[Report of Foreign Private Issuer (Form 6-K)](index=1&type=section&id=Form%206-K) This report details the change in the company's independent auditor, including the appointment of a new firm, official signing, and related exhibits [Change in Registrant's Certifying Accountants](index=2&type=section&id=Change%20in%20Registrant%27s%20Certifying%20Accountants) Luckin Coffee Inc. appointed BDO China Shu Lun Pan Certified Public Accountants LLP as its new independent auditor, effective April 14, 2022 - **BDO China Shu Lun Pan Certified Public Accountants LLP** has been appointed as the new independent registered public accounting firm for the fiscal year ending December 31, 2022[4](index=4&type=chunk) - The appointment of BDO is effective **April 14, 2022**, replacing Centurion ZD CPA & Co. (**CZD**)[4](index=4&type=chunk)[5](index=5&type=chunk) - CZD's audit reports for fiscal years **2019, 2020, and 2021** did not contain any adverse opinion or disclaimer[5](index=5&type=chunk) - The company reported no disagreements with CZD on accounting principles, financial disclosure, or auditing scope, and no "reportable events" occurred[6](index=6&type=chunk) - CZD provided a letter to the SEC, attached as **Exhibit 99.1**, confirming agreement with the company's disclosures regarding the change[7](index=7&type=chunk) [Signatures](index=3&type=section&id=SIGNATURES) The report was signed by Reinout Hendrik Schakel, Chief Financial Officer and Chief Strategy Officer, on April 14, 2022 - The report was signed on behalf of Luckin Coffee Inc. by **Reinout Hendrik Schakel**, Chief Financial Officer and Chief Strategy Officer[11](index=11&type=chunk) - The signature date is **April 14, 2022**[11](index=11&type=chunk) [Exhibits](index=4&type=section&id=EXHIBIT%20INDEX) The filing includes two exhibits: a letter from the former auditor and a press release announcing the new independent auditor Exhibit Index | Exhibit No. | Description | | :--- | :--- | | 99.1 | Letter of CZD dated April 14, 2022 regarding change in independent registered public accounting firm | | 99.2 | Press release entitled "Luckin Coffee Announces the Appointment of BDO as Independent Auditor" |

Financial Performance - Total net revenues in Q4 2021 were RMB2,432.7 million (US$381.7 million), an increase of 80.7% from RMB1,345.9 million in Q4 2020[4] - Total net revenues for fiscal year 2021 were RMB7,965.3 million (US$1,249.9 million), a 97.5% increase from RMB4,033.4 million in fiscal year 2020[6] - Revenues from self-operated stores in Q4 2021 were RMB1,837.2 million (US$288.3 million), up 61.0% from RMB1,141.1 million in Q4 2020[6] - Revenues from partnership stores in Q4 2021 were RMB448.8 million (US$70.4 million), representing a 248.4% increase from RMB128.8 million in Q4 2020[9] - Revenues from product sales for the three months ended December 31, 2021, were RMB1,983,827, up 63.0% from RMB1,217,062 in the same period of 2020[34] - The company reported a net income of RMB921,326 for the three months ended December 31, 2021, compared to a net loss of RMB2,336,574 in the same period of 2020[34] - The company reported a total comprehensive income of RMB973,429 for the three months ended December 31, 2021, compared to a total comprehensive loss of RMB2,211,108 in the same period of 2020[35] Customer Metrics - Average monthly transacting customers in Q4 2021 reached 16.2 million, a 67.1% increase from 9.7 million in Q4 2020[4] - Average monthly transacting customers reached 16,229 thousand in Q4 2021, up from 9,712 thousand in Q4 2020[18] Store Operations - The company opened 353 net new stores in Q4 2021, resulting in a total of 6,024 stores, including 4,397 self-operated and 1,627 partnership stores[4] - Total stores increased to 6,024 as of December 31, 2021, up from 4,803 at the end of 2020[18] - Same-store sales growth for self-operated stores in Q4 2021 was 43.6%, compared to 9.2% in Q4 2020[6] - Same-store sales growth for self-operated stores was 43.6% in Q4 2021, following 75.8% in Q3 2021 and 94.5% in Q2 2021[18] Financial Health - Cash and cash equivalents as of December 31, 2021, were RMB6,555.3 million (US$1,028.7 million), up from RMB5,189.0 million as of December 31, 2020[16] - Cash and cash equivalents increased to RMB6,477,636 as of December 31, 2021, from RMB4,806,023 as of December 31, 2020, representing a growth of 34.7%[32] - The company's total assets grew to RMB12,312,490 as of December 31, 2021, up from RMB9,322,399 in 2020, marking an increase of 32.5%[33] - The company’s accumulated deficits decreased to RMB11,768,626 as of December 31, 2021, from RMB12,452,882 in 2020, indicating an improvement in financial health[32] Operating Loss and Expenses - The company reported a GAAP operating loss of RMB120.8 million (US$19.0 million) in Q4 2021, significantly improved from a loss of RMB488.9 million in Q4 2020[12] - Operating loss for the year ended December 31, 2021, was RMB539,054, a significant reduction from an operating loss of RMB2,587,268 in 2020[34] - Luckin Coffee's non-GAAP operating loss for the year ended December 31, 2021, was RMB236,320 