UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 20-F(Mark One) ¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF1934OR x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2016 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 Date of event requiring this shell company report For the transition period from to Commission file number 001-36896JMU Limited(Exact name of Registrant as specified in its charter) N/A(Translation of Registrant’s name into English) Cayman Islands(Jurisdiction of incorporation or organization) North Guoquan Road 1688 LongNo. 75, Building A8, 6FYangpu District, Shanghai 200438People’s Republic of China(Address of principal executive offices) Frank Zhigang ZhaoChief Financial OfficerNorth Guoquan Road 1688 LongJMU LimitedNo. 75, Building A8, 6FYangpu District, Shanghai 200438People’s Republic of ChinaPhone: +86 21 6015 1166(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of Each Class Name of each exchange on which registeredAmerican Depositary Shares, each representing 18 ordinaryshares, par value US$0.00001 per share The NASDAQ Global Market Securities registered or to be registered pursuant to Section 12(g) of the Act: None(Title of Class) Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None(Title of Class) Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the periodcovered by the annual report. 1,475,645,946 Ordinary Shares (excluding 562,724 ordinary shares in the form of ADS that are reserved for issuance upon theexercise of outstanding options) as of December 31, 2016 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.¨ Yes x No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant toSection 13 or 15(d) of the Securities Exchange Act of 1934.¨ Yes x No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file suchreports), and (2) has been subject to such filing requirements for the past 90 days.¨ Yes x No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).¨ Yes x No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or anemerging growth company. See the definitions of “large accelerated filer,”, “accelerated filer” and “emerging growth company”in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ¨Accelerated filer xNon-accelerated filer ¨Emerging growth company x (Do not check if a smaller reporting company) If an emerging growth company that prepares its financial statements in accordance with U.S.GAAP, indicate by check mark ifthe registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards† provided pursuant to Section 13(a) of the Exchange Act.¨ † The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting StandardsBoard to its Accounting Standards Codification after April 5, 2012. Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in thisfiling: U.S. GAAP xInternational Financial Reporting Standardsas issued by the International AccountingStandards Board ¨Other ¨ If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item theregistrant has elected to follow.¨ Item 17 ¨ Item 18 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).¨ Yes x No (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d)of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.¨ Yes ¨ No TABLE OF CONTENTS INTRODUCTION2 FORWARD-LOOKING STATEMENTS2 PART I 3Item 1.Identity of Directors, Senior Management and Advisers3Item 2.Offer Statistics and Expected Timetable3Item 3.Key Information3Item 4.Information on the Company36Item 4A.Unresolved Staff Comments51Item 5.Operating and Financial Review and Prospects51Item 6.Directors, Senior Management and Employees69Item 7.Major Shareholders and Related Party Transactions78Item 8.Financial Information81Item 9.The Offer and Listing81Item 10.Additional Information82Item 11.Quantitative and Qualitative Disclosures about Market Risk99Item 12.Description of Securities Other than Equity Securities99 PART II 100Item 13.Defaults, Dividend Arrearages and Delinquencies100Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds100Item 14EUse of Proceeds100Item 15.Controls and Procedures100Item 16.102Item 16A.Audit Committee Financial Expert102Item 16B.Code of Ethics102Item 16C.Principal Accountant Fees and Services102Item 16D.Exemptions from the Listing Standards for Audit Committees102Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers103Item 16F.Change in Registrant’s Certifying Accountant103Item 16G.Corporate Governance104Item 16H.Mine Safety Disclosure105 PART III 105Item 17.Financial Statements105Item 18.Financial Statements105Item 19.Exhibits105 i INTRODUCTION Conventions Used in this Annual Report In this annual report, unless otherwise indicated or the context otherwise requires, references to: ·“we”, “us”, “our company”, or “our” refers to JMU Limited, which was formerly known as Wowo Limited, itssubsidiaries and its consolidated affiliated entities; ·“ordinary shares” refer to our ordinary shares, par value US$0.00001 per share; ·“ADS” refers to our American depositary shares, each of which represents 18 ordinary shares; ·“Our VIE” refers to Shanghai Zhongmin Supply Chain Management Co. Ltd., which together with its subsidiaries,we consolidate as variable interest entities; ·“Our WFOE” refers to Shanghai Zhongming Supply Chain Management Co. Ltd., our subsidiary in China that is awholly foreign-owned enterprise and has entered into contractual arrangements that give it effective control overOur VIE; ·“China” or the “PRC” refers to the People’s Republic of China excluding, for the purpose of this annual reportonly, Hong Kong, Macau and Taiwan; ·“Renminbi” or “RMB” refers to the legal currency of China; and ·“$”, “US$”, “dollars” or “U.S. dollars” refers to the legal currency of the United States. Our reporting and functional currency is U.S. dollar. This annual report contains translations of certain foreign currencyamounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations of Renminbi into U.S.dollars were made at RMB6.9430 to $1.00, the noon buying rate on December 30, 2016 as set forth in the H.10 statistical releaseof the U.S. Federal Reserve Board. FORWARD-LOOKING STATEMENTS Special Note Regarding Forward-Looking Statements This annual report contains forward-looking statements that involve risks and uncertainties, including statements basedon our current expectations, assumptions, estimates and projections about us and our industry. In some cases, these forward-looking statements can be identified by words or phrases such as “aim”, “anticipate”, “believe”, “estimate”, “expect”, “goingforward”, “intend”, “ought to”, “plan”, “project”, “potential”, “seek”, “may”, “might”, “can”, “could”, “will”, “would”, “shall”,“should”, “is likely to” and the negative form of these words and other similar expressions. The forward-looking statementsincluded in this annual report relate to, among others: ·our goals and strategies; ·our prospects, our business development, the growth of our operations, and our financial condition and results ofoperations; ·our plans to enhance supplier and customer experience, upgrade our infrastructure and increase our serviceofferings; ·our expectations regarding demand for and market acceptance of our services; ·competition in our industry in China; and ·fluctuations in general economic and business conditions in China. · These forward-looking statements involve various risks and uncertainties. Although we believe that our expectationsexpressed in these forward-looking statements are reasonable, our expectations could later be found to be incorrect. Our actualresults could be materially different from our expectations. You should thoroughly read this annual report and the documentsthat we refer to with the understanding that our actual future results may be materially different from and worse than what weexpect. We qualify all of our forward-looking statements by these cautionary statements. 2 This annual report contains certain data and information that we obtained from various government and privatepublications. Statistical data in these publications also include projections based on a number of assumptions. Our industrymight not grow at the rate projected by market data, or at all. Failure of our industry to grow at the projected rate may have amaterial adverse effect on our business and the market price of our ADSs. Furthermore, if any one or more of the assumptionsunderlying the market data is later found to be incorrect, actual results could differ from the projections based on theseassumptions. You should not place undue reliance on these forward-looking statements. PART I Item 1. Identity of Directors, Senior Management and Advisers Not applicable. Item 2. Offer Statistics and Expected Timetable Not applicable. Item 3. Key Information A.Selected Financial Data The following summary consolidated statements of operations for the years ended December 31, 2014, 2015 and 2016,and summary consolidated balance sheet data as of December 31, 2015 and 2016, have been derived from our auditedconsolidated financial statements included elsewhere in this annual report. The summary consolidated statements of operationsdata for the years ended December 31, 2012 and 2013, and consolidated balance sheet data as of December 31, 2012, 2013 and2014 are derived from our consolidated financial statements not included in this annual report, which have been restated due tothe divestment of the discontinued operations in the year of 2015. Our consolidated financial statements are prepared andpresented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. Ourhistorical results are not necessarily indicative of results expected for future periods. You should read this selected financial datasection together with our consolidated financial statements and the related notes and “Item 5. Operating and Financial Reviewand Prospects” included elsewhere in this annual report. Selected Consolidated Financial Data Year ended December 31, 2012(Note) 2013(Note) 2014(Note) 2015 2016 (US$ in thousands, except share and share related data) Summary consolidated statements of operationsdata: Revenues Related parties — — — 542 10,078 Third parties — — — 10,935 63,123 Cost of revenues — — — (13,220) (72,857)Gross (loss)/profit — — — (1,743) 344 Operating expenses: Selling and Marketing — — — (5,360) (20,405)General and administrative (122) (73) (4,323) (12,911) (7,531)Impairment of goodwill — — — (85,935) — Total operating expenses (122) (73) (4,323) (104,206) (27,936)Loss from operations (122) (73) (4,323) (105,949) (27,592)Interest income — — — 7 26 Other income, net — — — 46 39 Loss before provision for income taxes (122) (73) (4,323) (105,896) (27,527) Provision for income tax benefits — — — 1,250 2,234 Loss from continuing operations (122) (73) (4,323) (104,646) (25,293) Discontinued operations: Net (loss)/income from discontinued operations (38,957) (32,180) (39,546) 11,076 — 3 Year ended December 31, 2012(Note) 2013(Note) 2014(Note) 2015 2016 (US$ in thousands, except share and share related data) Provision for income tax benefits 69 81 — — — Net (loss)/income fromdiscontinued operations, net oftax (38,888) (32,099) (39,546) 11,076 — Net loss (39,010) (32,172) (43,869) (93,570) (25,293)Less: Net loss attributable tononcontrolling interests — — (13) — — Net loss attributable to JMU Limited (39,010) (32,172) (43,856) (93,570) (25,293) Deemed dividend on Series A-1preferred shares 289 1,199 1,445 442 — Deemed dividend on Series A-2preferred shares 15,748 34,336 36,947 1,203 — Deemed dividend on Series B preferredshares 1,544 2,106 2,422 720 — Net loss attributable to holders ofordinary shares of JMU Limited (56,591) (69,813) (84,670) (95,935) (25,293)Net loss per share: Basic-ordinary share (0.18) (0.23) (0.28) (0.09) (0.02)Diluted-ordinary share (0.18) (0.23) (0.28) (0.09) (0.02)Net loss per share from continuingoperations Basic-ordinary share (0.00) (0.00) (0.03) (0.10) (0.02)Diluted-ordinary share (0.00) (0.00) (0.03) (0.10) (0.02)Net (loss)/income per share fromdiscontinued operations Basic-ordinary share (0.18) (0.23) (0.25) 0.01 — Diluted-ordinary share (0.18) (0.23) (0.25) 0.01 — Basic-Series A-1 convertiblepreferred share 0.03 0.10 0.12 0.14 — Basic-Series A-2 convertiblepreferred share 0.14 0.28 0.30 0.04 — Basic-Series B convertiblepreferred share 0.06 0.07 0.08 0.09 — Weighted average shares used incalculating net loss per share Basic-ordinary share Continuing operations 310,188,010 303,886,640 303,886,640 1,001,754,524 1,474,087,060 Discontinued operations 310,188,010 303,886,640 303,886,640 1,001,754,524 — Diluted-ordinary share Continuing operations 310,188,010 303,886,640 303,886,640 1,001,754,524 1,474,087,060 Discontinued operations 310,188,010 303,886,640 303,886,640 1,043,473,265 — Basic-Series A-1 convertiblepreferred share 11,151,244 12,202,988 12,202,988 3,242,986 — Basic-Series A-2 convertiblepreferred share 110,937,536 122,029,877 122,029,877 32,429,858 — Basic-Series B convertible preferredshare 25,659,708 30,507,471 30,507,471 8,107,465 — Note:Due to the divestment of our group buying business in 2015, the results of operations from the group buying businessis reclassified as discontinued operations and the consolidated statements of operations for the years ended December31, 2012, 2013 and 2014 have been restated to reflect such reclassification. As of December 31, 2012 2013 2014 2015 2016 (US$ in thousands, except share and share related data) Summary consolidated balance sheet data: Total current assets 11,753 11,640 10,306 41,083 13,428 Total assets 26,991 23,375 20,343 342,774 274,045 Total current liabilities 67,297 96,425 67,500 24,950 15,227 Total liabilities 67,387 96,425 129,466 38,093 25,648 Total (deficit)/equity (86,594) (156,889) (233,776) 304,681 248,397 Total liabilities, mezzanine equity and deficit 26,991 23,375 20,343 342,774 274,045 B.Capitalization and indebtedness. Not applicable. C.Reasons for the offer and use of proceeds. Not applicable. D.Risk factors. 4 Risks Relating to Our Business and Industry We have a limited operating history and our business model is subject to uncertainties, which makes it difficult to evaluate ourbusiness. We disposed of our group buying services in September 2015. Our current business of providing integrated B2Bservices to food service suppliers and customers only started in late 2014, and we have only owned it since June 2015. Thelimited history of our current operations makes it difficult for you to evaluate our business, financial performance and prospects,and our historical growth rate might not be indicative of our future performance. We cannot assure you that our current businessof providing integrated B2B services to food service suppliers and customers will grow as rapidly as we expect or achieve thecritical mass needed for long-term success. Our business model of building a fair business ecosystem for medium and small foodservice businesses in China and cultivating the traditional offline food service businesses using internet tools is still a newbusiness model in China. Given our limited history, it is difficult to predict if our growth will be sustainable in the future, andthe market might evolve in ways that are difficult to anticipate. You should consider our prospects in light of the risks anduncertainties that fast-growing companies in a rapidly evolving market might encounter. These risks and difficulties include, butare not limited to: ·a new and relatively unproven business model; ·our ability to anticipate and adapt to a developing market and industry; ·our need to achieve greater brand recognition; ·our ability to attract sufficient suppliers and customers in the food services industry and generate sufficient netsales or cash flow; ·market acceptance of our business model; ·difficulties in managing rapid growth in personnel and operations; ·high expenditures associated with our geographic expansion, brand promotion and marketing activities; and ·our ability to compete in the market. Currently we are charging our customers low margin in our direct sales operation, and not charging any commission orservice fees for third-party sellers to use our platform. There is no assurance that we can keep the expansion of our B2B businessat the current pace after we start to apply higher margins to transactions in our direct sales business and charge service fees forthird-party sellers, and our ability to leverage our scale of business to have our platform users to continue using our serviceswith margins and service charges is uncertain. We cannot be certain that our business strategy will be successful or that we will successfully address these risks.Failure to address any of the risks described above could have adverse effect on our business, financial condition and results ofoperations. We have a history of losses, have spent substantial amounts in operating expenses and could require additional funding in thefuture. Our operations have consumed substantial amounts of cash since our inception. Our current food-industry B2B serviceincurred net loss in the amount of US$129.9 million since we acquired it in June 2015, primarily due to an impairment ofgoodwill of US$85.9 million in 2015 and because we have not been charging service fees or margins for a majority of alltransactions on our platform as part of our strategy to achieve scale of business. We have incurred net losses and experiencednegative cash flow from operating activities since our inception. In addition, we had a net current liabilities as of December 31,2016. As we continue to expand and develop, we expect to continue to incur losses in the near future. 5 5 We expect to continue to spend additional amounts in operating expenses in line with our projected growth. Wereceived net proceeds of US$37.3 million from our initial public offering on April 8, 2015 and the underwriters’ exercise of theover-allotment option, after deducting underwriting discounts and commissions and offering expenses payable by us.Additionally, we received US$15.0 million in a private placement transaction with our co-chairperson Mr. Maodong Xu inSeptember 2015. In January, March and May 2017, we received loans of RMB10.0 million (US$1.2 million), RMB15 million(US$1.9 million) and RMB35.0 million (US$5.1 million), respectively from our co-chairperson and chief executive officer Ms.Xiaoxia Zhu. We believe that our current cash and cash equivalents and anticipated cash flow from operations, together withcommitments by Ms. Zhu and our director Ms. Huimin Wang to provide the necessary financial support, will be sufficient tomeet our anticipated cash needs for the next 12 months from the date of this annual report. However, we may require additionalcash due to changing business conditions or other future developments, including any investments we may decide to pursue. Ifthese resources are insufficient to satisfy our cash requirements, we may seek to obtain a credit facility or sell additional equityor debt securities. The sale of additional equity securities could result in dilution of our existing shareholders. The incurrence ofindebtedness would result in increased debt service obligations and could result in operating and financing covenants thatwould restrict our operations. We cannot be certain that additional funding will be available to us on acceptable terms, or at all.If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us when needed, we may have tosignificantly delay, scale back or discontinue certain portion of our operations. Any of these events could significantly harmour business, financial condition and prospects. We may need to recognize significant goodwill impairment losses in connection with past and future acquisitions, which mayhave a material and adverse effect of our financial results. We acquired Join Me Group (HK) Investment Company Limited, or JMU HK, in June 2015 to establish our food-industry B2B services. We may acquire other companies that are complementary to our business in the future. We recordgoodwill if the purchase price paid in an acquisition exceeds the amount assigned to the fair value of the assets acquired andliability assumed. We are required to test goodwill for impairment annually, or more frequently if events or changes incircumstances indicate that it might be impaired in accordance with ASC 350, “Intangibles – Goodwill and Other.” The carryingamount of goodwill amounted to approximately US$221.3 million as of December 31, 2016 after the annual impairment test,and the impairment loss of US$85.9 million was recognized for the year ended December 31, 2015. If the carrying amount ofgoodwill in connection with past or future acquisitions is determined to be further impaired, we will be required to recognizeadditional goodwill impairment losses and our financial results will be adversely and materially affected. If we are unable to manage our growth or execute our strategies effectively, our business and prospects may be materially andadversely affected. Our current food-industry B2B service has grown substantially since its inception, and we expect continued growth inour business, revenues and number of employees. We plan to further expand our technology platform, enrich value-addedservices to our clients and increase our product offerings. We also plan to provide supply chain financing services to suppliersand third-party sellers on our platform, and integrate our service platform with key customers’ ERP system to optimize theirsupply chain management and increase their orders on our platform. In addition, as we increase our product offerings, we willneed to work with new suppliers and third-party sellers efficiently and establish and maintain mutually beneficial relationshipswith our existing and new suppliers and third-party sellers. To support our growth, we also plan to continue implementing avariety of new and upgraded managerial, operating, financial and human resources systems, procedures and controls. All theseefforts will require significant managerial and financial resources. We cannot assure you that we will be able to effectivelymanage our growth or to implement all these systems, procedures and control measures successfully. If we are not able tomanage our growth or execute our strategies effectively, our expansion may not be successful and our business and prospectsmay be materially and adversely affected. If we are unable to provide superior customer experience, our business and reputation may be materially and adverselyaffected. The success of our business hinges on our ability to provide superior customer experience, which in turn depends on avariety of factors. These factors include our ability to continue to attract suppliers and third-party sellers that can offer highquality products at competitive prices, source products to respond to customer demands, maintain the quality of products andservices provided on our platform, and provide timely and reliable delivery, flexible payment options and superior after-salesservice. 6 We rely completely on third party couriers to deliver products. Although we have implemented quality control policyfor selecting third party courier and for monitoring services rendered by them, we cannot assure you that third party couriers canmeet our requirement at all times and if products purchased by customers at our platform are not delivered on time or aredelivered in a damaged state, customers may refuse to accept products and have less confidence in our services. See “—We relyon service from third parties to deliver our orders, and our third-party sellers use couriers to deliver a significant number oforders for them. If these third party service providers fail to provide reliable delivery services, our business and reputation maybe materially and adversely affected.” Furthermore, employees of contracted third-party couriers act on our behalf and interactwith our customers personally. We maintain cooperation arrangements with a number of third-party couriers to deliver productsto our customers and we need to effectively manage these third-party service providers to ensure the quality of customerservices. We have in the past received customer complaints from time to time regarding our delivery and return and exchangeservices. Any failure to provide high-quality delivery services to our customers may negatively impact the purchase experienceof our customers, damage our reputation and cause us to lose customers. Our customer service center in Shanghai provides real-time assistance to our customers during working hours. It had 20customer service representatives as of December 31, 2016. If our customer service representatives fail to provide satisfactoryservice, or if waiting times are too long due to the volume of calls from customers at peak times, our brand and customer loyaltymay be adversely affected. In addition, any negative publicity or poor feedback regarding our customer service may harm ourbrand and reputation and in turn cause us to lose customers and market share. Any harm to our JMU brand or reputation may materially and adversely affect our business and results of operations. We believe that the recognition and reputation of our JMU brand among our customers, suppliers and third-partysellers has contributed to the growth and success of our business. Maintaining and enhancing the recognition and reputation ofour brand is critical to our business and competitiveness. Many factors, some of which are beyond our control, are important tomaintaining and enhancing our brand. These factors include our ability to: ·provide a compelling online purchase experience to customers; ·maintain the popularity, attractiveness, diversity, quality, safety and authenticity of the products that we or third-party sellers offer; ·maintain the efficiency, reliability and quality of the delivery services; ·maintain or improve customers’ satisfaction with our after-sale services; ·increase brand awareness through marketing and brand promotion activities; and ·preserve our reputation and goodwill in the event of any negative publicity on customer service, internet security,product quality, price or authenticity, or other issues affecting us or other e-commerce businesses in China. A public perception that low-quality or defective goods are sold on our platform or that we or third-party serviceproviders do not provide satisfactory customer service, even if factually incorrect or based on isolated incidents, could damageour reputation, diminish the value of our brand, undermine the trust and credibility we have established and have a negativeimpact on our ability to attract new customers or retain our current customers. If we are unable to maintain our reputation,enhance our brand recognition or increase positive awareness of our website, products and services, it may be difficult tomaintain and grow our customer base, and our business and growth prospects may be materially and adversely affected. Our quality control might not always be sufficient to review and ensure the goods and services offered to the customers, whichcould affect our profits and brand. We create, promote and help operate online storefronts in our JMU Mall in collaboration with our suppliers in ourdirect sales business. Once customers purchase goods from our website, we rely on our suppliers to provide goods to customers.Any customer dissatisfaction resulting from poor quality of goods provided by our suppliers could have an adverse effect onour reputation or revenue. Our business depends on our ability to ensure that high quality goods are provided to customers on aconsistent basis. This has placed, and will continue to place, substantial demands on our operational, technological and otherresources. 7 In particular, the food service industry is susceptible to the risk of food-borne illnesses. As with any food serviceoperation we cannot guarantee that our internal controls will be fully effective in preventing all food-borne illnesses, foodcontamination or food tampering, which may be caused by the products of the third-party food suppliers and distributors or thesupply chain of goods such as the food storage or the delivery. Reports in the media or on social media of one or more instancesof food-borne illness from the products offered at our platform could negatively affect our sales. This risk exists even if it werelater determined that the illness had been wrongly attributed to us. We cannot assure you that such measures will always be sufficient in discovering and remedying problems withmerchandise, some of which are out of our control. Any losses that we may suffer from customers’ request for a large amount ofrefunds or replacement of goods or future liability claims, including the successful assertion against us of one or a series of largeclaims, it could adversely affect our cash flows, financial conditions and results of operations. In addition, as we expand thetypes of goods and services for which we offer, the operational cost of quality control will also likely increase, which will have anegative effect on our profits. If we are unable to offer products that attract new customers and new purchases from existing customers, our business,financial condition and results of operations may be materially and adversely affected. Our future growth depends on our ability to continue to attract new customers as well as new purchases from existingcustomers. Our website makes recommendations to customers based on our understanding of the market as well as popularity ofproducts on our platform, and we also send product recommendations regularly to our customers through various means, such asemails, social network media and hardcopy catalogues. Our customers choose to purchase products on our website due in part tothe attractive prices that we offer, and they may choose to shop elsewhere if we cannot match the prices offered by other websitesor by offline suppliers. If our customers cannot find their desired products on our website at attractive prices, they may loseinterest in us and visit our website less frequently or even stop visiting our website altogether, which in turn may materially andadversely affect our business, financial condition and results of operations. We face intense competition. We may lose market share and customers if we fail to compete effectively. The e-commerce industry in China is intensely competitive. We compete for customers, orders, suppliers and third-partysellers. Our current or potential competitors include Alibaba, JD.com and Meicai as well as traditional offline food suppliers See“Item 4. Information on the Company—B. Business Overview—Competition.” In addition, new and enhanced technologies mayincrease the competition in the e-commerce industry and new competitive business models may appear. Increased competition may reduce our margins, market share and brand recognition, or result in significant losses.When we set prices, we have to consider how competitors have set prices for the same or similar products. When they cut pricesor offer additional benefits to compete with us, we may have to lower our own prices or offer additional benefits or risk losingmarket share, either of which could harm our financial condition and results of operations. Some of our current or future competitors have or may have longer operating histories, greater brand recognition,better supplier relationships, larger customer bases or greater financial, technical or marketing resources than we do. Thosesmaller companies or new entrants may be acquired by, receive investment from or enter into strategic relationships with well-established and well-financed companies or investors which would help enhance their competitive positions. Some of ourcompetitors may be able to secure more favorable terms from suppliers, devote greater resources to marketing and promotionalcampaigns, adopt more aggressive pricing or inventory policies and devote substantially more resources to their website, mobileapplication and systems development than us. We cannot assure you that we will be able to compete successfully against currentor future competitors, and competitive pressures may have a material and adverse effect on our business, financial condition andresults of operations. 8 If we fail to manage our inventory effectively, our results of operations, financial condition and liquidity may be materiallyand adversely affected. Although our inventory was relatively small as of December 31, 2016, our business model may require us increase ourinventory as our business expands and we will need to manage our inventory effectively. We depend on our understanding ofthe food service industry as well as demand forecasts for various kinds of products to make purchase decisions and to manageour inventory. Demand for products, however, can change significantly between the time inventory is ordered and the date bywhich we hope to sell it. Demand may be affected by seasonality, new product launches, changes in product cycles, pricing,product defects, changes in customer spending patterns, and other factors, and our customers may not order products in thequantities that we expect. Customers are extremely strict about the expiration date of food products, and poor inventorymanagement might lead to products expiring and becoming unacceptable in the market. In addition, when we begin selling anew product, it may be difficult to establish supplier relationships, determine appropriate product selection, and accuratelyforecast demand. The acquisition of certain types of inventory may require significant lead time and prepayment and they maynot be returnable. Substantial future sales of our shares in the public market, or the perception that these sales could occur, could cause ourshare price to decline. Additional sales of our shares in the public market, or the perception that these sales could occur, could cause themarket price of our shares to decline. As of December 31, 2016, we had 1,475,645,946 ordinary shares outstanding (excluding562,724 ordinary shares in the form of ADSs that are reserved for issuance upon the exercise of outstanding options), of which569,783,423 ordinary shares or approximately 38.6% were held by previous shareholders of JMU HK before our acquisition ofJMU HK in 2015. Pursuant to a Registration Rights Agreement we entered into with these former JMU HK shareholders on June8, 2015, we agreed to provide them with certain registration rights in respect of our ordinary shares held by them, subject tocertain limitations. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Registration Rights Agreement.” Registration of these shares under the Securities Act would result in these shares becomingfreely tradable without restriction immediately upon the effectiveness of the registration statement. If part or all of these sharesare sold in the public market or if any existing shareholder or shareholders sell a substantial amount of shares, the prevailingmarket price for our shares could be adversely affected. Such sales also might make it more difficult for us to sell equity orequity-related securities in the future at a time and price that we deem appropriate. If we fail to manage and expand our relationships with suppliers, or otherwise fail to procure products at favorable terms, ourbusiness and growth prospects may suffer. We had 253 suppliers for our online direct sales business as of December 31, 2016. Our suppliers include foodproducers, manufacturers, distributors and resellers. Maintaining strong relationships with these suppliers is important to thegrowth of our business. In particular, we depend significantly on our ability to procure products from suppliers on favorablepricing terms. We typically enter into framework agreements with suppliers, and these framework agreements do not ensure theavailability of products or the continuation of particular pricing practices or payment terms beyond the end of the contractualterm. In addition, our agreements with suppliers typically do not restrict the suppliers from selling products to other buyers. Wecannot assure you that our current suppliers will continue to sell products to us on commercially acceptable terms, or at all, afterthe term of the current agreement expires. Even if we maintain good relations with our suppliers, their ability to supply productsto us in sufficient quantity and at competitive prices may be adversely affected by economic conditions, labor actions,regulatory or legal decisions, natural disasters or other causes. In the event that we are not able to attract suppliers or third-partysellers that can provide merchandise at favorable prices, our revenues and cost of revenues may be materially and adverselyaffected. In the event any distributor or reseller does not have authority from the relevant manufacturer to sell certain productsto us, such distributor or reseller may cease selling such products to us at any time. If our suppliers cease to provide us withfavorable payment terms, our requirements for working capital may increase and our operations may be materially and adverselyaffected. We will also need to establish new supplier relationships to ensure that we have access to a steady supply of productson favorable commercial terms. If we are unable to develop and maintain good relationships with suppliers that would allow usto obtain a sufficient amount and variety of authentic and quality merchandise on acceptable commercial terms, it may inhibitour ability to offer sufficient products sought by our customers, or to offer these products at competitive prices. Any adversedevelopments in our relationships with suppliers could materially and adversely affect our business and growth prospects. Inaddition, as part of our growth strategy, we plan to further expand our product offerings. If we fail to attract new suppliers to selltheir products to us due to any reason, our business and growth prospects may be materially and adversely affected. 9 If we are unable to conduct our marketing activities cost-effectively, our results of operations and financial condition may bematerially and adversely affected. Although to a lesser extent compared to what we incurred in our discontinued B2C business, we have incurred a greatamount of expenses on a variety of different marketing and brand promotion efforts designed to enhance our brand recognitionand increase sales of our products. Our brand promotion and marketing activities may not be well received by customers andmay not result in the levels of product sales that we anticipate. We incurred US$20.4 million of selling and marketing expensesin 2016. Marketing of food products online to food service customers is new and evolving. This further requires us to enhanceour marketing approaches and experiment with new marketing methods to keep pace with customer preferences. Failure to refineour existing marketing approaches or to introduce new marketing approaches in a cost-effective manner could reduce ourmarket share, cause our revenues to decline and negatively impact our profitability. We rely on service from third parties to deliver our orders, and our third-party sellers use couriers to deliver a significantnumber of orders for them. If these third party service providers fail to provide reliable delivery services, our business andreputation may be materially and adversely affected. We maintain cooperation arrangements with a number of third-party couriers to deliver our products to our customersand sometimes suppliers in our direct sales operation deliver products to our customers themselves. Third-party sellers also usetheir own logistics network or other third-party couriers. Interruptions to or failures in these third parties’ delivery services couldprevent the timely or proper delivery of products offered at our platform to customers. These interruptions may be due to eventsthat are beyond our control or the control of these delivery companies, such as inclement weather, natural disasters,transportation disruptions or labor unrest. In addition, if our third-party delivery service providers fail to comply with applicablerules and regulations in China, our delivery services may be materially and adversely affected. We may not be able to findalternative delivery companies to provide delivery services in a timely and reliable manner, or at all. Delivery of our productscould also be affected or interrupted by the merger, acquisition, insolvency or government shut-down of the delivery companieswe engage to make deliveries, especially those local companies with relatively small business scales. If products offered at ourplatform are not delivered in proper condition or on a timely basis, our business and reputation could suffer. Our online marketplace is subject to risks associated with third-party sellers. As of December 31, 2016, there were over 16,300 third-party sellers on our online marketplace. We do not exercisecontrol over the storage and delivery of products sold by third-party sellers on our online marketplace. Our third-party sellersuse their own or third-party storage facilities and delivery systems to store and deliver their products, which makes it moredifficult for us to ensure that our customers get the same high quality service for all products sold on our website. If any third-party seller does not control the quality of the products that it sell on our website, or if it does not deliver the products ordelivers them late or delivers products that are materially different from its description of them, or if it sells low quality productson our website, the reputation of our online marketplace and our JMU brand may be materially and adversely affected and wecould face claims that we should be held liable for any losses. Moreover, despite our efforts to prevent it, some products sold onour online marketplace may compete with the products we sell directly, which may cannibalize our online direct sales. Inaddition, the supplier relationships, customer acquisition dynamics and other requirements for our online marketplace may notbe the same as those for our online direct sales operations, which may complicate the management of our business. In order forour online marketplace to be successful, we must continue to identify and attract third-party sellers, and we may not besuccessful in this regard. The successful operation of our business depends upon the performance and reliability of the internet and mobiletelecommunications infrastructures in China. Our business depends on the performance and reliability of the internet and mobile telecommunications infrastructuresin China. Almost all access to the internet is maintained through state-owned telecommunication operators under theadministrative control and regulatory supervision of the Ministry of Industry and Information Technology of China. In addition,the national networks in China are connected to the internet through state-owned international gateways, which are the onlychannels through which a domestic user can connect to the internet outside of China. We might not have access to alternativenetworks in the event of disruptions, failures or other problems with China’s internet infrastructure. In addition, the internetinfrastructure in China might not support the demands associated with continued growth in internet usage. 10 The failure of telecommunications network operators to provide us with the requisite bandwidth could also interferewith the speed and availability of our websites. We have no control over the costs of the services provided by the nationaltelecommunications operators. If the prices that we pay for telecommunications and internet services rise significantly, or if thetelecommunication network in China is disrupted or failed, our gross margins could be adversely affected. Technical limitationson internet use could also be developed or implemented. For example, restrictions could be implemented on personal internetuse in the workplace in general or access to our website in particular. This could lead to a reduction of customers’ activities or aloss of customers altogether, which in turn could have an adverse effect on our financial position and results of operations. Inaddition, if internet access fees or other charges to internet users increase, our user traffic might decrease, which in turn couldsignificantly decrease our revenues. The proper functioning of our technology platform is essential to our business. Any failure to maintain the satisfactoryperformance of our website and systems could materially and adversely affect our business and reputation. The satisfactory performance, reliability and availability of our technology platform are critical to our success and ourability to attract and retain customers and provide quality customer service. Most of our sales of products are made onlinethrough our website and mobile applications. Any system interruptions caused by telecommunications failures, computerviruses, hacking or other attempts to harm our systems that result in the unavailability or slowdown of our website or reducedorder fulfillment performance could reduce the volume of products sold and the attractiveness of product offerings on ourwebsite. Our servers may also be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, whichcould lead to system interruptions, website slowdown or unavailability, delays or errors in transaction processing, loss of data orthe inability to accept and fulfill customer orders. Security breaches, computer viruses and hacking attacks have become moreprevalent in our industry. We have experienced in the past, and may experience in the future, such attacks and unexpectedinterruptions. We can provide no assurance that our current security mechanisms will be sufficient to protect our IT systems fromany third-party intrusions, viruses or hacker attacks, information or data theft or other similar activities. Any such futureoccurrences could reduce customer satisfaction, damage our reputation and result in a material decrease in our revenue. Additionally, we must continue to upgrade and improve our technology platform to support our business growth, andfailure to do so could impede our growth. However, we cannot assure you that we will be successful in executing these systemupgrades and improvement strategies. In particular, our systems may experience interruptions during upgrades, and the newtechnologies or infrastructures may not be fully integrated with the existing systems on a timely basis, or at all. If our existing orfuture technology platform does not function properly, it could cause system disruptions and slow response times, affecting datatransmission, which in turn could materially and adversely affect our business, financial condition and results of operations. If we fail to adopt new technologies or adapt our website, mobile applications and systems to changing customerrequirements or emerging industry standards, our business may be materially and adversely affected. To remain competitive, we must continue to enhance and improve the responsiveness, functionality and features of ourwebsite and mobile applications. The internet and the e-commerce industry are characterized by rapid technological evolution,changes in customer requirements and preferences, frequent introductions of new products and services embodying newtechnologies and the emergence of new industry standards and practices, any of which could render our existing technologiesand systems obsolete. Our success will depend, in part, on our ability to identify, develop, acquire or license leadingtechnologies useful in our business, and respond to technological advances and emerging industry standards and practices, suchas mobile internet, in a cost-effective and timely way. The development of websites, mobile applications and other proprietarytechnology entails significant technical and business risks. We cannot assure you that we will be able to use new technologieseffectively or adapt our website, mobile applications, proprietary technologies and systems to meet customer requirements oremerging industry standards. If we are unable to adapt in a cost-effective and timely manner in response to changing marketconditions or customer requirements, whether for technical, legal, financial or other reasons, our business, prospects, financialcondition and results of operations may be materially and adversely affected. 11 If internet search engines’ ranking methodologies are modified or our search result page rankings declines, our user trafficcould decrease. We depend in part on various internet companies in China, such as Baidu, to direct traffic to our website. Our ability tomaintain and increase the number of visitors directed to our website is not entirely within our control. Our competitors’ searchengine optimization efforts could result in their websites receiving a higher search result page ranking than ours, or internetcompanies could revise their methodologies in an attempt to improve their search results, which could adversely affect theplacement of our search result page ranking. If internet companies modify their search algorithms in ways that are detrimental toour customer growth or in ways that make it harder for customers to find our website, or if our competitors’ search engineoptimization efforts are more successful than ours, our overall growth in user traffic could slow down or decrease, and we couldlose existing customers. Our website has experienced fluctuations in search result rankings in the past, and we anticipate similarfluctuations in the future. Any reduction in the number of visitors directed to our website could harm our business, financialcondition and results of operations. Failure to protect confidential information of our customers and network against security breaches could damage ourreputation and brand and substantially harm our business and results of operations. A significant challenge to the e-commerce industry is the secure storage of confidential information and its securetransmission over public networks. All of the orders for products we offer are made through our website and our mobileapplications. In addition, some transactions are settled through third-party online payment services. We also share certainpersonal information about our customers with contracted third-party couriers, such as their names, addresses, phone numbersand transaction records. Maintaining complete security for the storage and transmission of confidential information on ourtechnology platform, such as customer names, personal information and billing addresses, is essential to maintaining customerconfidence. We have adopted security policies and measures, including encryption technology, to protect our proprietary data andcustomer information. However, advances in technology, the expertise of hackers, new discoveries in the field of cryptographyor other events or developments could result in a compromise or breach of the technology that we use to protect confidentialinformation. We may not be able to prevent third parties, especially hackers or other individuals or entities engaging in similaractivities, from illegally obtaining such confidential or private information we hold as a result of our customers’ visits to ourwebsite and use of our mobile applications. Such individuals or entities obtaining our customers’ confidential or privateinformation may further engage in various other illegal activities using such information. In addition, we have limited control orinfluence over the security policies or measures adopted by third-party providers of online payment services through whichsome of our customers may elect to make payment for purchases. The contracted third-party couriers we use may also violatetheir confidentiality obligations and disclose or use information about our customers illegally. Any negative publicity on ourwebsite’s or mobile applications’ safety or privacy protection mechanisms and policies, and any claims asserted against us orfines imposed upon us as a result of actual or perceived failures, could have a material and adverse effect on our public image,reputation, financial condition and results of operations. We have experienced breaches of our information security measures inour B2C business in the past, and we cannot assure you that similar events will not occur in our B2B business in the future. If wegive third parties greater access to our technology platform in the future as part of providing more technology services to third-party sellers and others, it may become more challenging for us to ensure the security of our systems. Any compromise of ourinformation security or the information security measures of our contracted third-party couriers or third-party online paymentservice providers could have a material and adverse effect on our reputation, business, prospects, financial condition and resultsof operations. Practices regarding the collection, use, storage, transmission and security of personal information by companiesoperating over the internet and mobile platforms have recently come under increased public scrutiny. As e-commerce continuesto evolve, we believe that increased regulation by the PRC government of data privacy on the internet is likely. We may becomesubject to new laws and regulations applying to the solicitation, collection, processing or use of personal or consumerinformation that could affect how we store, process and share data with our customers, suppliers, third-party sellers and third-party service providers like couriers. We generally comply with industry standards and are subject to the terms of our ownprivacy policies. Compliance with any additional laws could be expensive, and may place restrictions on the conduct of ourbusiness and the manner in which we interact with our customers. Any failure to comply with applicable regulations could alsoresult in regulatory enforcement actions against us. 12 Significant capital and other resources may be required to protect against information security breaches or to alleviateproblems caused by such breaches or to comply with our privacy policies or privacy-related legal obligations. The resourcesrequired may increase over time as the methods used by hackers and others engaged in online criminal activities are increasinglysophisticated and constantly evolving. Any failure or perceived failure by us to prevent information security breaches or tocomply with privacy policies or privacy-related legal obligations, or any compromise of security that results in the unauthorizedrelease or transfer of personally identifiable information or other customer data, could cause our customers to lose trust in usand could expose us to legal claims. Any perception by the public that online transactions or the privacy of user information arebecoming increasingly unsafe or vulnerable to attacks could inhibit the growth of e-commerce and other online servicesgenerally, which may reduce the number of orders we receive. We rely on third parties online payment processors, and any disruption to the provision of these services to us could adverselyaffect our business and results of operations. We rely on third parties online payment processors to provide payment processing services, including the processing ofcredit cards and debit cards. Customers can make purchases through all major online payment systems in China, includingAlipay and the online banking systems of most commercial banks in China. Each online payment system provide paymentprocessing services to us and we pay service fees pursuant to our agreements with the payment system operators. Typically theterm of each of these agreements is one year, and would be automatically renewed for a term of one year unless otherwiserequested by payment system operator or us in writing within one month prior to the expiration date. Our business could bedisrupted if any of these online payment system operators becomes unwilling or unable to provide payment processing servicesto us, and we could incur additional cost as we seek alternative payment processing service providers. Moreover, the third-partyonline payment processors could fail to obtain, maintain or renew their required qualifications, which could result in disruptionin their services to us. For all the online payment transactions, secured transmission of confidential information, such as customers’ bankaccount numbers, personal information and billing addresses, over public networks is essential to maintain customers’confidence in us. Our current security measures and those of the third parties online payment processors might not be adequate.We must be prepared to increase and enhance our security measures and efforts so that suppliers, third-party sellers andcustomers have confidence in the reliability of the online payment systems that we use, which will impose additional costs andexpenses and might still not guarantee complete security. In addition, we do not have control over the security measuresimplemented by our third-party payment processors. Security breaches of the online payment systems that we use could exposeus to litigation and possible liability for failing to secure confidential customer information and could, among other things,damage our reputation and the perceived security of the online payment systems that we use. In addition, we may in the future increase the variety of payment methods accepted on our website. As we offer newpayment options to customers, we could be subject to additional regulations and compliance requirements. We pay paymentprocessing fees and other fees to third-party payment channels, which would increase over time and raise our operating costs andlower profitability. If our senior management is unable to work together effectively or efficiently or if we lose their services, our business may beseverely disrupted. Our success heavily depends upon the continued services of our management. In particular, we rely on the expertiseand experience of Mr. Maodong Xu, our co-chairperson, Ms. Xiaoxia Zhu, our co-chairperson and chief executive officer, andour other executive officers. The majority of our senior management joined us in 2015. If they cannot work together effectivelyor efficiently, our business may be severely disrupted. If one or more of our senior management were unable or unwilling tocontinue in their present positions, we might not be able to replace them easily or at all, and our business, financial conditionand results of operations may be materially and adversely affected. If any of our senior management joins a competitor or formsa competing business, we may lose customers, suppliers, know-how and key professionals and staff members. Our seniormanagement has entered into employment agreements and confidentiality and non-competition agreements with us. However, ifany dispute arises between our officers and us, we may have to incur substantial costs and expenses in order to enforce suchagreements in China or we may be unable to enforce them at all. In addition, while we formulate the overall business strategy at our headquarters in Shanghai, we also give latitude toour regional supply chain subsidiaries to manage the daily operations in their respective cities. We cannot assure you thatcommunications between the senior management team and the local management teams will always be effective, or the executions at the local levels will always have the results that the senior management team expects. 13 We have limited insurance coverage and could incur losses resulting from liability claims or business interruptions. As the insurance industry in China is still in an early stage of development, insurance companies in China currentlyoffer limited business insurance products. We do not have any product liability insurance or business interruption insurance. Aswe continue to expand the offerings by our suppliers and third-party sellers, we could be increasingly exposed to variousliability claims related to the products provided by our suppliers and third-party sellers. Any liability claims, businessdisruption, or natural disaster could result in substantial costs and the diversion of resources, which would have an adverse effecton our business and results of operations. We might not be able to adequately protect our intellectual property rights. We believe our domain names, trademarks, technology know-how and other intellectual properties enhance ourcompetitive advantages and are important to our success to date and our future prospects. We have been investing resources todevelop our own intellectual properties and we take prudent steps to protect our intellectual properties and know-how. But wecannot assure you such steps would be sufficient to prevent the infringement of our intellectual properties. If we fail toadequately protect our intellectual property rights, including our rights in know-how or our trademark, it could have an adverseeffect on our operations. The validity, enforceability and scope of protection available under intellectual property laws with respect to theinternet industry in China are uncertain and still evolving. Implementation and enforcement of PRC intellectual property-relatedlaws have historically been deficient and ineffective. Accordingly, protection of intellectual property rights in China might notbe as effective as in the United States or other western countries. Furthermore, policing unauthorized use of proprietarytechnology is difficult and expensive, and we might need to resort to litigation to enforce or defend our intellectual propertyrights or to determine the enforceability, scope and validity of our proprietary rights or those of others. Such litigation and anadverse determination in any such litigation, if any, could result in substantial costs and the diversion of resources andmanagement’s attention. Companies in the internet and technology industries are frequently involved in litigation based on allegations ofinfringement of intellectual property rights, unfair competition and other violations of third parties’ rights. From time to time,we could face allegations of trademark, copyright, patent and other intellectual property rights infringement of third parties.Such allegations of intellectual property rights infringements could come from our competitors and there could also beallegations that we are involved in unfair trade practices. We may be subject to product liability claims if people or properties are harmed by the products we sell. We sell products manufactured by third parties, some of which may be defective. As a result, sales of such productscould expose us to product liability claims relating to personal injury or property damage and may require product recalls orother actions. Third parties subject to such injury or damage may bring claims or legal proceedings against us as the retailer ofthe product. Although we would have legal recourse against the manufacturer of such products under PRC law, attempting toenforce our rights against the manufacturer may be expensive, time-consuming and ultimately futile. In addition, we do notcurrently maintain any third-party liability insurance or product liability insurance in relation to products we sell. As a result,any material product liability claim or litigation could have a material and adverse effect on our business, financial conditionand results of operations. Even unsuccessful claims could result in the expenditure of funds and managerial efforts in defendingthem and could have a negative impact on our reputation. We depend on regulatory approvals and licenses to operate in our existing markets and to gain access to new services. The internet, telecommunication and food service industries in China are highly regulated by the PRC government andnumerous regulatory authorities of the central PRC government are empowered to issue and implement regulations governingvarious aspects of the internet and food service industries including foreign ownership of and licensing and permit requirementspertaining to companies in the internet and food service industries. 14 The relevant laws and regulations are relatively new or evolving, and their interpretation and enforcement involvesignificant uncertainty. As a result, in certain circumstances, it could be difficult to determine what actions or omissions could bedeemed to be in violation of applicable laws and regulations. Our VIE is required to obtain and maintain the applicable ICPlicense for value-added Internet services and the applicable license or permit for selling food, liquor and nutritionalsupplements through our website. Furthermore, Our VIE could be required to obtain additional licenses. If Our VIE fails toobtain or maintain any of the required licenses or approvals, its continued business operations in the internet and the foodservice industries could subject it to various penalties, such as confiscation of illegal net sales, fines and the discontinuation orrestriction of its operations. Any such disruption in the business operations of Our VIE will materially and adversely affect ourbusiness, financial condition and results of operations. During the course of the audit of our consolidated financial statements, we and our independent registered public accountingfirm identified one material weakness in our internal control over financial reporting. If we fail to establish and maintaineffective internal control over financial reporting, our ability to accurately and timely report our financial results inaccordance with U.S. GAAP could be materially and adversely affected. In addition, investor confidence in us and the marketprice of our ADSs may decline significantly as we concluded that our internal control over financial reporting was noteffective as of December 31, 2016. We are subject to reporting obligations under U.S. securities laws. Our reporting obligations as a public company placea significant strain on our management, operational and financial resources and systems for the foreseeable future. We havelimited accounting personnel and other resources with which to address our internal control over financial reporting. We andour independent registered public accounting firm, in connection with the preparation and external audit of our consolidatedfinancial statements for the year ended December 31, 2016, identified one material weakness, as defined in the U.S. PublicCompany Accounting Oversight Board Standard AU Section 325, Communications About Control Deficiencies in an Audit ofFinancial Statements in our internal control over financial reporting. As defined in this AU Section 325, a “material weakness” isa deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonablepossibility that a material misstatement of the company’s annual or interim financial statements will not be prevented ordetected on a timely basis. The material weaknesses identified is related to lack of accounting personnel with appropriate knowledge of U.S.GAAP. This material weakness was also identified as material weaknesses in 2014 and 2015. This identified material weaknessescould affect our ability to accurately and timely report our financial results in accordance with U.S. GAAP and to prevent ordetect material misstatements of the company’s annual or interim financial statements on a timely basis. Following the identification of this material weakness, we have begun taking measures and plan to continue to takemeasures to remedy them. See “Item 15. Controls and Procedures—Management’s Annual Report on Internal Control overFinancial Reporting.” However, the implementation of these measures might not fully address this material weakness in ourinternal control over financial reporting, and we cannot conclude that they have been fully remedied. Our failure to correct thismaterial weakness or our failure to discover and address any other control deficiencies could result in inaccuracies in ourconsolidated financial statements and could also impair our ability to comply with applicable financial reporting requirementsand make related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations andprospects, as well as the trading price of our ADSs, may be materially and adversely affected. Our management concluded that our internal control over financial reporting was not effective as of December 31,2016. This could adversely affect the market price of our ADSs due to a loss of investor confidence in the reliability of ourreporting processes. The audit reports included in this annual report are prepared by auditors who are not inspected by the Public CompanyAccounting Oversight Board, and consequently you are deprived of the benefits of such inspection. Our independent registered public accounting firms that issue the audit reports included in our annual report filed withthe U.S. Securities and Exchange Commission, as auditors of companies that are traded publicly in the United States and firmsregistered with the U.S. Public Company Accounting Oversight Board, or the PCAOB, are required by the laws of the UnitedStates to undergo regular inspections by the PCAOB to assess their compliance with the laws of the United States andprofessional standards. Because our auditors are located in the PRC, a jurisdiction where the PCAOB is currently unable toconduct inspections without the approval of the PRC authorities, our auditors are not currently inspected by the PCAOB. 15 Inspections of other firms that the PCAOB has conducted outside China have identified deficiencies in those firms’audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve futureaudit quality. This lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating our auditor’s audits andits quality control procedures. As a result, investors are deprived of the benefits of PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate theeffectiveness of our auditors’ audit procedures or quality control procedures as compared to auditors outside of China that aresubject to PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and thequality of our consolidated financial statements. If additional remedial measures are imposed on the Big Four PRC-based accounting firms, including our independentregistered public accounting firms, in administrative proceedings brought by the SEC alleging the firms’ failure to meetspecific criteria set by the SEC, with respect to requests for the production of documents, we could be unable to timely filefuture financial statements in compliance with the requirements of the Securities Exchange Act of 1934. Starting in 2011 the Chinese affiliates of the “big four” accounting firms, (including our independent registered publicaccounting firm) were affected by a conflict between US and Chinese law. Specifically, for certain US listed companies operatingand audited in mainland China, the SEC and the PCAOB sought to obtain from the Chinese firms access to their audit workpapers and related documents. The firms were, however, advised and directed that under China law they could not responddirectly to the US regulators on those requests, and that requests by foreign regulators for access to such papers in China had tobe channeled through the China Securities Regulatory Commission, or the CSRC. In late 2012 this impasse led the SEC to commence administrative proceedings under Rule 102(e) of its Rules ofPractice and also under the Sarbanes-Oxley Act of 2002 against the Chinese accounting firms, (including our independentregistered public accounting firm). A first instance trial of the proceedings in July 2013 in the SEC’s internal administrativecourt resulted in an adverse judgment against the firms. The administrative law judge proposed penalties on the firms includinga temporary suspension of their right to practice before the SEC, although that proposed penalty did not take effect pendingreview by the Commissioners of the SEC. On February 6, 2015, before a review by the Commissioner had taken place, the firmsreached a settlement with the SEC. Under the settlement, the SEC accepts that future requests by the SEC for the production ofdocuments will normally be made to the CSRC. The firms will receive matching Section 106 requests, and are required to abideby a detailed set of procedures with respect to such requests, which in substance require them to facilitate production via theCSRC. If they fail to meet specified criteria, the SEC retains authority to impose a variety of additional remedial measures on thefirms depending on the nature of the failure. Remedies for any future noncompliance could include, as appropriate, an automaticsix-month bar on a single firm’s performance of certain audit work, commencement of a new proceeding against a firm, or inextreme cases the resumption of the current proceeding against all four firms. In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, listed companiesin the United States with major PRC operations may find it difficult or impossible to retain auditors in respect of their operationsin the PRC, which could result in financial statements being determined to not be in compliance with the requirements of theExchange Act, including possible delisting. Moreover, any negative news about any such future proceedings against these auditfirms may cause investor uncertainty regarding China-based, United States-listed companies and the market price of our ADSsmay be adversely affected. If our independent registered public accounting firm were denied, even temporarily, the ability to practice before theSEC and we were unable to timely find another registered public accounting firm to audit and issue an opinion on ourconsolidated financial statements, our consolidated financial statements could be determined not to be in compliance with therequirements of the Exchange Act of 1934, as amended. Such a determination could ultimately lead to the delisting of ourordinary shares from the Nasdaq Global Market or deregistration from the SEC, or both, which would substantially reduce oreffectively terminate the trading of our ADSs in the United States. 