SEC Filing | Fangdd Network Group Ltd

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the month of September 2023

Commission file number: 001-39109

Fangdd Network Group Ltd.

Room 4106, Building 12B1

Shenzhen Bay Ecological Technology Park

Nanshan District, Shenzhen, 518067

People’s Republic of China

Phone: +86 755 2699 8968

(Address and Telephone Number of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F ☒ Form 40-F ☐

EXPLANATORY NOTE

This current report on Form 6-K is hereby incorporated by reference into the registration statements of Fangdd Network Group Ltd. on Form F-3 (No. 333-267397) and shall be a part thereof from the date on which this current report is furnished, to the extent not superseded by documents or reports subsequently filed.

EXHIBIT INDEX

Exhibit No.		Description
99.1		Unaudited Interim Condensed Consolidated Financial Statements for the Six Months Ended June 30, 2023
101.INS		Inline XBRL Instance Document – this instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURE

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.

DR
	Fangdd Network Group Ltd.


	By:	/s/ Xi Zeng
		Name:	Xi Zeng
		Title:	Chief Executive Officer and Chairman of the Board of Directors

Date: September 29, 2023

Table of Contents

FANGDD NETWORK GROUP LTD.

INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS		PAGE(S)
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2022 AND JUNE 30, 2023		F-2 – F-3
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2023		F-4
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2023		F-5
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2023		F-6 – F-7
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS		F-8 – F-60

F-1

Table of Contents

Fangdd Network Group Ltd.

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

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


	As of December 31,	As of June 30,
	2022	2023
	RMB	RMB	US$
			(Note 2(g))
Assets
Current assets
Cash and cash equivalents	143,934	130,735	18,029
Restricted cash	38,811	13,782	1,901
Short-term investments	2,000	—	—
Accounts receivable, net	470,997	380,536	52,478
Prepayments and other assets, net	191,996	277,109	38,214
Inventories	11,157	12,650	1,745
Total current assets	858,895	814,812	112,367
Non-current assets
Property, equipment and software, net	3,037	3,723	513
Equity method investments, net	206,086	149,196	20,575
Long-term equity investment, net	6,000	3,000	414
Goodwill, net	454	454	63
Operating lease right-of-use assets	2,207	1,362	188
Total non-current assets	217,784	157,735	21,753
Total assets	1,076,679	972,547	134,120
Liabilities
Current liabilities
Short-term bank borrowings (including short-term bank borrowings of consolidated VIE without recourse to the Company of RMB72,500 and nil as of December 31, 2022 and June 30, 2023, respectively. Note 1)	72,500	—	—
Accounts payable (including accounts payable of consolidated VIE without recourse to the Company of RMB638,295 and RMB514,564 as of December 31, 2022 and June 30, 2023, respectively. Note 1)	659,215	534,823	73,755
Customers’ refundable fees (including customers’ refundable fees of consolidated VIE without recourse to the Company of RMB30,747 and RMB31,517 as of December 31, 2022 and June 30, 2023, respectively. Note 1)	30,747	31,517	4,346
Accrued expenses and other payables (including accrued expenses and other payables of consolidated VIE without recourse to the Company of RMB145,088 and RMB86,989 as of December 31, 2022 and June 30, 2023, respectively. Note 1)	181,140	120,252	16,584
Income tax payables (including income tax payables of consolidated VIE without recourse to the Company of RMB2,468 and RMB463 as of December 31, 2022 and June 30, 2023, respectively. Note 1)	4,876	1,021	141
Operating lease liabilities-current (including operating lease liabilities-current of consolidated VIE without recourse to the Company of RMB1,096 and RMB465 as of December 31, 2022 and June 30, 2023, respectively. Note 1)	1,243	465	64
Total current liabilities	949,721	688,078	94,890
Non-current liabilities
Income tax payables (including income tax payables of consolidated VIE without recourse to the Company of RMB27,429 and RMB27,669 as of December 31, 2022 and June 30, 2023, respectively. Note 1)	30,772	31,681	4,369
Operating lease liabilities (including operating lease liabilities of consolidated VIE without recourse to the Company of RMB791 and RMB779 as of December 31, 2022 and June 30, 2023, respectively. Note 1)	792	779	107
Total non-current liabilities	31,564	32,460	4,476
Total liabilities	981,285	720,538	99,366
Commitments and contingencies (Note 23)

The accompanying notes are an integral part of these Unaudited Interim Condensed Consolidated Financial Statements.

