| ORGANIZATIONS AND PRINCIPAL ACTIVITIES | 1. ORGINAZATIONS AND PRINCIPAL ACTIVITIES Ucommune Group Holdings Limited (“Ucommune Group”) was founded in 2018 and was incorporated in the Cayman Islands. On June Ucommune International Ltd, its consolidated subsidiaries, variable interest entities (“VIEs”) and VIEs’ subsidiaries (collectively referred to as the “Group”) is primarily engaged in providing long -term -demand -term -up -furnished -serviced (a) Reverse recapitalization On November Ucommune Group was determined to be the accounting acquirer given Ucommune Group effectively controlled the combined entity after the SPAC Transaction. The transaction is not a business combination because the Company was not a business. The transaction is accounted for as a reverse recapitalization, which is equivalent to the issuance of shares by Ucommune Group for the net monetary assets of the Company, accompanied by a recapitalization. Ucommune Group is determined as the predecessor and the historical financial statements of Ucommune Group became the Company’s historical financial statements, with retrospective adjustments to give effect of the reverse recapitalization. The equity is restated using the exchange ratio of 0.4783 established in the reverse recapitalization transaction, which is 70,000,000 divided by 146,341,551 (131,312,984 ordinary shares and 15,028,567 ordinary shares to be issued for options granted by Ucommune Group), to reflect the equity structure of the Company. Loss (income) per share is retrospectively restated using the historical weighted -average The par value of ordinary shares remained $0.0001, the subscription receivable was adjusted retrospectively from negative $12 to $nil, and the difference of $5 was adjusted retrospectively as in addition paid -in Upon the consummation of the SPAC Transaction, the net assets of the Company were USD 5,885 in cash which had been consolidated in the consolidated balance sheets. In addition, 4.0 Shares if (i) the volume weighted average price(“VWAP”)of the Company Class A Ordinary Shares equals or exceeds $16.50 (or any foreign currency equivalent) in any twenty trading days within a thirty trading day period before December (b) Reorganization Prior to the SPAC Transaction, Ucommune Group undertook a series of steps as follows to restructure its business (the “Reorganization”): Ucommune (Beijing) Venture Investment Co., Ltd. (“Ucommune Venture”) was established in April 2015, as a limited liability company in the PRC incorporated by Dr. Daqing Mao and other co -founders During September 2018 to June 2019, Ucommune Venture undertook a series of reorganization transactions to re -domicile -domiciliation -domiciliation (1) In September 2018, Ucommune Group was incorporated in the Cayman Islands to be the holding company of the Group. In December 2018, the Company established Ucommune Group Holdings (Hong Kong) Limited (“Ucommune HK”), a wholly owned subsidiary of the Company as an intermediate holding company. In January 2019, Ucommune HK established a wholly foreign owned enterprise, Ucommune (Beijing) Technology Co., Ltd. (“WFOE”), for the purpose of establishing a VIE structure as further described in 3) below. (2) In May and June 2019, Ucommune Group issued an aggregate of 90,646,360 ordinary shares to all Ucommune Venture’s then existing shareholders at par value, in the same proportions as the percentage of equity interest they held in Ucommune Venture. Upon the issuance of the ordinary shares, the equity structure of Ucommune Group is identical to that of Ucommune Venture. The preferential rights of Ucommune Venture’s equity interest holders were cancelled upon the issuance of ordinary shares by the Company, which was accounted for as a modification. (3) In May 2019, a series of VIE agreements were entered into between WFOE, Ucommune Venture and the shareholders of Ucommune Venture. Those arrangements effectively provided control over the operations of Ucommune Venture to WFOE. Upon the completion of step 2) and 3), the Re -domiciliation Prior to the Re -domiciliation -domiciliation (c) The VIE arrangements The Company operates substantially all of its business through its VIEs including Ucommune Venture and Beijing U Bazaar. On May The Group believes that these contractual arrangements enable the Company to (1) have power to direct the activities that most significantly affects the economic performance of the VIEs, and (2) receive the economic benefits of the VIEs that could be significant to the VIEs. Accordingly, the Company is considered the primary beneficiary of the VIEs and is able to consolidate the VIEs and VIEs’ subsidiaries. The Group’s business has been directly operated by the VIEs and their subsidiaries. As of December The following financial information of the Company’s VIEs and VIEs’ subsidiaries after the elimination of inter -company
