0001758736
false
2021-06-30
Q2
2021
--12-31
0001758736
2021-01-01
2021-06-30
0001758736
2020-12-31
0001758736
2021-06-30
0001758736
2020-01-01
2020-06-30
0001758736
2020-01-01
2020-12-31
0001758736
2019-12-31
0001758736
us-gaap:CommonStockMember
2020-12-31
0001758736
us-gaap:AdditionalPaidInCapitalMember
2020-12-31
0001758736
us-gaap:RetainedEarningsMember
2020-12-31
0001758736
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2020-12-31
0001758736
us-gaap:NoncontrollingInterestMember
2020-12-31
0001758736
us-gaap:CommonStockMember
2021-01-01
2021-06-30
0001758736
us-gaap:AdditionalPaidInCapitalMember
2021-01-01
2021-06-30
0001758736
us-gaap:RetainedEarningsMember
2021-01-01
2021-06-30
0001758736
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2021-01-01
2021-06-30
0001758736
us-gaap:NoncontrollingInterestMember
2021-01-01
2021-06-30
0001758736
us-gaap:CommonStockMember
2021-06-30
0001758736
us-gaap:AdditionalPaidInCapitalMember
2021-06-30
0001758736
us-gaap:RetainedEarningsMember
2021-06-30
0001758736
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2021-06-30
0001758736
us-gaap:NoncontrollingInterestMember
2021-06-30
0001758736
mkd:StrategicGlobalInvestmentsMember
2020-06-30
0001758736
mkd:StrategicGlobalInvestmentsMember
2020-06-01
2020-06-30
0001758736
srt:MinimumMember
us-gaap:OfficeEquipmentMember
2021-01-01
2021-06-30
0001758736
srt:MaximumMember
us-gaap:OfficeEquipmentMember
2021-01-01
2021-06-30
0001758736
us-gaap:LeaseholdImprovementsMember
2021-01-01
2021-06-30
0001758736
us-gaap:ComputerSoftwareIntangibleAssetMember
2021-01-01
2021-06-30
0001758736
mkd:MolecularDataHkLimitedMkdHkMember
2021-01-01
2021-06-30
0001758736
mkd:ShanghaiMolbaseTechnologyCo.Ltd.ShanghaiMolbaseMember
2021-01-01
2021-06-30
0001758736
us-gaap:DomesticCountryMember
2020-01-01
2020-12-31
0001758736
us-gaap:DomesticCountryMember
2021-01-01
2021-06-30
0001758736
us-gaap:ForeignCountryMember
2020-01-01
2020-12-31
0001758736
us-gaap:ForeignCountryMember
2021-01-01
2021-06-30
0001758736
us-gaap:CostOfSalesMember
2018-01-01
2018-12-31
0001758736
us-gaap:CostOfSalesMember
2019-01-01
2019-12-31
0001758736
us-gaap:CostOfSalesMember
2020-01-01
2020-12-31
0001758736
us-gaap:SalesRevenueNetMember
2018-01-01
2018-12-31
0001758736
us-gaap:SalesRevenueNetMember
2019-01-01
2019-12-31
0001758736
us-gaap:SalesRevenueNetMember
2020-01-01
2020-12-31
0001758736
mkd:SharePlan2018Member
mkd:BoardOfDirectorsMember
2019-12-31
0001758736
mkd:SharePlan2018Member
mkd:BoardOfDirectorsMember
2021-06-30
0001758736
mkd:SharePlan2018Member
mkd:BoardOfDirectorsMember
2021-01-01
2021-06-30
0001758736
us-gaap:SellingAndMarketingExpenseMember
2020-01-01
2020-12-31
0001758736
us-gaap:SellingAndMarketingExpenseMember
2021-01-01
2021-06-30
0001758736
us-gaap:GeneralAndAdministrativeExpenseMember
2020-01-01
2020-12-31
0001758736
us-gaap:GeneralAndAdministrativeExpenseMember
2021-01-01
2021-06-30
0001758736
us-gaap:ResearchAndDevelopmentExpenseMember
2020-01-01
2020-12-31
0001758736
us-gaap:ResearchAndDevelopmentExpenseMember
2021-01-01
2021-06-30
0001758736
us-gaap:SubsequentEventMember
mkd:WaichunLogisticsTechnologyMember
2021-09-01
2021-09-30
0001758736
us-gaap:SubsequentEventMember
2021-09-01
2021-09-30
iso4217:USD
xbrli:shares
iso4217:USD
xbrli:shares
xbrli:pure
iso4217:CNY
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
Molecular
Data Inc.
|
|
|
|
By
|
:
|
/s/
Steven Foo
|
|
Name
|
:
|
Steven
Foo
|
|
Title
|
:
|
Chief
Financial Officer
|
Date:
September 30, 2021
Exhibit 99.1
Molecular
Data Inc. Announces First Half 2021 Management Financial Results
SHANGHAI,
September 30, 2021 – Molecular Data Inc. (“Molecular Data” or the “Company”) (Nasdaq: MKD), a leading
technology-driven platform in China’s chemical industry, today announced its management financial results for the six months ended
June 30, 2021.
First
Half 2021 Financial Highlights
|
●
|
Net
revenues in the first half of 2021 were RMB 1,461.1 million (US$226.3 million), a 67.1% decrease from RMB 4,438.2 million in the
same period of 2020.
|
|
●
|
Gross
profit in the first half of 2021 was RMB 12.1 million (US$1.9 million), a 163.3% increase from RMB 4.6 million in the same period
of 2020.
|
|
●
|
Net
loss in the first half of 2021 was RMB 32.5 million (US$ 5.0 million), compared with RMB 104.9 million in the same period of 2020
in line with the decrease in net revenue.
|
Management
Comments
At
the 2021 Industrial Internet Summer Summit held in May 21, 2021, MKD stood out from thousands of companies and won two awards, 2021 China
Industrial Internet Listed Companies TOP10 and 2021 China Industrial Internet Companies TOP100.
MKD,
as the pioneer of Chemical internet industry, won the top 30 outstanding enterprises in China’s Industrial Internet industry. This
accolade was awarded at the August 2021 China Industrial Internet Annual Conference and China Industrial Internet Outstanding Enterprise
Award Ceremony held in Beijing.
At
a product upgrade launch ceremony held in Shanghai in August 2021, MKD teams up with various providers expanding the cooperation to many
more SMEs in areas involving supply chain services and finance.
First
Half 2021 Financial Results
Net
Revenues
Our
net revenues are primarily generated from sales of chemicals under direct sales model, provision of chemical trading matching service
under marketplace model and provision of online membership and advertising services. Currently, substantially all of our net revenues
are derived from sales of chemicals under direct sales model. Under direct sales model, we generally acquire chemicals from suppliers
after the customers place an order and sell them directly to customers primarily through our Online Platform. We also generate revenues
from chemical trading under marketplace model, online membership service and recently financial solutions, which represented immaterial
portion of our net revenues for the years ended December 31, 2018, 2019 and 2020 and six months ended June 30, 2020 and 2021.
Net
revenues in the first half of 2021 were RMB 1,461.1 million (US$226.3 million), a 67.1% decrease from RMB 4,438.2 million in the same
period of 2020. The decrease was primarily attributable to the persistent effects of Covid-19 on the Company’s business.