F-2

Table of Contents

Fangdd Network Group Ltd.

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

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


	As of December 31,	As of June 30,
	2022	2023
	RMB	RMB	US$
			(Note 2(g))
Equity:
Class A Ordinary shares(US$0.0000001par value, 50,000,000,000 and 50,000,000,000 shares authorized including Class A, Class B and Class C ordinary shares, as of December 31, 2022 and June 30, 2023, respectively,1,850,866,648 and 20,856,591,996 shares issued and outstanding as of December 31, 2022 and June 30, 2023, respectively)	1	14	2
Class B Ordinary shares (US$0.0000001 par value, 50,000,000,000 and 50,000,000,000 shares authorized including Class A, Class B and Class C ordinary shares, as of December 31, 2022 and June 30, 2023,respectively, 619,938,058 and 490,418,360 shares issued and outstanding as of December 31, 2022 and June 30, 2023, respectively)	—	—	—
Class C Ordinary shares (US$0.0000001 par value, 50,000,000,000 and 50,000,000,000 shares authorized including Class A, Class B and Class C ordinary shares, as of December 31, 2022 and June 30, 2023, respectively, 75,000 and 5,700,000 shares issued and outstanding as of December 31, 2022 and June 30, 2023, respectively)	—	—	—
Additional paid-in capital	5,051,631	5,197,029	716,703
Accumulated other comprehensive loss	(393,841)	(392,574)	(54,138)
Accumulated deficit	(4,557,675)	(4,548,217)	(627,228)
Total Fangdd Network Group Ltd. shareholders' equity	100,116	256,252	35,339
Non-controlling interests	(4,722)	(4,243)	(585)
Total equity	95,394	252,009	34,754
Total liabilities and equity	1,076,679	972,547	134,120

The accompanying notes are an integral part of these Unaudited Interim Condensed Consolidated Financial Statements.

F-3

Table of Contents

Fangdd Network Group Ltd.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

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


	For the Six Months Ended June 30,
	2022	2023
	RMB	RMB	US$
			(Note 2(g))
Revenue	144,834	153,488	21,167
Cost of revenue	(140,128)	(133,673)	(18,434)
Gross profit	4,706	19,815	2,733

Operating expenses:
Sales and marketing expenses	(8,802)	(1,855)	(256)
Product development expenses	(39,797)	(17,725)	(2,444)
General and administrative expenses	(134,300)	(69,204)	(9,544)
Total operating expenses	(182,899)	(88,784)	(12,244)
Loss from operations	(178,193)	(68,969)	(9,511)

Other income (expenses):
Interest expense, net	(1,797)	(69)	(10)
Foreign currency exchange gain, net	441	392	54
Gain (Loss) on short-term investments	153	(640)	(88)
Impairment loss for long-term equity investment	—	(3,000)	(414)
Impairment loss for equity method investments	(62,623)	(11,779)	(1,624)
Impairment loss for non-current assets	(7,642)	—	—
Government grants	12,270	1,658	229
Other income, net	50,880	88,617	12,221
Share of (loss) profit from equity method investees, net of income tax	(115)	442	61
Loss on disposal of subsidiaries	—	(200)	(28)
(Loss) Income before income tax	(186,626)	6,452	890
Income tax (expense) benefit	(5,474)	2,909	401
Net (loss) income	(192,100)	9,361	1,291
Net (profit) loss attributable to noncontrolling interests	(4,745)	97	13
Net (loss) income attributable to Fangdd Network Group Ltd.	(196,845)	9,458	1,304
Accretion of Redeemable Convertible Preferred Shares	—	—	—
Deemed dividend to preferred shareholder	—	—	—
Net (loss) income attributable to ordinary shareholders	(196,845)	9,458	1,304
Net (loss) income	(192,100)	9,361	1,291
Other comprehensive income
Foreign currency translation adjustment, net of tax	9,159	1,267	175
Total comprehensive (loss) income, net of tax	(182,941)	10,628	1,466

Total comprehensive (income) loss attributable to noncontrolling interests	(4,745)	97	13
Total comprehensive (loss) income attributable to ordinary shareholders	(187,686)	10,725	1,479
Net (loss) income per share attributable to ordinary shareholders
Basic and diluted	(0.10)	0.001	—
Weighted average number of ordinary shares outstanding used in computing net (loss) income per share
Basic and diluted	2,046,388,131	13,937,948,159

The accompanying notes are an integral part of these Unaudited Interim Condensed Consolidated Financial Statements.