16 We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt ouroperations. Our business could be materially and adversely affected by natural disasters or the outbreak of avian influenza, severeacute respiratory syndrome, or SARS, influenza A (H1N1), Ebola or another epidemic. Any such occurrences could cause severedisruption to our daily operations, including our fulfillment infrastructure and our customer service center, and may evenrequire a temporary closure of our facilities. Earthquakes or other similar disasters affecting Beijing, Shanghai, Guangzhou, orany other city where we have major operations in China could materially and adversely affect our operations due to loss ofpersonnel and damages to property, including our inventory and our technology systems. Our operation could also be severelydisrupted if our suppliers, customers or business partners were affected by health epidemics or other natural disasters. Risks Related to Our Corporate Structure and Dependence on our Contractual Arrangements with our Affiliates If the PRC government finds that the agreements that establish the structure for operating our businesses in China do notcomply with PRC governmental restrictions on foreign investment in internet business, or if these regulations or theinterpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquishour interests in those operations. Current PRC laws and regulations place certain restrictions on foreign ownership of companies that engage in internetbusinesses, including the provision of internet content distribution services. Foreign investors are not allowed to own more than50% of the equity interests in any entity conducting internet content distribution business or other value-added telecombusinesses, except e-commerce business, for which there is no upper limit to the shareholding percentage for foreign investors.Additionally any such foreign investor must have experience in providing value-added telecommunications services overseasand maintain a good track record in accordance with the Guidance Catalog of Industries for Foreign Investment promulgated in2015, as amended, and other applicable laws and regulations. We conduct our operations in China principally throughcontractual arrangements between our wholly-owned PRC subsidiary, Shanghai Zhongming Supply Chain Management Co.,Ltd., or Our WFOE, and our consolidated affiliated entity in China, Shanghai Zhongmin Supply Chain Management Co., Ltd.,or Our VIE, and its shareholder. Our VIE has twelve subsidiaries within China as of December 31, 2016. Our contractualarrangements with Our VIE and its shareholder enable us to exercise effective control over it and hence treat it as ourconsolidated affiliated entity and consolidate their results. For a detailed discussion of these contractual arrangements, see “Item4. Information on the Company—A. History and Development of the Company”. In the opinion of our PRC counsel, Beijing Dentons Law Offices, LLP, our current ownership structure, the ownershipstructure of Our WFOE and Our VIE, and the contractual arrangements between Our WFOE, Our VIE, and its shareholder are incompliance with existing PRC laws, rules and regulations. There are, however, substantial uncertainties regarding theinterpretation and application of current or future PRC laws and regulations. Thus, we cannot assure you, however, that we willbe able to enforce these contracts. Although we believe we are in compliance with current PRC regulations, we cannot assure youthat the PRC government would agree that these contractual arrangements comply with PRC licensing, registration or otherregulatory requirements, with existing policies or with requirements or policies that might be adopted in the future. PRC lawsand regulations governing the validity of these contractual arrangements are uncertain and the relevant government authoritieshave broad discretion in interpreting these laws and regulations. If the PRC government determines that we are not incompliance with applicable laws and regulations, it could revoke our business and operating licenses, require us to discontinueor restrict our operations, restrict our right to collect revenues, restrict or prohibit us to finance our business and operations inChina, shut down our servers or block our website, require us to restructure our operations, impose additional conditions orrequirements with which we might not be able to comply, levy fines, confiscate our income or the income of our PRC subsidiaryor affiliated PRC entities, or take other regulatory or enforcement actions against us that could be harmful to our business. Theimposition of any of these penalties would result in an adverse effect on our ability to conduct our business. Substantial uncertainties exist with respect to the enactment timetable and final content of draft PRC Foreign Investment Lawand how it may impact the viability of our current corporate structure, corporate governance and business operations. The Ministry of Commerce published a discussion draft of the proposed Foreign Investment Law in January 2015aiming to, upon its enactment, replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreignEquity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The proposed Foreign InvestmentLaw embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domesticinvestments. The Ministry of Commerce is currently soliciting comments on this draft and substantial uncertainties exist withrespect to its enactment timetable, final content, interpretation and implementation. 17 Among other things, the proposed Foreign Investment Law expands the definition of foreign investment and introducesthe principle of “actual control” in determining whether a company is considered a foreign-invested enterprise, or an FIE. Theproposed Foreign Investment Law specifically provides that entities established in China but “controlled” by foreign investorswill be treated as FIEs, whereas an entity set up in a foreign jurisdiction would nonetheless be, upon market entry clearance,treated as a PRC domestic investor provided that the entity is “controlled” by PRC entities and/or citizens. Once an entity isdetermined to be an FIE, it will be subject to the foreign investment restrictions or prohibitions set forth in a “negative list,” tobe separately issued by the State Council later. Unless the underlying business of the FIE falls within the negative list, whichcalls for market entry clearance, prior approval from the government authorities as mandated by the existing foreign investmentlegal regime would no longer be required for establishment of the FIE. Under the proposed Foreign Investment Law, VIEs thatare controlled via contractual arrangement would also be deemed as FIEs, if they are ultimately “controlled” by foreigninvestors. Therefore, for any companies with a VIE structure in an industry category that is on the “negative list” the VIEstructure may be deemed legitimate only if the ultimate controlling person(s) is/are of PRC nationality (either PRC companiesor PRC citizens). Conversely, if the actual controlling person(s) is/are of foreign nationalities, the VIEs will be treated as FIEsand any operation in the industry category on the “negative list” without market entry clearance may be considered as illegal. The provision of value-added telecommunication services, which we conduct through Our VIE, is currently subject toforeign investment restrictions set forth in the Catalogue of Industries for Guiding Foreign Investment, or the Catalogue, issuedby the National Development and Reform Commission and the Ministry of Commerce, as amended in March 2015. The draftForeign Investment Law has not taken a position on what actions shall be taken with respect to the existing companies with aVIE structure, although a few possible options were proffered in the draft. Under these options, a company with VIE structuresand in the business on the “negative list” at the time of enactment of the new Foreign Investment Law has either the option orobligation to disclose its corporate structure to the authorities, while the authorities, after reviewing the ultimate controlstructure of the company, may either permit the company to continue its business by maintaining the VIE structure, or requirethe company to dispose of its businesses and/or VIE structure. Moreover, it is uncertain whether the industries in which Our VIEoperates, such as the industry of providing value-added telecommunication services, will be subject to the foreign investmentrestrictions or prohibitions set forth in the “negative list” to be issued. If the enacted version of the Foreign Investment Law andthe final “negative list” mandate further actions, such as market entry clearance, to be completed by companies with existingVIE structure like us, we will face uncertainties as to whether such clearance can be timely obtained, or at all. As PRC residentsultimately control more than 50% of the total share capital of our Company, we believe the impact of the Foreign InvestmentAct, if enacted as currently proposed, on our business and operation will be limited, but there is no assurance that the Chinesegovernment will not interpret the rules differently from us. We rely on contractual arrangements with Our VIE in China and its shareholder for our operations, which might not be aseffective as direct ownership in providing operational control. Since PRC laws restrict foreign equity ownership in companies engaged in internet businesses in China, we rely oncontractual arrangements with our consolidated affiliated entity, in which we do not hold shares, and its shareholder to operateour business in China. If we held the shares of Our VIE, we would be able to exercise our rights as a shareholder to effectchanges in their respective board of directors, which in turn could effectuate changes at the management level, subject to anyapplicable fiduciary obligations. However, under the current contractual arrangements, we rely on Our VIE and its shareholder’sperformance of their contractual obligations to exercise effective control. In addition, our contractual arrangements are generallyeffective for the complete period Our VIE exists. In general, neither Our VIE nor its shareholder could terminate the contractsprior to the expiration date. However, the shareholder of Our VIE might not act in the best interests of our company or might notperform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate ourbusiness through the contractual arrangements with our consolidated affiliated entity. We can replace the shareholders of OurVIE at any time pursuant to our contractual arrangements with them and their shareholders. However, if any dispute relating tothese contracts remains unresolved, we will have to enforce our rights under these contracts through the operation of PRC lawand courts and therefore will be subject to uncertainties in the PRC legal system. See “—Any failure by our VIE or itsshareholder to perform their obligations under our contractual arrangements with them could have an adverse effect on ourbusiness”. Therefore, these contractual arrangements might not be as effective as direct holding of shares. 18 Any failure by Our VIE or its shareholder to perform their obligations under our contractual arrangements with them couldhave an adverse effect on our business. Our VIE and its shareholder could fail to take certain actions required for our business or follow our instructionsdespite their contractual obligations to do so. If they fail to perform their obligations under their respective agreements with us,we might have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, whichmight not be effective. All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes througharbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would beresolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in certain otherjurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce thesecontractual arrangements, which could make it difficult to exert effective control over our consolidated affiliated entity, and ourability to conduct our business could be adversely affected. Additionally, under PRC law, rulings by arbitrators are final. Partiescannot appeal the arbitration results in courts. If the losing parties fail to carry out the arbitration awards within a prescribed timelimit, the prevailing parties may enforce the arbitration awards only in PRC courts through arbitration award recognitionproceedings, which could require additional expenses and delay. Contractual arrangements with Our VIE might result in adverse tax consequences to us. Under applicable PRC tax laws and regulations, arrangements and transactions among related parties could be subjectto audit or scrutiny by the PRC tax authorities within ten years after the taxable year when the arrangements or transactions areconducted. We could face adverse tax consequences if the PRC tax authorities were to determine that the contractualarrangements between Our WFOE, Our VIE and its shareholder were not entered into on an arm’s-length basis and thereforeconstituted unfavorable transfer pricing arrangements. Unfavorable transfer pricing arrangements could, among other things,result in an upward adjustment on taxation. In addition, the PRC tax authorities could impose late payment fees and otherpenalties on our consolidated affiliated entity for the adjusted but unpaid taxes. Our results of operations could be adverselyaffected if our consolidated affiliated entity’ tax liabilities increase significantly or if they are required to pay late payment feesor other penalties. The ultimate beneficial owners of Our VIE, Ms. Xiaoxia Zhu and Ms. Huimin Wang, could have potential conflicts of interestwith us, and if any such conflicts of interest are not resolved in our favor, our business could be adversely affected. Our co-chairperson and chief executive officer, Ms. Xiaoxia Zhu, and our director, Ms. Huimin Wang, each hold 50%of the equity interests in Shanghai Zhongmin Investment and Development Group Co., Ltd., or Zhongmin Investment, which inturn holds 100% of equity interests in Our VIE. The interests of Ms. Zhu and Ms. Wang as the ultimate beneficial owner of OurVIE could differ from the interests of our company as a whole, notwithstanding both Ms. Zhu and Ms. Wang are our principalshareholders. We cannot assure you that when conflicts of interest arise, Ms. Zhu and Ms. Wang will act in the best interests ofour company or that conflicts of interests will always be resolved in our favor. In addition, Ms. Zhu and Ms. Wang could causeZhongmin Investment and Our VIE to breach or refuse to renew the existing contractual arrangements with us. Currently, we donot have existing arrangements to address potential conflicts of interest Ms. Zhu and Ms. Wang could encounter in theircapacity as beneficial owners of Our VIE. We rely on Ms. Zhu and Ms. Wang to comply with the laws of China, which protectcontracts, including the contractual arrangements that Our VIE and its shareholder have entered into with us, provide thatdirectors and executive officers owe a duty of loyalty to our company and require them to avoid conflicts of interest and not totake advantage of their positions for personal gains. We also rely on Ms. Zhu and Ms. Wang to abide by the laws of the CaymanIslands, which provide that directors have a duty of care and a duty of loyalty to act honestly in good faith with a view to ourbest interests. However, the legal frameworks of China and the Cayman Islands do not provide guidance on resolving conflicts inthe event of a conflict with another corporate governance regime. If we cannot resolve any conflicts of interest or disputesbetween us and Ms. Zhu and Ms. Wang, we would have to rely on legal proceedings, which could result in disruption of ourbusiness and subject us to substantial uncertainty as to the outcome of any such legal proceedings. 19 We rely principally on dividends and other distributions on equity paid by our PRC and Hong Kong subsidiaries to fund anycash and financing requirements we might have. Any limitation on the ability of our PRC and Hong Kong subsidiaries to paydividends to us could have an adverse effect on our ability to conduct our business. We are a holding company, and we rely principally on dividends and other distributions on equity paid by Our WFOE,and our wholly-owned Hong Kong subsidiary, JMU HK, which is the direct holding company of Our WFOE, for our cash andfinancing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders andservice any debt we might incur. If Our WFOE or JMU HK, as the case may be, incurs debt on their own behalf in the future, theinstruments governing the debt could restrict their ability to pay dividends or make other distributions to us. In addition, thePRC tax authorities could require us to adjust our taxable income under the contractual arrangements Our WFOE currently hasin place with our consolidated affiliated entity in a manner that would adversely affect its ability to pay dividends and otherdistributions to us. Under PRC laws and regulations, Our WFOE, as a wholly foreign-owned enterprise in China, can pay dividends onlyout of its accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a whollyforeign-owned enterprise such as Our WFOE is required to set aside at least 10% of its accumulated after-tax profits each year, ifany, to fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital. At itsdiscretion, it may allocate a portion of its after-tax profits based on PRC accounting standards to other funds. These statutoryreserve funds and other funds are not distributable as cash dividends. As of December 31, 2016, the paid-in registered capital ofOur WFOE was US$26.6 million. Any limitation on the ability of Our WFOE or JMU HK to pay dividends or make otherdistributions to us could adversely limit our ability to grow, make investments or acquisitions that could be beneficial to ourbusiness, pay dividends, or otherwise fund and conduct our business. PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental controlof currency conversion could limit our use of the proceeds we receive from our initial public offering to fund our expansionor operations. In utilizing the proceeds we receive from financing activities, we could (i) make additional capital contributions to ourPRC subsidiary, (ii) establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, (iii) makeloans to our PRC subsidiary or consolidated affiliated entity, or (iv) acquire offshore entities with business operations in Chinain an offshore transaction. However, most of these uses are subject to PRC regulations and approvals. For example: ·capital contributions to Our WFOE or to any newly established PRC subsidiaries, must be approved by the PRCMinistry of Commerce or its local counterparts; ·loans by us to Our WFOE, which is a foreign-invested enterprise, to finance its activities cannot exceed statutorylimits and must be registered with the PRC State Administration of Foreign Exchange, or SAFE, or its localbranches; and ·medium and long-term loans by us to Our VIE, which is a domestic PRC entity, must be approved by the NationalDevelopment and Reform Commission and must also be registered with SAFE or its local branches. On August 29, 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of theAdministration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular142, regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital into Renminbi byrestricting how the converted Renminbi may be used. In addition, SAFE promulgated Circular 45 on November 9, 2011 in orderto clarify the application of SAFE Circular 142. Under SAFE Circular 142 and Circular 45, the Renminbi capital converted fromforeign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scopeapproved by the applicable government authority and may not be used for equity investments within the PRC. In addition,SAFE strengthened its oversight of the flow and use of the Renminbi capital converted from foreign currency registered capitalof foreign- invested enterprises. The use of such Renminbi capital cannot be changed without SAFE’s approval, and suchRenminbi capital cannot in any case be used to repay Renminbi loans if the proceeds of such loans have not been used.Furthermore, SAFE promulgated Circular 59 in November 2010, which tightens the regulation over settlement of net proceedsfrom overseas offerings, such as our initial public offering, and requires, among other things, the authenticity of settlement ofnet proceeds from offshore offerings to be closely examined and the net proceeds to be settled in the manner described in theoffering documents or otherwise approved by our board. Violations of these SAFE regulations could result in severe monetary or other penalties, including confiscation of earnings derived from such violation activities, a fine of up to 30% of the Renminbifunds converted from the foreign invested funds or in the case of a severe violation, a fine ranging from 30% to 100% of theRenminbi funds converted from the foreign-invested funds. 20 In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities byoffshore holding companies, we cannot assure you that we will be able to obtain these government registrations or approvals ona timely basis, if at all, with respect to our future plans to use the U.S. dollar proceeds we receive from our initial public offeringfor our expansion and operations in China. If we fail to receive such registrations or approvals, our ability to use the proceedswe receive from financing activities and to capitalize our PRC operations could be negatively affected, which could adverselyaffect our liquidity and ability to fund and expand our business. We could lose the ability to use and enjoy assets held by Our VIE that are important to the operation of our business if suchentities go bankrupt or become subject to dissolution or liquidation proceedings. As part of our contractual arrangements with Our VIE, such entity holds certain assets that is important to the operationof our business. If Our VIE goes bankrupt and all or part of its assets become subject to liens or rights of third-party creditors, wemight not be able to continue some or all of our business activities, which could adversely affect our business, financialcondition and results of operations. If Our VIE undergoes voluntary or involuntary liquidation proceedings, the unrelated third-party creditors could claim rights to some or all of these assets, thereby hindering our ability to operate our business, whichcould adversely affect our business, financial condition and results of operations. Risks Relating to Doing Business in China We could be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet businesses andcompanies. The PRC government extensively regulates the internet industry, including foreign ownership of, and the licensing andpermit requirements pertaining to, companies in the internet industry. These internet-related laws and regulations are relativelynew and evolving, and their interpretation and enforcement involve significant uncertainties. As a result, in certaincircumstances it could be difficult to determine what actions or omissions could be deemed to be in violation of applicable lawsand regulations. Issues, risks and uncertainties relating to PRC regulation of internet businesses include, but are not limited to,the following: ·there are uncertainties relating to the regulation of internet businesses in China, including evolving licensingpractices. This means that permits, licenses or operations at some of our companies could be subject to challenge,or we could fail to obtain permits or licenses that would be deemed necessary for our operations or we might not beable to obtain or renew certain permits or licenses. The major permits and licenses that could be involved include,without limitation, the ICP license. If we fail to maintain any of these required licenses or approvals, we could besubject to various penalties, including fines and the discontinuation of or restrictions on our operations. Any suchdisruption in our business operations could have an adverse effect on our results of operations; ·new laws and regulations could be promulgated that will regulate internet activities, including online services. Ifthese new laws and regulations are promulgated, additional licenses could be required for our operations. If ouroperations do not comply with these new regulations after they become effective, or if we fail to obtain anylicenses required under these new laws and regulations, we could be subject to penalties; and ·we only have contractual control over our operating website, www.ccjoin.com. We do not own the website due tothe restriction of foreign investment in businesses providing value-added telecom services in China, includinginternet content distribution services. This could significantly disrupt our business, subject us to sanctions,compromise enforceability of related contractual arrangements, or have other harmful effects on us. 21 The interpretation and application of existing PRC laws, regulations and policies and possible new laws, regulations orpolicies relating to the internet industry have created substantial uncertainties regarding the legality of existing and futureforeign investments in, and the businesses and activities of, internet businesses in China, including our business. We cannotassure you that we have obtained all the permits or licenses required for conducting our business in China or will be able tomaintain our existing licenses or obtain any new licenses required under any new laws or regulations. There are also risks thatwe could be found to violate the existing or future laws and regulations given the uncertainty and complexity of China’sregulation of internet businesses. On July 13, 2006, the Ministry of Industry and Information Technology, or the MIIT, the successor of the Ministry ofInformation Industry, issued the Notice of the Ministry of Information Industry on Intensifying the Administration of ForeignInvestment in Value-added Telecom Services. This notice prohibits domestic telecom services providers from leasing,transferring or selling telecom business operating licenses to any foreign investor in any form, or providing any resources, sitesor facilities to any foreign investor for their illegal operation of a telecom business in China. According to this notice, either theholder of a value-added telecom business operating license or its shareholders must directly own the domain names andtrademarks used by such license holders in their provision of value-added telecom services. The notice also requires each licenseholder to have the necessary facilities, including servers, for its approved business operations and to maintain such facilities inthe regions covered by its license. Currently, Our VIE owns the related domain names, holds the ICP licenses necessary for theoperation of our www.ccjoin.com website, and has applied related trademarks with the Trademark Office of the StateAdministration for Industry and Commerce. Pursuant to the Administrative Measures on Internet Information Services effectivesince September 25, 2000, commercial internet information services are subject to licensing system. In case the operatorprovides commercial internet information services without obtaining an operation license or the services provided by theoperator exceed the scope of the services as permitted by the operation license, the relevant telecom administrative agencycould order to have such act corrected within a specified period. Where there is illegal income, the illegal income could beconfiscated and a fine of no less than three times but no more than five times the value of the illegal income would be imposed;where there is no illegal income or the illegal income does not exceed RMB50,000, a fine of no less than RMB100,000 but nomore than RMB1,000,000 could be imposed; in the event of a serious case, the operator shall be ordered to close down itswebsite. Uncertainties with respect to the PRC legal system could have an adverse effect on us. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior courtdecisions in a civil law system may be cited for reference but have limited precedential value. Since 1979, PRC legislation andregulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However,since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations ofmany laws, regulations and rules are not always consistent, and enforcement of these laws, regulations and rules involvesuncertainties, which could limit the available legal protections. In addition, the PRC administrative and court authorities have significant discretion in interpreting and implementingor enforcing statutory rules and contractual terms, and it could be more difficult to predict the outcome of administrative andcourt proceedings and the level of legal protection we could enjoy in the PRC than under some more developed legal systems.These uncertainties could affect our judgment on the relevance of legal requirements and our decisions on the measures andactions to be taken to fully comply therewith, and could affect our ability to enforce our contractual or tort rights. Suchuncertainties could therefore increase our operating costs and expenses as well as adversely affect our business and results ofoperations. Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are notpublished on a timely basis or at all, and could have a retroactive effect. As a result, we might not be aware of our violation ofany of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope andeffect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changesin the regulatory environment in China could adversely affect our business and impede our ability to continue our operations. 22 Regulation and censorship of information distribution over the internet in China could adversely affect our business, and wecould be liable for information displayed on, retrieved from or linked to our website. China has enacted laws and regulations governing internet access and the distribution of products, services, news,information and other content through the internet. In the past, the PRC government has prohibited the distribution ofinformation through the internet that it deems to be in violation of PRC laws and regulations. If any of our internet content weredeemed by the PRC government to violate any content restrictions, we would not be able to continue to display such contentand could become subject to penalties, including confiscation of income, fines, suspension of business and revocation ofrequired licenses, which could adversely affect our business, financial condition and results of operations. We could also besubject to potential liability for any unlawful actions of users of our website or for content we distribute that is deemedinappropriate. It could be difficult to determine the type of content that could result in liability to us, and if we are found to beliable, we could be prevented from operating our website in China. Regulation of food services in China could adversely affect our business, and we could be liable for food business operations. China has enacted laws and regulations governing the sale of food. In accordance with the Food Safety Law of thePeople’s Republic of China, the Administrative Measures for the Licensing of Food Business Operations, the ImplementingRegulations for the Food Safety Law of the People’s Republic of China and other relevant laws and regulations, businessoperators of food services shall carry out production and operation in accordance with the laws, regulations and food safetystandards, ensure food safety, uphold integrity and self-discipline, be accountable to the public and society at large, acceptpublic supervision and assume social responsibility. We have already obtained a Food Circulation License, a Retailing Licensefor Liquor and a Wholesale License for Liquor. We believe we now possess all necessary licenses and permits to sell allcategories of food products on our website. However, it is possible that the PRC government will require us to apply foradditional licenses for certain specific categories of products. We can not assure you that we can obtain any such additionalpermits from the PRC government at reasonable cost, or at all. Additionally, if any food product we sold is found unsafe by thePRC government, we will be punished under the relevant laws and regulations, and we may have to cease the sale of the wholecategory that contains the unsafe food product. Governmental control of currency conversion could affect the value of your investment. The PRC government imposes controls on the convertibility between the Renminbi and foreign currencies despite thesignificant reduction over the years by the PRC government of control over routine foreign exchange transactions under currentaccounts. Substantially all of our revenues are denominated in Renminbi. Under our current holding company corporatestructure, our income is primarily derived from dividend payments from our PRC subsidiary. Shortages in the availability offoreign currency or other restrictions could restrict the ability of our PRC subsidiary to remit sufficient foreign currency to paydividends or other payments to us, or otherwise satisfy their foreign currency- denominated obligations. Under existing PRCforeign exchange regulations, payments of current account items, including profit distributions, interest payments andexpenditures from trade related transactions, can be made in foreign currencies without prior approval from SAFE by complyingwith certain procedural requirements. However, approval from SAFE or its local branch is required where Renminbi is to beconverted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominatedin foreign currencies. The PRC government may also at its discretion restrict access to foreign currencies for current accounttransactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfyour currency demands, we might not be able to pay dividends in foreign currencies to our shareholders, including holders of ourADSs. Fluctuations in exchange rates of the Renminbi could affect our reported results of operations. Substantially all of our revenues and expenses are denominated in RMB. The value of the RMB against the U.S. dollarand other currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchangepolicies, among other things. In July 2005, the PRC government changed its decades-old policy of pegging the value of theRMB to the U.S. dollar, and the RMB appreciated more than 20% against the U.S. dollar over the following three years. BetweenJuly 2008 and June 2010, this appreciation halted and the exchange rate between the RMB and the U.S. dollar remained within anarrow band. Since June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably. It isdifficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB andthe U.S. dollar in the future. 23 As we rely on dividends and other fees paid to us by our subsidiary and affiliated consolidated entities in China, anysignificant revaluation of the Renminbi could adversely affect our cash flows, revenues, earnings and financial position, and thevalue of, and any dividends payable on, our ADSs in U.S. dollars. To the extent that we need to convert U.S. dollars we receivedfrom our initial public offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar wouldhave an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert ourRenminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for otherbusiness purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amountavailable to us. In addition, since our functional and reporting currency is the U.S. dollar while the functional currency of oursubsidiary and consolidated affiliated entities in China is Renminbi, appreciation or depreciation in the value of the Renminbirelative to the U.S. dollar would have a positive or negative effect on our reported financial results, which might not reflect anyunderlying change in our business, financial condition or results of operations. Our operations could be adversely affected by changes in China’s political, economic and social conditions. Substantially all of our assets and operations are located in China. Accordingly, our business, financial condition,results of operations and prospects could be influenced to a significant degree by political, economic and social conditions inChina generally and by continued economic growth in China as a whole. The Chinese economy differs from the economies of most developed countries in many respects, including the level ofgovernment involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Althoughthe PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reductionof state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, asubstantial portion of productive assets in China is still owned by the government. In addition, the PRC government continuesto play a significant role in regulating industry development by imposing industrial policies. The PRC government alsoexercises significant control over China’s economic growth through allocating resources, controlling payment of foreigncurrency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries orcompanies. While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, bothgeographically and among various sectors of the economy. The PRC government has implemented various measures toencourage economic growth and guide the allocation of resources. Some of these measures might benefit the overall Chineseeconomy, but could have a negative effect on us. For example, our financial condition and results of operations could beadversely affected by government control over capital investments or changes in tax regulations. In the past the PRCgovernment has implemented certain measures, including interest rate increases, to control the pace of economic growth. Thesemeasures could cause decreased economic activity in China, which could adversely affect our business and operating results.Any significant increase in China’s inflation rate could increase our costs and have an adverse effect on our operating margins.In addition, any sudden changes to China’s political system or the occurrence of widespread social unrest could have negativeeffects on our business and results of operations. Under the PRC enterprise income tax law, we could be classified as a “resident enterprise” of China. Such classification couldresult in unfavorable tax consequences to us and our non-PRC shareholders. Under the PRC Enterprise Income Tax Law and the Implementation Rules, both of which became effective on January1, 2008, an enterprise established outside of the PRC with “de facto management bodies” within the PRC is considered aresident enterprise and is subject to PRC enterprise income tax at the rate of 25% on its global income. The ImplementationRules define the term “de facto management bodies” as “establishments that carry out substantial and overall management andcontrol over the manufacturing and business operations, personnel, accounting, properties, etc. of an enterprise”. The onlydetailed guidance currently available regarding the definition of “de facto management body” as well as the determination ofthe tax residence of offshore incorporated enterprises whose primary controlling shareholder is a PRC company or a PRCcorporate group, and such enterprises’ tax administrations are set forth in two notices, the Notice On Issues Relating toDetermination of Chinese-Controlled Offshore Enterprise as PRC Resident Enterprises by applying the “De Facto ManagementBody”, or Circular 82, and the Administrative Measures of Enterprise Income of Chinese Controlled Offshore IncorporatedResident Enterprise (Trial), or Circular 45, issued by the PRC State Administration of Taxation, or the Circulars. The Circularsprovide that a foreign enterprise controlled by a PRC enterprise or a PRC enterprise group would be classified as a “residententerprise” with its “de facto management body” located within China if all of the following requirements are satisfied: (i) theenterprise’s day-to-day operations management is primarily exercised in China, (ii) decisions relating to the enterprise’s financial and human resource matters are made or subject to approval by organizations or personnel in China, (iii) the enterprise’s primaryassets, accounting books and records, company seals, board and shareholders’ meeting minutes are located or maintained inChina, and (iv) 50% or more of voting board members or senior executives of the enterprise habitually reside in China. If all ofthese criteria are met, the relevant offshore enterprise controlled by PRC enterprises or PRC enterprise groups would be deemedto have its “de facto management body” in China and therefore be deemed a PRC resident enterprise. The Circulars madeclarification in the areas of resident status determination, post-determination administration, as well as the exercise of competenttax authorities’ procedures. The Circulars also specify that when provided with a copy of PRC tax resident determinationcertificate from a resident Chinese controlled offshore incorporated enterprise, a payer of PRC-sourced dividends, interest,royalties, etc. should not withhold 10% income tax on such payments to such Chinese controlled offshore incorporatedenterprise. Although the Circulars apply only to offshore enterprises controlled by PRC enterprises and not those controlled byPRC individuals such as us, the determination criteria and administration clarification made in the Circulars reflect the PRCState Administration of Taxation’s general position on how the “de facto management body” test should be applied indetermining the tax residency status of offshore enterprises and how the administration measures should be implemented. Thereis no assurance that the PRC State Administration of Taxation will not apply the same or similar criteria as stated in the Circularsto determine whether the “de facto management body” of an offshore incorporated enterprise controlled by PRC individuals(like us) is located within the PRC in the future. If the PRC authorities were to determine that we should be treated as a PRCresident enterprise for the purpose of PRC enterprise income tax, a 25% enterprise income tax on our global income couldsignificantly increase our tax burden and adversely affect our financial condition and results of operations. 24 Pursuant to the Enterprise Income Tax Law and the Implementation Rules, dividends generated after January 1, 2008and payable by a foreign-invested enterprise in China to its foreign enterprise investors will be subject to a 10% withholding tax,unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for a reducedwithholding arrangement. We are a Cayman Islands holding company and substantially all of our income comes from dividendsfrom our PRC subsidiary through our Hong Kong holding company. To the extent these dividends are subject to withholdingtax, the amount of funds available to us to meet our cash requirements, including the payment of dividends to our shareholdersand ADS holders, will be reduced. The Implementation Rules provide that, (i) if the enterprise that distributes dividends is domiciled in the PRC, or (ii) ifgains are realized from transferring equity interests of enterprises domiciled in the PRC, then such dividends or capital gains aretreated as PRC-sourced income. It is not clear how “domicile” might be interpreted under the Enterprise Income Tax Law, and itcould be interpreted as the jurisdiction where the enterprise is a tax resident. Therefore, if we are considered to be a PRC residententerprise for tax purposes, any dividends we pay to our overseas corporate shareholders or ADS holders as well as gains realizedby such shareholders or ADS holders from the transfer of our shares or ADSs could be regarded as PRC-sourced income and as aresult subject to PRC withholding tax at a rate of up to 10%, subject to the provisions of any applicable tax treaty. If dividendswe pay to our overseas individual shareholders or ADS holders, or gains realized by such holders from the transfer of our sharesor ADSs, are treated as China-sourced income, the withholding rate would be 20%, subject to the provisions of any applicabletax treaty. If we are required under the Enterprise Income Tax Law to withhold PRC income tax on any dividends paid to our non-PRC shareholders and ADS holders or if gains from dispositions of our shares or ADSs are subject to PRC tax, your investmentin our ADSs or ordinary shares could be adversely affected. Furthermore, the State Administration of Taxation promulgated the Notice on How to Understand and Determine theBeneficial Owners in Tax Treaties in October 2009, or Circular 601, which provides guidance for determining whether aresident of a contracting state is the “beneficial owner” of an item of income under China’s tax treaties and tax arrangements.According to Circular 601, a beneficial owner generally must be engaged in substantive business activities. An agent or conduitcompany cannot be regarded as a beneficial owner and, therefore, cannot qualify for treaty benefits. The conduit companynormally refers to a company that is set up for the purpose of avoiding or reducing taxes or transferring or accumulating profits.We cannot assure you that any dividends distributed by us to our non-PRC shareholders and ADS holders whose jurisdiction ofincorporation has a tax treaty with China providing for avoidance of double taxation will be entitled to the benefits under therelevant withholding arrangement. 25 A failure by our shareholders or beneficial owners who are PRC citizens or residents in China to comply with certain PRCforeign exchange regulations could restrict our ability to distribute profits, restrict our overseas and cross-border investmentactivities or subject us to liability under PRC laws, which could adversely affect our business and financial condition. The State Administration of Foreign Exchange, or SAFE, issued the Circular Relating to Foreign ExchangeAdministration of Offshore Investment, Financing and Return Investment by Domestic Residents Utilizing Special PurposeVehicles, or SAFE Circular 37, that was promulgated and become effective on July 14, 2014. It requires a PRC natural person ora PRC company, or a PRC Resident, to file a “Registration Form of Overseas Investments Contributed by PRC Resident” andregister with the local SAFE branch before it contributes assets or equity interests in an overseas special purpose vehicle, or SPV,that is directly established and controlled by PRC Resident for the purpose of conducting investment or financing. Followingthe initial registration, the PRC resident is also required to register with the local SAFE branch timely for any major change inrespect of SPV, including, among other things, any major change of SPV’s PRC Resident shareholder, name of the SPV, term ofoperation or any increase or reduction of the SPV’s registered capital, share transfer or swap, and merger or division. Failure tocomply with the registration procedures of Circular 37 could result in the penalties including the imposition of restrictions onthe ability of SPV’s PRC subsidiaries to dividends to its overseas parent company. It remains unclear how this regulation and any future related legislation will be interpreted, amended and implementedby the relevant PRC government authorities. As of December 31, 2016, to the best of our knowledge, most of our PRC Residentshareholders with offshore investments had not registered their offshore investments with SAFE according to the predecessorregulation of Circular 37, namely the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRCResidents Engaging in Financing and Roundtrip Investments via Overseas Special Purpose Vehicles, or SAFE Circular 75,which was replaced by the SAFE Circular 37 but still effective when the relevant PRC shareholders made their investments. IfPRC government determined that our PRC Resident shareholders are required to make the registration regarding their offshoreinvestment under Circular 37, both they and us may be subject to fines by PRC government. We are committed to complying, and to ensuring that our shareholders and beneficial owners who are PRC citizens orresidents comply with SAFE Circular 37 requirements. The rest of our PRC citizen or resident beneficial owners are alsoapplying for registrations under SAFE Circular 37 with the relevant local counterpart of SAFE. However, we might not be fullyinformed of the identities of all our beneficial owners who are PRC citizens or residents, and we cannot compel our beneficialowners to comply with SAFE Circular 37 requirements. As a result, we cannot assure you that all of our shareholders orbeneficial owners who are PRC citizens or residents have complied with, or will in the future make or obtain the necessary anyapplicable registrations or approvals as required by, SAFE Circular 37 or other related regulations. Failure by such shareholdersor beneficial owners to comply with SAFE Circular 37, or failure by us to amend the foreign exchange registrations of our PRCsubsidiary, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit oursubsidiaries’ ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect ourbusiness and prospects. Failure by us to amend the foreign exchange registrations in compliance with SAFE Circular 37 couldsubject us to fines or legal sanctions restrict our overseas or cross-border ownership structure, which could adversely affect ourbusiness and prospects. See “—We rely principally on dividends and other distributions on equity paid by our PRC and HongKong subsidiaries to fund any cash and financing requirements we might have. Any limitation on the ability of our PRC andHong Kong subsidiaries to pay dividends to us could have an adverse effect on our ability to conduct our business”. A failure to comply with PRC regulations regarding the registration of shares and share options held by our employees whoare PRC citizens could subject such employees or us to fines and legal or administrative sanctions. Pursuant to the Implementation Rules of the Administrative Measures on Individual Foreign Exchange, or theIndividual Foreign Exchange Rules, promulgated by SAFE on January 5, 2007, a relevant guidance issued by SAFE in March2007 and Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating in StockIncentive Plan of Overseas Publicly-Listed Company, or the Stock Option Rules, on February 15, 2012 that replaces theguidance issued in March 2007, PRC citizens who are granted shares or share options by an overseas-listed company accordingto its employee share option or share incentive plan are required, through the PRC subsidiary of such overseas-listed companyor other qualified PRC agents selected by such PRC subsidiary, to register with SAFE and complete certain other proceduresrelated to the share option or other share incentive plan. In addition, the PRC agent is required to amend the SAFE registrationwith respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseasentrusted institution or other material changes. For participants who had already participated in an employee share option orshare incentive plan before the date of the guidance, the guidance require their PRC employers or PRC agents to complete therelevant formalities within three months of the date of the guidance. We and our PRC citizen employees who have been granted share options, or PRC option holders, are subject to these rules. If we or our PRC option holders fail to comply with these rules,we or our PRC option holders could be subject to fines and legal or administrative sanctions. 26 The heightened scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on our businessoperations, our acquisition or restructuring strategy or the value of your investment in us. The State Administration of Taxation has issued several rules and notices to tighten the scrutiny over acquisitiontransactions in recent years, including the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfersby Non-PRC Resident Enterprises issued in December 2009, or SAT Circular 698, and the Notice on Certain Corporate IncomeTax Matters Related to Indirect Transfer of Properties by Non-PRC Resident Enterprises issued in February 2015, or SATCircular 7. Pursuant to these rules and notices, except for a few circumstances falling into the scope of the safe harbor providedby SAT Circular 7, such as open market trading of stocks in public companies listed overseas, if a non-PRC resident enterpriseindirectly transfers PRC taxable properties (i.e. properties of an establishment or a place in the PRC, real estate properties in thePRC or equity investments in a PRC tax resident enterprise) by disposing of equity interest or other similar rights in an overseasholding company, without a reasonable commercial purpose and resulting in the avoidance of PRC enterprise income tax, suchindirect transfer should be deemed as a direct transfer of PRC taxable properties and gains derived from such indirect transfermay be subject to the PRC withholding tax at a rate of up to 10%. SAT Circular 7 sets out several factors to be taken intoconsideration by tax authorities in determining whether an indirect transfer has a reasonable commercial purpose, such aswhether the main value of equity interest in an overseas holding company is derived directly or indirectly from PRC taxableproperties. An indirect transfer satisfying all the following criteria will be deemed to lack reasonable commercial purpose and betaxable under PRC law without considering other factors set out by SAT Circular 7: (i) 75% or more of the equity value of theintermediary enterprise being transferred is derived directly or indirectly from the PRC taxable properties; (ii) at any time duringthe one-year period before the indirect transfer, 90% or more of the asset value of the intermediary enterprise (excluding cash) iscomprised directly or indirectly of investments in the PRC, or 90% or more of its income is derived directly or indirectly fromthe PRC; (iii) the functions performed and risks assumed by the intermediary enterprise and any of its subsidiaries that directlyor indirectly hold the PRC taxable properties are limited and are insufficient to prove their economic substance; and (iv) theforeign tax payable on the gain derived from the indirect transfer of the PRC taxable properties is lower than the potential PRCincome tax on the direct transfer of such assets. SAT Circular 7 also introduces an interest regime by providing that where atransferor fails to file and pay tax on time, and where a withholding agent fails to withhold the tax, interest will be charged on adaily basis. If the transferor has provided the required documents and information or has filed and paid the tax within 30 daysfrom the date that the share transfer contract or agreement is signed, then interest shall be calculated based on the benchmarkinterest rate; otherwise, the benchmark interest rate plus 5% will apply. Further, SAT Circular 7 replaces the compulsoryreporting requirement in SAT Circular 698 with a voluntary reporting regime, and the criteria set forth in Circular 698 forindirect transfer reporting have been abolished. Both the foreign transferor and the transferee, and the PRC tax residententerprise whose equity interests are being transferred may voluntarily report the transfer by submitting the documents requiredin SAT Circular 7. Although SAT Circular 7 provides clarity in many important areas, such as reasonable commercial purpose, there arestill uncertainties on the tax reporting and payment obligations with respect to future private equity financing transactions, shareexchange or other transactions involving the transfer of shares in non-PRC resident companies. Our company and other non-resident enterprises in our group may be subject to filing obligations or being taxed if our company and other non-residententerprises in our group are transferors in such transactions, and may be subject to withholding obligations if our company andother non-resident enterprises in our group are transferees in such transactions. For the transfer of shares in our company byinvestors who are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under the rules andnotices. As a result, we may be required to expend valuable resources to comply with these rules and notices or to request therelevant transferors from whom we purchase taxable assets to comply, or to establish that our company and other non-residententerprises in our group should not be taxed under these rules and notices, which may have a material adverse effect on ourfinancial condition and results of operations. 27 We cannot assure you that the PRC tax authorities will not, at their discretion, adjust any capital gains and impose taxreturn filing obligations on us or require us to provide assistance for the investigation of PRC tax authorities with respectthereto. We acquired JMU HK in June 2015 and divested our B2C business in September 2015, and we may pursue acquisitionsin the future that may involve complex corporate structures. If we are considered a non-resident enterprise under the PRCEnterprise Income Tax Law and if the PRC tax authorities make adjustments to the taxable income of these transactions underCircular 698 and SAT Circular 7, our income tax expenses associated with such potential acquisitions will be increased, whichmay have an adverse effect on our financial condition and results of operations. PRC laws and regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors,which could make it more difficult for us to pursue growth through acquisitions in China. PRC laws and regulations, such as the 2006 M&A Rules, the Anti-Monopoly Law promulgated by the PRC NationalPeople’s Congress in 2007 and the Notice on the Establishment of the Security Review System in Mergers and Acquisitions ofDomestic Enterprises by Foreign Investors promulgated by the State Council, or the Security Review Rule, establish proceduresand requirements that could make some acquisitions of Chinese companies by foreign investors and companies more time-consuming and complex, including requirements in some instances that various governmental authorities be notified in advanceof any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. For example, onFebruary 3, 2011, the State Council promulgated the Security Review Rule, which provides, among other things, that mergerand acquisition transactions by foreign investors of PRC enterprises in sensitive sectors or industries, such as internetinformation service industry, which our operations fall within, could be subject to security review. Consequently, any suchtransaction could be blocked due to their effect on the national defense security, national economic stability, basic social lifeorder, or capacity of indigenous research and development of key technologies. On August 25, 2011, the Ministry of Commercepromulgated the Regulations on Implementing the Security Review System in Mergers and Acquisition of Domestic Enterprisesby Foreign Investors, which, among other things, set forth detailed provisions on how the security review of relevanttransactions would be conducted, and provide for that foreign investors could not for any reason evade the security reviewprocess through entrustment, phased-in investment, leasing, loans and control agreement, and overseas transactions. We couldexpand our business in part by acquiring complementary businesses. Complying with the requirements of the relevant PRC lawsand regulations to complete such transactions could be time-consuming, and any required approval processes could delay orinhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our marketshare. Increases in labor costs in the PRC may adversely affect our business and results of operations. The economy of China has been experiencing increases in inflation and labor costs in recent years. As a result, theaverage wages in the PRC are expected to continue to grow. In addition, we are required by PRC laws and regulations to payvarious statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance,unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. Therelevant government agencies may examine whether an employer has made adequate payments of the requisite statutoryemployee benefits, and those employers who fail to make adequate payments could be subject to late payment fees, fines and/orother penalties. If the relevant PRC authorities determine that we should make supplemental social insurance and housing fundcontributions and that we are subject to fines and legal sanctions, our business, financial condition and results of operationscould be adversely affected. We expect that our labor costs, including wages and employee benefits, would continue to increase.Unless we are able to pass on these increased labor costs to our customers by increasing the prices of our products and services,our financial condition and results of operations could be adversely affected. We are subject to consumer protection laws that could require us to modify our current business practices and incur increasedcosts. We are subject to numerous PRC laws and regulations that govern e-commerce business, such as the ConsumerProtection Law. If these regulations were to change or if we or our merchant clients were to violate them, the costs of certainproducts or services could increase, or we could be subject to fines or penalties or suffer reputational harm, which could reducedemand for the products or services offered on our website and adversely affect our business and results of operations. Forexample, the recently amended Consumer Protection Law, which became effective in March 2014, further strengthens theprotection of consumers and imposes more stringent requirements and obligations on business operators, especially forbusinesses that operate on the internet. We do not maintain product liability insurance for products and services transacted onour platform, and our rights of indemnity from the vendors and service providers might not adequately cover us for any liability we incur. Even unsuccessful claims could result in the expenditure of funds and management time and resources and couldreduce our net income and profitability. Legal requirements are frequently changed and subject to interpretation, and we areunable to predict the ultimate cost of compliance with these requirements or their effect on our operations. We could be requiredto make significant expenditures or modify our business practices to comply with existing or future laws and regulations, whichcould increase our costs and limit our ability to operate our business. 28 Risks Relating to Our ADSs The trading price of our ADSs could be volatile, which would result in substantial losses to investors. Since our ADSs began trading on the Nasdaq Global Market on April 8, 2015, through May 19, 2017, the closing priceas reported by Nasdaq has ranged from a high of $11.99 to a low of $1.82 per ADSs. The trading price of our ADSs could bevolatile and could fluctuate widely in response to factors relating to our business as well as external factors beyond our control.Factors such as variations in our financial results, announcements of new business initiatives by us or by our competitors,recruitment or departure of key personnel, changes in the estimates of our financial results or changes in the recommendationsof any securities analysts electing to follow our securities or the securities of our competitors could cause the market price forour ADSs to change substantially. At the same time, securities markets could from time to time experience significant price andvolume fluctuations that are not related to the operating performance of particular companies, as they did for example in late2008 and early 2009. These market fluctuations could also have an adverse effect on the market price of our ordinary shares. The performance and fluctuation of the market prices of other companies with business operations located mainly inChina that have listed their securities in the United States could affect the volatility in the price of and trading volumes for ourADSs. In recent years, a number of PRC companies have listed their securities, or are in the process of preparing for listing theirsecurities, on U.S. stock markets. Some of these companies have experienced significant volatility, including significant pricedeclines in connection with their initial public offerings. The trading performances of these PRC companies’ securities at thetime of or after their offerings could affect the overall investor sentiment towards PRC companies listed in the United States andconsequently could affect the trading performance of our ADSs. These broad market and industry factors could significantlyaffect the market price and volatility of our ADSs, regardless of our actual operating performance. Any of these factors couldresult in large and sudden changes in the trading volume and price for our ADSs. We are an emerging growth company and cannot be certain if the reduced disclosure requirements applicable to emerginggrowth companies will make our ADSs less attractive to investors. We are an “emerging growth company” under the JOBS Act, and may take advantage of certain exemptions fromvarious reporting requirements that are applicable to other public companies that are not emerging growth companies including,but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-OxleyAct. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financialaccounting standards until such date that a private company is otherwise required to comply with such new or revisedaccounting standards. We have not yet opted out of these exemptions available to the emerging growth companies. This decision would allowus to delay the adoption of new or revised accounting standards that have different effective dates for public and privatecompanies until those standards apply to private companies or otherwise become applicable to us. As a result, our consolidatedfinancial statements might not be comparable to public companies or other emerging growth companies that have opted out ofthis provision. We cannot predict if investors will find our ADSs less attractive because we will rely on these exemptions. Ifsome investors find our ADSs less attractive as a result, our stock price could be lower than it otherwise would be, there could bea less active trading market for our ADSs and our stock price could be more volatile. We will remain an emerging growth company until the earliest of (i) the last day of our fiscal year during which wehave total annual gross revenues of at least $1.07 billion; (ii) the last day of our fiscal year ending after the fifth anniversary ofthe completion of our initial public offering; (iii) the date on which we have, during the previous three-year period, issued morethan $1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under theExchange Act. 29 We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt fromcertain provisions applicable to U.S. domestic public companies. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of thesecurities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: ·the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or currentreports on Form 8-K; ·the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of asecurity registered under the Exchange Act; ·the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and tradingactivities and liability for insiders who profit from trades made in a short period of time; and ·the selective disclosure rules by issuers of material nonpublic information under Regulation FD. We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition,press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, theinformation we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required tobe filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information thatwould be made available to you were you investing in a U.S. domestic issuer. As a foreign private issuer, we are permitted to, and we plan to, rely on exemptions from certain NASDAQ corporategovernance standards applicable to U.S. issuers, including the requirement that a majority of an issuer’s directors consist ofindependent directors. This might afford less protection to holders of our ordinary shares and ADSs. Section 5605(b)(1) of the Nasdaq Listing Rules requires listed companies to have, among other things, a majority of itsboard members to be independent, and Section 5605(d) and 5605(e) require listed companies to have independent directoroversight of executive compensation and nomination of directors. As a foreign private issuer, however, we are permitted to, andwe plan to follow home country practice in lieu of the above requirements. The corporate governance practice in our homecountry, the Cayman Islands, does not require a majority of our board to consist of independent directors or the implementationof a nominating and corporate governance committee. We have informed NASDAQ that we will follow home country practice inplace of all of the requirements of Rule 5600 other than those rules which we are required to follow pursuant to the provisionsof Rule 5615(a)(3). ·Rule 5605(b), pursuant to which (i) a majority of the board of directors must be comprised of IndependentDirectors, and (ii) the Independent Directors must have regularly scheduled meetings at which only IndependentDirectors are present. ·Rule 5605(c) (other than those parts as to which the home country exemption is not applicable), pursuant to whicheach company must have, and certify that it has and will continue to have, an audit committee of at least threemembers, each of whom must meet criteria set forth in Rule 5605(c)(2) (A). ·Rule 5605(d), pursuant to which each company must (i) certify that it has adopted a formal written compensationcommittee charter and that the compensation committee will review and reassess the adequacy of the formalwritten charter on an annual basis, and (ii) have a compensation committee of at least two members, each of whommust be an Independent Director. ·Rule 5605(e), pursuant to which director nominees must be selected, or recommended for the Board’s selection,either by Independent Directors constituting a majority of the Board’s Independent Directors in a vote in whichonly Independent Directors participate, or a nominations committee comprised solely of Independent Directors. 30 ·Rule 5610, pursuant to which each company shall adopt a code of conduct applicable to all directors, officers andemployees. ·Rule 5620(a), pursuant to which each company listing common stock or voting preferred stock, or theirequivalents, shall hold an annual meeting of shareholders no later than one year after the end of the issuer’s fiscalyear-end. ·Rule 5620(b), pursuant to which each company shall solicit proxies and provide proxy statements for all meetingsof shareholders and shall provide copies of such proxy solicitation to Nasdaq. ·Rule 5620(c), pursuant to which each company that is not a limited partnership shall provide for a quorum asspecified in its by-laws for any meeting of the holders of common stock; provided, however, that in no case shallsuch quorum be less than 331/3% of the outstanding shares of the company’s common voting stock. ·Rule 5630, pursuant to which each company that is not a limited partnership shall conduct an appropriate reviewand oversight of all related party transactions for potential conflict of interest situations on an ongoing basis by thecompany’s audit committee or another independent body of the board of directors. ·Rule 5635(a), pursuant to which shareholder approval is required in certain circumstances prior to an issuance ofsecurities in connection with the acquisition of the stock or assets of another company. ·Rule 5635(b), pursuant to which shareholder approval is required prior to the issuance of securities when theissuance or potential issuance will result in a change of control of the company. ·Rule 5635(c), pursuant to which shareholder approval is required prior to the issuance of securities when a stockoption or purchase plan is to be established or materially amended or other equity compensation arrangementmade or materially amended, pursuant to which stock may be acquired by officers, directors, employees, orconsultants, subject to certain exceptions. ·Rule 5635(d), pursuant to which shareholder approval is required prior to the issuance of securities in connectionwith a transaction other than a public offering involving: othe sale, issuance or potential issuance by the company of common stock (or securities convertible into orexercisable for common stock) at a price less than the greater of book or market value which together withsales by officers, directors or Substantial Shareholders of the company equals 20% or more of common stockor 20% or more of the voting power outstanding before the issuance; or othe sale, issuance or potential issuance by the company of common stock (or securities convertible into orexercisable common stock) equal to 20% or more of the common stock or 20% or more of the voting poweroutstanding before the issuance for less than the greater of book or market value of the stock. Our corporate actions are substantially influenced by Mr. Maodong Xu, our founder and co-chairperson, Ms. Xiaoxia Zhu,our chief executive officer and co-chairperson and Ms. Huimin Wang, our director, whose interests might differ from yoursand our company as a whole. As of March 31, 2017, Mr. Maodong Xu, Ms. Xiaoxia Zhu and Ms. Huimin Wang beneficially owned 21.8%, 16.6%and 19.7% of our total outstanding shares, respectively. If these shareholders choose to act in concert, they will have significantinfluence in determining the outcome of any corporate transaction or other matter submitted to the shareholders for approval,including mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significantcorporate actions. This concentration of ownership could also discourage, delay or prevent a change of control transactionsinvolving our company, which would deprive our shareholders of an opportunity to receive a premium for their shares as part ofa sale of our company and might reduce the price of our ADSs. These actions could be taken even if they are opposed by ourother shareholders, including those who purchased ADSs in our initial public offering or on the open market. 31 Anti-takeover provisions in our charter documents could discourage a third party from acquiring us, which could limit ourshareholders’ opportunities to sell their shares at a premium. Our third amended and restated memorandum and articles of association include provisions that could limit the abilityof others to acquire control of us, modify our structure or cause us to engage in change-of-control transactions. For example, ourboard of directors will have the authority, without further action by our shareholders, to issue preferred shares in one or moreseries and to fix the designations, powers, preferences and relative, participating, optional and other rights, if any, and thequalifications, limitations and restrictions thereof, if any, including, without limitation, the number of shares constituting eachsuch class or series, dividend rights, conversion rights, redemption privileges, voting powers, full or limited or no voting powers,and liquidation preferences, any or all of which could be greater than the rights associated with our ordinary shares. Preferredshares could thus be issued quickly with terms calculated to delay or prevent a change in control or make removal ofmanagement more difficult. In addition, if our board of directors issues preferred shares, the market price of our ordinary sharescould fall and the voting and other rights of the holders of our ordinary shares could be adversely affected. These provisionscould have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing marketprices by discouraging third parties from seeking to obtain control of us in a tender offer or similar transaction. You might not receive certain distributions we make on our ordinary shares or other deposited securities if the depositarydecides not to make such distributions to you. The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodianreceives on our ordinary shares or other deposited securities after deducting its fees and expenses. You will receive thesedistributions in proportion to the number of ordinary shares your ADSs represent. However, the depositary may, at its discretion,decide that it is not lawful or reasonably practicable to make a distribution available to any holders of ADSs. For example, thedepositary could determine that it is not practicable to distribute certain property through the mail, or that the value of certaindistributions could be less than the cost of mailing them. In these cases, the depositary could decide not to distribute suchproperty and you will not receive such distribution. We are a Cayman Islands company and, because judicial precedent regarding the rights of shareholders is more limited underCayman Islands law than under U.S. law, you could have less protection of your shareholder rights than you would under U.S.law. Our corporate affairs are governed by our third amended and restated memorandum and articles of association, theCayman Islands Companies Law (2016 Revision), as amended, and the common law of the Cayman Islands. The rights ofshareholders to take action against the directors, actions by noncontrolling shareholders and the fiduciary responsibilities of ourdirectors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. Thecommon law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands aswell as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rightsof our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established asthey would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islandshas a less developed body of securities laws than the United States and provides significantly less protection to investors. Inaddition, some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law thanthe Cayman Islands. There is uncertainty with regard to Cayman Islands law related to whether a judgment obtained from the U.S. courtsunder civil liability provisions of U.S. securities laws will be determined by the courts of the Cayman Islands as penal orpunitive in nature. If such a determination is made, the courts of the Cayman Islands will not recognize or enforce the judgmentagainst a Cayman Islands company, such as our company. As the courts of the Cayman Islands have yet to rule on making such adetermination in relation to judgments obtained from U.S. courts under civil liability provisions of U.S. securities laws, it isuncertain whether such judgments would be enforceable in the Cayman Islands. Maples and Calder (Hong Kong) LLP hasadvised us that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or statecourts of the United States, a judgment obtained in such jurisdiction will be recognized and enforced in the courts of theCayman Islands at common law, without any re-examination of the merits of the underlying dispute, by an action commencedon the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment: 32 ·is given by a foreign court of competent jurisdiction; ·imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given; ·is final; ·is not in respect of taxes, a fine or a penalty; and ·was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or thepublic policy of the Cayman Islands. You should also read “Item 10. Additional Information—A. Share Capital—Ordinary Shares—Differences in CorporateLaw” for some of the differences between the corporate and securities laws in the Cayman Islands and the United States. Your ability to protect your rights as shareholders through the U.S. federal courts could be limited because we areincorporated under Cayman Islands law. Cayman Islands companies might not have standing to initiate a derivative action in a federal court of the UnitedStates. As a result, your ability to protect your interests if you are harmed in a manner that would otherwise enable you to sue ina United States federal court could be limited to direct shareholder lawsuits. You will have limited ability to bring an action against us or against our directors and officers, or to enforce a judgmentagainst us or them, because we are incorporated in the Cayman Islands, because we conduct a majority of our operations inChina and because all of our directors and officers reside outside the United States. We are incorporated in the Cayman Islands and conduct our operations exclusively in China. All of our assets arelocated outside the United States. All of our officers and directors reside outside the United States and a substantial portion ofthe assets of those persons are located outside of the United States. As a result, it could be difficult or impossible for you to bringan action against us or against these individuals in the Cayman Islands or in China in the event that you believe that your rightshave been infringed under the applicable securities laws or otherwise. Even if you are successful in bringing an action of thiskind, the laws of the Cayman Islands and of China could render you unable to enforce a judgment against our assets or theassets of our directors and officers. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRCwould recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions ofthe securities laws of the United States or any state, and it is uncertain whether such Cayman Islands or PRC courts would becompetent to hear original actions brought in the Cayman Islands or China against us or such persons predicated upon thesecurities laws of the United States or any state. Shareholders of Cayman Islands exempted companies such as ourselves have no general rights under Cayman Islandslaw to inspect corporate records and accounts or to obtain copies of lists of shareholders of these companies. Our directors havediscretion under Cayman Islands law to determine whether or not, and under what conditions, our corporate records could beinspected by our shareholders, but are not obliged to make them available to our shareholders. This could make it more difficultfor you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies fromother shareholders in connection with a proxy contest. As a result of all of the above, public shareholders might have more difficulty in protecting their interests in the face ofactions taken by management, members of the board of directors or controlling shareholders than they would as publicshareholders of a U.S. company. 33 The voting rights of holders of ADSs are limited in several significant ways by the terms of the deposit agreement. Holders of our ADSs will only be able to exercise their voting rights with respect to the underlying ordinary shares inaccordance with the provisions of the deposit agreement. Under the deposit agreement, you must vote by giving votinginstructions to the depositary. Upon receipt of voting instructions from a holder of ADSs in the manner set forth in the depositagreement, the depositary will endeavor to vote the underlying ordinary shares in accordance with these instructions. You willnot be able to directly exercise your right to vote with respect to the underlying shares unless you cancel your ADSs andwithdraw the underlying shares and follow the requisite steps to be recognized as a holder of shares entitled to vote such shares.Under our third amended and restated memorandum and articles of association and Cayman Islands law, the minimum noticeperiod required for convening a general meeting is 10 clear days. When a general meeting is convened, you might not receivesufficient notice of a shareholders’ meeting to permit you to withdraw your ordinary shares to allow you to cast your vote withrespect to any specific matter at the meeting. In addition, the depositary might not be able to send voting instructions to you orcarry out your voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extendvoting rights to you in a timely manner, but we cannot assure you that you will receive the voting materials in time to ensure thatyou can instruct the depositary to vote the shares representing your ADSs. Furthermore, the depositary will not be responsible forany failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As aresult, you might not be able to exercise your right to vote and you could lack recourse if your ordinary shares are not voted asyou requested. Except as described in this annual report and in the deposit agreement, holders of our ADSs will not be able to exercisevoting rights attaching to the ordinary shares evidenced by our ADSs on an individual basis. Holders of our ADSs will appointthe depositary or its nominee as their representative to exercise the voting rights attaching to the ordinary shares represented bythe ADSs. You might not receive voting materials in time to instruct the depositary to vote, and it is possible that you, or personswho hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote. Thedeposit agreement provides that if the depositary does not timely receive valid voting instructions from the ADS holders, thenthe depositary must, with certain limited exceptions, give a discretionary proxy to a person designated by us to vote such shares.Furthermore, as a party to the deposit agreement, you waive your right to trial by jury in any legal proceedings arising out of thedeposit agreement or the ADRs against us and/or the depositary. You might not receive distributions on our ordinary shares or any value for them if it is unlawful or impractical for us tomake them available to you. The depositary of our ADSs has agreed to pay you the cash dividends or other distributions it or the custodian for ourADSs receives on our ordinary shares or other deposited securities after deducting its fees and expenses. You will receive thesedistributions in proportion to the number of our ordinary shares your ADSs represent. However, the depositary is not responsibleif it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful tomake a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that arenot properly registered or distributed pursuant to an applicable exemption from registration. The depositary is not responsiblefor making a distribution available to any holders of ADSs, if any government approval or registration is required for suchdistribution. We have no obligation to take any other action to permit the distribution of our ADSs, ordinary shares, rights oranything else to holders of our ADSs. This means that you might not receive the distributions we make on our ordinary shares orany value for them if it is unlawful or impractical for us to make them available to you. These restrictions could have an adverseeffect on the value of your ADSs. You might be subject to limitations on the transfer of your ADSs. Your ADSs are transferable on the books of the depositary. However, the depositary could close its books at any time orfrom time to time when it deems expedient in connection with the performance of its duties. The depositary could close itsbooks from time to time for a number of reasons, including in connection with corporate events such as a rights offering, duringwhich time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositarycould also close its books in emergencies, and on weekends and public holidays. The depositary could refuse to deliver, transferor register transfers of our ADSs generally when our books or the books of the depositary are closed, or at any time if we thinkor the depositary thinks it is necessary or advisable to do so in connection with the performance of its duty under the depositagreement, including due to any requirement of law or any government or governmental body, or under any provision of thedeposit agreement. 34 Compliance with rules and requirements applicable to public companies could cause us to incur increased costs, which couldnegatively affect our results of operations. As a public company, we incur significant legal, accounting and other expenses that we did not incur as a privatecompany. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and Nasdaq GlobalMarket, has required changes in corporate governance practices of public companies. We expect these rules and regulations toincrease our legal, accounting and financial compliance costs and to make certain corporate activities more time-consuming andcostly. Complying with these rules and requirements could be especially difficult and costly for us because we might havedifficulty locating sufficient personnel in China with experience and expertise relating to U.S. GAAP and U.S. public companyreporting requirements, and such personnel could command higher salaries relative to what similarly experienced personnelwould command in the United States. If we cannot employ sufficient personnel to ensure compliance with these rules andregulations, we might need to rely more on outside legal, accounting and financial experts, which could be very costly. Inaddition, we will incur additional costs associated with our public company reporting requirements. We are evaluating andmonitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we mightincur or the timing of such costs. We could be a passive foreign investment company, or PFIC, which would result in adverse United States tax consequences toUnited States investors. We will be classified as a “passive foreign investment company,” or “PFIC” if, in the case of any particular taxable year,either (a) 75% or more of our gross income for such year consists of certain types of “passive” income or (b) 50% or more of theaverage quarterly value of our assets (as determined on the basis of fair market value) during such year produce or are held forthe production of passive income. Passive income generally includes dividends, interest, royalties, rents, annuities, net gainsfrom the sale or exchange of passive assets (including property producing passive income) and net foreign currency gains. Forthis purpose, cash is categorized as a passive asset and the company’s unbooked intangibles associated with active businessactivity are taken into account as a non-passive asset. We will be treated as owning our proportionate share of the assets andearning our proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25%(by value) of the stock. Based on our current income and assets and the value of our ADSs and outstanding ordinary shares, we do not believethat we were a PFIC for our taxable year ended December 31, 2016 and we do not expect to be classified as a PFIC for ourtaxable year ending December 31, 2017 or in the foreseeable future. With respect to our 2017 taxable year and foreseeable future taxable years, we presently do not anticipate that we willbe a PFIC based upon the expected value of our assets, including goodwill (determined, in part, based on the price of our ADSs),and the expected future composition of our income and assets. However, we might be a PFIC for our 2017 taxable year or anyfuture taxable years due to changes in our asset or income composition, or the value of our assets, including if our marketcapitalization is less than anticipated or subsequently declines. Although the law in this regard is not entirely clear, we treat Our VIE as being owned by us for United States federalincome tax purposes because we control its management decisions and we are entitled to substantially all of its economicbenefits and, as a result, we consolidate its results of operations in our consolidated U.S. GAAP financial statements. If it weredetermined, however, that we are not the owner of Our VIE for United States federal income tax purposes, we could be treated asa PFIC for our taxable year ended December 31, 2016 and for subsequent taxable years. If we were or are a PFIC for any taxable year during which you hold our ADSs or ordinary shares, we generally willcontinue to be treated as a PFIC as to you for all succeeding taxable years during which you hold our ADSs or ordinary shares,except if you have made a mark-to-market election. Because there are uncertainties in the application of the relevant rules andPFIC status is a fact-intensive determination made on an annual basis, no assurance can be given that we will not be or have notbeen a PFIC for any year. If we were or are a PFIC, U.S. holders of our ADSs or ordinary shares could be subject to increased taxliabilities under United States federal income tax laws and could be subject to burdensome reporting requirements. See “Item 10.Additional Information—E. Taxation—Material United States Federal Income Tax Considerations—Passive Foreign InvestmentCompany”. 35 Item 4.Information on the Company A.History and Development of the Company. We commenced business in March 2010, operating a group buying and B2C e-commerce platform through BeijingWowo Tuan Information Technology Co., Ltd. In order to facilitate investment in our company, we incorporated our holdingcompany Wowo Limited in July 2011. In April 2015, we completed our initial public offering and listed our ADSs on the NASDAQ Global Market under thesymbol “WOWO.” We raised approximately US$37.3 million in net proceeds from our initial public offering after deductingunderwriting commissions and the offering expenses payable by us. In June 2015, we acquired Join Me Group (HK) Investment Company Limited to establish our food services industryB2B business. We issued 741,422,780 ordinary shares and paid US$30.0 million as consideration for the acquisition. In September 2015, we divested our group buying and B2C e-commerce businesses to focus our efforts on our foodservices industry B2B business. In September 2015, we raised US$15.0 million in a private placement transaction with our co-chairperson Mr. MaodongXu. In June 2016, we changed the trading symbol for our ADSs listed on the NASDAQ Global Market to “JMU”. InDecember 2016, we also changed our company name to “JMU Limited.” In August 2016, Xiao Nan Guo Restaurants Holdings Limited, a Hong Kong Stock Exchange listed company (StockCode: 3666), through its wholly-owned subsidiary, acquired a 9.82% stake in our company via secondary transfers for a totalconsideration of HK$368 million (approximately US$47.5 million). We currently conduct our operations in China through contractual arrangements between our wholly-owned PRCsubsidiary, Shanghai Zhongming Supply Chain Management Co. Ltd., on the one hand and our consolidated affiliated entity inChina, Shanghai Zhongmin Supply Chain Management Co. Ltd., and its shareholder on the other. Because the names of the twoentities in English differ by only one letter, we refer to our wholly-owned PRC subsidiary as Our WFOE and to our consolidatedaffiliated entity and its subsidiaries as Our VIE in this annual report to avoid confusion. Our principal executive offices are located at North Guoquan Road 1688 Long, No. 75, Building A8, 6F, YangpuDistrict, Shanghai 200438, People’s Republic of China and the telephone number at this address is +86 21 6015 1166. Ourregistered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, P.O. Box 309, UglandHouse, Grand Cayman, KY1-1104, Cayman Islands. B.Business overview. We currently operate a leading online platform for providing B2B services to food-industry suppliers and customers inChina. We acquired this business in a merger with Join Me Group (HK) Investment Company Limited, or JMU HK, in June 2015.Our B2B online platform recorded gross billing of RMB 10.9 billion (US$1.6 billion) in 2016, measured in terms of grossmerchandise value. We connect suppliers and customers in the food service industry through our online platform. Our customers includerestaurants, restaurant chains, hotels, food product manufacturers and others. We offer a wide selection of products atcompetitive prices through our website www.ccjoin.com and our mobile applications. We also offer convenient paymentoptions and comprehensive customer services. Our customers are focused on the quality of raw materials that they source fortheir businesses, and we provide more comfort and confidence to our customers by verifying the qualification of suppliers. Inaddition to our online services, we also host numerous offline auction events to afford suppliers and customers the opportunityto meet in person and establish connections and in the meantime give traditional food service businesses the chances to adoptthe online purchase process in a gradual manner. We started with the mission to transform the connection between suppliers and customers in the food service industry into a more transparent and efficient form, and from there we plan to leverage our supplier and customer base to further providevalue-added services such as logistics and trade financing. 36 We are a technology-driven company and have invested heavily in developing our own highly scalable proprietarytechnology platform that supports our rapid growth and enables us to provide value-added technology services. In 2015, wedeveloped our cloud procuring system, which can be both integrated into our customers’ existing enterprise resource systems orbe used independently as procurement management software. Previously, we had operated a B2C e-commerce platform for local entertainment and lifestyle services. Although wedisposed of this business in September 2015, we are still utilizing the experience we gained in operating an e-commerceplatform as well as our capacity to leverage the big data from online purchases in our current B2B services business. We haveclassified our B2C business as discontinued operations in our consolidated financial statements. We had revenues of US$73.2 million and net loss of US$25.3 million in 2016. Our Business Model Since the acquisition of our current B2B business, we have focused on developing an online marketplace that canconnect suppliers and customers in the food service industry in China, while in the meantime developing our own online directsales business. Leveraging our platform and the scale of our business, we have also begun to offer other services that arecomplementary to our core business and create significant value to our business partners, including third-party sellers andsuppliers, and ultimately benefit our business and customers. Currently substantially all of our business is carried out within China and Hong Kong. The total revenue of the foodservice industry in China was approximately RMB3,600 billion (US$518.7 billion) in 2016, of which raw material procurementconstituted approximately 30%. Most of this spending has been in the traditional offline form. Our B2B platform was startedwith the vision of reshaping industrial rules and building a more transparent and more efficient business ecosystem for foodservice businesses in China. Through cooperation with industry associations and hundreds of leading restaurants across China,we believe that we can create significant network effects with our B2B platform. We work closely with various reputable buyersand suppliers in the food service industry, providing one-stop procurement services, as well as product development, marketingand other value-added services, for a variety of food service businesses via the B2B platform www.ccjoin.com. Online Marketplace In our online marketplace business, third-party sellers offer products to customers over our online marketplace. Weacquired our B2B online marketplace in June 2015, and have been bringing new products and services to our onlinemarketplace since then. As of December 31, 2016, there were over 16,300 third-party sellers in our online marketplace. Our B2Bonline platform recorded gross billing of RMB10.9 billion (US$1.6 billion) in 2016, measured in terms of gross merchandisevalue. In order to attract more third-party sellers, we currently do not charge commission on transactions on our onlinemarketplace. We provide transaction processing and billing services on all orders on our online marketplace. We require third-party sellers to meet our standards of quality. We aim to offer customers the same high quality customer experience regardless ofthe source of the products they choose. Online Direct Sales In our online direct sales business, we acquire products from suppliers and sell them directly to customers. We havebeen continually expanding our offering in direct sales since the acquisition of our B2B business in June 2015. As of December31, 2016, we offered products in six of ten product categories through our online direct sales business model. Customer Experience We are committed to optimizing customer experience and achieving customer satisfaction. This commitment drivesevery aspect of our operations, which are focused on four core components: extensive product offerings, competitive pricing,compelling online experience and professional customer services. 37 Products We continually seek to add more products that appeal to our target customers. The number of products we offer hasgrown rapidly. Our offerings (including both online direct sales and online marketplace offerings) are organized into ten productcategories on our website: ·food ingredients; ·seasonings; ·alcoholic and non-alcoholic drinks; ·hotel appliances; ·tableware; ·kitchen appliances; ·office appliances; ·furniture; ·hotel and restaurant information systems; and ·hotel and restaurant decoration. Each of these categories is further divided into numerous subcategories to facilitate browsing. Pricing We offer competitive pricing to attract and retain customers. We make continual efforts to maintain and improve anefficient cost structure and create incentives for our suppliers to provide us with competitive prices. Pricing policy. We set our prices to be competitive with those on other major e-commerce websites and in physicalstores in China. We typically negotiate with our suppliers for prices that are comparable to or lower than those offered toretailers in other sales channels. Currently, third-party sellers are free to set their own prices on our online marketplace. Special promotions. We offer a selection of discounted products monthly. We also hold regular promotions for selectedproducts for a limited period of time. Special promotions attract bargain hunters and give our customers an additional incentiveto visit our website regularly. Online Experience We believe that providing a compelling online experience is critical to attracting and retaining customers andincreasing orders. We make sales primarily through our content-rich and user-friendly website www.ccjoin.com and mobileapplications. Our website not only offers a broad selection of products at competitive prices but also provides easy sitenavigation, basic and advanced search functions and comprehensive product information. These features address customers’desire to view, understand and compare products before purchasing. With the increasing popularity of mobile internet-enableddevices, we have also developed applications and features adapted to mobile internet users, and we currently offer mobile accessthrough our mobile website and our mobile applications. Our website contains the following information and features: Comprehensive product information. Each product page contains pictures of the product, price and applicable deliveryexpenses. Depending on the type of product, there will be additional information to help the customer make a purchase decisionor recommendations to steer the customer towards additional products. Product recommendations. Our website makes recommendations to customers based on our understanding of themarket and popular products on our platform. We also provide product recommendations to our customers through variousmeans, including emails, social network and hardcopy catalogues. Our sales volume gives us extensive marketing data aboutcustomer preferences that we believe will enable us to make recommendations that are appealing to our customers. 38 Online purchase system. We also provide an online purchase system that can be easily integrated into each customer’sown enterprise resource planning, or ERP, system for them to more efficiently manage their purchase plans. Those small andmedium size businesses that do not have their own ERP system can use our online purchase system to directly manage theirenterprise resources. Online order tracking. Customers can log into their accounts to check the status of their orders. Customer Service Providing satisfactory customer services is a high priority. Our commitment to customers is reflected in the high levelof service provided by our customer service staff as well as in our product return and exchange policies. Customer service center. We have a customer service center in Shanghai, with 20 full-time customer servicerepresentatives as of December 31, 2016. Customers can call our telephone hotline, ask questions and leave complaints inwriting through our website, or send us e-mails. Our customer representatives handled over 2,200 customer-initiatedcommunications over the telephone for our B2B business in 2016. Returns and exchanges. We generally allow customers to return defective products within 7 days or exchange within 15days, counting from the date when the customer receives the product. We will generally arrange our third-party courier partnersto pick up defective items for return or exchange at the customer’s address. The policies apply to products sold by ourselves orthird-parties sellers apply their own policies on returns and exchanges for transactions on our online marketplace.. Membership program. We have established a membership program to cultivate customer loyalty and encourage ourcustomers to make additional purchases. There are three levels of members, and promotion to higher levels is based on theamount that the customer has spent with us. Members get a variety of benefits that increase with level, and generally higherlevel members can enjoy a lower purchase price even for the same item. Third-party Seller Experience We are also endeavoring to make the transactions by third-party sellers on our platform convenient and efficient. Forexample, we link third-party sellers on our online marketplace to third-party service providers that offer either delivery servicesor a combination of warehousing plus delivery services as well as trade financing. Moreover, we also provide offline exhibitionmarketing services to sellers ourselves, in addition to the basic transaction processing and billing services that we provide themat no extra cost. We also provide certain premium customers, suppliers and third-party sellers with reports on a regular basis as to recentprocurement data and trends in the food services industry, to assist them to better develop their products and manage theirinventory. Our finance business unit is in the process of developing various financial products and services in addition to tradefinancing as additional value-added services we provide to our business partners, including third-party sellers. We will continueto develop innovative financial products that can further leverage our strengths in e-commerce and our technology platform. Currently all the services mentioned above have been provided to third-party sellers free of charge as part of ourstrategy to grow the scale of our business. Merchandise Sourcing In our online direct sales business, we sourced products from 253 suppliers as of December 31, 2016. Procuringproducts for the food services industry requires considerable specialized expertise, which is provided by our experienced buyerteam. We negotiate with the higher-level distributor where possible in order to obtain the most favorable terms. In addition, wehad over 16,300 third-party sellers on our online marketplace as of December 31, 2016. 39 We have created a vendor interface on our website where our third-party sellers can access reports regarding inventorystatus, purchase history and customer reviews of their products. Third-party sellers can use this information in their marketingand product development efforts and also in managing their own inventory, which helps them manage costs and makes ourservices more valuable to them. We select suppliers and third-party sellers on the basis of brand, reliability, volume and price. They must be able tomeet our demands for timely supply of high quality products and also provide high standard post-sale customer service. Weperform background checks on each supplier and third-party seller and the products they provide before we enter into anyagreement. We examine their business licenses and the qualification certificates for their products, and check their brandrecognition and make inquiries about the market acceptance of their products among players in the same industry. We alsoconduct on-site visits to assess certain suppliers and third-party sellers and verify their location, scale of business, productioncapacity, property and equipment, human resources, research and development capability, quality control system and fulfillmentcapability. We also require all vendors to upload their business license, tax registration certificate and organization codecertificate for our verification. Our standard form contract requires suppliers and third-party sellers to represent that their goodsare from lawful sources and do not infringe upon lawful rights of third parties and to pay us liquidated damages for any breach.We normally enter into framework agreements with our suppliers and third-party sellers and renew them after expiration. Wehave also put stringent rules in place governing the operations of third-party sellers on our online marketplace. Third-partysellers will be subject to penalties or be asked to end their operations on our online marketplace if they violate the marketplacerules, for example by selling food beyond its expiration date. Technology Platform We have built our technology platform relying primarily on software and systems that we have developed in-house andto a lesser extent on third-party software that we have modified and incorporated. Our server fleet consisted of approximately 30servers stored in two locations across the country as of December 31, 2016, and we employed 32 IT professionals to design,develop and operate our technology platform as of the same date. We believe that creating a comparable technology platform isan expensive and time-consuming process and constitutes a significant barrier to entry for potential competitors. Our proprietary technology platform supports our rapidly growing processing capacity requirements, provides usdetailed and accurate visibility and information throughout our operation value chain, and enables harnessing of insightful dataanalytics. Our strong technology platform is vital in supporting our pursuit of a continually improving customer experience,including the customer experience of our mobile users. From our website, the primary customer interface, to the back endmanagement systems, our technology platform supports smooth and accurate operational execution as well as seamlessinformation flow, data consistency and analytics. We are also working with our key customers to integrate our platform intotheir own ERP system to facilitate their management of food supplies. The principal components of our technology platform include: ·Website and mobile applications. Our website, together with our mobile applications, is our primary customerinterface. It provides a user-friendly customer interface, including a powerful search engine to enhance ourcustomers’ shopping experience. ·Vendor interfaces. Our vendor interfaces support key functions such as order tracking and inventory checking andprovide data analytics to help our third-party sellers better understand consumer needs. ·Customer relationship management system. Our customer relationship management system tracks customerinformation, including customers’ outstanding orders, order and payment history, and settings and preferences, aswell as all interaction between our customer service representatives and our customers, to ensure consistent andhigh quality customer service. ·Transaction processing system. Our transaction processing system handles transaction processing, online receiptsand disbursements, remote reimbursement and other prerequisites for conducting an online business. 40 We have adopted security policies and measures, including encryption technology, to protect our proprietary data andcustomer information, and we back up our database, including customer data, every day with both on-site and off-site storage. Marketing We engage various marketing channels to expand our business to more suppliers and customers. We provide variousincentives to our customers to increase their spending and loyalty, and we send e-mails to our customers periodically withproduct recommendations or promotions. To enhance our brand awareness, we also have engaged in brand promotion activities. In addition to the online marketing activities, we also utilize offline activities to attract more users and promote ourbrand recognition. In 2016, we organized five offline auction events for food service businesses to purchase their supplies inbulk. The chance to meet business partners in person affords both suppliers and customers more comfort and confidence in theirtransactions on our platform. We also utilize industrial associations to extend our services to an ever increasing number of food service business. Ourservices are recommended by the China Hotel Association, the China Cuisine Association and the China Tourist HotelAssociation. These associations bring in high quality suppliers and customers, including both national-scale and local mediumor small size businesses alike. Competition The e-commerce industry in China is intensely competitive. Our current or potential competitors include Alibaba,JD.com and Meicai as well as traditional offline food service suppliers. We anticipate that the e-commerce market will continually evolve and will continue to experience rapid technologicalchange, evolving industry standards, shifting customer requirements, and frequent innovation. We must continually innovate toremain competitive. We believe that the principal competitive factors in our industry are: ·brand recognition and reputation; ·product quality and selection; ·pricing; ·fulfillment capabilities; and ·customer service. In addition, new and enhanced technologies may increase the competition in the online retail industry. Newcompetitive business models may appear, for example based on new forms of social media or social commerce. We believe that we are well-positioned to effectively compete on the basis of the factors listed above. However, some ofour current or future competitors have or may have longer operating histories, greater brand recognition, better supplierrelationships, larger customer bases or greater financial, technical or marketing resources than we do. Seasonality We believe that we experience seasonality in our business that reflects seasonal fluctuations in purchase patterns forfood service business. In general, the fourth quarter is the high season for the food service industry in China, and consequentlywe expect the purchases on our B2B platform to be higher in the fourth quarter of each year compared to the first three.However, due to our limited operating history, the seasonal trends that we experience in the future may not match ourexpectations. 41 Intellectual Property We regard our trademarks, copyrights, domain names, know-how, proprietary technologies, and similar intellectualproperty as critical to our success, and we rely on copyright and trademark law and confidentiality, invention assignment andnon-compete agreements with our employees and others to protect our proprietary rights. As of December 31, 2016, we ownedeight computer software copyrights in China relating to various aspects of our operations. We had 72 trademark applicationsinside China and 19 outside China. As of December 31, 2016, we had registered four generic top-level domain names. Ourregistered domain names includewww.ccjoin.com and www.ccjmu.com, among others. Regulation This section sets forth a summary of the most significant rules and regulations that affect our business activities inChina. Regulations Relating to Foreign Investment Industry Catalogue Relating to Foreign Investment. Investment activities in the PRC by foreign investors areprincipally governed by the Guidance Catalogue of Industries for Foreign Investment, or the Catalogue, which was promulgatedand is amended from time to time by the Ministry of Commerce and the National Development and Reform Commission.Industries listed in the Catalogue are divided into three categories: encouraged, restricted and prohibited. Industries not listed inthe Catalogue are generally deemed as constituting a fourth “permitted” category. Establishment of wholly foreign-ownedenterprises is generally allowed in encouraged and permitted industries. Some restricted industries are limited to equity orcontractual joint ventures, while in some cases Chinese partners are required to hold the majority interests in such joint ventures.In addition, restricted category projects are subject to higher-level government approvals. Foreign investors are not allowed toinvest in industries in the prohibited category. Industries not listed in the Catalogue are generally open to foreign investmentunless specifically restricted by other PRC regulations. Through Our WFOE and Our VIE, we are engaged in certain industries that are classified as “restricted” under theCatalogue. Pursuant to the latest Catalogue amended in March 2015, the provision of value-added telecommunications servicesfalls in the restricted category and the percentage of foreign ownership cannot exceed 50% (excluding e-commerce), thepurchase of grains, wholesale of grains and cotton fall in the restricted category. We engages in the online wholesale and retailof products (except the grains and cotton), the development of computer network technology, technical consultancy andtechnical services, which are in the permitted category. Under PRC law, the establishment of a wholly foreign owned enterpriseis subject to the approval of, or the requirement for record filing with, the Ministry of Commerce or its local counterparts and thewholly foreign owned enterprise must register with the competent industry and commerce bureau. We have duly obtained theapprovals from the Ministry of Commerce or its local counterparts for our interest in our wholly owned PRC subsidiaries andcompleted the registration of these PRC subsidiaries with the competent industry and commerce bureau. In October 2016, the Ministry of Commerce issued the Interim Measures for Record-filing Administration of theEstablishment and Change of Foreign-invested Enterprises, or FIE Record-filing Interim Measures, effective on the same day.Pursuant to FIE Record-filing Interim Measures, the establishment and change of foreign-invested enterprises are subject torecord-filing procedures, instead of prior approval requirements, provided that the establishment or change does not involvespecial entry administration measures. If the establishment or change of FIE matters involve the special entry administrationmeasures, the approval of the Ministry of Commerce or its local counterparts is still required. Pursuant to the Announcement[2016] No. 22 of the National Development and Reform Commission and the Ministry of Commerce dated October 8, 2016, thespecial entry administration measures for foreign investment apply to restricted and prohibited categories specified in theCatalogue, and the encouraged categories are subject to certain requirements relating to equity ownership and seniormanagement under the special entry administration measures. 42 Foreign Investment in the Commercial Sector. According to the Administrative Measures on Foreign Investment in theCommercial Sector issued by the Ministry of Commerce in April 2004 and amended in October 2015, a foreign-investedenterprise may, upon approval, undertake one or more types of businesses in the commercial sector, which is defined in themeasures to include wholesale, retail, commission agency and franchising, and the types of commodities it deals with must bespecified in the scope of business prescribed in its articles of association. In order to establish a foreign-invested company in thecommercial sector, foreign investors must apply to the relevant provincial counterpart of the Ministry of Commerce, and suchprovincial authority will, after making preliminary examination of the documents submitted, report to the Ministry ofCommerce to obtain its approval. The incorporation of an enterprise by a foreign-invested enterprise that intends to conductbusiness in the commercial sector is also subject to the approval of the local counterpart of the Ministry of Commerce. Onseveral occasions in 2005, 2008 and 2010, the Ministry of Commerce delegated its approval authority to its provincialcounterparts and authorized them to examine and approve certain applications. Currently, the provincial counterparts of theMinistry of Commerce have the authority to approve applications for setting up foreign-invested enterprises solely engaging insale of goods through the internet, among others. Our WFOE and its subsidiaries engage in retail, wholesale and commissionagency of food, liquor and other general merchandise via the internet. While Our WFOE has obtained approval from therelevant authorities for this business, most of its subsidiaries were established without obtaining the prior approval from thelocal counterpart of the Ministry of Commerce. Foreign Investment in Value-Added Telecommunications Businesses. The Regulations for Administration of Foreign-invested Telecommunications Enterprises promulgated by the PRC State Council in December 2001 and subsequently amendedin September 2008 and February 2016 set forth detailed requirements with respect to capitalization, investor qualifications andapplication procedures in connection with the establishment of a foreign-invested telecommunications enterprise. Theseregulations prohibit a foreign entity from owning more than 50% of the total equity interest in any value-addedtelecommunications service business in China and require the major foreign investor in any value-added telecommunicationsservice business in China have a good and profitable record and operating experience in this industry. Due to these regulations,we operate our website www.ccjoin.com through Our VIE. In July 2006, the Ministry of Information Industry, the predecessor of the Ministry of Industry and InformationTechnology, or the MIIT, issued the Circular on Strengthening the Administration of Foreign Investment in the Operation ofValue-added Telecommunications Business, pursuant to which a domestic PRC company that holds an operating license forvalue-added telecommunications business, which we refer to as an ICP License, is prohibited from leasing, transferring or sellingthe ICP License to foreign investors in any form and from providing any assistance, including resources, sites or facilities, toforeign investors that conduct a value-added telecommunications business illegally in China. Further, the domain names andregistered trademarks used by an operating company providing value-added telecommunications services must be legally ownedby that company or its shareholders. In addition, the company’s operational premises and equipment must comply with theapproved coverage region on its ICP License, and the company must establish and improve its internal internet and informationsecurity policies and standards and emergency management procedures. If an ICP License holder fails to comply with therequirements and also fails to remedy such non-compliance within a specified period of time, the MIIT or its local counterpartshave the discretion to take administrative measures against the license holder, including revoking its ICP license. Our VIE, theoperator of our website, owns the relevant domain names and registered trademarks and has the necessary personnel to operatethe website. Licenses and Permits We are required to hold a variety of licenses and permits in connection with various aspects of our business, includingthe following: Value-added Telecommunication License. The Telecommunications Regulations promulgated by the State Counciland its related implementation rules, including the Catalogue of Classification of Telecommunications Business issued by theMIIT, categorize various types of telecommunications and telecommunications-related activities into basic or value-addedtelecommunications services, and internet information services, or ICP services, are classified as value-addedtelecommunications businesses. Under the Telecommunications Regulations, commercial operators of value-addedtelecommunications services must first obtain an ICP License from the MIIT or its provincial level counterparts. In 2000, theState Council also issued the Administrative Measures on Internet Information Services, which was amended in 2011. Accordingto these measures, a commercial ICP service operator must obtain an ICP License from the relevant government authoritiesbefore engaging in any commercial ICP service in China. When the ICP service involves areas of news, publication, education,medical treatment, health, pharmaceuticals and medical equipment, and if required by law or relevant regulations, specific approval from the respective regulatory authorities must be obtained prior to applying for the ICP License from the MIIT or itsprovincial level counterpart. In 2009, the MIIT promulgated the Administrative Measures on Telecommunications BusinessOperating Licenses, which set forth more specific provisions regarding the types of licenses required to operate value-addedtelecommunications services, the qualifications and procedures for obtaining such licenses and the administration andsupervision of such licenses. Our VIE, as our ICP operator, holds an ICP License issued by the Shanghai TelecommunicationsAdministration for the provision of information services through the internet and also a value-added telecommunication licenseissued by the MIIT for the provision of information services through a mobile network, the provision of internet data centerservices, internet access services, and online data processing and transaction processing services. 43 Food Distribution Permit. China has adopted a licensing system for food supply operations under the Food Safety Lawand its implementation rules. Entities or individuals that intend to engage in food production, food distribution or food servicebusinesses must obtain licenses or permits for such businesses. Pursuant to the Administrative Measures on Food OperationLicensing issued by the SFDA in August 2015, an enterprise needs to obtain a Food Operation Permit from the local food anddrug administration, and the permits already obtained by food business operators prior to the effective date of these newmeasures will remain valid for their originally approved validity period. We sell food and nutritional supplements through ourwebsite. Our PRC WFOE engaging in food distribution business have obtained Food Distribution Permits. License or Registration for Wholesale and Retail of Liquor. The Measures for the Administration of LiquorCirculation, issued by the Ministry of Commerce in November 2005, require any entity engaged in the wholesale or retail ofliquor to file and register, within 60 days of acquiring a business license, with the local branch of the Ministry of Commerce atthe same level as the local branch of the State Administration of Industry and Commerce where the entity is registered. Inaddition, certain provinces in the PRC have adopted a licensing system for the wholesale or retail of liquor. We sell liquorthrough our website. Our WFOE or its branches engaging in the wholesale or retail of liquor have obtained the license orcompleted the required registration with the local branches of the Ministry of Commerce for such business. Regulations Relating to E-Commerce China’s e-commerce industry is at a relatively early stage of development and there are few PRC laws or regulationsspecifically regulating the e-commerce industry. In May 2010, the State Administration of Industry and Commerce adopted theInterim Measures for the Administration of Online Commodities Trading and Relevant Services, which took effective inJuly 2010. Under these measures, enterprises or other operators which engage in online commodities trading and other servicesand have been registered with the State Administration of Industry and Commerce or its local branches must make theinformation stated in their business license available to the public or provide a link to their business license on their website.Online distributors must adopt measures to ensure safe online transactions, protect online shoppers’ rights and prevent the sale ofcounterfeit goods. Information on products and transactions released by online distributors must be authentic, accurate, completeand sufficient. In January 2014, the State Administration of Industry and Commerce promulgated the Administrative Measures forOnline Trading, which terminated the above interim measures and became effective in March 2014. The AdministrativeMeasures for Online Trading further strengthen the protection of consumers and impose more stringent requirements andobligations on online business operators and third-party online marketplace operators. For example, online business operatorsare required to issue invoices to consumers for online products and services. Consumers are generally entitled to return productspurchased from online business operators within seven days upon receipt, without giving any reason. Online business operatorsand third-party online marketplace operators are prohibited from collecting any information on consumers and businessoperators, or disclosing, selling or providing any such information to any third party, or sending commercial electronicmessages to consumers, without their consent. Fictitious transactions, deletion of adverse comments and technical attacks oncompetitors’ websites are prohibited as well. In addition, third-party online marketplace operators are required to examine andverify the identifications of the online business operators and set up and keep relevant records for at least two years. Moreover,any third-party online marketplace operator that simultaneously engages in online trading for products and services shouldclearly distinguish itself from other online business operators on the marketplace platform. We are subject to these measures as aresult of our online direct sales and online marketplace. Regulations Relating to Internet Content and Information Security The Administrative Measures on Internet Information Services specify that internet information services regarding news,publications, education, medical and health care, pharmacy and medical appliances, among other things, are to be examined,approved and regulated by the relevant authorities. Internet information providers are prohibited from providing servicesbeyond those included in the scope of their ICP licenses or filings. Furthermore, these measures clearly specify a list ofprohibited content. Internet information providers are prohibited from producing, copying, publishing or distributinginformation that is humiliating or defamatory to others or that infringes the lawful rights and interests of others. Internetinformation providers that violate the prohibition may face criminal charges or administrative sanctions by the PRC authorities.Internet information providers must monitor and control the information posted on their websites. If any prohibited content isfound, they must remove the offending content immediately, keep a record of it and report to the relevant authorities. 44 Internet information in China is also regulated and restricted from a national security standpoint. The National People’sCongress, China’s national legislative body, has enacted the Decisions on Maintaining Internet Security, which may subjectviolators to criminal punishment in China for any effort to: (1) gain improper entry into a computer or system of strategicimportance; (2) disseminate politically disruptive information; (3) leak state secrets; (4) spread false commercial information; or(5) infringe intellectual property rights. The Ministry of Public Security has promulgated measures that prohibit use of theinternet in ways which, among other things, result in a leakage of state secrets or a spread of socially destabilizing content. Regulations Relating to Internet Privacy In recent years, PRC government authorities have enacted laws and regulations on internet use to protect personalinformation from any unauthorized disclosure. The Administrative Measures on Internet Information Services prohibit ICPservice operators from insulting or slandering a third party or infringing upon the lawful rights and interests of a third party.Under the Several Provisions on Regulating the Market Order of Internet Information Services, issued by the MIIT in 2011, anICP operator may not collect any user personal information or provide any such information to third parties without the consentof a user. An ICP service operator must expressly inform the users of the method, content and purpose of the collection andprocessing of such user personal information and may only collect such information necessary for the provision of its services.An ICP service operator is also required to properly keep the user personal information, and in case of any leak or likely leak ofthe user personal information, the ICP service operator must take immediate remedial measures and, in severe circumstances, tomake an immediate report to the telecommunications regulatory authority. In addition, pursuant to the Decision onStrengthening the Protection of Online Information issued by the Standing Committee of the National People’s Congress inDecember 2012 and the Order for the Protection of Telecommunication and Internet User Personal Information issued by theMIIT in July 2013, any collection and use of user personal information must be subject to the consent of the user, abide by theprinciples of legality, rationality and necessity and be within the specified purposes, methods and scopes. An ICP serviceoperator must also keep such information strictly confidential, and is further prohibited from divulging, tampering or destroyingof any such information, or selling or proving such information to other parties. Any violation of the above decision or ordermay subject the ICP service operator to warnings, fines, confiscation of illegal gains, revocation of licenses, cancellation offilings, closedown of websites or even criminal liabilities. Furthermore, in June 2016, the State Internet Information Office issuedthe Administrative Provisions on Mobile Internet Applications Information Services, which became effect on August 1, 2016, tofurther strengthen the regulation of the mobile application information services. Pursuant to these provisions, owners oroperators of mobile internet applications that provide information services are required to be responsible for informationsecurity management, establish and improve the protective mechanism for user information, observe the principles of legality,rightfulness and necessity, and expressly state the purpose, method and scope of, and obtain user consent to, the collection anduse of users’ personal information. In addition, the new Cyber Security Law also requires network operators to strictly keepconfidential users’ personal information that they have collected and to establish and improve user information protectivemechanism. We have required our users to consent to our collecting and using their personal information, and establishedinformation security systems to protect user’s privacy. Regulations Relating to Product Quality and Consumer Protection The Product Quality Law applies to all production and sale activities in China. Pursuant to this law, products offered forsale must satisfy relevant quality and safety standards. Enterprises may not produce or sell counterfeit products in any fashion,including forging brand labels or giving false information regarding a product’s manufacturer. Violations of state or industrialstandards for health and safety and any other related violations may result in civil liabilities and administrative penalties, suchas compensation for damages, fines, suspension or shutdown of business, as well as confiscation of products illegally producedand sold and the proceeds from such sales. Severe violations may subject the responsible individual or enterprise to criminalliabilities. Where a defective product causes physical injury to a person or damage to another person’s property, the victim mayclaim compensation from the manufacturer or from the seller of the product. If the seller pays compensation and it is themanufacturer that should bear the liability, the seller has a right of recourse against the manufacturer. Similarly, if themanufacturer pays compensation and it is the seller that should bear the liability, the manufacturer has a right of recourseagainst the seller. 45 The Consumer Protection Law sets out the obligations of business operators and the rights and interests of theconsumers in China. Pursuant to this law, business operators must guarantee that the commodities they sell satisfy therequirements for personal or property safety, provide consumers with authentic information about the commodities, andguarantee the quality, function, usage and term of validity of the commodities. Failure to comply with the Consumer ProtectionLaw may subject business operators to civil liabilities such as refunding purchase prices, replacement of commodities, repairing,ceasing damages, compensation, and restoring reputation, and even subject the business operators or the responsible individualsto criminal penalties when personal damages are involved or if the circumstances are severe. The Consumer Protection Law wasfurther amended in October 2013 and became effective in March 2014. The amended Consumer Protection Law furtherstrengthen the protection of consumers and impose more stringent requirements and obligations on business operators,especially on the business operators through the internet. For example, the consumers are entitled to return the goods (except forcertain specific goods) within seven days upon receipt without any reasons when they purchase the goods from businessoperators on the internet. The consumers whose interests have been damaged due to their purchase of goods or acceptance ofservices on online marketplace platforms may claim damages from sellers or service providers. Where the providers of the onlinemarketplace platforms are unable to provide the real names, addresses and valid contact details of the sellers or service providers,the consumers may also claim damages from the providers of the online marketplace platforms. Providers of online marketplaceplatforms that know or should have known that sellers or service providers use their platforms to infringe upon the legitimaterights and interests of consumers but fail to take necessary measures must bear joint and several liabilities with the sellers orservice providers. Moreover, if business operators deceive consumers or knowingly sell substandard or defective products, theyshould not only compensate consumers for their losses, but also pay additional damages equal to three times the price of thegoods or services. We are subject to the Product Quality Law and the Consumer Protection Law as an online supplier of commodities anda provider of online marketplace platform and believe that we are currently in compliance with these regulations in all materialaspects. Regulations Relating to Pricing In China, the prices of a very small number of products and services are guided or fixed by the government. Accordingto the Pricing Law, business operators must, as required by the government departments in charge of pricing, mark the pricesexplicitly and indicate the name, origin of production, specifications, and other related particulars clearly. Business operatorsmay not sell products at a premium or charge any fees that are not explicitly indicated. Business operators must not commit thespecified unlawful pricing activities, such as colluding with others to manipulate the market price, using false or misleadingprices to deceive consumers to transact, or conducting price discrimination against other business operators. Failure to complywith the Pricing Law may subject business operators to administrative sanctions such as warning, ceasing unlawful activities,compensation, confiscating illegal gains, fines. The business operators may be ordered to suspend business for rectification, orhave their business licenses revoked if the circumstances are severe. We are subject to the Pricing Law as an online retailer andbelieve that our pricing activities are currently in compliance with the law in all material aspects. Regulations Relating to Leasing Pursuant to the Law on Administration of Urban Real Estate, when leasing premises, the lessor and lessee are requiredto enter into a written lease contract, containing such provisions as the leasing term, use of the premises, rental and repairliabilities, and other rights and obligations of both parties. Both lessor and lessee are also required to register the lease with thereal estate administration department. If the lessor and lessee fail to go through the registration procedures, both lessor andlessee may be subject to fines. According to the PRC Contract Law, the lessee may sublease the leased premises to a third party, subject to the consentof the lessor. Where the lessee subleases the premises, the lease contract between the lessee and the lessor remains valid. Thelessor is entitled to terminate the lease contract if the lessee subleases the premises without the consent of the lessor. In addition,if the lessor transfers the premises, the lease contract between the lessee and the lessor will still remain valid. 46 Pursuant to the PRC Property Law, if a mortgagor leases the mortgaged property before the mortgage contract isexecuted, the previously established leasehold interest will not be affected by the subsequent mortgage; and where a mortgagorleases the mortgaged property after the creation and registration of the mortgage interest, the leasehold interest will besubordinated to the registered mortgage. Regulations Relating to Intellectual Property Rights The PRC has adopted comprehensive legislation governing intellectual property rights, including copyrights, patents,trademarks and domain names. Copyright. Pursuant to the Copyright Law and its implementation rules, creators of protected works enjoy personal andproperty rights, including, among others, the right of disseminating the works through information networks. Pursuant to therelevant PRC regulations, rules and interpretations, internet service providers will be jointly liable with the infringer if they(a) participate in, assist in or abet infringing activities committed by any other person through the internet, (b) are or should beaware of the infringing activities committed by their website users through the internet, or (c) fail to remove infringing contentor take other action to eliminate infringing consequences after receiving a warning with evidence of such infringing activitiesfrom the copyright holder. In addition, where an ICP service operator is clearly aware of the infringement of certain contentagainst another’s copyright through the internet, or fails to take measures to remove relevant contents upon receipt of thecopyright owner’s notice, and as a result, it damages the public interest, the ICP service operator could be ordered to stop thetortious act and be subject to other administrative penalties such as confiscation of illegal income and fines. To comply withthese laws and regulations, we have implemented internal procedures to monitor and review the content we have licensed fromcontent providers before they are released on our website and remove any infringing content promptly after we receive notice ofinfringement from the legitimate rights holder. Trademark. The Trademark Law and its implementation rules protect registered trademarks. The PRC Trademark Officeof State Administration of Industry and Commerce is responsible for the registration and administration of trademarksthroughout the PRC. The Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. As ofDecember 31, 2016, we had approximately 91 trademark applications in China. Domain Name. Domain names are protected under the Administrative Measures on the Internet Domain Namespromulgated by the MIIT. The MIIT is the major regulatory body responsible for the administration of the PRC internet domainnames, under supervision of which the CNNIC is responsible for the daily administration of .cn domain names and Chinesedomain names. CNNIC adopts the “first to file” principle with respect to the registration of domain names. We have registeredwww.ccjoin.com and other domain names. Regulations Relating to Employment The Labor Contract Law and its implementation rules provide requirements concerning employment contracts betweenan employer and its employees. If an employer fails to enter into a written employment contract with an employee within oneyear from the date on which the employment relationship is established, the employer must rectify the situation by entering intoa written employment contract with the employee and pay the employee twice the employee’s salary for the period from the dayfollowing the lapse of one month from the date of establishment of the employment relationship to the day prior to theexecution of the written employment contract. The Labor Contract Law and its implementation rules also require compensationto be paid upon certain terminations, which significantly affects the cost of reducing workforce for employers. In addition, if anemployer intends to enforce a non-compete provision with an employee in an employment contract or non-competitionagreement, it has to compensate the employee on a monthly basis during the term of the restriction period after the terminationor ending of the labor contract. Employers in most cases are also required to provide a severance payment to their employeesafter their employment relationships are terminated. 47 Enterprises in China are required by PRC laws and regulations to participate in certain employee benefit plans,including social insurance funds, namely a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan, and a housing provident fund, and contribute to the plans or fundsin amounts equal to certain percentages of salaries, including bonuses and allowances, of the employees as specified by the localgovernment from time to time at locations where they operate their businesses or where they are located. According to the SocialInsurance Law, an employer that fails to make social insurance contributions may be ordered to pay the required contributionswithin a stipulated deadline and be subject to a late fee. If the employer still fails to rectify the failure to make social insurancecontributions within the stipulated deadline, it may be subject to a fine ranging from one to three times the amount overdue.According to the Regulations on Management of Housing Fund, an enterprise that fails to make housing fund contributions maybe ordered to rectify the noncompliance and pay the required contributions within a stipulated deadline; otherwise, anapplication may be made to a local court for compulsory enforcement. We have not made adequate contributions to employeebenefit plans, as required by applicable PRC laws and regulations. Regulations Relating to Dividend Withholding Tax Pursuant to the Enterprise Income Tax Law and its implementation rules, if a non-resident enterprise has not set up anorganization or establishment in the PRC, or has set up an organization or establishment but the income derived has no actualconnection with such organization or establishment, it will be subject to a withholding tax on its PRC-sourced income at a rateof 10%. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for theAvoidance of Double Taxation and Tax Evasion on Income, the withholding tax rate in respect to the payment of dividends by aPRC enterprise to a Hong Kong enterprise is reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directlyholds at least 25% of the PRC enterprise. Pursuant to the Notice of the State Administration of Taxation on the Issuesconcerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81, a Hong Kong resident enterprise mustmeet the following conditions, among others, in order to enjoy the reduced withholding tax: (i) it must directly own the requiredpercentage of equity interests and voting rights in the PRC resident enterprise; and (ii) it must have directly owned suchpercentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends. Furthermore, theAdministrative Measures for Non-Resident Enterprises to Enjoy Treatments under Tax Treaties (For Trial Implementation),which became effective in October 2009, require that non-resident enterprises must obtain approval from the relevant taxauthority in order to enjoy the reduced withholding tax rate. There are also other conditions for enjoying the reducedwithholding tax rate according to other relevant tax rules and regulations. Accordingly, Join Me Group (HK) InvestmentCompany Limited may be able to enjoy the 5% withholding tax rate for the dividends it receives from Our WFOE, if it satisfiesthe conditions prescribed under Circular 81 and other relevant tax rules and regulations, and obtain the approvals as required.However, according to Circular 81, if the relevant tax authorities consider the transactions or arrangements we have are for theprimary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax inthe future. Regulations Relating to Foreign Exchange The principal regulations governing foreign currency exchange in China are the Foreign Exchange AdministrationRegulations, most recently amended in August 2008. Under the PRC foreign exchange regulations, payments of current accountitems, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencieswithout prior approval from SAFE by complying with certain procedural requirements. By contrast, approval from orregistration with appropriate government authorities is required where RMB is to be converted into foreign currency andremitted out of China to pay capital expenses such as the repayment of foreign currency-denominated loans. In August 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of theAdministration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE CircularNo. 142, regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital into RMB byrestricting how the converted RMB may be used. SAFE Circular No. 142 provides that the RMB capital converted from foreigncurrency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved bythe applicable government authority and may not be used for equity investments within the PRC. SAFE also strengthened itsoversight of the flow and use of the RMB capital converted from foreign currency registered capital of foreign-investedenterprises. The use of such RMB capital may not be changed without SAFE’s approval, and such RMB capital may not in anycase be used to repay RMB loans if the proceeds of such loans have not been used. In March 2015, SAFE issued SAFE CircularNo.19, which took effective and replaced SAFE Circular No. 142 from June 1, 2015. Although SAFE Circular No.19 allows forthe use of RMB converted from the foreign currency-denominated capital for equity investments in the PRC, the restrictions continue to apply as to foreign-invested enterprises’ use of the converted RMB for purposes beyond the business scope, forentrusted loans or for inter-company RMB loans. 48 In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign ExchangeAdministration Policies on Foreign Direct Investment which substantially amends and simplifies the current foreign exchangeprocedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts (e.g. pre-establishmentexpenses account, foreign exchange capital account, guarantee account), the reinvestment of lawful incomes derived by foreigninvestors in the PRC (e.g. profit, proceeds of equity transfer, capital reduction, liquidation and early repatriation of investment),and purchase and remittance of foreign exchange as a result of capital reduction, liquidation, early repatriation or share transferin a foreign-invested enterprise no longer require SAFE approval, and multiple capital accounts for the same entity may beopened in different provinces, which was not possible before. In addition, SAFE promulgated the Circular on Printing andDistributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and theSupporting Documents in May 2013, which specifies that the administration by SAFE or its local branches over directinvestment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchangebusiness relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches. In February 2015, SAFE promulgated the Circular on Further Simplifying and Improving the Policies ConcerningForeign Exchange Control on Direct Investment, or SAFE Circular No. 13, which took effect on June 1, 2015. SAFE CircularNo. 