Market LLC
(The NASDAQ Global Select Market)
The NASDAQ Stock Market LLC (The NASDAQ

 

JD

Class A ordinary shares, par value
US$0.00002 per share*

 

Global Select Market)

 

 

 


*                   Not for trading, but only in connection with the listing on The NASDAQ Global Select Market of American depositary shares.

 

Securities registered or to be registered pursuant to Section 12(g) of the Act:

 

None
(Title of Class)

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

 

None
(Title of Class)

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

 

 

2,449,222,672 Class A ordinary shares (excluding the 58,250,658 Class A ordinary shares issued to the depositary bank for bulk issuance of ADSs reserved for future issuances upon the exercise or vesting of awards granted under the Share Incentive Plan) and 458,342,517 Class B ordinary shares, par value US$0.00002 per share, as of December 31, 2018.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x Yes   o No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. o Yes   x No

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes   o No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes   o No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer x

Accelerated filer o

Non-accelerated filer o

Emerging growth company o

 

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ¨ Yes   ¨ No

 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP x

International Financial Reporting Standards as issued by the International Accounting Standards Board o

Other o

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. o Item 17   o Item 18

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes   x No

 

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. o Yes   o No

 


Table of Contents

 

TABLE OF CONTENTS

 

 

 

EXPLANATORY NOTE

1

Item 19. Exhibits

2

SIGNATURES

9

 


Table of Contents

 

EXPLANATORY NOTE

 

This Amendment No. 1 on Form 20-F/A (the “Amendment”) is being filed by JD.com, Inc. (the “Company,” “we,” “our,” or “us”) to amend the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2018, originally filed with the U.S. Securities Exchange Commission on April 15, 2019 (the “Original Filing”). The Company is filing this Amendment to include the financial statements and related notes of Dada Nexus Limited (“Dada”), Bitauto Holdings Limited (“Bitauto”) and Tuniu Corporation (“Tuniu”), as required by Rule 3-09 of Regulation S-X under the Securities Exchange Act of 1934, as amended (“Rule 3-09”).

 

Rule 3-09 requires, among other things, that separate financial statements for unconsolidated subsidiaries and investees accounted for by the equity method to be included in the Form 20-F when such entities are individually significant. We have determined that our equity method investments in Dada, Bitauto and Tuniu, each of which is not consolidated in our financial statements, were significant under Rule 1-02(w) and Rule 3-09 of Regulation S-X in relation to our financial results for the years ended December 31, 2016 and 2017, and our equity method investments in Dada was also significant under Rule 1-02(w) and Rule 3-09 of Regulation S-X in relation to our financial results for the year ended December 31, 2018. This Amendment is therefore filed to supplement the Original Filing with the inclusion of the financial statements and related notes of Dada, Bitauto and Tuniu as of December 31, 2016, 2017 and 2018 and for the years ended December 31, 2016, 2017 and 2018 (the “Financial Statements of Dada, Bitauto and Tuniu”). In addition, Dada has restated its financial statements as of and for the years ended December 31, 2016 and 2017, all of which are included in the Financial Statements of Dada, Bitauto and Tuniu filed herewith.

 

This Form 20-F/A consists solely of the cover page, this explanatory note, the Financial Statements of Dada, Bitauto and Tuniu, certifications by our chief executive officer and chief financial officer, and the consents of the independent auditor of each of Dada, Bitauto and Tuniu. This Amendment does not affect any other parts of, or exhibits to, the Original Filing, nor does it reflect events occurring after the date of the Original Filing. Accordingly, this Amendment should be read in conjunction with the Original Filing and with our filings with the U.S. Securities and Exchange Commission subsequent to the Original Filing.

 

1


Table of Contents

 

Item 19.

 

Exhibits

 

Exhibit
Number

 

Description of Document

1.1

 

Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated herein by reference to Exhibit 3.2 to the registration statement on Form F-1 (File No. 333-193650), as amended, initially filed with the Securities and Exchange Commission on January 30, 2014)

 

 

 

2.1

 

Registrant’s Specimen American Depositary Receipt (included in Exhibit 2.3)

 

 

 

2.2

 

Registrant’s Specimen Certificate for Class A Ordinary Shares (incorporated herein by reference to Exhibit 4.2 to the registration statement on Form F-1 (File No. 333-193650), as amended, initially filed with the Securities and Exchange Commission on January 30, 2014)

 

 

 

2.3

 

Deposit Agreement dated May 21, 2014 among the Registrant, the depositary and holder of the American Depositary Receipts (incorporated herein by reference to Exhibit 4.3 to the registration statement on Form S-8 (File No. 333-198578), filed with the Securities and Exchange Commission on September 5, 2014)

 

 

 

2.4

 

Thirteenth Amended and Restated Shareholders Agreement between the Registrant and other parties therein dated March 10, 2014 (incorporated herein by reference to Exhibit 4.4 to the registration statement on Form F-1 (File No. 333-193650), as amended, initially filed with the Securities and Exchange Commission on January 30, 2014)

 

 

 

2.5

 

Form of Indenture between the Registrant and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.1 to the registration statement on Form F-3 (File No. 333-210795) filed with the Securities and Exchange Commission on April 18, 2016)

 

 

 

2.6

 

First Supplemental Indenture dated April 29, 2016 between the Registrant and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.1 to the current report on Form 6-K (File No. 001-36450) furnished to the Securities and Exchange Commission on April 29, 2016)

 

 

 

2.7

 

Form of 3.125% Notes Due 2021 (included in Exhibit 2.6)

 

 

 

2.8

 

Form of 3.875% Notes Due 2026 (included in Exhibit 2.6)

 

 

 

4.1

 

Share Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the registration statement on Form F-1 (File No. 333-200450), as amended, initially filed with the Securities and Exchange Commission on November 21, 2014)

 

 

 

4.2

 

Form of Indemnification Agreement between the Registrant and its directors and executive officers (incorporated herein by reference to Exhibit 10.2 to the registration statement on Form F-1 (File No. 333-193650), as amended, initially filed with the Securities and Exchange Commission on January 30, 2014)

 

 

 

4.3

 

Form of Employment Agreement between the Registrant and its executive officers (incorporated herein by reference to Exhibit 10.3 to the registration statement on Form F-1 (File No. 333-193650), as amended, initially filed with the Securities and Exchange Commission on January 30, 2014)

 

2


Table of Contents

 

Exhibit
Number

 

Description of Document

4.4

 

English translation of the Amended and Restated Loan Agreement between Beijing Jingdong Century Trade Co., Ltd. and the shareholders of Beijing Jingdong 360 Degree E-Commerce Co., Ltd. dated November 20, 2017 (incorporated herein by reference to Exhibit 4.4 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on April 27, 2018)

 

 

 

4.5

 

English translation of the Amended and Restated Equity Pledge Agreement between Beijing Jingdong Century Trade Co., Ltd. and the shareholders of Beijing Jingdong 360 Degree E-Commerce Co., Ltd. dated June 15, 2016 (incorporated herein by reference to Exhibit 4.5 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on May 1, 2017)

 

 

 

4.6

 

English translation of the Power of Attorney by the shareholders of Beijing Jingdong 360 Degree E-Commerce Co., Ltd. dated June 15, 2016 (incorporated herein by reference to Exhibit 4.6 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on May 1, 2017)

 

 

 

4.7†

 

English translation of the Second Amended and Restated Exclusive Technology Consulting and Service Agreement between Beijing Jingdong Century Trade Co., Ltd. and Beijing Jingdong 360 Degree E-Commerce Co., Ltd., dated June 15, 2016

 

 

 

4.8

 

English translation of the Amended and Restated Intellectual Property Rights License Agreement between Beijing Jingdong Century Trade Co., Ltd. and Beijing Jingdong 360 Degree E-Commerce Co., Ltd. dated December 25, 2013 (incorporated herein by reference to Exhibit 10.8 to the registration statement on Form F-1 (File No. 333-193650), as amended, initially filed with the Securities and Exchange Commission on January 30, 2014)

 

 

 

4.9

 

English translation of the Amended and Restated Business Cooperation Agreement between Beijing Jingdong Century Trade Co., Ltd., Shanghai Shengdayuan Information Technology Co., Ltd. and Beijing Jingdong 360 Degree E-Commerce Co., Ltd. dated May 29, 2012 (incorporated herein by reference to Exhibit 10.9 to the registration statement on Form F-1 (File No. 333-193650), as amended, initially filed with the Securities and Exchange Commission on January 30, 2014)

 

 

 

4.10

 

English translation of the Amended and Restated Exclusive Purchase Option Agreement between Beijing Jingdong Century Trade Co., Ltd., Beijing Jingdong 360 Degree E-Commerce Co., Ltd. and the shareholders of Beijing Jingdong 360 Degree E-Commerce Co., Ltd. dated June 15, 2016 (incorporated herein by reference to Exhibit 4.10 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on May 1, 2017)

 

 

 

4.11

 

English translation of the Business Operations Agreement between Beijing Jingdong Century Trade Co., Ltd., Beijing Jingdong 360 Degree E-Commerce Co., Ltd. and the shareholders of Beijing Jingdong 360 Degree E-Commerce Co., Ltd. dated November 20, 2017 (incorporated herein by reference to Exhibit 4.11 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on April 27, 2018)

 

3


Table of Contents

 

Exhibit
Number

 

Description of Document

4.12

 

English translation of the Amended and Restated Loan Agreement between Beijing Jingdong Century Trade Co., Ltd. and the shareholders of Jiangsu Yuanzhou E-Commerce Co., Ltd. dated June 15, 2016 (incorporated herein by reference to Exhibit 4.12 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on May 1, 2017)

 

 

 

4.13

 

English translation of the Amended and Restated Equity Pledge Agreement between Beijing Jingdong Century Trade Co., Ltd. and the shareholders of Jiangsu Yuanzhou E-Commerce Co., Ltd. dated June 15, 2016 (incorporated herein by reference to Exhibit 4.13 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on May 1, 2017)

 

 

 

4.14

 

English translation of the Power of Attorney by the shareholders of Jiangsu Yuanzhou E-Commerce Co., Ltd. dated June 15, 2016 (incorporated herein by reference to Exhibit 4.14 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on May 1, 2017)

 

 

 

4.15†

 

English translation of the Second Amended and Restated Exclusive Technology Consulting and Service Agreement between Beijing Jingdong Century Trade Co., Ltd. and Jiangsu Yuanzhou E-Commerce Co., Ltd., dated June 15, 2016

 

 

 

4.16

 

English translation of the Amended and Restated Intellectual Property Rights License Agreement between Beijing Jingdong Century Trade Co., Ltd. and Jiangsu Yuanzhou E-Commerce Co., Ltd. dated December 18, 2013 (incorporated herein by reference to Exhibit 10.15 to the registration statement on Form F-1 (File No. 333-193650), as amended, initially filed with the Securities and Exchange Commission on January 30, 2014)

 

 

 

4.17

 