As of
As of
RMB
RMB
USD
Cash and cash equivalents 122,354 167,663 25,968
Other current assets 376,221 333,209 51,608
Total current assets 498,575 500,872 77,576
Property and equipment, net 329,322 307,737 47,662
Right-of-use assets, net 832,411 680,882 105,455
Goodwill 1,440,769 1,440,769 223,147
Other non-current assets 382,218 389,971 60,399
Total non-current assets 2,984,720 2,819,359 436,663
TOTAL ASSETS 3,483,295 3,320,231 514,239
Accounts payable 267,558 228,507 35,391
Lease liabilities, current 351,225 313,407 48,541
Other current liabilities 447,621 556,494 86,189
Total current liabilities 1,066,404 1,098,408 170,121
Lease liabilities, non-current 553,034 430,507 66,677
Other non-current liabilities 33,261 34,996 5,420
Total non-current liabilities 586,295 465,503 72,097
Total liabilities 1,652,699 1,563,911 242,218
For the Six Months Ended June 30,
2020
2021
2021
RMB
RMB
USD
Net revenues 381,517
485,863
75,251
Net loss (177,970
) (129,256
) (20,019
)
Net cash (used in)/provided by operating activities (11,763
) 61,527
9,529
Net cash (used in)/provided by investing activities (27,266
) (5,145
) (797
)
Net cash provided by/(used in) financing activities (25,923
) 3,008
466
There are no consolidated VIEs’ assets that are collateral for the VIEs’ obligations. No creditors (or beneficial interest holders) of the VIEs have recourse to the general credit of the Company or any of its consolidated subsidiaries. No terms in any arrangements, considering both explicit arrangements and implicit variable interests, require the Company or its subsidiaries to provide financial support to the VIEs. However, if the VIEs ever need financial support, the Company or its subsidiaries may, at its option and subject to statutory limits and restrictions, provide financial support to the VIE through loans to the shareholders of the VIEs or entrustment loans to the VIEs. (d) Recent development Novel coronavirus (COVID -19 -19 The COVID -19 -wide -19 | 1. ORGANIZATIONS AND PRINCIPAL ACTIVITIES Ucommune Group Holdings Limited (“Ucommune Group”) was founded in 2018 and was incorporated in the Cayman Islands. On June Ucommune International Ltd, its consolidated subsidiaries, variable interest entities (“VIEs”) and VIEs’ subsidiaries (collectively referred to as the “Group”) is primarily engaged in providing long -term -demand -term -up -furnished -serviced a. Reverse recapitalization On November Ucommune Group was determined to be the accounting acquirer given Ucommune Group effectively controlled the combined entity after the SPAC Transaction. The transaction is not a business combination because the Company was not a business. The transaction is accounted for as a reverse recapitalization, which is equivalent to the issuance of shares by Ucommune Group for the net monetary assets of the Company, accompanied by a recapitalization. Ucommune Group is determined as the predecessor and the historical financial statements of Ucommune Group became the Company’s historical financial statements, with retrospective adjustments to give effect of the reverse recapitalization. The equity is restated using the exchange ratio of 0.4783 established in the reverse recapitalization transaction, which is 70,000,000 divided by 146,341,551 (131,312,984 ordinary shares and 15,028,567 ordinary shares to be issued for options granted by Ucommune Group), to reflect the equity structure of the Company. Loss (income) per share is retrospectively restated using the historical weighted -average -based The par value of ordinary shares remained $0.0001, the subscription receivable was adjusted retrospectively from negative $12 to $nil, and the difference of $5 was adjusted retrospectively as in addition paid -in outstanding used in computing net loss per ordinary share — basic and diluted was adjusted retrospectively from 131,312,984 to 70,000,000 for the years ended December
Year Ended December 31,
2018
2019
Before
After
Before
After
Net loss per share attributable to
– Basic (4.74
) (9.91
) (7.56
) (15.80
)
– Diluted (4.74
) (9.91
) (7.56
) (15.80
)
Weighted average shares used in calculating net loss per share
– Basic 90,646,360
43,359,150
104,684,701
50,074,152
– Diluted 90,646,360
43,359,150
104,684,701
50,074,152