13 delegates the authority to enforce the foreign exchange registration in connection with the inbound and outbound directinvestment under relevant SAFE rules to certain banks and therefore further simplifies the foreign exchange registrationprocedures for inbound and outbound direct investment. C.Organizational Structure. The following diagram illustrates our corporate structure as of the date of this annual report. (1)The shareholder of Our VIE is Shanghai Zhongmin Investment and Development Group Co., Ltd. (formerly known asShanghai Zhongmin Investment and Development Co., Ltd.), the shareholders of which in turn are Ms. Xiaoxia Zhu, our co- chairperson and chief executive officer, and Ms. Huimin Wang, our director, holding 50% equity interests each. 49 Contractual Arrangements with Our Consolidated Affiliated Entity Agreements that Transfers Economic Benefits and Risks to the Us Master Exclusive Service Agreement and Business Cooperation Agreement. Pursuant to the Master Exclusive ServiceAgreement and Business Cooperation Agreement, Our VIE, including its subsidiaries or any companies or entities under itscontrol, agrees to engage Our WFOE as its provider for technical and business support services. Our VIE will pay Our WFOEservice fees determined based on the audited consolidated net profit of Our VIE. Our WFOE will exclusively own anyintellectual property arising from the performance of the services set forth in the agreement. Our WFOE will provide financialsupport to Our VIE in the form of bank loans or others forms as permitted under the PRC laws. The service agreements willremain effective upon the written confirmation issued by Our WFOE to Our VIE and/or its shareholder 30 days before thetermination. Neither Our VIE nor its shareholder has the right to unilaterally terminate the agreement. In connection with the master service agreement, we also entered into financial support undertaking letter with Our VIEand agrees to provide unlimited financial support to the Our VIE, to the extent permissible under the applicable PRC laws andregulations, whether or not any such operational loss is actually incurred. We will not request repayment of the loans orborrowings if the Our VIE or its shareholder do not have sufficient funds or are otherwise unable to repay. Agreements that Provide Us with Effective Control over Our VIE Foreign investment in internet companies is currently subject to significant restrictions under PRC laws andregulations. As a Cayman Islands holding company, we do not qualify to conduct these businesses under PRC regulations. Inaddition, foreign investment in the online service industry requires the foreign investor to possess certain qualifications, whichwe do not have, and our PRC subsidiary, Our WFOE, is considered a foreign invested enterprise which is restricted from holdingthe licenses that are essential to the operation of our business, such as licenses for operating our website. As a result, Our WFOEhas entered into a series of contractual arrangements with Our VIE and its shareholder described below, through which weexercise effective control over the operations of Our VIE and its subsidiaries. We conduct our operations in China principallythrough Our VIE and its subsidiaries, which we treated as our consolidated affiliated entities in China. Each of the contractualarrangements between Our WFOE, Our VIE and its shareholder was executed in May 2015. These contractual arrangementsenable us to exercise effective control over these entities and receive substantially all of the economic benefits from them. Equity Interest Pledge Agreement. Our VIE’s shareholder has entered into an equity pledge agreement with the OurWFOE, under which the shareholder pledged all of the equity interests in Our VIE to Our WFOE as collateral to secureperformance of all obligations under the Master Exclusive Service Agreement, Business Cooperation Agreement, ProxyAgreement and Power of Attorney and the Exclusive Option Agreement (collectively, the "Principal Agreement"). Pursuant tothis Equity Interest Pledge Agreement, dividends generated by the pledged equity interests shall be deposited into the accountdesignated by the Our WFOE and shall be used to pay the secured indebtedness prior and in preference to any other paymentduring the term of the pledge. If any event of default incurred under the Principal Agreement, Our WFOE, as the pledgee, will beentitled to dispose of the pledged equity interests and shall be paid in priority with the proceeds recovered from the disposal. Proxy and Power of Attorney Agreement. Our VIE’s shareholder has signed an Irrevocable Proxy and Power OfAttorney Agreement to appoint Our WFOE, or its designee, as the attorney-in-fact to act on Our VIE’s shareholder's behalf on allrights that the shareholder has in respect of such shareholder's equity interest in Our VIE conferred by relevant laws andregulations and the articles of association of Our VIE. The rights include but not limited to attending shareholders meeting,exercising voting rights and transferring all or a part of the equity interests of Our VIE held by the shareholder. The proxy andpower of attorney will remain effective upon written confirmation issued by Our WFOE to Our VIE and its shareholder 30 daysbefore the termination. Neither Our VIE nor its Shareholder has the right to unilaterally terminate the agreement. 50 Exclusive Option Agreement. Our VIE’s shareholder has entered into an Exclusive Option Agreement with Our WFOE,pursuant to which Our WFOE has an exclusive option to purchase, or to designate other persons to purchase, to the extentpermitted by applicable PRC laws, rules and regulations, all of the equity interest in Our VIE from the shareholder. The purchaseprice for the entire equity interest is to be the minimum price permitted by applicable PRC laws and administrative regulations.If there is no minimum price under PRC laws or administrative regulations, the price shall be determined by the Our WFOE oron a basis of the registration capital of Our VIE. The term of the exclusive option agreement will remain effective upon writtenconfirmation issued by the Our WFOE to Our VIE and its shareholder 30 days before the termination. Neither Our VIE nor itsshareholder has the right to unilaterally terminate the agreement. We have been advised by our PRC legal counsel, Beijing Dentons Law Offices, LLP, that the ownership structure andthe contractual arrangements among Our WFOE, Our VIE and its shareholder will not result in any violation of PRC laws orregulations currently in effect. However, we have been further advised by our PRC legal counsel that there are substantialuncertainties regarding the interpretation and application of current and future PRC laws, rules and regulations. Accordingly,there can be no assurance that the PRC regulatory authorities will not take a view that is contrary to or otherwise different fromthe above opinion of our PRC legal counsel. Our PRC legal counsel has further advised that if the PRC government authorityfinds that our corporate structure, the contractual arrangements or the reorganization to establish our current corporate structuredo not comply with any applicable PRC laws, rules or regulations, the contractual arrangements will become invalid orunenforceable, and we could be subject to severe penalties including being prohibited from continuing operations. See “Item 3.Key Information—D. Risk Factors— Risks Related to Our Corporate Structure— If the PRC government finds that theagreements that establish the structure for operating our businesses in China do not comply with PRC governmental restrictionson foreign investment in internet business, or if these regulations or the interpretation of existing regulations change in thefuture, we could be subject to severe penalties or be forced to relinquish our interests in those operations” and “Item 3. KeyInformation—D. Risk Factors—Risks Relating to Doing Business in China—Uncertainties with respect to the PRC legal systemcould have an adverse effect on us”. D.Property, plants and equipment. Our executive offices are located at North Guoquan Road 1688 Long, No. 75, Building A8, 6F, Yangpu District,Shanghai 200438, China and occupy a total of 9,104 square meters. The lease of our headquarter office has a term of 15 years. The servers that we use to provide our products and services are primarily maintained at China Telecom and ChinaUnicom branches in cities across China, including Shanghai and Kunshan. Item 4A.Unresolved Staff Comments Not applicable. Item 5.Operating and Financial Review and Prospects A.Operating results. Overview We currently operate a leading online platform for providing B2B services to food-industry suppliers and customers inChina. We acquired this business in a merger with JMU HK, in June 2015. Our B2B online platform recorded gross billing ofRMB10.9 billion (US$1.6 billion) in 2016, measured in terms of gross merchandise value. We incurred losses from operations of US$4.3 million, US$105.9 million, and US$27.6 million for the years endedDecember 31, 2014, 2015 and 2016, respectively. As we only acquired our current continuing operation in 2015, our loss fromoperations for the year ended December 31, 2014 was primarily due to the share-based compensation we incurred during 2014.Our loss from operations for the year ended December 31, 2015 was mainly due to goodwill impairment of US$85.9 million aswell as the incurrence of general and administrative expenses of US$12.9 million related to our current B2B business. Our lossfrom operations for the year ended December 2016 was mainly due to the incurrence of selling and marketing expenses ofUS$20.4 million related to our current B2B business. 51 Factors Affecting Our Results of Operations Besides the operating metrics that directly affect our revenues, there are a number of factors that affect our results ofoperations, including: Continued growth of China’s economy and food service industry in general. Our results of operations and financialcondition are affected by the general factors driving China’s food industry, including levels of procurement spending byrestaurants in China. In addition, they are also affected by factors driving online B2B business in China, such as the adoption ofonline procurement strategies by restaurants or adoption of online sales strategies by suppliers, the availability of improveddelivery services and the increasing variety of payment options. Our results of operations are also affected by general economicconditions in China. In particular, we have experienced and expect to continue to experience upward pressure on our operatingexpenses. Competitive pressure. We operate in a highly competitive market. We compete with a number of other e-commerceservice providers that have significant capital and human resources, some of which have also launched initiatives in directcompetition with our business. The terms and conditions we offer our suppliers and customers are affected by our competitors’strategies, which, as a result, affect our cost of operation. Competition also has a direct effect on our ability to retain existingcustomers and attract new customers. Marketing expense. We engage in a variety of different online marketing efforts tailored to our targeted customers andsuppliers to expand our customer and supplier base. Expenses incurred for marketing and other promotional efforts may have anegative impact on our profitability, if they prove to be ineffective and do not expand our customer base as intended. Seasonality. We believe that we experience seasonality in our business that reflects seasonal fluctuations in purchasepatterns for food services businesses. In general, the fourth quarter is the high season for the food service industry in China, andconsequently we expect the purchases on our B2B platform to be higher in the fourth quarter of each year compared to the firstthree. However, due to our limited operating history, the seasonal trends that we experience in the future may not match ourexpectations. While our business is influenced by general factors affecting our industry, our operating results are more directlyaffected by company specific factors, including the following major factors: ·our ability to increase active customer accounts and orders from customers; ·our ability to manage our mix of product and service offerings; and ·our ability to further increase and leverage our scale of business; Our Ability to Increase Active Customer Accounts and Orders from Customers Growth in the number of our active customer accounts and orders are key drivers of our revenue growth. The B2Bbusiness for food service industry that we are currently operating was only started in late 2014, and in 2016 we had more than33,000 active customer accounts, defined as customers that have made at least one purchase on our B2B platform within aspecific financial year. We believe that we were successful in attracting both new active customer accounts and new orders fromexisting customer accounts. Within little more than two years after its launch, gross billing on our online B2B platform reachedRMB10.9 billion (US$1.6 million) in 2016, measured in terms of gross merchandise value. Our ability to attract new customer accounts and new orders from existing customer accounts depends on our ability toprovide superior customer experience. To this end, we offer a wide selection of products at competitive prices on our websiteand mobile applications and provide speedy and reliable delivery, convenient payment options and comprehensive customerservices. The number of products we offer has grown rapidly. We have benefited from word-of-mouth viral marketing in winningnew customers, and we also conduct online and offline marketing and brand promotion activities to attract new customers. Inaddition, we encourage existing customers to place more orders with us through a variety of means, including loyalty points. 52 Our Ability to Manage Our Mix of Product Offerings Our results of operations are also affected by the mix of products we offer. We commenced our B2B business for foodservice industry with sales to restaurants. We are gradually expanding our offerings to hotel-related products. The extent and mixof products we provided will influence our users’ willingness to utilize our online platform for more of their needs. In addition,our mix of products also affects our gross margin, as different products have different gross margins. Our Ability to Further Increase and Leverage our Scale of Business Our results of operations are directly affected by our ability to further increase and leverage our scale of business. Asour business further grows in scale, we expect to obtain more favorable terms from our suppliers, including pricing terms andvolume-based rebates. In addition, we aim to create value for our suppliers by providing an effective channel for selling largevolumes of their products online and by offering them comprehensive information on customer preferences and market demandand ensuring the high quality of storage and delivery services. We believe this value proposition also helps us obtain favorableterms from suppliers. Currently we are selling products in our direct sales business at low margin, and we are not charging any commission orservice fees for third-party sellers to use our platform. There is no assurance that we can keep the expansion of our B2B businessat the current pace after we start to apply higher margins to transactions in our direct sale business and charge commission orservice fees to third-party sellers. Our ability to leverage our scale of business to induce our platform users to continue using ourservices with margins and service charges is one key factor affecting our future operational and financial performance. Revenues We derive our revenues from direct sales and online platform services. We record revenue from online direct sales on agross basis and revenue from the online platform services that we provide to third-party sellers and purchasers for theirtransactions on a net basis. Revenue is recorded net of surcharges and value-added tax, or VAT, and related surcharges. Our revenues were nil, US$11.5 and US$73.2 million for the years ended December 31, 2014, 2015 and 2016,respectively. Cost of Revenues Our costs of revenues are direct and indirect costs incurred to generate revenues, and consist primarily of our cost foracquiring the products that we sell directly and the related shipping charges, as well as inventory write-downs. The rebates andsubsidies we receive from suppliers are accounted as a reduction to the purchase price and will be recorded as a reduction of costof revenues when the product is sold. Our cost of revenues was nil, US$13.2 and US$72.9 million for the years ended December 31, 2014, 2015 and 2016,respectively. Operating Expenses The following table sets forth our operating expenses by amount and as a percentage of total operating expenses for theperiods indicated: For the year ended December 31 2014 2015 2016 US$ % US$ % US$ % Operating Expenses Selling and marketing — 0.0% 5,360,044 5.1% 20,405,602 73.0%General and administrative 4,323,253 100.0% 12,911,773 12.4% 7,530,851 27.0%Impairment of goodwill — 0.0% 85,934,770 82.5% — 0.0%Total operating expenses 4,323,253 100% 104,206,587 100% 27,936,453 100% 53 Our operating expenses consist of selling and marketing expenses and general and administrative expenses as well asimpairment of goodwill. Our total operating expenses were US$4.3 million, US$104.2 million and US$27.9 million for the yearsended December 31, 2014, 2015 and 2016, respectively. Selling and marketing expenses Our selling and marketing expenses primarily consist of expenses incurred in connection with advertisements andmarket promotion events, loyalty program, as well as other overhead expenses incurred for our sales and marketing personnel. Our selling and marketing expenses were nil, US$5.4 and US$20.4 million for the years ended December 31, 2014,2015 and 2016, respectively. General and administrative expenses Our general and administrative expenses primarily consist of: ·salaries and benefits for employees, which are the salaries and benefits for our management, merchant servicerepresentatives and general administrative staff; ·share-based compensation to employees, which is the expense incurred in connection with the grant of shareoptions to our directors, officers and other employees pursuant to our share incentive plan; and ·office expenses, which consist primarily of office rental, maintenance and utilities expenses, depreciation of officeequipment and other office expenses. Our general and administrative expenses were US$4.3 million, US$12.9 million and US$7.5 million, for the years endedDecember 31, 2014, 2015 and 2016, respectively. Taxation We are incorporated in the Cayman Islands. Under Cayman Islands law, we are not subject to income or capital gainstax. Our subsidiary incorporated in the Cayman Islands is not subject to income or capital gains tax in the Cayman Islands,and dividend payments by this subsidiary to us are not subject to withholding tax in the Cayman Islands. Our subsidiary in Hong Kong is subject to a profit tax at the rate of 16.5% on assessable profit determined underrelevant Hong Kong tax regulations. Dividend payments by this subsidiary to us are not subject to withholding tax in HongKong. Our subsidiary and our consolidated variable interest entities in China are subject to value-added tax, or VAT, at ratesof either 17% or 13%. In addition, they are generally subject to the standard enterprise income tax in China at a rate of 25%. Under the Enterprise Income Tax Law and its implementation regulations, a 10% PRC income tax is applicable todividends payable to investors that are “non-resident enterprises,” enterprises that do not have an establishment or place ofbusiness in the PRC, to the extent such dividends have their sources within the PRC. Such dividends are also subject to the 10%tax even if the recipient has an establishment or place of business in the PRC if the relevant income is not effectively connectedwith the establishment or place of business. Under a special arrangement between China and Hong Kong, dividends from ourPRC subsidiary paid to our Hong Kong subsidiary, which would otherwise be subject to a 10% withholding tax, may be subjectto a 5% preferential withholding tax if our Hong Kong subsidiary can be considered as a “beneficial owner” of our PRCsubsidiary and is otherwise entitled to the benefits under the special arrangement. The State Administration for Taxationpromulgated the Notice Regarding Interpretation and Recognition of Beneficial Owners under Tax Treaties on October 27,2009, which provides guidance on the determination of “beneficial owner”. If our Hong Kong subsidiary is not considered to bethe “beneficial owner” of our PRC subsidiary under this notice, any dividends paid by our PRC subsidiary to our Hong Kongsubsidiary would be subject to withholding tax at a rate of 10%. 54 If our Cayman Islands holding company or our Hong Kong subsidiary is deemed to be a “resident enterprise” under theEnterprise Income Tax Law, then it is not clear whether or how the PRC tax authorities would apply the PRC tax on dividendspayable by our PRC subsidiary to our Hong Kong subsidiary or by our Hong Kong subsidiary to us. See “Item 3. KeyInformation—D. Risk Factors—Risks Relating to Doing Business in China—Under the PRC enterprise income tax law, we couldbe classified as a ‘resident enterprise’ of China. Such classification could result in unfavorable tax consequences to us and ournon-PRC shareholders.” Provision for Income Tax Benefit We are subject to PRC Enterprise Income Tax Law on taxable income in accordance with the relevant PRC income taxlaws. We incurred net losses of US$43.9 million, US$93.6 million and US$25.3 million for the years ended December 31, 2014,2015 and 2016, respectively. Our provision for income tax benefit were nil, US$1.2 million and US$2.2 million for the yearsended December 31, 2014, 2015 and 2016, respectively. Critical Accounting Policies The preparation of our consolidated financial statements and related notes requires us to make judgments, estimates andassumptions that affect the reported amounts of assets, liabilities, net sales and expenses, and related disclosure of contingentassets and liabilities. We have based our estimates on historical experience and various other assumptions that we believe to bereasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assetsand liabilities that are not readily apparent from other sources. Our management has discussed the development, selection anddisclosure of these estimates with our board of directors. Actual results may differ from these estimates under differentassumptions or conditions. An accounting policy is considered to be critical if it requires an accounting estimate to be madebased on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates thatreasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, couldmaterially impact the consolidated financial statements. We believe that the following critical accounting policies are the most sensitive and require more significant estimatesand assumptions used in the preparation of our consolidated financial statements. You should read the following descriptions of critical accounting policies, judgments and estimates in conjunctionwith our consolidated financial statements and other disclosures included in this annual report. Revenue Recognition We recognize revenue from the sales of rice, flavoring, oil, seafood, wine and other types of generic food and beverageproducts through our online platform www.ccjoin.com. The website also serves as an online platform to connect third partyvendors and customers. We recognize revenue when the following four revenue recognition criteria are met: (i) persuasiveevidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the selling price is fixed ordeterminable, and (iv) collectability is reasonably assured. We recognize revenue when the customers confirm the acceptance of the goods once they receive the delivered goods.The sales returns are considered and estimated when the related revenue was recognized. Revenue is recorded net of surcharges and value-added tax ("VAT") and related surcharges. We primarily generate revenue from online direct sales and online platform services. Online direct sales We primarily sell rice, flavoring, oil, seafood, wine and other products relating to catering and hotel industries throughonline direct sales. There is a separate channel on our online platform designated for our online direct sales, and we recordrevenue from online direct sales on a gross basis as we act as the principal in these arrangements: we are the primary obligor inthe sales arrangements, have latitude in establishing prices and have discretion in suppliers' selection. On certain transactions, wealso retain some of general inventory risk and physical inventory loss risk. 55 Online platform services We also provide the online platform services to connect third-party sellers and purchasers for their transactions via ouronline marketplace. Online platform sales are made from the online stores under the third-party sellers’ names, and we record therelated revenue on a net basis as we act as the agent in these arrangements: we are not the primary obligor, do not bear inventoryrisk, and do not have the ability to establish the price or discretion in supplier selection. For the years ended December 31, 2015and 2016, revenues related to the online platform services were nil, as we did not charge any service fees to the third-party sellersand purchasers. Impairment of Goodwill and Long-lived Assets Goodwill represents the cost of an acquired business in excess of the fair value of tangible and identifiable intangiblenet assets purchased. We seek the assistance of an independent valuation firm in determining the fair value of the identifiableintangible net assets of the acquired business. We assign all the assets and liabilities of an acquired business, includinggoodwill, to reporting units. Some of the significant estimates and assumptions inherent in the discounted cash flow, or DCF method or othermethods include the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent inthe future cash flows and the assessment of the asset’s economic life cycle and the competitive trends impacting the asset,including consideration of any technical, legal, regulatory or economic barriers to entry. Determining the useful life of anintangible asset also requires judgment, as different types of intangible assets will have different useful lives. Specifically, the income approach involves applying appropriate discount rates to estimated cash flows that are basedon earnings forecasts developed by us. The financial projections used in deriving the fair values of intangible assets wereconsistent with our business plan. However, these assumptions were inherently uncertain and highly subjective. Theseassumptions include: no material changes in the existing political, legal and economic conditions in China; no major changes inthe tax rates applicable to our subsidiaries and consolidated affiliated entities in China; our ability to retain competentmanagement, key personnel and staff to support our ongoing operations; and no material deviation in market conditions fromeconomic forecasts. Goodwill is tested for impairment at least once annually or more frequently if we believe indications of impairmentexist. Impairment is tested using a two-step process. The first step compares the fair value of each reporting unit to its carryingamount, including goodwill. We currently have one reporting unit, which recorded goodwill in relation to the acquisition ofJMU HK in June 2015. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and thesecond step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares theimplied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill isdetermined in a manner similar to accounting for a business combination with the allocation of the assessed fair valuedetermined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unitover the amounts assigned to the assets and liabilities is the implied fair value of goodwill. An impairment loss is recognized forany excess in the carrying value of goodwill over the implied fair value of goodwill. Estimating the fair value of reporting unitis performed by the DCF method. For the years ended 2013 and 2014 and through the date of completion of the merger with JMU, we had one reportingunit, the group buying business. We estimated that there was no impairment of goodwill as of December 31, 2013 and 2014 asthe fair value of the reporting unit exceeded the carrying amount. After the divestiture of the group buying business, we had one reporting unit, our B2B business for the food serviceindustry. We performed the annual impairment test on December 31, 2015 and 2016 by applying the DCF method. The fairvalue was determined using models with significant unobservable inputs (Level 3 inputs), which primarily includedmanagement projections on the discounted future cash flow analysis including the discount rate using a weighted average costof capital of 17.5% (2015:17.0%) and expected revenue growth rates. The estimated fair value of the reporting unit was belowthe carrying amount of our net assets. We recognized an impairment loss of US$85.9 million and nil for the years endedDecember 31, 2015 and 2016, respectively. 56 We estimated the fair values of the intangible assets with the assistance from an independent third-party appraiser. Weare ultimately responsible for the determination of all amounts related to the intangible assets recorded in the financialstatements. Acquired intangible assets are amortized over their useful lives. Useful lives are based on our management’s estimatesof the period that the assets will generate revenue. We amortize intangible assets with determinable useful lives on a straight-linebasis. We evaluate intangible assets with determinable useful lives for recoverability whenever events or changes incircumstances indicate that their carrying amounts may not be recoverable. We measure recoverability of long-lived assets to beheld and used as part of an asset group by comparing the carrying amount of an asset to the future undiscounted net cash flowsexpected to be generated by the asset. If we believe the assets are impaired, the impairment will equal the amount by which thecarrying value of the assets exceeds the fair value of the assets. Considering that we have incurred operating losses, we have determined to perform the annual impairment tests onacquired intangible assets on December 31 of each year. As a result of the annual impairment test, no impairment loss ofacquired intangible assets was recognized for the years ended December 31, 2014, 2015 and 2016. Estimates of fair valueinvolve a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. Ourjudgments in determining an estimate of fair value can materially impact our results of operations. We base these valuations oninformation available as of the impairment review date and on expectations and assumptions that management deemsreasonable. Any changes in key assumptions, including unanticipated events and circumstances, may affect the accuracy orvalidity of such estimates and could potentially result in impairment charges. Income Taxes We follow the liability method in accounting for income taxes in accordance with ASC topic 740 (“ASC 740”), IncomeTaxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financialreporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differencesare expected to reverse. We record a valuation allowance against deferred tax assets if, based on the weight of availableevidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. We apply the provision of ASC 740 to account for uncertainty in income taxes. ASC 740 clarifies the accounting foruncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognizedin the consolidated financial statements. We have elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part ofincome tax expense in the consolidated statements of operations. Share-based payments Share-based payment awards with employees are measured based on the grant date fair value of the equity instrumentissued, and recognized as compensation costs net of an estimated forfeiture rate using the straight-line method over the requisiteservice period, which is generally the vesting period of the options, with a corresponding impact reflected in additional paid-incapital. For share-based payment awards with market conditions, such market conditions are included in the determination of theestimated grant-date fair value. The estimate of forfeitures will be adjusted over the requisite service period to the extent thatactual forfeitures differ, or is expected to differ, from such estimate. Changes in estimated forfeitures will be recognized througha cumulative catch-up adjustment in the period of change and will also impact the amount of share-based compensationexpenses to be recognized in future years. A change in any of the terms or conditions of share-based payment awards is accounted for as a modification of awards.The Company measures the incremental compensation cost of a modification as the excess of the fair value of the modifiedawards over the fair value of the original awards immediately before its terms are modified, based on the share price and otherpertinent factors at the modification date. For vested awards, the Company recognizes incremental compensation cost in theperiod the modification occurred. For unvested awards, the Company recognizes, over the remaining requisite service period, thesum of the incremental compensation cost and the remaining unrecognized compensation cost for the original award on themodification date. 57 Fair Value of Our Ordinary Shares and Share-Based Compensation Before April 8, 2015, we are a private company with no quoted market prices for our ordinary shares. We thereforeneeded to make estimates of the fair value of our ordinary shares at various dates for the purposes of (1) determining the fairvalue of our ordinary shares at the date of the grant/re-measurement of share- based compensation award to our employees asone of the inputs in determining the fair value of the award and (2) at the date of issuance of convertible instruments as one ofthe inputs into determining the intrinsic value of the beneficial conversion feature. The fair value of the ordinary shares and share-based compensation award granted to our employees were estimated byus, with assistance from an independent third-party appraiser. We are ultimately responsible for the determination of all amountsrelated to share-based compensation and the convertible instruments recorded in the consolidated financial statements. The following table sets forth the fair value of our ordinary shares estimated at different dates during the past threefiscal years prior to our initial public offering: Date Class of shares Fair value Purpose of valuation Type of valuationApril 18, 2014 Ordinary Shares US$0.0590 Share options granted as of April 18, 2014 ContemporaneousJune 29, 2014 Ordinary Shares US$0.1380 Ordinary share compensation to executivesand certain directors as of June 29, 2014 Contemporaneous In determining the fair value of our ordinary shares, we have considered the guideline prescribed by the AICPA Auditand Accounting Practice Aid, Valuation of Privately-Held Company Equity Securities Issued and Compensation, or the PracticeAid. Specifically, paragraph 16 of the Practice Aid sets forth the preferred types of valuation that should be used. The independent third-party appraiser used the discounted cash flow, or DCF, method of the income approach to derivethe fair value of our ordinary shares as of June 29, 2014. We considered the market approach and searched for public companieslocated in China with similar business nature and in a stage of development similar to ours. However, no companies similar to usin many aspects could be identified, and we therefore only used the results obtained from the market approach as a sanity checkon the results obtained from the income approach. The determination of the fair value of our ordinary shares required complexand subjective judgments to be made regarding our projected financial and operating results, our unique business risks, theliquidity of our shares and our operating history and prospects at the time of valuation. The major assumptions used in calculating the fair value of our ordinary shares prior to our initial public offeringinclude: ·Weighted average cost of capital, or WACC: The WACCs were determined based on a consideration of such factorsas risk-free rate, comparative industry risk, equity risk premium, company size and company-specific factors. Thechanges in WACC from 26% as of October 1, 2012 to 25% as of March 15, 2013 were primarily due to ourbusiness growth and recovery in the global capital markets and economic conditions for accelerating ourdevelopment. In deriving the WACCs, which are used as the discount rates under the income approach, certainpublicly traded companies in the online commerce and travel service agency business were selected for reference asour guideline companies. To reflect the operating environment in China and the general sentiment in the U.S.capital markets towards the online commerce industries, the guideline companies were selected with considerationof the following factors: (i) the guideline companies should be online services provider; and (ii) the guidelinecompanies should either have their principal operations in China, as we operate in China, and/or are publicly listedcompanies in the U.S., as we plan to become a public company in the U.S. The WACC maintained at 23% over theperiod between April 18, 2014 and June 29, 2014 ·Discount for lack of marketability, or DLOM: When determining the DLOM, the option-pricing method (putoption) was applied to quantify the DLOM where applicable. Although it is reasonable to expect that thecompletion of our initial public offering will add value to our ordinary shares because we will have increasedliquidity and marketability as a result of the listing of our ADSs on the Nasdaq Stock Exchange, the amount ofadditional value can be measured with neither precision nor certainty. The higher DLOM is used for the valuation,the lower is the determined fair value of the ordinary shares. DLOM decreased from 14% as of April 18, 2014 to8% as of June 29, 2014 due to a shorter period to the expected initial public offering date. 58 The income approach involves applying appropriate discount rates to estimated cash flows that are based on earningsforecasts developed by us. The assumptions used in deriving the fair values were consistent with our business plan. However,these assumptions were inherently uncertain and highly subjective. These assumptions include: no material changes in theexisting political, legal and economic conditions in China; no major changes in the tax rates applicable to our subsidiaries andconsolidated affiliated entities in China; our ability to retain competent management, key personnel and staff to support ourongoing operations; and no material deviation in market conditions from economic forecasts. The risk associated with achievingour forecasts were assessed in selecting the appropriate discount rates of 23%. The fair value of our ordinary shares stayed at around US$0.06 per share over the period between July 1, 2012 andApril 18, 2014 due to the following reasons: ·basically the company’s business operated as usual but without real break-through over the period; ·revenue growth rate was lower when the management expected more intense competition in the group buyingbusiness; and ·recovery in the global capital markets and economic conditions resulted in lower market required return oninvesting in business similar to ours. Accordingly, the discount rate used for our valuation under the incomeapproach reduced. The fair value of our ordinary shares decreased from US$0.0611 per share as of March 15, 2013 to US$0.0590 per shareas of April 18, 2014, primarily due to the following reasons: ·the company’s 2013 actual performance missed budget; and ·profitability declined due to intense competition in the market resulting in our lower bargaining power tocounterparties in negotiating the take rate (margin) and higher operating expenses (e.g. sales commission cost). ·The fair value of our ordinary shares increased from US$0.0590 per share as of April 18, 2014 to US$0.1380 pershare as of June 29, 2014, primarily due to the following reasons: ·Financial performance was expected to be better in the long run when the company’s business was expected toreceive contribution from the new operation of WoWo Merchant App; ·We have engaged an underwriter to start preparing for an IPO and accordingly; ·DLOM was lower due to a shorter period to the expected initial public offering date; and ·There is a higher chance that an IPO leading to automatic conversion of the preference shares into ordinary shareswould occur. 1. We believe that the increase in the fair value of our ordinary shares from US$0.1380 as of June 29, 2014, toUS$0.56 per share, or US$10.00 per ADS, the initial public offering price divided by the number of ordinary shares representedby each ADS, was primarily attributable to the following factors: ·Upon the completion of our initial public offering, all of our preferred shares would be converted into ordinaryshares and thus forego the rights and the corresponding values attributable to the preferred shares. In other words,part of the value of the preferred shares will be transferred to the holders of ordinary shares, resulting in theordinary share value to be increased without increasing our total enterprise value. By assuming all of our preferred shares have been converted to ordinary shares, our ordinary share value wouldhave been increased to US$0.21 (or by US$0.07). 59 ·We achieved a better financial performance since July 1, 2014 than our previous estimate, as the result ofsignificant, unexpected revenue growth attributed by the following factors: (i) We upgraded our WoWo MerchantApps in July 2014. As a result, the number of our online merchant clients increased from 92,002 in the secondquarter to 119,310 in the fourth quarter of 2014, an increase of 25% on a semi-annual basis or 50% on an annualbasis. The number of our newly signed-up paying merchant clients also increased from 2,103 in the second quarterto 3,135 in the fourth quarter, an increase of 50% on a semi-annual basis. (ii) We launched a new strategic businessinitiative in fourth quarter of 2014 by opening our platform to third party service providers’ clients in variousvertical sectors. They have enrolled in this new business and have brought more than 10,000 new merchants to ourplatform. (iii) Within the fourth quarter of 2014, we achieved major milestones in the development and set up clearlaunching schedule for two new products with features that would enable our merchant clients to open and managetheir online stores using their own smart phones and enable craftsmen to open and manage their online stores onour platform. These two new products would be launched at the end of first quarter 2015. Once launched, webelieve these products will further increase the number of merchants signed up to our platform, many of whichcould ultimately become paying merchants. Our conversion rate from online merchants to paying merchants hasbeen approximately 12.4%. (iv) Within the fourth quarter of 2014, we completed the addition of three new value-added services into our product roadmap. These new services would attract more merchants and further improvepaying merchant conversion rate. We believe both growing merchant base and improvement of paying-merchantconversion rate will further drive our revenue growth. ·Based on the above strategic initiatives and strong operating performance in terms of revenues, number ofmerchants and other factors in the fourth quarter of 2014, we expect our performance in 2015 and beyond to bebetter than originally forecasted in the June 29, 2014 valuation. This results in an additional increment in theordinary shares value to US$0.36 (or by US$0.15). ·Taking into account the improvement of our business performance and indications of the success of our businessplan, the company-specific risk factor used in estimating a market participant’s required rate of return for investingin our shares was reduced by 4%, reflecting the decrease in the perceived risk in achieving our financial forecasts.Therefore, the overall discount rate was lowered from 23% as of June 29, 2014 to 19% as of January 30, 2015. Webelieve this factor would increase the fair value of our ordinary shares to US$0.52 (or by US$0.16). ·The imminent launch of our initial public offering will provide us with additional capital and will enhance ourability to access capital markets to grow our business, raise our profile in China and provide our shareholders withgreater liquidity. In particular, the 8% discount for lack of marketability previously used to value our ordinaryshares as of June 29, 2014 would no longer be applicable after our initial public offering. We believe this factorwould increase the fair value of our ordinary shares to US$0.56 (or by US$0.04). The increase in the fair value of our ordinary shares since July 1, 2014 was in line with the overall appreciation inthe market value of the shares of China-based publicly-traded companies, as a result of the further improved marketsentiment towards those companies since July 1, 2014. For instance, the NASDAQ China Index increased by 9.5%from June 30, 2014 to January 30, 2015. Furthermore, in accordance with Chapter 10 of the Practice Aid, we believe that the ultimate IPO price itself isgenerally not likely to be a reasonable estimate of the fair value of our ordinary shares as of various dates beforeour initial public offering, as increases in enterprise value may be attributed partly to (i) changes in the amount andrelative timing of future net cash flows (estimated and actual) as the enterprise successfully executes its businessplan and responds to risks and opportunities in the market, and (ii) a reduction in the risk associated with achievingprojected results. Since our initial public offering in April 2015, the determination of the fair value of the ordinary shares has been basedon the market price of our ADSs, each representing 18 ordinary shares, traded on the NASDAQ Global Market. 60 The following table sets forth certain information regarding the share options granted to our employees at differentdates in the past three fiscal years prior to December 31, 2016: Grant/Re-measurementdate Type of award Number ofaward Exercise price Fair value ofordinaryshare Intrinsic value Type of valuation April 18, 2014 Employee share option 11,445,500 US$0.01 US$0.00590 US$560,830 Contemporaneous July 27, 2015 Employee restrictedshare units 28,841,700 N/A US$0.2650 US$7,643,050 Contemporaneous July 1, 2016 Share option granted toexecutives 11,633,400 US$0.20 US$0.1196 US$- Contemporaneous July 1, 2016 Share option granted tostaffs 20,395,300 US$0.20 US$0.0945 US$- Contemporaneous July 1, 2016 Employee restrictedshare units 10,430,000 N/A US$0.1328 US$1,385,202 Contemporaneous In determining the value of share options to employees, we have used the binomial option-pricing model, withassistance from the independent third-party appraiser. Under this option pricing model, certain assumptions, including risk-freeinterest rate, the contractual life of the options, the expected dividends on the underlying ordinary shares, the expected volatilityof the price of the underlying shares for the contractual life of the options, the post-vesting forfeiture rate and the expectedexercise multiple are required in order to determine the fair value of our options. Changes in these assumptions couldsignificantly affect the fair value of share options and hence the amount of compensation expense we recognize in ourconsolidated financial statements. In determining the value of ordinary shares to directors and executives, we have considered the fair value of theordinary share and the expected dividend paid-out ratio. Because we have no plan to pay dividend, the fair value of the sharegranted to directors and executives is the fair value of the ordinary share. The key assumptions used in valuation of the employee share options are summarized in the following table: Grants onApril 18,2014 Modification onSeptember 1,2015 Grants onJuly 1,2016 Risk-free rate of return(1) 1.8% 0.47% - 0.88% 1.46%Contractual life of the options(2) 5.0 years 5.0 years 10 years Volatility(3) 58% 60% - 65% 54.78%Expected dividend yield(4) 0% 0% 0%Post-vesting forfeiture rate(5) 9.0%/40.0% N/A 36.1%Exercise multiple(6) 3x / 2x 3x / 2x 3x / 2x (1)The risk-free rate of return is based on the yield curve of USD China Sovereign Bonds as of the valuation dates as extractedfrom Bloomberg. (2)The contractual life of the options is based on the option grant letter. (3)The volatility of the underlying ordinary shares during the life of the options was estimated based on the historical stockprice volatility of listed guideline companies over a period comparable to the contractual life of the options. (4)We estimate the dividend yield based on our expected dividend policy over the expected term of the options. (5)The post vesting forfeiture rate applied to options granted to general staff was based on our historical statistical data. 0%was applied to options granted to executive management with expectation that the executive management will not quitfrom the company over the contractual life of the options. (6)Exercise multiple is the ratio of fair value of share over the exercise price at the time which the option will be exercised, estimated based on a consideration of research study regarding exercise pattern from historical statistical data. A multiple ofthree was used for the executive management and a multiple of two was used for general staff. 61 Loyalty program In 2016, we launched a customer loyalty program to certain qualified customers, who can earn customer credits frompurchases if their annual spending with us exceeds RMB10 million. The customers can redeem the earned credits for giftmerchandise, and we account for such credits by recording a liability and corresponding selling expenses for the estimatedincremental cost of outstanding credits earned that are expected to be redeemed. During 2016, we negotiated settlement of earned loyalty credits with 13 of our customers in our ordinary shares. As partof the settlement, we agreed to issue 4.42 million of our ordinary shares, and recognized US$1,377,503 in paid-in capital andselling expenses based on the grant date fair value of the ordinary shares. We are not legally obligated, or expects to continue,redemption of the credits for the ordinary shares in the future Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers. ASU 2014-09 supersedes the revenue recognitionrequirements in ASC 605, and requires entities to recognize revenue when it transfers promised goods or services to customers inan amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.ASU 2014-09 is originally effective for the annual reporting periods beginning after December 15, 2016, including interimperiods within that reporting period for public entities; and, annual reporting periods beginning after December 15, 2017, andinterim periods within annual periods beginning after December 15, 2018 for all other entities. ASU 2015-14, Revenue fromContracts with Customers, defers the effective date of ASU 2014-09 by one year. As a result, ASU 2014-09 is effective for annualreporting periods beginning after December 15, 2017, including interim periods within that reporting period for public entities;and, annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning afterDecember 15, 2019 for all other entities. Early adoption is permitted to the original effective date. We are currently evaluatingthe impact of adopting this standard on its consolidated financial statements. In July 2015, the FASB issued ASU No. 2015-11 (“ASU 2015-11”), Inventory (Topic 330): Simplifying theMeasurement of Inventory. Under ASU 2015-11, the measurement principle for inventory will change from lower of cost ormarket value to lower of cost and net realizable value. The ASU defines net realizable value as the estimated selling price in theordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 iseffective for public entities for fiscal years and interim periods within those fiscal years, as well as for all other entities for fiscalyears beginning after December 15, 2016; and, interim periods within annual periods beginning after December 15, 2017 for allother entities. Early adoption is permitted. We are currently evaluating the impact of adopting this standard on its consolidatedfinancial statements. In November 2015, the FASB issued ASU No. 2015-17 (“ASU 2015-17”), Income Taxes (Topic 740): Balance SheetClassification of Deferred Taxes. ASU 2015-17 simplifies the presentation of deferred income taxes by eliminating the separateclassification of deferred income tax liabilities and assets into current and noncurrent amounts in the consolidated balance sheetstatement of financial position. The amendments in the update require that all deferred tax liabilities and assets be classified asnoncurrent in the consolidated balance sheet. The amendments in this update are effective for fiscal years beginning afterDecember 15, 2016, and interim periods therein and may be applied either prospectively or retrospectively to all periodspresented for public entities; and, annual reporting periods beginning after December 15, 2017, and interim periods withinannual periods beginning after December 15, 2018 for all other entities. Early adoption is permitted. After the adoption of ASU2015-17, all the current deferred tax assets will be reclassified as noncurrent deferred tax asset on the consolidated balance sheet. In January 2016, the FASB issued ASU No. 2016-01 (“ASU 2016-01”), Financial Instruments. ASU 2016-01 requiresequity investments (except those accounted for under the equity method of accounting or those that result in consolidation ofthe investee) to be measured at fair value with changes in fair value recognized in net income. An entity may choose to measureequity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changesresulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. ASU2016-01 also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring aqualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity isrequired to measure the investment at fair value. For public business entities, the amendments are effective for fiscal yearsbeginning after December 15, 2017, including interim periods within those fiscal years; and for all other entities, are effectivefor annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact of adopting this standard on itsconsolidated financial statements. 62 In February 2016, the FASB issued ASU No. 2016-02 (“ASU 2016-02”), Leases. ASU 2016-02 specifies the accountingfor leases. For operating leases, ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability, initiallymeasured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a singlelease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. ASU 2016-02is effective for public business entities for annual reporting periods and interim periods within those years beginning afterDecember 15, 2018; and, annual reporting periods beginning after December 15, 2019, and interim periods within annualperiods beginning after December 15, 2020 for all other entities. Early adoption is permitted. We are currently evaluating theimpact of adopting this standard on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principalversus Agent Considerations (Reporting Revenue Gross versus Net), (“ASU 2016-08”) which clarifies the implementationguidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether itcontrols a specified good or service before it is transferred to the customers. This guidance will be effective at the same date asthe adoption of ASU 2014-09. We are currently evaluating the impact of adopting this standard on its consolidated financialstatements. In March 2016, the FASB issued ASU No. 2016-09 (“ASU 2016-09”), Stock Compensation (Topic 718): Improvementsto Employee Share-Based Payment Accounting. ASU 2016-09 involves several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities,classification on the statement of cash flows and accounting for forfeitures. Some of the areas apply only to nonpublic entities.In terms of accounting for forfeitures, companies will have to elect whether to account for forfeitures of share-based payments by(1) recognizing forfeitures of awards as they occur (e.g., when an award does not vest because the employee leaves the company)or (2) estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, as iscurrently required. We will make an election at the entity level using a modified retrospective transition method, with acumulative-effect adjustment to retained earnings. ASU 2016-09 is effective for public business entities for annual reportingperiod and interim periods within those years beginning after December 15, 2016; and, annual reporting periods beginning afterDecember 15, 2017, and interim periods within annual periods beginning after December 15, 2018 for all other entities. Earlyadoption is permitted. We are currently evaluating the impact of adopting this standard on its consolidated financial statements. In January 2017, FASB has issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition ofa Business. The ASU affects all companies and other reporting organizations that must determine whether they have acquired orsold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, andconsolidation. The ASU is effective for annual periods beginning after December 15, 2017, including interim periods withinthose periods for public entities; and, annual reporting periods beginning after December 15, 2018, and interim periods withinannual periods beginning after December 15, 2019 for all other entities. In January 2017, the FASB issued ASU No. 2017-04 (“ASU 2017-04”), Intangibles – Goodwill and Other (Topic 350):Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates the requirement to calculate the implied fair value ofgoodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of areporting unit’s carrying amount over its fair value. This standard is effective for public business entities in the first quarter of2020 and for all other entities in the first quarter of 2022. Early adoption is permitted. We are currently evaluating the impact ofadopting this standard on its consolidated financial statements. In February 2017, the FASB issued ASU No. 2017-05 (“ASU 2017-05”), Other income-Gains and Losses from theDerecognition of Nonfinancial Assets (Subtopic 610-20). ASU 2017-05 clarifies the scope of asset derecognition guidance andaccounting for partial sales of nonfinancial assets. The update is effective for public business entities for annual reportingperiods beginning after December 15, 2017, including interim reporting periods within that reporting period; and, annualreporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15,2019 for all other entities. We are currently evaluating the impact of adopting this standard on its consolidated financialstatements. 63 Results of Operations The following table presents selected financial data from our consolidated statements of operations for the periodsindicated. Because we had a significant restructuring and a switch of strategic emphasis during 2015, the historical operation ofour group buying business was categorized as a discontinued operation. In addition, we only acquired our current continuingB2B business in 2015. As a result, the period-to-period comparisons of our results of operations can only provide very limitedinsight into the development of our operation and thus should not be relied upon as indicative of our future performance. For the year ended December 31, 2014 2015 2016 (US$ in thousands) Consolidated statements of operations data Revenues Related parties — 542 10,078 Third parties — 10,935 63,123 Cost of revenues — (13,220) (72,857)Gross (loss) / profit — (1,743) 344 Operating expenses: Selling and marketing — (5,360) (20,405)General and administrative (4,323) (12,911) (7,531)Impairment of goodwill — (85,935) — Total operating expenses (4,323) (104,206) (27,936)Loss from operations (4,323) (105,949) (27,592)Interest income — 7 26 Other income, net — 46 39 Loss before provision for income tax (4,323) (105,896) (27,527)Provision for income tax benefits — 1,250 2,234 Loss from continuing operations (4,323) (104,646) (25,293) Discontinued operations: (Loss)/Income from discontinued operations (39,546) 11,076 — Provision for income tax benefits — — — (Loss)/Income from discontinued operations, net of tax (39,546) 11,076 — Net loss (43,869) (93,570) (25,293) Year ended December 31, 2016 compared to Year ended December 31, 2015 Revenues Our revenues increased by 538% from US$11.5 million for the year ended December 31, 2015 to US$73.2 million forthe year ended December 31, 2016. This increase was primarily due to our rapid growth of business in 2016 as well as the factthe our revenue number for the fiscal year 2015 only contains the financial results since June 2015 when we acquired JMU HK. Cost of revenues Our cost of revenues increased by 451% from US$13.2 million for the year ended December 31, 2015 to US$72.9million for the year ended December 31, 2016. This increase was primarily due to our rapid growth of business and generally inline with the increase of revenue. The increase rate of cost of revenues was lower than the increase rate of revenues because westarted to charge margins in our direct sales business in 2016 while we maintained zero margin to attract customers in 2015. Total operating expenses Our total operating expenses decreased by 73% from US$104.2 million for the year ended December 31, 2015 to US$27.9 million for the year ended December 31, 2016. This change was primarily because we did not incur impairment ofgoodwill in 2016 as compared to a charge of US$85.9 million in 2015. Selling and marketing expenses Our selling and marketing expenses increased by 278% from US$5.4 million for the year ended December 31, 2015 toUS$20.4 million for the year ended December 31, 2016. This increase was due to (i) a US$4.3 million expense related to loyaltyprogram, which we started in 2016, (ii) share based compensation increased by US$0.7 million, and (iii) an increase of US$8.6million of amortization of intangible assets in 2016 compared to 2015. Our salaries to sales personnel also increased US$1.5million mainly because the salary expense for fiscal year 2015 only contains the expense incurred since June 2015 when weacquired JMU HK while the number for fiscal year 2016 covers the whole year 2016. 64 General and administrative expenses Our general and administrative expenses decreased by 42% from US$12.9 million for the year ended December 31,2015 to US$7.5 million for the year ended December 31, 2016, primarily because the fee paid to professional service providersdecreased US$4.1 million compared to 2015 when we had our initial public offering and several major corporate transaction. Loss As a result of the foregoing, our loss from continuing operations decreased by 76% from US$104.6 million for the yearended December 31, 2015 to US$25.3 million for the year ended December 31, 2016. Year ended December 31, 2015 compared to Year ended December 31, 2014 Revenues Our revenues for the year ended December 31, 2015 were US$11.5 million, which consisted primarily of revenues fromour direct sales, as we did not charge service fees for third-party sellers on our marketplace in 2015. We did not record anyrevenue for the year ended December 31, 2014 as we did not acquire our current continuing B2B business until 2015. Cost of revenues Our cost of revenues for the year ended December 31, 2015 was US$13.2 million, which consisted primarily of ourprocurement costs. We did not incur any cost of revenues for the year ended December 31, 2014 as we did not acquire ourcurrent continuing B2B business until 2015. Total operating expenses Our total operating expenses increased from US$4.3 million for the year ended December 31, 2014 to US$104.2million for the year ended December 31, 2015. This increase was due to the fact that our expenses for the year ended December31, 2014 consisted primarily of share-based compensation, whereas our operating expenses for the year ended December 31,2015 also included impairment of goodwill as well as expenses related to our B2B business. We had US$85.9 million ofimpairment of goodwill in 2015. Selling and marketing expenses Our selling and marketing expenses increased from nil for the year ended December 31, 2014 to US$5.4 million for theyear ended December 31, 2015. We did not incur selling and marketing expenses for the year ended December 31, 2014 as weonly acquired our current continuing B2B business in 2015, whereas we started to incur advertising and marketing promotionexpenses related to our B2B platform for the year ended December 31, 2015. General and administrative expenses Our general and administrative expenses increased by 199% from US$4.3 million for the year ended December 31,2014 to US$12.9 million for the year ended December 31, 2015, primarily due to the increase in fees paid to professionalsrelated to our acquisition of JMU and the divestment of our group buying business. 65 Loss from continuing operations As a result of the foregoing, our loss from continuing operations increased from US$4.3 million for the year endedDecember 31, 2014, to US$104.6 million for the year ended December 31, 2015. B.Liquidity and Capital Resources. We had US$1.6 million, US$11.2 million and US$2.6 million in cash and cash equivalents as of December 31, 2014,2015 and 2016, respectively. The following table sets forth a summary of our cash and cash equivalents inside and outside of the PRC as ofDecember 31, 2016: Total cash and cash equivalents (US$ in thousands) Our VIE 1,924 PRC entities other than Our VIE 13 Entities inside of the PRC 1,937 Entities outside of the PRC 668 Total 2,605 We have incurred net losses and experienced negative cash flow from operating activities since our inception. Our netlosses were US$43.9 million, US$93.6 million and US$25.3 million for the years ended December 31, 2014, 2015 and 2016,respectively, and our net cash used in operating activities in these three years was US$32.0 million, US$33.5 million and US$5.8million, respectively. We believe that our current cash balance, anticipated cash flows from operations, and the financial supportobtained from Ms. Xiaoxia Zhu and Ms. Huimin Wang, two of our principal shareholders, will be sufficient to meet ouranticipated capital needs for the next 12 months from the date of this annual report. These commitments are guaranteed bycertain assets from Ms. Zhu and Ms. Wang. The funds, if and when called, shall be provided in cash as equity investment in ourCompany. This commitment is for an amount subject to our actual deficiency without any limitation. Ms. Huimin Wang madean interest-free loan to us in the amount of to RMB40 million (US$5.8 million) in April 2016 and Ms. Xiaoxia Zhu madeanother loans to us in the amount of RMB10 million (US$1.2 million), RMB15 million (S$1.9 million) and RMB35 million(US$5.1 million) in January, March and May 2017, respectively to enable us to meet the working capital requirements to fundour daily operations. If there is any change in business conditions or other future developments, including any investments we may decide topursue, and if our existing cash balance and commitment from Ms. Xiaoxia Zhu and Ms. Huimin Wang are insufficient to meetour requirements, we may also seek to sell additional equity securities or debt securities or borrow from lending institutions.Financing may be unavailable in the amounts we need or on terms acceptable to us, if at all. The sale of additional equitysecurities, including convertible debt securities, would dilute our earnings per share. The incurrence of debt would divert cashfor working capital and capital expenditures to service debt obligations and could result in operating and financial covenantsthat restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity ordebt financing as required, our business operations and prospects may suffer. In the future, we may rely on dividends and other distributions on equity paid by our wholly-owned PRC subsidiary forour cash and financing requirements. There are potential restrictions on the dividends and other distributions by our PRCsubsidiary. For instance, if our wholly-owned PRC subsidiary incurs debt on its own behalf in the future, the instrumentsgoverning the debt could restrict its ability to pay dividends or make other distributions to us. The PRC tax authorities mayrequire us to adjust our taxable income under the contractual arrangements that Our WFOE currently has in place with Our VIEin a way that could adversely affect the latter’s ability to pay dividends and other distributions to us. In addition, under PRClaws and regulations, our wholly-owned PRC subsidiary, as a wholly foreign-owned enterprise in the PRC, may only paydividends out of its accumulated profits. Wholly foreign-owned enterprises such as our wholly-owned PRC subsidiary arerequired to set aside at least 10% of their accumulated after-tax profits each year, if any, to fund a statutory reserve fund, untilthe aggregate amount of such fund reaches 50% of their respective registered capital. At their discretion, wholly foreign-ownedenterprises may allocate a portion of their after-tax profits to staff welfare and bonus funds. These reserve funds and staff welfareand bonus funds are not distributable as cash dividends. See “Item 3. Key Information—D. Risk factors—Risks Related to Our Corporate Structure and Dependence on our Contractual Arrangements with our Affiliates—We rely principally on dividendsand other distributions on equity paid by our PRC and Hong Kong subsidiaries to fund any cash and financing requirements wemight have. Any limitation on the ability of our PRC and Hong Kong subsidiaries to pay dividends to us could have an adverseeffect on our ability to conduct our business”. In addition, our investment made as registered capital and additional paid incapital of Our WFOE and Our VIE are also subject to restrictions in their distribution and transfer according to the laws andregulations in China. Owing to the above, Our WFOE and Our VIE in China are restricted in their ability to transfer their netassets to us in terms of cash dividends, loans or advances. As of December 31, 2016, the restricted net assets of Our WFOE andOur VIE, which represents registered capital and additional paid-in capital, was US$28.2 million. Any limitation on the abilityof Our WFOE or our Hong Kong subsidiary, JMU HK, to pay dividends or make other distributions to us could adversely limitour ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fundand conduct our business. 66 We are an offshore holding company conducting our operations in China through Our WFOE and Our VIE. Thefunctional and reporting currency of our company is US Dollars. The financial records of Our WFOE and Our VIE located in thePRC are maintained in Renminbi. Fluctuation in the exchange rate between the Renminbi and other foreign currency may affectour ability to inject capital in Our WFOE and Our VIE. We could lend to Our WFOE and Our VIE, or we could make additionalcapital contributions to Our WFOE, or we could establish new PRC subsidiary and make capital contributions to these new PRCsubsidiary, or we could acquire offshore entities with business operations in China in an offshore transaction. Most of these usesare subject to PRC regulations and approvals. For example, loans by us to Our WFOE to finance its activities cannot exceedstatutory limits and must be registered with the local counterpart of SAFE. If we decide to finance Our WFOE by means ofcapital contributions, these capital contributions must be approved by the Ministry of Commerce or its local counterpart. Due tothe restrictions imposed on loans in foreign currencies extended to any PRC domestic companies, we are unlikely to lend moneyto Our VIE and its subsidiaries which are PRC domestic companies. See “Item 3. Key Information—D. Risk factors—RisksRelated to Our Corporate Structure and Dependence on our Contractual Arrangements with our Affiliates—PRC regulation ofloans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversioncould limit our use of the proceeds we receive from our initial public offering to fund our expansion or operations”. The following table sets forth a summary of our cash flows for the periods indicated: For the year ended December 31, 2014 2015 2016 (US$ in thousands) Net cash used in operating activities (31,960) (33,531) (5,826)Net cash used in investing activities (586) (11,896) (2,581)Net cash provided by financing activities 33,768 54,883 — Effect of exchange rate changes 5 50 (140)increase/(decrease) in cash 1,227 9,506 (8,547)Cash at the beginning of the period 419 1,646 11,152 Cash at the end of the period 1,646 11,152 2,605 Net cash used in operating activities Net cash used in operating activities was US$5.8 million for the year ended December 31, 2016. We had net loss ofUS$25.3 million. The principal items accounting for the difference between our net loss and our net cash used in operatingactivities were a decrease of prepaid expenses and other current assets of US$15.8 million, depreciation and amortization ofUS$8.9 million and a decrease of accounts receivable of US$1.9 million, partially offset by a decrease of accrued expenses andother current liabilities of US$8.6 million, income tax benefits of US$2.2 million and a decrease of accounts and notes payableof US$1.4 million. Net cash used in operating activities for the year ended December 31, 2015 was US$33.5 million, of which US$10.7million was used in continuing operations and US$22.8 million in discontinued operations. The principal items accounting forthe difference between our net loss from continuing operations of US$104.6 million and our net cash used in continuingoperations of US$10.7 million were impairment of goodwill of US$85.9 million, an increase of accrued expenses and othercurrent liabilities of US$16.7 million, an increase of amount due from related parties of US$8.5 million and depreciation andamortization of US$4.9 million, partially offset by a decrease of prepaid expenses and other current assets of US$18.5 million,an increase in accounts receivable of US$3.0 million and an increase of amounts due to related parties of US$2.7 million. Net cash used in operating activities was US$32.0 million for the year ended December 31, 2014. We had net loss ofUS$43.9 million, which was further increased by a decrease in advance to customers of US$5.4 million and a decrease in accruedexpenses and other current liabilities of US$3.1 million as we transition from group buy business where we received advancefrom customers to online mall operations; offset in part by an increase in accounts payable of US$9.7 million and a decrease inprepaid expenses and other current assets by US$2.3 million. 