The
following table sets forth the components of our net revenues by amounts and percentages of our total revenues for the periods presented:
|
|
For the Year Ended December 31,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2020
|
|
|
2021
|
|
|
|
RMB
|
|
|
%
|
|
|
RMB
|
|
|
%
|
|
|
RMB
|
|
|
US$
|
|
|
%
|
|
|
RMB
|
|
|
%
|
|
|
RMB
|
|
|
US$
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(in thousands, except for percentages)
|
|
Net Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemical trading— direct sales model
|
|
|
9,045,458
|
|
|
|
99.9
|
|
|
|
13,167,719.00
|
|
|
|
99.7
|
|
|
|
7,587,004
|
|
|
|
1,162,759
|
|
|
|
1.0
|
|
|
|
4,434,560
|
|
|
|
99.9
|
|
|
|
1,459,822
|
|
|
|
226,098
|
|
|
|
99.9
|
|
Chemical trading— marketplace model
|
|
|
4,387
|
|
|
|
0.1
|
|
|
|
26,513.00
|
|
|
|
0.2
|
|
|
|
107
|
|
|
|
16
|
|
|
|
0.0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Online membership and advertising service
|
|
|
3,421
|
|
|
|
0.0
|
|
|
|
10,650.00
|
|
|
|
0.1
|
|
|
|
8,740
|
|
|
|
1,339
|
|
|
|
0.0
|
|
|
|
3,636
|
|
|
|
0.1
|
|
|
|
1,311
|
|
|
|
203.00
|
|
|
|
0.1
|
|
Financial service
|
|
|
—
|
|
|
|
—
|
|
|
|
917.00
|
|
|
|
—
|
|
|
|
465.00
|
|
|
|
71
|
|
|
|
0.0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Others
|
|
|
—
|
|
|
|
—
|
|
|
|
1,516.00
|
|
|
|
—
|
|
|
|
96
|
|
|
|
16
|
|
|
|
0.0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total revenues
|
|
|
9,053,266
|
|
|
|
100.0
|
|
|
|
13,207,315
|
|
|
|
100.0
|
|
|
|
7,596,412
|
|
|
|
1,164,201
|
|
|
|
100.0
|
|
|
|
4,438,196
|
|
|
|
100.0
|
|
|
|
1,461,133
|
|
|
|
226,301
|
|
|
|
100.0
|
|
Chemical
trading—direct sales model. We generate a substantial majority of our net revenues from chemical trading under our direct
sales model. We generally acquire chemicals from suppliers after the customers place an order and sell them directly to customers primarily
through our Online Platform as well as handle the delivery of the chemicals.
Chemical
trading—marketplace model. Our chemical trading under marketplace model provide an integrated supplier-customer matching
system, directing demands and supplies in a cost-effective manner. We generate revenue by charging commission fees, the amount of which
is at our discretion for the periods presented, upon the completion of our matching services.
Online
membership and advertising service. We generate revenue from the service fees charged to our online members in relation to
the membership services, including advertising services and market updates. The service provided to the online members are unique and
member-specific with no other alternative use.
Financial
service. We cooperate with banks and non-bank financial institutions to provide financial solutions to certain customers and
suppliers who use our Online Platform. We charge a fixed fee for the facilitation service provided among the customers, suppliers and
the banks and non-bank financial institutions and the guarantees provided on the loan repayments as stipulated in the purchase agreements
for the underlying chemicals transactions.
We
expect our business to be affected by COVID-19 and its impact on economic climate and business conditions, although we are unable to
provide an accurate account of its effect.
Cost
of Revenues
Cost
of revenues was RMB 1,449.0 million (US$224.4 million), a 67.3% decrease from RMB 4,433.6 million in the same period of 2020. This change
was primarily due to the decrease in net revenues.
Gross
Profit and Gross Margin
Gross
profit was RMB 12.1 million (US$1.9 million), a 163.3% increase from RMB 4.6 million in the same period of 2020. Gross margin increased
to 0.83%, compared with 0.10% in the same period of 2020. The increase in gross margin was primarily due to the increase of high margin
business.
Operating
Expenses
Total
operating expenses were RMB46.7 million (US$7.2 million), a 55.8% decrease from RMB105.9 million in the same period of 2020. The decrease
was primarily due to the reduction of personnel expenses and cost control measures by the Company.
|
●
|
Sales
and marketing expenses were RMB11.9 million (US$1.9 million), a 75.1% decrease from RMB48.0 million in the same period of 2020,
which was primarily due to decreased personnel expenses.
|
|
●
|
General
and administrative expenses were RMB29.4 million (US$4.6 million), a 19.1% decrease from RMB36.4 million in the same period
of 2020, which was primarily due to decreased personnel expenses and cost control measures carried out by the Company.
|
|
●
|
Research
and development expenses were RMB5.4 million (US$0.8 million), a 75% decrease from RMB21.5 million in the same period of 2020.
|
Operating
Loss
Operating
loss was RMB34.6 million (US$5.4 million), compared with RMB101.3 million in the same period of 2020.
Net
Loss
Net
loss was RMB32.5 million (US$5.0 million), compared with RMB104.9 million in the same period of 2020.
Certain
Balance Sheet Item
As
of June 30, 2021, the Company had cash, cash equivalents and restricted cash of RMB13.5 million (US$2.1 million), compared with
RMB11.6 million as of December 31, 2020.
Liquidity
and Capital Resources
The
following table sets forth a summary of our cash flows for the periods presented:
|
|
For the Year Ended December 31,
|
|
|
For the Six Months Ended June 30,
|
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2020
|
|
|
2021
|
|
|
|
RMB
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(in thousands)
|
|
Net cash flows used in operating activities
|
|
|
(134,636
|
)
|
|
|
(95,821
|
)
|
|
|
(234,048
|
)
|
|
|
(35,870
|
)
|
|
|
(84,712
|
)
|
|
|
(25,355
|
)
|
|
|
(3,927
|
)
|
Net cash flows used in investing activities
|
|
|
(2,242
|
)
|
|
|
(1,820
|
)
|
|
|
(320,308
|
)
|
|
|
(49,089
|
)
|
|
|
(52
|
)
|
|
|
(3,403
|
)
|
|
|
(527
|
)
|
Net cash flows generated from financing activities
|
|
|
37,333
|
|
|
|
149,399
|
|
|
|
529,143
|
|
|
|
81,095
|
|
|
|
89,085
|
|
|
|
30,958
|
|
|
|
4,795
|
|
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
|
|
|
—
|
|
|
|
(561
|
)
|
|
|
(20,873
|
)
|
|
|
(3,200
|
)
|
|
|
6,419
|
|
|
|
(296
|
)
|
|
|
(46
|
)
|
Net increase / (decrease)in cash and cash equivalents
|
|
|
(99,545
|
)
|
|
|
51,197
|
|
|
|
(46,086
|
)
|
|
|
(7,064
|
)
|
|
|
10,740
|
|
|
|
1,904
|
|
|
|
295
|
|
Cash, cash equivalents and restricted cash at beginning of the year
|
|
|
106,022
|
|
|
|
6,477
|
|
|
|
57,674
|
|
|
|
8,839
|
|
|
|
57,674
|
|
|
|
11,588
|
|
|
|
1,795
|
|
Cash, cash equivalents and restricted cash at end of the year
|
|
|
6,477
|
|
|
|
57,674
|
|
|
|
11,588
|
|
|
|
1,775
|
|
|
|
68,414
|
|
|
|
13,492
|
|
|
|
2,090
|
|
Our
cash and cash equivalents primarily consist of cash on hand and bank deposits, which are unrestricted as to withdrawal or use.
We
are at the early stage of our monetization and therefore have incurred significant losses and negative net cash flows used in operating
activities in the past.
