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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM
6-K
 
 
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE
13a-16
OR
15d-16
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of
February 2021
Commission File Number:
001-39173
 
 
I-MAB
 
 
Suite 802, West Tower, OmniVision, 88 Shangke Road, Pudong District
Shanghai, 201210
People’s Republic of China
(Address of principal executive offices)
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form
20-F    ☒            Form
40-F    ☐
Indicate by check mark if the registrant is submitting the Form
6-K
in paper as permitted by Regulation
S-T
Rule 101(b)(1):  ☐
Indicate by check mark if the registrant is submitting the Form
6-K
in paper as permitted by Regulation
S-T
Rule 101(b)(7):  ☐
 
 
 

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
I-MAB
     
By   :    
/s/ Jielun Zhu
Name   :     Jielun Zhu
Title   :     Director and Chief Financial Officer
Date: February
5
, 2021

EXHIBIT INDEX
 
Exhibit No.
  
Description
   
99.1
  
Unaudited Consolidated Interim Financial Statements
   
99.2
  
Management’s Discussion and Analysis of Financial Condition and Results Of Operations
   
101.INS
  
Inline XBRL Instance Document – this instance document does not appear in the Interactive Data File because its XBRL tags are not embedded within the Inline XBRL document
   
101.SCH
  
Inline XBRL Taxonomy Extension Schema
   
101.CAL
  
Inline XBRL Taxonomy Extension Calculation Linkbase
   
101.DEF
  
Inline XBRL Taxonomy Extension Definition Linkbase
   
101.LAB
  
Inline XBRL Taxonomy Extension Label Linkbase
   
101.PRE
  
Inline XBRL Taxonomy Extension Presentation Linkbase
   
104
  
Cover Page Interactive Data File (embedded within the Inline IXBRL document)
EX-99.1
23
Exhibit 99.1
I-Mab
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Interim Condensed Consolidated Financial Statements for the Nine Months Ended September 30, 2019 and 2020
 
    
Page
 
Consolidated Balance Sheet as of December 31, 2019 and Unaudited Interim Condensed Consolidated Balance Sheet as of September 30, 2020
     F-2  
Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss for the Nine Months Ended September 30, 2019 and 2020
     F-4  
Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficit) for the Nine Months Ended September 30, 2019 and 2020
     F-5  
Unaudited Interim Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2020
     F-6  
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
     F-8  
 
F-1

I-MAB
Consolidated Balance Sheet as of December 31, 2019 and
Unaudited Interim Condensed Consolidated Balance Sheet
as of September 30, 2020
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
           
As of December 31,
    
As of September 30,
 
           
2019
    
2020
 
    
Notes
    
RMB
    
RMB
    
US$
(Note 2.5)
 
Assets
                          
Current assets
                                   
Cash and cash equivalents
     2.6        1,137,473        2,960,017        435,963  
Restricted cash
     2.7        55,810        —          —    
Short-term investments
     2.8        32,000        28,526        4,201  
Prepayments and other receivables
     3        136,036        219,839        32,379  
             
 
 
    
 
 
    
 
 
 
Total current assets
              1,361,319        3,208,382        472,543  
Property, equipment and software
     4        30,069        27,058        3,985  
Operating lease
right-of-use
assets
              16,435        15,061        2,218  
Intangible assets
     5        148,844        122,000        17,969  
Goodwill
     6        162,574        162,574        23,945  
Investment accounted for using the equity method
     7        —          762,997        112,377  
Other
non-current
assets
              18,331        —          —    
             
 
 
    
 
 
    
 
 
 
Total assets
           
 
1,737,572
 
  
 
4,298,072
 
  
 
633,037
 
             
 
 
    
 
 
    
 
 
 
Liabilities, mezzanine equity and shareholders’ equity (deficit)
                                   
Current liabilities
                                   
Short-term borrowings
     8        50,000        —          —    
Accruals and other payables
     9        273,553        338,317        49,829  
Operating lease liabilities, current
              6,807        8,001        1,178  
Deferred subsidy income
     2.14        —          3,078        453  
Ordinary shares to be issued to Everest
     21        258,119        —          —    
             
 
 
    
 
 
    
 
 
 
Total current liabilities
              588,479        349,396        51,460  
Convertible promissory notes
     13        68,199        64,771        9,540  
Put right liabilities
     7        —          124,100        18,278  
Operating lease liabilities,
non-current
              7,492        5,177        762  
Deferred subsidy income
     2.14        3,920        4,560        672  
Other
non-current
liabilities
     9        —          8,433        1,242  
             
 
 
    
 
 
    
 
 
 
Total liabilities
           
 
668,090
 
  
 
556,437
 
  
 
81,954
 
             
 
 
    
 
 
    
 
 
 
Commitments and contingencies
     20                       
 
F-2

I-MAB
Consolidated Balance Sheet as of December 31, 2019 and
Unaudited Interim Condensed Consolidated Balance Sheet
as of September 30, 2020 (Continued)
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
           
As of December 31,
   
As of September 30,
 
           
2019
   
2020
 
    
Notes
    
RMB
   
RMB
   
US$
(Note 2.5)
 
Mezzanine equity
                                 
Series A convertible preferred shares (US$0.0001 par value, 30,227,056 shares authorized, issued and outstanding as of December 31, 2019, and nil authorized, issued and outstanding as of September 30, 2020)
     12        687,482       —         —    
Series B convertible preferred shares (US$0.0001 par value, 30,305,212 shares authorized, issued and outstanding as of December 31, 2019, and nil
 a
uthorized, issued and outstanding as of September 30, 2020)
     12        921,243       —         —    
Series C convertible preferred shares (US$0.0001 par value, 31,046,360 shares authorized, issued and outstanding as of December 31, 2019, and nil authorized, issued and outstanding as of September 30, 2020)
     12        1,306,633       —         —    
Series
C-1
convertible preferred shares (US$0.0001 par value, 3,857,143 shares authorized, issued and outstanding as of December 31, 2019, and nil
 a
uthorized, issued and outstanding as of September 30, 2020)
     12        188,819       —         —    
             
 
 
   
 
 
   
 
 
 
Total mezzanine equity
           
 
3,104,177
 
 
 
—  
 
 
 
—  
 
             
 
 
   
 
 
   
 
 
 
Shareholders’ equity (deficit)
                                 
Ordinary shares (US$0.0001 par value, 500,000,000 and 800,000,000 shares authorized as of December 31, 2019 and September 30, 2020, respectively; 8,363,719 and 153,543,910 shares issued and outstanding as of December 31, 2019 and September 30, 2020, respectively)
     11        6       106       16  
Additional
paid-in
capital
              389,379       6,720,714       989,854  
Accumulated other comprehensive income
              70,127       85,657       12,616  
Accumulated deficit
              (2,494,207     (3,064,842     (451,403
             
 
 
   
 
 
   
 
 
 
Total shareholders’ equity (deficit)
           
 
(2,034,695
 
 
3,741,635
 
 
 
551,083
 
             
 
 
   
 
 
   
 
 
 
Total liabilities, mezzanine equity and shareholders’ equity (deficit)
           
 
1,737,572
 
 
 
4,298,072
 
 
 
633,037
 
             
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
 
F-3

I-MAB
Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss
For the Nine Months Ended September 30, 2019 and 2020
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
           
Nine Months Ended September 30,
 
           
2019
   
2020
 
    
Notes
    
RMB
   
RMB
   
US$
(Note 2.5)
 