thousand (US$37,085), a substantial reduction from a non-GAAP operating loss of RMB2,493,772 thousand in 2020[38] - Losses and expenses related to Fabricated Transactions and Restructuring were RMB109.4 million (US$17.2 million) in Q4 2021, a 21.8% increase from RMB89.8 million in Q4 2020[17] Cash Flow - For the three months ended December 31, 2021, Luckin Coffee reported a net cash provided by operating activities of RMB123,447 thousand (US$19,372), a significant improvement compared to a net cash used of RMB131,892 thousand in the same period of 2020[36] - The company achieved a net cash provided by financing activities of RMB1,514,660 thousand (US$237,683) for the three months ended December 31, 2021, compared to no financing activities in the same period of 2020[36] - The company experienced a net increase in cash and cash equivalents of RMB1,443,656 thousand (US$226,541) for the three months ended December 31, 2021, compared to a net decrease of RMB205,110 thousand in the same period of 2020[36] Shareholder Information - The weighted average shares outstanding for basic loss per share increased to 2,025,936,330 in 2021 from 2,025,174,797 in 2020[35] - The weighted average shares outstanding used in calculating basic and diluted income per share increased to 2,215,544,209 for the three months ended December 31, 2021, from 2,067,706,003 in the same period of 2020[39] - Luckin Coffee's basic and diluted non-GAAP net income per share for the three months ended December 31, 2021, was US$0.01, a decrease from US$0.10 in the same period of 2020[39] Strategic Initiatives - The company aims to enhance its brand recognition and maintain quality control as part of its growth strategy in the competitive coffee industry[27]

PART I [ITEM 3. KEY INFORMATION](index=10&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section presents selected financial data for fiscal years 2018, 2019, and 2020, including significant net losses and negative operating cash flows, alongside detailed risk factors related to fabricated transactions, legal proceedings, and regulatory environments [3.A. Selected Financial Data](index=10&type=section&id=3.A.%20Selected%20Financial%20Data) The company's total net revenues grew from RMB 3.02 billion in 2019 to RMB 4.03 billion in 2020, yet net loss attributable to shareholders widened to RMB 5.59 billion, driven by approximately RMB 2.4 billion in provisions for SEC and equity litigant settlements, with operating cash flow remaining negative Selected Consolidated Statements of Comprehensive Loss (2018-2020) | Indicator | 2018 (RMB thousands) | 2019 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | :--- | | **Total net revenues** | 840,695 | 3,024,934 | 4,033,418 | | **Operating loss** | (1,598,006) | (3,212,115) | (2,587,268) | | **Net loss** | (1,619,152) | (3,160,507) | (5,602,990) | | **Net loss attributable to shareholders** | (3,190,334) | (3,712,596) | (5,589,105) | Selected Consolidated Balance Sheet Data (as of Dec 31) | Indicator | 2019 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | **Total assets** | 9,762,261 | 9,322,399 | | **Total liabilities** | 4,619,734 | 6,597,515 | | **Cash and cash equivalents** | 4,865,824 | 4,806,023 | Selected Consolidated Cash Flow Data (2018-2020) | Indicator | 2018 (RMB thousands) | 2019 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | :--- | | **Net cash used in operating activities** | (1,310,694) | (2,166,970) | (2,376,832) | | **Net cash used in investing activities** | (1,283,218) | (1,815,890) | (1,712,333) | | **Net cash generated from financing activities** | 3,988,402 | 7,240,746 | 4,029,070 | - The company provides non-GAAP financial measures, such as adjusted operating loss and adjusted net loss, to exclude items like share-based compensation, impairment losses, and provisions for settlements, which management uses to evaluate operating performance[49](index=49&type=chunk)[51](index=51&type=chunk) [3.D. Risk Factors](index=12&type=section&id=3.D.%20Risk%20Factors) The company faces substantial risks stemming from its 2019 fabricated transactions, including numerous legal proceedings, Nasdaq delisting, and a material weakness in internal controls, alongside operational, structural, and significant regulatory risks in China and the U.S - The previously disclosed Fabricated Transactions have led to numerous legal proceedings, significant expenses, and adverse impacts on the company's reputation, operations, and ability to raise capital[55](index=55&type=chunk)[57](index=57&type=chunk) - A material weakness in internal control over financial reporting was identified as of December 31, 2020, specifically a lack of sufficient entity-level control policies and procedures, including failures in demonstrating integrity and proper segregation of duties[64](index=64&type=chunk)[65](index=65&type=chunk) - The company is undergoing an offshore restructuring of its indebtedness under the supervision of Joint Provisional Liquidators (JPLs) appointed by a Cayman court, with no absolute assurance of its successful completion[73](index=73&type=chunk)[74](index=74&type=chunk) - Trading in the company's ADSs may be prohibited under the Holding Foreign Companies Accountable Act (HFCA Act) if the PCAOB is unable to inspect its auditor located in China[197](index=197&type=chunk)[201](index=201&type=chunk) - Recent PRC government actions to strengthen supervision over U.S.