We
had short-term borrowings of RMB16.1 million (US$2.5 million) as of June 30, 2021, which represented Renminbi-denominated borrowings
obtained from financial institutions with repayment terms of less than one year.
About
Molecular Data Inc.
Molecular
Data Inc. is a leading technology-driven platform in China’s chemical industry, connecting participants along the chemical value
chain through integrated solutions. The Company delivers e-commerce solutions, financial solutions, warehousing and logistics solutions,
and SaaS suite that are intended to solve pain points for participants in the traditional chemical industry. Built upon a comprehensive
knowledge engine and artificial intelligence (AI) capabilities, the Company’s e-commerce solutions are mainly offered through its
online platform, consisting of molbase.com, molbase.cn, Moku Data WeChat account, Chemical Community APP and
other ancillary platforms.
Exchange
Rate Information
This
announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless
otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.4566 to US$1.00, the rate in effect as of June 30,
2021 published by the Federal Reserve Board.
Safe
Harbor Statement
The
Company’s interim financial statements (“interim statements”) are prepared and presented in accordance with U.S. GAAP.
However, the interim statements have not been audited or reviewed by the Company’s auditor. The interim statements may be adjusted
in connection with the audit of the consolidated financial statements for the year ended December 31, 2021. In addition, accounting
estimates and assumptions made in preparing the consolidated financial statements as of December 31, 2021 may differ from that used
in the interim statements due to the differences in reporting periods and changes in the Company’s financial conditions during
those periods. As a result, the Company cannot assure you that its consolidated financial statements as of December 31, 2021
will not contain significant differences, adjustments or discrepancies from the interim statements.
In
addition to historical information, this announcement contains forward-looking statements. These statements are made under the “safe
harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified
by terminology such as “will,” “expects,” “anticipates,” “aims,” “future,”
“intends,” “plans,” “believes,” “estimates,” “confident,” “potential,”
“continue” or other similar expressions. Among other things, the Outlook and quotations from management in this announcement,
as well as the Company’s strategic and operational plans, contain forward-looking statements. The Company may also make written
or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders,
in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements
that are not historical facts, including but not limited to statements about the Company’s beliefs and expectations, are forward-looking
statements. Forward-looking statements involve inherent risks and uncertainties, and a variety of factors could cause actual results
to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company’s
goals and strategies; the Company’s future business development, results of operations and financial condition; the expected growth
of the education market; the Company’s ability to monetize the user base; fluctuations in general economic and business conditions
in China; the potential impact of the Covid-19 to the Company’s business operations and the economy in China and elsewhere generally;
and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in the
Company’s filings with the Securities and Exchange Commission. All information provided in this earnings results and in the attachments
is as of the date of the earnings results and the Company undertakes no duty to update such information, except as required under applicable
law.
CONSOLIDATED
STATEMENTS OF BALANCE SHEET
(Amounts
in thousands of RMB and US$,
except
for number of shares and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
2020
|
|
|
As of June 30, 2021
|
|
|
|
(RMB’000)
|
|
|
(RMB’000)
Unaudited
|
|
|
(USD’000)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
11,311
|
|
|
|
13,215
|
|
|
|
2,047
|
|
Restricted cash
|
|
|
277
|
|
|
|
277
|
|
|
|
43
|
|
Accounts receivable, net
|
|
|
5,963
|
|
|
|
7,902
|
|
|
|
1,224
|
|
Short-term investments
|
|
|
336,038
|
|
|
|
336,038
|
|
|
|
52,046
|
|
Unbilled receivables
|
|
|
51,825
|
|
|
|
56,842
|
|
|
|
8,804
|
|
Notes receivable
|
|
|
24,761
|
|
|
|
22,679
|
|
|
|
3,513
|
|
Inventories, net
|
|
|
2,821
|
|
|
|
4,275
|
|
|
|
662
|
|
Amounts due from related parties
|
|
|
1,144
|
|
|
|
3,967
|
|
|
|
614
|
|
Prepayments and other current assets
|
|
|
229,046
|
|
|
|
298,698
|
|
|
|
46,262
|
|
Total current assets
|
|
|
663,186
|
|
|
|
743,893
|
|
|
|
115,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term investment
|
|
|
353
|
|
|
|
3,753
|
|
|
|
581
|
|
Property and equipment, net
|
|
|
725
|
|
|
|
432
|
|
|
|
67
|
|
Intangible assets, net
|
|
|
536
|
|
|
|
249
|
|
|
|
39
|
|
Deferred assets & deferred tax assets
|
|
|
15,826
|
|
|
|
10,495
|
|
|
|
1,625
|
|
Right-of-use asset, net
|
|
|
4,195
|
|
|
|
4,195
|
|
|
|
650
|
|
Total non-current assets
|
|
|
21,635
|
|
|
|
19,124
|
|
|
|
2,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
684,821
|
|
|
|
763,017
|
|
|
|
118,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
|
33,749
|
|
|
|
16,149
|
|
|
|
2,501
|
|
Accounts payable
|
|
|
315,729
|
|
|
|
322,434
|
|
|
|
49,939
|
|
Deferred revenue
|
|
|
81,636
|
|
|
|
68,693
|
|
|
|
10,639
|
|
Accrued expenses and other liabilities
|
|
|
132,674
|
|
|
|
152,491
|
|
|
|
23,618
|
|
Income taxes payable
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Convertible notes
|
|
|
16,096
|
|
|
|
64,653
|
|
|
|
10,013
|
|
Amounts due to related parties
|
|
|
111,186
|
|
|
|
175,864
|
|
|
|
27,238
|
|
Operating lease liabilities-current
|
|
|
1,536
|
|
|
|
1,536
|
|
|
|
238
|
|
Total current liabilities
|
|
|
692,606
|
|
|
|
801,820
|
|
|
|
124,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current portion of capital lease obligations
|
|
|
17,052
|
|
|
|
17,052
|
|
|
|
2,641
|
|
Non-current portion of lease liability
|
|
|
2,659
|
|
|
|
2,659
|
|
|
|
412
|
|
Contingency liability
|
|
|
341
|
|
|
|
341
|
|
|
|
53
|
|
Total non-current liabilities
|
|
|
20,052
|
|
|
|
20,052
|
|
|
|
3,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
712,658
|
|
|
|
821,872
|
|
|
|
127,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests
|
|
|
42
|
|
|
|
42
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity/(deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares/paid-in capital
|
|
|
114
|
|
|
|
142
|
|
|
|
22
|
|
Additional paid-in capital
|
|
|
1,075,064
|
|
|
|
1,074,767
|
|
|
|
166,460
|
|
Accumulated other comprehensive gain/(loss)
|
|
|
(21,192
|
)
|
|
|
(21,192
|
)
|
|
|
(3,282
|
)
|
Accumulated deficit
|
|
|
(1,081,914
|
)
|
|
|
(1,112,912
|
)
|
|
|
(172,368
|
)
|
Total shareholders’ equity/(deficit)
|
|
|
(27,928
|
)
|
|
|
(59,195
|
)
|
|
|
(9,168
|
)
|
Non-controlling interest
|
|
|
49
|
|
|
|
298
|
|
|
|
46
|
|
TOTAL EQUITY
|
|
|
(27,879
|
)
|
|
|
(58,897
|
)
|
|
|
(9,122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity/(deficit)
|
|
|
684,821
|
|
|
|
763,017
|
|
|
|
118,177
|
|
CONSOLIDATED
STATEMENTS OF INCOME
(Amounts
in thousands of RMB and US$,
except
for number of shares and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months ended Jun 30
|
|
|
|
2020
|
|
|
2021
|
|
|
|
(RMB’000)
|
|
|
(RMB’000)
Unaudited
|
|
|
(USD’000)
|
|
Total net revenues
|
|
|
4,438,196
|
|
|
|
1,461,133
|
|
|
|
226,301
|
|
Cost of revenues
|
|
|
(4,433,591
|
)
|
|
|
(1,449,007
|
)
|
|
|
(224,423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
4,605
|
|
|
|
12,126
|
|
|
|
1,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing expenses
|
|
|
(47,968
|
)
|
|
|
(11,948
|
)
|
|
|
(1,851
|
)
|
General and administrative expenses
|
|
|
(36,376
|
)
|
|
|
(29,423
|
)
|
|
|
(4,557
|
)
|
Research and development expenses
|
|
|
(21,536
|
)
|
|
|
(5,378
|
)
|
|
|
(833
|
)
|
Total operating expenses
|
|
|
(105,880
|
)
|
|
|
(46,749
|
)
|
|
|
(7,241
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(101,275
|
)
|
|
|
(34,623
|
)
|
|
|
(5,363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expenses, net
|
|
|
(4,801
|
)
|
|
|
(186
|
)
|
|
|
(29
|
)
|
(Income)/Loss from equity investment
|
|
|
—
|
|
|
|
30
|
|
|
|
5
|
|
Foreign exchange gain/(loss)
|
|
|
(1,640
|
)
|
|
|
1,909
|
|
|
|
296
|
|
Other income, net
|
|
|
3,770
|
|
|
|
375
|
|
|
|
58
|
|
Income before income tax
|
|
|
(103,946
|
)
|
|
|
(32,495
|
)
|
|
|
(5,033
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expenses
|
|
|
(990
|
)
|
|
|
(22
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(104,936
|
)
|
|
|
(32,517
|
)
|
|
|
(5,036
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to non-controlling interest
|
|
|
—
|
|
|
|
248
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Molecular Data Inc.