English translation of the Amended and Restated Exclusive Purchase Option Agreement between Beijing Jingdong Century Trade Co., Ltd., Jiangsu Yuanzhou E-Commerce Co., Ltd. and the shareholders of Jiangsu Yuanzhou E-Commerce Co., Ltd. dated June 15, 2016 (incorporated herein by reference to Exhibit 4.17 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on May 1, 2017)

 

 

 

4.18

 

English translation of the Business Operations Agreement between Beijing Jingdong Century Trade Co., Ltd., Jiangsu Yuanzhou E-Commerce Co., Ltd. and the shareholders of Jiangsu Yuanzhou E-Commerce Co., Ltd. dated August 25, 2016 (incorporated herein by reference to Exhibit 4.18 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on May 1, 2017)

 

 

 

4.19

 

Strategic Cooperation Agreement by and between the Registrant and Tencent Holdings Limited dated March 10, 2014 (incorporated herein by reference to Exhibit 10.22 to the registration statement on Form F-1 (File No. 333-193650), as amended, initially filed with the Securities and Exchange Commission on January 30, 2014)

 

4


Table of Contents

 

Exhibit
Number

 

Description of Document

4.20

 

English translation of Business Cooperation Agreement between the Registrant and Bitauto Holdings Limited, dated January 9, 2015 (incorporated herein by reference to Exhibit 99.3 to Schedule 13D (File No. 005-85981) filed with the Securities and Exchange Commission on February 26, 2015)

 

 

 

4.21

 

Amended and Restated Investor Rights Agreement by and among Bitauto Holdings Limited, JD.com Global Investment Limited, Dongting Lake Investment Limited, Morespark Limited and Baidu Holdings Limited dated June 17, 2016 (incorporated herein by reference to Exhibit 99.6 to Schedule 13D/A (File No. 005-85981) filed with the Securities and Exchange Commission on June 21, 2016)

 

 

 

4.22†

 

English translation of Executed Form of the Equity Pledge Agreement between a wholly-owned subsidiary of the Registrant and the shareholders of the Chinese variable interest entity of the Registrant, as currently in effect

 

 

 

4.23†

 

English translation of Executed Form of the Power of Attorney by the shareholders of the Chinese variable interest entity of the Registrant, as currently in effect

 

 

 

4.24†

 

English translation of Executed Form of the Exclusive Technology Consulting and Service Agreement between a wholly-owned subsidiary of the Registrant and a Chinese variable interest entity of the Registrant, as currently in effect

 

 

 

4.25†

 

English translation of Executed Form of the Business Operations Agreement between a wholly-owned subsidiary of the Registrant, a Chinese variable interest entity of the Registrant, and the shareholders of the Chinese variable interest entity of the Registrant, as currently in effect

 

 

 

4.26†

 

English translation of Executed Form of the Exclusive Purchase Option Agreement between a wholly-owned subsidiary of the Registrant, a Chinese variable interest entity of the Registrant, and the shareholders of the Chinese variable interest entity of the Registrant, as currently in effect

 

 

 

4.27†

 

English translation of Executed Form of the Loan Agreement between a wholly-owned subsidiary of the Registrant and the shareholders of the Chinese variable interest entity of the Registrant, as currently in effect

 

 

 

4.28

 

English translation of Executed Form of the Termination Agreement between a wholly-owned subsidiary of the Registrant, a Chinese variable interest entity of the Registrant, and the former shareholders of a Chinese variable interest entity, as currently in effect (incorporated herein by reference to Exhibit 4.29 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on May 1, 2017)

 

 

 

4.29

 

English translation of Executed Form of the Subscription Agreement between a Chinese variable interest entity of the Registrant and Yonghui, dated August 7, 2015 (incorporated herein by reference to Exhibit 4.29 to the annual report on Form 20-F (File No. 001-36450) filed with the Securities and Exchange Commission on April 18, 2016)

 

5


Table of Contents

 

Exhibit
Number

 

Description of Document

4.30

 

Investor Rights Agreement between the Registrant and Newheight Holdings Ltd., dated June 20, 2016 (incorporated herein by reference to Exhibit 4.35 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on May 1, 2017)

 

 

 

4.31

 

Framework Agreement by and among the Registrant, Beijing Jingdong Financial Technology Holding Co., Ltd. and other parties listed therein, dated March 1, 2017 (incorporated herein by reference to Exhibit 4.36 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on May 1, 2017)

 

 

 

4.32

 

Intellectual Property License and Software Technology Services Agreement between the Registrant and Beijing Jingdong Financial Technology Holding Co., Ltd., dated March 1, 2017 (incorporated herein by reference to Exhibit 4.37 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on May 1, 2017)

 

 

 

4.33

 

English translation of Conditional Share Subscription Agreement by and between Suqian Jingdong Sanhong Enterprise Management Center (L.P.) and China United Network Communications Limited, dated August 16, 2017 (incorporated herein by reference to Exhibit 4.38 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on April 27, 2018)

 

 

 

4.34

 

Subscription Agreement by and among Vipshop Holdings Limited, Windcreek Limited, and Tencent Mobility Limited, dated December 17, 2017 (incorporated herein by reference to Exhibit 99.2 to our report on Schedule 13D filed with the Securities and Exchange Commission with respect to Vipshop Holdings Limited on January 8, 2018)

 

 

 

4.35

 

Investor Rights Agreement by and among Vipshop Holdings Limited, Windcreek Limited, Tencent Mobility Limited and other parties listed therein, dated December 29, 2017 (incorporated herein by reference to Exhibit 99.4 to our report on Schedule 13D filed with the Securities and Exchange Commission with respect to Vipshop Holdings Limited on January 8, 2018)

 

 

 

4.36

 

English summary of Strategic Partnership Agreement regarding Dalian Wanda Commercial Properties Co., Ltd. by and among Dalian Wanda Group Co., Ltd., Dalian Wanda Commercial Properties Co., Ltd., Tencent Technology (Shenzhen) Co., Ltd. and Beijing Jingdong Century Trading Co., Ltd., dated January 27, 2018 (incorporated herein by reference to Exhibit 4.41 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on April 27, 2018)

 

 

 

4.37

 

Series A Preference Shares Subscription Agreement by and between Jingdong Express Group Corporation and purchasers listed therein, dated February 14, 2018 (incorporated herein by reference to Exhibit 4.42 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on April 27, 2018)

 

6


Table of Contents

 

Exhibit
Number

 

Description of Document

4.38

 

Shareholders Agreement of Jingdong Express Group Corporation, dated March 7, 2018 (incorporated herein by reference to Exhibit 4.43 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on April 27, 2018)

 

 

 

4.39

 

US$1,000,000,000 Term and Revolving Credit Facilities Agreement dated between the Registrant and other parties thereto, dated December 21, 2017 (incorporated herein by reference to Exhibit 4.44 to the annual report on Form 20-F filed by the Registrant with the Securities and Exchange Commission on April 27, 2018)

 

 

 

4.40†

 

Investor Rights Agreement, by and between the Registrant and Google LLC, dated as of June 18, 2018

 

 

 

4.41†

 

Subscription Agreement, by and between the Registrant and Google LLC, dated as of June 18, 2018

 

 

 

4.42†

 

Subscription Agreement relating to the offering of limited partnership interests in JD Logistics Properties Core Fund, L.P.

 

 

 

4.43†

 

Share Purchase Agreement, by and between Jingdong E-Commerce (Logistics) Hong Kong Corporation Limited, as sellers, and JD Star Development X (HK) Limited, as purchaser, dated as of February 27, 2019

 

 

 

 

 

(Portions of this exhibit have been omitted pursuant to Rule 406 under the Securities Act)

 

 

 

8.1†

 

List of Principal Subsidiaries and Consolidated Variable Interest Entities

 

 

 

11.1

 

Code of Business Conduct and Ethics of the Registrant (incorporated herein by reference to Exhibit 99.1 to the registration statement on Form F-1 (File No. 333-193650), as amended, initially filed with the Securities and Exchange Commission on January 30, 2014)

 

 

 

12.1*

 

Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

12.2*

 

Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

13.1**

 

Certification by Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

13.2**

 

Certification by Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

15.1†

 

Consent of PricewaterhouseCoopers Zhong Tian LLP

 

 

 

15.2†

 

Consent of Zhong Lun Law Firm

 

 

 

15.3*

 

Consent of Deloitte Touche Tohmatsu Certified Public Accountants LLP regarding the opinion in Exhibit 99.1

 

 

 

15.4*

 

Consent of Deloitte Touche Tohmatsu Certified Public Accountants LLP regarding the opinion in Exhibit 99.2

 

7


Table of Contents

 

Exhibit
Number

 

Description of Document

15.5*

 

Consent of PricewaterhouseCoopers Zhong Tian LLP regarding the opinion in Exhibit 99.3

 

 

 

15.6*

 

Consent of PricewaterhouseCoopers Zhong Tian LLP regarding the opinion in Exhibit 99.4

 

 

 

99.1*

 

Consolidated Financial Statements of Dada Nexus Limited as of and for the years ended December 31, 2016 (Restated) and 2017 (Restated)

 

 

 

99.2*

 

Consolidated Financial Statements of Dada Nexus Limited as of December 31, 2017 and 2018 and for each of the three years in the period ended December 31, 2018

 

 

 

99.3*

 

Consolidated Financial Statements of Bitauto Holdings Limited as of December 31, 2017 and 2018 and for each of the three years in the period ended December 31, 2018

 

 

 

99.4*

 

Consolidated Financial Statements of Tuniu Corporation as of December 31, 2017 and 2018  and for each of the three years in the period ended December 31, 2018

 

 

 

101.INS†

 

XBRL Instance Document

 

 

 

101.SCH†

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL†

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF†

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB†

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE†

 

XBRL Taxonomy Extension Presentation Linkbase Document

 


 

Filed on April 15, 2019

 

 

 

*

 

Filed herewith

 

 

 

**

 

Furnished herewith

 

8


Table of Contents

 

SIGNATURES

 

The registrant hereby certifies that it meets all of the requirements for filing its annual report on Form 20-F/A and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

 

 

 

JD.com, Inc.

