KK Technology Company Holdings Limited - :: HKEX ...

The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contentsof this Application Proof, make no representation as to its accuracy or completeness and expressly disclaim any liabilitywhatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this ApplicationProof.

Application Proof of

KK Technology Company Holdings Limited(the “Company”)

(Incorporated in the Cayman Islands with limited liability)

WARNING

The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the “Stock Exchange”)and the Securities and Futures Commission (the “Commission”) solely for the purpose of providing information to the publicin Hong Kong.

This Application Proof is in draft form. The information contained in it is incomplete and is subject to change which canbe material. By viewing this document, you acknowledge, accept and agree with the Company, its sponsor, advisors ormembers of the underwriting syndicate that:

(a) this document is only for the purpose of providing information about the Company to the public in Hong Kong andnot for any other purposes. No investment decision should be based on the information contained in this document;

(b) the publication of this document or supplemental, revised or replacement pages on the Stock Exchange’s website doesnot give rise to any obligation of the Company, its sponsor, advisors or members of the underwriting syndicate toproceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Company will proceedwith the offering;

(c) the contents of this document or any supplemental, revised or replacement pages may or may not be replicated in fullor in part in the actual final listing document;

(d) this document is not the final listing document and may be updated or revised by the Company from time to time inaccordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited;

(e) this document does not constitute, and shall not be deemed to be, a prospectus, offering circular, notice, circular,brochure or advertisement offering to sell any securities to the public in any jurisdiction, nor is it an invitation to thepublic to make offers to subscribe for or purchase any securities, nor is it calculated to invite offers by the public tosubscribe for or purchase any securities;

(f) this document must not be regarded as an inducement to subscribe for or purchase any securities, and no suchinducement is intended;

(g) neither the Company nor any of its affiliates, advisors or members of its underwriting syndicate is offering, or issoliciting offers to buy, any securities in any jurisdiction through the publication of this document;

(h) no application for the securities mentioned in this document should be made by any person nor would such applicationbe accepted;

(i) the Company has not and will not register the securities referred to in this document under the United States SecuritiesAct of 1933, as amended, or any state securities laws of the United States;

(j) as there may be legal restrictions on the distribution of this document or dissemination of any information containedin this document, you agree to inform yourself about and observe any such restrictions applicable to you; and

(k) the application to which this document relates has not been approved for listing and the Stock Exchange and theCommission may accept, return or reject the application for the subject public offering and/or listing.

If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded tomake their investment decision solely based on the Company’s prospectus registered with the Registrar of Companiesin Hong Kong, copies of which will be distributed to the public during the offer period.

If you are in any doubt about any of the contents of this document, you should obtain independent professional advice.

KK Technology Company Holdings Limited(Incorporated in the Cayman Islands with limited liability)

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Maximum [REDACTED] : HK$[REDACTED] per Share plusbrokerage of 1%, SFC transaction levyof 0.0027% and the Stock Exchangetrading fee of 0.005% (payable in full onapplication, subject to refund)

Nominal value : US$[0.000004] per Share[REDACTED]

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Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities ClearingCompany Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completenessand expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of thecontents of this document.

A copy of this document, having attached thereto the documents specified in the section headed “Documents Delivered to theRegistrar of Companies in Hong Kong and Available on Display” in Appendix V, has been registered by the Registrar of Companiesin Hong Kong as required by Section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32of the Laws of Hong Kong). The Securities and Futures Commission of Hong Kong and the Registrar of Companies in Hong Kongtake no responsibility for the contents of this document or any of the other documents referred to above.

The [REDACTED] is expected to be determined by agreement between the [REDACTED] (for themselves and on behalf of the[REDACTED]) and our Company on or about [REDACTED] and, in any event, not later than [REDACTED], [REDACTED]. The[REDACTED] will be not more than HK$[REDACTED] per [REDACTED] and is currently expected to be not less thanHK$[REDACTED] per [REDACTED], unless otherwise announced. If, for any reason, the [REDACTED] is not agreed by[REDACTED] between the [REDACTED] (for themselves and on behalf of the [REDACTED]) and our Company, the[REDACTED] will not proceed and will lapse.

Prior to making an investment decision, prospective [REDACTED] should consider carefully all of the information set out in thisdocument, including the risk factors set out in the section headed “Risk Factors” in this document. The obligations of the[REDACTED] under the [REDACTED] are subject to termination by the [REDACTED] (for themselves and on behalf of the[REDACTED]) if certain grounds arise prior to 8:00 a.m. on the [REDACTED]. See “[REDACTED]” in this document. It isimportant that you refer to that section for further details.

The [REDACTED] have not been and will not be registered under the U.S. Securities Act or any state securities law in the UnitedStates and may not be [REDACTED], [REDACTED], pledged or transferred within the United States, except that [REDACTED]may be [REDACTED], [REDACTED] or delivered to QIBs in reliance on an exemption from registration under the U.S. SecuritiesAct provided by, and in accordance with the restrictions of, Rule 144A or another exemption from the registration requirements ofthe U.S. Securities Act. The [REDACTED] may be [REDACTED], [REDACTED] or delivered outside the United States inoffshore transactions in accordance with Regulation S.

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IMPORTANT

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THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUSTBE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

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IMPORTANT


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IMPORTANT


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EXPECTED TIMETABLE(1)

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This document is issued by us solely in connection with the [REDACTED] and the[REDACTED] and does not constitute an [REDACTED] to sell or a solicitation of an[REDACTED] to buy any security other than the [REDACTED] by this document pursuantto the [REDACTED]. This document may not be used for the purpose of making, and doesnot constitute, an [REDACTED] or invitation in any other jurisdiction or in any othercircumstances. No action has been taken to permit a [REDACTED] of the [REDACTED] inany jurisdiction other than Hong Kong and no action has been taken to permit the distributionof this document in any jurisdiction other than Hong Kong. The distribution of this documentand the [REDACTED] of the [REDACTED] in other jurisdictions are subject to restrictionsand may not be made except as permitted under the applicable securities laws of suchjurisdictions pursuant to registration with or authorization by the relevant securitiesregulatory authorities or an exemption therefrom.

You should rely only on the information contained in this document to make your[REDACTED] decision. We have not authorized anyone to provide you with information thatis different from what is contained in this document. Any information or representation notmade in this document must not be relied on by you as having been authorized by us, the JointSponsors, the [REDACTED], the [REDACTED], the [REDACTED], any of the[REDACTED], any of our or their respective directors, officers, representatives, employeesor agents, or any other person or party involved in the [REDACTED].

Page

Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Glossary of Technical Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Forward-looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Waivers from Strict Compliance with the Listing Rules and Exemption from StrictCompliance with the Companies (Winding Up and Miscellaneous Provisions)Ordinance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Information about this Document and the [REDACTED] . . . . . . . . . . . . . . . . . . . . . 73

Directors and Parties Involved in the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . 77

Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

CONTENTS

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Regulatory Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

History, Reorganization and Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . . . . 102

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

Relationship with the Single Largest Shareholders Group . . . . . . . . . . . . . . . . . . . . . 220

Directors and Senior Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223

Substantial Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234

Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240

Future Plans and Use of [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299

[REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302

Structure of the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313

How to Apply for [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323

Appendix I – Accountants’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1

Appendix IA – Profit/(Loss) Estimate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IA-1

Appendix II – Unaudited [REDACTED] Financial Information . . . . . . . . . . . II-1

Appendix III – Summary of the Constitution of the Company and CaymanIslands Company Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1

Appendix IV – Statutory and General Information . . . . . . . . . . . . . . . . . . . . . IV-1

Appendix V – Documents Delivered to the Registrar of Companies in HongKong and Available on Display . . . . . . . . . . . . . . . . . . . . . . . V-1

CONTENTS

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This summary aims to give you an overview of the information contained in thisdocument. As this is a summary, it does not contain all the information that may be importantto you. You should read this document in its entirety before you decide whether to[REDACTED] in the [REDACTED]. There are risks associated with any [REDACTED].Some of the particular risks in [REDACTED] in the [REDACTED] are set out in the sectionheaded “Risk Factors” in this document. You should read that section carefully before youdecide whether to [REDACTED] in the [REDACTED].

OVERVIEW

Our Mission

Our mission is to create an enjoyable life without boundaries.

Our Vision

We are committed to becoming a world-class specialty retailer with consumer trust andpreferred brands. We plan to expand our consumer bases to the overseas market by utilizing superiorDTC operations, comprehensive and dedicated customer services, and a world-class supply chainthat connects us with global leading brand partners.

Who We Are

We are a pioneering specialty retailer with multiple retail brands that enjoys a massiveconsumer base and favorable market influence. We were one of the top three specialty retailers inChina by GMV in 2020, and the fastest-growing specialty retailer among the top ten players inChina with a GMV CAGR of 246.2% from 2018 to 2020, according to the Frost & Sullivan Report.As of the Latest Practicable Date, we offered a variety of specialty retail products to our customersthrough a wide retail network of 680 stores, covering 31 provinces in China and one city inIndonesia, carrying four self-incubated retail brands, namely KKV, THE COLORIST, X11 and KKGuan. Our product portfolio covers a variety of products categories including beauty, pop toy, foodand beverage, household product and stationery.

We are dedicated to providing an immersive shopping experience to our customers supportedby our strong technology capabilities. Upholding such commitment, we have built a large and loyalcustomer base, through which we continue to expand our brand image. Our success in theever-changing specialty retail market trend is attributable to a broad range of factors, including,among others, strong brand synergies, exquisite site and merchandise selection, aesthetic interiordecoration and layout, data-centric and technology-driven operation, as well as an extensivesuppliers portfolio. The following diagram illustrates how these endeavors respond to the markettrend which further contributes to our market-leading position.

Driven by EmergingChannels

Fashion Leaderamong Young

Generation

Rapidly EvolvingIteration

Exquisite MerchandiseSelection & Fast Iteration of QualityProducts

Strong Control & Efficient Management of Supply Chain

Intelligent Technologies & Digital Infrastructure

Unique StoreDecoration & Brand Building

Exquisite SiteSelection &Smart Operation

Interaction between the Group and retail brands

Mutual empowermentbetween retail brands

Diversified Demandswith Evolving

Information Flow

Pursuit of Self-Expression &

Spontaneous Marketing

Brand Personality &Shopping Experience

Focused

NewConsumers

NewBrands

Next-Generation Specialty Retail Platform

SUMMARY

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Where We Started

The specialty retail market in China has been evolving rapidly at both demand and supplyends.

Demand

• Rising disposable income and growing middle class group. The growing middle-class inthe urban areas of China has become the main customers for lifestyle products, while therising disposable income enhances their desire for better living standards, resulting inincreased consumption expenditures on various types of lifestyle products, according tothe Frost & Sullivan Report.

• Younger generation’s strong willingness to purchase. Those who are 30 years old oryounger accounted for approximately 35% of the total population in China in 2020.Their consumption of cosmetics products accounted for 49.5% of all beauty productsales in China in 2020. In selecting products and place for shopping, they tend to placemore emphasis on (i) the design of lifestyle products that can reflect individualizedpreference, novelty, and aesthetic; (ii) good value for money; (iii) product diversity andbrand image; and (iv) shopping experience that highlights surprise discoveries.

• Increasing demand for a surprise-filled and immersive shopping experience. In the eraof “rapid consumption”, consumers prefer a surprise hunting experience through sensoryparticipation in uniquely themed offline stores. Immersed in a pleasant and surprise-filled store atmosphere, consumers are prone to make independent and quick purchasedecisions.

• Consumption upgrade mega trend in China. The expected ongoing urbanization in Chinais going to bring more city residents and raise the disposable income of consumers,enabling them to pursue higher lifestyle standards and seek quality lifestyle products tosatisfy their personalized demand.

Supply

• Emerging new brands. Over the past few years, China has witnessed a surge inconsumers’ interest in domestic brands and products that incorporate traditional Chinesecultural elements, featuring fashionable design and cool style, as well as the rise ofimported cutting-edge brands. This trend drives the emergence of domestic collectionstores, particularly those carrying the business model that integrates a large number ofcost-effective products from trendy and popular brands, and offers consumers a moredynamic and immersive shopping experience at a one-stop location.

• Emerging new technologies. Advanced analytical and processing technologies have beenwidely adopted to continuously improve technology capability of retailers’ managementsystems. This greatly enhances the operational efficiency of retailers from variousaspects including merchandise identification, store management and supply chainmanagement.

• High demand for operational efficiency. To adapt to the ever-changing market, retailershave strong motivation to improve their operational efficiency, making retail giantsbetter-positioned to leverage their deep consumer insights and strong resourceintegration capabilities.

• Development of big data. Capitalizing on substantial amounts of transaction data,retailers can simplify the supply chain hierarchy and reduce supply chain costs bydirectly sourcing merchandise from brand owners, local authorized dealers or OEM andODM contractors and intelligently planning the optimal logistics routes.

SUMMARY

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What We Have Achieved

We are a pioneering specialty retailer with multiple retail brands that enjoy a massiveconsumer base and favorable market influence. We were one of the top three specialty retailers byGMV in 2020 and the fastest-growing specialty retailer among the top ten players in China with aGMV CAGR of 246.2% from 2018 to 2020, according to the Frost & Sullivan Report. As of theLatest Practicable Date, we have established a store network of 680 stores spanning across 169cities in 31 provinces in China and one city in Indonesia. We had successfully incubated four retailbrands, namely KKV, THE COLORIST, X11 and KK Guan, among which our KKV and KK Guancollectively ranked fourth in featured variety category in specialty retail market in China and THECOLORIST ranked third in beauty category in specialty retail market in China, in terms of GMVin 2020, according to Frost & Sullivan Report.

We offered consumers various specialty products of over 20,000 SKUs across 18 majorcategories under our four retail brands, covering all major core lifestyle product categoriesincluding beauty, pop toys, food and beverage, household, stationery, etc., as of June 30, 2021,facilitating an effective reach to wide consumer spectrum.

We have experienced rapid growth since our inception. The total number of our retail storesincreased from 80 as of December 31, 2018 to 211 as of December 31, 2019 and increased from 211as of December 31, 2019 to 556 as of December 31, 2020 and further increased to 640 as of June30, 2021. In line with our business expansion, we had revenue of RMB155.3 million, RMB463.7million, RMB1,645.9 million, RMB502.4 million and RMB1,683.2 million in 2018, 2019 and 2020and the first half of 2020 and 2021, respectively. Our gross profit was RMB49.8 million, RMB125.8million, RMB499.7 million in 2018, 2019 and 2020, respectively, representing a gross profit marginof 32.1%, 27.1% and 30.4% in the same periods, respectively. Our gross profit amounted toRMB151.8 million and RMB610.0 million in the first half of 2020 and 2021, representing a grossprofit margin of 30.2% and 36.2% in the same periods, respectively.

OUR BUSINESS MODEL

We focus on the operation of specialty retail stores which offer distinctively characterizedmerchandise through the DTC model, where we serve customers directly through our self-ownedstores or franchise stores which we have managed through store management arrangement. Formore details on store management arrangement, see “Business — Our Business Model —Self-owned Stores and Franchise Stores — Key Terms of Franchising Arrangement.” During theTrack Record Period, we generated revenue primarily from (i) the sales of goods, primarilycomprising retail sales in our self-owned stores and sales to the franchise stores, and (ii) thesales-based management and consultation services charges. Our footprints spanned across 169 citiesin 31 provinces in China and one city in Indonesia as of the Latest Practicable Date. We operate fourspecialty retail brands, namely KKV, THE COLORIST, X11 and KK Guan, primarily through anextensive retail network. Please also see “Business — Procurement and Manufacturing Procedures.”

Our Retail Brands

Benefiting from our unique business model, and reinforced by our core strength in positioningour merchandise mix, we had been able to launch and expand multiple store brands in a short spanof time since the establishment of our Group in April 2015. Each of KKV, THE COLORIST, X11and KK Guan is strategically designed to serve the market needs of different consumerdemographics in China.

Our success in continuously launching different retail brands is underpinned by our strongtechnology capability, which lays the foundation of a highly efficient store management system inline with our business strategies. In particular, our acute data-driven capacity adeptly identifies andcaptures ever-changing business opportunities and customer preferences in terms of product type,brand image, as well as shopping experience. Further leveraging our experience in screening a largenumber of specialty retail products candidates through an effective and selective shelf policy, wehave managed to quickly identify the most sought-after merchandise by deciphering the prevailingshopping patterns of our target customer group. We then utilize our advanced, group-widetechnology platform to consolidate the necessary resources for achieving expeditious and optimizedstore development, resulting in prompt establishment of market recognition of our brands and

SUMMARY

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achievement of economies of scale. We believe that our ongoing success in building up our retailbrands is a testament to our outstanding innovative power and technology capacity, which furtherconstitutes our competitive edge over our industry peers.

While each of our brands may differ in their merchandise offerings and target customers, theynevertheless share our common goal of giving unforgettable retail shopping experience to thecustomers through our best efforts. The following table provides a glimpse of the marketpositioning of our retail brands:

Retail Brand Launch Year Market Positioning

Number ofStores as ofthe Latest

PracticableDate

2019 Integrated lifestyle specialty retail stores with a wide range ofexquisite merchandise targeting teenagers and young adults

315

2019 Beauty specialty retail stores offering wide range of domesticand imported masstige and entry-level luxury cosmetics brands

247

2020 Pop culture specialty retail stores where fans shop for pop toysand pop art products of the characters they adore

21

2015 Lifestyle mini marts with an assortment of domestic andimported products in diversified product categories

97

For details on our retails brands and their market positioning, see “Business — Our BusinessModel — Our Retail Brands.”

The following table sets forth our revenue by store brand and the contribution of each brandboth in absolute amounts and as percentages of our total revenue for the periods indicated:

For the year ended December 31, For the six months ended June 30,

2018 2019 2020 2020 2021

RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %

(Unaudited)

RevenueKKV (1) . . . . . . . . . – – 81,878 17.7% 834,734 50.7% 221,930 44.2% 1,048,589 62.3%THE COLORIST(2) . . . – – 20,048 4.3% 439,729 26.7% 97,366 19.4% 461,280 27.4%KK Guan. . . . . . . . . 153,135 98.6% 357,231 77.0% 320,885 19.5% 157,939 31.4% 120,105 7.1%X11(3) . . . . . . . . . . – – – – 12,840 0.8% 919 0.2% 45,707 2.7%Others(4) . . . . . . . . . 2,174 1.4% 4,587 1.0% 37,716 2.3% 24,203 4.8% 7,479 0.4%

Total . . . . . . . . . . . . 155,309 100.0% 463,744 100.0% 1,645,904 100.0% 502,357 100.0% 1,683,160 100.0%

Notes:

(1) Including revenue generated from three self-owned overseas stores situated in Jakarta, Indonesia. We launched KKVas a new specialty retail brand in 2019.

(2) We launched THE COLORIST as a new specialty retail brand in 2019.

(3) We launched X11 as a new specialty retail brand in 2020.

(4) Others primarily included income generated from online sales, bulk purchasing by retail customers, and sales ofimported goods.

SUMMARY

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Our Retail Business Model

During the Track Record Period, we generated revenue primarily from (i) the sales of goods,primarily comprising retail sales in our self-owned stores and sales to the franchise stores, and (ii)the sales-based management and consultation services income.

The following table sets forth a breakdown of our revenue by product and service line, andthe contribution of each line both in absolute amounts and as percentages of our total revenue forthe periods indicated:


2018 2019 2020 2020 2021


(Unaudited)

Sales of GoodsSelf-owned Stores . . . . 108,437 69.8% 195,652 42.2% 581,845 35.4% 206,882 41.2% 879,476 52.3%Franchise Stores . . . . . 40,613 26.1% 240,596 51.9% 946,548 57.5% 249,717 49.7% 721,564 42.9%Others(1) . . . . . . . . . 2,174 1.4% 4,587 1.0% 37,716 2.3% 24,203 4.8% 7,479 0.4%

Subtotal . . . . . . . . . 151,224 97.4% 440,835 95.1% 1,566,109 95.2% 480,802 95.7% 1,608,519 95.6%

Sales-based managementand consultation serviceincome(2) . . . . . . . . 4,085 2.6% 22,909 4.9% 79,795 4.8% 21,555 4.3% 74,641 4.4%

Total . . . . . . . . . . . . 155,309 100.0% 463,744 100.0% 1,645,904 100.0% 502,357 100.0% 1,683,160 100.0%

Notes:(1) Others primarily included income generated from online sales, bulk purchasing by retail customers, and sales of

imported goods.

(2) Primarily included fees we charged franchisees according to store management agreements for management andconsultation services, such as store management fees, logistics charges and POS charges to our franchisees.

Our Retail Store Network

We have established an extensive, well-managed nationwide retail store network. As of theLatest Practicable Date, we had 680 stores in operation, spread across 169 cities in China and onecity in Indonesia. By offering our customers immersive shopping experience, we have beensuccessfully reinforcing customer loyalty and brand awareness. The below table sets out the numberof our retail stores by store type as of dates indicated:

As of December 31, As of June 30,

2018 2019 2020 2021

Self-owned Stores . . . . . . . . . . . . . . . . . 27 47 132 288Wholly owned stores . . . . . . . . . . . . . . 27 46 80 75Non-wholly owned stores . . . . . . . . . . . . – 1 52 213

Franchise Stores . . . . . . . . . . . . . . . . . . 53 164 424 352Franchise stores with equity investment

arrangement . . . . . . . . . . . . . . . . . . 1 38 338 277Franchise stores without equity investment

arrangement . . . . . . . . . . . . . . . . . . 52 126 86 75

Total . . . . . . . . . . . . . . . . . . . . . . . . . 80 211 556 640

In line with our store development strategies, we prioritize opening new stores in shoppingmalls, offering an all-under-one-roof experience, while allowing us to access a steady flow ofcustomers. When selecting locations for our new stores, we consider various factors, including thefoot traffic in the shopping malls, buying power of the residents in the neighborhood, their spendingpatterns and non-compete considerations such as store of same brands in the neighborhood, as wellas rentals and other costs. For details, see “Business — Network Management and Operations.”

For details of the geographical coverage of our retail stores, see “Business — Our BusinessModel — Our Retail Store Network.” For details of reason for closure and addition of self-ownedstores and franchise stores, see “Business — Our Business Model — Self-owned Stores andFranchise Stores — Self-owned Stores” and “Business — Our Business Model — Self-ownedStores and Franchise Stores — Franchise Stores.”

SUMMARY

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OUR COMPETITIVE STRENGTHS

We believe that our business success hitherto was a product of our continuous effort inmaintaining and improving the following competitive strengths:

• A fast-growing and pioneering specialty retailer with multiple retail brands and a strongconnection with a massive consumer base;

• A consumer-centric and innovative specialty retailer with deep consumer insights and alarge group of high quality and loyal consumers;

• Proven ability to incubate and scale new retail brands with continuous innovation;

• Data-centric and technology-driven systematic retail operation to achieve excellentoperational efficiency;

• Our capabilities in maintaining a stable, collaborative and extensive supplier network;and

• Visionary Founders supported by innovative and experienced management team.

OUR DEVELOPMENT STRATEGIES

In order to further solidify our competitive strength and achieve future growth, we plan topursue the following development strategies:

• Expand our nationwide retail network;

• Continue to develop global product sourcing capability and bring our customer the latestcurated product portfolio;

• Further optimize our packaged business capabilities and efficiency through data-driventechnology;

• Enhance and upgrade our existing brand portfolio and roll out new retail brands, with afocus on the unmet demands of our target customers;

• Promote online sales; and

• Expand into the global markets to gain international presence.

OUR SUPPLIERS AND CUSTOMERS

Our suppliers include Third Party Brand Partners and OEM and ODM contractors. As of June30, 2021, we sourced merchandise locally and globally from 1,145 Third Party Brand Partners, andhad engaged 145 OEM and ODM contractors for the manufacturing of our self-owned brandmerchandise. For the years ended December 31, 2018, 2019, 2020 and the six months ended June30, 2021, the total amount of purchases from our five largest suppliers amounted to RMB44.9million, RMB184.2 million, RMB330.7 million and RMB119.9 million, which accounted forapproximately 25.5%, 21.7%, 18.1% and 7.8% of our total purchases, respectively. For details ofour suppliers, please see “Business — Our Suppliers and Raw Materials.”

Our customers mainly include our franchisees and retail customers in our self-owned stores.In 2018, 2019, 2020 and the first half of 2021, revenue generated from our five largest customersaccounted for approximately 14.6%, 17.6%, 22.3% and 22.2% of our total revenue, respectively.

SUMMARY

– 6 –


SUMMARY OF STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVEINCOME

The following tables summarize our combined financial results during the Track RecordPeriod and should be read in conjunction with the section headed “Financial Information” of thisdocument and the Accountants’ Report set out in Appendix I to this document, together with therespective accompanying notes.

For the year endedDecember 31,

For thesix months ended

June 30,

2018 2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

(Unaudited)

Revenue . . . . . . . . . . . . . . . . . . . . . . 155,309 463,744 1,645,904 502,357 1,683,160Cost of sales . . . . . . . . . . . . . . . . . . . (105,517) (337,895) (1,146,191) (350,592) (1,073,204)

Gross profit. . . . . . . . . . . . . . . . . . . . 49,792 125,849 499,713 151,765 609,956

Other income . . . . . . . . . . . . . . . . . . . 78 9,069 34,888 11,241 26,654Selling and distribution expenses . . . . . . . . (54,959) (111,413) (395,250) (120,140) (469,883)Administrative and other operating expenses . (46,491) (112,079) (281,894) (108,060) (140,975)

(Loss)/profit from operations . . . . . . . . . (51,580) (88,574) (142,543) (65,194) 25,752Finance costs . . . . . . . . . . . . . . . . . . . (2,948) (8,232) (49,152) (17,684) (43,918)Share of losses from joint ventures . . . . . . – – (16,170) (829) (31,791)Fair value changes of financial liabilities

measured at fair value through profit orloss (“FVTPL”)(1) . . . . . . . . . . . . . . (37,689) (437,552) (1,842,514) (445,459) (4,353,866)

Loss before taxation . . . . . . . . . . . . . . (92,217) (534,358) (2,050,379) (529,166) (4,403,823)Income tax . . . . . . . . . . . . . . . . . . . . 12,732 19,855 33,172 16,292 6,740

Loss for the year/period . . . . . . . . . . . . (79,485) (514,503) (2,017,207) (512,874) (4,397,083)Non-HKFRS Measures:Adjusted net loss (unaudited)(2) . . . . . . . (41,796) (76,951) (171,380) (67,415) (38,462)Adjusted EBITDA(unaudited)(3) . . . . . . . (20,767) (32,303) 67,540 16,369 216,402

Notes:

(1) Financial liabilities measured at FVTPL represented the fair value changes of the convertible redeemable preferredshares issued by our Company and the redemption liabilities of ordinary shares issued by Guangdong Kuaike, andrelate to changes in the valuation of our Group. Fair value changes of the convertible redeemable preferred shares andthe redemption liabilities do not directly relate to our ability to generate revenue from our daily operations, and wedo not expect to record any further fair value changes of the convertible redeemable preferred shares as suchconvertible redeemable preferred shares will be re-designated from liabilities to equity as a result of the automaticconversion into ordinary shares upon the [REDACTED].

(2) Adjusted net loss is a non-HKFRS measure. We define “adjusted net loss” as loss for the year or period adjusted byadding back fair value changes of financial liabilities measured at FVTPL and [REDACTED]. Adjusted net loss isnot a measure required by, or presented in accordance with, HKFRS. The use of adjusted net loss has limitations asan analytical tool, and you should not consider it in isolation from, as a substitute for analysis of, or superior to, ourresults of operations or financial condition as reported under HKFRS. For details, see “Financial Information —Non-HKFRS Measures.”

(3) Adjusted EBITDA is a non-HKFRS measure. We define “adjusted EBITDA” as adjusted net loss for the year or periodadjusted by adding back income tax, depreciation of property, plant and equipment, depreciation of right-of-useassets, amortization of intangible assets, and finance cost, net. Adjusted EBITDA is not a measure required by, orpresented in accordance with HKFRS. The use of adjusted EBITDA has limitations as an analytical tool, and youshould not consider it in isolation from, or as a substitute for analysis of, or superior to, our results of operations orfinancial condition as reported under HKFRS. For details, see “Financial Information — Non-HKFRS Measures.”

During the Track Record Period, we generated our revenue from (i) sales of goods, primarilycomprising retail sales from our self-owned stores and sales to franchise stores; and (ii) sales-basedmanagement and consultation services income such as store management fees, logistics charges andPOS charges to our franchisees. Our revenue amounted to RMB155.3 million, RMB463.7 million,RMB1,645.9 million, RMB502.4 million and RMB1,683.2 million in 2018, 2019 and 2020 and thefirst half of 2020 and 2021, respectively. For details on how we generate our revenue from ourbusiness models, see “Business — Our Business Model — Our Retail Business Model.” Thecontinued increase in our revenue during the Track Record Period was primarily due to the increasein our sales of goods as a result of expansion of our self-owned stores and franchise stores duringthe Track Record Period. During the same period, the number of our self-owned stores and franchisestores increased from 80 stores as of December 31, 2018 to 640 stores as of June 30, 2021. Fordetails, see “Business — Our Business Model — Our Retail Store Network.”

SUMMARY

– 7 –


We incurred net losses throughout the Track Record Period, primarily because of ourinvestment in relation to constant ramp-up of business scale and store network expansion. Our lossfor the year/period amounted to RMB79.5 million, RMB514.5 million and RMB2,017.2 million,RMB512.9 million and RMB4,397.1 million for the year ended December 31, 2018, 2019 and 2020and the six months ended June 30, 2020 and 2021, respectively. The increase in our net lossesduring the Track Record Period was primarily attributable to the fair value increase in our financialliabilities measured at FVTPL. For details, see “Financial Information — Description of SelectCombined Statements of Comprehensive Income Line Items — Fair Value Changes of FinancialLiabilities Measured at FVTPL” and note 24 to the Accountants’ Report in Appendix I to thisdocument.

Reconciliation for Non-HKFRS Measures

We believe that the presentation of non-HKFRS measures facilitates comparisons of operatingperformance from period to period and company to company by eliminating the potential impact ofitems that our management does not consider indicative of our operating performance, such ascertain non-cash items. The use of these non-HKFRS measures has limitations as an analytical tool,and you should not consider them in isolation from, as a substitute for, analysis of, or superior to,our results of operations or financial condition as reported under HKFRS. In addition, thesenon-HKFRS financial measures may be defined differently from similar terms used by othercompanies, and may not be comparable to other similarly titled measures used by other companies.Our presentation of these non-HKFRS measures should not be construed as an implication that ourfuture results will be unaffected by unusual or non-recurring items. The following table reconcilesour adjusted net loss for the period and adjusted EBITDA for the year/period presented to the mostdirectly comparable financial measures calculated and presented under HKFRS, which is loss forthe year/period:

For the year ended December 31,For the six months

ended June 30,

2018 2019 2020 2020 2021


(Unaudited)

Loss for the year/period . . . . . . . . . . . . (79,485) (514,503) (2,017,207) (512,874) (4,397,083)

Adjusted for:Fair value changes of financial liabilities

measured at FVTPL . . . . . . . . . . . . . . 37,689 437,552 1,842,514 445,459 4,353,866[REDACTED] . . . . . . . . . . . . . . . . . . [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Non-HKFRS measure:Adjusted net loss for the year/period

(unaudited)(1) . . . . . . . . . . . . . . . . . (41,796) (76,951) (171,380) (67,415) (38,462)


ended June 30,

2018 2019 2020 2020 2021


(Unaudited)

Adjusted net loss for the year/period(unaudited) . . . . . . . . . . . . . . . . . . (41,796) (76,951) (171,380) (67,415) (38,462)

Adjusted for:Income tax . . . . . . . . . . . . . . . . . . . . (12,732) (19,855) (33,172) (16,292) (6,740)Depreciation and amortization . . . . . . . . . 30,813 56,271 222,940 82,392 217,686Finance costs, net . . . . . . . . . . . . . . . . 2,948 8,232 49,152 17,684 43,918

Non-HKFRS measure:Adjusted EBITDA for the year/period

(unaudited)(2) . . . . . . . . . . . . . . . . . (20,767) (32,303) 67,540 16,369 216,402

Notes:(1) Adjusted net loss is a non-HKFRS measure. We define “adjusted net loss” as loss for the year or period adjusted by

adding back fair value changes of financial liabilities measured at FVTPL and [REDACTED]. Adjusted net loss isnot a measure required by, or presented in accordance with, HKFRS. The use of adjusted net loss has limitations asan analytical tool, and you should not consider it in isolation from, as a substitute for analysis of, or superior to, ourresults of operations or financial condition as reported under HKFRS. For details, see “Financial Information —Non-HKFRS Measures.”

(2) Adjusted EBITDA is a non-HKFRS measure. We define “adjusted EBITDA” as adjusted net loss for the year or periodadjusted by adding back income tax, depreciation of property, plant and equipment, depreciation of right-of-useassets, amortization of intangible assets, and finance cost. Adjusted EBITDA is not a measure required by, orpresented in accordance with HKFRS. The use of adjusted EBITDA has limitations as an analytical tool, and youshould not consider it in isolation from, or as a substitute for analysis of, or superior to, our results of operations orfinancial condition as reported under HKFRS. For details, see “Financial Information — Non-HKFRS Measures.”

SUMMARY

– 8 –


SUMMARY OF COMBINED STATEMENTS OF FINANCIAL POSITIONSThe table below sets forth selected information from our combined statements of financial

position as of the dates indicated.

As of December 31,As of

June 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Total non-current assets . . . . . . . . . . . . . . . . . . 78,359 533,727 1,831,953 2,358,143Total current assets . . . . . . . . . . . . . . . . . . . . . 169,666 918,219 1,282,415 2,846,710

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . 248,025 1,451,946 3,114,368 5,204,853

Total non-current liabilities . . . . . . . . . . . . . . . . (186,693) (1,579,253) (4,865,698) (11,328,341)Total current liabilities . . . . . . . . . . . . . . . . . . . (162,370) (584,249) (958,479) (858,082)

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . (349,063) (2,163,502) (5,824,177) (12,186,423)

Net liabilities . . . . . . . . . . . . . . . . . . . . . . . . (101,038) (711,556) (2,709,809) (6,981,570)

Our net current assets increased from RMB7.3 million as of December 31, 2018 to RMB334.0million as of December 31, 2019. Our net current assets also increased from RMB323.9 million asof December 31, 2020 to RMB1,988.6 million as of June 30, 2021. Such increases were primarilydue to the increase in inventories, cash and cash equivalents and trade and other receivables. Ournet current assets decreased slightly from RMB334.0 million as of December 31, 2019 toRMB323.9 million as of December 31, 2020, primarily due to the increase in trade and otherpayables and lease liabilities. For details, see “Financial Information — Discussion of CertainStatements of Financial Position Items — Current Assets and Current Liabilities.”

Our non-current assets increased from RMB78.4 million as of December 31, 2018 toRMB533.7 million as of December 31, 2019, and further increased to RMB1,832.0 million as ofDecember 31, 2020, and RMB2,358.1 million as of June 30, 2021. Such increases were primarilyattributable to the increase in right-of-use assets such as leases, property, plant and equipment, anddeferred tax assets during the respective periods. For details, see “Financial Information —Discussion of Certain Statements of Financial Position Items — Non-current Assets andNon-Current Liabilities.”

Our non-current liabilities increased from RMB186.7 million as of December 31, 2018 toRMB1,579.3 million as of December 31, 2019, and further increased to RMB4,865.7 million as ofDecember 31, 2020, and RMB11,328.3 million as of June 30, 2021. Such increases were primarilyattributable to the increase in our financial liabilities measured at FVTPL. For details, see“Financial Information — Discussion of Certain Statements of Financial Position Items —Non-current Assets and Non-Current Liabilities — Financial Liabilities measured at FVTPL.”

SUMMARY OF COMBINED STATEMENTS OF CASH FLOWS

The following table sets forth a summary of our cash flows for the periods indicated:



June 30,

2018 2019 2020 2020 2021


(Unaudited)

Net cash used in operating activities . . . . . . . . . . (25,194) (381,102) (314,070) (105,080) (356,333)Net cash used in investing activities . . . . . . . . . . (16,627) (121,722) (525,590) (166,964) (61,562)Net cash generated from financing activities . . . . . 68,238 706,465 778,202 73,036 1,367,426Net increase/(decrease) in cash and cash

equivalents . . . . . . . . . . . . . . . . . . . . . . . 26,417 203,641 (61,458) (199,008) 949,531Cash and cash equivalents at the beginning of the

year/period . . . . . . . . . . . . . . . . . . . . . . . 1,709 28,126 233,291 233,291 168,294Effect of foreign exchange rate change . . . . . . . . – 1,524 (3,539) 1,358 (985)Cash and cash equivalents at the end of the

year/period . . . . . . . . . . . . . . . . . . . . . . . 28,126 233,291 168,294 35,641 1,116,840

For details, see “Financial Information — Liquidity and Capital Resources.”

SUMMARY

– 9 –


KEY FINANCIAL RATIOSThe following table sets forth our key financial ratios as of the dates or for the periods

indicated:

As of/For the year ended December 31,

As of/For thesix months ended

June 30,

2018 2019 2020 2021

Current ratio(1) . . . . . . . . . . . . . . . . . . . . . . 1.04 1.57 1.34 3.32Revenue growth. . . . . . . . . . . . . . . . . . . . . . – 198.6% 254.9% 235.1%Gross profit margin . . . . . . . . . . . . . . . . . . . 32.1% 27.1% 30.4% 36.2%Operating (loss)/profit margin . . . . . . . . . . . . . (33.2%) (19.1%) (8.7%) 1.5%Non-HKFRS adjusted EBITDA margin(2) . . . . . . . (13.4%) (7.0%) 4.1% 12.9%

Notes:(1) Current ratio is calculated using total current assets divided by total current liabilities at the end of the period.(2) Adjusted EBITDA for the period divided by revenue for the same period and multiplied by 100.0%. For reconciliation

of adjusted EBITDA from profit before tax, see “Financial Information — Non-HKFRS Measures.”

PATH TO PROFITABILITYWe are one of the top three specialty retailers by GMV and the fastest-growing specialty

retailer among the top ten players in China with a GMV CAGR of 246.2% from 2018 to 2020,according to the Frost & Sullivan Report. Leveraging our leading market position in specialty retailmarket, and capitalizing on our technology and management capability, we believe that we arewell-positioned to capture market opportunities.

Lifestyle products have contributed to the definition of customers’ way of life and become asymbol of self-awareness of Millennials and Generation Z. According to the Frost & SullivanReport, the market size of specialty retail by GMV has experienced a fast expansion in recent years,and is expected to grow to RMB475 billion in 2025 from RMB195 billion in 2020, representing anestimated GMV CAGR of 19.5%, during this period.

Since our inception in 2015, we have invested in developing different retail brands andexpansion of store network pursuant to our overall business strategy with the vision for long-termprofitability and sustainable development. During the Track Record Period, we observed positivetrends towards our path to profitability. Our revenue and gross profit were consistently on a risingtrend, representing a CAGR of 225.5% and 216.8% from 2018 to 2020, respectively. In addition,along with rapid expansion of business scale, our overall gross profit margin increased constantlysince 2019, amounting to 27.1%, 30.4% and 36.2% in 2019, 2020 and the first half of 2021,respectively, exhibiting improved cost and expenses structures. For detailed discussion on our grossprofit margin during the Track Record Period, see “Financial Information — Management’sDiscussion and Analysis of Results of Operations.” In particular, as a percentage of total revenue,our administrative and other operating expenses decreased constantly during the Track RecordPeriod, accounting for 29.9%, 24.2%, 17.1% and 8.4% in 2018, 2019 and 2020 and the first half of2021, respectively.

Our adjusted net loss margin (non-HKFRS measure) gradually decreased during the TrackRecord Period, reaching minus 26.9%, minus 16.6%, minus 10.4% and minus 2.3%, respectively,in 2018, 2019, 2020 and the first half of 2021. In the same periods, our adjusted EBITDA(non-HKFRS measure) amounted to minus RMB20.8 million, minus RMB32.3 million, RMB67.5million and RMB216.4 million, respectively, while our adjusted EBITDA margin (non-HKFRSmeasure) was minus 13.4%, minus 7.0%, 4.1% and 12.9%, respectively. For details, see “FinancialInformation — Non-HKFRS Measures.” In particular, KKV brand, our flagship retail brand, had anadjusted EBITDA (non-HKFRS measure) of RMB18.7 million, RMB166.8 million, RMB40.4million and RMB235.7 million, respectively, in 2019, 2020 and the first half of 2020 and 2021. Fordetails on our retail brands in terms of Non-HKFRS measures, see “Business — Our BusinessModel — Our Retail Brands.”

We expect to further improve our financial performance and achieve profitability in the futurethrough continuous revenue growth and improved cost efficiency. Specifically, we intend to drivecontinuous overall revenue growth by further expansion and optimization of our store network inorder to achieve sustainable profitability at scale in the long term, as well as continue implementingour customer-centric merchandise portfolio expansion, with attention on those carrying strong salespotential and optimal margin. In the meantime, as we continue to scale our business, we believe wewill enjoy improved economies of scale through managing our costs and expenses incurred aspercentages of revenue in an effective way, with particular focus on enhancing our control onexpenses in relation to leasing of relevant properties, improving cost-efficiency of sales andmarketing events, and reducing expenses associated with administrative work leveragingtechnology evolvement. In addition, to reduce effective travel distance of goods to be delivered toour stores and achieve improved cost-efficiency for logistics, we intend to continue expanding thenetwork of our logistics infrastructure by placing regional warehouse centers and prepositionwarehouses at strategic locations. For detailed analysis on our path to profitability, see “FinancialInformation — Path to Profitability.”

SUMMARY

– 10 –


SUMMARY OF KEY RISK FACTORSThere are certain risks involved in our operations and in connection with the [REDACTED],

many of which are beyond our control. These risks can be categorized into (i) risks relating to ourbusiness and industry, (ii) risks relating to doing business in China, and (iii) risks relating to the[REDACTED]. Among these risks, we believe the following to be relatively material:

• Our sales depend on the popularity of the brands and merchandise we offer, as well ascustomer preferences and spending patterns. We may not be able to identify the changingconsumer preference towards the merchandise we offer in our sales channels in a timelymanner.

• Failure to maintain good relationships with or secure competitive terms from brandcompanies may materially and adversely affect our profitability, business and prospects.

• We may lose our distribution rights to sell certain brand merchandise in our distributionchannels and/or fail to renew these distribution agreements which could have adverseeffect on our business.

• Unauthorized use of our Third Party Brand Partners’ brands by others or allegationsagainst us regarding the merchandise we sell may adversely affect our business.

• We rely on third-party OEM and ODM contractors for the manufacturing of ourself-owned brand merchandise. Our brand image and business may be negativelyaffected by a disruption in the supply of our OEM and ODM contractors.

• If we fail to protect our intellectual property rights, our business, financial conditionsand results of operations would be severely harmed.

• If we are unable to provide superior customer experiences, our business and reputationmay be materially and adversely affected.

• We may experience complaints from our customers, or adverse publicity involving ourmerchandise, our service or our prices.

• We had incurred net losses in the past, and we may continue to experience significantnet losses in the future.

• We recorded net operating and investing cash outflow as well as net liabilities for theyears ended December 31, 2018, 2019 and 2020 and the six months ended June 30, 2020and 2021.

• We may not be able to continue to successfully expand our merchandise offerings andbrand portfolio.

• We may not be able to successfully expand our offline sales network by increasing thenumber of self-owned stores and franchise stores.

OUR SINGLE LARGEST SHAREHOLDERS GROUP AND SHAREHOLDERSINFORMATION

The Single Largest Shareholders Group, Mr. Wu, Mr. Guo and their respective wholly-ownedinvestment holding companies (namely, MOGR and Starlight), is a group of persons acting inconcert with each other. See “Relationship with the Single Largest Shareholders Group” for furtherdetails.

As of the Latest Practicable Date, the Single Largest Shareholders Group was interested inapproximately 28.3865% of the total issued share capital of our Company. Immediately uponcompletion of the Share Subdivision and the [REDACTED] (assuming the [REDACTED] is notexercised), the Single Largest Shareholders Group will be interested in approximately[REDACTED]% of the total issued share capital of our Company, comprising (i) Sharesrepresenting approximately [REDACTED] % of the share capital of our Company held by MOGR(a wholly-owned investment holding company of Mr. Wu), and (ii) Shares representingapproximately [REDACTED]% of the share capital of our Company held by Starlight (awholly-owned investment holding company of Mr. Guo). See “Relationship with the Single LargestShareholders Group” and “Substantial Shareholders” for further details.OUR [REDACTED] INVESTORS

We underwent 13 rounds of [REDACTED] Investments from our [REDACTED] Investorscomprising institutional investors including, among others, KK Brothers, eWTP, CMC Krypton andMatrix since our establishment. For further details of the identity and background of the[REDACTED] Investors, see the section headed “History, Reorganization and Corporate Structure– [REDACTED] Investments – Information about our Shareholders and [REDACTED] Investors”in this document.

[REDACTED]

SUMMARY

– 11 –


[REDACTED]

USE OF [REDACTED]We estimate that the [REDACTED] from the [REDACTED] which we will receive, if the

[REDACTED] is not exercised, assuming an [REDACTED] of HK$[REDACTED] per Share(being the mid-point of the indicative [REDACTED] range), will be approximatelyHK$[REDACTED], after deducting [REDACTED], fees and estimated expenses payable by us inconnection with the [REDACTED]. We intend to apply the [REDACTED] from the[REDACTED] for the purposes and in the amounts set out below:

• approximately [REDACTED]%, or HK$[REDACTED], will be used over the nextthree years to continue developing our store network and further deepening our marketpenetration;

• approximately [REDACTED]%, or HK$[REDACTED], will be used over the nextthree years to further invest in technology initiatives to strengthen our merchandiseselection capabilities, and to enhance the digitalization of our business;

• approximately [REDACTED]%, or HK$[REDACTED], will be used over the nextthree years for expansion and optimization of our supply chains and distributionchannels, with a goal to sustain our business growth; and

• the remaining approximately [REDACTED]%, or HK$[REDACTED], will be used forworking capital and general corporate purposes.

DIVIDENDAs we are a holding company incorporated under the laws of the Cayman Islands, the payment

and amount of any future dividends will depend on the availability of dividends received from oursubsidiaries. During the Track Record Period, we did not declare or distribute any dividend to ourshareholders. We do not have any dividend policy at present and have no present plan to pay anydividends to our Shareholders in the foreseeable future. However, we may distribute dividends inthe future by way of cash or by other means that we consider appropriate. Any dividends we paywill be determined at the absolute discretion of our Board, taking into account factors including ouractual and expected results of operations, cash flow and financial position, general businessconditions and business strategies, expected working capital requirements and future expansionplans, legal, regulatory and other contractual restrictions, and other factors that our Board deemsto be appropriate. Our shareholders may approve, in a general meeting, any declaration ofdividends, which must not exceed the amount recommended by our Board.

As advised by our Cayman Islands legal advisor, under Cayman Islands law, a position ofaccumulated losses does not necessarily restrict us from declaring and paying dividends to ourShareholders out of profits and reserves of our Company lawfully available for distribution,including share premium, provided this would not result in our Company being unable to pay itsdebts as they fall due in the ordinary course of business.

[REDACTED]Our [REDACTED] mainly include [REDACTED] and professional fees paid to legal,

accounting and other advisors for their services rendered in relation to the [REDACTED] and the[REDACTED]. The estimated total [REDACTED] (based on the mid-point of the [REDACTED]range and assuming that the [REDACTED] is not exercised) for the [REDACTED] areapproximately RMB[REDACTED], accounting for approximately [REDACTED]% of the[REDACTED] from the [REDACTED] (based on the mid-point of the [REDACTED] range andassuming that the [REDACTED] is not exercised), of which (i) approximately RMB[REDACTED]has been charged to our combined statements of profit or loss and other comprehensive incomeduring the Track Record Period, and (ii) approximately RMB[REDACTED] is expected to becharged to our combined statements of profit or loss and other comprehensive income for the yearsending December 31, 2021 and 2022 and the remaining amount of RMB[REDACTED] is expectedto be recognized directly as a deduction from equity upon the [REDACTED]. Our Directors do notexpect such expenses to have a material and adverse impact on our financial results for the yearending December 31, 2021.

SUMMARY

– 12 –


RECENT DEVELOPMENTS

Since June 30, 2021 and up to the Latest Practicable Date, our business continued to develop,and our retail network grew from 640 stores to 680 stores from June 30, 2021 to the LatestPracticable Date. During the same period, we continued implementing the strategic optimization ofstore network by closing stores that failed to meet our performance appraisal criteria, or no longerserved our overall business arrangement or enjoy store-to-store synergy effect, while launching newstores taking over strategic venue at regions with growth potential with upgraded facilities and storemanagement system. Since June 30, 2021 and up to the Latest Practicable Date, we opened 53 KKVstores, 29 THE COLORIST stores, 13 X11 stores and 17 KK Guan stores. Among the newly openedstores, 58 were self-owned stores. During the same period, we closed 19 KKV stores, 22 THECOLORIST stores, four X11 stores and 27 KK Guan stores.

On the basis set out in Appendix IA to this document, and in the absence of unforeseencircumstances, we estimate that our unaudited combined profit/(loss) attributable to equity holdersof our Company for [the year ending December 31, 2021] to be not [less/more] than RMB[●].

On [●], our Company [has implemented] the Share Subdivision whereby each existing issuedand unissued share capital with par value of USD0.0001 in the authorized share capital of ourCompany [were] subdivided into 25 ordinary shares with par value of USD0.000004 each and theauthorized share capital of our Company [was] altered to USD[50,000] divided into[12,500,000,000] Shares with par value of USD0.000004 each. The total number of issued Sharesin our Company [increased] from [34,814,658] Shares to [870,366,450] Shares.

Save for the subsequent events described in this document, to the best knowledge of ourDirectors, since June 30, 2021, and up to the Latest Practicable Date, there was no material adversechange in our operations or financial or trading position, and no event occurred that wouldmaterially and adversely affect the information presented in the combined financial statements ofour Company.

IMPACT OF COVID-19 ON OUR BUSINESS

An outbreak of a novel strain of coronavirus named COVID-19 that began since the end ofDecember 2019 has materially and adversely affected the global economy. In response to thepandemic, countries and regions across the world, including China, began to impose movementrestriction measures such as lockdowns, closure of work places and travel bans to contain the spreadof the virus. As of the Latest Practicable Date, most of the Chinese cities had eased or lifteddomestic travel restrictions and resumed normal social activities, business, work and production. Asmandated shutdowns and limited operation orders were effected across China from late January2020 to late February 2020 when the COVID-19 outbreak peaked in China, we had experienced areduction to a certain degree in sales levels compared to the same periods in 2019.

Approximately 71% of our retail stores in China were closed for seven or more days in themonth of February 2020 when the COVID-19 outbreak peaked in China. In particular, all of our fiveretail stores situated in Wuhan, China suspended operations for 67 days, from January 24, 2020 toMarch 30, 2020, as a result of the city-wide lockdown. For our retail stores that remained open inother regions of China, the average daily sales per retail store declined following the shortenedhours of operation and reduced customer traffic.

As the number of COVID-19 cases in China subsided and with the mobility restrictions liftedby the Chinese government in May 2020, our sales and operating performance steadily recovered.Since April 2020, our retail stores reopened and customer traffics had gradually returned to normallevels. In addition, our retail store network expansion resumed its momentum and we hadsuccessfully opened 354 retails stores during the period from May 2020 to December 2020, and wehad introduced a new retail brand, X11, in our retail brands portfolio. We believe that with thestrong rebound in our sales level after our retail stores resumed normal operation since late of April2020, we did not experience significant adverse impact arising from the COVID-19 pandemic onour 2020 financial performance. Furthermore, following the economic recovery in China, wecontinue to believe that the COVID-19 pandemic will have minimal impact on our financialperformance for the year ending December 31, 2021.

In addition, due to new wave outbreak of the COVID-19 pandemic, in particular its Deltavariant, in certain regions around China in 2021, we have observed drop in sales for stores in thoseregions for short period of time, primarily as a result of lock-down policies and strict socialisolation practice there. However, given the fast and effective measures taken by the government,and quick recovery of local economy and business activities in relevant region, we do not believethat the COVID-19 outbreak, including the more recent ones brought by its latest variants, wouldhave caused any material adverse impact on our business operations and financial results.

SUMMARY

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In this document, unless the context otherwise requires, the following terms shall havethe meanings set out below. Certain technical terms are explained in the section headed“Glossary of Technical Terms” in this document.

“affiliate” with respect to any specified person, any other person,directly or indirectly, controlling or controlled by or underdirect or indirect common control with such specifiedperson

“Articles” or “Articles ofAssociation”

the articles of association of our Company conditionallyadopted on [●] with effect from the [REDACTED], asamended from time to time, a summary of which is set outin Appendix III to this document

“associate(s)” has the meaning ascribed to it under the Listing Rules

“Board” or “Board of Directors” the board of directors of our Company

“Bright Deshang” Bright Deshang (Shenzhen) Venture Capital Center (LimitedPartnership) (璀璨德商(深圳)創業投資中心(有限合夥)), alimited partnership registered in the PRC

“Bright Vision” Bright Vision (Shenzhen) Enterprise ManagementPartnership (Limited Partnership) (璀璨遠見(深圳)企業管理合夥企業(有限合夥)), a limited partnership registered in thePRC

“business day” any day (other than a Saturday, Sunday or public holiday inHong Kong) on which banks in Hong Kong are generallyopen for normal banking business

“BVI” the British Virgin Islands

“Cayman Islands Companies Act”or “Companies Act”

the Companies Act, Cap. 22 (Law 3 of 1961, as consolidatedand revised) of the Cayman Islands

[REDACTED]

DEFINITIONS

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[REDACTED]

“China” or “the PRC” the People’s Republic of China, and for the purposes of thisdocument only, except where the context requires otherwise,excluding Hong Kong, the Macao Special AdministrativeRegions of the People’s Republic of China and Taiwan

“close associate(s)” has the meaning ascribed to it under the Listing Rules

“CMC II” CMC Krypton II Holdings Limited, an exempted companywith limited liability organized under the Laws of theCayman Islands

“CMC Krypton” CMC Krypton Holdings Limited, an exempted companywith limited liability organized under the Laws of theCayman Islands

DEFINITIONS

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“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of HongKong), as amended, supplemented or otherwise modifiedfrom time to time

“Companies (Winding Up andMiscellaneous Provisions)Ordinance”

the Companies (Winding Up and Miscellaneous Provisions)Ordinance (Chapter 32 of the Laws of Hong Kong), asamended, supplemented or otherwise modified from time totime

“Company”, “our Company” or“the Company”

KK Technology Company Holdings Limited, an exemptedcompany with limited liability incorporated under the lawsof the Cayman Islands on March 29, 2019

“connected person(s)” has the meaning ascribed to it under the Listing Rules

“connected transaction(s)” has the meaning ascribed to it under the Listing Rules

“core connected person(s)” has the meaning ascribed to it under the Listing Rules

“CSRC” China Securities Regulatory Commission (中國證券監督管理委員會), a regulatory body responsible for the supervisionand regulation of the national securities market in China

“Dongguan Kuaike” Dongguan Kuaike Partnership (Limited Partnership) (東莞快客合夥企業(有限合夥)), a limited partnership establishedunder the laws of the PRC

“Dongguan Kuaike Investment” Dongguan Kuaike Investment Partnership (LimitedPartnership) (東莞市快客投資合夥企業(有限合夥)), alimited partnership established under the laws of the PRC

“Dongguan WFOE “ Guangdong Xingke Commerce Management Co, Ltd. (廣東星客商業管理有限公司), a company established underlimited liability under the laws the PRC

“Director(s)” the director(s) of our Company

“EIT” the PRC enterprise income tax

“EIT Law” the Enterprise Income Tax Law of the PRC (中華人民共和國企業所得稅法), enacted on March 16, 2007, effectivefrom January 1, 2008 and amended on February 24, 2017and December 29, 2018 by the SCNPC

“Extreme Conditions” extreme conditions caused by a super typhoon as announcedby the government of Hong Kong

DEFINITIONS

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“eWTP” eWTP Tech Innovation Fund LP, a limited partnershipregistered in the Cayman Islands

“Founders” Mr. Wu and Mr. Guo

“Frost & Sullivan” Frost & Sullivan International Limited, an independentmarket research expert

“Frost & Sullivan Report” an independent market research report commissioned by usand prepared by Frost & Sullivan for the purpose of thisdocument

“GDP” gross domestic product

[REDACTED]

“Gongqingcheng” Gongqingcheng Yueke Investment Management Partnership(Limited Partnership) (共青城悅客投資管理合夥企業(有限合夥), a limited partnership established under the laws of thePRC

[REDACTED]

“Group”, “our Group”, “theGroup”, “we”, “us” or “our”

our Company and its subsidiaries from time to time or,where the context so requires, in respect of the period priorto our Company becoming the holding company of itspresent subsidiaries, such subsidiaries as if they weresubsidiaries of our Company at the relevant time

“Guangdong Kuaike Electronic” Guangdong Kuaike Electronic Commerce Co., Ltd. (廣東快客電子商務有限公司), a company established under limitedliability under the laws the PRC

“Guangzhou Kuaike EnterpriseManagement”

Guangzhou Kuaike Enterprise Management Partnership(Limited Partnership) (廣州快客企業管理合夥企業(有限合夥)), a limited partnership established under the laws of thePRC

[REDACTED]

DEFINITIONS

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“HKFRS” Hong Kong Financial Reporting Standards issued by theHong Kong Institute of Certified Public Accountants

[REDACTED]

“Hong Kong” or “HK” the Hong Kong Special Administrative Region of the PRC

“Hong Kong dollars” or “HKdollars” or “HK$”

Hong Kong dollars, the lawful currency of Hong Kong

[REDACTED]

“Hong Kong Stock Exchange” or“Stock Exchange”

The Stock Exchange of Hong Kong Limited

[REDACTED]

DEFINITIONS

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“Hongtu Venture” Dongguan Hongtu Venture Capital Co., Ltd. (東莞紅土創業投資有限公司), a company established with limited liabilityunder the laws of the PRC

“Independent Third Party” or“Independent Third Parties”

person(s) or company(ies) and their respective ultimatebeneficial owner(s), who/which, to the best of our Directors’knowledge, information and belief, having made allreasonable enquiries, is/are not connected with ourCompany or our connected persons within the meaningascribed thereto under the Listing Rules

[REDACTED]

DEFINITIONS

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[REDACTED]

“Key Opinion Leader(s)” or“KOL(s)”

person(s) or organization(s) who have expert knowledge andinfluence in a respective field

“KK Brothers” KK Brothers Hong Kong Limited, a limited liabilitycompany incorporated in Hong Kong and is indirectlywholly owned by TMF (Cayman) Ltd, the trustee of theLiang Family Trust, a trust established by Mr. Liang Jie (梁捷), a non-executive Director, for the benefit of himself andhis family

“KK Technology HK” KK Technology (HK) Company Limited, a companyincorporated with limited liability under the laws of HongKong and a wholly owned subsidiary of our Company

“Single Largest ShareholdersGroup”

collectively, Mr. Wu, Mr. Guo, MOGR and Starlight

“Latest Practicable Date” October 31, 2021, being the latest practicable date for thepurpose of ascertaining certain information in this documentprior to its publication

[REDACTED]

“Listing Committee” the Listing Committee of the Stock Exchange

[REDACTED]

DEFINITIONS

– 20 –


“Listing Rules” the Rules Governing the Listing of Securities on The StockExchange of Hong Kong Limited, as amended,supplemented or otherwise modified from time to time

“Main Board” the stock exchange (excluding the option market) operatedby the Stock Exchange which is independent from andoperates in parallel with the Growth Enterprise Market ofthe Stock Exchange

“Matrix” Hangzhou Chuangqian Investment Partnership (LimitedPartnership) (杭州創乾投資合夥企業(有限合夥)), a limitedpartnership established under the laws of the PRC

“Memorandum” or “Memorandumof Association”

the amended and restated memorandum and articles ofassociation of our Company conditionally adopted on [●],with effect from the [REDACTED] (as amended from timeto time), a summary of which is set out in Appendix III tothis document

“MOFCOM” the Ministry of Commerce of the PRC (中華人民共和國商務部)

“MOGR” MOGR Holding Co., Ltd., a BVI business companyincorporated under the Laws of British Virgin Islands whichis 100% owned by Mr. Wu

“Mr. Guo” Mr. Guo Huibo, one of the co-founders of our Group and anexecutive Director

“Mr. Wu” Mr. Wu Yuening, one of the co-founders of our Group and anexecutive Director

“Nomination Committee” the nomination committee of the Board

“Non-voting Ordinary Share(s)” the non-voting ordinary share(s) of US$[0.000004] each inthe share capital of our Company upon completion of theShare Subdivision, which will be converted to OrdinaryShares on a one-for-one basis on the [REDACTED]

“NPC” National People’s Congress of the PRC (中華人民共和國全國人民代表大會)

[REDACTED]

DEFINITIONS

– 21 –


[REDACTED]

“PBOC” People’s Bank of China (中國人民銀行), the central bank ofthe PRC

“PRC Government” the central government of the PRC and all governmentalsubdivisions (including provincial, municipal and otherregional or local government entities) and instrumentalitiesthereof or, where the context requires, any of them

“PRC Legal Advisers” Haiwen & Partners, acting as legal counsel as to PRC lawsto our Company

Jingtian & Gongcheng, acting as legal counsel as to PRClaws to our Company

“Preferred Shares” or “preferredshares”

preferred share(s) in the share capital of our Company,including Series Seed Preferred Shares, Series A PreferredShares, Series B Preferred Shares, Series C PreferredShares, Series Pre-D Preferred Shares, Series D PreferredShares, Series E Preferred Shares and Series F PreferredShares

“[REDACTED] Investment(s)” the investment(s) in our Company undertaken by the[REDACTED] Investors pursuant to the respective sharesubscription agreement(s) and/or share transferagreement(s) prior to the [REDACTED], the details ofwhich are set out in the section headed “History,Reorganization and Corporate Structure” in this document

“[REDACTED] Investor(s)” holders of ordinary Shares, Series Seed Shares and/orPreferred Shares or their respective affiliates, other than theFounders and the RSU Trustee

DEFINITIONS

– 22 –


[REDACTED]

“QIB” a qualified institutional buyer within the meaning of Rule144A

“Regulation S” Regulation S under the U.S. Securities Act

“Remuneration Committee” the remuneration committee of the Board

“Reorganization” the reorganization of our Group in preparation of the[REDACTED], details of which are set out in the sectionheaded “History, Reorganization and Corporate Structure”in this document

“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC

“RSU” restricted share unit

“RSU Scheme” the RSU scheme approved and adopted by our Company onAugust 12, 2021 for the grant of RSUs to RSU participantsfollowing the completion of the [REDACTED], a summaryof the principal terms of which is set forth in the sectionheaded “Appendix IV — Statutory and General Information— RSU Scheme”

“RSU Trustee” Futu Trustee Limited, a professional trustee and anIndependent Third Party appointed by our Company to actas the trustee to administer the RSU Scheme

“Rule 144A” Rule 144A under the U.S. Securities Act

“SAFE” the State Administration for Foreign Exchange of the PRC(中華人民共和國國家外匯管理局),

“SAT” the State Administration of Taxation of the PRC (中華人民共和國國家稅務總局)

“SCNPC” the Standing Committee of the NPC (全國人民代表大會常務委員會)

DEFINITIONS

– 23 –


“Series A Preferred Share(s)” the series A preferred share(s) of our Company

“Series B Preferred Share(s)” the series B preferred share(s) of our Company

“Series C Preferred Share(s)” the series C preferred share(s) of our Company

“Series D Preferred Share(s)” the series D preferred share(s) of our Company

“Series E Preferred Share(s)” the series E preferred share(s) of our Company

“Series F Preferred Share(s)” the series F preferred share(s) of our Company

“Series PRE-D Preferred Share(s)” the series PRE-D preferred share(s) of our Company

“Series Seed Preferred Share(s)” the series seed preferred share(s) of our Company

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” or “Securities and FuturesOrdinance”

the Securities and Futures Ordinance (Chapter 571 of theLaws of Hong Kong), as amended, supplemented orotherwise modified from time to time

“Share(s)” or “Ordinary Share(s)” ordinary share(s) in the share capital of our Company witha par value of [US$0.000004] each

“Shareholder(s)” holder(s) of our Share(s)

“Share Subdivision” the subdivision of each share in our Company’s issued andunissued share capital with par value of US$0.0001 eachinto 25 ordinary shares with par value of US$0.000004 eachon [●], the details of which are set out in “History,Reorganization and Corporate Structure”

“Shenzhen Capital Group” Shenzhen Capital Group Co., Ltd (深圳市創新投資集團有限公司), a company incorporated with limited liability underthe laws of the PRC

“Shenzhen Hongtai” Shenzhen Hongtai Growth Venture Capital Center (LimitedPartnership) (深圳洪泰成長創業投資中心(有限合夥)), alimited partnership established under the laws of the PRC

“Stabilizing Manager” [●]

“Starlight” Starlight Holding Co., Ltd., a BVI business companyincorporated under the Laws of British Virgin Islands whichis 100% owned by Mr. Guo

“State Council” the State Council of the PRC (中華人民共和國國務院)

DEFINITIONS

– 24 –


“subsidiary” or “subsidiaries” has the meaning ascribed to it under the Listing Rules

“substantial shareholder” has the meaning ascribed to it under the Listing Rules

“Takeovers Code” the Code on Takeovers and Mergers issued by the SFC, asamended, supplemented or otherwise modified from time totime

“Tier-one cities” according to Frost & Sullivan, composed of the four cities ofBeijing, Shanghai, Guangzhou and Shenzhen, following theclassification standards of the National Bureau of Statisticsof the PRC

“Tier-two cities” according to Frost & Sullivan, composed of provincialcapital cities, capital cities of autonomous regions and othersub-provincial cities in the PRC, following the classificationstandards of the National Bureau of Statistics of the PRC

“Track Record Period” the financial years ended December 31, 2018, 2019 and2020 and the six months ended June 30, 2021

“U.S. Securities Act” United States Securities Act of 1933, as amended, and therules and regulations promulgated thereunder

[REDACTED]

“United States”, “U.S.” or “US” the United States of America, its territories, its possessionsand all areas subject to its jurisdiction

“US dollars”, “U.S. dollars”,“US$” or “USD”

United States dollars, the lawful currency of the UnitedStates

“VAT” value-added tax

“%” per cent

For easy of reference, the names of the PRC laws and regulations, governmental authorities,institutions, natural persons or other entitles (including certain of our subsidiaries) have beenincluded in this document in both Chinese and English languages. In the event of any inconsistency,the Chinese versions shall prevail. English translations of official Chinese names are foridentification purposes only.

DEFINITIONS

– 25 –


This glossary of technical terms contains terms used in this document in connection withour Company and our business. Some of these terms and their meanings may not correspondto standard industry meanings or usage of such terms.

“CAGR” compound annual growth rate

“DTC” direct-to-consumer

“FVTPL” fair value through profit or loss

“Generation Z” the population of youngsters born during the period from1996 to 2009

“GMV” gross merchandise value, referring to the full value of allpurchases transacted and settled on the stores operated byour Company

“Millennials” the population of youngsters born during the period from1981 to 1995

“ODM” refers to the independent third-party original designmanufacturers

“OEM” refers to the independent third-party original equipmentmanufacturers

“OEM and ODM contractors” refers to the OEM and ODM manufacturers, contractors,subcontractors and suppliers

“POS” point of sale system

“Same store” Same store includes retail stores that opened for more than300 days in both 2018 and 2019, and in both 2019 and 2020,and more than 150 days in the six months ended June 30,2020 and 2021

“SKU” stock keeping unit, a unique identifier for each distinctproduct and service that can be purchased

“Third Party Brand Partners” refers to the brand owners, local authorized dealers anddistributors directly from whom we source merchandise

“WMS” warehouse management system

GLOSSARY OF TECHNICAL TERMS

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We have included in this document forward-looking statements that are not historical facts butrelate to our intentions, beliefs, expectations or predictions for future events and conditions whichmay not materialize or may change. Even though these statements have been made by our Directorsafter due and careful consideration and on bases and assumptions that we believe are fair andreasonable at the time, they nevertheless involve known and unknown risks, uncertainties and otherfactors which may cause our actual results, performance or achievements to be materially differentfrom those expressed or implied by the forward-looking statements. Some of the risks anduncertainties are listed in the section headed “Risk Factors” and elsewhere in this document. Insome case, you can identify these forward-looking statements by words or phrases such as “aim”,“anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “going forwards”, “intend”,“may”, “ought to”, “plan”, “potential”, “predict”, “project”, “propose”, “seek”, “should”, “will”, “isgoing to”, “would” or similar expressions, or their negatives. These forward-looking statementsinclude, but are not limited to, the following:

• our future business development, financial condition and results of operations;

• future developments, trends and conditions in the industry and markets in which weoperate;

• our business strategies and plans to achieve these strategies;

• general economic, political and business conditions in the industry and in markets inwhich we operate;

• any changes in the laws, rules and regulations of the central and local governments inthe PRC and the rules, regulations and policies of the relevant governmental authoritiesrelating to all aspects of our business and our business plans;

• the effects of the global financial markets and economic crisis, and development ofpandemic status in countries and regions where we operate, including COVID-19 and itsvariants;

• our ability to identify and integrate suitable acquisition targets;

• our ability to control or reduce costs;

• the amount and nature of, and potential for, future development of our business;

• capital market developments;

• exchange rate fluctuations and restrictions;

• the actions and developments of our competitors; and

• risks identified under the section headed “Risk Factors” of this document.

FORWARD-LOOKING STATEMENTS

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This document also contains market data and projections that are based on a number ofassumptions. The markets may not grow at the rates projected by the market data, or at all. Thefailure of the markets to grow at the projected rates may materially and adversely affect ourbusiness and the market price of our Shares. In addition, due to the rapidly changing nature of thePRC economy and the specialty retail industry, projections or estimates relating to the growthprospects or future conditions of the markets are subject to significant uncertainties. If any of theassumptions underlying the market data prove to be incorrect, actual results may differ from theprojections based on these assumptions. You should not place undue reliance on these forward-looking statements.

We do not guarantee that the transactions and events described in the forward-lookingstatements in this document will happen as described, or at all. Actual outcomes may differmaterially from the information contained in the forward-looking statements as a result of a numberof factors, including, without limitation, the risks and uncertainties set out in the section headed“Risk Factors” in this document. You should read this document in its entirety and with theunderstanding that actual future results may be materially different from what we expect. Theforward-looking statements made in this document relate only to events as of the date on which thestatements are made or, if obtained from third-party studies or reports, the dates of the respectivestudies or reports. Since we operate in an evolving environment where new risks and uncertaintiesmay emerge from time to time, you should not rely upon forward-looking statements as predictionsof future events. We undertake no obligation, beyond what is required by law, to update anyforward-looking statement to reflect events or circumstances after the date on which the statementis made, even when our situation may have changed.

FORWARD-LOOKING STATEMENTS

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In addition to other information in this document, you should carefully consider thefollowing risk factors, which may not be typically associated with [REDACTED] in equitysecurities of companies from other jurisdictions, before making any [REDACTED]decision in relation to the [REDACTED]. Any of the following risks, as well as other risksand uncertainties that are not yet identified or that we currently think are immaterial, maymaterially and adversely affect our business, financial condition or results of operations, orotherwise result in a decrease in the [REDACTED] price of our Shares and cause you tolose part or all of the value of your [REDACTED] in our Shares. You should pay particularattention to the fact that we are a company incorporated in the Cayman Islands and mostof our operations are conducted in China, which are governed by a legal and regulatoryregime that may differ significantly from that of other jurisdictions. For details concerningthe PRC and certain related matters discussed below, see “Regulatory Overview” and“Appendix III — Summary of the Constitution of the Company and Cayman IslandsCompany Law.”

RISKS RELATING TO OUR BUSINESS AND INDUSTRY

Our sales depend on the popularity of the brands and merchandise we offer, as well ascustomer preferences and spending patterns. We may not be able to identify changingconsumer preferences towards the merchandise we offer in our sales channels in a timelymanner.

The performance of our stores is sensitive to customer spending patterns. If we or our brandcompanies fail to anticipate increased customer demand for the merchandise we sell, we mayexperience inventory shortages, which would result in lost sales and negatively affect ourprofitability.

Furthermore, changes in economic conditions affect the level of customer spending on themerchandise we sell. Customer spending patterns are affected by, among other factors, general andlocal economic conditions, interest rates, inflation, taxation, government austerity measures,uncertainties about future economic prospects and shifts in discretionary spending towards othergoods and services. Customer preferences, spending habits and economic conditions may differ orchange from time to time in the markets in which we operate. We cannot guarantee that we will beable to maintain our historical growth rates of revenue and profit, or remain profitable, particularlyif the retail environment is stagnant or declines in the event of a recession in the general economy.

The life cycle of the merchandise we offer in our stores is getting shorter as consumerpreferences change frequently. The success of our business is largely dependent on our ability toanticipate future market trends of the merchandise supplied by us and consumer preferences in atimely manner. Consumer preferences differ across and within different regions in China and amongdifferent customer groups, and they are influenced by, among other things, social media, economiccircumstances and the demographic profile of the target customers.

As industry trends and consumer preferences and behavior continue to change, we must alsocontinually work to offer and supply new merchandise, and achieve a favorable mix of merchandiseand refine our approach as to how and where we market and sell our merchandise. Our successdepends on the appeal our offered merchandise to a broad range of consumers whose preferencesand behavior cannot be predicted with certainty and may change rapidly, and on our ability toanticipate and respond in a timely and cost-effective manner to industry trends and consumer

RISK FACTORS

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preferences through merchandise innovations, merchandise line extensions and marketing andpromotional activities, among other things. Drawing on our deep engagement with our customers,we have been able to anticipate and react to industry trends and consumer preferences and behaviorin an effective and efficient manner. However, we cannot assure you that we will be able tosuccessfully anticipate and respond to consumer preferences and behavior at all times, especiallyas we continue to broaden our customer base and diversify our merchandise offerings aimed atcustomers with differing characteristics. If we are unable to anticipate and respond to the changesin industry trends and consumer preferences and behavior, we may fail to continuously developmerchandise with wide market acceptance, capture emerging growth opportunities, adoptcompetitive sales strategies for our existing merchandise, or properly predict and manage ourinventory. Such failure could also negatively impact our brand image and result in diminishedcustomer experience and brand loyalty. Any of these occurrences could materially and adverselyaffect our business, prospects and results of operations.

Failure to maintain good relationships with or secure competitive terms from brandcompanies may materially and adversely affect our profitability, business and prospects.

We believe that the popularity and strength of the brands that we carry are critical to oursuccess. We source merchandise directly from Third Party Brand Partners. The success of ourbusiness and our growth depend to a significant extent on our relationships with the Third PartyBrand Partners. As of June 30, 2021, we sourced merchandise locally and globally from 1,145 ThirdParty Brand Partners. Our brand companies enjoy strong bargaining power vis-à-vis theirdistributors, including us. If we are unable to maintain good relationships with Third Party BrandPartners, we may not be able to secure competitive terms from them, and our costs may increase.In particular, we depend significantly on our ability to source merchandise from them at favorablepricing terms, typically at a discount to the suggested retail prices. We cannot assure you that ourThird Party Brand Partners will continue to sell merchandise to us on commercially acceptableterms, or at all. If we are not able to source merchandise from our brand companies at favorablepricing terms, our revenue, profit and profit margin may be materially and adversely affected.

We also may not be able to receive adequate support from our Third Party Brand Partners interms of marketing and promotion of their brand names leveraging their capital and public relationresources, merchandise development, personnel training and intellectual property. In addition, ourfinancial performance and our ability to increase our penetration in our existing markets and expandinto new markets depends on our Third Party Brand Partners’ willingness and ability to supplysufficient quantities of merchandise to our stores. The inability or unwillingness of our Third PartyBrand Partners to supply merchandise to us at acceptable prices, or changes in the supply policesof our Third Party Brand Partners, could lead to a decrease in our profit. Any negative developmentsin our relationships with our Third Party Brand Partners could materially and adversely affect ourbusiness and growth prospects.

In addition, there is no assurance that there will not be any material dispute between us andany of these Third Party Brand Partners in connection with the performance of a party’s obligationsor the compliance with a party’s responsibilities under the relevant arrangement between us andthese Third Party Brand Partners. If our relationship with any of these Third Party Brand Partnersdeteriorates, our results of operations and prospects may be materially and adversely affected.

RISK FACTORS

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Furthermore, we are currently the exclusive distributor in China for 30 third party brands. Ifwe lose our exclusive distribution rights with these Third Party Brand Partners, we will be subjectto intensified competition and our business and results of operations may be materially andadversely affected.

Some of our distributorship agreements with Third Party Brand Partners companies haveterms that limit our ability to sell their merchandise through avenues other than those as specifiedin the agreements in respect to territory and channels. These limitations may hinder our businessexpansion plan and intensify the competition we may face in the market.

We may lose our distribution rights to sell certain brand merchandise in our distributionchannels and/or fail to renew these distribution agreements which could have adverse effecton our business.

Our business success relies on having a broad range of merchandise portfolio. Our Third PartyBrand Partners may change their existing sales or marketing strategy in respect of the merchandisesupplied to us by selling those merchandise directly to our end-customers without going through ourGroup, changing their business strategy or reducing their sales on volume. While we are granteddistribution rights by a few of our Third Party Brand Partners in China, they may terminate thedistribution rights by changing the terms of distributorship agreements. Consequently, there is noassurance that such major Third Party Brand Partners will not appoint other dealers or distributorswhich may compete with us.

Our ability to maintain our existing distributorship agreements and to enter into newagreements with our Third Party Brand Partners is critical to the growth of our business. Ourdistributorship agreements with our Third Party Brand Partners, which generally have a term of oneyear, may be renewed based on negotiations between our brand companies and us. Factors that ourbrand companies may consider in these negotiations may include our sales performance duringprevious contract terms, our compliance with our brand companies’ general policies and proceduresand the distributorship agreements, our relationships with our brand companies, general marketconditions and our brand companies’ overall development strategies and plans. Some of thesefactors are beyond our control. There is no assurance that we will be able to maintain and renewour existing distributorship agreements with our Third Party Brand Partners on terms favorable tous, or at all.

There is no assurance that there will be no deterioration in our relationship with our ThirdParty Brand Partners which could affect our ability to secure sufficient supply of merchandise forour business. In the event that any of our Third Party Brand Partners changes its sales or marketingstrategy or otherwise appoint other dealers or distributors who may compete with us, our business,financial condition and operating results could be materially and adversely affected.

Unauthorized use of our Third Party Brand Partners’ brands or allegations against usregarding the merchandise we sell may adversely affect our business.

We sell merchandise supplied by our Third Party Brand Partners in our stores. We cannotassure you that there will be no unauthorized sales of counterfeit merchandise under these brands.Any public perception that non-authentic or counterfeit merchandise under these brands iswidespread in China, regardless of its veracity, could damage our reputation, reduce our ability toattract new end-customers or retain our existing end-customers, and diminish the value of thebrands we carry. As a result, our business and growth prospects may be materially and adverselyaffected.

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In addition, we may be subject to allegations that some of the merchandise sold through oursales channels is counterfeit or without authorization from the relevant brand companies. We canprovide no assurance that the measures we have adopted in the course of sourcing such merchandiseto ensure its authenticity or authorization and to minimize potential liability of infringing thirdparties’ rights will be effective. Any inadvertent sales of counterfeit, non-authentic or unauthorizeditems, or public perception of such incidents, could harm our reputation, impair our ability to attractand retain end-customers and cause us to incur additional costs to respond to any incident of thisnature. In the event that counterfeit merchandise, unauthorized merchandise or merchandise thatotherwise infringe third parties’ intellectual property rights are sold in our stores, we could also faceinfringement claims. In the event that we are subject to any such claim, irrespective of the validityof such claims, we could be required to allocate significant resources and incur material expensesregarding such claims. We could also be required to pay substantial damages or to refrain from thesale of relevant merchandise in the event that the claimant prevails in such proceedings. Forms ofpotential liabilities under PRC law, if we negligently participated or assisted in infringementactivities associated with counterfeit goods, include injunctions to cease infringing activities,rectification, compensation and administrative penalties. Moreover, our reputation could benegatively affected due to the negative publicity of any infringement claim against us. Any suchclaims could have a material adverse effect on our business, prospects, financial condition andresults of operations.

We rely on third-party OEM and ODM contractors for the manufacturing of our self-ownedbrand merchandise. Our brand image and business may be negatively affected by a disruptionin the supply of our OEM and ODM contractors.

We develop our self-owned brand merchandise through the engagement of OEM and ODMcontractors and we further sell the finished merchandise to our customers in our stores. All of themerchandise of our self-owned brands is outsourced to OEM and ODM contractors. In managingOEM model, we capitalize on our dedicated merchandise design, research and development teamto generate stylish and comfortable merchandise design. In managing ODM model, the ODMcontractors are responsible for providing merchandise designs, procuring raw materials,manufacturing merchandise, and identifying and supervising contract manufacturers (whererequired). Our in-house team work closely with the contractors to review and determine the artisticand outlook designs of merchandise according to the anticipated fashion trends and consumers’preference.

During the Track Record Period, we had introduced our self-owned brand merchandise underthe merchandise categories of (i) food and supplements, (ii) daily supplies and householdmerchandise, and (iii) pop toys and stationery. We select our OEM and ODM contractors based onstringent criteria. See “Business — Our Suppliers and Raw Materials — Our OEM and ODMContractors — Selection of OEM and ODM Contractors.” However, we cannot assure you that ourOEM and ODM contractors will deliver merchandise to us in a timely manner or are of satisfactoryquality. In addition, there is no assurance that they will continue to work with us on similar termsor at all in the future, or that they will have sufficient resources to meet our demand at all times.If the performance of any of our OEM and ODM contractors is not satisfactory, or an OEM andODM contractor decides to substantially reduce its volume of supply to us, to increase the pricesof its merchandise or to terminate its business relationship with us, we may need to find replacement

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OEM and ODM contractor or take other remedial actions, which could increase the cost andlengthen the time required to dispatch the merchandise we sell to our third-party retailers,distributors or end-customers.

In addition, as we exercise limited control over the operations of our OEM and ODMcontractors, we cannot ensure that they will adhere to our quality control policies and guidelines atall times. Any defect in the merchandise designed or manufactured by our OEM and ODMcontractors could subject us to merchandise liability or damage our reputation and reduce thedemand for the merchandise we sell. Furthermore, we cannot assure you that our OEM and ODMcontractors will fully comply with the applicable laws and regulations, such as labor andenvironmental laws. If there is any negative publicity regarding such non-compliance, our brandimage may be damaged.

If we fail to protect our intellectual property rights, our business, financial conditions andresults of operations would be severely harmed.

Our intellectual property rights, in particular our retail brand names, KKV, THE COLORIST,X11 and KK Guan are crucial business assets, key to customer loyalty and essential to our futuregrowth. The success of our business depends substantially upon our continued ability to use ourbrand, trade names and trademarks to increase brand recognition and to further develop our brand.The unauthorized reproduction of our trade names or trademarks could diminish the value of ourbrand and our market reputation and competitive advantages. We rely on a combination oftrademarks, trade secrets, confidentiality procedures and contractual provisions to protect ourintellectual property rights. Nevertheless, these may afford limited protection and the measures toprevent unauthorized use of proprietary information could be challenging and costly. Any of ourintellectual property rights could be challenged, invalidated, circumvented or misappropriated, orsuch intellectual property rights may not be sufficient to provide us with competitive advantages.Besides, there can be no assurance that (i) our pending applications for intellectual property rightswill be approved, (ii) all of our intellectual property rights will be adequately protected, or (iii) ourintellectual property rights will not be challenged by third parties or found by a judicial authorityto be invalid or unenforceable. In addition, enforceability, scope and validity of the laws governingintellectual property rights in China are uncertain and still evolving, and could involve substantialrisks to us. If we were unable to detect unauthorized use of, or take appropriate steps to enforce,our intellectual property rights, it could have a material adverse effect on our business, financialcondition and results of operations.

If we are unable to provide superior customer experiences, our business and reputation maybe materially and adversely affected.

We pride ourselves with our retail capability in ensuring a variety of merchandise choices,store atmosphere, shopping convenience, appropriate staff-customer interaction and merchandiserefreshments and display policies. The success of our business hinges on our ability to providesuperior customer experience, which in turn depends on a variety of factors. These factors includeour ability to offer brand merchandise to the market at competitive prices that respond to consumerdemands and preferences, our ability to fit in the lifestyle of our customers and our ability tomaintain the quality of our merchandise and services, provide timely and reliable delivery andresponsive and superior before- and after-sales service.

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As of June 30, 2021, we had 2,813 in-store staff working in our self-owned stores. Althoughwe provide standardized employee conduct training for all our in-store staff and maintain a detailedemployee handbook regulating employee conduct, there is no assurance that our in-store staff willprovide consistently satisfactory customer service to our customers. In addition, as the number ofour in-store staff continues to rapidly expand along with our growth, it may be harder for us tomanage our in-store staff and ensure the quality of services they provide to our customers. Anynegative customer service experience with our in-store staff in our physical retail stores maydiscourage customers from purchasing our merchandise and adversely affect our reputation andbrand image. There is no assurance that we will be able to maintain a low turnover rate of existingemployees and provide sufficient training to new employees to meet our standards of customerservice or that an influx of less experienced personnel will not dilute the quality of our customerservice. In addition, any negative publicity or poor feedback regarding our customer service mayharm our brand and reputation and in turn cause us to lose customers and market share.

We may experience complaints from our customers, or adverse publicity involving ourmerchandise, our service or our prices.

Our brand reputation and recognition may be significantly impaired by negative news andpublicity posted online and on other channels. We endeavor to ensure that our merchandise is ofmerchantable quality and safe for our customers through the adoption of various stringent internalstandard operation procedures. However, we have no control over other issues relating to the taste,preference and suitability of our merchandise for our customers. During the Track Record Period,we received a certain number of complaints following the dissatisfaction perceived by ourcustomers. Most of these complaints were related to the taste, the price, the suitability of ourmerchandise, as well as service quality provided by our online customer service. We address thesecomplaints attentively and we continue to work on improving the remedies we can offer to ourcustomers. However, we cannot guarantee that the complaints can be resolved at all and that thecustomers will not post negative reviews on social media platforms.

Any complaints or claims against us, even if meritless and unsuccessful, may divertmanagement attention and other resources from our business and adversely affect our business andoperations. Our customers may lose confidence in us and our brand, which may adversely affect thebusiness of our stores, resulting in declines in our revenue and even losses. Furthermore, negativepublicity including but not limited to negative online reviews on social media and crowd sourcedreview platforms or media reports related to our merchandise, stores and services, whether or notaccurate, and whether or not concerning our stores and the brands we offer, can adversely affect ourbusiness, results of operations and reputation.