F-4

Table of Contents

Fangdd Network Group Ltd.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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


								Total
						Accumulated		shareholders’
					Additional	other		equity attributable
	Class A		Class B		paid-in	comprehensive	Accumulated	to Fangdd Network	Noncontrolling
	Ordinary shares		Ordinary shares		capital	loss	deficit	Group Limited	interests	Total equity
	Shares	RMB	Shares	RMB	RMB	RMB	RMB	RMB	RMB	RMB
Balance as of January 1, 2022	1,426,450,073	1	619,938,058	—	5,031,772	(404,877)	(4,313,637)	313,259	(9,582)	303,677
Net loss for the year	—	—	—	—	—	—	(196,845)	(196,845)	4,745	(192,100)
Capital contribution from noncontrolling shareholder	—	—	—	—	—	—	—	—	376	376
Share-based compensation	—	—	—	—	9,207	—	—	9,207	—	9,207
Foreign currency translation adjustments, net of nil tax	—	—	—	—	—	9,159	—	9,159	—	9,159
Balance as of June 30, 2022	1,426,450,073	1	619,938,058	—	5,040,979	(395,718)	(4,510,482)	134,780	(4,461)	130,319


										Total
										shareholders'
								Accumulated		equity attributable
							Additional	other		to Fangdd
	Class A Ordinary		Class B Ordinary		Class C Ordinary		paid-in	Comprehensive	Accumulated	Network Group	Noncontrolling
	shares		shares		shares		capital	loss	deficit	Limited	interests	Total equity
	Shares	RMB	Shares	RMB	Shares	RMB	RMB	RMB	RMB	RMB	RMB	RMB
Balance as of January 1, 2023	1,850,866,648	1	619,938,058	—	75,000	—	5,051,631	(393,841)	(4,557,675)	100,116	(4,722)	95,394
Net income (loss) for the year	—	—	—	—	—	—	—	—	9,458	9,458	(97)	9,361
Share-based compensation	5,394,150	—	—	—	—	—	82	—	—	82	—	82
Capital contribution from noncontrolling shareholder	—	—	—	—	—	—	—	—	—	—	561	561
Acquisition of additional interests in subsidiaries	—	—	—	—	—	—	—	—	—	—	1	1
Disposal of subsidiaries	—	—	—	—	—	—	—	—	—	—	14	14
Issuance of ordinary shares	120,811,500	—	—	—	5,625,000	—	264	—	—	264	—	264
Conversion of class B ordinary shares to class A ordinary shares	129,519,698	—	(129,519,698)	—	—	—	—	—	—	—	—	—
Issuance of convertible promissory note	—	—	—	—	—	—	4,343	—	—	4,343	—	4,343
Conversion of convertible promissory note	18,750,000,000	13	—	—	—	—	140,709	—	—	140,722	—	140,722
Foreign currency translation adjustments, net of nil tax	—	—	—	—	—	—	—	1,267	—	1,267	—	1,267
Balance as of June 30, 2023	20,856,591,996	14	490,418,360	—	5,700,000	—	5,197,029	(392,574)	(4,548,217)	256,252	(4,243)	252,009
US$ (Note 2(g))		—		—		—	716,703	(54,138)	(627,228)	35,339	(585)	34,754

The accompanying notes are an integral part of these Unaudited Interim Condensed Consolidated Financial Statements.