Revenues
                                 
Licensing and collaboration revenue
     16        30,000       —         —    
Expenses
                                 
Research and development expenses
     2.17        (578,377     (698,461     (102,872
Administrative expenses
              (582,732     (310,775     (45,772
             
 
 
   
 
 
   
 
 
 
Loss from operations
           
 
(1,131,109
 
 
(1,009,236
 
 
(148,644
Interest income
              22,828       18,658       2,748  
Interest expense
              (2,466     (957     (141
Other income, net
     17        1,758       420,900       61,992  
Fair value change of warrants
     14        5,609       —         —    
             
 
 
   
 
 
   
 
 
 
Loss before income tax expense
           
 
(1,103,380
 
 
(570,635
 
 
(84,045
Income tax expense
     10        —                  —    
             
 
 
   
 
 
   
 
 
 
Net loss attributable to
I-MAB
           
 
(1,103,380
 
 
(570,635
 
 
(84,045
Net loss attributable to ordinary shareholders
           
 
(1,103,380
 
 
(570,635
 
 
(84,045
             
 
 
   
 
 
   
 
 
 
Net loss attributable to
I-MAB
           
 
(1,103,380
 
 
(570,635
 
 
(84,045
Other comprehensive income:
                                 
Foreign currency translation adjustments, net of nil tax
              66,254       15,530       2,288  
             
 
 
   
 
 
   
 
 
 
Total comprehensive loss attributable to
I-MAB
           
 
(1,037,126
 
 
(555,105
 
 
(81,757
             
 
 
   
 
 
   
 
 
 
Net loss attributable to ordinary shareholders
           
 
(1,103,380
 
 
(570,635
 
 
(84,045
Weighted-average number of ordinary shares used in calculating net loss per share—basic and diluted
     18        7,184,086       126,758,926       126,758,926  
Net loss per share attributable to ordinary shareholders
                                 
—Basic
     18        (153.59     (4.50     (0.66
—Diluted
     18        (153.59     (4.50     (0.66
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
 
F-4

I-MAB
Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficit)
For the Nine Months Ended September 30, 2019 and 2020
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
   
Ordinary shares (Note 11)
   
Treasury
stock
   
Additional
paid-in

capital
   
Accumulated
other
comprehensive
income
   
Accumulated
deficit
   
Total
shareholders’
deficit
 
 
(US$0.001 par value)
 
 
Number of

shares
   
Amount
 
         
RMB
   
RMB
   
RMB
   
RMB
   
RMB
   
RMB
 
Balance as of December 31, 2018
 
 
8,363,719
 
 
 
6
 
 
 
(1
 
 
  
 
 
 
59,380
 
 
 
(1,014,489
 
 
(955,104
Foreign currency translation adjustments
    —         —         —         —         66,254       —         66,254  
Net loss
    —         —         —         —                 (1,103,380     (1,103,380
Share-based compensation
    —         —         —         366,885       —         —         366,885  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance as of September 30, 2019
 
 
8,363,719
 
 
 
6
 
 
 
(1
 
 
366,885
 
 
 
125,634
 
 
 
(2,117,869
 
 
(1,625,345
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance as of December 31, 2019
 
 
8,363,719
 
 
 
6
 
    —      
 
389,379
 
 
 
70,127
 
 
 
(2,494,207
 
 
(2,034,695
Foreign currency translation adjustments
    —         —         —         —         15,530       —         15,530  
Net loss
    —         —         —         —         —         (570,635     (570,635
Share-based compensation
    —         —         —         301,525       —         —         301,525  
Exercise of stock options
    115,888       1       —         790       —         —         791  
Capital contribution from stock option surrender (Note 15 (h))
    —         —         —         91,051       —         —         91,051  
Conversion of preferred shares to ordinary shares upon the completion of initial public offering (“IPO”)
    99,760,129       69       —         3,104,108       —         —         3,104,177  
Issuance of ordinary shares to Everest
    6,078,571       4       —         254,844       —         —         254,848  
Issuance of ordinary shares upon IPO and over-allotment, net of issuance cost
    18,804,225       13       —         697,865       —         —         697,878  
Issuance of ordinary shares upon private placement, net of issuance cost
    20,421,378       13       —         1,809,278       —         —         1,809,291  
Issuance of warrants
    —                  —         71,874       —         —         71,874  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance as of September 30, 2020
 
 
153,543,910
 
 
 
106
 
    —      
 
6,720,714
 
 
 
85,657
 
 
 
(3,064,842
 
 
3,741,635
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
 
F-5

I-MAB
Unaudited Interim Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2019 and 2020
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
    
Nine Months Ended September 30,
 
    
2019
   
2020
 
    
RMB
   
RMB
   
US$
(Note 2.5)
 
Cash flows from operating activities
                        
Net loss
     (1,103,380     (570,635     (84,045
Adjustments to reconcile net loss to net cash used in operating activities
                        
Depreciation of property, equipment and software
     6,835       7,738       1,140  
Loss on disposal of property, equipment and software
     —         8       1  
Fair value change of short-term investments
     (332     (2,557     (377
Fair value change of warrants
     (5,609     —         —    
Fair value change of other financial assets
     145       —         —    
Share-based compensation
     366,885       392,576       57,820  
Amortization of
right-of
use assets and interest of lease liabilities
     4,427       6,935       1,021  
Gains on deconsolidation of a subsidiary
     —         (407,598     (60,033
Changes in operating assets and liabilities
                        
Prepayments and other receivables
     12,310       3,309       488  
Accruals and other payables
     32,200       (17,623     (2,596
Advance from customers
     (14,151     —         —    
Research and development funding received
     52,207       —         —    
Deferred subsidy income
     1,420       3,718       548  
Other
non-current
liabilities
     —         8,433       1,242  
Lease liabilities
     (4,950     (6,935     (1,021
    
 
 
   
 
 
   
 
 
 
Net cash used in operating activities
  
 
(651,993
 
 
(582,631
 
 
(85,812
    
 
 
   
 
 
   
 
 
 
Cash flows from investing activities
                        
Purchase of property, equipment and software
     (4,617     (4,761     (701
Proceeds from disposal of property, equipment and software
     12       —         —    
Proceeds from disposal of short-term investments
     35,332       276,884       40,781  
Purchase of short-term investments
     (88,000     (270,853     (39,892
Cash disposed of resulting from deconsolidation of a subsidiary
     —         (257,651     (37,948
Cash received from disposal of other financial assets
     192,401       —         —    
    
 
 
   
 
 
   
 
 
 
Net cash generated from (used in) investing activities
  
 
135,128
 
 
 
(256,381
 
 
(37,760
    
 
 
   
 
 
   
 
 
 
 
F-6

I-MAB
Unaudited Interim Condensed Consolidated Statements of Cash Flows (Continued)
For the Nine Months Ended September 30, 2019 and 2020
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
    
Nine Months Ended September 30,
 
    
2019
   
2020
 
    
RMB
   
RMB
   
US$
(Note 2.5)
 
Cash flows from financing activities
                        
Consideration received in advance from a preferred shares investor
     70,729       —         —    
Proceeds from initial public offering and over-allotment, net of underwriting discounts and commissions
     —         726,300       106,972  
Payment of issuance cost for initial public offering and over-allotment
     (1,316     (27,088     (3,990
Proceeds from private placement, net of payment of issuance cost
     —         1,980,548       291,703  
Proceeds from exercise of stock options
     —         791       117  
Proceeds from bank borrowings
     50,000       —         —    
Prepayment for stock repurchase program
     —         (34,859     (5,134
Repayment of bank borrowings
     (80,000     (50,000     (7,364
    