We had incurred net losses in the past, and we may continue to experience significant netlosses in the future.

During the Track Record Period, we had incurred significant net losses due to substantialnegative fair value changes of financial liabilities measured at FVTPL. For details of fair valuechanges of financial liabilities measured at fair value through profit or loss, see “FinancialInformation — Description of Select Combined Statements of Comprehensive Income Line Items— Fair Value Changes of Financial Liabilities Measured at FVTPL.” For the years ended December31, 2018, 2019 and 2020 and the six months ended June 30, 2020 and 2021, we incurred net lossof RMB79.5 million, RMB514.5 million, RMB2,017.2 million, RMB512.9 million andRMB4,397.1 million, respectively. Our future profitability will be dependent upon several factors,including the expansion and performances of our self-owned stores and franchise stores,

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competitive landscape, customer preference and macroeconomic and regulatory environment.Therefore, our revenues may not grow at the rate we expect and it may not increase sufficiently tooffset the increase in our expenses. We may continue to incur losses in the future and we cannotassure you that we will eventually achieve our intended profitability.

We recorded net operating and investing cash outflow as well as net liabilities for the yearsended December 31, 2018, 2019 and 2020 and the six months ended June 30, 2020 and 2021.

We recorded net cash outflow from operating activities of approximately RMB25.2 million,RMB381.1 million, RMB314.1 million, RMB105.1 million and RMB356.3 million for the yearsended December 31, 2018, 2019 and 2020 and the six months ended June 30, 2020 and 2021,respectively. We also recorded net cash outflow from investing activities of approximatelyRMB16.6 million, RMB121.7 million, RMB525.6 million, RMB167.0 million and RMB61.6million for the years ended December 31, 2018, 2019 and 2020 and the six months ended June 30,2020 and 2021, respectively. Please refer to the section headed “Financial Information — Liquidityand Capital Resources” for reasons of the net operating cash outflow and the net investing cashoutflow.

We recorded net liabilities during the Track Record Period, which amounted to RMB101.0million, RMB711.6 million, RMB2,709.8 million and RMB6,981.6 million, respectively. Our netliabilities position as of each of these dates was primarily due to increase in financial liabilitiesmeasured at fair value through profit or loss in connection with our rounds of financing by issuingconvertible redeemable preferred shares from series A to series F.

Regardless of the performance from our operating activities and investing activities, we mayexperience periods of net cash outflow from operating activities and investing activities in thefuture. For instance, we may from time to time need to incur additional working capital for purchaseand replenishment of additional inventories, payment of rental deposits, renovation and acquisitionof equipment and employment of additional staff in the course of opening additional retail stores,which may take time for achieving breakeven or investment payback and may not be able to resultin immediate increase in net operational cash inflow. If we are unable to obtain sufficient funds tofinance our business operation or expansion, our liquidity and financial condition may be materiallyand adversely affected. There is no assurance that we will have sufficient cash from other sourcesto fund our operations or expansion. If we resort to other financing activities to generate additionalcash, we will incur additional financing costs, and we cannot guarantee that we will be able toobtain the required financing on terms acceptable to us, or at all.

We may not be able to continue to successfully expand our merchandise offerings and brandportfolio.

We constantly seek to diversify and expand our brand and merchandise portfolio by partneringwith new brand companies through distributorship agreements or procurement agreements.However, whether we will be able to establish new partnerships with new brand companies isdependent upon a number of factors, including whether there will be suitable brand companiesseeking new distributors in the relevant markets, whether our distribution infrastructure and ourcorporate culture would be a good match with those brand companies, whether our competitorswould be able to offer terms more favorable than ours and whether those brand companies mayperceive that we have a conflict of interest, including as a result of our relationship with competingbrands. There is no assurance that we can enter into new distributorship agreements that willsupport our growth.

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If we partner with new brand companies, we will need to recruit more staff with expertise inmanaging different brands and merchandise categories, and to enhance our operational and financialsystems, internal procedures and controls. It may also require us to introduce new merchandisecategories and work with different brand companies to address the needs of different kinds ofend-customers. We may also need to develop new marketing strategies to promote these new brandsand merchandise. Our expansion into these new brands and merchandise categories may not achievebroad customer acceptance. All of these endeavors involve risks, and require substantial planning,skillful execution and significant expenditures. There is no assurance that we will be able to recoupany investments we make in introducing these new brands and merchandise categories.

There is no assurance that we will be able to successfully integrate new brands or merchandisecategories into our existing brand and merchandise portfolio. The new brands or merchandise weintroduce may not be well received by our customers. We cannot assure you that any new brandsor merchandise we offer will gain market acceptance or that they will be able to generate a positivecash flow. In addition, our profitability in our new merchandise categories, if any, may be lowerthan in our existing categories, which may adversely affect our overall profitability and results ofoperations. Furthermore, the introduction of new brands and merchandise may adversely affect thesales of our existing merchandise offerings and brand portfolio, and we cannot assure you that wewill maintain an optimized merchandise offerings and brand portfolio at all times. If we are not ableto manage our growth or execute our strategies effectively, we may not be successful in growingour business and our business and prospects may be materially and adversely affected.

We may not be able to compete effectively with other specialty retailers in the highly fierce andfragmented specialty retail market in China.

We operate in the highly competitive and fragmented specialty retail market. We compete withother specialty retailers primarily for the brand offerings, depth and breadth of sales and distributionnetwork, customer relationships, merchandise quality and safety, merchandise mix, supply chainmanagement and ability to meet consumer preferences. As we operate primarily as a non-exclusivedistributor for most of the brands in our brand portfolio, we compete with other specialty retailersfor sales of merchandise under the brands that we offer. Some of our competitors may have morefinancial and human resources, better access to attractive store locations, more competitive pricingstrategies or closer relationships with brand companies. A number of different competitive factorscould have a material adverse effect on our operational results and financial condition. Competitionmay lead to, among other things, less favorable terms in agreements with brand companies, highercosts for retail space and lower sales per store, all of which could have a material adverse effect onour results of operations and financial condition.

We may not be able to successfully expand our offline sales network by increasing the numberof self-owned stores and franchise stores.

Our extensive offline sales network has been critical in driving our business growth andoperating results. As of the Latest Practicable Date, we had 326 self-owned stores and 354 franchisestores. To further increase our market share, we plan to continue to expand the geographic coverageof self-owned stores and franchise stores and deepen our market penetration. However, there are anumber of factors that could affect our ability to open new retail stores. These factors could alsoaffect the ability of any newly opened retail stores to achieve sales and profitability levelscomparable with our existing stores or to become profitable at all. These factors include, amongother things:

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• our ability to identify suitable sites and locations;

• the availability of adequate management and financial resources;

• our ability to negotiate acceptable rental terms;

• our ability to maintain efficient and cost-effective operation;

• our ability to adapt our logistics and other operational and management systems to anexpanded network;

• our ability to hire, train and retain skilled personnel;

• continued customer demand for the merchandise we sell at levels that can supportacceptable profit margins;

• our ability to address increasing competition in the industry;

• our ability to address fluctuations in market demand for the merchandise we sell;

• our ability to obtain all necessary governmental and third-party consents; and

• increasing competition in the retail industry.

Our ability to manage future growth will depend on our ability to continue to implement andimprove operational, financial and management information systems on a timely basis and toexpand, train, motivate and manage our workforce, including our ability to recruit qualifiedpersonnel with the necessary experience to operate new self-owned stores and franchise stores inthe new markets that we are entering into. We cannot assure you that our personnel, procedures,systems and controls will be effectively managed to support our future growth. We also may not beable to effectively integrate any new self-owned stores or franchise stores into our existingoperations. If we are unable to effectively manage our expansion or control rising costs associatedwith our expansion, our growth potential and profitability could be adversely affected.

In particular, as we no longer extended loans since June 30, 2021 and will no longer extendadvance payment upon [REDACTED], we may not be able to attract or retain sufficient numbersof quality franchisees or expand our offline sales network in the way we expected, or at all.

In addition, during the Track Record Period, we entered into equity investment arrangementswith respect to relevant franchise stores, where franchisees own respective stores through relevantjoint ventures they established with us. According to relevant arrangements, each party is entitledto share profit or loss of relevant stores based on their contributions. As of the Latest PracticableDate, we were still in the process of completing equity investment related documentation orbusiness registration work for a certain number of franchise stores. For more details, please also see“Business — Our Business Model — Self-owned Stores and Franchise Stores — Equity Investmentto Franchise Stores.” If we are unable to complete equity investment related documentation orbusiness registration work, we may not be able to gain opportunities for long-term investmentreturn, retain quality franchisees or expand store network in the way we expected.

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An increase in the level of rental expenses will increase our selling and distribution as well asadministrative and other operating expenses and may adversely affect our operations andprofitability.

We operate our retail shops in shopping malls we lease from major shopping malls and we alsouse leased properties for our offices and distribution centers. Therefore, our business is to a certainextent affected by the fluctuation of our rents. For 2018, 2019, 2020 and the six months ended June30, 2020 and 2021, our rental expenses, which equaled to the sum of (i) depreciation of right of useassets, (ii) interests on lease liabilities and (iii) other rental expenses related to our retail shops,offices and distribution centers amounted to approximately RMB23.1 million, RMB44.4 million,RMB180.7 million, RMB63.0 million and RMB189.9 million, respectively, representing 14.9%,9.6%, 11.0%, 12.5% and 11.3%, respectively, of our revenue for the corresponding periods. Inrecent years, property prices and levels of rental expenses in China have substantially increased andwe expect they will continue to increase in the near future. The increase in the level of rentalexpenses may increase our selling and distribution expenses when we open new retail shop or whenwe renew the lease agreements relating to our existing retail shops.

The term of our lease agreements typically range from three to eight years. We cannot assureyou that shopping malls will not increase the rental charged to us when we seek to renew our leaseagreements or to request for better locations for our retail shops, or that we will be able to renewthe lease agreements on the same terms or on terms that are more favorable to us or at all. Anymaterial increase in the level of our rental expenses which we may not pass on to our end-customersmay have a material adverse impact on our business, financial condition, results of operations andprospects.

We may not be able to effectively manage the growth of our store network.

The success of our retail operations is dependent on a number of factors, including our abilityto introduce brands and merchandise that cater to local demands and preferences, the success of themarketing efforts by us and the brand companies, and our ability to compete with other retailers anddistributors of the similar merchandise we offer in our stores.

We are constantly reviewing our sales performance data, both by sales channels and by brand.We had rapidly grown our network of our stores during the Track Record Period, and plan to addapproximately 290 and 270 new retail stores nationwide, respectively, for the year ending 2021 and2022. Since June 30, 2021 and up to the Latest Practicable Date, we had added 89 retail stores andwe would add 58 more retail stores for the year ending December 31, 2021. The expansion of ouroffline sales network is intended to benefit our growth in the long term. However, it takes time fornew retail stores to break even and achieve the same level of profitability as more mature retailstores. As we expand our offline sales network by adding new retail stores, we may experience adecrease in average sales per store, at least initially. If new retail stores experience prolonged delaysin breaking even or achieving our desired level of profitability, our overall profitability may beaffected. In addition, whether we will be able to continue to grow our sales with our existing retailstores is subject to a number of factors, including the macro and local economic conditions andcustomer disposable income and spending patterns, the pedestrian flow of the area where retailstores are located and the competition that we encounter, many of which are out of our control.

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Our ability to manage future growth will depend on our ability to continue to implement andimprove operational, financial and management information systems on a timely basis and toexpand, train, motivate and manage our workforce. We cannot assure you that our personnel,procedures, system and controls will be effectively managed to support its future growth. If we failto manage its growth effectively, our financial condition and results of operation could be adverselyaffected.

During the Track Record Period, we experienced an increase in the number of loss-makingstores, primarily due to factors such as certain stores at its early stage of development and impactfrom lock-down policies in various cities from time to time due to COVID-19 outbreak, includingDelta variant. In line with our continued efforts and leveraging on our leading market positions, wehave seen a general decrease in the loss-making stores as a percentage of our total number of storesduring the Track Record Period. In addition, our operating loss margin, being the percentage of lossfrom operations to revenue, continued improving from 33.2% in 2018 to 19.1% in 2019, and furtherto 8.7% in 2020, and turned to a positive operating profit margin of 1.5% in the six months endedJune 30, 2021. For details on key financial ratios, see “Financial Information — Key FinancialRatios.”

If we are unable to increase store sales in line with increasing costs, our overall performanceand profitability will be adversely affected. Any decrease may be caused in part by a slowdown ingrowth in China’s retail industry, adverse changes in merchandise supplies from certain brandcompanies and slower replenishment timing of inventory of certain imported merchandise. Wecannot assure you that we will be able to maintain a relatively higher same-store sales growth inthe future.

We are subject to customer concentration risk.

Our customers consist primarily of our franchisees. During the Track Record Period, ourrevenue derived from our five largest customers amounted to 14.6%, 17.6%, 22.3% and 22.2% ofour total revenue for the years ended December 31, 2018, 2019, 2020 and the six months ended June30, 2021 respectively. And the revenue attributable to our largest customer for the correspondingperiods amounted to 4.7%, 4.8%, 5.2% and 12.1% respectively.

There is no assurance that we would be able to maintain good business relationships with ourmajor customers in the future. Our five largest customers are not obliged to continue theirfranchising arrangements with us at a level similar to those in the past or at all. There is noguarantee that they will not reduce their purchases from us in the future or take actions to exploittheir comparably superior bargaining position in negotiating the terms of agreements. In addition,if any of our major customers ceased to purchase from us or reduced significantly their purchasesin the future due to reasons such as loss of market share, reduced competitiveness, trade restrictions,changes in business strategies or production plans, deterioration in their business relationship withus, operational difficulties and deterioration in financial condition, or if we are unable to renew ourcontracts with our customers or identify new customers promptly or at all, our sales volume maysignificantly decrease, which may materially and adversely affect our business, results ofoperations, financial condition and prospects.

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We currently do not own the properties on which we carry out our retail store operations, andwe are exposed to the risks associated with the commercial real estate market. In addition, ourrights to use our leased properties could be challenged by third parties, resulting in forcedrelocation of our stores.

All of our self-owned stores are under lease arrangements. As a result of rapid rent increasesin China, particularly for prime locations in major cities or as a result of our competition with otherbusinesses for these locations, we may not be able to renew the existing lease arrangements forself-owned stores on commercially acceptable terms or at all. If we fail to renew these arrangementson terms commercially acceptable to us, we may need to incur additional costs in relocatingself-owned stores and the replacement locations may be less attractive. These factors couldadversely affect our business, results of operations and financial condition.

In addition, we also face certain risks with respect to certain properties we lease, for whichour lessors have not provided us with relevant ownership certificates or necessary consents from therelevant owners to sublease the properties. As of the Latest Practicable Date, we leased 291properties in China with an aggregate GFA of approximately 248,439.9 sq.m. For 93 properties withan aggregate GFA of approximately 92,284.3 sq.m, the lessors have not obtained relevant ownershipcertificates or land use right certificates. For 48 properties with an aggregate GFA of approximately34,391.9 sq.m, the lessors have not obtained the relevant authorization documents from the ownersto authorize the lessors to lease or sublease the specific properties. The leased properties that wehad not received copies of ownership certificates or any other relevant authorization documentsevidencing the rights of lessors to lease the properties may subject us to challenges relating to thetitle of the leased properties or challenges raised by the relevant regulatory bodies. In the event ourrights to use the leased properties are challenged,the lease of the relevant properties could bepotentially invalidated and we may need to relocate our operations or renegotiate the lease on termsless favorable to us. In addition, we may also encounter controversies with our lessors in terms ofutilities and lease payment and any other disputes with respect to certain properties we lease, wherewe may need to incur additional costs in resolving such disputes, complaints or even lawsuits.

In addition, we conducted renovation on one of our lease property which is used as ourheadquarter office, and since we did not obtain the construction planning permit and constructionpermit for the decoration and construction for such leased property pursuant to the PRC laws andregulations, we may be subject to (i) an order of rectification or suspension of the usage of theleased property; and (ii) a fine up to RMB1,440,000 since we did not obtain the constructionplanning permit and construction permit for the decoration and construction for one particularcollectively owned leased property.

A few lease agreements of our leased properties have not been registered with the relevantPRC government authorities as required by PRC law, which may expose us to potential fines.

Under PRC law, all lease agreements are required to be registered with the local land and realestate administration bureau. However, the enforcement of this legal requirement varies dependingon the local regulations and practices. As of the Latest Practicable Date, we had not completed leaseregistration for the 291 leased properties in China, primarily due to the difficulty of procuring ourlessors’ cooperation required to register such leases. Although failure to register does not in itselfinvalidate the leases, we may be subject to fines if we fail to rectify such non-compliance withinthe prescribed time frame after receiving notice from the relevant PRC government authorities. Thepenalty ranges from RMB1,000 to RMB10,000 for each unregistered lease, at the discretion of therelevant authority. In the event that any fine is imposed on us for our failure to register our leaseagreements, we may not be able to recover such losses from the lessors. For more details of ourlease registration, see “Business — Properties — Leased Properties.”

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We are subject to risks associated with franchise business.

The success of our Group will partly depend on the financial success of and cooperation withour franchisees, which is further subject to factors that are beyond our control, including generaleconomic conditions in China and the world, our limited control on franchise stores’ businessoperations and credit risks. All of these factors may negatively impact our ability to collect paymentfor goods and sales-based management and consultation service income from our franchisees,resulting in damages towards the goodwill associated with our brands, and adversely impact ourbusiness and results of operations.

In particular, during the Track Record Period, according to store management arrangements inrelation to franchise stores, we took charge of daily management and operation of relevant stores,including sales of goods, logistics arrangement, shelf and cash management, store booking andaccounting, as well as staff management and training. To ensure effective supervision onperformance of franchise stores, we also dispatch our employees to conduct routine onsiteinspections. For details, please see “Business — Our Business Model — Self-owned Stores andFranchise Stores — Key Terms of Franchising Arrangement.” However, our management therein issubject to inherent limitations and there is no assurance that our franchisees may always strictlyperform their obligations pursuant to relevant agreements, including, without limitation, obtainingor renewing requested permits or license on a timely basis or at all, making timely settlement fortheir share of utilities expenses, operation related expenses such as rental expense, as well as initialstore decoration and opening related expenses or complying with the applicable laws andregulations, or operating the franchise stores in a manner consistent with our required standards.Furthermore, while we take efforts to check and verify financial capacity of our franchisees, thereis no assurance that they can always achieve sustainable development, or may not be subject tobankruptcy due to various factors beyond our control, as a result of which, we may not be able tosuccessfully recover trade receivables or collect investment return as we expected, or at all.Moreover, there is no assurance that our franchisees may always agree with our vision with businessdevelopment, particularly our store development strategy in respect of layout of, and synergyamong different stores carrying different retail brands, which may negatively affect our capacity ofretaining them or even lead to disputes.

During the ordinary course of business, we may encounter disputes with franchisees in respectof their failure in meeting our store performance appraisal requirements, or default in makingpayment for fees and expenses in the way set out in relevant agreement. In addition, should wedecide to enforce our rights set out in relevant agreements in respect of relevant franchise stores,such as our right to terminate relevant agreements or carry out call option right, franchises may notagree with us or even bring litigation against us. For details, please also see “Business — OurBusiness Model — Self-owned Stores and Franchise Stores — Key Terms of FranchisingArrangement.” Any such dispute or litigation may be time- and cost-consuming, and may distractour management attention or resources, or cause damage to our brand image or our capacity toattract or retain franchisees. Furthermore, there is no assurance that the court may agree with ourpositions entirely, or at all. Should any of these above mentioned factors take place, operation ofrelevant store may be disrupted, and our business, financial condition and results of operations maybe materially and adversely affected.

The expansion of our self-owned stores has required and will continue to require a substantialinvestment and commitment of resources and is subject to numerous risks and uncertainties.

We set up self-owned stores with a view to enable our customers to immerse themselves in apersonalized shopping experience which required substantial investment in equipment andleasehold improvements, information systems, inventory and personnel, often times even prior to

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generating any sales in these stores. We also have entered into substantial operating leasecommitments for store space. A decline in sales or the closure or poor performance of individualor multiple stores could result in significant lease termination costs, write-offs of equipment andleasehold improvements and severance costs.

The success of our store network expansion depends in part on our ability to manage thefinancial and operational aspects of our self-owned stores expansion strategy, our ability to properlyassess the potential profitability and payback period of potential new store locations, our ability tohire and train skilled store operating personnel, especially management personnel, our ability toimmerse such personnel in our culture, and our ability to guarantee timely supply of inventory forretail stores. We cannot assure you that we will succeed in all of these areas. In addition, manyfactors unique to offline retail operations, some of which are beyond our control, pose risks anduncertainties to our store network expansion. These risks and uncertainties include, but are notlimited to, macro-economic factors that could have an adverse effect on general retail activity,health epidemics, the overall customer traffic in and around the location of our experience stores,the opening of stores of competitors in the same area or location of our self-owned stores, theopening of a new store of ours in the same city as our existing stores, our failure in identifyingappropriate locations for opening up new stores and accurately predicting customer traffic at suchnew stores, our inability to attract high customer traffic to our self-owned stores, our inability tomanage costs associated with store construction and operation, more challenging environments inmanaging offline retail operations, costs associated with unanticipated fluctuations in the value ofretail inventory, and our inability to obtain and renew leases in quality retail locations at areasonable cost.

If we are unable to open self-owned stores at convenient locations in such cities that havelarge number of customers of our merchandise sales and offer similar competitive prices at ourself-owned stores our ability to retain these customers, and further enlarge our customer base maybe negatively impacted. Meanwhile, if we are unable to generate sufficient sales from these stores,we may fail to recover the advanced costs and investments in connection with such store expansionand our business and profitability may suffer. The substantial management time and resourceswhich any future experience store expansion strategy may require could also result in disruption toour existing business operations, which may decrease our net revenue and profitability.

Failure to maintain optimal inventory levels could increase our inventory holding costs orcause us to lose sales, either of which could have a material adverse effect on our business,financial condition and results of operations.

Maintaining optimal inventory levels is critical to the success of our business. As of December31, 2018, 2019, 2020 and June 30, 2021, our inventories accounted for approximately 41.0%,52.0%, 57.8% and 34.6%, respectively, of our total current assets. In 2018, 2019 and 2020 and thesix months ended June 30, 2021, our inventory turnover days were 163 days, 301 days, 196 daysand 150 days, respectively. We are exposed to inventory risks as a result of a variety of factorsbeyond our control, including changing consumption trends and customer preferences and launchesof competing merchandise. Moreover, for stocking purposes we generally estimate demand for themerchandise we sell ahead of the actual time of sale. We cannot assure you that we can accuratelypredict these trends and events and maintain adequate levels of inventory at all times. Anunexpected decrease in the market demand for the merchandise we sell could lead to excessiveinventory, and we may be forced to offer discounts or conduct promotional activities to dispose ofslow-moving inventory, sometimes at prices below cost, which in turn may adversely affect ourfinancial condition and results of operations. On the other hand, inventory under-stock may causeus to lose sales and our results of operations may also be adversely affected.

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We may be involved in legal or other proceedings arising out of our operations, includingproduct liability claims, from time to time and may face significant liabilities as a result.

We are exposed to product liability claims. According to the relevant PRC laws andregulations, customers may choose to sue the retailer and the manufacturer for damages caused bydefective product. Although we normally have recourse against others for losses caused bydefective product, we may have to pay damages to the customers first before we can seekcompensation or indemnification from others. If we are found to be liable for any product liabilityclaim initiated due to, among other things, injuries caused by problems such as hidden brokenneedles in our apparel, toxic materials in the raw materials used in the product we sell or lack ofadequate protection afforded by the product we sell, we could be subject to substantial monetarydamages. Even if we successfully defend ourselves against a claim, or successfully makecompensation claims against others, we may need to spend a substantial amount of money and timein defending such a claim and in seeking compensation, which could result in significant adversepublicity against us, and could have a material adverse effect on our reputation and themarketability of the product we sell. In addition, we may encounter additional compliance issuesin the course of our operations, which may subject us to administrative proceedings and unfavorableresults. Furthermore, our reputation could be negatively affected due to any negative publicity ofany quality issues with respect to the merchandise we sell. As of the Latest Practicable Date, we hadnot received any complaint or been subject to any penalties or investigations in relation to thesealleged quality issues. See “Business — Quality Control” for details of our quality controlmeasures.

Any negative news release about us, our retail brands or our products could harm the brandimage and reputation of us or our retail brands, which could result in a material and adverseimpact on our business and prospects.

Negative publicity involving us, our retail brands or our products such as operating cashoutflow and several disputes with our franchisees may materially and adversely harm the brandimage and reputation of us or our retail brands and cause deterioration in the level of marketrecognition of and trust in the products sold in our stores, thereby resulting in reduced customervisits and potential loss of franchisees as well as sales persons and staff. Such negative publicitymay also result in diversion of management’s attention, and governmental investigations or otherforms of scrutiny. These consequences may have a material and adverse effect on our business,results of operations, financial condition and prospects.

We may not be successful in sustaining growth in our financial performance.

We had experienced significant growth in revenue and profitability during the Track RecordPeriod. Our revenue from continuing operations increased by 198.6% from RMB155.3 million in2018 to RMB463.7 million in 2019, and increased by 254.9% from RMB463.7 million in 2019 toRMB1,645.9 million in 2020. Our revenue further increased by 235.1% from RMB502.4 million forthe six months ended June 30, 2020 to RMB1,683.2 million for the six months ended June 30, 2021.However, there is no assurance that we will be able to maintain our historical growth rates in futureperiods. Our revenue growth may slow down or our revenue may decline for a number of possiblereasons, including decreasing customer spending, increasing competition from other online andoffline retailers and distributors, slower growth in China’s retail or online retail industry, supply

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chain and logistical bottlenecks, emergence of alternative business models and changes ingovernment policies or general economic conditions. If our growth rate declines, investors’perceptions of our business and prospects may be adversely affected and the market price of ourShares could decline.

Although we experienced significant revenue growth during the Track Record Period, theseand similar measures may decrease in the future. In addition, our profitability depends on our abilityto control costs and operating expenses, which may increase as our business expands and negativelyimpact our short-term profitability. If we fail to increase sales, or if our cost of sales and operatingexpenses grow faster than our sales, our business, financial condition and results of operations maybe negatively affected.

We are exposed to credit risks related to our trade and other receivables.

Our trade and other receivables are subject to inherent counter-party risks in relation to ourbusiness operations, where the relevant parties may be default and/or fail to meet their repaymentor contractual obligations in part, or at all, due to various factors beyond of control, includingwithout limitation, overall general economic conditions, pandemic, liquidity or credit crisis in theglobal or Chinese finance sectors. During the Track Record Period, in line with our businessstrategy in relation to store network expansion and optimization, as well as relevant store operationarrangement where we closely involve in managing franchise stores given our expertise, we enteredinto agreements with select franchisees and joint ventures, according to which, we shall makeadvance payment for utilities costs, staff costs and renovation expenses of relevant stores. Indetermining store selections, we particularly focus on those stores that we consider withholdingstrategic value for our competitive edges over industry peers in local markets, or strong growthpotential taking into account factors like expected development of local resident group andeconomy. As of December 31, 2018, 2019 and 2020 and June 30, 2021, amount due from franchiseesamounted to RMB44.8 million, RMB54.7 million, RMB91.4 million and RMB173.1 million,respectively. For details on advance payment, please see “Business — Our Business Model —Self-owned Stores and Franchise Stores — Financial Support Provided to Franchisees — AdvancePayment.” As of December 31, 2018, 2019 and 2020 and June 30, 2021, amount due from jointventures amounted to nil, nil, RMB47.2 million and RMB128.9 million. For detailed analysis onhistorical turbulence of these items, please also see “Financial Information — Discussion of CertainStatements of Financial Position Items — Current Assets and Current Liabilities — Trade and OtherReceivables.”

In addition, during the Track Record Period, we used to provide unsecured and interest-bearing loans to franchisees to fund the operation of the relevant stores, including expenses andcosts in connection with store startup, decoration and other operation related expenses. As ofDecember 31, 2018, 2019 and 2020 and June 30, 2021, loans to franchisees amounted to nil,RMB34.8 million, RMB272.0 million and RMB257.7 million, respectively. For more details onloans to franchisees, please see “Business — Our Business Model — Self-owned Stores andFranchise Stores — Financial Support Provided to Franchisees — Loans to Franchisees.” Our PRCLegal Advisers are of the view that our financial support to relevant parties does not violateapplicable rules as provided by Article 146, 153 and 154 of PRC Civil Code (《中華人民共和國民法典》) or Article 13 of the Provisions of the Supreme People’s Court on Several Issues Concerningthe Application of Law in the Trial of Private Lending Cases (《最高人民法院關於審理民間借貸案件適用法律若干問題的規定》) (the “Judicial Interpretations on Private Lending Cases”), and thepossibility for us to be subject to penalty is low based on the interview conducted with the PBOC.According to the Article 21 and 61 of the General Lending Provisions (《貸款通則》), onlylicensed financial institutions may legally engage in the business of extending loans, and loansbetween companies that are not financial institutions are prohibited. Although as of the LatestPracticable Date, we did not receive any notice of claim or penalty relating to the loans to relevantparties, we cannot assure you that the PBOC will not impose penalties on us, which may amountto one to five times of the income generated (being interests charged) from loan advancingactivities.

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As of the Latest Practicable Date, to the best knowledge of our Directors, there were nodefault by the relevant franchisees and all of them were in compliance with the terms of the loans.

Our senior management regularly reviews the recoverability of overdue balances of trade andother receivables, and no impairment is necessary in respect of the remaining unsettled balances.During the Track Record Period, we have not made any provision to relevant amount in line withour accounting policy. However, our due diligence and credit risk control measures are subject toinherent risks associated with limited control on relevant parties, the subjective nature of ourbusiness judgment on relevant market and overall general economic conditions and consumerpreference, as well as other factors beyond our control, including, among other things, overallgeneral economic conditions, pandemic, liquidity or credit crisis in the global or Chinese financesectors. Should any relevant counterparties defaults and/or fails to meet their repayment orcontractual obligations, our business and economic prospects may be materially and adverselyaffected.

We intend to incur significant costs for a variety of sales and marketing efforts, including massadvertising on social media platforms and promotions to attract more customers. If we areunable to conduct our sales and marketing efforts in a cost-effective and efficient manner, ourresults of operations and financial conditions may be materially and adversely affected.

As a relatively young company, we have invested, and will continue to invest, a large amountof financial and other resources in promoting our brand awareness and acquiring customers,including expanding our sales teams, engaging with customers on social media platforms andplacing advertisements. We acknowledge the growing importance of consumer engagement desiredby the younger generation of consumer, and had implemented initiatives to deepen consumerengagement experience with the setting-up of official brand accounts managed by us on socialmedia platforms such as Kuaishou and Xiaohongshu. Our customers can watch our live-streamingvideos and interact with us through these platforms. Our marketing and branding activities may notbe well received, successful or cost-effective, which may lead to significantly higher marketingexpenses in the future.

We may also not be able to continue our existing marketing and branding activities, orsuccessfully identify and utilize the new trends in marketing strategies, channels and approachesthat appeal to or fit in the lifestyle of our target customers. We may also fail to adjust our sales andmarketing strategies fast enough to stay current with consumers’ behavioral changes in usinginternet and mobile devices. Failure to refine our existing marketing strategies or introduce neweffective marketing strategies in a cost-effective manner could negatively impact our business,results of operations and financial condition. In addition, failure to comply with relevant provisionsof Advertising Law of the PRC promulgated by the Standing Committee of the National People’sCongress, or the SCNPC in 1994 and last amended on April 29, 2021, Regulations on theSupervision and Administration of Cosmetics, or the Supervision Regulations, which waspromulgated by the State Council on June 16, 2020 and became effective from January 1, 2021, andother relevant laws and regulations will result in the restriction, inhibition or delay of our abilityto sell merchandise. See “Regulatory Overview — Regulations Relating to the Circulation ofCommodities” and “Regulations Relating to Product Liability and Consumer Protection.”

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We are required to adhere to certain national health and safety standards, and in the eventthat we are unsuccessful at meeting these standards, our business, results of operation andbrands’ image would be materially and adversely affected.

We are subject to laws and regulations in the PRC governing food safety. Please refer to thesection headed “Regulatory Overview — Regulations Relating to the Circulation of Commodities”in this Document for more information. In light of recent food quality and safety concerns in thePRC, there may be stringent enforcement of food quality and safety rules and regulations andimplementation of additional safety rules and regulations. In the event that the governmentincreases the stringency of such laws, our distribution and quality control costs may increase, andwe may be unable to pass these additional cost on to our customers.

We cannot guarantee that our procedures and training will be completely effective in meetingall relevant health and safety requirements and preventing all contamination and pollution. Anyfailure to meet relevant government requirements or any instance of contamination could occur inour operations or those of our customers or suppliers. This could result in fines, suspension ofoperations, and in more extreme cases, criminal proceedings against our Company and ourmanagement. Any of these failures or occurrences could negatively affect our business and financialperformance.

Our business relies on the proper operation of our information technology systems, anymalfunction of which for extended periods could materially and adversely affect our business.

Our business relies on the proper functioning of our information technology systems. We useour information technology platform, which integrates POS, DRP, SCRM and WMS systems, toenable us to quickly and efficiently collect and analyze our operational data and informationincluding procurement, sales, inventory, order fulfillment and logistics data and after sales serviceson a real-time basis. We use our information technology platforms to assist us in budgeting, humanresources, inventory control, financial management and retail management. As a result, thecontemplated operation of our information technology system is critical for us to monitor theinventory/sales level of our stores and for our stores to place orders with us. We need to constantlyupgrade and improve our information technology systems to keep up with the continuous growthof our operations and business. However, our IT systems may not always operate withoutinterruption and may encounter temporary abnormality or become obsolete. As our retail networkis highly integrated, any malfunction to a particular part of our information technology system foran extended period of time may result in a breakdown throughout our network and our ability tocontinue our operations smoothly may be negatively affected, which in turn could adversely affectour results of operations.

It is also important that we constantly review our existing IT systems, identify new businessneeds, provide IT solutions and upgrade our systems. We may not always be successful indeveloping, installing, running and migrating to new software or systems as required by ourbusiness development. Even if we are successful in this regard, significant capital expenditure maybe required, and we may not be able to benefit from these types of investment immediately or atall. All of these may have a material adverse effect on our operations and profitability. Although wecarry business interruption insurance, we cannot assure you that we will always be able to claimunder that insurance or that its proceeds will be sufficient to fully cover our losses.

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Our business generates and processes a large amount of data, including personal and businessdata, and the improper collection, hosting, use or disclosure of data could harm our reputationand have a material adverse effect on our business and prospects.

Our business generates and processes a large quantity of personal data as well as user and usergroup profiles based on our analysis of personal data. We face risks inherent to handling andprotecting a large volume of data, especially user data. In particular, we face a number of challengesrelating to data security and privacy, including but not limited to:

• protecting the data in and hosted on our system, including against attacks on our systemby outside parties, data leakage or fraudulent behavior or improper use by our employeesor business partners;

• addressing concerns, challenges, negative publicity and litigation related to data securityand privacy, collection, use and actual or perceived sharing (including sharing amongour own businesses, with business partners or regulators), safety, security and otherfactors that may arise from our existing businesses or new businesses and technology,such as new forms of data (for example, biometric data, location information and otherdemographic information); and

• complying with applicable laws and regulations relating to the collection, use, storage,transfer, disclosure and security of personal data, including requests from data subjectsand compliance requirements in accordance with applicable laws and regulations.

We have adopted internal guidelines for the protection of personal data of our members, andto ensure our Group’s compliance with relevant PRC laws and regulations with respect to privacyand personal data protection. Nevertheless, the efforts that we take to protect our members’ personalinformation may not always be sufficient or effective. Any improper handling of our customers’personal information as a result of any misconduct by our employees or any information leakagedue to external factors, such as unauthorized access to our customers’ database by hackers, couldresult in civil or regulatory liabilities which may subject us to significant legal, financial andoperational consequences.

However, the laws and regulations regarding privacy and data protection in China, as well asother countries, are generally complex and evolving, with uncertainty as to the interpretation andapplication thereof. As such, we cannot assure you that our data privacy and protection measuresare, and will be, always considered sufficient under applicable laws and regulations. Additionally,the integrity of our data privacy and protection measures is also subject to system failure,interruption, inadequacy, security breaches or cyber-attacks. If we are unable to comply with thethen applicable laws and regulations, or to address any data privacy and protection concerns, suchactual or alleged failure could damage our reputation, deter current and potential customers fromusing our solutions and could subject us to significant legal, financial and operationalconsequences.

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Any deficiencies in China’s Internet infrastructure could impair our ability to sellmerchandise over our online sales network, which could cause us to lose end-customers andharm our operating results.

Our online channel serves mainly as a marketing tool for us to broadcast brand awareness toa wider audience. We intend to expand our online sales channel as part of our future businessdevelopment strategies. These sales depend on the performance and reliability of the Internetinfrastructure in China. The third-party online sales and payment platforms depend ontelecommunications carriers and other third-party providers for communications and storagecapacity, including bandwidth and server storage, among other things. If any third-party onlineplatform providers are unable to enter into and renew agreements with these providers on acceptableterms, or if any of their existing agreements with such providers are terminated as a result of theirbreach or otherwise, as applicable, our ability to sell merchandise to our end-customers online couldbe adversely affected. Service interruptions prevent customers from accessing our online saleschannels and placing orders, and frequent interruptions could frustrate customers and discouragethem from attempting to place orders, which could cause us to lose end-customers and harm ouroperating results.

Our sales and results of operations are subject to seasonality.

Our sales and results of operations are subject to seasonality due to various factors, includingthe timing of additional store openings and the incurrence of associated pre-opening costs andexpenses, operating costs for our newly opened stores, any losses associated with our store closingsand seasonal fluctuations that may vary depending upon the region in which a particular store islocated. We typically experience higher sales during national holidays in China, such as Labor Dayand National Day. Apart from that, our merchandise may also experience higher demand duringfestive seasons such as Chinese New Year, Christmas and Valentines’ day. For this reason, weusually increase our inventory level to satisfy the demand from our customers at the end of afinancial year and around those holiday seasons. If we fail to capture the sales opportunities arisingfrom these public holidays, our business, financial condition and results of operation may beadversely affected. This seasonal pattern may result in the fluctuation of our operating results,therefore, comparing our results of operations across different periods of a given year as anindicator of future performance may not be meaningful and should not be relied upon as indicatorsof our future performance. Furthermore, if our operations are disrupted or affected by unpredictableevents during these festive seasons, our business, financial condition and results of operationswould be adversely affected.

Our risk management and internal control measures and policies may not afford us fullprotection against various inherent risks in our business.

We have implemented risk management and internal control measures and policies withrespect to our business operations, in particular in relation to the management of our self-ownedstores and franchise stores. However, there is no guarantee that our risk management and internalcontrol measures and policies are adequate or effective to fully protect us against the potential risksinherent in our business. In the event that we fail to identify and deal with any potential risks orinternal control deficiencies, our business operations and prospects may be materially affected.

Furthermore, the successful implementation of our risk management and internal controlmeasures and policies depends on our employees and our franchisees. There is no assurance that ouremployees and our franchisees will strictly observe and adhere to such measures and policies. There

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is also no guarantee that our employees and our franchisees will be able to carry out such measuresand policies without human errors or mistakes. In addition, as our business expands, we may haveto adopt and modify our risk management and internal control measures and policies in a timelymanner in response to our business growth. Failure to do so may result in material and adverseeffect on our business and results of operations.

We are exposed to risk of cannibalisation between our existing retail stores and additionalretail stores.

Our existing retail stores and additional retail stores may engage in market cannibalisationamong themselves. The capacities and growth in some of our target location and demands from ourtarget customers for our merchandise may be limited and may not be able to support our expansionplan. There could be overlapping coverage and unexpected competition between our existing retailstores and additional retail stores due to the over-expansion and cannibalisation effect. As a result,our new retail stores may not perform as anticipated and may have adverse effect on the overallperformances of our retail stores and our profitability.

We are subject to certain risks relating to the warehousing of the merchandise we sell.

Before delivery of merchandise to our self-owned stores and franchise stores, we temporarilystore them in our warehouses. We maintain insurance to cover financial losses we may sustain asa result of accidents, including fires, in our warehouses. However, if such accidents, including fires,were to occur, causing damage to the merchandise we sell or our warehouses, our ability to supplymerchandise to our stores, third-party retailers and distributors on time could be adversely affected,causing our market reputation, financial condition, results or operations or business to be materiallyand adversely affected. The occurrence of any of these incidents could also require us to makesignificant unanticipated capital expenditures and delay our delivery of merchandise. Lost sales orincreased costs that we may incur due to such disruption of operations and delay in delivery maynot be recoverable under our existing insurance policies, and prolonged business disruptions couldresult in a loss of end-customers. If any one or more of the above risks were to materialize, ourfinancial condition and results of operations may be adversely affected.

Our business operations may be affected by risks related to logistics support provided byIndependent Third Party logistics service providers.

We engage independent third-party logistics service providers to deliver the merchandise wesell directly from our warehouses to our stores. As of June 30, 2021, we engaged six logisticsservice providers. We also deliver orders placed on our online sales channel through expressdelivery services from reputable third-party courier companies with nationwide coverage. Disputeswith or a termination in our contractual relationships with one or more of our logistics serviceproviders or courier companies could result in delayed delivery of merchandise, increased costs orcustomer dissatisfaction. There can be no assurance that we can continue or extend relationshipswith our current logistics service providers or courier companies on terms acceptable to us, or thatwe will be able to establish relationships with new logistics service providers or courier companiesto ensure accurate, timely and cost-efficient delivery services. If we are unable to maintain ordevelop good relationships with logistics service providers or courier companies, it may inhibit ourability to offer merchandise in sufficient quantities, on a timely basis, or at prices acceptable to ourend-customers. We cannot guarantee that no interruptions would occur which would materially andadversely affect our business, prospects or results of operations.

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As we do not have any direct control over these logistics service providers or couriercompanies, we cannot guarantee their quality of services. If there is any delay in delivery, damageto merchandise or any other issue, we may lose end-customers and sales and our brand image maybe tarnished. In addition, our brand companies sometimes deliver merchandise to us by landtransportation through independent third-party logistics companies. Delays in delivery due totransportation shortages, work stoppages, infrastructure congestion or other factors could adverselyimpact our ability to timely deliver the merchandise we sell to our stores or end-customers.

Our insurance policies may not provide adequate coverage for all claims associated with ourbusiness operations.

As of the Latest Practicable Date, we have obtained insurance policies that we believe arecustomary for businesses of our similar size and type, and in line with the standard commercialpractice in China. For details on our insurance policies, see “Business — Insurance.” However,there are types of losses we may incur that cannot be insured or claimed against, such as loss ofreputation. If we were held liable for uninsured losses or amounts and claims for insured lossesexceeding the limits of our insurance coverage, our businesses and results of operation may bematerially and adversely affected.

We may require additional funding to finance our operations, which may not be available onterms acceptable to us or at all, and if we are able to raise funds, the value of your[REDACTED] in us may be negatively impacted.

We currently fund our operations principally by proceeds from sales of merchandise. Tofinance our ongoing operations, existing and future capital expenditure requirements, acquisitionand investment plans and other funding requirements, we may need to obtain adequate financingfrom external sources to supplement our internal sources of liquidity in the future. Our ability toobtain external financing in the future is subject to a variety of uncertainties, including, amongother things:

• our future financial condition, results of operations and cash flows;

• general market conditions for capital raising and debt financing activities; and

• economic, political and other conditions in China and elsewhere.

Furthermore, if we raise additional funds through equity or equity-linked financings, yourequity interest in our Company may be diluted. Alternatively, if we raise additional funds byincurring debt obligations, we may be subject to various covenants under the relevant debtinstruments that may, among other things, restrict our ability to pay dividends or obtain additionalfinancing. Servicing such debt obligations could also be burdensome to our operations. If we failto service such debt obligations or are unable to comply with any of these covenants, we could bein default under such debt obligations and our liquidity and financial condition could be materiallyand adversely affected.

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Our success depends on our ability to retain our senior management team and to recruit, trainand retain qualified personnel.

The talent, experience and leadership of our senior management team are critical to thesuccess of our business. Members of our senior management team have substantial experience andexpertise in our business and have made significant contributions to our growth and success. Theunexpected loss of services of one or more of these individuals could also have a material adverseeffect on us.

Our continued growth depends in part on our ability to recruit and retain suitable staff. As weexpand our retail network, we will need to hire experienced staff who are knowledgeable of thelocal market and the retail industry to operate our stores. We have faced increasing competition formanagement and skilled personnel with significant knowledge and experience in the retail sector inChina. In addition, we have seen an increasing trend in labor costs in China in recent years, whichhas had a direct impact on our staff costs. We may need to offer better compensation and otherbenefits in order to attract and retain key personnel in the future and that may materially affect ourcosts and profitability. We cannot assure you that we will have the resources to fully satisfy ourstaffing needs as we continue to grow our business in the future or that our operating expenses willnot significantly increase. Competition for talent in some areas of the Chinese retail industry isintense and qualified individuals can be difficult to recruit. Consequently, we may not be able toeasily or quickly replace lost personnel and we may incur additional expenses to recruit, train andretain new hires. Significant increases in employee turnover rates, which is generally high in theChinese retail industry, or significant increases in labor costs, due to competition for talents orchanges in labor and healthcare laws, could have a material adverse effect on our results ofoperations and financial condition.

We require various approvals, licenses and permits to operate our business and any failure toobtain or renew any of these approvals, licenses and permits could materially and adverselyaffect our business and results of operations.

In accordance with the laws and regulations of the PRC, we are required to maintain variousapprovals, licenses and permits in order to operate our business in the PRC including, but notlimited to, business license, food operation license, settlement license, commercial franchisingfiling and fire safety inspection. These approvals, licenses, permits and filings are granted uponsatisfactory compliance with, among other things, the applicable laws and regulations.

If we fail to obtain the required approvals, licenses, permits and filings, we may be subjectto fines and confiscation of the income derived from the related stores. The relevant store may berequired to temporarily close until it satisfies all legal and regulatory requirements. We may alsoexperience negative publicity arising from such deficiencies, which may materially and adverselyaffect our business and financial performance.

As of the Latest Practicable Date, we, as franchisor engaging franchise activities in relationto our KK Guan and KKV, had completed commercial franchise filing pursuant to relevant PRClaws. In addition, we also franchised other parties to engage in operations using our THECOLORIST brands and are in the process of application of commercial franchise filing. As advisedby our PRC Legal Advisers, PRC laws and regulations require a franchisor to have at least twodirectly operated stores and have operated each of the two directly operated stores for over one yearbefore engaging in franchising activities. Our PRC Legal Advisers also advised us that a franchisoris required to make filings with relevant government authorities within 15 days after entering into

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the first franchising agreement. When we engaged in franchising activities under THE COLORISTbrands, we did not make relevant filings on time. We have submitted the application of thecommercial franchising filings after we satisfied the legal requirement for engaging franchiseactivities under THE COLORIST. As advised by our PRC Legal Advisers, the relevant authoritiesmay impose the maximum fine of RMB100,000 for our failure to file commercial franchise on time.As of the Latest Practicable Date, no administrative action or penalty had been imposed by therelevant regulatory authorities with respect to our failure to make commercial franchise filing withthe relevant authorities on time.

We may experience difficulties, delays or failures in obtaining the necessary approvals,licenses and permits for our new stores and our new processing facilities. In addition, there can beno assurance that we will be able to obtain or renew all of the approvals, licenses and permitsrequired for our existing business operations in a timely manner or at all. If we fail to obtain and/ormaintain required approvals, licenses or permits, our ongoing business could be interrupted and ourexpansion plan may be delayed.

The unavailability of any favourable regulatory treatment, such as government grants, mayadversely affect our business, financial condition and results of operations.

We enjoy certain favourable regulatory treatments, such as government grants offered byrelevant governmental authorities. For the years ended December 31, 2018, 2019 and 2020 and thesix months ended June 30, 2020 and 2021, the total amount of government grants we receivedamounted to approximately nil, RMB3.0 million, RMB1.7 million, nil and RMB1.0 million,respectively. Please refer to the section headed “Financial Information — Description of SelectCombined Statements of Comprehensive Income Line Items — Other Income” in this document fordetails.

It is in the local government authorities’ sole discretion, subject to relevant PRC laws,regulations and policies, to decide whether and when to provide government grants to us. We cannotassure you that we will be able to receive government grants in the future. Furthermore, althoughwe believe that government grants are provided by authorities in compliance with current policies,laws and regulations in China, we face uncertainty relating to the availability of government grantsdue to potential unexpected changes in the PRC laws, regulations and policies. If we are unable toobtain or maintain government grants or any other favourable treatments in the future, the reductionin the amount of government grants received may impact our Group’s results of operations and cashflows, and we may experience decreases in profitability, and our business, financial condition andresults of operations could be affected.

Rising labor costs and enforcement of stricter labor laws and regulations in China mayadversely affect our business and profitability.

The operation of our retail stores are labor-intensive. Any failure to retain stable and dedicatedlabor by us may lead to disruption to our business operations. Although we have not experiencedany labor shortage to date, we have observed an overall tightening and increasing competitive labormarket. We have experienced, and expect to continue to experience, increases in labor costs due toincreases in salary, social benefits and employee headcount. In 2018, 2019, 2020 and the six monthsended June 30, 2020 and 2021, staff costs amounted to RMB30.6 million, RMB69.7 million,RMB184.9 million, RMB68.8 million and RMB194.2 million, respectively. China’s overalleconomy and the average wage in China have increased in recent years and are expected to continueto grow. The average wage level for our employees has also increased in recent years. We expect

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that our labor costs, including wages and employee benefits, will continue to increase. Unless weare able to pass on these increased labor costs to our customers effectively, our profitability andresults of operations may be materially and adversely affected.

In addition, we have been subject to stricter regulatory requirements in terms of entering intolabor contracts with our employees and paying various statutory employee benefits, including socialsecurity funds, pension schemes, housing fund, medical insurance, work-related injury insurance,unemployment insurance and maternity insurance to designated government agencies for the benefitof our employees. Pursuant to the PRC Labor Contract Law and its implementation rules, employersare subject to stricter requirements in terms of signing labor contracts, minimum wages, payingremuneration, determining the term of employee’s probation and unilaterally terminating laborcontracts. In the event that we decide to terminate some of our employees or otherwise change ouremployment or labor practices, the PRC Labor Contract Law and its implementation rules may limitour ability to effect those changes in a desirable or cost-effective manner, which could adverselyaffect our business and results of operations.

Failure to make social insurance and housing provident fund contributions for some of ouremployees timely as required by PRC laws and regulations may subject us to late paymentsand fines imposed by relevant governmental authorities.

Companies (including its subsidiaries) operating in China are required to register with localsocial insurance agencies and register with applicable housing provident fund management centersand open a social insurance account and a housing provident fund account under such Companies’own names, and to make social insurance and housing provident funds for their employees. Duringthe Track Record Period and up to the Latest Practicable Date, some of our PRC subsidiaries hadnot open social insurance account or housing provident fund account for some employees, or hadnot made full contributions to the social insurance plan and housing provident fund based on theactual salary level of some of our employees as prescribed by relevant laws and regulations. Andduring the Track Record Period and up to the Latest Practicable Date, some of our PRC subsidiarieshad entrusted third parties to pay for the social insurance and housing provident fund for the PRCsubsidiaries’ employees, on behalf of the PRC subsidiaries, based on a lower salary level than theactual salary level of employees. As of the Latest Practicable Date, we had not received any noticefrom the local authorities or any claim or request from the relevant employees that require us tomake payments or impose upon us administrative penalties for delay in account opening andinsufficient contributions. For details, see “Business — Human Resources — Social Insurance andHousing Provident Funds.” Our PRC Legal Advisers advised us that, pursuant to relevant PRC lawsand regulations, where the PRC subsidiaries fail to register with social insurance agencies andhousing provident fund management centers and open accounts, such PRC subsidiaries may beimposed a fine of not less than one time but not more than three times the amount of socialinsurance premiums payable for failing to open a social insurance account within prescribed time,and may be imposed a fine of not less than RMB10,000 but not more than RMB50,000 for failingto open a housing provident fund account within prescribed time, respectively. Pursuant to relevantPRC laws and regulations, we may be ordered by the relevant PRC authorities to pay theoutstanding social insurance contributions within a prescribed time limit, and the under-contribution of social insurance within a prescribed period may subject us to a daily overdue chargeof 0.05% of the delayed payment amount, and if we fail to comply when ordered, the relevantauthorities may impose a maximum fine or penalty equivalent to three times the outstandingamounts. With respect to housing provident funds, the relevant authorities may order us to pay theoutstanding amounts within the prescribed time period, and they may apply to a competent court forenforcement of the outstanding amounts if we fail to do so.

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Our future financial performance will be negatively affected by the [REDACTED] incurred inconnection with the [REDACTED].

Our financial results for the year ending December 31, 2021 will be affected by non-recurringexpenses in relation to the [REDACTED]. The estimated total [REDACTED] (based on themid-point of the [REDACTED] range and assuming that the [REDACTED] is not exercised) forthe [REDACTED] are approximately RMB[REDACTED], accounting for approximately[REDACTED]% of the [REDACTED] from the [REDACTED] (based on the mid-point of the[REDACTED] range and assuming that the [REDACTED] is not exercised), of which (i)approximately RMB[REDACTED] has been charged to our combined statements of profit or lossand other comprehensive income during the Track Record Period, and (ii) approximatelyRMB[REDACTED] is expected to be charged to our combined statements of profit or loss andother comprehensive income for the years ending December 31, 2021 and 2022 and the remainingamount of RMB[REDACTED] is expected to be recognized directly as a deduction from equityupon the [REDACTED].

Whether or not the [REDACTED] eventually occurs, a significant portion of the[REDACTED] will have been incurred and recognized as expenses, which will reduce our netprofit and therefore negatively affect our future financial performance. In addition, if the[REDACTED] were to be postponed due to market conditions, we would also need to incuradditional [REDACTED] for our future [REDACTED] plan, which would further negatively affectour future net profit. As a result, our business, financial performance, results of operations andprospect would be materially and adversely affected.

Fair value changes in our financial instruments issued to [REDACTED] investors and relatedvaluation uncertainty may materially affect our financial condition and results of operations.

We have historically issued convertible redeemable preferred shares and redemption liabilitiesfrom series A to series F to investors. Upon the completion of this [REDACTED], all of suchpreferred shares will be automatically converted into ordinary shares. Additionally, the foregoinginvestors have the right to require us to redeem such preferred shares if this [REDACTED] is notconsummated on or prior to certain date or upon the occurrence of some specified events. For theidentity and background of the foregoing investors, see the section headed “History, Reorganizationand Corporate Structure — Our Corporate History and Major Shareholding Changes of Our Group”for details.

The convertible redeemable preferred shares and redemption liabilities were recorded on a fairvalue basis. The binomial option-pricing model was adopted to determine the fair value of theconvertible redeemable preferred shares and redemption liabilities, and the key valuationassumptions used discount rate, risk-free interest rate and volatility. Any change in the assumptionsmay lead to different valuation results and, in turn, changes in the fair value of these financialinstruments issued to investors. To the extent we need to revalue the convertible redeemablepreferred shares and redemption liabilities prior to the closing of the [REDACTED], any changein fair value of convertible redeemable preferred shares and redemption liabilities and relatedvaluation uncertainty could materially affect our financial position and performance. After theautomatic conversion of the convertible redeemable preferred shares and redemption liabilities intoShares upon the closing of the [REDACTED], we do not expect to recognize any further gains orlosses on fair value changes from these convertible redeemable preferred shares and redemptionliabilities in the future.

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RISKS RELATING TO DOING BUSINESS IN THE PRC

China’s economic, political and social conditions, as well as regulatory policies, significantlyaffect the overall economic growth of China, which could reduce the demand for ourmerchandise, and materially and adversely affect our competitive position.

Our business operation and all of our assets are located in the PRC. Accordingly, our financialcondition and results of operations are subject to the economic, political and legal developments inChina. China’s economy differs from the economies of developed countries in many respects,including the amount of government involvement, level of development, growth rate, control offoreign exchange and allocation of resources. While China’s economy has experienced significantgrowth in the past few decades, growth has been uneven across different regions and economicsectors and we cannot assure you that such growth is sustainable. The PRC government hasimplemented various measures to encourage economic development and guide the allocation ofresources. Some of these measures benefit the overall economy in China, but may negatively affectus. For example, our business, financial condition and results of operations may be adverselyaffected by the following factors:

• an economic downturn in China or any regional market in China;

• inaccurate assessment of the economic conditions of the markets in which we operate;

• economic policies and initiatives undertaken by the PRC government;

• changes to prevailing market interest rates; and

• a higher rate of bankruptcy.

Moreover, concerns over capital market volatility, issues of liquidity, inflation, geopoliticalissues, the availability and cost of credit and concerns about the rate of unemployment have resultedin adverse market conditions in China, which may materially and adversely affect our business,financial condition and results of operations.

Changes in the economic, political and social conditions or the relevant policies of the PRCgovernment, such as changes in laws and regulations (or the interpretation thereof) or restrictivefinancial measures, could have an adverse effect on the overall economic growth of the PRC, whichcould subsequently hinder our current or future business, growth strategies, financial condition andresults of operations.

A severe or prolonged downturn in the Chinese or global economy could materially andadversely affect our business and our financial condition.

COVID-19 continues to have a severe and prolonged negative impact on the Chinese and theglobal economy. Even before the outbreak of COVID-19, the global macroeconomic environmentfaced numerous challenges. The growth rate of the Chinese economy has decreased since 2010.There is considerable uncertainty over the long-term effects of the expansionary monetary andfiscal policies which have been adopted by the central banks and financial authorities of some ofthe world’s leading economies, including the United States and China, even before 2020. Unrest,terrorist threats and the potential for war in the Middle East and elsewhere may increase marketvolatility across the globe. There have also been concerns about the relationship between China and

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other countries, including the surrounding Asian countries, which may potentially have negativeeconomic effects. In particular, there is significant uncertainty about the future relationship betweenthe United States and China with respect to trade policies, treaties, government regulations andtariffs. Economic conditions in China are sensitive to global economic conditions, as well aschanges in domestic economic and political policies and the expected or perceived overall economicgrowth rate in China. Any severe or prolonged slowdown in the global or Chinese economy maymaterially and adversely affect our business, results of operations and financial condition.

Uncertainties in the Chinese legal system may adversely affect our business and limit the legalprotection available to you.

Our operating subsidiaries and operations are located in China and are subject to the laws andregulations of China. The Chinese legal system is a civil law system based on written statutes.Unlike the common law legal system, prior court decisions in a civil law system have littleprecedential value and can only be used as a reference. In 1979, the PRC government began topromulgate a comprehensive system of laws and regulations governing economic matters in general.The overall effect of legislation over the past four decades has significantly enhanced theprotections afforded to various forms of foreign investments in China. However, China has notdeveloped a fully integrated legal system, and recently enacted laws and regulations may notsufficiently cover all aspects of economic activities in China. In particular, the interpretation andenforcement of these laws and regulations involve uncertainties. Since administrative and courtauthorities in the PRC have significant discretion in interpreting and implementing statutoryprovisions and contractual terms, it may be difficult to evaluate the outcome of administrative andcourt proceedings and the level of legal protection we enjoy. These uncertainties may affect ourjudgment on the relevance of legal requirements and our ability to enforce our contractual rights ortort claims. In addition, the regulatory uncertainties may be exploited through unmerited orfrivolous legal actions or threats in attempts to extract payments or benefits from us.

Furthermore, the PRC legal system is based in part on government policies and internal rules,some of which are not published on a timely basis or at all and may have retroactive effect. As aresult, we may not be aware of our violation of any of these policies and rules until sometime afterthe violation. In addition, any administrative and court proceedings in China may be protracted,resulting in substantial costs and diversion of resources and management attention. In recent years,regulatory and administrative measures over various areas such as environmental protection and firesafety have tightened and enhanced in China. While such development is beneficial to the operationof business in China over the long run, China-based companies may experience temporary businessdisruption and incur increased compliance costs in the short run.

As a holding company, we rely on the distribution by our Chinese subsidiaries for funding.

We are a holding company incorporated in the Cayman Islands, and we operate our businessthrough our operating subsidiaries in China. We rely on the distribution to us by our Chinesesubsidiaries for funding, including to pay dividends to our Shareholders and to service any debt wemay incur. Chinese laws permit dividends to be paid by our Chinese subsidiaries only out of theirdistributable profits determined in accordance with the PRC generally accepted accountingprinciples (“PRC GAAP”), which differ from the accounting principles and standards generallyaccepted in many other jurisdictions. Chinese laws also require each of our Chinese subsidiaries tomaintain a general reserve fund of 10% of its after-tax profits based on PRC GAAP, until theaggregate amount of such fund reaches 50% of its register capital. Additionally, factors such as cashflows, restrictions in debt instruments, withholding tax and other arrangements may restrict our

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Chinese subsidiaries’ ability to pay dividends to us and in turn restrict our ability to pay dividendsto our Shareholders. Distributions by our Chinese subsidiaries to us in forms other than dividendsmay also be subject to government approvals and taxes.

The recent outbreak of COVID-19 has caused, and may continue to cause, damage to theeconomy and as a result may adversely affect our business, financial condition and results ofoperations.

Since the end of December 2019, the outbreak of a novel strain of coronavirus namedCOVID-19 has materially and adversely affected the global economy. Since early 2020, MainlandChina and in Guangdong province where we operate have been affected by the COVID-19 outbreakand, in response, governments have implemented, among other measures, restrictions on mobilityand travel and cancellation of public activities, to contain the spread of the virus. As a result, ouroperations have to a certain extent been impacted by delays in business activities, commercialtransactions and general uncertainties surrounding the duration of the governments’ extendedbusiness and travel restrictions. In particular, the travel restrictions resulted in the reduction in sizeor even the closing of our retail stores, which temporarily adversely affected our marketingactivities. The COVID-19 outbreak had also resulted in regulatory approval delays due togovernment-imposed lockdowns and workplace closures. Further, as social and work gatheringswere banned, mandatory quarantine requirements were imposed and public transportation wassuspended in certain cities and countries where our offices and facilities were located, a portion ofour employees have been working remotely and our operations in those regions have beeninterrupted to the extent that onsite services of our employees were required.

In addition, our business operations could be disrupted if any of our employees is suspectedof contracting COVID-19 or any other epidemic disease, since our employees could be quarantinedand/or our store where the infected employee works at may have to be shut down for disinfection.While the lockdowns and various social distancing initiatives adopted by the governments duringthe outbreak of COVID-19 have caused people to turn to online shopping in lieu of visiting retailstores, these measures have led to reduced business activities in general. The general concerns anduncertainties about the pandemic and the economy and the overall weakening consumer sentimentmay have negatively affected our business. There remain significant uncertainties surrounding theCOVID-19 outbreak and its further development as a global pandemic. Should there be a resurgenceof the virus, China may again take emergency measures to combat the spread of the virus, includingtravel restrictions, closing of public spaces including shopping malls, mandatory cessations ofbusiness operations, mandatory quarantines, work-from-home and other alternative workingarrangements, and limitations on social and public gatherings and lockdowns of cities or regions,which may impact our businesses significantly. The potential downturn brought by and the durationof the COVID-19 outbreak may be difficult to assess or predict as the actual effects will depend onmany factors beyond our control. While we believe the impact on our business due to the outbreakof COVID-19 was limited, it is hard for us to quantify the impact and estimate the extent to whichthe COVID-19 outbreak impacts our long-term results.

The Chinese tax authorities have strengthened their scrutiny over transfers of equity interestsin a PRC resident enterprise by a non-resident enterprise, which may negatively affect thevalue of your [REDACTED] in our Company.

On February 3, 2015, the PRC State Administration of Taxation issued the Announcement onSeveral Issues Concerning Enterprise Income Tax for Indirect Transfer of Assets by Non- ResidentEnterprises (關於非居民企業間接轉讓財產企業所得稅若干問題的公告) (“Circular 7”). Thisregulation repealed certain provisions in the Notice on Strengthening the Administration ofEnterprise Income Tax on Non-Resident Enterprises (關於加強非居民企業股權轉讓企業所得稅管

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理的通知) (“Circular 698”) and certain rules clarifying Circular 698. Circular 698 was issued bythe PRC State Administration of Taxation on December 10, 2009. Circular 7 providescomprehensive guidelines relating to, and heightened the Chinese tax authorities’ scrutiny on,indirect transfers by a non-resident enterprise of assets (including equity interests) of a PRCresident enterprise (“PRC Taxable Assets”). For example, when a non-resident enterprise transfersequity interests in an overseas holding company that directly or indirectly holds certain PRCTaxable Assets and if the transfer is believed by the Chinese tax authorities to have no reasonablecommercial purpose other than to evade enterprise income tax, Circular 7 allows the Chinese taxauthorities to reclassify this indirect transfer of PRC Taxable Assets into a direct transfer andimpose on the non-resident enterprise a 10% rate of PRC enterprise income tax. Circular 7 exemptsthis tax, for examples, (i) where a non-resident enterprise derives income from an indirect transferof PRC Taxable Assets by acquiring and selling shares of a listed overseas holding company in thepublic market, and (ii) where a non-resident enterprise transfers PRC Taxable Assets that it directlyholds and an applicable tax treaty or arrangement exempts this transfer from PRC enterprise incometax. It remains unclear whether any exemptions under Circular 7 will be applicable to transfers ofour Shares by our Shareholders. If the Chinese tax authorities impose PRC enterprise income taxeson these activities, the value of your [REDACTED] in our Shares may be adversely affected.

We may be deemed as a PRC tax resident under the Enterprise Income Tax Law and be subjectto PRC taxation on our worldwide income.

Under the EIT Law, enterprises established under the laws of jurisdiction other than Chinamay be considered as a PRC tax resident provided that their “de facto management body” arelocated within China. Supplementary rules of the EIT Law interprets “de facto management body”as a body that exercises substantial management or control over the business, personnel, finance andproperties of an enterprise. Through a circular promulgated in April 2009, the PRC StateAdministration of Taxation further clarified the criteria for determining whether an enterprise hasa “de facto management body” within China. As most of our management is currently based inChina and many may remain in China in the future, we and our non-PRC subsidiaries may be treatedas PRC tax residents and a number of unfavorable tax consequences could follow. We may besubject to enterprise income tax at a rate of 25% on our worldwide taxable income and to PRCenterprise income tax reporting obligations. Any income sourced by us from outside China, such asinterest on [REDACTED] held outside China, would be subject to PRC enterprise income tax at arate of 25%. While the EIT Law provides that dividend income between “qualified residententerprises” is exempt from PRC enterprise income tax, it is not clear whether our Company andour non-PRC subsidiaries would be eligible for such exemption were we considered to be PRC taxresidents. In addition, if we are treated as PRC tax residents under Chinese laws, capital gainsrealized from sales of our Shares and dividends we pay to non-PRC resident Shareholders may betreated as income sourced within China. Accordingly, dividends we pay to non-PRC residentShareholders and transfers of Shares by these Shareholders may be subject to PRC income tax. Thetax on this income of non-PRC resident Enterprise Shareholders would be imposed at a rate of 10%(and may be imposed at a rate of 20% in the case of non-PRC resident individual Shareholders),subject to the provisions of any applicable tax treaty. If we are required to withhold PRC incometax on dividends payable to you, or if you are required to pay PRC income tax on the transfer ofour Shares, the value of your [REDACTED] in our Shares may be materially and adverselyaffected.

Dividends paid by our PRC subsidiaries to us are subject to PRC withholding taxes.

Under the EIT Law and its implementation rules, a 10% withholding tax is applicable to theprofit of a foreign-invested enterprise distributed to its immediate holding company outside Chinato the extent the distributed profit is sourced from China, (i) if the immediate holding company isneither a PRC resident enterprise nor has any establishment or place of business in China, or (ii)

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if the immediate holding company has an establishment or place of business in China but therelevant income is not effectively connected with the establishment or place of business. Pursuantto a special arrangement between Hong Kong and China, this rate will be lowered to 5% if a HongKong resident enterprise directly owns over 25% of the Chinese company at all times during the12-month period immediately prior to obtaining a dividend from such company. In addition,according to a tax circular issued by the SAT in February 2009, if the main purpose of an offshorearrangement is to obtain a preferential tax treatment, Chinese tax authorities have the discretion toadjust the tax rate enjoyed by the relevant offshore entity. We cannot assure you that Chinese taxauthorities will determine that the 5% tax rate applies to dividends received by our subsidiaries inHong Kong from our Chinese subsidiaries or that Chinese tax authorities will not levy a higherwithholding tax rate on these dividends in the future. In accordance with the AdministrativeMeasures for Convention Treatment for Non-resident Taxpayers (《非居民納稅人享受協議待遇管理辦法》) which was promulgated by the SAT and came into effect on January 1, 2020, ifnon-resident taxpayers consider they are eligible for treatments under the tax treaties throughself-assessment, they may, at the time of filing tax returns or making withholding tax filings throughwithholding agents, enjoy the treatments under the tax treaties, and shall concurrently collect andretain the relevant documents for inspection according to relevant regulations, and accept taxauthorities’ post-filing administration.

Failure by our Shareholders or beneficial owners who are PRC residents to make requiredapplications and filings pursuant to regulations relating to offshore investment activities byPRC residents may prevent us from distributing dividends and could expose us and ourShareholders who are PRC residents to liability under Chinese laws.

The Circular on Relevant Issues concerning Foreign Exchange Administration of OverseasInvestment and Financing and Return Investments Conducted by Domestic Residents throughOverseas Special Purpose Vehicles (關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知) (“SAFE Circular No. 37”), which was promulgated by SAFE and becameeffective on July 14, 2014, requires a PRC individual resident (“PRC Resident”) to register withthe local SAFE branch before he or she contributes assets or equity interests in an overseas specialpurpose vehicle (“Offshore SPV”) that is directly established or controlled by the PRC Resident forthe purpose of conducting investment or financing. Following the initial registration, the PRCResident is also required to register with the local SAFE branch for any major change in respect ofthe Offshore SPV, including, among other things, any major change of a PRC Resident shareholder,name or term of operation of the Offshore SPV, or any increase or reduction of the Offshore SPV’sregistered capital, share transfer or swap, merger or division. According to the Notice of the SAFEon Further Simplifying and Improving the Foreign Currency Management Policy on DirectInvestment (《國家外匯管理局關於進一步簡化和改進直接投資外匯管理政策的通知》) releasedon February 13, 2015 by the SAFE, local banks will examine and handle foreign exchangeregistration for overseas direct investment, including the initial foreign exchange registration andamendment registration, under SAFE Circular No. 37 from June 1, 2015. Failure to comply with theregistration procedures of SAFE Circular No. 37 may result in penalties and sanctions, includingthe imposition of restrictions on the ability of the Offshore SPV’s Chinese subsidiary to distributedividends to its overseas parent.

As SAFE Circular No. 37 was recently promulgated, it is unclear how this regulation and anyfuture regulation concerning offshore or cross-border transactions will be interpreted, amended orimplemented by the relevant government authorities. We cannot predict how these regulations willaffect our business operations or future strategies. As of the Latest Practicable Date, to the bestknowledge of our Directors, Mr. Wu and Mr. Guo, who are PRC residents, have completed theirinitial foreign exchange registration in respect of their respective incorporation of MOGR andStarlight as required under SAFE Circular No. 37. However, we may not at all times be fully aware

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or informed of the identities of all our Shareholders or beneficial owners that are required to makesuch registrations, and we cannot compel our beneficial owners to comply with SAFE registrationrequirements. As a result, we cannot assure you that all of our Shareholders or beneficial ownerswho are PRC residents or entities have complied with, and will in the future make or obtain anyapplicable registrations or approvals required by, SAFE regulations. Any failure by our PRCResident Shareholders or beneficial owners to make the registrations or updates with SAFE maysubject the relevant PRC Resident shareholders or beneficial owners to penalties, restrict ouroverseas or cross-border investment activities, limit our Chinese subsidiaries’ ability to makedistributions or pay dividends, or affect our ownership structure and capital inflow from ouroffshore subsidiaries. As such, our business, financial condition, results of operations and liquidityas well as our ability to pay dividends or make other distributions to our shareholders may bematerially and adversely affected.

Current Chinese regulations on loans provided by, and foreign direct investment by, anoffshore holding company to Chinese companies may delay or prevent us from using the[REDACTED] from the [REDACTED] to fund our business operations in China.

Any loans or capital contributions that we, as an offshore entity, make to our Chinesesubsidiaries that are foreign-invested enterprises, including with the [REDACTED] of the[REDACTED], are subject to Chinese laws and regulations. Foreign-invested enterprises mustregister with SAFE or its local counterpart in order to obtain shareholder loans from the foreigninvestors. The aggregate amount of these foreign loans must not exceed statutory limits.Furthermore, the foreign-invested enterprises must register with SAFE or its local counterpart forrepayment of the foreign loans. In addition, foreign investors must register with SAIC or its localcounterpart to make capital contributions to the foreign-invested enterprises and submit theinvestment information to the competent commerce department through the enterprise registrationsystem and the national enterprise credit information publicity system.

We cannot assure you that we can obtain the required government approvals or registrationson a timely basis, or at all, with respect to loans or capital contributions that we may make to ourChinese subsidiaries. If we fail to obtain the approvals or registrations, our ability to use the[REDACTED] from the [REDACTED] to fund our operations in China would be negativelyaffected, which would materially and adversely affect our liquidity and our ability to expand ourbusiness.

Governmental control of currency conversion may limit our ability to utilize our revenueseffectively and affect the value of your investment.

The PRC government imposes controls on the convertibility of the Renminbi into foreigncurrencies and, in certain cases, the remittance of currency out of China. We receive substantiallyall of our revenue in Renminbi. Under our current corporate structure, our Cayman Islands holdingcompany primarily relies on dividend payments from our PRC subsidiaries to fund any cash andfinancing requirements we may have. Under existing PRC foreign exchange regulations, paymentsof current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval ofthe SAFE by complying with certain procedural requirements. Specifically, under the existingexchange restrictions, without prior approval of SAFE, cash generated from the operations of ourPRC subsidiaries in China may be used to pay dividends to our company but we are required topresent documentary evidence of such transactions and conduct such transactions at designatedforeign exchange banks within China that have the licenses to carry out foreign exchange business.Foreign exchange transactions under the capital account conducted by us, however, must be

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approved in advance by the SAFE. If the foreign exchange control system prevents us fromobtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be ableto pay dividends in foreign currencies to our shareholders, including holders of our Shares.

You may encounter difficulty in effecting service of legal process upon us, our Directors andsenior management and enforcing foreign judgments against us, our Directors and seniormanagement.

We are a company incorporated in the Cayman Islands with substantially all of our assetslocated within China. Most of our Directors and senior management reside in China andsubstantially all of their assets are within China. As a result, it may not be possible for you to effectservice of legal process within China on us or our Directors or senior management.

Judgments of courts of another jurisdiction may be reciprocally recognized or enforced if thejurisdiction has a treaty on that with China. Currently, China does not have treaties providing forthe reciprocal enforcement of judgments of courts with Japan, the United States, the UnitedKingdom or most other western countries. On July 14, 2006, Hong Kong and China entered into theArrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and CommercialMatters by the Courts of the Mainland and of the Hong Kong Special Administrative RegionPursuant to Choice of Court Agreements Between Parties Concerned (《關於內地與香港特別行政區法院相互認可和執行當事人協議管轄的民商事案件判決的安排》), pursuant to which reciprocalrecognition and enforcement of the judgment may be possible between these two jurisdictionsprovided that the judgment is rendered by a final court of these two jurisdictions and the parties hasa expressly written choice of court. It may be difficult or impossible for you to enforce judgmentbetween these jurisdictions if you have not agreed on sole jurisdiction with the other party. Inaddition, Hong Kong has no arrangement for reciprocal enforcement of judgments with the UnitedStates and certain other jurisdictions. As a result, you may encounter difficulty in enforcing foreignjudgments against us or our directors or senior management. On January 18, 2019, the Arrangementon Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by theCourts of the Mainland and of the Hong Kong Special Administrative Region (《關於內地與香港特別行政區法院相互認可和執行民商事案件判決的安排》) (the “2019 Arrangement”) was signedbetween the Supreme People’s Court of China and Hong Kong. Comparing with the 2006Arrangement, the 2019 Arrangement seeks to establish a bilateral legal mechanism with greaterclarity and certainty for reciprocal recognition and enforcement of judgments between Hong Kongand the PRC in civil and commercial matters under both Hong Kong and PRC laws. The 2019Arrangement will apply to judgments made by the courts of Hong Kong and the PRC on or afterits commencement date, which will be announced by Hong Kong and the PRC after necessaryprocedures of both places have been completed. The 2006 Arrangement will be superseded upon theeffective date of the 2019 Arrangement. However, the 2006 Arrangement will remain applicable toa “choice of court agreement in writing” as defined in the 2006 Arrangement which is entered intobefore the 2019 Arrangement taking effect. Although the 2019 Arrangement has been signed, itremains unclear as to its effective date and uncertain as to the outcome and effectiveness of anyaction brought under the 2019 Arrangement.

RISKS RELATING TO THE [REDACTED]

As there has been no prior public market for our Shares, their market price may be volatileand an active [REDACTED] market in our Shares may not develop.

Prior to the [REDACTED], there was no public market for our Shares. The [REDACTED]of our Shares is the result of negotiations between us and the [REDACTED] Representative onbehalf of the [REDACTED], and the [REDACTED] may differ significantly from the market price

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for our Shares following the [REDACTED]. There is no guarantee that an active [REDACTED]market for our Shares will develop, or, if it does develop, that it will sustain or that the market priceof our Shares will not decline after the [REDACTED].

The market price and [REDACTED] volume of our Shares may be volatile, which may resultin substantial losses for investors in our Shares.

The price and [REDACTED] volume of our Shares may fluctuate widely in response tofactors beyond our control. The factors that could cause significant market price change include butdo not limit to the following:

• changes in our results of operations, earnings and cash flows, and securities analysts’estimates of our financial performance;

• changes in competitive landscapes of our industries, including strategic alliances,acquisitions or joint ventures by us or our competitors;

• changes in general economic conditions affecting us or our industries;

• regulatory developments, and our inability to obtain or renew necessary licenses andpermits;

• changes in our senior management;

• fluctuations of the general stock market, particularly fluctuations in stock prices of othercompanies that operate mainly in China and are listed on the Stock Exchange; and

• material litigation or regulatory investigations affecting us or our senior management.

There will be a time gap of several business days between pricing and [REDACTED] of ourShares [REDACTED] under the [REDACTED]. The market price of the Shares after[REDACTED] begins could be lower than the [REDACTED].

The [REDACTED] of our Shares will be determined on the [REDACTED]. However, ourShares will not commence [REDACTED] on the Stock Exchange until they are delivered, whichis expected to be several Business Days after the [REDACTED]. Investors are unlikely to be ableto sell or otherwise deal in our Shares before they commence [REDACTED]. Accordingly, holdersof our Shares are subject to the risk that the price of our Shares after [REDACTED] begins couldbe lower than the [REDACTED] as a result of adverse market conditions or other adversedevelopment that may occur between the [REDACTED] and the time [REDACTED] begins.

Control by our Single Largest Shareholders Group of a substantial percentage of ourCompany’s share capital after the completion of the [REDACTED] may limit your ability toinfluence the outcome of decisions requiring the approval of Shareholders and the interests ofour Single Largest Shareholders Group may not be aligned with those of our otherShareholders.

Upon the completion of the [REDACTED], approximately [REDACTED]% of our Shareswill be held by our Single Largest Shareholders Group, assuming that the [REDACTED] is notexercised. After the completion of the [REDACTED], our Single Largest Shareholders Group willcontinue to have significant influence on us on various important corporate actions requiring the

RISK FACTORS

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approval of Shareholders, such as mergers, disposal of assets, election of Directors, and timing andamount of dividends and other distributions. There may be a conflict between our Single LargestShareholders Group’s interests and your interests. Control by our Single Largest ShareholdersGroup of a substantial percentage of our Shares may have the effect of delaying, discouraging orpreventing a change in control of us, which may deprive you of opportunities to receive premiumsfor your Shares and may reduce the price of the Shares. If our Single Largest Shareholders Groupcause us to pursue strategic objectives that would conflict with your interests, you may also be leftin a disadvantaged position.

Future sales or major divestment of our Shares by any of our Single Largest ShareholdersGroup could adversely affect the prevailing market price of our Shares.

The market price of our Shares may be adversely affected by future sales of a significantnumber of our Shares in the public market after the [REDACTED], or the possibility of such sales,by our Single Largest Shareholders Group. The Shares held by our Single Largest ShareholdersGroup are subject to certain lock-up arrangements; please see the section headed “[REDACTED]”in this document for a detailed description of the restrictions. After the restrictions of the lock-uparrangements expire, our Single Largest Shareholder may dispose of our Shares. Sales of asubstantial amount of our Shares following the expiration of such lock-up arrangements couldadversely affect the market price of our Shares, which could negatively affect our ability to raiseequity capital.

Our future financing may cause dilution of your shareholding or place restrictions on ouroperations.

In order to raise capital and expand our business, we may consider offering and issuingadditional Shares or other securities convertible into or exchangeable for our Shares in the futureother than on a pro rata basis to our then existing Shareholders. As a result, the shareholdings ofthose Shareholders may experience dilution in net asset value per Share. If additional funds are tobe raised through debt financing, certain restrictions may be imposed on our operations, which may:

• further limit our ability or discretion to pay dividends;

• increase our risks in adverse economic conditions;

• adversely affect our cash flows; or

• limit our flexibility in business development and strategic plans.

You may experience immediate and substantial dilution in the book value of your[REDACTED] as a result of the [REDACTED].

The [REDACTED] of our Shares is higher than our net tangible book value per Shareimmediately prior to the [REDACTED]. Therefore, purchasers of our Shares will experience animmediate dilution in [REDACTED] net tangible book value per Share. Our existing Shareholderswill, however, receive an increase in [REDACTED] net tangible book value per Share with respectto their Shares. In addition, if the [REDACTED] exercises the [REDACTED], holder of our Sharesmay experience further dilution.

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There is no assurance as to whether and when we will pay dividends. Dividends declared in thepast may not be indicative of our dividend policy in the future.

We cannot guarantee when, if or in what form and amount dividends will be paid on ourShares following the [REDACTED]. Distribution of dividends must be proposed by our Board andis subject to a number of factors, including the results of operations, cash flows, financial situationand capital expenditure requirements of our Group, distributable profits of our subsidiaries anddividends they pay to us, our future plans and business prospects, market conditions, our Articlesof Association, regulatory restrictions and our contractual obligations. As a result, our historicaldividend distributions are not indicative of dividends that we may pay in the future. See “FinancialInformation — Report on Matters under the Rules Governing the Listing of Securities on The StockExchange of Hong Kong Limited and the Companies (Winding Up and Miscellaneous Provisions)Ordinance — Dividend” for details of our dividend policy.

Certain facts, forecasts and other statistics contained in this document are obtained fromgovernment sources and other third parties and may not be accurate or reliable, and statisticsin the document provided by Frost & Sullivan are subject to assumptions and methodologiesset forth in the “Industry Overview” section of this document.

In this document, certain facts, forecasts and other statistics concerning China, its economicconditions and the industries are derived from publications of Chinese government agencies orindustry associations, or an industry report prepared by Frost & Sullivan and commission by us.Although we have taken reasonable care in extracting those facts, forecasts and statistics, they havenot been independently verified by us, the Joint Sponsors, the [REDACTED], the [REDACTED],any of our or their respective directors, officers or representatives or any other person involved inthe [REDACTED]. We cannot assure you that those facts, forecasts and statistics are accurate andreliable. We cannot assure you that they are stated or compiled on the same basis or with the samedegree of accuracy in other jurisdictions. You should consider carefully that how much weight youshould place on those facts, forecasts and statistics.

This document contains forward-looking statements relating to our plans, objectives,expectations and intentions, which may not represent our overall performance for periods oftime to which such statements relate.

This document contains certain future plans and forward-looking statements about us that aremade based on the information currently available to our management. The forward-lookinginformation contained in this document is subject to certain risk and uncertainties. Whether weimplement those plans, or whether we can achieve the objective described in this document, willdepend on various factors including the market conditions, our business prospects, actions by ourcompetitors and the global financial situations.

You may experience difficulties in enforcing your shareholder rights because we areincorporated in the Cayman Islands, and the Cayman Islands law is different from the lawsof Hong Kong and other jurisdictions in terms of minority shareholder’s protection.

We are an exempted company incorporated in the Cayman Islands with limited liability.Cayman Islands law differs in some respects from the laws of Hong Kong and other jurisdictionswhere investors may be located. Our corporate affairs are governed by our Memorandum andArticles of Association, the Cayman Islands Companies Act and the common law of the CaymanIslands. The rights of our Shareholders to take legal actions against us and our Directors, actionsby minority shareholders and the fiduciary responsibilities of our Directors to us under CaymanIslands law are to a large extent governed by the common law of the Cayman Islands. The common

RISK FACTORS

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law of the Cayman Islands is derived in part from comparatively limited judicial precedents in theCayman Islands, and from English common law, which is persuasive but does not have bindingauthority on a court in the Cayman Islands. The rights of our Shareholders and the fiduciaryresponsibilities of our Directors under the Cayman Islands law may not be as clearly established asthey would be under statutes or judicial precedents in Hong Kong, the United States or otherjurisdictions where investors may be located. In particular, the Cayman Islands has a less developedbody of securities law. As a result, our Shareholders may have more difficulty in protecting theirinterests in the face of actions taken by our management, Directors or Single Largest ShareholdersGroup than they would as shareholders of a Hong Kong company, a United States company orcompanies incorporated in other jurisdictions.

Investors should read the entire document carefully and should not place any reliance on anyinformation contained in press articles or other media in making your [REDACTED] decision.

Prior or subsequent to the publication of this document, there may have been press and mediacoverage regarding us and the [REDACTED], which includes certain information about us thatdoes not appear in, or is different from what is contained in, this document. We have not authorizedthe disclosure of any such information in the press or media. The financial information, financialprojection, valuation and other information about us contained in such unauthorized press or mediacoverage may not truly reflect what is disclosed in the document or the actual circumstances. Wedo not accept any responsibility for such unauthorized press and media coverage or the accuracy orcompleteness of any such information. We make no representation as to the appropriateness,accuracy, completeness or reliability of any such information. To the extent that any informationappearing in the press and media is inconsistent or conflict with the information contained in thisdocument, we disclaim it. Investors should rely only on the information contained in this documentin making [REDACTED] decision.

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In preparation for the [REDACTED], our Company has applied for the following waiversfrom strict compliance with the relevant provisions of the Listing Rules and exemption from strictcompliance with the Companies (Winding Up and Miscellaneous Provisions) Ordinance.

WAIVER IN RELATION TO MANAGEMENT PRESENCE IN HONG KONG

Pursuant to Rule 8.12 of the Listing Rules, our Company must have a sufficient managementpresence in Hong Kong. This normally means that at least two of our executive Directors must beordinarily resident in Hong Kong. Our Group’s principal business and operations are located,managed and conducted in the PRC through our PRC subsidiaries. None of our executive Directorsis ordinarily based in Hong Kong and they will continue to be based in the PRC after[REDACTED]. As a result, our Company does not, and for the foreseeable future, will not have asufficient management presence in Hong Kong as required under Rule 8.12 of the Listing Rules.Further, it would be impractical and commercially unnecessary for our Company to relocate itsexisting PRC-based executive Directors to Hong Kong or to appoint additional executive Directorswho are ordinarily resident in Hong Kong.

Accordingly, we have applied to the Stock Exchange for, and the Stock Exchange [has agreedto grant], a waiver from strict compliance with the requirements under Rule 8.12 of the ListingRules. In order to maintain regular and effective communication with the Stock Exchange, we putin place the following measures:

(i) we have appointed two authorized representatives pursuant to Rule 3.05 of the ListingRules to act as our principal channel of communication with the Stock Exchange. Thetwo authorized representatives of our Company are Mr. Guo and Ms. Cho Wing Han (曹詠嫻), our executive Director and one of our joint company secretaries. Each of the twoauthorized representatives will be the principal channel of communication with theStock Exchange and can be readily contactable by telephone, facsimile and email;

(ii) each of the two authorized representatives will have means to contact all Directors(including the independent non-executive Directors) promptly at all times as and whenthe Stock Exchange wishes to contact the Directors on any matters. Our Companyrequires that all Directors will provide, if available, their mobile phone numbers, officephone numbers, email addresses and fax numbers to the Stock Exchange;

(iii) each Director who is not ordinarily resident in Hong Kong has confirmed that he or shepossesses or can apply for valid travel documents to visit Hong Kong and is able to meetwith the Stock Exchange within a reasonable period, when required; and

(iv) we have appointed Somerley Capital Limited as our compliance adviser pursuant to Rule3A.19 of the Listing Rules to act as an additional channel of communication with theStock Exchange for the period commencing from the [REDACTED] and ending on thedate on which our Company complies with Rule 13.46 of the Listing Rules in respect ofits financial results for the first full financial year commencing after the [REDACTED].Our compliance advisor will advise our Company on on-going compliance requirementsand other issues arising under the Listing Rules and other applicable laws andregulations in Hong Kong after [REDACTED] and have full access at all times to ourtwo authorized representatives and our Directors.

WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES ANDEXEMPTION FROM STRICT COMPLIANCE WITH THE COMPANIES

(WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

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WAIVER IN RELATION TO JOINT COMPANY SECRETARIES

Pursuant to Rule 8.17 of the Listing Rules, our Company must appoint a company secretarywho satisfies Rule 3.28 of the Listing Rules. Pursuant to Rule 3.28 of the Listing Rules, ourCompany must appoint as our company secretary an individual who, by virtue of his or heracademic or professional qualifications or relevant experience, is, in the opinion of the StockExchange, capable of discharging the functions of company secretary.

The Stock Exchange considers the following academic or professional qualifications to beacceptable:

(i) a member of The Hong Kong chartered governance institute (formerly known as TheHong Kong Institute of Chartered Secretaries);

(ii) a solicitor or barrister (as defined in the Legal Practitioners Ordinance (Chapter 159 ofthe Laws of Hong Kong)); and

(iii) a certified public accountant (as defined in the Professional Accountants Ordinance(Chapter 50 of the Laws of Hong Kong)).

In assessing “relevant experience”, the Stock Exchange will consider the followings of theindividual:

(i) length of employment with the issuer and other issuers and the roles he or she played;

(ii) familiarity with the Listing Rules and other relevant laws and regulations including theSFO, the Companies Ordinance, the Companies (Winding Up and MiscellaneousProvisions) Ordinance and the Takeovers Code;

(iii) relevant training taken and/or to be taken in addition to the minimum requirement underRule 3.29 of the Listing Rules; and

(iv) professional qualifications in other jurisdictions.

Our Company has appointed Ms. He Pingping (“Ms. He”) and Ms. Cho Wing Han as our jointcompany secretaries. Ms. He joined our Company in July 2018 as the manager of legal andcompliance department of our Group where she was responsible for the daily legal and complianceoperation and matters related to corporate governance. Since June 2021, Ms. He has served as thehead of strategic investment department, where she has been primarily responsible for the legalmatters in relation to the investment and financing activities of our Group. For more details of Ms.He’s biography, please see “Directors and Senior Management – Joint Company Secretaries”.Although our Company believes, having regard to Ms. He’s past experience in handlingadministrative, legal and corporate matters, that she has a thorough understanding of our Companyand the Board, Ms. He does not possess the requisite qualifications as required by Rule 3.28 of theListing Rules. Therefore, our Company has appointed Ms. Cho Wing Han, who is a Hong Kongresident and possesses the qualification and relevant experience as stipulated under Rule 3.28 of theListing Rules, to be a joint company secretary of our Company. For more details of Ms. Cho WingHan’s biography, see “Directors and Senior Management – Joint Company Secretaries”.



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Given the important role of the company secretary in the corporate governance of a listedissuer, particularly in assisting the listed issuer as well as its directors in complying with the ListingRules and other relevant laws and regulations, our Company has put in place the followingarrangements:

(i) Ms. Cho Wing Han, one of the joint company secretaries of our Company who satisfiesthe requirements under Rule 3.28 of the Listing Rules, will assist Ms. He so as to enableher to discharge her duties and responsibilities as a joint company secretary of ourCompany. Given Ms. Cho Wing Han’s relevant experiences, she will closely work withand provide assistance to Ms. He for compliance with the relevant requirements of theListing Rules as well as other applicable laws and regulations of Hong Kong;

(ii) our Company undertakes to re-apply to the Stock Exchange in the event that Ms. ChoWing Han ceases to meet the requirements under Rule 3.28 of the Listing Rules orotherwise ceases to serve as a joint company secretary;

(iii) Ms. He, one of the joint company secretaries of our Company, will be assisted by Ms.Cho Wing Han, for a period from the [REDACTED] to the end of three years after the[REDACTED], which should be sufficient for her to acquire the requisite knowledgeand experience under Rule 3.28 of the Listing Rules;

(iv) our Company will ensure that Ms. He has access to the relevant trainings and support toenable her to familiarize herself with the Listing Rules and the duties required of acompany secretary of a Hong Kong listed company, and Ms. He has undertaken to attendsuch trainings;

(v) Ms. Cho Wing Han will communicate with Ms. He on a regular basis regarding mattersin relation to corporate governance, the Listing Rules as well as other applicable lawsand regulations of Hong Kong which are relevant to the operations and affairs of ourCompany. Ms. Cho Wing Han will work closely with, and provide assistance to Ms. Hewith a view to discharging her duties and responsibilities as a company secretary,including but not limited to organizing the Board meetings and Shareholders’ generalmeetings; and

(vi) pursuant to Rule 3.29 of the Listing Rules, Ms. He and Ms. Cho Wing Han will alsoattend in each financial year no less than 15 hours of relevant professional trainingcourses to familiarize themselves with the requirements of the Listing Rules and otherlegal and regulatory requirements of Hong Kong. Both Ms. He and Ms. Cho Wing Hanwill be advised by the legal advisers of our Company as to Hong Kong law and thecompliance advisor of our Company as and when appropriate and required.



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Accordingly, our Company has applied for, [and the Stock Exchange has granted], a waiverfrom strict compliance with the requirements under Rules 8.17 and 3.28 of the Listing Rules,provided that Ms. Cho Wing Han will act as a joint company secretary and provide assistance to Ms.He. The waiver is valid for an initial period of three years commencing from the [REDACTED],and will be revoked immediately if Ms. Cho Wing Han ceases to provide assistance and guidanceto Ms. He. The waiver granted can also be revoked if there are material breaches of the ListingRules by our Company. Prior to the expiry of the initial three-year period, our Company willre-evaluate the qualifications and experiences of Ms. He. Upon the determination of our Companythat no on-going assistance to Ms. He is necessary, our Company will demonstrate to the StockExchange that, with the assistance of Ms. Cho Wing Han over such three-year period, Ms. He hasacquired the requisite knowledge and experience as prescribed in Rule 3.28 of the Listing Rules.The Stock Exchange will then re-evaluate whether any further waiver would be necessary.

WAIVER IN RELATION TO RULE 4.04(1) OF THE LISTING RULES AND EXEMPTIONFROM STRICT COMPLIANCE WITH SECTION 342(1)(B) IN RELATION TOPARAGRAPH 27 OF PART I AND PARAGRAPH 31 OF PART II OF THE THIRDSCHEDULE TO THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS)ORDINANCE

Rule 4.04(1) of the Listing Rules requires the accountants’ report contained in this documentmust include, among others, the consolidated results of our Company and its subsidiaries in respectof each of the three financial years immediately preceding the issue of this document or such shorterperiod as may be acceptable to the Stock Exchange.

Section 342(1)(b) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance,requires all [REDACTED] to include the matters specified in Part I of the Third Schedule to theCompanies (Winding Up and Miscellaneous Provisions) Ordinance and sets out the reportsspecified in Part II of the Third Schedule to the Companies (Winding Up and MiscellaneousProvisions) Ordinance.

Pursuant to paragraph 27 of Part I of the Third Schedule to the Companies (Winding Up andMiscellaneous Provisions) Ordinance, our Company is required to include in this document astatement as to the gross trading income or sales turnover (as may be appropriate) of our Companyduring each of the three financial years immediately preceding the issue of this document as wellas an explanation of the method used for the computation of such income or turnover and areasonable breakdown of the more important trading activities.

Pursuant to paragraph 31 of Part II of the Third Schedule to the Companies (Winding Up andMiscellaneous Provisions) Ordinance, our Company is required to include in this document a reportby our Company’s auditor with respect to profits and losses in respect of each of the three financialyears immediately preceding the issue of this document and assets and liabilities of our Group atthe last date to which our financial statements were prepared.

Pursuant to section 342A(1) of the Companies (Winding Up and Miscellaneous Provisions)Ordinance, the SFC may issue, subject to such conditions (if any) as the SFC thinks fit, a certificateof exemption from compliance with the relevant requirements under the Companies (Winding Up



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and Miscellaneous Provisions) Ordinance if, having regard to the circumstances, the SFC considersthat the exemption will not prejudice the interests of the [REDACTED] public and compliance withany or all of such requirements would be irrelevant or unduly burdensome, or is otherwiseunnecessary or inappropriate.

Where an applicant issues its [REDACTED] document within two months after the latest yearend, Guidance Letter HKEx-GL25-11 issued by the Stock Exchange has provided the conditions forgranting a waiver from strict compliance with Rule 4.04(1) of the Listing Rules as follows:

(1) the applicant must [REDACTED] on the Stock Exchange within three months after thelatest year end;

(2) the applicant must obtain a certificate of exemption from the SFC on compliance withthe requirements of section 342(1) in relation to paragraph 27 of Part I and paragraph31 of Part II of the Third Schedule to the Companies (Winding Up and MiscellaneousProvisions) Ordinance;

(3) a profit estimate for the latest financial year (which must comply with Rules 11.17 to11.19 of the Listing Rules) must be included in the document or the applicant mustprovide justification why a profit estimate cannot be included in the document; and

(4) there must be a directors’ statement in the document that there is no material adversechange to our Company’s financial and trading positions or prospect with specificreference to the trading results from the end of the stub period to the latest financial yearend.

The accountants’ report of our Group for each of the three financial years ended December 31,2018, 2019 and 2020 and the [ten months ended October 31, 2021] would be prepared and wouldbe set out in the Appendix I to this document.

Pursuant to the relevant requirements set forth above, our Company is required to producethree full years of audited consolidated financial statements for the years ended December 31, 2019,2020 and 2021. Accordingly, we applied to the Stock Exchange for a waiver from strict compliancewith Rule 4.04(1) of the Listing Rules, and such waiver [was granted by the Stock Exchange] onthe conditions that:

(1) this document will be issued on or before [REDACTED] and the [REDACTED] shallnot be later than three months after the end of our Company’s latest financial year (i.e.on or before [REDACTED]);

(2) our Company will obtain a certificate of exemption from the SFC on compliance withthe relevant Companies (Winding Up and Miscellaneous Provisions) Ordinancerequirements;

(3) a profit/(loss) estimate for the financial year ending December 31, 2021 will be includedin this document; and



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(4) a statement of the Directors that there is no material adverse change to our Company’sfinancial and trading positions or prospects with specific reference to the trading resultsfrom [October 31, 2021] (being the date of which the latest audited consolidatedfinancial statement of our Group were made up) and up to December 31, 2021, being thelatest financial year end of our Company, [will be] included in this document.

An application has also been made to the SFC[, and the SFC has granted us], a certificate ofexemption from strict compliance with the requirements under section 342(1)(b) of the Companies(Winding Up and Miscellaneous Provisions) Ordinance in relation to paragraphs 27 of Part I andparagraph 31 of Part II of the Third Schedule to the Companies (Winding Up and MiscellaneousProvisions) Ordinance and a certificate of exemption [has been granted by the SFC] under section342A of the Companies (Winding Up and Miscellaneous Provisions) Ordinance on the conditionsthat:

(1) the particulars of the exemption are set out in this document; and

(2) this document will be issued on or before [REDACTED] and the [REDACTED] shallnot be later than three months after the end of our Company’s latest financial year (i.e.on or before [REDACTED]).

The applications to the Stock Exchange for a waiver from strict compliance with Rule 4.04(1)of the Listing Rules and to the SFC for a certificate of exemption from strict compliance with therequirements under section 342(1)(b) of the Companies (Winding Up and MiscellaneousProvisions) Ordinance in relation to paragraphs 27 of Part I and paragraph 31 of Part II of the ThirdSchedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance were made onthe grounds, that strict compliance with the above requirements would be unduly burdensome andthe exemption would not prejudice the interest of the [REDACTED] public for the followingreasons:

(1) there would not be sufficient time for our Company and our Reporting Accountants tocomplete the audit work on the full financial information for the year ending December31, 2021 for inclusion in this document. If the financial information is required to beaudited up to December 31, 2021, our Company and our Reporting Accountants wouldhave to undertake a considerable amount of work to prepare, update and finalize thefinancial information to be included in this document and to update the relevantdisclosures in this document to cover such additional period. It would be undulyburdensome for the results for the year ending December 31, 2021 to be finalized andaudited in such short period of time. Our Directors consider that the benefits of suchwork to the existing and prospective shareholders of our Company may not justify theadditional work and expenses involved and the delay of the [REDACTED] timetable ofour Company;

(2) our Directors and the Joint Sponsors herein [confirm] that after performing allreasonable due diligence work which they consider appropriate, up to the LatestPracticable Date, there has been no material adverse change to the financial and tradingpositions or prospects of our Group since [October 31, 2021] (being the date of whichthe latest audited consolidated financial statement of our Group were made up) up toDecember 31, 2021 and there has been no event which would materially affect theinformation shown in the Accountants’ Report as set out in Appendix I to this document,



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the unaudited [REDACTED] financial information as set out in Appendix II to thisdocument, profit/(loss) estimate as set out in Appendix IA to this document and otherparts of this document since [October 31, 2021] and up to the Latest Practicable Date;and

(3) our Company shall include in this document (a) the Accountants’ Report covering thethree years ended December 31, 2018, 2019 and 2020 and the [ten months endedOctober 31, 2021] as set out in Appendix I to this document, (b) a profit/(loss) estimatefor the full financial year ending December 31, 2021 in Appendix IA to this document;and (c) information regarding our Group’s recent developments subsequent to the TrackRecord Period and up to the Latest Practicable Date. As such, our Company and the JointSponsors confirm that all material information that is necessary for the Shareholders andthe potential [REDACTED] to make an informed assessment of the activities, assets andliabilities, financial position, management and prospects of our Group has beendisclosed in this document.

Our Company will comply with the requirements under Rules 13.49(1) and 13.46(2) of theListing Rules in respect of the publication of its annual results and its annual report. Our Companycurrently expects to issue its annual results and its annual report for the financial year endingDecember 31, 2021 on or before March 31, 2021 and April 30, 2022, respectively. In this regard,our Directors consider that our Shareholders, the [REDACTED] public as well as potential[REDACTED] of our Company will be kept informed of the financial results of our Group for thefinancial year ending December 31, 2021.

Furthermore, our Directors confirm that they do not contemplate any material change to theshare capital structure of our Company and each of the subsidiaries immediately following the[REDACTED].



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[REDACTED]

INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

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[REDACTED]


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[REDACTED]


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[REDACTED]


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DIRECTORS

Name Address Nationality

Executive Directors

Mr. Wu Yuening (吳悅寧) . . . . . Room 1501, Unit 1, Building 7Senlinhu Lanxigu, Nancheng DistrictDongguan CityGuangdong ProvincePRC

Chinese

Mr. Guo Huibo (郭惠波) . . . . . . Room 1602, Building 7Second District Galaxy LegendDongcheng DistrictDongguan CityGuangdong ProvincePRC

Chinese

Ms. Shu Yanfang (舒豔芳) . . . . Room 1005, Kaige Court, Saina Jiayuan68 Hongfu Road, Nancheng DistrictDongguan CityGuangdong ProvincePRC

Chinese

Ms. Peng Yao (彭瑤) . . . . . . . . . Room 1702, Unit 1Block 46, Dongguan Hengda Garden666 Dongguan AvenueNancheng DistrictDongguan CityGuangdong ProvincePRC

Chinese

Mr. Chen Shixin (陳世欣) . . . . . Room 702, Jindun Yuan Building 2Dongdun Street, Jinping DistrictShantou CityGuangdong ProvincePRC

Chinese

DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

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Name Address Nationality

Non-executive Director

Mr. Liang Jie (梁捷) . . . . . . . . . House 12Coronation Road WestSingapore 269243

Cypriot

Independent non-executive Directors

Mr. Ye Wangchun (葉旺春) . . . . Unit 904, Building 8Fulian GardenFutian District, ShenzhenGuangdong ProvincePRC

Chinese

Ms. Li Hui (李卉) . . . . . . . . . . Unit 7078 Zhuxi, West StreetYuexiu DistrictGuangzhouPRC

Chinese

Mr. Zeng Guanglong (曾廣龍) . . Unit 502No. 16, Lane 77Fang Dian RoadShanghaiPRC

Chinese

For further information about our Directors and senior management, see the section headed“Directors and Senior Management” in this document.


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PARTIES INVOLVED IN THE [REDACTED]

Joint Sponsors, [REDACTED] Morgan Stanley Asia Limited(In relation to the [REDACTED] only)46/F, InternationalCommerce Centre1 Austin Road WestKowloonHong Kong

Morgan Stanley & Co. International plc(In relation to the [REDACTED] only)25 Cabot SquareCanary WharfLondon E14 4QAUnited Kingdom

Credit Suisse (Hong Kong) Limited88/F, International Commerce Centre1 Austin Road WestKowloonHong Kong

Legal Advisers to our Company As to Hong Kong and U.S. lawsPaul Hastings22/F, Bank of China Tower1 Garden RoadHong Kong

As to PRC lawsHaiwen & Partners20/F, Fortune Financial Center5 Dong San Huan Central RoadChaoyang DistrictBeijingPRC

As to PRC lawsJingtian & Gongcheng34/F, Tower 3China Central Place77 Jianguo RoadBeijing 100025PRC


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As to Cayman Islands lawsMaples and Calder (Hong Kong) LLP26th Floor, Central Plaza18 Harbour RoadWanchaiHong Kong

Legal Advisors to the Joint Sponsors and[REDACTED]

As to Hong Kong and U.S. lawsClifford Chance27/F, Jardine HouseOne Connaught PlaceCentralHong Kong

As to PRC lawsHan Kun Law Offices9/F, Office Tower C1Oriental Plaza, 1 East Chang An AvenueBeijingPRC

Auditor and Reporting Accountants KPMGCertified Public Accountants8th FloorPrince’s Building10 Chater Road CentralHong Kong

Industry Consultant Frost & Sullivan International Limited1706, One Exchange Square8 Connaught PlaceCentralHong Kong

Compliance Advisor Somerley Capital Limited20/F, China Building29 Queen’s Road CentralHong Kong

[REDACTED]


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Registered Office PO Box 309Ugland HouseGrand Cayman, KY1-1104Cayman Islands

Headquarter in the PRC 35 Yinshan RoadYuanwubian Nancheng streetDongguan CityGuangdong ProvincePRC

Principal Place of Business in Hong Kong Level 54, Hopewell Centre183 Queen’s Road EastHong Kong

Company’s Website https://www.kkgroup.cn(the information contained on this websitedoes not form part of this document)

Joint Company Secretaries Ms. He Pingping (何萍萍)35 Yinshan RoadYuanwubian Nancheng streetDongguan CityGuangdong ProvincePRC

Ms. Cho Wing Han (曹詠嫻) FCG, FCSLevel 54, Hopewell Centre183 Queen’s Road EastHong Kong

Authorized Representatives Mr. Guo Huibo (郭惠波)Room 1602, Building 7Second District, Galaxy LegendDongcheng District, Dongguan CityGuangdong Province,PRC

Ms. Cho Wing Han (曹詠嫻) FCG, FCSLevel 54, Hopewell Centre183 Queen’s Road EastHong Kong

Audit Committee Mr. Zeng Guanglong (曾廣龍) (chairperson)Mr. Ye Wangchun (葉旺春)Ms. Li Hui (李卉)

CORPORATE INFORMATION

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Remuneration Committee Ms. Li Hui (李卉) (chairperson)Mr. Guo Huibo (郭惠波)Mr. Zeng Guanglong (曾廣龍)

Nomination Committee Mr. Wu Yuening (吳悅寧) (chairperson)Ms. Li Hui (李卉)Mr. Ye Wangchun (葉旺春)

[REDACTED]

Principal Bank China Merchants Bank Co., Ltd.Shenzhen Chegongmiao Sub-BranchBlock A, 1/FTianxiang BuildingTianan Chegongmiao Industrial DistrictFutian DistrictShenzhenPRC

CORPORATE INFORMATION

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The information, statistics and data set out in this section and other sections of thisDocument were extracted from official government publications, industry sources, andfrom the market research report prepared by Frost & Sullivan, an independent industryconsultant which was commissioned by us in connection with the [REDACTED] andindependently prepared the Frost & Sullivan Report. We believe that the sources of theinformation in this section are appropriate sources for such information, and we have takenreasonable care in extracting and reproducing such information. We have no reason tobelieve that such information is false or misleading in any material respect, or that any facthas been omitted that would render such information false or misleading in any materialrespect. The information has not been independently verified by us, the Joint Sponsors, the[REDACTED], the [REDACTED], the [REDACTED], any of the [REDACTED], any oftheir respective directors and advisors, or any other persons or parties involved in the[REDACTED] (excluding Frost & Sullivan), and no representation is given as to itsaccuracy. Accordingly, the information from official and non-official sources containedherein may not be accurate and should not be unduly relied upon. For a discussion of risksrelating to our industry, see “Risk Factors — Risks Relating to Our Business and Industry.”

SOURCE OF INDUSTRY INFORMATION

We commissioned Frost & Sullivan to conduct research, provide an analysis of, and to preparea report on the markets in which we operate. Founded in 1961, Frost & Sullivan is an independentmarket research and consulting company that provides industry research, market strategies, growthconsulting and corporate training services. We incurred a total of USD109,400 in fees and expensesfor the preparation of the Frost & Sullivan Report.

In preparation of the Frost & Sullivan Report, Frost & Sullivan undertook both primary andsecondary research using a variety of resources. Primary research involved interviewing keyindustry experts and leading industry participants. Secondary research involved analyzing data fromvarious publicly available data sources, including company reports, independent research reportsand Frost & Sullivan’s own internal database.

The Frost & Sullivan Report was compiled based on the following assumptions: (i) China’ssocial, economic, and political environment is likely to remain stable in the forecast period; and (ii)key drivers of the related industry are likely to remain stable in the forecast period.

We have extracted certain information from the Frost & Sullivan Report in this section andother sections of this Document to provide our potential [REDACTED] with a more comprehensivepresentation of the industry in which we operate. Our Directors confirm to the best of theirknowledge and that after taking reasonable enquiries, that there have been no material adversechanges in the overall market information since the date of the Frost & Sullivan Report that wouldmaterially qualify, contradict or have an impact on such information.

INDUSTRY OVERVIEW

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OVERVIEW OF RETAIL MARKET IN CHINA

China’s retail industry experienced a fast growth over the past three decades along with arobust economic growth and rising per capita disposable income. According to the National Bureauof Statistics of China, the annual per capita disposable income for all households in China grewfrom RMB23.8 thousand in 2016 to RMB31.3 thousand in 2020, representing a CAGR of 7.1%. Thepositive economic development has been driving the growth of per capita consumption expenditurein China. According to the Frost & Sullivan Report, per capita consumption expenditure in Chinaincreased from RMB17.1 thousand in 2016 to RMB22.0 thousand in 2020 and is estimated tofurther increase to RMB31.1 thousand in 2025. Along with the rapidly increasing per capitaconsumption expenditure, China’s retail market has been growing, and the trend will continue.According to the Frost & Sullivan Report, the size of China’s retail market by GMV increased fromRMB33.2 trillion in 2016 to RMB39.2 trillion in 2020 with the CAGR of 4.2% and is estimated toreach RMB52.1 trillion in 2025.

Market Size of Retail Market by GMV (China), 2016-2025E

0

10

20

30

40

50

60

70

2016 2024E2023E2022E2021E2020201920182017 2025E

33.2

49.446.844.341.7

39.240.837.836.6

52.1

China Retail Market 5.9%4.2%

CAGR 2020-2025ECAGR 2016-2020

(RMB in Trillion)

Source: Frost & Sullivan

OVERVIEW OF LIFESTYLE PRODUCT RETAIL MARKET IN CHINA

Lifestyle products generally refer to consumable household products, including beauty andskincare products, bags, accessories, small electronics, textile products, toys, leisure food, digitalaccessories and daily consumables. Driven by the middle-class expansion, improved standards ofliving, individualized consumption preferences and trendy taste of the Generation Z who were bornbetween 1995 and 2009 and Millennials who were born between 1982 and 1994, the lifestyleproduct market has become one of the largest retail market segments in China in terms of marketsize by GMV. According to the Frost & Sullivan Report, in 2020, lifestyle product retail representedapproximately 9.2% of the retail market size in China.

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Market Size

Driven by rapid economic growth, consumption upgrade, and prevalence of modernconsumption culture, the lifestyle product market in China experienced a rapid development overthe past two decades. According to the Frost & Sullivan Report, the market size by GMV of China’slifestyle product retail market increased from RMB2,830.2 billion in 2016 to RMB3,595.8 billionin 2020, representing a CAGR of 6.2% during this period, and is estimated to reach RMB5,802.6billion in 2025, representing an estimated CAGR of 10.0% from 2020 to 2025. China’s lifestyleproduct market has become one of the fastest growing markets among all retail segments in itsdomestic market, according to the Frost & Sullivan Report.

Market Size of Lifestyle Product Retail Market by GMV (China), 2016-2025E

0

1,000

2,000

3,000

4,000

5,000

6,000

2016 2024E2023E2022E2021E2020201920182017 2025E

2,830.2

5,430.05,053.0

4,666.64,183.8

3,595.83,743.03,397.2

3,095.5

5,802.6

Lifestyle Products 10.0%6.2%

CAGR 2020-2025ECAGR 2016-2020

(RMB in Billion)


Market Trends

In order to provide consumers with quality products and a pleasant shopping experience,lifestyle product retailers have to manage their products, stores and suppliers in a comprehensivemanner. Lifestyle product retailers who are able to (i) possess the business acumen to anticipatemarket trends, (ii) keep abreast of market trends, and (iii) work closely with business partners invarious aspects, such as product design, manufacturing, display and distribution, are better-positioned to capture consumer needs. According to the Frost & Sullivan Report, the key trends inthe lifestyle product market are as follows:

• Younger generation’s growing purchasing power and more personalized tastes.Millennials and Generation Z, defined as those who were born between 1982 and 2009,have contributed the most to various segments in China’s lifestyle product market. Theytend to place more emphasis on (i) the design of lifestyle products that can reflectindividualized preference, novelty and aesthetics; (ii) product diversity and brand image;(iii) good value for money; and (iv) shopping experience that features pleasantdiscoveries.

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• Rising of Generation Z. The number of generation Z was approximately 260 million in2020. The consumption ability of generation Z is strong and on the rise. In 2020, themonthly per capita disposable income of generation Z exceeded RMB3,500, farexceeding RMB2,682 of the per capita disposable income of residents in China. Theconsumption expenditure of generation Z accounted for about 13%-15% of the totalhousehold expenditure in China in 2020. As generation Z, in terms of its population, ageand purchasing power, is still in the growth stage, it is expected that the per capita annualexpenditure of generation Z will show a rapid growth trend in the next few years. Thediversification of consumption scenarios and modes and the development of Internet andsocial media have been providing more diversified and convenient consumptionopportunities for generation Z.

• Customers’ open-mindedness and optimism towards new brands. Driven by customers’increasing demands for personalized merchandise and service that can reflect theirunique personalities, domestic and foreign new brands who demonstrate fast productiteration, innovative product design and creative marketing strategies have been growingrapidly.

• Customer-centric offline shopping experience with online social DNAs. Offline retailstores can provide consumers with in-person, comfortable and sometimes surprise-filledshopping experiences. The Generation Z and Millennials often check product reviews inonline communities or platforms before ordering, and post eye-catching digital contentson the same platforms after purchasing. Consumer behavior and brand image will becontinuously influenced by social media.

• Digital operation that could timely respond to the changing consumer needs. To trackthe ever-changing market conditions and satisfy consumer preference, sophisticateddigital solutions that improve the efficiency of network and management have becomethe bedrock of the day-to-day operation of lifestyle retailers. Digital solutions includingdata analytical tools are typically adopted in front-end store operation, warehousing andlogistics for inventories, and supply chain management.

OVERVIEW OF SPECIALTY RETAIL MARKET IN CHINA

Within the lifestyle product retail market, specialty retail refers to a new retail model thathighlights products’ unique concepts and styles, entertaining functionalities with creative andfashionable designs, and an immersive shopping experience. Specialty retail can be furtherclassified into featured variety retail, beauty retail, pop toys retail and others.

Featuring the fashionable designs, individualized shopping experiences and broad shoppingchoice, specialty retail primarily targets young customers. Innovative decorations and well-maneuvered presentations afford customers with a sense of adventure, naturally prolongingcustomers’ stays and enriching their shopping experience. Moreover, with unique themes and brandpersonalities, specialty retailers are better-positioned to build differentiated images, expand thecustomer base and strengthen customer loyalty.

According to the Frost & Sullivan Report, the market size of specialty retail by GMV hasexperienced a fast expansion in recent years, increasing from RMB129.8 billion to 195.2 billionfrom 2016 to 2020, marking a CAGR of 10.7%. By estimates, the market size by GMV will reachRMB475.0 billion in 2025, highlighting an estimated CAGR of 19.5% from 2020 to 2025. Morespecifically, each segment of the specialty retail market has undergone rapid growth. For example,

INDUSTRY OVERVIEW

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featured variety retail is currently the largest segment by GMV, having grown from RMB64.4billion to 91.0 billion from 2016 to 2020, representing a CAGR of 9.0%, and, by estimates, it willcontinue to grow from RMB91.0 billion to RMB205.9 billion from 2020 to 2025, representing anestimated CAGR of 17.7%.

The following chart illustrates the market size of specialty retail market by segments in Chinain the years presented:

0

50

100

150

200

250

300

350

400

450

500

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E

38.235.031.526.922.212.9 7.414.3

10.015.8

12.818.5 17.4

18.9 25.2

88.1110.1

130.7151.6

174.3

45.1

64.4

129.8151.0

178.0207.7 195.2

251.9

308.1

361.8

416.7

475.0

74.787.4

99.6 91.0

116.4

139.1

160.4

182.9

205.9

52.0 62.0 72.6 67.932.0 39.2 47.2 56.6

Featured Variety

CAGR

9.0%

2016-2020

17.7%

2020-2025E

Beauty 10.8% 20.7%Pop Toys 26.5% 24.5%Others 7.7% 17.1%

Total 10.7% 19.5%

(RMB in Billion)

Market Size of Specialty Retail Market by Segments (China), 2016-2025E

17.0


Value Chain Analysis of the Specialty Retail Market in China

The value chain of the specialty retail market in China consists mainly of three stakeholders,including upstream suppliers, specialty retailers, and customers. The upstream consists primarily of(i) raw material providers, (ii) domestic and international brand owners and manufacturers, and (iii)OEM and ODM contractors. Through direct cooperation, importers and local agents, the upstreamactors, provide specialty retailers like ourselves with materials and products. By our regular chain,franchising chain and voluntary chain, customers can purchase a variety of products, such as colorcosmetics, pop toys, and household products.

After procurement from the upstream players, specialty retailers at the midstream providevarious kinds of products to downstream customers, with major roles of procurement, storage,processing, warehousing, transportation and delivery. The midstream specialty retailers mainlyoperate three types of retail chains to approach the downstream customers, including (i) regularchains which are owned and managed by the specialty retailers; (ii) franchising chains which areowned and operated by franchisees and licensed to use brands and business model to sell and marketa service or product of the specialty retailers; and (iii) voluntary chains which are owned byindependent retailers, operating under the guidance of the specialty retailers. The products providedto the downstream customers include but not limited to cosmetics, pop toys, stationary, snack food,beverage and household products.

Our Group positions as a midstream participant along the value chain which mainly involvesthe provision of retailing services of specialty products to the downstream customers and thesourcing of the goods from the upstream suppliers.

INDUSTRY OVERVIEW

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The following chart illustrates the key players in the supply chain, the relationships amongthem and typical business flow in specialty retail market:

Upstream(Suppliers and providers)

Raw material providers

Domestic and international brandowners and manufacturers

OEM and ODM contractors

Midstream(Specialty retailers)

Downstream(Customers)

Customers

Regular chain

Franchising chain

Voluntary chain

Specialty retailers

Colour cosmetics

Pop toys andstationery

Fashion andaccessories

Daily supplies and household products

Beauty and skincareproducts

Food, beverages andsupplements

Others

...

Importers

Directcooperation

Agencies

Specialty Retail Business Flow:

Third-party and otherproduct business

Own productbusiness

Productdesign

Sourcing rawmaterial andprocurement

Manufacturingand

processing

Qualitycontrol

Warehousingand

inventorycontrol

Receivingorders

Transportationand

delivery

Sales ofproducts

Customerservice and

support


Market Drivers and Trends

According to the Frost & Sullivan Report, the key drivers and trends of specialty retail inChina include:

• Pursuit of personalized lifestyle. As consumers’ living standards and disposable incomecontinue to rise in China, they focus more on the quality and unique design of lifestyleproducts. Specialty retailers are therefore encouraged to continuously improve onlifestyle product portfolios with unique life philosophy and aesthetic designs so as tomeet each customer’s way of life.

• Product diversification. Customers, especially the Generation Z and Millennials, havemore diverse and personalized needs for lifestyle products, caring more than ever beforeabout a product’s differentiated functions, innovative elements, and fashionable features.The ever-increasing debuts of innovative products through brand collaboration andproduct customization, such as limited-edition products, demonstrate the growingmarket trend for a more diverse product portfolio that can effectively address customers’different needs.

• Demand for surprise-filled and immersive shopping experience. In the era of “rapidconsumption”, consumers prefer surprise-hunting experiences through sensoryparticipation in uniquely themed shopping arena. Immersed in an aesthetically pleasingand surprising environment, curious customers are excited for an unknown serendipity,which drives them to make more purchases.

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• Ever-increasing impact of social media and Key Opinion Leader. The reviews andevaluations on lifestyle retail brands within their social communities are changingMillennials and Generation Z’s shopping preferences. China’s Key Opinion Leader(“KOL”) market has been one of the fastest-growing economic phenomena in recentyears. As consumers are growing stickier with the word-of-mouth in their social circlesas well as from KOLs, brands are extending their marketing efforts to KOL collaborationto promote products in the loyal fan base of these KOLs.

• Retailers’ on-going utilization of technology in optimizing operation. In order tocapture customers’ evolving demands efficiently, specialty retailers are utilizing bothsoftware- and hardware-based technologies to closely monitor a variety of functions instore, in supply chain and in daily transactions with upstream suppliers.

Entry Barriers

According to the Frost & Sullivan Report, the entry barriers of China’s specialty retail marketinclude:

• Exquisite merchandise selection capacity. Specialty retailers need to make forward-looking and exquisite merchandise selection to grasp the latest market dynamics. Inorder to effectively manage a large variety of products, specialty retailers need to havean in-depth understanding of supply chain integration, merchandise selection, sales andmarketing.

• Capital management. The initial capital investment to enter into the specialty retailmarket in China is relatively high. New market entrants must be able to acquiresufficient funds to pay for rent and unique decoration of the retail stores, to pay off theorder of specialty products from suppliers, and to cover labor costs. To maintain awell-functioned supply chain and operation of business, specialty retailers also need toensure their business partners’ fast capital turnover by adjusting terms of supply,delivery and payment.

• Brand power and branding capacity. New market entrants must establish brandawareness among customers. The new entrants need to speak to customers’ values,deliver quality products and services, maintain consistent customer experiences andcommit to customer retention and loyalty. Unique brand positioning attracts targetcustomer groups by conveying certain life concepts or personality, thus buildingdifferentiated store image and expanding customer base.

• Data-driven marketing strategy. To closely monitor real-time consumer perception anddemand, specialty retailers need to make use of online channels, social media and KOLsas efficient marketing tools to broadcast brand awareness to a wider audience.

• Supply chain control. In response to consumers’ demand for thousands of uniquelydesigned and produced specialty products, new market entrants must be able to havesufficient inventory and logistics control, such as procuring, warehousing, transportationand selling. Leveraging excellent supply chain integration, marketing ability, strongsales channels and high sensitivity for market trends, leading market players are betterpositioned to secure best-in-class specialty products and enjoy stronger bargainingpower in the process.

INDUSTRY OVERVIEW

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Competitive Landscape in Specialty Retail Market in China

According to the Frost & Sullivan Report, competition in specialty retail market in China isintense and fragmented. Top five players have a total market size of RMB30.5 billion in terms ofGMV, accounting for approximately 15.6% of China’s specialty retail market by GMV in 2020. KKGroup was the third largest specialty retail market player in China in terms of GMV in 2020. Inaddition, KK Group is also the fastest-growing player among the top five specialty retail marketplayers in China in terms of GMV CAGR from 2018 to 2020. According to the Frost & SullivanReport, leading players are expected to gain more market share and the level of marketconcentration is expected to increase.

The table below sets forth the top five specialty retail market players in terms of GMV in2020:

Company 2

KK Group

Company 3

Company 4

Company 1

-1.7%

246.2%

-1.8%

-21.0%

-8.1%

9.0 (4.6%)

2.3 (1.2%)

2.1 (1.1%)

2.0 (1.0%)

15.1 (7.7%)

Groups/Companies GMV (RMB in Billion)/Market Share % 2018-2020 CAGR of GMV


Our business is unique in that we operate in all three major segments in China’s specialtyretail market, including featured variety, beauty and pop toys. Below are the competitive landscapesfor some of our major brands put in context with our major competitors. All the market share andsize information for respective markets are extracted from the Frost & Sullivan Report.

Competitive landscape in featured variety in China’s specialty retail market

The featured variety market in China is characterized by the wide range of products offeredby a large number of companies, including, among others, small electronics, accessories, snacks,stationary, home appliances, perfumes and beverages. As a strategy to stand out amongst thenumerous competitors and products, a unique brand positioning is key. We provide customers aselection of quality products ranging from beauty products to household products, and focus oninnovative design ideas, delicately designed “life-scenario-based” displays, strong category styleand surprise-hunting shopping experience.

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The featured variety market is highly competitive. According to the Frost & Sullivan Report,in 2020, the top five brands accounted for approximately 17.8% of the featured variety segment inChina’s specialty retail market by GMV. The top five brands are expected to gain more marketshares, and the level of market concentration is expected to increase. Our brands, including KKVand KK Guan, generated RMB1.6 billion by GMV in 2020, ranking fourth in featured variety inChina’s specialty retail market with market share of approximately 1.8%. According to the Frost &Sullivan Report, as a pioneer of China featured variety retail industry, the sales of our brands haveskyrocketed in recent years, boasting a GMV CAGR of 194.9% from 2018 to 2020, drasticallyoutpacing any of our major competitors. Overall, KKV and KK Guan are regarded with strongperformance in cost-effectiveness, quality, supply chain, brand awareness as well as marketing.

The table below sets forth the details of the top five featured variety specialty brands in Chinaby GMV in 2020:

Rank by

GMV Brand Brand positioning Business model

Number ofstores in

China as ofDecember 31,

2020

2020GMV inChina in

RMBbillion

Marketshare

2018-20CAGR of

GMV

% %

1 . . . . . Brand A Fast-growing globalvalue retaileroffering design-led lifestyleproducts

Mainly franchisingmodel,supplemented byself-owned model

2,768 9.0 9.9% (1.7%)

2 . . . . . Brand B Japaneseminimalistic andsimple designstyle, andreasonable price

Mainly self-ownedmodel,supplemented byfranchising model

289 2.1 2.3% (1.8%)

3 . . . . . Brand C Fast fashion brandand moderateprice


~800 2.0 2.2% (21.0%)

4 . . . . . KKV &KKGuan

Aesthetic spacedesign, strongcategory style,surprise-huntingshoppingexperience aswell as cost-effective qualityproducts

KKV mainlyself-ownedsupplemented byfranchisingmodel; KK Guanmainlyfranchisingmodel,supplemented byself-owned model

323 1.6 1.8% 194.9%

5 . . . . . Brand D Swedish designstyle, simplicitystyle, affordableprice

Mainly franchisingmodel,supplemented byself-owned model

~320 1.4 1.6% (15.9%)


INDUSTRY OVERVIEW

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Competitive landscape in beauty specialty retail market in China

According to the Frost & Sullivan Report, the multinational beauty companies in globalbeauty industry are still in a strong position. With strong R&D capability, marketing strategies andbrand reputation, overseas beauty players are firmly taking the leading position in the global beautyindustry. Thanks to customers’ high dependence on offline trials as well as multi-choice and priceadvantages brought by the beauty collection mode, domestic collection stores have developedrapidly in the past two years.

In 2020, the top five brands accounted for approximately 20.6% of beauty specialty retailmarket in China in terms of GMV. According to the Frost & Sullivan Report, the top five leadingplayers are expected to gain more market shares and the market concentration is estimated to behigher. Our “THE COLORIST” brand, focusing on cosmetics collection, has developed rapidly withhigh foot-traffic and conversion rate since 2019, boasting a GMV CAGR of 2,887.5% from 2019to 2020 that has substantially outpaced any of our major competitors. THE COLORIST is amongthe top five beauty specialty retailers in China with market share of approximately 0.9% in termsof GMV in 2020. According to the Frost & Sullivan Report, THE COLORIST, as a new leadingplayer of China’s beauty specialty retail industry, presents overall good performance in cost-effectiveness, quality, supply chain, fashionable experience as well as marketing.

The table below sets forth the details of the top five beauty specialty brands in China by GMVin 2020:

Rank by


Number ofstores in


2020

2020GMV inChina by

RMBbillion

Marketshare

2018-20CAGR of

GMV

% %

1 . . . . . Brand E Chain stores ofpersonal careproducts

Self-ownedmodel only

~4,000 10.6 15.6% (3.7%)

2 . . . . . Brand F Open and modernstyle cosmeticsretailer


~218 1.9 2.8% 1.8%

3 . . . . . THECOLORIST

Large new makeupcollection store,quality fast fashion,affordable beautymakeup retailer,incubation platformfor global high-quality cosmeticsbrands


229 0.6 0.9% 2,887.5%(1)

4 . . . . . Brand G High quality, easy touse make-upproducts


~116 0.5 0.7% (8.2%)

INDUSTRY OVERVIEW

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Rank by


Number ofstores in


2020

2020GMV inChina by

RMBbillion

Marketshare

2018-20CAGR of

GMV

% %

5 . . . . . Brand H Cutting-edge supermakeup collectionstore, young peopleone-stopprofessional beautyand cosmeticsretailer

Franchisingmodel only

270 0.4 0.6% 166.7%(1)


Note:

(1) The CAGR of GMV for THE COLORIST and Brand H refers to the data from 2019 to 2020, instead of 2018 to 2020,because both THE COLORIST and Brand H commenced their business from 2019.

Competitive landscape in pop toy specialty retail market in China

According to the Frost & Sullivan Report, pop toy refers to toys that highlight pop contentdistinctly designed and infused with aesthetic sensibility, or licensed content featured with movie,animation or game characters. The market size of pop toys in China was approximately RMB18.9billion in 2020 and is expected to increase to RMB56.6 billion in 2025, representing an estimatedGMV CAGR of 24.5% between 2020 and 2025, according to the Frost & Sullivan Report. As popcultures continue to develop and attract more audiences in China, customers are growing anddiversifying. According to the Frost & Sullivan Report, currently, China pop toys market is underlow concentration.

Our brand “X11” has been experiencing a fast growth in recent years, achieving a GMV ofRMB13.9 million in 2020. According to the Frost & Sullivan Report, X11 presents overall goodperformance in terms of market acumen, data analytic capabilities, cooperation with IP licensorsand independent designers as well as integrated supply chain management.

Leveraging on our innovative, young and fashionable DNA, our brand X11 has successfullyobtained over 5,500 SKUs from 16 categories as of June 30, 2021, covering a wide selection of poptoys, including blind boxes, BJD dolls, assembled models, boutique models and quadratic models.With an in-depth understanding of the pop culture among the latest generation, we collaborate withIP holders that are of high popularity, good product quality, and high cultivation potential. As such,we boast our identity not only as a channel for selling pop toys, but a “pop toy theater”, animmersive gathering space for young customers.

Shopping in our X11 stores provides our customers exciting, interactive experiences, whichhelp us establish strong emotional ties with our customers. Located in high-end shopping malls withhigh foot-traffic, our X11 stores have 3-meter-high, blind-box walls and Angel Boy walls that areappealing to young customers for photo taking, and have ignited a new trend of taking pictures atX11 stores on social media.

INDUSTRY OVERVIEW

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This section sets out summaries of certain aspects of the PRC laws and regulations which arerelevant to the operation and business of our Company.

REGULATIONS RELATING TO FOREIGN INVESTMENT

On January 1, 2020, the PRC Foreign Investment Law (《中華人民共和國外商投資法》) (the“Foreign Investment Law”) promulgated by the NPC and the Regulations for Implementation ofthe PRC Foreign Investment Law (《中華人民共和國外商投資法實施條例》) promulgated by theState Council came into effect and became the principal laws and regulations governing foreigninvestment in the PRC, replacing three previous major laws regulating foreign investment in thePRC, namely, the Sino-foreign Equity Joint Venture Enterprise Law (《中華人民共和國中外合資經營企業法》), the Sino-foreign Cooperative Joint Venture Enterprise Law (《中華人民共和國中外合作經營企業法》), and the Wholly Foreign-invested Enterprise Law (《中華人民共和國外資企業法》), together with their implementation rules and ancillary regulations.

According to the Foreign Investment Law, “foreign investment” refers to the investmentactivities conducted directly or indirectly by foreign individuals, enterprises or other entities in thePRC, including the following circumstances: (i) the establishment of foreign-invested enterprises inthe PRC by foreign investors solely or jointly with other investors; (ii) a foreign investor’sacquisition of shares, equity interests, property portions or other similar rights and interests ofenterprises in the PRC; (iii) investment in new projects in the PRC by foreign investors solely orjointly with other investors; and (iv) investments made by foreign investors through means providedin laws, administrative regulations, or other methods prescribed by the State Council.

The Foreign Investment Law and the Implementation Regulations provide that a system ofpre-entry national treatment and negative list shall apply to the administration of foreigninvestment, where “pre-entry national treatment” means that the treatment given to foreigninvestors and their investments at market entry stage is no less favorable than that given to domesticinvestors and their investments, and “negative list” means the special administrative measures forforeign investment’s entry to specific fields or industries. Foreign investments not in the fields ofthe negative list will be granted national treatment. Foreign investors shall not invest in theprohibited fields as specified in the negative list, and foreign investors who invest in the restrictedfields shall comply with certain special requirements on shareholding and senior managementpersonnel, etc.

On December 30, 2019, the MOFCOM and the State Administration of Market Regulation (the“SAMR”) jointly promulgated the Measures for Information Reporting on Foreign Investment(《外商投資信息報告辦法》), which became effective on January 1, 2020. Pursuant to themeasures, where a foreign investor directly or indirectly carries out investment activities withinPRC, the foreign investor or the foreign-invested enterprise shall submit the investment informationto the competent commerce department through the enterprise registration system and the nationalenterprise credit information publicity system.

REGULATIONS RELATING TO COMMERCIAL FRANCHISING

The principal legal provisions governing commercial franchising are set out in the Regulationson the Administration of Commercial Franchising (《商業特許經營管理條例》) (the “FranchisingRegulations”) promulgated by the State Council, which took effect on May 1, 2007, theAdministrative Measures on the Filing of the Commercial Franchise (《商業特許經營備案管理辦法》) promulgated by the MOFCOM, which took effect on February 1, 2012, and the Administrative

REGULATORY OVERVIEW

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Measures on the Information Disclosure of Commercial Franchising (《商業特許經營信息披露管理辦法》) promulgated by the MOFCOM, which took effect on April 1, 2012. Commercial franchisingrefers to the business activities where a franchisor, being an enterprise with registered trademarks,corporate logos, patents, proprietary technology, or other business resources, licenses throughcontracts its business resources to the franchisees, being other business operators, and thefranchisees carry out business operation under a uniform business model and pay franchising feesto the franchisor pursuant to the contracts.

The Franchising Regulations set forth a number of prerequisite requirements for franchisors,including possession of a mature business model, capability to provide business guidance, technicalsupport, and business training to the franchisees, and ownership of at least two directly-operatedstores which shall have been in operation for at least one year in China. Those regulations also setforth a number of requirements governing the franchise agreements. For example, franchisors andfranchisees are required to enter into franchising agreements containing certain required terms, andthe franchise term thereunder shall be no less than three years unless otherwise agreed by thefranchisee. The franchisor shall disclose particular information to franchisees in writing at least 30days prior to the execution of the franchising agreements, file with the MOFCOM or its localcounterparts for record within 15 days after executing the first franchise agreement, and apply foralteration within 30 days after occurrence of any changes to the franchisor’s business registration,business resources, and the franchisee store network throughout China. Furthermore, the franchisorshall report the execution, revocation, termination, and renewal of the franchise agreementsoccurring in the previous year to MOFCOM or its local counterparts within the first quarter of eachyear.

REGULATIONS RELATING TO PRODUCT LIABILITY AND CONSUMER PROTECTION

The PRC Product Quality Law (《中華人民共和國產品質量法》) (the “Product QualityLaw”) promulgated by the SCNPC, which took effect on September 1, 1993, and was amended onDecember 29, 2018, sets out the requirements to strengthen quality control of product and themeasures that sellers shall adopt to maintain the quality of products for sale. Pursuant to the ProductQuality Law, sellers shall establish and implement purchase inspection and acceptance system andverify the product qualification certificate and other marks. Sellers shall not mix impurities orimitations into products, or take counterfeit goods as genuine ones, defective products as good ones,or substandard products as standard ones. Violations of the Product Quality Law may result inconfiscation of illicit products and imposition of fines. In addition, relevant sellers will be orderedto suspend its operations, with business license revoked and criminal liability incurred in seriouscases. According to the Product Quality Law, consumers or victims who suffer injuries or propertylosses due to product defects may demand compensation from either the producer or the seller.Where the liability lies with the producer, the seller shall, after settling the claim, have the right torecover such claim from the producer, and vice versa.

The Law of PRC on the Protection of the Rights and Interests of Consumers (《中華人民共和國消費者權益保護法》) (the “Consumer Protection Law”) promulgated by the SCNPC, whichbecame effective on January 1, 1994, and was amended on October 25, 2013, sets out theobligations of business operators and the rights and interests of the consumers in China. Pursuantto the Consumer Protection Law, business operators shall ensure that their goods or servicesprovided satisfy the requirements for personal or property safety, and provide consumers withauthentic and complete information about the quality, function, usage and shelf life of the productsor services. Where a business operator has discovered a defect in its goods or services providedwhich may harm personal or property safety, it shall immediately report to the relevant

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administrative authorities and notify consumers, and adopt measures such as suspension of selling,alert, recall, decontamination, and destruction. Violations of the Consumer Protection Law mayresult in warning, the confiscation of illegal income, and the imposition of fines. In addition,relevant business operator will be ordered to suspend its operations, with business license revokedand criminal liability incurred in serious cases. According to the Consumer Protection Law, aconsumer whose legal rights and interests are prejudiced during the purchase or use of goods maydemand compensation from the seller. Where the liability lies with the producer or another sellerthat provides the goods to the seller, the seller shall, after settling the claim, have the right torecover such claim from that manufacturer or such other sellers. Consumers or parties who sufferinjuries or property losses due to product defects may demand compensation from the producer aswell as the seller. Where the liability lies with the producer, the seller shall, after settling the claim,have the right to recover such claim from the producer, and vice versa.

REGULATIONS RELATING TO THE CIRCULATION OF COMMODITIES

Food Sales

According to the PRC Food Safety Law (《中華人民共和國食品安全法》) promulgated bythe SCNPC, as effective on June 1, 2009 and most recently amended on April 29, 2021, the PRCgovernment has implemented a licensing system for food manufacturing and food businessoperations. Food safety management system and inspection and recording system for the purchasedfood are required for food operators, and recording system for sale is required for food wholesalersadditionally.

Pursuant to the Administrative Measures for Food Business Licensing (《食品經營許可管理辦法》) promulgated by the State Administration for Food and Drug, as effective on August31,2015 and amended on November 17, 2017 respectively, a food operation license shall beobtained to engage in food selling within PRC. The application for a food operation license shallbe filed according to the type of business operators and business items of the operator. Foodbusiness items are divided into pre-packaged food sales, unpackaged food sales, special food sales(including health supplements, food for special medical purposes, infant formula milk powder, andother infant formula food), and other food sales. Food business operations without permit mayresult in confiscation of illegal income and illicit products and the imposition of fines.

Cosmetics Sales

The Cosmetics Supervision and Administration Regulation (《化妝品監督管理條例》)promulgated by the State Council, as effective on January 1, 2021, requires that the cosmeticsoperators shall establish and implement the inspection and recording system for the purchasedgoods to verify the market entity registration certificates, cosmetics registration or record-filingsituations and the ex-factory inspection conformity certificates of the suppliers, and shall truthfullyrecord, and keep the relevant vouchers. Special cosmetics and ordinary cosmetics may be importedonly after they are registered or filed with the drug regulatory department.

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Medical Devices Sales

Pursuant to the Regulation on the Supervision and Administration of Medical Devices (《醫療器械監督管理條例》) promulgated by the State Council, as effective on April 1, 2000 andamended on February 9, 2021, and the Measures on Supervision and Administration of BusinessOperations of Medical Devices (《醫療器械經營監督管理辦法》) promulgated by the StateAdministration for Food and Drug, as effective on October 1, 2014 and amended on November 17,2017, medical devices are administered by categorization according to their risk levels, no licenseor filing is required for the sale of Class I medical devices, filing is required for the sale of ClassII medical devices, and a license is required for the sale of Class III medical devices. Recordingsystem for the medical devices are required for the purchased medical devices operators, and arecording system for sale is required for wholesalers of Class II and Class III medical devices andretailers of Class III medical devices additionally.

Anti-Unfair Competition

The Anti-Unfair Competition Law of the PRC (《中華人民共和國反不正當競爭法》) (the“Anti-Unfair Competition Law”) promulgated by the SCNPC, as effective on December 1, 1993and amended on April 23, 2019, imposes prohibitions on improper market activities conducted bybusiness operators to undermine their competitors, including forging or counterfeiting trademark,names, and marks of others, infringing business secrets of others, making false or misleadingpublicity of goods through advertising or other means, bribing, infringing upon the goodwill ofcompetitors or the reputation of their products. Violations of the Anti-Unfair Competition Law mayresult in fines, the confiscation of illegal proceeds, and, in serious cases, revocation of businesslicense.

Pricing

The Pricing Law of the PRC (《中華人民共和國價格法》) (the “Pricing Law”) promulgatedby the SCNPC, as effective on May 1, 1998, imposes prohibitions on improper pricing activitiescommitted by business operators, including manipulating market prices, dumping goods at pricelower than the costs, forcing up prices, using false or misleading prices to deceive consumers orother business operators, price discrimination, etc. Failure to comply with the Pricing Law maysubject business operators to administrative sanctions such as warning, ceasing unlawful activities,compensation, confiscating illegal gains, and fines. The business operators may be ordered tosuspend business for rectification, or have their business license revoked if the circumstances areserious.

Advertising

According to the Advertising Law of the PRC (《中華人民共和國廣告法》) promulgated bythe SCNPC, as effective on February 1, 1995 and recently amended on April 29, 2021,advertisements shall not contain false or misleading contents, and shall not deceive or misleadconsumers. The Cosmetics Supervision and Administration Regulation also sets limitations on thecontent included in cosmetic advertising, where the cosmetic advertisement may not expressly orimpliedly indicate that the product has any medical effect, contain any false or misleadinginformation, or deceive or mislead consumers.

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E-Commerce

According to the E-commerce Law of the PRC (《中華人民共和國電子商務法》)promulgated by the SCNPC, which came into force on January 1, 2019, e-commerce operators arereferred to as natural persons, legal persons, and other non-legal-person organizations that engagedin the business activities of sale of goods or provision of services through Internet and otherinformation networks, including e-commerce platform operators, business operators using thee-commerce platform, and e-commerce business operators engaging in the sale of goods orprovision of services through their self-built website or other network services. E-commercebusiness operators shall display, prominently and continuously on their homepage, their businesslicense information, administrative licensing information relating to their business operation, orhyperlinks of the aforesaid information. E-commerce business operators shall disclose informationof goods or services fully, accurately and promptly, and protect consumers’ right to know and rightto choose. E-commerce business operators shall not use false transactions, fabricated user review,etc. to conduct false or misleading business promotion, so as to defraud or mislead consumers.

REGULATIONS RELATING TO FIRE PROTECTION

According to the Fire Prevention Law of the PRC (《中華人民共和國消防法》) (the “FirePrevention Law”), promulgated by the SCNPC, as effective on September 1, 1998 and lastamended on April 29, 2021, Interim Provisions on the Administration of Fire Protection DesignReview and Final Inspection of Construction Projects (《建設工程消防設計審查驗收管理暫行規定》), promulgated by the Ministry of Housing and Urban-rural Development, as effective on June1, 2020, a special construction project as provided in the Interim Provisions Regarding FireProtection shall be subject to fire protection design review before such project was commencedconstruction and shall be subject to fire protection inspection before such project was put into use.Other construction projects other than a special construction project shall be subject to fireprotection inspection recordation, and the competent department of housing and urban-ruraldevelopment shall conduct a random fire protection inspection thereof. If the project fails to passthe random fire protection inspection, such project shall be ceased to use. The constructor or userentity shall apply to the fire and rescue department of the local people’s government at or abovecounty level for a fire safety inspection before a public gathering place is put into use or opens forbusiness. Any construction illegally putting into use or operating a public gathering place withoutundergoing the fire safety inspection or without satisfying the fire safety requirements uponinspection shall be ordered to stop construction, stop use, stop production, or business operation,and be fined.

REGULATIONS RELATING TO INTELLECTUAL PROPERTY

Copyright

The Copyright Law of the PRC (《中華人民共和國著作權法》) (the “Copyright Law”)which was promulgated by the SCNPC on September 7, 1990 and amended on November 11, 2020provides that Chinese citizens, legal persons, or other organizations shall, whether published or not,enjoy copyright in their works, which include, among others, works of literature, art, naturalscience, social science, engineering technology, and computer software.

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Trademark

Trademarks are protected by the Trademark Law of the PRC (《中華人民共和國商標法》)which was promulgated on August 23, 1982 and last amended on April 23, 2019 as well as theImplementation Regulation of the PRC Trademark Law (《中華人民共和國商標法實施條例》)which was adopted by the State Council on August 3, 2002 and amended on April 29, 2014. InChina, registered trademarks include commodity trademarks, service trademarks, collective marks,and certification marks. The PRC Trademark Office of National Intellectual PropertyAdministration is responsible for the registration and administration of trademarks throughout thePRC, and grants a term of ten years to registered trademarks. Trademarks are renewable every tenyears where a registered trademark needs to be used after the expiration of its validity term. Aregistration renewal application shall be filed within twelve months prior to the expiration of theterm. A trademark registrant may license its registered trademark to another party by entering intoa trademark license contract. The licensor shall supervise the quality of the commodities on whichthe trademark is used, and the licensee shall guarantee the quality of such commodities. The PRCTrademark Law has adopted a “first come, first file” principle with respect to trademarkregistration. Where trademark for which a registration application has been made is identical orsimilar to another trademark which has already been registered or been subject to a preliminaryexamination and approval for use on the same kind of or similar commodities or services, theapplication for registration of such trademark may be rejected. Any person applying for theregistration of a trademark may not prejudice the existing right first obtained by others, nor may anyperson register in advance a trademark that has already been used by another party and has alreadygained a “sufficient degree of reputation” through such party’s use.

Patent

Patents are protected by the Patent Law of the PRC (《中華人民共和國專利法》) which waspromulgated on March 12, 1984 and recently amended on October 17, 2020. The Patent Officeunder the National Intellectual Property Administration is responsible for receiving, examining, andapproving patent applications. A patent is valid for a twenty-year term for an invention and aten-year term for a utility model or design. Except under certain specific circumstances providedby law, any third-party user must obtain consent or a proper license from the patent owner to usethe patent, or else the use will constitute an infringement of the rights of the patent holder.

REGULATIONS RELATING TO FOREIGN EXCHANGE

Under the PRC Foreign Currency Administration Rules (《中華人民共和國外匯管理條例》)promulgated by the State Council on January 29, 1996 and last amended on August 5, 2008 andvarious regulations issued by the State Administration of Foreign Exchange (the “SAFE”) and otherrelevant PRC government authorities, RMB is generally freely convertible for payments of currentaccount items, such as trade and service-related foreign exchange transactions and dividendpayments, but not freely convertible for capital account items, such as direct investment, loan, orinvestment in securities outside the PRC, unless the prior approval by the SAFE or its localcounterparts is obtained.

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On July 4, 2014, the SAFE promulgated the Notice of State Administration of ForeignExchange on Issues Relating to Foreign Exchange Control for Overseas Investment and Financingand Round-tripping by Chinese Residents through Special Purpose Vehicles (《國家外匯管理局關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知》) (the “SAFECircular No. 37”), which regulates foreign exchange matters in relation to the use of specialpurpose vehicles by PRC residents or entities to seek offshore investment and financing or conductround trip investment in China. Under SAFE Circular No. 37, a “special purpose vehicle” refers toan offshore entity established or controlled, directly or indirectly, by PRC residents or entities forthe purpose of seeking offshore financing or making offshore investment, using legitimate onshoreor offshore assets or interests, and “round trip investment” refers to direct investment in China byPRC residents or entities through special purpose vehicles, namely, establishing foreign-investedenterprises to obtain ownership, control rights, and management rights. SAFE Circular No. 37provides that, before making a contribution into a special purpose vehicle, PRC residents or entitiesare required to complete foreign exchange registration with SAFE or its local branch. On February13, 2015, the SAFE promulgated the Notice of the SAFE on Further Simplifying and Improving theForeign Currency Management Policy on Direct Investment (《國家外匯管理局關於進一步簡化和改進直接投資外匯管理政策的通知》), effective from June 1, 2015, which further amended SAFECircular No. 37 by requiring PRC residents or entities to register with qualified banks rather thanthe SAFE or its local branches in connection with their establishment of an offshore entityestablished for the purpose of overseas investment or financing.

REGULATIONS RELATING TO TAX

Enterprise Income Tax

The Law of the People’s Republic of China on Enterprise Income Tax (《中華人民共和國企業所得稅法》) and The Regulations for the Implementation of the Law on Enterprise Income Tax(《中華人民共和國企業所得稅法實施條例》) (collectively, the “EIT Laws”) were promulgated onMarch 16, 2007 and December 6, 2007, respectively, and were amended on December 29, 2018 andApril 23, 2019, respectively. According to the EIT Laws, taxpayers consist of resident enterprisesand non-resident enterprises. Resident enterprises are defined as enterprises that are established inChina in accordance with PRC laws, or that are established in accordance with the laws of foreigncountries but whose actual or de facto control is administered within China. Non-residententerprises are defined as enterprises that are set up in accordance with the laws of foreign countriesand whose actual administration is conducted outside China, but have established institutions orpremises in China, or have no such established institutions or premises but have income generatedfrom inside China. Under the EIT Laws and relevant implementing regulations, a uniform EIT rateof 25% is applicable. However, if non-resident enterprises have not formed permanentestablishments or premises in China, or if they have formed permanent establishment institutionsor premises in China but there is no actual relationship between the relevant income derived inChina and the established institutions or premises set up by them, the enterprise income tax is, inthat case, set at the rate of 10% for their income sourced from inside China.

Value Added Tax

The Interim Value-Added Tax Regulations of the People’s Republic of China (《中華人民共和國增值稅暫行條例》) (the “VAT Regulations”) was promulgated by the State Council onDecember 13, 1993 and last amended on November 19, 2017. Under the VAT Regulations, valueadded tax is imposed on goods sold in or imported into the PRC and on processing, repair andreplacement services provided with in the PRC.

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REGULATIONS RELATING TO EMPLOYMENT AND SOCIAL WELFARE

The Labor Contract Law

According to the Labor Law of the People’s Republic of China (《中華人民共和國勞動法》)promulgated on July 5, 1994 and last amended on December 29, 2018, enterprises and institutionsshall establish and improve their system of workplace safety and sanitation, strictly abide by staterules and standards on workplace safety, educate laborers in labor safety and sanitation in China.Labor safety and sanitation facilities shall comply with state-fixed standards. Enterprises andinstitutions shall provide laborers with a safe workplace and sanitation conditions which are incompliance with state stipulations and the relevant articles of labor protection. The PRC LaborContract Law (《中華人民共和國勞動合同法》), which was implemented on January 1, 2008 andamended on December 28, 2012, is primarily aimed at regulating employee/employer rights andobligations, including matters with respect to the establishment, performance and termination oflabor contracts. Pursuant to the PRC Labor Contract Law, labor contracts shall be concluded inwriting if labor relationships are to be or have been established between enterprises or institutionsand the laborers. Enterprises and institutions are forbidden to force laborers to work beyond thetime limit and employers shall pay laborers for overtime work in accordance with the laws andregulations. In addition, labor wages shall not be lower than local standards on minimum wages andshall be paid to laborers in a timely manner.

Social Insurance and Housing Fund

As required under the Regulation of Insurance for Labor Injury (《工傷保險條例》)implemented on January 1, 2004 and amended on December 20, 2010, the Provisional Measures forMaternity Insurance of Employees of Corporations (《企業職工生育保險試行辦法》) implementedon January 1, 1995, the Decisions on the Establishment of a Unified Program for Basic Old-AgedPension Insurance for Employees of Corporations of the State Council (《國務院關於建立統一的企業職工基本養老保險制度的決定》) issued on July 16, 1997, the Decisions on the Establishmentof the Medical Insurance Program for Urban Workers of the State Council (《國務院關於建立城鎮職工基本醫療保險制度的決定》) promulgated on December 14, 1998, the UnemploymentInsurance Measures (《失業保險條例》) promulgated on January 22, 1999, and the SocialInsurance Law of the People’s Republic of China (《中華人民共和國社會保險法》) implementedon July 1, 2011 and amended on December 29, 2018, enterprises are obliged to provide theiremployees in China with welfare schemes covering pension insurance, unemployment insurance,maternity insurance, labor injury insurance, and medical insurance. These payments are made tolocal administrative authorities and any employer that fails to contribute may be fined and orderedto make up within a prescribed time limit. In accordance with the Regulations on the Managementof Housing Funds (《住房公積金管理條例》) which was promulgated by the State Council on April3, 1999 and last amended on March 24, 2019, enterprises must register at the competent managingcenter for housing funds and upon the examination by such managing center of housing funds, theseenterprises shall complete procedures for opening an account at the relevant bank for the depositof employees’ housing funds. Enterprises are also required to pay and deposit housing funds onbehalf of their employees in full and in a timely manner.

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OVERVIEW

Our primary businesses commenced in 2015 with the launch of the first brand of our Group,KK Guan. We focus on operating specialty retail stores which offer distinctively characterizedmerchandise through the DTC model. We operate four specialty retail brands, namely KKV, THECOLORIST, X11 and KK Guan, primarily through an extensive retail network.

Mr. Wu and Mr. Guo are our Founders. Mr. Wu and Mr. Guo each has extensive experiencein the retail industry. For details of each of Mr. Wu’s and Mr. Guo’s biographies, please refer to thesection headed “Directors and Senior Management” of this document.

KEY MILESTONES

The following is a summary of our Group’s key development milestones:

Year Milestone

April 2015 . . . . . . . . . . . . . Established Guangdong Kuaike Electronic.

December 2015 . . . . . . . . . . Opened our first store of KK Guan in China.

April 2016 . . . . . . . . . . . . . Completed our series seed round of financing.

August 2017 . . . . . . . . . . . . Completed our series A round of financing.

April 2018 . . . . . . . . . . . . . Completed our series B round of financing.

September 2018 . . . . . . . . . . Completed our series B+ round of financing.

May 2019 . . . . . . . . . . . . . Launched the second brand of our Group, KKV.

June 2019 . . . . . . . . . . . . . Completed our series C+ round of financing.

September 2019 . . . . . . . . . . KKV was awarded Asia Cup “Main Store Innovation Leading Brand” in the Asia PacificRetailer Conference.Launched the third brand of our Group, THE COLORIST, our beauty specialty retailbrand.

October 2019 . . . . . . . . . . . Completed our series C round of financing.

November 2019 . . . . . . . . . . THE COLORIST has reached strategic cooperation with more than 30 well-knowncosmetics brands around the world.

December 2019 . . . . . . . . . . Completed our series D round of financing.

January 2020 . . . . . . . . . . . Completed our series Pre-D round of financing.Launched the fourth brand of our Group, X11.

March 2020 . . . . . . . . . . . . Launched the first single-building flagship store of KKV in Chengdu, the PRC.Launched the global strategy and first entered the Southeast Asian market by launchingour first overseas store in Central Park in Indonesia.

April 2020 . . . . . . . . . . . . . Completed our series D+ round of financing.

July 2020 . . . . . . . . . . . . . Launched the first flagship store of THE COLORIST in Shenyang Joy City, Shenyang,the PRC.We were awarded “China’s Most Investor-Focused Startups” from 36Kr.

July 2020 . . . . . . . . . . . . . Launched the first X11 flagship store in Shanghai, the PRC.

HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

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Year Milestone

August 2020 . . . . . . . . . . . . We were awarded the “Demonstration Case of Development Potential” from ChinaInternational Fair for Trade In Services.

September 2020 . . . . . . . . . . We were listed on the “2020 Hurun Global Unicorn List”.

October 2020 . . . . . . . . . . . Completed our series E round of financing.

February 2021 . . . . . . . . . . . Launched the first “THE COLORIST” master shop in Dongguan, the PRC.

May 2021 . . . . . . . . . . . . . Launched the global flagship store of “X11” in Shanghai, Chengdu, Dongguan, Wuhanand Shenyang, the PRC.

June 2021 . . . . . . . . . . . . . Completed our series F, series F+ and series F++ rounds of financing.

MAJOR OPERATING SUBSIDIARIES

As of the Latest Practicable Date, our Group comprised our Company and 37 subsidiaries,which are mainly established in the PRC. We had adopted a relatively complex group structure witha number of subsidiaries to facilitate our business and store management. We believe the adoptionof such structure would enable our Group to better manage and monitor the operations of ourbusinesses, as well as allows for flexibility and effective control in the relevant leasing, complianceand risk management.

The principal business activities, date of incorporation and date of commencement of businessof our major operating subsidiaries (each of which is wholly-owned by our Company) that made amaterial contribution to our results of operations during the Track Record Period are summarizedas follows:

Name of SubsidiaryPrincipal business

activities

Date ofestablishment andcommencement of

business

Guangdong Kuaike Electronic Commerce Co., Ltd.(廣東快客電子商務有限公司) . . . . . . . . . . . . . . . . . . . . . . . . .

Investment holdingand retail oflifestyle products

April 13, 2015

Shenzhen Mengke Supply Chain Technology Co., Ltd.(深圳市盟客供應鏈科技有限公司) (“Shenzhen Mengke SupplyChain”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provision of supplychain services

April 3, 2020

Dongguan Yueke Enterprise Management Service Co., Ltd.(東莞市悅客企業管理服務有限公司) (“Dongguan Yueke”) . . . . . . . .

Enterprisemanagementservices

August 11, 2015


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For more details of the shareholding changes of our subsidiaries, please refer to thesub-section headed “– Our Corporate History and Major Shareholding Changes of Our Group”below and “Appendix IV – Statutory and General Information – Further Information about OurGroup – 5. Changes in the Share Capital of Our Subsidiaries” in this document.

OUR CORPORATE HISTORY AND MAJOR SHAREHOLDING CHANGES OF OURGROUP

Our Company and Guangdong Kuaike Electronic

1. Establishment of Guangdong Kuaike Electronic

Guangdong Kuaike Electronic was established in the PRC on April 13, 2015, with an initialregistered capital of RMB10,060,000. The initial shareholders of Guangdong Kuaike Electronicwere Mr. Lin Jian (林劍), Mr. Wen Jiansheng (溫健勝), Ms. Shan Lixia (單麗霞) and Mr. Wu, withequity interests of 10%, 10%, 4% and 76% respectively. On January 19, 2016, (i) Mr. Wutransferred 8% equity interests in Guangdong Kuaike Electronic to Mr. Chen Hongcheng (陳宏城)(“Mr. Chen”) and another 13% to Dongguan Kuaike Investment Partnership (Limited Partnership)(東莞市快客投資合夥企業(有限合夥)) (“Dongguan Kuaike Investment”); (ii) Ms. Shan Lixiatransferred 2% equity interests in Guangdong Kuaike Electronic to Mr. Chen and another 2% toDongguan Kuaike Investment; and (iii) Mr. Lin Jian and Mr. Wen Jiansheng each transferred all ofits equity interests in Guangdong Kuaike Electronic to Dongguan Kuaike Investment, all at nilconsideration. Upon completion of the abovementioned equity transfers, Guangdong KuaikeElectronic was owned as to 55% by Mr. Wu, 35% by Dongguan Kuaike Investment and 10% as toMr. Chen. Each of Mr. Lin Jian, Mr. Wen Jiansheng, Ms. Shan Lixia and Mr. Chen is an IndependentThird Party.

2. Onshore Series Seed round of Financing – Capital Increase of Guangdong KuaikeElectronic

On March 31, 2016, Guangdong Kuaike Electronic entered into a capital increase agreementwith, among others, the series seed investors (the “Series Seed Investors”) set out below, pursuantto which the Series Seed Investors agreed to subscribe for additional registered capital ofGuangdong Kuaike Electronic in the amount and consideration as set forth below:

Name of Series Seed Investor

Amount ofRegistered Capital

SubscribedAggregate

Consideration

RMB RMB

Hongtu Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,183,529 10,000,000Shenzhen Capital Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591,765 5,000,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,775,294 15,000,000

Upon completion of the series seed financing, the registered capital of Guangdong KuaikeElectronic was increased from RMB10,060,000 to RMB11,835,294, and Guangdong KuaikeElectronic was owned as to, among others, 5% by Shenzhen Capital Group and 10% by HongtuVenture, respectively.

For further details of the investment described above, please refer to the subsections headed“Reorganization” and “[REDACTED] Investments” of this section.


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3. Onshore Series A round of Financing – Capital Increase of Guangdong Kuaike Electronic

On July 11, 2017, Guangdong Kuaike Electronic entered into a capital increase agreementwith, among others, the series A investors (the “Series A Investors”) set out below, pursuant towhich, the Series A Investors agreed to subscribe for additional registered capital of GuangdongKuaike Electronic in the amount and consideration as set forth below:

Name of Series A Investor


SubscribedAggregate

Consideration

RMB RMB

Bright Growth (Shenzhen) Equity Investment Fund Enterprise (LimitedPartnership) (璀璨成長(深圳)股權投資基金企業(有限合夥))(“Bright Growth”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204,958 4,390,000

Bright Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,167 1,610,000

Shanghai Black Algae Investment Management Center (Limited Partnership)(currently known as Shanghai Black Algae Information TechnologyPartnership (Limited Partnership)) (“Shanghai Black Algae”) . . . . . . . . 1,890,846 40,500,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,170,971 46,500,000

Upon completion of the series A financing, the registered capital of Guangdong KuaikeElectronic was increased from RMB11,835,294 to RMB14,006,265, and Guangdong KuaikeElectronic was owned as to, among others, 1.46% by Bright Growth, 0.54% by Bright Vision and13.5% by Shanghai Black Algae, respectively.

For further details of the investment described above, please refer to the subsections headed“Reorganization” and “[REDACTED] Investments” of this section.

4. Onshore Series B and Series B+ rounds of Financing – Equity Transfers and CapitalIncrease of Guangdong Kuaike Electronic

On March 29, 2018, Guangdong Kuaike Electronic entered into a share transfer and capitalincrease agreement (the “Series B Share Transfer and Capital Increase Agreement”) with,among others, the following then shareholders of Guangdong Kuaike Electronic and the series Binvestors (the “Series B Investors”) in relation to a series of equity transfers and subscriptions ofadditional registered capital of Guangdong Kuaike Electronic as set forth below.

(a) Equity Transfers of Guangdong Kuaike Electronic

Pursuant to the Series B Share Transfer and Capital Increase Agreement, (i) Mr. Chen agreedto transfer, and Mr. Wu agreed to acquire, RMB503,000 of the registered capital of GuangdongKuaike Electronic at the consideration of RMB503,000; and (ii) Shenzhen Capital Group andHongtu Venture agreed to transfer, and Dongguan Kuaike Investment agreed to acquire,RMB190,303 and RMB380,605 of the registered capital of Guangdong Kuaike Electronic at aconsideration of RMB5,000,000 and RMB10,000,000, respectively.


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(b) Capital Increase of Guangdong Kuaike Electronic

Pursuant to the Series B Share Transfer and Capital Increase Agreement, (i) Gongqingcheng,the then share incentive platform which held underlying shares originally reserved for incentivizingthe employees of Guangdong Kuaike Electronic, agreed to subscribe for RMB1,217,936 additionalregistered capital of Guangdong Kuaike Electronic at a consideration of RMB1,217,936; and (ii) theSeries B Investors set out below agreed to subscribe for additional registered capital of GuangdongKuaike Electronic in the amount and consideration set out as follows:

Name of Series B Investor


SubscribedAggregate

Consideration

RMB RMB

Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,014,947 30,000,000

Bright Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,215 1,100,000

Bright Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131,943 3,900,000

Shanghai Black Algae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507,473 15,000,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,691,578 50,000,000

On September 3, 2018, Matrix exercised its call options under the Series B Share Transfer andCapital Increase Agreement and agreed to subscribe for RMB676,631 additional registered capitalof Guangdong Kuaike Electronic at a consideration of RMB20,000,000 as series B+ financing.

Upon completion of series B and series B+ rounds of financing, the registered capital ofGuangdong Kuaike Electronic was increased from RMB14,006,265 to RMB17,592,410, andGuangdong Kuaike Electronic was owned as to, among others, 9.62% by Matrix, 1.38% by BrightGrowth, 1.18% by Bright Vision and 13.63% by Shanghai Black Algae, respectively.

For further details of the equity transfers and investments described above, please refer to thesubsections headed “Reorganization” and “[REDACTED] Investments” of this section.

5. Onshore Series C and C+ rounds of Financing – Equity Transfers and Capital Increaseof Guangdong Kuaike Electronic

On March 9, 2019, Guangdong Kuaike Electronic entered into a share transfer and capitalincrease agreement (the “Series C Share Transfer and Capital Increase Agreement”) with,among others, the then shareholders of Guangdong Kuaike Electronic and the series C investors (the“Series C Investors”) in relation to a series of equity transfers and subscriptions of additionalregistered capital. On May 10, 2019, Guangdong Kuaike Electronic further entered into a capitalincrease agreement (the “Series C+ Capital Increase Agreement”) with, among others, BrightVision and Wuyue Tianxia (as defined below) (the “Series C+ Investors”) for their subscription ofadditional registered capital of Guangdong Kuaike Electronic. The details of such equity transfersand subscriptions are as set forth below.


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(a) Equity Transfers of Guangdong Kuaike Electronic

Pursuant to the Series C Share Transfer and Capital Increase Agreement, Mr. Chen, DongguanKuaike Investment, Hongtu Venture and Bright Growth each agreed to transfer certain or all of theirrespective equity interests in Guangdong Kuaike Electronic to the Series C Investors for a price ofRMB56.84 per each RMB1 of the registered capital of Guangdong Kuaike Electronic in the amountand consideration set out as follows:

Name of Transferor Shareholder/Amount of Registered Capital Acquired/Transferred

Total Amountof Registered

CapitalAcquired

Aggregateconsideration

RMB RMB RMB

Mr. Chen DongguanKuaikeInvestment

HongtuVenture

BrightGrowth

Name of Series CInvestor(Transferee)

Redefine CapitalLimited(“Redefine”) . . . . . 266,160 401,462 401,462 – 1,069,084 60,769,595(Note)

Shanghai Black Algae . 145,886 – – – 145,886 8,292,160

Matrix . . . . . . . . . . 63,625 – 39,271 – 102,896 5,848,609

Bright Deshang . . . . . 27,329 – – – 27,329 1,553,380

Shenzhen Hongtai . . . . – – 362,191 – 362,191 20,586,936

Bright Vision . . . . . . – – – 242,173 242,173 13,765,113

Total Amount ofRegistered CapitalTransferred . . . . . . 503,000 401,462 802,924 242,173 1,949,559 110,815,793

Note: The aggregate consideration for Redefine acquiring such RMB1,069,084 registered capital of Guangdong KuaikeElectronic was the USD equivalent of RMB60,769,595.

(b) Capital Increase of Guangdong Kuaike Electronic

Pursuant to the Series C Share Transfer and Capital Increase Agreement, the following SeriesC Investors agreed to subscribe for additional registered capital of Guangdong Kuaike Electronicin the amount and consideration as set forth below:

Name of Series C Investor


SubscribedAggregate

Consideration

RMB RMB

Redefine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,795,249 116,333,387

Shenzhen Hongtai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608,205 39,412,116

Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,788 11,196,761

Shanghai Black Algae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244,979 15,874,766

Bright Deshang . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,893 2,973,859

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,867,114 185,790,889


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(c) Further Capital Increase of Guangdong Kuaike Electronic

Pursuant to the Series C+ Capital Increase Agreement, Bright Vision and Suzhou WuyueTianxia Venture Investment Center (Limited Partnership) (“Wuyue Tianxia”) agreed to subscribefor additional registered capital of Guangdong Kuaike Electronic in the amount and considerationas set forth below:

Name of Series C+ Investor


SubscribedAggregate

Consideration

RMB RMB

Bright Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,721 11,707,560

Suzhou Wuyue Tianxia Venture Investment Center (Limited Partnership) . . . 1,086,329 70,394,119

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,267,050 82,101,679

Upon completion of series C and series C+ rounds of financing, the registered capital ofGuangdong Kuaike Electronic was increased from RMB17,592,410 to RMB21,726,574, andGuangdong Kuaike Electronic was owned as to, among others, 13.18% by Redefine, 4.47% byShenzhen Hongtai, 9.05% by Matrix, 12.84% by Shanghai Black Algae, 0.34% by Bright Deshang,2.9% by Bright Vision, and 5% by Wuyue Tianxia. Guangdong Kuaike Electronic also became asino-foreign joint venture upon completion of series C financing.

For further details of the equity transfers and investments described above, please refer to thesubsections headed “Reorganization” and “[REDACTED] Investments” of this section.

6. Incorporation of our Company

Our Company was incorporated in the Cayman Islands as an exempted company with limitedliability on March 29, 2019. Upon incorporation, our Company had an authorized share capital ofUS$50,000 divided into 500,000,000 Shares with a par value of US$0.0001 each. One Share wasissued subsequently to the initial subscriber Vistra (Cayman) Limited and on the same daytransferred to MOGR, a company wholly-owned by Mr. Wu. An additional 5,999,999 Shares and4,000,000 Shares were allotted and issued by our Company to MOGR (previously known as MOGRInvestment Co., Ltd), a company wholly-owned by Mr. Wu, our co-founder and an executiveDirector and Starlight (previously known as Starryland Investment Co., Ltd), a companywholly-owned by Mr. Guo, our co-founder and an executive Director, on the same day.


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7. Onshore Series Pre-D, Series D and Series D+ rounds of Financing – Capital Increase ofGuangdong Kuaike Electronic

(a) Capital Increase of Guangdong Kuaike Electronic

On November 17, 2019, Guangdong Kuaike Electronic entered into a capital increaseagreement with, among others, the Series Pre-D investors (the “Series Pre-D Investors”) set outbelow, pursuant to which, the Series Pre-D Investors agreed to subscribe for additional registeredcapital of Guangdong Kuaike Electronic in the amount and consideration as set forth below:

Name of Series Pre-D Investor


SubscribedAggregate

Consideration

RMB RMB

Redefine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495,179.19 67,485,355.85

KK Brothers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 482,187.61 65,714,801.59

Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,095.65 46,349,839.95

Wuyue Tianxia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,340.15 9,450,002.61

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,386,802.60 189,000,000

On November 22, 2019, Guangdong Kuaike Electronic entered into a share transfer andcapital increase agreement with, among others, the series D investors (the “Series D Investors”) setout below, pursuant to which, (i) Bright Vision agreed to transfer, and KK Brothers agreed tosubscribe for, RMB256,103.9 registered capital of Guangdong Kuaike Electronic at theconsideration of RMB42,840,000.00; (ii) Gongqingcheng agreed to subscribe for RMB1,216,493.51additional registered capital of Guangdong Kuaike Electronic at a consideration ofRMB1,216,493.51; and (iii) the Series D Investors agreed to subscribe for additional registeredcapital of Guangdong Kuaike Electronic in the amount and consideration as set forth below:

Name of Series D Investor


SubscribedAggregate

Consideration

RMB RMB

KK Brothers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 818,293.40 136,880,734.61

Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253,681.31 42,434,759.60

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,071,974.71 179,315,494.21


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On March 24, 2020, Guangdong Kuaike Electronic entered into a capital increase agreementwith, among others, Shanghai Yiqian Enterprise Management Consulting Partnership (LimitedPartnership) (上海沂乾企業管理諮詢合夥企業(有限合夥)) (“Shanghai Yiqian”), pursuant to whichShanghai Yiqian agreed to subscribe for RMB292,929.29 additional registered capital ofGuangdong Kuaike Electronic at a consideration of RMB49,000,000 as series D+ round offinancing.

Upon completion of the above equity transfer and subscriptions, the registered capital ofGuangdong Kuaike Electronic was increased from RMB21,726,574 to RMB25,694,774.11, andGuangdong Kuaike Electronic was owned as to, among others, 9.3981% by Gongqingcheng,12.9694% by Redefine, 6.0092% by KK Brothers, 9.8869% by Matrix and 4.4615% by WuyueTianxia, respectively.

For further details of the subscription and investment described above, please refer to thesubsections headed “Reorganization” and “[REDACTED] Investments” of this section.

(b) Allotment and Issuance of Shares by our Company

On August 6, 2020, our Company entered into a preferred share and warrant purchaseagreement (the “August 2020 Preferred Share and Warrant Purchase Agreement”) with, amongothers, N5Capital Fund II, L.P. (“N5Capital”) and X Adventure Fund I L.P. (“X Adventure”),pursuant to which N5Capital and X Adventure each agreed to subscribe for, and our Companyagreed to issue, 124,851 Series D Preferred Shares and 83,694 Series D Preferred Shares at theconsideration of USD equivalent to RMB20,884,505.78 and RMB14,000,000, respectively.

For further details of the allotment and issue described above, please refer to the subsectionheaded “[REDACTED] Investments” of this section.

8. Offshore and Onshore Series E Financing – Allotment and Issue of Preferred Shares andWarrants by our Company and Capital Increase of Guangdong Kuaike Electronic

On July 10, 2020, our Company and Guandong Kuaike Electronic entered into a preferredshares purchase agreement (the “Series E Preferred Shares Purchase Agreement”) with, amongothers, the series E investors (the “Series E Investors”) set out under subsection (a) below, pursuantto which (i) our Company agreed to issue, and CMC Krypton, KK Brothers, INCE Capital Partners,L.P. (“INCE Capital”), Lighthouse Capital International Inc., Lighthousecap Fellow L.P.(“Lighthousecap Fellow”), Lighthousecap International Inc. (“Lighthousecap International”)and eWTP agreed to subscribe for, a total of 3,546,762 Series E Preferred Shares at a price ofUS$25.09 per share for an aggregate consideration of US$89,000,000; (ii) our Company agreed toissue, and CMC Krypton agreed to subscribe for, a warrant to purchase certain Preferred Shareswith the aggregate purchase price up to US$15,000,000 (the “CMC Warrant”); and (iii) ourCompany agreed to issue, and Shenzhen Hongtai and Matrix each agreed to subscribe for, a warrantcarrying the right for each of them to purchase from our Company certain number of Series EPreferred Shares reflecting their subscription of registered capital of Guangdong Kuaike Electronicas they were then yet to obtain outbound direct investments (ODI) approval for the subscription ofthe relevant Series E Preferred Shares (the “Hongtai Series E Warrant” and the “MatrixWarrant”).

On July 10, 2020, Guangdong Kuaike Electronic also entered into a capital increase agreementwith, among others, Shenzhen Hongtai and Matrix, pursuant to which Shenzhen Hongtai and Matrixagreed to subscribe for the additional registered capital of RMB506,062.02 of Guangdong KuaikeElectronic at an aggregate consideration of RMB90,000,000.


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Details of (i) the allotment and issuance of the Series E Preferred Shares; and (ii) thesubscription of additional registered capital at Guangdong Kuaike Electronic are set forth below:

(a) Allotment and issuance of Series E Preferred Shares by our Company

Name of Series E Investor

Number ofSeries E

Preferred SharesAggregate

Consideration

USD

CMC Krypton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,191,819 55,000,000KK Brothers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 797,025 20,000,000eWTP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,703 2,000,000INCE Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398,513 10,000,000Lighthouse Capital International Inc. . . . . . . . . . . . . . . . . . . . . . . . . 31,881 800,000Lighthousecap Fellow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,970 200,000Lighthousecap International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,851 1,000,000

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,546,762 89,000,000

RMB

Shenzhen Hongtai(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449,833 80,000,000Matrix(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,229 10,000,000

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506,062 90,000,000

Notes:

(1) On May 31, 2021, 449,833 Series E Preferred Shares were allotted and issued by our Company to Shanghai ChongyiEnterprise Management Consultation Partnership (Limited Partnership) (上海翀益企業管理諮詢合夥企業(有限合夥))(“Shanghai Chongyi”), a wholly-owned subsidiary of Shenzhen Hongtai which Shenzhen Hongtai assigned itsHongtai Series E Warrant to, pursuant to Shanghai Chongyi’s exercise of the Hongtai Series E Warrant. For detailsof the warrant, please refer to the subsections headed “Reorganization” and “[REDACTED] Investment” of thissection.

(2) On May 31, 2021, 56,229 Series E Preferred Shares were allotted and issued by our Company to Shanghai WeiliEnterprise Management Consultation Partnership (Limited Partnership) (上海緯礪企業管理諮詢合夥企業(有限合夥)(“Shanghai Weili”), an affiliate of Matrix which Matrix assigned its Matrix Warrant to, pursuant to Shanghai Weili’sexercise of the Matrix Warrant. For details of the warrant, please refer to the subsections headed “Reorganization”and “[REDACTED] Investment” of this section.

(b) Subscription of additional registered capital in Guangdong Kuaike Electronic

Name of Series E Investor


SubscribedAggregate

Consideration

RMB RMB

Shenzhen Hongtai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449,832.91 80,000,000Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,229.11 10,000,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506,062.02 90,000,000

Upon completion of series E financing, the registered capital of Guangdong Kuaike Electronicwas increased from RMB25,903,318.87 to RMB26,313,294.36, and Guangdong Kuaike Electronicwas held as to, among others, 5.4205% by Shenzhen Hongtai and 9.9893% by Matrix, respectively.

For further details of the allotment and issue described above, please refer to the subsectionsheaded “Reorganization” and “[REDACTED] Investments” of this section.


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9. Offshore Series F, Series F+ and Series F++ rounds of Financing

(a) Series F round of Financing

On March 30, 2021, our Company and Guandong Kuaike Electronic entered into a share andwarrant purchase agreement (the “First Series F Share and Warrant Purchase Agreement”) with,among others, (i) the series F investors (the “Series F Investors”) as set out in the below table,pursuant to which the Series F Investors (except for Qidian Equity Investment (Guangdong)Partnership (Limited Partnership) (奇點股權投資(廣東)合夥企業(有限合夥)) (“Qidian”) agreed tosubscribe, and our Company agreed to issue and allot, Series F Preferred Shares set forth in thebelow table at the purchase price of US$83.4554 per share; and (ii) Qidian, pursuant to which ourCompany agreed to issue, and Qidian agreed to subscribe for, a warrant carrying the right topurchase from our Company 599,123 Series F Preferred Shares as it was yet to obtain the outbounddirect investments (ODI) approval for the subscription of the relevant Series F Preferred Shares then( the “Qidian Warrant”). Details of series F round of financing of our Company are set forth asbelow:

Name of Series F Investor(1)Number of Series

F Preferred SharesAggregate

Consideration

USD

Harvest International Premium Value (Secondary Market) Fund SPC onbehalf of Harvest New Retail Investment SP (“Harvest International”) . . 119,825 10,000,000

Kamet Thrive 3 Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,825 10,000,000

Guolian Securities Global Investment SPC for the account of GuolianInternational China Consumer Fund I SP (“Guolian Securities”) . . . . . . . 119,825 10,000,000

Qidian(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599,123US$50,000,000 or

its USD equivalent

KK Brothers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,198,246 100,000,000

CMC II(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,737 15,000,000

ZUIKAKU CO., LIMITED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,912 5,000,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,396,493 200,000,000

Notes:

(1) Bright Capital Limited, a limited liability company incorporated in the British Virgin Islands and an IndependentThird Party, was originally also a Series F Investor subscribing for 239,649 Series F Preferred Shares under the FirstSeries F Share and Warrant Purchase Agreement. However, such investment did not proceed to completion as theconsideration has not been settled. On September 10, 2021, Bright Capital Limited irrevocably surrendered 239,649Series F Preferred Shares to our Company for cancellation, and our Company cancelled such 239,649 Series FPreferred Shares on the same day.

For further details, please see the section headed “Appendix IV – Statutory and General Information – FurtherInformation about Our Group – 2. Changes in Our Share Capital”.

(2) On the same date as the First Series F Share and Warrant Purchase Agreement (March 30, 2021) was entered into,Qidian provided Shenzhen Mengke Supply, an onshore wholly-owned subsidiary of our Company, a convertible loanwith the principal amount of USD50,000,000 (being the USD equivalent of RMB328,205,000 based on the thencentral parity rate as published by the People’s Bank of China). On April 9, 2021, our Company issued to Qidian awarrant to subscribe for an aggregate of 599,123 Series F Preferred Shares at a consideration of RMB328,205,000or its USD equivalent.

Upon Qidian’s completion of its ODI registrations and obtaining the relevant approvals from the PRC government forits subscription of the Series F Preferred Shares, Mengke fully settled the convertible loan of US$50,000,000 owedto Qidian on May 12, 2021. Qidian subsequently assigned the Qidian Warrant to its subsidiary, Shanghai YukuangEnterprise Management Consultation Partnership (Limited Partnership) (上海煜曠企業管理諮詢合夥企業(有限合夥))


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(“Shanghai Yukuang”), which Shanghai Yukuang fully exercised the Qidian Warrant on March 30, 2020 and ourCompany issued to Shanghai Yukuang an aggregate of 599,123 Series F Preferred Shares. The exercise price of suchwarrant (being the USD equivalent of RMB328,205,000) was fully paid by June 7, 2021.

(3) Pursuant to the CMC Warrant issued under the series E round of financing, CMC Krypton (or its designated affiliate)has the right to purchase from our Company certain number of Shares with the aggregate purchase price up toUS$15,000,000 at the subsequent round of equity financing of our Company after the date of the CMC Warrant. CMCKrypton assigned the CMC Warrant to CMC II, and CMC II fully exercised the CMC Warrant to subscribe for 179,737Series F Preferred Shares on March 30, 2021, and the aggregate consideration was settled on April 12, 2021.

(b) Series F+ round of Financing

On May 28, 2021, our Company and Guandong Kuaike Electronic entered into a sharepurchase agreement (the “Second Series F Preferred Share Purchase Agreement”) with, amongothers, the Series F+ investors (the “Series F+ Investors”) as set out in the below table, pursuantto which the Series F+ Investors agreed to subscribe for, and our Company agreed to issue and allot,Series F Preferred Shares set forth in the below table at the purchase price of US$83.4554 per share.Details of series F+ round of financing of our Company are set forth as below:

Name of Series F+ InvestorNumber of Series

F Preferred SharesAggregate

Consideration

USD

Angara Innovation Limited (“JD Angara”) . . . . . . . . . . . . . . . . . . . . . 479,298 40,000,000

Pluto Connection Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,737 15,000,000

CMBC International Holdings Limited . . . . . . . . . . . . . . . . . . . . . . . 59,912 5,000,000

STARWIN FUND SPC – SUNRISE FUND SP. . . . . . . . . . . . . . . . . . . 35,947 3,000,000

INCE Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,825 10,000,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 874,719 73,000,000

(c) Series F++ round of Financing

On June 4, 2021, our Company and Guandong Kuaike Electronic entered into a share purchaseagreement (the “Third Series F Preferred Share Purchase Agreement”) with, among others,Redview Capital Investment XI Limited (“Redview Capital”) as the series F++ investor, pursuantto which Redview Capital agreed to subscribe, and our Company agreed to issue and allot, 239,649Series F Preferred Shares at the purchase price of US$83.4553 per share in an aggregateconsideration of USD20,000,000.

On the same date, our Company entered into a share repurchase agreement with KK Brothers,pursuant to which our Company agreed to repurchase, and KK Brothers agreed to sell, 155,772Series F Preferred Shares for an aggregate purchase price of US$13,000,000.

For further details of the allotment and issue described above, please refer to the subsectionheaded “[REDACTED] Investments” of this section.


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10. RSU Scheme

We adopted the RSU Scheme on August 12, 2021 (the “Adoption Date”), for the purpose ofrecognizing and rewarding the RSU participants (including full time employees of the Group andany person who, in the sole opinion of the Board, has contributed or will contribute to the Group)for their contribution to the Group, to attract suitable personnel, and to provide incentives to themto remain with and further contribute to the Group. As of the Latest Practicable Date, no RSUs havebeen granted under the RSU Scheme.

To facilitate the administration of the RSU Scheme, on August 12, 2021, we have appointedFutu Trustee Limited, an Independent Third Party, as the trustee (the “RSU Trustee”) and KKEvergreen Holdings Co., Ltd, a company wholly owned by the RSU Trustee and an IndependentThird Party, as the nominee (the “RSU Nominee”), to hold the underlying Shares under the RSUScheme. As of the Latest Practicable Date, the RSU Nominee held an aggregate of 2,657,335Shares, all of which were underlying Shares of the awards under the RSU Scheme.

Details of the shareholding structure of our Company as of the Latest Practicable Date are setout in the subsections headed “Our Shareholding and Corporate Structure” and “Capitalization ofOur Company” below.

As of the Latest Practicable Date, no RSUs have been granted pursuant to the RSU Scheme,and our Company does not have any outstanding options, warrants or other convertible securities.A summary of the principal terms of the RSU Scheme are set out in the section headed “AppendixIV – Statutory and General Information – RSU Scheme”.

Shenzhen Mengke Supply Chain

Shenzhen Mengke was established as a limited liability company in the PRC on April 3, 2020with an initial registered capital of RMB20,000,000. It is principally engaged in provision of supplychain services. Upon its establishment and as of the Latest Practicable Date, it was wholly-ownedby our Company. On June 15, 2020, August 7, 2020, May 8, 2021, the registered capital ofShenzhen Mengke was increased from RMB20,000,000 to RMB100,000,000, fromRMB100,000,000 to RMB1,000,000,000, and from RMB1,000,000,000 to RMB3,000,000,000,respectively.

Dongguan Yueke

Dongguan Yueke was established as a limited liability company in the PRC on August 11,2015 with an initial registered capital of RMB500,000. It is principally engaged in commercemanagement service. Upon its establishment and as of the Latest Practicable Date, it waswholly-owned by our Company.


– 114 –


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– 115 –


Not

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– 116 –


Step 1: Issuance of Warrants to Onshore Restructuring Participants

For the purpose of consolidating the [REDACTED] Investments in Guangdong KuaikeElectronic to the shareholding structure of our Company, our Company issued (i) warrants (togetherwith the Hongtai Series E Warrant, the “Restructuring Warrants”) to each of SCGC CapitalHolding Company Limited (SCGC資本控股有限公司) (“SCGC”) (an affiliate of Shenzhen CapitalGroup), KK Brothers, Matrix, Bright Vision, eWTP, Shenzhen Hongtai, Bright Deshang, WuyueTianxia and Shanghai Yiqian (the “Onshore Restructuring Participants”) on August 7, 2021pursuant to the August 2020 Preferred Share and Warrant Purchase Agreement; and (ii) the HongtaiSeries E Warrant on October 22, 2020, for each of the Onshore Restructuring Participants tosubscribe for certain number of Preferred Shares corresponding to their then shareholdings inGuangdong Kuaike Electronic upon (a) their receipt of the capital reduction amount from theOnshore Capital Reduction (as defined below) and (b) their completion of ODI registration andobtaining of the relevant approvals from the PRC government.

For further details of the Restructuring Warrants, please refer to the subsections headed“Reorganization – Step 4: Restoration of Shareholding Interests in Guangdong Kuaike Electronicto our Company” and “[REDACTED] Investments” in this section.

Step 2: Capital Increase and Capital Reduction of Guangdong Kuaike Electronic

Pursuant to a restructuring agreement dated April 9, 2021 (as amended and supplemented fromtime to time) entered into by, among others, Guangdong Kuaike Electronic, our Company and thethen shareholders of Guangdong Kuaike Electronic (the “Restructuring Agreement”), an onshorecapital restructuring comprising, among others, (i) a capital increase of Guangdong KuaikeElectronic with subscription of additional registered capital by Redefine and KK Brothers; and (ii)a capital reduction of Guangdong Kuaike Electronic was implemented.

Capital Increase of Guangdong Kuaike Electronic

On April 9, 2021, KK Brothers and Redefine subscribed for RMB243,879,000 andRMB241,228,800 additional registered capital of Guangdong Kuaike Electronic, respectively, inorder to capitalize their historical investments in Guangdong Kuaike Electronic which werecontributed to the capital reserve of Guangdong Kuaike Electronic (the “Restructuring CapitalIncrease”).

Capital Reduction of Guangdong Kuaike Electronic

A capital reduction of Guangdong Kuaike Electronic was effected whereby each of theOnshore Restructuring Participants would reduce or cease to hold equity interests in GuangdongKuaike Electronic through reduction of their registered capital at Guangdong Kuaike Electronic (the“Onshore Capital Reduction”). Guangdong Kuaike Electronic returned the original investmentamount to the respective [REDACTED] Investors, which then the capital reduction amount wasapplied for settlement of the respective exercise prices under the Restructuring Warrants for thecorresponding number of Preferred Shares.


– 117 –


Details of the Onshore Capital Reduction are set forth below:

No. Onshore Restructuring Participants and Shareholders

Onshore CapitalReductionAmount(1)

Shareholdingpercentage (%)in Guangdong

KuaikeElectronic after

the OnshoreShare Capital

Reduction

RMB

1. SCGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401,462 0%

2. KK Brothers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245,435,536(2) 1%

3. Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,561,039 0%

4. Bright Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373,900 0%

5. eWTP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244,588,338(3) 0%

6. Shenzhen Hongtai . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 970,396 0%

7. Bright Deshang . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,222 0%

8. Wuyue Tianxia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,155,669 0%

9. Shanghai Yiqian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292,929 0%

10. Shanghai Black Algae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,789,184(2) 0%

Notes:

(1) The Onshore Capital Reduction amount was determined based on the investment amount made by the relevantshareholder in Guangdong Kuaike Electronic.

(2) Such Onshore Capital Reduction amount in aggregate represents the investments made for the aggregate shareholdingof KK Brothers and Shanghai Black Algae in Guangdong Kuaike Electronic prior to the Onshore Share CapitalReduction. Shanghai Black Algae has designated KK Brothers, being its affiliate, to subscribe for its correspondingpart of shareholdings at our Company for the purpose of Reorganization. Shanghai Black Algae is owned as to 90%by Mr. Liang Jie (梁捷), a non-executive Director and 10% by Ms. Shen Huashan (沈華姍) (spouse of Mr. Liang Jie).KK Brothers is indirectly owned as to 100% by TMF (Cayman) Ltd, the trustee of the Liang Family Trust. LiangFamily Trust is a trust established by Mr. Liang Jie (梁捷) for the benefit of himself and his family.

(3) Such Onshore Capital Reduction amount represents the investments made for the aggregate shareholding of eWTPand Redefine in Guangdong Kuaike Electronic. Redefine has designated eWTP, being its sole shareholder, tosubscribe for the shareholdings of our Company for the purpose of Reorganization.

As a result of the Restructuring Capital Increase and the Onshore Capital Reduction, the totalregistered capital of Guangdong Kuaike Electronic was reduced to RMB12,283,713 and itsshareholding structure immediately upon completion of the Restructuring Capital Increase and theOnshore Capital Reduction are as follows:

ShareholdersRegistered Capital

SubscribedShareholding

Percentage

Mr. Wu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,036,000 49.1382%

Guangzhou Kuaike Enterprise Management . . . . . . . . . . . . . . . . . . . . 3,690,446 30.0434%

Gongqingcheng . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,434,430 19.8184%

KK Brothers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,837 1.0000%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,283,713 100%


– 118 –


Step 3: Acquisition of Guangdong Kuaike Electronic by Dongguan WFOE and Termination ofVIE Arrangements

Acquisition of 100% of Guangdong Kuaike Electronic by Dongguan WFOE

Upon completion of the Restructuring Capital Increase and the Onshore Capital Reduction, onJune 29, 2021, Mr Wu, Guangzhou Kuaike Enterprise Management, Gongqingcheng and KKBrothers transferred in aggregate 100% of their respective equity interests of Guangdong KuaikeElectronic to Dongguan WFOE at the consideration of RMB6,036,000, RMB3,690,446, RMB0 andRMB122,837.13, respectively, representing the respective amount of registered capital ofGuangdong Kuaike Electronic subscribed for and settled by each of them as of June 29, 2021. Uponcompletion of such equity transfers, Guangdong Kuaike Electronic is 100% owned by DongguanWFOE, a wholly-owned subsidiary of KK Technology HK, which is in turn 100% owned by ourCompany.

Termination of VIE Arrangements

On August 6, 2020 and August 7, 2020, a series of contractual arrangements were entered intoby and among Guangdong Kuaike Electronic, its then registered shareholders (including ourFounders and certain of our [REDACTED] Investors) and Guangdong Kuaike CommerceManagement Co., Ltd. (“Shenzhen WFOE”, a wholly foreign-owned enterprise and a wholly-owned subsidiary of our Company) (the “Previous Contractual Agreements”), pursuant to whichShenzhen WFOE gained management control over the operations of our business conducted throughGuangdong Kuaike Electronic and its subsidiaries, and enjoy economic benefits of GuangdongKuaike Electronic and its subsidiaries. On July 27, 2021, having considered the applicableregulatory requirements in relation to contractual arrangements and as part of our Reorganization,pursuant to the Restructuring Agreement, the Previous Contractual Arrangements were terminated.For more details of the shareholding changes of Guangdong Kuaike Electronic, please refer to thesubsection headed “Our Corporate History and Major Shareholding Changes of our Group” above.

Step 4: Restoration of Shareholding Interests in Guangdong Kuaike Electronic to ourCompany

During the period from November 27, 2020 to May 28, 2021, upon the receipt of the relevantcash consideration from the Onshore Capital Reduction, the Onshore Restructuring Participantsand/or their designated affiliates, pursuant to the Restructuring Agreement, applied such cashconsideration to acquire Preferred Shares by exercising their Restructuring Warrants for the purposeof restoring and aligning their previous shareholding interests in Guangdong Kuaike Electronicprior to the Restructuring Capital Increase and the Onshore Capital Reduction. Details of suchallotment and issuance of Preferred Shares are set forth below:

Onshore Restructuring Participants

Number of Preferred Shares SCGC(1)KK

Brothers(2) Matrix(3)Bright

Vision(4) eWTP(5)ShenzhenHongtai(6)

BrightDeshang(7)

WuyueTianxia(8)

ShanghaiYiqian (9)

ShenzhenHongtai (10)

Series Seed Preferred Share . . . . . 401,462 – – – – – – – – –

Series A Preferred Shares . . . . . . – 1,890,846 – 24,021 – – – – – –

Series B Preferred Shares . . . . . . – 507,473 1,691,578 169,158 – – – – – –

Series C Preferred Shares . . . . . . – 390,865 275,684 180,721 2,864,333 970,396 73,222 1,086,329 – –

Series Pre-D Preferred Shares . . . . – 482,187 340,096 – 495,179 – – 69,340 – –

Series D Preferred Shares . . . . . . – 1,074,397 253,681 – – – – – 292,929 –

Series E Preferred Shares . . . . . . – – 56,229 – – – – – – 449,833


– 119 –


Notes:

(1) Pursuant to the onshore series seed round of financing of Guangdong Kuaike Electronic which was settled onMarch 31, 2016, Shenzhen Capital Group subscribed for RMB591,765 registered capital of Guangdong KuaikeElectronic. As part of the Reorganization, Shenzhen Capital Group assigned SCGC (its indirect wholly-ownedsubsidiary) to subscribe for the warrant to purchase 401,462 Series Seed Preferred Shares to restore and align itsinterests in Guangdong Kuaike Electronic to the shareholding in our Company (the “Shenzhen Capital GroupWarrant”). SCGC assigned the Shenzhen Capital Group Warrant to its wholly-owned subsidiary, Red EarthInnovation International Company Limited (紅土創新國際有限公司) (“Red Earth”). 401,462 Series Seed PreferredShares were issued by our Company to Red Earth on May 31, 2021 pursuant to the full exercise of the ShenzhenCapital Group Warrant by Red Earth.

(2) Pursuant to the onshore series A, B and C rounds of financing of Guangdong Kuaike Electronic which were settledon July 21, 2017, April 4, 2018 and April 2, 2019, Shanghai Black Algae subscribed for RMB1,890,846, RMB507,473and RMB244,979 registered capital of Guangdong Kuaike Electronic, respectively. Pursuant to the onshore seriesPre-D and D rounds of financing of Guangdong Kuaike Electronic which were both settled on December 26, 2019,KK Brothers subscribed for RMB482,187.61 and RMB818,293.40 registered capital of Guangdong KuaikeElectronic, respectively.

As part of the Reorganization, Shanghai Black Algae assigned KK Brothers, being its affiliate, to subscribe for thewarrant to purchase the corresponding series of Preferred Shares for the purpose of restoring and aligning itsshareholding interests in Guangdong Kuaike Electronic to our Company. As a result, KK Brothers subscribed for awarrant to subscribe 1,890,846 Series A Preferred Shares, 507,473, Series B Preferred Shares, 390,865 Series CPreferred Shares, 482,187 Series Pre-D Preferred Shares and 1,074,397 Series D Preferred Shares.

1,890,846 Series A Preferred Share, 507,473, Series B Preferred Shares, 390,865 Series C Preferred Shares, 482,187Series Pre-D Preferred Shares and 1,074,397 Series D Preferred Shares were issued by our Company to KK Brotherson May 31, 2021 pursuant to the full exercise of its warrant by KK Brothers.

(3) Pursuant to the onshore series B, B+, C, Pre-D and D rounds of financing of Guangdong Kuaike Electronic whichwere settled on April 2, 2018, September 26, 2018, April 9, 2019, December 2, 2019 and December 2, 2019,respectively, Matrix subscribed for and/or acquired RMB1,014,947, RMB676,631, RMB275,684, RMB340,095.65and RMB56,229.11 registered capital of Guangdong Kuaike Electronic, respectively. As part of the Reorganization,our Company issued, and Matrix subscribed for, a warrant to purchase 1,691,578 Series B Preferred Shares, 275,684Series C Preferred Shares, 340,096 Series Pre-D Preferred Shares and 253,681 Series D Preferred Shares for thepurpose of restoring and aligning Matrix’s shareholding interests in Guangdong Kuaike Electronic to our Company(the “Matrix Warrant”). Matrix assigned the Matrix Warrant to its affiliate, Shanghai Weili. 1,691,578 Series BPreferred Shares, 275,684 Series C Preferred Shares, 340,096 Series Pre-D Preferred Shares and 253,681 Series DPreferred Share were issued by our Company to Shanghai Weili on May 31, 2021 pursuant to the full exercise of theMatrix Warrant by Shanghai Weili.

(4) Pursuant to the onshore series A, B, C and C+ rounds of financing of Guangdong Kuaike Electronic which weresettled on August 3, 2017, April 11, 2018, October 17, 2019 and June 14, 2019, respectively, Bright Vision subscribedfor and/or acquired RMB75,167, RMB131,943, RMB242,173 and RMB180,721 registered capital of GuangdongKuaike Electronic, respectively. As part of the Reorganization, our Company issued, and Bright Vision subscribed for,a warrant to purchase 24,021 Series A Preferred Shares, 169,158 Series B Preferred Shares and 180,721 Series CPreferred Shares for the purpose of restoring and aligning Bright Vision’s shareholding interests in GuangdongKuaike Electronic to our Company (the “Bright Vision Warrant”). Bright Vision assigned the Bright Vision Warrantto its affiliate, Bright Galaxy Limited (“Bright Galaxy”). 24,021 Series A Preferred Shares, 169,158 Series BPreferred Shares and 180,721 Series C Preferred Shares were issued by our Company to Bright Galaxy on May 31,2021 pursuant to the full exercise of the Bright Vision Warrant by Bright Galaxy. Bright Galaxy subsequentlytransferred 16,523 series A Preferred Shares, 116,354 series B Preferred Shares, and 124,308 series C Preferred Sharesto Bright Galaxy II Limited, its wholly-owned subsidiary, on July 20, 2021.

(5) Pursuant to the onshore series C, C+ and Pre-D rounds of financing of Guangdong Kuaike Electronic which weresettled on October 30, 2019, September 30, 2019 and January 2, 2020, respectively, Redefine subscribed for and/oracquired RMB1,069,084, RMB1,795,249, and RMB495,179.19 registered capital of Guangdong Kuaike Electronic,respectively.

As part of the Reorganization, Redefine assigned eWTP, being its sole shareholder, to subscribe for the warrant topurchase the corresponding number of Preferred Shares for the purpose of restoring and aligning Redefine’sshareholding interests in Guangdong Kuaike Electronic to our Company. As a result, eWTP subscribed for a warrantto purchase 2,864,333 Series C Preferred Shares and 495,179 Series Pre-D Preferred Shares. 2,864,333 Series CPreferred Shares and 495,179 Series Pre-D Preferred Shares were issued by our Company to eWTP on May 31, 2021pursuant to the full exercise of the warrant by eWTP.


– 120 –


(6) Pursuant to the onshore series C round of financing of Guangdong Kuaike Electronic which was settled on April 4,2019, Shenzhen Hongtai subscribed for RMB970,396 registered capital of Guangdong Kuaike Electronic. As part ofthe Reorganization, our Company issued, and Shenzhen Hongtai subscribed, a warrant to purchase 970,396 Series CPreferred Shares to restore and align Shenzhen Hongtai’s interests in Guangdong Kuaike Electronic to theshareholding in our Company (the “Hongtai Series C Warrant”). Shenzhen Hongtai assigned the Hongtai Series CWarrant to its non-wholly-owned subsidiary, Shanghai Chongyi. 970,396 Series C Preferred Share were issued by ourCompany to Shanghai Chongyi on May 31, 2021 pursuant to the full exercise of the Hongtai Series C Warrant byShanghai Chongyi.

(7) Pursuant to the onshore series C round of financing of Guangdong Kuaike Electronic which was settled on April 1,2019 and April 2, 2019, respectively, Bright Deshang subscribed for RMB45,893 and acquired RMB27,329 registeredcapital of Guangdong Kuaike Electronic, respectively. As part of the Reorganization, our Company issued, and BrightDeshang subscribed, a warrant to purchase 73,222 Series C Preferred Share to restore and align Bright Deshang’sinterests in Guangdong Kuaike Electronic to the shareholding in our Company (the “Bright Deshang Warrant”).Bright Deshang assigned the Bright Deshang Warrant to its wholly-owned subsidiary, Bright Desun Limited (“BrightDesun”). 73,222 Series C Preferred Shares were issued by our Company to Bright Desun on May 31, 2021 pursuantto the full exercise of the Bright Deshang Warrant by Bright Desun. Bright Desun subsequently transferred the 73,222Series C Preferred Shares to Bright Desun II Limited, a wholly-owned subsidiary of Bright Desun on July 20, 2021.

(8) Pursuant to the onshore series C and Pre-D rounds of financing of Guangdong Kuaike Electronic which were settledon June 11, 2019 and December 10, 2019, respectively, Wuyue Tianxia subscribed for RMB1,086,329 andRMB69,340.15 registered capital of Guangdong Kuaike Electronic, respectively. As part of the Reorganization, ourCompany issued, and Wuyue Tianxia subscribed, a warrant to purchase 1,086,329 Series C Preferred Shares and69,340 Series Pre-D Preferred Share to restore and align Wuyue Tianxia’s interests in Guangdong Kuaike Electronicto the shareholding in our Company (the “Wuyue Tianxia Warrant”). Wuyue Tianxia assigned the Wuyue TianxiaWarrant to its non-wholly-owned subsidiary, Oriental Grow Limited (“Oriental Grow”). 1,086,329 Series CPreferred Share were issued by our Company to Oriental Grow on May 31, 2021 pursuant to the full exercise of theWuyue Tianxia Warrant by Oriental Grow.

(9) Pursuant to the onshore series D+ round of financing of Guangdong Kuaike Electronic which was settled on April 26,2020, Shanghai Yiqian subscribed for RMB292,929.29 registered capital of Guangdong Kuaike Electronic. As partof the Reorganization, our Company issued, and Shanghai Yiqian subscribed for, a warrant to purchase 292,929 SeriesD Preferred Share to restore and align Shanghai Yiqian’s interests in Guangdong Kuaike Electronic to theshareholding in our Company. 292,929 Series D Preferred Shares were issued by our Company to Shanghai Yiqianon May 31, 2021 pursuant to the full exercise of the warrant by Shanghai Yiqian. Shanghai Yiqian subsequentlytransferred 292,929 Series D Preferred Shares to Millennium Investment Global Limited, its wholly owned subsidiaryon September 8, 2021.

(10) Pursuant to the onshore series E round of financing of Guangdong Kuaike which was settled on April 26, 2020,Shenzhen Hongtai subscribed for RMB449,833 registered capital of Guangdong Kuaike Electronic. As part of theReorganization, our Company issued, and Shenzhen Hongtai subscribed, a warrant to purchase 449,833 Series EPreferred Share to restore and align Shenzhen Hongtai’s interests in Guangdong Kuaike Electronic to the shareholdingin our Company (the “Hongtai Series E Warrant”). Shenzhen Hongtai assigned the Hongtai Series E Warrant to itsaffiliate, Shanghai Chongyi. 449,833 Series E Preferred Share were issued by our Company to Shanghai Chongyi onMay 31, 2021 pursuant to the full exercise of the Hongtai Series E Warrant by Shanghai Chongyi.

The purchases of the Preferred Shares pursuant to the exercise of the Restructuring Warrantsform part of the Reorganization. The considerations for the investments made by the relevant[REDACTED] Investors to Guangdong Kuaike Electronic had been irrevocably settled andreceived by our Group when such investments were initially made onshore as described in thesub-section headed “Our Corporate History and Major Shareholding Changes of Our Group” above.Accordingly, the exercise of the Restructuring Warrants and the corresponding settlement for andissuance of the Preferred Shares as described above only constitute the restructuring of existing[REDACTED] Investments, and did not constitute any new investment in our Group.


– 121 –


For the shareholding structure of our Company upon completion of the above restructuringstep for restoration of shareholding interests in Guangdong Kuaike Electronic to Our Company, see“– Capitalization of Our Company” below.

MAJOR ACQUISITIONS, DISPOSALS AND MERGERS

Saved as disclosed in the subsection headed “Reorganization” above, we have not conductedany acquisitions, disposals or mergers during the Track Record Period that we consider material tous.

SHARE SUBDIVISION

On [●], our Company [has implemented] the Share Subdivision whereby each existing issuedand unissued share capital with par value of US$0.0001 in the authorized share capital of ourCompany [were] subdivided and reclassified into 25 ordinary Shares with par value ofUS$0.000004 each and the authorized share capital of our Company [was] altered to US$50,000divided into 12,500,000,000 Shares with par value of US$0.000004 each. The total number ofissued Shares in our Company [increased] from [34,814,658] Shares to [870,366,450] Shares.


– 122 –


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– 123 –


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– 125 –


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Inve

stor

sea

chho

ldin

gle

ssth

an2%

refe

rto

:

(i)

Bri

ght

Gal

axy

IIL

imit

ed(0

.738

8%);

(ii)

Bri

ght

Gal

axy

(0.3

352%

);

(iii

)M

ille

nniu

mIn

vest

men

tG

loba

lL

imit

ed(0

.841

4%);

(iv)

N5C

apit

al(0

.358

6%);

(v)

XA

dven

ture

(0.2

404%

);

(vi)

Bri

ght

Des

unII

Lim

ited

(0.2

103%

);

(vii

)L

ight

hous

ecap

Inte

rnat

iona

l(0

.114

5%);

(vii

i)L

ight

hous

eC

apit

alIn

tern

atio

nal

Inc.

(0.0

916%

);

(ix)

Lig

htho

use

Fel

low

(0.0

229%

);

(x)

Red

Ear

th(1

.153

1%);

(xi)

INC

EC

apit

al(1

.488

9%);

(xii

)K

amet

Thr

ive

3L

imit

ed(0

.344

2%);

(xii

i)H

arve

stIn

tern

atio

nal

(0.3

442%

);

(xiv

)Z

UIK

AK

UC

O.,

LIM

ITE

D(0

.172

1%);

(xv)

Guo

lian

Sec

urit

ies

(0.3

442%

);

(xvi

)C

MC

II(0

.516

3%);

(xvi

i)S

hang

hai

Yuk

uang

(1.7

209%

);

(xvi

ii)

JDA

ngar

a(1

.376

7%);

(xix

)C

MB

CIn

tern

atio

nal

Hol

ding

sL

imit

ed(0

.172

1%);

(xx)

ST

AR

WIN

FU

ND

SP

C–

SU

NR

ISE

FU

ND

SP

(0.1

033%

);


– 126 –


(xxi

)P

luto

Con

nect

ion

Lim

ited

(0.5

163%

);an

d

(xxi

i)R

edvi

ewC

apit

al(0

.688

4%).

For

furt

her

deta

ils,

plea

sere

fer

toth

esu

bsec

tion

head

ed“[

RE

DA

CT

ED

]In

vest

men

ts–

5.In

form

atio

nof

our

Sha

reho

lder

san

d[R

ED

AC

TE

D]

Inve

stor

s”in

this

sect

ion.

(4)

The

51%

owne

dsu

bsid

iari

esof

Don

ggua

nK

uaik

eB

usin

ess

Man

agem

ent

Co.

,L

td.

incl

ude:

(i)

Hun

anY

ize

Tra

ding

Co.

,L

td.

(湖南熠澤商貿有限責任公司

);

(ii)

Bei

jing

Quk

eT

ongy

ing

Bus

ines

sC

o.,

Ltd

.(北京趣客通盈商務有限責任公司

);

(iii

)W

uhan

Xin

kuai

Mao

keT

radi

ngC

o.,

Ltd

.(武漢新快貓客商貿有限公司

);

(iv)

Kua

mei

ke(C

heng

du)

Com

mer

cial

Man

agem

ent

Co.

,L

td.

(快麥客

(成都

)商業管理有限公司

);

(v)

Sha

ngha

iK

uaic

heng

Tra

ding

Co.

,L

td.

(上海快澄商貿有限責任公司

);

(vi)

Hef

eiS

iqin

gxiu

Tra

ding

Co.

,L

td.

(合肥市思青秀商貿有限公司

);

(vii

)B

eiji

ngJu

yaT

radi

ngC

o.,

Ltd

.(北京巨牙商貿有限公司

);

(vii

i)S

hanx

iC

huan

ghe

Tra

ding

Co.

,L

td.

(山西創合貿易有限公司

);

(ix)

Gua

ngzh

ouL

emin

gC

omm

erci

alM

anag

emen

tC

o.,

Ltd

.(廣州樂明商業管理有限公司

);

(x)

Hen

anku

aizh

isha

oT

radi

ngC

o.,

Ltd

.(河南快之劭商貿有限公司

);

(xi)

Xin

jian

gQ

iany

ufei

Com

mer

cial

Man

agem

ent

Co.

,L

td.

(新疆倩雨飛商業管理有限責任公司

);

(xii

)S

uzho

uP

urpl

eD

olph

inB

rand

Man

agem

ent

Co.

,L

td.

(蘇州紫海豚品牌管理有限公司

);

(xii

i)S

hant

ouG

aoca

iA

nyi

Tra

ding

Co.

,L

td.

(汕頭市高彩安易商貿有限公司

);

(xiv

)S

ichu

anY

uesh

ang

Com

mer

cial

Man

agem

ent

Co.

,L

td.

(四川省悅商商業管理有限公司

);

(xv)

Wen

zhou

Ben

chen

gC

omm

erce

Co.

,L

td.

(溫州市本成商貿有限公司

);

(xvi

)D

ongg

uan

Ful

iT

radi

ngC

o.,

Ltd

.(東莞市賦麗貿易有限公司

);an

d

(xvi

i)B

eiji

ngQ

uke

Ton

gyin

gB

usin

ess

Co.

,L

td.

(北京趣客通盈商務有限責任公司

).


– 127 –


(5)

For

deta

ils

ofth

eno

n-G

roup

shar

ehol

ders

ofth

eno

n-w

holl

yow

ned

subs

idia

ries

,pl

ease

refe

rto

“App

endi

xIV

–S

tatu

tory

and

Gen

eral

Info

rmat

ion

–6.

Par

ticu

lars

ofO

urS

ubsi

diar

ies”

.T

oth

ebe

stof

our

know

ledg

e,in

form

atio

nan

dbe

lief

,ha

ving

mad

eal

lre

ason

able

enqu

irie

s,no

neof

the

othe

rm

inor

ity

shar

ehol

ders

was

aco

nnec

ted

pers

onof

our

Com

pany

asof

the

Lat

est

Pra

ctic

able

Dat

e(o

ther

than

bein

gsu

bsta

ntia

lsh

areh

olde

rsof

our

subs

idia

ries

).

(6)

The

50%

owne

djo

int

vent

ures

ofD

ongg

uan

Kua

ike

Bus

ines

sM

anag

emen

tC

o.,

Ltd

incl

ude:

(i)

Don

ggua

nS

tar

Tra

ding

Co.

,L

td.

(東莞市星空貿易有限公司

),w

hich

the

othe

r50

%is

held

byD

ongg

uan

Yih

aoE

quit

yIn

vest

men

tP

artn

ersh

ip(L

imit

edP

artn

ersh

ip)

(東莞市壹號

股權投資合夥企業

(有限合夥

)),

anIn

depe

nden

tT

hird

Par

ty;

(ii)

Fuz

hou

Wen

keT

radi

ngC

o.,

Ltd

.(福州文客商貿有限公司

),w

hich

the

othe

r50

%is

held

byF

uzho

uT

aiji

ang

Wan

wen

Inve

stm

ent

Par

tner

ship

(Lim

ited

Par

tner

ship

)(福州台江万文

投資合夥企業

(有限合夥

)),

anIn

depe

nden

tT

hird

Par

ty;

(iii

)W

enzh

ouC

ity

Ben

juT

radi

ngC

o.,L

td.(溫州市本巨貿易有限公司

),w

hich

the

othe

r50

%is

held

byW

enzh

ouY

aner

Com

mer

ceC

o.,L

td.(溫州市衍洱商貿有限公司

),an

Inde

pend

ent

Thi

rdP

arty

;

(iv)

Xia

nJi

ndin

gH

uiji

eB

usin

ess

Info

rmat

ion

Con

sult

ing

Co.

,L

td.

(西安金鼎匯捷商務信息諮詢有限公司

),w

hich

the

othe

r50

%is

held

byS

hanx

iS

hihu

iH

ongt

ong

Com

mer

ceP

artn

ersh

ip(L

imit

edP

artn

ersh

ip)

(陝西世匯泓通商貿合夥企業

(有限合夥

)),

anIn

depe

nden

tT

hird

Par

ty;

(v)

Nin

gxia

Qis

hunt

ong

Tra

ding

Co.

,L

td.

(寧夏啟順通商貿有限公司

),w

hich

the

othe

r50

%is

held

byN

ingx

iaG

uang

yun

Bus

ines

sM

anag

emen

tP

artn

ersh

ip(L

imit

edP

artn

ersh

ip)

(寧夏光蘊商業管理合夥企業

(有限合夥

)),

anIn

depe

nden

tT

hird

Par

ty;

(vi)

Lan

zhou

Dia

nle

Tra

ding

Co.

,L

td.

(蘭州點樂商貿有限公司

),w

hich

the

othe

r50

%is

held

byL

anzh

ouD

ianq

ing

Bus

ines

sM

anag

emen

tP

artn

ersh

ip(L

imit

edP

artn

ersh

ip)

(蘭州點

晴商業管理合夥企業

(有限合夥

)),

anIn

depe

nden

tT

hird

Par

ty;

(vii

)X

inin

gZ

hong

aiT

rade

Co.

,L

td.

(西寧中愛商貿有限責任公司

),w

hich

the

othe

r50

%is

held

byX

inin

gZ

hong

xuan

Bus

ines

sM

anag

emen

tP

artn

ersh

ip(L

imit

edP

artn

ersh

ip)

(西寧

中選商業管理合夥企業

(有限合夥

)),

anIn

depe

nden

tT

hird

Par

ty;

(vii

i)Y

unna

nY

anya

nT

rade

Co.

,L

td.

(雲南延延商貿有限公司

),w

hich

the

othe

r50

%is

held

byK

unm

ing

Gao

shen

gC

omm

erce

Par

tner

ship

(Lim

ited

Par

tner

ship

)(昆明高升商貿合夥企

業(有限合夥

)),

anIn

depe

nden

tT

hird

Par

ty;

and

(ix)

Wuh

anS

heng

keT

radi

ngC

o.,

Ltd

.(武漢盛客商貿有限公司

),w

hich

the

othe

r50

%is

held

byG

uang

zhou

Zhe

ngke

Com

mer

ceC

o.,

Ltd

.(廣州正客商貿有限公司

),an

Inde

pend

ent

Thi

rdP

arty

.


– 128 –


The

foll

owin

gch

art

sets

fort

hou

rG

roup

’sco

rpor

ate

and

shar

ehol

ding

stru

ctur

eup

onco

mpl

etio

nof

the

Sha

reS

ubdi

visi

onan

dth

e[R

ED

AC

TE

D]

(ass

umin

gth

e[R

ED

AC

TE

D]

isno

tex

erci

sed)

(1) :

80%

100%

99%

1%

KK

Bro

ther

s(2)

Oth

er [R

EDACTED]

Inve

stor

s ea

ch h

oldi

ngle

ss th

an 2

%(3

)

Oth

erPu

blic

Sha

reho

lder

sC

MC

Kry

pton

eWT

P Sh

angh

ai W

eili

Shan

ghai

Cho

ngyi

O

rien

tal G

row

The

Com

pany

Van

cl S

uppl

y C

hain

Lim

ited

offs

hore

onsh

ore

Gua

ngdo

ng K

uaik

e C

omm

erce

Man

agem

ent

Co.

, Ltd

.

Gua

ngdo

ng X

ingk

e C

omm

erce

Man

agem

ent

Co,

Ltd

.

Gua

ngzh

ou M

engk

e Su

pply

Cha

in

Tec

hnol

ogy

Co.

, Ltd

.

Sich

uan

Yue

xi

Bra

nd M

anag

emen

t C

o., L

td(4

)

KK

Inte

rnat

iona

l Hon

g K

ong

Lim

ited

HK

NY

Inve

stm

ent

Hol

ding

Lim

ited

PT K

KV

Inte

rnat

iona

lIn

done

sia

PT K

KV

Ret

ail

Indo

nesi

a(5)

Gua

ngdo

ng K

uaik

e E

lect

roni

c C

omm

erce

C

o., L

td.

Don

ggua

n Y

ueke

E

nter

pris

e M

anag

emen

t Se

rvic

e C

o., L

td.

Shen

zhen

Col

oris

t C

osm

etic

s C

o., L

td.

Don

ggua

n K

uaik

e B

usin

ess

Man

agem

ent C

o., L

td.

MO

GR

[REDACTED]

[REDACTED]

[REDACTED]

[REDACTED]

[REDACTED]

[REDACTED]

[REDACTED]

[REDACTED]

[REDACTED]

[REDACTED]

[REDACTED]

Star

light

KK

Tec

hnol

ogy

(HK

) C

ompa

ny L

imite

d

Mr.

Wu

Mr.

Lia

ng J

ie(2

)M

r. G

uo

Gua

ngzh

ou K

uaik

e C

omm

erce

Man

agem

ent

Co.

, Ltd

.

100%

100%

100%

100%

10

0%

100%

100%

100%

10

0%

100%

51%

10

0%

Shen

zhen

Men

gke

Supp

ly C

hain

T

echn

olog

y C

o., L

td.

100%

Ron

gke

Ent

erpr

ise

Man

agem

ent S

ervi

ce(G

uang

dong

) Co.

, Ltd

.

100%

Shen

zhen

Xin

keSo

ftw

are

Tec

hnol

ogy

Serv

ice

Co.

, Ltd

.

100%

Che

ngdu

kua

itaik

eT

rade

Co.

, Ltd

.50

% o

wne

djo

int v

entu

res(6

)51

% o

wne

dsu

bsid

iari

es(4

)(5)

100%

10

0%

50%

51

%

Bei

jing

Jiuh

aoIn

tern

et T

echn

olog

yC

o., L

td.

RSU

Nom

inee

100%

100%


– 129 –


Note:

(1) See “[REDACTED] Investments – 5. Information of our Shareholders and [REDACTED] Investors” in this sectionfor details of our Shareholders.

(2) KK Brothers is a limited liability company incorporated in Hong Kong and is wholly owned by Diligent Shine Inc.,which is in turn wholly owned by Verticillata Inc.. Both Diligent Shine Inc. and Verticillata Inc. are limited companiesincorporated in the British Virgin Islands. Verticillata Inc. is held as to 100% by TMF (Cayman) Ltd, the trustee ofthe Liang Family Trust. Liang Family Trust is a trust established by Mr. Liang Jie (梁捷), a non-executive Director,for the benefit of himself and his family.

(3) Other [REDACTED] Investors each holding less than 2% refer to:

(i) Bright Galaxy II Limited (0.6279%);

(ii) Bright Galaxy (0.2850%);

(iii) Millennium Investment Global Limited (0.7152%);

(iv) N5Capital (0.3048%);

(v) X Adventure (0.2043%);

(vi) Bright Desun II Limited (0.1788%);

(vii) Lighthouse International (0.0973%);

(viii) Lighthouse Capital International Inc. (0.0778%);

(ix) Lighthouse Fellow (0.0195%);

(x) Red Earth (0.9802%);

(xi) INCE Capital (1.2655%);

(xii) Kamet Thrive 3 Limited (0.2926%);

(xiii) Harvest International (0.2926%);

(xiv) ZUIKAKU CO., LIMITED (0.1463%);

(xv) Guolian Securities (0.2926%);

(xvi) CMC II (0.4388%);

(xvii) Shanghai Yukuang (1.4628%);

(xviii) JD Angara (1.1702%);

(xix) CMBC International Holdings Limited (0.1463%);

(xx) STARWIN FUND SPC – SUNRISE FUND SP (0.0878%); Pluto Connection Limited (0.4388%); and

(xxi) Redview Capital (0.5851%).

For further details, please refer to the subsection headed “[REDACTED] Investments – 5. Information of ourShareholders and [REDACTED] Investors” in this section.

(4) Please see Note (4) to the corporate structure chart of our Company immediately prior to the completion of the[REDACTED] above.




– 130 –


[REDACTED] INVESTMENTS

1. Overview

We underwent 13 rounds of [REDACTED] Investments. The basis of determination for theconsideration for the [REDACTED] Investments were arm’s length negotiations between ourCompany and the respective [REDACTED] Investors after taking into consideration the timing ofthe investments, our valuation and the status of our business operations and financial performanceof our Group at the relevant time.

In connection with the [REDACTED] Investments, the [REDACTED] Investors becameparties to the shareholders’ agreement at the time of their relevant investment.


– 131 –


2.P

rin

cip

alT

erm

sof

the

[RE

DA

CT

ED

]In

vest

men

ts

The

belo

wsu

mm

ariz

esth

epr

inci

pal

term

sof

the

[RE

DA

CT

ED

]In

vest

men

ts:

Serie

sSee

dSe

riesA

Serie

sBSe

riesB

+Se

riesC

Serie

sC+

Serie

sPre

-DSe

riesD

Serie

sD+

Serie

sESe

riesF

Serie

sF+

Serie

sF++

Date

ofini

tials

hare

purch

asea

gree

ment

.M

arch

3,20

16Ju

ly11

,201

7M

arch

29,2

018

Septe

mber

13,

2018

Marc

h9,

2019

May

10,2

019

Nove

mber

17,

2019

Nove

mber

22,

2019

Marc

h24

,202

0Ju

ly10

,202

0,Se

ptemb

er27

,20

20

Marc

h30

,202

1M

ay28

,202

1Ju

ne4,

2021

Date

onwh

ichinv

estm

entw

asfu

llyse

ttled

..

..

..

Marc

h23

,201

6to

April

1,20

16(1

)

July

20,2

017

toAu

gust

4,20

17(1

)

April

2,20

18to

April

11,

2018

(1)

Septe

mber

26,

2018

(1)

April

1,20

19to

Octob

er30

,20

19(1

)

June

11,2

019

toJu

ne14

,20

19(1

)

Dece

mber

2,20

19to

Janu

ary2,

2020

(1)

Dece

mber

2,20

19to

Dece

mber

26,2

019(1

)

April

3,20

20to

April

26,

2020

(1)

July

14,2

020

toOc

tober

22,

2020

(1)

April

1,20

21to

June

7,20

21M

ay31

,202

1to

June

3,20

21

June

8,20

21

Appr

oxim

ateco

stspe

rPr

eferre

dSh

arepa

id(2)

..

..

..

RMB0

.4982

RMB0

.9713

RMB1

.4442

RMB1

.4442

RMB1

.8344

RMB1

.8344

RMB5

.4514

RMB5

.9549

RMB5

.9549

USD1

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/RM

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13US

D3.33

82US

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82US

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82

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3. Special Rights of the [REDACTED] Investors

The [REDACTED] Investors were granted certain customary special rights according to therelevant shareholders agreement. Pursuant to the relevant shareholders’ resolution, such specialrights shall be terminated upon submission of a [REDACTED] and/or will be terminated upon the[REDACTED], in compliance with Guidance Letters HKEx-GL43-12 and HKEx-GL44-12.

4. Public Float

Upon completion of the [REDACTED] (assuming the [REDACTED] is not exercised), (i)MOGR (an investment holding company wholly-owned by Mr. Wu, our Founder, the chairman ofour Board and an executive Director); (ii) Starlight (an investment holding company wholly-ownedby Mr. Guo, our co-Founder and an executive Director); and (iii) KK Brothers (a substantialShareholder beneficially owned by Mr. Liang Jie, a non-executive Director), will holdapproximately [REDACTED]%, [REDACTED]% and [REDACTED]% of our enlarged issuedshare capital, respectively, and such Shares will not be counted towards the public float of ourCompany for the purpose of Rule 8.08 of the Listing Rules.

To the best of the Company’s knowledge and belief, save as disclosed above, no otherShareholder (including the [REDACTED] Investors) (i) is a core connected person of our Company(as defined under the Listing Rules); (ii) has been financed directly or indirectly by a coreconnected person of our Company for the subscription of Shares; or (iii) is accustomed to takeinstructions from a core connected person of our Company in relation to the acquisition, disposal,voting or other dispositions of the Shares registered in his/her/its name or otherwise held byhim/her/it, and all the Shares held by such Shareholders will be counted towards the public float ofour Company for the purpose of Rule 8.08 of the Listing Rules upon the [REDACTED].Accordingly, it is expected that no less than 25% of the Shares will be held by the public uponcompletion of the [REDACTED] (assuming the [REDACTED] is not exercised), and our Companywill be able to fulfill the minimum public float requirement under Rule 8.08 of the Listing Rules.

5. Information of our Shareholders and [REDACTED] Investors

The background information of our Shareholders (including our [REDACTED] Investors) isset out below.

MOGR and Starlight

MOGR is a limited liability company incorporated in the British Virgin Islands and was ownedas to 100% by Mr. Wu, our Founder, an executive Director and our chief executive officer.

Starlight is a limited liability company incorporated in the British Virgin Islands, which isowned as to 100% by Mr. Guo, our co-Founder and an executive Director.

For more details of, among others, the concert party arrangements amongst Mr. Wu, Mr. Guo,MOGR and Starlight, please refer to the section headed “Relationship with the Single LargestShareholders Group” in this document.


– 134 –


KK Brothers and Shanghai Black Algae

KK Brothers is a limited liability company incorporated in Hong Kong and is wholly ownedby Diligent Shine Inc., which is in turn wholly owned by Verticillata Inc. Both Diligent Shine Inc.and Verticillata Inc. are limited companies incorporated in the British Virgin Islands. VerticillataInc. is held as to 100% by TMF (Cayman) Ltd, the trustee of the Liang Family Trust. Liang FamilyTrust is a trust established by Mr. Liang Jie (梁捷), a non-executive Director, for the benefit ofhimself and his family.

Shanghai Black Algae is a limited partnership registered in the PRC, whose general partneris Ms. Shen Huashan, the spouse of Mr. Liang Jie, a non-executive Director. Shanghai Black Algaeis owned as to 90% by Mr. Liang Jie and 10% by Ms. Shen Huashan.

eWTP and Redefine

eWTP is a limited partnership registered in the Cayman Islands, whose general partner isRedefine Capital Management Company Limited, a limited liability company which is whollyowned by MF New World Investment Limited. MF New World Investment Limited is owned as to100% by Mr. Yu Yongfu (俞永福), an Independent Third Party. Redefine is owned as to 100% byeWTP.

CMC Krypton and CMC II

CMC Krypton and CMC II is each a limited liability company incorporated in the CaymanIslands, and is owned as to 100% by CMC Krypton, L.P. and CMC Krypton II, L.P., respectively.The general partner of each of CMC Krypton, L.P. and CMC Krypton II, L.P. is CMC Krypton GP,L.P., a limited partnership registered in the Cayman Islands whose general partner is CMC CapitalPartners GP III, Ltd. CMC Capital Partners GP III, Ltd. is wholly owned by LaConfianceInvestments Ltd., which in turn is wholly owned by LeBonheur Holdings Ltd., which is in turnwholly owned by Brilliant Spark Holdings Limited. Brilliant Spark Holdings Limited is whollyowned by Mr. Ruigang Li (黎瑞剛), an Independent Third Party.

Oriental Grow and Wuyue Tianxia

Oriental Grow is a limited liability company incorporated in British Virgins Islands. It iswholly owned by Shanghai Siyue Technology Partnership (Limited Partnership) (上海司嶽科技合夥企業(有限合夥)), which is in turn owned as to 99.9917% by Wuyue Tianxia, a limited partnershipregistered in the PRC, whose general partner was Beijing Wuyue Century Investment Co., Ltd. (北京五嶽世紀投資有限公司), which was held as to 50% by Mr. Zhao Weiguo (趙維國) and 50% byMs. Zhao Jie (趙潔), respectively, each of whom is an Independent Third Party.

Guolian Securities

Guolian Securities is a segregated portfolio company incorporated in the Cayman Islands, andGuolian Global Capital Limited holds its 100% management shares. Guolian Global CapitalLimited is wholly-owned by Guolian Securities International Co., Limited, which is a wholly ownedsubsidiary of Guolian Securities (H.K.) Co., Limited. Guolian Securities (H.K.) Co., Limited iswholly owned by Guolian Securities Co., Ltd., a company listed on the Stock Exchange (stock code:1456) and the Shanghai Stock Exchange (stock code: 601456).


– 135 –


Bright Galaxy, Bright Galaxy II Limited and Bright Growth

Bright Galaxy is a limited liability company incorporated in British Virgin Islands. It is whollyowned by Bright Vision. Bright Galaxy II Limited is a limited liability company incorporated in theBritish Virgin Island and a wholly-owned subsidiary of Bright Galaxy.

Bright Growth is a limited partnership registered in the PRC, whose general partner is TibetBright Venture Capital Management Co., Ltd. (西藏璀璨創業投資管理有限公司, “Tibet Bright”),which is in turn owned as to 55% by Lin Haixu and 49% of Huang Fei (黃飛), each an IndependentThird Party.

Bright Deshang, Bright Desun, Bright Desun II Limited and Bright Vision

Bright Desun is a limited liability company incorporated in British Virgins Islands andwholly-owned by Bright Deshang. Bright Desun II Limited is a limited liability companyincorporated in British Virgins Islands and a wholly-owned subsidiary of Bright Desun.

The general partner of Bright Deshang is Tibet Zeze Venture Capital Management Co., Ltd.(西藏澤澤創業投資管理有限公司) (“Tibet Zeze”). Tibet Zeze is owned as to 45.25%, 30% and4.75% by Wu Xiaofeng (吳曉豐), Luo Tingxia (羅挺夏) and an entity controlled by Wu Xiaofeng.Each of Wu Xiaofeng and Luo Tingxia is an Independent Third Party. The remaining interest isultimately controlled by Lin Haixu (林海旭). The general partner of Bright Vision is ShenzhenBright Private Equity Investment Management Co., Ltd. (深圳璀璨私募股權投資管理有限公司),which is owned as to 80% to Tibet Zeze and 20% to Tibet Dilong Venture Investment Co., Ltd. (西藏迪龍創業投資有限公司) (“Tibet Dilong”). Tibet Dilong is controlled by Lin Haixu (林海旭),being an Independent Third Party.

Bright Vision is a limited partnership registered in the PRC, whose general partner is TibetBright, which is in turn owned as to 55% by Lin Haixu and 49% by Huang Fei (黃飛), each beingan Independent Third Party.

Shanghai Yiqian

Shanghai Yiqian is a limited partnership registered in the PRC, whose general partner isGongqingcheng Yihe Investment Partnership (Limited Partnership) (共青城逸合投資合夥企業(有限合夥)). Gongqingcheng Yihe Investment Partnership (Limited Partnership) was owned as to 39%,39%, 20% and 2% by Mr. He Yu (何愚), Mr. Chen Feng (陳峰), Mr. Zhang Peiyuan (張沛元) andShenzhen Qianhai Heiyi Investment Management Co., Ltd. (深圳前海黑翼投資管理有限公司), alimited liability company incorporated in the PRC. Shenzhen Qianhai Heiyi InvestmentManagement Co., Ltd. is owned as to 25% by Mr. Chen Feng, 51% by Mr. He Yu and 24% by Mr.Zhang Peiyuan, each of whom is an Independent Third Party.

Lighthouse Capital International Inc., Lighthousecap Fellow and Lighthousecap International

Lighthouse Capital International Inc. is a limited liability company incorporated in the BritishVirgin Islands, which is controlled by Leo Sense Trust, a trust for the benefit of Mr. Xuanle Zheng(鄭烜樂), an Independent Third Party. Lighthousecap Fellow is a limited partnership registered inthe British Virgin Islands, which is controlled by Mr. Xuanle Zheng (鄭烜樂). LighthousecapInternational is a limited liability company incorporated in the Cayman Islands, which is in turnowned as to 87% by Lighthouse Technology Investment Limited. Lighthouse TechnologyInvestment Limited is a wholly owned subsidiary of Lighthouse Holdings (Cayman) Limited, whichis controlled by Leo Sense Trust.


– 136 –


ZUIKAKU CO., LIMITED

ZUIKAKU CO., LIMITED, a limited liability company incorporated in Hong Kong, which iswholly owned by Ge Zhihui (葛志輝), an Independent Third Party.

Harvest International

Harvest International is a segregated portfolio company incorporated in the Cayman Islandsand its management shares are held as to 91% by Harvest Global Investments Limited (“HarvestInvestments”) and 9% by Harvest Global Capital Investments Limited (“Harvest Capital”), anindirect wholly-owned subsidiary of Harvest Investments. Harvest Investments is wholly-owned byHarvest Fund Management Co., Ltd. (嘉實基金管理有限公司), which is owned as to 40%, 30% and30% by China Credit Trust Co., Ltd. (中誠信託有限責任公司), DWS Investments SingaporeLimited and Lixin Investment Co., Ltd. (立信投資有限責任公司), respectively. China Credit TrustCo., Ltd. is owned by 15 entities and The People’s Insurance Company (Group) of China Limited,the H shares of which are listed on the Stock Exchange (stock code: 1339) and the A shares of whichare listed on the Shanghai Stock Exchange (stock code: 601319), being the largest shareholder ofChina Credit Trust Co., Ltd. which holds approximately 32.92% of interest. To the best knowledgeof the Directors, China Credit Trust Co., Ltd. and its beneficial owners are Independent ThirdParties. DWS Investments Singapore Limited is a subsidiary of DWS Group GmBH & Co. KGaA,a company listed on the Frankfurt Stock Exchange (symbol: DWS). Lixin Investment Co., Ltd. iscontrolled by Tongyuan Holdings Co., Ltd. (通元控股有限公司), an indirect wholly-ownedsubsidiary of Beijing Saiang Media Investment Co., Ltd. (北京賽昂傳媒投資有限公司), which isultimately owned by 60% and 40% by Zhao Hongzheng (趙宏徵) and Wang Boyu (王伯彧),respectively, each of whom being an Independent Third Party.

Shanghai Weili and Matrix

Shanghai Weili is a limited partnership registered in the PRC, whose general partner is NingboMatrix Investment Management Co., Ltd. (寧波矩陣投資管理有限公司) (“Ningbo Matrix”) andNingbo Matrix is held as to 90% by Mr. Zuo Lingye, an Independent Third Party. Shanghai Weiliis an affiliate of Matrix. Matrix holds approximately 99.994% in Shanghai Weili and is a limitedpartnership registered in the PRC, whose general partner is Hangzhou Maiqisi InvestmentPartnership (Limited Partnership) (杭州麥奇思投資合夥企業(有限合夥)), a limited partnershipregistered in the PRC. The general partner of Hangzhou Maiqisi Investment Partnership (LimitedPartnership) is Hangzhou Jingwei Investment Management Co., Ltd. (杭州景巍投資管理有限公司),a limited liability company incorporated in the PRC which is owned by Mr. Zuo Lingye (左淩燁),an Independent Third Party, as to 90% and Ms. Xiao Ping (肖萍) as to 10%, an Independent ThirdParty. By virtue of SFO, Mr. Zuo Lingye is deemed to be interested in the Shares held by HangzhouChuangqian Investment Partnership (Limited Partnership).

Red Earth, Hongtu Venture, SCGC and Shenzhen Capital Group

Red Earth is a wholly-owned subsidiary of SCGC. SCGC is a company incorporated in theBVI with limited liability which is an investment holding company and wholly owned by ShenzhenCapital (Hong Kong) Company Limited (創新資本(香港)有限公司) which is in turn wholly-ownedby Shenzhen Capital Group. Hongtu Venture is a limited liability company established under PRClaws and Shenzhen Capital Group is its largest shareholder holding 35% of interest.

Shenzhen Capital Group is a limited liability company established in August 1990 under PRClaws, under the sponsorship from the Shenzhen government, who still holds approximately 28.2%equity interest as its largest shareholder. To the best of our Directors’ knowledge, Shenzhen CapitalGroup and its ultimate beneficial owners are Independent Third Parties.


– 137 –


Shanghai Yukuang, Qidian, Guangzhou Kuaike Enterprise Management and Gongqingcheng

Shanghai Yukuang is a limited partnership registered in the PRC, whose general partner isQidian. Shanghai Yukuang is owned as to 90.5714% and 9.4286% by Qidian and Pingxiang AoyeInvestment Development Co., Ltd.* (萍鄉奧燁投資發展有限公司), respectively.

Qidian is a limited partnership registered in the PRC, whose general partner is GuangzhouQidian Universe Enterprise Management Service Co., Ltd. (廣州市奇點宇宙企業管理服務有限公司, “Guangzhou Qidian Universe”). Guangzhou Qidian Universe is owned as to 70% by Mr. He Fen(何奮), 10% by Mr. Huang Dequan (黃得全) and 20% by Mr. Zhang Yutao (張宇濤). In addition,Qidian is owned as to approximately 10.81%, 2.70%, 2.70% and 2.70% by Guangdong MutianInvestment Consulting Partnership (Limited Partnership) (廣東沐田投資諮詢合夥企業(有限合夥),“Guangdong Mutian”), Guangzhou Lingyi Enterprise Consulting Services Partnership (LimitedPartnership) (廣州零壹企業諮詢服務合夥企業(有限合夥), “Guangzhou Lingyi”), GuangdongYuling Equity Investment Partnership (Limited Partnership) (廣東宇零股權投資合夥企業(有限合夥), “Guangdong Yuling”) and Guangzhou Qidian Universe respectively. Guangdong Mutian isowned as to 99% by Mr. He Fen and 1% by Mr. Guo; Guangzhou Lingyi is owned as to 99.99% byMr. Wu and 0.01% by Ms. Zheng Xiaosi (鄭曉思); Guangdong Yuling is owned as to 99% by Mr.Guo and 1% by Mr. He Fen. Guangzhou Kuaike Enterprise Management is a limited partnershipregistered in the PRC, whose general partner is Guangzhou Lingyi. Gongqingcheng is a limitedpartnership registered in the PRC, whose general partner is Guangzhou Qidian EnterpriseConsulting Service Partnership (Limited Partnership) (“Qidian Enterprise”). Qidian Enterprise isowned as to 51% and 49% by Mr. Guo and Mr. He Fen, respectively. Save for Mr. Wu and Mr. Guo,our executive Directors, the beneficial owners of Qidian, Guangzhou Kuaike EnterpriseManagement and Gongqingcheng are each an Independent Third Party.

Pingxiang Aoye Investment Development Co., Ltd.* (萍鄉奧燁投資發展有限公司) is a limitedliability company established in the PRC, which is ultimately owned as to 100%, by Mr. WangWeihua (王偉華) and Ms. Hu Ping (胡萍), each an Independent Third Party.

Shanghai Chongyi and Shenzhen Hongtai

Shanghai Chongyi is a limited partnership registered in the PRC, whose general partner isShanghai Chongyue Enterprise Management Consulting Co., Ltd.* (上海翀越企業管理諮詢有限公司) (“Shanghai Chongyue”). Shanghai Chongyi is an indirect wholly-owned subsidiary ofShenzhen Hongtai.

Shenzhen Hongtai is a private equity fund which is principally engaged in, among others,project investment, investment management, asset management, investment consulting andcorporate management consulting. After having made all reasonable enquiries, the general partnersof Shenzhen Hongtai are Ningbo Meishan Bonded Port Area Jinhu Investment Management LP* (寧波梅山保稅港區錦鵠投資管理合夥企業(有限合夥)) (“Jinhu”) and Shenzhen Hongtai GrowthEquity Investment Management Co., Ltd.* (深圳洪泰成長股權投資管理有限公司) (“ShenzhenHongtai Growth Equity”). Ms. Shen Yanjie directly or indirectly controls Jinhu and Mr. ShengXitai directly or indirectly controls Shenzhen Hongtai Growth Equity. Ms. Shen Yanjie and Mr.Sheng Xitai are each an Independent Third Party. There are more than 20 limited partners inShenzhen Hongtai and each of them holds less than 20% of the entire equity interest in ShenzhenHongtai as of the Latest Practicable Date.


– 138 –


N5Capital

N5Capital is a limited partnership registered in the Cayman Islands, whose general partner isN5Capital GP II, LLC. N5 Capital GP II, LLC is wholly owned by Yiwei Jiang, an IndependentThird Party.

X Adventure

X Adventure is a limited partnership registered in the Cayman Islands, whose general partneris X Adventure Management, L.P. and is controlled by X Adventure GP GP, Ltd. X Adventure GPGP, Ltd. is controlled by Yan Xubin (閻緒彬), an Independent Third Party.

INCE Capital

INCE Capital is a limited partnership registered in the Cayman Islands, which is controlledby INCE GP Ltd., an entity ultimately controlled by JP Gan, an Independent Third Party.

Kamet Thrive 3 Limited

Kamet Thrive 3 Limited is a limited liability company incorporated in the British VirginIslands, wholly owned by Kamet Thrive Pte. Ltd., a limited liability company incorporated inSingapore. Kamet Thrive Pte. Ltd. is wholly owned by Kamet Capital Partners Pte. Ltd., a limitedliability company incorporated in Singapore, which is in turn wholly owned by Mana Ventures Ltd,a limited liability company incorporated in the British Virgin Islands. Mana Ventures Ltd is ownedas to 35%, 30%, 25% and 10% by Mr. Huang FaDiao, Mr. Liang Jie, Mr. Kerry Goh Siow Hong andMr. Derek Tay, respectively. Save for Mr. Liang Jie, the non-executive Director, the beneficialowners of Mana Ventures Ltd are each an Independent Third Party. By virtue of SFO, Mr. HuangFaDiao is deemed to be interested in the Shares held by Kamet Thrive 3 Limited.

JD Angara

JD Angara is an exempted company with limited liability organized under the Laws of theBritish Virgin Islands. JD Angara is a wholly-owned subsidiary of JD.com, Inc., a company listedon the NASDAQ (NASDAQ Ticker: JD) and the Stock Exchange (stock code: 9618).

Pluto Connection Limited

Pluto Connection Limited is a limited liability company incorporated in the British VirginIslands. It is an indirectly wholly-owned subsidiary of CITIC Securities Company Limited, whoseH shares are listed on the Stock Exchange (stock code: 6030).

CMBC International Holdings Limited

CMBC International Holdings Limited is a limited liability company incorporated in HongKong. It is a wholly-owned subsidiary of China Minsheng Banking Corp., Ltd. (中國民生銀行股份有限公司), a joint stock limited company incorporated in the PRC with limited liability, the Hshares of which are listed on the Stock Exchange (stock code: 1988) and the A shares of which arelisted on the Shanghai Stock Exchange (stock code: 600016).


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STARWIN FUND SPC – SUNRISE FUND SP

STARWIN FUND SPC – SUNRISE FUND SP is a segregated portfolio of Starwin Fund SPC,a segregated portfolio company incorporated in the Cayman Islands. Starwin Fund is wholly ownedby Starwin Financial Group Limited (“SFGL”), a limited liability company incorporated in HongKong. SFGL is controlled by Hong Tai International Holding Limited, which is wholly owned byMs. Shen Yanjie, an Independent Third Party.

Redview Capital

Redview Capital is a limited liability company incorporated in Cayman Islands. It is whollyowned by Redview Capital II Master Investment Limited, which is in turn owned by RedviewCapital II L.P., a limited partnership registered in the Cayman Islands whose general partner isRedview Capital Partners II Limited, which is wholly owned by Mr. Hebert Kee Chan Pang, anIndependent Third Party.

RSU Nominee

KK Evergreen Holdings Co., Ltd was a company incorporated under the laws of the BritishVirgin Islands. It is wholly-owned by Futu Trustee Limited RSU Trustee and an Independent ThirdParty, as the nominee to hold the underlying Shares under the RSU Scheme.

6. Compliance with Interim Guidance and Guidance Letters

On the basis that (i) the considerations for the [REDACTED] Investments were irrevocablysettled more than 28 clear days before the date of our first submission of the [REDACTED] to theStock Exchange and (ii) the special rights granted to the [REDACTED] Investors pursuant to therelevant shareholders agreement have been terminated prior to such [REDACTED] or will beterminated immediately upon the [REDACTED], as the case may be pursuant to the relevantshareholders’ resolution, the Joint Sponsors have confirmed that the [REDACTED] Investmentsare in compliance with the Guidance Letter HKEx-GL29-12 issued in January 2012 and updated inMarch 2017 by the Stock Exchange, Guidance Letter HKEx-GL43-12 issued in October 2012 andupdated in July 2013 and in March 2017 by the Stock Exchange and Guidance LetterHKEx-GL44-12 issued in October 2012 and in March 2017 by the Stock Exchange.

7. Compliance with PRC Laws and Regulations

Our PRC Legal Advisers have confirmed that the share transfers, reorganizations, acquisitionsand disposals in respect of the PRC companies in our Group as described above have been properlyand legally completed and all regulatory approvals have been obtained in accordance with PRC lawsand regulations as of the Latest Practicable Date.

M&A Rules

According to the Regulations on Merger with and Acquisition of Domestic Enterprises byForeign Investors (《關於外國投資者併購境內企業的規定》) (the “M&A Rules”) jointly issued bythe MOFCOM, the State-owned Assets Supervision and Administration Commission, the SAT, theCSRC, the State Administration for Industry and Commerce and the SAFE on August 8, 2006,effective as of September 8, 2006 and amended on June 22, 2009, a foreign investor is required toobtain necessary approvals when it (i) acquires the equity of a domestic enterprise so as to convertthe domestic enterprise into a foreign-invested enterprise; (ii) subscribes the increased capital of a


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domestic enterprise so as to convert the domestic enterprise into a foreign-invested enterprise; (iii)establishes a foreign-invested enterprise through which it purchases the assets of a domesticenterprise and operates these assets; or (iv) purchases the assets of a domestic enterprise, and theninvests such assets to establish a foreign-invested enterprise. The M&A Rules, among other things,further purport to require that an offshore special vehicle, or a special purpose vehicle, formed forlisting purposes and controlled directly or indirectly by PRC companies or individuals, shall obtainthe approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securitieson an overseas stock exchange, especially in the event that the special purpose vehicle acquiresshares of or equity interests in the PRC companies in exchange for the shares of offshore companies.

Our PRC Legal Advisers are of the opinion that based on their understanding of the currentPRC laws and regulations, prior CSRC approval for the [REDACTED] under the M&A rules is notrequired because (i) the CSRC currently has not issued any definitive rule or interpretationconcerning whether [REDACTED] like ours under this document are subject to this regulation; and(ii) Guangdong Kuaike Electronic was a foreign-invested enterprise before it was acquired byDongguan WFOE. However, there can be no assurance that the relevant PRC government agencies,including the CSRC, would reach the same conclusion.

SAFE Circular No. 37

Pursuant to the SAFE Circular No. 37 promulgated by SAFE and which became effective onJuly 4, 2014, (i) a PRC resident must register with the local SAFE branch before he or shecontributes assets or equity interests in an overseas special purpose vehicle (the “Overseas SPV”)that is directly established or indirectly controlled by the PRC resident for the purpose ofconducting investment or financing, and (ii) following the initial registration, the PRC resident isalso required to register with the local SAFE branch for any major change in respect of the OverseasSPV, including, among other things, a change of the Overseas SPV’s PRC resident shareholder(s),the name of the Overseas SPV, terms of operation, or any increase or reduction of the OverseasSPV’s capital, share transfer or swap, and merger or division. Pursuant to SAFE Circular No. 37,failure to comply with these registration procedures may result in penalties.

Pursuant to the SAFE Circular No. 13 issued by SAFE and which became effective on June 1,2015, the power to accept SAFE registration was delegated from local SAFE to local banks wherethe assets or interest in the domestic entity was located.

Our PRC Legal Advisers have advised that Mr. Wu and Mr. Guo, who are PRC residents, havecompleted their initial foreign exchange registration in respect of their respective incorporation ofMOGR and Starlight as required under SAFE Circular No. 37 on April 3, 2020.


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OVERVIEW

Our Mission

Our mission is to create an enjoyable life without boundaries.

Our Vision

We are committed to becoming a world-class specialty retailer with consumer trust andpreferred brands. We plan to expand our consumer base to the overseas market by utilizing superiorDTC operations, comprehensive and dedicated customer services, and a world-class supply chainthat connects us with global leading Third Party Brand Partners.

Who We Are

We are a pioneering specialty retailer with multiple retail brands that enjoys a massiveconsumer base and favorable market influence. We were one of the top three specialty retailers inChina by GMV in 2020, and the fastest-growing specialty retailer among the top ten players inChina with a GMV CAGR of 246.2% from 2018 to 2020, according to the Frost & Sullivan Report.As of the Latest Practicable Date, we offered a variety of specialty retail products to our customersthrough a wide retail network of 680 stores, covering 31 provinces in China and one city inIndonesia, carrying four self-incubated retail brands, namely KKV, THE COLORIST, X11 and KKGuan. Our product portfolio covers a variety of product categories, including beauty, pop toy, foodand beverage, household product and stationery.

We are dedicated to providing an immersive shopping experience to our customers supportedby our strong data and technology capabilities. Upholding such commitment, we have built a largeand loyal customer base, through which we continue to expand our brand image. Our success in theever-changing specialty retail market trend is attributable to a broad range of factors, including,among others, strong brand synergies, exquisite site and merchandise selection, aesthetic interiordecoration and layout, data-centric and technology-driven operation, as well as an extensivesuppliers portfolio. The following diagram illustrates how these factors respond to the market trendwhich further contributes to maintain our market-leading position.

Driven by EmergingChannels

Fashion Leaderamong Young

Generation

Rapidly EvolvingIteration

Exquisite MerchandiseSelection & Fast Iteration of QualityProducts

Strong Control & Efficient Management of Supply Chain

Intelligent Technologies & Digital Infrastructure

Unique StoreDecoration & Brand Building

Exquisite SiteSelection &Smart Operation

Interaction between the Group and retail brands

Mutual empowermentbetween retail brands

Diversified Demandswith Evolving

Information Flow

Pursuit of Self-Expression &

Spontaneous Marketing

Brand Personality &Shopping Experience

Focused

NewConsumers

NewBrands

Next-Generation Specialty Retail Platform

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Where We Started

The specialty retail market in China has been evolving rapidly at both demand and supplyends.

Demand

• Rising disposable income and growing middle-class population. The growing middle-class population in the urban areas of China has become the main customer for lifestyleproducts, while the rising disposable income enhances their desire for better livingstandards, resulting in increased consumption expenditures on lifestyle products,according to the Frost & Sullivan Report.

• Younger generation’s strong willingness to buy. Those who are 30 years old or youngeraccounted for approximately 35% of the Chinese population in 2020. Their consumptionof cosmetics accounted for 49.5% of all beauty product sales in 2020. In selectingproducts and place for shopping, they tend to place more emphasis on (i) the design oflifestyle products that can reflect individualized preference, novelty and high aestheticquality; (ii) good value for money; (iii) product diversity and brand image; and (iv) ashopping experience that highlights surprise discoveries.

• Increasing demand for a surprise-filled and immersive shopping experience. In the eraof “rapid consumption”, consumers prefer a surprise-hunting experience through sensoryparticipation in uniquely themed offline stores. Immersed in a pleasant and surprise-filled store atmosphere, consumers are prone to make independent and happy purchasedecisions.

• Consumption upgrade mega trend in China. The expected ongoing urbanization inChina is going to bring more city residents and raise the disposable income ofconsumers, enabling them to pursue higher lifestyle standards and seek quality lifestyleproducts to satisfy their individual preferences.

Supply

• Emerging new brands. Over the past few years, China has witnessed a surge inconsumers’ interest in domestic brands and products that embody traditional Chinesecultural elements, featuring fashionable design and cool style, as well as the rise ofimported cutting-edge brands. This trend drives the emergence of domestic collectionstores, particularly those carrying the business model that integrates a large number ofcost-effective products from trendy and popular brands, and provides consumers with amore dynamic and immersive shopping experience at a one-stop location.

• Emerging new technologies. Advanced analytical and processing technologies havebeen widely adopted to continuously improve technology capability of retailers’management systems. This greatly enhance the operational efficiency of retailers fromvarious aspects, such as merchandise identification, store management and supply chainmanagement.

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• High demand for operational efficiency. To adapt to the ever-changing market, retailershave strong motivation to improve their operational efficiency, making retail giantsbetter positioned to leverage their deep consumer insights and strong resourceintegration capabilities.

• Development of big data. Capitalizing on substantial amounts of transaction data,retailers can simplify the supply chain hierarchy and reduce supply chain costs bydirectly procuring merchandise from brand owners, local authorized dealers or OEM andODM contractors and intelligently planning cost-effective logistics routes.

What We Have Achieved

We are a pioneering specialty retailer with multiple self-incubated retail brands that enjoy amassive consumer base and a favorable market influence. We were one of the top three specialtyretailers by GMV and the fastest-growing specialty retailer among the top ten players in China witha GMV CAGR of 246.2% from 2018 to 2020, according to the Frost & Sullivan Report. As of theLatest Practicable Date, we have established a store network of 680 stores that are strategicallysituated in 169 cities in 31 provinces in China and one city in Indonesia. We had successfullyincubated four retail brands, namely KKV, THE COLORIST, X11 and KK Guan, among which ourKKV and KK Guan collectively ranked fourth in featured variety category in specialty retail marketand THE COLORIST ranked third in beauty category in specialty retail market in China, in termsof GMV in 2020, according to Frost & Sullivan Report.

We offered consumers various kinds of specialty products of over 20,000 SKUs across 18major categories under our four retail brands, covering all major core lifestyle product categoriesincluding beauty, pop toys, food and beverage, household, stationery, etc., facilitating an effectivereach to wide consumer spectrum, as of June 30, 2021.

We have experienced rapid growth since our inception. Our total revenue increased fromRMB155.3 million in 2018 to RMB463.7 million in 2019 and further increased to RMB1,645.9million in 2020. Our total revenue increased by 235.1% from RMB502.4 million in the six monthsended June 30, 2020 to RMB1,683.2 million in the six months ended June 30, 2021. The totalnumber of our retail stores increased from 80 as of December 31, 2018 to 211 as of December 31,2019, from 211 as of December 31, 2019 to 556 as of December 31, 2020 and further reached 640as of June 30, 2021.

OUR COMPETITIVE STRENGTHS

A fast-growing and pioneering specialty retailer with multiple retail brands and a strongconnection with a massive consumer base

As a pioneering specialty retailer in China, we offer an immersive shopping experience anda vast variety of lifestyle products to consumers through our extensive nationwide store networkunder multiple retail brands. We were one of the top three specialty retailers by GMV in 2020 andthe fastest-growing specialty retailer among the top ten players in China with a GMV CAGR of246.2% from 2018 to 2020, according to the Frost & Sullivan Report. We opened our first store inChina in December 2015, and have built up an extensive network of 637 stores covering 155 citiesacross 31 provinces in China and three stores in Jakarta, Indonesia as of June 30, 2021.

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Our success in the ever-changing specialty retail market trend is largely attributable to ourmulti-brand strategy. Benefiting from our core strength in positioning our merchandise mix andstrong bargaining power in sourcing merchandise from our Third Party Brand Partners, we fortifiedour market position as a multi-brand retail pioneer with a strong commitment to providingconsumers with the ultimate shopping experience. Optimizing the shopping experiences by ourcustomers, our strategy focused on the selection and collections of diverse, popular and highvalue-for-money specialty products in our stores that enjoy continuous multi-dimensionalinnovation. We believe that having a portfolio of different brands and product offerings at aone-stop location not only creates positive brand synergies, but also increases our bargaining powerwith lease owners.

Over the years, we have capitalized on market opportunities by rolling out our current fourretail brands, namely, KKV, THE COLORIST, X11 and KK Guan, and new product offerings to ourend customers, thereby enabling us to access and retain a wide range of customers and furthersolidify our source of revenue. Leveraging our excellent merchandise selection capability, we offerconsumers various specialty products of over 20,000 SKUs across 18 major categories under ourfour retail brands, covering all major core lifestyle product categories including beauty, pop toys,food and beverage, household, stationery, etc., facilitating an effective reach to wide consumerspectrum.

In line with our strategy on store network expansion and brand influence, we take into accountvarious factors in determining locations of our retail stores, including visibility, population densityin local areas, and proximity to target customer groups.

To further illuminate our efforts made to reach and diversify our target customers, the detailsof our site selection of each retail brand are set forth below.

Retail Brand Brand position Typical site selection

Integrated lifestyle specialty retail storeswith a wide range of exquisite merchandisetargeting teenagers and young adults

Super-sized anchor store sites in landmarkshopping centers with ad single store sitearea ranging from 300 sq.m. to3,500 sq.m.

Beauty specialty retail stores offering widerange of domestic and imported masstigeand entry lux cosmetics brands

Large anchor store sites in landmarkshopping centers with a single store sitearea ranging from 100 sq.m. to 2,100 sq.m.

Pop culture specialty retail stores wherefans shop for pop toys and pop art productsof the characters they adore

Large anchor store sites in high-end andupscale shopping centers with a single storesite area ranging from 150 sq.m. to 5,500sq.m.

Lifestyle mini marts with an assortment ofdomestic and imported products indiversified product categories

Flexible selection of either core shoppingareas or other store sites with high-volumepedestrian flow with a store site arearanging from 80 sq.m. to 900 sq.m.

We are devoted to continuously optimizing our merchandise collection, brand positioning andsite selection, through which, we have managed to successfully foster consumer trust and loyaltythat further contributes to our long-term competitiveness. With accumulated customer visits to ourretail brands, we have successfully established public recognition of our brand value, i.e., aspecialty retailer embodied in a premium shopping experience. Leveraging our market influence, webelieve that we are able to maintain a lasting connection between our brands and customers, furtherpromoting our consistent growth.

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A consumer-centric and innovative specialty retailer with deep consumer insights and a largegroup of high quality and loyal consumers

A consumer-centric culture has been deep-rooted in our history since our inception in April2015. We strategically positioned ourselves as a market leader with distinguished competitiveness,in line with which, we have implemented various measures to promote customers’ experiencecovering various key sectors of our daily operation, including merchandise selection, storedecoration and soft marketing behavior conducted by our stores’ sales persons. We focus our corebusiness judgments around the customers, and invest in consistent studies on customers’ actualneeds through analyzing customer behavior and interests, so that we could timely identifyopportunities to offer suitable products and services to our customers.

Through continuous, extensive and direct interaction with target consumer groups, we haveaccumulated and continuously studied substantial amounts of transaction data, capitalizing onwhich, we have established deep consumer insights allowing us to achieve effective innovation atall core aspects affecting our consumers’ shopping experience. As a result, we have managed toprovide consumers with an ultimate shopping experience with distinguished features, which furtherimplants our distinctive brand image and value in consumers’ minds. We believe that transactiondata is a reliable tool to accurately reflect market demand and consumer preferences. We haveadopted a merchandise selection strategy supported heavily by big data analysis, instead of utilizingmanual decision making, to minimize the effect from subjective factors. This allows us to discoverthe most popular products among local consumers in a timely manner, so that we can efficientlyadjust our product portfolio at each store in a flexible way, optimizing our service to localconsumers’ needs resulting in “Unique Design for Every Store (千店千面)” that benefit us bybringing surprising joy to visited customers.

Underpinned by our in-time capture and study of transaction data and capitalizing on ourcomprehensive experience of retail store opening and management, we have been investing inpromoting an ultimate experience for customers at every key stage along their shopping decisionjourneys. By creating a minimalist space layout and utilizing vibrant color schemes, we catchconsumers’ eyes and stimulate their curiosity and desire to explore before they enter the store.Leveraging this feature, quite a number of our stores have immediately become “popular” uponopening, turning into one of the local fashion landmarks and check-in spots for “internet celebrities(網紅)”. After consumers enter our stores, they can easily find the products they want while having“the joy of experience and discovery” thanks to the clear classification of shelf displays, matchedwith innovative design ideas and delicately designed “life-scenario-based” displays. Furthermore,these designs exhibit intrinsic aesthetic appeal and encourages our consumers to proactively sharetheir shopping experience on social media platforms, bringing value-added rewards to them whilecreating valuable word-of-mouth marketing effect.

Our successful track record proves the value of a consumer-centric business developmentstrategy. Leveraging on such strategy, our four retail brands stand as market leaders in theirrespective market segments and hold large customer bases featuring strong loyalty and high activity.For example, our KKV and KK Guan brands collectively ranked fourth in the featured varietymarket and THE COLORIST ranked third in the beauty market, in terms of GMV, in China’sspecialty retail market in 2020, according to Frost & Sullivan Report. Standing out in the highlycompetitive retail market, we look closely into the interests and demands of our vast customer base,particularly Millennials and Generation Z, and have formed a deep insight into KOL marketing onsocial networks, all of which contribute to the promotion of our brand recognition among the public,customer affinity and competitive edge over other industry players.

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Proven ability to incubate and scale new retail brands with continuous innovation

Innovation is one of our core philosophies deeply instilled in our daily operations. Whilecautiously observing the common trend of businesses flocking into the booming e-commerce sectorin China, we pride ourselves on our daring and innovative business model that focuses on offlineretail business featuring a competitive edge of allowing customers to enjoy choices from a broadrange of merchandise with ease. Furthermore, leveraging our store layout that enhances ourcustomers’ aesthetic and sensory experience, we deliver an immersive shopping experience withcozy, welcoming, trendy or progressive themes, which cannot be duplicated online. By attending tocustomers’ needs that have been long underserved, we successfully became the ultimate destinationfor conveying a vibrant and attractive feeling to consumers. Since our inception in April 2015, welearned through our store-opening experiences and never ceased our effort to understand customers’actual needs. Underpinned by these experiences and the business acumen of our founders, we havesuccessfully incubated four retail brands, namely KKV, THE COLORIST, X11 and KK Guan, eachof which was designed to serve customers from different demographics.

The success of our devotion to innovation can be demonstrated by the market position heldby each of our four retail brands, each recognized as a leader or successful pioneer in theirrespective sectors. Despite the challenges of a highly competitive retail industry, our innovative andprogressive business model paid off, evidently reflected in the exponential growth of the numberof our retail stores, especially in recent years, as our business model began to mature and stabilize.We also firmly believe that the expansion of our store network contributed to our ability to benefitfrom the economies of scale, thereby promoting a virtuous circle in favor of our past and futureexpansion. The following summary chart further illustrates our proven ability to roll out ourbusiness model at scale:

Number of retail stores at the end of the period#

281

107185.6

1367.2

612.8

Number of retailstores as of

June 30, 2021

M0 M41 M45 M49 M71

GMV for eachretail chainbrand in the

first six monthsof 2021

(in million)

47.3

240

12

Note: M refers to the number of months since the first store of a particular brand launched.

For details on our store network and location of stores, see “— Our Business Model — OurRetail Store Network.”

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To illuminate the upgrading and innovation process of our retails chain brands, the summaryof each retail brand is provided as follows:

KKV

• Innovative strategy: Evolved from KK Guan, KKV leverages the core competenciespreviously harnessed by KK Guan in upgrading its merchandise offering, store format andtarget customers. KKV focuses on offering the hottest-selling merchandise (爆款)characterized by a strong aesthetic appeal. KKV stores generally occupy large store spaceranging from 300 sq.m to 3,500 sq.m. in key commercial areas, granting them strongerbargaining power and operating leverage with greater brand influence.

• Industry position: As the existing major branded stores in shopping centers are going out ofvogue, we are determined to become a leading next-generation and traffic-oriented majorbrand.

THE COLORIST

• Innovative strategy: Taking advantage of our existing core strengths, THE COLORISTembodies our horizontal expansion into various vertical segments in the beauty industry. Withyouthful ambience and perceptible energy, THE COLORIST focuses on giving customers anin-store experiential shopping journey with carefully selected product offerings across 12categories.

• Industry position: A locally-adapted beauty specialty retail stores to serve the ever-increasingdemands in the beauty market.

X11

• Innovative strategy: With diversified cultural and pop elements, X11 provides an accessibleway for passionate fans to express their affection and affinity to characters they adore. Giventhe wide range of pop merchandise we offer, fans will find their shopping experience morepersonalized.

• Industry position: A mega-sized pop toys collection retail brand with diversified pop cultureofferings in China.

KK Guan

• Innovative strategy: KK Guan is a modern mini-mart that offers an assortment of domestic andimported leisure foods, personal care products and other merchandise with attractive designand great value at friendly prices.

• Industry position: KK Guan stores have become a “go-to” venue for urbanites occupied witha busy lifestyle to replenish their daily household products.

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Data-centric and technology-driven systematic retail operation to achieve excellentoperational efficiency

We pride and distinguish ourselves on continuously improving operational efficiency withcutting-edge information technologies. Leveraging our strong self-developed technologycapabilities, we are able to form a highly scalable analysis system tailor-made for our dailyoperation that enables in-depth and real-time analysis of substantial amounts of transaction data.Furthermore, we have endeavored to transform our leading technologies and large numbers oftransaction data into a digital and intelligent management system to empower every link ofoperations.

Merchandise Selection

Since commencement of our operation, we believe that the excellent merchandise offerings inour retail stores have greatly contributed to our business success. With a view to further solidify thisstrength, we utilized Product Selection System (“PSS”), that works in-sync with our otherinformation technology systems as a whole, allowing us to process large volumes of raw andscattered market data, purchase history, real-time inventory feedback from stores, and informationwe obtained from third-party social media platforms, and further convert this quickly and accuratelyinto readable and structured information. This readable and structured information will thentranslate into relatable insights that form the basis of our merchandise selection decisions.

It is noteworthy that, based on the objective information generated by our PSS, we are ableto avoid the risks of human judgment error and emotional biases to the fullest extent possible. Inaddition, with the insights provided by PSS, our merchandise selection process is systematic andhighly efficient. We also have a dynamic merchandise reevaluation mechanism in place. We holdweekly merchandise review meetings to determine new merchandise candidates and at the sametime eliminate unpopular merchandise. Coupled with our business agility in navigating throughfast-changing consumer preferences, this series of mechanisms has allowed us to react withflexibility to address the preference of different demographics of customers in each retail brandtargets.

For details on each step we take in the merchandise selection process, see “— OurMerchandise Offerings — Our Merchandise Selection Criteria and Process.”

Store Management

We implemented proprietary KPOS, KVCM and other systems in every store across all ourbrands to efficiently visualize and manage site selection evaluation, decoration design, shelfdisplay, order processing, member and employee status as well as inventory status. This real-timedata and standardized management empower our store front-line staff and enable the managementteam to effectively assess the popularity of individual products and the preference of our customers,which is crucial for a prompt adjustment of product mix, pricing and shelf arrangement to boostsales as well as brand image. For details on KPOS, KVCM and other systems, see “— InformationTechnology — Our Technology Infrastructure.”

We also established a standard store employee training and management system with anemphasis on executive force, so as to reduce operation dependence on human factors and enhancethe replicability of store operation.

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Supply Chain

The efficiency of our supply chain is critical to ensure the operation of our national salesnetwork in 169 cities. Our supply chain management system integrates our self-developed KPOSand TERP system seamlessly with WMS system to provide our management with high visibility andcontrol over key aspects of the supply chain, including inventory control, logistics andwarehousing. For details on KPOS, TERP and WMS systems, please see “— InformationTechnology — Our Technology Infrastructure.” Leveraging this highly intelligent system, our fivenational distribution centers (“NDCs”) and regional warehouses work fully in sync to completeorders from our sales channels, strengthening our competitiveness on fast inventory turnover, lowlogistics costs and short order-fulfillment time.

With the supply chain management system, we have simplified the supply chain hierarchy andreduced the supply chain cost by directly sourcing merchandise from Third Party Brand Partners orengaging OEM and ODM contractors for the manufacturing of our self-owned brand merchandise,intelligently planning the optimal logistics routes, and establishing long-term cooperation withquality warehousing and logistics service providers.

Cross-Department Cooperation

Keewood Low-Code system is a novel software platform that facilitates the development ofinternal IT systems with low coding work and quick turnaround time, by representing eachdepartment as a module and visualizing the internal process design. For the sake of efficientinformation sharing and close collaboration between different operating departments, multiplein-use and under-development systems are derived from Keewood Low-Code platform, such assystems to optimize product procurement, cash management, store development, internal tasktracking, as well as information sharing across departments. For details on Keewood Low-Codesystem, please see “— Information Technology — Our Technology Infrastructure.”

We sincerely believe that by relying on our self-developed technology platforms and toolswith high precision, efficiency and flexibility, we have fortified our leading marketing position andare well equipped to cope with diversified market challenges.

Our capabilities in maintaining a stable, collaborative and extensive supplier network

We have established a growing and high-quality list of Third Party Brand Partners who supplyus with merchandise desired by our target customers. As of June 30, 2021, we sourced merchandiselocally and globally from 1,145 Third Party Brand Partners, and had engaged 145 OEM and ODMcontractors for the manufacturing of our self-owned brand merchandise. For details on oursuppliers, please see “— Our Suppliers and Raw Materials — Our Suppliers.” Given that we havedeveloped and maintained a diverse supplier network and have accumulated extensive latestproducts information in the specialty retail markets, we are able to comprehend the ever-changingproduct trends swiftly and to capture the pre-emptive opportunities to source a wide variety ofquality, popular, trendy and distinctive specialty retail products from various suppliers swiftly andon a continual basis. Further, as we do not rely on any of our suppliers, we are therefore in a moreadvantageous position to negotiate more favorable pricing so as to better control our procurementcosts. We believe that the stable collaborative relationships maintained by us with our suppliersenable our Group to create and foster long-term relationships with our suppliers which in turncontribute to the success of our Group.

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Visionary Founders supported by innovative and experienced management team

Our visionary founding team has unique insights into relevant industries. Our principalfounders Mr. Wu and Mr. Guo are among the first cross-border e-commerce entrepreneurs in China.They have in-depth understanding of new retail industry. Our principal founders have progressiveentrepreneurial and investment vision.

Our management team has rich experience spanning all major aspects of our business,including retailing, branding and marketing, supply chain management and digital technologies. Webelieve that the knowledge, experience and strategic vision of our senior management team havebeen crucial to the success of our business and enabled us to anticipate market trends and stay aheadof our competitors.

Our management team is driving our rapid development and cultivating a vigorous andtalent-oriented corporate culture that encourages acting with courage and determination. Thesevalues and culture have instilled a sense of identity and accomplishment in our talented employees.

OUR DEVELOPMENT STRATEGIES

Expand our nationwide retail network

Our four retail brands, namely KKV, THE COLORIST, X11 and KK Guan, have become thewell-recognized new retail models and the trendsetter of customers’ lifestyle. We aim to open moreoffline stores and create the “go-to” (首選) brands for our target customers when they are makingdecisions in purchasing specialty products. Since consumers tend to use a lasting impression tointerpret and classify information about brands and products, our “go-to” brand image could shapeconsumer behaviors and drive associated purchases among our different brands.

To create and ensure a “go-to” lifestyle brand image, we will open new stores in hot spotlocations of major shopping centers across various cities of different tiers and attract heavycustomer traffic through our unique interior design and distinctive brand image. We will alsomaintain long-term mutually-beneficial relationships with strategically important shopping centersand lease owners, to retain consistent store facade style and corporate image and to secure primelocations. We will further expand our customer base through our innovative store style,carefully-curated product portfolio, extensive store network and modern lifestyle advocacy.

Continue to develop global product sourcing capability and bring our customer the latestcurated product portfolio

Through our advanced and data-driven intelligent store sales management and monitoringsystem, we will continue to refine and optimize our sourcing criteria for evaluating and selectingour product portfolio. We pride ourselves in identifying “value-for-money” high quality productsfor our customers which drives us to further enrich our product offerings by launching distinctiveSKUs in existing categories and timely adjusting our merchandise mix, in order to cater toever-changing consumer preferences.

We will optimize our pricing policy and control our procurement costs by large-volumepurchasing and supplier bidding mechanism, bringing our end customers a variety of products atcompetitive prices. Furthermore, we will establish long-term and mutually-beneficial businessrelationships with our suppliers to ensure merchandise quality and continuous product iteration.

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We will further develop our global supply chain sourcing capabilities by strengthening ourcooperation with existing qualified suppliers and attracting new capable upstream suppliers. We aimto grow and increase the diversity within our procurement team, to capitalize on the diversebackground and experience of team members and maximize our exposure with new products andnew suppliers that meet our standards. We will also deeply and seamlessly integrate suppliers intoevery step of our supply chain management system to increase the efficiency of global supplies andlogistics.

Further optimize our packaged business capabilities and efficiency through data-driventechnology

We plan to continuously innovate and invest in our information technology systems,particularly in our packaged business capabilities that are software components to streamlineworkflows, lighten back-end management and simplify collection of services. Packaged businesscapabilities serve as the backbone support to our business growth. We consider efficient logisticsand order fulfillment an integral part of our business operation and will continue to implementheadquarters’ real-time and centralized management system covering supply chain, logistics,storage and store level operations. Our upgrades in those systems will enhance our packagedbusiness capabilities through full alignment and synchronization amongst real-time operating data,real-time financials and real-time feedbacks from stores.

We also plan to further enhance our database and big data analytics capability to gain insightinto customers’ purchase pattern, behavior and preference across regions and standardize ourapproach to store operation and management with an aim to minimize influence of human biases.Our systematic approach to store operation, standardized workflow and strong packaged businesscapabilities will enable us to expand stores in a swift and economic manner.

Furthermore, with improved big data analysis capability that empowers automation, we willcontinue to enhance operating efficiency through streamlined and simplified corporate structure andbusiness divisions, with well-defined operation targets to maximize the results under “less is more”principle.

Enhance and upgrade our existing brand portfolio and roll out new retail brands, with a focuson the unmet demands of our target customer base

Riding on the success of our various retail brands, we will continue to incubate and developspecialty brands and stores with unique brand image and strong characteristics appealing to ourtarget customers, further stimulate the potential demands of target customers and reinvent theirconsumption habits.

We aim to deepen the brand connection across our portfolio and build affinity and bondingwith our target customers, thereby establishing brand stickiness through our array of specialtybrands.

As uniform brand image is crucial to establish brand recognition and awareness, we intend tofurther deploy a strict control of store image, sales reception and environment that each of our retailbrands requires with the same standards, and constantly upgrade our store design. We believe thatthese measures will provide us with more standardized management across different stores underthe same retail brand and closer contacts with our customers to understand their perceptions,thereby offering us deep insights into their future needs and expectations while maintaining a lowercost of operations.

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Promote online sales

Leveraging the mass of offline traffic, we plan to boost online sales by diverting our largeoffline customer base to online platforms, where we strive to enhance customer loyalty throughdigital and social transformation.

We believe our strong offline retail business and huge base of loyal customers presentremarkable potential for online sales. According to the Frost & Sullivan Report, we ranked thirdwith RMB2.3 billion GMV generated in 2020 among the top five largest specialty retailers in China.We have an expansive presence in numerous cities in China in terms of number of offline stores.Many of our customers are under 30 and seasoned in online shopping, bringing an unprecedentedopportunity for us to expand our online business. Furthermore, our integrated coverage of bothonline and offline market can further promote the online purchasing power through cross-sellingand our brand affinity. The strong in-store social media presence will also maximize customertouchpoints and promote online sales.

We will continue to promote and spearhead the digital, social, and quality-focusedtransformation in retail market. By launching innovative marketing initiatives on popular socialmedia platforms, we will proactively continue reaching out to online customers. We look to enlargethe impact of our brands and customer base through marketing campaign collaborations with KOLsin online shopping communities, through active involvement in marketing activities on onlineshopping-related platforms. With such a comprehensive approach, we will greatly boost our onlinesales, increase brand awareness and enhance brand loyalty among millions of existing as well aspotential customers.

Expand into the global markets to gain international presence

To further solidify our leading position and enhance our competitive advantages, we plan toexpand into the global market. We adopt a prudent approach for our global expansion and will carryout comprehensive research on our overseas target markets and consider a broad range of factorssuch as the legal and regulatory environment, macro-economic performance as well as the socialand cultural characteristics of each particular market. We will carefully evaluate and selectappropriate markets for expansion.

OUR BUSINESS MODEL

We focus on operating specialty retail stores which offer distinctively characterizedmerchandise through the DTC model, where we serve customers directly through our self-ownedstores or franchise stores which we have managed through store management arrangement. Formore details on store management arrangement, see “— Self-owned Stores and Franchise Stores —Key Terms of Franchising Arrangement.” Our footprints spanned across 169 cities in 31 provincesin China and one city in Indonesia as of the Latest Practicable Date. We operate four specialty retailbrands, namely KKV, THE COLORIST, X11 and KK Guan, primarily through an extensive retailnetwork. Please also see “— Procurement and Manufacturing Procedures.”

During the Track Record Period, we generated revenue primarily from (i) the sales of goods,primarily comprising retail sales in our self-owned stores and sales to the franchise stores, and (ii)the sales-based management and consultation services income.

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The following table sets forth a breakdown of our revenue by service line, and the contributionof each service line in absolute amounts and as percentages of our total revenue for the periodsindicated:


2018 2019 2020 2020 2021


(Unaudited)

Sales of Goods

Self-owned Stores . . . . 108,437 69.8% 195,652 42.2% 581,845 35.4% 206,882 41.2% 879,476 52.3%

Franchise Stores . . . . . 40,613 26.1% 240,596 51.9% 946,548 57.5% 249,717 49.7% 721,564 42.9%

Others(1) . . . . . . . . . 2,174 1.4% 4,587 1.0% 37,716 2.3% 24,203 4.8% 7,479 0.4%

Subtotal . . . . . . . . . 151,224 97.4% 440,835 95.1% 1,566,109 95.2% 480,802 95.7% 1,608,519 95.6%


Total . . . . . . . . . . . . 155,309 100.0% 463,744 100.0% 1,645,904 100.0% 502,357 100.0% 1,683,160 100.0%

Notes:


(2) Primarily included store management income, logistics charges and POS charges to our franchise stores.

Our Retail Brands

We sell specialty retail products and operate an extensive retail network of self-owned andfranchise stores under four specialty retail brands — (i) KKV, (ii) THE COLORIST, (iii) X11 and(iv) KK Guan. Drawing on our unique business model, and benefited from our core strength inpositioning our merchandise mix, we had been able to launch and expand multiple store brands ina short span of time since the establishment of our Group in April 2015. Each of KKV, THECOLORIST, X11 and KK Guan is strategically developed to serve the market needs of differentconsumer demographics in China.

Our success in continuously launching different retail brands is underpinned by our strongtechnology capability, which lays the foundation for developing and continuously improving ourhighly efficient store management system in line with our business strategy. In particular, our acutedata-driven capacity adeptly identifies and captures ever-changing business opportunities andcustomer demand in terms of product type, brand image, as well as shopping experience. Furtherleveraging our highly competitive shelf policy and rich experience in screening a large number ofproduct candidates, we have managed to quickly identify the most sought-after merchandisecandidates by deciphering the prevailing shopping patterns of our target customer group. We thenutilize our advanced, group-wide technology platform to consolidate the necessary resources forachieving expeditious and optimized store development, resulting in prompt establishment of brandawareness among our potential consumers and economies of scale. Our ongoing success in buildingup our retail brands is a testament to our outstanding innovative power and technology capacity,which further constitutes our competitive edge over our peers.

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While each of our brands may differ in their merchandise offerings and target customers, theynevertheless share our common philosophy of giving unforgettable retail shopping experience to thecustomers through our best efforts. Moreover, we invested in various pilot programs to exploreopportunities expected to emerge based on our observation of evolving consumers’ preferences, sothat we may continuously enhance and optimize synergy among different retail brands as well asreview our branding strategy in a dynamic way.

The following table provides a breakdown of our GMV(1) by retail brands for the periodsindicated:


2018 2019 2020 2020 2021


KKV . . . . . . . . . . . . – – 97,045 14.9% 1,156,480 51.3% 294,011 45.5% 1,367,194 61.8%

THE COLORIST . . . . . . – – 20,246 3.1% 604,842 26.8% 115,727 17.9% 612,790 27.7%

KK Guan . . . . . . . . . . 188,130 100.0% 534,842 82.0% 479,072 21.3% 236,172 36.5% 185,627 8.4%

X11 . . . . . . . . . . . . – – – – 13,853 0.6% 931 0.1% 47,325 2.1%

Total GMV . . . . . . . . 188,130 100.0% 652,133 100.0% 2,254,247 100.0% 646,842 100.0% 2,212,935 100.0%

Note:

(1) GMV refers to gross merchandise value, namely the full value of all purchases transacted and settled on the storesoperated by our Company including self-owned stores and franchise stores.

The following table sets forth a breakdown of our revenue by retail brands for the periodsindicated:


2018 2019 2020 2020 2021


(Unaudited)

KKV (1) . . . . . . . . . . – – 81,878 17.7% 834,734 50.7% 221,930 44.2% 1,048,589 62.3%

THE COLORIST(2) . . . . . – – 20,048 4.3% 439,729 26.7% 97,366 19.4% 461,280 27.4%

KK Guan . . . . . . . . . . 153,135 98.6% 357,231 77.0% 320,885 19.5% 157,939 31.4% 120,105 7.1%

X11(3) . . . . . . . . . . . – – – – 12,840 0.8% 919 0.2% 45,707 2.7%

Others(4) . . . . . . . . . . 2,174 1.4% 4,587 1.0% 37,716 2.3% 24,203 4.8% 7,479 0.4%

Total . . . . . . . . . . . . 155,309 100.0% 463,744 100.0% 1,645,904 100.0% 502,357 100.0% 1,683,160 100.0%

Notes:





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KKV

We commenced the operation of KKV stores in May 2019, which demonstrates our successfulexpansion in the retail sector leveraging in-depth industry insights through operating KK Guan, ourfirst retail brand. With a store space typically ranging from 300 sq.m. to 3,500 sq.m., KKV is anintegrated lifestyle specialty retail brand which offers a wide range of exquisite merchandisetargeting teenagers and young adults who represent the class of consumers with strong spendingpower, acute appetite for fashion, and increasing needs for refined lifestyles. The merchandise weoffer in KKV stores is prominently characterized with novelty and aesthetic elements that webelieve will strongly appeal to our target customers. As of June 30, 2021, each KKV store generallycarried over 20,000 SKUs from 18 categories, covering various core lifestyle product categories,such as food, daily products, cosmetics, skincare and pop toys. Building on our successful trackrecord and extensive nationwide store network, we began tapping into overseas market in March2020, with the opening of our first overseas KKV store in Jakarta, Indonesia.

As of June 30, 2021, we had 281 KKV stores in operation, 278 of which were situated inChina, spanning across 97 cities in 30 provinces, and three of which were situated in Jakarta,Indonesia. For detailed locations of our KKV stores, see “— Our Business Model — Our RetailStore Network.” Under KKV brand, our same store sales increased by 11.3% from the six monthsended June 30, 2020 to the six months ended June 30, 2021.

We pay particular attention to the location and storefront design of KKV stores with the aimof giving our customers an ultimate leisure shopping experience while enjoying quality goods withgreat value. Most of our KKV stores are located in prominent areas in middle- to high-end shoppingmalls across tier-one and tier-two cities in China. Some KKV stores also operate as standalonelandmark shops on nationally renowned shopping streets such as Wujiang Road in Shanghai,Beijing Road in Guangzhou, Chunxi Road in Chengdu, Chu River and Han Street in Wuhan andFuzi Temple in Nanjing.

Merchandise offered under the brand KKV is curated to appeal to the taste of the youngergeneration of the populace, and we place great emphasis on the aesthetic and utility values of thesemerchandise. We believe that given the aesthetical appeal and the value propositions of our KKVmerchandise, we can continue to attract a stable stream of customers to our stores.

In particular, we invest in designing the color theme and shelf display in our KKV stores topromote a better shopping experience, which has made KKV stores popular check-in spotswelcomed by internet celebrities who are keen to share their shopping experience on social medialplatforms. This strategy has resulted in a strong influence among target demographic customergroups, contributed by word-of-mouth marketing effect. Together with our retail capability inensuring a variety of merchandise choices, store atmosphere, shopping convenience, stress-freestaff-customer interaction and progressive merchandise replacement and display policies, we havesuccessfully enhanced customer loyalty and experience, which we believed had attributed to thestrong growth of KKV store performance. For details, please also see “— Network Management andOperations — Store Management — Designs and Merchandise Display.”

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The following pictures illustrate our KKV stores:

(KKV; various cities in China, including Chengdu and Shenzhen)

(KKV; interior)

(KKV; customer traffic)

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For the years ended December 31, 2018, 2019, 2020 and for the six months ended June 30,2020 and 2021, revenue generated from KKV stores amounted to nil, RMB81.9 million, RMB834.7million, RMB221.9 million and RMB1,048.6 million, respectively, representing nil, 17.7%, 50.7%,44.2% and 62.3%, respectively, of our total revenue for the same periods.

The table below sets forth the total number of KKV stores and their movement during theTrack Record Period:

For the year ended December 31,

For thesix months

endedJune 30,

2018 2019 2020 2021

Number of retail stores at the beginning of the period . . . . – – 35 202

Number of new retail stores opened during the period . . . . – 35 168 83

Number of retail stores closed during the period. . . . . . . . – – 1 4

Number of retail stores at the end of the period . . . . . . – 35 202 281

In 2019 and 2020 and in the first half of 2021, we opened 35, 168 and 83 new KKV stores,respectively, primarily to expand the coverage of our retail network and enhance marketpenetration. We commenced operation of KKV stores since May 2019 and during the Track RecordPeriod, we experienced a fast growth stage of KKV stores thanks to younger generation’srecognition and favor for an integrated specialty retail brand with a wide variety of productofferings. We closed nil, one and four stores in 2019, 2020 and the first half of 2021, respectively,primarily in line with store network optimization strategy where we chose to close those storeswhich failed to meet our performance appraisal standards or no longer serve our store networksynergy target.

The following table sets forth the operation details of KKV stores:


ended June 30,

2018 2019 2020 2020 2021

Revenue (RMB in million) . . . . . . . . . . . . . . . . . – 81.9 834.7 221.9 1,048.6

Operating profit(1) (RMB in million) . . . . . . . . . . . – 11.2 82.6 9.7 140.6

Operating margin(2) . . . . . . . . . . . . . . . . . . . . . – 13.7% 9.9% 4.4% 13.4%

EBITDA(3) (RMB in million) . . . . . . . . . . . . . . . – 18.7 166.8 40.4 235.7

EBITDA margin(4) . . . . . . . . . . . . . . . . . . . . . . – 22.8% 20.0% 18.2% 22.5%

Notes:

(1) We define operating profit of KKV stores as revenue deducting operational costs incurred at store level, including (i)cost of goods sold, (ii) staff costs, (iii) depreciation of right-of-use assets and other rental related expense, (iv)depreciation and amortization of other assets, (v) daily operating expenses and (vi) relevant central management aswell as logistic and warehouse expenses allocated to stores.

(2) Operating margin of KKV stores was calculated by operating profit of KKV stores divided by revenue for the sameperiod.

(3) EBITDA of KKV stores represents total of operating profit of KKV stores after adding back depreciation of property,plant and equipment and depreciation of right-of-use assets at store level.

(4) EBITDA margin of KKV stores was calculated by EBITDA of KKV stores divided by revenue for the same period.

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THE COLORIST

We commenced THE COLORIST as a beauty specialty retail brand in September 2019. THECOLORIST brand represents our successful efforts in bringing our strength and market influenceinto the color cosmetics and skincare sector. THE COLORIST stores predominantly offer domesticand imported masstige and entry lux cosmetics brands, covering over 5,500 SKUs from 12categories as of June 30, 2021, which makes it the destination for customers to conveniently pickup cosmetic and skincare products from a wide selection. THE COLORIST primarily targets youngcustomers, whether they are beauty amateurs or connoisseurs. As of June 30, 2021, THECOLORIST offered 185 domestic brands, including our own brands, and 246 overseas brandssourced from Japan, Korea, Thailand, and United States.

We expand the network of THE COLORIST primarily in tier-one and tier-two cities, and othercities with promising economic growth. THE COLORIST stores are generally present in shoppingmalls with strong pedestrian flow and frequented by the younger generation, with a store spacetypically ranging from 100 sq.m. to 2,100 sq.m..

As of June 30, 2021, we had 240 THE COLORIST stores in operation, spanning across 99cities in 29 provinces in China. For the detailed locations of THE COLORIST stores, see “— OurBusiness Model — Our Retail Store Network.” Under THE COLORIST brand, our same store salesincreased by 0.4% from the six months ended June 30, 2020 to the six months ended June 30, 2021.

THE COLORIST embraces an experiential concept to allow our customers to try on theproducts before they purchase. Samples for all of our products are arranged in bright and openself-service displays for testing, and we encourage customers who visit our stores to explore as theywish. We respect their personal space and a stress-free shopping experience desired by ourcustomers. Our in-store staff are trained to refrain from hard-selling marketing behavior and,instead, maintain a warm and approachable manner. They answer questions from our customers andrecommend products holistically, and step back as appropriate. This approach has empowered ourcustomers with the freedom to select products that best suit their preferences with the aid ofprofessional advice offered by our in-store staff when needed. With that, visitors in our beautyspecialty retail stores also tend to spend more time exploring products in our premises.

THE COLORIST as a specialty retail brand distinguishes itself from market competitors withits youthful ambience and perceptible energy. We invest in designing our in-store spacedecoration and merchandise display in a cheerful and colorful way to attract teenagers and youngadults. Besides that, our stores also properly serve both customers who intend to “grab and go”quality products they are seeking, and those who would like to experience a delightful shoppingtime by browsing and testing different brands, or even sharing such moments on social media.

In addition, given our stable cooperation model with third-party brand owners, coupled withour ability to attract younger customers, THE COLORIST has become an offline avenue preferredby many overseas brands as their first station to officially launch their products in China. With ouradvanced consumer analytical tools and localized marketing approach, these overseas brands areable to obtain instant access to valuable market data and utilize our nationwide retail platform.Similarly, many domestic and overseas nascent brand market players had chosen us as their firststation to distribute their products in the offline network after they had established a stable customerbase online.

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The following pictures illustrate THE COLORIST stores:

(THE COLORIST: Wuhan city and Dongguan city)

(THE COLORIST: interior)

(THE COLORIST: customer traffic)

For the years ended December 31, 2018, 2019, 2020 and the six months ended June 30, 2020and 2021, revenue generated from THE COLORIST amounted to nil, RMB20.0 million, RMB439.7million, RMB97.4 million and RMB461.3 million, respectively, representing nil, 4.3%, 26.7%,19.4% and 27.4%, respectively, of our total revenue for the same periods.

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The table below sets forth the total number of THE COLORIST stores and their movementduring the Track Record Period:


For thesix months

endedJune 30,

2018 2019 2020 2021

Number of retail stores at the beginning of the period . . . . – – 7 229

Number of new retail stores opened during the period . . . . – 7 223 35

Number of retail stores closed during the period. . . . . . . . – – 1 24

Number of retail stores at the end of the period . . . . . . – 7 229 240

In 2019, 2020 and in the first half of 2021, we opened seven, 223 and 35 new THE COLORISTstores, respectively, primarily to expand the coverage of our retail network and enhance marketpenetration. We closed nil, one and 24 stores during the same period, respectively, primarily due tothe failure to meet our performance targets, to maintain an efficient sales network and the impactof COVID-19 breakout.

The following table sets forth the operation details of THE COLORIST stores:


ended June 30,

2018 2019 2020 2020 2021

Revenue (RMB in million) . . . . . . . . . . . . . . . . . – 20.0 439.7 97.4 461.3

Operating profit(1) (RMB in million) . . . . . . . . . . . – 3.6 19.7 (4.7) 31.1

Operating margin(2) . . . . . . . . . . . . . . . . . . . . . – 18.0% 4.5% (4.8%) 6.7%

EBITDA(3) (RMB in million) . . . . . . . . . . . . . . . – 8.6 109.6 23.8 115.3

EBITDA margin(4) . . . . . . . . . . . . . . . . . . . . . . – 43.0% 24.9% 24.4% 25.0%

Notes:

(1) We define operating profit of THE COLORIST stores as revenue deducting operational costs incurred at store level,including (i) cost of goods sold, (ii) staff costs, (iii) depreciation of right-of-use assets and other rental relatedexpense, (iv) depreciation and amortization of other assets, (v) daily operating expenses and (vi) relevant centralmanagement as well as logistic and warehouse expenses allocated to stores.

(2) Operating margin of THE COLORIST stores was calculated by operating profit of THE COLORIST stores dividedby revenue for the same period.

(3) EBITDA of THE COLORIST stores represents total of operating profit of THE COLORIST stores after adding backdepreciation of property, plant and equipment and depreciation of right-of-use assets at store level.

(4) EBITDA margin of THE COLORIST stores was calculated by EBITDA of THE COLORIST stores divided by revenuefor the same period.

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X11

We commenced the X11 specialty retail brand in January 2020 by observing strong growth inthe underserved demand for pop toys and pop art products in China. Pop toys and pop art productsare becoming an accessible way for fans to express their affection and affinity with characters theyadore. Our observation had led us to pay close attention to identifying and tracking merchandiseendorsed by pop culture or content, with a view to offering it to our target customers. Themerchandise offerings under X11 brand target a wide array of audience from Z-generation togrown-ups, as well as pop toy collectors of all ages.

As of June 30, 2021, X11 stores carried over 5,500 SKUs from 16 categories, coveringproducts such as blind boxes, action figures, puzzles, figurines, BJD dolls, and plush toys. We relyon IP resources for the operation of our X11 stores. Apart from selling licensed IPs merchandise,we have also engaged independent designers for the creation of our proprietary IPs to be offered inour X11 stores.

All of our X11 stores are located in high-end commercial areas or art districts with highfoot-traffic, with a store space typically ranging from 150 sq.m. to 5,500 sq.m. As of June 30, 2021,we had 12 X11 stores in operation, located in seven cities in six provinces in China. For detailedlocations of the X11 stores, see “— Our Business Model — Our Retail Store Network.”

The following pictures illustrate the X11 stores:

(X11; Shanghai)

(X11; interior)

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(X11; customer traffic)

For the year ended December 31, 2020 and for the six months ended June 30, 2020 and 2021,revenue generated from X11 amounted to RMB12.8 million, RMB0.9 million and RMB45.7million, representing 0.8%, 0.2% and 2.7% of our total revenue for the same period.

In 2020 and in the first half of 2021, we opened four and eight new X11 stores primarily toexpand the coverage of our retail network and enhance market penetration. We did not close anystore during the same period.

The following table sets forth the operation details of X11 stores:


ended June 30,

2018 2019 2020 2020 2021

Revenue (RMB in million) . . . . . . . . . . . . . . . . . – – 12.8 0.9 45.7

Operating profit(1) (RMB in million) . . . . . . . . . . . – – (3.0) (2.0) (14.1)

Operating margin(2) . . . . . . . . . . . . . . . . . . . . . – – (23.4%) (222.2%) (30.9%)

EBITDA(3) (RMB in million) . . . . . . . . . . . . . . . – – 2.1 (0.4) (3.3)

EBITDA margin(4) . . . . . . . . . . . . . . . . . . . . . . – – 16.4% (44.4%) (7.2%)

Notes:

(1) We define operating profit of X11 stores as revenue deducting operational costs incurred at store level, including (i)cost of goods sold, (ii) staff costs, (iii) depreciation of right-of-use assets and other rental related expense, (iv)depreciation and amortization of other assets, (v) daily operating expenses and (vi) relevant central management aswell as logistic and warehouse expenses allocated to stores.

(2) Operating margin of X11 stores was calculated by operating profit of X11 stores divided by revenue for the sameperiod.

(3) EBITDA of X11 stores represent total of operating profit of X11 stores after adding back depreciation of property,plant and equipment and depreciation of right-of-use assets at store level.

(4) EBITDA margin of X11 stores was calculated by EBITDA of X11 stores divided by revenue for the same period.

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KK Guan

We opened our first KK Guan store in December 2015. Since then, KK Guan has continuedto distinguish itself by offering an assortment of domestic and imported leisure foods, personal careproducts and other merchandise with attractive design and great value at friendly prices, thatprovides our customers, particularly young and busy customers, with convenient and quality livingsolutions and enjoyable leisure food.

Leveraging our strong technology capability in product assortment and store management, wehave established KK Guan as the “go-to” place for customers to find top-selling and the mostsought-after goods. As of June 30, 2021, KK Guan stores carried over 2,500 SKUs, primarilycovering food and household products.

Our merchandise offered under the KK Guan stores is carefully selected based onconsiderations such as popularity, unique preferences of local consumers, aesthetic appearance, andvalue-for-money in order to appeal to the mass market.

We generally place KK Guan in shopping malls with strong pedestrian flow, particularly thosethat enjoy convenient proximity to a residential community, with a store space typically rangingfrom 80 sq.m. to 900 sq.m. As of June 30, 2021, we had 107 KK Guan stores in operation, locatedacross 66 cities in 26 provinces in China. For detailed locations of the KK Guan stores, see “— OurBusiness Model — Our Retail Store Network.”

Under KK Guan brand, our same store sales decreased by 4.9% from 2018 to 2019 and 36.2%from 2019 to 2020 primarily due to certain stores at its early stage of development and impact fromlock-down policies in various cities from time to time due to COVID-19 outbreak. Our same storesales increased by 1.9% from the six months ended June 30, 2020 to June 30, 2021.

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We have taken efforts in determining in-store displays of each KK Guan store so that theycould show unique theme that enhances customers’ brand awareness and loyalty, while presentingspecific shelf layout and merchandise combinations that suit the preference of targeted keydemographic customers. The assortment of merchandise in our KK Guan stores is frequentlyreevaluated and refreshed to reflect changing trends, as well as to attract recurring visits of ourexisting customers.

The following pictures illustrate the KK Guan stores:

(KK Guan; Maoming)

(KK Guan; interior)

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The table below sets forth the total number of KK Guan stores and their movement during theTrack Record Period:


For thesix months

endedJune 30,

2018 2019 2020 2021

Number of retail stores at the beginning of the period . . . . 21 80 169 121

Number of new retail stores opened during the period . . . . 64 119 13 17

Number of retail stores closed during the period. . . . . . . . 5 30 61 31

Number of retail stores at the end of the period . . . . . . 80 169 121 107

In 2018, 2019, 2020 and in the first half of 2021, we opened 64, 119, 13 and 17 new KK Guanstores, respectively, primarily to expand geographic coverage, and enhance market penetration, ofKK Guan store network in line with our business expansion and business synergy plan. We closedfive, 30, 61 and 31 stores during the same period, respectively, mainly caused by failure of relevantstores to meet our performance appraisal targets, our proactive approach to terminate operation ofcertain KK Guan stores to launch KKV stores in nearby regions in line with our overall storenetwork synergy and optimization strategy, and the impact of COVID-19 breakout.

The following table sets forth the operation details of KK Guan stores:


ended June 30,

2018 2019 2020 2020 2021

Revenue (RMB in million) . . . . . . . . . . . . . . . . . 153.1 357.2 320.9 157.9 120.1

Operating profit(1) (RMB in million) . . . . . . . . . . . (4.8) 13.5 22.0 8.2 7.0

Operating margin(2) . . . . . . . . . . . . . . . . . . . . . (3.1%) 3.8% 6.9% 5.2% 5.8%

EBITDA(3) (RMB in million) . . . . . . . . . . . . . . . 22.8 42.1 42.4 20.5 13.0

EBITDA margin(4) . . . . . . . . . . . . . . . . . . . . . . 14.9% 11.8% 13.2% 13.0% 10.8%

Notes:

(1) We define operating profit of KK Guan stores as revenue deducting operational costs incurred at store level, including(i) cost of goods sold, (ii) staff costs, (iii) depreciation of right-of-use assets and other rental related expense, (iv)depreciation and amortization of other assets, (v) daily operating expenses and (vi) relevant central management aswell as logistic and warehouse expenses allocated to stores.

(2) Operating margin of KK Guan stores was calculated by operating profit of KK Guan stores divided by revenue forthe same period and multiplied by 100.0%.

(3) EBITDA of KK Guan stores represents total of operating profit of KK Guan stores after adding back depreciation ofproperty, plant and equipment and depreciation of right-of-use assets at store level.

(4) EBITDA margin of KK Guan stores was calculated by EBITDA of KK Guan stores divided by revenue for the sameperiod.

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Our Retail Business Model

During the Track Record Period, we generated our revenue primarily from (i) the sales ofgoods, primarily comprising retail sales in our self-owned stores and sales to the franchise stores,and (ii) sales-based management and consultation services income. The following table sets fortha breakdown of our revenue by product and service lines, and each line’s contribution to our totalrevenue for the periods indicated:


2018 2019 2020 2020 2021


(Unaudited)

Sales of Goods



Others(1) . . . . . . . . . 2,174 1.4% 4,587 1.0% 37,716 2.3% 24,203 4.8% 7,479 0.4%

Subtotal . . . . . . . . . 151,224 97.4% 440,835 95.1% 1,566,109 95.2% 480,802 95.7% 1,608,519 95.6%


Total . . . . . . . . . . . . 155,309 100.0% 463,744 100.0% 1,645,904 100.0% 502,357 100.0% 1,683,160 100.0%

Notes:


(2) Our sales-based management and consultation service income primarily include fees we charged franchiseesaccording to store management agreement for management and consultation services.

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Our Retail Store Network

We have established an extensive, well-managed and strategically situated nationwide retailstore network. By offering our customers immersive shopping experience, we have beensuccessfully reinforcing customer loyalty and brand awareness.

The table below sets forth the number of our retail stores by store types for the periodsindicated:


June 30,

2018 2019 2020 2021

Self-owned Stores

Wholly owned stores(1) . . . . . . . . . . . . . . . . . . . . . 27 46 80 75

Non-wholly owned stores(2) . . . . . . . . . . . . . . . . . . – 1 52 213

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 47 132 288

Franchise Stores

Franchise stores with equity investment arrangement(3). . . 1 38 338 277

Franchise stores without equity investment arrangement . . 52 126 86 75

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 164 424 352

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 211 556 640

Notes:

(1) Wholly owned stores refer to the stores directly or indirectly wholly owned by us.

(2) Non-wholly owned stores primarily refer to the stores we own and control through our subsidiaries where we hold51% shareholding. We held an indirect majority shareholding in a non-wholly owned store set up by the joint venturewhich we control through our majority ownership. We are generally responsible for managing daily operation of thenon-wholly owned store while the other investor holding the remaining 49% of the non-wholly owned store is entitledto monitor and be informed of the financial performance of the non-wholly owned store.

(3) During the Track Record Period, we entered into equity investment arrangements with respect to these franchisestores, where franchisees own respective stores through relevant joint ventures they established with us. Accordingto relevant arrangements, each party is entitled to share profit or loss of relevant stores based on their contributions.As of the Latest Practicable Date, we were still in the process of completing equity investment related documentationor business registration work for a certain number of franchise stores. For details, see “— Self-owned Stores andFranchise Stores — Equity Investment to Franchise Stores.”

For details for the reason of movement of self-owned stores and franchise stores, see “—Self-owned Stores and Franchise Stores — Self-owned Stores” and “— Self-owned Stores andFranchise Stores — Franchise Stores.”

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The following map illustrates the geographical coverage of our retail store network as ofJune 30, 2021.

Store Network as of June 30, 2021

Xinjiang(22)

Tibet(1)

Qinghai(2)

Sichuan(51)

Gansu(8)

Yunnan(14)

Guizhou(13)

Chongqing(14)

Shaanxi(17)

Ningxia(2)

Guangxi(12)

Hunan(18)

Guangdong(128)

Jiangxi(11)

Fujian(15)

Taiwan

Shanghai(30)

Zhejiang(37)

Anhui(13)

Jiangsu(49)

Hubei(17)

Henan(13)

Shanxi(11)

Shandong(27)

Tianjin(12)

Hebei(10)

Beijing(24)

Inner Mongolia(14)

Liaoning(27)

Jilin(12)

Heilongjiang(9)

Hainan(4)

Hong KongMacau

No store

Fewer than 10 stores

Between 10 to 30 stores

Between 30 to 50 stores

More than 50 stores

GuangxiGuangdong

Taiwan

Hainan

Note: Our Company also operates three stores in Jakarta, Indonesia

In line with our store development strategies, we prioritize opening new stores in shoppingmalls, offering an all-under-one-roof experience while allowing us to access a steady flow ofcustomers. When selecting locations for our new stores, we consider various factors, includingamong others, foot traffic in the shopping malls, neighborhood residents’ purchasing power andtheir spending patterns, non-compete considerations such as stores of the same brand in theneighborhood, as well as rentals and other costs. For details, see “— Network Management andOperations.”

To mitigate the risks of store cannibalism, we determine the distance between our stores basedon our market analysis and other commercial considerations to minimize competition among stores.In principle, the distance of two stores of the same brand within the same commercial area isgenerally no less than 500 meters, subject to further detailed evaluation and judgment as toconsumer traffic, market demands, customer positioning, spending power and other factorspertinent to the determination of store location.

Since June 30, 2021, our business continued to develop, and our retail network grew from 640stores to 680 stores from June 30, 2021 to the Latest Practicable Date. During the same period, wecontinued implementing strategic optimization of store network by closing stores that failed to meetour performance appraisal standards, or no longer serve our overall business arrangement or enjoystore-to-store synergy effect, while launching new stores to take over key location at regions withgrowth potential with upgrades in facilities and store management system. Since June 30, 2021 andup to the Latest Practicable Date, we opened 53 KKV stores, 29 THE COLORIST stores, 13 X11stores and 17 KK Guan stores, and we closed 19 KKV stores, 22 THE COLORIST stores, four X11stores and 27 KK Guan stores. Among these newly opened stores, 58 of them are self-owned stores.See also “— Network Management and Operations — Expansion Plan for Sales Channels” fordetails of our retail store network expansion plan.

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The following table sets forth our revenue breakdown by store brand and each brand’scontribution to our total revenue for the periods indicated:


Revenue 2018 2019 2020 2020 2021


(Unaudited)

KKV(1) . . . . . . . . . . . . – – 81,878 17.7% 834,734 50.7% 221,930 44.2% 1,048,589 62.3%Self-owned stores . . . . . . – – 50,880 11.0% 317,213 19.3% 110,676 22.0% 561,495 33.4%Franchise stores . . . . . . . – – 30,998 6.7% 517,521 31.4% 111,254 22.1% 487,094 28.9%

THE COLORIST . . . . . . . – – 20,048 4.3% 439,729 26.7% 97,366 19.4% 461,280 27.4%Self-owned stores . . . . . . – – 19,564 4.2% 159,600 9.7% 48,614 9.7% 255,805 15.2%Franchise stores . . . . . . . – – 484 0.1% 280,129 17.0% 48,752 9.7% 205,475 12.2%

X11 . . . . . . . . . . . . . . – – – – 12,840 0.8% 919 0.2% 45,707 2.7%Self-owned stores . . . . . . – – – – 11,605 0.7% 919 0.2% 34,984 2.1%Franchise stores . . . . . . . – – – – 1,235 0.1% – – 10,723 0.6%

KK Guan . . . . . . . . . . . 153,135 98.6% 357,231 77.0% 320,885 19.5% 157,939 31.4% 120,105 7.1%Self-owned stores . . . . . . 108,437 69.8% 125,208 27.0% 93,427 5.7% 46,673 9.3% 27,192 1.6%Franchise stores . . . . . . . 44,698 28.8% 232,023 50.0% 227,458 13.8% 111,266 22.1% 92,913 5.5%

Others(2) . . . . . . . . . . . . 2,174 1.4% 4,587 1.0% 37,716 2.3% 24,203 4.8% 7,479 0.4%

Total. . . . . . . . . . . . . . 155,309 100.0% 463,744 100.0% 1,645,904 100.0% 502,357 100.0% 1,683,160 100.0%

Notes:

(1) Our revenue generated from our KKV stores included three overseas stores situated in Jakarta, Indonesia.


Store Economics

We believe that our retail brand stores offer attractive economics. During the Track RecordPeriod, it generally took a retail brand store (either a self-owned store or franchise store):

a. approximately two months to reach the breakeven point(1) (being the first point in timeat which its monthly revenue is at least equal to monthly operating expenses (includingcost of goods sold, rental and staff costs) plus depreciation and amortization) (the“Breakeven Point”) and

b. approximately 12 months to 21 months to reach the investment payback point(2) whichis defined as the average length of time required to recoup the capital expenditures toopen a retail store (the “Investment Payback Point”). It is calculated as (i) theaggregate amount of capital expenditures incurred to open a retail store duringrespective periods, divided by (ii) the aggregate amount of store-level operating profitplus depreciation and amortization recorded after their openings.

Notes:

(1) The stores that had not reached the “Breakeven Point” and the stores that were closed during the Track Record Periodare excluded.

(2) The store-level operating profit for the first month after opening are excluded and the stores that were closed duringthe Track Record Period are excluded.

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The length of time required for a store to reach the Breakeven Point or the Investment PaybackPoint is affected by a variety of factors, including, among others, the type, size, location andopening times of the store, the expenditures of securing the location for and opening the store, theeconomic and other conditions in the market in which the store operates, and competition. Suchtime varies substantially from store to store and over time. It is possible that a store may not reachthe Breakeven Point or the Investment Payback Point until after a prolonged period of time, or atall. For details relating to such risks, see “Risk Factors — Risks Relating to Our Business andIndustry — We may not be able to effectively manage the growth of our store network.”

The following table sets forth the overall operation details of our stores of our four brands:


ended June 30,

2018 2019 2020 2020 2021

Revenue (RMB in million) . . . . . . . . . . . . . . . . . 153.1 459.1 1,608.1 478.1 1,675.7

Operating profit(1) (RMB in millions) . . . . . . . . . . . (4.8) 28.3 121.3 11.2 164.6

Operating margin(2) . . . . . . . . . . . . . . . . . . . . . (3.1%) 6.2% 7.5% 2.3% 9.8%

EBITDA(3) (RMB in million) . . . . . . . . . . . . . . . 22.8 69.4 320.9 84.3 360.7

EBITDA margin(4) . . . . . . . . . . . . . . . . . . . . . . 14.9% 15.1% 20.0% 17.6% 21.5%

Notes:

(1) We define overall operating profit of our stores as revenue deducting operational costs incurred at store level,including (i) cost of goods sold, (ii) staff costs, (iii) depreciation of right-of-use assets and other rental relatedexpense, (iv) depreciation and amortization of other assets, (v) daily operating expenses and (vi) relevant centralmanagement as well as logistic and warehouse expenses allocated to stores.

(2) Operating margin of our stores of our four brands was calculated by operating profit of our stores divided by revenuefor the same period and multiplied by 100.0%.

(3) EBITDA of our stores represents total of operating profit of our stores after adding back depreciation of property,plant and equipment and depreciation of right-of-use assets at store-level.

(4) EBITDA margin of our stores was calculated by EBITDA of our stores divided by revenue for the same period.

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Self-owned Stores and Franchise Stores

The table below sets forth a breakdown of the number of our retail stores by store type.

As of December 31, As of June 30,

2018 2019 2020 2021

Numberof stores %

Numberof stores %

Numberof stores %

Numberof stores %

KKV

Self-owned stores . . . . . . . . . – – 10 4.7% 54 9.7% 134 20.9%

Franchise stores . . . . . . . . . . – – 25 11.9% 148 26.6% 147 23.0%

THE COLORIST

Self-owned stores . . . . . . . . . – – 6 2.8% 59 10.6% 129 20.2%

Franchise stores . . . . . . . . . . – – 1 0.5% 170 30.6% 111 17.3%

X11

Self-owned stores . . . . . . . . . – – – – 3 0.5% 9 1.4%

Franchise stores . . . . . . . . . . – – – – 1 0.2% 3 0.5%

KK Guan

Self-owned stores . . . . . . . . . 27 33.8% 31 14.7% 16 2.9% 16 2.5%

Franchise stores . . . . . . . . . . 53 66.2% 138 65.4% 105 18.9% 91 14.2%

Total . . . . . . . . . . . . . . . . . 80 100.0% 211 100.0% 556 100.0% 640 100.0%

Self-owned stores . . . . . . . . . . 27 33.8% 47 22.3% 132 23.7% 288 45.0%

Franchise stores . . . . . . . . . . . 53 66.2% 164 77.7% 424 76.3% 352 55.0%

Self-owned Stores

As of June 30, 2021, we had 288 self-owned stores strategically located in 83 cities of 25provinces in China, and one overseas city.

The following table sets forth the revenue breakdown of our self-owned stores by store typeduring the Track Record Period.

For the year ended December 31,Six months ended

June 30,

2018 2019 2020 2020 2021

(RMB in thousand)

Self-owned stores

Wholly-owned stores . . . . . . . . . . . . . . . . . . . 108,437 195,652 477,920 180,134 265,509

Non-wholly owned stores . . . . . . . . . . . . . . . . . – – 103,925 26,748 613,967

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,437 195,652 581,845 206,882 879,476

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The following table sets forth the changes in the number of our self-owned stores as of andfor the periods indicated.

As of and for the year endedDecember 31,

As of andfor the

six monthsended

June 30,

2018 2019 2020 2021

Self-owned Stores

KKV

As of the beginning of the year/period . . . . . . . . . . . . . – – 10 54

Addition of new stores . . . . . . . . . . . . . . . . . . . . . . – 10 44 83

Closure of stores . . . . . . . . . . . . . . . . . . . . . . . . . . – – – 3

Net increase/(decrease) in the number of stores . . . . . . . . – 10 44 80

As of year-end/period-end. . . . . . . . . . . . . . . . . . . . . – 10 54 134

THE COLORIST



Closure of stores . . . . . . . . . . . . . . . . . . . . . . . . . . – – – 4

Net increase/(decrease) in the number of stores . . . . . . . . – 6 53 70


X11

As of the beginning of the year/period . . . . . . . . . . . . . – – – 3

Addition of new stores . . . . . . . . . . . . . . . . . . . . . . – – 3 6

Closure of stores . . . . . . . . . . . . . . . . . . . . . . . . . . – – – –

Net increase/(decrease) in the number of stores . . . . . . . . – – 3 6

As of year-end/period-end. . . . . . . . . . . . . . . . . . . . . – – 3 9

KK Guan

As of the beginning of the year/period . . . . . . . . . . . . . 18 27 31 16

Addition of new stores . . . . . . . . . . . . . . . . . . . . . . 13 15 4 2

Closure of stores . . . . . . . . . . . . . . . . . . . . . . . . . . 4 11 19 2

Net increase/(decrease) in the number of stores . . . . . . . . 9 4 (15) 0

As of year-end/period-end. . . . . . . . . . . . . . . . . . . . . 27 31 16 16

Total Self-owned Stores




Net increase/(decrease) in the number of stores . . . . . . . . 9 20 85 156


In 2018, 2019, 2020 and in the first half of 2021, we opened 13, 31, 104, 165 new self-ownedstores, respectively, mainly as a result of our efforts to expand store network to capture businessopportunities in line with increased recognition among public on our retail brands. During the sameperiods, we closed four, 11, 19 and nine self-owned stores, primarily due to failure of relevant storesto meet our performance appraisal requirements caused by unexpected changes in local marketconditions, or our proactive approach for store relocation or remodeling in line with our storenetwork optimization plan.

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During the Track Record Period, we used lease arrangements to operate our KKV, THECOLORIST, X11 and KK Guan stores. More specifically, by operating stores in shopping malls, weare able to increase our offline visibility and benefit from the well-established customer traffic,reputation and marketing campaigns of the shopping malls in which these stores are located.

Our leasing agreements typically contain the following key terms:

• Rental and property management fees. Depending on the terms of the agreements, wemay pay (i) variable monthly rent, which is calculated as percentages based on the GMVof the relevant store; (ii) fixed monthly rent; and/or (iii) the higher of the variablemonthly rent and the fixed monthly rent, in addition to property management feesimposed by the shopping malls.

• Termination. The lease agreements may be terminated by either party if the other partyfails to perform any of its obligations under the lease agreement and fails to rectify thatbreach within a prescribed time-period.

For 2018, 2019, 2020 and the six months ended June 30, 2020 and 2021, our rental expenses,which equaled to the sum of (i) depreciation of right of use assets, (ii) interests on lease liabilitiesand (iii) other rental expenses related to our retail stores, offices and distribution centers amountedto approximately RMB23.1 million, RMB44.4 million, RMB180.7 million, RMB63.0 million andRMB189.9 million, respectively, representing 14.9%, 9.6%, 11.0%, 12.5% and 11.3%, respectively,of our revenue for the corresponding periods.

To ensure a disciplined and effective coordination of our store management system, ourself-owned stores follow a suite of standardized internal guidelines and policy formulated by ourheadquarters. For details, see “— Network Management and Operations — Store Management —Management of Self-owned Stores.”

Store network optimization initiatives

We invested in continuously upgrading and optimizing our store network layout, both in termsof geographic coverage and penetration, taking into account composition and synergy of differentretail brands. We consider this is crucial for our successful capturing of ever-evolving consumers’preference and local market trend. In implementing this strategy, we may choose to upgrade anexisting store, or when we deem appropriate, close a specific franchise store and place a self-ownedstore at or around relevant location to continue our business coverage for that region. In determiningdetailed store upgrade, closing and launching schedule, we take various factors into account,including our retail brand strategy, necessity to cater to upgrade or changes in composition of localcustomer demographics, particularly, their purchasing capacity or preference, historicalperformance of relevant stores, our resources and capability of store management, as well aschanges in competition in that region. From time to time, franchisees of relevant closed stores maychoose to stay with us as minority shareholders of our operating subsidiaries in relation to thosenewly opened self-owned stores. We believe that we have been benefited from our successful trackrecord of store network upgrade initiatives by improving our direct access to first-hand insight onmarket and customers, and further enhancing our competitive edge over local competitors, as wecan exert more comprehensive control and management on our self-owned stores compared withthat for franchise stores. As of June 30, 2021, we closed 99 franchise stores and placed 99self-owned stores at or around relevant locations to continue our business coverage for that region.

Franchise Stores

During the Track Record Period, we had entered into franchise arrangements to achieve afaster expansion, preferred regional penetration, and higher market shares, utilizing the franchisees’entrepreneurial spirit, local expertise and business network.

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In managing franchise stores, we generated revenue from (i) sales of goods to franchise stores,and (ii) charging franchise stores sales-based management and consultation services income. Fordetails on revenue recognition policy, please see note 2(r) to the Accountants’ Report included asAppendix I to this document.

The following table sets forth the changes in the number of our franchise stores as of and forthe periods indicated.

As of and for the year endedDecember 31,

As of andfor the six

monthsended

June 30,

2018 2019 2020 2021

Franchise Stores

KKV



Closure of stores . . . . . . . . . . . . . . . . . . . . . . . . . . – – 1 44

Net increase/(decrease) in the number of stores . . . . . . . . – 25 123 (1)


THE COLORIST



Closure of stores . . . . . . . . . . . . . . . . . . . . . . . . . . – – 1 68

Net increase/(decrease) in the number of stores . . . . . . . . – 1 169 (59)


X11

As of the beginning of the year/period . . . . . . . . . . . . . – – – 1

Addition of new stores . . . . . . . . . . . . . . . . . . . . . . – – 1 2

Closure of stores . . . . . . . . . . . . . . . . . . . . . . . . . . – – – –

Net increase/(decrease) in the number of stores . . . . . . . . – – 1 2

As of year-end/period-end. . . . . . . . . . . . . . . . . . . . . – – 1 3

KK Guan




Net increase/(decrease) in the number of stores . . . . . . . . 50 85 (33) (14)


Total Franchise Stores




Net increase/(decrease) in the number of stores . . . . . . . . 50 111 260 (72)


In 2018, 2019, 2020 and in the first half of 2021, we opened 51, 140, 306 and 71 new franchisestores, respectively, primarily because of our unique brand image and strong characteristics, storenetwork expansion and strong market penetration. We closed one, 29, 46 and 143 franchise stores,primarily because franchise stores’ sales performances fell short of expectations, and COVID-19outbreak impacted franchise stores’ performance. The closure of franchise stores was also attributed

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to the factors that we carried out store network upgrading and optimization strategy, according towhich we may choose to close select franchise stores and place self-owned stores at or aroundrelevant locations to continue our business coverage for that region. We believe that we have beenbenefited from this initiative by improving direct access to first-hand insight on market andcustomers, resulting in our enhanced competitive edges, as we can exert more comprehensivecontrol and management on our self-owned stores compared with that for franchise stores.

Key Terms of Franchising Arrangement

We enter into legally binding franchising agreements with our franchisees which contain termsrelating to each party’s respective obligations. The principal terms of our franchising arrangementsby franchise store type are set out as below.

For details on particular arrangements we may entered into with franchisees in line with ourbusiness vision and store network development strategy during the Track Record Period, please alsosee subsections “— Financial Support Provided to Franchisees” and “— Equity Investment toFranchisees” below.

Payments for goods . . . . . . . We set out an agreed percentage of GMV of respective franchisestores as payment from relevant franchisees to us for good sold,which we generally settle on daily or monthly basis. For more detailson product sales to franchisees, please see “Financial Information —Critical Accounting Policies, Judgments and Estimates — RevenueRecognition — Sales of Products.” For more details on cashmanagement, see “— Network Management and Operations — CashManagement.”

Management of the stores . . During the Track Record Period, we took charge of dailymanagement and operation of relevant stores, including sales ofgoods, logistics arrangement, shelf and cash management, storebooking and accounting, as well as staff management and training.To ensure effective supervision on performance of franchise stores,we also dispatch our employees to conduct routine onsiteinspections. For more details on expenses associated with storeoperations, please see “Financial Support Provided to Franchisees —Advance Payment” in this section.

Franchise term/duration. . . . Generally three to 12 years and renewable upon negotiation 12months prior to the termination of the agreement.

Location . . . . . . . . . . . . . . . Franchisees can submit a proposed store location and we have theright to make the final decision. We are entitled to make variousdecisions in preparation for store opening, including site selection,store layout, and interior decoration.

Staffing . . . . . . . . . . . . . . . . While the franchise stores shall enter into employment agreementswith their in-store staff, we primarily provide services in managingthe recruitment and training of their in-store staff stationed in thefranchise stores. The number of staff per store can be determined atour discretion.

Product offering andpricing . . . . . . . . . . . . . .

Franchisee shall only offer our self-owned brand merchandise andthird party brand merchandise supplied by us. Franchisee may pricethe merchandise based on our suggested retail price with adjustmentof no more than 5%.

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Credit term . . . . . . . . . . . . . The payment made in the franchise stores will be directly made to asettlement bank account independently operated by a licensedfinancial institution, which will collect and divide fund to us and thefranchisees under the agreed timeframe. For more details of cashmanagement, see “— Network Management and Operations — CashManagement.”

Termination . . . . . . . . . . . . . The agreement may be terminated by either party if the other partyfails to perform any of its obligations under the franchisingagreement and fails to rectify that breach within a prescribed timeperiod.

Inventory . . . . . . . . . . . . . . The goods we dispatch to our franchisee’s premises for sale areunder our inventory ownership until the goods are sold to endcustomers. As part of our franchising arrangement, franchisees havethe right to request us to replace products with latent defects. Duringthe Track Record Period, we incurred minimum amount of return byend customers.

Miscellaneous . . . . . . . . . . In line with our store management and development strategy, forselect franchise stores with equity investment arrangement, weretain the right, without obligation, to call upon relevant franchiseesto transfer its shares in affected stores to us, according to the pricedetermination formula set out in relevant agreement, either any timeas we deem appropriate within three years after such storecommenced business operations, or should relevant franchisee fail tosuccessfully carry out their obligations under relevant agreement.

To ensure a disciplined and effective coordination of our store management system, ourfranchise stores follow substantially the same internal guidelines and policies as our self-ownedstores. For details, see “— Network Management and Operations — Store Management —Management of Franchise Stores.”

Movement in the Number of Franchisees

The following table sets forth the changes in the number of franchisees for the periodsindicated:

As of/for the year ended December 31,

As of/for thesix months

endedJune 30,

2018 2019 2020 2021

FranchiseesAt the beginning of the period . . . . . . . . . . . . . . . . . . 2 30 79 70Addition of new franchisees . . . . . . . . . . . . . . . . . . . 28 54 11 20Termination relationship with franchisees(1) . . . . . . . . . . – 5 20 15Net increase/(decrease) in the number of franchisees . . . . . 28 49 (9) 5At the end of the period . . . . . . . . . . . . . . . . . . . . . . 30 79 70 75

Note:

(1) include certain franchisees who have become minority shareholders of the operating subsidiaries for self-owned storesthat we launched in line with our store network upgrade initiatives. For details, please see “Self-owned stores andfranchise stores — Self-owned Stores — Store Network Optimization Initiatives.”

During the Track Record Period, we have terminated business relationship with nil, five, 20and 15 franchisees upon expiration of relevant franchising agreements, primarily because relevantstores failed to meet our store performance appraisal criteria and/or relevant franchisees determinedto pursue other business based on their own business judgment.

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To minimize the risk of cannibalization among our franchisees, we adopt the followingmeasures: (i) monitoring and managing the number of franchisees in each designated geographicalarea; (ii) maintaining regular communication with our franchisees; and (iii) analyzing the salesvolume in our franchise stores which we operated under the store management arrangement enteredinto between the franchisees and us.

Equity Investment to Franchise Stores

During the Track Record Period, we entered into equity investment arrangements with respectto our franchise stores through arm’s length negotiation with relevant franchisees, which benefit usby enhancing our business relationship with franchisees with strong resources and commitment tobusiness with us, while gaining opportunities for long-term investment return. In managing thispractice, we pay particular attention to stores that enjoy key locations serving large customer groupsor have strong growth potential. We believe that our franchisees also benefit from our equityinvestment therein as the exhibition of our commitment to business operations, in particular, as wegenerally take charge of store management.

According to relevant arrangement, we will set up a joint venture with the relevant franchisee,through which, parties own respective franchise stores, where each party is entitled to share profitor loss of relevant stores based on their contributions. For more details on expense sharing, pleasesee below “Financial Support Provided to Franchisees — Advance Payment” in this section. Formore details on risks in relation to franchisees’ failure to pay relevant expenses, please see “RiskFactors — Risks relating to Our Business and Industry — We are subject to risks associated withfranchise stores.” As of the Latest Practicable Date, we were still in the process of completingequity investment related documentation or business registration work for a certain number offranchise stores. We intend to take first-mover advantages by launching stores at valuable locationsto build up entrance barriers. This is of particular importance for us as we target sales of trendyspecialty products, where customers’ preference keeps evolving, while valuable offline propertiessuitable for developing relevant stores are scarce in nature.

During the Track Record Period, revenue generated from franchise stores where we haveequity investment arrangement represented a large majority of the total revenue generated by ourfranchise stores.

Financial Support Provided to Franchisees

During the Track Record Period, we extended financial support in the form of loans andadvance payment primarily to select franchisees to facilitate their need of capital at initialdevelopment stage of relevant stores, in line with our long-term vision on attracting and retainingfranchisees with strong resources and commitment to business with us, as well as our strategy totake first-mover advantages by placing stores at valuable locations in regions with strong growthpotential. This is of particular importance for us as we target sales of trendy specialty products,where customers’ preference keeps evolving, while valuable offline properties suitable fordeveloping relevant stores are scarce in nature.

In particular, our practice in advance payment is also related to inherent nature of our storemanagement arrangement, where parties deem it more efficient for us to settle utilities fees andoperation related expenses in advance and subsequently collect such amount from franchisees. Fordetails, please see “Advance payment” below. We constantly review and modify our storemanagement and financial support arrangements so that it better fits our evolving and expandingbusiness operations.

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According to the Frost & Sullivan Report, financial support in the form of loans and/oradvance payment is in line with general practice in the retail industry in China where franchiseesbenefit from the company’s strong expertise in business operation, while the company can alsobenefit from the franchisees’ local resources.

Loans to franchisees

During the Track Record Period, we extended interest-bearing loans to 10, 32 and 32franchisees in 2019 and 2020 and in the first half of 2021, respectively, including those franchiseeswho subsequently became minority shareholders of our operating subsidiaries in relation to relevantnewly opened self-owned stores during our store network optimization process. For details, pleasesee “Self-owned Stores and Franchise Stores — Self-owned Stores – Store Network OptimizationInitiatives.” As of December 31, 2018, 2019 and 2020 and June 30, 2021, outstanding amount ofloans to franchisees amounted to nil, RMB34.8 million, RMB272.0 million and RMB257.7 million,respectively. For more details on initiatives of upgrading and optimizing our store network layout,please see above “Self-owned Stores” in this section.

We generally require that franchisees can only use proceeds from loans for operation of therelevant stores, including expenses and costs in connection with store start up, decoration and otheroperation related expenses. The franchisees are required to update our management team with theusage of the borrowings on a regular basis. Leveraging on store management arrangement forfranchise stores, we also closely monitor use of proceeds there and assess the performance of eachrelevant franchise store on an ongoing basis to minimize our risk exposure. Our loans to franchiseesgenerally have an annual interest ranging from 10% to 12%, with the term of three years.

Prior to the [REDACTED], the outstanding balance of loans to franchisees will be fullyrepaid or settled. In particular, during the Track Record Period and up to the Latest Practicable Date,210 stores fully repaid or settled the borrowings. As of the Latest Practicable Date, RMB151.2million of the outstanding balance of loans we extended to the franchisees was settled. Since June30, 2021, we no longer extended new loans to franchisees. As of the Latest Practicable Date,substantially all of relevant stores that have fully repaid our loans experienced continuous businessgrowth and increase in sales.

During the Track Record Period, the loan to revenue ratio, being the ratio of the outstandingloan to franchisees to our total revenue as of the relevant period, amounted to nil, 7.5%, 16.5% and15.3%, respectively. The increase from nil to 15.3% during the Track Record Period was mainlybecause we commenced quick ramp up of store network since 2019. The slight decrease from 16.5%to 15.3% primarily reflected that relevant stores experienced strong growth after completing initialyears of development. To the best knowledge of our Directors, we believe that the franchisees couldfully repay or settle the loans prior to the [REDACTED], taking into account factors including (i)franchisees have been proactively seeking after external financing; and (ii) as proven by oursuccessful track record, we expect to continue carrying out our business operations in a normal waynotwithstanding changes of loans arrangement. For more details, see “Risk Factors — We may notbe able to successfully expand our offline sales network by increasing the number of self-ownedstores and franchise stores.”

As of the Latest Practicable Date, to the best knowledge of our Directors, there were nodefault by relevant franchisees and all of them were in compliance with the terms of the loans.

According to the General Lending Provisions (《貸款通則》) (the “General Provisions”), aregulation promulgated by the PBOC on June 28, 1996, no financing business involving lending orborrowing, or lending and borrowing in a disguised form, may be handled between enterpriseswithout authorization. However, according to the Provisions of the Supreme People’s Court onSeveral Issues Concerning the Application of Law in the Trial of Private Lending Cases (《最高人民法院關於審理民間借貸案件適用法律若干問題的規定》) (the “Judicial Interpretations on PrivateLending Cases”), borrowing agreements among companies are valid if extended for the purpose of

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financing production or business operations (except for the circumstances resulting in a voidcontract pursuant to Article 146, 153 and 154 of PRC Civil Code or Article 13 of the JudicialInterpretations on Private Lending Cases). In addition, The PRC courts will also support acompany’s claim for interest in respect of such a loan as long as the annual interest rate does notexceed four times the one-year loan prime rate, at the time when the contract is entered into,published on the 20th of every month by National Interbank Funding Center (全國銀行間同業拆借中心) with the authorization from PBOC.

Considering that (i) lending is not our primary business, and the financial supports we provideto relevant parties are for the purpose of sustainable development of business partners in our valuechain, rather than making profit out of interest collection, (ii) the interest rates do not exceed therate set out by the Judicial Interpretations on Private Lending Cases, (iii) the financial supportarrangements are available to our franchisees, instead of any random third parties, (iv) based on theinterview conducted with the PBOC, for any borrowings among enterprises with actual transactionbackground and under loan contracts, the risk of being subject to penalty by the competentauthorities is low, (v) as of the Latest Practicable Date, we did not receive any notice of claim orpenalty relating to the loans to relevant parties and (vi) we are requiring all the relevant parties topay off the historical loans, and we reach into agreement that in the future business, all the relevantparties would apply for commercial loans from third-party financial institutions themselves.Therefore, our PRC Legal Advisers are of the view that our above-mentioned financingarrangements with relevant parties do not violate applicable rules as provided by Article 146, 153and 154 of PRC Civil Code (《中華人民共和國民法典》) or Article 13 of the JudicialInterpretations on Private Lending Cases, and the possibility of above-mentioned financingarrangement with relevant parties being subject to penalty is low. For more details on uncertaintiesin Chinese legal systems, please see “Risk Factors — Risks Relating to Doing Business in the PRC— Uncertainties in the Chinese legal system may adversely affect our business and limit the legalprotection available to you.”

Advance payment

During the Track Record Period, being the party in charge of daily management of stores, wemade advance payment for various fees and expenses associated with store operations on behalf offranchisees in respect of relevant franchise stores, including those franchise stores with equityinvestment arrangement; and certain minority shareholders in respect of relevant self-owned stores.Such fees and expenses included utilities expenses, operation related expenses such as rentalexpense, as well as initial store decoration and opening related expenses. We generally madesubsequent settlement on advance payment with relevant counter parties to collect portion of feesand expenses they are obliged on a regular basis during the Track Record Period.

As of December 31, 2018, 2019 and 2020 and June 30, 2021, the amount of advance paymentamounted to RMB44.8 million, RMB54.7 million, RMB138.5 million and RMB302.0 million,respectively. For details, please see note 17 to Appendix I attached to this document. The continuousincrease in this amount during the Track Record Period is mainly due to increase in the number offranchise stores in line with our business expansion. Please also see “Financial Information —Discussion of Certain Statements of Financial Position Items — Current Assets and CurrentLiabilities — Trade and Other Receivables — Amounts Due from Franchisees” and “FinancialInformation — Discussion of Certain Statements of Financial Position Items — Current Assets andCurrent Liabilities — Trade and Other Receivables — Amounts Due from Joint Ventures.”

We believe that franchisees can fully repay or settle the advance payment based on factorssuch as (i) franchisees have been proactively seeking after external financing; and (ii) as proven byour successful track record, we expect to continue carrying out our business operations in a normalway notwithstanding changes with respect to advance payment arrangement. For more details, see“Risk Factors — We may not be able to successfully expand our offline sales network by increasingthe number of self-owned stores and franchise stores.” In addition, we believe that full settlementor repayment for the advance payment would not bring material adverse impact on the franchiseesor our business as a whole. For more details on our financial performance and profitability, see“Financial Information — Path to Profitability.”

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Initiatives for Profit Improvement

In line with our business strategy, we decided not to extend loans since June 30, 2021 oradvance payment to our franchisees upon the [REDACTED]. In addition, all outstanding loans andadvance payment shall be fully repaid and settled prior to the [REDACTED]. For details, pleasesee “— Our Business Model — Self-owned Stores and Franchise Stores — Financial SupportProvided to Franchisees.” As a result of which, going forward, in selecting cooperative franchisees,we will take into account, among other things, their capability in securing premium location in localarea, as well as their financial capability to make contribution for store development and operations.We consider changes in this practice shall not have any material adverse impact to our businessoperations and future development, taking into account the following factors:

• Our successful track record that proves visibility towards profitability, as a resultof which, we enjoy increasingly strong capability to secure cooperation withfranchisee candidates with strong financial capability and investment willingness todevelop and operate stores independently. During the Track Record Period, wegenerated revenue mainly from sales of specialty retail products through our extensivenetwork of self-owned stores and franchise stores under our four retail brands, each ofwhich is strategically designed to serve the market needs of different consumerdemographics in China and enjoys established market leading position and well-receivedpublic recognition, as proved by our rapid growth. We believe that we are wellpositioned to achieve sustainable, rapid growth of our revenue by leveraging, amongother things (i) our leading market position that allows us to effectively capture marketopportunities from expected strong growth in the special retail industry; (ii) continuousexpansion and optimization of our store network enabling us to further penetrate intomarket with strong potential; and (iii) our ability to continuously proliferate andoptimize product portfolio that may attract and retain more customers, while introducingmore and more products of higher margin. For details, please see “Financial Information— Path to Profitability.”

• Expected continuous growth of existing stores upon repayment of loans andsettlement of advance payment. To our best knowledge, we expect our stores to makefull repayment of loans and advance payment extended by us through external financingsought after by relevant franchisees and their internal financial resources leveragingcontinuous business expansion of relevant stores that took place in the past and expectto continue in the foreseeable future.

In particular, during Track Record Period and up to the Latest Practicable Date, 210stores have fully repaid or settled our loans to them. Subsequent to settlement,substantially all of these stores continued their normal operation and business growth bythe Latest Practicable Date. In respect with advance payment to franchisee stores, suchamount took place simply due to the fact that, we closely involve in store operations inline with store management arrangement. As a result, it is more convenient for us tomake advance payment for utilities expenses and operation related expenses, such asrental expense, and then settle such amount later on with relevant franchisees in linewith arrangement. During the Track Record Period, we settled such amount withfranchisees generally on regular basis. Therefore, subsequent to termination of suchpractice and fully settlement of outstanding advance payment, we intend to adopt more

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efficient settlement mechanism for utilities expenses and operation related expenses, aswell as necessary technical and managerial support to franchisees, to prevent re-occurrence of such issue by allowing franchisees making timely payment of such amountfrom their accounts.

• Continued optimization of store network composition during the Track RecordPeriod with growth of self-owned stores in both number of stores and revenuecontribution, forging the spin to strike our expected continuous business growthwith stronger momentum. During the Track Record Period, in line with our storedevelopment strategy, we placed great emphasis on development of self-owned storeswhere we can exert more comprehensive control and management on stores comparedwith that for franchise stores, particularly for development of our KKV, THECOLORIST and X11 stores. We commenced quick ramp up of these three retail brandssince 2019 and after relevant stores complete their initial one to two years developmentstage, the revenue contribution from self-owned stores of these brands exceeded that offranchise stores and increased from nil in 2018 to 50.7% for the six months ended June30, 2021.

In the meantime, we carried out continued optimization to KK Guan, the first retailbrand we launched. We chose to close certain franchise stores and place self-ownedstores at or around relevant locations to continue our business coverage for that region,taking various factors, including our retail brand strategy, necessity to cater to upgradeor changes in composition of local customer demographics, particularly, their purchasingcapacity or preference, and changes in competition in local region. We believe that wehave been benefited from our successful track record of store network upgradeinitiatives by improving our direct access to first-hand insight on market and customers,and further enhancing our competitive edge over local competitors, as we can exert morecomprehensive control and management on our self-owned stores compared with that forfranchise stores.

In addition, we launched KKV in 2019 as an evolution from KK Guan, which quicklybecame a leading next-generation and traffic-oriented major brand in China. Due to itsunique positioning, as well as the focus on SKUs selection, KKV stores generallycommand higher operating margin than that of KK Guan stores.

Going forward, taking into account the benefit that we enjoy from self-owned storesoperations, including, among other things, improved direct access to first-hand insighton market and customers, and enhanced efficiency of intra-group resource allocation topromote better inter-store synergies and achieve our overall strategic goal, we intend toplace more importance on self-owned stores development in future business expansion.We believe this approach may also effectively help us to mitigate risks associated withpotential adverse impact for developing franchise stores that may brought up by changesin our practice with respect to loans and advance payment. Please also see “Risk Factors— We may not be able to successfully expand our offline sales network by increasingthe number of self-owned stores and franchise stores.”

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INFORMATION TECHNOLOGY

We pride and distinguish ourselves in implementing advanced information technology tosupport our development.

We have established an integrated information technology platform combining both a strongtechnology infrastructure that reaches each of our stores, gathering comprehensive operation dataon a real-time basis, and advanced big data analytical capability that effectively supports ourdecision-making process. As of June 30, 2021, our information technology team consists of 114employees, approximately 10.2% of our total employees.

We believe that our effective and customized information technology systems are crucial forimproving operational efficiency, reducing operating costs and achieving higher profitability.

Our Technology Infrastructure

We are committed to continuously investing in a cutting-edge technological infrastructure.Our integrated IT platform allows us to manage each of our key operation sectors at the front,middle and back end, covering site selection and store building, merchandise selection procurement,order fulfillment, logistics chain management, inventory management, financial management andother administrative functions.

Over the years, we have not only procured professional software systems from leadinginternational vendors, but also invested heavily in building self-developed systems tailored for ouroperations.

As of the Latest Practicable Date, our key proprietary information technology systemsinclude:

• TERP System. We rolled out our proprietary ERP system, TERP, which serves as agroup-wide technology platform featuring flexible applicability, user-friendly operatinginterface and efficient communication across multiple departments. Through thiscentralized system, we are able to monitor and manage a variety of functions at eachstore as well as daily transactions with our suppliers, including procurement, sales,warehousing and accounting. The system also allows us to detect fluctuations in sales,costs, and other key operational indicators on a regular basis.

• KPOS System. We installed this proprietary system to serve each key scenario in themanagement of our stores across all brands, allowing us to efficiently administer,through a standardized and unified platform, various critical functions including cashflows, shelf display, order processing and inventory management. In particular, KPOSallows our store staff to conveniently monitor and inspect, using their mobile devices,shelf display and the corresponding inventory status, greatly improving the accuracy andefficiency of inventory management.

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Each of our self-owned and franchise stores are connected to our information technologysystem through a POS terminal, which facilitates real-time collection and managementof financial and operational data. Such information is essential for assessing themarketability of individual products and our customers’ purchasing preferences, whichin turn allows our management to make effective adjustments in product mix andpricing.

• KVCM System. We began to implement this self-developed system designed tovisualize, synchronize and optimize shelf display management at our stores across allbrands, which we consider crucial for maintaining our competitiveness in attractingtarget customers, as well as the effective enforcement of our strict merchandise selectionpolicy. Through a visualized interface, we synchronize shelf display information at eachstore so that our headquarters may review and adjust, on a real-time basis, the exactcategory, amount and position of a specific product type on the shelf. This way, we areable to substantially improve administrative efficiency across our extensive storenetwork to achieve and maintain high-standard brand image.

• Keewood Low-code System. We developed this platform to facilitate efficientinformation sharing and analysis among different operating departments and, inparticular, to enable convenient, multidimensional processing of a substantial amount ofdata generated across our Group. Each key operating department is represented as amodule on this platform, where we connect them through a visualized interface tosimulate a real-life business operation flow, where operating data in each relevant workstream could be quickly retrieved for our observation and study. In particular, thisplatform features low coding work load and quick turnaround time, significantlyenhancing our data-driven business management capability. This platform has offered usadvanced technology support to further optimize product procurement, cashmanagement, store development, internal task tracking, as well as information sharingacross departments.

• Cashless Payment System. An integrated system we developed to accommodate thesuppliers’ needs to review and reconcile their bills and orders, settle payments, and carryout other supply chain financing functions.

• Work Order System. A self-developed internal communication platform to which ouremployees may submit tickets containing issues to be resolved. The system will thenautomatically match such tickets with the responsible department, while allowing timelydocumentation, tracking and analysis of the topics most commonly raised.

• Microservice Governance System. A self-developed technology platform, through whichwe can manage the whole life cycle of microservices of each self-developed system,including the operation, monitoring and inter-service call of basic services, so that ourtechnical services can be managed in an efficient, automatic, choreographable andobservable manner.

• Warehouse Management System (WMS). A warehouse management system that providesservices in each key scenario of warehouse operations, so that all functions in ourwarehouse can be systematically managed and the efficiency of information sharing andtransmission in the warehouse can be improved, so as to realize and maintain efficientproduct management.

• Product Selection System (PSS). A data analysis platform to provide the importantscenario support in the merchandise selection stage for each brand of our Group. Byanalyzing our own platform data and Internet open data, we can have a more

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comprehensive understanding of the trends of each product brand, users’ preferences andmarket hot spots. Meanwhile, we can systematize and digitize the merchandise selectionprocess, so that our selection are not prone to selection errors due to human subjectivepreferences and judgments.

Apart from our self-developed IT systems, we have also formed in-depth relationships withthird-party IT services providers who offer sophisticated digital solutions ranging from dataanalytical tools to the warehousing and logistics for our inventories, including the WarehouseManagement System (WMS), Business Intelligence (BI) System and Product Selection System(PSS).

Application and Future Development

Building on this solid infrastructure, we further developed and endeavored to upgrade a rangeof refined sub-systems which support and optimize our daily operations. Functioning as a whole,our information technology systems are capable of processing large volumes of raw and scatteredmarket data and converting them into readable and structured information pieces quickly andaccurately, allowing us to collect information regarding consumer purchases, monitor consumerpreferences, make timely assessments of market trends and estimate our future growth.

Leveraging our strong technology capability, we managed to observe, track and capturebusiness opportunities and customer preference in a more efficient manner compared with ourindustry peers, resulting in our quick expansion and growing market influence. We collectinformation relating to customers preferences and market trends through our KPOS system installedin our stores, online surveys, as well as behavioral data extracted from our third party platformssuch as Kuaishou and Xiaohongshu.

PROCUREMENT AND MANUFACTURING PROCEDURES

During the Track Record Period, we generated revenue from the (i) sales of third party brandmerchandise under procurement agreements with Third Party Brand Partners, and (ii) sales ofself-owned brand merchandise which were manufactured by the OEM and ODM contractors weengaged.

The following table sets forth a breakdown of our revenue by source of merchandise, and thecontribution of each source of merchandise in absolute amounts and as percentages of our totalrevenue for the periods indicated:


2018 2019 2020 2020 2021


Self-owned brandmerchandise(1) . . . . . . 2,170 1.4% 35,726 7.7% 202,916 12.3% 54,945 10.9% 225,203 13.4%

Third party brandmerchandise(2) . . . . . . 153,139 98.6% 428,018 92.3% 1,442,988 87.7% 447,412 89.1% 1,457,957 86.6%

Total . . . . . . . . . . . 155,309 100.0% 463,744 100.0% 1,645,904 100.0% 502,357 100.0% 1,683,160 100.0%

Notes:

(1) Self-owned brand merchandise refers to merchandise we procure from OEM and ODM contractors.

(2) Third party brand merchandise refers to merchandise we procure from Third Party Brand Partners.

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The charts below illustrates the typical procedures adopted in the (i) procurement ofmerchandise from Third Party Brand Partners and (ii) manufacturing of self-owned brandmerchandise through OEM and ODM contractors.

Procurement from Third Party Brand Partners

Annual plan

Ordinaryprocurement

Custom-madeorders

Suppliers/brand owners

Internal initial selection

Official merchandiseselection for new release

Execute formal trial salescontracts and make orders

Goods dispatchedby suppliers

Warehouses

Trial sales

Evaluation (4C)

Selected Unselected

Data

Data

Returngoods

Store system

Determinationof MerchandiseCandidate

Sales andStore Management

MarketResearch and ProductIdentification

Logistics Management and Trial Sale

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Self-owned Brand Merchandise from OEM and ODM Contractors

Determination of MerchandiseCandidate

Logistics Managementand Trial Sale

Sales and Store Management

MarketResearch and ProductIdentification

Annual plan

Selected Unselected

Data

Data

Returngoods

Store system

OEM and ODM Contractors

New merchandise selection

New merchandise release

Determination ofOEM and ODM objectives

Execute agreementswith sourced suppliers

Sample inspection

Goods dispatched

In-warehousequality inspection

Trial sales

Evaluation (4C)

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Market Research and Product Identification

Sales of Third Party Brand Merchandise

We source third party brand merchandise and distribute them in our stores. We regularlyconduct industry research, participate in trade fairs and conventions, and meet with new brandowners, authorized dealers and distributors to discover new merchandise with high potential. Inaddition, with the aid of our proprietary information technology systems, we use real-timeperformance indicators to help us evaluate changing market trends and consumer behavior. Fordetails on our proprietary IT systems, see “— Information Technology.”

When determining potential merchandise, we take into account a broad range of factors,including (i) popularity of relevant product based on historical sales record, (ii) market trendanticipation; (iii) reputation of the supplier; (iv) aesthetical appeal; (v) attraction to our targetcustomers; and (vi) pricing.

For details of our third party brand merchandise, see “— Our Merchandise Offerings — OurMerchandise Sourcing Procedures and Selection Policy — Identifying Third Party BrandMerchandise.”

Sales of Our Self-owned Brand Merchandise

We develop our self-owned brand merchandise through the engagement of OEM and ODMcontractors. We further sell the finished merchandise to the customers through our store network.The production of our self-owned brand merchandise is fully outsourced to OEM and ODMcontractors, all of whom are Independent Third Parties.

During the Track Record Period, we had also collaborated with 14 popular brands to launcha series of tailored merchandise, which achieved a strong sales record.

When determining the types of merchandise to produce under our self-owned brand, we takeinto account considerations such as (i) the extent of customers’ brand loyalty to the merchandisesupplied by third party brand, (ii) substitutability of the particular merchandise, (iii) the ability toset the price of the merchandise at a premium, and (iv) whether the current market has addressedthe prevailing customer demand.

For details of our self-owned brand merchandise, see “— Our Merchandise Offerings — OurMerchandise Sourcing Procedures and Selection Policy — Determination of Our Self-owned BrandMerchandise.”

Determination of Merchandise Candidate

We follow a stringent set of requirements when determining merchandise candidates. Once apool of potential merchandise is identified, the relevant merchandise will undergo a three-stepelimination process so that only the most demanded by the market are retained. For details, see “—Our Merchandise Offerings — Our Merchandise Sourcing Procedures and Selection Policy — OurMerchandise Selection Criteria and Process.”

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Logistics Management

We maintain a logistics and delivery network with nationwide coverage. Empowered by ourrobust and advanced digital warehouse management system, we have adopted a logistics model thatsupports our nationwide network. We use both nationwide and regional third-party logistics serviceproviders to ensure reliable and timely deliveries. For details, see “— Logistics and InventoryManagement — Logistics and Warehousing.”

Sales and Store Management

We take into account the target demographic of a particular store and, accordingly, assign themost suitable merchandise offerings to cater to the target customers and maximize our potentialsales. The performance of each store is also monitored in real time by our proprietary KPOS system.This has enabled us to keep track of various performance indicators at the store level, includingGMV, total transactions, average spending per customer, and others. For details, see “—Information Technology.”

NETWORK MANAGEMENT AND OPERATIONS

We have a dedicated team that plans and manages our retail store network. We follow adisciplined approach in selecting cities for store network expansion. In determining the regions weexpect to tap into, we evaluate a number of factors, including the target city’s local economy anddemographic structure, level of urbanization, income and purchasing power, the coverage of ourfacilities and logistics capabilities, as well as the availability and potential growth of qualifiedfranchisees.

In each city, we aim to locate our stores at desirable sites near residential areas or businessdistricts with affluent consumer traffic, particularly within shopping malls with strong pedestrianflow, which helps to increase the convenience for the customers to make purchases and enhance thevisibility of our stores and merchandise. For details on our marketing strategy of promoting publicrecognition of our stores, see “— Sales and Marketing.”

Network Management Structure

Our Operation Division (運營部) at the headquarters is responsible for the management ofstore network, with support from four business departments each in charge of one retail store branddevelopment. We dispatch managers on a routine basis to supervise the operation of stores, whereeach manager takes charge of several stores in a specific geographic region. They report directly tothe corresponding departments at our headquarters regarding store performance, staffing and otherkey administrative matters, which will form the basis of our regular store review.

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Store Management

Staffing

We believe that the performance of store staff is critical for the efficient operation of ourstores and the provision of outstanding customer service. We carefully determine the number ofin-store staff per store, which may differ depending on the store brand, store size and sales level.

We adopt a “no-interruption” policy to ensure a customer-centric shopping experience. We donot impose sales target on our in-store staff, who are only tasked with providing superior customerservices and assistance to our customers when they seek help. We believe that our approacheffectively prevents in-store staff from engaging in pushy marketing techniques and enables us toprovide a differentiated shopping experience compared to other retail stores in the market. Ourin-store staff undergo a two-week training which focuses on customer services and customerrelationship management prior to their placement in the stores. Meanwhile, our online customerservice assistants provide back-office support to answer technical questions relating to our products.Moreover, when we receive complaints from our customers, our in-store staff are trained topromptly and properly record the complaints received, which are carefully investigated by our teamin order to avoid similar incidents in the future.

For store management, we also capitalize on our proprietary KVCM system which is designedto provide digitalized merchandising solutions in relation to merchandise display, store layout, andproduct space allocation. Our stores are also installed with our proprietary KPOS system to monitorthe sales performance and inventory level on a timely basis across our store network. For details,see “— Information Technology.”

Designs and Merchandise Display

We envision a relaxed and fun shopping experience for our customers. Our stores are generallydecorated with bright and vibrant hues, and our merchandise is displayed in eye-catchingarrangements. To satisfy the adventurous appetite of our young target customers, our merchandiseis frequently refreshed and the storefronts are constantly showcasing new and novel merchandiseto attract pedestrians bypassing our stores. The merchandise offerings in our stores is frequentlyreevaluated and rotated to catch up with the changing trends. For example, benefiting from oureffective merchandise screening procedures, our KKV stores (including overseas) merchandiseofferings elimination rate as of June 30, 2021 was approximately 30.9%, measured by SKUseliminated divided by total SKUs in the first half of 2021. Our high elimination rate and widevarieties of merchandise offerings are not only captivating to potential new customers, they alsoencourage recurring visits of our existing customers.

We uphold a conviction for aesthetical appeal and place strong emphasis on the expression ofour brand concepts. Our Engineering Division (工程部) at the headquarters is responsible for thesetting of guidelines in relation to storefront design, theme, store layout and merchandise displayof all stores. We aim to present a unified design concept for the stores under our brands of KKV,THE COLORIST, X11, and KK Guan. Our Regional Store Managers (門店大區經理) regularlyconduct on-site inspection at the retail stores to ensure their compliance with our guidelines onunified decoration and display in our stores.

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Management of Self-owned Stores

To ensure a disciplined and effective coordination of our store management system, ourself-owned stores follow a suite of internal guidelines and policy formulated by our headquarters.These detailed guidelines and policies cover various operational aspects of our self-owned stores,including standardized operating procedures, warehousing and logistics operations and stafftraining. In addition, our Regional Store Managers (門店大區經理) regularly conduct on-siteinspections at our retail stores to ensure that they are in compliance with our operating guidelines.

Management of Franchise Stores

Our franchise stores adopt substantially the same internal guidelines and policies as ourself-owned stores, in order to provide a quality and consistent shopping experience to ourcustomers. To ensure compliance with our operating requirements in franchise stores, themanagement of the franchise store is consigned to us pursuant to a separate standardized storemanagement arrangement where we provide various services, including pre-opening preparation,staff hiring and training as well as goods supplement. We generally collect management, andconsultation service income based on a certain percentage of monthly GMV generated in eachfranchise store.

Apart from the store management arrangement, pursuant to which we are able to establishuniform management across our store network, we conduct onsite inspection at least once a monthat each of our franchise stores to monitor their compliance with our guidelines. All our franchisestores, like our self-owned stores, are installed with our proprietary KPOS system, which enablesus to perform sales and inventory tracking on a real-time basis. This also allows us to monitorin-store sales and their correspondence to the actual amount of payment for goods and sales-basedmanagement and consultation services income we are receiving from the franchisees.

Expansion Plan for Sales Channels

We seek to open additional self-owned stores and franchise stores to complement our existingstore network and sales channels to increase our customer reach and increase our sales andvisibility. For existing retail stores, we plan to focus on improving their sales performance throughtraining, enhanced marketing efforts and other value-added services. We intend to continuouslyidentify attractive locations for the expansion of our retail stores, focusing on opening retail storesin shopping malls with a high flow of customers.

With respect to the geographic distribution of these stores, we plan to open new stores in citiesand provinces with strong economy strengths and growth potential because (i) our market presencein more developed cities and regions in these provinces have well positioned us to expand intoneighboring lower-tier cities where there is substantial demand for specialty products and (ii) thespecialty retail market in China is very fragmented, and we believe that there is substantial potentialfor us to increase our market penetration in these more developed markets, such as opening upstores in newly opened shopping malls in prime locations.

For the year ending December 31, 2021 and 2022, we plan to add 290 and 270 new retailstores to expand our retail network. Since June 30, 2021 and up to the Latest Practicable Date, wehad added 89 retail stores and we would add 58 more retail stores for the year ending December31, 2021.

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Cash Management

Payment at our stores may be settled by common methods including Alipay, WeChat Pay,credit cards, or cash. In our current practice, our stores generally receive payments from customersprimarily through Alipay and WeChat Pay which shall be directly managed by a settlement bankaccount independently operated by a third-party licensed financial institution, which will collectand divide fund to us and the franchisees under the agreed timeframe. We leverage our integratedKPOS system to monitor the sales activities in both our self-owned stores and all of our franchisestores. For cash received from our customers, we require each of our stores to adhere strictly to ourinternal cash management policies which include the deposit of all cash receipts into the settlementbank account on a next-day basis.

During the Track Record Period and up to the Latest Practicable Date, our stores did notexperience material misappropriation of cash or major discrepancy in our sales reconciliation.

OUR MERCHANDISE OFFERINGS

During the Track Record Period, we generated revenue from the (i) sales of third party brandmerchandise under distribution agreement with Third Party Brand Partners, and (ii) sales ofself-owned brand merchandise which were manufactured by the OEM and ODM contractors weengaged.

Our Merchandise Sourcing Procedures and Selection Policy

Identifying Third Party Brand Merchandise

For the years ended December 31, 2018, 2019, 2020 and the six months ended June 30, 2020and 2021, the sales of third party brand merchandise amounted to 98.6%, 92.3%, 87.7%, 89.1% and86.6%, respectively, of our total revenue during the same periods. Our annual sales were heavilyweighted in the segment of third party brand merchandise sales as we constantly seek to offer newand attractive products to our customers. Leveraging our strong market research and data analyticcapabilities, we are able to identify merchandise with great market potential. We incessantly explorenew and innovative merchandise through various avenues to enrich the offerings on our storeshelves. As part of our development strategies, we regularly conduct industry research, participatein trade fairs and conventions, and meet with new brands owners, authorized dealers anddistributors to discover new merchandise with high potential. In addition, we had invested in thedevelopment of a proprietary data analytical software, namely BI, tailored to provide us with athorough insight on consumer behavior and changing market trends. Through data intelligence, weendeavor to visualize the needs of our consumers and react to market demand in a timely manner.

Apart from the typical procurement agreements we entered into with our Third Party BrandPartners, we also enter into exclusive distribution agreements for merchandise that we believe willalign us with our business strategies. During the Track Record Period, we had two types ofexclusive distribution agreements with our Third Party Brand Partners, namely the exclusive branddistributorship agreement(s) and the exclusive merchandise distributorship agreement(s), within theterritories as specified in the respective agreements. These exclusive brand distributorshipagreements typically had a term ranging from six months and one year and were renewable uponnegotiation.

We also constantly have special arrangements with certain Third Party Brand Partners tomanufacture their merchandise in accordance with our specific requirements such as the size of thepackaging and special flavors. We determine specification of these special merchandise based onour study of customer behavior and the concepts of our different store brands to attract and retaintarget customers’ loyalty.

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Determination of Our Self-owned Brand Merchandise

For the years ended December 31, 2018, 2019 and 2020 and the six months ended June 30,2020 and 2021, the sales of our self-owned brand merchandise amounted to 1.4%, 7.7%, 12.3%,10.9% and 13.4%, respectively, of our total revenue during the same periods. We develop ourself-owned brand merchandise through the engagement of OEM and ODM contractors and wefurther sell the finished merchandise to our customers in our stores. The production of ourself-owned brand merchandise is fully outsourced to OEM and ODM contractors. For details on ourOEM and ODM contractors, see “— Our Suppliers and Raw Materials — Our OEM and ODMContractors.”

During the Track Record Period, we had introduced our self-owned brand merchandise underthe product categories of (i) food and supplements, (ii) daily supplies and household products, and(iii) pop toys and stationery.

When determining the types of merchandise to be produced under our self-owned brand, wetake into account considerations such as (i) the extent of customers’ brand loyalty to comparablemerchandise supplied by other brands in the market, (ii) substitutability of the particularmerchandise, (iii) the ability to set the price of the merchandise at a premium, and (iv) whether thecurrent market has addressed the prevailing customer demand.

We had registered 30 patents in China, comprising 28 design patents and 2 utility patents asof June 30, 2021. We plan to continue to invest in product design, research and development andfocus on innovations in order to remain competitive. In addition, we began the production of ourown brands of pop toys in December 2020 by engaging external designers to create original pop toyproducts and offer them in our stores. The underlying intellectual properties of such pop toyproducts are owned by us. For details, see “— Intellectual Properties.”

For the years ended December 31, 2018, 2019 and 2020 and the six months ended June 30,2020 and 2021, none of our purchases from any of the OEM and ODM contractors exceeded 5.0%of our total purchases in the respective periods.

Our Merchandise Selection Criteria and Process

We believe in our business success story. We recognize the powerful capabilities of FMCGproducts, and we continue to focus on resources to strengthen this capability. We use the productinformation system, the selection system (PSS), to understand the market indicators of each productbrand. The system processes and analyzes our own platform and Internet disclosure, allowing us toquickly and accurately understand the current market environment. Going deep into the power ofPSS, our product identification process is data-centric, and the issues of judgment errors and subjectbiases have been roughly deleted. For details about our technical infrastructure, please refer to “—Information Technology.”

(i) Selection Pool. With PSS, our specialized in-house merchandise buyers (the“Merchandise Buyers”) in our KKV Program, TC/THE COLORIST Program, X11Program and KK Guan Program respectively are able to screen through a vast amountof new products launched in the market and refine our merchandise candidates to onlya small pool with the greatest potential. For details of our Merchandise Buyers, seesubsection below “Our Merchandise Buyers”. Once a pool of merchandise candidateshas been determined, our Merchandise Buyers will utilize the available indicators (suchas online opinion and actual sales volume) derived from PSS and nominate a number of

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merchandise candidates to the next round of selection process. In determining candidatemerchandise to be brought to next stage, our Merchandise Buyers take into account abroad range of factors, including (i) popularity of relevant product based on historicalsales record and market trend anticipation; (ii) aesthetical appeal; (iii) attraction to ourtarget customers; and (iv) pricing.

(ii) Merchandise Voting. Our new merchandise committee (the “New MerchandiseCommittee”) is in charge of selecting from the pool a number of appropriate newmerchandise candidates, for which we later enter into trial stage purchasing agreementwith the relevant Third Party Brand Partners, in the case of procuring third party brandmerchandise, or manufacturing agreement with some ODM contractors, in the case ofself-owned brand merchandise. This committee comprises our senior management teamand experienced employees from the relevant departments managing each specificcategory of merchandise. As of June 30, 2021, we had 40 members on the NewMerchandise Committee.

We hold weekly merchandise review meetings to determine merchandise candidates fortheir launching in our stores. Our New Merchandise Committee members will vote todecide whether a merchandise candidate will be brought to the shelf in our stores, basedon a broad range of factors, including (i) our merchandise refreshment strategy andexpected life-cycles of relevant products; (ii) prevailing market trend and competition;(iii) current store development plan; (iv) aesthetical appeal and pricing of relevantmerchandise; and (v) the availability and sales performance of similar merchandise inthe same product category.

(iii) Trial Sale. For product candidates approved by our New Merchandise Committee, wewould enter into trial stage purchasing agreement with the relevant Third Party BrandPartners, in the case of procuring third party brand merchandise, or manufacturingagreement with ODM contractors, in the case of self-owned brand merchandise,according to which we would procure a flexible volume of the merchandise for a trialsale. Merchandise that fail to meet our sales target in the trial sale stage would bereturned and we only made further purchasing arrangement on merchandise that hadpassed our trial sale tests for further full store network-wide sales. In addition, we alsoset out strict quality check clauses according to which we are entitled to return anyunqualified goods we identified upon inspection.

The trial sale of a merchandise candidate generally lasts two weeks where we typicallyconduct an initial trial in around 30 stores nationwide for approximately two weeks.Only merchandise candidates that had successfully passed the initial trial stage wouldenter into the second trial stage where the merchandise candidates would be furtherintroduced in 30 stores. We take advantage of our proprietary KPOS system whichallows us to monitor sales performance and consumer feedback for each SKU of themerchandise candidates closely, helping us gain a thorough and objective understandingof market response toward the relevant candidate. We rely on the data generated duringthe trial stage period to determine whether the merchandise candidate will be introducedinto the merchandise portfolio of our stores.

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Our merchandise selection process is objective and data-centric, which we believe is keyto the long-term success of our business model. A merchandise candidate has to meet apre-determined threshold as set out in our internal selection policy before it can beadopted. We believe the trial sale process allows us to accurately identify the mostappealing product with evident competitiveness in a cost-efficient way. Through theentire suite of our internal merchandise selection procedures, we could effectivelymitigate risks associated with the inevitable difficulty in determining mass customers’preference and market trend that keeps evolving. We distinguish ourselves from thetypical traditional retailers as our merchandise identification is data-centric. Benefitingfrom our effective merchandise screening procedures through which we narrow downour candidate products from a large pool to a small pool of highly selective ones. Ourmerchandise offerings elimination rate as of June 30, 2021 was approximately 31.3%,measured by SKUs eliminated divided by total SKUs in the first half of 2021.

Our Merchandise Buyers

Our Merchandise Buyers are a group of in-house specialist buyers categorized into variousteams in our KKV Program, TC/THE COLORIST Program, X11 Program and KK Guan Programrespectively based on product categories such as color cosmetics and beauty products, skin careproducts, liquor, food, nutrition products, baby products, pet products, daily products, specialtyproducts, pop toys, stationery, household products, clothing, and accessory. They are tasked withduties such as identifying merchandise from a sea of products in the market with the aid of PSS,analyzing market potential of merchandise candidates and presenting them to our New MerchandiseCommittee and negotiating terms with potential suppliers.

Our Merchandise Buyers are one of the pillars to our merchandise selection structure, whichsupports the foundation of our business success. Given their importance, we have adopted a uniformpolicy in regulating their performance and incentivizing them. The performance of eachmerchandise candidate recommended by one Merchandise Buyer will form the basis of his/herperformance evaluation. We take into account merchandise performance indicators, such as itsprofit margin, sales target, adoption of a merchandise candidate to permanent offering andmerchandise refreshment rate, to assess the Merchandise Buyer. We reward our high-achievingMerchandise Buyers accordingly and may eliminate those who do not meet our pre-determinedstandards.

Our Merchandise Buyers present and recommend new merchandise candidates regularlyduring our weekly merchandise reviews. We believe that with constant input of diversified and greatideas contributed by our Merchandise Buyers, we are able to keep up with the ever-changingconsumer preference and identify fast-selling merchandise for our stores.

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OUR SUPPLIERS AND RAW MATERIALS

Our Suppliers

Our suppliers include Third Party Brand Partners and OEM and ODM contractors. As ofJune 30, 2021, we sourced merchandise locally and globally from 1,145 Third Party Brand Partners,and had engaged 145 OEM and ODM contractors to manufacture our self-owned brandmerchandise. For the years ended December 31, 2018, 2019 and 2020 and the six months endedJune 30, 2021, our five largest suppliers accounted for approximately 25.5%, 21.7%, 18.1% and7.8% of our total purchases, respectively. Our suppliers may grant us a credit term up to 45 days.The following table sets forth our five largest suppliers and their respective contribution to our totalpurchase during the Track Record Period:

For the year ended December 31, 2018

Suppliers Product/service supplied BackgroundYears of

relationship

Purchaseamountby us

% of totalpurchase

RMB inmillion

1 Supplier A . . . Cosmetics, householdproducts, daily products

Regional brand agent Two years andsix months

17.2 9.8%

2 Supplier B . . . Food, maternal and infantproducts, liquor

Regional brand agent One year andseven months

8.7 4.9%

3 Supplier C . . . Skincare, facial mask Regional brand agent One year andtwo months

7.5 4.3%

4 Supplier D . . . Cosmetics, householdproducts, stationery

wholesaler One year 6.8 3.8%

5 Supplier E . . . Skincare, facial mask Regional brand agent One year andtwo months

4.8 2.8%



relationship

Purchaseamountby us

% of totalpurchase

RMB inmillion

1 Supplier D . . . Cosmetics, householdproducts, stationery

Wholesaler Two years 62.2 7.3%

2 Supplier A . . . Cosmetics, daily products,household products

Regional brand agent Three years andsix months

39.2 4.6%


Regional brand agent Two years andseven months

31.6 3.7%

4 Supplier F . . . Cosmetics, skincare, facialmask

Regional brand agent Two years andfive months

28.4 3.4%

5 Supplier G . . . Cosmetics, skincare,facial mask

Regional brand agent Four years andtwo months

22.8 2.7%

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relationship

Purchaseamountby us

% of totalpurchase

RMB inmillion

1 Supplier H . . . Materials Manufacturingcompanyspecializing indesigning andproducing displayshelf equipments

One year andeight months

94.7 5.2%

2 Supplier D . . . Cosmetics, householdproducts, stationary

Wholesaler Three years 82.6 4.5%


Regional brand agent Five years andtwo months

65.2 3.6%

4 Supplier F . . . Cosmetics, skincare,facial mask

Regional brand agent Three years andfive months

52.7 2.9%


Regional brand agent Three years andseven months

35.5 1.9%

For the six months ended June 30, 2021


relationship

Purchaseamountby us

% of totalpurchase

RMB inmillion


Regional brand agent Five years andeight months

39.3 2.6%


Regional brand agent Four years andone month

23.6 1.5%

3 Supplier F . . . Cosmetics, skincare,facial mask

Regional brand agent Three years andeleven months

21.5 1.4%

4 Supplier I. . . . Cosmetics, skincare Wholesaler One year andthree months

18.6 1.2%

5 Supplier J . . . Daily products, householdproducts

Wholesaler Three years andone month

16.9 1.1%

All of our five largest suppliers during the Track Record Period were Independent ThirdParties. None of our Directors, their respective close associates or any of our Shareholders (who tothe knowledge of our Directors owned more than 5% of our issued share capital) had any interestin any of our five largest suppliers during the Track Record Period.

During the Track Record Period, none of our five largest suppliers were also our customers.

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Third Party Brand Partners

With our Third Party Brand Partners, we generally enter into procurement agreements withterms ranging from six months to one year for the supply of the merchandise as specified in theagreements. We believe that a short term procurement agreement will enable us with greaterflexibility in switching our merchandise offerings in our stores, which is also in line with ourfundamental business philosophy to offer our customers trendy and most sought-after merchandisein the market.

For the years ended December 31, 2018, 2019 and 2020 and the six months ended June 30,2021, our sales of merchandise sourced from the top five Third Party Brand Partners generallyrepresented around 9.2%, 6.8%, 8.1% and 6.8% of our total GMV in the respective periods.

We consider merchandise refreshment a key competitive strength for our stores to attract andretain loyal customers and to conduct rapid replacement based on our stringent review procedures.In recognition of our strong market influence underpinned by our premium store locations andexcellent merchandise selection capabilities, we enjoy a strong bargaining power in sourcing andpurchasing merchandise from different Third Party Brand Partners.

For the years ended December 31, 2018, 2019 and 2020 and for the six months ended June 30,2020 and 2021, none of our Third Party Brand Partners contributed more than 5% of our GMV inthe respective periods. We are not exposed to reliance risk related to our Third Party Brand Partners.

During the Track Record Period, our purchase from our top five Third Party Brand Partnersamounted to RMB17.3 million, RMB44.4 million, RMB181.5 million and RMB151.3 million,respectively, accounting for 9.2%, 6.8%, 8.1% and 6.8% of our total purchases, respectively.

During the Track Record Period and up to the Latest Practicable Date, none of ourdistributorship agreements were terminated by the brand companies, none of the brand companieshad refused to renew any of their distributorship agreements with us, nor were there any materialadverse changes in the terms of our distributorship agreements with the brand companies.

None of our Directors or their respective close associates or any of our Shareholder (who tothe knowledge of our Directors owned more than 5% of the issued share capital) had any interestin the five largest Third Party Brand Partners from whom we sourced our merchandise during theTrack Record Period.

Selection of Third Party Brand Partners

As we frequently reevaluate and refresh our merchandise offerings, we do not maintain a rigidlist of Third Party Brand Partners whom we procure our merchandise from. Instead, we regularlyconduct industry research, participate in trade fairs and conventions, and meet with new brandsowners, authorized dealers and distributors to discover new products with high potential. We selectour Third Party Brand Partners based on the following key considerations, among others: (i)popularity or market potential of their products, (ii) their ability to fulfill our orders, (iii) reputationof their brands, and (iv) saturation of their products in the market. Aside from that, prior to theentering of procurement agreements and depending on the origin and nature of the products, wewould require the potential Third Party Brand Partners to provide us copies of certificates withrespect to their capacity to enter into agreement with us. These certificates include business license,certificate of general taxpayer, trademark registration certificate, brand authorization, food businesslicense, custom import products declaration form, third party test report and other applicablecertificates. As a measure to prevent popular merchandise from selling out, we typically maintaina key supplier and two supplemental suppliers for the same brand merchandise.

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Procurement Agreements with Third Party Brand Partners

With our Third Party Brand Partners, we generally enter into procurement agreements withterms ranging from six months to one year for the supply of the merchandise as specified in theagreements.

Principal commercial terms of the procurement agreements include:

• Duration. Our procurement agreements with Third Party Brand Partners generally haveterms ranging from six months to one year.

• Minimum purchase commitment. None.

• Anti-counterfeit clause. The Third Party Brand Partners whom we entered into thedistributorship agreements with shall be an authorized party to supply the relevant brandmerchandise. We have the right to return goods received by us that are found to becounterfeits.

• Pricing policy and resale price management. We pay for the merchandise at the purchaseprice mutually agreed upon by both parties, which comprises product price, all taxes,packing fees and other expenses. There is no mandatory pricing requirement for theretail price or resale price for the merchandise supplied to us.

• Delivery. Our Third Party Brand Partners generally pay for the costs incurred from thetransportation of the goods to our warehouses.

• Legality of the supply. We require our Third Party Brand Partners to provide us with therelevant certificates, files and other required information pursuant to the applicable legalrequirements.

• Order fulfillment. We require the Third Party Brand Partners to fulfill not less than 95%of each of our orders placed during the contractual term.

• Shelf life. The products can be accepted only if the remaining shelf life is no less thantwo thirds of the whole shelf life of the products. In particular, for products with shelflife of 12 months, we require a remaining shelf life of no less than eight months; forproducts with shelf life of 18 months, we require a remaining shelf life of no less than12 months; for products with shelf life of 24 months, we require remaining shelf life ofno less than 16 months, when they arrive at our warehouse.

• Credit and payment terms. We generally have a credit period of up to 45 days from thedate of delivery. Our settlement currencies are mainly in RMB.

• Return or exchange of products. We are allowed to return or exchange defective productsand the costs incurred as a result of which shall be borne by the Third Party BrandPartners.

• Intellectual property. Pursuant to the distributorship agreements, we are authorized tosell the merchandise carrying the brand name and logo of the relevant brand.

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• Termination. The distributorship agreement can be terminated by either party upon theoccurrence of certain specified force majeure events or terminated by the non-breachingparty upon the occurrence of a material breach.

• Liability. The suppliers are liable to any product defects and liabilities. We are entitledto terminate the agreement unilaterally and to be indemnified for any loss arising fromdefective products.

Our OEM and ODM Contractors

Given that our Group is strategically headquartered in Guangdong Province, we enjoy anatural geographic advantage for being located within the core of the manufacturing hub in China,which allows us to manage our OEM and ODM model more efficiently. During the Track RecordPeriod, we primarily adopted an OEM and ODM business model to produce our self-owned brandmerchandise. This strategy allowed us to avoid extensive direct exposure to the risks and expensesof operating production facilities, while at the same time promptly adjust our product offerings inresponse to shifting market trends so as to maintain a competitive cost structure. In addition, withan OEM and ODM production model, we could have more control over the supply of merchandiseand inventory level in our stores without relying solely on the Third Party Brand Partners.

Under our OEM model, we have an in-house product design team responsible for the design,research and development of our 23 brand merchandise in terms of their aesthetical appearances andfunctionalities. Our designs are subsequently given to our OEM contractors to produce prototypesfor our internal review prior to bulk production. As of June 30, 2021, this team comprised 13designers and product managers.

Under our ODM model, the ODM contractors are generally responsible for providing productdesigns, procuring raw materials, manufacturing products, and identifying and supervisingsub-contracted manufacturers (where applicable). Our product design team work closely with thecontractors to review and determine the artistic and outlook designs of our self-owned brandmerchandise according to the anticipated fashion trends and consumers’ preference.

Selection of OEM and ODM Contractors

Each of our potential OEM and ODM contractors undergoes an approval process beforeentering into any business relationship with us. We employ various evaluation and assessmentcriteria in selecting our OEM and ODM contractors, including industry experience, their ability tomeet our requirements, production capacity, customers they had served before, quality management,qualifications, and ability to meet our delivery timeline.

We typically involve three to five leading OEM or ODM contractors of the same type andconduct comprehensive surveys on these candidates who will undergo a preliminary approvalprocess. Once an OEM and ODM contractor has passed our approval process, we perform samplingof the prototypes it manufactures based on our needs.

Management of OEM and ODM Contractors

We employ an integrated supply chain management system for our outsourced merchandise.The production cycles of our OEM and ODM contractors vary depending on the product producedand the raw materials used.

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We impose stringent criteria in evaluating the performance of our existing OEM and ODMcontractors. We closely monitor the performance of our OEM and ODM contractors through thefollowing measures, where we assess each contractor’s on-time delivery rate, product qualitypassing rate, after-sale services and other performance indicators:

• we inspect products arriving in our warehouses, and we would return any unqualifiedgoods we identified upon reception;

• our OEM and ODM contractors are subject to routine quality control checks. Pursuantto our quality control guidelines, we terminate our relationship with any of OEM andODM contractor that fails to meet our required standards for three consecutive months;and

• we conduct annual inspections of our OEM and ODM contractors to re-evaluate theiroverall performance and may terminate our business relationship with contractors whodo not pass our annual inspection.

As of December 31, 2018, 2019 and 2020 and June 30, 2021, we had ten, 30, 138 and 145OEM and ODM contractors, respectively. All of our OEM and ODM contractors are located inChina.

We have been working with our OEM and ODM contractors for an average of one year. Webelieve that we have a good working relationship with our OEM and ODM contractors. Changes inthe number of our OEM and ODM contractors during the Track Record Period were primarily dueto (i) changes in our product mix and (ii) our termination of a small number of OEM and ODMcontractors who did not pass our annual inspection or failed to adhere to our required standards.

We maintain stringent quality control standards in the selection and management of our OEMand ODM contractors and throughout the outsourcing process. See “— Quality Control.” We areexposed to risks related to our reliance on third-party OEM and ODM contractors. See “RiskFactors — Risk Relating to Our Business and Industry — We rely on third-party OEM and ODMcontractors for the manufacturing of our self-owned brand merchandise. Our brand image andbusiness may be negatively affected by a disruption in the supply of our OEM and ODMcontractors.”

Supply Agreements with OEM and ODM Contractors

Our supply agreements with OEM and ODM contractors generally have a term ofapproximately 12 months. These supply agreements set forth fundamental terms in relation to thequalification of the OEM and ODM contractors, order placement process, production commitmentof the OEM and ODM contractors, quality standards, pricing terms, delivery protocols, inspectionand acceptance of products, return policies, payment terms, protection of trademarks and otherintellectual properties rights and confidentiality obligations. For our arrangements with OEMcontractors, we will inspect the prototype manufactured based on our own design prior tocommencing mass production of the relevant merchandise. In respect of our agreements with ODMcontractors, we generally require contractors to commence mass production only after obtaining ourapproval on their proposed designs and specifications. For our arrangements with OEM and ODMcontractors, we can send our supervision team to inspect and oversee the raw materials, accessories,production process, and product quality of the OEM and ODM products.

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Pursuant to the relevant supply agreements, our OEM and ODM contractors are obligated tofulfill all of our purchase orders and are not allowed to subcontract without our consent. Deliverycharges and any damage to the products incurred during the transportation are borne by our OEMand ODM contractors.

We require our OEM and ODM contractors to keep confidential our trade secrets known orused by them in the design and manufacturing of our merchandise and to comply with the applicablelegal requirements. In addition, molds used in the production of our self-owned brand merchandiseshall not be used by our OEM and ODM contractors for the manufacturing of orders placed by otherparties. We retain the intellectual property rights to products manufactured by our OEM and ODMcontractors. Our OEM and ODM contractors are required to indemnify us in the event they discloseour trade secrets to any other third party without our prior consent or if they reproduce or sell themerchandise with our brand name to other parties.

To cooperate with a new OEM or ODM contractor, we generally need to prepay 30% ofpayment for goods. After a period of time of collaboration, our OEM and ODM contractorsgenerally grant us a credit period ranging from 30 to 60 days. We may return defective productsupon delivery or at any time product defects are discovered.

During the Track Record Period, we did not have any material disputes with our OEM andODM contractors. We believe that the manufacturing capacity of our OEM and ODM contractorsis sufficient to meet our anticipated demand for the foreseeable future.

Raw Material Procurement

We do not procure raw materials for our OEM and ODM contractors, who are our finishedproduct suppliers and source the raw materials themselves in accordance with our design andmanufacturing specifications. However, our quality control personnel may inspect onsite andoversee the raw materials and accessories used in the production process.

During the Track Record Period and up to the Latest Practicable Date, we had not experiencedany business interruption due to shortage or delay in our OEM and ODM contractors’ procurementof raw materials.

The raw material prices of our merchandise fluctuate from time to time and may continue tofluctuate in the future. While our OEM and ODM contractors usually procure raw materials atmarket prices and therefore we do not have control over the raw material costs, we believe we canpass on any material increase in the raw material costs to our customers through appropriate pricing.

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OUR CUSTOMERS

Our customers consist primarily of our franchisees and retail customers in our self-ownedstores.

Our five largest customers

The following tables set forth our five largest customers during the Track Record Period,including their background and years of business relationship with us:


Customers BackgroundYears of

relationship % of Revenue

1 . . Customer A. . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee

Eight months 4.7%

2 . . Customer B. . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee

Three years andone month

3.7%

3 . . Customer C. . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee

Six months 2.7%

4 . . Customer D. . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee

Seven months 1.9%

5 . . Customer E . . . . . . . . . . . . . . . . . . . . . . . . Corporation Three months 1.6%




1 Customer A. . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee


4.8%

2 Customer F . . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee

One year 4.4%

3 Customer G. . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee

One year 3.6%

4 Customer H. . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee

Eight months 2.4%

5 Customer I . . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee

One year andfive months

2.3%




1 Customer J . . . . . . . . . . . . . . . . . . . . . . . . Corporation One year 5.2%

2 Customer K. . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee

One year 4.8%

3 Customer L . . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee

Two years andfive months

4.5%

4 Customer M . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee

One year 3.9%

5 Customer N. . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee


3.9%

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For the six months ended June 30, 2021



1 Customer J . . . . . . . . . . . . . . . . . . . . . . . . Corporation One year andsix months

12.1%

2 Customer M . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee

One year andsix months

3.0%

3 Customer L . . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee

Two years andeleven months

2.9%

4 Customer O. . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee

One year andten months

2.1%

5 Customer K. . . . . . . . . . . . . . . . . . . . . . . . Individualfranchisee

One year andsix months

2.1%

As of June 30, 2021, our business relationships with our five largest customers ranged fromthree months to three years and one month. We have developed and maintained long-term businessrelationships with most of our customers even though we have not entered into long-termfranchising agreements with them.

All of our five largest customers during the Track Record Period were Independent ThirdParties. Customer J is a joint venture company where we hold 50% equity interest, while theremaining 50% is held by an Independent Third Party. Customer M indirectly holds 49%shareholding in one of our insignificant subsidiaries. To the best of our knowledge, we conductedarm’s length transaction with each of our customers during the Track Record Period. None of ourDirectors, their respective close associates or any of our Shareholders (who to the knowledge of ourDirectors owned more than 5% of our issued share capital) had any interest in any of our five largestcustomers during the Track Record Period.

During the Track Record Period, none of our five largest customers were also our suppliers.

LOGISTICS AND INVENTORY MANAGEMENT

Technology and digitalization are the bedrocks of our logistics operations, and we leverage theinterface of our various proprietary and third party IT systems such as TERP, KPOS and WMS tomanage our day-to-day transportation of goods in our supply chain. For details of our technologyinfrastructure, see “— Information Technology.” Powered by our robust and advanced inventorymanagement systems, we have adopted a logistics model that supports our nationwide storenetwork.

Stores Ordering Process

Store orders will typically be fulfilled following the procedures as illustrated in the belowdiagram:

STEP 1: STEP 2: STEP 3: STEP 4:

Automated deliveryschedule/Storeplaces ad hoc orders

Goods dispatchedfrom NDC

Goods picked upby logistics serviceprovider (LTL)

Goods out fordelivery toindividual stores

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We normally maintain a certain level of inventory in our regional warehouses. The deliveryof goods from our NDC to a regional warehouse is automated with the use of our logistics analyticalintelligence based on the inventory levels of the respective stores. In addition, goods may also bedispatched from the NDCs following ad hoc orders placed by individual stores. For details of themanagement of our NDCs, see “— Our Distribution Centers and Warehouses.”

Owing to the strategically planned locations of our NDCs, we have been able to capitalize theextensive nexus of our delivery routes with minimum latency and costs. When delivering goodsfrom an NDC to an individual store, we engage third party logistics service providers for fulltruckload services (FTL) that is more time- and cost-efficient. The delivery time required for thetransportation of goods from an NDC to a regional warehouse will typically take an average of 30hours. When the goods arrive at an individual store, we engage logistics service providers forless-than-truckload services (LTL) to deliver the goods to each individual stores. The delivery timerequired for the transportation of goods from NDCs to individual store will typically take anaverage of 3.5 days. With this delivery approach, the lead time from the initiation of order-placingto the delivery of the goods to individual stores can be effectively shortened.

Our Distribution Centers and Warehouses

We consider logistics and fulfillment an integral part of our suite of offerings and willcontinue to commit resources to enhance our logistics capabilities. With the delivery approach asdiscussed above, our network of NDCs and regional warehouses is critical in supporting theprofitability of our business as it ensures that our merchandise can always be delivered to our endcustomers in the most cost-effective manner.

As of June 30, 2021, we had five NDCs located in Foshan, Dongguan, Tianjin, Jiaxing, andChengdu. Our NDCs serve as our main inventory storage space where we receive goods suppliedby our Third Party Brand Partners and OEM and ODM contractors before dispatching such goodsto individual stores. Each of our five NDCs has a designated serving region to ensure a smooth andspeedy stock replenishment for our nationwide network of stores. We had carefully selected thelocations of our NDCs after taking into considerations of our retail stores network in order toeffectuate expeditious delivery and replenishment of inventory in our stores, ensuring that the needsof our customers are met and to achieve inventory optimization. The following table sets forth thedetails of our existing distribution centers during the Track Record Period:

LocationTotal Gross

Floor Area(1)

sq.m.

1 Foshan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,297

2 Dongguan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,418

3 Tianjin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,861

4 Jiaxing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,540

5 Chengdu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,181

Note:

(1) Based on the total gross floor area of the relevant distribution centers as of June 30, 2021.

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As of June 30, 2021, our regional warehouse network comprised four warehouses operated byus and one cloud warehouse where we rented storage space from third party service providers.Leveraging on our self-developed TERP system that provides us a comprehensive view of inventorylevels at group level and forecasts our replenishment needs, our NDCs and regional warehouseswork in sync to fulfill orders from our sales channels.

Logistics and Warehousing

Depending on the terms of the agreements with our suppliers, our suppliers or we may bearthe costs and losses associated with the delivery of goods from the place of origin or productionfacilities of the suppliers to our NDCs. To facilitate the order process with our suppliers, we relyon our supply chain collaboration system (供應鏈協同系統), a sub-system derived from our TERPsystem which allows us to conveniently track our procurement orders and status of delivery of thegoods. When shipments from our suppliers arrive at our NDCs, they are stored in our NDCs byproduct categories. The SKU in our inventory will be bar-coded and tracked through WMS,allowing real-time monitoring of inventory levels across our NDCs and regional warehouse networkand item tracking.

We have set up the Supply Chain Center in our headquarters to monitor the operations of ourNDCs and logistics-related arrangements. The department oversees the fulfillment of automatedorders and ad hoc orders from the individual stores to ensure optimization of the overall inventorylevel of our Group. It also formulates delivery schedules on a weekly basis to make sure that thereplenishment of inventory in the stores can always be achieved in a timely manner. The goodsstored in our NDCs will automatically be dispatched based on the weekly delivery schedules plottedby our Supply Chain Center. With the data generated from our logistics analytical intelligencewhich provides foresights as to the demand of each stores, the delivery schedules are constantlyadjusted to reflect the changing customer traffic in each store.

In addition, with our TERP, WMS that integrates seamlessly with our KPOS systems installedin our stores, we are able to track in real time for each purchase made by our customers whichallows us to continuously improve the space utilization and operational efficiency of ourwarehousing facilities. Relying on the foresights provided by our logistics analytical intelligence,the sequence of each delivery event can be planned to reduce latency while minimizing costs.Besides that, with sequences of delivery events efficiently formulated, it allows an optimalallocation of our delivery resources across different regions to reduce the occurrence ofout-of-region fulfillment, or alternatively, the need to deliver goods directly from an NDC to ourindividual store when certain merchandise is out of stock.

Management of Logistics Service Providers

We engage third party logistics service providers for the delivery of goods by landtransportation from our NDCs and regional warehouses to our self-owned stores and franchiseestores. We typically enter into agreements with logistics service providers for product transportationannually. Under these agreements, the logistics service providers bear the risks and lossesassociated with product transportation as well as related insurance expenses, and are responsible forall losses associated with the delivery and transportation of the relevant products. The logisticsservice providers compensate us for all claims and losses arising from the conducts of their driversand employees.

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Our transportation arrangements with third party logistics service providers and couriercompanies allow us to reduce our capital investments in developing and maintaining an in-houselogistics system. The risks relating to transportation and delivery of products are also transferredto third-party logistics service providers and courier companies. During the Track Record Periodand as of the Latest Practicable Date, we had not experienced any significant delays or improperhandling of goods that materially and adversely affected our business operations. Furthermore,there are sufficient replacement logistics service providers and courier companies in China thatoffer similar terms as our existing ones, and we do not anticipate any impediments in ourintra-delivery system in the foreseeable future.

Inventory Control

Inventory control is an integral component in the success of our business and our profitabilitywill be adversely affected when our inventory is held for excessive periods of time. Ourtechnology-driven logistics and inventory management protocols have provided tangiblecontributions to our Group in terms of warehouse utilization, improved inventory turnover days,reduced delivery lead time and overall profitability.

In order to minimize our inventory carrying costs and the use of our working capital, we striveto maintain optimal inventory levels in our NDCs, regional warehouses as well as individual stores.Our inventory primarily consists of finished products procured from the Third Party Brand Ownersand finished products of our own brands we ordered from OEM and ODM contractors. Ourinventory management process adopts a first-in-first-out policy. Our WMS system has beenconfigured with the functions to indicate the expiration date of each SKUs and to automaticallygenerate the storage positioning of such inventories with closest expiration dates for the purpose ofpriority picking and delivering stocks for replenishment which effectively strengthens our inventorycontrol and lessen obsolete and/or expired inventories.

Each item of merchandise that we offer has a unique SKU for identification in our WMSsystem and is linked to our KPOS system. The cashiers at our self-owned stores and franchise storesthat are equipped with our KPOS terminals will scan the bar code merchandise being sold. Salesdata from each of these store’s KPOS terminal is collated and uploaded to the TERP system, andtransferred to our logistics analytical intelligence for delivery schedule formulation.

QUALITY CONTROL

Our business emphasizes the provision of an outstanding customer shopping experience. Thequality of the merchandise we offer in our stores remains our key focus to maintain and growcustomers’ loyalty. We follow stringent quality control procedures to ensure that the merchandisewe procured from our Third Party Brand Partners or manufactured by our OEM and ODMcontractors are of satisfactory quality and meet the relevant safety standards.

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Some of the national safety guidelines that we have followed closely include the followings:

• In relation to color cosmetics and beauty products, Product Quality Law of the PRC《中華人民共和國產品質量法》, Regulation on the Supervision and Administration ofCosmetics《化妝品監督管理條例》, Cosmetic Safety Technical Specifications 《化妝品安全技術規範》, Regulation on the Supervision and Administration of MedicalDevices 《醫療器械監督管理條例》 and others

• In relation to food and beverage, Food Safety Law of the People’s Republic of China《中華人民共和國食品安全法》、 GB2760 National Food Safety Standard for Use ofFood Additives 《GB2760食品安全國家標準食品添加劑使用標準》、 GB2761National Food Safety Standard Limit of Myotoxins in Food《GB2761食品安全國家標準食品中真菌毒素限量》、 GB2762 National Food Safety Standard Limit of Pollutant inFood《GB2762食品安全國家標準食品中污染物限量》 and others

• In relation to toys, GB6675.1 Toy Safety Section I: Basic Rules《GB6675.1玩具安全第1部分：基本規範》、GB6675.2 Toy Safety Section II: Mechanical and Physical Properties《GB6675.2玩具安全第2部分：機械與物理性能》、GB6675.3 Toy Safety Section III:Flammability《GB6675.3玩具安全第3部分：易燃性能》、GB6675.4-2014 Toy SafetySection IV: Migration of Specific Elements《GB6675.4-2014玩具安全第4部分：特定元素的遷移》、GB6675.14 Toy Safety Section 14: Finger Paint Technical Requirementsand Test Methods《GB6675.14玩具安全第14部分：指畫顏料技術要求及測試方法》and others

We have developed a comprehensive and effective quality management system as part of ourcommitment to adhering to stringent quality control standards. In our procurement of merchandisefrom Third Party Brand Partners model, we require them to submit various qualification certificatessuch as inspection and quarantine certificate, product tax clearance certificate and trademarkregistration certificate for each batch of products. In our OEM and ODM model, we haveformulated detailed manufacturing standards and rigorous quality control guidelines and protocolsthat govern the entire production process, from product design and development and sourcing ofraw materials to the packaging and shipment of finished products. In addition, we have establisheda comprehensive product safety risk prevention system, which aims to minimize the number ofsafety incidents arising from the use of our products. When our orders are delivered to ourwarehouses, our staff will perform inspections on the goods. Any nonconforming products will bereturned immediately at the costs of the suppliers.

As of June 30, 2021, we had assembled a dedicated quality control team consisting of 15employees who are responsible for monitoring quality risks throughout the whole process ofproduct development, manufacturing, delivery and sales.

SALES AND MARKETING

We consider it crucial for retail stores to capture attention and establish strong brandrecognition in the public eyes. We leverage our strong technology capability and acumen inidentifying new merchandise with great market potential to develop and enhance our coverage inmerchandise offering, immersive shopping experience and great value the merchandise may offer.

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During the Track Record Period, our advertising and marketing expenses amounted toapproximately RMB1.4 million, RMB4.3 million, RMB10.3 million, RMB4.2 million and RMB2.5million, respectively. During the Track Record Period, we did not carry out price deductionpromotion as part of our marketing strategies as we believe that such strategy does not align withour brand concept which focuses on delivering extraordinary retail shopping experience.

As we consider it crucial to establish a strong brand recognition, from the design and colortheme of the stores, to the merchandise display layout and staff uniforms, our stores are designedand decorated to present a consistent and distinctive brand image. For details, see the subsectionheaded “— Store Management.”

Utilization of Social Medial Influence

We acknowledge the growing importance of consumer engagement desired by the youngergeneration of consumers, and had implemented initiatives to deepen the consumer engagementexperience with the setting-up of official brand accounts managed by us on social media platformssuch as Kuaishou and Xiaohongshu. Our customers can watch our live-streaming videos andinteract with us through these platforms. As the China market is increasingly acclimated to a socialmedia economy, we believe that our approach will reinforce customer affinity and extend our brandoutreach to the public. In addition, during the Track Record Period, we had also commissionedpublic accounts on WeChat to promote our new stores to increase our brand exposure to attract morecustomer traffic in our retail shops.

We strive to create an environment in our stores for photo-taking for our customers to posteye-catching digital contents online (“打卡”). When such content becomes viral online, we are ableto effectively and rapidly increase the awareness of our brands among our potential customers.

Self-owned Brand Merchandise Marketing

Our stores offer a broad range of merchandise to our customers including those manufacturedunder our self-owned brand name and those we sourced from Third Party Brand Partners. Weendeavor to provide a customer-centric and special retail shopping experience by giving ourcustomers numerous choices. We introduced our self-owned brand merchandise in our stores withthe primary objective of giving our customers not just shopping options, but also qualitymerchandise with great value. We believe that our self-owned brand merchandise and merchandisesourced from Third Party Brand Partners are not in competition with each other. We uphold ourbrand concept as an integrated retailer where our customers can find the most popular andsought-after brand merchandise in one place, and there is no intention nor need to replace thirdparty brand merchandise with our self-owned brand merchandise.

PRICING POLICY

While our Group operates four retail brands, we adopt a uniform pricing strategy across ourbrands by taking into various factors such as procurement costs, our target operating profit marginsfor each merchandise, general market trends, the popularity, availability and comparability ofidentical or similar products in the market, the place of origin of the product, purchasing power ofour target customers and prices set by our competitors. As we regularly review the pricing of ourmerchandise, we believe that we are able to divert increased costs to our customers effectively.

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SEASONALITY

We typically experience higher sales during national holidays in China, such as Labor Day andNational Day. Apart from that, our merchandise may also experience higher demand during festiveseasons such as Chinese New Year, Christmas and Valentines’ day. Given our comprehensiveproduct offerings, we do not believe that seasonality has any material effect on our results ofoperations as a whole.

COMPETITION

According to the Frost & Sullivan Report, the specialty retail market reached RMB195.2billion by GMV in 2020, marking a CAGR of 10.7% from 2016 to 2020, and is expected to reachRMB475.0 billion in 2025, representing an estimated CAGR of 19.5% from 2020 to 2025.Moreover, the competition in specialty retail market in China is fierce and fragmented, top fiveplayers have a total market size of approximately RMB30.5 billion by GMV, accounting for 15.6%of the specialty retail market in China in 2020, and leading players are expected to gain more sharesand the level of market concentration is expected to increase, according to the Frost & SullivanReport.

We were the fastest-growing specialty retailer among the top ten players and ranked thirdamong the five largest specialty retailers by GMV in China in 2020 with a CAGR of 246.2% from2018 to 2020, according to the Frost & Sullivan Report. Besides, we are unique in that we operatein all three major categories in specialty retail market, i.e. featured variety, beauty, and pop toys.Our KKV and KK Guan brands collectively ranked fourth in the featured variety market and THECOLORIST ranked third in the beauty market, in terms of GMV, in China’s specialty retail marketin 2020, according to Frost & Sullivan Report.

There are various entry barriers for new market entrants, including accurate merchandiseselection capacity, capital management, and brand power and branding capacity, data-drivenoperation management as well as supply chain control, according to Frost & Sullivan Report.

We believe that by leveraging our pioneering position and brand recognition established in thespecialty retail market, our ability to offer quality, trendy and broad appeal product mix procuredfrom the international market at competitive prices, our stable collaborative relationshipsmaintained with our suppliers, our in-depth industry knowledge and experience in capturing markettrends and catering to ever-charging consumers’ needs, preferences and expectations of consumersand our capability in strategically locating our retail stores to effectively serve our target customersin the past years, we are in a favorable position to compete with the new entrants and other existingmarket players in the specialty retail market. However, we cannot assure you that we can replicateour fast growth in recent years.

DATA PRIVACY AND SECURITY

We are committed to protecting consumers’ data in our business and operation. We collectcustomers’ data from third party platforms primarily including KKV and THE COLORIST WeChatmini programs. Prior to obtaining their personal data, we explain the terms and conditions tocustomers and have also gained their prior consent before collecting their data.

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Various laws and regulations, such as the Cyber Security Law of the PRC, govern thecollection, use, retention, sharing, and security of the personal data we receive from and about ourusers. Privacy groups and government bodies have increasingly scrutinized the ways in whichcompanies link personal identities and data associated with particular users with data collectedthrough the Internet, and we expect such scrutiny to continue to increase. We have adopted policies,procedures and guidelines to comply with these laws and regulations and protect the personalprivacy of our customers and the security of their data. During the Track Record Period and up tothe Latest Practicable Date, we had complied with the applicable laws and regulations regardinguser privacy and data security in all material aspects. See “Risk Factors — Risks Relating to OurBusiness and Industry — Our business generates and processes a large amount of data, includingpersonal and business data, and the improper collection, hosting, use or disclosure of data couldharm our reputation and have a material adverse effect on our business and prospects.”

RISK MANAGEMENT

Our management has designed and implemented a risk management policy to address variouspotential risks identified in relation to operations of our retail stores, including strategic risks,operational risks, financial risks and legal risks. Our risk management policy sets forth proceduresto identify, analyze, categorize, mitigate and monitor various risks. Our Board is responsible foroverseeing the overall risk management and assessing and updating our risk management policy onan annual basis. Our risk management policy also sets forth the reporting hierarchy of risksidentified in our operations.

Parallel Imports

During the Track Record Period, we were aware of parallel imports of products for which weare the sole or exclusive authorized dealers in China. During the Track Record Period, none of theincidents of counterfeit products or parallel imports had any material adverse effect on our Group’soperations.

INTERNAL CONTROL

To monitor the ongoing implementation of our risk management policies and corporategovernance measures after the [REDACTED], we have adopted and will continue to adopt, amongother things, the following risk management measures:

• establish an audit committee to review and supervise our financial reporting process andinternal control system. Our audit committee consists of three members, namely Mr. YeWangchun (葉旺春), Ms. Li Hui (李卉) and Mr. Zeng Guanglong (曾廣龍). For thequalifications and experience of these committee members, see “Directors and SeniorManagement;”

• adopt various policies to ensure compliance with the Listing Rules, including but notlimited to aspects related to risk management, connected transactions and informationdisclosure;

• provide anti-corruption and anti-bribery compliance training periodically to our seniormanagement and employees to enhance their knowledge and compliance with applicablelaws and regulations, and include relevant policies against non-compliance in employeehandbooks; and

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• attend training session by our Directors and senior management in respect of the relevantrequirements of the Listing Rules and duties of directors of companies [REDACTED]in Hong Kong.

We have also engaged an internal control consultant to review the effectiveness of our internalcontrols associated with our major business processes, identify deficiencies and areas forimprovement, provide recommendations and review the implementation status of these remedialactions. No material deficiencies were identified during the review.

We have taken measures to further improve internal controls in relation to our operations. Wehave implemented various policies and procedures to ensure effective management in our operation,production, financial reporting and recording, and compliance with applicable laws and regulations.We have adopted the recommendations made by the internal control consultant, who has alsocompleted the follow-up review on our internal control system with regard to those actions takenby us.

HUMAN RESOURCES

As of June 30, 2021, we had a total number of 3,928 full-time employees, among which 1,115employees work in our headquarter, and the remaining 2,813 employees are in-store staff stationedat our self-owned stores. Substantially all of our employees are located in China.

The following table provides a breakdown of our full-time employees by function of ourGroup as of June 30, 2021.

DepartmentNumber ofEmployees

Headquarter

Office of Executive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

Material Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Human Resource Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

IT Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Overseas Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Supply Chain Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

Engineering Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Development Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Warehousing Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Finance Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

KK Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

KKV Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

TC/THE COLORIST Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

X11 Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,115

In-store Staff at Our Self-owned Stores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,813

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,928

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Relationship with Our Employees

Our success depends on our ability to attract, motivate, train and retain qualified personnel.We believe we offer our employees competitive compensation packages and an environment thatencourages self-development and, as a result, have generally been able to attract and retain qualifiedpersonnel and maintain a stable core management team.

We value our employees and we are committed to growing with our own employees. Inaddition, we place strong emphasis on providing trainings to our employees in order to enhancetheir professional skills, understanding of our industry and work place safety standards, andappreciation of our value, especially our satisfying customer services. We design and offer differenttraining programs for employees at various positions periodically.

None of our employees are currently represented by labor unions. We believe that we maintaina good working relationship with our employees, and we have not experienced any significant labordisputes or any difficulty in recruiting staff for our operations during the Track Record Period.

As required by regulations in China, we participate in various employee social security plansthat are organized by municipal and provincial governments, including basic pension,unemployment insurance, maternity insurance, work-related injury insurance, medical insuranceand housing fund. We are required under PRC law to make contributions to employee benefit plansat specified percentages of the salaries, bonuses and certain allowances of our employees, up to amaximum amount specified by the local government from time to time.

Social Insurance and Housing Provident Funds

During the Track Record Period, some of our PRC subsidiaries had not opened socialinsurance account or housing provident fund account as prescribed by relevant laws and regulations.Some of our PRC subsidiaries had entrusted third parties to pay for the social insurance and housingprovident fund for the PRC subsidiaries’ employees, on behalf of the PRC subsidiaries. We and theentrusted third parties also failed to make full social security insurance and housing provident fundcontributions for some of our employees primarily because (i) our labor force is highly mobile; (ii)they were unwilling to cooperate in making payments for such funds as they chose to participatein local rural social security systems offered in their place of residency; (iii) inconsistentimplementation of the PRC laws and regulations is often undertaken by the local authorities, and(iv) in practice, local authorities generally permit the PRC subsidiaries to pay for the socialinsurance and housing provident fund based on a lower salary level than the actual salary of anemployee.

Pursuant to relevant PRC laws and regulations, where the PRC subsidiaries fail to registerwith social insurance agencies and housing provident fund management centers and open accounts,such PRC subsidiaries may be imposed a fine of not less than one time but not more than three timesthe amount of social insurance premiums payable for failing to open a social insurance accountwithin prescribed time, and may be imposed a fine of not less than RMB10,000 but not more thanRMB50,000 for failing to open a housing provident fund account within prescribed time,respectively. Pursuant to relevant PRC laws and regulations, we may be ordered by the relevantPRC authorities to pay the outstanding social insurance contributions within a prescribed time limit,and the under-contribution of social insurance within a prescribed period may subject us to a dailyoverdue charge of 0.05% of the delayed payment amount, and if we fail to comply when ordered,the relevant authorities may impose a maximum fine or penalty equivalent to three times theoutstanding amounts. With respect to housing provident funds, the relevant authorities may orderus to pay the outstanding amounts within the prescribed time period, and they may apply to acompetent court for enforcement of the outstanding amounts if we fail to do so.

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As of the Latest Practicable Date, no administrative action or penalty had been imposed by therelevant regulatory authorities with respect to our social insurance and housing provident fundcontributions, nor had we received any order to settle the deficit amount. Moreover, as of the LatestPracticable Date, we were not aware of any complaint filed by our employees regarding our socialsecurity insurance and housing provident fund policy.

We’ve paid social insurance for most of employees and we undertake to make timely paymentsfor the deficient amount and overdue charges if and when requested by the competent governmentauthorities. As advised by our PRC Legal Advisers, once we make timely payments for the deficientamount and overdue charges if requested by the competent government authorities, the risk of beingimposed material penalties by the competent government authorities on us is low. As of December31, 2018, 2019 and 2020 and June 30, 2021, we made provisions of RMB2.6 million, RMB5.8million, RMB13.8 million and RMB32.0 million for the social insurance and housing providentfund contribution shortfall, respectively. To prevent the recurrence of such incident, we haverequired all of our employees to fully participate in contributing to such funds.

Our Directors believe that such non-compliance would not have a material adverse effect onour business, financial condition and results of operations, considering that: (i) we had not beensubject to any administrative penalties during the Track Record Period and up to the LatestPracticable Date; (ii) we were neither aware of any employee complaints filed against us norinvolved in any labor disputes with our employees with respect to social insurance and housingprovident funds during the Track Record Period and up to the Latest Practicable Date; (iii) as of theLatest Practicable Date, we had not received any notification from the relevant PRC authoritiesrequiring us to pay for the shortfalls or any overdue charges with respect to social insurance andhousing provident funds; and (iv) no employee complaint was filed against our Company during theTrack Record Period and up to the Latest Practicable Date.

PROPERTIES

As of the Latest Practicable Date, we did not own any property.

Leased Properties

As of the Latest Practicable Date, we had leased 291 properties with the total GFA of248,439.9 sq.m. in China from Independent Third Parties. Our leased properties in China serve asour offices, warehouses and self-owned retail stores.

As of the Latest Practicable Date, the total GFA of our self-owned retail stores in China wasapproximately 201,217.3 sq.m.. The size of our self-owned retail store typically ranges fromapproximately 80 sq.m. to 5,500 sq.m.. The lease agreements typically have a term of three to eightyears.

We also enter into legally binding leasing agreements for warehouses with the lessors. Theprincipal terms of our leasing agreements for warehouse are set out as below:

• Rental fees. We generally pay a fixed monthly rent to the lessors for each warehouse werent.

• Uses. The uses of the warehouses are generally limited to warehousing, logistics, anddelivery.

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• Term. The term of our lease agreements generally ranges from three years to eight years.

• Termination. The lease agreements may be terminated by either party if the other partyfails to perform certain obligations under the lease agreement.

• Deposit. Under certain lease agreements, we are required to pay a deposit within a periodof time after the lease agreement is signed, which is refundable upon termination orexpiration of the agreements.

• Sublease. We are required to obtain the lessor’s written consent to sublease the lease toany third-party.

• Renovation and construction. In case that we intend to renovate or construct any part ofthe leased warehouse, we are required to obtain the lessor’s written consent as well asrelevant government authorizations.

During the Track Record Period, we have successfully renewed all expiring leases, except forthose leased properties that we believe were no longer needed for our business operations andtherefore we decided not to renew. Based on our communications with landlords, our Directorsconfirm that there is no material impediment for our Company to renew such lease agreements.

As of the Latest Practicable Date, for 93 properties with an aggregate GFA of approximately92,284.3 sq.m, the lessors have not obtained relevant ownership certificates or land use rightcertificates; while for 48 properties with an aggregate GFA of approximately 34,391.9 sq.m, thelessors have not obtained the relevant authorization documents from the owners to authorize thelessors to lease or sublease the specific properties. In accordance with the PRC Urban Real EstateManagement Law (《中華人民共和國城市房地產管理法》) and other relevant laws, regulationsand judicial interpretations, if the lessor does not have the ownership of the property and/or landuse rights, or without the authorization or consent of the owner of the house and/or land use rights,the lessor has no right to lease such properties. Our PRC Legal Advisers are of the view that theselease agreements may not be valid, and there are risks that we may not be able to continue to usesuch properties, should a third party raise objections. Our Directors confirmed that the above-mentioned ownership defects would not materially and adversely affect our business operationsbecause if we have to terminate the leases or relocate from such leased properties with ownershipdefects, we are able to locate qualified alternative premises within a short period of time undercomparable terms without incurring substantial additional costs.

With respect to one of the leased properties located in Dongguan City with a GFA of 7,500sq.m., owned by the collective economic organization and primarily used as our offices, there is noguarantee that the lessor has obtained the valid ownership certificate for the aforesaid leasedproperty or relevant consent from the collective economic organization to lease the property. Inaccordance with the PRC Land Administration Law (《中華人民共和國土地管理法》), in case thatland utilization master plan and urban and rural planning categorizes the collectively owned landas land for industrial, commercial and other business operation purposes which is legally registeredas collectively operational construction land, the land owner can authorize land use right toindividuals through transfer or lease based on written agreements, setting forth land site, size anduse, construction period, use period, planning conditions as well as other rights and duties. Theaforesaid transfer and lease shall be subject to the consent of more than two-thirds of the membersin the collective economic organization’s villagers’ assembly or the villagers’ representatives. OurPRC Legal Advisers are of the view that the lease agreements may not be valid, and there are risksthat we may not be able to continue to use such properties, should a third party raise objections. Our

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Directors confirmed that the above-mentioned ownership defects would not materially andadversely affect our business operations because if we have to terminate the leases or relocate fromsuch leased property with ownership defects, we are able to locate qualified alternative premiseswithin a short period of time under comparable terms without incurring substantial additional costs.

In addition, we did not obtain the construction planning permit and construction permit for thedecoration and construction of the aforesaid leased property as of the Latest Practicable Date. Inaccordance with applicable laws and regulations, for the decoration projects with an investment ofmore than RMB300,000 and a construction size of larger than 300 sq.m., the construction entityshall, before the commencement of construction, apply to the competent housing and urban-ruraldevelopment department for a construction permit. As advised by our PRC Legal Advisers, we maybe subject to (i) an order of rectification or suspension of the usage of the leased property; and (ii)a fine up to RMB1,440,000. As of the Latest Practicable Date, we had not received anyadministrative penalties in this regard. Our Directors confirmed that the facts above would notmaterially and adversely affect our business operations because if we have to relocate from suchleased property, we are able to locate qualified alternative premises within a short period of timeunder comparable terms without incurring substantial additional costs.

Pursuant to the applicable PRC laws and regulations, property lease contracts must beregistered with the competent PRC government authorities. As of the Latest Practicable Date, wehad not completed lease registration for the 291 leased properties in China, primarily due to thedifficulty of procuring our lessors’ cooperation required to register such leases. We will take allpracticable and reasonable steps to ensure that the unregistered leases are registered. Our PRCLegal Advisers have advised us that, in accordance to PRC Urban Real Estate Administration Law(“《中華人民共和國城市房地產管理法》”), and the Administrative Measures for CommodityHouse Leasing (《商品房屋租賃管理辦法》), the lack of registration of the lease contracts will notin itself invalidate our relevant lease agreements under PRC laws, and has also advised us that amaximum penalty of RMB10,000 may be imposed for non-registration of each lease. Our Directorsconfirmed that the above-mentioned ownership defects would not materially and adversely affectour business operations. As of the Latest Practicable Date, we have not received any administrativepenalties in this regard.

Fire Safety

As of the Latest Practicable Date, we had a total of 63 self-owned stores which failed to obtainthe fire safety inspection permit. Pursuant to the Fire Prevention Law, the operators of publicfacility shall apply to the local fire safety governmental authority for a fire safety inspection andobtain the fire safety inspection permit before opening for business operation. As advised by ourPRC Legal Advisers, we may be required to suspend our operation of the relevant stores, and maybe subject to a fine of up to RMB300,000 for each store for which we fail to obtain the fire safetyinspection permit.

Among these 63 self-owned stores, applications for fire safety inspection permit from sixself-owned stores have been accepted by the fire safety inspection governmental authority. Asadvised by our PRC Legal Advisers, there will be no substantial legal impediment for us to obtainthe fire safety inspection permit, provided that we submit all the requisite documents to the relevantgovernmental authorities and complete the on-site inspection in accordance with the relevant PRClaws, regulations, government policies and the specific requirements of the relevant governmentalauthorities.

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In addition, we are also under the process of preparing the application submission of firesafety inspection permit for the remaining 57 self-owned stores. Among the remaining 57self-owned stores, approximately 22 self-owned stores may not successfully obtain the fire safetyinspection permit due to various practical difficulties, such as failure to obtain the fire safetyinspection permit by the shopping mall where the self-owned store is located.

As part of our rectification measures, we engaged Shenzhen Anzhi Electrical Fire FightingSafety Inspection Co., Ltd. (深圳市安智電氣消防安全檢測有限公司) as the fire safety consultant(the “Fire Safety Consultant”) to inspect all of the remaining 57 self-owned stores in the processof preparation for application of fire safety inspection permit as of the Latest Practicable Date.Incorporated in 2013, our Fire Safety Consultant primarily offers fire safety inspection, evaluationand consulting services. After conducting comprehensive assessment on all of 57 self-owned stores,our Fire Safety Consultant is of the view that (i) these self-owned stores have met the requirementof fire safety regulation and standards, and the relevant requirements for the completion of firesafety inspections; (ii) these self-owned stores have not yet completed the relevant procedures forthe time being due to the fact the leased property has defects of title or in fire safety procedures,or other reasons unrelated to fire safety issues of the self-owned stores; and (iii) after theseself-owned stores submit applications to the relevant competent authority, there will be no materialimpediment in procedures to obtain fire safety inspection permit.

After considering the foregoing, the Directors are of the view that non-compliance will nothave a material adverse effect on our business, results of operation or financial conditions. Thereasons are as follows: (i) during the Track Record Period and up to the Latest Practicable Date, wehad not been subject to any material administrative penalties; (ii) given that these properties aregeographically dispersed and managed by different authorities, we are unlikely to be required by thecompetent authorities to close or relocate a large number of related self-owned stores at the sametime; (iii) we have a number of candidate locations for self-owned stores, and believe that when weare required to relocate by the relevant authorities, we can relocate relatively easily; (iv) as advisedby the Fire Safety Consultant, each of the remaining 57 stores in process of application of fire safetyinspection permit has met the requirement of fire safety regulation and standards, and the relevantrequirements for the completion of fire safety inspections among other things, and does not haveany major obstacles in passing the fire safety inspection as required by the fire service department;and (v) in the event that we are ordered by the relevant governmental authorities to rectify therelevant fire safety non-compliance, we undertake to fully comply with such order.

INTELLECTUAL PROPERTIES

Intellectual property rights owned by our Group

We rely on a combination of patent, copyright, trademark and trade secret laws andrestrictions on disclosure to protect our intellectual property rights. As of the Latest PracticableDate, we had registered 436 trademarks, 31 patents and 23 copyrights in China, and purchased onetrademark which is in the process of change of registration.

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Intellectual property rights licensed by Third Party Brand Partners to our Group

Under the distributorship agreements made with our Third Party Brand Partners, we aregenerally licensed to use the brand names or trademarks of the Third Party Brand Partners or inrespect of the relevant merchandise in some of our sales and marketing activities.

As of the Latest Practicable Date, there were no disputes or infringements in connection withour intellectual property rights pending or threatened against our Group which could have a materialadverse effect on our operations or financial performance.

INSURANCE

As of the Latest Practicable Date, we maintained various insurance policies to safeguardagainst risks and unexpected events. We have purchased property insurance covering our inventoryinside warehouses and fixed assets such as equipment, furniture and office facilities. We alsoprovide social security insurance including pension insurance, unemployment insurance, work-related injury insurance and medical insurance for our employees. We maintain directors’ andofficers’ liability insurance for our directors and officers. We do not maintain business interruptioninsurance, nor do we maintain product liability insurance or key-man life insurance. We do not haveinsurance related to the COVID-19 pandemic either. We consider that the coverage from theinsurance policies we maintain is adequate for our present operations and is in line with the industrynorm. See “Risk Factors — Risks Relating to Our Business and Industry — Our insurance policiesmay not provide adequate coverage for all claims associated with our business operations.” Duringthe Track Record Period and up to the Latest Practicable Date, we have not made, nor been thesubject of, any material insurance claim.

LEGAL PROCEEDINGS

From time to time, we may be subject to legal proceedings, investigations and claims arisingin the ordinary course of our business. As of the Latest Practicable Date, we were not involved inany litigation, arbitration or administrative proceedings pending or, to our knowledge, threatenedagainst us or any of our Directors that could have a material and adverse effect on our business,financial condition or results of operations.

LICENSES, REGULATORY APPROVALS AND COMPLIANCE

Except as disclosed hereunder and elsewhere in this document, we had obtained all requisitelicenses, approvals and permits from relevant authorities in China except those where the absenceof such individual license, approval and permit would not have a material adverse effect on ouroperations during the Track Record Period and up to the Latest Practicable Date.

We will renew these licenses and permits timely upon their expiration to ensure that ourbusiness operation complies with relevant applicable laws and regulations. Based on the advice ofour PRC Legal Advisers, we do not foresee legal impediments in the renewal of our licenses andpermits, as long as we comply with the relevant legal requirements and provided that we take allnecessary steps and submit the relevant applications in accordance with the requirements andschedule prescribed by the applicable laws and regulations of China. For details of the laws andregulations to which we are subject, see “Regulatory Overview.”

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ENVIRONMENTAL, SOCIAL AND GOVERNANCE

Our business is generally not subject to relevant PRC national and local environmental lawsand regulations, and we are committed to environmental protection. A few of our retail stores adoptthe policy to use the fully biodegradable material for our plastic bags. Furthermore, during theTrack Record Period, we complied with the relevant occupational health and safety laws andregulations in all material respects in China, and we did not have any incidents or complaints whichhad a material and adverse effect on our business, financial condition or results of operations duringthe same periods.

We strive to provide a safe working environment for our employees. We have implementedwork safety guidelines setting out safety practices, accident prevention and accident reporting. Ourwork safety guidelines provide clear guidance on various occupational and safety matters which ourin-store staff are required to follow. During the Track Record Period, none of our employees wereinvolved in any major accidents in their workplaces.

Our employees are entitled to the welfare benefits and a broad range of career developmentopportunities. We promote an open, transparent and inclusive work environment through anemphasis on communication and participation. We have established a sound talent cultivationmechanism. We also value the gender equality and diversity at workplace, and we have takeninitiatives to broaden the impact of female workers, and empower and encourage them to share theirperspectives. We strive to create a diverse environment for our employees.

We are also committed to undertaking our social responsibility and lending our hands topeople in need in time of a natural disaster. For example, we made a donation of RMB3.0 millionto the charity organization in Henan province, where a record-breaking heavy rainfall took place onJuly 20, 2021 in Henan province which caused heavy floods with many people losing their home.

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OUR SINGLE LARGEST SHAREHOLDERS GROUP

The Single Largest Shareholders Group, Mr. Wu, Mr. Guo and their respective wholly-ownedinvestment holding companies (namely, MOGR and Starlight), is a group of persons acting inconcert with each other. Our Founders, Mr. Wu and Mr. Guo, have been acting in concert in relationto the exercise of their voting rights in our Company at the meetings of the Shareholders and theBoard in respect of the matters of our Group since January 2017 when Mr. Guo joined our Group.To record such concert parties relationship, on September 23, 2021, Mr. Wu and Mr. Guo enteredinto an acting-in-concert confirmation (the “Concert Parties Confirmation”), pursuant to whichMr. Wu and Mr. Guo confirmed, among other things, that they (together with their respectivewholly-owned investment holding companies) have been acting in concert in respect of the mattersof our Group with each other since January 2017, and would continue to act in the same manneruntil the date when the Concert Parties Confirmation is amended or terminated by mutual consentof the parties thereto.

As of the Latest Practicable Date, the Single Largest Shareholders Group collectively wasinterested in approximately 28.3865% of the total issued share capital of our Company, comprising(i) the Shares representing approximately 24.0023% of the issued share capital of our Companydirectly held by MOGR, and (ii) the Shares representing approximately 4.3842% of the issued sharecapital of our Company directly held by Starlight. Furthermore, Mr. Wu and Mr. Guo, as theFounders and through MOGR and Starlight, were together in a position to control the compositionof a majority of our Board pursuant to the amended and restated memorandum and articles ofassociation of our Company. Accordingly, Mr. Wu and Mr. Guo, together with MOGR and Starlight,constituted a group of controlling shareholders of our Company as defined under Rule 1.01 of theListing Rules.

Following completion of the [REDACTED] (without taking into account the Shares that maybe issued upon the exercise of the [REDACTED]), the Single Largest Shareholders Group will beinterested in approximately [REDACTED]% of the enlarged issued share capital of our Company,comprising (i) the Shares representing approximately [REDACTED]% of the enlarged issued sharecapital of our Company directly held by MOGR, and (ii) the Shares representing approximately[REDACTED]% of the enlarged issued share capital of our Company directly held by Starlight.Furthermore, none of Mr. Wu, Mr. Guo, MOGR or Starlight will have the right to control thenomination or appointment of a Director after completion of the [REDACTED]. Accordingly, Mr.Wu and Mr. Guo, together with MOGR and Starlight, will cease to be our controlling shareholdersbut will together constitute our Single Largest Shareholders Group after the [REDACTED]. OurCompany will not have any controlling shareholder after completion of the [REDACTED].

For more details of the members of our Single Largest Shareholders Group, please refer to thesections headed “History, Reorganization and Corporate Structure” and “Directors and SeniorManagement” of this document.

RELATIONSHIP WITH THE SINGLE LARGEST SHAREHOLDERS GROUP

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INDEPENDENCE FROM THE SINGLE LARGEST SHAREHOLDERS GROUP

After considering the following factors, our Directors are of the view that we are capable ofindependently carrying on our business from members of the Single Largest Shareholders Groupand their respective close associates.

(a) Financial Independence

We have established our own finance department with a team of independent financial staffresponsible for discharging treasury, accounting, reporting, group credit and internal controlfunctions independent from members of the Single Largest Shareholders Group and their respectiveclose associates, as well as a sound and independent financial system, and make independentfinancial decisions according to our own business needs. We maintain bank accounts independentlyand do not share any bank account with members of the Single Largest Shareholders Group or theirrespective close associates. We make tax registration and pays tax independently with our ownfunds. As such, our financial functions, such as cash and accounting management, invoices andbills, operate independently of members of the Single Largest Shareholders Group and theirrespective close associates.

Our Directors confirm that, as of the Latest Practicable Date, there were no subsisting loans,guarantees or pledges provided by members of the Single Largest Shareholders Group and and/ortheir respective close associates to our Group.

Based on the above, our Directors are of the view that we are able to maintain financialindependence from members of the Single Largest Shareholders Group and their respective closeassociates.

(b) Operational Independence

We do not rely on the members of the Single Largest Shareholders Group and their closeassociates for our finance, audit and control, sales and marketing, human resources, administrationor company secretarial functions. We have our own departments specializing in these respectiveareas which have been in operation and are expected to continue to operate separately andindependently from the members of the Single Largest Shareholders Group and their closeassociates. We have access to suppliers and customers independent of the Single LargestShareholders Group. We are also in possession of all relevant licenses and own all relevantintellectual properties and research and development facilities necessary to carry on and operate ourbusiness, and we have sufficient operational capacity in terms of capital and employees to operateindependently from the Single Largest Shareholders Group. Our Directors do not expect that therewill be any transactions between our Company and the Single Largest Shareholders Group upon orshortly after the [REDACTED].

Based on the above, our Directors are of the view that we are able to operate independentlyfrom the Single Largest Shareholders Group after the [REDACTED].

(c) Management Independence

We are able to carry out our business independently from the members of the Single LargestShareholders Group and their respective close associates from a management perspective. Upon[REDACTED], our Board of Directors will consist of nine Directors, comprising five executiveDirectors which include, among others, Mr. Wu and Mr. Guo, one non-executive Director and threeindependent non-executive Directors.


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Our management and operational decisions are made by our Board of Directors and seniormanagement collectively, most of whom have served our Group for a significant period and havesubstantial and extensive relevant industry experience and expertise. Other than Mr. Wu andMr. Guo, none of the Directors or members of the senior management of our Company holds anydirectorships and/or other roles with any companies owned or controlled by the members of theSingle Largest Shareholders Group and their close associates.

Our Directors are of the view that our Board of Directors and senior management will functionindependently from the Single Largest Shareholders Group for the following reasons:

(i) each of our Directors is aware of his/her fiduciary duties as a Director which require,among other things, that he/she acts for the benefit and in the best interests of ourCompany and does not allow any conflict between his duties as a Director and hispersonal interests to exist;

(ii) the Articles of Association (which will be effective on the [REDACTED]) require aDirector to declare his/her interest in any contract or arrangement in which he has aninterest and he/she is not entitled to vote on (nor be counted in the quorum in relationto) any resolution of the Board approving any contract or arrangement or any otherproposal in which he/she or any of his/her close associates has a material interest, exceptin certain prescribed circumstances, details of which are set out in the section headed“Appendix III – Summary of the Constitution of the Company and Cayman IslandsCompany Law” in this document. The provisions of the Articles of Association ensurethat matters involving a conflict of interest which may arise from time to time will bemanaged in line with accepted corporate governance practice with a view to ensuringthat decisions are taken having regard to the best interests of our Company and theShareholders (including the independent Shareholders) taken as a whole;

(iii) following the [REDACTED], the Board will be required to comply with the ListingRules, including the provisions relating to corporate governance which require, amongother things, that a Director shall not vote on any Board resolution, any contract orarrangement or any other proposal in which he or any of his/her associates has a materialinterest, nor shall he/she be counted in the quorum for the meeting; and

(iv) our independent non-executive Directors have extensive experience in different areasand have been appointed in accordance with the requirements under the Listing Rules toensure that the decision of the Board of Directors are made only after due considerationof independent and impartial opinions.

INTEREST IN COMPETING BUSINESS OF THE SINGLE LARGEST SHAREHOLDERSGROUP AND THE DIRECTORS

None of the members of the Single Largest Shareholders Group or our Directors was, as ofthe Latest Practicable Date, interested in or engaged in any business, other than our Company,which, competes or is likely to compete, either directly or indirectly, with our Group’s businessesand which requires disclosure pursuant to Rule 8.10 of the Listing Rules.


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BOARD OF DIRECTORS

Our Board comprises nine Directors, including five executive Directors, one non-executiveDirectors and three independent non-executive Directors. Our Board is responsible for and has thegeneral power over the management and operation of our business, including determining ourbusiness strategies and investment plans, implementing resolutions passed at our Shareholders’general meetings, and exercising other powers, functions and duties as conferred by the Articles ofAssociation. Our Board also assumes the responsibilities for convening general meetings andreporting the Board’s work at our Shareholders’ meetings, developing and reviewing the policiesand practices of our Company on corporate governance, risk management and internal control andcompliance with legal and regulatory requirements.

The table below sets forth the key information in respect of our Directors as of the LatestPracticable Date:

Name Age Position(s)

Date ofappointment

as aDirector

Time ofjoining

our Group Roles and responsibilities

Mr. Wu Yuening(吳悅寧) . . . . . . . . . . .

37 Founder,chairman ofthe Board,executiveDirector andchiefexecutiveofficer

August 7,2020

April 2015 Responsible for overallmanagement, strategic planning,business and daily operations ofour Group

Mr. Guo Huibo (郭惠波) . . . 36 Co-founder,executiveDirector andpresident

March 29,2019

January 2017 Responsible for overall financialmanagement, legal and humanresources management andinternational businessmanagement of our Group

Ms. Shu Yanfang(舒豔芳) . . . . . . . . . . .

38 ExecutiveDirector andvicepresident

August 7,2020

August 2015 Responsible for managing businessdevelopment and expansion ofour Group

Ms. Peng Yao (彭瑤) . . . . . 34 ExecutiveDirector andvicepresident

August 7,2020

June 2016 Responsible for overallmerchandise management of ourGroup

Mr. Chen Shixin(陳世欣) . . . . . . . . . . .

34 ExecutiveDirector andbusinesssystemsspecialist

August 7,2020

April 2016 Responsible for businessinformation technology systemof our Group

Mr. Liang Jie(梁捷) . . . . . . . . . . . .

46 Non-executiveDirector

August 7,2020

August 2020 Responsible for providing adviceon the business and strategicdevelopments of our Group

Mr. Ye Wangchun(葉旺春) . . . . . . . . . .

43 Independentnon-executiveDirector

[REDACTED] [REDACTED] Responsible for providingindependent advice on theoperations and management ofour Group

Ms. Li Hui (李卉) . . . . . . 53 Independentnon-executiveDirector


Mr. Zeng Guanglong(曾廣龍) . . . . . . . . . .

42 Independentnon-executiveDirector


DIRECTORS AND SENIOR MANAGEMENT

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Executive Directors

Mr. Wu Yuening (吳悅寧), aged 37, is the founder and chief executive officer of our Group.Mr. Wu was appointed as our Director and our chairman on August 7, 2020 and was redesignatedas our executive Director on September 20, 2021. Mr. Wu is primarily responsible for overallmanagement, strategic planning, business and daily operations of our Group. Mr. Wu has more than10 years of experience in the business management field.

In September 2008, Mr. Wu founded Dongguan Yidu Network Technology Co., Ltd. (東莞市易得網路科技有限公司). In April 2015, Mr. Wu founded Guangdong Kuaike Electronic andlaunched KK Guan.

Over the years, Mr. Wu obtained awards and honors in recognition of his entrepreneurshipachievements and accomplishments, including “40 business elites under the age of 40 in PRC (中國40位40歲以下的商界精英)” awarded by Fortune China (財富中文網) in April 2021, “36outstanding entrepreneurs under the age of 36 (36位36歲以下了不起的創業者)” awarded by 36Kr(36氪) in November 2020, “New Top 50 Business Leaders in 2020 (2020最佳新經濟領袖50強榜單)awarded by iAsk (艾問) in January 2020, “Chasing Dreams of the Times – Leaders in the RetailIndustry (時代追夢-零售業領袖人物)” awarded by Winshang.com (贏商網) in August 2020 and“Leader Award (領袖欣星獎)” awarded by China Shopping Center Industry Service Platform (中國購物中心產業服務平台) in January 2020.

Mr. Wu obtained a bachelor’s degree in software engineering from Dongguan University ofTechnology (東莞理工學院), Dongguan, Guangdong Province, the PRC in June 2007.

Mr. Guo Huibo (郭惠波), aged 36, is the co-founder and president of our Group. Mr. Guo wasappointed as our Director on March 29, 2019 and was redesignated as our executive Director onSeptember 20, 2021. Mr. Guo is primarily responsible for overall financial management, legal andhuman resources management and international business management of our Group. Mr. Guo joinedour Group in January 2017 as the co-founder and president of our Group. Prior to joining our Groupin January 2017, Mr. Guo had worked in China Everbright Bank.

Mr. Guo obtained a bachelor’s degree in business administration from Dongguan Institute ofTechnology (東莞理工學院) in Dongguan, Guangdong Province, the PRC, in June 2008.

Ms. Shu Yanfang (舒豔芳), aged 38, was appointed as our Director on August 7, 2020 andwas redesignated as our executive Director on September 20, 2021. Ms. Shu is primarily responsiblefor managing business development and expansion of our Group. Since joining our Group in August2015, Ms. Shu has successively served as the vice general manager and the vice president of thedevelopment center of Guangdong Kuaike Electronic, a wholly-owned subsidiary of our Company.Ms. Shu has over 12 years of experience in the sales industry. Prior to joining our Group, fromOctober 2007 to July 2014, Ms. Shu served as the sales director of Guangzhou Liye Clothing Co.,Ltd (廣州市麗葉服飾有限公司), responsible for the overall sales and marketing management of thecompany.

Ms. Shu obtained a bachelor’s degree in marketing from Jingmen Vocational and TechnicalCollege (荊門職業技術學院) in Jingmen, Hubei Province, the PRC, in July 2003.

Ms. Peng Yao (彭瑤), aged 34, was appointed as our Director on August 7, 2020 and wasredesignated as our executive Director on September 20, 2021. Ms. Peng is primarily responsiblefor overall merchandise management of our Group. Ms. Peng joined our Group in June 2016 and


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has held several positions within the product center of Guangdong Kuaike Electronic. since then,including serving as the procurement manager from June 2016 to March 2018 and the productdirector from March 2018 to July 2019. Since August 2019, Ms. Peng has served as the vicepresident of the product center of Guangdong Kuaike Electronic, primarily responsible for theprocurement and sales strategy formulation. Ms. Peng has more than 10 years of experience in thebusiness management field. Prior to joining our Group, Ms. Peng has worked in Dongguan YiduNetwork Technology Co., Ltd from May 2012 to January 2014, primarily responsible for thecompany’s overall sales management.

Ms. Peng obtained a bachelor’s degree in international economics and trade from the NetworkEducation College of Beijing Foreign Studies University (北京外國語大學網絡教育學院), the PRCthrough long-distance education in July 2018.

Mr. Chen Shixin (陳世欣), aged 34, was appointed as our Director on August 7, 2020 and wasredesignated as our executive Director on September 20, 2021. Mr. Chen is primarily responsiblefor business information technology system of our Group. Since April 2016, Mr. Chen has servedas the business systems specialist in our Group, primarily responsible for the development of ourbusiness systems projects. Prior to joining our Group, Mr. Chen has worked in Dongguan YiduNetwork Technology Co., Ltd. from March 2009 to April 2015.

Mr. Chen obtained a bachelor’s degree in computer applied technology from GuangzhouVocational and Technical College of Science and Technology (廣州科技職業技術學院) (currentlyknown as Guangzhou Vocational and Technical University of Science and Technology (廣州科技職業技術大學)) in Guangzhou, Guangdong Province, the PRC in June 2009.

Non-executive Director

Mr. Liang Jie (梁捷), aged 46, was appointed as our Director on August 7, 2020 and wasre-designated as our non-executive Director on September 20, 2021. He is responsible for providingadvice on the business and strategic development of our Group. Since August 2017, Mr. Liang hasbeen the partner and co-founder of Kamet Capital Partners Pte Ltd., a company engages in capitalmarkets services and fund management. Prior to joining our Group, Mr. Liang was the co-founderof UCWeb Inc. (優視科技有限公司) (a company being fully acquired by Alibaba Group HoldingLimited in June 2014) and Mr. Liang served as the president of the search engine Shenma (神馬)in Alibaba Mobile Business Group until June 2017.

Mr. Liang obtained a bachelor’s degree in computer science from South China University ofTechnology (華南理工大學) in Guangzhou, Guangdong Province, the PRC in July 1998.

Independent non-executive Directors

Mr. Ye Wangchun (葉旺春), aged 43, was appointed as our independent non-executiveDirector with effect from the [REDACTED]. He is primarily responsible for providing independentadvice on the operations and management of our Group. Mr. Ye has more than 15 years ofexperience in the legal field in the PRC.

Mr. Ye has been the partner of Beijing Dentons (Shenzhen) Law Offices, LLP (北京大成(深圳)律師事務所) and the lead counsel of W. Ye Law Firm in Canada since June 2020. Mr. Ye servedas the assistant professor in laws and tutor for postgraduate students in Southwest University ofPolitical Science and Law (西南政法大學), Chongqing, the PRC from September 2012 to December


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2016, primarily responsible for teaching criminal laws of the PRC. Prior to that, Mr. Ye was a publicprosecutor of Shenzhen Futian People’s Procuratorate (深圳市福田區人民檢察院) from December2009 to September 2011, primarily responsible for criminal prosecution. Mr. Ye was a governmentlegal counsel of Shenzhen People’s Government Legal Counsel Office (深圳市人民政府法律顧問室) from June 2006 to August 2008, primarily responsible for providing advice to the government.

Mr. Ye has been qualified to practice law in the PRC since June 2007 and in Canada since May2020. Mr. Ye is currently an arbitrator of Hainan International Arbitration Court and a member ofthe Society of Trust and Estate Practitioners. Mr. Ye is also currently a researcher in the ResearchCenter on Sentencing of Southwest University of Political Science and Law.

Mr. Ye obtained a bachelor’s degree in laws and a master’s degree in laws from SouthwestUniversity of Political Science and Law in Chongqing, the PRC in July 2001 and July 2004,respectively. Mr. Ye further obtained a doctor’s degree in laws from Renmin University of China(中國人民大學) in Beijing, the PRC in July 2011 and a master’s degree in criminology and lawsfrom the University of Tornoto in Toronto, Canada in November 2019.

Ms. Li Hui (李卉), aged 53, was appointed as our independent non-executive Director witheffect from the [REDACTED]. She is primarily responsible for providing independent advice onthe operations and management of our Group. Ms. Li has more than 25 years of experience in thebanking industry.

Ms. Li has served at China Minsheng Bank for approximately 19 years and successivelyserved at various positions. From April 2015 to July 2021, Ms. Li served at China Minsheng BankGuangzhou Branch (Dongguan secondary branch) as the secretary of the party committee andpresident of the branch. From November 2007 to April 2015, Ms. Li served as the president of theChina Minsheng Bank Guangzhou Branch (Dongcheng sub-branch). Ms. Li served as the presidentand retail general manager of the China Minsheng Bank Guangzhou Branch (Huacheng sub-branch)from February 2006 to October 2007. From December 2004 to February 2006, Ms. Li served as theassistant to the general manager of branch department (分行部門總經理助理) and director (主任) ofinternet banking center at the retail banking department of China Minsheng Bank GuangzhouBranch.

Ms. Li graduated from China Europe International Business School (中歐國際工商學院),Shenzhen, the PRC in October 2013 with a master’s degree in business administration.

Mr. Zeng Guanglong (曾廣龍), aged 42, was appointed as our independent non-executivedirector with effect from the [REDACTED]. He is primarily responsible for providing independentadvice on the operation and management of our Group. Mr. Zeng has more than 10 years ofexperience in the auditing, investment and consulting industry.

Since August 2015, Mr. Zeng has been a partner of Shanghai Chengwei Investment ConsultingCo., Ltd. (上海誠維投資諮詢有限公司), primarily responsible for providing financial, accountingand tax advisory services for clients from private equity and venture capital industry. From May2008 to November 2014, Mr. Zeng worked at Ernst & Young (China) Advisory Limited.

Mr. Zeng obtained a bachelor’s degree in international enterprise management from FudanUniversity (復旦大學) in Shanghai, the PRC in July 2001. In November 2010, Mr. Zeng furtherobtained a master’s degree in business administration from the University of Hong Kong in HongKong, the PRC. Mr. Zeng has been qualified as a Certified Public Accountant in the PRC sinceDecember 2009.


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SENIOR MANAGEMENT

Our senior management is responsible for the day-to-day management of our business. Thetable below illustrates the composition of the senior management of our Company.

Name Age Position(s)

Date ofappointment

as seniormanagement

Time ofjoining our

Group Roles and responsibilities

Mr. Wu Yuening(吳悅寧) . . . . . . . . . .

37 Chiefexecutiveofficer

April 2015 April 2015 Responsible for overallmanagement, strategic planning,business and daily operations ofour Group

Mr. Guo Huibo(郭惠波) . . . . . . . . . .

36 Co-chiefexecutiveofficer

January 2017 January 2017 Responsible for overall financialmanagement, legal and humanresources management andinternational businessmanagement of our Group

Ms. Shu Yanfang(舒豔芳) . . . . . . . . . .

38 ExecutiveDirector andvicepresident

August 2019 August 2015 Responsible for managing businessdevelopment and expansion ofour Group

Ms. Peng Yao (彭瑤) . . . . 34 ExecutiveDirector andvicepresident

August 2019 June 2016 Responsible for overallmerchandise management of ourGroup

Mr. Chen Shixin(陳世欣) . . . . . . . . . .

34 ExecutiveDirector andbusinesssystemsspecialist

April 2016 April 2016 Responsible for businessinformation technology systemof our Group

Mr. Liu Peng(劉鵬) . . . . . . . . . . .

41 Director ofsupply chain

April 2020 April 2020 Responsible for coordinationof our supply chain management

Mr. Zhang Liwei(張力維) . . . . . . . . . .

43 Chief financialofficer

March 2021 March 2021 Responsible for overall financialmanagement, capital markets andinvestment activities of ourGroup

Mr. Zhao Yanchao(趙延超) . . . . . . . . . .

38 Head ofhumanresources

April 2020 April 2020 Responsible for human resourcesmanagement

Mr. Huang Zhaohui(黃朝暉) . . . . . . . . . .

27 Head ofInformationTechnology

May 2015 May 2015 Responsible for the overallmanagement of our technologycenter

For the biographical details of Mr. Wu, Mr. Guo, Ms. Shu Yanfang, Ms. Peng Yao and Mr.Chen Shixin, please refer to the paragraph headed “– Board of Directors – Executive Directors”above.

Mr. Liu Peng (劉鵬), aged 41, was appointed as the director of supply chain of our Group inApril 2020, primarily responsible for the coordination of our supply chain management. Prior tojoining our Group, Mr. Liu served as the director of supply chain management of SainStore Inc. (廣東尚睿網路技術有限公司) from September 2018 to November 2019. Prior to that, Mr. Liu was thedeputy director of the procurement and sales department at Shenzhen Fenqile Internet TechnologyCo., Ltd. (深圳市分期樂網絡科技有限公司), the e-commerce channel of Lexin Fintech HoldingsLtd. (a company listed on NASDAQ (NASDAQ ticket: LX)). Mr. Liu also served as the manager


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at Beijing Jingdong Century Trading Co., Ltd. (北京京東世紀貿易有限公司), during which he wasresponsible for operational management management of major appliances. Prior to joining BeijingJingdong Century Trading Co., Ltd., Mr. Liu worked at Huawei Technologies Co., Ltd. (華為科技有限公司).

Mr. Liu obtained a bachelor’s degree in mechanical and electrical engineering from NorthwestInstitute of Light Industry (西北輕工業學院) (currently known as Shaanxi University of Science &Technology (陝西科技大學)) in Xian, Shaanxi Province, the PRC in July 2002.

Mr. Zhang Liwei (張力維), aged 43, was appointed as chief financial officer of our Group inMarch 2021, primarily responsible for overall financial management, capital markets andinvestment activities of our Group. Prior to joining our Group, Mr. Zhang served as the chieffinancial officer of Yoyi Digital Inc. from May 2019 to January 2021, primarily responsible forfinancial management and capital markets of the company. Mr. Zhang also worked at MacquarieCapital and Hongkong and Shanghai Banking Corporation prior to joining Yoyi Digital Inc.,primarily responsible for providing investment banking services.

Mr. Zhang obtained a bachelor’s degree in economics from London School of Economics andPolitical Science in London, United Kingdom in July 2002.

Mr. Zhao Yanchao (趙延超), aged 38, was appointed as the head of human resources of ourGroup since April 2020. Mr. Zhao is primarily responsible for human resources management. Priorto joining our Group, Mr. Zhao worked in the field of human resources at Huawei Technologies Co.,Ltd. (華為科技有限公司) from November 2015 to November 2019. Prior to joining HuaweiTechnologies Co., Ltd., Mr. Zhao worked at ZMKS International Cancer Therapy BiotechnologiesCo., Ltd. (深圳市中美康士生物科技有限公司).

Mr. Zhao obtained a bachelor’s degree in labour and social security from Hefei University ofTechnology (合肥工業大學) in Hefei, Anhui Province, the PRC in June 2006.

Mr. Huang Chaohui (黃朝暉), aged 27, was appointed as the head of information technologyof our Group since May 2015, being primarily responsible for the overall management of ourtechnology center. Prior to joining our Group, Mr. Huang worked at Guangdong ShidaiInterconnection Technology Co., Ltd. (廣東時代互聯科技有限公司), a company principallyengaged in software business, as manager of PHP (Hypertext Preprocessor) from December 2014to May 2015.

Mr. Huang obtained a diploma in software technology from Neusoft Institute Guangdong (廣東東軟學院) in Guangdong, the PRC in June 2015.

Interests of our Directors and Senior Management

Save as disclosed above, each of our Directors and the members of our senior management (i)had no other relationship with any Directors or members of our senior management as of the LatestPracticable Date; and (ii) did not hold any other directorship of any public company, the securitiesof which are listed on any securities market in Hong Kong or overseas during the three yearsimmediately preceding the Latest Practicable Date.


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As of the Latest Practicable Date, save as disclosed in the section headed “Statutory andGeneral Information – Further Information about Our Directors and Substantial Shareholders” inAppendix IV to this document, none of our Directors held any interest in the Shares which wouldbe required to be disclosed pursuant to the meaning of Part XV of the SFO.

Save as disclosed above, there are no other matters in respect of each of our Directors and themembers of our senior management that are required to be disclosed pursuant to Rule 13.51(2) ofthe Listing Rules and there are no other material matters relating to our Directors and the membersof our senior management that need to be brought to the attention of our Shareholders.

Save as disclosed above and in the section headed “Relationship with the Single LargestShareholders Group” in this document, as of the Latest Practicable Date and so far as our Directorsare aware, none of our Directors had any interest in any business which competes or is likely tocompete, either directly or indirectly, with the business of our Group, which would requiredisclosure under Rule 8.10 of the Listing Rules.

JOINT COMPANY SECRETARIES

Ms. He Pingping (何萍萍), was appointed as the joint company secretary of our Group onSeptember 20, 2021. Ms. He joined our Group in July 2018 as the manager of our legal andcompliance department, where she was responsible for the daily legal and compliance operation andmatters related to corporate governance. Since June 2021, Ms. He has served as the head of strategicinvestment department, where she has been primarily responsible for the legal matters in relationto the investment and financing activities of our Group.

Ms. He graduated from Wuzhou University (梧州學院) in Wuzhou, Guangxi ZhuangAutonomous Region, the PRC with a bachelor’s degree in law in June 2018.

Ms. Cho Wing Han (曹詠嫻女士), was appointed as the joint company secretary of our Groupon September 20, 2021. She is a senior manager of Corporate Services of Tricor Services Limited,a global professional services provider specializing in integrated business corporate and investorservices. She has over 20 years of experience in the corporate secretarial field. She is a CharteredSecretary and a Fellow of both The Hong Kong Chartered Governance Institute (formerly The HongKong Institute of Chartered Secretaries) and The Chartered Governance Institute (formerly TheInstitute of Chartered Secretaries and Administrators) in United Kingdom. She holds a bachelor’sdegree of laws from Nottingham Trent University. Ms. Cho is currently the company secretary ofSun Art Retail Group Limited (stock code: 6808), Prosper One International Holdings CompanyLimited (stock code: 1470) and Takbo Group Holdings Limited (stock code: 8436).

BOARD COMMITTEES

Our Board have established the Audit Committee, the Remuneration Committee and theNomination Committee. The committees operate in accordance with the terms of referencesestablished by our Board.


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Audit Committee

We have established the Audit Committee with written terms of reference in compliance withRule 3.21 of the Listing Rules and the Corporate Governance Code. The Audit Committee consistsof three Directors, namely Mr. Ye Wangchun, Ms. Li Hui and Mr. Zeng Guanglong. Mr. ZengGuanglong is the chairperson of the Audit Committee who holds the appropriate professionalqualifications as required under Rules 3.10(2) and 3.21 of the Listing Rules. The primary duties ofthe Audit Committee are to review and oversee the the financial reporting process, internal controland risk management systems of our Group and the audit process, provide advice and comments toour Board and performing other duties and responsibilities as assigned by our Board.

Remuneration Committee

We have established the Remuneration Committee with written terms of reference incompliance with Rule 3.25 of the Listing Rules and the Corporate Governance Code. TheRemuneration Committee consists of three Directors, namely Mr. Guo, Ms. Li Hui and Mr. ZengGuanglong. Ms. Li Hui is the chairperson of the Remuneration Committee. The primary duties ofthe Remuneration Committee include, but are not limited to (i) making recommendations to theBoard on our remuneration policy and structure for our Directors and senior management and onthe establishment of a formal and transparent procedure for developing the policy concerning suchremuneration; (ii) determining the specific remuneration packages of each Director and seniormanagement; and (iii) reviewing and approving performance-based remuneration by reference tocorporate goals and objectives resolved by our Board from time to time.

Nomination Committee

We have established the Nomination Committee with written terms of reference in compliancewith the Corporate Governance Code to the Listing Rules. The Nomination Committee consists ofthree Directors, namely Mr. Wu, Ms. Li Hui and Mr. Ye Wangchun. Mr. Wu Yuening is thechairperson of the Nomination Committee. The primary duties of the Nomination Committeeinclude, but are not limited to (i) reviewing the structure, size and composition of the Board on aregular basis, assessing the independence of independent non-executive Directors; (ii) overseeingthe process for evaluating the performance of the Board; and (iii) making recommendations to theBoard on matters relating to the appointment, re-appointment and removal of our Directors.

CORPORATE GOVERNANCE

Our Company is committed to achieve high standards of corporate governance which arecrucial to our development and safeguard the interests of our Shareholders. To accomplish this, ourCompany intends to comply with all code provisions under the Corporate Governance Code set outin Appendix 14 to the Listing Rules after the [REDACTED] save for the deviation from the codeprovision A.2.1 of the Corporate Governance Code.

Pursuant to code provision A.2.1, the roles of chairman and chief executive should be separateand should not be performed by the same individual. Mr. Wu is the chairman of our Board and thechief executive officer of our Company. In view of the fact that Mr. Wu is the founder of our Groupand has been managing and operating our Group since April 2015, our Board believes that Mr. Wushould continue to assume the responsibilities of the chief executive officer of our Company upon[REDACTED] as this arrangement will improve the efficiency of our decision-making andexecution process and provide strong and consistent leadership to our Group. Further, our Company


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has put in place an appropriate check-and-balance mechanism through our Board and ourindependent non-executive Directors. In light of the above, our Board considers that the deviationfrom Code provision A.2.1 of the Corporate Governance Code is appropriate in the circumstancesof our Group.

BOARD DIVERSITY

We have adopted the board diversity policy which sets out the objective and approach forachieving and maintaining diversity of the Board in order to enhance its effectiveness. Inaccordance with the board diversity policy, the Company seeks to achieve board diversity by takinginto account a number of factors, including but not limited to gender, age, cultural and educationalbackground, professional experience, skills, knowledge and/or length of service.

Our Directors have an appropriate mix of gender, knowledge and skills, including overallmanagement and strategic development, information technology, laws, accounting and banking.They obtained degrees in various majors including accountancy, business administration andengineering. We have three independent non-executive Directors with different industrybackgrounds, representing more than one third of the members of our Board. Furthermore, ourBoard has a wide range of age, ranging from 34 years old to 53 years old. We have also taken, andwill continue to take, steps to promote gender diversity at all levels of our Company, including butwithout limitation, on our Board. In particular, upon the [REDACTED], three of our nine boardmembers are female. Taking into account our existing business model and specific needs, as wellas the different backgrounds of our Directors, the composition of our Board satisfies our boarddiversity policy.

Upon the [REDACTED], the Nomination Committee will from time to time (i) discuss andagree on expected goals to ensure board diversity, and (ii) review the board diversity policy toensure its continued effectiveness. The Company will (i) disclose the biographical details of eachDirector and (ii) disclose the board diversity policy and its implementation in its annual corporategovernance report.

WAIVERS GRANTED BY THE STOCK EXCHANGE

Management presence

We have applied to the Stock Exchange for, and the Stock Exchange [has agreed] to grant awaiver from strict compliance with the requirements under Rule 8.12 of the Listing Rules in relationto the requirement of management presence in Hong Kong.

Joint Company Secretaries

We have also applied to the Stock Exchange for, and the Stock Exchange [has agreed] to granta waiver from strict compliance with the requirements under Rules 3.28 and 8.17 of the ListingRules in relation to the requirement of company secretaries.

For details of the waivers, please refer to the section headed “Waivers from Strict Compliancewith the Listing Rules and Exemption from Strict Compliance with the Companies (Winding Up andMiscellaneous Provisions) Ordinance” in this document.


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RENUMERATION OF DIRECTORS AND SENIOR MANAGEMENT

Our Directors and senior management receive remuneration, including salaries, allowances,discretionary bonus and other benefits in kind, including our contributions to the retirementschemes. The remuneration of our Directors is determined based on each Director’s responsibilities,qualification, position and seniority. For further information about our Directors, including theparticulars of their service contracts or letters of appointment and remuneration, and details of theinterests of the Directors in the Shares (within the meaning of Part XV of the SFO), please refer tothe section headed “Statutory and General Information – Further Information about Our Directorsand Substantial Shareholders – 2. Particulars of Service Contracts and Letters of Appointment” inAppendix IV to this document for further information.

The aggregate amount of remuneration (including basic salaries, other allowances and benefitsin kind, contributions to pension plans and discretionary bonus) for our Directors for the three yearsended December 31, 2018, 2019 and 2020 and the six months ended June 30, 2021 wasapproximately RMB1.66 million, RMB3.07 million, RMB3.70 million and RMB2.16 million,respectively. None of our Directors waived any remuneration during the aforesaid periods. The fivehighest paid individuals for the three years ended December 31, 2018, 2019 and 2020 and the sixmonths ended June 30, 2021 included three, three, two and two Directors, respectively. Theaggregate amount of renumeration (including basic salaries, other allowances and other benefits inkind, contributions to retirement schemes and discretionary bonus) we paid to the remaining two,two, three and three highest paid individuals for the three years ended December 31, 2018, 2019 and2020 and the six months ended June 30, 2021 was approximately RMB0.86 million, RMB1.38million, RMB2.72 million and RMB1.33 million, respectively, which included the aggregatecontributions we paid to retirement schemes for the remaining two, two, one and three highest paidindividuals in respect of the three years ended December 31, 2018, 2019 and 2020 and the sixmonths ended June 30, 2021 of approximately RMB0.12 million, RMB0.12 million, RMB7.00thousand and RMB0.16 million, respectively.

During the Track Record Period, no remuneration was paid to our Directors or the five highestpaid individuals as an inducement to join, or upon joining, our Group. No compensation was paidto, or receivable by, our Directors or past directors for the loss of office during the Track RecordPeriod.

For further information on our Directors’ remuneration during the Track Record Period as wellas information on the five highest paid individuals, please see Notes 8 and 9 of the Accountants’Report set out in Appendix I to this document.

Save as disclosed above in this section and the sections headed “Financial Information”,“Accountants’ Report” and “Appendix IV – Statutory and General Information” in this document,no other payments have been paid or are payable in respect of the Track Record Period to ourDirectors by our Group.


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COMPLIANCE ADVISOR

We have appointed Somerley Capital Limited as our compliance advisor pursuant to Rule3A.19 of the Listing Rules. Our compliance advisor will provide us with guidance and advice as tocompliance with the Listing Rules and applicable Hong Kong laws. Pursuant to Rule 3A.23 of theListing Rules, the compliance advisor will, amongst other things, advise our Company in thefollowing circumstances:

• before the publication of any regulatory announcement, circular, or financial report;

• where a transaction, which might be a notifiable or connected transaction, iscontemplated, including share issues and share repurchases;

• where we propose to use the [REDACTED] of the [REDACTED] in a manner differentfrom that detailed in this document or where our business activities, development orresults of our Group deviate from any forecast, estimate or other information in thisdocument; and

• where the Stock Exchange makes an inquiry to our Company under Rule 13.10 of theListing Rules.

The term of appointment of our compliance advisor shall commence on the [REDACTED]and end on the date on which we comply with Rule 13.46 of the Listing Rules in respect of ourfinancial results for the first full financial year commencing after the [REDACTED].


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SUBSTANTIAL SHAREHOLDERS

So far as our Directors are aware as of the Latest Practicable Date, immediately following thecompletion of the [REDACTED] and assuming that the [REDACTED] is not exercised, thefollowing persons will have interests or short positions in our Shares or our underlying Shareswhich would fall to be disclosed to us under the provisions of Divisions 2 and 3 of Part XV of theSFO or will be, directly or indirectly, interested in 10% or more of the nominal value of any classof share capital carrying rights to vote in all circumstances at general meetings of our Company:

Name of shareholder Nature of interest

As of the LatestPracticable Date(8)

Shares held immediatelyfollowing the completion

of the [REDACTED](assuming the

[REDACTED]is not exercised)

Number ofShares held

Approximateshareholdingpercentage



Mr. Wu(1). . . . . . . . . . . . . . . . . Interest in controlledcorporation;

Interest held jointlywith other persons

[247,066,475] [28.39]% [REDACTED] [REDACTED]%

Mr. Guo(1) . . . . . . . . . . . . . . . . Interest in controlledcorporation;

Interest held jointlywith other persons


MOGR(1) . . . . . . . . . . . . . . . . . Beneficial owner [208,907,800] [24.00]% [REDACTED] [REDACTED]%Starlight(1) . . . . . . . . . . . . . . . . Beneficial owner [38,158,675] [4.39]% [REDACTED] [REDACTED]%Mr. Liang Jie (梁捷)(2) . . . . . . . . . Founder of a

discretionary trust[182,739,400] [21.00]% [REDACTED] [REDACTED]%

TMF (Cayman) Ltd(2) . . . . . . . . . Trustee [182,739,400] [21.00]% [REDACTED] [REDACTED]%Verticillata Inc.(2) . . . . . . . . . . . . Interest in controlled

corporation[182,739,400] [21.00]% [REDACTED] [REDACTED]%

Diligent Shine Inc.(2) . . . . . . . . . . Interest in controlledcorporation


KK Brothers(2). . . . . . . . . . . . . . Beneficial owner [182,739,400] [21.00]% [REDACTED] [REDACTED]%Mr. Yu Yongfu (俞永福)(3) . . . . . . . Interest in controlled


MF New World InvestmentLimited(3) . . . . . . . . . . . . . . .

Interest in controlledcorporation


RD Glocal Fund LP(3) . . . . . . . . . Interest in controlledcorporation


Alibaba.com Singapore InvestmentHolding Private Limited(3) . . . . .



Redefine Capital ManagementCompany Limited(3) . . . . . . . . .



eWTP(3) . . . . . . . . . . . . . . . . . Beneficial owner [85,980,375] [9.88]% [REDACTED] [REDACTED]%KK Evergreen Holdings Co., Ltd.(4) . Nominee for another

person[66,433,375] [7.63]% [REDACTED] [REDACTED]%

Futu Trustee Limited(4) . . . . . . . . . Trustee [66,433,375] [7.63]% [REDACTED] [REDACTED]%Mr. Zuo Lingye (左淩燁)(5) . . . . . . Interest in controlled


Matrix(5) . . . . . . . . . . . . . . . . . Interest in controlledcorporation


Ningbo Matrix InvestmentManagement Co., Ltd.(寧波矩陣投資管理有限公司)(5) . . . Interest in

controlledcorporation


Shanghai Weili EnterpriseManagement ConsultingPartnership (Limited Partnership)(上海緯礪企業管理諮詢合夥企業(有限合夥))(5) . . . . . . . . . . . . Beneficial owner [65,431,700] [7.52]% [REDACTED] [REDACTED]%


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Name of shareholder Nature of interest

As of the LatestPracticable Date(8)

Shares held immediatelyfollowing the completion

of the [REDACTED](assuming the

[REDACTED]is not exercised)





Mr. Ruigang Li (黎瑞剛)(6) . . . . . . Interest in controlledcorporation


Brilliant Spark Holdings Limited(6) . Interest in controlledcorporation


LeBonheur Holdings Ltd.(6) . . . . . . Interest in controlledcorporation


LaConfiance Investments Ltd.(6) . . . Interest in controlledcorporation


CMC Capital Partners GP III, Ltd.(6) . Interest in controlledcorporation


CMC Krypton GP, L.P.(6) . . . . . . . Interest in controlledcorporation


CMC Krypton, L.P.(6). . . . . . . . . . Interest in controlledcorporation


CMC Krypton(6) . . . . . . . . . . . . Beneficial owner [54,795,475] [6.30]% [REDACTED] [REDACTED]%CMC Krypton II, L.P.(6) . . . . . . . . Interest in controlled


CMC II(6) . . . . . . . . . . . . . . . . Beneficial owner [4,493,425] [0.52]% [REDACTED] [REDACTED]%

Notes:

(1) MOGR is wholly owned by Mr. Wu and Starlight is wholly owned by Mr. Guo. Mr. Wu and Mr. Guo, have been actingin concert in relation to the exercise of their voting rights in our Company at the meetings of the Shareholders andthe Board in respect of the matters of our Group since January 2017 when Mr. Guo joined our Group. To record suchconcert parties relationship, on September 23, 2021, Mr. Wu and Mr. Guo entered into the Concert PartiesConfirmation, pursuant to which Mr. Wu and Mr. Guo confirmed, among other things, that they (together with theirrespective wholly-owned investment holding companies) have been acting in concert in respect of the matters of ourGroup with each other since January 2017, and would continue to act in the same manner until the date when theConcert Parties Confirmation is amended or terminated by mutual consent of the parties thereto. By virtue of the SFO,each of Mr. Wu and Mr. Guo together with their respective controlled corporation (being MOGR and Starlight) isdeemed to be interested in the total Shares held by MOGR and Starlight.

(2) KK Brothers is wholly owned by Diligent Shine Inc., which is in turn wholly owned by Verticillata Inc.. VerticillataInc. is held as to 100% by TMF (Cayman) Ltd, the trustee of the Liang Family Trust. Liang Family Trust is a trustestablished by Mr. Liang Jie, for the benefit of himself and his family. By virtue of SFO, each of Diligent Shine Inc.,Verticillata Inc., TMF (Cayman) Ltd and Mr. Liang Jie is deemed to be interested in the Shares held by KK Brothers.

(3) The general partner of eWTP is Redefine Capital Management Company Limited, which is wholly owned by MF NewWorld Investment Limited. MF New World Investment Limited is owned as to 100% by Mr. Yu Yongfu (俞永福), anIndependent Third Party. In addition, each of RD Glocal Fund LP and Alibaba.com Singapore Investment HoldingPrivate Limited holds approximately 33.33% and 54.17% in eWTP, respectively. By virtue of SFO, each of RedefineCapital Management Company Limited, RD Glocal Fund LP, Alibaba.com Singapore Investment Holding PrivateLimited, MF New World Investment Limited and Mr. Yu Yongfu is deemed to be interested in the Shares held byeWTP.

(4) Futu Trustee Limited is the sole shareholder of KK Evergreen Holdings Co., Ltd., a nominee to hold 2,657,335underlying Shares in respect of the RSU to be granted under the RSU Scheme. See subsection headed “AppendixIV – Statutory and General Information – 10. RSU Scheme” for details.

(5) Shanghai Weili Enterprise Management Consulting Partnership (Limited Partnership) (上海緯礪企業管理諮詢合夥企業(有限合夥)) (“Shanghai Weili”) is a limited partnership registered in the PRC, whose general partner is NingboMatrix Investment Management Co., Ltd. (寧波矩陣投資管理有限公司) (“Ningbo Matrix”) and Ningbo Matrix isheld as to 90% by Mr. Zuo Lingye, an Independent Third Party. In addition, Matrix holds approximately 99.994% inShanghai Weili. By virtue of SFO, each of Ningbo Matrix, Matrix and Mr. Zuo Lingye is deemed to be interested inthe Shares held by Shanghai Weili.


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(6) Each of CMC Krypton and CMC II is a limited liability company incorporated in the Cayman Islands. CMC Kryptonis owned as to 100% by CMC Krypton, L.P. and CMC II is owned as to 100% by CMC Krypton II, L.P. respectively.The general partner of each of CMC Krypton, L.P. and CMC Krypton II, L.P. is CMC Krypton GP, L.P. CMC KryptonGP, L.P., is a limited partnership registered in the Cayman Islands whose general partner is CMC Capital Partners GPIII, Ltd., a limited liability company wholly owned by LaConfiance Investments Ltd. LaConfiance Investment Ltd.is wholly owned by LeBonheur Holdings Ltd., which is in turn wholly owned by Brilliant Spark Holdings Limited.Brilliant Spark Holdings Limited is wholly owned by Mr. Ruigang Li, an Independent Third Party. By virtue of SFO,(i) each of CMC Krypton L.P., CMC Krypton GP, L.P., CMC Capital Partners GP III, Ltd., LaConfiance InvestmentsLtd., LeBonheur Holdings Ltd., Brilliant Spark Holdings Limited and Mr. Ruigang Li is deemed to be interested inthe Shares held by CMC Krypton; and (ii) each of CMC Krypton II, L.P., CMC Krypton GP, L.P., CMC CapitalPartners GP III, Ltd., LaConfiance Investments Ltd., LeBonheur Holdings Ltd., Brilliant Spark Holdings Limited andMr. Ruigang Li is deemed to be interested in the Shares held by CMC II.

(7) Assuming all Preferred Shares are converted into Shares on a one to one basis.

(8) Figures above have been adjusted assuming Share Subdivision has been completed.

Save as disclosed above, our Directors are not aware of any persons who will, immediatelyfollowing completion of the [REDACTED] (assuming the [REDACTED] is not exercised), haveinterests or short positions in Shares or underlying Shares which would be required to be disclosedto our Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV ofthe SFO or will be, directly or indirectly, interested in 10% or more of the nominal value of anyclass of share capital carrying rights to vote in all circumstances at general meetings of any othermember of our Group. We are not aware of any arrangement which may result in any change ofcontrol in our Company at any subsequent date.


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SHARE CAPITAL

The following is a description of our authorized and issued share capital in issue and to beissued as fully paid or credited as fully paid immediately before and following the completion ofthe [REDACTED].

As of the Latest Practicable Date, our authorised share capital (assuming the ShareSubdivision has been completed) was US$[50,000] divided into [12,500,000,000] Shares with parvalue of US$0.000004 each, of which (i) [275,174,200] voting ordinary Shares, (ii) [66,433,375]Non-voting Ordinary Shares, (iii) [10,036,550] Series Seed Preferred Shares, (iv) [47,871,675]Series A Preferred Shares, (v) [59,205,225] Series B Preferred Shares, (vi) [146,038,750] Series CPreferred Shares (vii) [34,670,050] Series Pre-D Preferred Shares, (viii) [45,738,800] Series DPreferred Shares, (ix) [101,320,600] Series E Preferred Shares and (x) [83,877,225] Series FPreferred Shares are issued and fully paid up.

Each voting ordinary Share, Non-voting Ordinary Share, Series Seed Preferred Share, SeriesA Preferred Share, Series B Preferred Share, Series C Preferred Share, Series Pre-D PreferredShare, Series D Preferred Share, Series E Preferred Share and Series F Preferred Share will beconverted into ordinary Share on a one-to-one basis by way of re-designation immediately prior tothe completion of the [REDACTED].

Assuming the [REDACTED] is not exercised, the share capital of our Company immediatelyfollowing the completion of the [REDACTED] will be as follows:

Number ofShares

Aggregatenominalvalue ofShares

(US$)

Shares in issue as of the date of this document . . . . . . . . . . . . . . . . . . . . . . [REDACTED] [REDACTED]

Shares to be issued under the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED] [REDACTED]

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED] [REDACTED]

Assuming the [REDACTED] is exercised in full, the share capital of our Companyimmediately following the completion of the [REDACTED] will be as follows:

Number ofShares

Aggregatenominalvalue ofShares

(US$)

Shares in issue as of the date of this document . . . . . . . . . . . . . . . . . . . . . . [REDACTED] [REDACTED]

Shares to be issued under the [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED] [REDACTED]

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [REDACTED] [REDACTED]

SHARE CAPITAL

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ASSUMPTIONS

The above table assumes that the [REDACTED] becomes unconditional and Shares are issuedpursuant to the the [REDACTED]. It takes no account of any Shares which may be allotted andrepurchased by us pursuant to the general mandates granted to our Directors to issue or repurchaseShares as described below or otherwise.

RANKINGS

The [REDACTED] are Shares in the share capital of our Company and rank equally with allShares currently in issue or to be issued (including all Preferred Shares to be re-designated intoShares immediately prior to the completion of the [REDACTED]) and, in particular, will rank infull for all dividends or other distributions declared, made or paid on the Shares in respect of arecord date which falls after the date of this document.

POTENTIAL CHANGES TO SHARE CAPITAL

Circumstances under which general meetings are required

Pursuant to the Cayman Islands Companies Act and the terms of the Memorandum and theArticles, our Company may from time to time by Shareholders’ ordinary resolution (i) increase itscapital; (ii) consolidate and divide its capital into shares of larger amount; (iii) divide its shares intoseveral classes; (iv) subdivide its shares into shares of smaller amount; and (v) cancel any shareswhich have not been taken. In addition, our Company may subject to the provisions of the CaymanIslands Companies Act reduce our share capital or capital redemption reserve by our Shareholderspassing a special resolution. For details, see “Summary of the Constitution of the Company andCayman Islands Company Law – Articles of Association – 2.5 Alteration of capital” in AppendixIII to this document.

Pursuant to the Cayman Islands Companies Act and the terms of the Memorandum and theArticles, all or any of the special rights attached to the Shares may be varied, modified or abrogatedeither with the consent in writing of the holders of not less than three-fourths in nominal value ofthe issued Shares or with the sanction of a special resolution passed at a separate general meetingof the holders of the Shares. For details, see “Summary of the Constitution of the Company andCayman Islands Company Law – Articles of Association – 2.4 Variation of rights of existing sharesor classes of shares” in Appendix III to this document.

Further, our Company will also hold general meetings from time to time as may be requiredunder the Articles, a summary of which is set out in the section headed “Summary of theConstitution of the Company and Cayman Islands Company Law” in Appendix III to this document.

General mandate to issue Shares

Subject to the [REDACTED] becoming unconditional, our Directors have been granted ageneral unconditional mandate to allot, issue and deal with the Shares with an aggregate nominalvalue of not more than the sum of:

• 20% of the aggregate nominal value of our share capital in issue immediately followingthe completion of the [REDACTED]; and

• the aggregate nominal value of our share capital repurchased by us (if any) under thegeneral mandate to repurchase Shares referred to below in this section.

SHARE CAPITAL

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This general mandate to issue Shares will expire at the earliest of:

• the conclusion of the next annual general meeting of our Company unless otherwiserenewed by an ordinary resolution of our Shareholders in a general meeting, eitherunconditionally or subject to conditions; or

• the expiration of the period within which the next annual general meeting of ourCompany is required under any applicable laws of the Cayman Islands or theMemorandum and the Articles to be held; or

• the date on which it is varied or revoked by an ordinary resolution of our Shareholdersin a general meeting.

Particulars of this general mandate to allot, issue and deal with Shares are set forth under“Statutory and General Information – 3. Resolutions of Our Shareholders” in Appendix IV to thisdocument.

General mandate to repurchase Shares

Subject to the [REDACTED] becoming unconditional, our Directors have been granted ageneral unconditional mandate to exercise all our powers to repurchase our own Shares on the StockExchange or on any other stock exchange on which our Shares may be [REDACTED] with a totalnominal value of not more than [REDACTED]% of the aggregate nominal value of our sharecapital in issue immediately following the completion of the [REDACTED] (excluding any Shareswhich may be issued pursuant to the exercise of the [REDACTED]).

This repurchase mandate only relates to repurchases made on the Stock Exchange, or on anyother stock exchange on which the Shares are [REDACTED] (and which is recognized by the SFCand the Stock Exchange for this purpose), and made in accordance with all applicable laws and therequirements of the Listing Rules. A summary of the relevant Listing Rules is set out in “Statutoryand General Information – 3. Resolutions of Our Shareholders” in Appendix IV to this document.

The general mandate to repurchase Shares will expire at the earliest of:

• the conclusion of the next annual general meeting of our Company unless otherwiserenewed by an ordinary resolution of our Shareholders in a general meeting, eitherunconditionally or subject to conditions; or

• the expiration of the period within which the next annual general meeting of ourCompany is required by any applicable laws of the Cayman Islands or the Memorandumand the Articles to be held; or

• the date on which it is varied or revoked by an ordinary resolution of our Shareholdersin a general meeting.

RSU Scheme

Our Board approved and adopted the RSU Scheme on August 12, 2021. For further details,please see the section headed “Statutory and General Information – RSU Scheme” in Appendix IVin this document.

SHARE CAPITAL

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You should read the following discussion and analysis of our Group’s financialcondition and results of operations in conjunction with our audited combined financialstatements as of and for each of the years ended December 31, 2018, 2019 and 2020 andthe six months ended June 30, 2021, including notes thereto set forth in the Accountants’Report included as Appendix I to this document (the “Historical Financial Information”).Our Historical Financial Information has been prepared in accordance with the HKFRSs.You should read the whole Accountants’ Report and not merely rely on the informationcontained in this section.

This discussion contains forward-looking statements that reflect our current view withrespect to future events and financial performance. These statements are based on ourassumptions and analysis in light of our experience and perception of historical trends,current conditions and expected future developments, as well as factors that we believe areappropriate under the circumstances. However, our actual results and the timing of selectedevents could differ materially from those anticipated in these forward-looking statements asa result of various factors, including those set forth under “Risk Factors”, “Forward-looking Statements” and elsewhere in this document.

OVERVIEW

We are a pioneering specialty retailer with multiple retail brands that enjoys a massiveconsumer base and a favorable market influence. We are one of the top three specialty retailers byGMV and the fastest-growing specialty retailer among the top ten players in China with a GMVCAGR of 246.2% from 2018 to 2020, according to the Frost & Sullivan Report.

As of the Latest Practicable Date, we offer a variety of specialty retail products to ourcustomers through a wide retail network of 680 stores covering 31 provinces in China and Jakarta,Indonesia under four self-incubated retail brands, namely KKV, THE COLORIST, X11 and KKGuan. Our product portfolio covers all major core consumption categories, including beauty, poptoy, food and beverage, household product and stationery.

Over the years, we have capitalized on market opportunities by rolling out our current fourretail brands, namely, KKV, THE COLORIST, X11 and KK Guan, and new product offerings to ourend customers, thereby enabling us to access and retain a wide range of customers and furthersolidify our source of revenue. Leveraging our excellent merchandise selection capability, we offerconsumers various specialty products of over 20,000 SKUs across 18 major categories under ourfour retail brands, covering all major core lifestyle products categories including beauty, pop toys,food and beverage, household, stationery, etc., facilitating an effective reach to wide consumerspectrum.

We are devoted to continuously optimizing our merchandise collection, brand positioning andsite selection, through which, we have managed to successfully foster consumer trust and loyaltythat further contributes to our long-term competitiveness. With accumulated customer visits to ourretail brands, we have successfully established public recognition of our brand value, i.e., aspecialty retailer embodied in a premium shopping experience. Leveraging our market influence, webelieve that we are able to maintain a lasting connection between our brands and customers, furtherpromoting our consistent growth.

FINANCIAL INFORMATION

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During the Track Record Period, we have experienced rapid growth since our inception. Ourtotal revenue increased from RMB155.3 million in 2018 to RMB463.7 million in 2019 and furtherincreased to RMB1,645.9 million in 2020. Our total revenue increased by 235.1% from RMB502.4million in the first half of 2020 to RMB1,683.2 million in the same period of 2021. The total numberof our retail stores increased from 80 as of December 31, 2018 to 211 as of December 31, 2019,from 211 as of December 31, 2019 to 556 as of December 31, 2020 and further reached 640 as ofJune 30, 2021.

BASIS OF PRESENTATION

Our Company was incorporated in Cayman Islands with limited liability on March 29, 2019.In preparation for the [REDACTED], we underwent the Reorganization, as detailed in the sectionheaded “History, Reorganization and Corporate Structure” in this document. Following theReorganization, our Company became the holding company of all the subsidiaries currentlyconstituting our Group. See the Accountants’ Report in Appendix I to this document for details onthe basis of preparation of our financial information included herein.

SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATIONS ANDFINANCIAL CONDITION

The results of operations and financial condition of our Group have been and will continue tobe affected by a number of factors, including those discussed below and under the section headed“Risk Factors” in this document.

Consumer Demand and Spending Power for Lifestyle Products in China

Our results of operations depend on the consumer demand for the merchandise we offer viaour store network, in particular those in the product categories of beauty, pop toys, food andbeverage, household, stationery, etc. Consumer demand and purchasing power are affected by thegrowth of China’s economy and Chinese residents’ per capita disposable income. In 2018, 2019 and2020, China’s real GDP grew at a rate of 6.7%, 6.0% and 2.3%, respectively, according to China’sNational Bureau of Statistics. During these same respective periods, the per capita disposableincome of Chinese urban households grew at a rate of 7.8%, 7.9% and 3.5%, according to China’sNational Bureau of Statistics, and is expected to grow at a CAGR of 7.5% from 2021 to 2025,according to Frost & Sullivan. Along with the increasing per capita disposable income, China’sretail market has been growing, and the trend is expected to continue. The market size of China’sretail market by GMV increased from RMB33.2 trillion in 2016 to RMB39.2 trillion in 2020representing a CAGR of 4.2% during this period and is estimated to reach RMB52.1 trillion in 2025.Whilst at the same time, the market size of China’s specialty retail by GMV increased fromRMB129.8 billion to RMB195.2 billion from 2016 to 2020, representing a CAGR of 10.7% duringthis period and is estimated to reach RMB475.0 billion in 2025, according to Frost & Sullivan.

We believe that the increase in per capita disposable income growth will be accompanied bygrowth in purchasing power of consumers to spend on the types of merchandise we offer via ourstore network. For details of consumer demand and spending power for lifestyle products in China,see “Industry Overview — Overview of Specialty Retail Market in China — Market Drivers andTrends.”


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Merchandise Offerings and Average Spending per Transaction

In order to cater to a broad customer base and provide a comprehensive shopping experience,we believe it is necessary to provide a wide range of merchandise covering different categories suchas beauty, pop toy, food and beverage, household product and stationery, while maintaining acompetitive pricing strategy appealing to our new and existing customers. According to Frost &Sullivan, the key factor behind an integrated retailer’s ability to attract customers is the wide rangeof products it offers, as customers tend to return to stores where they are given a variety of choicesto satisfy their demand and to fulfill their desire to try out the latest products in the market.

Our profitability is dependent in part upon our success in adjusting and refreshing ourmerchandise portfolio to respond to customer preferences and demands, which may change orevolve over time. We constantly adjust and refresh the mix of merchandise portfolio in our retailstores to attract new customers, and at the same time retain the loyalty of our existing customers.

Our results of operations can be significantly affected by changes in our customers’ averagespending per transaction. The average spending per transaction serves as an indicator of thecustomers’ expenditure from our retail channels and may be affected by, among other things, ourmerchandise portfolio, pricing, and customer preferences.

Breadth and Structure of Our Store Network

As of June 30, 2021, our retail store network consisted of 288 self-owned stores located in 83cities across China (including three overseas self-owned stores in Indonesia), and 352 franchisestores in 124 cities across China. According to Frost & Sullivan, we were the fastest-growingspecialty retailers among the top ten players in China in 2020, with a GMV CAGR of 246.2% from2018 to 2020.

We see our extensive store network as an indispensable asset that lays the foundation for usto continuously drive our business growth. To prudently expand and persistently optimize thebreadth and depth of our store network, we constantly look for attractive locations for ourself-owned stores and resourceful partners for franchise stores. During the Track Record Period, thenumber of our retail stores increased from 80 stores as of December 31, 2018 to 640 stores as ofJune 30, 2021. During the same period, our self-owned stores increased from 27 stores as ofDecember 31, 2018 to 288 stores as of June 30, 2021 whilst our franchise stores increased from 53stores in 2018 to 352 stores as of June 30, 2021. Leveraging our strong brand value in China andindustry experience, we believe that we can further broaden our customer base and expand ourmarket share in the current market. In addition, we also proactively review the performance of retailstores to determine and fine tune our expansion strategy, according to which we chose to close andopen retail stores during the Track Record Period. For details of our store network, see “Business— Our Business Model — Our Retail Store Network.”


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We are committed to expand and operate our stores nationwide, while at the same time we alsofocus on selected cities with promising economic growth. Furthermore, in line with our businessdevelopment strategies and brand positioning, we continuously roll out new stores in some of themost renowned shopping streets and shopping centers nationwide. For example, we have beenoperating our flagship stores in prestigious locations in Shanghai, Guangzhou, Chengdu, Wuhan,Nanjing and Shenyang during the Track Record Period. Leveraging on our successful track recordand extensive store network nationwide, we began tapping into overseas market in March 2020,with the opening of our first overseas KKV store in Jakarta, Indonesia.

Relationship with and Procurement from Third Party Brand Partners

In 2018, 2019, 2020 and the first half of 2020 and 2021, sales of third party brand merchandiseaccounted for 98.6%, 92.3%, 87.7%, 89.1% and 86.6%, respectively, of our total revenue. Wetherefore depend on Third Party Brand Partners to provide us with high quality merchandise for salevia our store network, although, during the Track Record Period, we did not rely heavily on anysingle Third Party Brand Partner.

We believe that establishing and maintaining mutually beneficial relationships with our ThirdParty Brand Partners is essential to our success. As of December 31, 2018, 2019 and 2020 and June30, 2021, we had 286, 464, 1,002 and 1,145 Third Party Brand Partners in our suppliers pool. Ourability to procure a wide array of merchandise of different popular brands is one of the pillars ofsuccess in terms of continuous growth of our business. We also believe that we benefit from thequality products we procure from our Third Party Brand Partners in terms of presenting a strongbrand image before our customers. We evaluated and expect to continuously evaluate our brandportfolio to introduce new brands that cater to the needs of our target customers. See “Risk Factors— Risks Relating to Our Business and Industry — Failure to maintain good relationships with orsecure competitive terms from brand companies may materially and adversely affect ourprofitability, business and prospects.”

Furthermore, our profitability is affected by the pricing of the merchandise we purchase forresale, and the costs of our outsourced production. Our gross profit represents the differencebetween our revenue from selling the products to our customers and the cost of sales, whichprimarily consists of the costs of purchasing products from Third Party Brand Partners and the costsfor procuring the merchandise produced by the OEM and ODM contractors we engage with.

We typically negotiate with our Third Party Brand Partners in an effort to realize moreeconomical product procurements. The amounts of these discounts vary depending on the ThirdParty Brand Partners’ brand positioning, marketing strategies, types of products, raw material pricesand other costs and our bargaining power and relationship with them, among others. Ourprofitability is affected by the terms and conditions of our procurement agreements with Third PartyBrand Partners. For details, please see “Business — Suppliers and Raw Materials — Third PartyBrand Partners — Procurement Agreements with Third Party Brand Partners.”

Costs of Manufacturing of Our Self-owned Brand Merchandise

We outsource the production of our self-owned brand merchandise to OEM and ODMcontractors. Sales of our self-owned brand merchandise gradually accounted for a greater portionof our total revenue during the Track Record Period. In 2018, 2019, 2020 and the first half of 2020and 2021, revenue generated from sales of such merchandise represented 1.4%, 7.7%, 12.3%, 10.9%and 13.4%, respectively, of our total revenue. As a result, the increase in cost of labor, raw materials


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and other expenses of our OEM and ODM contractors may be transferred to us, which affects thecosts of manufacturing, and the competitiveness products under our self-owned brand. We alsostrive to leverage our bargaining power with the OEM and ODM contractors to control ourprocurement costs. Our financial performance partially depends on our ability to pass the costs ofoutsourced production onto our customers, and our ability to locate and effectively manage OEMand ODM contractors that can fill our orders at commercially acceptable prices with high quality.See “Risk Factors — Risks Relating to Our Business and Industry — We rely on third-party OEMand ODM contractors for the manufacturing of our self-owned brand merchandise. Our brand imageand business may be negatively affected by a disruption in the supply of our OEM and ODMcontractors.”

Lease Expenses

We do not own any property. We lease all of our retail stores, warehouses and headquarterspremises from third parties. Our leases typically have a term of three to eight years, with most ofthe leases providing for a renewal option if we could agree to the renewal terms and conditions withthe lessor.

As of the Latest Practicable Date, we had leased 291 properties with the total GFA of 248,440sq.m. in China from third parties. Our leased properties mainly serve as our offices, warehouses andself-owned retail stores. As of the same date, the total GFA of our self-owned retail stores in Chinawas approximately 201,217 sq.m.. The size of our self-owned retail store typically ranges fromapproximately 80 sq.m. to 5,500 sq.m..

In 2018, 2019, 2020 and the first half of 2020 and 2021, our rental expenses, which equaledto the sum of (i) depreciation of right-of-use assets; (ii) interests on lease liabilities; and (iii) otherrentals expenses, were approximately RMB23.1 million, RMB44.4 million, RMB180.7 million,RMB63.0 million and RMB189.9 million, representing approximately 14.9%, 9.6%, 11.0%, 12.5%and 11.3% of our total revenue, respectively.

Staff Costs

Our staff costs have a significant impact on our profitability. Our staff costs primarily includewages and salaries, sales commissions, bonuses, social security and housing fund contributions forour employees, including our sales personnel who work at self-owned stores and our managementand administrative personnel. Our staff costs (including directors’ emoluments) amounted toRMB30.6 million, RMB69.7 million, RMB184.9 million, RMB68.8 million and RMB194.2 millionin 2018, 2019 and 2020 and the first half of 2020 and 2021, respectively, accounting for 19.7%,15.0%, 11.2%, 13.7% and 11.5% of our total revenue during the same periods. As we continue toexpand our business operations and store network, we expect that the absolute amount of our staffcosts will grow in the foreseeable future. Our staff costs may also increase as we compete fortalented and experienced personnel. See “Risk Factors — Risks Relating to Our Business andIndustry — Our success depends on our ability to retain our senior management team and to recruit,train and retain qualified personnel.”


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Seasonality

Our business, financial condition and result of operations are subject to seasonal fluctuations.We usually experience higher sales volume during festival seasons and public holidays, such as theChinese New Year. In addition, our results of operation may fluctuate from period to period becauseof other factors, including the availability of the merchandise we can offer to our customers,weather conditions, etc. As a result, our results of operations may fluctuate from period to periodand comparison of different periods may not be meaningful.

CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

We have identified certain accounting policies that are significant to the preparation of ourcombined financial statements. Some of our accounting policies involve subjective assumptions andestimates, as well as complex judgments relating to the accounting items. Such assumptions,estimates and judgments are made based on historical information and various other factors,including industry practices and expectations of future events we believe to be reasonable under thecircumstances.

We have set forth below those accounting policies, judgments and estimates we believe mostsignificant for the preparation of our financial statements. Other significant accounting policies,which are important for you to understand our financial condition and results of operations, are setforth in detail in note 2 and 3 to the Accountants’ Report in Appendix I to this document.

Revenue Recognition

We recognize revenue when it arises from the sale of products and the provision of services.Revenue is recognized when control over the product or service is transferred to our customers’ atthe amount of promised consideration to which we are expected to be entitled in exchange for thesatisfaction of a specific performance obligation, excluding those amounts collected on behalf ofthird parties. Revenue excludes value added tax or other sales taxes and is after deduction of anytrade discounts. For further details, see note 2(r) to the Accountants’ Report in Appendix I to thisdocument.

Further details of our revenue and other income recognition policies are as follows:

(i) Sales of Products

(1) Retail sales in self-owned stores:

We sell specialty products and operate an extensive retail network of self-ownedstores under four specialty retail brands. Revenue from retail sales to customers inour self-owned stores is recognized at the point when the end customer takespossession of and pays for the products.


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(2) Product sales to franchisees:

We have entered into a series of agreements with our franchisees, primarily inChina, whereby the franchisees are authorized to operate franchise stores and sell,in their own retail stores, our products. For product sales to franchisees, we havedetermined that the franchisees are our customers. For details, see “Business —Our Business Model — Self-owned Stores and Franchise Stores — FranchiseStores” and “— Our Retail Store Network.” We recognize revenue from sales tofranchisees at the point when they obtain legal title of the products, i.e., the timewhen franchisees sell products to their customers and become obliged to pay us forsuch products.

(ii) Sales-based Management and Consultation Service

Our franchisees are also required to pay sales-based management and consultationservices for their access to such services. Sales-based management and consultation serviceare recognized when product sales occur.

(iii) Interest Income

Interest income is recognized as it accrues using the effective interest method.

(iv) Government Grants

Government grants are recognized in the statements of financial position initially whenthere is reasonable assurance that they will be received and that we will comply with theconditions attaching to them. Grants that compensate us for expenses incurred are recognizedas other income in profit or loss based on the timing of when the related costs for which thegrants are intended to compensate are incurred. Grants that compensate us for the cost of anasset are deducted from the carrying amount of the asset and consequently are effectivelyrecognized in profit or loss over the useful life of the asset by way of reduced depreciationexpense.

Inventories

Inventories are assets which are held for sale or display, including the products placed atself-owned stores or franchise stores or our warehouses, and low value consumables to be consumedin the ordinary course of our business. Inventories are carried at the lower of cost and net realizablevalue. Cost of inventories is calculated using the weighted average cost formula. Net realizablevalue is the estimated selling price in the ordinary course of business less the estimated costsnecessary to make the sale.


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When inventories are sold, the carrying amount of those inventories is recognized as anexpense in the period in which the related revenue is recognized.

The amount of any write-down of inventories to net realizable value and all losses ofinventories are recognized as an expense in the period the write-down or loss occurs. The amountof any reversal of any write-down of inventories is recognized as a reduction in the amount ofinventories recognized as an expense in the period in which the reversal occurs.

HKFRS 16

HKFRS 16 is effective for the accounting period beginning on or after January 1, 2019 andearlier application is permitted for entities that adopt HKFRS 15 on or before the date of initialapplication of HKFRS 16. We have elected to adopt HKFRS 16 consistently throughout the relevantperiod and early adopted Amendment to HKFRS 16, Covid-19-related rent concessions beyond 30June 2021. The adoption of HKFRS 16 primarily affects our accounting as a lessee of leases forproperties for retail stores and warehouses which are classified as operating leases under HKAS 17,Leases. Upon adoption of HKFRS 16, at the lease commencement date, we, as a lessee recognizeright-of-use assets and lease liabilities for all fixed-rate leases, except for short-term leases withlease term of 12 months or less and lease of low-value assets. For further details, see note 2(g) tothe Accountants’ Report set forth in Appendix I to this document.

Leased Assets

At inception of a contract, we assess whether the contract is, or contains, a lease. A contractis, or contains, a lease if the contract conveys the right to control the use of an identified asset fora period of time in exchange for consideration. Control is conveyed where the customer has boththe right to direct the use of the identified asset and to obtain substantially all of the economicbenefits from that use.

Where the contract contains lease components and non-lease components, we have elected notto separate non-lease components and accounts for each lease component and any associatednon-lease components as a single lease component for all leases.

On the lease commencement date, we recognize a right-of-use asset and a lease liability,except for short-term leases that have a lease term of 12 months or less and leases of low-valueassets, which for us are primarily staff apartments with lease term of less than 12 months. When weenter into a lease in respect of a low-value asset, we decide whether to capitalize the lease on alease-by-lease basis. The lease payments associated with those leases which are not capitalized arerecognized as an expense on a systematic basis over the lease term.

Where the lease is capitalized, the lease liability is initially recognized at the present value ofthe lease payments payable over the lease term, discounted using the interest rate implicit in thelease or, if that rate cannot be readily determined, using a relevant incremental borrowing rate. Afterinitial recognition, the lease liability is measured at amortized cost and interest expense iscalculated using the effective interest method. Variable lease payments that do not depend on anindex or rate are not included in the measurement of the lease liability and hence are charged toprofit or loss in the accounting period in which they are incurred.


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The right-of-use asset recognized when a lease is capitalized is initially measured at cost,which comprises the initial amount of the lease liability plus any lease payments made at or beforethe commencement date, and any initial direct costs incurred. Where applicable, the cost of theright-of-use assets also includes an estimate of costs to dismantle and remove the underlying assetor to restore the underlying asset or the site on which it is located, discounted to their present value,less any lease incentives received. The right-of-use asset is subsequently stated at cost lessaccumulated depreciation and impairment losses.

The lease liability is remeasured when there is a change in future lease payments arising froma change in an index or rate, or there is a change in our estimate of the amount expected to bepayable under a residual value guarantee, or there is a change arising from the reassessment ofwhether we will be reasonably certain to exercise a purchase, extension or termination option. Whenthe lease liability is remeasured in this way, a corresponding adjustment is made to the carryingamount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of theright-of-use asset has been reduced to zero.

The lease liability is remeasured when there is a change in the scope of a lease or theconsideration for a lease that is not originally provided for in the lease contract (“leasemodification”) that is not accounted for as a separate lease. In this case the lease liability isremeasured based on the revised lease payments and lease term using a revised discount rate at theeffective date of the modification. The only exceptions are any rent concessions which arose as adirect consequence of the COVID-19 pandemic and which satisfied the conditions set out inparagraph 46B of HKFRS 16 Leases. In such cases, we took advantage of the practical expedientset out in paragraph 46A of HKFRS 16 and recognized the change in consideration as if it were nota lease modification.

In the combined statement of financial position, the current portion of long-term leaseliabilities is determined as the present value of contractual payments that are due to be settled withintwelve months after the reporting period.

We have elected not to recognize right-of-use assets and lease liabilities for short-term leasesthat have a lease term of 12 months or less. We recognize the lease payments associated with theseleases as an expense on a straight-line basis over the lease term.

Property, Plant and Equipment

We state property, plant and equipment at cost less accumulated depreciation and impairmentlosses. Construction in progress represents property and equipment under construction, which isstated of cost less any impairment losses, and is not depreciated.

Gains or losses arising from the retirement or disposal of an item of property, plant andequipment are determined as the difference between the net disposal proceeds and the carryingamount of the item and are recognized in profit or loss on the date of retirement or disposal.


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Depreciation is calculated to write off the cost of items of property, plant and equipment, lesstheir estimated residual value, if any, using the straight-line method over their estimated useful livesas follows:

Motor vehicles . . . . . . . . . . . . . . . . . . . . . . . Three to four yearsLeasehold improvements . . . . . . . . . . . . . . . . Over the shorter of the lease term or the

estimated useful life of the assetOffice equipment . . . . . . . . . . . . . . . . . . . . . Three to five yearsStore equipment, furniture and fittings . . . . . . . Three to 12 years

Depreciation and Amortization

Property, plant and equipment, right-of-use assets and intangible assets, are depreciated oramortized on a straight-line basis over the estimated useful lives of the assets. We review theestimated useful lives of the assets regularly in order to determine the amount of depreciationexpense to be recorded during any reporting periods. The useful lives are based on our historicalexperience with similar assets. The depreciation and amortization expenses for future periods areadjusted if there are material changes from previous estimates.

Impairment of Assets

Internal and external sources of information are reviewed at the end of each reporting periodto identify indications that the following assets may be impaired or, except in the case of animpairment loss previously recognized no longer exists or may have decreased:

• property, plant and equipment;

• right-of-use assets;

• intangible assets; and

• investment in subsidiaries in the Company’s statement of financial position.

If any such indication exists, the asset’s recoverable amount is estimated.

Income Tax

Income tax for the period comprises current tax and movements in deferred tax assets andliabilities. Current tax and movements in deferred tax assets and liabilities are recognized in profitor loss except to the extent that they relate to items recognized in other comprehensive income ordirectly in equity, in which case the relevant amounts of tax are recognized in other comprehensiveincome or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the period, using tax ratesenacted or substantively enacted at the end of the reporting period, and any adjustment to taxpayable in respect of previous years.


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Deferred tax assets and liabilities arise from deductible and taxable temporary differencesrespectively, being the differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and their tax bases. Deferred tax assets also arise from unused taxlosses and unused tax credits.

All deferred tax liabilities, and all deferred tax assets to the extent that it is probable thatfuture taxable profits will be available against which the asset can be utilized, are recognized.Future taxable profits that may support the recognition of deferred tax assets arising fromdeductible temporary differences include those that will arise from the reversal of existing taxabletemporary differences, provided those differences relate to the same taxation authority and the sametaxable entity, and are expected to reverse either in the same period as the expected reversal of thedeductible temporary difference or in periods into which a tax loss arising from the deferred taxasset can be carried back or forward. The same criteria are adopted when determining whetherexisting taxable temporary differences support the recognition of deferred tax assets arising fromunused tax losses and credits, that is, those differences are taken into account if they relate to thesame taxation authority and the same taxable entity, and are expected to reverse in a period, orperiods, in which the tax loss or credit can be utilized.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting periodand is reduced to the extent that it is no longer probable that sufficient taxable profits will beavailable to allow the related tax benefit to be utilized. Any such reduction is reversed to the extentthat it becomes probable that sufficient taxable profits will be available.

Current tax balances and deferred tax balances, and movements therein, are presentedseparately from each other and are not offset. Current tax assets are offset against current taxliabilities, and deferred tax assets against deferred tax liabilities, if our Company or our Group hasthe legally enforceable right to set off current tax assets against current tax liabilities and thefollowing additional conditions are met:

• in the case of current tax assets and liabilities, our Company or our Group intends eitherto settle on a net basis, or to realize the asset and settle the liability simultaneously; or

• in the case of deferred tax assets and liabilities, if they relate to income taxes levied bythe same taxation authority on either:

• the same taxable entity; or

• different taxable entities, which, in each future period in which significant amountsof deferred tax liabilities or assets are expected to be settled or recovered, intendto realize the current tax assets and settle the current tax liabilities on a net basisor realize and settle simultaneously.

Financial Liabilities Measured at FVTPL

Our Company and Guangdong Kuaike have issued a series of convertible redeemablepreferred shares and ordinary shares with redemption option prior to and during the Track RecordPeriod. These instruments can also be converted into our ordinary shares at any time at the optionof the holders, or automatically upon occurrence of an [REDACTED] of our Company. For detailsof our equity-based financing in the past, see “History, Reorganization and Corporate Structure —Our Corporate History and Major Shareholding Changes of Our Group” and note 24(a) to theAccountants’ Report in Appendix I to this document.


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We designated our convertible redeemable preferred shares and ordinary shares withredemption option, which were our only level 3 financial instruments during the Track RecordPeriod, as financial liabilities at fair value through profit or loss. They are initially recognized atfair value. Any directly attributable transaction costs are recognized in profit or loss. Theconvertible redeemable preferred shares and ordinary shares with redemption option are not tradedin an active market. The fair value of redemption liabilities of the ordinary shares and convertibleredeemable preferred shares at each balance sheet dates were determined based on the valuationperformed by an independent valuer, using valuation techniques. We use our judgments to select avariety of methods and make assumptions that are mainly based on market conditions existing atthe respective valuation dates. We have used discounted cash flow to determine our business value,followed by option pricing models to determine the fair value of financial instruments withpreferred rights, which involved the use of significant accounting estimates and judgments. See note3(d) to the Accountants’ Report in Appendix I to this document. Our convertible redeemablepreferred shares are classified as non-current liabilities unless holders of the convertible redeemablepreferred shares can demand us to redeem the convertible redeemable preferred shares within 12months after the end of the reporting period.

In relation to the valuation of our level 3 convertible redeemable preferred shares and ordinaryshares with redemption option, our Directors had adopted the following procedures: (i) engagedindependent and competent third-party valuer to appraise the fair value of convertible redeemablepreferred shares and ordinary shares with redemption option; (ii) reviewed the valuation workingpapers and results prepared by the valuer; (iii) carefully considered all information especially thosenon-market related information input, such as fair value of the ordinary shares of our Company,possibilities under different scenarios, time to liquidation and discount for lack of marketability,which require management assessments and estimates; and (iv) reviewed the valuation workingpapers and results prepared by the valuer. Details of the fair value measurement of level 3convertible redeemable preferred shares and ordinary shares with redemption option, particularlythe fair value hierarchy, the valuation techniques and key inputs, including significant unobservableinputs, the relationship of unobservable inputs to fair value and reconciliation of level 3measurements, are disclosed in note 25(e)(i) in the Accountants’ Report set forth in Appendix I tothis document.

Based on the abovementioned procedures, our Directors are of the view that the valuationanalysis performed by the valuer is fair and reasonable, and the fair value measurements of level3 convertible redeemable preferred shares in our financial statements are properly prepared.


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DESCRIPTION OF SELECT COMBINED STATEMENTS OF COMPREHENSIVE INCOMELINE ITEMS

The following table sets forth our select combined statements of comprehensive income forthe periods indicated:



June 30,

2018 2019 2020 2020 2021


(Unaudited)

Revenue . . . . . . . . . . . . . . . . . . . . . . 155,309 463,744 1,645,904 502,357 1,683,160

Cost of sales . . . . . . . . . . . . . . . . . . . (105,517) (337,895) (1,146,191) (350,592) (1,073,204)

Gross profit . . . . . . . . . . . . . . . . . . . 49,792 125,849 499,713 151,765 609,956

Other income . . . . . . . . . . . . . . . . . . . 78 9,069 34,888 11,241 26,654

Selling and distribution expenses . . . . . . (54,959) (111,413) (395,250) (120,140) (469,883)

Administrative and other operatingexpenses . . . . . . . . . . . . . . . . . . . . (46,491) (112,079) (281,894) (108,060) (140,975)

(Loss)/profit from operations . . . . . . . . (51,580) (88,574) (142,543) (65,194) 25,752

Finance costs . . . . . . . . . . . . . . . . . . . (2,948) (8,232) (49,152) (17,684) (43,918)

Share of losses from joint ventures . . . . . – – (16,170) (829) (31,791)

Fair value changes of financial liabilitiesmeasured at FVTPL(1) . . . . . . . . . . . . (37,689) (437,552) (1,842,514) (445,459) (4,353,866)

Loss before taxation . . . . . . . . . . . . . . (92,217) (534,358) (2,050,379) (529,166) (4,403,823)

Income tax . . . . . . . . . . . . . . . . . . . . 12,732 19,855 33,172 16,292 6,740

Loss for the year/period . . . . . . . . . . . (79,485) (514,503) (2,017,207) (512,874) (4,397,083)

Non-HKFRS Measures:

Adjusted net loss (unaudited)(2) . . . . . . . (41,796) (76,951) (171,380) (67,415) (38,462)

Adjusted EBITDA(unaudited)(3) . . . . . . (20,767) (32,303) 67,540 16,369 216,402

Notes:

(1) Financial liabilities measured at FVTPL represented the fair value changes of the convertible redeemable preferredshares issued by our Company and the redemption liabilities of ordinary shares issued by Guangdong Kuaike, andrelate to changes in the valuation of our Group. Fair value changes of the convertible redeemable preferred shares andthe redemption liabilities do not directly relate to our ability to generate revenue from our daily operations, and wedo not expect to record any further fair value changes of the convertible redeemable preferred shares as suchconvertible redeemable preferred shares will be re-designated from liabilities to equity as a result of the automaticconversion into ordinary shares upon the [REDACTED].

(2) Adjusted net loss is a non-HKFRS measure. We define “adjusted net loss” as loss for the year or period adjusted byadding back fair value changes of financial liabilities measured at FVTPL and [REDACTED]. Adjusted net loss isnot a measure required by, or presented in accordance with, HKFRS. The use of adjusted net loss has limitations asan analytical tool, and you should not consider it in isolation from, as a substitute for analysis of, or superior to, ourresults of operations or financial condition as reported under HKFRS. For details, see “— Non-HKFRS Measures”in this section.

(3) Adjusted EBITDA is a non-HKFRS measure. We define “adjusted EBITDA” as adjusted net loss for the year or periodadjusted by adding back income tax, depreciation of property, plant and equipment, depreciation of right-of-useassets, amortization of intangible assets, and finance cost, net. Adjusted EBITDA is not a measure required by, orpresented in accordance with HKFRS. The use of adjusted EBITDA has limitations as an analytical tool, and youshould not consider it in isolation from, or as a substitute for analysis of, or superior to, our results of operations orfinancial condition as reported under HKFRS. For details, see “— Non-HKFRS Measures” in this section.


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Revenue

During the Track Record Period, we generated revenue from (i) sales of goods, primarilycomprising sales from our self-owned stores and sales to franchise stores; and (ii) sales-basedmanagement and consultation services income such as store management fees, logistics charges andPOS charges to our franchisees. Our revenue amounted to RMB155.3 million, RMB463.7 million,RMB1,645.9 million, RMB502.4 million and RMB1,683.2 million in 2018, 2019 and 2020 and thefirst half of 2020 and 2021, respectively. For details on how we generate our revenue from ourbusiness models, see “Business — Our Business Model — Our Retail Business Model.” Thecontinued increase in our revenue during the Track Record Period was primarily due to the increasein our sales of goods as a result of expansion of our self-owned stores and franchise stores duringthe Track Record Period. During the same period, the number of our retail stores increased from 80stores as of December 31, 2018 to 640 stores as of June 30, 2021. For details, see “Business — OurBusiness Model — Our Retail Store Network.”

The following table sets forth a breakdown of our revenue by service line, and the contributionof each service line in absolute amounts and as percentages of our total revenue for the periodsindicated:


2018 2019 2020 2020 2021


(Unaudited)

Sales of Goods



Others(1) . . . . . . . . . 2,174 1.4% 4,587 1.0% 37,716 2.3% 24,203 4.8% 7,479 0.4%

Subtotal . . . . . . . . . 151,224 97.4% 440,835 95.1% 1,566,109 95.2% 480,802 95.7% 1,608,519 95.6%


Total . . . . . . . . . . . . 155,309 100.0% 463,744 100.0% 1,645,904 100.0% 502,357 100.0% 1,683,160 100.0%

Notes:


(2) Primarily included fees we charged franchisees according to store management agreements for management andconsultation services, such as store management fees, logistics charges and POS charges to our franchisees.


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The following table sets forth our revenue by store brand and the contribution of each brandin absolute amounts and as percentages of our total revenue for the periods indicated:


2018 2019 2020 2020 2021


(Unaudited)

KKV (1) . . . . . . . . . . – – 81,878 17.7% 834,734 50.7% 221,930 44.2% 1,048,589 62.3%THE COLORIST(2) . . . . . – – 20,048 4.3% 439,729 26.7% 97,366 19.4% 461,280 27.4%KK Guan . . . . . . . . . . 153,135 98.6% 357,231 77.0% 320,885 19.5% 157,939 31.4% 120,105 7.1%X11(3) . . . . . . . . . . . – – – – 12,840 0.8% 919 0.2% 45,707 2.7%Others(4) . . . . . . . . . . 2,174 1.4% 4,587 1.0% 37,716 2.3% 24,203 4.8% 7,479 0.4%

Total . . . . . . . . . . . . 155,309 100.0% 463,744 100.0% 1,645,904 100.0% 502,357 100.0% 1,683,160 100.0%

Notes:





The following table sets forth a breakdown of our revenue by source of merchandise, and thecontribution of each source of merchandise in absolute amounts and as percentages of our totalrevenue for the periods indicated:


2018 2019 2020 2020 2021


Self-owned brandmerchandise(1) . . . . . . 2,170 1.4% 35,726 7.7% 202,916 12.3% 54,945 10.9% 225,203 13.4%

Third party brandmerchandise(2) . . . . . . 153,139 98.6% 428,018 92.3% 1,442,988 87.7% 447,412 89.1% 1,457,957 86.6%

Total . . . . . . . . . . . 155,309 100.0% 463,744 100.0% 1,645,904 100.0% 502,357 100.0% 1,683,160 100.0%

Notes:

(1) Self-owned brand merchandise refers to merchandise we procure from OEM and ODM contractors.

(2) Third party brand merchandise refers to merchandise we procure from Third Party Brand Partners.


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Cost of Sales

Our cost of sales, which primarily consists of our cost of procurement of inventories, eitherfrom Third Party Brand Partners or from OEM and ODM contractors, amounted to RMB105.5million, RMB337.9 million, RMB1,146.2 million, RMB350.6 million and RMB1,073.2 million in2018, 2019, 2020 and the first half of 2020 and 2021, respectively. The increase in our cost of salesduring the Track Record Period was primarily due to the increased demand and sale of ourmerchandise either from our self-owned stores or franchise stores as a result of expansion of ourstore network during the Track Record Period.

The following table sets forth a breakdown of our cost of sales by store brand both in absoluteamounts and as percentages of our total cost of sales for the periods indicated:


2018 2019 2020 2020 2021


(Unaudited)

KKV(1) . . . . . . . . . . . – – 51,122 15.1% 582,529 50.8% 151,522 43.2% 657,244 61.2%

THE COLORIST(2) . . . . . – – 9,421 2.8% 289,975 25.3% 60,284 17.2% 277,230 25.8%

KK Guan . . . . . . . . . . 105,030 99.5% 273,303 80.9% 239,113 20.9% 118,220 33.7% 93,037 8.7%

X11(3) . . . . . . . . . . . – – – – 7,654 0.7% 549 0.2% 38,694 3.6%

Others(4) . . . . . . . . . . 487 0.5% 4,050 1.2% 26,921 2.3% 20,017 5.7% 6,999 0.7%

Total . . . . . . . . . . . . 105,517 100.0% 337,895 100.0% 1,146,191 100.0% 350,592 100.0% 1,073,204 100.0%

Notes:

(1) Including cost of sales related to three self-owned overseas stores situated in Jakarta, Indonesia, as of June 30, 2021.We launched KKV as a new specialty retail brand in 2019.



(4) Others primarily included costs in relation to online sales, bulk purchasing business, and sales of imported goods.


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Gross Profit and Gross Profit Margin

Our gross profit represents our revenue less the cost of sales, and our gross profit marginrepresents our gross profit divided by our revenue, expressed as a percentage. Our gross profit wasRMB49.8 million, RMB125.8 million, RMB499.7 million, RMB151.8 million and RMB610.0million in 2018, 2019 and 2020 and the first half of 2020 and 2021, respectively whilst our grossprofit margin was 32.1%, 27.1%, 30.4%, 30.2% and 36.2% in the same periods, respectively.

The following tables set forth our gross profits and gross profit margins by store brand for theperiods indicated:


2018 2019 2020 2020 2021

Gross profit

Grossprofit

margin Gross profit

Grossprofit

margin Gross profit

Grossprofit

margin Gross profit

Grossprofit

margin Gross profit

Grossprofit

margin


(Unaudited)

KKV(1) . . . . . . . . – – 30,756 37.6% 252,205 30.2% 70,408 31.7% 391,345 37.3%

THE COLORIST(2) . . – – 10,627 53.0% 149,754 34.1% 37,082 38.1% 184,050 39.9%

KK Guan . . . . . . . 48,105 31.4% 83,928 23.5% 81,772 25.5% 39,719 25.1% 27,068 22.5%

X11(3) . . . . . . . . – – – – 5,186 40.4% 370 40.3% 7,013 15.3%

Others . . . . . . . . 1,687 77.6% 537 11.7% 10,795 28.6% 4,186 17.3% 480 6.4%

Total . . . . . . . . . 49,792 32.1% 125,849 27.1% 499,713 30.4% 151,765 30.2% 609,956 36.2%

Notes:

(1) Including gross profit generated from three self-owned overseas stores situated in Jakarta, Indonesia, as of June 30,2021. We launched KKV as a new specialty retail brand in 2019.




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Other Income

Our other income primarily consisted of (i) interest income from loans to franchisees; (ii)government grants; and (iii) bank interest income.

The following table sets forth our other income in absolute amounts and as percentages of ourtotal other income for the periods indicated:


2018 2019 2020 2020 2021


(Unaudited)

Interest income from loansto franchisees . . . . . . – – 5,218 57.5% 29,950 85.8% 10,778 95.9% 20,524 77.0%

Government grants . . . . – – 3,000 33.1% 1,682 4.8% – – 1,016 3.8%Bank interest income . . . 75 96.2% 114 1.3% 485 1.4% 70 0.6% 429 1.6%Others(1) . . . . . . . . . . 3 3.8% 737 8.1% 2,771 7.9% 393 3.5% 4,685 17.6%

Total . . . . . . . . . . . . 78 100.0% 9,069 100.0% 34,888 100.0% 11,241 100.0% 26,654 100.0%

Note:

(1) Others primarily included income from wealth management products and advertising services we provided tofranchisees.

During the Track Record Period, we extended interest-bearing borrowings to certainfranchisees to provide start-up capitals in support of the launching and initial operations of theirnew stores. Pursuant to the relevant agreements, each borrowing franchisee is contractually obligedto repay us either by way of (i) fixed monthly repayment (inclusive of interest and principal) overthe entire term of the loan; or (ii) fixed interest only monthly repayment with principal due at theend of the terms of the loan. For details about our financial support provided to franchisees, see“Business — Our Business Model — Self-owned Stores and Franchise Stores — Financial SupportProvided to Franchisees.”

In addition, during the Track Record Period, we also received certain government grants andsuch amounts and timing of our government grants are determined at the discretion of the relevantgovernment authorities in the PRC. There is no assurance that we will continue to receive anygovernment grants in the future.

Selling and Distribution Expenses

Our selling and distribution expenses primarily consisted of (i) depreciation and amortizationexpenses; (ii) staff costs; (iii) logistic costs; (iv) other rental expenses and property managementfees; and (v) others.

Depreciation and amortization expenses primarily relate to our fixed assets in the retail storesand right-of-use assets such as leases of the retail stores. Staff costs relating to our sales anddistribution channels primarily consist of salaries, wages, other benefits and contributions todefined contribution retirement plans of store-level personnel. Logistics costs primarily representsfees paid by us to third-party service providers for merchandise transportation. Other rentalexpenses and property management fees are primarily associated with short-term leases, leases forlow-value assets, and variable lease payments in connection with our retail stores.