|
|
|
(104,936
|
)
|
|
|
(32,765
|
)
|
|
|
(5,074
|
)
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Amounts
in thousands of RMB and US$,
except
for number of shares and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
years ended
December 31,
|
|
|
As of June 30,
|
|
|
|
2020
|
|
|
2021
|
|
|
|
(RMB’000)
|
|
|
(RMB’000)
Unaudited
|
|
|
(USD’000)
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(328,038
|
)
|
|
|
(32,517
|
)
|
|
|
(5,036
|
)
|
Adjustments to reconcile net loss to net cash generated from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of property and equipment
|
|
|
584
|
|
|
|
295
|
|
|
|
46
|
|
Amortization of intangible assets
|
|
|
1,140
|
|
|
|
5,618
|
|
|
|
870
|
|
Loss (gain) on disposal of property and equipment
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
Non-cash lease expense of right-of-use asset
|
|
|
140
|
|
|
|
—
|
|
|
|
—
|
|
Allowance for doubtful accounts
|
|
|
8,723
|
|
|
|
—
|
|
|
|
—
|
|
Deferred income taxes (benefit) expense
|
|
|
(5,116
|
)
|
|
|
—
|
|
|
|
—
|
|
Interest expense
|
|
|
2,298
|
|
|
|
—
|
|
|
|
—
|
|
Impairment of long-term investment
|
|
|
647
|
|
|
|
—
|
|
|
|
—
|
|
Share-based compensation expense
|
|
|
44,526
|
|
|
|
—
|
|
|
|
—
|
|
Others
|
|
|
—
|
|
|
|
1,793
|
|
|
|
278
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
13,155
|
|
|
|
(1,939
|
)
|
|
|
(300
|
)
|
Unbilled receivables
|
|
|
10,703
|
|
|
|
(5,017
|
)
|
|
|
(777
|
)
|
Inventories
|
|
|
1,530
|
|
|
|
(1,455
|
)
|
|
|
(225
|
)
|
Notes receivable
|
|
|
99,415
|
|
|
|
2,082
|
|
|
|
322
|
|
Long-term deferred cost
|
|
|
(10,710
|
)
|
|
|
—
|
|
|
|
—
|
|
Prepayments and other current assets
|
|
|
(19,612
|
)
|
|
|
(69,652
|
)
|
|
|
(10,788
|
)
|
Amounts due from related parties
|
|
|
(316
|
)
|
|
|
(2,822
|
)
|
|
|
(437
|
)
|
Amounts due to related parties
|
|
|
(66,226
|
)
|
|
|
64,678
|
|
|
|
10,017
|
|
Accounts payable
|
|
|
11,346
|
|
|
|
6,708
|
|
|
|
1,039
|
|
Deferred revenue
|
|
|
(25,544
|
)
|
|
|
(12,944
|
)
|
|
|
(2,005
|
)
|
Accrued expenses and other liabilities
|
|
|
26,843
|
|
|
|
19,065
|
|
|
|
2,953
|
|
Income taxes payable
|
|
|
461
|
|
|
|
752
|
|
|
|
116
|
|
Right-of-use asset
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Lease liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net cash used in operating activities
|
|
|
(234,048
|
)
|
|
|
(25,355
|
)
|
|
|
(3,927
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
16,846
|
|
|
|
(3
|
)
|
|
|
—
|
|
Purchases of intangible assets
|
|
|
(116
|
)
|
|
|
—
|
|
|
|
—
|
|
Payments for short-term investments
|
|
|
(336,038
|
)
|
|
|
—
|
|
|
|
—
|
|
Payment for long-term investment
|
|
|
(1,000
|
)
|
|
|
(3,400
|
)
|
|
|
(527
|
)
|
Net cash used in investing activities
|
|
|
(320,308
|
)
|
|
|
(3,403
|
)
|
|
|
(527
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of ordinary shares
|
|
|
419,955
|
|
|
|
—
|
|
|
|
—
|
|
Proceeds from mandatorily redeemable noncontrolling interests
|
|
|
16,137
|
|
|
|
48,558
|
|
|
|
7,521
|
|
Deemed contribution to shareholders
|
|
|
72,961
|
|
|
|
—
|
|
|
|
—
|
|
Capital contribution to equity by M.I.