-listed China-based companies, particularly concerning data security and overseas listings, may require CSRC approval for future offerings and could materially impact the company[202](index=202&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) [ITEM 4. INFORMATION ON THE COMPANY](index=50&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section details Luckin Coffee's history, including its 2019 IPO, 2020 Nasdaq delisting, and subsequent restructuring efforts, along with a business overview of its technology-driven new retail model, store network, product offerings, organizational structure, and the complex regulatory landscape in China [4.A. History and Development of the Company](index=50&type=section&id=4.A.%20History%20and%20Development%20of%20the%20Company) Founded in 2017, Luckin Coffee Inc. rapidly grew, completing its IPO in May 2019, but was delisted from NASDAQ in July 2020 following a financial fabrication scandal, leading to the appointment of Joint Provisional Liquidators and subsequent restructuring agreements with bondholders and investors - The company was delisted from Nasdaq on **July 1, 2020**, and its ADSs have since been quoted on the OTC Pink market under the symbol 'LKNCY'[271](index=271&type=chunk) - In July 2020, 'light-touch' Joint Provisional Liquidators (JPLs) were appointed by a Cayman court to supervise the company's operations and oversee a restructuring of its financial obligations[272](index=272&type=chunk) - In March 2021, the company entered into a Restructuring Support Agreement (RSA) with a majority of its convertible note holders, aiming for a recovery of **91%-96% of par value** for them[273](index=273&type=chunk) - In April 2021, the company secured an investment agreement for approximately **$250 million** from Centurium Capital and Joy Capital, with proceeds intended to facilitate the restructuring and fulfill obligations under the SEC settlement[275](index=275&type=chunk) [4.B. Business Overview](index=51&type=section&id=4.B.%20Business%20Overview) Luckin Coffee operates one of China's largest coffee networks, pioneering a technology-driven model focused on high quality, convenience, and affordability through mobile apps and a network of primarily small-format pick-up stores, supplemented by a retail partnership model, while being subject to extensive PRC regulations - The company's business model is built on mobile apps for a cashier-less environment and a store network focused on pick-up stores (**96.5% of total self-operated stores as of Dec 31, 2020**) to ensure convenience and low operating costs[282](index=282&type=chunk)[293](index=293&type=chunk) - As of July 31, 2021, the company had **4,030 self-operated stores**, **1,293 partnership stores**, and **752 Luckin Coffee EXPRESS machines**, with over **78.4 million cumulative transacting customers**[286](index=286&type=chunk) - Technology is central to the business, used for customer engagement, simplifying store operations, inventory management, and supply chain optimization[284](index=284&type=chunk)[348](index=348&type=chunk) - The company launched a retail partnership model in September 2019 to expand its footprint, particularly in lower-tier cities, with **874 partnership stores** in operation by the end of 2020[310](index=310&type=chunk)[311](index=311&type=chunk) - The business is subject to a wide range of PRC regulations, including the recently effective Data Security Law and the upcoming Personal Information Protection Law, which govern data collection, use, and security[354](index=354&type=chunk)[402](index=402&type=chunk)[403](index=403&type=chunk) [4.C. Organizational Structure](index=73&type=section&id=4.C.%20Organizational%20Structure) Luckin Coffee Inc., a Cayman Islands holding company, operates in China through its PRC subsidiaries and a Variable Interest Entity (VIE), Beijing Luckin Coffee Technology Ltd., controlled via contractual arrangements to hold foreign-restricted licenses and manage economic benefits - The company uses a VIE structure to hold certain foreign-restricted licenses, such as the ICP license, which may be needed for future operations[436](index=436&type=chunk) - Control over the VIE is maintained through a series of contractual agreements, including a Proxy Agreement, Share Pledge Agreement, Master Exclusive Service Agreement, and Exclusive Option Agreement[441](index=441&type=chunk)[444](index=444&type=chunk)[445](index=445&type=chunk)[447](index=447&type=chunk) - The nominal shareholders of the VIE as of the report date were Ms. Jenny Zhiya Qian and Mr. Min Chen, both of whom were terminated from the company, and the company is in the process of replacing them[439](index=439&type=chunk)[848](index=848&type=chunk) [ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS](index=77&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section provides management's discussion and analysis of the company's financial condition and results of operations, highlighting a 33.3% increase in net revenues to RMB 4.03 billion in 2020, driven by higher average selling prices and customer growth, despite a significant widening of net loss to RMB 5.60 billion due to large provisions for legal settlements [5.A. Operating Results](index=77&type=section&id=5.A.