 
 
   
 
 
   
 
 
 
Net cash generated from financing activities
  
 
39,413
 
 
 
2,595,692
 
 
 
382,304
 
    
 
 
   
 
 
   
 
 
 
Effect of exchange rate changes on cash and cash equivalents and restricted cash
     77,581       10,054       1,480  
Net increase (decrease) in cash and cash equivalents and restricted cash
  
 
(399,871
 
 
1,766,734
 
 
 
260,212
 
Cash, cash equivalents, and restricted cash, beginning of period
     1,680,931       1,193,283       175,751  
    
 
 
   
 
 
   
 
 
 
Cash, cash equivalents, and restricted cash, end of the period
  
 
1,281,060
 
 
 
2,960,017
 
 
 
435,963
 
    
 
 
   
 
 
   
 
 
 
Additional ASC 842 supplemental disclosures
                        
Cash paid for fixed operating lease costs included in the measurement of lease obligations in operating activities
     4,950       6,935       1,021  
Right-of-use
assets obtained in exchange for operating lease obligations
     2,952       5,029       741  
Other supplemental cash flow disclosures
                        
Interest paid
     2,466       957       141  
Non-cash
activities
                        
Accrued initial public offering costs payable
     4,850       508       75  
Accrued private placement offering costs payable
     —         96,837       14,263  
Ordinary shares issued to Everest
     —         254,848       37,535  
Conversion of preferred shares to ordinary shares
     —         3,104,177       457,196  
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
 
F-7

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
1. Principal Activities and Organization
I-Mab
(the “Company”) was incorporated in the Cayman Islands on June 30, 2016 as an exempted company with limited liability under the Companies Act of the Cayman Islands. The Company and its subsidiaries (together the “Group”) are principally engaged in discovering and developing transformational biologics in the fields of immuno-oncology and immuno-inflammation diseases in the People’s Republic of China (the “PRC”) and other countries and regions.
Prior to the incorporation of the Company, the Group carried out its operation in the PRC since November 2014 mainly through Third Venture Biopharma (Nanjing) Co., Ltd. (“Third Venture”), which was incorporated on November 17, 2014 in the PRC. For the purpose of introduction of overseas investors and in preparation for a listing of the Company’s shares on the overseas capital markets, the Group underwent a reorganization (the “Reorganization”) in 2016. The Reorganization was approved by the Board of Directors and a restructuring framework agreement was entered into by Third Venture, the Company, and the shareholders of the Company based on Reorganization framework agreement, pursuant to which on July 7, 2016, Third Venture transferred all of its assets and operations to the Company’s wholly owned subsidiary,
I-Mab
Biopharma Co., Ltd.
(“I-Mab
Shanghai”), which was a transaction in which shareholders had identical ownership interests before and after the transaction and was accounted for in a manner similar to a common control transaction.
The Reorganization, as described above has been accounted for at historical cost. That Reorganization was reverse merger of Third Venture and Third Venture is the predecessor of the Company. As such, the assets and liabilities of Third Venture are consolidated in the Company’s financial statements at historical cost.
On January 17, 2020, the Company consummated its IPO on the Nasdaq Global Market, where 7,407,400 American Depositary Shares (“ADSs”) were issued at the price of US$14.00 per ADS for total gross proceeds of US$103.7 million. On February 10, 2020, the underwriters of the IPO have exercised their over-allotment option to purchase an additional 768,350 ADSs of the Company at the IPO price of US$14.00 per ADS. After giving effect to the exercise of the over-allotment option, the Company has issued and sold a total of 8,175,750 ADSs in the IPO, for total gross proceeds of US$114.5 million. Each ten ADSs represents twenty-three ordinary shares of the Company.
As of
September 30, 2020, the Company’s principal subsidiaries are as follows:
 
Subsidiaries
 
Place of
incorporation
 
Date of
incorporation or
acquisition
 
Percentage
of direct
or indirect
ownership
by the
Company
   
Principal activities
I-Mab
Biopharma Hong Kong Limited
(“I-Mab
Hong Kong”)
  Hong Kong   July 8, 2016     100   Investment holding
I-Mab
Shanghai
  PRC   August 24, 2016     100   Research and development
of innovative medicines
I-Mab
Bio-tech
(Tianjin) Co., Ltd.
(“I-Mab
Tianjin”)
  PRC   July 15, 2017     100   Research and development
of innovative medicines
I-Mab
Biopharma US Ltd.
  U.S.   February 28, 2018     100   Research and development
of innovative medicines
 
F-8

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
2. Principal Accounting Policies
2.1 Basis of presentation
The accompanying unaudited interim condensed consolidated financial statements of the Group have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes normally included in the annual financial statements prepared in accordance with U.S. GAAP. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted consistent with Article 10 of Regulation
S-X.
In the opinion of management, the Group’s unaudited interim condensed consolidated financial statements and accompanying notes include all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of the Group’s financial position as of September 30, 2020, and results of operations and cash flows for the nine months ended September 30, 2019 and 2020. Interim results of operations are not necessarily indicative of the results for the full year or for any future period. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2019, and related notes included in the Group’s audited consolidated financial statements. The financial information as of December 31, 2019 presented in the unaudited interim condensed consolidated financial statements is derived from the audited consolidated financial statements as of December 31, 2019.
Significant accounting policies followed by the Group in the preparation of the accompanying consolidated financial statements are summarized below.
2.2 Basis of consolidation
The accompanying consolidated financial statements reflect the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained. All inter-company balances and transactions have been eliminated in consolidation.
2.3 Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used when accounting for amounts recorded in connection with acquisitions, including initial fair value determinations of assets and liabilities and other intangible assets as well as subsequent fair value measurements. Additionally, estimates are used in determining items such as fair value measurements of wealth management products, impairment of other receivables, long-lived assets, intangible assets and goodwill, useful lives of property, equipment and software, recognition of
right-of-use
assets and lease liabilities, fair value measurements of warrants, variable consideration in collaboration revenue arrangements, determination of the standalone selling price of each performance obligation in the Company’s revenue arrangements, valuation of share-based compensation arrangements, deferred tax assets valuation allowances and fair value of put right liabilities. Management bases the estimates on historical experience, known trends and various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.
 
F-9

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
2. Principal Accounting Policies (Continued)
 
2.4 Fair value measurements
Financial assets and liabilities of the Group primarily comprise of cash and cash equivalents, restricted cash, short-term investments, other financial assets, contract assets, other receivables, short-term borrowings, accruals and other payables and put right liabilities. As of December 31, 2019, and September 30, 2020, except for short-term investments and put right liabilities, the carrying values of these financial assets and financial liabilities approximated their fair values because of their generally short maturities. The Group reports short-term investments and put right liabilities at fair value at each balance sheet date and changes in fair value are reflected in the consolidated statements of comprehensive loss.
The Group measures its financial assets and liabilities using inputs from the following three levels of the fair value hierarchy. The three levels are as follows:
Level 1 inputs are unadjusted quoted prices in active markets for identical assets that the management has the ability to access at the measurement date.
Level 2 inputs include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable for the asset (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 includes unobservable inputs that reflect the management’s assumptions about the assumptions that market participants would use in pricing the asset. The management develops these inputs based on the best information available, including the own data.
Assets and liabilities measured at fair value on a recurring basis
The Group measured its short-term investments and put right liabilities at fair value on a recurring basis. As the Group’s short-term investments and put right liabilities are not traded in an active market with readily observable prices, the Group uses significant unobservable inputs to measure the fair value of short-term investments and put right liabilities. These instruments are categorized in the Level 3 valuation hierarchy based on the significance of unobservable factors in the overall fair value measurement.
The following table summarizes the Group’s financial assets and financial liabilities measured and recorded at fair value on a recurring basis as of December 31, 2019 and September 30, 2020:
 
