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Related Party Transactions

12 Months Ended

Dec. 31, 2021

18.	RELATED PARTY TRANSACTIONS

Name		Relationship with the Group
Mr. Chen		Founder
Xiaomi		Shareholder of the Group
Foshan Wanwuhulian Trade Co., Ltd. (“Foshan Wanwuhulian”)		Controlled by the Founder

The Group’s relationship with Xiaomi

Xiaomi is the Group’s strategic partner and shareholder.

The Group’s sales to Xiaomi are governed by a business cooperation agreement, pursuant to which Xiaomi is responsible for the distribution and sales of such products through their network and sales channels.

The Group also sells products through Xiaomi’s online e-commerce channel Xiaomiyoupin.com, and is charged of commissions pursuant to a commission sales agreement.

Transaction with Xiaomi

Business cooperation agreement

The current business corporation agreement entered into in 2019 with Xiaomi governs all the Group’s sales to Xiaomi. It expired in September 2021 and has been renewed up to September 2023.

Under the business cooperation agreement, (i) certain products sold to Xiaomi are exclusively designed for and can only be sold to Xiaomi, (ii) Xiaomi shall purchase these products at a price that covers all of the Group’s costs of raw materials, outsourcing manufacture, models, logistics and paid intellectual property licensing fees, in connection with the manufacture and delivery of these products, and (iii) Xiaomi and the Group shall share gross profits, derived from sales of these products, the retail prices of which were set by Xiaomi and the Group together.

In 2019, the Group has entered into a service arrangement with Xiaomi for a particular type of product under which the Group acts as the agent of Xiaomi. The Group charges Xiaomi with reference to market price. This service arrangement was terminated at the end of 2020.

18.	RELATED PARTY TRANSACTIONS (Continued)

Youpin commission sales agreement

The Group has entered into a commission sales agreement with Xiaomi for the sale of the Group’s own branded products on an E-platform operated by Xiaomi, namely Youpin. The commission sales agreement expired on December 31, 2021. The agreement has been renewed in 2022 and the end date will be determined through further negotiations. Furthermore, this agreement may be terminated by Xiaomi with 30 days’ written notice.

Under the commission sales agreement, the Group shall pay a service fee, calculated as certain portion of the sales price excluding customers’ refunds or as otherwise agreed by the parties with respect to specific product lines, as well as a deposit to Xiaomi. The retail prices of the Group’s products on Youpin’s platform shall be no higher than the sales price from any other e-commerce merchants or the Group’s official offline sales channel, including in the event of sales or promotion. Refer to Note 18 (5) to the consolidated financial statements for the commission expenses charged by Youpin for the years ended December 31, 2019, 2020 and 2021.

(1)	Amount due from/to related parties

	As of December 31,
	2020		2021
	RMB		RMB
Accounts receivable from a related party:
Xiaomi^(a)		609,094	320,939

Other receivables from related parties:
Sales receivable from Xiaomi^(b)		88,029		88,331
Other receivables from Xiaomi		9		36
Total		88,038		88,367

Amounts due to related parties:
Purchase payable to Xiaomi^(a)		2,463		3,537
Purchase payable to Foshan Wanwuhulian^(c)		121,321		-
Research and development expenses payable to Xiaomi		408	715
Selling and marketing expenses payable to Xiaomi^(d)		-	1,163
Total		124,192	5,415

(2)	Purchase from related parties

	Year ended December 31,
	2019		2020		2021
	RMB		RMB		RMB
Xiaomi^(a)		43,037		50,843		33,767
Foshan Wanwuhulian^(c)		15,422		469,950		-
Total		58,459		520,793		33,767

(3)	Revenue from a related party

	Year ended December 31,
	2019		2020		2021
	RMB		RMB		RMB
Xiaomi^(a)		2,112,170		2,889,441		2,295,569

(4)	Research and development expenses

	Year ended December 31,
	2019		2020		2021
	RMB		RMB		RMB
Xiaomi		657		1,915		3,484

18.	RELATED PARTY TRANSACTIONS (Continued)

(5)	Selling and marketing expenses

	Year ended December 31,
	2019		2020		2021
	RMB		RMB		RMB
Commission expenses charged by Xiaomi^(b)		58,874		77,163		82,617
Other expenses charged by Xiaomi^(b)		22,977		20,060		24,312
Total		81,851		97,223		106,929

(a)

The Group both sells water purifiers and other products to and purchase Xiaomi branded products and certain raw materials from Xiaomi. The amount due from Xiaomi represents receivable arising from sales of water purifiers and other products. The balance due to Xiaomi represents payable arising from purchase of Xiaomi branded products and certain raw materials

(b)

The Group sells its own brand products on the E-platform of Xiaomi, which charges the Group commission and technical service fees, also Xiaomi provides advertising and promotion service. The amount due from Xiaomi represents sales receivable net of commission, advertising and promotion service.

(c)

The Group purchases products from Foshan Wanwuhulian for trading during the year ended December 31, 2020. The cooperation with Foshan Wanwuhulian was terminated at the end of 2020.

(d)

The Group sells its own brand products on the E-platform of Xiaomi, which charges the Group customer service fees.