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Missfresh Announces the Substantial Completion of the Audit Committee-Led Independent Internal Review

07/01/2022 | 04:30pm EDT

BEIJING, July 01, 2022 (GLOBE NEWSWIRE) -- Missfresh Limited (“Missfresh” or the “Company”) (NASDAQ: MF), an innovator and leader in China’s neighborhood retail industry, today announced the results of the previously disclosed independent review conducted by the independent audit committee of its board of directors (the “Audit Committee”).

The Independent Review

As previously disclosed by the Company in its Notification of Late Filing (Form 12b-25) on April 29, 2022, the Audit Committee, with the assistance of third-party professional advisors—including a leading international law firm and forensic accounting experts from a Big-Four accounting firm that is not the Company’s auditor—conducted an independent internal review of certain transactions carried out by the Next-Day Delivery Business Unit of the Company (“Next-Day Delivery BU”) with third-party suppliers and customers in 2021(the “Review”). The Review involved analyzing and sample-testing certain transactions carried out by the Next-Day Delivery BU in 2021; reviewing select documents, including electronic data collected from certain Company management-level executives and relevant employees in the Next-Day Delivery BU in 2021; and interviewing Company management-level executives and relevant employees who were available and willing to participate in such interviews.

Summary of Findings

The Review is now substantially complete. The Review identified certain transactions carried out by the Next-Day Delivery BU in 2021 that exhibited characteristics of questionable transactions, such as undisclosed relationships between suppliers and customers, different customers or suppliers sharing the same contact information, and/or lack of supporting logistics information.  As a result, certain revenue associated with these reporting periods in 2021 may have been inaccurately recorded in the Company’s financial statements.

Based on the Review’s investigative steps as described above, the individual employees in the Next-Day Delivery BU responsible for carrying out the questionable transactions have been identified. All of them had given notices of resignation to the Company before the conclusion of the Review. The Review did not uncover any evidence indicating that Company management-level executives, including the CEO and Co-CFOs, were involved in or aware of any misconduct relating to the questionable transactions at the time of their occurrence.

Remedial Measures in Response to Review

To enhance the Company’s internal controls in light of the aforementioned findings, the Company, under the supervision of the Audit Committee, has begun and will continue implementing a remediation plan. The remedial measures include, among other things: (i) disciplinary actions against individual employees found to be responsible or knowingly took part in the questionable transactions identified; and (ii) enhancement of the Company’s internal controls and risk management policies and procedures for the Next-Day Delivery BU, including follow-on employee trainings. Given the Review findings and in an abundance of caution, the Company has also terminated its relationships with suppliers and customers involved in the high-risk questionable transactions identified.

Follow-up Financial Impact Assessment

The Company has conducted a preliminary assessment of the overall financial impact of the Review findings on the relevant financial statements, as shown in the table below. While the Company does not expect any further adjustments to be needed, the Company’s management is committed to full and transparent disclosure and will provide timely updates if needed, as its financial impact assessment continues. 

  As Previously Announced Adjustments As Adjusted
   For the three months ended For the three months ended For the three months ended
(All amounts in thousands, except for share, per share data or otherwise noted) March
Net revenues                                
Sales of products through online platforms 1,492,780  1,854,120    2,078,226  (156,824) (256,482) (263,873) 1,335,956    1,597,638    1,814,353 
Other revenues 37,447  40,360    43,706  -  -  -  37,447    40,360    43,706 
Total net revenues 1,530,227   1,894,480     2,121,932   (156,824) (256,482) (263,873) 1,373,403     1,637,998    1,858,059 
Cost of revenues (1,341,249) (1,752,626)   (1,861,290) 161,696  265,495  272,358  (1,179,553)   (1,487,131)   (1,588,932)
Fulfillment expenses (440,224) (540,990)   (637,869) -  -  -  (440,224)   (540,990)   (637,869)
Sales and marketing expenses (167,615) (304,700)   (256,208) (4,872) (9,013) (8,485) (172,487)   (313,713)   (264,693)
General and administrative expenses (86,853) (396,012)   (192,176) -  -  -  (86,853)   (396,012)   (192,176)
Technology and content (94,794) (393,829)   (145,121) -  -  -  (94,794)   (393,829)   (145,121)
Total cost and operating expenses (2,130,735) (3,388,157)   (3,092,664) 156,824  256,482  263,873  (1,973,911)   (3,131,675)   (2,828,791)
Loss from operations (600,508) (1,493,677)   (970,732) -  -  -  (600,508)   (1,493,677)   (970,732)
Other income/(expense), net (2,772) 6,193    7,241  -  -  -  (2,772)   6,193    7,241 
Change in fair value of options and embedded conversion feature 10,292  69,094    -  -  -  -  10,292    69,094    - 
Interest expense, net (17,158) (14,649)   (10,025) -  -  -  (17,158)   (14,649)   (10,025)
Share of results of equity investees (201) (195)   (195) -  -  -  (201)   (195)   (195)
Loss before income tax expenses (610,347) (1,433,234)   (973,711) -  -  -  (610,347)   (1,433,234)   (973,711)
Income tax expenses (2) (15)   (15) -  -  -  (2)   (15)   (15)
Net loss  (610,349) (1,433,249)   (973,726) -  -  -  (610,349)   (1,433,249)   (973,726)
Net loss attributable to non-controlling interests shareholders (67) (390)   58  -  -  -  (67)   (390)   58 
Net loss attributable to Missfresh Limited (610,416) (1,433,639)   (973,668) -  -  -  (610,416)   (1,433,639)   (973,668)
Accretion of convertible redeemable preferred shares and convertible redeemable non-controlling preferred shares to redemption value (153,785) (164,191)   -  -  -  -  (153,785)   (164,191)   - 
Net loss attributable to ordinary shareholders of Missfresh Limited (764,201)   (1,597,830)   (973,668) -  -  -  (764,201)   (1,597,830)   (973,668)
Shares used in calculating loss per share:                                  
Weighted average number of ordinary shares:                                            
Basic and diluted 104,132,597    141,586,134    688,715,943  -  -  -  104,132,597    141,586,134    688,715,943 
Net loss per share attributable to ordinary shareholders of Missfresh Limited                                            
Net loss per share-Basic and diluted (7.34)   (11.29)   (1.41) -  -  -  (7.34)   (11.29)   (1.41)
Net loss per ADS1 attributable to ordinary shareholders of Missfresh Limited                                  
Net loss per ADS-Basic and diluted -    (33.87)   (4.23) -  -  -  -    (33.87)   (4.23)