    
As of December 31, 2019
 
    
Active market
(Level 1)
    
Observable input
(Level 2)
    
Non-observable input

(Level 3)
    
Total
 
    
RMB
    
RMB
    
RMB
    
RMB
 
Assets:
                                   
Short-term investments
     —          —          32,000        32,000  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
F-10

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
2. Principal Accounting Policies (Continued)
 
2.4 Fair value measurements (Continued)
 
    
As of September 30, 2020
 
    
Active market
(Level 1)
    
Observable input
(Level 2)
    
Non-observable input

(Level 3)
    
Total
 
    
RMB
    
RMB
    
RMB
    
RMB
 
Assets:
                                   
Short-term investments
     —          —          28,526        28,526  
    
 
 
    
 
 
    
 
 
    
 
 
 
Liabilities
                                   
Put right liabilities
     —          —          124,100        124,100  
    
 
 
    
 
 
    
 
 
    
 
 
 
The roll forward of major Level 3 financial assets and financial liabilities are as follows:
 
    
Short-term investments
    
Put right liabilities
 
Fair value of Level 3 financial assets and financial liabilities as of December 31, 2019
     32,000            
Purchase of short-term investments
     270,853            
Disposal of short-term investments
     (276,884          
Grant of put right liabilities
               124,321  
Fair value changes
     2,557            
Effect of exchange rate changes
               (221
    
 
 
    
 
 
 
Fair value of Level 3 financial assets and financial liabilities as of September 30, 2020
     28,526        124,100  
    
 
 
    
 
 
 
Refer to Note 7 for additional information about Level 3 put right measured at fair value on a recurring basis for the nine months ended September 30, 2020.
2.5 Foreign currency translation
The Group uses Chinese Renminbi (“RMB”) as its reporting currency. The United States Dollar (“US$”) is the functional currency of the Group’s entities incorporated in the Cayman Islands, the United States of America (“U.S.”) and Hong Kong, the Australia Dollar (“AUD”) is the functional currency of the Group’s entity incorporated in Australia and the RMB is the functional currency of the Company’s PRC subsidiaries.
Transactions denominated in other than the functional currencies are translated into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in other than the functional currencies are translated at the balance sheet date exchange rate. The resulting exchange differences are recorded in the consolidated statements of comprehensive loss.
 
F-11

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
2. Principal Accounting Policies (Continued)
 
2.5 Foreign currency translation (Continued)
 
The unaudited interim condensed consolidated financial statements of the Group are translated from the functional currency to the reporting currency, RMB. Assets and liabilities of the subsidiaries are translated into RMB using the exchange rate in effect at each balance sheet date. Income and expenses are translated at the average exchange rates prevailing for the year. Foreign currency translation adjustments arising from these are reflected in the accumulated other comprehensive income. The exchange rates used for translation on December 31, 2019 and September 30, 2020 were US$1.00 = RMB6.9762 and RMB6.8101 respectively, representing the index rates stipulated by the People’s Bank of China.
Translations of balances in the consolidated balance sheets, consolidated statements of comprehensive loss, consolidated statements of changes in shareholders’ equity (deficit) and consolidated statements of cash flows from RMB into US$ as of and for the nine months ended September 30, 2020 are solely for the convenience of the readers and were calculated at the rate of US$1.00=RMB6.7896, representing the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York on September 30, 2020. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on September 30, 2020, or at any other rate. The US$ convenience translation is not required under U.S. GAAP and all US$ convenience translation amounts in the accompanying consolidated financial statements are unaudited.
2.6 Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and bank deposits, which are unrestricted as to withdrawal and use. The Company considers all highly liquid investments with an original maturity date of three months or less at the date of purchase to be cash equivalents.
2.7 Restricted cash
Restricted cash consists of the guarantee deposits held in a designated bank account as security deposits under bank borrowing agreements. Such restricted cash was released when the Group repaid the related bank borrowings.
2.8 Short-term investments
Short-term investments represent the investments issued by commercial banks or other financial institutions with a variable interest rate indexed to the performance of underlying assets within one year. These investments are stated at fair value. Changes in the fair value are reflected in the consolidated statements of comprehensive loss.
2.9 Property, equipment and software
Property, equipment and software are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the following estimated useful lives, taking into account any estimated residual value:
 
Laboratory equipment
  
3 to 5 years
Software
  
2 to 5 years
Office furniture and equipment
  
5 years
Leasehold improvements
  
Lesser of useful life or lease term
 
F-12

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
2. Principal Accounting Policies (Continued)
 
2.9 Property, equipment and software (Continued)
 
The Group recognized the gain or loss on the disposal of property, equipment and software in the consolidated statements of comprehensive loss.
2.10 Intangible assets
Intangible assets with definite useful lives are amortized to their estimated residual values over their estimated useful lives and reviewed for impairment if certain events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Amortization is initiated for
in-process
research and development (IPR&D) intangible assets that are acquired from business combination when their useful lives have been determined. IPR&D intangible assets which are determined to have an impairment in their fair value are adjusted downward and an expense recognized in research and development in the consolidated statements of comprehensive loss. These IPR&D intangible assets are tested at least on an annual basis on December 31 or when a triggering event occurs that could indicate a potential impairment (see Note 5).
2.11 Impairment of long-lived assets
Long-lived assets are reviewed for impairment in accordance with authoritative guidance for impairment or disposal of long-lived assets. Long-lived assets are reviewed for events or changes in circumstances, which indicate that their carrying value may not be recoverable. Long-lived assets are reported at the lower of carrying amount or fair value less cost to sell. For the year ended December 31, 2019 and nine months ended September 30, 2020, there was no impairment of the value of the Group’s long-lived assets.
2.12 Goodwill
Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. The Group allocates the cost of an acquired entity to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price for acquisitions over the fair value of the net assets acquired, including other intangible assets, is recorded as goodwill. Goodwill is not amortized, but impairment of goodwill assessment is performed on at least an annual basis on December 31 or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.
The Group has elected to first assess qualitative factors to determine whether it is more likely than not that the fair value of the Group’s reporting unit is less than its carrying amount, including goodwill. The qualitative assessment includes the Group’s evaluation of relevant events and circumstances affecting the Group’s single reporting unit, including macroeconomic, industry, market conditions and the Group’s overall financial performance. If qualitative factors indicate that it is more likely than not that the Group’s reporting unit’s fair value is less than its carrying amount, then the Group will perform the quantitative impairment test by comparing the reporting unit’s carrying amount, including goodwill, to its fair value. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess. For the year ended December 31, 2019 and nine months ended September 30, 2020, the Group determined that there were no indicators of impairment of the goodwill.
 