F-5

Table of Contents

Fangdd Network Group Ltd.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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


	For the Six Months Ended June 30,
	2022	2023
	RMB	RMB	US$
			(Note 2(g))
Cash flows from operating activities:
Net (loss) income	(192,100)	9,361	1,291
Adjustments to reconcile net (loss) income to net cash used in operating activities
Depreciation and amortization	2,081	463	64
Amortization of right-of-use assets	—	647	89
Share-based compensation expenses	9,207	82	11
Gain (Loss) on short-term investments	(153)	640	88
Impairment loss for non-current assets	7,642	—	—
Impairment on short-term investments	144,027	—	—
Impairment loss for long-term equity investment	—	3,000	414
Impairment loss for equity method investments	62,623	11,779	1,624
Share of profit (loss) from equity method investments, net of income tax	115	(442)	(61)
(Reversal) Allowance for doubtful accounts	(81,004)	38,281	5,279
Loss on disposal of property and equipment	175	32	5
Foreign currency exchange gain, net	(441)	(392)	(54)
Changes in operating assets and liabilities, net of effects of acquisition
Accounts receivable	299,277	53,396	7,364
Prepayments and other assets	21,664	(88,941)	(12,266)
Accounts payable	(262,834)	(124,392)	(17,154)
Customers’ refundable fees	9,433	770	106
Accrued expenses and other payables	(70,588)	(60,885)	(8,396)
Operating lease liabilities	—	(593)	(82)
Income tax payables	4,246	(2,946)	(406)
Net cash used in operating activities	(46,630)	(160,140)	(22,084)
Cash flows from investing activities:
Purchase of property, equipment and software	(194)	(64)	(9)
Investment in equity method investments	(32,354)	—	—
Return of capital from equity method investees	19,311	45,553	6,282
Cash proceeds paid for business combination, net of cash acquired	(648)	—	—
Cash paid for short-term investments	(262,896)	(10,000)	(1,379)
Proceeds from disposal of short-term investments	121,022	11,360	1,567
Net cash (used in) provided by investing activities	(155,759)	46,849	6,461
Cash flows from financing activities:
Contribution from noncontrolling shareholder	490	576	79
Proceeds from issuance of ordinary shares, net of issuance costs	—	264	36
Proceeds from issuance of convertible promissory note, net of issuance costs	—	145,064	20,005
Repayment for short-term bank borrowings	(50,000)	(72,500)	(9,998)
Net cash (used in) provided by financing activities	(49,510)	73,404	10,122

Effect of exchange rate changes on cash, cash equivalents and restricted cash	9,601	1,659	229
Net decrease in cash, cash equivalents and restricted cash	(242,298)	(38,228)	(5,272)

F-6

Table of Contents

Fangdd Network Group Ltd.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

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


	For the Six Months Ended June 30,
	2022	2023
	RMB	RMB	US$
			(Note 2(g))
Cash, cash equivalents and restricted cash at the beginning of the period	516,238	182,745	25,202
Cash, cash equivalents and restricted cash at the end of the period	273,940	144,517	19,930
Supplemental information
Interest paid	(3,233)	(592)	(82)
Income tax paid	(812)	(37)	(5)

The accompanying notes are an integral part of these Unaudited Interim Condensed Consolidated Financial Statements.

F-7

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Fangdd Network Group Ltd.

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

1.Organization and principal activities

Fangdd Network Group Ltd. (the “Company”) was incorporated in the Cayman Islands on September 19, 2013 as an exempted company with limited liability under the Companies Law (2011 Revision) (as consolidated and revised) of the Cayman Islands. The registered office of the Company is at the offices of Appleby Trust (Cayman) Ltd., Clifton House, 75 Fort Street, P.O. Box 1350, Grand Cayman KY1-1108, Cayman Islands.

The Company is an investment holding company. The Company, through its consolidated subsidiaries, variables interest entity and variables interest entity’s subsidiaries (together, “the Group”) is principally engaged in the provision of real estate information services through its online platform which also offers integrated marketing services for individual customers, real estate developers and agents in the People’s Republic of China (the “PRC”).

The accompanying Unaudited Interim Condensed Consolidated Financial Statements include the financial statements of the Company, its subsidiaries, variable interest entity (“VIE”) and the VIE’s subsidiaries.