|
|
|
90
|
|
|
|
—
|
|
|
|
—
|
|
Proceeds from bank borrowings
|
|
|
20,000
|
|
|
|
2,400
|
|
|
|
372
|
|
Repayment of bank borrowings
|
|
|
0
|
|
|
|
(20,000
|
)
|
|
|
(3,098
|
)
|
Net cash generated from financing activities
|
|
|
529,143
|
|
|
|
30,958
|
|
|
|
4,795
|
|
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
|
|
|
(20,873
|
)
|
|
|
(296
|
)
|
|
|
(46
|
)
|
Net increase/(decrease) in cash, cash equivalents and restricted cash
|
|
|
(46,086
|
)
|
|
|
1,904
|
|
|
|
295
|
|
Cash, cash equivalents and restricted cash at beginning of the period
|
|
|
57,674
|
|
|
|
11,588
|
|
|
|
1,795
|
|
Cash, cash equivalents and restricted cash at end of the period
|
|
|
11,588
|
|
|
|
13,492
|
|
|
|
2,090
|
|
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
(Amounts
in thousands of RMB and US$,
except
for number of shares and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of
Shares
|
|
|
Ordinary
Shares
|
|
|
Additional
paid-in
capital
|
|
|
Accumulated deficit
|
|
|
Other
comprehensive
income/(loss)
|
|
|
Non-controlling interest
|
|
|
Total
shareholder’s
equity
|
|
|
|
|
|
|
RMB’000
|
|
|
RMB’000
|
|
|
RMB’000
|
|
|
RMB’000
|
|
|
RMB’000
|
|
|
RMB’000
|
|
Balance as of January 1, 2021
|
|
|
359,308,050
|
|
|
|
114
|
|
|
|
1,075,064
|
|
|
|
(1,081,914
|
)
|
|
|
(21,192
|
)
|
|
|
49
|
|
|
|
(27,879
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net (loss) profit
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(32,765
|
)
|
|
|
—
|
|
|
|
248
|
|
|
|
(32,517
|
)
|
Share issuance
|
|
|
77,665,768
|
|
|
|
25
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25
|
|
Debt-to-equity
|
|
|
8,646,651
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Capitalized initial public offering expenses
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Foreign exchange Difference
|
|
|
—
|
|
|
|
—
|
|
|
|
(297
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(297
|
)
|
Share based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Debt-to-equity
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Restricted shares units vested
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Others
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,767
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,767
|
|
Balance as of June 30, 2021
|
|
|
445,620,469
|
|
|
|
142
|
|
|
|
1,074,767
|
|
|
|
(1,112,912
|
)
|
|
|
(21,192
|
)
|
|
|
298
|
|
|
|
(58,897
|
)
|
Balance as of June 30, 2021 in US$
|
|
|
|
|
|
|
22
|
|
|
|
166,460
|
|
|
|
(172,368
|
)
|
|
|
(3,282
|
)
|
|
|
46
|
|
|
|
(9,122
|
)
|
MOLECULAR
DATA INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Amounts
in thousands of RMB and US$,
except
for number of shares and per share data)
|
1.
|
Summary
of Significant Accounting Policies
|
|
(a)
|
Basis
of presentation
|
The
accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“US
GAAP”). The management believes the Company has the ability to fulfill its financial obligations and will continue as a going concern
As a result, it is appropriate for the consolidated financial statements to be prepared on a going concern basis.
|
(b)
|
Principles
of consolidation
|
The
consolidated financial statements include the financial statements of the Company, its subsidiaries, the VIEs and the subsidiary of the
VIE. All significant inter-company transactions and balances between the Company, its subsidiaries, the VIEs and subsidiary of the VIE
have been eliminated upon consolidation.
The
preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the balance sheet date and revenues and expenses during the reporting periods. Significant
accounting estimates reflected in the Company’s consolidated financial statements include, but not limited to, estimating variable
consideration, the useful lives of long- lived assets and intangible assets, determining the provision for accounts receivable and prepayments,
determining the provision for inventories, impairment assessment for long-term investment and long-lived assets, accounting for share-based
compensation, valuation allowance for deferred tax assets, measurement of right-of-use assets and lease liabilities. Changes in facts
and circumstances may result in revised estimates. Actual results could materially differ from those estimates.
The
functional currency of the Company and its Hong Kong subsidiary is the United States dollars (“US$”). The Company’s
PRC subsidiaries, the VIEs and the subsidiary of the VIE determined their functional currency to be the Chinese Renminbi (“RMB”).
The determination of functional currency is based on the criteria of ASC 830, Foreign Currency Matters (“ASC 830”). The
Company uses the RMB as its reporting currency.
The
financial statements of the Company and its Hong Kong subsidiary are translated from the functional currency to the reporting currency,
RMB. Monetary assets and liabilities of the subsidiaries are translated into RMB using the exchange rate in effect at each balance sheet
date. Income and expense items are translated at the average exchange rate prevailing during the fiscal year. Translation gains and losses
are accumulated in other comprehensive loss, as a component of shareholders’ deficit in the consolidated financial statements.
Transactions
denominated in other than the functional currencies are remeasured into the functional currency of the entity at the exchange rates prevailing
on the transaction dates. Financial assets and liabilities denominated in other than the functional currency are re-measured into the
functional currency at the exchange rates prevailing at the balance sheet date. The foreign exchange differences are recorded in the
consolidated statements of comprehensive loss.
This
announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader.
Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.4566 to US$1.00, the rate in effect as of
June 30, 2021 published by the Federal Reserve Board.
|
(e)
|
Convenience
translation
|
Amounts
in US$ are presented for the convenience of the readers and are translated at the noon buying rate of US$1.00 to RMB6.4566 on June30,
2021 as published on the website of the United States Federal Reserve Board. No representation is made that the RMB amounts could have
been, or could be, converted, realized or settled into US$ at such rate.
|
(f)
|
Cash
and cash equivalents
|
Cash
and cash equivalents consist of cash on hand and bank deposits, which are unrestricted as to withdrawal and use. The Company considers
all highly liquid investments that are readily convertible to known amounts of cash and with original maturities from the date of purchase
of three months or less to be cash equivalents.
Restricted
cash mainly represents cash held in escrow as security for financial service and related party’s credit facilities.
The
Company adopted ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, effective January 1, 2017
retrospectively and presented restricted cash within the ending cash, cash equivalents, and restricted cash balance on the Company’s
consolidated statements of cash flows for the periods presented.
|
(h)
|
Accounts
receivable and allowance for doubtful debt
|
Accounts
receivable are carried at net realizable value. An allowance for doubtful debt is recorded in the period when loss is probable based
on an assessment of specific evidence indicating troubled collection, historical experience, accounts aging and other factors. An accounts
receivable is written off when it is deemed uncollectible.
On
June 15, 2020, the Company purchased a US$ 51.5 million senior unsecured note (the “Note”) issued by a third party,
Strategic Global Investments. The Note matures on June 15, 2023 and bears interest at 6.25% per annum, on an annual and non-compounded
basis, payable in full at maturity date. The Company may request the issuer to redeem at any time after the issuance of the Note by giving
14 days prior written notice.
|
(j)
|
Prepayments
and other current assets
|
Prepayments
and other current
assets mainly represent deposits with suppliers. Prepayments and other current assets
increased by 30.4% from RMB 229.0
million ended December 31, 2020 to RMB 298.7 million ended June 30, 2021.
Inventories
of the Company are chemical products. Inventories are stated at the lower of cost or net realizable value. Costs of inventory are determined
using the weighted average method. Adjustments to reduce the cost of inventories are made, if required, for decreases in sales prices,
obsolescence or similar reductions in the estimated net realizable value.
|
(l)
|
Property
and equipment
|
Property
and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets as
follows:
Summary of estimated useful lives of property and equipment
|
|
|
Category
|
|
Estimated useful life
|
|
|
|
Office
equipment
|
|
1-3
years
|
Leasehold
improvements
|
|
5
years
|
Repair
and maintenance costs are charged to expenses as incurred.
Intangible
assets are carried at cost less accumulated amortization and any recorded impairment. Intangible assets with finite useful lives are
amortized using a straight-line method. The amortization method reflects the estimated pattern in which the economic benefits of the
respective intangible assets are to be consumed.
Intangible
assets have estimated economic lives from the date of purchase as follows:
Summary of estimated economic lives of intangible assets from the date of purchase
|
|
|
Category
|
|
Estimated economic life
|
|
|
|
Purchased
software
|
|
3
years
|
The
Company does not have any indefinite-lived intangible assets.
The
Company’s long-term investment represents an equity method investment. Investments in equity investees represent investments in
entities in which the Company can exercise significant influence but does not own a majority equity interest or control are accounted
for using the equity method of accounting in accordance with ASC 323-10, Investments-Equity Method and Joint Ventures: Overall.