F-13

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
2. Principal Accounting Policies (Continued)
 
2.13 Long-term investments
The Group’s long-term investments include equity investments in an affiliate in which it does not have a controlling financial interest, but has the ability to exercise significant influence over the operating and financial policies of the investee. The investment is accounted for using the equity method of accounting in accordance with ASC topic 323, Investments—Equity Method and Joint Ventures (“ASC 323”). Under the equity method, the Group initially records its investments at fair value. The Group subsequently adjusts the carrying amount of the investment to recognize the Group’s proportionate share of the equity investee’s net income or loss after the date of investment. The Group evaluates the equity method investment for impairment under ASC 323. An impairment loss on the equity method investments is recognized in losses when the decline in value is determined to be other-than-temporary. No impairment charge was recognized for the nine months ended September 30, 2020.
2.14 Deferred subsidy income
Deferred subsidy income consists of deferred income from government grants. Government grants mainly consist of cash subsidies received by the Group’s subsidiaries in the PRC from local governments as support on expenses relating to certain projects. Grants received with government specified performance obligations are recognized when all the obligations have been fulfilled. If such obligations are not satisfied, the Group may be required to refund the subsidy. Cash grants of RMB3,920 was recorded in deferred subsidy income as of December 31, 2019. As of September 30, 2020, cash grants of RMB7,638 was recorded in deferred subsidy income, which will be recognized when the government specified performance obligation is satisfied.
2.15 Revenue recognition
The Group adopted Accounting Standard Codification (“ASC”) 606,
Revenue from Contracts with Customers
(Topic 606) (“ASC 606”) for all periods presented. Consistent with the criteria of Topic 606, the Group recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services.
Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Group only applies the five-step model to contracts when it is probable that the entity will collect substantially all the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.
Once a contract is determined to be within the scope of ASC 606 at contract inception, the Group audits the contract to determine which performance obligations it must deliver and which of these performance obligations are distinct. The Group recognizes as revenue the amount of the transaction price that is allocated to each performance obligation when that performance obligation is satisfied or as it is satisfied.
 
F-14

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
2. Principal Accounting Policies (Continued)
 
2.15 Revenue recognition (Continued)
 
Collaboration revenue
At contract inception, the Group analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808,
 Collaborative Arrangements
 (“ASC 808”) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Group first determines if the collaboration is deemed to be within the scope of ASC 808. For any units of account that are reflective of a vendor-customer relationship those units of account are accounted for within the scope of ASC 606. For any units of account that are not accounted for under ASC 606 and therefore accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently.
The Group’s collaborative arrangements may contain more than one unit of account, or performance obligation, including grants of licenses to intellectual property rights, agreement to provide research and development services and other deliverables. The collaborative arrangements do not include a right of return for any deliverable. As part of the accounting for these arrangements, the Group must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. In developing the stand-alone selling price for a performance obligation, the Group considers competitor pricing for a similar or identical product, market awareness of and perception of the product, expected product life and current market trends. In general, the consideration allocated to each performance obligation is recognized when the respective obligation is satisfied either by delivering a good or providing a service, limited to the consideration that is not constrained.
When the timing of the delivery of product is different from the timing of payments made by the customers, the Group recognizes either a contract asset (performance precedes the contractual due date) or a contract liability (customer payment precedes performance). The Group’s contractual payment terms are typically due in no more than 30 days from invoicing. In limited situations, certain customer contractual payment terms require the Group to bill in arrears; thus, the Group satisfies some or all of the performance obligations before the Group is contractually entitled to bill the customer. In these situations, billing occurs subsequent to revenue recognition, which results in a contract asset. A receivable is recorded when the Group has an unconditional right to consideration. A right to consideration is unconditional if only the passage of the time is required before payment of the consideration is due. A contract asset is recorded when the Group has transferred products or services to the customer before payment is received or is due, and the Group’s right to consideration is conditional on future performance or other factors in the contract. For example, certain of the contractual arrangements do not permit the Group to bill until the completion of the production of the samples. In other limited situations, certain customer contractual payment terms allow the Group to bill in advance; thus, the Group receives customer cash payment before satisfying some or all of its performance obligations. In these situations, billing occurs in advance of revenue recognition, which results in contract liabilities.
Licenses of Intellectual Property:
Upfront
non-refundable
payments for licensing the Group’s intellectual property are evaluated to determine if the license is distinct from the other performance obligations identified in the arrangement. For licenses determined to be distinct, the Group recognizes revenues from
non-refundable,
up-front
fees allocated to the license at a point in time, when the license is transferred to the licensee and the licensee is able to use and benefit from the license.
 
F-15

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
2. Principal Accounting Policies (Continued)
 
2.15 Revenue recognition (Continued)
 
Research and Development Services:
The portion of the transaction price allocated to research and development services performance obligations is deferred and recognized as revenue over time as delivery or performance of such services provided to the Group’s customers occurs.
Milestone Payments
: At the inception of each arrangement that includes development, commercialization, and regulatory milestone payments, the Group evaluates whether the milestones are considered probable of being reached and to the extent that a significant reversal of cumulative revenue would not occur in future periods, estimates the amount to be included in the transaction price using the most likely amount method. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Group recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Group
re-evaluates
the probability of achieving such development milestones and any related constraint, and if necessary, adjust the estimate of the overall transaction price. Any such adjustments are recorded on a cumulative
catch-up
basis, which would affect revenues and earnings in the period of adjustment.
Royalties
: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties or milestone payments based on the level of sales relate, the Group recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
2.16
Value-added-tax
(“VAT”) recoverable and surcharges
Value added tax recoverable represent amounts paid by the Group for purchases. The surcharges (i.e., Urban construction and maintenance tax, educational surtax, local educational surtax), vary from 6% to 17% of
the value-added-tax depending
on
the tax-payer’s location.
The deductible input VAT balance is reflected in the prepayments and other receivables, and VAT payable balance is recorded in the accruals and other payables.
2.17 Research and development expenses
Elements of research and development expenses primarily include (1) payroll and other related expenses of personnel engaged in research and development activities,
(2) in-licensed
patent rights fee of exclusive development rights of drugs granted to the Group, (3) expenses related to preclinical testing of the Group’s technologies under development and clinical trials such as payments to contract research organizations (“CRO”), investigators and clinical trial sites that conduct the clinical studies (4) expenses to develop the product candidates, including raw materials and supplies, product testing, depreciation, and facility related expenses, (5) other research and development expenses. Research and development expenses are charged to expense as incurred when these expenditures relate to the Group’s research and development services and have no alternative future uses.
 
F-16

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
2. Principal Accounting Policies (Continued)
 