%20Operating%20Results) In 2020, net revenues increased by 33.3% to RMB 4.03 billion, primarily due to higher average selling prices and customer growth, with significant revenue growth from partnership stores, though operating expenses rose to RMB 6.62 billion, and net loss widened to RMB 5.60 billion due to substantial provisions for legal settlements and impairment of trust investments Key Operating Data (Q4 2019 vs Q4 2020) | Indicator | Q4 2019 | Q4 2020 | | :--- | :--- | :--- | | **Total self-operated stores** | 4,507 | 3,929 | | **Total partnership stores** | 282 | 874 | | **Cumulative transacting customers (thousands)** | 40,608.9 | 64,915.6 | | **Avg. monthly items sold in self-op stores (thousands)** | 33,273.4 | 31,632.2 | | **Avg. monthly items sold in partnership stores (thousands)** | 594.7 | 6,068.7 | - Net revenues grew **33.3% year-over-year** to **RMB 4,033.4 million** in 2020, driven by increased average selling prices, growth in transacting customers, and a significant increase in revenue from partnership stores[487](index=487&type=chunk)[492](index=492&type=chunk) - Operating expenses in 2020 included **RMB 475.3 million** in losses and expenses related to the Fabricated Transactions and restructuring, covering legal fees, investigation costs, and regulatory penalties[505](index=505&type=chunk) - The company recorded significant one-time provisions in 2020: **RMB 1,177.1 million** for the SEC settlement, **RMB 1,226.1 million** for equity litigants settlement, and **RMB 1,140.0 million** for the impairment of trust investments[510](index=510&type=chunk)[511](index=511&type=chunk)[512](index=512&type=chunk) [5.B. Liquidity and Capital Resources](index=94&type=section&id=5.B.%20Liquidity%20and%20Capital%20Resources) The company's primary liquidity source has been cash from historical equity and debt financings, with cash, cash equivalents, and restricted cash totaling RMB 4.94 billion as of December 31, 2020, despite net cash used in operating activities of RMB 2.38 billion and net cash used in investing activities of RMB 1.71 billion, offset by RMB 4.03 billion from financing activities Summary of Cash Flows (2019 vs 2020) | Indicator | 2019 (RMB thousands) | 2020 (RMB thousands) | | :--- | :--- | :--- | | **Net cash used in operating activities** | (2,166,970) | (2,376,832) | | **Net cash used in investing activities** | (1,815,890) | (1,712,333) | | **Net cash generated from financing activities** | 7,240,746 | 4,029,070) | | **Cash and restricted cash at end of year** | 4,981,429 | 4,939,045 | - The company believes its current cash and anticipated cash flow will be sufficient to meet its working capital and capital expenditure needs for at least the next **12 months**[553](index=553&type=chunk) - Capital expenditures decreased to **RMB 822.3 million** in 2020 from **RMB 1,614.2 million** in 2019, primarily for property and equipment[558](index=558&type=chunk) [ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](index=99&type=section&id=ITEM%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section outlines significant leadership changes following the 2020 financial scandal, with Dr. Jinyi Guo appointed Chairman and CEO, details the Board's composition and committees, executive compensation, equity incentive plans, employee headcount, and the dual-class share ownership structure, where Centurium Capital holds 43.5% of total voting power [6.A. Directors and Senior Management](index=99&type=section&id=6.A.%20Directors%20and%20Senior%20Management) Following the financial fabrication scandal, the company reformed its leadership, terminating former CEO Jenny Zhiya Qian and COO Jian Liu, and removing former Chairman Charles Zhengyao Lu, with Dr. Jinyi Guo now serving as Chairman and CEO, leading a new senior management team and a Board comprising three other executives and four independent directors - The company underwent a significant leadership overhaul in July 2020, terminating the former CEO and COO and removing the former Chairman due to their involvement in the Fabricated Transactions[570](index=570&type=chunk) - Dr. Jinyi Guo, a co-founder, was appointed Chairman of the Board and CEO in July 2020[571](index=571&type=chunk) [6.B. Compensation](index=101&type=section&id=6.B.%20Compensation) In 2020, aggregate cash compensation for executive officers was RMB 26.6 million and for non-executive directors was RMB 3.1 million, with the company adopting a new 2021 Equity Incentive Plan authorizing up to 222.8 million Class A ordinary shares for issuance, under which 4.2 million restricted share units have been granted - In 2020, the company paid **RMB 26.6 million** in cash to its executive officers and **RMB 3.1 million** to its non-executive directors[582](index=582&type=chunk) - The company adopted a new 2021 Equity Incentive Plan in January 2021, authorizing up to **222,769,232 Class A ordinary shares** for awards[597](index=597&type=chunk) [6.C. Board Practices](index=105&type=section&id=6.C.%20Board%20Practices) The Board of Directors consists of seven members, including four independent directors, and has established an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, each with specific charters and responsibilities, with the Audit Committee composed entirely of independent directors, and Mr. Sean Shao designated as an 'audit committee financial expert' - The Board consists of **seven directors**, four of whom are independent[610](index=610&type=chunk) - The company has three key board committees: Audit, Compensation, and Nominating and Corporate Governance[612](index=612&type=chunk) - The Audit Committee is comprised of **four independent directors**, and Mr. Sean Shao is designated as the 'audit committee financial expert'[613](index=613&type=chunk) [6.D. Employees](index=106&type=section&id=6.D.%20Employees) As of December 31, 2020, Luckin Coffee had 8,590 full-time and 12,718 part-time employees, all based in China, representing a decrease from year-end 2019, with the majority of full-time staff involved in store operations Employee Headcount (as of Dec 31) | Employee Type | 2019 | 2020 | | :--- | :--- | :--- | | **Full-time** | 12,007 | 8,590 | | **Part-time** | 18,114 | 12,718 | [6.E. Share Ownership](index=107&type=section&id=6.E.%20Share%20Ownership) As of July 31, 2021, the company had a dual-class share structure with 1.88 billion Class A shares and 144.8 million Class B shares outstanding, with Centurium Capital beneficially owning 100% of the Class B shares, granting it 43.5% of the aggregate voting power, while other major shareholders included entities in liquidation and Joy Capital - The company has a dual-class share structure where Class A shares have one vote and Class B shares have ten votes[239](index=239&type=chunk)[690](index=690&type=chunk) - As of July 31, 2021, Centurium Capital beneficially owned **100% of the outstanding Class B ordinary shares**, representing **43.5% of the company's total voting power**[628](index=628&type=chunk)[632](index=632&type=chunk) [ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS](index=108&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details transactions with related parties, primarily entities affiliated with former chairman Mr. Charles Zhengyao Lu, including services received from UCAR Inc. and QWOM, guarantees provided by former management for credit facilities, and notably, two fully impaired trust investments totaling RMB 1.14 billion made in March 2020 that benefited Mr. Lu's affiliated entities - The company engaged in transactions with entities controlled by former chairman Mr. Charles Zhengyao Lu, including renting office space from UCAR Inc. and receiving advertising services from QWOM[641](index=641&type=chunk)[643](index=643&type=chunk) - In March 2020, under the direction of former management, the company made two trust investments totaling **RMB 1.14 billion (US$174.7 million)** into entities affiliated with Mr. Lu, which have been fully impaired[645](index=645&type=chunk)[649](index=649&type=chunk) - Former chairman Mr. Charles Zhengyao Lu and former CEO Ms. Jenny Zhiya Qian provided personal guarantees for several credit facilities, all of which were terminated by June 2020 after the underlying borrowings were settled[635](index=635&type=chunk)[638](index=638&type=chunk) [ITEM 8. FINANCIAL INFORMATION](index=112&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section focuses on legal proceedings arising from the financial fabrication scandal, including a US$180 million SEC settlement in December 2020, ongoing investigations by the U.S. Department of Justice and China's Ministry of Finance, multiple U.S. securities class action lawsuits with a binding term sheet for a US$187.5 million settlement in one federal case, and a RMB 61.0 million fine from China's SAMR - The company settled with the SEC in December 2020, agreeing to a **US$180 million** civil penalty for the Fabricated Transactions, which can be offset by payments made to security holders through the Cayman restructuring process[654](index=654&type=chunk)[1063](index=1063&type=chunk) - The company remains under investigation by the U.S. Department of Justice (DOJ) and China's Ministry of Finance regarding the Fabricated Transactions[657](index=657&type=chunk)[661](index=661&type=chunk) - Multiple securities class action lawsuits were filed, with a binding term sheet entered into on September 20, 2021, to settle the primary federal class action for a global amount of **US$187.5 million**, subject to court approvals[662](index=662&type=chunk)[663](index=663&type=chunk)[1075](index=1075&type=chunk) - China's State Administration for Market Regulation (SAMR) imposed an aggregate fine of **RMB 61.0 million** on two of the company's entities and other third parties for violating anti-unfair competition laws[658](index=658&type=chunk) [ITEM 10. ADDITIONAL INFORMATION](index=117&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section details the company's corporate governance and share structure, including its dual-class share system that grants disproportionate voting power to Class B shareholders, and outlines material tax consequences for investors in the Cayman Islands, PRC, and the U.S., highlighting a significant risk of being classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes - The company has a dual-class share structure where each Class A ordinary share has one vote and each Class B ordinary share has ten votes, concentrating control with holders of Class B shares[690](index=690&type=chunk) - There is a significant risk that the company will be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in adverse tax consequences for U.S. investors[260](index=260&type=chunk)[725](index=725&type=chunk) - If the company is deemed a PRC resident enterprise for tax purposes, it could be subject to a **25% tax** on its worldwide income, and dividends paid to non-PRC shareholders could be subject to a **10% withholding tax**[716](index=716&type=chunk) [ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=128&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to several market risks, primarily foreign currency exchange rate risk as revenues and most costs are in Renminbi (RMB) while some cash is held in U.S. dollars, currency convertibility risk due to PRC government controls, and interest rate risk on its interest-bearing assets and liabilities - The company faces foreign currency exchange rate risk as its revenues are in RMB but it holds some cash in USD and may need to convert currencies for dividends or debt service[748](index=748&type=chunk)[749](index=749&type=chunk) - Currency convertibility risk exists due to PRC government controls on the remittance of RMB out of China[750](index=750&type=chunk) PART II [ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES](index=132&type=section&id=ITEM%2013.%20DEFAULTS,%20DIVIDEND%20ARREARAGES%20AND%20DELINQUENCIES) The company defaulted on its US$460 million convertible senior notes due 2025, as the appointment of 'light-touch' Joint Provisional Liquidators (JPLs) on July 15, 2020, constituted an event of default, causing the entire principal and accrued interest to become immediately due and payable, with the company currently negotiating a restructuring of this debt with noteholders - The appointment of Joint Provisional Liquidators (JPLs) on **July 15, 2020**, triggered an event of default on the **US$460 million** convertible senior notes due 2025, making the full principal and interest immediately due[762](index=762&type=chunk) - The company is negotiating a restructuring of the defaulted notes under a Restructuring Support Agreement (RSA) with a majority of the noteholders[763](index=763&type=chunk) [ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS](index=132&type=section&id=ITEM%2014.%20MATERIAL%20MODIFICATIONS%20TO%20THE%20RIGHTS%20OF%20SECURITY%20HOLDERS%20AND%20USE%20OF%20PROCEEDS) This section confirms no material modifications to security holders' rights and details the full utilization of net proceeds from the May 2019 IPO and January 2020 follow-on public offering for general corporate purposes - The net proceeds from the May 2019 IPO (approx. **US$607.2 million**) and the January 2020 follow-on offering (approx. **US$419.5 million**) have been fully utilized for general corporate purposes[766](index=766&type=chunk)[767](index=767&type=chunk)[769](index=769&type=chunk)[770](index=770&type=chunk) [ITEM 15. CONTROLS AND PROCEDURES](index=132&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that as of December 31, 2020, the company's disclosure controls and procedures were ineffective due to a material weakness in internal control over financial reporting, specifically a lack of sufficient entity-level controls and proper segregation of duties, for which a comprehensive remediation plan is underway - Management concluded that disclosure controls and procedures were ineffective as of **December 31, 2020**, due to a material weakness in internal control over financial reporting[772](index=772&type=chunk) - The identified material weakness is a 'Lack of sufficient entity level control policies and procedures, including failure to demonstrate commitment to integrity and ethical values and lack of appropriate segregation of functions and duties and approval'[774](index=774&type=chunk) - A comprehensive remediation plan is underway, including strengthening payment and contract controls, enhancing IT security, establishing internal audit and compliance functions, and hiring key finance personnel with U.S. GAAP experience[775](index=775&type=chunk)[777](index=777&type=chunk)[778](index=778&type=chunk)[780](index=780&type=chunk) PART III [ITEM 18. FINANCIAL STATEMENTS](index=138&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section contains the company's audited consolidated financial statements for fiscal years 2018, 2019, and 2020, including balance sheets, statements of comprehensive loss, shareholders' equity, and cash flows, along with detailed notes covering financial fabrication, accounting policies, legal contingencies, related party transactions, and subsequent events Consolidated Balance Sheet Highlights (As of Dec 31, 2020) | Account | Amount (RMB thousands) | Amount (US$ thousands) | | :--- | :--- | :--- | | **Total Assets** | 9,322,399 | 1,428,720 | | Cash and cash equivalents | 4,806,023 | 736,555 | | **Total Liabilities** | 6,597,515 | 1,011,113 | | Convertible senior notes | 3,001,500 | 460,000 | | Payable for SEC settlement | 1,174,500 | 180,000 | | Payable for equity litigants settlement | 1,223,438 | 187,500 | | **Total Shareholders' Equity** | 2,724,884 | 417,607 | Consolidated Statement of Comprehensive Loss Highlights (FY 2020) | Account | Amount (RMB thousands) | Amount (US$ thousands) | | :--- | :--- | :--- | | **Total net revenues** | 4,033,418 | 618,147 | | **Operating loss** | (2,587,268) | (396,519) | | **Provision for SEC settlement** | (1,177,074) | (180,394) | | **Provision for equity litigants settlement** | (1,226,119) | (187,911) | | **Impairment of trust investments** | (1,140,000) | (174,713) | | **Net loss** | (5,602,990) | (858,699) |

Revenue Growth - Revenue from product sales increased from RMB840.7 million in 2018 to RMB3,009.6 million (US$432.3 million) in 2019, representing a growth of approximately 257%[519] - Revenue from partnership stores' material sales was RMB12.6 million (US$1.8 million) in 2019, compared to nil in the previous periods[522] - Deferred revenues increased from RMB126.5 million in 2018 to RMB144.9 million (US$20.8 million) in 2019, indicating a growth of approximately 14%[527] Revenue Recognition - The company adopted ASC 606 for revenue recognition on January 1, 2019, which did not impact the beginning retained earnings[517] - The company has not recognized any material profit-sharing revenue from partnership stores during the reported periods[524] Financial Position - The balance of accounts receivable was RMB22.8 million (US$3.3 million) as of December 31, 2019, compared to nil in 2018[526] - Inventory impairment recognized was RMB2.2 million (US$0.3 million) in 2019, compared to nil in the previous periods[532] - Cash and cash equivalents and restricted cash at the end of 2019 were RMB4,981.43 million (US$715.54 million), up from RMB1,630.98 million at the end of 2018[550] Operating and Investing Activities - Net cash used in operating activities was RMB2,166.97 million (US$311.3 million) in 2019, compared to RMB1,310.69 million in 2018[550] - Net cash used in investing activities increased to RMB1,815.89 million (US$260.8 million) in 2019 from RMB1,283.22 million in 2018[555] - Capital expenditures were RMB1,614.2 million (US$231.9 million) in 2019, compared to RMB1,005.7 million in 2018[557] Financing Activities - Net cash generated from financing activities was RMB7,240.75 million (US$1,040.1 million) in 2019, up from RMB3,988.40 million in 2018[556] - The company intends to fund future capital expenditures with existing cash balance and proceeds from the IPO and follow-on offerings[557] Operating Performance - Operating expenses as a percentage of net revenues decreased from 1,066.2% in Q1 2018 to 208.3% in Q4 2019[550] - Operating loss as a percentage of net revenues decreased from 966.2% in Q1 2018 to 108.3% in Q4 2019[550] Corporate Governance - The company has reformed its board and senior management to enhance corporate governance and foster long-term growth[569] - The board of directors consists of seven members, including four independent directors, ensuring a diverse governance structure[610] Employee Information - The company had 12,007 full-time employees and 18,114 part-time employees as of December 31, 2019, with a significant portion in store operations[620] - Employees receive comprehensive training through Luckin University, which includes both self-developed programs and external courses[623] Share-Based Compensation - Total unrecognized share-based compensation expense was estimated to be RMB0.2 million (US$0.03 million) as of December 31, 2019[546] - The 2021 Equity Incentive Plan allows for the issuance of up to 222,769,232 Ordinary Shares, with 4,291,928 restricted share units granted, entitling 34,335,424 Ordinary Shares[597] Loans and Financial Transactions - The company provided a loan of RMB147.6 million (US$20.6 million) to Haode Group Inc. in 2018, which was settled in February 2019[639] - In 2019, the company transferred RMB306.3 million to Haode Group Inc. and received the same amount back from Haode Investment Inc.[640] Risk Management - The company is exposed to foreign currency exchange rate risk, particularly in converting U.S. Dollars to Renminbi and vice versa, which can impact the amounts available for dividends and debt servicing[743] - The Renminbi is not freely convertible into foreign currencies, and all foreign exchange transactions must be approved by the People's Bank of China (PBOC) or authorized banks[745] - The company has not been exposed to material risks from changes in market interest rates and did not use derivative financial instruments for interest rate risk management in 2018 and 2019[746] Leadership Changes - The company experienced significant changes in executive leadership, including the termination of the former CEO and COO in July 2020[569] - The company operates under the supervision of Joint Provisional Liquidators (JPLs) since July 2020, requiring their approval for key management issues[633]

Financial Data and Key Metrics Changes - Product revenue for Q3 2019 was CNY 1.493 billion, representing a year-over-year increase of 558% [14] - Store level profit margin reached 12.5%, showing significant improvement in profitability [27] - Non-GAAP net loss margin was reduced, indicating a trend towards breakeven by Q3 2020 [34] Business Line Data and Key Metrics Changes - Sales from coffee maintained strong growth, with the average product revenue per store per quarter increasing by nearly 80% year-over-year [80] - Luckin Tea products saw sales increase 8x in the past five months, contributing to higher customer retention rates [17] - Revenue from non-coffee products increased from 31% in 2018 to 45% in Q3 2019 [25] Market Data and Key Metrics Changes - The number of monthly transacting customers rose to 9.3 million, a 51% quarter-over-quarter increase [28] - The average monthly items per transacting customer increased to 4.7, a 6% quarter-over-quarter rise [29] - The net selling price per item was CNY 11.2, reflecting a 7% increase quarter-over-quarter [30] Company Strategy and Development Direction - The company aims to become the largest coffee player in China by the end of 2019, leveraging a technology-driven retail model [8][12] - A new retail partnership model was launched, allowing for asset-light expansion and reduced investment risks [22] - The company plans to continue investing in branding and marketing, with expectations of normalizing costs by Q3 2020 [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in reaching breakeven by Q3 2020, supported by strong growth metrics and improved store efficiency [31][60] - The company remains optimistic about the growth of the tea market, despite potential seasonal impacts on demand [72] - Management highlighted a strong balance sheet with over CNY 5.5 billion in available cash, indicating readiness to execute business plans [34] Other Important Information - The company has entered a joint venture with Louis Dreyfus to produce Luckin Juice, expanding its product offerings [24] - The operational partnership model allows for reduced upfront costs for partners, enhancing the company's market reach [22] Q&A Session Summary Question: About the gross margin and raw material costs - Management noted that per cup costs have been trending favorably, with raw material costs for tea and coffee being similar, despite tea potentially being slightly higher [41][42] Question: Trends in key operating metrics and growth outlook for Luckin Tea - Management expects continued growth in average selling price and customer acquisition, with a long-term target price of CNY 16 to CNY 17 [43][44] Question: Progress on the new retail partner model - The company has received nearly 2,000 deposits for the new retail model, with some partners already launching stores [45][46] Question: Marketing expenses for Luckin Tea and customer repurchase rates - Marketing expenses for Luckin Tea are included in the overall guidance, with no significant difference in retention rates between lower and higher-tier cities [51][52] Question: Profitability and growth of the core coffee business - Management confirmed strong performance in the coffee segment, with significant growth in items sold per store per day [61] Question: Balancing store productivity with openings and product mix - The company maintains a balance between demand and store openings, with non-coffee products expected to continue growing [66][67]

LK 3Q2019 Earnings Highlights 小蓝杯.大梦想 luckin coffee 8 JU UX November 13, 2019 DISCLAIMER This presentation contains certain financial measures that are not recognized under generally accepted accounting principles in the United States ("GAAP"), including non-GAAP operating loss, non-GAAP net loss, non-GAAP basic and diluted net loss per ADS. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, please see the table captioned "Reconciliation of Non-GAAP Meas ...

Luckin Coffee, Inc. (LK) Q2 2019 Earnings Conference Call August 14, 2019 8:00 AM ET Company Participants | --- | |-----------------------------------------------------------| | | | Bill Zima - ICR, Inc. | | Charles Lu - Co-Founder & Chairman | | Jenny Qian - Co-Founder & CEO Reinout Schakel - CFO & CSO | | Conference Call Participants | | | | Tony Wang - Credit Suisse | | Lillian Lou - Morgan Stanley | | Eric Gonzalez - KeyBanc Capital Markets | | Ro Chen - CICC | | Billy Leung - Haitong International | | ...

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