Under the equity method, the Company initially records its investment at cost and prospectively recognizes its proportionate share of
each equity investee’s net profit or loss into its consolidated statements of comprehensive loss. The difference between the cost
of the equity investee and the amount of the underlying equity in the net assets of the equity investee is recognized as equity method
goodwill included in equity method investment on the consolidated balance sheets. The Company evaluates its equity method investment
for impairment under ASC 323-10. An impairment loss on the equity method investment is recognized in the consolidated statements of comprehensive
loss when the decline in value is determined to be other-than-temporary.
|
(o)
|
Impairment
of long-lived assets
|
The
Company evaluates its long-lived assets or asset group, including intangible assets with finite lives, for impairment whenever events
or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets,
indicate that the carrying amount of an asset or a group of long-lived assets may not be recoverable. When these events occur, the Company
evaluates for impairment by comparing the carrying amount of the assets to future undiscounted net cash flows expected to result from
the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount
of the assets, the Company would recognize an impairment loss based on the excess of the carrying amount of the asset group over its
fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market
prices are not readily available for the long-lived assets.
|
(p)
|
Fair
value measurements of financial instruments
|
The
Company’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, notes receivable, unbilled
receivables, amounts due from related parties, other receivables, accounts payable, other payables, amounts due to related parties, and
short-term borrowings. Other than the non-current amounts due to related parties, the carrying values of these financial instruments
approximate to their fair values due to their short-term maturities, which are categorized in level 1.
The
Company applies ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), in measuring fair value. ASC
820 defines fair value, establishes a framework for measuring fair value and requires disclosures to be provided on fair value measurement.
ASC
820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
|
●
|
Level
1 —Observable inputs that reflect quoted prices in active markets for identical assets or liabilities.
|
|
●
|
Level
2 —Include other inputs that are directly or indirectly observable in the marketplace.
|
|
●
|
Level
3 —Unobservable inputs which are supported by little or no market activity.
|
ASC
820 describes three main approaches to measuring 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.
Effective
January 1, 2017, the Company elected to early adopt the requirements of Accounting Standards Update (ASU) 2014-09, Revenue
from contracts with Customers (“ASC 606”) using the full retrospective method. The Company’s revenues are
primarily derived from sales of chemical products through direct sales model, provision of matching service through marketplace model,
provision of online membership services and provision of financial service. Revenue is recognized to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services under ASC 606.
Chemical
trading — direct sales model
The
Company sells chemical products to customers through an online platform or sales representatives. Sales contracts are entered into with
each individual customer. The Company is the principal under the chemical direct sales model as the Company controls the chemical products
with the ability to direct the use of, and obtain substantially all the remaining benefits from the chemical products before they are
sold to its customers. The Company has a single performance obligation to sell chemical products to the buyers. The Company estimates
the amount of variable consideration including sales return using the expected value method and includes variable consideration in the
transaction price to the extent that it is probable that a significant reversal will not occur. Revenue for chemical trading under direct
sales model is recognized at a point in time when the single performance obligation is satisfied when the chemical products are delivered
to the customer.
Chemical
trading — marketplace model
The
Company matches product suppliers and platform buyers through its vendor-supplier matching recommendation system. The Company charges
a commission fee to either the buyer or seller, depending on which party requests the matching services based on the commission agreements
signed. The Company has a single performance obligation to provide the matching service. As the Company is a service provider and does
not control the goods prior to transfer to the end customer, the Company recognizes commission fee as an agent on a net basis. The Company
considers both the buyer and end customer to be its customers in the transaction. The Company estimates the amount of variable consideration
including payment contingent on product delivery to platform buyer using the most likely amount method and includes in the transaction
price to the extent that it is probable that a significant reversal will not occur. Revenue for chemical trading under marketplace model
is recognized at a point in time when the performance obligation is satisfied upon the completion of the matching service.
Online
membership service
The
Company provides access to the users who subscribed for its online membership service to upload their product information on its online
platform for promotion purpose and to attend the online trainings and marketing activities organized by the Company during the membership
period. The Company typically charges a fixed fee over the membership period. The Company has a single performance obligation to stand
ready to perform the membership services during the membership period. As the users simultaneously receive and consume the benefits provided
by the Company’s performance as the Company performs, revenue for online membership service is recognized ratably over the contract
period.
Prior
to July 2019, for certain transactions under the direct sales model and marketplace model, the Company provides guarantee on the
customers’ loan repayments to certain financial institutions. The guarantees are within the scope of ASC 460, Guarantees, which
is accounted for at fair value at inception. The Company first allocates the fair value of the guarantee obligation from the total transaction
price and allocates the remaining transaction price to the performance obligation under ASC 606. Subsequently, the Company amortizes
the guarantee obligation into revenue outside the scope of ASC 606 as the Company is released from risk under the guarantee. The Company
subsequently accounts for the contingent loss arising from the arrangement in accordance with ASC 450, Contingencies.
Financial
service
Starting
from July 2019, the Company enters into financial service contracts with its suppliers, customers, and financing providers, including
banks and non-bank financial institutions, to facilitate lending arrangements between the financing providers and the customers and suppliers
who use the Company’s online platforms. In addition to the loan facilitation service, the Company provides a guarantee to the financing
providers on the loan repayments. The guarantees are within the scope of ASC 460, Guarantees. The Company typically charges its customers
and suppliers a fixed fee based on a percentage of the loan amount for the facilitation service and the guarantee. The Company first
allocates the transaction price to the guarantee obligation at fair value and allocates the remaining transaction price to the facilitation
service under ASC 606. The Company recognizes revenue generated from the facilitation service when the Company successfully matches the
customers or suppliers with the financing providers. The Company amortizes the guarantee obligation into revenue outside the scope of
ASC 606 as the Company is released from risk under the guarantee. The Company subsequently accounts for the contingent loss arising from
the guarantee arrangement in accordance with ASC 450, Contingencies.
When
the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due,
and the right to consideration is conditioned only on the passage of time, the Company recognizes an unbilled receivable on the consolidated
balance sheets.
Contract
assets, which arise when revenue is recognized prior to invoicing and the right to the amount due from customers is conditioned on something
other than the passage of time, such as the completion of a related performance obligation.
When
a customer pays consideration before the Company transfers goods or services, the Company records its obligation as a contract liability,
which is classified as deferred revenue.
Cost
of revenue consists primarily of cost of chemical products sold.
|
(s)
|
Research
and development expenses
|
Research
and development expenses consist primarily of personnel-related expenses and rental expenses incurred for the development of, enhancement
to, and maintenance of the Company’s technology infrastructure to support its business operations. Research and development costs
are expensed as incurred unless such costs qualify for capitalization as software development costs. In order to qualify for capitalization,
(i) the preliminary project should be completed, (ii) management has committed to funding the project and it is probable that
the project will be completed and the software will be used to perform the function intended, and (iii) it will result in significant
additional functionality in the Company’s services. The amount of costs qualifying for capitalization has been immaterial during
the periods presented, and as a result, all development costs were expensed as incurred.
Leases
are classified as operating leases or finance leases in accordance with ASC 842. The Company do not assume renewals in our determination
of the lease term unless the renewals are reasonably certain to be exercised at lease commencement. The Company’s lease agreements
do not contain any material residual value guarantees or material restrictive covenants.