2.17 Research and development expenses (Continued)
 
The Group has acquired rights to develop and commercialize product candidates. Upfront payments that relate to the acquisition of a new drug compound, as well as
pre-commercial
milestone payments, are immediately expensed as acquired
in-process
research and development in the period in which they are incurred, provided that the new drug compound did not also include processes or activities that would constitute a “business” as defined under U.S. GAAP, the drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future use. Milestone payments made to third parties subsequent to regulatory approval would be capitalized as intangible assets and amortized over the estimated remaining useful life of the related product. The conditions enabling capitalization of development expenses as an asset have not yet been met and, therefore, all development expenditures are recognized in profit or loss when incurred.​​​​​​​
2.18 Leases
In accordance with ASC 842 adopted on January 1, 2019, the Group determines if an arrangement is a lease at inception. Operating leases are included in operating lease
right-of-use
(“ROU”) assets, operating lease liability, and operating lease liability,
non-current
in the Group’s consolidated balance sheets. The Group does not have any finance leases since the adoption date.
ROU assets represent the Group’s right to use an underlying asset for the lease term and lease liabilities represent the Group’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. When determining the lease term, the Group includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option, if any. As the Group’s leases do not provide an implicit rate, the Group uses its incremental borrowing rate, which it calculates based on the credit quality of the Group and by comparing interest rates available in the market for similar borrowings, and adjusting this amount based on the impact of collateral over the term of each lease.
The Group has elected to adopt the following lease policies in conjunction with the adoption of ASU
2016-02:
(i) elect for each lease not to separate
non-lease
components from lease components and instead to account for each separate lease component and the
non-lease
components associated with that lease component as a single lease component; (ii) for leases that have lease terms of 12 months or less and does not include a purchase option that is reasonably certain to exercise, the Group elected not to apply ASC 842 recognition requirements; and (iii) the Group elected to apply the package of practical expedients for existing arrangements entered into prior to January 1, 2019 to not reassess (a) whether an arrangement is or contains a lease, (b) the lease classification applied to existing leases, and (c) initial direct costs.
In connection with the adoption of ASC 842, on January 1, 2019, the Company recorded an impact of RMB13,100 on its assets and RMB11,333 on its liabilities for the recognition of operating lease
right-of-use-assets
and operating lease liabilities, respectively, which are primarily related to the lease of the Group’s offices and warehouses. The adoption of ASC 842 did not have a material impact on the Company’s results of operations or cash flows.
2.19 Comprehensive loss
Comprehensive loss is defined as the changes in equity of the Group during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220, Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components of comprehensive loss be reported in a financial statement that is displayed with the same prominence as other financial statements. For each of the periods presented, the Group’s comprehensive loss includes net loss and foreign currency translation adjustments, which are presented in the consolidated statements of comprehensive loss.
 
F-17

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
2. Principal Accounting Policies (Continued)
 
2.20 Share-based compensation
The Company grants restricted shares and stock options to eligible employees and accounts for share-based compensation in accordance with ASC 718, Compensation—Stock Compensation.
Employees’ share-based compensation awards are measured at the grant date fair value of the awards and recognized as expenses a) immediately at the grant date if no vesting conditions are required; or b) for share based awards granted with only service conditions, using the graded vesting method net of estimated forfeitures over the vesting period; or c) for share-based awards granted with service conditions and the occurrence of an initial public offering (“IPO”) as performance condition cumulative share-based compensation expenses for the options that have satisfied the service condition should be recorded upon the completion of the IPO using the graded vesting method.
A change in any of the terms or conditions of share-based awards is accounted for as a modification of the awards. The Group calculates incremental compensation expense of a modification as the excess of the fair value of the modified awards over the fair value of the original awards immediately before its terms are modified at the modification date. For vested awards, the Group recognizes incremental compensation cost in the period when the modification occurs. For awards not being fully vested, the Group recognizes the sum of the incremental compensation expense and the remaining unrecognized compensation expense for the original awards over the remaining requisite service period after modification.
Share-based compensation in relation to the restricted shares is measured based on the fair market value of the Group’s ordinary shares at the grant date of the award. Prior to the listing, estimation of the fair value of the Group’s ordinary shares involves significant assumptions that might not be observable in the market, and a number of complex and subjective variables, including discount rate, and subjective judgments regarding the Group’s projected financial and operating results, its unique business risks, the liquidity of its ordinary shares and its operating history and prospects at the time the grants are made. Share-based compensation in relation to the stock options is estimated using the Binominal Option Pricing Model. The determination of the fair value of stock options is affected by the share price of the Group’s ordinary shares as well as the assumptions regarding a number of complex and subjective variables, including the expected share price volatility, risk-free interest rate, exercise multiple and expected dividend yield. The fair value of these awards was determined with the assistance from an independent valuation firm.
2.21 Income taxes
The Group accounts for income taxes under the liability method. Under the liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and income tax bases of assets and liabilities and are measured using the tax income rates that will be in effect when the differences are expected to reverse. A valuation allowance is recorded if it is more likely than not that some portion or all of the deferred income tax assets will not be utilized in the foreseeable future.
 
F-18

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
2. Principal Accounting Policies (Continued)
 
2.21 Income taxes (Continued)
 
The Group evaluates its uncertain tax positions using the provisions of ASC
740-10, Income
Taxes, which prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements. The Group recognizes in the financial statements the benefit of a tax position which is ‘‘more likely than not’’ to be sustained under examination based solely on the technical merits of the position assuming a review by tax authorities having all relevant information. Tax positions that meet the recognition threshold are measured using a cumulative probability approach, at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. It is the Group’s policy to recognize interest and penalties related to unrecognized tax benefits, if any, as a component of income tax expense.​​​​​​​
2.22 Borrowings
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statements of comprehensive loss over the period of the borrowings using the effective interest method.
2.23 Segment information
In accordance with ASC 280, Segment Reporting, the Group’s chief operating decision maker, the Chief Executive Officer, reviews the consolidated results when making decisions about allocating resources and assessing performance of the Group as a whole and hence, the Group has only one reportable segment. The Group does not distinguish between markets or segments for the purpose of internal reporting. As the Group’s long-lived assets are substantially located in and derived from the PRC, no geographical segments are presented.
2.24 Loss per share
Basic loss per share is computed by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period using
the two-class method.
Under
the two-class method,
the net loss is allocated between ordinary shares and other participating securities based on their participating rights. Net loss is not allocated to other participating securities if based on their contractual terms they are not obligated to share in the loss. Diluted loss per share is calculated by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of shares issuable upon the conversion of the preferred shares using
the if-converted method,
shares issuable upon the exercise of stock options using the treasury stock method, shares issuable upon the conversion of the convertible promissory notes using
the if-converted method,
and shares issuable upon the exercise of warrants using the treasury stock method. Ordinary equivalent shares are not included in the denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive.
 
F-19

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
2. Principal Accounting Policies (Continued)
 
2.25 Adopted accounting pronouncements
In June 2016, the FASB issued ASU
2016-13,
Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU
2016-13”).
This guidance requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability. In November 2018, the FASB issued ASU
2018-19,
Codification Improvements to Topic 326, Financial Instruments-Credit Losses (“ASU
2018-19”),
which clarifies certain topics included within ASU
2016-13.
ASU
2016-13
and ASU
2018-19
are effective for the annual reporting period beginning after December 15, 2019, including interim periods within that reporting period. The impact of this ASU to the consolidated financial statements is immaterial. The Group elected to adopt this ASU and applied this guidance retrospectively to all periods presented.
In January 2017, the FASB issued ASU
2017-04,
Intangibles—Goodwill and Other (Topic 350), which simplifies the subsequent measurement of goodwill by removing the second step of the
two-step
impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The Group adopted this ASU on January 1, 2020 and the adoption of this ASU does not have a material impact to its consolidated financial statements.
In August 2018 the FASB issued ASU
No. 2018-13,
Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This standard modifies certain disclosure requirements on fair value measurements. This standard became effective for us on January 1, 2020.
In November 2018 the FASB issued
ASU No. 2018-18, Collaborative
Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This standard makes targeted improvements for collaborative arrangements as follows:
 
   
Clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606, Revenue from Contracts with Customers, when the collaborative arrangement participant is a customer in the context of a unit of account. In those situations, all the guidance in ASC 606 should be applied, including recognition, measurement, presentation and disclosure requirements;
 
   
Adds unit-of-account guidance
to ASC 808, Collaborative Arrangements, to align with the guidance in ASC 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of ASC 606; and
 
   
Precludes a company from presenting transactions with collaborative arrangement participants that are not directly related to sales to third parties with revenue recognized under ASC 606 if the collaborative arrangement participant is not a customer.
This standard became effective for the Group on January 1, 2020. A retrospective transition approach is required for either all contracts or only for contracts that are not completed at the date of initial application of ASC 606, with a cumulative adjustment to opening retained earnings. Since the Group’s all relevant units of accounts were accounted for under ASC 606, the adoption of this ASU does not have a material impact to the Group’s consolidated financial statements, with no adjustment to its opening retained earnings.
 