67 Net cash used in investing activities Net cash used in investing activities was US$2.6 million for the year ended December 31, 2016, including US$1.9million for purchase of property and equipment and US$0.7 million payment for investment. Net cash used in investing activities was US$11.9 million for the year ended December 31, 2015, including US$9.9million used in connection with continuing operations and US$2.0 million used in connection with discontinued operations,consisting primarily of payment for acquisition of business of $9.8 million. Net cash used in investing activities was US$0.6 million for the year ended December 31, 2014, consisting primarily ofpurchase of property and equipment. Net cash provided by financing activities Financing activities did not provide us with any cash for the year ended December 31, 2016. Net cash provided by financing activities was US$54.9 million for the year ended December 31, 2015 includingUS$52.9 million provided in connection with continuing operations and US$2.0 million provided in connection withdiscontinued operations. We received net proceeds of approximately US$37.3 million from our initial public offering, includingthe exercise of the over-allotment option by the underwriters, after deducting underwriting discounts and commissions and otherexpenses. We also received US$15.0 million in a private placement transaction with our co-chairperson Mr. Maodong Xu. Net cash provided by financing activities was US$33.8 million for the year ended December 31, 2014, consistedprimarily of an increase in amounts due to related parties of US$36.3 million in relation to a shareholder loan from ourChairman and CEO, Mr. Xu, offset in part by repayments of borrowing of US$1.7 million. Capital Expenditures We made capital expenditures of US$1.9 million for the year ended December 31, 2016, consisting of the purchase ofproperty and equipment. We made capital expenditures of US$0.1 million for the year ended December 31, 2015, consisting of the purchase ofproperty and equipment. We made capital expenditures of US$0.6 million for the year ended December 31, 2014, consisting of the purchase ofproperty and equipment. Going forward, as more third-party sellers utilize our online markets and more customers and third-party sellersdownload and utilize our app, our server demand will increase and we intend to purchase additional servers to service ourexpanded networking. Inflation Since our inception, inflation in China has not materially affected our results of operations. According to the NationalBureau of Statistics of China, the year-over-year percent changes in the consumer price index for December 2014, 2015 and2016 were increases of 1.5%, and 1.6% and 2.1%, respectively. Although we have not been materially affected by inflation inthe past, we have experienced and expect to continue to experience upward pressure on our operating expenses. 68 Withholding Tax Obligation Pursuant to PRC individual income tax laws, when a corporation purchases equity interest from individuals, theindividuals are obligated to pay individual income tax based on 20% of the capital gain from the transaction with thecorporation as the withholding agent. We have purchased equity interests of certain entities from individual sellers. There is apossibility that if individual sellers fail to meet their income tax obligations, the tax authority may require us, as thewithholding agent, to pay the taxes for the sellers. Based on the information currently available, we are unable to make areasonable estimate of the related liability due to the uncertainty related to the outcome and amount of payment and relatingpenalty and interest. C.Research and development, patents and licenses, etc. Please refer to Item 4B “Information on the Company—Business Overview—Technology” and “—IntellectualProperty.” D.Trend information. Other than as described elsewhere in this annual report, we are not aware of any trends, uncertainties, demands,commitments or events that are reasonably likely to have a material adverse effect on our revenue, income from continuingoperations, profitability, liquidity or capital resources, or that would cause our reported financial information not necessarily tobe indicative of future operation results or financial condition. E.Off-balance sheet arrangements. Save for the contingent withholding tax obligation disclosed above and commitments disclosed below, we do notcurrently have any outstanding off-balance sheet arrangements or commitments. We have no plans to enter into transactionsinvolving, or otherwise form relationships with, unconsolidated entities or financial partnerships established for the purpose offacilitating off-balance sheet arrangements or commitments. F.Tabular Disclosure of Contractual obligations. The following table sets forth our contractual obligations as of December 31, 2016: Payment Due by Period Total Less than 1 year 1–3 years 3–5 years More than 5 years (US$ in thousands) Operating Lease Commitments 21,160 1,819 3,203 3,056 13,082 Investment Commitments* 2,160 — — — 2,160 Total 23,320 1,819 3,203 3,056 15,242 *In May 2016, Our VIE completed its acquisition of 10% equity interest in Cold Chain Link Global (Shanghai) Logistic Co.,Ltd. The contractual investment amount is RMB30.0 million (US$2.9 million). As of December 31, 2016, Our VIE have paidRMB5.0 million (US$0.7 million). The remaining payment obligation is due no later than March 9, 2045. Item 6.Directors, Senior Management and Employees A.Directors and senior management. The following table sets forth certain information relating to our directors and executive officers as of the date of thisannual report. Directors and Executive Officers Age Position/TitleXiaoxia Zhu 46 Co-Chairperson of the Board of Directors, Chief Executive OfficerMaodong Xu 48 Co-Chairperson of the Board of DirectorsJianguang Wu 42 Director Huimin Wang 60 DirectorFeng Pan 38 DirectorLiyun Cao 46 DirectorTianruo (Robert) Pu 48 Independent DirectorTony C. Luh 52 Independent DirectorMin Zhou 52 Independent DirectorGang Yu 57 Independent DirectorFrank Zhigang Zhao 52 Chief Financial Officer 69 Ms. Xiaoxia Zhu has served as the co-chairperson of our board of directors since June 2015. She was our co-chiefexecutive officer from June 2015 to September 2015, and has served as our chief executive officer since then. Ms. Zhu has over21 years of experiences on Chinese hotels and restaurant management and the internet startups. In 2013, Ms. Zhu, Ms. HuiminWang and over 40 leading catering and hotel brands across China, jointly founded JMU. Ms. Zhu is also the vice chairwoman ofChina Hotel Association. From 1998 to current, Ms. Zhu founded and served as chief executive officer and chairwoman ofZhejiang Sunward Fishery Restaurant Group Co., Ltd. where she successfully expanded its business operations across multipleregions and brands to become what is now among China’s top 100 catering enterprises. Mr. Maodong Xu has served as the co-chairperson of our board of directors since June 2015 and the chairman of ourboard of directors from December 2010 to June 2015. Mr. Xu also served as our chief executive officer from December 2010 toJune 2015. Mr. Xu is the founder of Welink Information Technology Co., Ltd., a leading wireless advertising service company inChina. Between 2006 and 2008, Mr. Xu served as a senior vice president of Focus Media Limited after Focus Media acquiredDotad Media Limited, a China-based wireless advertising service provider founded by Mr. Xu in 2005. Mr. Xu was also thefounder and CEO of Qilu Supermarket, one of the largest chain supermarkets in Shandong province in late 1990s. Mr. Xureceived a bachelor’s degree from Wuhan University of Technology in 1990. Mr. Jianguang Wu has been our director since August 2011. Mr. Wu also served as our co-chief executive officer fromJune 2015 to September 2015, and executive president from November 2013 to June 2015. Before that, Mr. Wu was our chieftechnology officer from September 2011 to November 2013. Between 2008 and 2011, he served as the Executive Vice Presidentof Welink Information Technology Co., Ltd. Between 2007 and 2008, Mr. Wu served as the Executive Vice President of FocusMedia Limited. In 2005, Mr. Wu founded Beijing Mingzhi Unlimited Information Technology Co., Ltd., and served as the ChiefTechnology Officer until 2007. In 2004, Mr. Wu founded Beijing eTone Infotech Co., Ltd., and served as the Chief TechnologyOfficer until 2005. In addition to his current role in our company, Mr. Wu has been the chairman of the board of director ofBeijing Yunzong Internet Information Technology Limited since September 2015. Mr. Wu received a bachelor’s degree fromBeijing Union University School of Information Engineering in 2000. Ms. Huimin Wang has served as our director since June 2015. Ms. Wang is a cofounder of JMU HK, and she is also thefounder of “Xiao Nan Guo” or the “Shanghai Min” brand. Besides her directorship in our Company, at present, Ms. Wang is alsothe chairperson of Xiao Nan Guo Holdings Limited and chairperson of the board of directors of Xiao Nan Guo RestaurantsHoldings Limited, a company listed on the Stock Exchange of Hong Kong (code: 3666.HK). Ms. Huimin Wang is also the ViceChairman of China Cuisine Association, China Hotel Association and World Association of Chinese Cuisine. Mr. Feng Pan has served as our director and chief strategic officer since June 2015. Mr. Pan has worked in the field ofsupply chain management, the internet, and strategy consulting over the past 14 years. Mr. Pan joined JMU as executive vicepresident in 2013, and he participated in the design of JMU’s business model and its strategic investment. From 2005 to 2013,he served as the president of Influence Education Training Group and Influence Education Technology Company where heprovided strategic planning for various leading corporations and several public companies. Mr. Pan worked at Midea Groupfrom 2003 to 2005 and Hisense Kelon Group from 2001 to 2003. Ms. Liyun Cao has served as our director since June 2015. Ms. Cao has served as vice president of JMU HK andpresident of JMU HK’s Supply Unit since 2014, and was responsible for the operation and management of its B2B business.From 2001 to 2014, Ms. Cao worked at Zhejiang Sunward Fishery Restaurant Group Co., Ltd. in various roles includingOperations Manager of the Jiangsu and Shanghai Districts. In 2012, she was promoted and has served as a director and vicepresident of Zhejiang Sunward Fishery Restaurant Group Co., Ltd. for two years. Mr. Tianruo (Robert) Pu has served as our independent director since April 2015. Mr. Pu has also served as the chieffinancial officer of Zhaopin Limited, a NYSE listed company, since January 2016 and a director of Renren Inc., a NYSE listedcompany since December 2016. Previously, Mr. Pu served as a director of UTStarcom Holdings Corporation, a NASDAQ listedcompany, from November 2011 to August 2014 and its Chief Financial Officer from October 2012 to August 2014. Mr. Puserved as the Chief Financial Officer of China Nuokang Biopharmaceutical Inc., a NASDAQ listed company, from September2008 to June 2012. Prior to Nuokang Biopharmaceutical Inc., Mr. Pu was Chief Financial Officer of Global Data Solutions, aChinese information technology services company, from June 2006 to August 2008. Prior to Global Data Solutions, Mr. Pu hadgained various accounting and finance experiences in both China and the United States. Mr. Pu received an MBA degree fromNorthwestern University’s Kellogg School of Management, a Master of Science degree in accounting from the University ofIllinois and a Bachelor of Arts degree in English from China Foreign Affairs College. 70 Mr. Tony C. Luh has served as our independent director since April 2015. At present, Tony is a venture partner for DFJDragonFund and Yifang Ventures. Mr. Luh was an independent board director for Pansoft Inc. between 2008 and 2012. Mr. Luhserved as a General Partner and Greater China President for the Westly Group between 2011 and 2014. Before joining the WestlyGroup, Mr. Luh was a Founding Partner and Managing Director at DFJ DragonFund from 2006 to 2011. Mr. Luh is also one ofthe Founder and Managing Director at DragonVenture, which he co-founded in 1999. Before DragonVenture, Mr. Luh was asenior executive at InfoWave Communications from 1997 to 1999. Mr. Luh has over 20 years of experience in capital markets,sales, strategic alliances and business development and has accumulated public investment expertise in sectors ranging frominformation technology to high volume manufacturing in Asia. Mr. Min Zhou has served as our independent director since April 2015. At present, Mr. Zhou is the executive directorand executive president of Beijing Enterprises Water Group Limited serving since 2013. Between 2008 and 2012, Mr. Zhouserved as an executive director and vice president of Beijing Enterprises Water Group Limited. Mr. Zhou served as the directorand chief financial officer of Beijing Zhongkecheng Environment Protection Group Limited from 2004 to 2008. Previously, Mr.Zhou served as a director and chief financial officer of Sichuan Zhongkecheng Environment Protection Stock Co., Ltd. from2001 to 2004. Mr. Zhou served as the Chairman of Beijing Jingsheng Investment Co., Ltd. from 1989 to 2001. Prior to that, Mr.Zhou worked at Industrial and Commercial Bank of China—Zhejiang Yongkang Branch from 1985 to 1989 and worked at thePeople’s Bank of China—Zhejiang Yongkang Branch from 1980 to 1985. Mr. Zhou received an EMBA degree from TsinghuaUniversity. Dr. Gang Yu has served as our director since October 2016. Dr. Yu is the co-founder and executive chairman of NewPeak Group, and has served as the co-chairman of Zall Group Limited, a company listed on the Hong Kong Stock Exchange,since August 2015. During August 2008 to July 2015 prior to founding New Peak Group, he was the co-founder and chairman ofYihaodian, a leading ecommerce company in China. Prior to this role, Dr. Yu served as vice president, worldwide procurement atDell Inc. between September 2006 and August 2007 and vice president, worldwide supply chain at Amazon.com between July2004 and August 2006. Dr. Yu received Bachelor of Science degree from Wuhan University, Master of Science degree fromCornell University and Ph. D. from the Wharton School of the University of Pennsylvania. Mr. Frank Zhigang Zhao has served as our chief financial officer since June 2014. Mr. Zhao has over two decades ofexperience in financial and accounting management with auditing firms and public companies. Prior to joining us, Mr. Zhao wasthe chief financial officer of Borqs International Limited, from 2012 to 2014. Mr. Zhao was the chief financial officer of SimcerePharmaceutical Group, from 2006 to 2011. From 2005 to 2006, Mr. Zhao worked as the chief financial officer of Sun NewMedia Inc. From 2003 to 2005, Mr. Zhao worked at FARO Technologies, Inc. as a financial controller. Mr. Zhao received hisbachelor’s degree in economics from Peking University and MBA degree from University of Hartford. B.Compensation. Compensation of Directors and Executive Officers In 2016, we paid an aggregate of approximately RMB2.56 million (US$0.39 million) in cash as salaries and fees to oursenior executives, officers and directors named in this annual report. Other than salaries, fees and share incentives, we do nototherwise provide pension, retirement or similar benefits to our officers and directors. Share Incentive Plan We adopted our share incentive plan in 2011 and amended it in 2015 to attract and retain the best available personnel,provide additional incentives to our employees, directors and consultants, and promote the success of our business. Theamended and restated 2011 share incentive plan provides for the grant of options, restricted shares and other share-based awards,collectively referred to as “awards.” Our board of directors has authorized the issuance of ordinary shares of up to 15% of theissued and outstanding share capital of our company from time to time. Plan Administration. Our compensation committee will administer the amended and restated 2011 share incentive plan.The committee determines the participants to receive awards, the type and number of awards to be granted, and the terms andconditions of each award grant. 71 Award Agreements. Awards granted under our amended and restated 2011 share incentive plan are evidenced by anaward agreement that sets forth the terms, conditions and limitations for each grant, which may include the term of the award, theprovisions applicable in the event that the grantee’s employment or service terminates, and our authority to unilaterally orbilaterally amend, modify, suspend, cancel or rescind the award. Unless specifically approved by our board of directors, thepurchase price per share of an option shall not be less than 100% of the fair market value of the shares on the date of grant. Transfer Restrictions. The right of a grantee in an award granted under our amended and restated 2011 share incentiveplan may not be transferred in any manner by the grantee other than by will or the laws of descent and, with limited exceptions,may be exercised during the lifetime of the grantee only by the grantee. Option Exercise. The term of options granted under the amended and restated 2011 share incentive plan may notexceed ten years from the date of grant. The consideration to be paid for our ordinary shares upon exercise of an option orpurchase of ordinary shares underlying the option may include cash, check or other cash-equivalent, ordinary shares,consideration received by us in a cashless exercise, or any combination of the foregoing methods of payment. Acceleration upon a Change of Control. If a change of control of our company occurs, (i) the compensation committeemay determine that any outstanding unexercisable, unvested or lapsable awards shall automatically be deemed exercisable,vested and not subject to lapse immediately prior to the event triggering the change of control and (ii) the compensationcommittee may cancel such awards for fair value, provide for the issuance of substitute awards or provide that for a period of atleast 15 days prior to the event triggering the change of control, such options shall be exercisable and that upon the occurrenceof the change of control, such options shall terminate and be of no further force and effect. Termination and Amendment. Unless terminated earlier, our share incentive plan will expire on February 1, 2021. Ourboard of directors has the authority to amend or terminate our share incentive plan subject to shareholder approval to the extentnecessary to comply with applicable laws. Shareholders’ approval is required for any amendment to the amended and restated2011 share incentive plan that increases the number of ordinary shares available under the amended and restated 2011 shareincentive plan or changes the maximum number of shares for which awards may be granted to any participant. Additionally, aparticipant’s consent is required to diminish any of the rights of the participant under any award previously granted to suchparticipant. The following table summarizes, as of March 31, 2017, the outstanding options granted to our executive officers,directors, and other individuals as a group under our amended and restated 2011 share incentive plan. Name Common sharesunderlying optionsawarded/RestrictedShare Units Exercise price(US$/share) Date of grant Date of expirationFeng Pan * 0.2 2016/7/1 2016/7/1 *(1) — 2016/7/1 2016/7/1Liyun Cao * 0.2 2016/7/1 2016/7/1 *(1) — 2016/7/1 2016/7/1Other Individuals as aGroup 54,571,332 from 0 to 0.2 from 2011/2/1 to 2016/7/1 from 2017/9/1 to 2016/7/1 *(1) — 2016/7/1 2016/7/1Total 71,468,032 *Less than one percent of our total outstanding share capital. (1)restricted share units C.Board Practices. Duties of Directors Under Cayman Islands law, our directors owe certain fiduciary duties to our company, including duties of loyalty, toact honestly, and to act in what they consider in good faith to be in our best interests. Our directors also have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling theirduty of care to us, our directors must ensure compliance with our third amended and restated memorandum and articles ofassociation. We have the right to seek damages if a duty owed by our directors is breached. 72 The powers of our board of directors include, among others: ·convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings; ·issuing authorized but unissued shares; ·declaring dividends and distributions; ·exercising the borrowing powers of our company and mortgaging the property of our company; ·approving the transfer of shares of our company, including the registering of such shares; and ·exercising any other powers conferred by the shareholders’ meetings or under our third amended and restatedmemorandum and articles of association. Terms of Directors and Executive Officers We have ten directors on our board of directors, four of whom are independent directors. Any director on our boardmay be removed by way of an ordinary resolution of shareholders. Any vacancies on our board of directors or additions to theexisting board of directors can be filled by the affirmative vote of a majority of the remaining directors. The shareholders mayalso by ordinary resolution elect any person to be a director either to fill a casual vacancy or as an addition to the existing boardof directors. The directors are divided into three different classes, namely Class I Directors, Class II Directors and Class IIIDirectors. Any director appointed to fill a casual vacancy shall hold office for the remaining term of the director in whose placehe is appointed and shall be eligible for re-election at the expiry of the said term. Any director appointed as an additional to theexisting board of directors shall be designated a class in accordance with the third amended and restated articles of association,shall hold office until the expiry of the term of the class for which said director is designated and shall then be eligible for re-election. At the first annual general meeting after the adoption of the third amended and restated articles of association, all ClassII Directors shall retire from office and be eligible for re-election. At the second annual general meeting after the adoption of thethird amended and restated articles of association, all Class III Directors shall retire from office and be eligible for re-election. Atthe third annual general meeting after the adoption of the third amended and restated articles of association, all Class I Directorsshall retire from office and be eligible for re-election. Currently Class I includes Mr. Maodong Xu, Mr. Tianruo (Robert) Pu andMs. Xiaoxia Zhu; Class II includes Mr. Jianguang Wu, Mr, Feng Pan and Mr. Gang Yu; and Class III includes Mr. Tony C. Luh,Mr. Min Zhou, Ms. Huimin Wang and Ms. Liyun Cao. At each subsequent annual general meeting after the third annual general meeting after the adoption of the thirdamended and restated articles of association, one-third of the directors for the time being (or, if their number is not a multiple ofthree (3), the number nearest to but not greater than one third) shall retire from office by rotation. A retiring director shall beeligible for re-election. The directors to retire by rotation shall include (so far as necessary to ascertain the number of directors toretire by rotation) any director who wishes to retire and not to offer himself for re-election. Any further directors so to retire shallbe those of the other directors subject to retirement by rotation who have been longest in office since their last re-election orappointment and so that as between persons who became or were last re-elected directors on the same day those to retire shall(unless they otherwise agree among themselves) be determined by lot. For the avoidance of doubt, every director shall be subject to retirement in accordance with the third amended andrestated articles of association at least once every three years. If the number of directors is changed, any increase or decrease shall be apportioned among the classes of directors so asto maintain the size of the three classes as nearly equal as possible, and any director added to a class as a result of an increase inthe board size shall hold office for a term that shall coincide with the remaining term of that class. 73 Grounds for Vacating a Director The office of a director shall be vacated if the director: ·resigns his office by notice in writing delivered to us or tendered at a meeting of the board of directors; ·becomes of unsound mind or dies; ·without special leave of absence from the board of directors, is absent from meetings of the board of directors forsix consecutive months and the board of directors resolves that his office be vacated; ·becomes bankrupt or has a receiving order made against him or suspends payment or compounds with hiscreditors; ·is prohibited by law from being a director; or ·ceases to be a director by virtue of any provisions of Cayman Islands law or is removed from office pursuant to thethird amended and restated articles of association. All of our executive officers are appointed by and serve at the discretion of our board of directors. Our executiveofficers are elected by and may be removed by a majority vote of our board of directors. Board Committees Our board of directors has established an audit committee and a compensation committee. Audit Committee Our audit committee consists of Tianruo (Robert) Pu, Tony C. Luh and Min Zhou. We have determined that all themembers of our audit committee satisfy the “independence” requirements of Rule 10A-3 under the Exchange Act and NasdaqMarketplace Rule 5605(c)(2)(A) and that Tianruo (Robert) Pu is an audit committee financial expert as defined in theinstructions to Item 16A of the Form 20-F. Tianruo (Robert) Pu serves as the chairperson of the audit committee. The audit committee oversees our accounting and financial reporting processes and the audits of our consolidatedfinancial statements. Our audit committee is responsible for, among other things: ·selecting the independent auditor; ·pre-approving auditing and non-auditing services permitted to be performed by the independent auditor; ·annually reviewing the independent auditor’s report describing the auditing firm’s internal quality controlprocedures, any material issues raised by the most recent internal quality control review, or peer review, of theindependent auditors and all relationships between the independent auditor and our company; ·setting clear hiring policies for employees and former employees of the independent auditors; ·reviewing with the independent auditor any audit problems or difficulties and management’s response; ·reviewing and approving all related party transactions on an ongoing basis; ·reviewing and discussing the annual audited consolidated financial statements with management and theindependent auditor; 74 ·reviewing and discussing with management and the independent auditors major issues regarding accountingprinciples and financial statement presentations; ·reviewing reports prepared by management or the independent auditors relating to significant financial reportingissues and judgments; ·discussing earnings press releases with management, as well as financial information and earnings guidanceprovided to analysts and rating agencies; ·reviewing with management and the independent auditors the effect of regulatory and accounting initiatives, aswell as off-balance sheet structures, on our consolidated financial statements; ·discussing policies with respect to risk assessment and risk management with management, internal auditors andthe independent auditor; ·timely reviewing reports from the independent auditor regarding all critical accounting policies and practices to beused by our company, all alternative treatments of financial information within U.S. GAAP that have beendiscussed with management and all other material written communications between the independent auditor andmanagement; ·establishing procedures for the receipt, retention and treatment of complaints received from our employeesregarding accounting, internal accounting controls or auditing matters and the confidential, anonymoussubmission by our employees of concerns regarding questionable accounting or auditing matters; ·annually reviewing and reassessing the adequacy of our audit committee charter; ·such other matters that are specifically delegated to our audit committee by our board of directors from time totime; ·meeting separately, periodically, with management, internal auditors and the independent auditor; and ·reporting regularly to the full board of directors. Compensation Committee Our compensation committee consists of Min Zhou, Tianruo (Robert) Pu and Tony C. Luh. We have determined that allthe members of our compensation committee satisfy the “independence” requirements of Rule 5605(d) of Nasdaq Stock MarketMarketplace Rules. Min Zhou serves as the chairperson of the compensation committee. Our compensation committee is responsible for, among other things: ·reviewing and approving our overall compensation policies; ·reviewing and approving corporate goals and objectives relevant to the compensation of our Chief ExecutiveOfficer, evaluating our Chief Executive Officer’s performance in light of those goals and objectives, reporting theresults of such evaluation to the board of directors, and determining our Chief Executive Officer’s compensationlevel based on this evaluation; ·determining the compensation level of our other executive officers; ·making recommendations to the board of directors with respect to our incentive-compensation plan and equity-based compensation plans; ·administering our equity-based compensation plans in accordance with the terms thereof; and ·such other matters that are specifically delegated to the compensation committee by our board of directors from ·time to time. 75 Corporate Governance Our board of directors has adopted a code of business conduct and ethics, which is applicable to all of our directors,officers and employees. We have made our code of business conduct and ethics publicly available on our website. In addition, our board of directors has adopted a set of corporate governance guidelines. The guidelines reflect certainguiding principles with respect to our board’s structure, procedures and committees. The guidelines are not intended to changeor interpret any law, or our third amended and restated memorandum and articles of association. Remuneration and Borrowing The directors may determine remuneration to be paid to the directors. The compensation committee will assist thedirectors in reviewing and approving the compensation structure for the directors. The directors may exercise all the powers ofthe company to borrow money and to mortgage or charge its undertaking, property and uncalled capital, and to issue debenturesor other securities whether outright or as security for any debt obligations of our company or of any third party. Qualification There is no requirement for our directors to own any shares in our company in order for them to qualify as a director. Employment Agreements We have entered into employment agreements with each of our executive officers. We may terminate an executiveofficer’s employment for cause, at any time, without notice or remuneration, for certain acts of the officer, including, but notlimited to, a conviction or plea of guilty to a felony, willful misconduct to our detriment or a failure to perform agreed duties.We may also terminate an executive officer’s employment under certain conditions, including, but not limited to, incapacity ordisability of the officer, by a one-month prior written notice. An executive officer may terminate his or her employment with usfor cause, at any time for certain reasons, or by a one-month prior written notice. Our executive officers have also agreed not to engage in any activities that compete with us, or to directly or indirectsolicit the services of our employees, during employment or for a period of two years after termination of employment. Eachexecutive officer has agreed to hold in strict confidence any confidential information or trade secrets of our company. Eachexecutive officer also agrees to comply with all material applicable laws and regulations related to his or her responsibilities atour company as well as all material corporate and business policies and procedures of our company. D.Employees. The number of our employees decreased significantly after we acquired our B2B business and disposed of our groupbuy and B2C businesses, and few of our employees as of December 31, 2014, were still working for our company as ofDecember 31, 2015. As of December 31, 2016, we had a total of 291 employees, consisting of 92 in sales, 66 in marketing, 35 in researchand development, and 98 staff members in administrative and management departments. We had a total of 285 employees as ofDecember 31, 2015 and 3,194 employees as of December 31, 2014. The remuneration package of our employees includes salary, sales commissions and employee share option programs.In accordance with applicable regulations in China, we participate in a number of social insurance schemes, namely, a pensioncontribution plan, a medical insurance plan, an unemployment insurance plan, a personal injury insurance plan, a maternityinsurance and a housing reserve fund for the benefit of all of our employees. We have not experienced any material labordisputes or disputes with the labor department of the PRC government since our inception. 76 E.Share Ownership. The following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3under the Exchange Act, of our ordinary shares as of March 31, 2017 (unless otherwise indicated) by: ·each of our directors and executive officers; and ·each person known to us to own beneficially more than 5% of our ordinary shares. Beneficial ownership is determined in accordance with the rules of the SEC and generally. includes voting power orinvestment power with respect to securities. The number of ordinary shares beneficially owned including ordinary shares suchperson has the right to acquire within 60 days after March 31, 2017. Such shares, however, are not deemed to be outstanding andbeneficially owned for the purpose of computing the percentage ownership of any other shareholder. Percentage of ordinaryshares is based on 1,475,645,946, the total number of ordinary shares outstanding as of March 31, 2017 (excluding 562,724ordinary shares in the form of ADSs that are reserved for issuance upon the exercise of outstanding options) Ordinary Shares Beneficially Owned Number Percentage (%) Directors and Executive Officers: Maodong Xu(1) 322,342,368 21.8%Xiaoxia Zhu(2) 245,485,086 16.6%Jianguang Wu * * Huimin Wang(3) 291,015,012 19.7%Feng Pan(4) 111,213,418 7.5%Liyun Cao — — Tianruo (Robert) Pu(5) — — Tony C. Luh(6) — — Min Zhou(7) — — Gang Yu(8) — — Frank Zhigang Zhao * * Directors and executive officers as a group 980,428,424 66.4%Principal Shareholders: New Field Worldwide Limited(9) 294,410,503 20.0%Zhejiang Sunward Fishery Restaurant Group Share Co., Ltd.(10) 158,219,624 10.7%Extensive Power Limited(11) 149,100,132 10.1%Moonlight Vista Limited(12) 141,914,880 9.6%Shanghai Zhongju Investment Management Center (limited Partnership)(13) 111,213,418 7.5%Markland (Hong Kong) Investment Limited(14) 87,265,462 5.9%CDH Barley Limited(15) 78,362,511 5.3% *Less than 1% of our total outstanding shares. **The address of our directors (except Mr. Tianruo (Robert) Pu, Mr. Tony C. Luh, Mr. Min Zhou and Mr. Guang Yu) andexecutive officers is North Guoquan Road 1688 Long, No. 75, Building A8, 6F, Yangpu District, Shanghai 200438,People’s Republic of China. (1)representing (i) 294,410,503 ordinary shares owned by New Field Worldwide Limited, a BVI company wholly owned byMaodong Xu, the registered address of which is Trinity Chambers, P.O. Box 4301, Road Town, Tortola, British VirginIslands, (ii) 931,865 ordinary shares owned by Link Crossing Limited, a BVI company wholly owned by Maodong Xu, theregistered address of which is Trinity Chambers, P.O. Box 4301, Road Town, Tortola, British Virgin Islands, and (iii)27,000,000 ordinary shares owned by Estate Spring Limited, a Cayman Islands company controlled by Maodong Xu, theregistered address of which is Floor 4, Willow house, Cricket Square, P.O. Box 2804, Grand Cayman KY1-1112, CaymanIslands. (2)representing (i) 158,219,624 ordinary shares owned by Zhejiang Sunward Fishery Restaurant Group Share Co., Ltd., a PRCcompany controlled by Xiaoxia Zhu, the principal business address of which is No. 236, Caihong South Road, Jiangdong,Ningbo, People’s Republic of China, and (ii) 87,265,462 ordinary shares owned by Markland (Hong Kong) InvestmentLimited, a Hong Kong company wholly owned by Xiaoxia Zhu, the principal business address of which is Flat B4, 6/F.,Block B, Hankow Centre, 4A Ashley Road, Tsim Sha Tsui, Kowloon, Hong Kong. (3)representing (i) 149,100,132 ordinary shares owned by Extensive Power Limited, a Hong Kong company controlled byHuimin Wang, the principal business address of which is Suites 3201-5, Tower One, Times Square, 1 Matheson Street,Causeway Bay, Hong Kong, and (ii) 141,914,880 ordinary shares owned by Moonlight Vista Limited, a BVI companycontrolled by Huimin Wang, the principal business address of which is Suites 3201-5, Tower One, Times Square, 1Matheson Street, Causeway Bay, Hong Kong. (4)representing 111,213,418 ordinary shares owned by Shanghai Zhong Ju Investment Management Center, a PRC limitedliability partnership, whose general partner has irrevocably appointed Feng Pan to act on behalf of the general partner forall matters relating to Shanghai Zhong Ju Investment Management Center and has irrevocably waived the right to replaceFeng Pan. The principal business address of Shanghai Zhong Ju Investment Management Center is Room 304-22, 3/Fl,Building 2, No. 38 Debao Road, China (Shanghai) Pilot Free Trade Zone, People’s Republic of China. 77 (5)The business address of Mr. Pu is 5th Floor Shoukai Plaza, 10 Fu Rong Street, Wang Jing, Beijing, People’s Republic ofChina. (6)The business address of Mr. Luh is c/o Dragon Venture, Inc., 55 East 3rd Avenue, San Mateo, CA 94401. (7)The business address of Mr. Zhou is c/o Beijing Enterprises Water Group Limited. Tower 3 Poly International Plaza, Zone 7Wangjing East Park, Chaoyang District, Beijing, People’s Republic of China. (8)The business address of Mr. Yu is Building 10, No. 115 Lane 572, Bibo Road, Pudong District, Shanghai 201203, People’sRepublic of China. (9)representing 294,410,503 ordinary shares owned by New Field Worldwide Limited, a BVI company wholly owned byMaodong Xu, the registered address of which is Trinity Chambers, P.O. Box 4301, Road Town, Tortola, British VirginIslands (10)representing 158,219,624 ordinary shares owned by Zhejiang Sunward Fishery Restaurant Group Share Co., Ltd., a PRCcompany controlled by Xiaoxia Zhu, the principal business address of which is No. 236, Caihong South Road, Jiangdong,Ningbo, People’s Republic of China. (11)representing 149,100,132 ordinary shares owned by Extensive Power Limited, a Hong Kong company controlled by HuiminWang, the principal business address of which is Suites 3201-5, Tower One, Times Square, 1 Matheson Street, CausewayBay, Hong Kong, (12)representing 141,914,880 ordinary shares owned by Moonlight Vista Limited, a BVI company controlled by Huimin Wang,the principal business address of which is Suites 3201-5, Tower One, Times Square, 1 Matheson Street, Causeway Bay,Hong Kong. (13)representing 111,213,418 ordinary shares owned by Shanghai Zhong Ju Investment Management Center, a PRC limitedliability partnership. The principal business address of Shanghai Zhong Ju Investment Management Center is Room 304-22, 3/Fl, Building 2, No. 38 Debao Road, China (Shanghai) Pilot Free Trade Zone, People’s Republic of China. (14)representing 87,265,462 ordinary shares owned by Markland (Hong Kong) Investment Limited, a Hong Kong companywholly owned by Xiaoxia Zhu, the principal business address of which is Flat B4, 6/F., Block B, Hankow Centre, 4A AshleyRoad, Tsim Sha Tsui, Kowloon, Hong Kong. (15)representing 78,362,511 ordinary shares owned by CDH Barley Limited, a British Virgin Islands company 100%beneficially owned by CDH Venture Partners II, L.P. CDH Venture GP II Company Limited, a Cayman Islands exemptedlimited liability company, is the general partner of CDH Venture Partners II, L.P. and has the power to direct CDH VenturePartners II, L.P. as to the voting and disposition of shares directly and indirectly held by CDH Venture Partners II, L.P. Theregistered address of CDH Barley Limited is Kingston Chambers, P.O. Box 173, Road Town, British Virgin Islands. Suchinformation is solely based the Schedule 13G/A filed by CDH Barley Limited, CDH Venture Partners II, L.P. and CDHVenture GP II Company Limited with Securities and Exchange Commission on February 6, 2017. As of March 31, 2017, we had 1,476,208,670 ordinary shares issued and outstanding. To our knowledge, we had onlyone record shareholder in the United States. Citibank, N.A., depositary of our ADS program, held 254,080,746 ordinary shares asof that date, representing 17.2% of our outstanding ordinary shares. The number of beneficial owners of our ADSs in the UnitedStates is likely to be much larger than the number of record holders of our ordinary shares in the United States. None of our existing shareholders has voting rights that will differ from the voting rights of other shareholders. We arenot aware of any arrangement that may, at a subsequent date, result in a change of control of our company. Item 7.Major Shareholders and Related Party Transactions A.Major Shareholders. Please refer to “Item 6. Directors, Senior Management and Employees—E. Directors, Senior Management and Employees—Share Ownership.” 78 B.Related Party Transactions. Contractual Arrangements with Our Consolidated Affiliated Entities and Their Shareholders Due to certain restrictions under PRC law on foreign ownership of businesses engaged in internet businesses, weconduct our operations in China principally through contractual arrangements between our wholly-owned PRC subsidiary,Shanghai Zhongming Supply Chain Management Co., Ltd., on the one hand and our consolidated affiliated entity in China,Shanghai Zhongmin Supply Chain Management Co., Ltd., and its subsidiaries and shareholders on the other. For a descriptionof these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure”. Agreements with our Directors and Officers Share Issuance to Mr. Maodong Xu We and Mr. Maodong Xu, the co-chairperson of our board, entered into a subscription agreement in June 2015 and anamendment to this agreement in September 2015. Pursuant to this subscription agreement, as amended, we issued 27,000,000ordinary shares to Estate Spring Limited, a Cayman Islands company beneficially owned by Mr. Xu, in September 2015 for atotal subscription price of US$15.0 million. Lock-up Agreement with Mr. Maodong Xu, Ms. Xiaoxia Zhu and Ms. Huimin Wang In connection with the share issuance to Mr. Maodong Xu in 2015 and the acquisition of JMU HK, we entered into alock-up agreement in June 2015 with each of Mr. Xu, Ms. Xiaoxia Zhu and Ms. Huimin Wang, pursuant to which each of Mr.Xu, Ms. Zhu and Ms. Wang agreed not to directly or indirectly dispose of the number of the ordinary shares beneficially ownedby them on June 8, 2015, the closing date of the acquisition of JMU, without the prior written consent of our board of directors.Additionally, Mr. Xu also agreed not to directly or indirectly dispose of the ordinary shares he acquired under the subscriptionagreement described above. The restrictions on one-third of the total ordinary shares under the lock-up agreement will beremoved on each anniversary of June 8, 2015. Registration Rights Agreement In connection with acquisition of JMU HK, we entered into a registration rights agreement with former shareholders ofJMU HK and entities beneficially owned by Mr. Maodong Xu, pursuant to which we agreed to provide these former shareholdersand Mr. Xu with certain registration rights in respect of our ordinary shares held by them. Upon receipt of a written request from the holders of 10% of the registrable securities then outstanding requesting useffect a registration under the Securities Act covering all of part of the shares held by them, we shall, as soon as is practicable,but in no event not later than ninety days after receipt of such written request, file with the SEC, and use our reasonable bestefforts to cause to be declared effective, a registration statement, or a shelf registration statement. However, that we shall not beobligated to effect any such registration if the aggregate price (net of any underwriters’ discounts or commissions) of the sale ofshares relating to such registration is less than $10,000,000. If, at any time, we file a registration statement with the SEC, holders of registration rights under this agreement will beentitled, subject to certain exceptions, to exercise “piggyback” registration rights requiring us to include in any such registrationthat number of shares held by them, subject to certain prescribed limitations provided in the registration rights agreement. We may, on a limited number of occasions, and in certain prescribed circumstances, delay the filing or effectiveness ofany registration statement required to be filed pursuant to the registration rights agreement. Related Party Loans and Other Payments In April 2016, Ms. Huimin Wang, our director, provided us an interest free loan of RMB40 million through Xiao NanGuo (Group) Co., Ltd., an entity controlled by her. We had repaid such loan in 2016. 79 In January, March and May 2017, Ms. Xiaoxia Zhu, our Chief Executive Officer and Co-Chairperson of the Board,provided us loans of RMB10 million (US$1.2 million), RMB 15 million (US$1.9 million) and RMB35 million (US$5.1 million),respectively. Chung So Si Fong Dessert Limited, Hong Kong Sunward Fishery Restaurant Management Co., Ltd., Nanjing JiangdongSunward Fishery Restaurant Co., Ltd., Nanjing Xinzijin Sunward Fishery Restaurant Co., Ltd., Ningbo Yinzhou SunwardLogistics Co., Ltd., Nanjing Yongji Sunward Fishery Restaurant Co., Ltd., Shanghai Congshao Dessert Co., Ltd., ShanghaiCongshao Restaurant Management Co., Ltd., Shanghai Putuo Sunward Restaurant Co., Ltd., Shenzhen Congshao RestaurantManagement Co., Ltd., Tianjin Congshao Restaurant Management Co., Ltd. and Zhejiang Zhonggangjumei Supply ChainManagement Co., Ltd., all of which are controlled by Ms. Xiaoxia Zhu, purchased products on our B2B platform. We recordedrevenues of US$1.7 million from these entities in 2016, and as of December 31, 2016 the total amount due from them wasUS$182 thousand. Xiao Nan Guo Holdings Limited, Shenzhen Xiao Nan Guo Restaurant Management Co., Ltd., Shanghai Xiao Nan GuoHai Zhi Yuan Restaurant Management Co., Ltd. and WM Ming Hotel, all of which are controlled by Ms. Huimin Wang,purchased products on our B2B platform. We recorded revenues of US$8.4 million from these entities in 2016, and as ofDecember 31, 2016 the total amount due from them was US$7 thousand. Shanghai MIN Hongshi Trading Co., Ltd., entity controlled by Ms. Huimin Wang, sold products to other customers viaour B2B platform. As of December 31, 2016, the amount due from the entity was US$24 thousand. Chung So Si Fong Dessert Limited, Nanjing Jiangdong Sunward Fishery Restaurant Co., Ltd., Nanjing XinzijinSunward Fishery Restaurant Co., Ltd., Nanjing Yongji Sunward Fishery Restaurant Co., Ltd., Shanghai Congshao Dessert Co.,Ltd., Shanghai Congshao Restaurant Management Co., Ltd., Shenzhen Congshao Restaurant Management Co., Ltd., TianjinCongshao Restaurant Management Co., Ltd., Wuhan Congshao Restaurant Management Co., Ltd. and Hong Kong SunwardFishery Restaurant Management Co., Ltd., all of which are controlled by Ms. Xiaoxia Zhu, purchased products from othersuppliers via our B2B platform. As of December 31, 2016, the amount due to them was US$802 thousand. Shanghai Xiao Nan Guo Hai Zhi Yuan Restaurant Management Co., Ltd. and WM Ming Hotel, all of which arecontrolled by Ms. Huimin Wang, purchased products from other suppliers via our B2B platform. As of December 31, 2016, theamount advance from them was US$909 thousand. Cold Chain Link Global (Shanghai) Logistic Co., Ltd., an entity under the significant influence of the Company,provided logistics services for our online direct sales. We recorded service fee charged by this entity of US$170 thousand in2016. We also rented offices from Xiao Nan Guo (Group) Co., Ltd., which is controlled by Ms. Huimin Wang. We recordedrental expenses of US$218 thousand to this entity in 2016 and the rental agreement expired in June 2016. Except for the loans borrowed from Ms. Xiaoxia Zhu, all the amounts due to or from related parties are unsecured, non-interest bearing and payable on demand. Employment Agreements See “Item 6. Directors, Senior Management and Employees—C. Board Practices—Employment Agreements”. Share Options See “Item 6. Directors, Senior Management and Employees—B. Compensation—Compensation of Directors andExecutive Officers—Share Incentive Plan”. C.Interests of experts and counsel. Not applicable. 80 Item 8.Financial Information A.Consolidated Statements and Other Financial Information. Please refer to Item 18 “Financial Statements” for our audited consolidated financial statements filed as part of thisannual report. Legal Proceedings We are currently not a party to any material legal or administrative proceedings and are not aware of any pending orthreatened material legal or administrative proceedings against us. We may from time to time become a party to various legal oradministrative proceedings arising in the ordinary course of our business. Dividend Policy Since our inception, we have not declared or paid any dividends on our ordinary shares. We have no present plan topay any dividends on our ordinary shares in the foreseeable future. We intend to retain most, if not all, of our available fundsand any future earnings to operate and expand our business. Any future determination to pay dividends will be made at the discretion of our board of directors subject to certainrestrictions under Cayman Islands law, namely that our company may only pay dividends out of profits or share premium, andprovided always that in no circumstances may a dividend be paid if this would result in our company being unable to pay itsdebts as they fall due in the ordinary course of business. In addition, our shareholders may declare a dividend at a generalmeeting of our company. Our board of directors’ decision to declare and pay dividends may be based on a number of factors,including our future operations and earnings, capital requirements and surplus, the amount of distributions, if any, received byus from our PRC subsidiary, our general financial condition, contractual restrictions and other factors that the board of directorsmay deem relevant. If we pay any dividends, we will pay our ADS holders to the same extent as holders of our ordinary shares,subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. Cash dividends on ourordinary shares, if any, will be paid in U.S. dollars. We are a holding company incorporated in the Cayman Islands. In order for us to distribute any dividends to ourshareholders and ADS holders, we will rely on dividends distributed by Our WFOE. Certain payments from our PRC subsidiaryto us are subject to PRC taxes, such as withholding income tax. In addition, regulations in China currently permit payment ofdividends of a PRC company only out of accumulated distributable after-tax profits as determined in accordance with its articlesof association and the accounting standards and regulations in China. Our PRC subsidiary is required to set aside at least 10% ofits after-tax profit based on PRC accounting standards every year to a statutory common reserve fund until the aggregate amountof such reserve fund reaches 50% of the registered capital of such subsidiary. Such statutory reserves are not distributable asloans, advances or cash dividends. Our PRC subsidiary may set aside a certain amount of its after-tax profits to other funds at itsdiscretion. These reserve funds can only be used for specific purposes and are not transferable to the company’s parent in theform of loans, advances or dividends. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structureand Dependence on our Contractual Arrangements with our Affiliates—We rely principally on dividends and other distributionson equity paid by our PRC and Hong Kong subsidiaries to fund any cash and financing requirements we might have. Anylimitation on the ability of our PRC and Hong Kong subsidiaries to pay dividends to us could have an adverse effect on ourability to conduct our business”. B.Significant Changes. Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date ofour audited consolidated financial statements included in this annual report. Item 9.The Offer and Listing. A.Offer and listing details. Our ADSs, each representing 18 of our ordinary shares, are listed on the NASDAQ Global Market under the symbol“JMU”. Trading in our ADSs commenced on April 8, 2015. 81 The following table provides the high and low trading prices for our ADSs on the Nasdaq Global Market for the periodindicated. Price per ADS (US$) High Low US$ US$ Annual Highs and Lows 2015 (from April 8, 2015) 13.00 4.11 2016 6.20 2.90 Quarterly Highs and Lows Second Quarter 2015 (from April 8, 2015) 13.00 8.00 Third Quarter 2015 9.17 4.11 Fourth Quarter 2015 7.90 4.76 First Quarter 2016 6.20 3.83 Second Quarter 2016 4.58 3.11 Third Quarter 2016 6.00 3.02 Fourth Quarter 2016 4.00 2.90 First Quarter 2017 3.83 2.64 Monthly Highs and Lows December 2016 4.00 2.90 January 2017 3.83 2.87 February 2017 3.28 2.80 March 2017 3.25 2.64 April 2017 2.80 2.06 May 2017 (through May 19, 2017) 2.68 1.82 B.Plan of distribution. Not applicable. C.Markets. Our ADSs are listed on The NASDAQ Global Market under the symbol “JMU”. Each ADS represents 18 ordinary shares. D.Selling shareholders Not applicable. E.Dilution. Not applicable. F.Expenses of the issue. Not applicable. Item 10.Additional Information. A.Share capital. Not applicable. B.Memorandum and articles of association. We are a Cayman Islands exempted company with limited liability and our affairs are governed by our memorandumand articles of association, and the Companies Law (2016 Revision), as amended, of the Cayman Islands, which is referred to asthe Companies Law below. The following are summaries of material provisions of our third amended and restated memorandumand articles of association and the Companies Law insofar as they relate to the material terms of our ordinary shares. 82 Registered Office and Objects Our registered office in the Cayman Islands is at Maples Corporate Services Limited, P.O. Box 309, Ugland House,Grand Cayman KY1-1104, Cayman Islands. The objects for which our company is established are unrestricted and we have fullpower and authority to carry out any object not prohibited by the Companies Law, as amended from time to time, or any otherlaw of the Cayman Islands. Board of Directors A director is not required to hold any shares in our company by way of qualification. A director may vote with respectto any contract, proposed contract or arrangement in which he is materially interested. A director may exercise all the powers ofour company to borrow money, mortgage its undertaking, property and uncalled capital, and issue debentures or other securitieswhenever money is borrowed or as security for any obligation of our company or of any third party. The directors may receivesuch remuneration as our board may from time to time determine. There is no age limit requirement with respect to the retirementor non-retirement of a director. See also “Item 6. Directors, Senior Management and Employees — C. Board Practices.” Ordinary Shares General All of our outstanding ordinary shares are fully paid and non-assessable. Our ordinary shares are issued in registeredform and are issued when registered in our register of members. Our shareholders who are non-residents of the Cayman Islandsmay freely hold and vote their ordinary shares. Our third amended and restated memorandum and articles of association do notpermit us to issue bearer shares. Dividends The holders of our ordinary shares are entitled to such dividends as may be declared by our shareholders or board ofdirectors subject to the Companies Law and to the third amended and restated articles of association. Under Cayman Islands law,dividends may be declared and paid only out of funds legally available therefor, namely out of either profit or our sharepremium account, and provided further that a dividend may not be paid if this would result in our company being unable to payits debts as they fall due in the ordinary course of business. Voting Rights Each ordinary share is entitled to one vote on all matters upon which the ordinary shares are entitled to vote. Voting atany meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by the chairman of suchmeeting or any one shareholder present in person or by proxy. An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of votesattached to the ordinary shares cast in a general meeting, while a special resolution requires the affirmative vote of at least two-thirds of votes cast attached to the ordinary shares in a meeting. A special resolution will be required for important matters suchas a change of name or making changes to our memorandum and articles of association. General Meetings of Shareholders Shareholders’ meetings may be convened by a majority of our board of directors or our chairman. Cayman Islands lawprovides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any rightto put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Ourthird amended and restated articles of association allow our shareholders holding shares representing in aggregate not less than30% of our voting share capital in issue, to requisition an extraordinary general meeting of our shareholders, in which case ourdirectors are obliged to call such meeting and to put the resolutions so requisitioned to a vote at such meeting; however, ourthird amended and restated articles of association do not provide our shareholders with any right to put any proposals beforeannual general meetings or extraordinary general meetings not called by such shareholders. Advance notice of at least ten cleardays is required for the convening of our annual general shareholders’ meeting and any other general meeting of our shareholders. A quorum required for a meeting of shareholders consists of at least two shareholders present or by proxy,representing not less than one-third in nominal value of the total issued voting shares in our company. 83 Transfer of Ordinary Shares Subject to the restrictions contained in our third amended and restated articles of association, as applicable, any of ourshareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form orany other form approved by our board of directors. Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is notfully paid up to a person of whom it does not approve, or any share issued under any share incentive scheme for employeesupon which a restriction on transfer imposed thereby still subsists. Our board of directors may also decline to register anytransfer of any ordinary share unless (a) the instrument of transfer is lodged with us or such other place at which the register ofmembers is kept in accordance with Cayman Islands law, accompanied by the certificate for the ordinary shares to which itrelates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make thetransfer; (b) the instrument of transfer is in respect of only one class of shares; (c) the instrument of transfer is properly stamped,if required; (d) the ordinary shares transferred are fully paid and free of any lien in favor of us; (e) a fee of such maximum sum asthe Nasdaq Global Market may determine to be payable or such lesser sum as the board may from time to time require is paid tous in respect thereof; and (f) the transfer is not to more than four joint holders. If our directors refuse to register a transfer they are required, within three months after the date on which the instrumentof transfer was lodged, to send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, after compliance with any notice requirement of the Nasdaq Global Market, besuspended and the register closed at such times and for such periods as our directors may from time to time determine; provided,however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year as ourdirectors may determine. Liquidation On a return of capital on winding up or otherwise (other than on redemption or purchase of ordinary shares), assetsavailable for distribution among the holders of ordinary shares will be distributed among the holders of the ordinary shares on apro rata basis. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will bedistributed so that the losses are borne by our shareholders proportionately. Calls on Ordinary Shares and Forfeiture of Ordinary Shares Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinaryshares in a notice served to such shareholders at least 14 days prior to the specified time of payment. The ordinary shares thathave been called upon and remain unpaid are subject to forfeiture. Share Repurchases We are empowered under our third amended and restated memorandum of association to purchase our shares subject tothe Companies Law and our third amended and restated articles of association. Our third amended and restated articles ofassociation provide that this power is exercisable by our board of directors in such manner, upon such terms and subject to suchconditions as it in its absolute discretion thinks fit subject to the Companies Law and, where applicable, the rules of the NasdaqGlobal Market and the applicable regulatory authority. Variations of Rights of Shares If at any time our share capital is divided into different classes of shares, all or any of the special rights attached to anyclass of shares may, subject to the provisions of the Companies Law, be varied with the sanction of a special resolution passed ata separate general meeting of the holders of the shares of that class. Consequently, the rights of any class of shares cannot bedetrimentally altered without a majority of two-thirds of the vote of all of the shares in that class. The rights conferred upon theholders of the shares of any class issued with preferred or other rights will not, unless otherwise expressly provided by the termsof issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu with suchexisting class of shares. 84 Inspection of Books and Records Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of ourlist of shareholders or our corporate records. However, our third amended and restated articles of association provide ourshareholders with the right to inspect our list of shareholders and to receive annual audited financial statements. Changes in Capital We may from time to time by ordinary resolution: (a) increase the share capital by such sum, to be divided into shares ofsuch classes and amount, as the resolution shall prescribe; (b) consolidate and divide all or any of our share capital into shares ofa larger amount than our existing shares; (c) sub-divide our existing shares, or any of them into shares of a smaller amount; or(d) cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any personand diminish the amount of our share capital by the amount of the shares so cancelled. We may by special resolution reduce ourshare capital or any capital redemption reserve in any manner permitted by law. Register of Members Under Cayman Islands law, we must keep a register of members and there should be entered therein: (a) the names andaddresses of the members, a statement of the shares held by each member, and of the amount paid or agreed to be considered aspaid, on the shares of each member; (b) the date on which the name of any person was entered on the register as a member; and(c) the date on which any person ceased to be a member. Under Cayman Islands law, the register of members of our company is prima facie evidence of the matters set outtherein (i.e. the register of members will raise a presumption of fact on the matters referred to above unless rebutted) and amember registered in the register of members should be deemed as a matter of Cayman Islands law to have legal title to theshares as set against its name in the register of members. Upon the closing of this offering, the register of members should beimmediately updated to record and give effect to the issue of shares by us to the Depositary (or its nominee) as the depositary.Once our register of members has been updated, the shareholders recorded in the register of members will be deemed to havelegal title to the shares set against their name. If the name of any person is incorrectly entered in or omitted from our register of members, or if there is any default orunnecessary delay in entering on the register the fact of any person having ceased to be a member of our company, the person ormember aggrieved (or any member of our company or our company itself) may apply to the Cayman Islands Grand Court for anorder that the register be rectified, and the Court may either refuse such application or it may, if satisfied of the justice of thecase, make an order for the rectification of the register. Differences in Corporate Law The Companies Law is derived, to a large extent, from the older Companies Acts of England but does not follow recentstatutory enactments in England. In addition, the Companies Law differs from laws applicable to United States corporations andtheir shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Lawapplicable to us and the laws applicable to companies incorporated in the United States. Mergers and Similar Arrangements The Companies Law permits mergers and consolidations between Cayman Islands companies and between CaymanIslands companies and non-Cayman Islands companies. For these purposes, (a) “merger” means the merging of two or moreconstituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the survivingcompany and (b) a “consolidation” means the combination of two or more constituent companies into a combined company andthe vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such amerger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation,which must then be authorized by (a) a special resolution of the shareholders of each constituent company, and (b) such otherauthorization, if any, as may be specified in such constituent company’s articles of association. 85 The written plan of merger or consolidation must be filed with the Registrar of Companies together with a declarationas to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company andan undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of eachconstituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette.Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will bedetermined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval isnot required for a merger or consolidation which is effected in compliance with these statutory procedures. In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, providedthat the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangementis to be made, and who must, in addition, represent three-fourths in value of each such class of shareholders or creditors, as thecase may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. Theconvening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands.While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, theGrand Court of the Cayman Islands can be expected to approve the arrangement if it determines that (a) the statutory provisionsas to the required majority vote have been met; (b) the shareholders have been fairly represented at the meeting in question andthe statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class; (c)the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of hisinterest; and (d) the arrangement is not one that would more properly be sanctioned under some other provision of theCompanies Law. If an arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable toappraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providingrights to receive payment in cash for the judicially determined value of the shares. When a takeover offer is made and accepted by holders of 90% of the shares affected within four months, the offerormay, within a two-month period commencing on the expiration of such four month period, require the holders of the remainingshares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands butthis is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith orcollusion. Shareholders’ Suits In principle, we will normally be the proper plaintiff and as a general rule a derivative action may not be brought by aminority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in theCayman Islands, there are exceptions to the foregoing principle, including when (a) a company acts or proposes to act illegallyor ultra vires; (b) the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simplemajority vote that has not been obtained; and (c) those who control the company are perpetrating a “fraud on the minority”. Indemnification of Directors and Executive Officers and Limitation of Liability Cayman Islands law does not limit the extent to which a company’s articles of association may provide forindemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts tobe contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.Our third amended and restated memorandum and articles of association permit indemnification of officers and directors forlosses, damages, costs and expenses incurred in their capacities as such unless such losses or damages arise from dishonesty orfraud which may attach to such directors or officers. This standard of conduct is generally the same as permitted under theDelaware General Corporation Law for a Delaware corporation. In addition, we intend to enter into indemnification agreementswith our directors and senior executive officers that will provide such persons with additional indemnification beyond thatprovided in our third amended and restated memorandum and articles of association. 86 Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers orpersons controlling us under the foregoing provisions, we have been informed that, in the opinion of the SEC, suchindemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. Anti-Takeover Provisions in the Memorandum and Articles of Association Some provisions of our third amended and restated memorandum and articles of association may discourage, delay orprevent a change in control of our company or management that shareholders may consider favorable, including provisions thatauthorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences,privileges and restrictions of such preference shares without any further vote or action by our shareholders. However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under ourmemorandum and articles of association, as amended and restated from time to time, for what they believe in good faith to be inthe best interests of our company. Directors’ Fiduciary Duties As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary withrespect to the company and therefore it is considered that he owes the following duties to the company—a duty to act bona fidein the best interests of the company, a duty not to make a profit based on his or her position as director (unless the companypermits him to do so) and a duty not to put himself in a position where the interests of the company conflict with his or herpersonal interest or his or her duty to a third party. A director of a Cayman Islands company owes to the company a duty to actwith skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greaterdegree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, English andCommonwealth courts have moved towards an objective standard with regard to the required skill and care and these authoritiesare likely to be followed in the Cayman Islands. In addition, directors of a Cayman Islands company must not place themselves in a position in which there is a conflictbetween their duty to the company and their personal interests. However, this obligation may be varied by the company’sarticles of association, which may permit a director to vote on a matter in which he has a personal interest provided that he hasdisclosed that nature of his interest to the board. Our third amended and restated memorandum and articles of associationprovides that a director with an interest (direct or indirect) in a contract or arrangement or proposed contract or arrangement withthe company must declare the nature of his interest at the meeting of the board of directors at which the question of entering intothe contract or arrangement is first considered, if he knows his interest then exists, or in any other case at the first meeting of theboard of directors after he is or has become so interested. A general notice may be given at a meeting of the board of directors to the effect that (i) the director is a member/officerof a specified company or firm and is to be regarded as interested in any contract or arrangement which may after the date of thenotice in writing be made with that company or firm; or (ii) he is to be regarded as interested in any contract or arrangementwhich may after the date of the notice in writing to the board of directors be made with a specified person who is connected withhim, will be deemed sufficient declaration of interest. Following the disclosure being made pursuant to our third amended andrestated memorandum and articles of association and subject to any separate requirement for Audit Committee approval underapplicable law or the listing rules of Nasdaq, and unless disqualified by the chairman of the relevant board meeting, a directormay vote in respect of any contract or arrangement in which such director is interested and may be counted in the quorum atsuch meeting. However, even if a director discloses his interest and is therefore permitted to vote, he must still comply with hisduty to act bona fide in the best interest of our company. In comparison, under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to thecorporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of carerequires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similarcircumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material informationreasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he or shereasonably believes to be in the best interests of the corporation. He or she must not use his or her corporate position forpersonal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporationand its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not sharedby the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may berebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by adirector, a director must prove the procedural fairness of the transaction, and that the transaction was of fair value to thecorporation. 