On 24 November 2016, the Company had entered into an investment agreement with Spruce pursuant to which the Company agreed to subscribe for the newly issued convertible preferred shares of Spruce at a cash consideration of US$25.70 million, representing approximately 1.24% of the enlarged issued capital of Spruce. Spruce is a holding company incorporated in the Cayman Islands and provides supply chain related services including ingredient procurement, warehousing and distribution to small-and-mediumsized restaurants in the PRC. It is the largest e-commerce platform in terms of gross merchandise volume in the area of supply chain for agricultural products in the PRC. By shortening the distribution process of agricultural products, improving the efficiency of agricultural products supply chain, and establishing large scale warehousing and distribution system and the good quality control for the whole process, Spruce is able to provide economic and efficient services for farmers and restaurant customers in the PRCís agricultural products supply chain. Spruce is an independent third party of the Group.
The focus of Spruce in 2020 is to continue to boost the business coverage in cities where the market was newly exploited by it and to increase its market share. As a result of the multiple impacts of the Lunar New Year Holidays and COVID-19, the revenue of Spruce for the first quarter of 2020 fell significantly compared to the same period in 2019. However, as businesses in China gradually resumes, Spruceís business has gradually come back to normal in the second quarter. In the future, Spruce will continue to increase its market share by shortening the distribution process of agricultural products, improving the efficiency of agricultural products supply chain, and providing economic and efficient services to farmers and restaurant customers in the agricultural supply chain industry in the PRC. The Company is confident that Spruce will continue its business expansion at a satisfactory growth rate, and become one of the leaders in the agricultural supply chain industry in the PRC.