F-20

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
2. Principal Accounting Policies (Continued)
 
2.26 Recent accounting pronouncements
In December 2019, the FASB issued ASU
2019-12-Income
Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in ASU
2019-12
simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU
2019-12
is effective for the Company beginning on January 1, 2022. Early adoption of the amendments is permitted. The Company is currently evaluating the impact of ASU
2019-12
on its consolidated financial statements.
3. Prepayments and Other Receivables
 
    
As of December 31,
    
As of September 30,
 
    
2019
    
2020
 
    
RMB
    
RMB
    
US$
(Note 2.5)
 
Prepayments:
                          
—Prepayments to CRO vendors
     78,740        72,285        10,646  
—Prepayments for stock repurchase program (Note 11)
     —          34,051        5,015  
—Prepayments for other services
     880        1,722        254  
Receivables due from employees (Note (i))
     16,201                      
Loans to an affiliate (Note 21)
     —          52,000        7,659  
Value-added tax recoverable
     12,517        25,330        3,731  
Rental deposits
     546        994        146  
Interest receivables
     764                   
Others
     26,388        33,457        4,928  
    
 
 
    
 
 
    
 
 
 
       136,036        219,839        32,379  
    
 
 
    
 
 
    
 
 
 
Note:
(i) The balance mainly represented the receivables due from employees, which were arising from the Group’s obligation to pay the withholding individual income tax (“IIT”) for those employees’ stock option activities and was collected by the Group in January 2020.
 
F-21

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
4. Property, Equipment and Software
Property, equipment and software consist of the following:
 
    
As of December 31,
    
As of September 30,
 
    
2019
    
2020
 
    
RMB
    
RMB
    
US$
(Note 2.5)
 
Cost
                          
Laboratory equipment
     24,265        27,336        4,026  
Leasehold improvement
     11,856        12,605        1,857  
Software
     10,220        10,201        1,502  
Office furniture and equipment
     1,526        1,526        225  
    
 
 
    
 
 
    
 
 
 
Total property, equipment and software
     47,867        51,668        7,610  
Less: accumulated depreciation and amortization
     (18,221      (25,935      (3,820
    
 
 
    
 
 
    
 
 
 
Net book value
     29,646        25,733        3,790  
Construction in progress
     423        1,325        195  
    
 
 
    
 
 
    
 
 
 
Total net book value of property, equipment and software
     30,069        27,058        3,985  
    
 
 
    
 
 
    
 
 
 
The total amounts charged to the interim condensed consolidated statements of comprehensive loss for depreciation and amortization expenses amounted to approximately RMB6.8 million and RMB7.7 million for the nine months ended September 30, 2019 and 2020, respectively.
5. Intangible
Assets
Intangible assets as of December 31, 2019 and
September 
30, 2020 are summarized as follows:
 
    
As of December 31,
    
As of September 30,
 
    
2019
    
2020
 
    
RMB
    
RMB
    
US$
(Note 2.5)
 
Cost
                          
IPR&D
     148,844        122,000        17,969  
Less: accumulated amortization
     —          —          —    
    
 
 
    
 
 
    
 
 
 
Net book value
     148,844        122,000        17,969  
    
 
 
    
 
 
    
 
 
 
IPR&D represents the fair value assigned to research and development assets that the Group acquired from business combination of
I-Mab
Tianjin and its subsidiaries including Chengdu Tasgen
Bio-Tech
Co., Ltd. and Shanghai Tianyunjian
Bio-Tech
Co., Ltd. (together the “Tasgen Group”) in 2017 and had not reached technological feasibility at the date of acquisition. Upon commercialization, the Group will determine the estimated useful life and amortize these amounts based upon an economic consumption method.
 
F-22

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
5. Intangible Assets (Continued)
 
The fair value assigned to the IPR&D related to TJ102 was RMB26,844 (US$3,954). On September 15, 2020,
I-Mab
Hong Kong and Genexine, Inc. entered into amendments to Intellectual Property License Agreement with
I-Mab
Hangzhou to assign and transfer all the rights and obligations related to TJ102 to
I-Mab
Hangzhou, pursuant to an equity transfer and investment agreement entered into between
I-Mab
Hong Kong and various parties (Note 7).
As of December 31, 2019 and September 30, 2020, there was no impairment of the value of the Group’s intangible assets.
6. Goodwill
On July 15, 2017, the Group acquired 66.67% of the equity interests in the Tasgen Group by issuing convertible preferred shares and controlled the board of directors and business of
I-Mab
Tianjin since then. Tasgen Group is principally engaged in the research and development of innovative medicines and the Group acquired Tasgen Group for its research team, technical experience, and IPR&D pipeline assets (see Note 5). As of December 31, 2019 and September 30, 2020, the goodwill of RMB162,574 (US$23,945) represented the goodwill generated from the aforementioned acquisition of Tasgen Group and the business of Tasgen Group was fully integrated into the Company after the acquisition. There was no impairment of the value of the Group’s goodwill.
As of December 31, 2019 and September 30, 2020, the Group performed a qualitative assessment by evaluating relevant events and circumstances that would affect the Group’s single reporting unit and did not note any indicator that it is more likely than not that the fair value of the Group’s reporting unit is less than its carrying amount and therefore the Group’s goodwill was not impaired.
7. Investment Accounted for Using the Equity Method and Put Right Liabilities
(a) Investment accounted for using the equity method
I-Mab
Hangzhou, incorporated on June 16, 2019, was a wholly owned subsidiary of
I-Mab
Hong Kong with registered capital of US$30 million, which was paid up by
I-Mab
Hong Kong on September 14, 2020.
On September 15, 2020 (the “Closing Date”),
I-Mab
Hong Kong entered into an equity transfer and investment agreement (the “SPA”) with (i) a limited partnership jointly established by the management of
I-Mab
Hangzhou to hold restricted equity of
I-Mab
Hangzhou issued to the management (“Management Holdco”), (ii) a limited partnership established to hold the shares of
I-Mab
Hangzhou for future equity incentive plan (“ESOP Holdco”) and (iii) a group of domestic investors in China (“Domestic Investors”).
In accordance with the terms of the SPA,
 
  (i)
I-Mab
Hong Kong agreed to assign all rights and obligations/ownership of certain drug candidates in different stages of development (“Target Pipelines”) to
I-Mab
Hangzhou as of the Closing Date as well as to transfer employment of a team of designated management/workforce to
I-Mab
Hangzhou. The Target Pipelines were evaluated by an independent valuer, with a total value of US$105 million as of the Closing Date;
 
F-23

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
7. Investment Accounted for Using the Equity Method and Put Right Liabilities (Continued)
 
(a) Investment accounted for using the equity method (Continued)
 
  (ii)
Management Holdco would acquire 10% of the equity of
I-Mab
Hangzhou from
I-Mab
Hong Kong with no consideration. The
10
% equity is represented by
I-Mab
Hangzhou’s registered capital of US$3 million, and that after acquiring such equity, Management Holdco will pay US$3 million to
I-Mab
Hangzhou to fulfil its capital contribution obligations in a period of four years starting from the Closing Date;
 
  (iii)
ESOP Holdco would acquire 5% of the equity of
I-Mab
Hangzhou from
I-Mab
Hong Kong with no consideration. The
5%
equity is represented by
I-Mab
Hangzhou’s registered capital of US$1.5 million. All of such equity will be used to implement
I-Mab
Hangzhou’s equity incentive plan.
 