87 Shareholder Proposals Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meetingof shareholders, provided it complies with the notice provisions in the governing documents. The Delaware General CorporationLaw does not provide shareholders an express right to put any proposal before the annual meeting of shareholders, but inkeeping with common law, Delaware corporations generally afford shareholders an opportunity to make proposals andnominations provided that they comply with the notice provisions in the certificate of incorporation or bylaws. A specialmeeting may be called by the board of directors or any other person authorized to do so in the governing documents, butshareholders may be precluded from calling special meetings. There are no statutory requirements under Cayman Islands law allowing our shareholders to requisition a shareholders’meeting. However, under our third amended and restated articles of association, on the requisition of shareholders representingnot less than 30% of the voting rights entitled to vote at general meetings, the board shall convene an extraordinary generalmeeting. As an exempted Cayman Islands company, we are not obliged by law to call shareholders’ annual general meetings.However, our third amended and restated articles of association require us to call such meetings every year. Cumulative Voting Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless thecorporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representationof minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which theshareholder is entitled on a single director, which increases the shareholder’s voting power with respect to electing such director.As permitted under Cayman Islands law, our third amended and restated articles of association do not provide for cumulativevoting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delawarecorporation. Removal of Directors Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed onlyfor cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporationprovides otherwise. Under our third amended and restated articles of association, directors may be removed by an ordinaryresolution of shareholders. Transactions with Interested Shareholders The Delaware General Corporation Law contains a business combination statute applicable to Delaware publiccorporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to itscertificate of incorporation or bylaws that is approved by its shareholders, it is prohibited from engaging in certain businesscombinations with an “interested shareholder” for three years following the date that such person becomes an interestedshareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target’soutstanding voting stock or who or which is an affiliate or associate of the corporation and owned 15% or more of thecorporation’s outstanding voting stock within the past three years. This has the effect of limiting the ability of a potentialacquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does notapply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board ofdirectors approves either the business combination or the transaction which resulted in the person becoming an interestedshareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisitiontransaction with the target’s board of directors. 88 Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protectionsafforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactionsbetween a company and its significant shareholders, it does provide that such transactions must be entered into bona fide in thebest interests of the company and for a proper corporate purpose and not with the effect of constituting a fraud on the minorityshareholders. Dissolution; Winding Up Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve,dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if thedissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares.Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement inconnection with dissolutions initiated by the board. Under Cayman Islands law, a company may be wound up by either an orderof the courts of the Cayman Islands or by a special resolution of its members or, if the company is unable to pay its debts as theyfall due, by an ordinary resolution of its members. The court has authority to order winding up in a number of specifiedcircumstances including where it is, in the opinion of the court, just and equitable to do so. Under the Companies Law of the Cayman Islands and our third amended and restated articles of association, ourcompany may be dissolved, liquidated or wound up by a special resolution of our shareholders. Variation of Rights of Shares Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approvalof a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under CaymanIslands law and our third amended and restated articles of association, if our share capital is divided into more than one class ofshares, we may vary the rights attached to any class only with the sanction of a special resolution passed at a separate meeting ofthe holders of the shares of that class. Amendment of Governing Documents Under the Delaware General Corporation Law, a corporation’s certificate of incorporation may be amended only ifadopted and declared advisable by the board of directors and approved by a majority of the outstanding shares entitled to vote,and the bylaws may be amended with the approval of a majority of the outstanding shares entitled to vote and may, if soprovided in the certificate of incorporation, also be amended by the board of directors. Under Cayman Islands law, our thirdamended and restated memorandum and articles of association may only be amended by a special resolution of ourshareholders. Rights of Non-Resident or Foreign Shareholders There are no limitations imposed by our third amended and restated memorandum and articles of association on therights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisionsin our third amended and restated memorandum and articles of association governing the ownership threshold above whichshareholder ownership must be disclosed. Directors’ Power to Issue Shares Subject to applicable law, our board of directors is empowered to issue or allot shares or grant options and warrantswith or without preferred, deferred, qualified or other special rights or restrictions. C.Material contracts. We have not entered into any material contracts other than in the ordinary course of business and other than thosedescribed in Item 4 “Information on the Company”, elsewhere in this annual report or below. 89 D.Exchange controls. Regulations on Foreign Exchange Foreign Exchange Regulation The principal regulations governing foreign currency exchange in China are the Foreign Exchange AdministrationRegulations. Under the PRC foreign exchange regulations, payments of current account items, such as profit distributions andtrade and service-related foreign exchange transactions, may be made in foreign currencies without prior approval from SAFE bycomplying with certain procedural requirements. By contrast, approval from or registration with appropriate governmentauthorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expensessuch as the repayment of foreign currency-denominated loans or foreign currency is to be remitted into China under the capitalaccount, such as a capital increase or foreign currency loans to our PRC subsidiary. In August 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of theAdministration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular142, regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital into RMB by restrictinghow the converted RMB may be used. In addition, SAFE promulgated Circular 45 on November 9, 2011 in order to clarify theapplication of SAFE Circular 142. Under SAFE Circular 142 and Circular 45, the RMB capital converted from foreign currencyregistered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by theapplicable government authority and cannot be used for equity investments within the PRC. In addition, SAFE strengthened itsoversight of the flow and use of the RMB capital converted from foreign currency registered capital of foreign-investedenterprises. The use of such RMB capital cannot be changed without SAFE’s approval, and such RMB capital cannot in any casebe used to repay RMB loans if the proceeds of such loans have not been used. Furthermore, SAFE promulgated Circular 59 inNovember 2010, which tightens the regulation over settlement of net proceeds from overseas offerings, such as our initial publicoffering, and requires, among other things, the authenticity of settlement of net proceeds from offshore offerings to be closelyexamined and the net proceeds to be settled in the manner described in the offering documents or otherwise approved by ourboard. Violations of these SAFE regulations could result in severe monetary or other penalties, including confiscation ofearnings derived from such violation activities, a fine of up to 30% of the RMB funds converted from the foreign invested fundsor in the case of a severe violation, a fine ranging from 30% to 100% of the RMB funds converted from the foreign-investedfunds. In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign ExchangeAdministration Policies on Foreign Direct Investment, which substantially amends and simplifies the current foreign exchangeprocedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishmentexpenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds by foreigninvestors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreignshareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity could beopened in different provinces, which was not possible previously. In addition, SAFE promulgated the Circular on Printing andDistributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and theSupporting Documents in May 2013, which specifies that the administration by SAFE or its local branches over directinvestment by foreign investors in the PRC must be conducted by way of registration and banks must process foreign exchangebusiness relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches. SAFE Circular 37 In July 2014, SAFE issued SAFE Circular 37, which supersedes SAFE Circular 75, and requires that PRC citizens orresidents must register with the relevant local SAFE branch before making capital contribution to any offshore entity directlyestablished or indirectly controlled by that PRC citizen or resident for the purpose of investment or financing and with onshoreor offshore assets or equity interests legally owned by that PRC citizen or resident. In addition, the SAFE registrations arerequired to be updated with local SAFE branch with respect to that offshore special purpose company in connection with thechange of its basic information, such as its company name, business term, shareholding by individual PRC citizens or residents,merger, or division and, with respect to the individual PRC citizens or residents in case of any increases or decreases of capitalin that offshore special purpose company, or share transfers or swaps by the individual PRC citizens or residents 90 Our PRC citizen or resident beneficial owners are applying for registrations under SAFE Circular 37 with the relevantlocal counterpart of SAFE in Beijing. However, we might not be fully informed of the identities of all our beneficial owners whoare PRC citizens or residents, and we cannot compel our beneficial owners to comply with SAFE Circular 37 requirements. As aresult, we cannot assure you that all of our shareholders or beneficial owners who are PRC citizens or residents have compliedwith and will in the future make or obtain any applicable registrations or approvals required by SAFE Circular 37 or otherrelated regulations. Failure to comply with the required SAFE registration and updating requirements described above couldsubject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries’ ability tomake distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—A failure by our shareholders orbeneficial owners who are PRC citizens or residents in China to comply with certain PRC foreign exchange regulations couldrestrict our ability to distribute profits, restrict our overseas and cross-border investment activities or subject us to liability underPRC laws, which could adversely affect our business and financial condition”. Employee Stock Option Plans In February 2012, SAFE promulgated the Notices on Issues concerning the Foreign Exchange Administration forDomestic Individuals Participating in Stock Incentive Plan of Overseas Publicly-Listed Company, replacing earlier rulespromulgated in March 2007, to regulate the foreign exchange administration of PRC citizens and non-PRC citizens who residein the PRC for a continuous period of not less than one year, with a few exceptions, who participate in stock incentive plans ofoverseas publicly-listed companies. Pursuant to these rules, these individuals who participate in any stock incentive plan of anoverseas publicly-listed company, are required to register with SAFE through a domestic qualified agent, which could be thePRC subsidiary of such overseas listed company, and complete certain other procedures. We and our executive officers andother employees who are PRC citizens or non-PRC citizens who reside in the PRC for a continuous period of not less than oneyear and have been granted options are subject to these regulations. Failure to complete such SAFE registrations could subjectus and these employees to fines and other legal sanctions. The State Administration of Taxation has issued certain circularsconcerning employee share options or restricted shares. Under these circulars, our employees working in the PRC who exerciseshare options or are granted restricted shares would be subject to PRC individual income tax. Our PRC subsidiary haveobligations to file documents related to employee share options or restricted shares with relevant tax authorities and to withholdindividual income taxes of those employees who exercise their share options. If our employees fail to pay or we fail to withholdtheir income taxes according to relevant laws and regulations, we could face sanctions imposed by the tax authorities or otherPRC government authorities. In addition, under the SAFE Circular 37 effective from July 2014, the individual PRC citizens orresidents who are directors, supervisors, senior management or other employees of an enterprise in the PRC that is directly orindirectly controlled by an overseas non-listed special purpose company and participate in any stock incentive plan of suchnon-listed special purpose company, can submit relevant materials to the relevant local SAFE branch for the foreign exchangeregistration before the exercise of the share option. However, as a newly implemented regulation, specific terms of SAFECircular 37 remain subject to interpretation and application by SAFE. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—A failure to comply withPRC regulations regarding the registration of shares and share options held by our employees who are PRC citizens couldsubject such employees or us to fines and legal or administrative sanctions”. Foreign Exchange Administration Applicable to Direct Investment In February 2015, SAFE further simplified and improved the policies of Foreign Exchange Administration ApplicableTo Direct Investment, two administrative examination and approval items, i.e. verification and approval of foreign exchangeregistration under domestic direct investment, and verification and approval of foreign exchange registration under overseasdirect investment, shall be abolished. Instead, banks shall, in accordance with this Notice and the Operating Guidelines forForeign Exchange Services under Direct Investment, directly examine and handle foreign exchange registration under domesticdirect investment and foreign exchange registration under overseas direct investment. The SAFE and its branches will thenconduct indirect regulation of Foreign Exchange Registration of Direct Investment via banks. Pursuant to these rules, foreigninvestors can directly invest into PRC entities without prior verification and approval of foreign exchange registration fromSAFE. 91 Settlement of the Foreign Exchange Capitals of Foreign-invested Enterprises In March 2015, SAFE reformed the administrative approach regarding the settlement of the foreign exchange capitals offoreign-invested enterprises. Foreign-invested enterprises will be allowed to settle their foreign exchange capitals on adiscretionary basis. It means a foreign-invested enterprise may, based on its actual business needs, settle with a bank the portionof the foreign exchange capital in its capital account for which the relevant foreign exchange bureau has confirmed monetarycontribution rights and interests (or for which the bank has registered the account-crediting of monetary contribution). For thetime being, foreign-invested enterprises are allowed to settle 100% of their foreign exchange capitals on a discretionary basis.However, a foreign-invested enterprise shall not use its capital and the RMB funds obtained from foreign exchange settlementfor any of the following purposes: (1) directly or indirectly, using the foregoing funds for expenditure beyond its business scopeor expenditure prohibited by State laws and regulations; (2) directly or indirectly, using the foregoing funds for investment insecurities, unless otherwise prescribed by laws and regulations; (3) directly or indirectly, using the foregoing funds fordisbursing RMB entrusted loans(unless permitted under its business scope), repaying inter-corporate borrowings (includingthird-party advances) and repaying RMB bank loans that have been sub-lent to third parties; or (4) using the foregoing funds topay for the expenses related to the purchase of real estate not for self-use, unless it is a foreign-invested real estate enterprise. Regulations on Dividend Distribution Wholly foreign-owned companies in China, such as Our WFOE, may pay dividends only out of their accumulatedprofits after tax as determined in accordance with PRC accounting standards. Remittance of dividends by a wholly foreign-owned enterprise out of China is subject to examination by the commercial banks. Wholly foreign-owned companies is notpermitted to pay dividends unless they set aside at least 10% of their respective accumulated profits after-tax each year, if any,to fund certain reserve funds, until such time as the accumulative amount of such fund reaches 50% of the wholly foreign-ownedcompany’s registered capital. In addition, these companies also may allocate a portion of their after-tax profits based on PRCaccounting standards to other funds at their discretion. These statutory reserve funds and other funds are not distributable ascash dividends. E.Taxation. The following is a general summary of the material Cayman Islands, People’s Republic of China and U.S. federalincome tax consequences relevant to an investment in our ADSs and ordinary shares. The discussion is not intended to be, norshould it be construed as, legal or tax advice to any particular prospective purchaser. The discussion is based on laws andrelevant interpretations thereof as of the date of this annual report, all of which are subject to change or differentinterpretations, possibly with retroactive effect. The discussion does not address U.S. state or local tax laws, or tax laws ofjurisdictions other than the Cayman Islands, the People’s Republic of China and the United States. You should consult yourown tax advisors with respect to the consequences of acquisition, ownership and disposition of our ADSs and ordinary shares. Cayman Islands Taxation The Cayman Islands does not impose any withholding taxes on dividends paid to shareholders by a Cayman Islandscorporation, nor does the Cayman Islands impose any other taxes on shareholders of a Cayman Islands corporation who are notthemselves residents of the Cayman Islands. The Cayman Islands is not a party to any tax treaties that are applicable to anypayments made to or by our company. People’s Republic of China Taxation Under the Enterprise Income Tax Law and the Regulations on the Implementation of the Enterprise Income Tax Law ofthe People’s Republic of China, enterprises established outside of China but whose “de facto management body” is located inChina are considered “resident enterprises” for PRC tax purposes. Under the applicable implementation regulations, “de factomanagement body” is defined as the organizational body that effectively exercises overall management and control overproduction and business operations, personnel, finance and accounting, and properties of the enterprise. Substantially all of ourmanagement is currently based in China, and may remain in China in the future. If we are treated as a “resident enterprise” forPRC tax purposes, foreign enterprise holders of our ADSs or ordinary shares may be subject to a 10% PRC income tax upondividends payable by us and on gains realized on their sales or other dispositions of our ADSs or ordinary shares. See “Item 3.Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Under the PRC enterprise income tax law, wecould be classified as a ‘resident enterprise’ of China. Such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.” In addition, gains derived by our non-PRC individual shareholders from the sale of our shares andADSs may be subject to a 20% PRC withholding tax. It is unclear whether our non-PRC individual shareholders (including ourADS holders) would be subject to any PRC tax on dividends obtained by such non-PRC individual shareholders in the event weare determined to be a PRC resident enterprise. If any PRC tax were to apply to dividends realized by non-PRC individuals, itwould generally apply at a rate of 20% unless a reduced rate is available under an applicable tax treaty. However, it is uncleareither whether our non-PRC shareholders would be able to claim the benefits of any tax treaties between their country of taxresidence and the PRC in the event that we are treated as a PRC resident enterprise. 92 Material United States Federal Income Tax Considerations The following summary describes the material United States federal income tax consequences to United States Holders(as defined below) of the ownership of our ordinary shares and ADSs as of the date hereof. Except where noted, this summarydeals only with ordinary shares and ADSs held as capital assets. As used herein, the term “United States Holder” means abeneficial owner of an ordinary share or ADS that is for United States federal income tax purposes: ·an individual citizen or resident of the United States; ·a corporation (or other entity treated as a corporation for United States federal income tax purposes) created ororganized in or under the laws of the United States, any state thereof or the District of Columbia; ·an estate the income of which is subject to United States federal income taxation regardless of its source; or ·a trust if it (1) is subject to the primary supervision of a court within the United States and one or more UnitedStates persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effectunder applicable United States Treasury regulations to be treated as a United States person. This summary does not represent a detailed description of all of the United States federal income tax consequences thatmay be applicable to you if you are subject to special treatment under the United States federal income tax laws, including ifyou are: ·a dealer in securities or currencies; ·a financial institution of certain types; ·a regulated investment company; ·a real estate investment trust; ·an insurance company; ·a tax-exempt organization; ·a person holding our ordinary shares or ADSs as part of a hedging, integrated or conversion transaction, aconstructive sale or a straddle; ·a trader in securities that has elected the mark-to-market method of accounting for your securities; ·a person who owns or is deemed to own 10% or more of our voting stock; ·a partnership or other pass-through entity for United States federal income tax purposes; or ·a person whose “functional currency” is not the United States dollar. 93 In addition, this discussion does not address any state, local, alternative minimum tax, or non-United States taxconsiderations, or the Medicare contribution tax on net investment income. Each potential investor is urged to consult its taxadvisor regarding the United States federal, state, local and non-United States income and other tax considerations of aninvestment in our ADSs or ordinary shares. The discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code,final and proposed regulations thereunder, rulings and judicial decisions as of the date hereof, and such authorities may bereplaced, revoked or modified so as to result in United States federal income tax consequences different from those discussedbelow. In addition, this summary is based, in part, upon representations made by the depositary to us and assumes that thedeposit agreement, and all other related agreements, will be performed in accordance with their terms. If a partnership holds our ordinary shares or ADSs, the tax treatment of a partner will generally depend upon the statusof the partner and the activities of the partnership. If you are a partnership or a partner of a partnership holding our ordinaryshares or ADSs, you should consult your tax advisors. This summary does not contain a detailed description of all the United States federal income tax consequences that may beapplicable to you in light of your particular circumstances and, except as set forth below with respect to PRC taxconsiderations, does not address the effects of any state, local or non-United States tax laws. If you are considering thepurchase, ownership or disposition of our ordinary shares or ADSs, you should consult your own tax advisors concerningthe United States federal income tax consequences to you in light of your particular situation as well as any consequencesarising under the laws of any other taxing jurisdiction. ADSs If you hold ADSs, for United States federal income tax purposes, you generally will be treated as the owner of theunderlying ordinary shares that are represented by such ADSs. Accordingly, deposits or withdrawals of ordinary shares for ADSswill not be subject to United States federal income tax. Taxation of Dividends and Other Distributions on the ADSs Subject to the discussion under “—Passive Foreign Investment Company” below, the gross amount of any distributionson the ADSs or ordinary shares (including any amounts withheld to reflect PRC withholding taxes) will be taxable as dividends,to the extent paid out of our current or accumulated earnings and profits, as determined under United States federal income taxprinciples. Such income (including withheld taxes) will be includable in your gross income as ordinary income on the dayactually or constructively received by you, in the case of the ordinary shares, or by the depositary, in the case of ADSs. Suchdividends will not be eligible for the dividends received deduction allowed to corporations under the Code. Dividends paid to certain non-corporate United States Holders may be taxable at preferential rates applicable to long-term capital gain if we are treated as a “qualified foreign corporation”. A foreign corporation is treated as a qualified foreigncorporation with respect to dividends received from that corporation on ordinary shares (or ADSs backed by such shares) that arereadily tradable on an established securities market in the United States. Our ADSs are listed on the Nasdaq Global Market, andthus, pursuant to United States Treasury Department guidance, our ADSs are treated as readily tradable on an establishedsecurities market in the United States. Thus, we believe that dividends we pay on our ADSs will meet the conditions required forthe reduced tax rate. Since we do not expect that our ordinary shares will be listed on an established securities market, we do notbelieve that dividends that we pay on our ordinary shares that do not back ADSs currently meet the conditions required for thesereduced tax rates. There can be no assurance that our ADSs will continue to be considered readily tradable on an establishedsecurities market in later years. A qualified foreign corporation also includes a foreign corporation that is eligible for thebenefits of certain income tax treaties with the United States. In the event that we are deemed to be a PRC resident enterpriseunder the PRC tax law, we believe we would be eligible for the benefits of the income tax treaty between the United States andthe PRC (including any protocol thereunder), or the Treaty, and if we are eligible for such benefits, dividends we pay on ourordinary shares, regardless of whether such shares are represented by ADSs or are readily tradable on an established securitiesmarket in the United States, would be eligible for the reduced rates of taxation. For discussion regarding whether we may beclassified as a PRC resident enterprise, see “Item 10. Additional Information—E. Taxation—People’s Republic of ChinaTaxation”. Even if dividends would be treated as paid by a qualified foreign corporation, non-corporate United States Holderswill not be eligible for reduced rates of taxation if they do not hold our ADSs or ordinary shares for more than 60 days duringthe 121-day period beginning 60 days before the ex-dividend date or to the extent that such United States Holders elect to treat the dividend income as “investment income” under the Code. In addition, the rate reduction will not apply to dividends if therecipient of a dividend is obligated to make related payments with respect to positions in substantially similar or relatedproperty. This disallowance applies even if the minimum holding period has been met. You should consult your own taxadvisors regarding the application of these rules given your particular circumstances. 94 Non-corporate United States Holders will not be eligible for reduced rates of taxation on any dividends received fromus if we are a passive foreign investment company, or PFIC, for United States federal income tax purpose for the taxable year inwhich such dividends are paid or for the preceding taxable year. In the event that we are deemed to be a PRC resident enterprise under the PRC tax law, you may be subject to PRCwithholding taxes on dividends paid to you with respect to the ADSs or ordinary shares. See “Item 10. Additional Information—E. Taxation—People’s Republic of China Taxation”. In that case, PRC withholding taxes on dividends (limited, in the case ofa U.S. holder who qualifies for the benefits of the Treaty, to the extent not exceeding the applicable dividend withholding rateunder the Treaty), generally will be treated as foreign taxes eligible for credit against your United States federal income taxliability. For purposes of calculating the foreign tax credit, dividends paid on the ADSs or ordinary shares will be treated asforeign-source income and generally will constitute passive category income. Furthermore, if you have not held the ADSs orordinary shares for more than 15 days during the 31-day period beginning 15 days before the ex-dividend date (during whichyou are not protected from risk of loss), or are obligated to make payments related to the dividends, you generally will not beallowed a foreign tax credit for any PRC withholding taxes imposed on dividends paid on the ADSs or ordinary shares. The rulesgoverning the foreign tax credit are complex. You are urged to consult your tax advisor regarding the availability of the foreigntax credit under your particular circumstances. To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits for ataxable year, as determined under United States federal income tax principles, the distribution will first be treated as a tax-freereturn of capital, causing a reduction in the adjusted basis of the ADSs or ordinary shares (thereby increasing the amount of gain,or decreasing the amount of loss, to be recognized by you on a subsequent disposition of the ADSs or ordinary shares), and thebalance in excess of adjusted basis will be taxed as capital gain recognized on a sale or exchange. However, we do not expect tocalculate our earnings and profits in accordance with United States federal income tax principles. Therefore, you should expectthat a distribution generally will be treated as a dividend (as discussed above). Passive Foreign Investment Company In general, we will be a PFIC for any taxable year in which: ·at least 75% of our gross income is passive income, or ·at least 50% of the average value (determined on a quarterly basis) of our assets produce or are held for theproduction of passive income. For this purpose, passive income generally includes dividends, interest, royalties and rents. Furthermore, cash iscategorized as a passive asset and our unbooked intangibles associated with active business activities (including goodwill) maygenerally be taken into account and classified as active assets. In estimating the value of our goodwill, we generally take intoaccount our market capitalization. If we own at least 25% (by value) of the stock of another corporation, we will be treated, forpurposes of the PFIC tests, as owning our proportionate share of the other corporation’s assets and receiving our proportionateshare of the other corporation’s income. 95 Based on our current income and assets and the value of our ADSs and ordinary shares, we do not believe that we were aPFIC for our taxable year ended December 31, 2016. With respect to our 2017 taxable year and foreseeable future taxable years,and subject to the uncertainty regarding the treatment of our contractual arrangements with our consolidated affiliated entities(discussed below), we presently do not anticipate that we will be a PFIC based upon the expected composition of our incomeand assets and the expected value of our assets, including goodwill (determined, in part, based on the price of our ADSs andordinary shares). The determination of whether we are a PFIC is made annually. Accordingly, it is possible that we may be a PFICfor our 2017 taxable year or any future taxable year due to changes in our asset or income composition or the value of ourassets. Because the value of our assets may be determined by reference to our market capitalization, and because the marketprice of our ADSs and ordinary shares may be volatile, a decrease in the price of our ADSs may also result in our becoming aPFIC. Under circumstances where the cash is not deployed for active purposes, our risk of becoming a PFIC may increase. Inaddition, although the law in this regard is not entirely clear, we treat Our VIE as being owned by us for United States federalincome tax purposes because we control its management decisions and we are entitled to substantially all of its economicbenefits and, as a result, we consolidate its results of operations in our consolidated U.S. GAAP financial statements. If it weredetermined, however, that we are not the owner of Our VIE for United States federal income tax purposes, we could be treated asa PFIC for taxable years ending after the date of our initial public offering. If we are a PFIC for any taxable year during which you hold our ADSs or ordinary shares, we generally will continue tobe treated as a PFIC as to you for all succeeding taxable years during which you hold our ADSs or ordinary shares, and you willbe subject to the special tax rules discussed below, except if you have made a mark-to-market election as discussed below.However, if we are a PFIC for any taxable year and subsequently cease to be a PFIC, you can avoid the continuing impact of thePFIC rules by making a special election, or a Purging Election, to recognize gain (but not loss) in the manner described below asif your ADSs or ordinary shares had been sold on the last day of the last taxable year during which we were a PFIC. After thePurging Election, your ADSs or ordinary shares will not be treated as shares in a PFIC unless we subsequently become a PFIC.You are urged to consult your own tax advisors about the availability of this election, and whether making the election wouldbe advisable in your particular circumstances. If we are a PFIC for any taxable year during which you hold our ADSs or ordinary shares, you will be subject to specialtax rules with respect to any “excess distribution” received and any gain realized from a sale or other disposition, including aPurging Election or pledge, of ADSs or ordinary shares. Distributions received in a taxable year that are greater than 125% ofthe average annual distributions received during the shorter of the three preceding taxable years or your holding period for theADSs or ordinary shares will be treated as excess distributions. Under these special tax rules: ·the excess distribution or gain will be allocated ratably over your holding period for the ADSs or ordinary shares, ·the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which wewere a PFIC with respect to you, will be treated as ordinary income, and ·the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and theinterest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable toeach such year. If we are a PFIC for any taxable year during which you hold our ADSs or ordinary shares and any of our non-UnitedStates subsidiaries is also a PFIC, a United States Holder would be treated as owning a proportionate amount (by value) of theshares of the lower-tier PFIC for purposes of the application of these rules. A disposition of shares in, or a distribution by, any ofour subsidiaries that is a PFIC will trigger the excess distributions rules described above. You are urged to consult your taxadvisors about the application of the PFIC rules to any of our subsidiaries. In lieu of being subject to the excess distribution rules discussed above, you may make an election to include gain onthe stock of a PFIC as ordinary income under a mark-to-market method, provided that such stock is regularly traded on aqualified exchange. Under current law, the mark-to-market election will be available to holders of ADSs as long as the ADSs arelisted on the Nasdaq Global Market, which constitutes a qualified exchange, and are “regularly traded” for purposes of the mark-to-market election (for which no assurance can be given). It should also be noted that only the ADSs and not the ordinary shares,are listed on the Nasdaq Global Market. Consequently, if you are a holder of ordinary shares that are not represented by ADSs,you generally will not be eligible to make a mark-to-market election if we are or were to become a PFIC. If you make an effective mark-to-market election, you will include in each year that we are a PFIC as ordinary income the excess of the fair market value of your ADSs at the end of the year over your adjusted tax basis in the ADSs. You will beentitled to deduct as an ordinary loss in each such year the excess of your adjusted tax basis in the ADSs over their fair marketvalue at the end of the year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. If you make an effective mark-to-market election, any gain you recognize upon the sale or other disposition ofyour ADSs will be treated as ordinary income and any loss will be treated as ordinary loss, but only to the extent of the netamount previously included in income as a result of the mark-to-market election. 96 Your adjusted tax basis in the ADSs will be increased by the amount of any income inclusion and decreased by theamount of any deductions under the mark-to-market rules. If you make a mark-to-market election it will be effective for thetaxable year for which the election is made and all subsequent taxable years unless the ADSs are no longer regularly traded on aqualified exchange or the Internal Revenue Service consents to the revocation of the election. You are urged to consult your taxadvisor about the availability of the mark-to-market election, and whether making the election would be advisable in yourparticular circumstances. A U.S. investor in a PFIC generally can mitigate the adverse consequences of the excess distribution rules describedabove by electing to treat the PFIC as a “qualified electing fund” under the Code. However, this option is not available to youbecause we do not intend to comply with the requirements necessary to permit you to make this election. We expect to file annual reports on Form 20-F with the U.S. Securities and Exchange Commission in which we willindicate whether or not we believe we were a PFIC for the relevant taxable year. We do not intend to make any other annualdetermination or otherwise notify you regarding our status as a PFIC for any taxable year. You are urged to consult your taxadvisors concerning the United States federal income tax consequences of holding ADSs or ordinary shares if we are considereda PFIC in any taxable year. A United States Holder that owns (or is deemed to own) ordinary shares in a PFIC during any taxable year of the UnitedStates Holder may have to file an IRS Form 8621 (whether or not a mark-to-market election is or has been made) with suchUnited States Holder’s U.S. federal income tax return and provide such other information as may be required by the U.S. TreasuryDepartment. The rules dealing with PFICs and the mark-to-market election are complex and are affected by various factors in additionto those described above. Accordingly, United States Holders of our ordinary shares and ADSs should consult their own taxadvisors concerning the application of the PFIC rules to our ordinary shares and ADSs under their particularcircumstances. Taxation of Capital Gains For United States federal income tax purposes you will recognize taxable gain or loss on any sale or exchange of ADSsor ordinary shares in an amount equal to the difference between the amount realized for the ADSs or ordinary shares and yourtax basis in the ADSs or ordinary shares. Subject to the discussion under “—Passive Foreign Investment Company” above, suchgain or loss will generally be capital gain or loss. Capital gains of individuals derived with respect to capital assets held formore than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by you generally will be treated as United States source gain or loss. However, if we aretreated as a PRC resident enterprise for PRC tax purposes and PRC tax were imposed on any gain, and if you are eligible for thebenefits of the Treaty, you may elect to treat such gain as PRC source gain under the Treaty and, accordingly, you may be ableto credit the PRC tax against your United States federal income tax liability. If you are not eligible for the benefits of the Treatyor you fail to make the election to treat any gain as PRC source, then you generally would not be able to use the foreign taxcredit arising from any PRC tax imposed on the disposition of our ADSs or ordinary shares unless such credit can be applied(subject to applicable limitations) against tax due on other income treated as derived from foreign sources. You will be eligiblefor the benefits of the Treaty if, for purposes of the Treaty, you are a resident of the United States, and you meet other factualrequirements specified in the Treaty. Because qualification for the benefits of the Treaty is a fact-intensive inquiry whichdepends upon the particular circumstances of each investor, you are specifically urged to consult your tax advisors regardingyour eligibility for the benefits of the Treaty. You are also urged to consult your tax advisor regarding the tax consequences ifPRC tax is imposed on gain on a disposition of our ordinary shares or ADSs, including the availability of the foreign tax creditand the election to treat any gain as PRC source under your particular circumstances. 97 Information Reporting and Backup Withholding In general, information reporting will apply to dividends in respect of our ADSs or ordinary shares and the proceedsfrom the sale, exchange or redemption of our ADSs or ordinary shares that are paid to you within the United States (and incertain cases, outside the United States), unless you are an exempt recipient such as a corporation. Backup withholding mayapply to such payments if you fail to provide a taxpayer identification number or certification of other exempt status or fail toreport in full dividend and interest income. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your UnitedStates federal income tax liability provided the required information is furnished to the Internal Revenue Service in a timelymanner. Foreign Asset Reporting Certain United States Holders who are individuals (and under proposed regulations, certain entities) may be required toreport information relating to an interest in our ordinary shares or ADSs, subject to certain exceptions (including an exceptionfor shares held in accounts maintained by U.S. financial institutions) on IRS Form 8938. United States Holders are urged toconsult their tax advisors regarding their information reporting obligations, if any, with respect to their ownership anddisposition of our ordinary shares or ADSs. F.Dividends and paying agents. Not applicable. G.Statement by experts. Not applicable. H.Documents on display. We are subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreignprivate issuers. Accordingly, we are required to file reports, including annual reports on Form 20-F, and other information withthe SEC. As a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing the furnishing and content ofproxy statements to shareholders, and our executive officers, directors and principal shareholders are not subject to the insidershort-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. All information that we have filed with the SEC can be accessed through the SEC’s website at www.sec.gov. Thisinformation can also be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E.,Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC.Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. We intend to furnish the depositary with our annual reports, which will include a review of operations and annualaudited consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meeting andother reports and communications that are made generally available to our shareholders. The depositary will make such notices,reports and communications available to holders of ADSs and, upon our written request, will mail to all record holders of ADSsthe information contained in any notice of a shareholders’ meeting received by the depositary from us. In accordance with NASDAQ Stock Market Rule 5250(d), we will post this annual report on Form 20-F on our websiteat ir.ccjmu.com. In addition, we will provide hard copies of our annual report free of charge to shareholders and ADS holdersupon request. I.Subsidiary Information. Not applicable. 98 Item 11.Quantitative and Qualitative Disclosures about Market Risk. Foreign Exchange Risk Substantially all of our revenues and expenses are denominated in RMB. We do not believe that we currently have anysignificant direct foreign exchange risk and have not used any derivative financial instruments to hedge our exposure to suchrisk. Although in general, our exposure to foreign exchange risks should be limited, the value of your investment in our ADSswill be affected by the exchange rate between the U.S. dollar and the RMB because the value of our business is effectivelydenominated in RMB, while the ADSs will be traded in U.S. dollars. The value of the RMB against the U.S. dollar and other currencies is affected by changes in China’s political andeconomic conditions and by China’s foreign exchange policies, among other things. In July 2005, the PRC government changedits decades-old policy of pegging the value of the RMB to the U.S. dollar, and the RMB appreciated more than 20% against theU.S. dollar over the following three years. Between July 2008 and June 2010, this appreciation halted and the exchange ratebetween the RMB and the U.S. dollar remained within a narrow band. Since June 2010, the RMB has fluctuated against the U.S.dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S. government policymay impact the exchange rate between the RMB and the U.S. dollar in the future. To the extent that we need to convert U.S.dollars we receive from our initial public offering into RMB for our operations, appreciation of the RMB against the U.S. dollarwould have an adverse effect on the RMB amount we receive from the conversion. Conversely, if we decide to convert RMBinto U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other businesspurposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amounts available tous. Interest Rate Risk Our exposure to interest rate risk primarily relates to the interest income generated by excess cash, which is mostly heldin interest-bearing bank deposits. We generated interest income of nil, US$7.4 thousand and US$26.1 thousand for the yearended December 31, 2014, 2015 and 2016, respectively. We had cash and cash equivalents of US$2.6 million as of December31, 2016. Assuming such amount of cash and cash equivalents are held entirely in interest-bearing bank deposits, a hypotheticalone percentage point (100 basis-point) decrease in interest rates would decrease our interest income from these interest-bearingbank deposits for one year by approximately US$26 thousand. Interest-earning instruments carry a degree of interest rate risk.We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in market interest rates.However, our future interest income may fall short of expectations due to changes in market interest rates. Item 12.Description of Securities Other than Equity Securities. A.Debt Securities. Not applicable. B.Warrants and Rights Not applicable. C.Other Securities. Not applicable. D.American Depositary Shares. Fees and Charges Our ADS Holders May Have to Pay Citibank, N.A. is our depositary. The depositary collects its fees for delivery and surrender of ADSs directly frominvestors depositing ordinary shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them.The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services bydeduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participantsacting for them. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid. 99 An ADS holder will be required to pay the following fees under the terms of the deposit agreement: Services: Fees:· Issuance of ADSs upon deposit of shares (excludingissuances as a result of distributions of shares) Up to US$0.05 per ADS issued· Cancellation of ADSs Up to US$0.05 per ADS cancelled· Distribution of cash dividends or other cash distributions(i.e., sale of rights and other entitlements) Up to US$0.05 per ADS held· Distribution of ADSs pursuant to (i) stock dividends orother fee stock distributions, or (ii) exercise of rights topurchase additional ADSs Up to US$0.05 per ADS held· Distribution of securities other than ADSs or rights topurchase additional ADSs (i.e., spin-off shares) Up to US$0.05 per ADS held· ADS Services Up to US$0.05 per ADS held on the applicable record date(s)established by the depositary Fees and Other Payments Made by the Depositary to Us The depositary has agreed to reimburse us for expenses we incur that are related to the establishment and maintenanceof the ADR program, including investor relations expenses. There are limits on the amount of expenses for which the depositarywill reimburse us, but the amount of reimbursement available to us is not linked to the amounts of fees the depositary collectsfrom investors. We have received US$0.8 million from the depositary until the date of this annual report. PART II Item 13.Defaults, Dividend Arrearages and Delinquencies. None. Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds. None. Item 14E Use of Proceeds. The following “Use of Proceeds” information relates to the registration statement on Form F-1 (File No. 333-201413)for our initial public offering of 4,000,000 ADSs, which became effective on March 31, 2015. We received net proceeds ofapproximately US$37.3 million from our initial public offering. For the period from March 31, 2015 to December 31, 2016, we used US$30.0 million from our initial public offeringfor our acquisition of JMU in June 2015 and the rest in our day-to-day operations. Item 15.Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our chief executive officer and chief financial officer, has performed anevaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act)as of the end of the period covered by this report, as required by Rule 13a-15(b) under the Exchange Act. 100 Based upon that evaluation, our management has concluded that, as of December 31, 2016, our disclosure controls andprocedures were effective in ensuring that the information required to be disclosed by us in the reports that we file and furnishunder the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rulesand forms, and that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act isaccumulated and communicated to our management, including our chief executive officer and chief financial officer, asappropriate, to allow timely decisions regarding required disclosure. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Ourinternal control over financial reporting is a process designed under the supervision of our chief executive officer and chieffinancial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of ourconsolidated financial statements for external reporting purposes in accordance with U.S. generally accepted accountingprinciples. After our acquisition of JMU HK, the scope of our internal controls over financial reporting was also enlargedsignificantly. We also performed a related assessment based on this new control environment and change in scope. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. Inmaking this assessment, management used the framework set forth in the report Internal Control - Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO frameworksummarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) riskassessment, (iii) control activities, (iv) information and communication and (v) monitoring. Based on that evaluation, our management concluded that these controls were not effective at December 31, 2016. Wedid not maintain sufficient controls over financial reporting processes due to an insufficient complement of internal personnelwith a level of accounting knowledge, experience and training in the application of U.S. GAAP to ensure that the consolidatedfinancial statements were prepared in compliance with U.S. GAAP and SEC requirements properly. This deficiency constitutes asa material weakness of our internal control over financial reporting. Attestation Report of the Registered Public Accounting Firm This annual report does not include an attestation report of our registered public accounting firm pursuant to thetransition periods established by rules of the SEC for an Emerging Growth Company. Changes in Internal Control over Financial Reporting We identified four material weaknesses in internal control over financial reporting during our preparation of thefinancial statements for the year ended December 31, 2015: (i) lack of accounting personnel with appropriate knowledge ofaccounting principles generally accepted in the United States of America, or U.S. GAAP, (ii) lack of comprehensive accountingpolicies and procedures manual in accordance with U.S. GAAP, (iii) lack of risk assessment process, and (iv) lack of qualifiedinternal control team with sufficient control experience. Since then, we have implemented the following measures to remediatethese material weakness: · We hired a reporting manager in the first half of 2016 with experience in U.S. GAAP accounting andreporting, skills and knowledge in the preparation of financial statements under the requirements of U.S. GAAP andfinancial reporting disclosure under the requirement of SEC rules. This reporting manager has been involved inpreparing and reviewing our consolidated financial statements under U.S. GAAP; · We hired a controlling manager responsible for internal control establishment and implementation inthe first half of 2016 with years of working experience in one of big 4 accounting firms as well as rich experience ininternal control, skills and knowledge in the Internal Control - Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission, or COSO framework; 101 · We established comprehensive accounting policies and procedures manual in accordance with U.S.GAAP in the first half of 2016 which is monitored by the reporting manager on a continuing basis; · We established, implemented and improved internal control system including entity level and processlevel key controls as well as policies monitored by the controlling manager according to COSO framework during 2016.Risk assessment and control evaluation process were conducted by the controlling manager in 2016; As a result, material weakness (ii) to (iv) in internal control over financial reporting have been remediated. However, westill have an insufficient number of financial reporting personnel with an appropriate level of knowledge, experience andtraining in application of U.S. GAAP and SEC rules and regulations commensurate with our reporting requirements. We will (i)hire additional qualified financial reporting personnel with U.S. GAAP and SEC reporting experience, and, (ii) improve thecapabilities of existing financial reporting personnel through training and education in the accounting and reportingrequirements under U.S. GAAP, and SEC rules and regulations. In addition, we will establish effective monitoring and oversightcontrols for non-recurring and complex transactions to ensure the accuracy and completeness of the Company’s consolidatedfinancial statements and related disclosures. Item 16. Item 16A.Audit Committee Financial Expert. Our board of directors has determined that Mr. Tianruo (Robert) Pu, chairman of our audit committee, meets the criteriaof an audit committee financial expert as set forth under the applicable rules of the SEC and meets the criteria for independenceset forth in Section 10A(m)(3) of the Exchange Act. Item 16B.Code of Ethics. Our board of directors has adopted a code of business conduct and ethics which is applicable to our directors, officersand employees. Our code of business conduct and ethics has been filed as an exhibit to our registration statement on Form F-1(File No. 333-201413) initially filed with the SEC on January 9, 2015. Item 16C.Principal Accountant Fees and Services. The following table sets forth the aggregate fees by categories specified below in connection with certain professionalservices rendered by our principal external accounting firms. Year Ended December 31, 2015 2016 USD USD (in thousands) Audit fees (1) 1,200 500 Total 1,200 500 (1)“Audit fees” means the aggregate fees billed in each of the fiscal years for professional services rendered by our principalexternal auditors for the audit of our annual consolidated financial statements. The policy of our audit committee is to pre-approve all auditing and non-auditing services permitted to be performedby our independent registered public accounting firm. Item 16D.Exemptions from the Listing Standards for Audit Committees. Not applicable. 102 Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers. None. Item 16F. Change in Registrant’s Certifying Accountant. On July 7, 2016, we dismissed Deloitte Touche Tohmatsu Certified Public Accountants LLP, or Deloitte as ourindependent registered public accounting firm. The decision was not made due to any disagreements with Deloitte. Effectivefrom November 30, 2016, we appointed Ernst & Young Hua Ming LLP, or Ernst & Young China, a member firm of Ernst &Young Global Limited, or Ernst & Young Global, as our new independent registered public accounting firm. The change of ourindependent registered public accounting firm was approved by the audit committee of our board. Deloitte’s audit reports on our consolidated financial statements as of December 31, 2015 and 2014 and for each of theyears ended December 31, 2015 and 2014 did not contain an adverse opinion or a disclaimer of opinion and were not qualified.The audit reports were not modified as to accounting principles or audit scope however they were modified due to uncertaintyregarding the our Company’s ability to continue as a going concern. During each of the years ended December 31, 2015, 2014 and the subsequent interim period through July 7, 2016, therewere (i) no disagreements between us and Deloitte on any matter of accounting principles or practices, financial statementdisclosure, or auditing scope or procedure, any of which, if not resolved to Deloitte’s satisfaction, would have caused Deloitte tomake reference thereto in their reports, and (ii) no “reportable events” requiring disclosure pursuant to Item 16F(a)(1)(v) of theinstructions to Form 20-F in connection with our annual report on Form 20-F. We provided Deloitte with a copy of the disclosures from the first paragraph to the third paragraph under this Item 16Fand requested from Deloitte a letter addressed to the Securities and Exchange Commission indicating whether it agrees withsuch disclosures. A copy of Deloitte’s letter dated May 26, 2017 is attached as Exhibit 15.5. During each of the years ended December 31, 2015, 2014 and 2013 and the subsequent interim period throughNovember 30, 2016, neither we nor anyone on behalf of us has consulted with Ernst & Young China regarding (i) theapplication of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion thatmight be rendered on our consolidated financial statements, and neither a written report nor oral advice was provided to us thatErnst & Young China concluded was an important factor considered by us in reaching a decision as to any accounting, auditing,or financial reporting issue, (ii) any matter that was the subject of a disagreement pursuant to Item 16F(a)(1)(iv) of theinstructions to Form 20-F, or (iii) any reportable event pursuant to Item 16F(a)(1)(v) of the instructions to Form 20-F. In connection with the appointment of Ernst & Young China as our independent auditor for the year ended December31, 2016, Ernst & Young China evaluated its auditor independence and informed us the following matter: On April 13, 2015, we appointed Citibank, N.A. as the depositary for our ADSs to be listed for trading on the NasdaqGlobal Market. As of December 31, 2016 Citibank, N.A. was our only record shareholder in the United States, holding226,322,442 ordinary shares, which represented 15.3 % of our outstanding ordinary shares. Ernst & Young China informed us that certain member firms of Ernst & Young Global have lending relationships withCitibank, N.A. that have been in place throughout 2016 and such relationships are continuing. According to SEC auditorindependent rules, an accountant is not independent when the accounting firm, has any loan (including any margin loan) to orfrom an audit client’s record owner of more than ten percent of the audit client’s equity securities, subject to certain exceptions. Ernst & Young China subsequently informed us that after careful consideration of the facts and circumstances and theapplicable independence rules, it concluded that the debtor-credit relationships would not impair Ernst & Young China’s abilityto exercise objective and impartial judgment in connection with its audits of our financial statements for the year endingDecember 31, 2016 and future periods. 103 Our audit committee also reviewed and considered the impact that the debtor-creditor relationships may have had onErnst & Young China’s independence with respect to us under the applicable independence rules. After considering all the factsand circumstances, our audit committee determined that Ernst & Young China would be capable of exercising objective andimpartial judgment in connection with the audits of our financial statements. Therefore, with respect to the independence matter described above, we concluded that a reasonable investor withknowledge of all relevant facts and circumstances would conclude that Ernst & Young China was and would be capable ofexercising objective and impartial judgment in connection with the audits of our financial statement for the fiscal year endedDecember 31, 2016 and future periods. Item 16G.Corporate Governance. We are incorporated in the Cayman Islands and our corporate governance practices are governed by applicable CaymanIslands law. In addition, because our ADSs are listed on The NASDAQ Global Market, we are subject to NASDAQ’s corporategovernance requirements.NASDAQ Stock Market Rule 5615(a)(3) permits a foreign private issuer like us to follow homecountry practices in lieu of certain requirements of Rule 5600, provided that such foreign private issuer discloses in its annualreport filed with the SEC each requirement of Rule 5600 that it does not follow and describes the home country practicefollowed in lieu of such requirement. NASDAQ Marketplace Rule 5615(a)(3) permits a foreign private issuer like us to follow home country practices in lieuof certain requirements of Rule 5600, provided that such foreign private issuer discloses in its annual report filed with the SECeach requirement of Rule 5600 that it does not follow and describes the home country practice followed in lieu of suchrequirement. We have informed NASDAQ that we will follow home country practice in place of all of the requirements of Rule 5600other than those rules which we are required to follow pursuant to the provisions of Rule 5615(a)(3). ·Rule 5605(b), pursuant to which (i) a majority of the board of directors must be comprised of IndependentDirectors, and (ii) the Independent Directors must have regularly scheduled meetings at which only IndependentDirectors are present. ·Rule 5605(c) (other than those parts as to which the home country exemption is not applicable), pursuant to whicheach company must have, and certify that it has and will continue to have, an audit committee of at least threemembers, each of whom must meet criteria set forth in Rule 5605(c)(2) (A). ·Rule 5605(d), pursuant to which each company must (i) certify that it has adopted a formal written compensationcommittee charter and that the compensation committee will review and reassess the adequacy of the formalwritten charter on an annual basis, and (ii) have a compensation committee of at least two members, each of whommust be an Independent Director. ·Rule 5605(e), pursuant to which director nominees must be selected, or recommended for the Board’s selection,either by Independent Directors constituting a majority of the Board’s Independent Directors in a vote in whichonly Independent Directors participate, or a nominations committee comprised solely of Independent Directors. ·Rule 5610, pursuant to which each company shall adopt a code of conduct applicable to all directors, officers andemployees. ·Rule 5620(a), pursuant to which each company listing common stock or voting preferred stock, or theirequivalents, shall hold an annual meeting of shareholders no later than one year after the end of the issuer’s fiscalyear-end. ·Rule 5620(b), pursuant to which each company shall solicit proxies and provide proxy statements for all meetingsof shareholders and shall provide copies of such proxy solicitation to Nasdaq. ·Rule 5620(c), pursuant to which each company that is not a limited partnership shall provide for a quorum asspecified in its by-laws for any meeting of the holders of common stock; provided, however, that in no case shall such quorum be less than 331/3% of the outstanding shares of the company’s common voting stock. 104 ·Rule 5630, pursuant to which each company that is not a limited partnership shall conduct an appropriate reviewand oversight of all related party transactions for potential conflict of interest situations on an ongoing basis by thecompany’s audit committee or another independent body of the board of directors. ·Rule 5635(a), pursuant to which shareholder approval is required in certain circumstances prior to an issuance ofsecurities in connection with the acquisition of the stock or assets of another company. ·Rule 5635(b), pursuant to which shareholder approval is required prior to the issuance of securities when theissuance or potential issuance will result in a change of control of the company. ·Rule 5635(c), pursuant to which shareholder approval is required prior to the issuance of securities when a stockoption or purchase plan is to be established or materially amended or other equity compensation arrangementmade or materially amended, pursuant to which stock may be acquired by officers, directors, employees, orconsultants, subject to certain exceptions. ·Rule 5635(d), pursuant to which shareholder approval is required prior to the issuance of securities in connectionwith a transaction other than a public offering involving: othe sale, issuance or potential issuance by the company of common stock (or securities convertible into orexercisable for common stock) at a price less than the greater of book or market value which together withsales by officers, directors or Substantial Shareholders of the company equals 20% or more of common stockor 20% or more of the voting power outstanding before the issuance; or othe sale, issuance or potential issuance by the company of common stock (or securities convertible into orexercisable common stock) equal to 20% or more of the common stock or 20% or more of the voting poweroutstanding before the issuance for less than the greater of book or market value of the stock. Item 16H. Mine Safety Disclosure Not applicable. PART III Item 17.Financial Statements. We have elected to provide financial statements pursuant to Item 18. Item 18.Financial Statements. Our consolidated financial statements are included at the end of this annual report. Item 19.Exhibits. Exhibit No. Description of Exhibit 1.1 Third Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated byreference to exhibit 3.1 to our F-1 registration statement (File No. 333-201413) initially filed with the SECon January 9, 2015) 2.1 Deposit Agreement by and among the Registrant and Citibank, N.A., as Depositary, and the Holders andBeneficial Owners of the American Depositary Shares issued thereunder, dated as of April 13, 2015(incorporated by reference to exhibit 4.3 to our S-8 registration statement (File No. 333-206466) filed withthe SEC on August 19, 2015) 2.2 Specimen American Depositary Receipt (included in Exhibit 2.1) 105 3.3 Specimen Certificate for Ordinary Shares (incorporated by reference to exhibit 4.2 to our F-1 registrationstatement (File No. 333-201413) initially filed with the SEC on January 9, 2015) 4.1 Amended and Restated 2011 Share Incentive Plan (incorporated by reference to exhibit 10.1 to our S-8registration statement (File No. 333-206466) filed with the SEC on August 19, 2015) 4.2 Master Exclusive Service Agreement, dated as of May 13, 2015, by and among Shanghai Zhongming SupplyChain Management Co., Ltd., Shanghai Zhongmin Supply Chain Management Co., Ltd. and the shareholderof Shanghai Zhongmin Supply Chain Management Co., Ltd.(incorporated by reference to exhibit 4.10 to ourannual report on Form 20-F filed with the SEC on April 29, 2016) 4.3 Business Cooperation Agreement, dated as of May 13, 2015, by and among Shanghai Zhongming SupplyChain Management Co., Ltd., Shanghai Zhongmin Supply Chain Management Co., Ltd. and the shareholderof Shanghai Zhongmin Supply Chain Management Co., Ltd. (incorporated by reference to exhibit 4.11 toour annual report on Form 20-F filed with the SEC on April 29, 2016) 4.4 Exclusive Option Agreement, dated as of May 13, 2015, by and among Shanghai Zhongming Supply ChainManagement Co., Ltd., Shanghai Zhongmin Supply Chain Management Co., Ltd. and the shareholder ofShanghai Zhongmin Supply Chain Management Co., Ltd. (incorporated by reference to exhibit 4.12 to ourannual report on Form 20-F filed with the SEC on April 29, 2016) 4.5 Equity Interest Pledge Agreement, dated as of May 13, 2015, by and among Shanghai Zhongming SupplyChain Management Co., Ltd., Shanghai Zhongmin Supply Chain Management Co., Ltd. and the shareholderof Shanghai Zhongmin Supply Chain Management Co., Ltd. (incorporated by reference to exhibit 4.13 toour annual report on Form 20-F filed with the SEC on April 29, 2016) 4.6 Proxy Agreement and Power of Attorney, dated as of May 13, 2015, by and among Shanghai ZhongmingSupply Chain Management Co., Ltd., Shanghai Zhongmin Supply Chain Management Co., Ltd. and theshareholder of Shanghai Zhongmin Supply Chain Management Co., Ltd. (incorporated by reference toexhibit 4.14 to our annual report on Form 20-F filed with the SEC on April 29, 2016) 4.7 Share Purchase Agreement, dated as of June 5, 2015, by and among the Registrant, New Admiral Limited,Zhejiang Sunward Fishery Restaurant Group Share Co., Ltd., Junhe Investment Pte. Ltd., Shanghai Zhong JuInvestment Management Center, Extensive Power Limited, Global Oriental Development Limited, AsiaGlobal Develop Limited, Markland (Hong Kong) Investment Limited, Markland (Hong Kong) PlanningLimited, Youlong Huang, Ning Lin, Wai Poon, Gang Wang and Guoping Wu (incorporated by reference toexhibit 99.5 to the Schedule 13D (File No. 005-88838) filed with the SEC on September 21, 2015). 4.8 Amendment to Share Purchase Agreement, dated as of September 7, 2015, by and between the Registrant,New Admiral Limited and the representative of the sellers (incorporated by reference to exhibit 99.6 to theSchedule 13D (File No. 005-88838) filed with the SEC on September 21, 2015). 4.9 Share Subscription Agreement, dated as of June 5, 2015, by and between the Registrant and Maodong Xu(incorporated by reference to exhibit 99.2 to the Schedule 13D (File No. 005-88838) filed with the SEC onSeptember 21, 2015). 4.10 Amendment to Subscription Agreement, dated as of September 7, 2015, by and between the Registrant andMaodong Xu (incorporated by reference to exhibit 99.3 to the Schedule 13D (File No. 005-88838) filed withthe SEC on September 21, 2015) 4.11 Registration Rights Agreement, dated as of June 8, 2015, by and among the Registrant, New AdmiralLimited, Zhejiang Sunward Fishery Restaurant Group Share Co., Ltd., Junhe Investment Pte. Ltd., ShanghaiZhong Ju Investment Management Center, Extensive Power Limited, Global Oriental Development Limited,Asia Global Develop Limited, Markland (Hong Kong) Investment Limited, Markland (Hong Kong) PlanningLimited, Youlong Huang, Ning Lin, Wai Poon, Gang Wang, Guoping Wu, New Field Worldwide Ltd., LinkCrossing Limited, Blue Ivy Holdings Limited and Maodong Xu (incorporated by reference to exhibit 99.8 to the Schedule 13D (File No. 005-88838) filed with the SEC on September 21, 2015) 4.12 Lock-Up Agreement, dated as of June 8, 2015, by and between the Registrant and Maodong Xu (incorporatedby reference to exhibit 99.9 to the Schedule 13D (File No. 005-88838) filed with the SEC on September 21,2015) 4.13 Lock-Up Agreement, dated as of June 8, 2015, by and between the Registrant and Xiaoxia Zhu (incorporatedby reference to exhibit 99.5 to the Schedule 13D (File No. 005-88838) filed with the SEC on June 18, 2015) 4.14 Lock-Up Agreement, dated as of June 8, 2015, by and between the Registrant and Huimin Wang(incorporated by reference to exhibit 99.5 to the Schedule 13D (File No. 005-88838) filed with the SEC onJune 19, 2015) 4.15 Working Capital Provision Agreement, dated as of April 20, 2015, by and between the Registrant, XiaoxiaZhu and Huimin Wang (incorporated by reference to exhibit 4.23 of our annual report on Form 20-F filedwith the SEC on April 29, 2016) 106 4.16* Working Capital Provision Agreement, dated as of May 25, 2017, by and between the Registrant, XiaoxiaZhu and Huimin Wang. 4.17 Share Purchase Agreement, dated as of September 7, 2015, by and between the Registrant and CenturyWinning Limited (incorporated by reference to exhibit 4.33 of our annual report on Form 20-F filed with theSEC on April 29, 2016) 4.18* Supplemental Agreement, dated as of December 28, 2016, by and among Shanghai Zhongming SupplyChain Management Co., Ltd., Shanghai Zhongmin Supply Chain Management Co., Ltd. and ShanghaiZhongmin Investment and Development Group Co., Ltd. (formally known as Shanghai Zhongmin Investmentand Development Group Co., Ltd.) 4.19* Financial Support Letter, dated as of May 18, 2017, from the Registrant to Shanghai Zhongmin SupplyChain Management Co., Ltd. 8.1* List of Subsidiaries of the Registrant 11.1 Code of Business Conduct and Ethics of the Registrant (incorporated by reference to exhibit 99.1 to our F-1registration statement (File No. 333-201413) initially filed with the SEC on January 9, 2015) 12.1* Certification of Chief Executive Officer Required by Rule 13a-14(a) 12.2* Certification of Chief Financial Officer Required by Rule 13a-14(a) 13.1** Certification of Chief Executive Officer Required by Rule 13a-14(b) 13.2** Certification of Chief Financial Officer Required by Rule 13a-14(b) 15.1* Consent of Ernst & Young Hua Ming LLP 15.2* Consent of Beijing Dentons Law Offices, LLP 15.3* Consent of Maples and Calder (Hong Kong) LLP 15.4* Consent of Deloitte Touche Tohmatsu Certified Public Accountants LLP 15.5* Letter from Deloitte Touche Tohmatsu Certified Public Accountants LLP to the SEC 101.INS* XBRL Instance Document. 101.SCH* XBRL Taxonomy Extension Schema Document. 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF* XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB* XBRL Taxonomy Extension Labels Linkbase Document. 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document. *Filed herewith **Furnished herewith 107 SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly causedand authorized the undersigned to sign this annual report on its behalf. JMU LIMITED By:/s/Xiaoxia Zhu Name:Xiaoxia Zhu Title:Chief Executive Officer Date: May 26, 2017 108 JMU LIMITED (FORMERLY KNOWN AS WOWO LIMITED)CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 JMU LIMITED FORMERLY KNOWN AS WOWO LIMITED INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements PAGE(S) REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-3 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2015 AND 2016 F-4 – F-5 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2014, 2015AND 2016 F-6 – F-7 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31,2014, 2015 AND 2016 F-8 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDEDDECEMBER 31, 2014, 2015 AND 2016 F-9 – F-11 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014, 2015AND 2016 F-12 – F-13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2014,2015 AND 2016 F-14 – F-60 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders ofJMU Limited (formerly known as Wowo Limited): We have audited the accompanying consolidated balance sheet of JMU Limited (formerly known as Wowo Limited) (the"Company") as of December 31, 2016 and the related consolidated statements of operations, comprehensive loss, changes inshareholders’ equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, anaudit of its internal control over financial reporting. Our audit included consideration of internal control over financialreporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we expressno such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in theconsolidated financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our auditprovide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidatedfinancial position of JMU Limited at December 31, 2016 and the consolidated results of its operations and its cash flows for theyear then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young Hua Ming LLPShanghai, the People’s Republic of China May 26, 2017 F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of JMU Limited: We have audited the accompanying consolidated balance sheet of JMU Limited (the "Company", formerly known as "WowoLimited"), its subsidiaries, its variable interest entity ("VIE"), and its VIE’s subsidiaries (collectively, the "Group") as ofDecember 31, 2015 and the related consolidated statements of operations, comprehensive loss, changes in equity, and cash flowsfor the each of the two years ended December 31, 2015. These financial statements are the responsibility of the Group’smanagement. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement. The Group is not required to have, nor were we engaged to perform, anaudit of its internal control over financial reporting. Our audits included consideration of internal control over financialreporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Group’s internal control over financial reporting. Accordingly, we express nosuch opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in theconsolidated financial statements, assessing the accounting principles used and significant estimates made by management, aswell as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group asof December 31, 2015 and the results of their operations and their cash flows for each of the two years ended December 31,2015, in conformity with the accounting principles generally accepted in the United States of America . The accompanying consolidated financial statements have been prepared assuming that the Group will continue as a goingconcern. As discussed in Note 2 to the consolidated financial statements, the Group’s recurring losses from operations andshareholders’ equity raise substantial doubt about its ability to continue as a going concern. Management’s plans concerningthese matters are also discussed in Note 2 to the consolidated financial statements. The consolidated financial statements do notinclude any adjustments that might result from the outcome of this uncertainty. /s/ Deloitte Touche Tohmatsu Certified Public Accountants LLPBeijing, the People’s Republic of China April 29, 2016 F-3 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDCONSOLIDATED BALANCE SHEETS(In U.S. dollars, except for number of shares and per share (or ADS) data) As of December 31, Note 2015 2016 ASSETS: Current assets: Cash and cash equivalents 11,151,900 2,604,886 Accounts receivable, net of allowance of nil as of December 31, 2015 and2016 7 3,748,398 1,645,237 Inventories, net 94,409 224,148 Prepaid expenses and other current assets 8 25,281,434 8,677,630 Deferred tax assets 14 - 63,286 Amounts due from related parties 20 806,423 212,805 Total current assets 41,082,564 13,427,992 Non-current assets: Property and equipment, net 9 478,075 1,977,659 Acquired intangible assets, net 10 50,562,945 36,274,238 Investment 11 - 720,150 Goodwill 12 250,650,500 221,337,157 Deferred tax assets 14 - 156,316 Other non-current assets - 151,552 Total non-current assets 301,691,520 260,617,072 TOTAL ASSETS 342,774,084 274,045,064 LIABILITIES AND SHAREHOLDER’S EQUITY : Current liabilities: Accounts and notes payable (including accounts and notes payable of VIEwithout recourse to the Company of $3,818,023 and $2,200,292 as ofDecember 31, 2015 and 2016, respectively) 3,831,218 2,200,451 Accrued expenses and other current liabilities (including accrued expensesand other current liabilities of VIE without recourse to the Company of$19,134,673 and $8,198,754 as of December 31, 2015 and 2016,respectively) 13 19,970,456 9,033,258 Advance from customers (including advance from customers of VIE withoutrecourse to the Company of $828,437 and $2,282,353 as of December 31,2015 and 2016, respectively) 828,437 2,282,353 Amounts due to related parties (including amounts due to related parties ofVIE without recourse to the Company of $319,767 and $1,650,168 as ofDecember 31, 2015 and 2016, respectively) 20 319,767 1,711,028 Total current liabilities 24,949,878 15,227,090 F-4 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDCONSOLIDATED BALANCE SHEETS (CONTINUED)(In U.S. dollars, except for number of shares and per share (or ADS) data) As of December 31, Note 2015 2016 LIABILITIES AND SHAREHOLDER’S EQUITY (CONTINUED): Non-current liabilities: Other non-current liabilities (including other non-current liabilities of VIEwithout recourse to the Company of nil and $1,086,342 as of December 31,2015 and 2016, respectively) 502,180 1,352,202 Deferred tax liabilities (including deferred tax liabilities of the VIE withoutrecourse to the Company of nil and nil as of December 31, 2015 and 2016,respectively) 14 12,640,736 9,068,560 Total non-current liabilities 13,142,916 10,420,762 TOTAL LIABILITIES 38,092,794 25,647,852 Commitments and contingencies 21 Shareholders’ equity: Ordinary shares ($0.00001 par value; 1,827,462,652 shares authorized,1,476,208,670 shares issued and outstanding as of December 31, 2015 and2016) 15 14,447 14,756 Additional paid-in capital 630,469,782 632,994,514 Accumulated deficit (326,711,132) (352,004,277)Accumulated other comprehensive income/(loss) 908,193 (32,607,781)Total shareholders’ equity 304,681,290 248,397,212 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 342,774,084 274,045,064 The accompanying notes are an integral part of these consolidated financial statements. F-5 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDCONSOLIDATED STATEMENTS OF OPERATIONS(In U.S. dollars, except for number of shares and per share (or ADS) data) For the years ended December 31, Note 2014 2015 2016 Revenues Related parties 20 - 541,758 10,078,276 Third parties - 10,935,794 63,122,885 Total revenues - 11,477,552 73,201,161 Cost of revenues - (13,220,386) (72,856,808)Gross (loss) profit - (1,742,834) 344,353 Operating expenses: Selling and marketing (including share-based compensationof nil, nil and $680,124 for the years ended December 31,2014, 2015 and 2016, respectively) - (5,360,044) (20,405,602)General and administrative (including share-basedcompensation of $4,190,449, nil and $417,419 for theyears ended December 31, 2014, 2015 and 2016,respectively) (4,323,253) (12,911,773) (7,530,851)Impairment of goodwill - (85,934,770) - Total operating expenses (4,323,253) (104,206,587) (27,936,453)Loss from operations (4,323,253) (105,949,421) (27,592,100) Interest income 4 7,392 26,147 Other income, net - 46,210 39,351 Loss before provision for income taxes (4,323,249) (105,895,819) (27,526,602)Income tax benefits 14 - 1,249,696 2,233,457 Loss from continuing operations (4,323,249) (104,646,123) (25,293,145) Discontinued operations: (Loss)/income from discontinued operations (including gainof $47,390,421 upon disposal in the year ended December31, 2015), net of tax of nil 6 (39,546,576) 11,075,935 - Net loss (43,869,825) (93,570,188) (25,293,145)Less: Net loss attributable to noncontrolling interests (13,478) - - Net loss attributable to JMU Limited (43,856,347) (93,570,188) (25,293,145) F-6 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDCONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)(In U.S. dollars, except for number of shares and per share (or ADS) data) For the years ended December 31, Note 2014 2015 2016 Accretion for Series A-1 convertible redeemable preferredshares 16 1,445,125 442,409 - Accretion for Series A-2 convertible redeemable preferredshares 16 36,947,001 1,202,748 - Accretion for Series B convertible redeemable preferredshares 16 2,422,383 720,194 - Net loss attributable to holders of ordinary shares ofJMU Limited (84,670,856) (95,935,539) (25,293,145) Net loss per ordinary share 19 Basic (0.28) (0.09) (0.02)Diluted (0.28) (0.09) (0.02)Net loss per ordinary share from continuing operations 19 Basic (0.03) (0.1) (0.02)Diluted (0.03) (0.1) (0.02)Net (loss) income per ordinary share from discontinuedoperations 19 Basic (0.25) 0.01 - Diluted (0.25) 0.01 - Net income per Series A-1 preferred share-Basic 19 0.12 0.14 - Net income per Series A-2 preferred share-Basic 19 0.30 0.04 - Net income per Series B preferred share-Basic 19 0.08 0.09 - Weighted average shares used in calculating net loss perordinary share 19 Basic Continuing operations 303,886,640 1,001,754,524 1,474,087,060 Discontinued operations 303,886,640 1,001,754,524 - Diluted Continuing operations 303,886,640 1,001,754,524 1,474,087,060 Discontinued operations 303,886,640 1,043,473,265 - Weighted average shares used in calculating net loss pershare 19 Series A-1 preferred share 12,202,988 3,242,986 - Series A-2 preferred share 122,029,877 32,429,858 - Series B preferred share 30,507,471 8,107,465 - The accompanying notes are an integral part of these consolidated financial statements F-7 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDCONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(In U.S. dollars, except for number of shares and per share (or ADS) data) For the years ended December 31, Note 2014 2015 2016 Net loss (43,869,825) (93,570,188) (25,293,145)Other comprehensive income (loss), net of tax of nil: Change in cumulative foreign currency translation adjustment 2,031,505 1,589,686 (33,515,974)Comprehensive loss (41,838,320) (91,980,502) (58,809,119)Less: comprehensive loss attributable to noncontrolling interests (13,353) - - Comprehensive loss attributable to JMU Limited’s shareholders (41,824,967) (91,980,502) (58,809,119) The accompanying notes are an integral part of these consolidated financial statements. F-8 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDCONSOLIDATED STATEMENTS OF CHANGES IN (DEFICIT) EQUITY(In U.S. dollars, except for number of shares and per share (or ADS) data) Ordinary shares Additionalpaid-in capital Subscriptionreceivable Accumulateddeficit Accumulatedothercomprehensiveloss Total JMULimitedshareholders’(deficit)/equity Noncontrollinginterests Totalshareholders’(deficit)/equity Number ofShares Amount Balance as of January1, 2014 303,886,640 3,039 7,029,716 (3,000) (161,205,591) (2,712,873) (156,888,709) - (156,888,709) Accretion for Series A-1,Series A-2 and Series Bconvertible redeemablepreferred shares (Note16) - - (12,735,503) - (28,079,006) - (40,814,509) - (40,814,509)Net loss - - - - (43,856,347) - (43,856,347) (13,478) (43,869,825)Share-basedcompensation (Note 18) - - 5,762,384 - - - 5,762,384 - 5,762,384 Subscription received - - - 3,000 - - 3,000 - 3,000 Other comprehensiveincome - - - - - 2,031,380 2,031,380 125 2,031,505 Partial disposal of a VIE - - (56,597) - - - (56,597) 56,597 - Balance as of December31, 2014 303,886,640 3,039 - - (233,140,944) (681,493) (233,819,398) 43,244 (233,776,154) F-9 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDCONSOLIDATED STATEMENTS OF CHANGES IN (DEFICIT) EQUITY (CONTINUED)(In U.S. dollars, except for number of shares and per share (or ADS) data) Ordinary shares Additional paid-in capital Subscription receivable Accumulated deficit Accumulatedothercomprehensiveloss Total JMULimitedshareholders’(deficit)/equity Noncontrollinginterests Totalshareholders’(deficit)/equity Number ofShares Amount Issuance of ordinaryshares upon initialpublic offering (“IPO”) 75,960,000 760 37,293,840 - - - 37,294,600 - 37,294,600 Ordinary shares convertedto ADS shares for futureexercise of shareoptions (Note 15) 31,496,832 - - - - - - - Share options exercised(Note 15) 6,866,280 69 105,839 - - - 105,908 - 105,908 Conversion of Mr. Xu'sindebtness into ordinaryshares 124,835,802 1,248 69,351,975 - - - 69,353,223 - 69,353,223 Conversion of Series A-1,Series A-2 and Series Bconvertible redeemablepreferred shares intoordinary shares (Note16) 164,740,336 1,647 127,017,632 - - - 127,019,279 - 127,019,279 Issuance of shares as aconsideration foracquisition of JMU 741,422,780 7,414 376,957,523 - - - 376,964,937 - 376,964,937 Issuance of ordinaryshares to Mr. Xu 27,000,000 270 14,999,730 - - - 15,000,000 - 15,000,000 Share-based compensation(Note 18) - - 7,176,600 - - - 7,176,600 - 7,176,600 Purchase thenoncontrolling interestsof subsidiaries - - (68,006) - - - (68,006) (43,244) (111,250)Accretion for Series A-1,Series A-2 and Series Bconvertible redeemablepreferred shares (Note16) - - (2,365,351) - - - (2,365,351) - (2,365,351)Net loss - - - - (93,570,188) - (93,570,188) - (93,570,188)Other comprehensiveincome - - - - - 1,589,686 1,589,686 - 1,589,686 Balance as of December31, 2015 1,476,208,670 14,447 630,469,782 - (326,711,132) 908,193 304,681,290 - 304,681,290 F-10 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDCONSOLIDATED STATEMENTS OF CHANGES IN (DEFICIT) EQUITY (CONTINUED)(In U.S. dollars, except for number of shares and per share (or ADS) data) Ordinary shares Additional Accumulatedother Total JMULimited Non Total Number of Shares Amount paid-incapital Subscriptionreceivable Accumulateddeficit comprehensiveloss shareholders’(deficit)/equity controllinginterests shareholders’(deficit)/equity Share options exercised (Note 15) 2,294,208 23 49,972 - - - 49,995 - 49,995 Restricted share units vested (Note15) 28,639,900 286 (286) - - - - - - Share-based compensation (Note18) - - 1,097,543 - - - 1,097,543 - 1,097,543 Obligation to issue ordinary shares(Note 3) - - 1,377,503 - - - 1,377,503 - 1,377,503 Net loss - - - - (25,293,145) - (25,293,145) - (25,293,145)Other comprehensive loss - - - - - (33,515,974) (33,515,974) - (33,515,974)Settlement of share optionsexercised with shares held bydepository bank (Note 15) (30,934,108) - - - - - - - - Balance as of December 31, 2016 1,476,208,670 14,756 632,994,514 - (352,004,277) (32,607,781) 248,397,212 - 248,397,212 The accompanying notes are an integral part of these consolidated financial statements. F-11 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDCONSOLIDATED STATEMENTS OF CASH FLOWS(In U.S. dollars, except for number of shares and per share (or ADS) data) For the years ended December 31, 2014 2015 2016 Cash flows from operating activities: Net loss (43,869,825) (93,570,188) (25,293,145)Less: Net (loss)/income from discontinued operations (39,546,576) 11,075,935 - Net loss from continuing operations (4,323,249) (104,646,123) (25,293,145)Adjustments to reconcile net loss to net cash used in operating activities: Share-based compensation 4,190,449 - 1,097,543 Depreciation and amortization - 4,949,036 8,900,192 Impairment of goodwill - 85,934,770 - Income tax benefits - (1,249,696) (2,233,457)Customer credits earned under the loyalty program to be settled in shares - - 1,377,503 Changes in operating assets and liabilities: Accounts receivable - (3,008,932) 1,936,461 Inventories - 957,133 (142,273)Prepaid expenses and other current assets (110,778) (18,524,604) 15,797,204 Amount due from related parties - 8,512,188 567,545 Other non-current assets - - (158,469)Accounts and notes payable - 1,873,123 (1,436,785)Accrued expenses and other current liabilities (16,863) 16,708,637 (8,612,603)Amounts due to related parties - (2,739,467) 1,474,304 Other non-current liabilities - 502,180 899,594 Net cash used in continuing operations (260,441) (10,731,755) (5,826,386)Net cash used in discontinued operations (31,699,619) (22,799,544) - Net cash used in operating activities (31,960,060) (33,531,299) (5,826,386) Cash flows from investing activities: Purchase of property and equipment - (93,317) (1,860,321)Payment for investment - - (720,150)Payments for acquisition of business (net of cash acquired of nil, $20,196,362and nil for the years ended December 31, 2014, 2015 and 2016,respectively) - (9,803,638) - Net cash used in continuing operations - (9,896,955) (2,580,471)Net cash used in discontinued operations (586,534) (1,999,364) - Net cash used in investing activities (586,534) (11,896,319) (2,580,471) F-12 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDCONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)(In U.S. dollars, except for number of shares and per share (or ADS) data) For the years ended December 31, 2014 2015 2016 Cash flows from financing activities: Proceeds from issuance of ordinary shares upon IPO - 40,294,600 - Payments for IPO costs (874,628) (2,125,372) - Received from / (payment to) related parties 36,291,479 (250,000) - Subscription proceeds received 3,000 - - Proceeds from issuance of ordinary shares to Mr. Xu - 15,000,000 - Net cash provided by continuing operations 35,419,851 52,919,228 - Net cash (used in) / provided by discontinued operations (1,651,880) 1,963,650 - Net cash provided by financing activities 33,767,971 54,882,878 - Effect of exchange rate changes 5,490 50,468 (140,157)Increase/(decrease) in cash and cash equivalents 1,226,867 9,505,728 (8,547,014) Cash and cash equivalents, beginning of the year 419,305 1,646,172 11,151,900 Cash and cash equivalents, end of the year 1,646,172 11,151,900 2,604,886 Supplement disclosure of cash flow information: Interest paid 104,084 - - The accompanying notes are an integral part of these consolidated financial statements. F-13 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 1.ORGANIZATION AND PRINCIPAL ACTIVITIES JMU Limited, formerly known as “Wowo Limited”, (the “Company”), was incorporated in Cayman Islands on July 13, 2011.The Company and its subsidiaries, variable interest entities (“VIEs”) and VIEs’ subsidiaries are primarily engaged inproviding the e-commerce platform networking services, focusing on local entertainment and lifestyle services such asrestaurants, movie theaters and beauty salons and also allow local merchants to create online stores and make direct sales totheir target customers for consumption at their brick and mortar stores in the People’s Republic of China ("PRC"). On April 8, 2015, the Company completed its IPO in National Association of Securities Dealers Automated Quotation(“NASDAQ”) by offering 4 million American Depositary Shares (“ADSs”), representing 72 million ordinary shares, andreceived net proceeds of $35.2 million. On April 27, 2015, the Company issued an additional 220,000 ADSs, representing3.96 million of ordinary shares to the underwriter for exercising the over-allotment option at price of $10 per ADS andreceived net proceeds of $2.1 million. On June 5, 2015, the Company and its wholly owned subsidiary, New Admiral Limited (“New Admiral”) entered into anagreement to acquire Join Me Group (HK) Investment Company Limited and its subsidiaries, variable interest entity (“VIE”)and VIE’s subsidiaries (Collectively, “JMU Group”) with a consideration of 741,422,780 ordinary shares of the Companyand $30 million in cash. On that date, JMU Group, which operates a business-to-business ("B2B") online e-commerceplatform that provides integrated services to suppliers and consumers in the catering industry, became a wholly ownedsubsidiary of the Company. JMU Group engages primarily in the sale of rice, flavor, bean oil, seafood, wine and some othertypes of generic food and beverage products through its website www.ccjoin.com. On September 9, 2015, the Company sold all of its equity interests in Wowo Group Limited, a subsidiary of the Company,together with all of its subsidiaries and consolidated VIEs and their respective subsidiaries (collectively, the “Group BuyingEntities”), which were engaged in the Company’s group buying business and other non-food service-related businesses. Thesale was pursuant to a definitive agreement entered into between the Company and Century Winning Limited, an exemptedcompany with limited liability incorporated under the laws of the British Virgin Islands (the “Buyer”), in exchange for theBuyer’s payment of $1 and the assumption of $47,390,420 of net liabilities of the Group Buying Entities. F-14 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 1.ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED) This disposal represents a strategic shift and has a major effect on the Company’s results of operations. Accordingly, assetsand liabilities, revenues and expenses, and cash flows related to the Group Buying Entities have been reclassified in theaccompanying consolidated financial statements as discontinued operations for all periods presented. The consolidatedstatement of operations and the consolidated statements of cash flows for the years ended December 31, 2014 is adjustedretrospectively to reflect the change. Additionally, the presentation of the accompanying notes will not include thefinancial information for the year ended December 31, 2014 if they were nil due to the disposal and related classificationwithin discontinued operations mentioned above. On December 28, 2016, the Company changed its name from Wowo Limited to JMU Limited. As of December 31, 2016, the Company’s major subsidiaries and VIE (collectively, the “Group”) are as follows: Date ofacquisition/incorporation Place ofestablishment/incorporation Percentageoflegalownership Subsidiaries: New Admiral April 27, 2015 CaymanIslands 100%Join Me Group (HK) Investment Company Limited (“JMU Investment”) June 8, 2015 Hong Kong 100%Join Me Group Supply Chain Management Company Limited (“JMUSupply Chain”) October 15,2015 Hong Kong 100%Shanghai Zhongming Supply Chain Management Co., Ltd. (“ShanghaiZhongming” or “WFOE” ) June 8, 2015 PRC 100% VIE: Shanghai Zhongmin Supply Chain Management Co., Ltd. (“ShanghaiZhongmin” or “VIE”) June 8, 2015 PRC N/A F-15 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 1.ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED) The VIE arrangements The PRC laws and regulations currently place certain restrictions on foreign ownership of companies that engage in internetcontent and other restricted businesses. Specifically, foreign investors are not allowed to own more than 50% of the equityinterests in any entity conducting internet content and other restricted businesses. To comply with these PRC laws andregulations, the Company conducts substantially its businesses through the VIE and VIE’s subsidiaries. To provide theCompany’s control over the VIE and the rights to the expected residual returns of the VIE and VIE’s subsidiaries, ShanghaiZhongming, a wholly foreign-invested enterprise in China, or WFOE entered into a series of contractual arrangements asdescribed below with VIE and its shareholder. Prior to the acquisition of JMU Group, JMU Group formed contractual arrangements through its wholly owned subsidiaryShanghai Zhongming with the VIE. As a result of the Company's acquisition of JMU Group, the Company through JMU'swholly owned subsidiary, Shanghai Zhongming, has (1) power to direct the activities of the VIE that most significantlyaffect the entity’s economic performance and (2) the right to receive economic benefits of the VIE that could be significantto the VIE. Accordingly, the Company is considered the primary beneficiary of the VIE and has consolidated the VIE’sfinancial results of operations, assets, and liabilities in the Company’s consolidated financial statements. The Company alsobelieves that this ability to exercise control ensures that the VIE will continue to execute and renew the exclusiveconsulting and services agreements and pay service fees to the Company. The ability to charge service fees in amountsdetermined at the Company’s sole discretion, and by ensuring that the exclusive services agreements are executed andrenewed indefinitely, the Company has the right to receive substantially all of the economic benefits from the VIE. Additionally, the previous VIE agreements entered into between Beijing Wowo Shijie Information Technology Co., Ltd.and Beijing Wowo Tuan Information Technology Co., Ltd. and Beijing Kai Yi Shi Dai Network Technology Co., Ltd are nolonger in force as result of the disposal of Group Buying Entities. The following is a summary of the various VIE agreements: ·Agreements that Transfers Economic Benefits and Risks to the Company Master Exclusive Service Agreement and Business Cooperation AgreementPursuant to the master exclusive service agreement and business cooperation agreement, VIE, including its subsidiaries orany companies or entities under its control, agrees to engage WFOE as its provider for technical and business supportservices. VIE will pay to WFOE service fees determined based on the audited consolidated net profit of VIE. WFOE willexclusively own any intellectual property arising from the performance of the services set forth in the agreement. WFOE willprovide financial support to VIE in the form of bank loans or others forms as permitted under the PRC laws. The serviceagreements will remain effective upon the written confirmation issued by WFOE to VIE and/or its shareholder 30 daysbefore the termination. Neither VIE nor its shareholder has the right to unilaterally terminate the agreement. In connection with the master service agreement, the Company also entered into financial support undertaking letter withVIE and agrees to provide unlimited financial support to the VIE, to the extent permissible under the applicable PRC lawsand regulations, whether or not any such operational loss is actually incurred. The Company will not request repayment ofthe loans or borrowings if the VIE or its shareholder do not have sufficient funds or are otherwise unable to repay. F-16 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 1.ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED) The VIE arrangements (Continued) ·Agreements that Provide the Company with Effective Control over VIE Exclusive Option AgreementThe VIE’s shareholder has entered into an exclusive option agreement with WFOE, pursuant to which WFOE has anexclusive option to purchase, or to designate other persons to purchase, to the extent permitted by applicable PRC laws,rules and regulations, all of the equity interest in VIE from the shareholder. The purchase price for the entire equity interestis to be the minimum price permitted by applicable PRC laws and administrative regulations. If there is no minimum priceunder PRC laws or administrative regulations, the price shall be determined by the WFOE or on a basis of the registrationcapital of VIE. The term of the exclusive option agreement will remain effective upon written confirmation issued by theWFOE to VIE and its shareholder 30 days before the termination. Neither VIE nor its shareholder has the right tounilaterally terminate the agreement. Proxy and Power of Attorney AgreementThe VIE’s shareholder has signed an irrevocable proxy and power of attorney agreement to appoint WFOE, or its designee,as the attorney-in-fact to act on VIE’s shareholder's behalf on all rights that the shareholder has in respect of suchshareholder's equity interest in VIE conferred by relevant laws and regulations and the articles of association of VIE. Therights include but not limited to attending shareholders meeting, exercising voting rights and transferring all or a part of theequity interests of VIE held by the shareholder. The proxy and power of attorney will remain effective upon writtenconfirmation issued by WFOE to VIE and its shareholder 30 days before the termination. Neither VIE nor its Shareholderhas the right to unilaterally terminate the agreement. Equity Interest Pledge AgreementThe VIE’s shareholder has entered into an equity pledge agreement with the WFOE, under which the shareholder pledgedall of the equity interests in VIE to WFOE as collateral to secure performance of all obligations under the Master ExclusiveService Agreement, Business Cooperation Agreement, Proxy and Power of Attorney Agreement and the Exclusive OptionAgreement (collectively, the "Principal Agreement"). Pursuant to this Equity Interest Pledge Agreement, dividendsgenerated by the pledged equity interests shall be deposited into the account designated by the WFOE and shall be used topay the secured indebtedness prior and in preference to any other payment during the term of the pledge. If any event ofdefault incurred under the Principal Agreement, WFOE, as the pledgee, will be entitled to dispose of the pledged equityinterests and shall be paid in priority with the proceeds recovered from the disposal. F-17 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 1.ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED) Risks in relation to the VIE structure Assessing the legal validity and compliance of these above noted arrangements are a precursor to the Company’s ability toconsolidate the results of operations and financial condition of the VIE and VIE’s subsidiaries. The Company, inconsultation with its PRC legal counsel, believes that:(1) the ownership structure of the Group, including its PRCsubsidiary, VIE and VIE’s subsidiaries is in compliance with all existing PRC laws and regulations; (2) each of the VIEagreements amongst the WFOE, the VIE and VIE’s shareholder governed by PRC laws, are legal, valid and binding,enforceable against such parties, and will not result in any violations of PRC laws or regulations currently in effects; and (3)the Group’s PRC subsidiary, VIE and VIE’s subsidiaries have the necessary corporate power and authority to conduct itsbusiness as described in its business scope under its business licenses, which is in full force and effect, and the Group’sbusiness operations in the PRC are in compliance with existing PRC laws and regulations. The shareholder of the VIE arealso shareholders of the Company and therefore have no current interest in seeking to act contrary to the contractualarrangements. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce thesecontractual arrangements and if the shareholders were to reduce their interest in the Company, their interests may divergefrom that of the Company and that may potentially increase the risk that they would seek to act contrary to the contractualterms. The Company’s ability to control the VIE also depends on the power of attorney. The Company, through WFOE, has to voteon all matters requiring shareholder approval in the VIE entities. As noted above, the Company believes this power ofattorney is legally enforceable but may not be as effective as direct equity ownership. In addition, if the legal structure and contractual arrangements were found to be in violation of any existing PRC laws andregulations, the PRC regulatory authorities could: §revoke the Group’s business and operating licenses;§require the Group to discontinue or restrict its operations;§restrict the Group’s right to collect revenues;§restrict or prohibit the Group to finance its business and operations in China;§shut down the Group’s servers or block the Group’s website;§require the Group to restructure its operations;§impose additional conditions or requirements with which the Group might not be able to comply, levy fines,confiscate the Group’s income or the income of its PRC subsidiary or affiliated PRC entities; or§take other regulatory or enforcement actions against the Group that could be harmful to its business. The imposition of any of these penalties could result in a material adverse effect on the Group’s ability to conduct theGroup’s business. In addition, if the imposition of any of these penalties causes the Group to lose the rights to direct theactivities of the VIE, VIE’s subsidiaries, or the right to receive their economic benefits, the Group would no longer be ableto consolidate the VIE and VIE’s subsidiaries. The Group does not believe that any penalties imposed or actions taken bythe PRC government would result in the liquidation or dissolution of the Company, WFOE, the VIE and their respectivesubsidiaries. The following financial statement balances and amounts of the VIE and VIE’s subsidiaries were included in theaccompanying consolidated financial statements as follows after the elimination of intercompany balances and transactionsamong VIE and VIE’s subsidiaries within the Group: F-18 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 1.ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED) Risks in relation to the VIE structure (Continued) As of December 31, 2015 2016 US$ US$ Cash and cash equivalents 2,137,414 1,923,903 Accounts receivable, net 3,748,398 1,645,237 Inventories, net 94,409 224,148 Prepaid expenses and other current assets 19,919,504 7,812,462 Amounts due from related parties 661,275 212,805 Total current assets 26,561,000 11,818,555 Property and equipment, net 317,186 1,864,660 Investment - 720,150 Other non-current assets - 151,553 Total non-current assets 317,186 2,736,363 TOTAL ASSETS 26,878,186 14,554,918 Accounts and notes payable 3,818,023 2,200,292 Accrued expenses and other current liabilities 19,134,673 8,198,754 Advance from customers 828,437 2,282,353 Amounts due to related parties 319,767 1,650,168 Total current liabilities 24,100,900 14,331,567 Other non-current liabilities - 1,086,342 Total non-current liabilities - 1,086,342 TOTAL LIABILITIES 24,100,900 15,417,909 For the years ended December31, 2015 2016 US$ US$ Revenues 11,477,552 66,288,019 Net loss (8,052,187) (17,022,631) F-19 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 1.ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED) Risks in relation to the VIE structure (Continued) For the years ended December31, 2015 2016 US$ US$ Net cash provided by operating activities 238,302 2,657,916 Net cash used in investing activities (44,228) (2,578,472)Net cash provided by financing activities - - The VIE contributed an aggregate of nil, 100% and 90.6% of the consolidated revenues for the years ended December 31,2014, 2015 and 2016, respectively. As of December 31, 2015 and 2016, the VIE accounted for an aggregate of 7.8% and5.3%, respectively, of the consolidated total assets, and 63.3% and 60.1%, respectively, of the consolidated total liabilities.The assets not associated with the VIE primarily consist of certain cash and cash equivalents, certain prepaid expenses andother current assets and certain property and equipment. The recognized and unrecognized revenue-producing assets thatare held by the VIE are primarily property and equipment and online platform. There are no consolidated VIE’s assets that are collateral for the VIE’s obligations and can only be used to settle the VIE’sobligations. There are no creditors (or beneficial interest holders) of the VIE that have recourse to the general credit of theCompany or any of its consolidated subsidiaries. There are no terms in any arrangements, considering both explicitarrangements and implicit variable interests that require the Company or its subsidiaries to provide financial support to theVIE. However, if the VIE ever need financial support, the Company’ PRC subsidiary, WOFE, shall provide financial supportto VIE in the form of bank loans or other forms as permitted under PRC law. Relevant PRC laws and regulations restrict theVIE from transferring a portion of their net assets, equivalent to the balance of its statutory reserve and its share capital, tothe Company in the form of loans and advances or cash dividends. Please refer to Note 23 for disclosure of restricted netassets. F-20 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 2.GOING CONCERN The Group experienced a net loss of approximately $43.9 million, $93.6 million and $25.3 million for the years endedDecember 31, 2014, 2015 and 2016, respectively, and negative cash flows from operations of approximately $32.0 million,$33.5 million and $5.8 million for the years ended December 31, 2014, 2015 and 2016, respectively. These conditions raisesubstantial doubt about the Group’s ability to continue as a going concern. However, management believes the Group hasthe ability to fulfill its financial obligations and will continue as a going concern because its primary shareholders, Ms.Xiaoxia Zhu (“Ms. Zhu”) and Ms. Huimin Wang (“Ms. Wang”), have agreed in writing to provide adequate funds to enablethe Group to meet in full its financial obligations as they fall due through May 31, 2018. In January, March and May 2017,Ms. Zhu provided loans to fund the Group’s daily operations with amounts of RMB10.0 million ($1.2 million), RMB15.0million ($1.9 million) and RMB35.0 million ($5.1 million), respectively. These loans are due on July 1, 2018. The Group believes that it can realize its assets and satisfy its liabilities in the normal course of business with the financialsupport from Ms. Zhu and Ms. Wang. As a result, the consolidated financial statements have been prepared assuming theGroup will continue as a going concern. The accompanying consolidated financial statements do not reflect anyadjustments relating to the recoverability and reclassification of assets and liabilities as that might be necessary if the Groupis unable to continue as a going concern. 3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The consolidated financial statements of the Group have been prepared in accordance with the U.S. generally acceptedaccounting principles (‘‘US GAAP’’). Principle of consolidation The consolidated financial statements of the Group include the financial statements of the Company, its consolidatedsubsidiaries, VIE and VIE’s subsidiaries for which the Company is the primary beneficiary. All significant inter-companytransactions and balances have been eliminated upon consolidation. Business combinations Business combinations are recorded using the acquisition method of accounting. The assets acquired, the liabilitiesassumed, and any noncontrolling interest of the acquiree at the acquisition date, if any, are measured at their fair values asof that date. Goodwill is recognized and measured as the excess of the total consideration transferred plus the fair value ofany noncontrolling interests of the acquiree, if any, at the acquisition date over the fair values of the identifiable net assetsacquired. Consideration transferred in a business acquisition is measured at the fair value as at the date of acquisition. F-21 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Discontinued operations A disposal of a component of an entity or a group of components of an entity shall be reported in discontinued operationsif the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations. Classification as adiscontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, ifearlier. Where an operation is classified as discontinued, a single amount is presented on the face of the consolidatedstatements of operations. The amount of total current assets, total non-current assets, total current liabilities and total non-current liabilities are presented separately on the consolidated balance sheets. Use of estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities atthe date of the consolidated financial statements and the reported amounts of revenues and expenses during the period.Areas where management uses subjective judgment include, but are not limited to, estimating useful lives and impairmentfor property and equipment and acquired intangible assets, impairment of goodwill, valuation allowance for deferred taxassets, share-based compensation and purchase price allocation. Changes in facts and circumstances may result in revisedestimates. Actual results could differ from those estimates, and as such, differences may be material to the consolidatedfinancial statements. Foreign currency The functional and reporting currency of the Company is the United States dollar (“U.S. dollars”). The functional currencyof the Company's subsidiary, New Admiral, is U.S. dollars. The functional currency of the Company’s HK subsidiaries, JMUInvestment and JMU Supply Chain, is Hong Kong dollars (“HK dollars”). The financial records of the Group’s subsidiaries,VIE and VIE’s subsidiaries located in the PRC are maintained in their local currencies, the Renminbi (“RMB”), respectively,which are also the functional currencies of these entities. Transactions denominated in currencies other than the respective entities’ functional currencies are re-measured into thefunctional currencies, in accordance with Accounting Standards Codification (“ASC”) 830 (“ASC 830”) Foreign CurrencyMatters, at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in foreigncurrencies are re-measured into the functional currencies at the exchange rates prevailing at the balance sheet date. Allforeign exchange gains or losses are included in the consolidated statements of operations. Assets and liabilities are translated to the reporting currency at the exchange rates at the balance sheet date, equity accountsare translated at historical exchange rates and revenues, expenses, gains and losses are translated using the average rate forthe year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate componentof consolidated statements of comprehensive loss. Cash and cash equivalents Cash and cash equivalents consists of cash on hand and demand deposits placed with banks or other financial institutionswhich are unrestricted as to withdrawal and use and have original maturities less than three months. F-22 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Accounts receivable, net of allowance Accounts receivable represents those receivables derived in the ordinary course of business, carried at net realizable value. The Group maintains an allowance for doubtful accounts for estimated losses on uncollected accounts receivable.Management considers the following factors when determining the collectability of specific accounts: creditworthiness ofcustomers, aging of the receivables, past transaction history with customers and their current condition, changes in customerpayment terms, specific facts and circumstances, and the overall economic climate in the industries the Group serves. Noallowance for doubtful accounts was recognized for each of the three years ended December 31, 2016. Inventories Inventory is stated at the lower of cost or market. Cost of inventory is determined using the weighted average cost method.Adjustments are recorded to write down the cost of inventory to the estimated market value for slow-moving merchandiseand damaged goods. The amount of written-down depends upon factors such as whether the goods are returnable to vendors,historical and forecasted consumer demand, market condition and the promotional environment. Written-down amounts are recorded in cost of goods sold in the consolidated statements of operations. No inventoryprovision was recognized for each of the three years ended December 31, 2016. Property and equipment Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful livesof the assets, as follows: Computer equipment3 yearsOffice equipment5 yearsLeasehold improvementOver the shorter of lease term or the estimated useful lives of the assets Repair and maintenance costs are charged to expense when incurred, whereas the cost of betterments that extend the usefullife of property and equipment are capitalized as additions to the related assets. Retirement, sale and disposals of assets arerecorded by removing the cost and related accumulated depreciation with any resulting gain or loss reflected in theconsolidated statements of operations F-23 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Acquired intangible assets Acquired intangible assets with finite lives are carried at cost less accumulated amortization and impairment. Amortizationof finite lived intangible assets is calculated on a straight-line basis over the shorter of the contractual terms or the expecteduseful lives of the acquired assets. The amortization period by major intangible asset classes is as follows: Trade name/domain name10 yearsNon-compete agreement4.5 yearsOnline platform5 yearsCustomer relationship5-10 years Impairment of long-lived assets other than goodwill The Group evaluates the recoverability of its long-lived assets, including intangible assets with finite lives, wheneverevents or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When theseevents occur, the Group measures impairment by comparing the carrying value of the assets to the estimated undiscountedfuture cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expectedundiscounted cash flow is less than the carrying amount of the assets, the Group would recognize an impairment loss basedon the excess of carrying amount over the fair value of the assets. No impairment loss was provided for each of the three years ended December 31, 2016. Impairment of goodwill The Group annually, or more frequently if the Group believes indicators of impairment exist, reviews the carrying value ofgoodwill to determine whether impairment may exist. Specifically, goodwill impairment is determined using a two-step process. The first step compares the fair value of eachreporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carryingamount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of areporting unit exceeds its fair value, the second step compares the implied fair value of the affected reporting unit’sgoodwill to the carrying value of that goodwill. The implied fair value of goodwill is determined in a manner similar toaccounting for a business combination with the allocation of the assessed fair value determined in the first step to the assetsand liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assetsand liabilities is the implied fair value of goodwill. An impairment loss is recognized for any excess in the carrying value ofgoodwill over the implied fair value of goodwill. Estimating fair value is performed by utilizing various valuationtechniques, with the primary technique being a discounted cash flow. The Group has determined to perform the annual impairment tests on December 31 of each year. Prior to the acquisition ofJMU Group, goodwill was attributable to the group buying business which is classified as discontinued operations in theyear ended December 31, 2015. No goodwill impairment loss was recognized for this business for the year ended December31, 2014. The goodwill as of December 31, 2015 and 2016 was attributable solely to the JMU business on which animpairment loss of $85,934,770 and nil were recognized for the years ended December 31, 2015 and 2016, respectively. F-24 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Investment Cost Method Investment In accordance with ASC subtopic 325-20 (“ASC 325-20”), Investments-Other: Cost Method Investments, for investments inan investee over which the Company does not have significant influence and which do not have readily determinable fairvalue, the Company carries the investment at cost and only adjusts for other-than-temporary declines in fair value anddistributions of earnings that exceed the Company’s share of earnings since its investment. The Company accounted for itsinvestment in accordance with ASC subtopic 320-10 (“ASC 320-10”), Investments-Debt and Equity Securities- Overall.Management regularly evaluates the impairment of the cost method investments based on performance and financialposition of the investee as well as other evidence of market value. Such evaluation includes, but is not limited to, reviewingthe investee’s cash position, recent financing, projected and historical financial performance, cash flow forecasts andfinancing needs. An impairment loss is recognized in earnings equal to the excess of the investment’s cost over its fair valueat the balance sheet date of the reporting period for which the assessment is made. The fair value would then become thenew cost basis of investment. No impairment was recognized for each of the three years ended December 31, 2016. Revenue recognition The Group recognizes revenue from the sales of rice, flavoring, oil, seafood, wine and other types of generic food andbeverage products through its online platform www.ccjoin.com. The website also serves as an online platform to connectthird party vendors and customers. The Group recognizes revenue when the following four revenue recognition criteria aremet: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) theselling price is fixed or determinable, and (iv) collectability is reasonably assured. The Group recognizes revenue when the customers confirm the acceptance of the goods once they receive the deliveredgoods. The sales returns are considered and estimated when the related revenue was recognized. Revenue is recorded net of surcharges and value-added tax ("VAT") and related surcharges. The Group primarily generates revenue from online direct sales and online platform services. F-25 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Revenue recognition (Continued) Online direct sales The Group primarily sells rice, flavoring, oil, seafood, wine and other products relating to catering and hotel industriesthrough online direct sales. There is a separate channel on the Group’s online platform designated for the Group’s onlinedirect sales. and the Group records revenue from online direct sales on a gross basis as the Group acts as the principal inthese arrangements: it is the primary obligor in the sales arrangements, has latitude in establishing prices and has discretionin suppliers' selection. On certain transactions, the Group also retains some of general inventory risk and physical inventoryloss risk. Online platform services The Group also provides the online platform services to connect third-party sellers and purchasers for their transactions viaits online marketplace. Online platform sales are made from the online stores under the third-party sellers’ names, and theGroup records the related revenue on a net basis as the Group acts as the agent in these arrangements: it is not the primaryobligor, does not bear inventory risk, and does not have the ability to establish the price or discretion in supplier selection.For the years ended December 31, 2015 and 2016, revenues related to the online platform services was nil, as the Group didnot charge any service fees to the third-party sellers and purchasers. Value-added tax Value added tax (“VAT”) is calculated at 13% on the revenue from primary agricultural products and 17% on the revenuefrom sales of other products. The Group reports revenue net of VAT. WFOE, VIE and VIE's subsidiaries that are VAT generaltax payers are allowed to offset qualified VAT paid against their output VAT liabilities. Cost of revenue Costs of revenues primarily consist of purchased cost of the products sold related to online direct sales and payroll of theoperating personnel. Advertising and promotional expenses Advertising and promotional expenses, including advertisements through various form of media and kinds of marketingand promotional activities, are included in “Selling and marketing expense” in the consolidated statements of operationsand are expensed when incurred. Advertising and marketing expenses for the years ended December 31, 2014, 2015 and2016 are nil, $131,486 and $498,045, respectively. Operating leases Leases where substantially all the rewards and risks of the ownership of the assets remain with the leasing companies areaccounted for as operating leases. Payments made for the operating leases are charged to the consolidated statements ofoperations on a straight-line basis over the lease term and have been included in the operating expenses in the consolidatedstatements of operations. In 2016, the Group entered into a 15-year lease arrangement for its new headquarter in Shanghai,China, which provided a seven month rent free period. As of December 31, 2015 and 2016, the Company recognized non-current liabilities related to deferred rent holiday of nil and $1,086,342, respectively. F-26 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income taxes The Company follows the liability method in accounting for income taxes in accordance to ASC topic 740 (“ASC 740”),Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between thefinancial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in whichthe differences are expected to reverse. The Company records a valuation allowance against deferred tax assets if, based onthe weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not berealized. The Company applies the provision of ASC 740 to account for uncertainty in income taxes. ASC 740 clarifies theaccounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet beforebeing recognized in the consolidated financial statements. The Company has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as partof income tax expense in the consolidated statements of operations. Loyalty program In 2016, the Company launched a customer loyalty program to certain qualified customers, who can earn customer creditsfrom purchases if their annual spending with the Group exceeds RMB10 million. The customers can redeem the earnedcredits for gift merchandise, and the Group accounts for such credits by recording a liability and corresponding sellingexpenses for the estimated incremental cost of outstanding credits earned that are expected to be redeemed. During 2016, the Group negotiated settlement of earned loyalty credits with 13 of its customers in ordinary shares of theCompany. As part of the settlement, the Group agreed to issue 4.42 million of its ordinary shares, and recognized$1,377,503 in paid-in capital and selling expenses based on the grant date fair value of the ordinary shares. The Group isnot legally obligated, or expects to continue, redemption of the credits for the ordinary shares in the future. Share-based payments Share-based payment awards with employees are measured based on the grant date fair value of the equity instrumentissued, and recognized as compensation costs net of an estimated forfeiture rate using the straight-line method over therequisite service period, which is generally the vesting period of the options, with a corresponding impact reflected inadditional paid-in capital. For share-based payment awards with market conditions, such market conditions are included inthe determination of the estimated grant-date fair value. The estimate of forfeitures will be adjusted over the requisiteservice period to the extent that actual forfeitures differ, or is expected to differ, from such estimate. Changes in estimatedforfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact theamount of share-based compensation expenses to be recognized in future years. A change in any of the terms or conditions of share-based payment awards is accounted for as a modification of awards. TheCompany measures the incremental compensation cost of a modification as the excess of the fair value of the modifiedawards over the fair value of the original awards immediately before its terms are modified, based on the share price andother pertinent factors at the modification date. For vested awards, the Company recognizes incremental compensation costin the period the modification occurred. For unvested awards, the Company recognizes, over the remaining requisite serviceperiod, the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the originalaward on the modification date. F-27 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Net loss per share Basic loss per ordinary share is computed by dividing net loss attributable to ordinary shareholders by the weighted averagenumber of ordinary shares outstanding during the period. The Group’s convertible redeemable participating preferred shares are participating securities as they participate inundistributed earnings on an as-if-converted basis. Accordingly, the Group uses the two-class method whereby undistributednet income is allocated on a pro rata basis to the ordinary shares and convertible redeemable participating preferred shares tothe extent that each class may share in income for the period; whereas the undistributed net loss for the period is allocated toordinary shares only because the convertible redeemable participating preferred shares are not contractually obligated toshare the loss. Diluted loss per ordinary share reflects the potential dilution that could occur if securities were exercised or converted intoordinary shares. The Group had convertible redeemable participating preferred shares, which have been automaticallyconverted into ordinary shares upon the IPO of the Company, stock options and restricted share units, which couldpotentially dilute basic loss per share in the future. To calculate the number of shares for diluted loss per ordinary share, theeffect of the convertible redeemable participating preferred shares is computed using the as-if-converted method; the effectof the stock options and restricted share units is computed using the treasury stock method. Potential ordinary shares in thediluted net loss per share computation are excluded in periods of losses from continuing operations, as their effect would beanti-dilutive. Comprehensive loss Comprehensive loss is defined as the decrease in equity of the Company during a period from transactions and other eventsand circumstances excluding transactions resulting from investments by owners and distributions to owners. Comprehensiveloss is reported in the consolidated statements of comprehensive loss, including net loss and foreign currency translationadjustments and is presented net of tax. Segment reporting The Company follows ASC 280, Segment Reporting. The Company’s Chief Executive Officer or chief operating decision-maker reviews the consolidated financial results when making decisions about allocating resources and assessing theperformance of the Company as a whole and hence, the Company has only one reportable segment. The Company operatesand manages its business as a single segment through the provision of integrated services to suppliers and consumers in thecatering and hotel industries. As the Company’s long-lived assets are substantially all located in the PRC and substantiallyall the Company’s revenues are derived from within the PRC, no geographical segments are presented. Fair value Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date. When determining the fair value measurements for assets andliabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous marketin which it would transact and it considers assumptions that market participants would use when pricing the asset orliability. F-28 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fair value (Continued) Authoritative literature provides a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measurefair value into three broad levels. The level in the hierarchy within which the fair value measurement in its entirety falls isbased upon the lowest level of input that is significant to the fair value measurement as follows: Level 1-inputs are based upon quoted prices for instruments traded in active markets.Level 2-inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similarinstruments in markets that are not active, and model-based calculation techniques for which all significantassumptions are observable in the market or can be corroborated by observable market data for substantially thefull term of the assets or liabilities.Level 3-inputs are generally unobservable and typically reflect management’s estimates of assumptions that marketparticipants would use in pricing the asset or liability. The fair values are therefore determined using model-basedtechniques that include option pricing models, cash flow models, and similar techniques.Fair value of financial instruments Financial instruments include cash and cash equivalents, amounts due from/to related parties, accounts receivable, accountspayable and investment. The carrying values of cash, amounts due from/to related parties, accounts receivable and accountspayable approximate their fair values reported in the consolidated balance sheets due to the short-term maturities. TheCompany determined that it was not practicable to estimate the fair value of its cost method investment as of December 31,2016 and measures the cost method investment at fair value on a nonrecurring basis only if an impairment charge were to berecognized. Financial assets and liabilities measured at fair value on a non-recurring basis include acquired assets and liabilities andgoodwill based on Level 3 inputs in connection with business acquisition set out in Note 5. Recently accounting pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers. ASU 2014-09 supersedes the revenue recognitionrequirements in ASC 605, and requires entities to recognize revenue when it transfers promised goods or services tocustomers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for thosegoods or services. ASU 2014-09 is originally effective for the annual reporting periods beginning after December 15, 2016,including interim periods within that reporting period for public entities; and, annual reporting periods beginning afterDecember 15, 2017, and interim periods within annual periods beginning after December 15, 2018 for all other entities.ASU 2015-14, Revenue from Contracts with Customers, defers the effective date of ASU 2014-09 by one year. As a result,ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods withinthat reporting period for public entities; and, annual reporting periods beginning after December 15, 2018, and interimperiods within annual periods beginning after December 15, 2019 for all other entities. Early adoption is permitted to theoriginal effective date. The Company is currently evaluating the impact of adopting this standard on its consolidatedfinancial statements. F-29 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Recently accounting pronouncements (Continued) In July 2015, the FASB issued ASU No. 2015-11 (“ASU 2015-11”), Inventory (Topic 330): Simplifying the Measurement ofInventory. Under ASU 2015-11, the measurement principle for inventory will change from lower of cost or market value tolower of cost and net realizable value. The ASU defines net realizable value as the estimated selling price in the ordinarycourse of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effectivefor public entities for fiscal years and interim periods within those fiscal years, as well as for all other entities for fiscal yearsbeginning after December 15, 2016, and, interim periods within annual periods beginning after December 15, 2017 for allother entities. Early adoption is permitted. The Company is currently evaluating the impact of adopting this standard on itsconsolidated financial statements. In November 2015, the FASB issued ASU No. 2015-17 (“ASU 2015-17”), Income Taxes (Topic 740): Balance SheetClassification of Deferred Taxes. ASU 2015-17 simplifies the presentation of deferred income taxes by eliminating theseparate classification of deferred income tax liabilities and assets into current and noncurrent amounts in the consolidatedbalance sheet statement of financial position. The amendments in the update require that all deferred tax liabilities andassets be classified as noncurrent in the consolidated balance sheet. The amendments in this update are effective for fiscalyears beginning after December 15, 2016, and interim periods therein and may be applied either prospectively orretrospectively to all periods presented for public entities; and, annual reporting periods beginning after December 15,2017, and interim periods within annual periods beginning after December 15, 2018 for all other entities. Early adoption ispermitted. After the adoption of ASU 2015-17, all the current deferred tax assets will be reclassified as noncurrent deferredtax asset on the consolidated balance sheet. In January 2016, the FASB issued ASU No. 2016-01 (“ASU 2016-01”), Financial Instruments. ASU 2016-01 requires equityinvestments (except those accounted for under the equity method of accounting or those that result in consolidation of theinvestee) to be measured at fair value with changes in fair value recognized in net income. An entity may choose to measureequity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minuschanges resulting from observable price changes in orderly transactions for the identical or a similar investment of the sameissuer. ASU 2016-01 also simplifies the impairment assessment of equity investments without readily determinable fairvalues by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates thatimpairment exists, an entity is required to measure the investment at fair value. For public business entities, the amendmentsare effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years; and forall other entities, are effective for annual reporting periods beginning after December 15, 2018, and interim periods withinannual periods beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating theimpact of adopting this standard on its consolidated financial statements. F-30 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Recently accounting pronouncements (Continued) In February 2016, the FASB issued ASU No. 2016-02 (“ASU 2016-02”), Leases. ASU 2016-02 specifies the accounting forleases. For operating leases, ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability, initiallymeasured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize asingle lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis.ASU 2016-02 is effective for public business entities for annual reporting periods and interim periods within those yearsbeginning after December 15, 2018; and, annual reporting periods beginning after December 15, 2019, and interim periodswithin annual periods beginning after December 15, 2020 for all other entities. Early adoption is permitted. The Companyis currently evaluating the impact of adopting this standard on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versusAgent Considerations (Reporting Revenue Gross versus Net), (“ASU 2016-08”) which clarifies the implementation guidanceon principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether itcontrols a specified good or service before it is transferred to the customers. This guidance will be effective at the same dateas the adoption of ASU 2014-09. The Company is currently evaluating the impact of adopting this standard on itsconsolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09 (“ASU 2016-09”), Stock Compensation (Topic 718): Improvements toEmployee Share-Based Payment Accounting. ASU 2016-09 involves several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities,classification on the statement of cash flows and accounting for forfeitures. Some of the areas apply only to nonpublicentities. In terms of accounting for forfeitures, companies will have to elect whether to account for forfeitures of share-basedpayments by (1) recognizing forfeitures of awards as they occur (e.g., when an award does not vest because the employeeleaves the company) or (2) estimating the number of awards expected to be forfeited and adjusting the estimate when it islikely to change, as is currently required. The Company will make an election at the entity level using a modifiedretrospective transition method, with a cumulative-effect adjustment to retained earnings. ASU 2016-09 is effective forpublic business entities for annual reporting period and interim periods within those years beginning after December 15,2016; and, annual reporting periods beginning after December 15, 2017, and interim periods within annual periodsbeginning after December 15, 2018 for all other entities. Early adoption is permitted. The Company is currently evaluatingthe impact of adopting this standard on its consolidated financial statements. F-31 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Recently accounting pronouncements (Continued) In January 2017, FASB has issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of aBusiness. The ASU affects all companies and other reporting organizations that must determine whether they have acquiredor sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill,and consolidation. The ASU is effective for annual periods beginning after December 15, 2017, including interim periodswithin those periods for public entities; and, annual reporting periods beginning after December 15, 2018, and interimperiods within annual periods beginning after December 15, 2019 for all other entities. In January 2017, the FASB issued ASU No. 2017-04 (“ASU 2017-04”), Intangibles – Goodwill and Other (Topic 350):Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates the requirement to calculate the implied fair valueof goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excessof a reporting unit’s carrying amount over its fair value. This standard is effective for public business entities in the firstquarter of 2020 and for all other entities in the first quarter of 2022. Early adoption is permitted. The Company is currentlyevaluating the impact of adopting this standard on its consolidated financial statements. In February 2017, the FASB issued ASU No. 2017-05 (“ASU 2017-05”), Other income-Gains and Losses from theDerecognition of Nonfinancial Assets (Subtopic 610-20). ASU 2017-05 clarifies the scope of asset derecognition guidanceand accounting for partial sales of nonfinancial assets. The update is effective for public business entities for annualreporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period; and,annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning afterDecember 15, 2019 for all other entities. The Company is currently evaluating the impact of adopting this standard on itsconsolidated financial statements. F-32 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 4.CONCENTRATION OF RISK Credit risk Financial instruments that potentially expose the Group to concentrations of credit risk consist primarily of cash and cashequivalents. The Group places its cash and cash equivalents with financial institutions with high-credit ratings and quality. Customers accounting for 10% or more of total revenue are: For the years ended December 31, Customer 2015 2016 A 28.4% * B * 20.4% Customers accounting for 10% or more of accounts receivable are: As of December 31, Customer 2015 2016 A 99.9% 0%B * 37.3%C * 19.0%D * 17.2%E * 11.9% *Less than 10% 5.BUSINESS ACQUISTION On June 5, 2015, the Company entered into an agreement to acquire JMU Investment with a consideration of 741,422,780ordinary shares of the Company and $30,000,000 in cash (the “Acquisition”). Pursuant to the share purchase agreement, 741,422,780 shares were issued as part of consideration of which 311,842,983was subject to lock-up period. One third of the lock-up shares will be removed on each anniversary date of the issuance datefor three years. For those shares which are not subject to lock-up, the Company used the stock price of $10.39 per ADS as ofthe acquisition date to determine the fair value. For those shares that are subject to lock-up, an average of 28% discount rateto the stock price has been used to determine the value of the consideration so as to reflect the impact of the restriction foreach of the three years from the issuance date. The transaction was considered as a business acquisition. The Company was determined as the accounting acquirer based onthe facts and circumstances of the transaction including the Company’s payment of cash consideration for the equityinterests of JMU Investment. F-33 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 5.BUSINESS ACQUISTION (CONTINUED) Accordingly, the purchase method of accounting has been applied. The acquired net assets were recorded at their estimatedfair values on the acquisition date. The acquired goodwill is not deductible for tax purposes. The preliminary purchase price for the acquisition was allocated as follows: US$ Amortization Period Net tangible assets 28,793,669 Intangible assets: Trade name/domain name 16,228,000 10 yearsNon-compete agreement 10,096,000 4.5 yearsOnline platform 1,364,000 5 yearsCustomer relationships 27,760,000 5-10 years Total 55,448,000 Deferred tax liabilities (13,862,000) Goodwill 336,585,270 Total consideration 406,964,939 The goodwill is mainly attributable to intangible assets that cannot be recognized separately as identifiable assets under USGAAP, and comprise of (a) the assembled work force and (b) the expected but unidentifiable business growth resulting fromthe Acquisition. The following unaudited pro forma information summarizes the results of operations for the years ended December 31, 2014and 2015 of the Group as if the acquisition had occurred on January 1, 2014. The following pro forma financial informationis not necessarily indicative of the results that would have occurred had the acquisition been completed at the beginning ofthe period indicated, nor is it indicative of future operating results: For the years ended December 31, 2014 2015 US$ US$ (unaudited) (unaudited) Pro forma revenues 68,298 11,522,525 Pro forma net loss (16,439,806) (115,066,695)Pro forma net loss per ordinary share-basic (0.02) (0.09)Pro forma net loss per ordinary share-diluted (0.02) (0.09) F-34 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 6.DISCONTINUED OPERATIONS The disposal described in Note 1 represents a strategic shift and has a major effect on the Group’s results of operations. TheGroup Buying Entities were accounted as discontinued operations in the consolidated financial statements for the yearsended December 31, 2014 and 2015. A gain of $47,390,421 was recognized on the disposal. The financial results of the Group Buying Entities are set out below: For the years ended December 31, 2014 2015 US$ US$ Net revenues 30,073,452 16,832,352 Cost of revenues (7,040,383) (2,927,148) Gross profit 23,033,069 13,905,204 Operating expenses (62,378,258) (50,212,995) Loss from operations (39,345,189) (36,307,791) Gain from disposal of Group Buying Entities - 47,390,421 Interest income 6,699 1,904 Interest expense (11,798) - Other expenses, net (196,288) (8,599) (Loss)/income before income tax (39,546,576) 11,075,935 Provision for income tax - - (Loss)/income from discontinuing operations attributable to owners of the Company (39,546,576) 11,075,935 F-35 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 7.ACCOUNTS RECEIVABLE, NET Accounts receivable and allowance for doubtful accounts consist of the following: As of December 31, 2015 2016 US$ US$ Accounts receivable 3,748,398 1,645,237 Less: allowance for doubtful accounts - - 3,748,398 1,645,237 As of December 31, 2015 and 2016, all accounts receivable are due from third party customers for online direct sales. 