 

 

 

 

 

 

 

 

By:

/s/ Richard Qiangdong Liu

 

 

Name:

Richard Qiangdong Liu

 

 

Title:

Chairman and Chief Executive Officer

 

 

 

 

Date: June 28, 2019

 

 

 

 

9


EXHIBIT 12.1

 

Certification by the Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Richard Qiangdong Liu, certify that:

 

1.                                      I have reviewed this annual report on Form 20-F, as amended by Amendment No. 1 thereto, of JD.com, Inc. (the “Company”);

 

2.                                      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.                                      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

 

4.                                      The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

 

(a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)          Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)         Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

 

5.                                      The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

 

(a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

 

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

 

Date: June 28, 2019

 

 

 

By:

/s/ Richard Qiangdong Liu

 

Name:

Richard Qiangdong Liu

 

Title:

Chief Executive Officer

 

 


EXHIBIT 12.2

 

Certification by the Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Sidney Xuande Huang, certify that:

 

1.                                      I have reviewed this annual report on Form 20-F, as amended by Amendment No. 1 thereto, of JD.com, Inc. (the “Company”);

 

2.                                      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.                                      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

 

4.                                      The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

 

(a)         Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)         Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)          Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)         Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

 

5.                                      The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

 

(a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

 

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

 

Date: June 28, 2019

 

 

By:

/s/ Sidney Xuande Huang

 

Name:

Sidney Xuande Huang

 

Title:

Chief Financial Officer

 

 


EXHIBIT 13.1

 

Certification by the Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

In connection with the Annual Report of JD.com, Inc. (the “Company”) on Form 20-F for the year ended December 31, 2018 as filed with the Securities and Exchange Commission on April 15, 2019, as amended by Amendment No. 1 thereto (the “Report”), I, Richard Qiangdong Liu, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: June 28, 2019

 

 

By:

/s/ Richard Qiangdong Liu

 

Name:

Richard Qiangdong Liu

 

Title:

Chief Executive Officer

 

 


EXHIBIT 13.2

 

Certification by the Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

In connection with the Annual Report of JD.com, Inc. (the “Company”) on Form 20-F for the year ended December 31, 2018 as filed with the Securities and Exchange Commission on April 15, 2019, as amended by Amendment No. 1 thereto (the “Report”), I, Sidney Xuande Huang, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: June 28, 2019

 

 

By:

/s/ Sidney Xuande Huang

 

Name:

Sidney Xuande Huang

 

Title:

Chief Financial Officer

 

 


EXHIBIT 15.3

 

Consent of Independent Registered Public Accounting Firm

 

We consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-229957 and No. 333-198578) and Form F-3 (No. 333-210795) of JD.com, Inc. of our report dated June 28, 2019 relating to the consolidated financial statements of Dada Nexus Limited, its subsidiaries, its variable interest entity (“VIE”) and VIE’s subsidiaries (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the restatement of previously issued financial statements), appearing in Exhibit 99.1 to the Annual Report on Form 20-F/A (Amendment No. 1) of JD.com, Inc. for the year ended December 31, 2018.

 

/s/ Deloitte Touche Tohmatsu Certified Public Accountants LLP

Shanghai, the People’s Republic of China

June 28, 2019

 


EXHIBIT 15.4

 

Consent of Independent Registered Public Accounting Firm

 

We consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-229957 and No. 333-198578) and Form F-3 (No. 333-210795) of JD.com, Inc. of our report dated June 28, 2019 relating to the consolidated financial statements of Dada Nexus Limited, its subsidiaries, its variable interest entity (“VIE”) and VIE’s subsidiaries, appearing in Exhibit 99.2 to the Annual Report on Form 20-F/A (Amendment No. 1) of JD.com, Inc. for the year ended December 31, 2018.

 

/s/ Deloitte Touche Tohmatsu Certified Public Accountants LLP

Shanghai, the People’s Republic of China

June 28, 2019

 


EXHIBIT 15.5

 

Consent of Independent Registered Public Accounting Firm

 

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-229957 and No. 333-198578) and Form F-3 (No. 333-210795) of JD.com, Inc. of our report dated April 26, 2019 relating to the financial statements and the effectiveness of internal control over financial reporting of Bitauto Holdings Limited, which appears in this Form 20-F/A (Amendment No. 1).

 

/s/ PricewaterhouseCoopers Zhong Tian LLP

 

Beijing, the People’s Republic of China

 

June 28, 2019

 

 


EXHIBIT 15.6

 

Consent of Independent Registered Public Accounting Firm

 

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-229957 and No. 333-198578) and Form F-3 (No. 333-210795) of JD.com, Inc. of our report dated April 4, 2019 relating to the financial statements, financial statement schedule, and the effectiveness of internal control over financial reporting of Tuniu Corporation, which appears in this Form 20F/A (Amendment No. 1).

 

/s/ PricewaterhouseCoopers Zhong Tian LLP

Shanghai, the People’s Republic of China

June 28, 2019

 


Exhibit 99.1

 

DADA NEXUS LIMITED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

Page

 

 

 

Independent Auditors’ Report

 

3

Consolidated Balance Sheets as of December 31, 2016 (Restated) and 2017 (Restated)

 

4-5

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2016 (Restated) and 2017 (Restated)

 

6

Consolidated Statements of Changes in Shareholders’ Deficit for the Years Ended December 31, 2016 (Restated) and 2017 (Restated)

 

7

Consolidated Statements of Cash Flows for the Years Ended December 31, 2016 (Restated) and 2017 (Restated)

 

8-9

Notes to the Consolidated Financial Statements

 

10-54

 


 

INDEPENDENT AUDITORS’ REPORT

 

To the Board of Directors of Dada Nexus Limited:

 

We have audited the accompanying consolidated financial statements of Dada Nexus Limited (the “Company”), its subsidiaries, its variable interest entity (“VIE”) and VIE’s subsidiaries, which comprise the consolidated balance sheets as of December 31, 2016 and 2017, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ deficit, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

 

Management’s Responsibility for the Consolidated Financial Statements

 

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditors’ Responsibility

 

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dada Nexus Limited, its subsidiaries, its VIE and VIE’s subsidiaries as of December 31, 2016 and 2017, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

 

Restatement of Previously Issued Financial Statements

 

As discussed in Note 21 to the consolidated financial statements, the accompanying 2016 and 2017 financial statements have been restated to correct certain errors. Our opinion is not modified with respect to this matter.

 

 

/s/ Deloitte Touche Tohmatsu Certified Public Accountants LLP

Shanghai, the People’s Republic of China

 

June 28, 2019

 

3


 

DADA NEXUS LIMITED

 

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2016(Restated) and 2017(Restated)

(Renminbi in thousands, except share data and otherwise noted)

 

 

 

 

 

As of December 31,

 

 

 

Note

 

2016

 

2017

 

 

 

 

 

As Restated
see Note 21

 

As Restated
see Note 21

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

1,977,574

 

1,559,537

 

Restricted cash

 

 

 

 

359,731

 

Short-term investments

 

5

 

205,420

 

324,746

 

Accounts receivable, net of allowance for doubtful accounts of RMB nil as of December 31, 2016 and 2017

 

6

 

3

 

6,946

 

Inventories, net

 

 

 

2,337

 

5,886

 

Amount due from related parties

 

18

 

32,858

 

48,760

 

Prepayments and other current assets

 

7

 

40,538

 

54,704

 

Total current assets

 

 

 

2,258,730

 

2,360,310

 

Property and equipment, net

 

8

 

5,621

 

12,863

 

Goodwill

 

3

 

957,605

 

957,605

 

Intangible assets, net

 

9

 

1,324,202

 

1,069,702

 

Other non-current assets

 

 

 

3,925

 

11,584

 

Total non-current assets

 

 

 

2,291,353

 

2,051,754

 

Total assets

 

 

 

4,550,083

 

4,412,064

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ DEFICIT

 

 

 

 

 

 

 

Current liabilities (including amounts of the consolidated VIE without recourse to the Company. See Note 2.2):

 

 

 

 

 

 

 

Short-term loan

 

10

 

 

354,499

 

Accounts payable

 

 

 

6,158

 

7,145

 

Payable to Drivers

 

 

 

160,467

 

265,015

 

Amount due to related parties

 

18

 

121,233

 

38,290

 

Accrued expenses and other current liabilities

 

11

 

151,045

 

258,115

 

Total current liabilities

 

 

 

438,903

 

923,064

 

Deferred tax liabilities

 

16

 

95,109

 

80,272

 

Warrant liabilities

 

12

 

197,705

 

 

Total non-current liabilities

 

 

 

292,814

 

80,272

 

Total liabilities

 

 

 

731,717

 

1,003,336

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

20

 

 

 

 

 

 

4


 

DADA NEXUS LIMITED

 

CONSOLIDATED BALANCE SHEETS (CONTINUED)

AS OF DECEMBER 31, 2016(Restated) and 2017(Restated)

(Renminbi in thousands, except share data and otherwise noted)

 

 

 

 

 

As of December 31,

 

 

 

Note

 

2016

 

2017

 

 

 

 

 

As Restated
see Note 21

 

As Restated
see Note 21

 

 

 

 

 

 

 

 

 

MEZZANINE EQUITY

 

14

 

 

 

 

 

Series A Convertible Redeemable Preferred Shares (US$ 0.0001 par value, 77,000,000 shares authorised, issued and outstanding as of December 31, 2016 and 2017, respectively)

 

 

 

12,930

 

14,064

 

Series B Convertible Redeemable Preferred Shares (US$ 0.0001 par value, 37,748,300 shares authorised, issued and outstanding as of December 31, 2016 and 2017, respectively)

 

 

 

158,762

 

172,655

 

Series C Convertible Redeemable Preferred Shares (US$ 0.0001 par value, 44,286,448 shares authorised, issued and outstanding as of December 31, 2016 and 2017, respectively)

 

 

 

661,884

 

720,028

 

Series D Convertible Redeemable Preferred Shares (US$ 0.0001 par value, 95,524,122 shares authorised, 64,001,162 shares issued and outstanding as of December 31, 2016 and 2017, respectively)

 

 

 

1,881,800

 

2,041,281

 

Series E Convertible Redeemable Preferred Shares (US$ 0.0001 par value, 128,637,939 shares authorised; 58,428,921 and 93,580,586 shares issued and outstanding as of December 31, 2016 and 2017, respectively)

 

 

 

1,707,072

 

2,935,726

 

Total Mezzanine equity

 

 

 

4,422,448

 

5,883,754

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ DEFICIT

 

 

 

 

 

 

 

Ordinary shares ($0.0001 par value, 1,616,803,191 shares authorized, 355,105,296 and 355,105,296 shares issued and outstanding as of December 31, 2016 and 2017, respectively)

 

15

 

227

 

227

 

Additional paid-in capital

 

 

 

1,826,825

 

1,513,420

 

Subscription receivable

 

 

 

(35

)

(35

)

Accumulated deficit

 

 

 

(2,642,680

)

(4,091,770

)

Accumulated other comprehensive income

 

 

 

211,581

 

103,132

 

Total shareholders’ deficit

 

 

 

(604,082

)

(2,475,026

)

 

 

 

 

 

 

 

 

Total liabilities, mezzanine equity and shareholders’ deficit

 

 

 

4,550,083

 

4,412,064

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5


 

DADA NEXUS LIMITED

 

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31, 2016(Restated) and 2017(Restated)

(Renminbi in thousands, except share data and otherwise noted)

 

 

 

 

 

Years ended December 31,

 

 

 

Note

 

2016

 

2017

 

 

 

 

 

As Restated,
see Note 21

 

As Restated,
see Note 21

 

 

 

 

 

 

 

 

 

Net Revenues

 

 

 

122,641

 

1,217,965

 

Operating expenses

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

(20,675

)

(47,687

)

Fulfilment expenses

 

 

 

(853,533

)

(1,592,664

)

Selling and marketing expenses

 

 

 

(480,973

)

(723,463

)

General and administrative expenses

 

 

 

(233,187

)

(249,172

)

Research and development expenses

 

 

 

(129,294

)

(191,977

)

Other operating expenses

 

 

 

(602

)

(1,173

)

Total operating expenses

 

 

 

(1,718,264

)

(2,806,136

)

Other operating income

 

 

 

60

 

1,408

 

Loss from operations

 

 

 

(1,595,563

)

(1,586,763

)

Other income/(expenses)

 

 

 

 

 

 

 

Interest income

 

 

 

20,008

 

31,408

 

Interest expenses

 

 

 

 

(8,908

)

Foreign exchange gain/(loss)

 

 

 

5,518

 

(4,253

)

Fair value change in foreign currency forward contract

 

 

 

 

22,846

 

Fair value change in warrant liabilities

 

 

 

29,221

 

82,467

 

Total other income

 

 

 

54,747

 

123,560

 

Loss before income tax benefits

 

 

 

(1,540,816

)

(1,463,203

)

Income tax benefits

 

16

 

9,891

 

14,113

 

Net loss and net loss attributable to the Company

 

 

 

(1,530,925

)

(1,449,090

)

 

 

 

 

 

 

 

 

Accretion of convertible redeemable preferred shares

 

14

 

(295,809

)

(374,246

)

Net loss attributable to ordinary shareholders

 

 

 

(1,826,734

)

(1,823,336

)

 

 

 

 

 

 

 

 

Net Loss

 

 

 

(1,530,925

)

(1,449,090

)

Other comprehensive income/(loss)

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

172,418

 

(108,449

)

Total comprehensive loss

 

 

 

(1,358,507

)

(1,557,539

)

 

accompanying notes are an integral part of these consolidated financial statements.