  (iv)
Domestic Investors would acquire a total of 40% of the equity of
I-Mab
Hangzhou from
I-Mab
Hong Kong with no consideration. The
40
% equity is represented
I-Mab
Hangzhou’s registered capital of US$12 million, and after acquiring such equity of
I-Mab
Hangzhou, Domestic Investors would pay US$120 million collectively to
I-Mab
Hangzhou to fulfil its capital contribution obligations.
After completion of the equity transfer, the registered capital of
I-Mab
Hangzhou remained to be US$30 million. The equity interest in
I-Mab
Hangzhou held by
I-Mab
Hong Kong, Domestic Investors, Management Holdco and ESOP Holdco are 45%, 40%, 10% and 5% respectively.
On the same day,
I-Mab
Hong Kong also entered into a shareholders agreement with the aforementioned investors (the “SHA”). According to the SHA and
I-Mab
Hangzhou’s articles of association, the board of directors of
I-Mab
Hangzhou shall be composed of seven directors. The directors shall be elected in the following ways:
I-Mab
Hong Kong is entitled to appoint three directors, including the chairman of the board of directors, as well as nominate one independent director; the Management Holdco is entitled to appoint one director; two
non-related
entities of the Domestic Investors are entitled to appoint one director respectively (“Investors Directors”). Each director of the board of directors shall have one vote.
I-Mab
Hong Kong, Management Holdco and ESOP Holdco agree to act in concert, as long as each of Management Holdco and ESOP Holdco respectively holds equity in
I-Mab
Hangzhou, when exercising the rights as a shareholder.
As a result of the above transactions,
I-Mab
Hangzhou became an affiliate of the Group on the Closing Date in accordance with ASC 810 since
I-Mab
Hangzhou meets the definition of a business under ASC 805. In accordance with ASC 810-10, I-Mab Hangzhou is a variable interest entity, and no shareholder shall consolidate I-Mab Hangzhou under variable interest entity model as neither party have the power to direct all the activities that most significantly impact the economic performance of I-Mab Hangzhou. Therefore, the Group deconsolidated
I-Mab
Hangzhou and retained 45% equity interest in
I-Mab
Hangzhou. The investment was accounted for using the equity method. The retained investment in the common stock of
I-Mab
Hangzhou was initially measured at fair value in accordance with ASC
810-10-40.
The Group determined the fair value of its retained equity interest with the assistance of an independent third-party valuation firm. The Group used equity allocation model to estimate the fair value of the investment. The fair value as of the Closing Date was US$112,039 (equivalent to approximately RMB764,352) which reflected the fact that the shares subscribed by Management Holdco and ESOP Holdco were not issued and outstanding as of the Closing Date. The carrying value of the Group’s long-term investment measured under equity method was RMB762,997 as of September 30, 2020.
 
F-24

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
7. Investment Accounted for Using the Equity Method and Put Right Liabilities (Continued)
 
(a) Investment accounted for using the equity method (Continued)
 
A gain of RMB407,598 was recognized as a result of the deconsolidation. The gain represented the difference between:
 
  i)
The fair value of the retained noncontrolling investment in
I-Mab
Hangzhou at the Closing Date; and
 
  ii)
The aggregate of all of the following:
 
  a)
the carrying amount of transferred intellectual property related to TJ102 at the Closing Date (Note 5);
 
  b)
the fair value of the put right liabilities written by
I-Mab
Hong Kong to Domestic Investors;
 
  c)
the carrying amount of
I-Mab
Hangzhou’s net assets at the Closing Date.
(b) Put right liabilities
Pursuant to the SHA, if
I-Mab
Hangzhou fails to close a public offering of
I-Mab
Hangzhou’s shares on the China Stock Exchange’s Science and Technology Innovation Board, Main Board, Small and
Medium-Sized
Enterprise Board, Growth Enterprise Board, or Hong Kong Stock Exchange, U.S. Stock Exchange, or other stock exchanges approved by the shareholders of
I-Mab
Hangzhou in accordance with provisions of the SHA within 4 years after September 15, 2020,
I-Mab
Hong Kong has agreed to repurchase the equity held by Domestic Investors by cash or
I-Mab’s
stock (subject to the approval procedures of
I-Mab)
within 3 years after the expiration of the
4-year
period after September 15, 2020.
The put right written by
I-Mab
Hong Kong to Domestic Investors is a freestanding equity-linked instrument, which is classified as a put right liability and recorded at fair value with changes in fair value recorded in the income statement.
The Group determined the fair value of the put right with the assistance of an independent third-party valuation firm. The Group used the option pricing model (finnerty model) to estimate the fair value of the put right using the following assumptions:
 
    
As of September 15,
and September 30,
 
    
2020
 
Expected terms (Year)
     4  
Estimated volatility
     55.2
Spot price
   US$ 143,401  
Probability of triggering event for redemption option
     65
The model requires the input of highly subjective assumptions including the expected terms, estimated volatility, spot price and probability of triggering event for redemption option. Expected terms is estimated based on the timing of a hypothetical redemption event which is assumed to be the earlier of expected redemption date or expected public offering date. Expected volatility is estimated based on daily stock prices of the comparable company for a period with length commensurate to the expected terms of redemption event. The spot price was determined with assistance from an independent third-party valuation firm. The Group’s management is ultimately responsible for the determination of the spot price and probability of triggering event for redemption option.
 
F-25

I-MAB
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(All amounts in thousands, except for share and per share data, unless otherwise noted)
 
7. Investment Accounted for Using the Equity Method and Put Right Liabilities (Continued)
 
(b) Put right liabilities (Continued)
 
Significant decreases in interval between valuation date and maturity date, estimated volatility, spot price and probability of triggering event for redemption option would result in a significantly lower fair value measurement.
8. Short-term Borrowings
In June 2019,
I-Mab
Bio-tech
(Tianjin) Co., Ltd. borrowed a loan of RMB50,000 from China Merchant Bank Co., Ltd. for a term of one year and at the interest rate of 4.15% per annum. To facilitate this borrowing, another subsidiary of the Company in Hong Kong placed cash deposits of US$8,000 (equivalent to approximately RMB55,810) with the bank. The use of such cash deposits and the interest earned thereon are restricted by the bank during the period of the borrowing. The deposits have a
one-year
term and bear interest at 2.63% per annum. The borrowing was repaid in June 2020.
9. Accruals and Other Payables
 
    
As of December 31,
    
As of September 30,
 
    
2019
    
2020
 
    
RMB
    
RMB
    
US$
(Note 2.5)
 
Current:
                          
Staff salaries and welfare payables
     30,166        15,783        2,325  
Accrued external research and development activities related expenses
     144,000        150,622        22,184  
Accrued initial public offering costs payable
     17,504        508        75  
Accrued private placement offering costs payable
     —          96,837        14,263  
Withholding IIT payable related to stock options
     16,201        —          —    
Non-refundable
incentive payment from depositary bank (Note)
     —          2,630        387  
Accrued traveling expenses, office expenses and others
     65,682        71,937        10,595  
    
 
 
    
 
 
    
 
 
 
       273,553        338,317        49,829  
    
 
 
    
 
 
    
 
 
 
Non-current: