0001104659-21-087180 | 20-F | XBRL Viewer

As of December 31,

Payables for the purchase of property and equipment

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Document and Entity Information	12 Months Ended
Document and Entity Information	Dec. 31, 2019 shares
Document Information [Line Items]
Document Type	20-F
Document Registration Statement	false
Document Period End Date	Dec. 31, 2019
Entity Registrant Name	Luckin Coffee Inc.
Document Annual Report	true
Document Transition Report	false
Document Shell Company Report	false
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	No
Entity Interactive Data Current	No
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Entity Central Index Key	0001767582
Amendment Flag	false
Ordinary shares
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	1,942,374,800
Class A ordinary shares
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	664,687,728
Class B ordinary shares
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	1,277,687,072

CONSOLIDATED BALANCE SHEETS $ in Thousands	Dec. 31, 2019 USD ($)	Dec. 31, 2019 CNY (¥)	Dec. 31, 2018 CNY (¥)
Current assets:
Cash and cash equivalents	$ 698,932	¥ 4,865,824,000	¥ 1,630,983,000
Restricted cash	14,579	101,496,000
Short-term investments	71,821	500,000,000	130,000,000
Accounts receivable	3,275	22,801,000	0
Receivables from online payment platforms	2,326	16,190,000	4,609,000
Inventories, net	55,380	385,544,000	150,015,000
Prepaid expenses and other current assets, net	238,507	1,660,439,000	365,510,000
Amount due from a related party	13	90,000	147,559,000
Total current assets	1,084,833	7,552,384,000	2,428,676,000
Non-current assets:
Property and equipment, net	278,435	1,938,409,000	904,992,000
Restricted cash	2,027	14,109,000
Other non-current assets, net	36,967	257,359,000	151,408,000
Total non-current assets	317,429	2,209,877,000	1,056,400,000
Total assets	1,402,262	9,762,261,000	3,485,076,000
Current liabilities:
Short-term bank borrowing			8,000,000
Current portion of long-term borrowing	37,624	261,934,000	72,787,000
Capital lease obligation	1,657	11,537,000	108,664,000
Accounts payable	77,291	538,087,000	176,704,000
Notes payable	13,628	94,873,000
Accrued expenses and other liabilities	458,770	3,193,849,000	371,017,000
Amounts due to related parties	9,218	64,175,000	24,198,000
Deferred revenues	20,817	144,924,000
Warrant liability			19,520,000
Total current liabilities	619,005	4,309,379,000	780,890,000
Non-current liabilities:
Long-term borrowings	44,580	310,355,000	226,969,000
Deferred revenues			126,469,000
Total non-current liabilities	44,580	310,355,000	353,438,000
Total liabilities	663,585	4,619,734,000	1,134,328,000
Commitments and contingencies
Mezzanine equity:
Total mezzanine equity			4,278,341,000
Shareholders' (deficits)/equity:
Additional paid-in capital	1,701,560	11,845,920,000	65,000,000
Statutory reserves	60	421,000
Accumulated deficits	(985,894)	(6,863,595,000)	(3,246,705,000)
Accumulated other comprehensive (loss)/income	11,112	77,357,000	(2,076,000)
Total Company's ordinary shareholders'(deficits)/ equity	726,841	5,060,124,000	(1,927,593,000)
Non-controlling interests	11,836	82,403,000
Total shareholders' (deficits)/equity	738,677	5,142,527,000	(1,927,593,000)
Total liabilities, mezzanine equity and shareholders' equity	1,402,262	9,762,261,000	3,485,076,000
Series A convertible redeemable preferred shares
Mezzanine equity:
Total mezzanine equity			2,113,347,000
Series B convertible redeemable preferred shares
Mezzanine equity:
Total mezzanine equity			2,164,994,000
Class A ordinary shares
Shareholders' (deficits)/equity:
Shares	1	8,000
Total shareholders' (deficits)/equity	1	8,000
Class B ordinary shares
Shareholders' (deficits)/equity:
Shares	2	13,000
Total shareholders' (deficits)/equity	2	13,000
Ordinary shares
Shareholders' (deficits)/equity:
Shares
Angel-1 shares
Shareholders' (deficits)/equity:
Shares			743,376,000
Angel-2 shares
Shareholders' (deficits)/equity:
Shares			¥ 512,812,000

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2019	May 17, 2019	Dec. 31, 2018
Series A convertible redeemable preferred shares
Mezzanine equity, par value (in US dollars per share)	$ 0.001		$ 0.001
Mezzanine equity, shares authorized (in shares)	0		2,000,000
Mezzanine equity, shares issued (in shares)	0		544,688
Mezzanine equity, shares outstanding (in shares)	0		544,688
Series B convertible redeemable preferred shares
Mezzanine equity, par value (in US dollars per share)	$ 0.001		$ 0.001
Mezzanine equity, shares authorized (in shares)	0		1,000,000
Mezzanine equity, shares issued (in shares)	0		272,343
Mezzanine equity, shares outstanding (in shares)	0		272,343
Class A ordinary shares
Equity, par value (in US dollars per share)	$ 0.000002	$ 0.000002	$ 0.000002
Equity, shares authorized (in shares)	20,000,000,000		0
Equity, shares issued (in shares)	664,687,728		0
Equity, shares outstanding (in shares)	664,687,728		0
Class B ordinary shares
Equity, par value (in US dollars per share)	$ 0.000002	$ 0.000002	$ 0.000002
Equity, shares authorized (in shares)	5,000,000,000		0
Equity, shares issued (in shares)	1,277,687,072		0
Equity, shares outstanding (in shares)	1,277,687,072		0
Ordinary shares
Equity, par value (in US dollars per share)	$ 0.001		$ 0.001
Equity, shares authorized (in shares)	0		45,400,000
Equity, shares issued (in shares)	0		750,000
Equity, shares outstanding (in shares)	0		750,000
Angel-1 shares
Equity, par value (in US dollars per share)	$ 0.001		$ 0.001
Equity, shares authorized (in shares)	0		1,000,000
Equity, shares issued (in shares)	0		915,750
Equity, shares outstanding (in shares)	0		915,750
Angel-2 shares
Equity, par value (in US dollars per share)	$ 0.001		$ 0.001
Equity, shares authorized (in shares)	0		600,000
Equity, shares issued (in shares)	0		513,000
Equity, shares outstanding (in shares)	0		513,000

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
¥ in Thousands, $ in Thousands

7 Months Ended

12 Months Ended

Dec. 31, 2017

CNY (¥)

¥ / shares

Dec. 31, 2019

USD ($)

$ / shares

Dec. 31, 2019

CNY (¥)

¥ / shares

Dec. 31, 2018

CNY (¥)

¥ / shares

Net revenues:

Net revenue

¥ 250

$ 434,505

¥ 3,024,934

¥ 840,695

Cost of materials

(789)

(233,176)

(1,623,324)

(532,217)

Store rental and other operating costs

(1,559)

(229,413)

(1,597,125)

(576,244)

Depreciation and amortization expenses

(917)

(59,163)

(411,883)

(106,690)

Sales and marketing expense

(25,464)

(179,768)

(1,251,506)

(746,018)

General and administrative expenses

(22,005)

(154,032)

(1,072,339)

(379,738)

Store preopening and other expenses

(5,723)

(10,288)

(71,623)

(97,794)

Impairment loss of long-lived assets

(30,057)

(209,249)

Total operating expenses

(56,457)

(895,897)

(6,237,049)

(2,438,701)

Operating loss

(56,207)

(461,392)

(3,212,115)

(1,598,006)

Interest income

11,406

79,407

8,915

Interest and financing expenses

(4,543)

(31,629)

(16,121)

Foreign exchange (loss)/ gain, net

(175)

2,850

19,842

13,113

Other (expenses)/ income, net

(905)

(6,303)

(7,777)

Change in the fair value of warrant liability

(1,195)

(8,322)

(19,276)

Net loss before income taxes

(56,371)

(453,779)

(3,159,120)

(1,619,152)

Income tax expense

(199)

(1,387)

Net loss

(56,371)

(453,978)

(3,160,507)

(1,619,152)

Add: Accretion to redemption value of convertible redeemable preferred shares

(79,295)

(552,036)

(1,571,182)

Add: Deemed distribution to a certain holder of Series B convertible redeemable preferred shares

(306)

(2,127)

Less: Net loss attributable to non-controlling interests

(298)

(2,074)

Net loss attributable to the Company's ordinary shareholders and angel shareholders

¥ (56,371)

$ (533,281)

¥ (3,712,596)

¥ (3,190,334)

Loss per share:

Basic and diluted | (per share)

^[1]

¥ (0.15)

$ (0.33)

¥ (2.31)

¥ (4.32)

Weighted average shares outstanding used in calculating basic and diluted loss per share:

Basic and diluted

^[1]

375,000,000

1,609,200,055

739,037,500

Net loss

¥ (56,371)

$ (453,978)

¥ (3,160,507)

¥ (1,619,152)

Other comprehensive (loss)/income, net of tax of nil:

Foreign currency translation difference, net of tax of nil

11,410

79,433

(2,076)

Total comprehensive loss

(56,371)

(442,568)

(3,081,074)

(1,621,228)

Add: Accretion to redemption value of convertible redeemable preferred shares

(79,295)

(552,036)

(1,571,182)

Add: Deemed distribution to a certain holder of Series B convertible redeemable preferred shares

(306)

(2,127)

Less: total comprehensive loss attributable to non-controlling interests

(298)

(2,074)

Total comprehensive loss attributable to the Company's ordinary shareholders and angel shareholders

(56,371)

(521,871)

(3,633,163)

(3,192,410)

Revenues from product sales

Net revenues:

Net revenue

¥ 250

432,301

3,009,590

¥ 840,695

Revenues from partnership stores

Net revenues:

Net revenue

$ 2,204

¥ 15,344

[1]	1-to-500 share split concurrent with the completion of IPO in May 2019 was accounted for on a retrospective basis for the calculation of basic and diluted loss per share as if it was completed at the inception of the Company.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Parenthetical) ¥ in Thousands	7 Months Ended	12 Months Ended
	Dec. 31, 2017 CNY (¥)	Dec. 31, 2019 CNY (¥)	Dec. 31, 2018 CNY (¥)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Other comprehensive loss, tax	¥ 0	¥ 0	¥ 0
Foreign currency translation difference, tax	¥ 0	¥ 0	¥ 0
Stock split		500

- Definition

Amount of tax expense (benefit) allocated to other comprehensive income (loss).

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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-URI http://asc.fasb.org/extlink&oid=120395209&loc=SL114868664-224227

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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-URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32672-109319

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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-URI http://asc.fasb.org/extlink&oid=6450520&loc=d3e32583-110901

Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
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-Topic 220
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-URI http://asc.fasb.org/extlink&oid=121641772&loc=d3e640-108580

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-04(19))
-URI http://asc.fasb.org/extlink&oid=120400993&loc=SL114874131-224263

+ Details

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICITS)/EQUITY $ in Thousands	Ordinary shares CNY (¥) shares	Angel shares CNY (¥) shares	Additional paid-in capital USD ($)	Additional paid-in capital CNY (¥)	Accumulated other comprehensive (loss)/income USD ($)	Accumulated other comprehensive (loss)/income CNY (¥)	Statutory reserves USD ($)	Statutory reserves CNY (¥)	Accumulated deficits USD ($)	Accumulated deficits CNY (¥)	Total Company's ordinary shareholders' (deficits)/equity USD ($)	Total Company's ordinary shareholders' (deficits)/equity CNY (¥)	Non-controlling interests USD ($)	Non-controlling interests CNY (¥)	Class A ordinary shares USD ($) shares	Class A ordinary shares CNY (¥) shares	Class B ordinary shares USD ($) shares	Class B ordinary shares CNY (¥) shares	USD ($)	CNY (¥)
Beginning balance at Jun. 15, 2017	¥ 0	¥ 0		¥ 0		¥ 0		¥ 0		¥ 0		¥ 0		¥ 0		¥ 0		¥ 0		¥ 0
Beginning balance (in shares) at Jun. 15, 2017 \| shares	0	0													0	0
Net loss										(56,371,000)		(56,371,000)								(56,371,000)
Contribution by shareholders				5,000,000								5,000,000								5,000,000
Issuance of shares (in shares) \| shares	750,000
Ending balance at Dec. 31, 2017				5,000,000						(56,371,000)		(51,371,000)								(51,371,000)
Ending balance (in shares) at Dec. 31, 2017 \| shares	750,000
Net loss										(1,619,152,000)		(1,619,152,000)								(1,619,152,000)
Foreign currency translation difference						(2,076,000)						(2,076,000)								(2,076,000)
Contribution by shareholders				60,000,000								60,000,000								60,000,000
Issuance of shares		¥ 1,256,188,000										1,256,188,000								1,256,188,000
Issuance of shares (in shares) \| shares		1,428,750
Add: Accretion to redemption value of convertible redeemable preferred shares										(1,571,182,000)		(1,571,182,000)								(1,571,182,000)
Ending balance at Dec. 31, 2018		¥ 1,256,188,000		65,000,000		(2,076,000)				(3,246,705,000)		(1,927,593,000)								(1,927,593,000)
Ending balance (in shares) at Dec. 31, 2018 \| shares	750,000	1,428,750
Net loss										(3,158,433,000)		(3,158,433,000)		(2,074,000)					$ (453,978)	(3,160,507,000)
Foreign currency translation difference						79,433,000						79,433,000							11,410	79,433,000
Issuance of shares				4,508,503,000								4,508,508,000				¥ 5,000				4,508,508,000
Issuance of shares (in shares) \| shares															327,129,412	327,129,412
Add: Accretion to redemption value of convertible redeemable preferred shares				(94,000,000)						(458,036,000)		(552,036,000)							(79,295)	(552,036,000)
Deemed distribution to a certain holder of Series B convertible redeemable preferred shares				(2,127,000)								(2,127,000)							(306)	(2,127,000)
Conversion from Angel Shares to Class B ordinary shares		¥ (1,256,188,000)		1,256,179,000														¥ 9,000
Conversion from Angel Shares to Class B ordinary shares (in shares) \| shares		(1,428,750)															1,428,750	1,428,750
Conversion from Ordinary Shares and Preferred Shares to Class A and Class B ordinary shares				5,960,080,000								5,960,087,000						¥ 7,000		5,960,087,000
Conversion from Ordinary Shares and Preferred Shares to Class A and Class B ordinary shares (in shares) \| shares	(750,000)														15,211	15,211	1,747,022	1,747,022
1-to-500 share split (in shares) \| shares															7,590,289	7,590,289	1,584,710,228	1,584,710,228
Conversion from Class B ordinary shares to Class A ordinary shares																¥ 3,000		¥ (3,000)
Conversion from Class B ordinary shares to Class A ordinary shares (in shares) \| shares															310,198,928	310,198,928	(310,198,928)	(310,198,928)
Issuance of Class A ordinary shares for 2019 share option plan (in shares) \| shares															19,753,888	19,753,888
Share based compensation				152,285,000								152,285,000								152,285,000
Appropriation to statutory reserves								421,000		(421,000)
Contribution from non-controlling shareholder in a subsidiary														84,477,000						84,477,000
Ending balance at Dec. 31, 2019			$ 1,701,560	¥ 11,845,920,000	$ 11,112	¥ 77,357,000	$ 60	¥ 421,000	$ (985,894)	¥ (6,863,595,000)	$ 726,841	¥ 5,060,124,000	$ 11,836	¥ 82,403,000	$ 1	¥ 8,000	$ 2	¥ 13,000	$ 738,677	¥ 5,142,527,000
Ending balance (in shares) at Dec. 31, 2019 \| shares															664,687,728	664,687,728	1,277,687,072	1,277,687,072

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICITS)/EQUITY (Parenthetical)	1 Months Ended	12 Months Ended
	May 31, 2019	Dec. 31, 2019
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICITS)/EQUITY
Share split ratio	500	500

CONSOLIDATED STATEMENTS OF CASH FLOWS ¥ in Thousands, $ in Thousands	7 Months Ended	12 Months Ended
	Dec. 31, 2017 CNY (¥)	Dec. 31, 2019 USD ($)	Dec. 31, 2019 CNY (¥)	Dec. 31, 2018 CNY (¥)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	¥ (56,371)	$ (453,978)	¥ (3,160,507)	¥ (1,619,152)
Adjustments to reconcile net loss to net cash provided by operating activities:
Foreign exchange loss/ (gain), net	175	(2,866)	(19,953)	25,101
Loss on disposal of property and equipment		1	5
Depreciation and amortization	917	59,163	411,883	106,690
Change in the fair value of warrant liability		1,195	8,322	19,276
Impairment of long-lived assets		30,057	209,249
Allowance for Unrecoverable Payments In Relation To Fabricated Transactions		7,157	49,829
Allowance for prepayments		1,233	8,585
Interest and financing expenses				8,074
Share-based compensation expenses		21,874	152,285
Amortized income for the refund from shares depositary bank		554	3,854
Changes in operating assets and liabilities:
Accounts receivable		(3,275)	(22,801)
Inventories	(3,396)	(33,832)	(235,529)	(146,619)
Receivables from online payment platforms	(12)	(1,664)	(11,581)	(4,597)
Prepaid expenses and other current assets	(36,604)	(54,980)	(382,762)	(311,355)
Other non-current assets	(5,843)	(5,039)	(35,080)	(76,582)
Amounts due from a related party		(13)	(90)
Accounts and notes payable		52,770	367,376	176,704
Accrued expenses and other liabilities	6,076	68,448	476,513	361,131
Amounts due to related parties		(722)	(5,023)	24,198
Deferred revenues	32	2,651	18,455	126,437
Net cash used in operating activities	(95,026)	(311,266)	(2,166,970)	(1,310,694)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(72,922)	(225,658)	(1,570,989)	(1,005,659)
Prepayment for land use right		(6,212)	(43,250)
Disposal of property and equipment		2,986	20,790
Purchases of short-term investments		(147,950)	(1,030,000)	(3,666,960)
Proceeds received from maturity of short-term investments		94,803	660,000	3,536,960
Loan to a related party				(147,559)
Repayment from a related party		21,196	147,559
Cash paid to a related party and an individual on behalf of related party		(44,000)	(306,319)
Cash repaid from a related party		44,000	306,319
Net cash used in investing activities	(72,922)	(260,835)	(1,815,890)	(1,283,218)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings		8,558	59,582	8,000
Proceeds from capital lease		6,383	44,434	172,868
Repayments for short-term borrowings		(9,708)	(67,582)
Capital lease payments		(20,549)	(143,060)	(68,325)
(Payment)/return of deposit for capital lease		1,875	13,050	(17,550)
Proceeds from long-term borrowing		50,224	349,650	300,000
Repayments for long-term borrowing		(11,077)	(77,117)
Deposit for long-term borrowing				(3,000)
Loans from related parties	382,219
Repayments of loans from related parties				(60,000)
Contribution from Ordinary shareholders	5,000			60,000
Contribution from non-controlling shareholder in a subsidiary		12,134	84,477
Refund from shares depositary bank		7,560	52,628
Cash received in relation to fabricated transaction		331,682	2,309,107
Cash paid in relation to fabricated transaction		(142,589)	(992,673)
Net cash generated from financing activities	387,219	1,040,068	7,240,746	3,988,402
Effect of foreign exchange rate changes on cash and cash equivalents and restricted cash	(175)	13,295	92,560	17,397
Net increase in cash and cash equivalents and restricted cash	219,096	481,262	3,350,446	1,411,887
Cash and cash equivalents and restricted cash at beginning of period/year		234,276	1,630,983	219,096
Cash and cash equivalents and restricted cash at end of period/year	219,096	715,538	4,981,429	1,630,983
Supplemental disclosures of cash flow information:
Interests received	¥ 11	11,067	77,045	8,459
Interests paid, net of capitalization		(4,746)	(33,040)	(8,047)
Supplemental disclosures of non-cash activities:
Purchase of property and equipment included in accrued expenses and other liabilities		(737)	(5,131)	(119,995)
Purchase of property and equipment through capital lease				(108,664)
Purchase of property and equipment included in notes payable		(12,767)	(88,881)
Issuance of Angel Shares converted from loans from angel shareholders				322,219
Angel shares
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of shares				890,913
Series A convertible redeemable preferred shares
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible redeemable preferred shares, net of issuance costs				1,318,075
Series B convertible redeemable preferred shares
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible redeemable preferred shares, net of issuance costs		4,864	33,861	¥ 1,387,421
Series B-1 Preferred Shares
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible redeemable preferred shares, net of issuance costs		153,104	1,065,882
Class A ordinary shares
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of shares		$ 647,607	¥ 4,508,507

ORGANIZATION

12 Months Ended

Dec. 31, 2019

ORGANIZATION

ORGANIZATION

1. ORGANIZATION

Luckin Coffee Inc. (the ''Company'') was incorporated in the Cayman Islands on June 16, 2017 under the Cayman Islands Companies Law as an exempted company with limited liability. The Company through its consolidated subsidiaries and variable interest entity (the “VIE”) (collectively, the ''Group'') are principally engaged in the provision of retail services for high-quality and affordable freshly brewed drinks and pre-made food and beverage items in the People’s Republic of China (the ''PRC'' or ''China'').

(a) As of December 31,2019, the details of the Company’s principal subsidiaries and VIE are as follows:

Entity	Date of incorporation	Place of incorporation	Percentage of direct or indirect ownership		Principal activities

Subsidiaries:
Luckin Coffee Investment Inc. (“Luckin BVI”)	June 16, 2017	British Virgin Islands	100	%	Investment holding
Luckin Coffee (Hong Kong) Limited (“Luckin HK”)	June 19, 2017	Hong Kong	100	%	Investment holding
Luckin Coffee Roasting (Hong Kong) Limited (“Luckin Roasting”)	April 12, 2019	Hong Kong	100	%	Investment holding
Luckin Coffee Roastery (Hong Kong) Limited (“Luckin Roastery”)	April 30, 2019	Hong Kong	100	%	Investment holding
Luckin Coffee E-commerce (Pingtan) Co., Ltd (1)	October 27, 2017	PRC	100	%	Provision of retail services for freshly brewed drinks and pre-made food and beverage items
Beijing Luckin Coffee Co., Ltd. (“Beijing WFOE”) (1) / (2)	October 31, 2017	PRC	100	%	Provision of retail services for freshly brewed drinks and pre-made food and beverage items and technical and consultation services
Luckin Investment (Tianjin) Co., Ltd. (“Luckin TJ”) (1)/ (3)/ (6)	December 7, 2017	PRC	100	%	Investment holding
Luckin Coffee (China) Co., Ltd. (“Luckin China”) (1) / (2) / (5)	March 28, 2018	PRC	100	%	Provision of retail services for freshly brewed drinks and pre-made food and beverage items
Luckin Coffee Roasting (Tianjin) Co., Ltd. (1)	May 9, 2018	PRC	80	%	Provision of retail services for freshly brewed drinks and pre-made food and beverage items
Luckin Coffee Roasting (Xiamen) Co., Ltd. (1)	January 22, 2019	PRC	100	%	Investment holding
Luckin Coffee Roasting (Pingnan) Co., Ltd. (1)	April 28, 2019	PRC	100	%	Manufacture of materials for products
Luckin Coffee Food (Xiamen) Co., Ltd. (1)	May 16, 2019	PRC	100	%	Provision of retail services for freshly brewed drinks and pre-made food and beverage items
Luckin Roastery Technology (Xiamen) Co., Ltd. (1)	June 24, 2019	PRC	60	%	Manufacture of materials for products

Variable Interest Entity:
Beijing Luckin Coffee Technology Ltd. (“VIE”) (4)	June 14, 2017	PRC	100	%	Online platform operator

(1)

Including their subsidiaries, collectively as the “PRC subsidiaries”.

(2)

On July 27, 2018, Beijing WFOE transferred all its 100% equity interest in its subsidiaries to Luckin China for the share capital of these companies under common control.

(3)

In July 2019, the company changed its name.

(4)

Ms. Jenny Zhiya Qian and Mr. Min Chen are nominal shareholders of the VIE, holding 83.33% and 16.67% of the equity interest, respectively. Both of Ms. Qian and Mr. Chen were terminated based on the internal investigation and have since ceased to be involved in the management of the Group. The Group is in the process of replacing the nominal shareholders and otherwise optimizing our VIE structure.

(5)

As of December 31, 2019, Luckin China has 91 direct and indirect wholly-owned subsidiaries.

(6)

As of December 31, 2019, Luckin Investment (Tianjin) Co., Ltd has 1 direct wholly-owned subsidiary.

(b) PRC laws and regulations prohibit foreign ownership in certain telecommunication related businesses. To comply with these foreign ownership restrictions, the Group conducts its businesses in the PRC through the online platform held by the VIE. Despite the lack of technical majority ownership, the Company has effective control of the VIE through a series of contractual agreements (the “VIE Agreements”). The equity interest of the VIE is legally held by PRC individuals (the “Nominee Shareholders”). Through the VIE Agreements, the Nominee Shareholders of the VIE effectively assign all their voting rights underlying their equity interests in the VIE to the Company, and therefore, the Company has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. The Company also has the right to receive economic benefits and obligations to absorb losses from the VIE that potentially could be significant to the VIE. Based on the above, the Company consolidates the VIE in accordance with SEC Regulation S-X Rule 3A‑02 and Accounting Standards Codification (“ASC”) 810‑10 (“ASC 810‑10”), Consolidation: Overall.

The financial position and the operating results of the VIE as of December 31, 2018 and 2019 and for the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019 were immaterial to the Group.

The following is a summary of the key VIE Agreements:

Exclusive Option Agreement

Pursuant to the Exclusive Option Agreement entered into amongst the VIE, the Nominee Shareholders and Beijing WFOE, the Nominee Shareholders granted Beijing WFOE or its designated party, an irrevocable and exclusive right to purchase all or part of the equity interests held by the Nominee Shareholders in the VIE at its sole discretion, to the extent permitted under the PRC laws, at an amount equal to the minimum consideration permitted under the applicable PRC law and administrative regulations. Any proceeds received by the Nominee Shareholders from the exercise of the options shall be remitted to Beijing WFOE or its designated party, to the extent permitted under PRC laws. In addition, the VIE and the Nominee Shareholders have agreed that without prior written consent of the Beijing WFOE, they will not create any pledge or encumbrance on their equity interests in the VIE, or transfer or otherwise dispose of their equity interests in the VIE. The term of the agreement remains effective as long as each Nominee Shareholder remains as a shareholder of the VIE. Beijing WFOE may terminate the agreement at its sole discretion, whereas under no circumstances may the VIE or the Nominee Shareholders terminate the agreement.

Share Pledge Agreement

Pursuant to the Share Pledge Agreement entered into amongst Beijing WFOE, the VIE, and the Nominee Shareholders, the Nominee Shareholders pledged all of their equity interests in the VIE to Beijing WFOE as collateral to secure their obligations. Beijing WFOE shall have the right to collect dividends generated by the pledged shares during the term of the pledge. If the VIE or the Nominee Shareholders breach their respective contractual obligations under the share pledge agreement, Beijing WFOE, as pledgee, will be entitled to rights, including the right to dispose the pledged equity interests entirely or partially. The Nominee Shareholders agreed not to transfer or otherwise create any encumbrance on their equity interests in the VIE without prior consent of Beijing WFOE. The Equity Pledge Agreement will remain effective until all the obligations have been satisfied in full and the pledged equity interests have been transferred to Beijing WFOE and/or its designee. The Company completed the registration of the pledge of equity interests in the VIE with the relevant office of Administration for the Industry and Commerce in accordance with the PRC Property Rights Law.

Proxy Agreement and Power of Attorney

Pursuant to the Proxy Agreement and Power of Attorney entered into amongst Beijing WFOE, the VIE, and the Nominee Shareholders, each Nominee Shareholder appointed Beijing WFOE to act on behalf of the Nominee Shareholders as exclusive agent and attorney with all respect to all matters concerning the shareholding including but not limited to (1) call and attend shareholders’ meetings of the VIE; (2) exercise all the shareholders’ rights, including voting rights; and (3) appoint at its sole discretion, a substitute or substitutes to perform any or all of its right of the VIE. The power of attorney remains irrevocable and continuously valid from the date of execution so long as each Nominee Shareholder remains as a shareholder of the VIE unless Beijing WFOE issues adverse instructions in writing. The Proxy Agreement and Power of Attorney was subsequently reassigned to the Company.

Master Exclusive Service Agreement

Pursuant to the Master Exclusive Service Agreement entered into between Beijing WFOE and the VIE, Beijing WFOE or its designated entities affiliated has the exclusive right to provide the VIE with technical support and business support services in return for fees equal to 100% of the consolidated net profits of the VIE. Beijing WFOE has sole discretion in determining the service fee charged to the VIE under this agreement. Without Beijing WFOE’s prior written consent, the VIE shall not, directly and indirectly, obtain the same or similar services as provided under this agreement from any third party, or enter into any similar agreement with any third party. Beijing WFOE will have the exclusive ownership of all intellectual property rights developed by performance of this agreement. This agreement will remain effective until it is terminated at the discretion of Beijing WFOE or upon the transfer of all the shares of the VIE to Beijing WFOE and/or a third party designated by Beijing WFOE.

The Company is obligated and hereby undertakes to provide unlimited financial support to the VIE, to the extent permissible under the applicable PRC law and regulations, whether or not any such operational loss is actually incurred. The Company will forego the right to seek repayment in the event the VIE are unable to repay such funding.

Business Cooperation Agreement

Pursuant to the Business Cooperation Agreement entered into amongst Beijing WFOE, the VIE and the Nominee Shareholders, the VIE and the Nominee Shareholders agreed and covenanted that, without obtaining Beijing WFOE's written consent, the VIE shall not, and the Nominee Shareholders shall cause the VIE not to, engage in any transaction which may materially affect the VIE's assets, obligations, rights or operation. The VIE shall accept, and the Nominee Shareholders shall cause the VIE to accept, suggestions raised by Beijing WFOE over the employee engagement and replacement, daily operation, dividend distribution and financial management systems of the VIE. The Business Cooperation Agreement will remain effective until it is terminated at the discretion of Beijing WFOE or upon the transfer of all the shares of the VIE to Beijing WFOE and/or its designated party.

In the opinion of the Group’s management and PRC counsel, (i) the ownership structure of the VIE is not in violation with any existing PRC laws and regulations in any material respect; and (ii) each of the VIE Agreements is valid, legally binding and enforceable to each party of such agreements and will not result in any violation of PRC laws or regulations currently in effect.

However, uncertainties in the PRC legal system could cause the relevant regulatory authorities to find the current VIE Agreements and businesses to be in violation of any existing or future PRC laws or regulations. If the Company, Beijing WFOE or any of its current or future VIE are found in violation of any existing or future laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, which may include but not limited to, confiscating the income of the primary beneficiary, and the VIE, revoking the business licenses or operating licenses of the primary beneficiary, and VIE, shutting down the Group’s servers, discontinuing or placing restrictions or onerous conditions on the Group’s operations, requiring the Group to undergo a costly and disruptive restructuring or enforcing actions that could be harmful to the Group’s business. Any of these actions could cause significant disruption to the Group’s business operations and severely damage the Group’s reputation, which would in turn materially and adversely affect the Group’s business and results of operations. In addition, if the imposition of any of these penalties causes the primary beneficiary to lose the rights to direct the activities of the VIE or the right to receive their economic benefits, the Company, as the primary beneficiary, would no longer be able to consolidate the VIE.

There are no assets that are pledged or collateralized for the VIE’ obligations and which can only be used to settle the VIE’s obligations, except for registered capital. Relevant PRC laws and regulations restrict the VIE from transferring a portion of their net assets, equivalent to the balance of its share capital and statutory reserve, to the Company in the form of loans and advances or cash dividends. Please refer to Note 13 for disclosure of restricted net assets. As the VIE is incorporated as limited liability company under the PRC Company Law, creditors of the VIE do not have recourse to the general credit of the Company for any of the liabilities of the VIE. There were no other pledges or collateralization of the VIE’s assets.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”).

(b) Principles of consolidation

The consolidated financial statements of the Group include the financial statements of the Company, its subsidiaries and the VIE for which the Company is the primary beneficiary. All significant inter-company transactions and balances between the Company, its subsidiaries and the VIE have been eliminated upon consolidation.

For the Group’s non-wholly owned subsidiaries, a non-controlling interest is recognized to reflect the portion of equity that is not attributable, directly or indirectly, to the Group. Non-controlling interests are classified as a separate line item in the equity section of the Group's consolidated balance sheets and have been separately disclosed in the Group's consolidated statements of comprehensive loss to distinguish the interests from that of the Group. Cash flows related to transactions with non-controlling interests are presented under financing activities in the consolidated statements of cash flows.

(d) Use of estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and revenues and expenses during the reporting periods. Significant accounting estimates reflected in the Group’s consolidated financial statements include, but not limited to, estimates for provision of accounts receivable and inventories, useful lives and impairment of long-lived assets, accounting for deferred income taxes and uncertain tax benefits, valuation allowance for deferred tax assets, and valuations for the warrant liability, Angel Shares and convertible redeemable preferred shares. Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material to the consolidated financial statements.

(e) Foreign currency

The functional currency of the Company, Luckin BVI and Luckin HK , Luckin Roasting and Luckin Roastery is the United States dollar (“US$”) and its reporting currency is Renminbi (the “RMB”). The functional currency of the Company’s PRC subsidiaries and the VIE is the RMB as determined based on the criteria of ASC 830, Foreign Currency Matters.

The financial statements of the Company, Luckin BVI and Luckin HK, Luckin Roasting and Luckin Roastery are translated from the functional currency to the reporting currency, RMB. Transactions denominated in foreign currencies are re-measured into the functional currency at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are re-measured at the exchange rates prevailing at the balance sheet date. Non-monetary items that are measured in terms of historical costs in foreign currency are re-measured using the exchange rates at the dates of the initial transactions. Exchange gains and losses are included in the consolidated statements of comprehensive loss.

The Group uses the average exchange rate for the year and the exchange rate at the balance sheet date to translate the operating results and financial position, respectively. Translation differences are recorded in accumulated other comprehensive (loss)/income, a component of shareholders’ (deficits)/equity.

(f) Convenience translation

Amounts in US$ are presented for the convenience of the reader and are translated at the noon buying rate of US$1.00 to RMB6.9618 on December 31, 2019, the last business day in fiscal year 2019, representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be converted, realized or settled into US$ at such rate or at any other rate.

(g) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and demand deposits placed with banks which are unrestricted as to withdrawal or use, and have original maturities less than three months. All highly liquid investments with a stated maturity of 90 days or less from the date of purchase are classified as cash equivalents.

(h) Restricted cash

Restricted cash is reported separately on the face of the Consolidated Balance Sheets. The Group adopted Accounting Standard Update (ASU) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash for the fiscal year of 2019. As a result, restricted cash is included in the total cash and cash equivalents, and restricted cash in the Consolidated Statements of Cash Flows. For the period from June 16, 2017 (date of inception) through December 31, 2017 and for the year ended December 31, 2018, there is no impact on cash flow as no restricted cash existed. The Group's restricted cash mainly represents security deposits held in bank accounts for bank acceptance notes. Restricted cash is classified as current and non-current based on the duration of restriction.

(i) Short-term investments

All highly liquid investments with original maturities of greater than three months but less than twelve months, are classified as short-term investments. Investments that are expected to be realized in cash during the next twelve months are also included in short-term investments. The Group accounts for short-term investments in accordance with ASC 320, Investments — Debt and Equity Securities . Interest income is included in earnings. Any realized gains or losses on the sale of the short-term investments, are determined on a specific identification method, and such gains and losses are reflected in earnings during the period in which gains or losses are realized. The Group does not intend to sell the investments and it is not more likely than not that the Group will be required to sell the investments before maturity.

(j) Accounts receivable

Accounts receivable represents the amounts that the Group has an unconditional right to consideration. The Group considers many factors in assessing the collectability of its accounts receivable, such as industry trend, the age of the amounts, the payment history, and conditions that may affect the customers' ability to pay. There is no provision made for accounts receivable as of December 31, 2018 and 2019.

(k) Inventories

Inventories are stated at the lower of cost or net realizable value. Cost of inventory are determined using the moving weighted average method. The Group records inventory impairment for obsolete and slow-moving inventory. Inventory impairment is based on inventory obsolescence trends, historical experience and application of the specific identification method. For the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019, the Group recognized inventory impairment of nil, nil and RMB2,158 (US$310) respectively.

(l) Property and equipment

Property and equipment are stated at cost less accumulated depreciation and any recorded impairment. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets, as follows:


Category		Estimated useful life
Store operating equipment		5 years
Office equipment and others		3-5 years
Leasehold improvements		Over the shorter of lease term or the estimated useful lives of the assets
Office buildings		40-50 years

Direct costs that are related to the construction of property and equipment and incurred in connection with bringing the assets to their intended use are capitalized as construction in progress. Construction in progress is transferred to specific property and equipment items and the depreciation of these assets commences when the assets are ready for their intended use.

Repair and maintenance costs are charged to expense as incurred, whereas the costs of betterments that extend the useful life of property and equipment are capitalized as additions to the related assets. Retirements, sale and disposals of assets are recorded by removing the cost and accumulated depreciation with any resulting gain or loss reflected in the consolidated statements of comprehensive loss.

(m) Impairment of long-lived assets other than goodwill

The Group evaluates its long-lived assets, including property and equipment with finite lives, for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that indicate that the carrying amount of an asset or asset group may not be fully recoverable. When these events occur, the Group evaluates the recoverability of long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows of the asset or asset group is less than the carrying amount of the assets or the asset groups, the Group recognizes an impairment loss based on the excess of the carrying amount of the assets or the asset groups over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets or asset groups based on forecasted future sales and operating costs, using internal projections, when the market prices are not readily available. The adjusted carrying amount of the assets become new cost basis and are depreciated over the assets’ remaining useful lives. Long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

The Group estimates of future cash flows requires management to make assumptions and to apply judgment, including forecasting future sales and gross profits and estimating useful lives of the assets or asset groups. These estimates can be affected by factors such as future sales results, store closure plans, economic conditions, business interruptions, interest rates and government regulations that can be difficult to predict. If actual results and conditions are not consistent with the estimates and assumptions used in its calculations, the Group may be exposed to additional impairments of long-lived assets.

For the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019, the Group recognized impairment of long-lived assets other than goodwill of nil, nil and RMB209,249 (US$30,057) respectively. The impairment loss consisted of: 1) the impairment loss amounted to RMB52,058 (US$7,478) for the asset group related to Luckin Coffee EXPRESS, which is an unmanned machine that prepares a selection of freshly brewed drinks (see Note 8 and Note 9), 2) the impairment loss amounted to RMB151,916 (US$21,821) for the asset group related to underperforming or planned closed self-operating stores (see Note 8 and Note 9), and 3) the impairment loss amounted RMB5,275 (US$758) related to the cancellation of the constructing coffee bean roasting factories and return of the land use right to local government in Tongan city, Fujian province and Tianjin (see Note 8 and Note 9).

(n) Fair value of financial instruments

The Group applies ASC 820, Fair Value Measurements and Disclosures, (''ASC 820''). ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.

ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Other inputs that are directly or indirectly observable in the marketplace.

Level 3 — Unobservable inputs which are supported by little or no market activity.

ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

The Group’s financial instruments include cash and cash equivalents, short-term investments, accounts and notes payable, receivables from online payment platforms, accounts receivable, deposits, other receivables and payables, short-term bank borrowing, long-term borrowing, capital lease obligation and warrant liability. The warrant liability is measured at fair value (Note 19). Other than the warrant liability, the carrying values of these financial instruments approximate their fair values due to their short-term maturities. The carrying amount of the long-term borrowing approximates its fair values since it bears an interest rate which approximates market interest rate. The warrant liability is initially measured at fair value on the issuance date, and subsequently re-measured at the end of each reporting period with an adjustment for fair value recorded to the current period expense.

(o) Revenue recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), to provide principles within a single framework for revenue recognition of transactions involving contracts with customers across all industries. The standard allows for either a full retrospective or modified retrospective transition method. Additional amendments were subsequently issued by the FASB to clarify the implementation guidance. The Group adopted ASC 606, on January 1, 2019, and applied the modified retrospective transition approach which did not have impact on the beginning retained earnings on January 1, 2019. Revenues for the prior periods were not adjusted and continue to be presented under ASC Topic 605, Revenue Recognition. The Group’s revenue recognition policies effective on the adoption date of ASC 606 are presented as below.

Revenues from product sales

Customers place orders and pay for freshly brewed drinks and other products (including pre-made food, beverage and merchandise items) mainly through the Group’s self-developed app, Weixin mini-program and Meituan platform with different options to pay through third-party payment channels. The Group recognizes revenues at point in time when the Group satisfies its performance obligation upon customers’ in-store pickup or the delivery of promised products to customers. Delivery service is provided if it is a delivery order. Delivery service is determined as an activity to fulfill the Group’s promise to transfer the products, rather than another distinct performance obligation as it is performed before the customers obtain control of the products. Revenues represent the amount of consideration that the Group is entitled to, including products settlement price and delivery fees charged to customers, net of value-added tax (“VAT”), surcharges, discounts and returns, if any. There is no significant financing component or variable consideration in the transaction price. The Group reasonably estimates the possibility of return based on the historical experience, and there were no material returns historically.

Revenue from product sales were RMB250, RMB840,695 and RMB3,009,590 (US$432,301) for the period from June 16, 2017 (date of inception) through December 31, 2017 and the years ended December 31, 2018 and 2019, respectively.

Revenues from partnership stores

The Group cooperates with selective retail partners to operate the partnership stores they own. Under retail partnership model, the Group sells materials such as coffee beans, milk, food and related products to partners and shares simplified and standardized operation experience and provides use right of brand name and sales and supply chain management in exchange for a profit-sharing on retail sales. Partners are responsible for pre-opening capital investments and operating costs.

Revenues from partnership stores mainly consist of material sales to the partnership stores and profit-sharing revenue from the partnership stores for using the Luckin Coffee or Luckin Tea brand as well as integrated store operation solution.

For material sales, the Group’s performance obligation is to transfer required materials at fixed unit price to partners. The Group provides allowance for materials sales as consideration payable to partners when the products sold in partnership stores to customers at lower price than the cost of materials with certain markup to comply with the Group’s promotion strategy. Allowance for partnership stores is accounted for as a reduction of the transaction price, which is usually determined upon the completion of each order. Therefore, sales of materials are generally recognized on the partnership stores’ acceptance of materials, the settlement price is then deducted by the allowance provided to partnership stores that is determined upon the products are sold in partnership stores, if any. Revenue from material sales to partnership stores were nil, nil and RMB12,586 (US$1,808) for the period from June 16, 2017 (date of inception) through December 31, 2017 and the years ended December 31, 2018 and 2019, respectively.

For profit-sharing, the Group provides the integrated store operation solution, which includes the right to use brand name of Luckin Coffee or Luckin Tea, products and brand name promotion activities, unified ordering and payment collections platform, and basic operation guidance on store management and sanitary conditions, etc., in exchange for the profit-sharing based on the gross profit of retail sales. The Group recognizes the profit-sharing revenue from partnership stores at a variable consideration that is based upon partnership stores’ monthly gross profits which are determined at the end of each month. Revenue from partnership stores’ profit-sharing were immaterial during the periods.

The Group also provide pre-opening services such as store design and decoration, which has distinct value to partnership stores. Revenue associated with pre-opening services are recognized upon completion of the related performance obligations and the amount was immaterial for the year ended December 31,2019.

Contract balance

When either party to a revenue contract has performed, the Group presents the contract in the consolidated balance sheet as a contract asset or a contract liability, depending on the relationship between the Group’s performance and the customer’s payment. The Group presents any unconditional rights to consideration separately as a receivable. The Group does not have material contract asset. The balance of accounts receivable, net of nil allowance for doubtful accounts, were nil and RMB22,801 (US$3,275) as of December 31, 2018 and 2019, respectively.

Customers that purchase prepaid coupons are issued additional coupons of the same par value for free at the time of purchase. All prepaid coupons are stored in the “Coffee Wallet” of the customers’ registered accounts for future use. Cash received from the sales of prepaid coupons are recognized as deferred revenues which are contract liabilities under ASC 606. Purchase consideration is allocated to each prepaid coupon, including the coupons issued for free. The allocated considerations are recognized as revenues when the customers consume the prepaid coupons for payments of their purchase. As of December 31, 2018 and 2019, the balance of deferred revenues were RMB126,469 and RMB144,924(US$20,817), respectively.

(p) Costs of materials, store rental and other operating costs

Costs of materials consisted primarily of cost for coffee beans and coffee condiments, pre-made food and beverage items, packaging, supplies and warehouse. Store rental and other operating costs consisted primarily of rental expense of stores, staff costs, utilities, etc.

(q) Sales and marketing expenses

Advertising expenditures are expensed when incurred and are included in sales and marketing expenses, which amounted to RMB23,910, RMB362,142 and RMB586,774 (US$84,285) for the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019, respectively.

For promotion, the Group issues free vouchers for complimentary freshly brewed drinks or pre-made food and beverage items for first time user registrations and referrals, without any future purchase requirements. The Group recognizes the related costs in sales and marketing expenses of RMB160, RMB130,567 and RMB206,723 (US$29,694) for the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019, respectively.

Included in sales and marketing expenses are also the costs of deliveries made to customers. The Group incurred RMB29, RMB242,193 and RMB438,914 (US$63,046) of delivery costs for the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019, respectively.

(r) General and administrative expenses

General and administrative expenses consist primarily of payroll and related expenses for employees involved in general corporate functions, research and development expenses, share-based compensation, professional expenses and daily office expenses and rental fees for general corporate functions.

Research and development expenses are included in general and administrative expenses, which are mainly payroll expenses, employee benefits, and other headcount-related expenses associated with platform development and big data analysis to support the Group's business operations.

The Group charged RMB5,081, RMB77,958 and RMB219,048 (US$31,464) of research and development costs to expense for the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019, respectively.

(s) Store preopening and other expenses

Store preopening expenses mainly include store rental costs during the start-up of new stores. Other expenses include lease exit costs, such as the write offs of prepaid store rental costs, deposits and leasehold improvements. Costs incurred in connection with the start-up and closure of stores are expensed as incurred.

(t) Leases

Leases are classified at the inception date as either a capital lease or an operating lease. The Group did not enter into any leases whereby it is the lessor for any of the periods presented. As the lessee, a lease is a capital lease if any of the following conditions exists: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least 75% of the property’s estimated remaining economic life, or d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. The initial direct costs including processing fees paid to the lessor to consummate the lease are included in the minimum lease payments. A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. The Group entered into capital leases for certain store operating equipment during the years ended December 31, 2018 and 2019.

All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over the periods of their respective lease terms. The Group leases stores for food and beverage items services provision and office space for corporate administration under operating leases. Most lease agreements contain rent holidays and rent escalation clauses. Rent holidays and escalating rent are considered in determining the straight-line rent expenses to be recorded over the lease terms. The lease terms begin on the dates of initial possession of the lease properties for purposes of recognizing lease expenses on a straight-line basis over the terms of the leases.

(u) Income taxes

The Group follows the liability method of accounting for income taxes in accordance with ASC 740 (''ASC 740''), Income Taxes . Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Group records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in tax expense in the period that includes the enactment date of the change in tax rate.

The Group accounted for uncertainties in income taxes in accordance with ASC 740. Interest and penalties related to unrecognized tax benefit recognized in accordance with ASC 740 are classified in the consolidated statements of comprehensive loss as income tax expenses. Interest and penalties related to unrecognized tax benefit recognized the Group incurred were nil, nil, and nil for the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019, respectively.

(v) Employee benefit expenses

As stipulated by the regulations of the PRC, full-time employees of the Group are entitled to various government statutory employee benefit plans, including medical insurance, maternity insurance, workplace injury insurance, unemployment insurance, pension benefits and housing provident fund through a PRC government-mandated multi-employer defined contribution plan. The Group is required to make contributions to the plan and accrues for these benefits based on certain percentages of the qualified employees’ salaries. The total expenses the Group incurred for the plan were RMB2,777, RMB107,682 and RMB197,327 (US$28,344) for the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019, respectively.

(w) Comprehensive loss

Comprehensive loss is defined as the decrease 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. Amongst other disclosures, ASC 220, Comprehensive Income , requires that all items that are required to be recognized under current accounting standards as components of comprehensive income 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 included net loss and foreign currency translation adjustments that are presented in the consolidated statements of comprehensive loss.

(x) Segment reporting

The Group follows ASC 280, Segment Reporting . The Group’s Chief Executive Officer as the chief operating decision-maker reviews the consolidated financial results when making decisions about allocating resources and assessing the performance of the Group as a whole and hence, the Group has only one reportable segment. The Group operates and manages its business as a single segment. As the

Group’s long-lived assets are substantially all located in the PRC and substantially all the Group revenues are derived from within the PRC, no geographical segments are presented.

(y) Loss per share

In accordance with ASC 260, Earnings 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, net loss is allocated between ordinary shares, Angel Shares and other participating securities based on their participating rights. Ordinary shares and Angel Shares have the same rights with regard to dividends and distributions upon liquidation of the Group. They share losses during a given period. Diluted loss per share is calculated by dividing net loss attributable to ordinary and angel shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary shares, Angel Shares and dilutive ordinary equivalent shares outstanding during the period. Ordinary share equivalents are excluded from the computation of diluted loss per share as their effects would be anti-dilutive.

(z) Share-based compensation

The Group applies ASC 718, Compensation-Stock Compensation (“ASC 718”), to account for its employee share-based payments. In accordance with ASC 718, the Group determines whether an award should be classified and accounted for as a liability award or equity award. All the Group’s share-based awards to employees were classified as equity awards and are recognized in the consolidated financial statements based on their grant date fair values. The Group recognizes share-based compensation cost for equity awards to employees with a performance condition based on the probable outcome of that performance condition. Compensation cost is recognized using the accelerated method if it is probable that the performance condition will be achieved. The Group accounts for forfeitures as they occur.

(aa) Comparative information

Certain items in prior years' consolidated financial statements have been reclassified to conform to the current period’s presentation to facilitate comparison.

(bb) Recent accounting pronouncements

The Group is an emerging growth company (‘‘EGC’’) as defined by the Jumpstart Our Business Startups Act (‘‘JOBS Act’’). The JOBS Act provides that an EGC can take advantage of extended transition periods for complying with new or revised accounting standards. This allows an EGC to delay adoption of certain accounting standards until those standards would otherwise apply to private companies. The Group elected to take advantage of the extended transition periods. However, this election will not apply should the Group cease to be classified as an EGC.

In February 2016, the FASB issued ASU No. 2016-02 (“ASU 2016-02”), Leases (Topic 842) and issued subsequent amendments to the initial guidance and transitional guidance between January 2018 and November 2019 within ASU 2018-01, ASU 2018-10, ASU 2018-11, ASU 2018-20, ASU 2019-01, ASU 2019-10 and ASU 2020-05 (collectively, “the new lease standards”). ASU 2016-02 modifies existing guidance for off-balance sheet treatment of lessees’ operating leases by requiring lessees to recognize lease assets and lease liabilities. Under ASU 2016-02, lessor accounting is largely unchanged. ASU 2018-01 clarifies that an entity should determine whether land easements are leases in accordance with Topic 842 and elect an optional transition practical expedient to not evaluate them under Topic 842 before the entity’s adoption. ASU 2018-10 clarifies certain provisions and correct unintended applications of the guidance such as the application of implicit rate, lessee reassessment of lease classification, and certain transition adjustments that should be recognized to earnings rather than to stockholders’ equity. ASU 2018-11 provides an alternative transition method and practical expedient for separating contract components for the adoption of Topic 842. ASU 2018-20 addressed some stakeholders’ concerns about the accounting of lessors regarding sales taxes, lessor costs and variable payments relating to both a lease component and a non-lease component. ASU 2019-01 clarified that lessors that are not manufacturers or dealers will use their cost as the fair value of the underlying asset and apply the definition of fair value (exit price) in Topic 820 if significant time lapses between the acquisition of the underlying asset and lease commencement. ASU 2019-10 and ASU 2020-05 extend effective dates for certain entities. The new lease standards are effective for the Group for annual reporting periods beginning January 1, 2022 and interim reporting periods within fiscal years beginning January 1, 2023. Early adoption is permitted. The Group expects to use the modified retrospective and is currently evaluating the impacts the standards will have on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, (“ASU 2016-13”) and issued subsequent amendments to the initial guidance and transitional guidance between November 2018 and November 2019 within ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10 and ASU 2019-11 (collectively, “the new credit losses standards”). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. The standard will replace “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. ASU 2018-19 clarifies that the impairment of receivables arising from operating leases should be accounted for in accordance with ASC 842. ASU 2019-04 modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis. ASU 2019-05 addresses those stakeholders’ concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. ASU 2019-10 extend and simplify how effective dates are staggered between larger public companies and all other entities. ASU 2019-11 addressed stakeholders’ specific issues about expected recoveries for purchased financial assets with credit deterioration, transition relief for troubled debt restructurings, disclosures related to accrued interest receivables, financial assets secured by collateral maintenance provisions and conforming amendment to Subtopic 805-20. The new credit losses standards are effective for the Group for annual reporting periods beginning January 1, 2023 and interim periods therein. Early adoption is permitted. The Group does not plan to early adopt the standards and is currently evaluating the impacts the standards will have on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (‘‘ASU 2018-13’’), which modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The amendments in ASU 2018-13 will be effective for the Group for annual reporting periods beginning January 1, 2020 and interim periods therein. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU No. 2018-13 and delay adoption of the additional disclosures until their effective date. The Group is not early adopting the standard and does not expect that this standard will have a material impact on its consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (''ASU 2019-12''), which simplifies the accounting for income taxes by removing exceptions and simplifies the accounting for income taxes regarding franchise tax, good will, separate financial statements, enacted change in tax laws or rates and employee stock ownership plans. ASU 2019-12 will be effective for the Group for annual reporting periods beginning January 1, 2022 and interim periods within fiscal years beginning January 1, 2023. The Group is not early adopting the standard and does not expect that this standard will have a material impact on its consolidated financial statements.

CONCENTRATION OF RISKS

12 Months Ended

Dec. 31, 2019

CONCENTRATION OF RISKS

CONCENTRATION OF RISKS

3. CONCENTRATION OF RISKS

(a) Concentration of credit risk

Financial instruments that potentially subject the Group to significant concentration of credit risk consist primarily of cash and cash equivalents, restricted cash, short-term investments , accounts receivable and receivables from online payment platforms. As of December 31, 2018, and 2019, the aggregate amounts of cash and cash equivalents and short-term investments of RMB1,632,151 and RMB5,358,181 (US$769,655), respectively, were held at major financial institutions located in the PRC and US$19,197 and US$1,098 (RMB7,643), respectively, were deposited with major financial institutions located outside the PRC. Management believes that these financial institutions are of high credit quality and continually monitors the credit worthiness of these financial institutions. Historically, deposits in Chinese banks are secure due to the state policy on protecting depositors’ interests. However, China promulgated a new Bankruptcy Law in August 2006 that came into effect on June 1, 2007 which contains a separate article expressly stating that the State Council may promulgate implementation measures for the bankruptcy of Chinese banks based on the Bankruptcy Law. Under the new Bankruptcy Law, a Chinese bank may go into bankruptcy. In addition, since China’s concession to the World Trade Organization, foreign banks have been gradually permitted to operate in China and have been significant competitors against Chinese banks in many aspects, especially since the opening of the Renminbi business to foreign banks in late 2006. Therefore, the risk of bankruptcy of those Chinese banks in which the Group has deposits has increased. In the event of bankruptcy of one of the banks which holds the Group’s deposits, the Group is unlikely to claim its deposits back in full since the bank is unlikely to be classified as a secured creditor based on PRC laws.

Accounts receivable and receivables from online payment platforms are unsecured and denominated in RMB. Accounts receivable are mainly derived from sales of materials to partners and sales of exchange code to corporate customers which is redeemed as coupons and had already been utilized for the purchase of products. Receivables from online payment platforms are derived when the third-party payment platforms, on behalf of the Company, collect the proceeds of sales made by the Group to its customers. They are exposed to credit risk. The risk is mitigated by credit evaluations the Group performs on the selected corporate customers and online payment platforms that are highly reputable, and the deposits from partners as guarantees. There has been no default of payments in history.

(b) Business, customer, political, social and economic risks

The Group participates in a dynamic and competitive industry and believes that changes in the following areas could have a material adverse effect on the Group’s future financial position, results of operations or cash flows:

(i) Supplier risk – The Group’s operations rely on some suppliers for its major raw materials including coffee beans, dairy, sugar and syrup, and pre-made products. There can be no assurance that the Group will be able to secure the raw materials and pre-made products supply from these suppliers. Any termination or suspension of the supply arrangements, any change in cooperation terms, or the deterioration of cooperation relationships with these suppliers may materially and adversely affect the Group’s results of operations.

Suppliers accounting for 10% or more of total cost of purchased materials were:


	For the period from June 16
	(date of inception) through		For the year ended
	December 31,		December 31,
Supplier	2017	2018	2019
	RMB	RMB	RMB	US$
A	3,809	121,043	265,014	38,067
B	—	73,145	*	*
C	2,755	70,086	*	*

*Accounts for less than 10% during the period.

(ii) Customer risk – The success of the Group’s business going forward will rely in part on the Group’s ability to continue to obtain and expand business from existing customers while also attracting new customers. No customer accounted for 10% or more of the Group’s revenues for the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019.

(iii) Economic risk – The Group’s operations could be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than 20 years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective.

From July 21, 2005, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. The (depreciation) / appreciation of the US$ against RMB was approximately (3.9%) , 5.0% and 1.3% for the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019, respectively. The functional currency and the reporting currency of the Company, Luckin BVI and Luckin HK, Luckin Roasting and Luckin Roastery are the US$ and the RMB, respectively. The functional currency of the PRC subsidiaries and the VIE is the RMB. All of the Group’s revenues and costs are denominated in RMB, while a portion of cash and cash equivalents are denominated in U.S. dollars. Any significant revaluation of RMB may materially and adversely affect the Group’s cash flows, revenues, earnings and financial position in U.S. dollars.

(d) Currency convertibility risk

The Group transacts all of its business in RMB, which is not freely convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China (the ''PBOC''). However, the unification of the exchange rates does not imply that the RMB may be readily convertible into US$ or other foreign currencies. All foreign exchange transactions continue to take place either through the PBOC or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approval of foreign currency payments by the PBOC or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts.

(e) Interest rate risk

The Group is exposed to interest rate risk on its interest-bearing assets and liabilities. As part of its asset and liability risk management, the Group reviews and takes appropriate steps to manage its interest rate exposures on its interest-bearing assets and liabilities. The Group has not been exposed to material risks due to changes in market interest rates, and not used any derivative financial instruments to manage the interest risk exposure during the period/year presented.

SHORT-TERM INVESTMENTS	12 Months Ended
SHORT-TERM INVESTMENTS	Dec. 31, 2019
SHORT-TERM INVESTMENTS
SHORT-TERM INVESTMENTS	4. SHORT-TERM INVESTMENTS The Group’s short-term investments included wealth management products issued by commercial banks or other financial institutions with non-guaranteed principle and variable interest rates indexed to the performance of underlying assets within one year. For the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019, the Group recognized interest income from its short-term investments of nil, RMB6,594 and RMB22,318 (US$3,206), respectively, in the consolidated statements of comprehensive loss.

ACCOUNTS RECEIVABLE

12 Months Ended

Dec. 31, 2019

ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE

5. ACCOUNTS RECEIVABLE


	As of December 31,
	2018	2019
	RMB	RMB	US$
Receivables due from partners	—	8,072	1,159
Receivables due from corporate customers	—	14,729	2,116
	—	22,801	3,275

INVENTORIES, NET

12 Months Ended

Dec. 31, 2019

INVENTORIES, NET

INVENTORIES, NET

6. INVENTORIES, NET


	As of December 31,
	2018	2019
	RMB	RMB	US$
Raw materials	76,786	258,912	37,190
Packaging and other supplies	53,990	105,231	15,116
Pre-made food and beverage items	19,239	21,401	3,074
	150,015	385,544	55,380

PREPAID EXPENSES AND OTHER CURRENT ASSETS, NET

12 Months Ended

Dec. 31, 2019

PREPAID EXPENSES AND OTHER CURRENT ASSETS, NET

PREPAID EXPENSES AND OTHER CURRENT ASSETS, NET

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS, NET


	As of December 31,
	2018	2019
	RMB	RMB	US$
Deductible input VAT	188,106	494,013	70,961
Prepaid rental and deposits	120,207	146,920	21,104
Prepayments for materials and advertising fees	47,131	35,730	5,132
Interest receivables	456	2,818	405
Payments in relation to fabricated transactions	—	992,673	142,589
Others	9,610	46,699	6,707
	365,510	1,718,853	246,898
Less: allowance for unrecoverable payments in relation to fabricated transactions and other prepayments	—	(58,414)	(8,391)

	365,510	1,660,439	238,507

The payments in relation to fabricated transactions represents the cash paid to certain implicated third-party entities in the fabricated transaction in 2019 to inflate cost and expenses. Part of the balance in the total amount of RMB942,844 (US$135,432) was subsequently collected in the first half of year 2020. The remaining balance amounted to RMB49,829 (US$7,157) was not collected as of the issuance date of this report, and the management considered, after various steps taken, that it is probable that the amount will not be collected in the future. As a result, allowance for doubtful accounts for the uncollected portion of RMB49,829 (US$7,157) was provided. See “Note 21 Subsequent events- independent investigation and related matters”. The Group is in the progress of taking further legal action against these entities.

PROPERTY AND EQUIPMENT, NET

12 Months Ended

Dec. 31, 2019

PROPERTY AND EQUIPMENT, NET

PROPERTY AND EQUIPMENT, NET

8. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:


	As of December 31,
	2018	2019
	RMB	RMB	US$
Store operating equipment	496,959	924,359	132,776
Leasehold improvements	478,075	916,300	131,618
Office equipment and others	37,565	72,142	10,363
Office buildings	—	674,478	96,883
Construction in progress	—	39,217	5,633
	1,012,599	2,626,496	377,273
Less: accumulated depreciation	(107,607)	(519,320)	(74,596)
Less: impairment	—	(168,767)	(24,242)
	904,992	1,938,409	278,435

Depreciation expense was RMB917, RMB106,690 and RMB411,713 (US$59,139) for the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019, respectively.

The Group entered into the Project Cooperation Agreement and Strategic Cooperation Agreement with Xiamen municipal government as Party A and the Group together with Ucar Inc. jointly as Party B. (collectively as “Tri-Party Agreement”), according to which the Group acquired the new headquarters building under favorable pricing terms that came with commitments, including meeting certain requirements around tax contribution, operating performance and capital investments. As of the date of this annual report, the Group is in the process of obtaining the real property ownership certificate for its headquarters, and is currently in re-negotiations with the Xiamen municipal government to discuss a variety of resolving solutions, including to enter into a new cooperation agreement.

Xiamen office building in the PRC with carrying values of RMB663,790 (US$95,347) as of December 31 2019 was pledged as collateral for loans obtained in October 2019 in the amount of RMB176,440 (US$25,344) and RMB173,210 (US$24,880) from Industrial and Commercial Bank of China Xiamen Branch (the “ICBC Xiamen Branch”) and Bank of China Limited Xiamen Branch (the “BOC Xiamen Branch”), respectively (see Note 10).

Impairment loss was nil, nil and RMB168,767 (US$24,242) for the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019, respectively. It consisted of 1) impairment loss amounted to RMB50,989 (US$7,324) for the asset group related to Luckin Coffee EXPRESS in connection with the first generation Luckin Coffee EXPRESS machines purchased in 2019 for trial operation and launching in early 2020 (also see Note 9 and Note 2(m)), and 2) the impairment loss amounted to RMB117,778 (US$16,918) for the asset group related to the underperforming or planned closed self-operating stores (See Note 2(m)).

The Group accounted for the lease of certain store operating equipment in 2019 as a capital lease that transferred to the Group substantially all the benefits and risks incidental to the ownership of the assets. The carrying amount of the Group’s store operating equipment held under capital lease at December 31, 2018 and 2019 was as follows:


	As of December 31,
	2018	2019
	RMB	RMB	US$

Store operating equipment	175,500	66,681	9,578
Less: accumulated depreciation	(22,062)	(14,737)	(2,117)
	153,438	51,944	7,461

To secure the Group's obligation under the capital lease as of December 31, 2018, Luckin TJ provided a corporate guarantee and Mr. Lu Zhengyao, former chairman of the board of directors, pledged 35.3 million shares of UCAR Inc. The obligation was fully settled during the year of 2019.

Total future minimum lease payments of RMB11,642 (US$1,672) under the capital lease was outstanding as of December 31, 2019. To secure the Group’s obligation under the capital lease as of December 31, 2019, Ms.Qian Zhiya, former Chief Executive Officer of the Company, provided a personal guarantee. The capital lease obligation was fully settled subsequently as of March 2020.

OTHER NON-CURRENT ASSETS, NET

12 Months Ended

Dec. 31, 2019

OTHER NON-CURRENT ASSETS, NET

OTHER NON-CURRENT ASSETS, NET

9. OTHER NON-CURRENT ASSETS, NET


	As of December 31,
	2018	2019
	RMB	RMB	US$
Deposits for rental	85,425	117,506	16,879
Prepayments for equipment, net	65,983	100,957	14,501
Land use rights, net	—	38,896	5,587
	151,408	257,359	36,967

Land use rights represent repayments to the local government authorities for use of lands for 50 years from year 2019, net of accumulated amortization. The land use rights are amortized on a straight-line basis with amortization of nil, nil and RMB170 (US$24) for the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019, respectively.

Deposits for rental is net of impairment of nil and RMB34,138 (US$4,903) as of December 31, 2018 and 2019 respectively for the prepaid rental deposits in the asset group related to the underperforming or planned closed self-operating stores (See Note 2(m)).

The land use rights are net of impairment of nil and RMB4,185 (US$601) as of December 31, 2018 and 2019 respectively related to land use rights in Tongan city, Fujian province and Tianjin, which were subsequently returned to local government in connection with the impairment of nil and RMB1,090 (US$157) as of December 31, 2018 and 2019 respectively relating to prepayments for the cancellation of the constructing coffee bean roasting factories in Tongan and Tianjin. (See Note 2(m)).

Prepayment for equipment is net of impairment of RMB1,069 (US$154) for the prepayment to Luckin Coffee EXPRESS in connection with the first generation Luckin Coffee EXPRESS machines prepaid in 2019 for trial operation and launching in early 2020 (See Note 8 and Note 2(m)).

BORROWINGS

12 Months Ended

Dec. 31, 2019

BORROWINGS

BORROWINGS

10. BORROWINGS


	As of December 31,
	2018	2019
	RMB	RMB	US$
Short-term bank borrowing	8,000	—	—
Long-term borrowings, current portion
Bank borrowings	—	34,965	5,022
Borrowing from TTCO	72,787	226,969	32,602
	72,787	261,934	37,624

Long-term borrowings, non-current portion
Borrowing from TTCO	226,969	—	—
Bank borrowings	—	310,355	44,580
	226,969	310,355	44,580

Total borrowings	307,756	572,289	82,204

The short-term bank borrowing outstanding as of December 31, 2018 was personally guaranteed by Ms. Qian Zhiya and fully repaid in the year of 2019. During the year of 2019, the Group obtained a loan facility from Shanghai Pudong Development Bank for which Mr. Lu Zhengyao and Ms. Qian Zhiya has provided personal guarantees, and Beijing WFOE and Luckin TJ also provided a corporate guarantee. The loan facility as well as the personal guarantees provided by Mr. Lu Zhengyao and Ms. Qian Zhiya were settled by the end of 2019.

In July 2018, the Group got a borrowing of RMB300,000 from TTCO Trust Corporation Limited (“TTCO”) with a two-year maturity and an annual interest rate of 8%. The borrowing was denominated in RMB. The proceeds were used for general corporate and certain capital expenditure. To secure the Group’s obligation under the borrowing, Beijing WFOE provided a corporate guarantee and Mr. Lu Zhengyao and Ms. Qian Zhiya provided personal guarantees. Capitalized interest was nil, RMB539 and RMB694 (US$100) for the period from June 16, 2017 (date of inception) through December 31, 2017 and for the years ended December 31, 2018 and 2019, respectively. The borrowing has been fully repaid by April 2020.

In October 2019, the Group obtained new loans in the amount of RMB176,440 (US$25,344) and RMB173,210 (US$24,880) from Industrial and Commercial Bank of China Xiamen Branch (the “ICBC Xiamen Branch”) and Bank of China Limited Xiamen Branch (the “BOC Xiamen Branch”), respectively, with ten-year maturities and an annual interest rate of 4.66%. The interest rate is calculated based on the five-year loan prime rate minus 19.5 basis points. These loans are for the purchase of Xiamen office building and collateralized by a pledge of building in the PRC with carrying values of RMB663,790 (US$ 95,347) as of December 31 2019. Beijing WFOE and Luckin TJ also provided a corporate guarantee for these two bank borrowings from ICBC Xiamen Branch and BOC Xiamen Branch and Mr. Lu Zhengyao and Ms. Qian Zhiya, provided personal guarantees for the bank borrowing from BOC Xiamen Branch. These loans have been fully settled by the end of April 2020.

All the borrowings as of December 31, 2019 were early repaid and all the guarantees provided by Mr. Lu Zhengyao and Ms. Qian Zhiya were terminated by June 2020.

ACCRUED EXPENSES AND OTHER LIABILITIES

12 Months Ended

Dec. 31, 2019

ACCRUED EXPENSES AND OTHER LIABILITIES

ACCRUED EXPENSES AND OTHER LIABILITIES

11. ACCRUED EXPENSES AND OTHER LIABILITIES