 

6


 

DADA NEXUS LIMITED

 

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2016(Restated) and 2017(Restated)

(Renminbi in thousands, except share data and otherwise noted)

 

 

 

 

 

Ordinary shares
(par value US $0.0001)

 

 

 

 

 

 

 

Accumulated
other

 

Total

 

 

 

Note

 

Numbers
of Shares

 

Amount

 

Additional
paid-in capital

 

Subscription
receivables

 

Accumulated
deficit

 

comprehensive
income

 

shareholders’
deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2016 (As Restated)

 

 

 

68,713,999

 

42

 

 

(35

)

(1,073,704

)

39,163

 

(1,034,534

)

Issuance of ordinary shares

 

3

 

286,832,885

 

185

 

2,034,434

 

 

 

 

2,034,619

 

Early exercise of stock options granted to non-employees

 

13

 

716,431

 

 

 

55

 

 

 

 

55

 

Repurchase of early exercised share options

 

13

 

(716,431

)

 

 

(55

)

 

 

 

(55

)

Repurchase of ordinary shares from Co-founder

 

13

 

(441,588

)

 

 

(3,730

)

 

 

 

(3,730

)

Share-based compensation

 

13

 

 

 

53,879

 

 

 

 

53,879

 

Net loss

 

 

 

 

 

 

 

(1,530,925

)

 

(1,530,925

)

Accretion of convertible redeemable preferred shares

 

14

 

 

 

(257,758

)

 

(38,051

)

 

(295,809

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

172,418

 

172,418

 

Balance as of December 31, 2016 (As Restated)

 

 

 

355,105,296

 

227

 

1,826,825

 

(35

)

(2,642,680

)

211,581

 

(604,082

)

Share-based compensation

 

13

 

 

 

60,841

 

 

 

 

60,841

 

Net loss

 

 

 

 

 

 

 

(1,449,090

)

 

(1,449,090

)

Accretion of convertible redeemable preferred shares

 

14

 

 

 

(374,246

)

 

 

 

(374,246

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

(108,449

)

(108,449

)

Balance as of December 31, 2017 (As Restated)

 

 

 

355,105,296

 

227

 

1,513,420

 

(35

)

(4,091,770

)

103,132

 

(2,475,026

)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

7


 

DADA NEXUS LIMITED

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2016(Restated) and 2017(Restated)

(Renminbi in thousands and otherwise noted)

 

 

 

Years ended December 31,

 

 

 

2016

 

2017

 

 

 

As Restated
see Note 21

 

As Restated
see Note 21

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

 

(1,530,925

)

(1,449,090

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

Depreciation and amortization

 

138,136

 

209,061

 

Share-based compensation

 

93,128

 

60,841

 

Foreign exchange (gain)/loss

 

(5,518

)

4,253

 

Loss from disposal of property and equipment

 

128

 

 

Fair value change in foreign currency forward contract

 

 

(22,846

)

Fair value change in warrant liabilities

 

(29,221

)

(82,467

)

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

438

 

(6,943

)

Inventories

 

(1,918

)

(3,549

)

Amount due from related parties

 

(31,081

)

(15,902

)

Prepayments and other current assets

 

(30,080

)

(14,167

)

Other non-current assets

 

(1,987

)

(5,639

)

Accounts payable

 

3,448

 

987

 

Amount due to related parties

 

92,787

 

(82,943

)

Payable to Drivers

 

74,566

 

104,548

 

Accrued expenses and other current liabilities

 

(68,698

)

107,069

 

Deferred tax liabilities

 

(9,891

)

(14,837

)

Net cash used in operating activities

 

(1,306,688

)

(1,211,624

)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Disposal of wealth management product

 

3,572,546

 

2,348,604

 

Purchase of wealth management product

 

(3,161,966

)

(2,445,084

)

Increase in restricted cash

 

 

(359,731

)

Purchase of property and equipment and intangible assets

 

(4,917

)

(12,128

)

Cash paid for purchase of other non-current assets

 

 

(2,000

)

Proceeds from disposal of property and equipment

 

74

 

 

Cash acquired from business combination, net of cash paid (Note 3)

 

83,204

 

 

Net cash provided by/(used in) investing activities

 

488,941

 

(470,339

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from short-term loan

 

 

354,499

 

Proceeds from issuance of convertible redeemable preferred shares

 

1,778,540

 

983,820

 

Proceeds from early exercise of share options

 

55

 

 

Cash paid for repurchase of early exercised share options

 

(13,253

)

 

Cash paid for repurchase of ordinary shares

 

(6,392

)

 

Cash paid for repurchase of share options

 

(17,215

)

 

Cash paid for share issuance costs

 

(10,475

)

 

Net cash provided by financing activities

 

1,731,260

 

1,338,319

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

 

126,901

 

(74,393

)

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

1,040,414

 

(418,037

)

Cash and cash equivalents, beginning of the year

 

937,160

 

1,977,574

 

Cash and cash equivalents, end of the year

 

1,977,574

 

1,559,537

 

 

8


 

DADA NEXUS LIMITED

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2016(Restated) and 2017(Restated)

(Renminbi in thousands and otherwise noted)

 

 

 

Years ended December 31,

 

 

 

2016

 

2017

 

 

 

 

 

 

 

Supplemental disclosure for cash flow information

 

 

 

 

 

Cash paid for interest

 

 

5,514

 

Cash paid for income taxes

 

 

724

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

Accretion of convertible redeemable preferred shares

 

295,809

 

374,246

 

Payable in connection with the repurchase of early exercised share options of non-employees

 

6,174

 

 

 

See Note 3 for the non-cash investing activities related to the JDDJ business acquisition occurred on April 26, 2016.

 

The accompanying notes are an integral part of these consolidated financial statements.

 

9


 

DADA NEXUS LIMITED

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in thousands, except share and per share data)

 

1.              ORGANIZATION AND NATURE OF OPERATIONS

 

Description of Business

 

Dada Nexus Limited (the “Company”) was incorporated under the laws of the Cayman Islands on July 8, 2014. The Company through its wholly-owned subsidiaries, variable interest entity (“VIE”) and VIE’s subsidiaries (collectively, the “Group”) primarily provides comprehensive logistic solution service, on-demand logistic platform service and online marketplace platform service to its customers through its mobile platforms, websites and mini programs. The Group’s principal operations and geographic markets are in the People’s Republic of China (“PRC”).

 

As of December 31, 2017, the Company’s major subsidiaries and consolidated VIE are as follows:

 

Name of Company

 

Place of
incorporation

 

Date of
incorporation/
acquisition

 

Percentage of direct
or indirect economic
ownership

 

Subsidiaries

 

 

 

 

 

 

 

Dada Wisdom (HK) Limited (“Dada Wisdom”)

 

Hong Kong

 

July 24, 2014

 

100

%

Dada Glory Network Technology Ltd. (“Dada Glory”)

 

PRC

 

November 7, 2014

 

100

%

Shanghai JD Daojia Yuanxin Information Technology Co., Ltd. (“Yuanxin”)

 

PRC

 

April 26, 2016

 

100

%

 

 

 

 

 

 

 

 

VIE

 

 

 

 

 

 

 

Shanghai Qusheng Internet Co. Ltd. (“Qusheng”)

 

PRC

 

July 2, 2014

 

100

%

 

10


 

2.              PRINCIPAL ACCOUNTING POLICIES

 

2.1       Basis of presentation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for the years presented.

 

2.2       Basis of consolidation

 

The consolidated financial statements include the financial statements of the Company, its subsidiaries, VIE and VIE’s subsidiaries in which it has a controlling financial interest. The results of the subsidiaries, VIE  and VIE’s subsidiaries are consolidated from the date on which the Company obtained control and continue to be consolidated until the date that such control ceases. A controlling financial interest is typically determined when a company holds a majority of the voting equity interest in an entity.

 

The Group has adopted the guidance codified in ASC 810, Consolidations (“ASC 810”) on accounting for VIE, which requires certain variable interest entity to be consolidated by the primary beneficiary in which it has a controlling financial interest. A VIE is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional financial support; (b) as a group, the holders of the equity investment at risk lack the ability to make certain decisions, the obligation to absorb expected losses or the right to receive expected residual returns, or (c) an equity investor has voting rights that are disproportionate to its economic interest and substantially all of the entity’s activities are on behalf of the investor.

 

All intercompany balances and transactions between the Group, its subsidiaries, VIE and VIE’s subsidiaries have been eliminated in consolidation.

 

VIE Arrangements

 

In order to comply with the PRC laws and regulations which prohibit or restrict foreign control of companies involved in provision of internet content and other restricted businesses, the Group operates its websites and other restricted businesses in the PRC through certain PRC domestic companies, whose equity interests are held by certain management members and shareholders of the Group (“Nominee Shareholders”). On November 14, 2014, Dada Glory entered into a series of contractual agreements with Qusheng and its shareholders. The following is a summary of the agreements which allow the Dada Glory to exercise effective control over Qusheng:

 

Share Pledge Agreement

 

Under the equity interest pledge agreement entered between Dada Glory and the shareholders of Qusheng, the shareholders pledged all of their equity interests in Qusheng to guarantee their performance of their obligations under the Exclusive Business Cooperation Agreement. If the shareholders of Qusheng breach their contractual obligations under the Exclusive Business Cooperation Agreement, Dada Glory, as the pledgee, will have the right to dispose the pledged equity pursuant to the PRC law. The shareholders of Qusheng have not placed any security equity interests or allowed any encumbrance on the pledged equity interests. The equity interest pledge agreement remains effective until the shareholders of Qusheng have fully performed their obligations and repaid their consulting and service fees by the shareholders of Qusheng under the Exclusive Business Cooperation Agreement. During the equity pledge period, Dada Glory is entitled to all dividends and other distributions generated by Qusheng.

 

Exclusive Option Agreement

 

Pursuant to the exclusive option agreement entered into among Dada Glory, Qusheng and Qusheng’s shareholders, Qusheng’s shareholders irrevocably grant Dada Glory or its designated representatives an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interest of Qusheng. The exercise price shall be the lowest price as permitted by the applicable PRC law at the time of the transfer of the optioned interest. The option term remains effective for a term of 10 years and can be extended at Dada Glory’s election. Without Dada Glory’s written consent, Qusheng and its shareholders may not sell, transfer, mortgage, or otherwise dispose of in any manner any assets, or legal or beneficial interest in the business or revenues, or allow the encumbrance thereon of any security interest.

 

11


 

2.              PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

 

2.2       Basis of consolidation (continued)

 

VIE Arrangements (continued)

 

Exclusive Business Cooperation Agreement

 

Under the Exclusive Business Cooperation Agreement entered between Dada Glory and Qusheng, Qusheng appoints Dada Glory as its exclusive services provider with complete business support and technical and consulting services. Qusheng shall not accept any consultations or services provided by any third party, and shall not cooperate with any third party. Qusheng agrees to pay Dada Glory a monthly service fee for services performed, and the monthly service fee shall be 100% of the net income of Qusheng on a monthly basis. Unless earlier termination of this agreement by Dada Glory or relevant agreements separately executed between the parties, the term of this agreement shall be 10 years and extended term shall be determined by Dada Glory’s election prior to the expiration thereof.

 

Power of Attorney

 

Pursuant to the irrevocable power of attorney, each of the Nominee Shareholders to exercise all shareholder rights under PRC law and the relevant articles of association, including but not limited to, proposing, convening and attending shareholders’ meetings of Qusheng, voting on their behalf on all matters requiring shareholder approval, sale or transfer or pledging or disposing of all or part of the Nominee Shareholders’ equity interests, and designating and appointing the senior management of Qusheng. Each power of attorney shall be irrevocably and continuously valid and effective from the date of its execution, unless Dada Glory issues adverse instructions in writing. Each Nominee Shareholders waive all the rights which have been authorized to Dada Glory under each power of attorney, and should not exercise such rights by themselves.

 

The irrevocable power of attorney has conveyed all shareholder rights held by the VIE’ shareholders to Dada Glory, including the right to appoint board members who nominate the general managers of the VIE to conduct day-to-day management of the VIE’s businesses, and to approve significant transactions of the VIE. In addition, the exclusive option agreements provide Dada Glory with a substantive kick-out right of the VIE’s shareholders through an exclusive option to purchase all or any part of the shareholders’ equity interest in the VIE at the lowest price permitted under PRC laws then in effect. In addition, through the exclusive support services agreements, the Company established the right to receive benefits from the VIE that could potentially be significant to the VIE, and through the equity pledge agreement, the Company has, in substance, an obligation to absorb losses of the VIE that could potentially be significant to the VIE.

 

Risks in relation to the VIE structure

 

The Company believes that the contractual arrangements amongst Dada Glory, Qusheng and their respective shareholders are in compliance with PRC law and are legally enforceable. The shareholders of Qusheng are also shareholders of the Company and therefore have no current interest in seeking to act contrary to the contractual arrangements. However, Qusheng and their shareholders may fail to take certain actions required for the Company’s business or to follow the Company’s instructions despite their contractual obligations to do so. Furthermore, if Qusheng or their shareholders do not act in the best interests of the Company under the contractual arrangements and any dispute relating to these contractual arrangements remains unresolved, the Company will have to enforce its rights under these contractual arrangements through the operations of PRC law and courts and therefore will be subject to uncertainties in the PRC legal system. All of these contractual arrangements are governed by PRC law and provided for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. As a result, uncertainties in the PRC legal system could limit the Company’s ability to enforce these contractual arrangements, which may make it difficult to exert effective control over Qusheng, and its ability to conduct the Company’s business may be adversely affected.

 

12


 

2.              PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

 

2.2       Basis of consolidation (continued)

 

VIE Arrangements (continued)

 

The following amounts and balances of the consolidated VIE were included in the Group’s consolidated financial statements after the elimination of intercompany balances and transactions:

 

 

 

As of December 31,

 

 

 

2016

 

2017

 

 

 

RMB

 

RMB

 

 

 

 

 

 

 

Cash and cash equivalents

 

164

 

953

 

Short-term investments

 

 

1,000

 

Accounts receivable, net

 

 

1,574

 

Prepayments and other current assets

 

842

 

1,342

 

Property and equipment, net

 

100

 

60

 

Intangible assets, net

 

118

 

105

 

Other non-current assets

 

 

1

 

Total assets

 

1,224

 

5,035

 

 

 

 

 

 

 

Accounts payable

 

306

 

 

Amount due to related parties

 

 

32

 

Accrued expenses and other current liabilities

 

1,878

 

2,512

 

Total liabilities

 

2,184

 

2,544

 

 

 

 

Years ended December 31,

 

 

 

2016

 

2017

 

 

 

RMB

 

RMB

 

 

 

 

 

 

 

Net Revenues

 

 

9,843

 

Net loss

 

(21,362

)

(24,915

)

 

 

 

 

 

 

Net cash used in operating activities

 

(4,713

)

(974

)

Net cash used in investing activities

 

(197

)

 

Net cash provided by financing activities

 

 

1,763

 

 

The VIE contributed approximately nil and 0.8% of the Group’s consolidated net revenues for the years ended December 31, 2016 and 2017, respectively. As of December 31, 2016 and 2017, the VIE accounted for an aggregate of approximately 0.1% and 0.1%, respectively, of the consolidated total assets, and approximately 0.3% and 0.3%, respectively, of the consolidated total liabilities.

 

There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Group or its subsidiaries to provide financial support to the VIE. However, if the VIE was ever to need financial support, the Group or its subsidiaries may, at its option and subject to statutory limits and restrictions, provide financial support to its VIE through loans to the shareholders of the VIE or entrustment loans to the VIE.

 

The Group believes that there are no assets held in the consolidated VIE that can be used only to settle obligations of the VIE, except for registered capital and the PRC statutory reserves. As the consolidated VIE is incorporated as a limited liability company under the PRC Company Law, creditors of the VIE do not have recourse to the general credit of the Group for any of the liabilities of the consolidated VIE.

 

Relevant PRC laws and regulations restrict the VIE from transferring a portion of their net assets, equivalent to the balance of their statutory reserve and their share capital, to the Group in the form of loans and advances or cash dividends.

 

13


 

2.              PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

 

2.3       Use of estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets, long lived assets and liabilities at the dates of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Group’s management reviews these estimates based on information that is currently available. Changes in facts and circumstances may cause the Group to revise its estimates. Significant accounting estimates reflected in the Group’s financial statements mainly include the useful lives of property and equipment and intangible assets, assumptions used to measure the impairment of goodwill, property and equipment and intangible assets, assumptions impacting the valuation of ordinary shares, share options and warrant liabilities, the purchase price allocation in relation to business combination, and realization of deferred tax assets.

 

2.4       Functional currency and foreign currency translation

 

The Group uses Renminbi (“RMB”) as its reporting currency. The functional currency of the Company is the United States dollar (“$”, “US$” or “USD”). The functional currency of the Company’s subsidiaries, VIE and VIE’s subsidiaries is RMB or USD as determined based on the economic facts and circumstances.

 

Transactions denominated in other than the functional currencies are re-measured into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are re-measured at the balance sheet date exchange rate. The resulting exchange differences are included in the comprehensive loss.

 

Assets and liabilities of the Company and its subsidiaries with functional currency other than RMB are translated into RMB at fiscal year-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the fiscal year. Translation adjustments arising from these are reported as foreign currency translation adjustments and are shown as a component of other comprehensive loss.

 

2.5       Cash and cash equivalents

 

Cash and cash equivalents primarily consist of cash on hand and cash in bank which is highly liquid and unrestricted as to withdrawal and use.

 

2.6       Restricted cash

 

The Group’s restricted cash mainly represents the deposits pledged for short-term bank loans.

 

2.7       Short-term investments

 

Short-term investments include (i) wealth management products issued by commercial banks or other financial institutions with variable interest rates indexed to the performance of underlying assets within one year; and (ii) a foreign currency forward contract sold by a commercial bank. These investments are stated at fair value. Changes in fair value of wealth management products is included in interest income and fair value changes of the foreign currency forward contracts are presented in “Fair value change in foreign currency forward contract”.

 

2.8       Accounts receivable, net

 

Accounts receivable mainly consists of amount due from the Group’s customers, which are recorded net of allowance for doubtful accounts. The Group performs ongoing credit evaluation of its customers, and assesses allowance for doubtful accounts based upon expected collectability based on the age of the receivables and factors surrounding the credit risk of specific customers.

 

14


 

2.              PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

 

2.9       Inventories, net

 

Inventories, consisting of products available for sale, are stated at the lower of cost or market value. Cost of inventory is determined using the weighted average cost method. Adjustments are recorded to write down the cost of inventory to the estimated market value due to slow-moving merchandise and damaged goods, which is dependent upon factors such as historical and forecasted consumer demand, and promotional environment.

 

2.10 Property and equipment, net

 

Property and equipment is stated at cost less accumulated depreciation and impairment. Property and equipment is depreciated at rates sufficient to write off its costs less impairment and residual value, if any, over the estimated useful lives on a straight-line basis. The estimated useful lives are as follows:

 

Category

 

Estimated useful lives

Computer equipment

 

3 years

Office facilities

 

3-5 years

Vehicles

 

8 years

Software

 

3-5 years

Leasehold improvement

 

Over the shorter of the expected useful life or the lease term

 

Repairs and maintenance costs are charged to operating expenses as incurred, whereas the costs of renewals and betterment that extends the useful lives of property and equipment are capitalized as additions to the related assets. Retirements, sales and disposals of assets are recorded by removing the costs, accumulated depreciation and impairment with any resulting gain or loss recognized in the other operation income or expenses of Consolidated Statements of Operations and Comprehensive Loss.

 

2.11 Business combination

 

U.S. GAAP requires that all business combinations to be accounted for under the purchase method. Since its incorporation, the Group adopted ASC 805, “Business Combinations”. Following this adoption, the cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of the (i) the total of cost of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the Consolidated Statements of Operations and Comprehensive Loss.

 

The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgments. The most significant variables in these valuations are discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. Management determines discount rates to be used based on the risk inherent in the related activity’s current business model and industry comparisons. Terminal values are based on the expected life of assets and forecasted life cycle and forecasted cash flows over that period. Although the Group believes that the assumptions applied in the determination are reasonable based on information available at the date of acquisition, actual results may differ from the forecasted amounts and the difference could be material.

 

2.12 Intangible assets, net

 

Intangible assets purchased are recognized and measured at cost upon acquisition and intangible assets arising from business combination are recognized and measured at fair value upon acquisition. The Group performs valuation of the intangible assets arising from business combination to determine the fair value to be assigned to each asset acquired. The acquired intangible assets are recognized and measured at fair value and are amortized using the straight-line approach over the estimated economic useful lives of the assets.

 

15


 

2.              PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

 

2.13 Goodwill

 

Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired as a result of the Group’s acquisitions of JDDJ business. Goodwill is not amortized but is reviewed at least annually for impairment or earlier, if any indication of impairment exists.

 

The Group adopted FASB revised guidance on “Testing of Goodwill for Impairment”. Under this guidance, the Group has the option to choose whether it will apply the qualitative assessment first and then the quantitative assessment, if necessary, or to apply the quantitative assessment directly. For reporting units applying a qualitative assessment first, the Group starts the goodwill impairment test by assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Group determines that it is more likely not the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required. The quantitative impairment test consists of a comparison of the fair value of goodwill with its carrying value. For reporting units directly applying a quantitative assessment, the Group performs the goodwill impairment test by quantitatively comparing the fair values of those reporting units to their carrying amounts.

 

Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value of each reporting unit. The judgment in estimating the fair value of reporting units includes estimating future cash flows, determining appropriate discount rates and making other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit. The Group performs the annual goodwill impairment assessment on December 31 and no goodwill impairment was identified as of December 31, 2016 and 2017 (Note 3).

 

2.14   Other non-current assets

 

Other non-current assets mainly consist of long-term lease deposits, a convertible loan to a private company, and investments in privately-held entities. For equity investments over which the Group does not have significant influence or control, the cost method of accounting is used. Under the cost method, the Group carries the investments at cost and recognizes income to the extent of dividend received from the distribution of the equity investee’s post-acquisition profits.

 

The Group reviews investments in equity investees for other-than-temporary impairment. The primary factors the Group considers in its determination are duration and severity of the decline in fair value, general market conditions, operating performance and the prospects of the equity investees. If the equity investment’s estimated fair value is less than the cost of the investment and the Group determines the impairment to be other-than-temporary, the Group recognizes an impairment loss for the difference between the fair value and the cost basis of the investment. No impairment loss was recognized for the years ended December 31, 2016 and 2017.

 

2.15 Warrant liabilities

 

Warrants classified as liabilities are initially recorded at fair value with gains and losses arising from changes in fair value recognized in the Consolidated Statements of Operations and Comprehensive Loss during the period in which such instruments are outstanding.

 

16


 

2.              PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

 

2.16 Fair value measurement

 

Fair value reflects the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it transacts and considers assumptions that market participants use when pricing the asset or liability.

 

The Group applies a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is as follows:

 

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Observable, market-based inputs, other than quoted prices, in active markets for identical assets or liabilities.

Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The fair value guidance describes three main approaches to measure the fair value of assets and liabilities: (1) market approach, (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities.

 

The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

 

When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group will measure fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and currency rates.

 

17


 

2.              PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

 

2.17   Revenue recognition

 

The Group derives its revenues principally from merchants’ use of the Group’s core platforms in connection with online marketplace platform services, on-demand logistic platform services, and comprehensive logistic solution services.

 

·                  Platform Service

 

On-demand Logistic Platform Service

 

The Group provides on-demand logistic platform services through its self-developed on-demand logistics platform (“Dada Platform”) where the Group assists the customer, a registered merchant, in finding a deliveryman (“Driver”) to complete a delivery requested by the customer. The Group acts as an agent as it is not the primary obligor and does not bear the inventory risk. The service fee is the difference between the amount paid by a customer based on an upfront quoted fare and the amount earned by a Driver based on expected time, distance and other factors. The Group earns a variable amount from the customers and may record a loss from a transaction when an up-front quoted fare offered to a customer is less than the amount the Group is committed to pay the Driver. The service fee is recognized on a net basis at the point of delivery of merchandise. The loss of a transaction is recorded in fulfilment expenses in the Consolidated Statements of Operations and Comprehensive Loss.

 

JDDJ Marketplace Platform Service

 

The Group provides JDDJ marketplace platform services on its Online-to-Offline (“O2O”) ecommerce grocery platform (“JDDJ Platform”). The service revenues primarily consist of commission fees charged to third-party merchants for participating in the Group’s online marketplace, where the Group acts as an agent and facilitates the merchants’ online sales of their goods through JDDJ Platform. The Group is not the primary obligor, does not take inventory risk, and does not have latitude over pricing of the merchandise. Upon successful sales, the Group charges the merchant a fixed rate commission fee based on the sales amount. Commission fee revenues are recognized on a net basis at the point of delivery of products.

 

18


 

2.              PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

 

2.17   Revenue recognition (Continued)

 

·                  Comprehensive Logistic Solution Services

 

The Group provides comprehensive logistic solution services to merchants on its online marketplace and business customers that do not sell products on its online marketplace by utilizing the Group’s network of registered Drivers to fulfil the delivery service. The Group has determined that it acts as a principal in this type of services as the Group is primarily responsible for fulfilling the delivery request made by the customer, has latitudes in establishing prices and discretion in selecting Drivers and takes the gross credit risk. Revenues resulting from these services are recognized on a gross basis at a fixed rate or a pre-determined amount for each completed delivery, when merchandise are arrived at designated place or packages are delivered to the recipients, with the amounts paid to the Drivers recorded in fulfillment expenses.

 

·                  Goods Sales

 

The Group operates its own e-commerce business and sells delivery equipment and other merchandise. The Group also sells merchandise through unmanned smart mini-stores. Revenue is recognized on a gross basis as the Group is primarily obligated to the customers, subject to inventory risk, and has latitude in establishing prices and selecting suppliers. The Group recognizes revenues net of discounts and return allowances when the goods are delivered to the customers.

 

·                  Others

 

Other services primarily comprise (i) online marketing services to merchants or brand customers for promotion of their products or brands on JDDJ marketplace platform and (ii) service fees received from insurance companies for arranging life insurance for Drivers. Revenue is recognised when service is rendered.

 

·                  Incentive programs

 

Customer incentives

 

The Group offers various incentive programs to merchants and business customers in the form of coupons or volume-based discounts in the provision of on-demand logistics platform service and comprehensive logistics solution service that are recorded as reduction of revenues as the Group does not receive a distinct good or service in consideration or cannot reasonably estimate the fair value of goods or services received.

 

19


 

2.              PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

 

2.17   Revenue recognition (Continued)

 

Driver incentives

 

The Group offers various incentive programs to Drivers such as volume-based incentives. Since Drivers are not the Group’s customers, incentives are accounted for as fulfillment expenses. For the years ended December 31, 2016 and 2017, incentives to Drivers recorded as fulfilment expenses were RMB74,745 and RMB127,392, respectively.

 

Consumer incentives

 

The consumer incentives are offered to promote the Group’s platform in the form of promotion coupon on the JDDJ Platform, which are valid only during a limited period of time. These incentives are provided at the Group’s discretion and are not contractually required by the merchants. These incentives also do not reduce the overall pricing of the services provided by the Group. As the consumers are not the Group’s customers, incentives to consumers are recognized as selling and marketing expenses. For the years ended December 31, 2016 and 2017, consumer incentives that were recorded as selling and marketing expenses were RMB117,961 and RMB362,137, respectively.

 

All the incentives granted can be categorized into 1) incentives granted concurrent with a purchase transaction and 2) incentives granted not concurrent with a purchase transaction. When the incentive is granted concurrent with a purchase transaction, expenses or reduction of revenues are accrued as the related transactions are recorded. When the incentive is not granted concurrent with a purchase transaction, expenses or reduction of revenues are recognized with coupon redemption.

 

Types of revenues

 

For the years ended December 31, 2016 and 2017, all of the Group’s revenues were generated in the PRC. The revenues by types were as follows:

 

 

 

Years ended December 31,

 

 

 

2016

 

2017

 

 

 

RMB

 

RMB

 

 

 

 

 

 

 

Comprehensive logistic solution services

 

30,640

 

933,606

 

Platform services

 

54,049

 

133,582

 

Sales of goods

 

20,506

 

41,924

 

Others

 

17,446

 

108,853

 

Total revenues

 

122,641

 

1,217,965

 

 

20


 

2.              PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

 

2.18   Cost of goods sold

 

Cost of goods sold primarily consist of purchase price of merchandise, inventory provision and surcharge and sales taxes.

 

2.19   Fulfilment expenses

 

Fulfilment expenses primarily consist of (i) Drivers’ remuneration to fulfil the Group’s logistics orders from merchants, (ii) expenses incurred in operating the Group’s customer service centers, (iii) expenses charged by third-party couriers for logistics service and third-party customer service, (iv) transaction fees charged by third-party payment platform and (v) packaging cost as well as other fulfilment expenses directly attributed to the Group’s principal operations.

 

2.20   Selling and marketing expenses

 

Selling and marketing expenses primarily consist of incentive payments to consumers, advertising and promotion expenses, payroll and related expenses for employees involved in selling and marketing functions in the city stations, as well as the associated expenses of facilities and equipment, such as depreciation expenses, rental and others. The advertising and market promotion expenses amounted to RMB47,217 and RMB156,317 for the years ended December 31, 2016 and 2017, respectively.

 

21


 

2.     PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

 

2.21   Research and development expenses

 

Research and development expenses primarily consist of technology infrastructure expenses, payroll and related expenses for employees involved in platform development and internal system support, charges for the usage of the server and computer equipment, and editorial content.

 

2.22   Operating leases

 

Leases where substantially all the rewards and risks of ownership of assets remain with the leasing group are accounted for as operating leases. Payments made under operating leases net of any incentives received by the Group from the leasing group are charged to the Consolidated Statements of Operations and Comprehensive Loss on a straight-line basis over the leasing periods.

 

2.23   Share-based compensation

 

The Group accounts for share options granted to employees in accordance with ASC 718, “Stock Compensation”. The Group grants options and restricted share units to the Group’s employees, directors, and consultants. In accordance with the guidance, the Group determines whether a share option should be classified and accounted for as a liability award or an equity award.

 

Options and restricted share units granted to the employees, including the directors, vest upon satisfaction of a service condition, which is generally satisfied over four years and are measured at the grant date. Options granted to non-employees with a service condition are accounted for based on the fair value of the equity instrument issued, as this has been determined to be more reliably measurable. The Group has accounted for equity instruments issued to non-employees in accordance with the provisions of ASC 718 and ASC subtopic 505-50, “Equity: Equity based Payments to Non-Employees”. The fair value of each option granted to non-employees will be estimated on the date of grant using the same option valuation model used for options granted to employees. Options granted to non-employees of the Group are re-measured each period end in accordance with ASC 505. The final measurement date of the fair value of the equity instrument issued is the date on which the non-employee’s performance is completed.

 

Additionally, the Group’s incentive plan provides an exercisability clause where employees or non-employees can only exercise vested options upon the occurrence of the event that the Group’s ordinary shares are publicly traded. Options for which the service condition has been satisfied are forfeited should employment terminate prior to the occurrence of an exercisable event, which substantially creates a performance condition. The satisfaction of the performance condition becomes probable upon completion of the Group’s initial public offering and therefore, the Group has not recorded any compensation expenses and will record the cumulative share-based compensation expenses for these options when it completes the initial public offering.

 

According to ASC 718, a change in any of the terms or conditions of equity-based awards shall be accounted for as a modification of the award. Therefore, the Group calculates incremental compensation cost of a modification as the excess of the fair value of the modified option over the fair value of the original option immediately before its terms are modified. For vested options, the Group would recognize incremental compensation cost on the date of modification and for unvested options, the Group would recognize, prospectively and over the remaining requisite service period, the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original award.

 

2.24   Government grants

 

Government grants include cash subsidies received by the Group’s entities in the PRC from local governments as incentives for operating business in certain local districts. Such subsidies allow the Group full discretion in utilizing the funds and are used by the Group for general corporate purpose. Cash subsidies are included in other operating income and recognized when received.

 

22


 

2.              PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

 

2.25   Taxation

 

Deferred income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements, net operating loss carry forwards and credits. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided in accordance with the laws of the relevant taxing authorities. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in which temporary differences are expected to be received or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the Consolidated Statements of Operations and Comprehensive Loss in the period of the enactment of the change.

 

2.26   Comprehensive loss

 

Comprehensive loss is defined as the change in equity of the Group during a period arising from transactions and other events and circumstances excluding transactions resulting from investments by shareholders and distributions to shareholders. Comprehensive loss is reported in the Consolidated Statements of Operations and Comprehensive Loss. Accumulated other comprehensive loss, as presented on the accompanying Consolidated Balance Sheets, consists of accumulated foreign currency translation adjustments.

 

2.27   Recent accounting pronouncements

 

New accounting pronouncements not yet adopted

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in ASC 605, and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Group will adopt the new revenue standard beginning January 1, 2018 using the modified retrospective transition method. The impact of adopting this ASU will not be material to the consolidated financial statements.

 

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Under the new ASC, entities no longer use the cost method of accounting as it was applied before and the new ASC requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, a company can elect to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer (the “measurement alternative”). The Group will adopt this ASU beginning January 1, 2018 and does not expect the adoption of this ASU will have a material impact on its consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize leases on balance sheet and disclose key information about lease arrangements. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with terms of longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The standard is effective on January 1, 2019, with early adoption permitted. In July 2018, the FASB issued an update that provided an additional transition option that allows companies to continue applying the guidance under the lease standard in effect at that time in the comparative periods presented in the consolidated financial statements. Companies that elect this option would record a cumulative-effect adjustment to the opening balance of retained earnings on the date of adoption. The Group will elect this optional transition method. The Group is in the process of evaluating the impact on its consolidated financial statements, as well as the impact of adoption on policies, practices, systems and financial statement disclosures. As of December 31, 2017, RMB162,779 of undiscounted future minimum operating lease commitments were not recognized on the Group’s Consolidated Balance Sheets (see Note 20).

 

23


 

2.              PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

 

2.27   Recent accounting pronouncements (Continued)

 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments, which clarifies the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Group will adopt this ASU beginning January 1, 2018 and does not expect the adoption of this ASU has a material impact on its consolidated financial statements.

 

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, Restricted Cash, which clarifies guidance on the classification and presentation of restricted cash in the statement of cash flows. The adoption of this accounting pronouncement impacts the presentation of restricted cash in the Company’s Consolidated Statements of Cash Flows. The Group will adopt this ASU beginning January 1, 2018 in accordance with the retrospective transition method, including restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flow.

 

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350), which simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for an entity’s annual or any interim goodwill impairments tests in fiscal years beginning after December 15, 2019 and will require adoption on a prospective basis. The Group is currently in the process of evaluating the impact of the adoption of this ASU on its consolidated financial statements.

 

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), which simplifies the accounting for non-employee share-based payment transactions by expanding the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from non-employees. Under the new standard, most of the guidance on stock compensation payments to non-employees would be aligned with the requirements for share-based payments granted to employees. This standard is effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those annual reporting periods, with early adoption permitted. The Group is currently in the process of evaluating the impact of the adoption of this ASU on its consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement which eliminates, adds and modifies certain disclosure requirements for fair value measurements. Under the guidance, public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The guidance is effective for all entities for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years, but entities are permitted to early adopt either the entire standard or only the provisions that eliminate or modify the requirements. The Group does not expect the adoption of this ASU has a significant impact on its consolidated financial statements.

 

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810), which amends two aspects of the related-party guidance in ASC 810. Specifically, the ASU (1) adds an elective private-company scope exception to the variable interest entity guidance for entities under common control, and (2) amends the guidance for determining whether a decision-making fee is a variable interest. The amendments require organizations to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in GAAP). Therefore, these amendments likely will result in more decision makers not consolidating VIEs. For entities other than private companies, ASU 2018-17 is effective for fiscal years beginning after December 15, 2019, including interim periods therein. For private companies, the ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early adoption is permitted for all entities. This guidance will be adopted using a retrospective approach. The Group does not expect the adoption of this ASU has a significant impact on its consolidated financial statements.

 

24


 

3.              BUSINESS COMBINATION

 

On April 26, 2016, the Group and JD.com, Inc. (“JD”) entered into an agreement to acquire JDDJ Business, an online marketplace where registered merchants offers local retailers’ products to its end consumers. In connection with the acquisition, the Company also entered into a Business Cooperation Agreement (“BCA”) and a Non-Compete Agreement (“NCA”) with JD.

 

The consideration for the acquisition of JDDJ business, BCA and NCA includes 286,832,885 ordinary shares of the Company, 46,743,137 Series E Preferred Shares and a warrant to subscribe 35,151,665 Series E Preferred Shares within two years with a pre-determined purchase price. The acquisition-related costs amounted to RMB 10,474 was recorded in general and administrative expenses. The transactions were consummated on April 26, 2016.

 

The acquisition of JDDJ business was accounted for as a business combination and the results of operations of the JDDJ from the acquisition date have been included in the Group’s consolidated financial statements from April 26, 2016.  BCA and NCA were acquired in connection with the acquisition of JDDJ Business. The identifiable intangible assets acquired are amortized on a straight-line basis over the respective useful lives. The Group made estimates and judgments in determining the fair value of JDDJ business, NCA and BCA with assistance from an independent valuation firm.

 

The purchase price allocation is as follows:

 

 

 

Amount

 

 

 

RMB

 

 

 

 

 

Fair value of the consideration

 

 

 

Ordinary shares issued

 

2,034,619

 

Preferred shares issued

 

1,291,780

 

Warrant liabilities (Note 12)

 

214,286

 

Total consideration

 

3,540,685

 

 

 

 

As of April 26, 2016

 

Amortization
Years

 

 

 

RMB

 

 

 

 

 

 

 

 

 

Fair value of NCA

 

541,400

 

7

 

Fair value of BCA

 

434,900

 

7

 

JDDJ Business

 

 

 

 

 

Cash and cash equivalents

 

1,374,984

 

 

 

Other assets acquired

 

1,124

 

 

 

Payables to marketplace merchants

 

(19,946

)

 

 

Amount due to related parties

 

(28,446

)

 

 

Accrued expenses and other current liabilities

 

(35,936

)

 

 

Identifiable intangible assets - Technology

 

96,000

 

3.7

 

Identifiable intangible assets - Trademark and Domain Name

 

324,000

 

9.7

 

Deferred tax liabilities for identifiable intangible assets

 

(105,000

)

 

 

Goodwill

 

957,605

 

 

 

Total assets received and liabilities assumed

 

3,540,685

 

 

 

 

25


 

3.              BUSINESS COMBINATION (CONTINUED)

 

Goodwill represents the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired and is not deductible for tax purpose. Goodwill arising from this acquisition was attributable to the synergies expected from the combined business.

 

The following table summarizes unaudited pro forma results of operations for the years ended December 31, 2016 assuming that the acquisition occurred as of January 1, 2016. The pro forma results have been prepared for comparative purpose only based on management’s best estimate and do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred as of the beginning of period:

 

 

 

Year ended December 31, 2016

 

 

 

Unaudited

 

 

 

RMB

 

 

 

 

 

Pro forma revenue

 

148,363

 

Pro forma loss from operations

 

(1,802,522

)

Pro forma net loss

 

(1,760,939

)

 

4.              FAIR VALUE MEASUREMENTS

 

The Group’s financial instruments include cash and cash equivalent, restricted cash, receivables, payables, prepayments and other current assets, short-term loan, amount due from and due to related parties and accrued expenses and other current liabilities. The carrying amounts of these short-term financial instruments approximate their fair value due to their short-term nature.

 

As of December 31, 2016 and 2017, information about inputs into the fair value measurement of the Group’s assets and liabilities that are measured at fair value on a recurring basis in periods subsequent to their initial recognition is as follows:

 

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

Years
Ended
December
31,

 

Description

 

Fair
Value

 

Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

2016

 

Wealth management products

 

205,420

 

 

205,420

 

 

2017

 

Wealth management products

 

301,900

 

 

301,900

 

 

2017

 

Foreign currency forward contract

 

22,846

 

 

22,846

 

 

 

See Note 12 for the fair value measurement of warrant liabilities.

 

26


 

5.              SHORT-TERM INVESTMENT

 

 

 

As of December 31,

 

 

 

2016

 

2017

 

 

 

RMB

 

RMB

 

 

 

 

 

 

 

Wealth management products

 

205,420

 

301,900

 

Foreign currency forward

 

 

22,846

 

Total

 

205,420

 

324,746

 

 

The Group entered into a foreign currency forward contract on March 27, 2017 with a commercial bank to sell its time deposits denominated in USD for RMB at a fixed exchange rate of 7.03 on March 23, 2018 with the notional amount of USD52,380. The Group incurred fair value changes of RMB22,846 for the year ended December 31, 2017.

 

6.              ACCOUNTS RECEIVABLE, NET

 

Accounts receivable and the related bad debt provision as of December 31, 2016 and 2017 are as follows:

 

 

 

As of December 31,

 

 

 

2016

 

2017

 

 

 

RMB

 

RMB

 

 

 

 

 

 

 

Accounts receivable

 

3

 

6,946

 

Less: Bad debt provision

 

 

 

Total Accounts receivable, net

 

3

 

6,946

 

 

7.              PREPAYMENT AND OTHER CURRENT ASSETS

 

 

 

As of December 31,

 

 

 

2016

 

2017

 

 

 

RMB

 

RMB

 

 

 

 

 

 

 

Funds receivable from third party mobile and online payment platforms

 

14,402

 

24,275

 

Advance to suppliers mainly for cloud computing service

 

13,405

 

16,911

 

VAT receivable

 

9,294

 

2,299

 

Interest receivable from bank deposit and wealth management products

 

 

4,662

 

Deposits mainly for lease of premises

 

2,413

 

3,925

 

Other receivables

 

1,024

 

2,632

 

Total

 

40,538

 

54,704

 

 

27


 

8.              PROPERTY AND EQUIPMENT, NET

 

Property and equipment and its related accumulated depreciation are as follows:

 

 

 

As of December 31,

 

 

 

2016

 

2017

 

 

 

RMB

 

RMB

 

 

 

 

 

 

 

Office facilities

 

1,295

 

6,708

 

Software

 

876

 

1,908

 

Computer equipment

 

471

 

1,636

 

Vehicles

 

60

 

 60

 

Leasehold improvement

 

6,020

 

10,515

 

Total cost

 

8,722

 

20,827

 

Less: Accumulated depreciation

 

(3,101

)

(7,964

)

Property and equipment, net

 

5,621

 

12,863

 

 

Depreciation expenses related to property and equipment were RMB2,298 and RMB4,886 for the years ended December 31, 2016 and 2017, respectively.