Variable interest entity

The Group conducts the business in the PRC through Shenzhen Fangdd Network Technology Co. Ltd. (“Shenzhen Fangdd”), a limited liability company established under the laws of the PRC on October 10, 2011. Shenzhen Fangdd holds the necessary PRC operating licenses for the real estate agency and online business. The equity interests of Shenzhen Fangdd are legally held by individuals who act as nominee equity holders of Shenzhen Fangdd on behalf of Shenzhen Fangdd Information Technology Co. Ltd. (“Fangdd Information”). Shenzhen Fangdd entered into a series of contractual agreements with its legal shareholders and Fangdd Information, including the Business Operation Agreement, Powers of Attorney, Equity Interest Pledge Agreements, Exclusive Option Agreements, Operation Maintenance Service Agreement and Technology Development and Application Service Agreement (collectively, the “Shenzhen Fangdd VIE Agreements”) in March 2014 and were subsequently amended in 2017 to reflect the registration of the Equity Interest Pledge Agreements with the relevant registration authority and amended when certain nominee equity holders transferred their nominal shareholdings in Shenzhen Fangdd to other nominee equity holders.

Pursuant to the Shenzhen Fangdd VIE Agreements, the Group, through Fangdd Information, is able to exercise effective control over, bears the risks of, enjoys substantially all of the economic benefits of Shenzhen Fangdd, and has an exclusive option to purchase all or part of the equity interests in Shenzhen Fangdd when and to the extent permitted by PRC law at a nominal price. The Group’s management concluded that Shenzhen Fangdd is a consolidated VIE of the Group and Fangdd Information is the primary beneficiary of Shenzhen Fangdd. As such, the financial results of Shenzhen Fangdd and its subsidiaries are included in the Unaudited Interim Condensed Consolidated Financial Statements of the Group.

The principal terms of the agreements entered into among Shenzhen Fangdd, the nominee equity holders and Fangdd Information are further described below.

●

Business Operation Agreement

Fangdd Information, Shenzhen Fangdd and Shenzhen Fangdd’s shareholders have entered into a business operation agreement, pursuant to which Shenzhen Fangdd and its shareholders undertake not to enter into any transactions that may have material effects on Shenzhen Fangdd’s assets, obligations, rights or business operations without Fangdd Information’s prior written consent.

F-8

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Fangdd Network Group Ltd.

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Additionally, Shenzhen Fangdd’s shareholders undertake that, without the Fangdd Information’s prior written consent, they shall not (a) sell, transfer, pledge or otherwise dispose of any rights associated with their equity interests in Shenzhen Fangdd, (b) approve any merger or acquisition of Shenzhen Fangdd, (c) take any actions that may have a material adverse effect on Shenzhen Fangdd’s assets, businesses and liabilities, or sell, transfer, pledge or otherwise dispose or impose other encumbrances of any assets, businesses or income of Shenzhen Fangdd, (d) request Shenzhen Fangdd to declare dividend or make other distribution, (e) amend Shenzhen Fangdd’s articles of association, (f) increase, decrease or otherwise change Shenzhen Fangdd’s registered capital. Fangdd Information may request Shenzhen Fangdd to transfer at any time all the intellectual property rights held by Shenzhen Fangdd to Fangdd Information or any person designated by Fangdd Information. Shenzhen Fangdd and certain of its shareholders, including Yi Duan, Jiancheng Li and Xi Zeng, shall be jointly and severally responsible for the performance of their obligations under this agreement. This agreement has a term of ten years, which may be extended upon Fangdd Information’s unilateral written confirmation prior to the expiry. Shenzhen Fangdd has no right of transfer without Fangdd information’s written confirmation or right of early termination while Fangdd Information may unilaterally transfer its rights and obligations under this agreement to third parties at any time through written notification and may early terminate this agreement via a 30-day prior written notice.

●

Powers of Attorney

Each of the shareholders of Shenzhen Fangdd has issued a power of attorney, irrevocably appointing Mr. Jiancheng Li, a director of Fangdd Information, as such shareholder’s attorney-in-fact to exercise all shareholder rights, including, but not limited to, the right to call shareholders’ meeting, the right to vote on all matters of Shenzhen Fangdd that require shareholders’ approval, and the right to dispose of all or part of the shareholder’s equity interest in Shenzhen Fangdd, on behalf of such shareholder. The foregoing authorization is conditioned upon Mr. Jiancheng Li’s continuing directorship at Fangdd Information and Fangdd Information’s written consent to such authorization. In the event that Mr. Jiancheng Li ceases to serve as a director of Fangdd Information or that Fangdd Information requests the shareholders to terminate the authorization in writing, the power of attorney will terminate immediately and the shareholder shall then appoint any person designated by Fangdd Information as his or her attorney-in-fact to exercise all shareholder rights. Other than the foregoing circumstances, the power of attorney will remain in force until the termination of the business operation agreement and during its effective term, shall not be amended or terminated without consent of Fangdd Information.

●

Equity Interest Pledge Agreements

Each of the shareholders of Shenzhen Fangdd has entered into an equity interest pledge agreement with Fangdd Information and Shenzhen Fangdd, pursuant to which, the shareholders have pledged all of his or her equity interest in Shenzhen Fangdd to Fangdd Information to guarantee the performance by Shenzhen Fangdd and its shareholders of their obligations under the main contracts, which include technology development and application service agreement, the operation maintenance service agreement, the business operation agreement and the exclusive option agreements. Each shareholder of Shenzhen Fangdd agrees that, during the term of the equity interest pledge agreement, he or she will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests without the prior written consent of Fangdd Information. The equity interest pledge agreements remain effective until Shenzhen Fangdd and its shareholders discharge all of their obligations under the main contracts. The Group has registered the equity pledge with the local branches of the Administration for Industry and Commerce in accordance with the PRC Property Rights Law.

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Fangdd Network Group Ltd.

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

●

Exclusive Option Agreements

Fangdd Information, Shenzhen Fangdd and each of the Shenzhen Fangdd’s shareholders have entered into an exclusive option agreement, pursuant to which each of the Shenzhen Fangdd’s shareholders has irrevocably granted Fangdd Information an exclusive option, to the extent permitted by PRC law, to purchase, or have its designated person or persons to purchase, at its discretion all or part of the shareholder’s equity interests in Shenzhen Fangdd or all or part of Shenzhen Fangdd’s assets. The purchase price shall be a nominal price unless where PRC laws and regulations require valuation of the equity interests or the assets, or promulgates other restrictions on the purchase price, or otherwise prohibits purchasing the equity interests or the assets at a nominal price. If the PRC laws and regulations prohibit purchasing the equity interests or the assets at a nominal price, the purchase price shall be equal to the original investment of the equity interests made by such shareholders or the book value of the assets. Where PRC laws and regulations require valuation of the equity interests or the assets or promulgates other restrictions on the purchase price, the purchase price shall be the minimum price permitted under PRC laws and regulations. However, if the minimum price permitted under PRC laws and regulations exceed the original investment of the equity interests or the book value of the assets, Shenzhen Fangdd’s shareholders shall reimburse Fangdd Information the exceeded amount after deducting all taxes and fees paid under PRC laws and regulations. The shareholders of Shenzhen Fangdd undertake, among other things, that they shall not take any actions that may have material effects on Shenzhen Fangdd’s assets, businesses and liabilities, nor shall they appoint or replace any directors, supervisors and officers of Shenzhen Fangdd without Fangdd Information’s prior written consent. These agreements have terms of ten years, which may be extended upon Fangdd Information’s written confirmation prior to the expiry.

●

Operation Maintenance Service Agreement

Fangdd Information and Shenzhen Fangdd have entered into an operation maintenance service agreement, pursuant to which Fangdd Information has the exclusive right to provide Shenzhen Fangdd with operation maintenance services and marketing services. Without Fangdd Information’s written consent, Shenzhen Fangdd shall not engage any third party to provide the services covered by this agreement. Shenzhen Fangdd agrees to pay service fees on an annual basis and at an amount determined by Fangdd Information after taking into account factors such as the labor cost, facility cost and marketing expenses incurred by Fangdd Information in providing the services. Unless otherwise agreed by both parties, this agreement will remain effective until Fangdd Information ceases business operations.