8.PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consisted of the following: As of December 31, 2015 2016 US$ US$ Advance to suppliers 2,475,752 7,124,222 Prepaid rental expenses and other deposits 865,219 625,726 Amount due from third parties 4,917,068 286,333 Advance to employees 245,897 215,574 Receivables from third-party purchasers (i) 16,510,091 - Prepaid professional service fee 34,002 - Other current assets 233,405 425,775 25,281,434 8,677,630 (i)In connection with the online platform services, receivables from third-party purchasers represented the total amountspaid to third-party sellers on behalf of third-party purchasers through the Group’s online platform in a period less thanone week without any charges. F-36 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 9.PROPERTY AND EQUIPMENT, NET Property and equipment consists of the following: As of December 31, 2015 2016 US$ US$ Leasehold improvement - 1,583,641 Computer equipment 571,564 566,963 Office equipment - 162,462 Total 571,564 2,313,066 Less: accumulated depreciation (93,489) (335,407)Property and equipment, net 478,075 1,977,659 For the years ended December 31, 2014, 2015 and 2016, depreciation expense was nil, $63,981 and $259,307, respectively.No impairment loss was recognized for the years ended December 31, 2014, 2015 and 2016. 10.ACQUIRED INTANGIBLE ASSETS, NET Acquired intangible assets consists of the following: As of December 31, 2015 2016 US$ US$ Trade name/domain name 16,228,000 14,330,156 Non-compete agreement 10,096,000 8,915,286 Online platform 1,364,000 1,204,482 Customer relationship 27,760,000 24,514,105 Total 55,448,000 48,964,029 Less: Accumulated amortization (4,885,055) (12,689,791)Acquired intangible assets, net 50,562,945 36,274,238 The movement of acquired intangible assets is as follow: US$ Balance as of January 1, 2015 - Acquisition 55,448,000 Amortization (4,885,055)Balance as of December 31, 2015 50,562,945 Amortization (8,640,885)Foreign currency translation adjustment (5,647,822)Balance as of December 31, 2016 36,274,238 F-37 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 10.ACQUIRED INTANGIBLE ASSETS, NET(CONTINUED) The amortization expense of acquired intangible assets was nil, $4,885,055 and $8,640,885 for the years ended December31, 2014, 2015 and 2016, respectively. No impairment was provided for each of the three years ended December 31, 2016. The estimated annual amortization expense for each of the five succeeding fiscal years is as follow: For the years ending December 31, US$ 2017 8,132,191 2018 8,132,191 2019 8,012,449 2020 3,745,307 2021 1,858,475 11.INVESTMENT As of December 31, 2015 2016 US$ US$ Cost investment: Investment in Cold Chain Link Global (Shanghai) Logistic Co., Ltd. (“CCLG”) - 720,150 Less: accumulated impairment - - - 720,150 In May 2016, the VIE completed its acquisition of 10% equity interest in CCLG. The Board of Directors of CCLG shallconsist of three directors, whereby the VIE may appoint one director. As the Group’s investment contains a substantiveliquidation preference, the investment in CCLG is not considered in-substance common stock, and the Company hasaccounted for the investment as a cost method investment carried at cost. As of December 31, 2016, the Group has paid RMB5 million (US$0.72 million, equivalently) to CCLG and there were noindicators of impairment noted associated with the investment. F-38 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 12.GOODWILL The changes in the goodwill balance for the years ended December 31, 2015 and 2016 is as follows: US$ Balance as of January 1, 2015 - Goodwill acquired 336,585,270 Impairment (85,934,770)Balance as of December 31, 2015 250,650,500 Foreign currency translation adjustment (29,313,343)Balance as of December 31, 2016 221,337,157 The Group has one reporting unit and applies discounted cash flows for its impairment test as of December 31 for each year.The Group recorded an impairment loss of $85,934,770 for the year ended December 31, 2015, as the estimated fair valueof the reporting unit was below the carrying amount of its net assets. No impairment loss was recognized for goodwill forthe year ended December 31, 2016. 13.ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consisted of the following: As of December 31, 2015 2016 Provision for loyalty program (i) - 2,752,151 Accrued payroll and welfare 1,219,730 1,910,519 Accrued marketing expenses - 1,555,524 Payables for professional fees 858,577 1,261,405 Payables to third-party sellers (ii) 17,163,716 899,950 Payables for rental fee 639,753 164,234 Uncertain tax positions - 146,368 Others 88,680 343,107 Total accrued expenses and other current liabilities 19,970,456 9,033,258 (i)The Group launched its loyalty programs to certain customers in 2016.(ii)In connection with the online platform services, payable to third-party sellers represented the total amounts receivedfrom third-party purchasers on behalf of third-party sellers through the Group’s online platform in a period less thanone week without any charges. F-39 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 14.INCOME TAXES Cayman Under the current laws of the Cayman Islands, the Company is not subject to tax on its income or capital gains. Hong Kong Under the Hong Kong tax laws, the Company’s subsidiaries in Hong Kong are subject to Hong Kong profits tax rate at16.5%. No provision for Hong Kong profits tax was made for the years ended December 31, 2014, 2015 and 2016 on thebasis that the Group’s Hong Kong subsidiaries did not have any assessable profits arising in or derived from Hong Kong forthose years. PRC The enterprise income tax (‘‘EIT’’) law applies a uniform 25% EIT rate to both foreign invested enterprises and domesticenterprises. The EIT rate for the Group’s entities operating in the PRC are 25%. No taxable income was generated for both domestic and foreign entities of the Group during each of the three years endedDecember 31, 2016. Credit for income tax consisted of the following: For the years endedDecember 31, 2015 2016 US$ US$ Income tax benefits: Current income tax expenses - (146,368)Deferred income tax benefits 1,249,696 2,379,825 Total 1,249,696 2,233,457 F-40 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 14.INCOME TAXES (CONTINUED) The significant components of the Group’s deferred tax assets and liabilities were as follows: December31, December31, 2015 2016 US$ US$ Deferred tax assets Current: Accruals - 1,879,890 Valuation allowance - (1,816,604)Net current deferred tax assets - 63,286 Non-current: Net operating loss carry forwards 3,611,141 5,797,149 Valuation allowance (3,611,141) (5,640,833)Net non-current deferred tax assets - 156,316 Total deferred tax assets - 219,602 Deferred tax liabilities Non-current: Acquired intangible assets 12,640,736 9,068,560 Total deferred tax liabilities 12,640,736 9,068,560 The Group considers the following factors, among other matters, when determining whether some portion or all of thedeferred tax assets will more likely than not be realized: the nature, frequency and severity of recent losses, forecasts offuture profitability, the duration of statutory carry forward years, the Group’s experience with tax attributes expiring unusedand tax planning alternatives. The Group’s ability to realize deferred tax assets depends on its ability to generate sufficienttaxable income within the carry forward years provided for in the tax law. The Group incurred net operating losses carry forwards of nil, $8,064,039 and $8,744,032 from the Group’s PRC entities forthe years ended December 31, 2014, 2015 and 2016, respectively, which would expire on various dates through 2020 to2021. The Group operates its business through its subsidiaries, its VIE and its subsidiaries. The Group does not fileconsolidated tax returns, therefore, losses from individual subsidiaries or the VIE and its subsidiaries may not be used tooffset other subsidiaries’ or VIE’s earnings within the Group. Valuation allowance is considered on each individualsubsidiary and VIE basis. As of December 31, 2015 and 2016, valuation allowance was $3,611,141 and $7,457,437, respectively, which wereprovided against deferred tax assets as it is considered more likely than not that the relevant deferred tax assets will not berealized in the foreseeable future. F-41 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 14.INCOME TAXES (CONTINUED) Reconciliation between the income taxes expense (benefit) computed by applying the PRC tax rate to loss before incometaxes and the actual credit for income taxes is as follows: For the year ended December31, 2015 2016 US$ US$ Net loss before provision for income taxes (105,895,819) (27,526,602)Statutory tax rates in the PRC 25% 25%Income tax at statutory tax rate (26,473,955) (6,881,651)Expenses not deductible for tax purposes Goodwill impairment 21,483,693 - Entertainment expenses exceeded tax limit 7,687 21,533 Other expenses exceeded tax limit 226,428 - Effect of income tax rate difference in other jurisdiction 1,551,150 633,997 Changes in unrecognized tax benefits - 146,368 Changes of valuation allowance 1,955,301 3,846,296 Income tax benefits (1,249,696) (2,233,457) The EIT Law includes a provision specifying that legal entities organized outside the PRC will be considered residents forChinese income tax purposes if their place of effective management or control is within the PRC. If legal entities organizedoutside the PRC were considered residents for Chinese income tax purpose, they would become subject to the EIT Law ontheir worldwide income. This would cause any income legal entities organized outside the PRC earned to be subject to thePRC’s 25% EIT. The Implementation Rules to EIT Law provide that non-resident legal entities will be considered as PRCresidents if substantial and overall management and control over the manufacturing and business operations, personnel,accounting, properties, etc. reside within the PRC. Pursuant to the additional guidance released by the Chinese government on April 22, 2009 and issued bulletin on August 3,2011 which provide more guidance on the implementation, management does not believe that the legal entities organizedoutside the PRC should be characterized as the PRC tax residents for EIT Law purposes. F-42 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 14.INCOME TAXES (CONTINUED) Unrecognized Tax Benefits Under the EIT Law and its implementation rules which became effective on January 1, 2008, dividends generated afterJanuary 1, 2008 and payable by a foreign-invested enterprise in the PRC to its foreign investors who are non-residententerprises are subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a taxtreaty with the PRC that provides for a different withholding arrangement. The Cayman Islands, where the Company areincorporated, does not have a tax treaty with the PRC. There were no aggregate undistributed earnings of the Company’s subsidiaries, VIE and VIE’s subsidiaries located in thePRC available for dividend distribution. Therefore, no deferred tax liability has been accrued for the Chinese dividendwithholding taxes that might be payable upon the distribution of aggregate undistributed earnings as of December 31, 2015and 2016. The impact of an uncertain tax position on the income tax return is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized ifit has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a componentof the provisions for income taxes. As of December 31, 2015 and 2016, the Company recorded an unrecognized tax benefit of $70,979 and $271,019,respectively, of which $70,979 and $124,651, respectively, are presented on a net basis against the deferred tax assetsrelated to tax loss carry forward on the consolidated balance sheets. The unrecognized tax benefits is mainly related fromunder reported income. The amount of unrecognized tax benefits will change in the next 12 months, pending clarificationof current tax law or audit by tax authorities, however, an estimate of the range of the possible change cannot be made atthis time. A roll-forward of unrecognized tax benefits is as follows: For the years ended December 31, 2016 US$ Balance at beginning of the year 70,979 Addition based on tax positions related to the current year 200,040 Balance at end of the year 271,019 In the years ended December 31, 2015 and 2016, the Company did not record any interest accrued in relation to theunrecognized tax benefit in income tax expense. Since the incorporation, the relevant tax authorities of the Group’s subsidiaries, VIE and VIE’s subsidiaries located in thePRC have not conducted a tax examination. In accordance with relevant PRC tax administration laws, tax years from 2014to 2016 of the Group’s PRC subsidiaries, VIE and VIE’s subsidiaries, remain subject to tax audits as of December 31, 2016,at the tax authority’s discretion. F-43 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 15.ORDINARY SHARES On April 8, 2015, the Company completed its IPO on NASDAQ by offering 4,000,000 ADSs, representing 72 millionordinary shares at price of $10 per ADS. On April 27, 2015, the Company issued an additional 220,000 ADSs, representing3.96 million of ordinary shares to the underwriter for exercising the overallotment option at price of $10 per ADS. The totalproceeds from issuance of ordinary shares upon IPO is $37,294,600, after deducting the IPO related cost of $3,000,000. Upon the completion of the IPO, all of the Company's then outstanding Series A-1, Series A-2 and Series B preferred shareswere automatically converted into 12,202,988, 122,029,877 and 30,507,471 ordinary shares respectively, and immediatelyafter the completion of the IPO, the indebtedness owed to Mr. Maodong Xu ("Mr. Xu"), amounting to $69.4 million wasconverted into 124,835,802 ordinary shares. On June 8, 2015, the Company issued 741,422,780 ordinary shares to JMU's original shareholders for the acquisition ofJMU (see Note 5). In addition, the Company initially agreed to issue 72,000,000 ordinary shares of the Company to Mr. Xuat a purchase price of $0.5556 per share, for a total purchase price of $40,000,000. On September 7, 2015, the Company andMr. Xu reduced the number of shares to be purchased through a supplemental agreement resulting in a final subscriptionamount of $15,000,000 for 27,000,000 shares. On the same date, the Company issued an additional 27,000,000 ordinaryshares to Mr. Xu in relation to his additional subscription. On September 27, 2015, the Company issued and transferred 38,363,112 ordinary shares to its depositary bank representing2,131,284 ADSs, to be issued to employees and former-employees upon the exercise of their vested share options and RSUs. As of December 31, 2015 and 2016, 6,866,280 and 37,800,388 ordinary shares, respectively, out of these 38,363,112ordinary shares had been issued to employees and former-employees upon the exercise of share options and the vest ofRSUs. Therefore, as of December 31, 2015 and 2016, 31,496,832 and 562,724 common shares, respectively, remained forfuture issuance. F-44 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 16.CONVERTIBLE REDEEMABLE PREFERRED SHARES On April 3, 2011, Wowo Group Limited ("Wowo BVI") issued an aggregate of 5,489,604 Series A-1 ConvertibleRedeemable Preferred Shares (‘‘Series A-1 Preferred Shares’’) to an investor at an issuance price of $0.9108 per Series A-1Preferred Share for total cash proceeds of $5,000,000 before issuance cost of $18,072. On May 25, June 8, and July 5, 2011, Wowo BVI issued 30,803,678, 2,053,580 and 18,482,206 Series A-2 ConvertibleRedeemable Preferred Shares (‘‘Series A-2 Preferred Shares’’) to investors at an issuance price of $0.9739 per Series A-2Preferred Share for total cash proceeds of $30,000,000, $2,000,000 and $18,000,000, respectively. The related issuance costwas $192,149 and deducted from proceeds of Series A-2 Preferred Shares. On February 29, 2012, the Company issued an aggregate of 30,507,471 Series B Convertible Redeemable Preferred Shares(‘‘Series B Preferred Shares’’) to its existing shareholders at an issuance price of $0.4097 per Series B Preferred Shares fortotal cash proceeds of $12,500,000. The related issuance cost was $31,153 and deducted from proceeds of Series B PreferredShares. Meanwhile, the Company issued an aggregate of 6,713,384 Series A-1 Preferred Shares and 70,690,413 Series A-2Preferred Shares to existing Series A-1 and Series A-2 investors for no consideration, and the conversion price of Series A-1Preferred Shares and Series A-2 Preferred Shares were adjusted to $0.4097. A beneficial conversion feature of $43,234,050was recognized as the adjusted conversion price was lower than the fair value of the ordinary shares on respective issuancedates for Series A-1 and Series A-2 Preferred Shares. Each Series A and Series B convertible preferred share had been automatically converted into one ordinary share upon thequalified IPO on April 8, 2015. The rights, preferences, privileges and restriction granted to and imposed on the Series A-1, A-2 (collectively referred to as‘‘Series A Preferred Shares’’) and Series B Preferred Shares (collectively, "Preferred Shares") were as follows: Voting rights Each Preferred Share carried a number of votes equal to the number of Ordinary Shares then issuable upon its conversioninto Ordinary Shares. The Preferred Shares shall generally vote together with the Ordinary Shares and not as a separate class. According to the Third Amended Memorandum and Article of Association after above issuance of Series A-1, Series A-2and Series B Preferred Shares, the number of the Board of directors of the Company was four, including one appointed bypreferred shareholders and three appointed by ordinary shareholders. Dividends No dividends shall be declared or paid on the ordinary shares or any future series of Preferred Shares, unless and until adividend in like amount is declared and paid on each outstanding Preferred Share on an as-if converted basis. Each holder of Series B Preferred Shares shall be entitled to receive, on annual basis, preferential, non-cumulative dividendsat the rate equal to the greater of (i) 8% of the Series B Preferred Share Issue Price, (ii) the dividend that would be paid withrespect to the Ordinary Shares into which the Series B Preferred Shares could be converted. F-45 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 16.CONVERTIBLE REDEEMABLE PREFERRED SHARES (CONTINUED) After the full preferential dividends for Series B Preferred Shares had been paid on all outstanding Series B Preferred Shares,each holder of Series A-2 Preferred Shares shall be entitled to receive, on an annual basis, preferential, non-cumulativedividends at the rate equal to the greater of (i) 8% of the Series A-2 Preferred Share Issue Price, (ii) the dividend that wouldbe paid with respect to the Ordinary Shares into which the Series A-2 Preferred Shares could be converted. After the full preferential dividends for Series B and Series A-2 Preferred Shares had been paid on all outstanding Series Band Series A-2 Preferred Shares, each holder of Series A-1 Preferred Shares shall be entitled to receive, on an annual basis,preferential, non-cumulative dividends at the rate equal to the greater of (i) 8% of the Series A-1 Preferred Share Issue Price,(ii) the dividend that would be paid with respect to the Ordinary Shares into which the Series A-1 Preferred Shares could beconverted. In addition to any dividend pursuant to above, the holders of Preferred Shares shall be entitled to receive on a pari passubasis, when as and if declared at the sole discretion of the Board, but only out of funds that are legally available therefor,cash dividends at the rate or in the amount as the Board considers appropriate. Liquidation preference In the event of any liquidation, dissolution or winding up of the Company, each holder of Series B Preferred Shares shall beentitled to receive, prior to any distribution to the holders of Series A Preferred Shares, Ordinary Shares or any other class orseries of shares then outstanding, an amount per Series B Preferred Share equal to 100% of Series B Issue Price, plus alldeclared but unpaid dividends (‘‘Series A-2 Preference Amount’’). After the full Series B Preference Amount had been paid on all outstanding Series B Preferred Shares, the each holder ofSeries A-2 Preferred Shares shall be entitled to receive, prior to any distribution to the holders of Ordinary Shares or anyother class or series of shares then outstanding, an amount per Series A-2 Preferred Share equal to 100% of Series A-2 IssuePrice, plus all declared but unpaid dividends (‘‘Series A-2 Preference Amount’’). After the full Series A-2 Preference Amount had been paid on all outstanding Series A-2 Preferred Shares, the each holder ofSeries A-1 Preferred Shares shall be entitled to receive, prior to any distribution to the holders of Ordinary Shares or anyother class or series of shares then outstanding, an amount per Series A-1 Preferred Share equal to 100% of Series A-1 IssuePrice, plus all declared but unpaid dividends (‘‘Series A-1 Preference Amount’’). After the full Series B and Series A Preference Amount had been paid, any remaining funds or assets of the Company legallyavailable for distribution to shareholders shall be distributed pro rata among the holders of Preferred Shares (on an as-converted basis) and the holders of the Ordinary Shares. In the event the Company proposed to distribute assets other than cash in connection with any liquidation, dissolution orwinding up of the Company, the value of the assets to be distributed to the holders of Preferred Shares and Ordinary Sharesshall be determined by the Board. F-46 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 16.CONVERTIBLE REDEEMABLE PREFERRED SHARES (CONTINUED) Conversion Optional conversion Each holder of Preferred Shares shall have the right to convert all or any portion of the Preferred Shares into Ordinary Sharesat any time. The conversion rate for the Series B Preferred Shares and Series A Preferred Shares shall be determined bydividing the Series B and Series A Issue Price for each of the Series B Preferred Shares and Series A Preferred Shares by itsconversion price, respectively, provided that in the event of any share splits, share combinations, share dividends,recapitalizations and similar events, the initial Series B and Series A Conversion Price shall be adjusted accordingly,respectively. Automatic conversion The Preferred Shares would automatically be converted into Ordinary Shares, at its then respective Conversion Prices, upona Qualified IPO, which is defined as an initial public offering of securities of the Company on a recognized regional ornational exchange or quotation system in the United States, Hong Kong, the PRC or any other jurisdiction approved by theinvestors, and the aggregate proceeds to the Company in such initial public offering shall be not less than $100,000,000,unless otherwise agreed upon by the Investors and the Company (the “Qualified IPO”). No adjustment in the Series B Conversion Price shall be made in respect of the issuance of additional ordinary shares unlessthe consideration per share for an additional ordinary share issued or deemed to be issued by the Company is less than theSeries B Conversion Price. If the Company issues any additional ordinary shares and 0.85 times of the subscription priceless than Series B Conversion Price, the Series B Conversion Price shall be reduced to a price (to the nearest one thousandth(1/1000) of a cent) equal to 0.85 times of the consideration per share for the additional ordinary shares issued. No adjustment in the Series A Preferred Shares Conversion Price shall be made in respect of the issuance of additionalordinary shares unless the consideration per share for an additional ordinary share issued or deemed to be issued by theCompany is less than the Series A Conversion Price. If the Company issues any additional ordinary shares and 0.85 times ofthe subscription price less than Series A Conversion Price, the Series A Conversion Price shall be reduced to a price (to thenearest one thousandth (1/1000) of a cent) equal to 0.85 times of the consideration per share for the additional OrdinaryShares issued. The conversion price will be adjusted for share dividends, subdivisions, combinations or consolidations of ordinary shares,other distributions, reclassification, exchange and substitution. The Company will protect the Conversion Rights of the holders of the Preferred Shares against impairment, and not amendits Memorandum and Articles of Association or through any reorganization, transfer of assets, consolidation, merger,dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance orperformance of any of the terms to be observed or performed by the Company. The Group had determined that there was embedded beneficial conversion feature of $43,234,050 attributable to the SeriesA-1 and Series A-2 Preferred Shares because the adjusted conversion price of Series A-1 and Series A-2 Preferred Shares islower than the fair value of the Group’s ordinary share as of respective issuance dates and there was no embedded beneficialconversion feature attributable to the Series B Preferred Shares because the conversion price of the Series B Preferred Sharesis higher than the fair value of the Group’s ordinary share as of the issuance date. F-47 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 16.CONVERTIBLE REDEEMABLE PREFERRED SHARES (CONTINUED) The initial conversion price of Series B and Series A Preferred Shares shall be their Issue Price, therefore, the initialconversion rate was one for one. The conversion rate for each class of preferred shares were both one for one as of December31, 2014. The Group assessed the probability of redemption and accrues proper accretion over the period from the date of issuance tothe earliest redemption date of the Series A-1 Preferred Shares, Series A-2 Preferred Shares and Series B Preferred Sharesusing the effective interest rate method. The Group recognized $40,814,509 and $2,365,351 as accretion for Series A-1Preferred Shares, Series A-2 Preferred Shares and Series B Preferred Shares for the years ended December 31, 2014 and 2015,respectively. On April 8, 2015, all the issued and outstanding Series A-1, Series A-2 and Series B preferred shares were automaticallyconverted into 12,202,988, 122,029,877, 30,507,471 ordinary shares upon the IPO of the Company, respectively. 17.FAIR VALUE MEASUREMENT Measured at fair value on a recurring basis The Group had no financial assets and liabilities measured and recorded at fair value on a recurring basis as of December 31,2015 and 2016. Measured at fair value on a non-recurring basis The Group measures the acquired assets and liabilities at fair value on a nonrecurring basis as result of the businessacquisition as set forth in Note 5. The fair value was determined using models with significant unobservable inputs (Level 3inputs), primarily the management projection on the discounted future cash flow and the discount rate. The Group measures goodwill at fair value on a nonrecurring basis when it is annually evaluated or whenever events orchanges in circumstances indicate that carrying amount of a reporting unit exceeds its fair value. The fair value wasdetermined using models with significant unobservable inputs (Level 3 inputs) which primarily included managementprojections on the discounted future cash flow analysis including the discount rate using the weighted average cost ofcapital of 17% and 17.5% as of December 31, 2015 and 2016, respectively, and expected revenue growth rates. An impairment loss of nil, $85,934,770 and nil were recognized for the year ended December 31, 2014, 2015 and 2016,respectively. F-48 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 18.SHARE BASED COMPENSATION 2011 Share Incentive Plan On February 1, 2011, the Board of Directors approved the Company 2011 Share Incentive Plan (‘‘2011 Plan’’). The 2011Plan provides for the grant of options, restricted shares, and other share-based awards. The Group recognized compensation cost on the share options to employees under 2011 Plan on a straight-line basis overthe requisite service period. The options granted during 2012 and 2013 vest ratably over 48 months and the options grantedduring 2014 vest on the first anniversary of the date of grant. On July 27, 2015, the Board of Directors approved to grant 28,841,700 Restricted Share Units ("RSUs") awards pursuant tothe 2011 Plan. Each RSU represents the contingent right of the participant to receive an ordinary share. Each RSU is anagreement to issue ordinary share at the time the award vests with zero exercise price. The issued RSUs will vest 50%, and50%, respectively, on the each anniversary of the grant date. The Group recognizes share-based compensation cost on theRSUs on a straight-line basis over the 2 years from the grant date. On September 1, 2015, the Board of Directors approved that all 3,312,618 unvested options and 28,639,900 RSUs grantedunder 2011 Plan became vested and exercisable as of September 1, 2015. Meanwhile, the Board of Directors also approvedthat the all vested and accelerated vested options and RSUs shall be exercised within 2 years from the acceleration date, i.e.September 1, 2017. On July 1, 2016, under the 2011 Plan, the Board of Directors approved to grant 32,028,700 share options with exercise priceof $0.20 per share to its employees and managements. On July 1, 2016, the Board of Directors also approved to grant 10,430,000 RSUs awards pursuant to the 2011 Plan. EachRSU represents the contingent right of the participant to receive an ordinary share. Each RSU is an agreement to issueordinary share at the time the award vests with zero exercise price. The issued RSUs will vest 100% when the following twoconditions are both met: a) on and after the first anniversary of the grant date and b) the market price of the Company’s ADSis not less than $7 per ADS. The Group recognizes share-based compensation cost on the RSUs over the 12 months from thegrant date. F-49 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 18.SHARE BASED COMPENSATION (CONTINUED) (a)Restricted Shares Award Granted to Employees The following table summarizes the Company’s restricted shares award issued under 2011 Plan: Outstanding RSUs Number ofRSUs Weighted averagegrant datefair value (US$) Unvested as of January 1, 2015 - - Granted 28,841,700 0.265 Forfeited and expired (201,800) 0.265 Vested 28,639,900 0.265 Unvested as of December 31, 2015 - - Granted 10,430,000 0.133 Unvested as of December 31, 2016 10,430,000 0.133 Expect to vest as of December 31, 2016 10,430,000 0.133 (b)Options Granted to Employees The following table summarizes the Company’s employee share options under 2011 Plan: Options Number ofShare options Weightedaverageexercise price Weightedaveragegrant datefair value Weightedaverageremainingcontractual life AggregateIntrinsic value US$ US$ (Years) US$ Outstanding as of January 1, 2015 39,249,022 0.07 0.11 2.51 3,512,311 Granted - - - - - Forfeited and expired (1,079,202) 0.02 0.08 - - Exercised (6,866,280) 0.02 0.08 - - Outstanding as of December 31, 2015 31,303,540 0.08 0.26 1.34 1,734,975 Granted 32,028,700 0.20 0.10 Exercised (2,294,208) 0.02 0.10 Outstanding as of December 31, 2016 61,038,032 0.15 0.18 5.62 3,844,310 Vested and expect to vest as of December 31, 2016 61,038,032 0.15 0.18 5.62 3,844,310 Exercisable as of December 31, 2016 29,009,332 0.09 0.27 0.67 3,559,610 F-50 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 18.SHARE BASED COMPENSATION (CONTINUED) (b)Options Granted to Employees (Continued) Share-based compensation of $4,190,449, nil and $1,097,543 were charged to operating expenses of continuing operationsfor the years ended December 31, 2014, 2015 and 2016 under 2011 Plan, respectively. The share-based compensation of $1,571,935, $7,176,600 and nil were charged to operating expenses of discontinuedoperations for the years ended December 31, 2014, 2015 and 2016, respectively. On September 1, 2015, the Board of Directors approved that all 3,312,618 unvested options and 28,639,900 RSUs grantedunder 2011 Plan became vested and exercisable as of September 1, 2015. This was accounted for as a modification. Theshare-based compensation of $7,503,976 from this modification was one-time charge to operating expenses of discontinuedoperations for the year ended December 31, 2015. As all batches of options and RSUs outstanding as of September 1, 2015 were immediately vested on that date, the actualforfeiture rates were trued up, which resulted a reversal of $327,376 share-based compensation in discontinued operationsfor the year ended December 31, 2015. The aggregated intrinsic value of stock options outstanding and exercisable as of December 31, 2016 was calculated basedon the closing price of the Company’s ordinary shares on December 31, 2016 of $3.76 per ADS (equivalent to $0.21 perordinary share). The total intrinsic value of stock options exercised during the year ended December 31, 2014, 2015 and2016 was nil, $1,547,655 and $618,971, respectively. During the year ended December 31, 2016, share-based compensation of $1,097,543 was charged to operating expenses ofcontinued operations and as of December 31, 2016, there was $3,521,232 of unrecognized share-based compensation costrelated to share options and RSUs issued to employees, which are expected to be recognized following the straight-linemethod over the remaining vesting periods of different tranches, ranging from 0.5 years to 3.5 years. The fair value of the options granted/modified was estimated on the date of grant/modification with the assistance of anindependent third-party appraiser, and was determined using binomial model with the following assumptions: March 15, April 18, September 1, July 1, 2013 2014 2015 2016 Expected volatility (1) 65% 58% 60.3% - 65.1% 54.8%Risk-free interest rate (2) 0.90% 1.80% 0.47% - 0.88% 1.46%Expected dividend yield (3) nil nil nil nil Exercise price (4) $0.2 $0.01 $0.01 -$0.20 $0.20 Fair value of the underlying ordinary shares (5) $0.0611 $0.059 $0.38 $0.20 F-51 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 18.SHARE BASED COMPENSATION (CONTINUED) (1)Volatility The volatility of the underlying ordinary shares during the life of the options was estimated based on averagehistorical volatility of comparable companies for the period before the valuation date with lengths equal to the life ofthe options. (2)Risk-free rate Risk free rate is estimated based on yield to maturity of PRC international government bonds with maturity term closeto the life of the options. (3)Dividend yield The dividend yield was estimated by the Group based on its expected dividend policy over the life of the options. (4)Exercise price The exercise price of the options was determined by the Group’s Board of Directors. (5)Fair value of underlying ordinary shares The estimated fair value of the ordinary shares underlying the options as of the respective valuation dates wasdetermined based on a contemporaneous valuation. When estimating the fair value of the ordinary shares on thevaluation dates, management has considered a number of factors, including the result of a third-party appraisal andequity transactions of the Group, while taking into account standard valuation methods and the achievement ofcertain events. The fair value of the ordinary shares in connection with the option grants on the valuation dates wasdetermined with the assistance of an independent third-party appraiser. After the Company listed on NASDAQ in April 2015, the closing market price of the ordinary shares of the Companyas of the grant/modification date was used as the fair value of the ordinary shares on that date. (c)Ordinary shares to directors and executives On June 29, 2014, Mr. Xu transferred his 30,372,540 ordinary shares of the Company to certain directors andexecutives for nil consideration. The ordinary shares were transferred for the purpose of attracting and maintainingthese directors and executives without service or performance conditions. All the ordinary shares transferredimmediately vested and the estimated fair value per ordinary share was $0.138 on June 29, 2014. The share-basedcompensation of $4,190,449 was charged to operating expenses of continuing operations for the year endedDecember 31, 2014. F-52 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 19.NET LOSS PER SHARE The calculation of the net loss per share is as follows: For the years ended December 31, 2014 2015 2016 Numerator: Net loss attributable to the Company (43,856,347) (93,570,188) (25,293,145)-Continuing operations (4,323,249) (104,646,123) (25,293,145)-Discontinued operations (39,533,098) 11,075,935 - Accretion for Series A-1 Preferred Shares (1,445,125) (442,409) - Accretion for Series A-2 Preferred Shares (36,947,001) (1,202,748) - Accretion for Series B Preferred Shares (2,422,383) (720,194) - Net loss attributable to ordinary shareholders for computing basic netloss per ordinary shares (84,670,856) (95,935,539) (25,293,145)-Continuing operations (8,346,641) (104,646,123) (25,293,145)-Discontinued operations (76,324,215) 8,710,584 - Accretion for Series A-1 Preferred Shares 1,445,125 442,409 - Net income attributable to Series A-1 P referred Shareholders forcomputing basic net income per Series A-1 Preferred Shares 1,445,125 442,409 - Accretion for Series A-2 Preferred Shares 36,947,001 1,202,748 - Net income attributable to Series A-2 P referred Shareholders forcomputing basic net income per Series A-2 Preferred Shares 36,947,001 1,202,748 - Accretion for Series B Preferred Shares 2,422,383 720,194 - Net income attributable to Series B P referred Shareholders forcomputing basic net income per Series B Preferred Shares 2,422,383 720,194 - Denominator: Weighted average ordinary shares outstanding used in computing basicnet loss per ordinary shares 303,886,640 1,001,754,524 1,474,087,060 Weighted average ordinary shares outstanding used in computingdiluted net loss per ordinary shares 303,886,640 1,001,754,524 1,474,087,060 Weighted average shares outstanding used in computing basic netincome per Series A-1 Preferred Shares 12,202,988 3,242,986 - Weighted average shares outstanding used in computing basic netincome per Series A-2 Preferred Shares 122,029,877 32,429,858 - Weighted average shares outstanding used in computing basic netincome per Series B Preferred Shares 30,507,471 8,107,465 - F-53 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 19.NET LOSS PER SHARE (CONTINUED) For the years ended December 31, 2014 2015 2016 Net loss per ordinary share Basic (0.28) (0.09) (0.02)Diluted (0.28) (0.09) (0.02)Net loss per ordinary share from continuing operations Basic (0.03) (0.10) (0.02)Diluted (0.03) (0.10) (0.02)Net (loss)/income per share from discontinued operations Basic (0.25) 0.01 - Driluted (0.25) 0.01 - Net income per Series A-1 P referred Share-Basic 0.12 0.14 - Net income per Series A-2 P referred Share-Basic 0.30 0.04 - Net income per Series B P referred Share-Basic 0.08 0.09 - Weighted average shares used in calculating net loss per ordinaryshare Basic Continuing operations 303,886,640 1,001,754,524 1,474,087,060 Discontinued operations 303,886,640 1,001,754,524 - Diluted Continuing operations 303,886,640 1,001,754,524 1,474,087,060 Discontinued operations 303,886,640 1,043,473,265 - Weighted average shares used in calculating net loss per Series A-1 preferred shares 12,202,988 3,242,986 - Series A-2 preferred shares 122,029,877 32,429,858 - Series B preferred shares 30,507,471 8,107,465 - Series A-1, Series A-2 and Series B Preferred Shares were excluded from the computation of diluted net loss per ordinaryshare for the years ended December 31, 2015 because their effects were anti-dilutive. For the years ended December 31, 2014, 2015 and 2016, 39,249,022, 18,224,699 and nil ordinary shares resulting from theassumed exercise of share options were excluded as their effect was anti-dilutive for the discontinued operations of theGroup, respectively. For the years ended December 31, 2014, 2015 and 2016, 39,249,022, 59,943,440 and 35,190,467 ordinary shares resultingfrom the assumed exercise of share options were excluded as their effect was anti-dilutive for the continuing operations ofthe Group, respectively. F-54 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 20.RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED) Nature of the relationships with related parties: Name Relationship with the CompanyChung So Si Fong Dessert Limited Controlled by Ms. ZhuHong Kong Sunward Fishery Restaurant Management Co., Ltd. Controlled by Ms. ZhuNanjing Jiangdong Sunward Fishery Restaurant Co., Ltd. Controlled by Ms. ZhuNanjing Xinzijin Sunward Fishery Restaurant Co., Ltd. Controlled by Ms. ZhuNanjing Yongji Sunward Fishery Restaurant Co., Ltd. Controlled by Ms. ZhuNingbo Yinzhou Sunward Logistics Co., Ltd. Controlled by Ms. ZhuNoodles Dao (HK) Co., Ltd. Controlled by Ms. ZhuShanghai Congshao Dessert Co., Ltd. Controlled by Ms. ZhuShanghai Congshao Restaurant Management Co., Ltd. Controlled by Ms. ZhuShanghai Putuo Sunward Restaurant Co., Ltd. Controlled by Ms. ZhuShenzhen Congshao Restaurant Management Co., Ltd. Controlled by Ms. ZhuTianjin Congshao Restaurant Management Co., Ltd. Controlled by Ms. ZhuWuhan Congshao Restaurant Management Co., Ltd. Controlled by Ms. ZhuZhejiang Sunward Group Co., Ltd. Controlled by Ms. ZhuZhejiang Zhonggangjumei Supply Chain Management Co., Ltd. Controlled by Ms. ZhuXiao Nan Guo Holdings Limited Controlled by Ms. WangXiao Nan Guo (Group) Co., Ltd. Controlled by Ms. WangShanghai MIN Hongshi Trading Co., Ltd. Controlled by Ms. WangShanghai Xiao Nan Guo Hai Zhi YuanRestaurant Management Co., Ltd. Controlled by Ms. WangWM Ming Hotel Controlled by Ms. WangShenzhen Xiao Nan Guo Restaurant Management Co., Ltd. Controlled by Ms. WangCCLG A company under the significant influence of the Company F-55 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 20.RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED) (a)As of December 31, 2015 and 2016, the following balances were due from/ to the related parties: As of December 31, Amount due from related parties 2015 2016 US$ US$ Shanghai Congshao Restaurant Management Co., Ltd. - 71,031(i)Nanjing Xinzijin Sunward Fishery Restaurant Co., Ltd. 29,469 54,953(i)Shanghai MIN Hongshi Trading Co., Ltd. - 23,797(i)Nanjing Jiangdong Sunward Fishery Restaurant Co., Ltd. 29,831 22,129(i)Zhejiang Zhonggangjumei Supply Chain Management Co., Ltd. - 14,437(i)Nanjing Yongji Sunward Fishery Restaurant Co., Ltd. 13,015 12,018(i)WM Ming Hotel 1,815 6,613(i)Shanghai Putuo Sunward Restaurant Co., Ltd. - 6,235(i)Ningbo Yinzhou Sunward Logistics Co., Ltd. 149,033 984(i)CCLG - 608(i)Shanghai Xiao Nan Guo Hai Zhi Yuan Restaurant Management Co., Ltd. 260,623 -(i)Zhejiang Sunward Group Co., Ltd. 128,845 -(i)Noodles Dao (HK) Co., Ltd. 74,187 -(i)Hong Kong Sunward Fishery Restaurant Management Co., Ltd. 70,962 -(i)Xiao Nan Guo (Group) Co., Ltd. 48,643 -(i)Total 806,423 212,805 (i)The amounts represent the receivables due from related parties relating to the online direct sales and onlineplatform services. F-56 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 20.RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED) Amount due to related parties As of December 31, 2015 2016 US$ US$ Shanghai Xiao Nan Guo Hai Zhi Yuan Restaurant Management Co., Ltd. - 905,260(ii)Shanghai Congshao Dessert Co., Ltd. - 361,356(ii)Tianjin Congshao Restaurant Management Co., Ltd. - 134,703(ii)Shenzhen Congshao Restaurant Management Co., Ltd. - 92,369(ii)Wuhan Congshao Restaurant Management Co., Ltd. - 91,845(ii)Shanghai Congshao Restaurant Management Co., Ltd. - 69,935(ii)Chung So Si Fong Dessert Limited - 23,332(ii)Nanjing Jiangdong Sunward Fishery Restaurant Co., Ltd. - 11,271(ii)Nanjing Yongji Sunward Fishery Restaurant Co., Ltd. - 8,426(ii)Nanjing Xinzijin Sunward Fishery Restaurant Co., Ltd. - 7,811(ii)WM Ming Hotel - 3,306(ii)Hong Kong Sunward Fishery Restaurant Management Co., Ltd. - 1,414(ii)Shanghai MIN Hongshi Trading Co., Ltd. 319,767 -(ii)Total 319,767 1,711,028 (ii)The amounts represent the payables due to related parties relating to online direct sales and online platformservices. F-57 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 20.RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED) (b)Details of related party transactions occurred during the years ended December 31, 2015 and 2016 were as follows: Revenue from For the years ended December 31, 2015 2016 US$ US$ Xiao Nan Guo Holdings Limited - 6,056,439(iii)Shanghai Xiao Nan Guo Hai Zhi YuanRestaurant Management Co., Ltd. 393,147 2,296,225(iii)Hong Kong Sunward FisheryRestaurant Management Co., Ltd. - 460,132(iii)Chung So Si Fong Dessert Limited - 388,618(iii)Zhejiang ZhonggangjumeiSupply Chain Management Co., Ltd. - 296,727(iii)Shanghai Congshao Dessert Co., Ltd. - 172,521(iii)Shanghai Congshao Restaurant Management Co., Ltd. - 160,701(iii)Nanjing Xinzijin Sunward Fishery Restaurant Co., Ltd. 38,179 82,155(iii)Ningbo Yinzhou Sunward Logistics Co., Ltd. 58,560 56,722(iii)WM Ming Hotel 1,573 37,631(iii)Nanjing Jiangdong Sunward Fishery Restaurant Co., Ltd. 32,726 26,149(iii)Shanghai Putuo Sunward Restaurant Co., Ltd. - 21,631(iii)Nanjing Yongji Sunward Fishery Restaurant Co., Ltd. 17,573 15,692(iii)Shenzhen Xiao Nan Guo RestaurantManagement Co., Ltd. - 5,392(iii)Shenzhen Congshao Restaurant Management Co., Ltd. - 865(iii)Tianjin Congshao Restaurant Management Co., Ltd. - 676(iii)Total 541,758 10,078,276 (iii)The amounts represent the revenue generated from the Group’s online direct sales. Rental expense to: For the years ended December 31, 2015 2016 US$ US$ Xiao Nan Guo (Group) Co., Ltd. 335,249 218,212(iv)Total 335,249 218,212 (iv)The amount represents the rental expense paid for the Group’s office. F-58 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 20.RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED) Services fee charged by For the years ended December 31, 2015 2016 US$ US$ CCLG - 169,741(v)Total - 169,741 (v)The amount represents the logistics fee charged by the related party for the Group’s online direct sales. Loan borrowed from For the years ended December 31, 2015 2016 US$ US$ Xiao Nan Guo (Group) Co., Ltd. - 6,024,096(vi)Total - 6,024,096 (vi)The amount represents the interest-free loan borrowed by the Group from related party, which has been repaid bythe Group in 2016. 21.COMMITMENTS AND CONTINGENCIES Capital Commitments The Group’s capital commitments primarily relate to commitments in connection with the investment in CCLG. Totalcapital commitments contracted but not yet reflected in the financial statements amounted to $3 million and $2.2 million asof December 31, 2015 and December 31, 2016, respectively. Operating lease commitments The Group leases certain office premises under non-cancellable leases. Rental expenses under operating leases for the yearsended December 31, 2014, 2015 and 2016 were nil, $985,214 and $2,243,907, respectively. The future aggregate minimum lease payments under non-cancelable operating lease agreements were as follows: Years ending December 31,: US$ 2017 1,818,504 2018 1,674,808 2019 1,528,053 2020 1,528,053 2021 1,528,053 Thereafter 13,082,646 Total 21,160,117 F-59 JMU LIMITEDFORMERLY KNOWN AS WOWO LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)FOR THE YEARS ENDED DECEMBER 31, 2014, 2015 AND 2016 22.MAINLAND CHINA CONTRIBUTION PLAN Full time PRC employees of the Group are eligible to participate in a government-mandated multi- employer definedcontribution plan under which certain pension benefits, medical care, unemployment insurance, employee housing fund andother welfare benefits are provided to these employees. The PRC labor regulations require the Group to accrue for thesebenefits based on a percentage of each employee’s income. Total provisions for employee benefits were nil, $902,418 and$1,297,485 for the years ended December 31, 2014, 2015 and 2016, respectively, reported as a component of operatingexpenses when incurred. 23.STATUTORY RESERVES AND RESTRICTED NET ASSETS In accordance with the Regulations on Enterprises with Foreign Investment of China and their articles of association, theGroup’s subsidiaries, VIE and VIE’s subsidiaries located in the PRC, being foreign invested enterprises established in thePRC, are required to provide for certain statutory reserves. These statutory reserve funds include one or more of thefollowing: (i) a general reserve, (ii) an enterprise expansion fund or discretionary reserve fund, and (iii) a staff bonus andwelfare fund. Subject to certain cumulative limits, the general reserve fund requires a minimum annual appropriation of 10%of after-tax profit (as determined under accounting principles generally accepted in China at each year-end); the other fundappropriations are at the subsidiaries’ or the affiliated PRC entities’ discretion. These statutory reserve funds can only beused for specific purposes of enterprise expansion, staff bonus and welfare, and are not distributable as cash dividendsexcept in the event of liquidation of our subsidiaries, our affiliated PRC entities and their respective subsidiaries. TheGroup’s subsidiaries, VIE and VIE’s subsidiaries are required to allocate at least 10% of their after-tax profits to the generalreserve until such reserve has reached 50% of their respective registered capital. As of December 31, 2015 and 2016, noneof the Group’s PRC subsidiaries and VIE has a general reserve that reached 50% of their registered capital threshold andtherefore they will continue to allocate at least 10% of their after tax profits to the general reserve fund. Appropriations to the enterprise expansion reserve and the staff welfare and bonus reserve are to be made at the discretion ofthe Board of Directors of each of the Group’s subsidiaries. The appropriation to these reserves by the Group’s PRC subsidiaries and VIE were all nil for the years ended December 31,2014, 2015 and 2016. As a result of these PRC laws and regulations and the requirement that distributions by the PRC entities can only be paidout of distributable profits computed in accordance with the PRC GAAP, the PRC entities are restricted from transferring aportion of their net assets to the Group. Amounts restricted include paid-in capital and the statutory reserves of the Group’sPRC subsidiaries, VIE and VIE’s subsidiaries. The aggregate amounts of capital and statutory reserves restricted which represented the amount of net assets of the relevantsubsidiaries, VIE and VIE’s subsidiaries in the Group not available for distribution were $21,598,935 and $28,213,892 as ofDecember 31, 2015 and 2016, respectively, including $1,599,100 and $1,614,140 of net restricted assets recorded underVIE and VIE’s subsidiaries in the Group. F-60 Exhibit 4.16 WORKING CAPITAL PROVISION AGREEMENT BETWEEN WANG HUIMIN ZHU XIAOXIA AND JMU LIMITED DATED MAY 25, 2017 This Agreement (this “Agreement”) is signed as of May 25, 2017 by and between: (1)WANG Huimin and Zhu Xiaoxia, each of whom is a major shareholder of JMU LIMITED (collectively, the “MajorShareholders”); and(2)JMU LIMITED, which formerly known as WOWO LIMITED, a limited liability company incorporated under the laws ofCayman Islands, with its registered address at the office of MAPLES CORPORATE SERVICES LIMITED, P.O. BOX 309,UGLAND HOUSE, GRAND CAYMAN, KY1-1104, CAYMAN ISLANDS (hereinafter referred to as the “Company”); The Major Shareholders and JMU LIMITED shall hereinafter be collectively referred to as the “Parties” and individuallyreferred to as a “Party”. WHEREAS: (1)The Major Shareholders agree to provide funds necessary for the Company’s sustainable operation; and (2)The Company agrees to accept the funds provided by The Major Shareholders for the purpose of its sustainable operation. Therefore, the following terms and conditions are hereby agreed in relation to The Major Shareholders’ provision of fundsnecessary for the Company’s sustainable operation: 1.DEFINITION 1.1Unless otherwise interpreted herein, the following terms shall have the following meanings in this Agreement. 1.1.1This “Agreement” means this Agreement. 1.1.2“Working days” refer to those days other than the legal holidays and public holidays. 1.1.3“China” refers to the People’s Republic of China. 1 2.FUNDS PROVISION 2.1If the capital of each of the Company and its subsidiaries, variable interest entities and the subsidiaries of such variableinterest entities is unable to maintain its ongoing operation with own funds, the Major Shareholders will provide to theCompany the funds necessary for its sustainable operation. 2.2The funds shall be provided in cash by the Major Shareholders as equity investment in the Company. 2.3The term of Funds provision is from the date of this Agreement to May 31, 2018. 3.GUARANTEE 3.1The Major Shareholders agres to provide the following assets to guaranty the funds provision obligation under Clause2 hereof: 3.1.1The 42.72% equity interests in Xiao Nan Guo Restaurants Holding Limited (a Hong Kong listed company)owned and indirectly held by WANG Huimin; and 3.1.2The 67.80% equity interests in Zhejiang Sunward Fishery Restaurant Group Co., Ltd. held by Zhu Xiaoxia. 3.2If The Major Shareholders refuse to perform his obligation hereunder, the Company shall have the right to exercise itsguarantee rights over the assets provided hereunder. 4.CONFIDENTIALITY 4.1No Party may (i) disclose to any third party the confidential information of the other Party obtained through thisAgreement, or (ii) make any profit with the confidential information hereof. 4.2The Parties acknowledge and confirm that (i) any oral or written information exchanged by the Parties in connectionwith this Agreement is confidential information; (ii) due to this Agreement and the arrangement hereunder, the Partiesare likely to obtain or access the confidential information of the other Party. The Parties shall keep all information inconfidence and, without written consent from the other Party, shall not disclose to any third party any relevantinformation, except for the following information: (a) the information known or to be known by the public not byunauthorized disclosure to the public by the Party receiving the information); (b) the information disclosed required byapplicable laws or regulations; or (c) any information needed to be disclosed by any Party to its legal or financialadvisors in connection with the contemplated transaction hereunder, provided that such legal or financial advisors shallcomply with the confidentiality obligations similar with this provision. If any employee or entity engaged by any Partymake disclosure of any confidential information, it shall be deemed as a disclosure made by such Party and such Partyshall be held liable for breach of its liabilities pursuant to this Agreement. This provision shall survive after thisAgreement is terminated for any reason. 2 5.BREACH 5.1The Parties shall strictly abide by the provisions hereof. In the event of any breach by one Party, the non-breachingParty shall issue a notice requesting the breaching Party to rectify the breach within 30 days as of its knowledge of thebreach and the breaching Party shall rectify the breach within 30 days upon the receipt of the notice. If the breachingParty refuses to rectify the breach, it shall be deemed as a material breach. 5.2If any of the Major Shareholders breach and refuse to rectify such breach, the Company shall have the right to requestsuch Major Shareholder to pay 30% of the difference between the estimated working capital necessary for theCompany’s sustainable operation and the working capital paid by the Major Shareholders during the term hereof as theliquidated damage. 6.GOVERNING LAW AND DISPUTE RESOLUTION 6.1This Agreement shall be governed by and construed in accordance with the laws of the People’s Republic of China. 6.2Any dispute arising from interpretation and performance of this Agreement shall be first resolved by the Parties throughfriendly negotiation. If any dispute is not resolved within 30 days after one Party issues a written notice to the otherParty requesting negotiation, any Party may submit the dispute to Beijing Arbitration Commission for arbitration inaccordance with its arbitration rules then effective. The arbitration shall take place in Beijing and the arbitrationlanguage shall be Chinese. The arbitration award shall be final and binding upon both Parties. 7.MISCELLANEOUS. 7.1If any one or more provisions hereof are held as invalid, illegal or unenforceable in any aspect under any law orregulation, the validity, legality and enforceability of the remaining provisions shall not be affected or impaired in anyaspect. The Parties shall, through the negotiation in good faith, replace those invalid, illegal or unenforceableprovisions with valid provisions to the greatest extent permitted by laws and expected by the Parties, the economiceffect of which shall be substantially identical to that produced by those invalid, illegal or unenforceable provisions. 7.2The Parties may modify and supplement this Agreement in writing. Any modification and/or supplemental agreementmade by the Parties to this Agreement shall be an integral part of this Agreement and shall have the same legal effectwith this Agreement. 7.3All titles and headings used herein are only for convenience of reference, and shall not be used to construe or interpretthis Agreement. Unless otherwise provided, the sections referred to herein shall mean the applicable section of thisAgreement. [The Below is Intentionally Left Blank.] 3 [Signature Page] IN WITNESS WHEREOF, the Major Shareholders and the Company have executed this Agreement as of the date firstwritten above. Company: JMU LIMITED By:/s/ZHU Xiaoxia Name: ZHU Xiaoxia Title: Co-chairman and CEO Major Shareholders /s/WANG Huimin Name: WANG Huimin /s/ ZHU Xiaoxia Name: ZHU Xiaoxia 4 Exhibit 4.18 SUPPLEMENTAL AGREEMENT This supplemental agreement (the “Agreement”) is entered into in Shanghai as of December 28, 2016 by and among thefollowing parties: (1)Shanghai Zhongming Supply Chain Management Co., Ltd. (the “WFOE” or “Zhongming”), a wholly foreign-ownedenterprise registered in Shanghai, the People’s Republic of China (“China” or “PRC”), under laws of China; (2)Shanghai Zhongmin Supply Chain Management Co., Ltd. (“Zhongmin”), a domestic company registered in Shanghai,China under the laws of China; and (3)Shanghai Zhongmin Investment and Development Group Co., Ltd. (which was formally known as “Shanghai ZhongminInvestment and Development Co., Ltd.”, the “Shareholder”), an entity registered in Shanghai, China under the laws ofChina. (Each of WFOE, Zhongmin and the Shareholder, a “Party”, and collectively the “Parties”) (A)WHEREAS, the Shareholder holds 100% equity interests in Zhongmin; (B)WHEREAS, the WFOE and Zhongmin entered into a Master Exclusive Service Agreement dated May 13, 2015 (the“Master Exclusive Service Agreement”) (C)WHEREAS, the WFOE, Zhongmin and the Shareholder entered into a Business Cooperation Agreement dated May 13,2015 (the “Business Cooperation Agreement”); (D)WHEREAS, the WFOE, Zhongmin and the Shareholder entered into an Exclusive Option Agreement dated May 13, 2015 (the “Exclusive Option Agreement”); (E)WHEREAS, the WFOE, Zhongmin and the Shareholder entered into an Equity Interests Pledge Agreement dated May 13,2015 (the “Equity Interests Pledge Agreement”); (F)WHEREAS, the WFOE, Zhongmin and the Shareholder entered into a Proxy Agreement and Power of Attorney datedMay 13, 2015 (the “Proxy Agreement and Power of Attorney”, together with Master Exclusive Service Agreement,Business Cooperation Agreement, Exclusive Option Agreement and Equity Interests Pledge Agreement, the “PrincipalAgreements”) (G)WHEREAS, the Shareholder changed its name from Shanghai Zhongmin Investment and Development Co., Ltd. toShanghai Zhongmin Investment and Development Group Co., Ltd on May 14, 2015; (H)NOW, THEREFORE, the Parties hereby agree as follows: 1. The Parties hereto acknowledge and confirm that the name of “Shanghai Zhongmin Investment and Development Co., Ltd.”for all section under the Principal Agreements shall be changed as “Shanghai Zhongmin Investment and Development GroupCo., Ltd.” and take effect as the date appearing at the head hereof. 1 2. Article 4.1.7 of the Exclusive Option Agreement are amended as follows, Without the prior written consent of the WFOE, they shall not cause Zhongmin to provide any person or company with any loanor credit, or provide any person or company with any guarantee or security in any form, other than in the course of ordinarybusiness. 3. Article 4.2.7 of the Exclusive Option Agreement is amended as follows, The shareholder shall promptly return or donate any funds received, including but not limited to loans, profit, interest, dividendor proceeds of liquidation received from Zhongmin to the WFOE or any other entity designated by the WFOE to the extentpermitted under applicable PRC laws. 4. Article 5.1 of the Master Exclusive Service Agreement is amended as follows, To ensure that cash flow requirements with regard to the business operations of the Service Receiving Party are met and/or to setoff any loss accrued during such operations, the WOFE agrees that it shall, to the extent permissible under PRC law, throughitself or its designated person, provide financial support to the Service Receiving Party. The WOFE’s financing support to theService Receiving Party may take the form of bank entrusted loans or other forms permitted under PRC law. 5. Delete article 15.2 of the Master Exclusive Service Agreement. In the event that The Stock Exchange of Hong Kong Limited or other supervision and administration institution provides anycomments to this Agreement, or upon any changes to the Rules Governing the Listing of Securities on The Stock exchange ofHong Kong Limited or relevant requirements where they relate to this Agreement, the Parties shall amend this Agreementaccordingly. 6. Delete article 5.3 of the Business Cooperation Agreement. In the event that The Slack Exchange of Hong Kong Limited or other supervision and administration institution provides anycomments to this Agreement, or upon any changes to the Rules Governing the Listing of Securities on The Stock Exchange ofHong Kong Limited or relevant requirements where they relate to this Agreement, the Parties shall amend this Agreementaccordingly. 7. Delete article 9.3 of the Exclusive Option Agreement. In the event that The Slack Exchange of Hong Kong Limited or other supervision and administration institution provides anycomments to this Agreement, or upon any changes to the Rules Governing the Listing of Securities on The Stock Exchange ofHong Kong Limited or relevant requirements where they relate to this Agreement, the Parties shall amend this Agreementaccordingly. 2 8. Delete article 11.3 of the Equity Interests Pledge Agreement. In the event that The Slack Exchange of Hong Kong Limited or other supervision and administration institution provides anycomments to this Agreement, or upon any changes to the Rules Governing the Listing of Securities on The Stock Exchange ofHong Kong Limited or relevant requirements where they relate to this Agreement, the Parties shall amend this Agreementaccordingly. 9. Article 2 of the Proxy Agreement and Power of Attorney is amended as follows, The Attorney-in-Fact has the right to authorized, at its sole discretion, its affiliated companies, including but not limited itsultimate holding company, to exercise any or all of its rights of the Attorney-in-Fact under this Agreement. The Attorney-in-Fact has the right to appoint, at its sole discretion, a candidate or candidates to perform any or all of its rights ofthe Attorney-in-Fact under this Agreement, which could be the Attorney-in-Fact or the directors of the affiliated companies ofthe Attorney-in-Fact, and to replace such candidate or candidates. 10. Article 12 of the Proxy Agreement and Power of Attorney is amended as follows, Any modification of this Agreement shall be made in a written form and shall only become effective upon execution by allParties of this Agreement. Modifications and supplements to this Agreement duly executed by the Parties shall be parts of thisAgreement and shall have the same legal effect as this Agreement. Besides that, the Parties agree that all sections of the Principal Agreements remain unchanged. [Signature Page Follow] 3 IN WITNESS WHEREOF, the Parties have duly executed this Agreement on the date appearing at the head hereof. Shanghai Zhongming Supply Chain Management Co., Ltd. Authorized Representative: Signature:/s/Xiaoxia Zhu Seal: (Seal) Shanghai Zhongmin Supply Chain Management Co., Ltd. Authorized Representative: Signature:/s/Liyuan Cao Seal: (Seal) Shanghai Zhongmin Investment and Development Group Co., Ltd. Authorized Representative: Signature:/s/Xiaoxia Zhu Seal: (Seal) 4 Exhibit 4.19 May 18, 2017 To: Shanghai Zhongmin Supply Chain Management Co., Ltd. (the “VIE Entity”) To Whom It May Concern: To ensure the cash flow requirements of the VIE entity’s operations are met and/or to set off any loss accrued during suchoperations, the undersigned, JMU Limited. (the “Company”), is obligated and hereby undertakes to provide unlimited financialsupport to the VIE Entity, to the extent permissible under the applicable PRC laws and regulations, whether or not any suchoperational loss is actually incurred. The form of financial will not request repayment of the loans or borrowings if the VIEEntity or its shareholders do not have sufficient funds or are unable to repay. The undersigned agrees and acknowledges such undertaking shall be irrevocable and continuously valid from the first time ofthe VIE agreements were signed (May 13, 2015) until the earlier of (1) the date on which all of the equity interests of the VIE Entity have been acquired directly or indirectly by the Company or its designated representative (individual or legal person); or(2) the date of unilateral termination by the Company, at its sole and absolution discretion, by giving thirty (30) days priorwritten notice to the VIE Entity of its intention to terminate this letter. Please confirm receipt of this letter by returning a signed copy of this letter to the undersigned. JMU Limited /s/ Xiaoxie Zhu Name: Xiaoxia Zhu Title: Authorized Signatory Exhibit 8.1 List of Principal Subsidiaries and Consolidated Variable Interest Entities of JMU Limited Subsidiaries Place of IncorporationJoin Me Group (HK) Investment Company Limited Hong KongJoin Me Group Supply Chain Management Company Limited Hong KongNew Admiral Limited Cayman IslandsShanghai Zhongming Supply Chain Management Co. Ltd. PRC Consolidated Variable Interest Entities Shanghai Zhongmin Supply Chain Management Co. Ltd. PRC Exhibit 12.1 Certification by the Principal Executive Officer Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002 I, Xiaoxia Zhu, certify that: 1.I have reviewed this annual report on Form 20-F of JMU Limited; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly presentin all material respects the financial condition, results of operations and cash flows of the company as of, and for, theperiods presented in this report; 4.The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the company, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles; (c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this reportour conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periodcovered by this report based on such evaluation; and (d)Disclosed in this report any change in the company’s internal control over financial reporting that occurredduring the period covered by the annual report that has materially affected, or is reasonably likely to materiallyaffect, the company’s internal control over financial reporting; and 5.The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controlover financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (orpersons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the company’s ability to record, process,summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant rolein the company’s internal control over financial reporting. Date: May 26, 2017 By:/s/Xiaoxia Zhu Name: Xiaoxia Zhu Title: Chief Executive Officer Exhibit 12.2 Certification by the Principal Financial Officer Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002 I, Frank Zhigang Zhao, certify that: 1.I have reviewed this annual report on Form 20-F of JMU Limited; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly presentin all material respects the financial condition, results of operations and cash flows of the company as of, and for, theperiods presented in this report; 4.The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the company, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles; (c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this reportour conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periodcovered by this report based on such evaluation; and (d)Disclosed in this report any change in the company’s internal control over financial reporting that occurredduring the period covered by the annual report that has materially affected, or is reasonably likely to materiallyaffect, the company’s internal control over financial reporting; and 5.The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controlover financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (orpersons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the company’s ability to record, process,summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant rolein the company’s internal control over financial reporting. Date: May 26, 2017 By:/s/Frank Zhigang Zhao Name: Frank Zhigang Zhao Title: Chief Financial Officer Exhibit 13.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report of JMU Limited (the “Company”) on Form 20-F for the year ended December 31,2016 as filed with the Securities and Exchange Commission (the “Report”), I, Xiaoxia Zhu, Chief Executive Officer of theCompany, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002, that to my knowledge: 1.the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Actof 1934; and 2.the information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company at the dates and for the periods indicated. Date: May 26, 2017 By:/s/Xiaoxia Zhu Name: Xiaoxia Zhu Title: Chief Executive Officer Exhibit 13.2 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report of JMU Limited (the “Company”) on Form 20-F for the year ended December 31,2016 as filed with the Securities and Exchange Commission (the “Report”), I, Frank Zhigang Zhao, Chief Financial Officer ofthe Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Actof 2002, that to my knowledge: 1.the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Actof 1934; and 2.the information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company at the dates and for the periods indicated. Date: May 26, 2017 By:/s/Frank Zhigang Zhao Name: Frank Zhigang Zhao Title: Chief Financial Officer Exhibit 15.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-206466) pertaining to theAmended and Restated 2011 Share Incentive Plan of our report dated May 26, 2017, with respect to the consolidated financialstatements of JMU Limited, included in this Annual Report (Form 20-F) for the year ended December 31, 2016. /s/ Ernst & Young Hua Ming LLPErnst & Young Hua Ming LLP Shanghai, the People’s Republic of China May 26, 2017 Exhibit 15.2 CONSENT OF BEIJING DENTONS LAW OFFICES, LLP, PRC COUNSEL May 26, 2017 JMU Limited 10th Floor, No. 777 Jiamusi RoadYangpu District, ShanghaiPeople’s Republic of ChinaLadies and Gentlemen, We hereby consent to references to our name by JMU Limited under the heading “If the PRC government finds that theagreements that establish the structure for operating our businesses in China do not comply with PRC governmental restrictionson foreign investment in internet business, or if these regulations or the interpretation of existing regulations change in thefuture, we could be subject to severe penalties or be forced to relinquish our interests in those operations.” and “ContractualArrangements with Our Consolidated Affiliated Entity” on Form 20-F for the year ended December 31, 2016 (the “AnnualReport”), and further consent to the incorporation by reference into the Registration Statement on Form S-8 (No.333-206466).We also consent to the filing of this consent letter with the U.S. Securities and Exchange Commission as an exhibit to theAnnual Report. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required underSection 7 of the Securities Act of 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or theregulations promulgated thereunder. Yours faithfully By:/s/Beijing Dentons Law Offices, LLP Beijing Dentons Law Offices, LLP Exhibit 15.3 Our refDirect tel +852 36907431E-mail juno.huang@maplesandcalder.com 10th Floor, No. 777 Jiamusi RoadYangpu District, ShanghaiPeople’s Republic of China 26 May, 2017 Dear Sir JMU Limited (the "Company") We have acted as legal advisers as to the laws of the Cayman Islands to the Company in connection with the filing by theCompany with the United States Securities and Exchange Commission (the "SEC") of an annual report on Form 20-F for theyear ended 31 December 2016 (“Form 20-F”). We hereby consent to the reference of our name under the heading "Item 3. Key Information—D. Risk Factors—Risks Relatingto Our ADSs—We are a Cayman Islands company and, because judicial precedent regarding the rights of shareholders is morelimited under Cayman Islands law than under U.S. law, you could have less protection of your shareholder rights than youwould under U.S. law.” in the Form 20-F, and further consent to the incorporation by reference of the summary of our opinionunder this heading into the Company's registration statement under Form S-8 (File No. 333-206466) that was filed on 19 August2016. Yours faithfully /s/ Maples and Calder (Hong Kong) LLPMaples and Calder (Hong Kong) LLP Exhibit 15.4 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the Registration Statement on Form S-8 (File No. 333-206466) of our report dated April 27, 2016, relating to the consolidated financial statements of JMU Limited, its subsidiaries, its variable interestentity (the “VIE”) and its VIE's subsidiaries, appearing in this Annual Report on Form 20-F of JMU Limited for the year endedDecember 31, 2016. /s/Deloitte Touche Tohmatsu Certified Public Accountants LLPDeloitte Touche Tohmatsu Certified Public Accountants LLP Beijing, the People’s Republic of China May 26, 2017 Exhibit 15.5 May 26, 2017 Securities and Exchange Commission100 F Street, N.E.Washington, DC20549 Dear Commissioners: We have read Item 16F of Form 20-F of JMU Limited (the "Company") for the year ended December 31, 2016, which theCompany expects to file on or about May 26, 2017, and have the following comments: 1. We agree with the statements made in the first and second sentences of paragraph 1, paragraphs 2 and 3, and the firstsentence of paragraph 4 of Item 16F for which we have a basis on which to comment on, and we agree with, the disclosures. 2. We have no basis on which to agree or disagree with the statements made in the third and fourth sentences of paragraph1, the second sentence in paragraph 4 and paragraphs 5 through 11 of Item 16F. Very truly yours, /s/Deloitte Touche Tohmatsu Certified Public Accountants LLP Deloitte Touche Tohmatsu Certified Public Accountants LLP Beijing, the People’s Republic of China
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