 

9.              INTANGIBLE ASSETS, NET

 

Gross carrying amount, accumulated amortization and net book value of the intangible assets are as follows:

 

 

 

As of December 31,

 

 

 

2016

 

2017

 

 

 

RMB

 

RMB

 

 

 

 

 

 

 

BCA

 

464,603

 

437,626

 

NCA

 

578,377

 

544,793

 

Trademark and domain name

 

324,130

 

324,130

 

Technology

 

96,000

 

96,000

 

Less: Accumulated amortization

 

(138,908

)

(332,847

)

Intangible assets, net

 

1,324,202

 

1,069,702

 

 

Amortization expenses related to intangible assets were RMB135,838 and RMB204,175 for the years ended December 31, 2016 and 2017, respectively.

 

The estimated aggregate amortization expenses for each of the five succeeding fiscal years and thereafter are as follows:

 

 

 

Future amortization expenses

 

 

 

RMB

 

For the years ending December 31,

 

 

 

2018

 

200,381

 

2019

 

200,381

 

2020

 

174,701

 

2021

 

174,235

 

2022

 

174,235

 

Thereafter

 

145,769

 

Total

 

1,069,702

 

 

28


 

10.      SHORT-TERM LOAN

 

 

 

As of December 31,

 

 

 

2016

 

2017

 

 

 

RMB

 

RMB

 

 

 

 

 

 

 

Short-term bank borrowings

 

 

354,499

 

 

In March 2017, the Group entered into a credit agreement with a domestic commercial bank, for which the total facility was amounted to RMB 950,000 (the “Facility”) with a term of one year. In 2017, the Group drew five borrowings from the Facility for an aggregated principal amount of RMB 354,499 which was collateralized by the bank deposit of US$ 52,380 (RMB 342,261) classified as restricted cash. The annual interest rate of the borrowings was approximately 3.92%, resulting in interest expenses of RMB8,908 for the year ended December 31, 2017.

 

11.       ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

 

 

As of December 31,

 

 

 

2016

 

2017

 

 

 

RMB

 

RMB

 

 

 

 

 

 

 

Salaries and welfare payables

 

39,152

 

52,225

 

Payables to marketplace merchants (1)

 

25,971

 

36,678

 

Advance from merchants for delivery service (2)

 

22,343

 

39,470

 

Accrued marketing expenses for JDDJ Platform

 

16,373

 

27,696

 

Deposits from merchants and Drivers

 

12,107

 

7,362

 

Professional fee payables

 

3,413

 

3,890

 

Tax payables

 

21,967

 

77,394

 

Rental payables

 

 

31

 

Interest payable

 

 

3,395

 

Others

 

9,719

 

9,974

 

Total

 

151,045

 

258,115

 

 


(1) Payables to marketplace platform merchants represent cash collected on behalf of marketplace sellers for products sold through the Group’s online marketplace platform.

(2) Advance from merchants for logistic service represents the prepayments from merchants for on-demand logistic platform services. The amount is refundable if no service is provided.

 

12.       WARRANT LIABILITIES

 

In connection with the acquisition of JDDJ business on April 26, 2016, a warrant was issued to JD (Note 3), which provided JD the right to purchase additional 35,151,665 Series E Preferred Shares with the pre-determined purchase price of US$ 4.28 per share and exercisable at any time and expire on the earlier of (i) 24 months after issuance or (ii) immediately prior to a public offering (“Qualified IPO”). The warrant shall automatically terminate upon the completion of a Qualified Financing. A Qualified Financing means a bona fide private placement financing by the Company, which (i) values the Company at a pre-money valuation (excluding any amount of exercise price paid under this warrant) of at least US$4,090,950 and (ii) upon completion, will result in gross proceeds to the Company of at least US$100,000 in the aggregate (taking into account all closings of such financing if there is more than one closing).

 

The Group followed the authoritative guidance which requires liability classification for warrant issued that are exercisable into convertible redeemable preferred shares. Liability classification requires the warrant to be re-measured to their fair value at the end of each reporting period. The Group utilized the service of an independent third party specialist to determine the fair value of the warrant, which took into consideration the fair value of underlying preferred shares, a risk-free interest rate, and expected volatility. Certain inputs used in the model are unobservable. As a result, the valuation of the warrant was categorized as Level 3 in accordance with ASC 820, “Fair Value Measurement”.

 

On December 28, 2017, the warrants were exercised by JD, upon which JD paid the subscription amounting to US$ 150,404 (RMB 983,820) for 35,151,665 Series E Preferred Shares.

 

29


 

12.       WARRANT LIABILITIES (CONTINUED)

 

The Group estimates its fair value using binomial model as of December 31, 2016 and December 28, 2017 (immediate prior to the exercise of the warrants) using the following assumptions:

 

 

 

As of December 31, 2016

 

As of December 28, 2017

 

 

 

 

 

 

 

Fair market value per share as of valuation date

 

US$

4.35

 

US$

4.47

 

Exercise price

 

US$

4.28

 

US$

4.28

 

Risk free rate of interest

 

1.63

%

2.10

%

Dividend yield

 

0.00

%

0.00

%

Expected volatility

 

38

%

30

%

 

The carrying fair value of the warrant liabilities on exercise date was US$15,800 (RMB103,240), and the fair value changes in warrant liabilities for the years ended December 31, 2016, and 2017 were US$4,500 (RMB29,221) and US$12,700 (RMB82,467), respectively.

 

The Group estimated expected volatility by reference to the historical share price volatility of comparable companies over a period close to the remaining life of the warrant. The Group estimated the risk free interest rate based on the yield to maturity of U.S. Treasure Bill on the valuation date, with the maturity period close to the remaining life of the warrant and adjusted by country risk differential between US and China. The estimated fair value of the preferred shares was determined with assistance from an independent third party valuation firm. The dividend yield was estimated as zero based on the plan to retain profit for corporate expansion and no dividend distribute in the near future. The assumptions used in warrant fair value assessment represent the Group’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. If factors change or different assumptions are used, the fair value change of warrants could be materially different for any period.

 

13.       SHARE-BASED COMPENSATION

 

In February 2015, the Group adopted the 2015 Incentive Compensation Plan (“2015 Plan”), which permits the granting of share options, restricted share units and other equity incentives to employees, directors and consultants of the Group. The 2015 plan administrator is the Group’s board of directors. The board may also authorize one or more of the Group’s officers to grant awards under the plan. The Group has authorized 68,698,662 ordinary shares for issuance under the 2015 Plan.

 

Employee options:

 

Under the 2015 Plan, options granted to employees vest upon satisfaction of a service condition, which is generally satisfied over four years. Additionally, the 2015 Plan includes a condition where employees can only exercise vested options upon the occurrence of that the Company’s ordinary shares become listed securities, which substantially creates a performance condition (“IPO Condition”). Therefore, since the adoption of the 2015 Plan, the Group has not recognized any stock-based compensation expenses for options granted, because the exercisable event as described above has not occurred. The Group granted 7,632,897 and 3,057,177 share options to certain of its employees in 2016 and 2017, respectively. The options expire ten years from the date of grant.

 

In October 2016, in connection with the issuance of Series E Preferred Shares, the board of directors of the Company resolved to repurchase 1,199,608 share options from employees with a cash consideration of US$2,553 (RMB17,215). The Group believes that the repurchase was one-off in nature and the classification of the awards should not be changed as these awards were not deemed to have a substantive cash settlement feature. The repurchase of share options was an improbable-to-probable modification of the unvested awards and therefore accounted for as the issuance of a new award. The consideration paid for the repurchase was recognized as compensation cost in general and administrative expenses on settlement date.

 

30


 

13.       SHARE-BASED COMPENSATION (CONTINUED)

 

Non-employee options:

 

Under the 2015 Plan, the Group granted 2,000,000 share options to certain non-employees vest upon satisfaction of a 4-year service condition in 2015, including a condition where optionee can only exercise vested options when the Company’s ordinary shares become listed securities. The options expire ten years from the date of grant. The Group granted 862,390 and nil share options to certain of its non-employees in 2016 and 2017, respectively.

 

In April 2016, the board of directors agreed for early vesting and repurchase of 716,431 share options at the price of US$4.19 (RMB27.12) per share. The Group believes that the repurchase was one-off in nature and the classification of the awards should not be changed as these awards were not deemed to have a substantive cash settlement feature. The repurchase of early exercised share options was an improbable-to-probable modification of the unvested awards and accounted for as the issuance of a new award. The consideration paid for the repurchase was recognized as compensation cost in general and administrative expenses with an amount of US$2,991 (RMB19,372) on settlement date.

 

In determining the fair value of the stock options, the binomial option pricing model was applied. The key assumptions used to determine the fair value of the options at the relevant grant dates in 2016 and 2017 were as follows:

 

 

 

For the years ended December 31,

 

 

 

2016

 

2017

 

 

 

 

 

 

 

Expected volatility

 

40%~42

%

36%~40

%

Risk-free interest rate (per annum)

 

2.4%~3.3

%

3%~3.2

%

Exercise multiples

 

2.2

 

2.2 and 2.8

 

Expected dividend yield

 

0.00

%

0.00

%

 

The Group estimated expected volatility by reference to the historical price volatilities of ordinary shares of comparable companies over a period close to the contract term of the options. The Group estimated the risk free interest rate based on the yield to maturity of U.S. government bonds at grant dates with a maturity period close to the contract term of options, adjusted by country risk differential between U.S. and China. As the Group has had no option exercise history, it estimated exercise multiples based on empirical research on typical employee stock option exercising behavior. The dividend yield was estimated as zero based on the plan to retain profit for corporate expansion and no dividend distribute in near future. The assumptions used in share-based compensation expenses recognition represent the Group’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. If factors change or different assumptions are used, the share-based compensation expenses could be materially different for any period.

 

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13.       SHARE-BASED COMPENSATION (CONTINUED)

 

The following table summarized the Group’s share option activities under the Option Plans:

 

 

 

Number
of options

 

Weighted
average
exercise
price

 

Weighted
average
remaining
contract life

 

Weighted
average
grant date
fair value

 

Aggregate
intrinsic
value

 

 

 

 

 

US$

 

 

 

US$

 

US$

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at January 1, 2016

 

27,446,620

 

0.02

 

9.12

 

0.12

 

29,045

 

Granted

 

8,495,287

 

0.80

 

 

 

0.64

 

 

 

Exercised

 

(716,431

)