The
Company adopted ASU No. 2016-02, Leases (Topic 842), (“ASU 842”) from January 1, 2019 using the
modified retrospective method and chose to apply the new standard as of the effective date and did not restate the comparable
periods. The Company has elected the package of practical expedients, which allows the Company not to reassess (i) whether any
expired or existing contracts as of the adoption date are or contain a lease,
(i) lease classification for any expired or
existing leases as of the adoption date and (iii) initial direct costs for any existing leases as of the adoption date. The
Company also elected the short-term lease exemption for all contracts with lease terms of 12 months or less.
The
Company determines if an arrangement is a lease or contains a lease at the inception. For operating leases, the Company recognizes a
right-of-use asset (“ROU asset”) and a lease liability based on the present value of the lease payments over the lease term
in the consolidated balance sheets at the lease commencement date. For finance leases, assets are included in property and equipment
in the consolidated balance sheets. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental
borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s
leases often include options to extend and lease terms include such extended terms when the Company is reasonably certain to exercise
those options. Lease terms also include periods covered by options to terminate the leases when the Company is reasonably certain not
to exercise those options.
Government
grants are provided by the relevant PRC municipal government authorities to subsidize the cost of certain research and development projects.
The amount of such government grants are determined solely at the discretion of the relevant government authorities. The government grants
of non-operating nature with no further conditions to be met are recorded as non-operating income in “Other income, net”
when received. The government subsidies with certain operating conditions are recorded as liabilities when received and will be recorded
as operating income when the conditions are met.
The
Company follows the liability method of accounting for income taxes in accordance with ASC 740 Accounting for Income Taxes (“ASC
740”), to account for uncertainty in income taxes. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be
in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred
tax assets if based on the weight of available evidence, it is more-likely-than- not that some portions, or all, of the deferred tax
assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in tax expense in the period that includes
the enactment date of the change in tax rate.
The
Company evaluates its uncertain tax positions using the provisions of ASC 740, which prescribes a recognition threshold that a tax position
is required to meet before being recognized in the consolidated financial statements. The Company recognizes in the consolidated financial
statements the benefit of a tax position which is “more likely than not” to be sustained under examination based solely on
the technical merits of the position assuming a review by tax authorities having all relevant information. Tax positions that meet the
recognition threshold are measured using a cumulative probability approach, at the largest amount of tax benefit that has a greater than
fifty percent likelihood of being realized upon settlement. It is the Company’s policy to recognize interest and penalties related
to unrecognized tax benefits, if any, as a component of income tax expense.
Cayman
Islands
Under
the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain arising in the Cayman Islands. Additionally,
upon payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.
Hong
Kong
MKD
HK is incorporated in Hong Kong and is subject to Hong Kong profits tax rate of 16.5% on its activities conducted in Hong Kong. Additionally,
upon payments of dividends by the Company to its shareholders, no HK withholding tax will be imposed.
PRC
The
Company’s subsidiaries and VIEs in the PRC are subject to the statutory rate of 25%, in accordance with the Enterprise Income Tax
law (the ‘‘EIT Law’’), which was effective since January 1, 2008, except for the following entities eligible
for preferential tax rates.
In
October 2016, Shanghai MOLBASE qualified as High and New Technology Enterprise (“HNTE”) and was eligible for 15% preferential
tax rate effective for three consecutive years. Shanghai MOLBASE reapplied for HNTE certificate in 2019 and the approval was obtained
on January 10, 2020 with a retroactive effect from 2019 to 2021.
The
Company’s loss before income tax consisted of:
Schedule of loss before income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
years ended
December 31,
|
|
|
As of June 30,
|
|
|
|
2020
|
|
|
2021
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
Unaudited
|
|
|
|
|
Non-PRC
|
|
|
(192,799
|
)
|
|
|
(15,830
|
)
|
|
|
(2,452
|
)
|
PRC
|
|
|
(132,781
|
)
|
|
|
(16,665
|
)
|
|
|
(2,581
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(325,580
|
)
|
|
|
(32,495
|
)
|
|
|
(5,033
|
)
|
The
current and deferred portions of income tax expenses included in the consolidated statements of comprehensive loss were as follows:
Schedule of income tax expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
years ended
December 31,
|
|
|
As of June 30,
|
|
|
|
2020
|
|
|
2021
|
|
|
|
RMB
|
|
|
RMB
|
|
|
US$
|
|
|
|
|
|
|
Unaudited
|
|
|
|
|
Current
|
|
|
2,458
|
|
|
|
22
|
|
|
|
3
|
|
Deferred
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expenses
|
|
|
2,458
|
|
|
|
22
|
|
|
|
3
|
|
|
(w)
|
Share-Based
Compensation
|
The
Company applies ASC 718, Compensation — Stock Compensation (“ASC 718”), to account for its employee
share-based payments. In accordance with ASC 718, the Company determines whether an award should be classified and accounted for as a
liability award or an equity award. All of the Company’s share-based awards to employees were classified as equity awards and are
recognized in the consolidated financial statements based on their grant date fair values. For awards with only service conditions, the
Company has elected to recognize compensation expense using the accelerated method for the awards that have a graded vesting schedule.
The Company adopted Accounting Standard Update (“ASU”) ASU 2016-09, Compensation — Stock Compensation (Topic
718): Improvements to Employee Share-Based Payment Accounting and elected to account for forfeitures as they occur.
The
Company, with the assistance of an independent third-party valuation firm, determined the fair value of the stock options granted to
employees. The binominal option pricing model was applied in determining the estimated fair value of the options granted to employees.
|
(x)
|
Comprehensive
income (loss)
|
Comprehensive
income (loss) is defined as the changes in equity of the Company during a period from transactions and other events and circumstances
excluding transactions resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220, Comprehensive
Income, requires that all items that are required to be recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same prominence as other financial statements. For each of the
periods presented, the Company’s comprehensive loss includes only net loss and is presented in the consolidated statements of comprehensive
loss.
In
accordance with ASC 260, Earnings per Share, basic loss per share is computed by dividing net loss attributable to ordinary
shareholders by the weighted average number of unrestricted ordinary shares outstanding during the year. Diluted loss per share is calculated
by dividing net loss attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any,
by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent
shares are not included in the denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive.
The
Company’s Chief Executive Officer as the chief operating decision-maker reviews the consolidated financial results when making
decisions about allocating resources and assessing the performance of the Company as a whole. In accordance with ASC 280, Segment
Reporting, the Company has only one reportable segment. As the Company generates substantially all its revenues in the PRC and all
of the Company’s long-lived assets are substantially located in the PRC, no geographical segments are presented.
|
(aa)
|
Value
added taxes (“VAT”), business related tax and surcharges
|
The
Company is subject to VAT at the rate of 17%, 16%, 13%, 6%, 5% or 3%, depending on whether the entity is a general taxpayer or small-scale
taxpayer, and related surcharges on revenue generated from providing services.
The
Company is also subject to certain government surcharges on the VAT payable in the PRC, which is recorded as cost of revenues.
|
(bb)
|
Deferred
initial public offering (“IPO”) costs
|
Direct
and incremental costs incurred by the Company attributable to its proposed IPO of ordinary shares in the U.S. is deferred and recorded
as deferred IPO costs in the consolidated balance sheets and will be charged against the gross proceeds received from such offering.
|
(cc)
|
Commitments
and contingencies
|
The
Company records liabilities for contingencies when it is probable that a liability has been incurred and the amount of the assessment
can be reasonably estimated.
If
the assessment of a contingency indicates that it is probable that a material loss is incurred and the amount of the liability can be
estimated, then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially
material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the
contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed.