●

Technology Development and Application Service Agreement

Fangdd Information and Shenzhen Fangdd have entered into a technology development and application service agreement, pursuant to which, Fangdd Information has the exclusive right to provide Shenzhen Fangdd with technology development and application services. Without Fangdd Information’s written consent, Shenzhen Fangdd shall not accept any technology development and application services covered by this agreement from any third party. Shenzhen Fangdd agrees to pay service fees on an annual basis and at an amount determined by Fangdd Information after taking into account multiple factors, such as the labor and time consumed for provision of the service, the type and complexity of the services provided, the difficulties in providing the service, the commercial value of services provided and the market price of comparable services. Unless otherwise agreed by the parties, this agreement will remain effective until Fangdd Information ceases business operations.

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Fangdd Network Group Ltd.

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Risks in relation to Shenzhen Fangdd structure

In the opinion of the Group’s management, the contractual arrangements have resulted in Fangdd Information having the power to direct activities that most significantly impact Shenzhen Fangdd and Shenzhen Fangdd’s subsidiaries, including appointing key management, setting up operating policies, exerting financial controls and transferring profit or assets out of Shenzhen Fangdd and Shenzhen Fangdd’s subsidiaries at its discretion. Fangdd Information considers that it has the right to receive all the benefits and assets of Shenzhen Fangdd and Shenzhen Fangdd’ subsidiaries. As Shenzhen Fangdd and Shenzhen Fangdd’s subsidiaries were established as limited liability companies under the PRC law, their creditors do not have recourse to the general credit of Fangdd Information for the liabilities of Shenzhen Fangdd and VIE’s subsidiaries, and Fangdd Information does not have the obligation to assume the liabilities of Shenzhen Fangdd and VIE’ subsidiaries.

The Group has determined that Shenzhen Fangdd VIE Agreements are in compliance with PRC laws and are legally enforceable. However, uncertainties in the PRC legal system could limit the Group’s ability to enforce Shenzhen Fangdd VIE Agreements.

If the PRC government finds that these contractual arrangements do not comply with its restrictions on foreign investment in the internet business, or if the PRC government otherwise finds that the Group, the VIE, or any of its subsidiaries is in violation of PRC laws or regulations or lack the necessary permits or licenses to operate the business, the relevant PRC regulatory authorities, including but not limited to the Ministry of Industry and Information Technology of the People’s Republic China (“MIIT”), which regulates internet information service companies, would have broad discretion in dealing with such violations, including:

●

revoking the business and operating licenses;

●

discontinuing or restricting the operations;

●

imposing fines or confiscating any of the income that they deem to have been obtained through illegal operations;

●

imposing conditions or requirements with which the Group or the PRC subsidiaries and affiliates may not be able to comply;

●

requiring the Company or the PRC subsidiaries and affiliates to restructure the relevant ownership structure or operations;

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placing restrictions on the right to collect revenues;

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restricting or prohibiting the use of the proceeds from this offering to finance the business and operations of the VIE; and

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taking other regulatory or enforcement actions that could be harmful to the business.

The imposition of any of these penalties could have a material and adverse effect on the business, financial condition and results of operations. If any of these penalties results in the inability to direct the activities of the VIE that most significantly impact its economic performance, and/or failure to receive the economic benefits from the VIE, the Group may not be able to consolidate the financial results of the VIE and its subsidiaries in Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles.

There is no VIE in which the Group has a variable interest but is not the primary beneficiary. Currently there is no contractual arrangement that could require the Group to provide additional financial support to Shenzhen Fangdd.

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Fangdd Network Group Ltd.

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

The following consolidated assets and liabilities information of the Group’s VIE and VIE’s subsidiaries as of December 31, 2022 and June 30, 2023, and consolidated operating results and cash flows information for the periods ended June 30, 2022 and 2023, have been included in the accompanying Unaudited Interim Condensed Consolidated Financial Statements:


	As of December 31,	As of June 30,
	2022	2023
	RMB	RMB
Cash and cash equivalents	56,850	39,002
Restricted cash	38,811	13,782
Short-term investments	2,000	—
Accounts receivable, net	466,269	376,194
Amount due from related parties*	600,557	565,714
Prepayments and other current assets, net	188,144	121,627
Inventories	11,157	12,650
Total current assets	1,363,788	1,128,969
Property, equipment and software, net	3,036	3,723
Equity method investments, net	204,850	149,196
Long-term equity investment, net	6,000	3,000
Operating lease right-of-use assets	2,032	1,346
Total non-current assets	215,918	157,265
Total assets	1,579,706