About Missfresh Limited

Missfresh Limited is an innovator and leader in China’s neighborhood retail industry. The Company invented the Distributed Mini Warehouse (DMW) model to operate an integrated online-and-offline on-demand retail business focusing on offering fresh produce and fast-moving consumer goods (FMCGs). Through the “Missfresh” mobile application and Mini Program embedded in third-party social platforms, consumers can easily purchase quality groceries at their fingertips and have the finest products delivered to their doorstep in 37 minutes, on average.

Leveraging its core capabilities, Missfresh launched an intelligent fresh market business in the second half of 2020. This innovative business model is dedicated to standardizing and transforming fresh markets into smart fresh malls. Missfresh has also built up a full stack of proprietary technologies that empower a wide range of participants in the neighborhood retail business, such as supermarkets, fresh markets and local retailers, to jumpstart and efficiently operate their business digitally.

For more information, please visit: http://ir.missfresh.cn.

Safe Harbor Statement

This announcement contains statements that may constitute “forward-looking” statements which are made pursuant to the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “aims,” “future,” “intends,” “plans,” “believes,” “estimates,” “likely to,” and similar statements. Statements that are not historical facts, including statements about the Company’s beliefs, plans, and expectations, are forward-looking statements. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends, which involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company’s control. Forward-looking statements involve inherent risks and uncertainties. Further information regarding these and other risks is included in the Company’s filings with the SEC. All information provided in this press release is as of the date of this press release, and the Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries, please contact:

In China:

Missfresh Limited
Investor Relations
Tel: +86 (10) 5954-4422
Email: ir@missfresh.cn

The Piacente Group, Inc.
Jenny Cai
Tel: +86 (10) 6508-0677
E-mail: missfresh@tpg-ir.com

In the United States:

The Piacente Group, Inc.
Brandi Piacente
Tel: +1-212-481-2050
E-mail: missfresh@tpg-ir.com

1 Each ADS represents three Class B ordinary shares.

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Source: Missfresh Limited

2022 GlobeNewswire, Inc., source Press Releases

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Analyst Recommendations on MISSFRESH LIMITED
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Sales 2021 7 846 M 1 156 M 1 156 M
Net income 2021 -3 813 M -562 M -562 M
Net cash 2021 960 M 141 M 141 M
P/E ratio 2021 -0,07x
Yield 2021 -
Capitalization 269 M 39,6 M 39,6 M
EV / Sales 2021 -0,09x
EV / Sales 2022 -0,09x
Nbr of Employees 1 335
Free-Float 12,1%
Duration : Period :
Missfresh Limited Technical Analysis Chart | MarketScreener
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Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 3
Last Close Price 1,14 CNY
Average target price 41,64 CNY
Spread / Average Target 3 549%
EPS Revisions
Managers and Directors
Xu Zheng Chairman & Chief Executive Officer
Jun Wang Co-Chief Financial Officer & Director
Xi Chen Co-Chief Financial Officer
Han Song Zhu Independent Director
Shun Lam Tang Independent Director
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