Upon the consummation of the SPAC Transaction, the net assets of the Company were USD 5,885 in cash which had been consolidated in the consolidated balance sheets. In addition, 4.0 b. Reorganization Prior to the SPAC Transaction, Ucommune Group undertook a series of steps as follows to restructure its business (the “Reorganization”): Ucommune (Beijing) Venture Investment Co., Ltd. (“Ucommune Venture”) was established in April 2015, as a limited liability company in the PRC incorporated by Dr. Daqing Mao and other co -founders During September 2018 to June 2019, Ucommune Venture undertook a series of reorganization transactions to re -domicile -domiciliation -domiciliation 1) In September 2018, Ucommune Group was incorporated in the Cayman Islands to be the holding company of the Group. In December 2018, the Company established Ucommune Group Holdings (Hong Kong) Limited (“Ucommune HK”), a wholly owned subsidiary of the Company as an intermediate holding company. In January 2019, Ucommune HK established a wholly foreign owned enterprise, Ucommune (Beijing) Technology Co., Ltd. (“WFOE”), for the purpose of establishing a VIE structure as further described in 3) below. 2) In May and June 2019, Ucommune Group issued an aggregate of 90,646,360 ordinary shares to all Ucommune Venture’s then existing shareholders at par value, in the same proportions as the percentage of equity interest they held in Ucommune Venture. Upon the issuance of the ordinary shares, the equity structure of Ucommune Group is identical to that of Ucommune Venture. The preferential rights of Ucommune Venture’s equity interest holders were cancelled upon the issuance of ordinary shares by the Company, which was accounted for as a modification. 3) In May 2019, a series of VIE agreements were entered into between WFOE, Ucommune Venture and the shareholders of Ucommune Venture. Those arrangements effectively provided control over the operations of Ucommune Venture to WFOE. Upon the completion of step 2) and 3), the Re -domiciliation Prior to the Re -domiciliation -domiciliation As of December
Name
Later of date of
Place of
Percentage
Principal
Major Subsidiaries of the Company:
Ucommune Group Holdings Limited September 21, 2018 Cayman 100% Investment holding
Ucommune Group Holdings (Hong Kong) Limited (“Ucommune HK”) December 7, 2018 Hong Kong 100% Shared workspace
Ucommune (Beijing) Information Technology Co., Ltd (“WFOE”) January 3, 2019 PRC 100% Technology and internet service
Melo, Inc. May 15, 2019 Delaware 100% Technology Innovation
Melo Hongkong Limited May 15, 2019 Hong Kong 100% Technology Innovation
Beijing Melo Technology Co. Ltd May 15, 2019 PRC 100% Technology Innovation
Name
Later of date of
Place of
Percentage
Principal
VIEs:
Ucommune (Beijing) Venture Investment Co., Ltd (“Ucommune Investment”) April 3, 2015 PRC
Nil Shared workspace
Beijing Youxianji Technology Co., Ltd (“Youxianji”) August 29, 2018 PRC
Nil Technology and internet service
Beijing Weixue Tianxia Educational Technology Co. Ltd May 15, 2019 PRC
Nil Technology Innovation
Major VIEs’ subsidiaries:
Beijing Sunshine 100 Ucommune Venture Investment Co., Ltd. May 18, 2015 PRC
Nil Shared workspace
Beijing Pengda Ucommune Venture Investment Co., Ltd. July 31, 2015 PRC
Nil Shared workspace
Shanghai Ucommune Venture Investment Co., Ltd. October 30, 2015 PRC
Nil Shared workspace
Beijing Weituo Ucommune Venture Investment Co., Ltd. January 04, 2016 PRC
Nil Shared workspace
Beijing Hongkun Enterprise Management Consulting Co., Ltd. May 16, 2016 PRC
Nil Shared workspace
Beijing Jingchao Ucommune Technology Services Co., Ltd. September 19, 2016 PRC
Nil Shared workspace
Beijing Dongke Ucommune Technology Service Co., Ltd. July 06, 2017 PRC
Nil Shared workspace
Hongtai Innovation Space (Beijing) Venture Investment Co., Ltd. (“Hongtai Space”) December 05, 2017 PRC
Nil Shared workspace
Hongkunyouxiang (Beijing)Technology December 06, 2017 PRC
Nil Shared workspace
Shenzhen Weido Union Technology Co., Ltd. and Subsidiaries (“Shenzhen Weido”) June 01, 2018 PRC
Nil Shared workspace
Hezuogongchuang (Beijing) Office Services Co., Ltd. and its Subsidiaries (“Wujie Space”) June 01, 2018 PRC
Nil Shared workspace
Beijing Dongyi Yuanda Architectural Decoration Engineering Co., Ltd. (“Dongyi Yuanda”) July 01,2018 PRC
Nil Construction
Beijing Daguan Architectural Design Consulting Co., Ltd. and Subsidiary (“Daguan”) July 01,2018 PRC
Nil Interior design
Zhuhai Shengguang Zhongshuo Digital Marketing Co., Ltd. (“Shengguang Zhongshuo”) December 20, 2018 PRC
Nil Marketing service
Beijing Xiyu Information Technology March 20, 2017 PRC
Nil SaaS services and IOT solutions c. The VIE arrangements The Company operates substantially all of its business through its VIEs including Ucommune Venture and Beijing U Bazaar. On May The Group believes that these contractual arrangements enable the Company to (1) have power to direct the activities that most significantly affects the economic performance of the VIEs, and (2) receive the economic benefits of the VIEs that could be significant to the VIEs. Accordingly, the Company is considered the primary beneficiary of the VIEs and is able to consolidate the VIEs and VIEs’ subsidiaries. Details of the contractual agreements are set forth below. • Exclusive Business Cooperation Agreement Pursuant to the exclusive business cooperation agreement between WFOE and the VIEs, WFOE has the exclusive right to provide or designate any third -party -party • Equity Pledge Agreement Under the equity interest pledge agreement among WFOE, the VIEs and their shareholders, the VIEs’ shareholders pledged all of their equity interests of the VIEs to WFOE as security for performance of the obligations of the VIEs and its shareholders under the exclusive call option agreement, the exclusive business cooperation agreement and the powers of attorney. If any of the specified events of default occurs, WFOE may exercise the right to enforce the pledge immediately. WFOE may transfer all or any of its rights and obligations under the equity interest pledge agreement to its designee(s) at any time. The agreement will remain in effect until the fulfillment of all the obligations under the exclusive call option agreement, the exclusive business cooperation agreement and the powers of attorney. Exclusive Call Option Agreement Under the exclusive call option agreement among WFOE, the VIEs and their shareholders, each of the shareholders of the VIEs irrevocably granted WFOE a right to purchase, or designate a third -party -applicable equity interests in the VIEs or create any pledge or encumbrance on their equity interests in the VIEs; (ii) vote for shareholders’ resolution regarding sell, transfer, create any pledge or otherwise dispose of their equity interests in the VIEs; (iii) change the VIEs’ registered capital; (iv) amend the VIEs’ articles of association; (v) cause the VIEs to enter into any major contracts or terminate any material contracts to which the VIEs is a party; (vi) declare or distribute dividends; (vii) terminate, liquidate or dissolve the VIEs; or (viii) allow the VIEs to incur, inherit, guarantee or permit any debts, except for those payables incurred in the ordinary or usual course of business but not incurred by way of borrowing. The agreement will remain effective until terminated by WFOE at its discretion or the entire equity interests in the VIEs have been transferred to WFOE or its designee(s). Powers of Attorney Pursuant to the powers of attorney executed by the VIEs’ shareholders, each of them irrevocably authorized WFOE or its designee(s) to act on their respective behalf as exclusive agent and attorney, to the extent permitted by law, with respect to all rights of shareholders concerning all the equity interest held by each of them in the VIEs, including but not limited to proposing to convene or attend shareholder meetings, signing the resolutions and minutes of such meetings, exercising all the rights as shareholders (including but not limited to voting rights, nomination rights, appointment rights, the right to receive dividends and the right to sell, transfer, pledge or dispose of all the equity held in part or in whole). Spousal Consent Letters Pursuant to the spousal consent letters executed by the spouses of relevant individual shareholders of the VIEs, the signing spouses unconditionally and irrevocably agreed that the equity interest in the VIEs held by and registered in the name of their spouses be disposed of in accordance with the exclusive call option agreement, the exclusive business cooperation agreement, the equity interest pledge agreement and the powers of attorney described above, and that their spouses may perform, amend or terminate such agreements without their additional consent. Additionally, the signing spouses agreed not to assert any rights over the equity interest in the VIEs held by their spouses. In addition, in the event that the signing spouses obtain any equity interests in the VIEs held by their spouses for any reason, they agree to be bound by and sign any legal documents substantially similar to the contractual arrangements described above, as may be amended from time to time. Risks in relation to VIE structure The Company believes that the contractual arrangements with VIEs and their shareholders are in compliance with existing PRC laws and regulations and are legally enforceable. However, the contractual arrangements are subject to risks and uncertainties, including: — VIEs and their shareholders may have or develop interests that conflict with the Group’s interests, which may lead them to pursue opportunities in violation of the aforementioned contractual agreements. If the Group cannot resolve any conflicts of interest or disputes between the Group and the shareholders of VIEs, the Group would have to rely on legal proceedings, which could result in disruption of its business, and there is substantial uncertainty as to the outcome of any such legal proceedings. — VIEs and their shareholders could fail to obtain proper operating licenses or fail to comply with other regulatory requirements. As a result, the PRC government could impose fines, new requirements or other penalties on the VIE or the Group, mandate a change in ownership structure or operations for the VIEs or the Group, restrict the VIEs or the Group’s use of financing sources or otherwise restrict the VIEs or the Group’s ability to conduct business. — The PRC government may declare the aforementioned contractual arrangements invalid. They may modify the relevant regulations, have a different interpretation of such regulations, or otherwise determine that the Group or the VIEs have failed to comply with the legal obligations required to effectuate such contractual arrangements. — If the legal structure and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government may restrict or prohibit the Group’s business and operations in China. The Group’s ability to conduct its business may be negatively affected if the PRC government were to carry out any of the aforementioned actions. As a result, the Group may not be able to consolidate VIEs and their subsidiaries in the combined and consolidated financial statements as the Group may lose the ability to exert effective control over VIEs and their shareholders, and the Group may lose the ability to receive economic benefits from VIEs. The Group’s business has been directly operated by the VIEs and their subsidiaries. As of December The following financial information of the Company’s VIEs and VIEs’ subsidiaries after the elimination of inter -company
As of December 31,
2019
2020
RMB
RMB
USD
Cash and cash equivalents 169,530 122,354 18,752
Held-for-sale asset, current 356,233
—
—
Other current assets 362,155 376,221 57,658
Total current assets 887,918 498,575 76,410
Property and equipment, net 538,514 329,322 50,471
Right-of-use assets, net 1,778,734 832,411 127,573
Goodwill 1,440,769 1,440,769 220,808
Other non-current assets 272,772 382,218 58,577
Total non-current assets 4,030,789 2,984,720 457,429
TOTAL ASSETS 4,918,707 3,483,295 533,839
Accounts payable 317,816 267,558 41,005
Lease liabilities, current 557,647 351,225 53,828
Other current liabilities 574,779 447,621 68,600
Total current liabilities 1,450,242 1,066,404 163,433
Lease liabilities, non-current 1,345,623 553,034 84,756
Other non-current liabilities 21,735 33,261 5,097
Total non-current liabilities 1,367,358 586,295 89,853
Total liabilities 2,817,600 1,652,699 253,286
For the Years Ended
2018
2019
2020
2020
RMB
RMB
RMB
USD
Net revenues 448,508
1,147,942
846,298
129,701
Net loss (445,155
) (736,149
) (396,494
) (60,765
)
Net cash (used in)/provided by operating activities (52,071
) (164,856
) 8,435
1,293
Net cash (used in)/provided by investing activities (29,685
) 36,329
(41,915
) (6,424
)
Net cash provided by/(used in) financing activities (1) 189,862
13,538
(34,223
) (5,245
) (1) With respect to the cash flows of the Company’s VIEs and VIEs’ subsidiaries after the elimination of inter -company There are no combined and consolidated VIEs’ assets that are collateral for the VIEs’ obligations. No creditors (or beneficial interest holders) of the VIEs have recourse to the general credit of the Company or any of its combined and consolidated subsidiaries. No terms in any arrangements, considering both explicit arrangements and implicit variable interests, require the Company or its subsidiaries to provide financial support to the VIEs. However, if the VIEs ever need financial support, the Company or its subsidiaries may, at its option and subject to statutory limits and restrictions, provide financial support to the VIE through loans to the shareholders of the VIEs or entrustment loans to the VIEs. d. Recent development Novel coronavirus (COVID -19 -l9 The COVID -19 -wide -19 |