Certain
items reported in the prior year’s consolidated financial statements have been reclassified to conform with the current year’s
presentation.
|
(ee)
|
Recent
accounting pronouncements
|
In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit
Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 changes the impairment model for most financial assets
and certain other instruments. The standard will replace “incurred loss” approach with an “expected loss” model
for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather
than reduce the carrying amount, as they do today under the other-than-temporary impairment model. The standard is effective for public
business entities for annual periods beginning after December 15, 2019, and interim periods therein. Early adoption is permitted.
The Company does not currently anticipate the adoption of this ASU to have a material impact 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. The update eliminates, modifies, and adds certain disclosure requirements for fair value
measurements. This update is effective in fiscal years, including interim periods, beginning after December 15, 2019, and early
adoption is permitted. The added disclosure requirements and the modified disclosure on the narrative description of measurement uncertainty
should be applied prospectively for only the most recent interim or annual period presented. All other changes to disclosure requirements
in this update should be applied retrospectively to all periods presented upon their effective date. The Company is currently evaluating
the impact of the adoption of this guidance on its consolidated financial statements.
In
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This
update simplifies the accounting for income taxes as part of the FASB’s overall initiative to reduce complexity in accounting standards.
The amendments include removal of certain exceptions to the general principles of ASC 740, Income taxes, and simplification in several
other areas such as accounting for a franchise tax (or similar tax) that is partially based on income. The update is effective in fiscal
years beginning after December 15, 2020, and interim periods therein, and early adoption is permitted. Certain amendments in this
update should be applied retrospectively or modified retrospectively, all other amendments should be applied prospectively. The Company
does not expect the impact of this guidance to have a material impact on the Company’s consolidated financial statements.
|
3.
|
Concentration
of Risks
|
|
(a)
|
Concentration
of credit risk
|
Financial
instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents,
restricted cash and accounts receivable.
The
Company places its cash and cash equivalents and restricted cash with reputable financial institutions with high-credit ratings. There
has been no recent history of default in relation to these financial institutions. The Company continues to monitor the financial strength
of the financial institutions.
Accounts
receivable are typically unsecured and derived from revenue earned from customers in the PRC, which are exposed to credit risk. The risk
is mitigated by credit evaluations the Company performs on its customers and its ongoing monitoring process of outstanding balances.
|
(b)
|
Concentration
of suppliers and customers
|
The
success of the Company’s business going forward will rely in part on the Company’s ability to continue to obtain and expand
business from existing suppliers and customers while also attracting new suppliers and customers. No supplier accounted for 10% or more
of the Company’s total costs for the years ended December 31, 2018, 2019 and 2020. No customer accounted for 10% or more of the
Company’s revenues for the years ended December 31, 2018, 2019 and 2020.
|
(c)
|
Current
vulnerability due to certain other concentrations
|
The
Company participates in a dynamic and competitive high technology industry and believes that changes in any of the following areas could
have a material adverse effect on the Company’s future financial position, results of operations or cash flows: changes in the
overall demand for services; competitive pressures due to new entrants; advances and new trends in new technology; strategic relationships
or customer relationships; regulatory considerations; and risks associated with the Company’s ability to attract and retain employees
necessary to support its growth.
The
Company’s operations could be adversely affected by significant political, economic and social uncertainties in the PRC. Although
the PRC government has been pursuing economic reform policies for more than 20 years, no assurance can be given that the PRC government
will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in
leadership, social or political disruption or unforeseen circumstances affecting the PRC political, economic and social conditions. There
is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective.
|
(d)
|
Currency
convertibility risk
|
The
Company transacts all of its business in RMB, which is not freely convertible into foreign currencies. On January 1, 1994, the PRC
government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China
(the ‘‘PBOC’’). However, the unification of the exchange rates does not imply that the RMB may be readily convertible
into US$ or other foreign currencies. All foreign exchange transactions continue to take place either through the PBOC or other banks
authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approval of foreign currency payments by the
PBOC or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents
and signed contracts.
|
(e)
|
Foreign
currency exchange rate risk
|
The
functional currency and the reporting currency of the Company and its Hong Kong subsidiary are the US$ and the RMB, respectively. Most
of the Company’s PRC subsidiaries, the VIEs and subsidiary of the VIE’s revenues and costs are denominated in RMB, while
a portion of cash and cash equivalents is denominated in U.S. dollars. Any significant revaluation of RMB may materially and adversely
affect the Company’s cash flows, revenues, earnings and financial position in U.S. dollars.
The
Company historically operated its business through its subsidiaries, VIEs and the subsidiary of the VIE. The Company, through a series
of transactions which are accounted for as a reorganization of entities under common control, became the ultimate parent entity of these
subsidiaries, VIEs and the subsidiary of the VIE on December 21, 2018. Accordingly, these consolidated financial statements reflect
the historical operations of the Company as if the current organization structure had been in existence throughout the periods presented.
|
5.
|
Share-Based
Compensation
|
On
November 27, 2018, the Board of Directors of the Company approved the 2018 Share Plan (the “Plan”) for the purpose of
providing incentives and rewards to employees and executives. As of December 31, 2019, the Company had options outstanding
to purchase an aggregate of 39,512,055 shares.
As
of June 30, 2021, the Company had options outstanding to purchase an aggregate of 31,414,057 shares as 33,343 shares were forfeited.
The
Company recognized share-based compensation expense for the years ended December 31, 2020 and June 30, 2021 as follows:
Schedule of share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended
December 31,
|
|
|
As of June 30,
|
|
|
|
2020
|
|
|
2021
|
|
|
|
RMB
|
|
|
RMB
Unaudited
|
|
|
US$
|
|
Sales and marketing expenses
|
|
|
14,856
|
|
|
|
2,851
|
|
|
|
442
|
|
General and administrative expenses
|
|
|
120,699
|
|
|
|
10,890
|
|
|
|
1,687
|
|
Research and development expenses
|
|
|
4,246
|
|
|
|
864
|
|
|
|
134
|
|
Total
|
|
|
139,801
|
|
|
|
14,605
|
|
|
|
2,262
|
|
In
September 2021, MKD received USD 2.8 million in gross proceeds from Waichun logistics technology and USD 15 million in gross
proceeds via a registered direct offering for the purchase and sale of (i) common units, consisting of one American Depository Share,
or ADS and one warrant to purchase one ADS and (ii) pre-funded units, consisting of one pre-funded warrant to purchase one ADS and one
warrant to purchase one ADS.
|
7.
|
Impact
of COVID-19 on Our Operations and Financial Performance
|
Substantially
all of our revenues and workforce are concentrated in China. In response to the intensifying efforts to contain the spread of COVID-19,
the Chinese government took a number of actions, which included quarantining individuals suspected of having COVID-19, asking residents
in China to stay at home and to avoid public gathering, among other things. During the year of 2020, COVID-19 caused temporary closure
of many business operations across China, and put significant strain on our platform. Primarily as a result of the COVID-19 pandemic,
our revenue decreased by 67.1% from RMB4.4 billion in the six months ended June 30, 2020 to RMB1.4 billion (US$0.2 billion) in the
six months ended June 30, 2021. It is, however, still unclear how the pandemic will evolve going forward, and we cannot assure you
whether the COVID-19 pandemic will again bring about significant negative impact on our business operations, financial condition and
operating results, including but not limited to total revenues, cash flow options and operating results.
While
we have resumed business operations, there remain significant uncertainties surrounding the COVID-19 outbreak and its further development
as a global pandemic. Hence, the extent of the business disruption and the related impact on our financial results and outlook for 2021
cannot be reasonably estimated at this time.