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The following table sets forth a breakdown of the components of our selling and distributionexpenses both in absolute amounts and as percentages of total selling and distribution expenses forthe periods indicated:


2018 2019 2020 2020 2021


(Unaudited)

Depreciation andamortization(1) . . . . . . 27,592 50.2% 41,290 37.1% 199,673 50.5% 73,070 60.8% 200,254 42.6%

Staff costs . . . . . . . . . 10,226 18.6% 19,638 17.6% 70,010 17.7% 24,707 20.6% 113,316 24.1%

Logistics costs . . . . . . . 5,751 10.5% 32,202 28.9% 89,619 22.7% 18,887 15.7% 80,891 17.2%

Other rental expenses andproperty management fees . 8,159 14.8% 4,551 4.1% (15,870)(3) (4.0%) (6,776)(3) (5.6%) 25,142 5.4%

Office expenses . . . . . . . 2,137 3.9% 2,844 2.6% 10,853 2.7% 3,652 3.0% 16,981 3.6%

Others(2) . . . . . . . . . . 1,094 2.0% 10,888 9.8% 40,965 10.4% 6,600 5.5% 33,299 7.1%

Total . . . . . . . . . . . 54,959 100.0% 111,413 100.0% 395,250 100.0% 120,140 100.0% 469,883 100.0%

(1) Under HKFRS 16, depreciation charges for our right-of-use assets are recognized as depreciation and amortization,typically periodically depreciated on a straight-line basis over the lease term.

(2) Refers to miscellaneous expenses such as repairs and maintenance fees, sampling fees and outsourcing service fees.

(3) Other rental expenses and property management fees mainly represented (i) lease payments for leases which had alease term of 12 months or less; (ii) leases for low-value assets; and (iii) variable lease payments based on operationresults of relevant stores other than fixed rates. In 2020, we received rent concession granted by our landlords as aresult of the COVID-19 pandemic, and recorded as a negative variable lease payments.

In 2018, 2019 and 2020, our selling and distribution expenses represented 35.4%, 24.0% and24.0% of our total revenue, respectively. The decrease was primarily attributable to (i) improvedefficiency of our selling and distribution channels, as we have in the course of time achievedeconomics of scale as a result of business expansion; and (ii) rent concession granted to us by ourlandlords in 2020 as a result of the COVID-19 pandemic. Our selling and distribution expenses, asa percentage of our total revenue, increased to 27.9% in the first half of 2021 from 23.9% in thesame period of 2020, primarily due to the absence of the COVID-19 related rent concessionsgranted by our landlords.

Administrative and Other Operating Expenses

Our administrative and other operating expenses primarily include (i) staff costs; (ii)depreciation and amortization expenses which are primarily related to our premises and leasedproperties; (iii) professional service fee such as legal and service fees paid to various professionalparties whom we engaged and consulted in connection with this [REDACTED] and rounds offinancing activities in the first half of 2021. For details of our past financing activities, see “History,Reorganization and Corporate Structure — Our Corporate History and Major Shareholding Changesof Our Group;” (iv) other rental expenses and property management fees; (v) office expenses; (vi)traveling and entertainment expenses; (vii) advertising expenses; (viii) repairs and maintenanceexpenses; (ix) inventory losses; (x) losses on stores closures; and (xi) others.


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Staff costs primarily consisted of salaries, wages, other benefits, and contributions tocontribution retirement plans of our administrative personnel. The continued increase in our staffcosts during the Track Record Period was primarily due to the increase in the total headcount of ouradministrative personnel as a result of our rapid business growth during the Track Record Period.

The following table sets forth a breakdown of our administrative and other operating expensesboth in absolute amounts and as percentages of total administrative and other operating expensesfor the periods indicated:


2018 2019 2020 2020 2021


(Unaudited)

Staff costs . . . . . . . . . . 20,374 43.8% 50,098 44.7% 114,853 40.7% 44,132 40.8% 80,908 57.4%

Depreciation andamortization . . . . . . . 3,221 6.9% 14,981 13.4% 23,267 8.3% 9,322 8.6% 17,432 12.4%

Professional service fees . . 1,310 2.8% 7,439 6.6% 24,223 8.6% 5,770 5.3% 9,384 6.7%

Other rental expenses andproperty management fees . 3,089 6.6% 4,957 4.4% 13,314 4.7% 13,957 12.9% 9,275 6.6%

Office expenses . . . . . . . 2,584 5.6% 5,256 4.7% 15,473 5.5% 5,148 4.8% 5,766 4.1%

Traveling and entertainmentexpenses . . . . . . . . . 2,808 6.0% 6,444 5.7% 8,292 2.9% 2,607 2.4% 5,159 3.7%

Advertising expenses . . . . 1,353 2.9% 4,251 3.8% 10,288 3.6% 4,248 3.9% 2,458 1.7%

Repair and maintenanceexpenses . . . . . . . . . . 787 1.7% 1,509 1.3% 2,098 0.7% 354 0.3% 385 0.3%

Inventory losses . . . . . . . 963 2.1% 2,929 2.6% 23,392 8.3% 2,564 2.4% – –

Losses on stores closures . . – – 4,141 3.7% 11,512 4.1% 1,539 1.4% 7,457 5.3%

Others(1) . . . . . . . . . . . 10,002 21.5% 10,074 9.0% 35,182 12.5% 18,419 17.0% 2,751 2.0%

Total . . . . . . . . . . . . 46,491 100.0% 112,079 100.0% 281,894 100.0% 108,060 100.0% 140,975 100.0%

Note:

(1) Primarily refers to impairment losses, exchange gains or losses, and other miscellaneous expenses in relation today-to-day administrative management operations.


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Finance Costs

Our finance costs consisted primarily of interest on lease liabilities due to the adoption ofHKFRS 16 and interest on loans and borrowings. The following table sets forth a breakdown of ourfinance costs in absolute amounts and as percentages of total finance costs for the periods indicated:


2018 2019 2020 2020 2021


(Unaudited)

Interest on loans andborrowings . . . . . . . . 1,153 39.1% 2,695 32.7% 13,970 28.4% 4,354 24.6% 9,010 20.5%

Interest on leaseliabilities . . . . . . . . . 1,795 60.9% 5,537 67.3% 35,182 71.6% 13,330 75.4% 34,908 79.5%

Total . . . . . . . . . . . . 2,948 100.0% 8,232 100.0% 49,152 100.0% 17,684 100.0% 43,918 100.0%

We incurred finance costs of RMB2.9 million, RMB8.2 million, RMB49.2 million, RMB17.7million and RMB43.9 million in 2018, 2019 and 2020 and the first half of 2020 and 2021,respectively. The general increase in finance costs primarily reflected our increased debt financingactivities during the Track Record Period, which was in line with our business expansion during thesame period.

Share of Losses from Joint Ventures

As part of our business strategies and due to the nature of our business models, we from timeto time established joint ventures with our franchisees. For details, see “Business — Our BusinessModel — Self-owned Stores and Franchise Stores — Franchise Stores.” Substantially all of ourjoint ventures were established in the Track Record Period, and as some joint ventures were still attheir early stage of development, they would need to incur a substantial amount of expenses for newstore opening such as decoration and renovation costs, and rental expenses, etc. In 2018, 2019 and2020 and the first half of 2020 and 2021, our share of losses of joint ventures amounted to nil, nil,RMB16.2 million, RMB0.8 million and RMB31.8 million, respectively.

Fair Value Changes of Financial Liabilities Measured at FVTPL

Our Company and Guangdong Kuaike have issued a series of convertible redeemablepreferred shares and ordinary shares with redemption option prior to and during the Track RecordPeriod. These instruments can also be converted into our ordinary shares at any time at the optionof the holders, or automatically upon occurrence of an [REDACTED] of our Company. For detailsof our equity-based financing in the past, see “History, Reorganization and Corporate Structure —Our Corporate History and Major Shareholding Changes of Our Group” and note 24(a) to theAccountants’ Report in Appendix I to this document.

We designated the convertible redeemable preferred shares and ordinary shares withredemption option as financial liabilities at fair value through profit or loss. We applied the discountcash flow method to determine our underlying equity value and adopted option-pricing method andequity allocation model to determine the fair value of the convertible redeemable preferred sharesand ordinary shares with redemption option.


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Our fair value changes of financial liabilities measured at FVTPL was RMB37.7 million,RMB437.6 million, RMB1,842.5 million, RMB445.5 million and RMB4,353.9 million in 2018,2019 and 2020 and the first half of 2020 and 2021, respectively. These fair value changes offinancial liabilities measured at FVTPL represent the fair value of redemption liabilities of ordinaryshares and convertible redeemable preferred shares issued to investors in various rounds of privatefinancings.

Income Tax

Income tax consists of current tax expense and deferred tax credit. All of our PRC-establishedsubsidiaries were subject to the PRC corporate income tax rate of 25% during the Track RecordPeriod. As of the Latest Practicable Date, we had no material dispute with any tax authority.

The following table sets forth the breakdown of income tax expenses for the periods indicated:


ended June 30,

2018 2019 2020 2020 2021


(Unaudited)

Current tax . . . . . . . . . . . . . 264 335 1,868 905 16,545

Deferred tax . . . . . . . . . . . . (12,996) (20,190) (35,040) (17,197) (23,285)

Total . . . . . . . . . . . . . . . . (12,732) (19,855) (33,172) (16,292) (6,740)

We are subject to various rates of income tax under different jurisdictions. The followingsummarizes major factors affecting our applicable tax rates in the Cayman Islands, the BritishVirgin Islands, Hong Kong, the PRC and Indonesia.

Cayman Islands

We are incorporated in the Cayman Islands. Under the current law of the Cayman Islands, weare not subject to income or capital gains tax. In addition, dividend payments are not subject towithholding tax in the Cayman Islands.

British Virgin Islands

Our subsidiary incorporated in the British Virgin Islands is not subject to income or capitalgains tax under the current laws of the British Virgin Islands. The British Virgin Islands do notimpose a withholding tax on dividends.

Hong Kong

Hong Kong has adopted a two-tiered profits tax rates regime since March 2018. Under thetwo-tiered profits tax rates regime, the first HK$2,000,000 of profits of qualifying corporations willbe taxed at 8.25%, and profits above HK$2,000,000 will be taxed at 16.5%. The two-tiered profitstax rates would only apply to the one which is nominated to be chargeable at the two-tiered rates.The profits of corporations not qualifying for the two-tiered profits tax rates regime will continueto be taxed at 16.5%.


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No provision for Hong Kong Profits Tax was made as we did not generate any assessableincome subject to Hong Kong Profits Tax during the Track Record Period.

PRC

Our subsidiaries incorporated in China are subject to the PRC Enterprise Income Tax (“EIT”)on their taxable income as reported in their respective statutory financial statements adjusted inaccordance with the relevant PRC income tax laws. Pursuant to the PRC Enterprise Income TaxLaw, or the EIT Law, which became effective on January 1, 2008 and was last amended onDecember 29, 2018, our subsidiaries in the PRC are generally subject to EIT at the statutory rateof 25%. The enterprise income tax is calculated based on the entity’s global income as determinedunder PRC tax laws and accounting standards.

Indonesia

Our subsidiaries incorporated in Indonesia were subject to income tax rate of 22% during theTrack Record Period.

NON-HKFRS MEASURES

To supplement our combined financial statements which are presented under HKFRS, we alsouse adjusted net loss and adjusted EBITDA as additional financial measures, which are not requiredby, or presented in accordance with HKFRS. We believe that such non-HKFRS measures facilitatecomparisons of operating performance from period to period and company to company byeliminating potential impact of items that our management does not consider indicative of ouroperating performance. We believe that such measures provide useful information to investors andothers in understanding and evaluating our combined results of operations in the same manner asthey help our management. However, our presentation of the adjusted net loss and adjustedEBITDA may not be comparable to similarly titled measures presented by other companies. The useof such non-HKFRS measures has limitations as an analytical tool, and you should not considerthem in isolation from, or as a substitute for analysis of, our results of operations or financialcondition as reported under HKFRS.

We define adjusted net loss as loss for the period adjusted for (i) fair value changes offinancial liabilities measured at FVTPL; and (ii) [REDACTED]. Fair value changes of financialliabilities measured at FVTPL consist of redemption liabilities of ordinary shares and convertibleredeemable preferred shares. See note 24 to the Accountants’ Report in Appendix I to thisdocument. [REDACTED] related to this [REDACTED].

We define adjusted EBITDA as net loss for the period adjusted for (i) income tax; (ii)depreciation and amortization; and (iii) net finance costs. Income tax credit represents deferred taxbenefit arising from deductible temporary differences to the extent that, we expect it is probable thatfuture taxable profits will be available against which the deductible temporary differences can beutilized, after netting off the current tax expenses. Depreciation and amortization represent thelosses of tangible and intangible assets calculated using the straight-line method over their usefullife. Finance costs consist of interest expense on lease liabilities and interest expense on otherborrowing from related parties.


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As a result, we believe that these items should be adjusted for when calculating our adjustednet loss and adjusted EBITDA in order to provide potential [REDACTED] with a complete and fairunderstanding of our operating results without the items unrelated to our ordinary course ofbusiness operations, especially in making period-to-period comparisons of, and assessing the profileof, our operating and financial performance, and making comparisons with other comparablecompanies with similar business operations.

The following table reconciles our adjusted net loss for the period and adjusted EBITDA forthe period presented to the most directly comparable financial measure calculated and presentedunder HKFRS, which is loss for the year/period:


ended June 30,

2018 2019 2020 2020 2021


(Unaudited)

Loss for the year/period . . . . . . . . . . . . (79,485) (514,503) (2,017,207) (512,874) (4,397,083)

Adjusted for:Fair value changes of financial liabilities

measured at FVTPL . . . . . . . . . . . . . . 37,689 437,552 1,842,514 445,459 4,353,866[REDACTED] . . . . . . . . . . . . . . . . . . [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Non-HKFRS measure:Adjusted net loss for the year/period

(unaudited)(1) . . . . . . . . . . . . . . . . . (41,796) (76,951) (171,380) (67,415) (38,462)


ended June 30,

2018 2019 2020 2020 2021


(Unaudited)

Adjusted net loss for the year/period(unaudited) . . . . . . . . . . . . . . . . . . . (41,796) (76,951) (171,380) (67,415) (38,462)

Adjusted for:Income tax . . . . . . . . . . . . . . . . . . . . (12,732) (19,855) (33,172) (16,292) (6,740)Depreciation and amortization . . . . . . . . . 30,813 56,271 222,940 82,392 217,686Finance costs . . . . . . . . . . . . . . . . . . . 2,948 8,232 49,152 17,684 43,918

Non-HKFRS measure:Adjusted EBITDA for the year/period

(unaudited)(2) . . . . . . . . . . . . . . . . . (20,767) (32,303) 67,540 16,369 216,402

Notes:

(1) Adjusted net loss is a non-HKFRS measure. We define “adjusted net loss” as loss for the year or period adjusted byadding back fair value changes of financial liabilities measured at FVTPL and [REDACTED]. Adjusted net loss isnot a measure required by, or presented in accordance with, HKFRS. The use of adjusted net loss has limitations asan analytical tool, and you should not consider it in isolation from, as a substitute for analysis of, or superior to, ourresults of operations or financial condition as reported under HKFRS. For details, see “— Non-HKFRS Measures”in this section.


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(2) Adjusted EBITDA is a non-HKFRS measure. We define “adjusted EBITDA” as adjusted net loss for the year or periodadjusted by adding back income tax, depreciation of property, plant and equipment, depreciation of right-of-useassets, amortization of intangible assets, and finance cost. Adjusted EBITDA is not a measure required by, orpresented in accordance with HKFRS. The use of adjusted EBITDA has limitations as an analytical tool, and youshould not consider it in isolation from, or as a substitute for analysis of, or superior to, our results of operations orfinancial condition as reported under HKFRS. For details, see “— Non-HKFRS Measures” in this section.

PATH TO PROFITABILITY

We expect to further improve financial performance and achieve profitability in the nearfuture through continuous revenue growth and improved cost efficiency.

Driving Continued Revenue Growth

We generate revenue mainly from sales of specialty retail products through our extensivenetwork of self-owned stores and franchise stores under our four retail brands, each of which isstrategically designed to serve the market needs of different consumer demographics in China. Thesustainable, rapid growth of our revenue depends upon, among other things, (i) our leading marketposition, leveraging on which, we are well-positioned to enjoy market opportunities from expectedstrong growth in the special retail industry; (ii) expansion and optimization of our store network;and (iii) our ability to continuously proliferate and optimize product portfolio that may attract andretain more customers, while introducing more and more products of higher margin.

Benefit from Leading Market Position to Achieve Revenue Increase by Effectively CapturingGrowth in the Industry

Since our inception in 2015, we have invested in developing retail brands portfolio andexpansion of store network, pursuant to our overall business strategy with the vision for long-termprofitability and sustainable development. Through years of efforts, we have achieved leadingmarket position and strong recognition among consumers for our retail brands. We are one of thetop three specialty retailers by GMV and the fastest-growing specialty retailer among the top tenplayers in China with a GMV CAGR of 246.2% from 2018 to 2020, according to the Frost &Sullivan Report.

Lifestyle products have contributed to the definition of customers’ way of life and become asymbol of self-awareness of Millennials and Generation Z, demonstrating tremendous marketpotential. According to the Frost & Sullivan Report, the market size of specialty retail by GMV hasexperienced a fast expansion in recent years, and is expected to grow to RMB475 billion in 2025from RMB195 billion in 2020, representing an estimated GMV CAGR of 19.5%, during this period.

Leveraging our leading market position in specialty retail market, and capitalizing on ourtechnology and management capability, we believe that we are well-positioned to capture marketopportunities and achieve sustainable business growth.


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Expansion and Optimization of Our Store Network

During the Track Record Period, we continued to expand our store network across differentretail brands by leveraging growing market recognition on our leading industry positions, with ourtotal number of stores growing from 80 as of December 31, 2018 to 211 as of December 31, 2019,556 as of December 31, 2020, and further to 640 as of June 30, 2021. In addition, we strategicallydetermine layout and composition of store portfolio of each retail brand, leveraging our innovationcapability and business acumen to identify and address under-served needs of target consumers fortrendy lifestyle products. As a result, we successfully launched and expanded store network ofdifferent retail brands during the Track Record Period, while making innovation that effectivelydrives revenue growth. For instance, we launched KKV in 2019 as an evolution from KK Guan,which quickly became a leading next-generation and traffic-oriented major brand in China, withtotal number of KKV stores increased from 35 as of December 31, 2019 to 202 as of December 31,2020, while revenue generated from KKV retail brands increased from RMB81.9 million in 2019to RMB834.7 million in 2020. In the first half of 2021, our revenue generated from 281 KKV storesas of June 30, 2021 further amounted to RMB1,048.6 million. Moreover, due to its uniquepositioning, as well as the focus on SKUs selection, KKV stores generally command higheroperating margin than that of KK Guan stores.

To drive our overall revenue growth and achieve long-term profitability at scale, we expect toadd approximately 290 and 270 new retail stores for the year ending 2021 and 2022, respectively.Subsequent to June 30, 2021, we primarily focused on expansion of our business in regions andprovinces with strong growth potential. As of the Latest Practicable Date, we had added 232 retailstores. We expect to benefit from continuous expansion of store network by broader consumercoverage, further penetration in relevant regions and increase in sales, in light of the expectedgrowth in consumers’ demands for lifestyle products. For a detailed analysis illustrating suchfavorable industry trends, see “Industry Overview.”

Continue Proliferation and Optimization of Product Portfolio Carrying Consumer-preferredTheme and Higher Margin

During the Track Record Period, we leveraged our technology capacity to determine andcompile our product portfolio carried by each of the four retail brands, allowing consumers to enjoychoices from a broad range of merchandise with ease, resulting in one-stop and immersive shoppingexperience featuring cozy, welcoming, trendy or progressive themes. As of June 30, 2021, weoffered consumers various specialty products of over 20,000 SKUs covering all major core lifestyleproduct categories.

In addition, we adhere to stringent merchandise selection policy to ensure we can offerconsumers maximized “value-to-money” products and ultimate enjoyment through portfolio or rightmerchandise, which is crucial for successful retail business. For example, benefiting from oureffective merchandise screening procedures, the merchandise offerings elimination rate of our KKVstores as of June 30, 2021 was approximately 30.9%, measured by SKUs eliminated divided by totalSKUs in the first half of 2021. For details, see “Business — Our Business Model — OurMerchandise Sourcing Procedures and Selection Policy — Our Merchandise Selection Criteria andProcess.” During the Track Record Period, we also invested in self-owned brand merchandise andco-branded merchandise. The well-received characteristic merchandise have successfully broughtstrong customers’ loyalty on relevant brands and served as a strong attraction for pedestrian flow.In particular, during the Track Record Period, our self-owned brand merchandise generallycommanded higher profit margin than those of third party brand merchandise, given the fact that we


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exerted better control over entire value chain. We increased sales of our self-owned brandmerchandise, as a percentage of our total sales value, during the Track Record Period. In 2018,2019, 2020 and the first half of 2020 and 2021, sales of merchandise procured from OEM and ODMcontractors represented 1.4%, 7.7%, 12.3%, 10.9% and 13.4%, respectively, of our total revenue.For details, see “— Description of Select Combined Statements of Comprehensive Income LineItems — Revenue.”

Going forward, we intend to continue our customer-centric merchandise portfolio expansionand innovation strategy, with attention on those carrying strong sales potential and optimal margin.Leveraging our successful track record in merchandise selection and well-established recognitionamong public for our stores as the “go-to” place for ultimate enjoyable shopping and discoveryexperience, which are crucial for relevant target consumer demographics, we believe we arewell-positioned to achieve revenue growth and improve profitability.

Reducing Costs and Expenses as Percentage of Revenue

Continuous Business Expansion to Realize Greater Economies of Scale

During the Track Record Period, we benefited from virtuous circle in line with our qualitybusiness expansion. On one hand, our large store network and established brand recognition amongthe public allow us to win collaboration with various third parties with preferred terms, includinglessors such as owners of shopping malls or relevant properties, contractors and other serviceproviders, where they benefit from strong pedestrian flow we can attract and/or bulk purchasing ofmerchandise from us. On the other hand, the expansion of our business network allows us to gaininsight into market trends, consumers’ behavior and preference, as well as valuable managementmeasures on different product categories on a broader and deeper basis, further enhancing ourability to identify appropriate product to introduce, right location for store development, and thevery management measures to optimize cost-efficiency, which ensure our sustainable and successfulbusiness expansion.

Levering abovementioned factors, among other things, while we achieved rapid expansion inbusiness scale, our overall gross profit margin increased constantly since 2019, amounting to27.1%, 30.4% and 36.2% in 2019, 2020 and the first half of 2021. For detailed discussion on ourgross profit margin during the Track Record Period, see “— Management’s Discussion and Analysisof Results of Operations.” In particular, as a percentage of total revenue, our administrative andother operating expenses decreased constantly during the Track Record Period, accounting for29.9%, 24.2%, 17.1% and 8.4% in 2018, 2019 and 2020 and the first half of 2021, respectively.

As we continue to scale our business, we seek to continue managing our costs and expensesas percentages of revenue in an effective way by enhancing our control on expenses in relation toleasing of relevant properties, improving cost-efficiency of sales and marketing events, andreducing expenses associated with administrative work. In particular, by extending our storenetwork with a vision for accessing places enjoying strong potential and achieving optimizedsynergy with other stores nearby, we can further enhance sales with reduced management expenses.In the meantime, capitalizing on strong technology capability and continuous evolvement based onin-house team, we can further enhance quick sharing of, and analysis on information from broadrange of perspective and generated from different function modules within our Group. We expectthat continuous integration of data-driven business decision making and day-to-day managementstructure will serve us well in achieving economies of scale in line with business expansion.


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Optimized Logistics Infrastructure

During the Track Record Period, we invested in development and enhancement of our logisticscapabilities by establishing a network of distribution centers and regional warehouses with anational coverage in China that facilitates efficient reach to each of our stores. As of June 30, 2021,we had five national distribution centers located in Foshan, Dongguan, Tianjin, Jiaxing, andChengdu, serving our store network. As of June 30, 2021, our regional warehouse networkcomprised four warehouses operated by us and one cloud warehouse where we rented storage spacefrom third-party service providers.

To reduce effective travel distance of goods to be delivered to our stores and achieve improvedcost-efficiency for logistics, we intend to continue expanding the network of our logisticsinfrastructure by placing regional warehouse centers and preposition warehouses in strategiclocations, taking into account factors like ideal density of flow of goods covering respective regionto achieve optimal logistic efficiency, proper combination of bulk transportation and final deliveryof further sorted package of merchandise suitable for destination stores, as well as proper leadinventory time, stock replenishment and inventory turnover rate at store level. These measures areexpected to be beneficial to us by further reducing relevant costs and expenses as percentages ofrevenue, as we continue to ramp up our business scale.

The foregoing forward-looking statements are based on numerous assumptions regarding ourpresent and future business strategies and the environment in which we will operate in the future.These forward-looking statements involve known and unknown risks, uncertainties and otherfactors, some of which are beyond our control, which may cause the actual results, performance orachievements, or industry results, to be materially different from any future results, performance orachievements expressed or implied by these forward-looking statements. For related risks, see“Risk Factors — Risks Relating to Our Business and Industry — We may not be successful insustaining growth in our financial performance.”

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020

Revenue

Our revenue increased significantly by 235.1% from RMB502.4 million in the first half of2020 to RMB1,683.2 million in the same period of 2021.

Our revenue from the sales of goods increased substantially to RMB1,608.5 million in the firsthalf of 2021 as compared to RMB480.8 million in the same period of 2020 and such increase wasprimarily due to (i) a significant expansion of our store network, particularly the opening of 214new KKV stores and 169 new THE COLORIST stores from June 30, 2020 to June 30, 2021, whichincreased our sales of goods in the first half of 2021; and (ii) to a lesser extent, the increased salesof goods in our X11 stores in the first half of 2021 as compared to the same in 2020 as a result ofthe increased market demand of our products offerings at X11 stores and the new opening of eightX11 stores in the first half of 2021; which was partially offset by (i) a decrease in sales of goodsunder our KK Guan brand due to store closures, because we were reallocating strategic resourcesbetween our retail brands, with a focus on development of our KKV and THE COLORIST brands;and (ii) a decrease in revenue generated by online sales business due to the reorganization of suchbusiness in the second half of 2020.


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Our revenue from sales-based management and consultation service income increasedsubstantially to RMB74.6 million in the first half of 2021 as compared to RMB21.6 million in thesame period of 2020, primarily due to the increase in the number of our franchise stores from June30, 2020 to June 30, 2021. Such management and consultant fees were charged as a percentage ofmonthly GMV in accordance with respective franchise agreements. For details, see “Business —Network Management and Operations — Store Management — Management of Franchise Stores.”

Cost of Sales

Our cost of sales increased substantially to RMB1,073.2 million in the first half of 2021 ascompared to RMB350.6 million in the same period of 2020, which was generally in line with theincrease in our sales as a result of the increase in number of stores.


Our gross profit increased substantially by 301.9% from RMB151.8 million in the first halfof 2020 to RMB610.0 million in the same period of 2021, primarily because (i) our revenuegenerated from our business operations grew significantly, in line with an increase in the numberof our retail stores; (ii) our business operations were negatively affected by the outbreak ofCOVID-19 pandemic in China in the first half of 2020, during which period relevant localauthorities nationwide implemented strict lock-down and social distancing policies in many cities,resulting in temporary closures of our retail stores in early 2020; and (iii) we launched quickramp-up plan for development of our KKV and THE COLORIST brands, and many of our storesunder these two brand were still at their early ramp-up stage during the first half of 2020.

Our gross profit margin increased to 36.2% in the first half of 2021 from 30.2% in the sameperiod of 2020, primarily due to the increase in revenue generated from our KKV and THECOLORIST brands, in particular, (i) our KKV retail brand, which generally carries a broad rangeof merchandise selection and locates in premium commercial areas, had a relatively higher grossprofit margin, accounting for a greater portion of revenue from 44.2% in the first half of 2020 to62.3% in the same period of 2021; and (ii) to a less extent, our THE COLORIST retail brand, whichis a leading player of China’s beauty specialty retail industry, according to the Frost & SullivanReport, also had a relatively higher gross profit margin, accounting a greater portion of revenue of27.4% in the first half of 2021 as compared to 19.4% of our revenue in the same period of prior year.

Other Income

In the first half of 2020 and 2021, our other income was RMB11.2 million and RMB26.7million, accounting for 2.2% and 1.6% of our revenue for the same periods, respectively. Theincrease primarily resulted from (i) an increase in interest from loans to franchisees from RMB10.8million in the first half of 2020 to RMB20.5 million in the same period of 2021, due to the increasein the number of our franchise stores in first half of 2021. For details of our loans to franchiseesduring the Track Record Period, see “Business — Our Business Model — Self-owned Stores andFranchise Stores — Financial Support Provided to Franchisees;” and (ii) government grants ofRMB1.0 million received in the first half of 2021 in relation to a government funding scheme inShenzhen, in supportive of retail industry.


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Our selling and distribution expenses increased by 291.1% from RMB120.1 million in the firsthalf of 2020 to RMB469.9 million in the same period of 2021, primarily attributable to (i) theincrease in depreciation and amortization expenses which primarily related to our fixed assets in theretail stores and right-of-use assets such as the leases of the retails stores from RMB73.1 millionin the first half of 2020 to RMB200.3 million in the same period of 2021, as a result of an increaseof our self-owned stores from 79 stores as of June 30, 2020 to 288 stores as of June 30, 2021; (ii)the increase in logistics costs from RMB18.9 million in the first half of 2020 to RMB80.9 millionin the same period of 2021; (iii) the increase in staff costs from RMB24.7 million in the first halfof 2020 to RMB113.3 million in the same period of 2021; (iv) the increase in other rental expensesand property management fees from minus RMB6.8 million in the first half of 2020 to RMB25.1million in the same period of 2021; and (v) the increase in office expenses from RMB3.7 millionin the first half of 2020 to RMB17.0 million in the same period of 2021. All increases mentionedabove were driven by our business expansion, particularly the opening of new stores during thisperiod.

As a percentage of revenue, our selling and distribution expenses increased from 23.9% in thefirst half of 2020 to 27.9% in the same period of 2021, primarily attributable to the impact of theresurgence of COVID-19 pandemic on our revenue growth in the first half of 2021 in addition torent concessions we received in relation to the pandemic in the first half of 2020.


Our administrative and other operating expenses increased from RMB108.1 million in the firsthalf of 2020 to RMB141.0 million in the same period of 2021, primarily attributable to (i) theincrease in staff costs from RMB44.1 million in the first half of 2020 to RMB80.9 million in thesame period of 2021, mainly due to the increase in total number of our employees at headquarters-level from 730 as of June 30, 2020 to 1,115 as of June 30, 2021; (ii) the increase in depreciationand amortization expenses in connection with our office premises and leased properties fromRMB9.3 million in the first half of 2020 to RMB17.4 million in the same period of 2021 as a resultof our business operation expansion; and (iii) the increase in professional service fees from RMB5.8million in the first half of 2020 to RMB9.4 million in the same period of 2021, primarily due toengagement of professional parties in connection with this [REDACTED] and rounds of financingactivities in the first half of 2021. For details about our past rounds of financing, see “History,Reorganization and Corporate Structure — Our Corporate History and Major Shareholding Changesof Our Group.”

As a percentage of revenue, our administrative and other operating expenses decreased from21.5% in the first half of 2020 to 8.4% in the same period of 2021, primarily due to variouscost-effective measures adopted by us and our improved operational efficiency at headquarters-level.

Finance Costs

Our finance costs increased by 148.3% from RMB17.7 million in the first half of 2020 toRMB43.9 million in the same period of 2021, primarily due to (i) the increase in interest on leaseliabilities from RMB13.3 million in the first half of 2020 to RMB34.9 million in the first half of2021. The increased interest on lease liabilities was predominantly attributable to the increase innumber of our leased properties, mainly as a result of store network expansion. Under the HKFRS16, we were required to recognized lease liabilities as part of our obligation to make leasepayments; and (ii) to a lesser extent, the increase in interests on loans and borrowings from RMB4.4million in the first half of 2020 to RMB9.0 million in the same period of 2021, primarily due to ourcontinued debt financing to support our business operation and expansion.


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We recognized share of losses from joint ventures in the sum of RMB0.8 million andRMB31.8 million in the first half of 2020 and 2021, respectively, as some of our joint ventures werestill at their early stage of development. Our share of losses from joint ventures in the first half of2020 was considerably less than that in the same period in 2021, primarily due to the rentconcessions received by our joint ventures in the first half of 2020 in view of the COVID-19pandemic.


Our fair value changes of financial liabilities measured at FVTPL amounted to RMB445.5million and RMB4,353.9 million in the first half of 2020 and 2021, respectively. The increase wasprimarily attributable to changes in the valuation of our Company. As the valuation of our Companyincreased, the financial liabilities measured at FVTPL also increased. For details, see “—Description of Select Combined Statements of Comprehensive Income Line Items — Fair ValueChanges of Financial Liabilities Measured at FVTPL.”

Income Tax

In the first half of 2020 and 2021, we recorded income tax credit in the sum of RMB16.3million and RMB6.7 million, respectively. The decrease in our income tax credit was primarily dueto the increase in our current tax in the first half of 2021, which is partially offset by an increasein our deferred tax. Our current tax increased from RMB0.9 million in the first half of 2020 toRMB16.5 million in the same period of 2021, primarily because more subsidiaries in our Groupachieved profitability in the first half of 2021. Our deferred tax increased by 35.4% from RMB17.2million in the first half of 2020 to RMB23.3 million in the same period of 2021 primarily due tothe increased tax losses recognized by our subsidiaries due to the expansion of our store network.According to the PRC Tax Law, tax losses incurred by an entity in a year may be deducted fromits taxable income in the succeeding five years, based on which we estimated our deferred taxcredits for each year.

Loss for the Period

As a result of the foregoing, we reported loss of RMB512.9 million and RMB4,397.1 million,respectively, in the first half of 2020 and 2021.

Year Ended December 31, 2020 Compared with Year Ended December 31, 2019

Revenue

Our revenue increased significantly by 254.9% from RMB463.7 million in 2019 toRMB1,645.9 million in 2020.

Our revenue from the sales of goods increased substantially to RMB1,566.1 million in 2020compared to RMB440.8 million in 2019, and such increase was primarily due to (i) a significantincrease in the number of our retail stores, particularly the opening of 168 new KKV stores and 223new THE COLORIST stores in 2020, which increased our sales of goods in the same year; and (ii)to a lesser extent, the increase in sales of goods in our X11 stores in 2020 as a result of the openingof four new X11 stores; partially offset by a decrease of 10.2% in the revenue generated from ourretail stores under our brand KK Guan, primarily as a result of an upgrade of our brand portfolio,including introduction of new brands on which we have placed more strategic resources whichcaused our sales of goods under the KK Guan to decrease.


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Our revenue from sales-based management and consultation service income increasedsubstantially to RMB79.8 million in 2020 compared to RMB22.9 million in 2019, primarily due tothe increase in the number of our franchise stores in 2020. Such management and consultant feeswere charged as a percentage of monthly GMV in accordance with respective franchise agreements.For details, see “Business — Network Management and operations — Store Management —Management of Franchise Stores.”

Cost of Sales

Our cost of sales increased substantially to RMB1,146.2 million in 2020 as compared toRMB337.9 million in 2019, as we increased our inventory level to keep pace with expansion of ourstore network, particularly in the second half of 2020. Our increased cost of sales was primarily inrelation to the KKV and THE COLORIST retail brands, as we opened 168 new KKV stores and 223new THE COLORST stores in 2020, respectively.


Our gross profit increased substantially by 297.1% to RMB499.7 million in 2020 as comparedto RMB125.8 million in 2019, primarily because our revenue generated from business operationsgrew significantly, in line with our business expansion and an increase in the number of our retailstores.

Our gross profit margin increased from 27.1% in 2019 to 30.4% in 2020, primarily because(i) our KKV retail brand, which generally carries a broad range of merchandise selection and locatesin premium commercial areas, had a relatively higher gross profit margin, accounted for an greaterportion of revenue from 17.7% in 2019 to 50.7% in 2020; and (ii) to a less extent, our THECOLORIST retail brand, which also had a relatively higher gross profit margin, represented agreater portion of revenue to 26.7% in 2020 as compared to 4.3% in 2019. The increases mentionedabove were driven by an upgrade of our brand portfolio, as we shifted resources to supportdevelopment of KKV and THE COLORIST retail brands strategically.

Other Income

In 2019 and 2020, our other income was RMB9.1 million and RMB34.9 million, respectively,accounting for 2.0% and 2.1% of our revenue for the same periods. The increase in our other incomein 2020 was primarily due to the significant increase in interests from loans to franchisees fromRMB5.2 million in 2019 to RMB30.0 million in 2020 due to the increase in the number of ourfranchise stores to 424 as of December 31, 2020 from 164 as of December 31, 2019. For details ofour loans to franchisees during the Track Record Period, see “Business — Our Business Model —Self-owned Stores and Franchise Stores — Financial Support Provided to Franchisees.”


Our selling and distribution expenses increased by 254.8% from RMB111.4 million in 2019to RMB395.3 million in 2020, primarily attributable to (i) the increase in depreciation andamortization from RMB41.3 million in 2019 to RMB199.7 million in 2020; (ii) the increase fromRMB19.6 million in 2019 to RMB70.1 million in 2020 in staff cost driven by a growth in thenumber of our sales and marketing personnel from 541 as of December 31, 2019 to 1,634 as ofDecember 31, 2020; and (iii) an increase in logistics fees from RMB32.2 million in 2019 toRMB89.6 million in 2020. The increases mentioned above were primarily driven by a majorexpansion in our store network, from 211 as of December 31, 2019 to 556 as of the same date in2020, in terms of number of retail stores. Such increase in selling and distribution expenses werepartially offset by a rent concession granted by our landlords in 2020 amidst the COVID-19pandemic.


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As a percentage of revenue, our selling and distribution expenses remained at stable 24.0% in2019 and 2020, respectively.


Our administrative and other operating expenses increased significantly from RMB112.1million in 2019 to RMB281.9 million in 2020, primarily attributable to (i) the increase in staff costsfrom RMB50.1 million in 2019 to RMB114.9 million in 2020, mainly due to the increase in totalnumber of employees at headquarters-level from 549 as of December 31, 2019 to 971 as ofDecember 31, 2020; (ii) the increase in professional service fees from RMB7.4 million in 2019 toRMB24.2 million in 2020, mainly because of our increased demand for financial services andprofessional consultation amid rapid expansion of our business; (iii) the increase in depreciationand amortization from RMB15.0 million in 2019 to RMB23.3 million in 2020, which reflected ourincreased property, plant and equipment; (iv) the increase in office expenses from RMB5.3 millionin 2019 to RMB15.5 million in 2020 related to the expansion in our store network; (v) the increasein other rental expenses and property management fees from RMB5.0 million in 2019 to RMB13.3million in 2020, driven by a major store network expansion from 2019 to 2020; (vi) the increasein advertising expenses from RMB4.3 million in 2019 to RMB10.3 million in 2020 because of ourimproved resource allocation to finance marketing activities; and (vii) to a lesser extent, an increasein traveling and entertainment expenses from RMB6.4 million in 2019 to RMB8.3 million in 2020.

As a percentage of revenue, our administrative and other operating expenses decreased from24.2% in 2019 to 17.1% in 2020, primarily attributable to our decreasing marginal administrativeand other operating expenses as a result of improved operational efficiency at headquarters-level tosustain our business growth.

Finance Costs

Our finance costs increased by 497.1% from RMB8.2 million in 2019 to RMB49.2 million in2020, primarily due to (i) the increase in interest on our lease liabilities from RMB5.5 million in2019 to RMB35.2 million in 2020. The increased interest on lease liabilities was predominantlyattributable to the increase in number of our leased properties, mainly as a result of store networkexpansion. Under the HKFRS 16, we were required to recognized lease liabilities as part of ourobligation to make lease payments; and (ii) the increase in interest on loans and borrowings fromRMB2.7 million in 2019 to RMB14.0 million in 2020 primarily due to our continued debt financingto support our business operation and expansion.


We recognized share of losses from joint ventures of nil and RMB16.2 million in 2019 and2020, respectively. We incurred share of losses from joint ventures in 2020 primarily because ourjoint ventures were still at their early stage of their development and operating at losses.


Our fair value changes of financial liabilities measured at FVTPL amounted to RMB437.6million and RMB1,842.5 million in 2019 and 2020, respectively. The increase was primarilyattributable to changes in the valuation of our Company. As the valuation of our Companyincreased, the financial liabilities measured at FVTPL also increased. For details, see “—Description of Select Combined Statements of Comprehensive Income Line Items — Fair ValueChanges of Financial Liabilities Measured at FVTPL.”


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Income Tax

In 2019 and 2020, we recorded income tax credit in the sum of RMB19.9 million andRMB33.2 million, respectively. The increase in our income tax credit was primarily due to theincrease in our deferred tax in 2020, which was partially offset by an increase in our current tax inthe same year. Our deferred tax increased by 73.6% from RMB20.2 million in 2019 to RMB35.0in 2020, primarily due to the increased tax losses recognized by our subsidiaries due to theexpansion of our store network.

Loss for the Period

As a result of the foregoing, we reported loss for the period of RMB514.5 million andRMB2,017.2 million, respectively, in 2019 and 2020.

Year ended December 31, 2019 Compared with Year ended December 31, 2018

Revenue

Our revenue increased significantly by 198.6% from RMB155.3 million in the year endedDecember 31, 2018 to RMB463.7 million in the same period of 2019.

Our revenue from the sales of goods increased substantially to RMB440.8 million in 2019compared to RMB151.2 million in 2018. Such increase was primarily due to a significant expansionof our store network, particularly the new opening of 119 KK Guan stores and 35 KKV stores in2019, which increased our sale of goods.

Our revenue from sales-based management and consultation service income increasedsubstantially to RMB22.9 million in 2019 compared to RMB4.1 million in 2018. This increase wasdriven by the increase in the number of our franchise stores. Such management and consultant feeswere charged as a percentage of monthly GMV in accordance with respective franchise agreements.For details, see “Business — Network Management and Operations — Store Management —Management of Franchise Stores.”

Cost of Sales

Our cost of sales increased substantially to RMB337.9 million in 2019 as compared toRMB105.5 million in 2018 primarily due to the increase in inventory levels in line with storenetwork expansion, in particular, (i) the increased inventories related to KK Guan retail brand, aswe opened 119 new stores under this brand in 2019; (ii) the increased inventories related to KKVretail brand, as we launched it as a new specialty retail brand in 2019, and there were 35 storesunder this brand opened in the same year; and (iii) to a lesser extent, the increased inventoriesrelated to THE COLORIST retail brand, as we launched it as a new specialty retail brand in 2019,and opened 7 stores under this brand in the same year.


Our gross profit increased substantially to RMB125.8 million in 2019 compared to RMB49.8million in 2018, primarily because our revenue generated from business operations grewsignificantly, in line with our business expansion and an increase in the number of our retail stores.


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Our gross profit margin decreased from 32.1% in 2018 to 27.1% in 2019, primarily becausethe decrease in the gross profit margin of KK Guan retail brand to 23.5% in 2019 as compared to31.4% in 2018. Revenue generated in relation to KK Guan retail brand amounted to RMB357.2million in 2019, representing 77.0% of our total revenue in the same year.

Other Income

In 2018 and 2019, other income were RMB78,000 and RMB9.1 million, respectively,accounting for 0.1% and 2.0% of our revenue for the same periods. The increase was primarilyattributable to (i) an increase from nil in 2018 to RMB5.2 million in 2019 in interest from loans tofranchisees, in line with our business expansion of our franchise stores; and (ii) an increase fromnil in 2018 to RMB3.0 million in 2019 in government grants, which mainly consisted of governmentsubsidies granted for relocation of our office premises in 2019.


Our selling and distribution expenses increased by 102.7% from RMB55.0 million in 2018 toRMB111.4 million in 2019, primarily attributable to (i) an increase from RMB5.8 million in 2018to RMB32.2 million in 2019 in logistics fees, which reflected our increased logistics activitiesconsistent with the increase in our sales of goods and increase in number of our retail stores; and(ii) an increase from RMB10.2 million in 2018 to RMB19.6 million in 2019 in staff costs relatedto our marketing and sales personnel, mainly due to increased demand for advertising activities dueto expansion of store network.

As a percentage of revenue, our selling and distribution expenses decreased from 35.4% in2018 to 24.0% in 2019, primarily attributable to the greater growth rate of our revenue during thesame period.


Our administrative and other operating expenses increased significantly from RMB46.5million in 2018 to RMB112.1 million in 2019, primarily attributable to (i) an increase fromRMB20.4 million in 2018 to RMB50.1 million in 2019 in staff costs, mainly due to the increase inthe total headcount of our personnel at headquarters-level from 199 as of December 31, 2018 to 549as of December 31, 2019 as a result of greater demands for talent from various departments tosustain our continued business expansion; (ii) an increase from RMB3.2 million in 2018 toRMB15.0 million in 2019 in depreciation and amortization, primarily due to the increase in ourproperty, plant and equipment; (iii) an increase from RMB1.3 million in 2018 to RMB7.4 millionin 2019 in professional service fees, as we evolved into a fast-growing market leader in China’s newretail industry, triggering an increased need for financial services and professional consultation; (iv)an increase in traveling and entertainment expenses to RMB6.4 million in 2019 from RMB2.8million in 2018 in connection with our more frequent business development activities; (v) anincrease in office expenses from RMB2.6 million in 2018 to RMB5.3 million in 2019 in line withexpansion of our store network; and (vi) an increase from RMB3.1 million in 2018 to RMB5.0million in 2019 in other rental expenses and property management fees, primarily because wecontinually expanded our office premises in line with our business growth.

As a percentage of revenue, our administrative and other operating expenses decreased from29.9% in 2018 to 24.2% in 2019, primarily attributable to a decrease in staff costs as a percentageof our total revenue from 13.1% to 10.8% as a result of improved operational efficiency atheadquarters-level to sustain our business growth.


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Finance Costs

Our finance costs increased substantially from RMB2.9 million in 2018 to RMB8.2 million in2019, primarily due to an increase in interest on lease liabilities. The increased interest on leaseliabilities was predominantly attributable to the increase in number of our leased properties, mainlyas a result of store network expansion.


Our fair value changes of financial liabilities measured at FVTPL amounted to RMB37.7million and RMB437.6 million in 2018 and 2019, respectively. The increase was primarilyattributable to changes in the valuation of our Company. As the valuation of our Companyincreased, the financial liabilities measured at FVTPL also increased. For details, see “—Description of Select Combined Statements of Comprehensive Income Line Items — Fair ValueChanges of Financial Liabilities Measured at FVTPL.”

Income Tax

In 2018 and 2019, we recorded income tax credit in the sum of RMB12.7 million andRMB19.9 million, respectively. The increase in our income tax credit was primarily due to theincrease in our deferred tax in 2019, which was partially offset by a slight increase in our currenttax in the same year. Our deferred tax increased by 55.4% from RMB13.0 million in 2018 toRMB20.2 million in 2019, primarily due to the increased tax losses recognized by our subsidiariesdue to the expansion of our store network.

Loss for the Period

As a result of the foregoing, we reported loss for the period of RMB79.5 million andRMB514.5 million, respectively, in 2018 and 2019.

DISCUSSION OF CERTAIN STATEMENTS OF FINANCIAL POSITION ITEMS

The table below sets forth selected information from our combined statements of financialposition as of the dates indicated, which have been extracted from our combined financialstatements included in the Accountants’ Report in Appendix I to this document:


June 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Total non-current assets . . . . . . . . . . . . . . . . . . 78,359 533,727 1,831,953 2,358,143

Total current assets . . . . . . . . . . . . . . . . . . . . . 169,666 918,219 1,282,415 2,846,710

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . 248,025 1,451,946 3,114,368 5,204,853

Total non-current liabilities . . . . . . . . . . . . . . . . (186,693) (1,579,253) (4,865,698) (11,328,341)

Total current liabilities . . . . . . . . . . . . . . . . . . . (162,370) (584,249) (958,479) (858,082)

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . (349,063) (2,163,502) (5,824,177) (12,186,423)

Net liabilities . . . . . . . . . . . . . . . . . . . . . . . . (101,038) (711,556) (2,709,809) (6,981,570)


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Current Assets and Current Liabilities

The following table sets forth our current assets and current liabilities as of the datesindicated:


June 30,As of

September 30,

2018 2019 2020 2021 2021


Current assetsInventories . . . . . . . . . . . . . . . . . . . . 69,624 477,893 740,860 985,404 1,010,396Trade and other receivables . . . . . . . . . . 71,614 206,618 373,194 743,761 896,635Cash and cash equivalents . . . . . . . . . . . 28,126 233,291 168,294 1,116,840 771,625Income tax recoverable . . . . . . . . . . . . 302 417 37 37 37Restricted bank deposits . . . . . . . . . . . – – 30 668 668Other investments . . . . . . . . . . . . . . . . – – – – 49,000

Total current assets . . . . . . . . . . . . . . 169,666 918,219 1,282,415 2,846,710 2,728,361

Current liabilitiesTrade and other payables. . . . . . . . . . . . 109,785 311,855 486,180 523,058 477,880Loans and borrowings . . . . . . . . . . . . . 33,000 215,737 305,346 70,385 58,364Lease liabilities . . . . . . . . . . . . . . . . . 19,321 56,393 165,325 248,780 317,273Current taxation . . . . . . . . . . . . . . . . . 264 264 1,628 15,859 17,688

Total current liabilities . . . . . . . . . . . . 162,370 584,249 958,479 858,082 871,205

Net current assets . . . . . . . . . . . . . . . 7,296 333,970 323,936 1,988,628 1,857,156

Our net current assets decreased slightly from RMB1,988.6 million as of June 30, 2021 toRMB1,857.2 million as of September 30, 2021. The decrease was mainly due to (i) the decrease incash and cash equivalents from RMB1,116.8 million as of June 30, 2021 to RMB771.6 million asof September 30, 2021 primarily due to the payments and prepayments we made for renovation anddecoration of new retail stores, and repayments of bank loans, to a lesser extent; and (ii) thedecrease in trade and other payables from RMB523.1 million as of June 30, 2021 to RMB477.9million as of September 30, 2021 because of our settlement of such outstanding amount; partiallyoffset by the increases in both inventories and trade and other receivables driven by our continuedstore networking expansion and business growth.

Our net current assets increased from RMB323.9 million as of December 31, 2020 toRMB1,988.6 million as of June 30, 2021, primarily due to (i) the increase in cash and cashequivalents from RMB168.3 million as of December 31, 2020 to RMB1,116.8 million as of June 30,2021, as a result of the net proceeds received in connection with series F financing; (ii) the increasein trade and other receivables from RMB373.2 million as of December 31, 2020 to RMB743.8million as of June 30, 2021 in relation to our business expansion and increased sales of goods; and(iii) the increase in inventories both at headquarters-level and store-level.

Our net current assets decreased slightly from RMB334.0 million as of December 31, 2019 toRMB323.9 million as of December 31, 2020, primarily due to (i) an increase in trade and otherpayables from RMB311.9 million as of December 31, 2019 to RMB486.2 million as of December31, 2020, primarily due to the increased inventory procurement, driven by the opening of new retailstores; (ii) an increase in lease liabilities from RMB56.4 million as of December 31, 2019 toRMB165.3 million as of December 31, 2020 a result of the expansion of our self-owned storenetwork; partially offset by the increase in inventories and trade and other receivables.


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Our net current assets increased significantly from RMB7.3 million as of December 31, 2018to RMB334.0 million as of December 31, 2019, primarily due to (i) the increase in inventories fromRMB69.6 million as of December 31, 2018 to RMB477.9 million as of December 31, 2019; (ii) theincrease in cash and cash equivalents, resulting from the net proceeds of RMB568.7 million wereceived from our series C and Pre-D rounds of financing; (iii) the increase in trade and otherreceivables from RMB71.6 million as of December 31, 2018 to RMB206.6 million as of December31, 2019; the increases mentioned in (i) and (iii) above were attributable to our expansion ofbusiness operation during that period. The increase in net current assets was partially offset mainlyby (i) the increase in trade and other payables from RMB109.8 million as of December 31, 2018to RMB311.9 million as of December 31, 2019 in relation to new stores opening; and (ii) theincrease in loans and borrowings from RMB33.0 million as of December 31, 2018 to RMB215.7million as of December 31, 2019, in connection with the borrowing agreements we entered into withShanghai Black Algae Investment Management Center (Limited Partnership) (上海黑藻投資管理中心(有限合夥)).

Inventories

Our inventories consisted of (i) merchandise, which we purchase from Third Party BrandPartners and our OEM and ODM contractors for sales or display to our customers; and (ii)low-value consumables such as stationery and packaging materials. In general, our inventoryturnover days is higher as compared to other peers in the market, because we place a large volumeof merchandise for display in our retail stores as part of our aesthetic business philosophy. In termsof retail store layouts, we present our merchandise in aesthetic styles, such as pyramids and displaywalls, to provide immersive shopping experience to our customers. See “Business — Logistics andInventory Management — Inventory Control” for details on our inventory management, and“Business — Our Business Model — Our Retail Brands” for pictures illustrating aestheticmerchandise display in our retail stores.

The following table sets forth a breakdown of our total inventories as of each date indicated:


June 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Merchandise. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,653 447,077 727,168 961,349Low-value consumables . . . . . . . . . . . . . . . . . . . . . . 1,971 30,816 13,692 24,055

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,624 477,893 740,860 985,404

Our inventories increased significantly from RMB69.6 million as of December 31, 2018 toRMB477.9 million as of December 31, 2019, and further increased to RMB740.9 million as ofDecember 31, 2020 and RMB985.4 million as of June 30, 2021, primarily due to increased demandsfor our merchandise as a result of our retail store network expansion.

The following table sets forth our inventory turnover days for the periods indicated:


For thesix months

endedJune 30,

2018 2019 2020 2021

Inventory turnover days(1) . . . . . . . . . . . . . . . . . . . 163 301 196 150


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Note

(1) Inventory turnover days for each one-year period equals the average of the beginning and ending inventory, excludingwrite-down of inventories, for that year divided by carrying amount of inventories sold for the same year andmultiplied by 365 days. Inventory turnover days for a six-month period equals the average of the beginning andending inventory, excluding write-down of inventories, for that period divided by carrying amount of inventories soldfor the same period and multiplied by 183 days.

Our inventory turnover days increased from 163 days in 2018 to 301 days in 2019 primarilydue to (i) increased stock of our merchandise in the last two months of 2019, as to get ready forthe then expected increased demand for our products during the 2020 Chinese New Year; and (ii)more categories of our products were demonstrated in our retail stores in 2019 than the previousyear. Our inventory turnover days decreased from 301 days in 2019 to 196 days in 2020, and furtherdecreased to 150 days in the first half of 2021, primarily because we implemented a series ofmeasures to improve our inventory management, such as adoption of frequent procurement policy,reduction in purchase value of each procurement, and continuous expansion and better utilizationof our national and regional warehouse network.

As of September 30, 2021, RMB634.8 million, or 64.4%, of our inventory balance as of June30, 2021 had been sold or utilized.

Trade and Other Receivables

The following table sets forth a breakdown of the current portion of our trade and otherreceivables as of each date indicated:


June 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . – – 461 919Rental deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,800 20,806 73,820 158,695Input VAT recoverable . . . . . . . . . . . . . . . . . . . . . . . – 32,565 55,527 75,725Amount due from Directors(1) . . . . . . . . . . . . . . . . . . 5,450 16,911 16,046 –Prepayments to suppliers . . . . . . . . . . . . . . . . . . . . . 5,441 78,296 72,292 184,023Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,086 2,929 6,581 12,454Amount due from franchisees(2) . . . . . . . . . . . . . . . . . 44,837 54,683 91,374 173,143Amount due from joint ventures(2) . . . . . . . . . . . . . . . . – – 47,172 128,881Loans to franchisees(3) . . . . . . . . . . . . . . . . . . . . . . . – 428 9,921 9,921

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,614 206,618 373,194 743,761

Notes:

(1) Outstanding amount due from Directors, Mr. Wu and Mr. Guo. Such balances were unsecured, interest-free and hadbeen settled as of June 30, 2021.

(2) Amount due from franchisees and joint ventures are non-trade in nature, unsecured, interest-free and will be recoveredwithin one year.

(3) Loans to franchisees are non-trade in nature, unsecured and interest-bearing and will be recovered within one year.


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Trade Receivables

Our trade receivables mainly represented receivables due from third parties in connection withthe sales of our products online. We seek to maintain strict control over our outstanding receivables.Overdue balances are reviewed regularly by management. Our trade receivables are in generalunsecured and non-interest-bearing. We do not hold any collateral or other credit enhancementsover our trade receivable balances.

The following table sets forth an aging analysis of our trade receivables based on the invoicedate and net of loss allowance as of the dates indicated:


June 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Undue or within three months . . . . . . . . . . . . . . – – 461 919

The following table sets forth our trade receivables turnover days for the periods indicated:

For the Year ended December 31,

For theSix Months

endedJune 30,

2018 2019 2020 2021

Trade receivables turnover days(1) . . . . . . . . . . . . – – 0.1 0.1

Note:

(1) Trade receivables turnover days are based on the average balance of trade receivables divided by total revenuesfor the relevant period and multiplied by the number of days in the relevant period. Average balance iscalculated as the average of the beginning balance and ending balance of a given period. The number of daysfor the years ended December 31 and for the six months ended June 30 is 365 days and 183 days, respectively.

Our trade receivables turnover days was nil, nil, 0.1 day and 0.1 day in 2018, 2019, 2020 andthe first half of 2021, respectively. During the Track Record Period, we were efficient in terms oftrade receivables collection mainly because (i) for our self-owned stores, we usually require cashpayment from end customers upon checkout of merchandise; and (ii) for franchise stores, ourfranchisees, in accordance with relevant franchise agreements, do not own legal title of merchandisewhich we dispatch to their premises, until the moment end customers make purchases, leading totransfer of ownership to franchisees and then to end customers immediately.

As of September 30, 2021, all of our trade receivables outstanding as of June 30, 2021 hadbeen subsequently collected.


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Rental Deposits

Our rental deposits mainly related to deposits we lodged in connection with leased propertiesfor our own use, such as retail stores and office premises. Our rental deposits increased fromRMB7.8 million as of December 31, 2018 to RMB20.8 million as of December 31, 2019 and furtherincreased to RMB73.8 million as of December 31, 2020 and RMB158.7 million as of June 30, 2021,mainly attributable to the increase in number of our self-owned stores as a result of our businessand store network expansion, which was line with our business strategies.

Input VAT Recoverable

Our input VAT recoverable mainly represented VAT that could be recovered, related toinventories purchases. The increased of our input VAT recoverable during the Track Record Periodprimarily reflected our increased inventories procurement, which was generally in line with ourbusiness expansion and the increased demands for our merchandises.

Amount due from Directors

The amount due from Directors mainly represented advance from members of the SingleLargest Shareholders Group, namely Mr. Wu and Mr. Guo, to our Group during the Track RecordPeriod. Such amount was unsecured and interest-free. As of June 30, 2021, our outstanding balancewith Mr. Wu and Mr. Guo had been fully settled.

Others

Others mainly represented the advance payments to franchise stores related to marketingactivities.

Amount due from Franchisees

Amount due from franchisees mainly represented payments we made on behalf of franchiseesin respect of (i) utilities bills, rentals, employees’ salaries and other miscellaneous day-to-dayoperating expenses of the franchise stores; and (ii) initial store decoration and opening relatedexpenses. Such amount was non-interest bearing and unsecured. Our amount due from franchiseesincreased from RMB44.8 million as of December 31, 2018 to RMB54.7 million as of December 31,2019, RMB91.4 million as of December 31, 2020, and further to RMB173.1 million as of June 30,2021, primarily due to the increase in number of franchisees we engaged in the respective periods,and our overall business growth. For details, see “Business — Our Business Model — Self-ownedStores and Franchise Stores — Financial Support Provided to Franchisees.” We expect to settle theamount due from franchisees in full prior to the [REDACTED].

Amount due from Joint Ventures

Amount due from joint ventures mainly represented payments we made on behalf of our jointventures in respect of (i) utilities bills, rentals, employees’ salaries and other miscellaneousday-to-day operating expenses; and (ii) initial store decoration and opening-related expenses. Fordetails, see “Business — Our Business Model — Self-owned Stores and Franchise Stores —Financial Support Provided to Franchisees.” Such amount was non-interest bearing and unsecured.Our amount due from joint ventures increased from nil as of December 31, 2018 and December 31,2019, to RMB47.2 million as of December 31, 2020 and further to RMB128.9 million as of June30, 2021, primarily due to the increase in number of joint ventures we had in the respective periods,and our overall business growth. We expect to settle the amount due from joint ventures prior to the[REDACTED]. For details, see “— Related Party Transactions.”


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Loans to Franchisees, Current Portion

Current portion of loans to franchisees mainly represented loans we provided to franchiseesin respect of the initial store decoration and opening-related expenses, which are expected to berepaid within one year. Such loans were interest-bearing and unsecured. Our current portion ofloans to franchisees increased from nil as of December 31, 2018 to RMB0.4 million as of December31, 2019, and further increased to RMB9.9 million as of December 31, 2020, as we deepened ourcollaboration with an increasing number of franchisees. Compared to December 31, 2020, thecurrent portion of such loans remained unchanged as of June 30, 2021. For details and settlementarrangement of loans to franchisees, please see “Business — Our Business Model — Self-ownedStores and Franchise Stores — Financial Support Provided to Franchisees — Loans to franchisees.”

Cash and Cash Equivalents

Our cash and cash equivalents primarily comprise cash at bank and third-party paymentplatforms. During the Track Record Period, substantially all of our cash and cash equivalents weredenominated in Renminbi. Our cash and cash equivalents were RMB28.1 million, RMB233.3million, RMB168.3 million and RMB1,116.8 million, as of December 31, 2018, 2019, 2020 andJune 30, 2021, respectively. The increase in our cash and cash equivalents during the Track RecordPeriod was primarily attributable to our [REDACTED] Investments, as well as overall businessgrowth.

Trade and Other Payables

Our trade and other payables consist of trade payables due to third parties, staff costspayables, and other payables.

The following table sets forth a breakdown of our trade and other payables as of the datesindicated:


June 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,323 135,601 240,707 297,518

Staff costs payables . . . . . . . . . . . . . . . . . . . . . . . . 5,313 18,261 45,757 56,737

Other payables and accrued charges . . . . . . . . . . . . . . . 29,013 116,105 132,840 94,545

Amount due to franchisees . . . . . . . . . . . . . . . . . . . . 61,399 37,917 52,917 46,303

Amount due to joint ventures . . . . . . . . . . . . . . . . . . – – 8,881 6,555

VAT payables . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,737 3,971 5,078 21,400

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,785 311,855 486,180 523,058

Our trade and other payables increased from RMB109.8 million as of December 31, 2018 toRMB311.9 million as of December 31, 2019, and further to RMB486.2 million as of December 31,2020 and RMB523.1 million as of June 30, 2021. Such changes were primarily driven by ourcontinuous business expansion during the Track Record Period, particularly the increase in thenumber of our retail stores, resulting in an increase in inventory procurement in order to support ourbusiness expansion.


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Trade Payables

During the Track Record Period, a substantial majority of our trade payables were aged withinthree months. The following table sets forth an aging analysis, based on the invoice date, of ourtrade payables due to third parties as of the dates indicated:


June 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Aging analysis

Unbilled or within three months . . . . . . . . . . . . . . . . . 9,810 134,330 235,325 296,512

Three to six months . . . . . . . . . . . . . . . . . . . . . . . . 33 276 2,789 –

Six to 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . 12 225 1,712 830

Over 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . 468 770 881 176

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,323 135,601 240,707 297,518

The following table sets forth the turnover days of our trade payables due to third parties forthe periods indicated:

For the yearended December 31,

For thesix months

ended June 30,

2018 2019 2020 2021

Trade payables turnover days(1) . . . . . . . . . . . . . . . 27 79 60 46

Note:

(1) Trade payables turnover days are based on the average balance of trade payables divided by cost of sales for therelevant period and multiplied by the number of days in the relevant period. Average balance is calculated as theaverage of the beginning balance and ending balance of a given period. The number of days for the years endedDecember 31 and the six months ended June 30 is 365 days and 183 days, respectively.

The turnover days of trade payables due to third parties increased from 27 days in 2018 to 79days in 2019, primarily because our suppliers generally agreed to give us a longer credit period, dueto our enhanced bargaining power as a result of the increase in our business scale and ourprocurement amount. The turnover days of trade payables due to third parties decreased to 60 daysin 2020, and further decreased to 46 days in the first half of 2021, primarily because we offeredshorter credit term to our suppliers in exchange of more favorable procurement price ofmerchandise.

As of September 30, 2021, all of our trade payables outstanding as of June 30, 2021 had beensubsequently settled.


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Staff Costs Payables

Our staffs costs payable mainly represented the unpaid salaries and welfares payable as wellas our provision for social security insurance and housing provident fund during the Track RecordPeriod. Our staff costs payables increased from RMB5.3 million as of December 31, 2018 toRMB18.3 million as of December 31, 2019 and further increased to RMB45.8 million as ofDecember 31, 2020. Our staff costs payables continued to increase from RMB45.8 million as ofDecember 31, 2020 to RMB56.7 million as of June 30, 2021. Such increases were mainly due to(i) our business expansion which resulted in the increase in number of our personnel; and (ii)increase in our provision for social security insurance and housing provident fund during the TrackRecord Period.

Other Payables and Accrued Charges

Our other payables and accrued charges are primarily associated with store opening expensesand utilities expenses in relation to new retail stores. Our other payables and accrued chargesincreased from RMB29.0 million as of December 31, 2018 to RMB116.1 million as of December31, 2019 and subsequently increased to RMB132.8 million as of December 31, 2020, primarily dueto the increased initial store opening expenses in relation to the expansion of our store network. Ourother payables and accrued charges decreased from RMB132.8 million as of December 31, 2020 toRMB94.5 million as of June 30, 2021, primarily due to our settlement of such outstanding amount.

Amount due to Franchisees

Our amount due to franchisees mainly represented payments we received on behalf offranchisees. As of December 31, 2018, 2019 and 2020 and June 30, 2021, our amount due tofranchisees was RMB61.4 million, RMB37.9 million, RMB52.9 million and RMB46.3 million,respectively.

Amount due to Joint Ventures

Our amount due to joint ventures mainly represented payments we received on behalf of ourjoint ventures. As of December 31, 2018, 2019 and 2020 and June 30, 2021, our amount due to jointventures was nil, nil, RMB8.9 million and RMB6.6 million, respectively.

VAT Payables

Our VAT payables primarily related to purchase of inventories which had not been settled asof the balance sheet date. The increase in VAT payables during the Track Record Period was in linewith the expansion of our store network.

Loans and Borrowings

For details on the current portion of our loans and borrowings and lease liabilities, and theirrespective fluctuations during the Track Record Period, see “— Indebtedness.”


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Non-current Assets and Non-Current Liabilities

Property, Plant and Equipment

Our property, plant and equipment consist primarily of (i) leasehold improvements; (ii) officeequipment; (iii) motor vehicles; (iv) store equipment, furniture and fittings; and (v) construction inprogress. The following table sets forth a breakdown of the net book value of our property, plantand equipment as of the dates indicated:


June 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Leasehold improvements . . . . . . . . . . . . . . . . . . . . . 14,971 52,268 230,322 281,634

Store equipment, furniture and fittings . . . . . . . . . . . . . 7,085 27,190 157,140 205,236

Construction in progress. . . . . . . . . . . . . . . . . . . . . . 76 13,401 14,632 6,049

Office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 772 2,428 2,200 2,260

Motor vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . – 2,485 1,878 3,758

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,904 97,772 406,172 498,937

Our property, plant and equipment increased by 22.8% from RMB406.2 million as ofDecember 31, 2020 to RMB498.9 million as of June 30, 2021, primarily as a result of (i) an increasein leasehold improvement from RMB230.3 million as of December 31, 2020 to RMB281.6 millionas of June 30, 2021; and (ii) an increase in store equipment, furniture and fittings to RMB205.2million as of June 30, 2021 from RMB157.1 million as of December 31, 2020. The increases wereattributable to the expansion of our store network.

Our property, plant and equipment increased by 315.4% from RMB97.8 million as ofDecember 31, 2019 to RMB406.2 million as of December 31, 2020, primarily due to (i) an increasein leasehold improvements from RMB52.3 million as of December 31, 2019 to RMB230.3 millionas of December 31, 2020; and (ii) an increase in store equipment, furniture and fittings toRMB157.1 million as of December 31, 2020 from RMB27.2 million as of December 31, 2019. Theincrease reflected the continuous expansion of our store network.

Our property, plant and equipment increased by 326.9% from RMB22.9 million as ofDecember 31, 2018 to RMB97.8 million as of December 31, 2019, primarily due to (i) an increaseof RMB37.3 million in leasehold improvements in 2019; (ii) an increase of RMB20.1 million instore equipment, furniture and fittings; and (iii) an increase of RMB13.3 million in construction inprogress. These changes were primarily driven by the fast expansion of our store network.

Right-of-use Assets

We recognize right-of-use assets with respect to certain lease agreements in which we are theleasee, such as leases for properties including self-owned stores, offices dormitories andwarehouses.


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The right-of-use asset recognized is initially measured at cost when a lease is capitalized,which comprises the initial amount of the lease liability plus any lease payments made at or beforethe commencement date, and any initial direct costs incurred. Where applicable, the right-of-useassets also include the estimated costs to dismantle and remove the underlying asset, or to restorethe underlying asset, or the site where it is located, discounted to their present value, less any leaseincentives received. The right-of-use asset is subsequently stated at cost less accumulateddepreciation and impairment losses.

The following table sets forth a breakdown of the net book value of our right-of-use assets asof the dates indicated:


June 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,678 360,590 1,027,733 1,424,529

Warehouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,555 5,922 14,209 10,804

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,233 366,512 1,041,942 1,435,333

Our right-of-use assets increased significantly from RMB41.2 million as of December 31,2018 to RMB366.5 million as of December 31, 2019, and further to RMB1,041.9 million as ofDecember 31, 2020 and RMB1,435.3 million as of June 30, 2021, primarily because the number oflease agreements we entered into for both our self-owned stores and office premises increasedduring the Track Record Period.

Intangible Assets

Our intangible assets consist of software and others, which primarily represents our trademarkassets. The following table sets forth a breakdown of the net book value of our intangible assets asof the dates indicated:


June 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,114 1,219 988 1,522

Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 690 1,117 1,063

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,226 1,909 2,105 2,585

Our intangible assets increased from RMB1.2 million as of December 31, 2018 to RMB1.9million as of December 31, 2019, and further increased to RMB2.1 million as of December 31, 2020and RMB2.6 million as of June 30, 2021, primarily because of the newly purchased software andthe newly registered trademarks during the Track Record Period.


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Deferred Tax Assets

Our deferred tax assets increased significantly from RMB13.0 million as of December 31,2018 to RMB33.2 million as of December 31, 2019, and further to RMB68.2 million as ofDecember 31, 2020 and RMB91.5 million as of June 30, 2021, primarily due to the increases in therecognition of cumulative tax losses of certain subsidiaries.

Financial Liabilities measured at FVTPL

Since the date of incorporation, we have completed several rounds of financing by issuingconvertible redeemable preferred shares from series A to series F. Preferred shares issued by us areredeemable at the option of the holder or after the redemption commencement date. Theseinstruments will automatically convert into ordinary shares of our Company upon the[REDACTED]. See note 24 to the Accountants’ Report in Appendix I to this document and“History, Reorganization and Corporate Structure — Our Corporate History and MajorShareholding Changes of Our Group” for details.

We designated the convertible redeemable preferred shares as financial liabilities at fair valuethrough profit or loss. We applied the discount cash flow method to determine our underlying equityvalue and adopted option-pricing method and equity allocation model to determine the fair value ofthe convertible redeemable preferred shares.

The following table sets forth the movement of carrying amount of redemption liabilities ofordinary shares and convertible redeemable preferred shares as of the dates indicated:


June 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

At the beginning of the year/period . . . . . . . . . . . . . . . 46,500 154,189 1,257,514 3,972,169

Addition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000 568,722 872,141 1,788,452

Re-designation from ordinary shares . . . . . . . . . . . . . . . – 97,051 – –

Fair value changes . . . . . . . . . . . . . . . . . . . . . . . . . 37,689 437,552 1,842,514 4,353,866

At the end of the year/period . . . . . . . . . . . . . . . . . . 154,189 1,257,514 3,972,169 10,114,487

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow

During the Track Record Period and up to the Latest Practicable Date, we had historically metour working capital and other capital requirements primarily through bank borrowings and capitalinjection from shareholders. We had cash and cash equivalent of RMB28.1 million, RMB233.3million, RMB168.3 million and RMB1,116.8 million, as of December 31, 2018, 2019, 2020 andJune 30, 2021, respectively.


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The following table sets forth a summary of our cash flows for the periods indicated:



June 30,

2018 2019 2020 2020 2021


(Unaudited)

Net cash used in operating activities . . . . . . . . . (25,194) (381,102) (314,070) (105,080) (356,333)

Net cash used in investing activities . . . . . . . . . (16,627) (121,722) (525,590) (166,964) (61,562)

Net cash generated from financing activities . . . . . 68,238 706,465 778,202 73,036 1,367,426

Net increase/(decrease) in cash and cashequivalents . . . . . . . . . . . . . . . . . . . . . . 26,417 203,641 (61,458) (199,008) 949,531

Cash and cash equivalents at the beginning of theyear/period . . . . . . . . . . . . . . . . . . . . . . . 1,709 28,126 233,291 233,291 168,294

Effect of foreign exchange rate change . . . . . . . . – 1,524 (3,539) 1,358 (985)

Cash and cash equivalents at the end of theyear/period . . . . . . . . . . . . . . . . . . . . . . 28,126 233,291 168,294 35,641 1,116,840

Operating Activities

In the first half of 2021, our net cash used in operating activities was RMB356.3 million,which was primarily attributable to our loss before taxation of RMB4,403.8 million, adjusted forcertain non-cash and non-operating items, and aggregated income tax paid of RMB2.3 million.Adjustments for certain non-cash and non-operating items primarily included fair value changes offinancial liabilities measured at FVTPL of RMB4,353.9 million, and depreciation of right-of-useassets of RMB157.1 million. The amount was further adjusted by changes in working capital,primarily including (i) an increase in trade and other receivables of RMB369.4 million; and (ii) anincrease in inventories of RMB254.5 million. The abovementioned increases in (i) and (ii) were inline with our overall business growth.

In 2020, our net cash used in operating activities was RMB314.1 million, which was primarilyattributable to our loss before taxation of RMB2,050.4 million, adjusted for certain non-cash andnon-operating items, and aggregated income tax paid of RMB0.1 million. Adjustments for certainnon-cash and non-operating items primarily included fair value changes of financial liabilitiesmeasured at FVTPL of RMB1,842.5 million, and depreciation of right-of-use assets of RMB166.0million. The amount was further adjusted by changes in working capital, primarily comprising (i)an increase in inventories of RMB264.4 million; and (ii) an increase in trade and other receivablesof RMB158.2 million. Both increases mentioned in (i) and (ii) related to our rapid businessexpansion.

In 2019, our net cash used in operating activities was RMB381.1 million, which was primarilyattributable to our loss before taxation of RMB534.4 million, adjusted for certain non-cash andnon-operating items, and aggregated income tax paid of RMB0.5 million. Adjustments for certainnon-cash and non-operating items primarily included fair value changes of financial liabilitiesmeasured at FVTPL of RMB437.6 million, depreciation of right-of-use assets of RMB34.7 million,and depreciation of property, plant and equipment of RMB20.9 million. The amount was furtheradjusted by changes in working capital, primarily comprising (i) an increase in inventories ofRMB410.1 million; and (ii) an increase in trade and other receivables of RMB140.6 million;partially offset by an increase in trade and other payables of RMB197.5 million. Changes in ourworking capital were primarily driven by expansion in our business scale.


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In 2018, our net cash used in operating activities was RMB25.2 million, which was primarilyattributable to our loss before taxation of RMB92.2 million, adjusted for certain non-cash andnon-operating items, and aggregated income tax paid of RMB0.3 million. Adjustments for certainnon-cash and non-operating items primarily included fair value changes of financial liabilitiesmeasured at FVTPL of RMB37.7 million, depreciation of right-of-use assets of RMB17.2 million,depreciation of property, plant and equipment of RMB13.3 million, and impairment loss onright-of-use assets of RMB10.4 million. The amount was further adjusted by changes in workingcapital, primarily comprising (i) an increase in inventories of RMB51.5 million; and (ii) an increasein trade and other receivables of RMB42.9 million; partially offset by an increase in trade and otherpayables of RMB76.3 million. Changes in our working capital were primarily driven by ourbusiness expansion.

Investing Activities

In the first half of 2021, our net cash used in investing activities was RMB61.6 million, whichwas primarily attributable to payment for property, plant and equipment of RMB95.6 million as aresult of our expanded store network in order to sustain our business growth; partially offset by (i)interests from loans to franchisees of RMB20.5 million; and (ii) repayment from loans tofranchisees of RMB14.3 million.

In 2020, our net cash used in investing activities was RMB525.6 million, which was primarilyattributable to (i) payment for property, plant and equipment of RMB316.5 million in connectionwith our expanded store network in order to sustain our business growth; and (ii) payment for loansto franchisees of RMB270.0 million; partially offset by (i) repayment from loans to franchisees ofRMB32.8 million; and (ii) interests from loans to franchisees of RMB30.0 million.

In 2019, our net cash used in investing activities was RMB121.7 million, which was primarilyattributable to (i) payment for property, plant and equipment of RMB90.7 million in relation to ourstore network expansion in order to drive our business growth; and (ii) payment for loans tofranchisees of RMB34.8 million.

In 2018, our net cash used in investing activities was RMB16.6 million, which was primarilyattributable to payment for property, plant and equipment of RMB16.2 million, reflecting ourbusiness expansion.

For details about our investing activities with franchisees, see “Business — Our BusinessModel — Self-owned Stores and Franchise Stores — Financial Support Provided to Franchisees —Loans to franchisees.”

Financing Activities

In the first half of 2021, our net cash generated from financing activities was RMB1,367.4million, which was primarily attributable to the proceeds from issuance of convertible redeemablepreferred shares of RMB1,788.5 million in connection with our series F round of financing;partially offset by (i) repayment of loans and borrowings of RMB297.2 million; and (ii) capitalelement of lease rentals paid of RMB127.2 million, mainly in relation to leases for our retail stores.

In 2020, our net cash generated from financing activities was RMB778.2 million, which wasprimarily attributable to (i) the proceeds from issuance of ordinary shares with redemptionoption/convertible redeemable preferred shares of RMB872.1 million in connection with our seriesD and E rounds of financing; and (ii) loans and borrowings of RMB309.8 million from one of our


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shareholders and several commercial banks; partially offset by (i) repayment of loans andborrowings of RMB232.1 million; and (ii) capital element of lease rentals paid of RMB121.7million, mainly in relation to leases for our retail stores.

In 2019, our net cash generated from financing activities was RMB706.5 million, which wasprimarily attributable to (i) the proceeds from issuance of ordinary shares with redemption optionof RMB568.7 million in connection with our series C and Pre-D rounds of financing; and (ii) loansand borrowings of RMB232.1 million from one of our shareholders and several commercial banks;partially offset by (i) capital element of lease rentals paid of RMB53.1 million, mainly in relationto leases for our retail stores; and (ii) repayment of loans and borrowings of RMB33.0 million.

In 2018, our net cash generated from financing activities was RMB68.2 million, which wasprimarily attributable to (i) the proceeds from issuance of ordinary shares with redemption optionof RMB70.0 million in connection with our series B round of financing; and (ii) loans andborrowings of RMB38.0 million from one of our shareholders and several commercial banks;partially offset by (i) repayment of loans and borrowings of RMB20.0 million; and (ii) capitalelement of lease rentals paid of RMB16.8 million.

Working Capital Confirmation

Our Directors believe that, after taking into account the financial resources available to us,including internally generated funds, our cash and cash equivalents, our available banking facilitiesand the estimated [REDACTED] of the [REDACTED], we have sufficient working capital for ourpresent requirements for at least the next 12 months from the date of this document.

INDEBTEDNESS

The following table sets forth our indebtedness as of the dates indicated:


June 30,As of

September 30,

2018 2019 2020 2021 2021


Loans and borrowings . . . . . . . . . . . . . 33,000 232,070 309,790 70,385 58,364Lease liabilities . . . . . . . . . . . . . . . . . 51,825 361,799 1,054,410 1,462,234 1,648,247

Total . . . . . . . . . . . . . . . . . . . . . . . 84,825 593,869 1,364,200 1,532,619 1,706,611


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Loans and Borrowings

Our loans and borrowings primarily consisted of bank loans and borrowings from ourshareholders, to sustain our business expansion. The table below sets forth a breakdown of our loansand borrowings as of the dates indicated:


June 30,As of

September 30,

2018 2019 2020 2021 2021


Bank loans . . . . . . . . . . . . . . . . . . . . – 49,000 61,843 70,385 58,364Other borrowings . . . . . . . . . . . . . . . . 33,000(1) 183,070(2) 247,947 – –

Total . . . . . . . . . . . . . . . . . . . . . . . 33,000 232,070 309,790 70,385 58,364

Notes:

(1) Refer to loan borrowed from our shareholder Redefine Capital Limited, which was settled in 2020.

(2) Refer to loans borrowed from our shareholders Shanghai Black Algae Investment Management Center (LimitedPartnership), which was settled in 2020.

As of December 31, 2018, 2019, 2020 and June 30, 2021, our loans and borrowings amountedto RMB33.0 million, RMB232.1 million, RMB309.8 million and RMB70.4 million, respectively, ofwhich RMB33.0 million, RMB183.1 million, RMB247.9 million and nil, respectively, were loansborrowed from our shareholders to support our business growth and increased purchases ofinventories. As of June 30, 2020, we had settled all loans borrowed from shareholders in full.

As of September 30, 2021, being the indebtedness statement date, we had unutilized bankingfacilities of RMB133.2 million.

In October 2021, we made drawdown of RMB40.0 million pursuant to a facility agreement,which we entered into with a bank in the PRC in September 2021 for a maximum credit line ofRMB60.0 million at a fixed interest rate of 6.5% per annum.

The following table sets forth the maturity profiles of loans and borrowings as of the datesindicated:


June 30,As of

September 30,

2018 2019 2020 2021 2021


Loans and borrowings payable:

– Within one year . . . . . . . . . . . . . . 33,000 215,737 305,346 70,385 58,364

– After one year but within two years . . . – 16,333 4,444 – –

Total . . . . . . . . . . . . . . . . . . . . . . . 33,000 232,070 309,790 70,385 58,364


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Lease Liabilities

The table below sets forth the remaining contractual maturities of our lease liabilities as of thedates indicated:


June 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Within one year . . . . . . . . . . . . . . . . . . . . . . . 21,197 72,222 210,590 313,030

After one year but within two years. . . . . . . . . . . . 17,527 82,704 244,094 328,004

After two years but within five years . . . . . . . . . . . 13,231 174,511 526,397 734,751

After five years . . . . . . . . . . . . . . . . . . . . . . . 4,099 86,221 228,335 308,345

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,054 415,658 1,209,416 1,684,130

As of December 31, 2018, 2019, 2020 and June 30, 2021, our lease liabilities amounted toRMB56.1 million, RMB415.7 million, RMB1,209.4 million and RMB1,684.1 million, respectively,primarily because we entered into an increasing number of leases contracts for our self-ownedstores. For details on our the accounting of our lease liabilities, see “— Critical AccountingPolicies, Judgments and Estimates — Leased Assets.”

Statement of Indebtedness

Our Directors confirm that they are not aware of any material defaults in payment of our tradeand other payables and interest-bearing borrowings during the Track Record Period and up to theLatest Practicable Date. As of September 30, 2021, being the latest practicable date for the purposeof this statement of indebtedness, other than as disclosed in this document, we did not have anyoutstanding debt securities, borrowings or indebtedness in the nature of borrowings, acceptancecredits, charges, mortgages, hire purchase or finance lease commitments, guarantees or othercontingent liabilities. Save as disclosed in this document, our Directors confirm that, up to theLatest Practicable Date, there had been no material change in our indebtedness since September 30,2021.


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RELATED PARTY TRANSACTIONS

The table below sets forth the amount due to and from our related parties as of the datesindicated:


June 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Loans payable to a related party:Shanghai Black Algae Investment Management Center

(Limited Partnership) (上海黑藻投資管理中心(有限合夥)). . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,000) (183,070) (247,947) –

Amount due to related parties:Yunnan Yanyan Trade Co., Ltd. (雲南延延商貿有限公司) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – (3,854) –

Xi’an Jinding Huijie Business Information ConsultingCo., Ltd. (西安金鼎匯捷商務資訊諮詢有限公司) . . . – – (905) –

Wuhan Shengke Trading Co., Ltd. (武漢盛客商貿有限公司) . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – (62) –

Ningxia Qishuntong Trading Co., Ltd. (寧夏啟順通商貿有限公司) . . . . . . . . . . . . . . . . . . . . . . . . – – (1,039) (1,291)

Lanzhou Dianle Trading Co., Ltd. (蘭州點樂商貿有限公司) . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – (1,051) (2,724)

Xining Zhongai Trade Co., Ltd. (西寧中愛商貿有限責任公司) . . . . . . . . . . . . . . . . . . . . . . . . . . . – – (1,970) (2,332)

Fuzhou Wenke Trading Co., Ltd. (福州文客商貿有限公司) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – – (208)

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – (8,881) (6,555)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,000) (183,070) (256,828) (6,555)


June 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Amount due from related parties:Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,450 16,911 16,046 –Wenzhou Benju Trading Co., Ltd. (溫州市本巨貿易有限公司) . . . . . . . . . . . . . . . . . . . . . . . . . . . – – 406 11,807

Dongguan Xingkong Trading Co., Ltd. (東莞市星空貿易有限公司) . . . . . . . . . . . . . . . . . . . . . . . . – – 46,766 107,100

Xian Jinding Huijie Business Information ConsultingCo., Ltd. (西安金鼎匯捷商務資訊諮詢有限公司) . . . – – – 82

Wuhan Shengke Trading Co., Ltd. (武漢盛客商貿有限公司) . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – – 5,961

Yunnan Yanyan Trade Co., Ltd. (雲南延延商貿有限公司) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – – 3,931

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,450 16,911 63,218 128,881

As of December 31, 2018, 2019, 2020 and June 30, 2021, our loans payables to ShanghaiBlack Algae Investment Management Center (上海黑藻投資管理中心), one of our non-controllingshareholders, amounted to RMB33.0 million, RMB183.1 million, RMB247.9 million and nil,


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respectively. These amounts were non-trade in nature, and they were unsecured, interest-free andrepayable within one year. We used the proceeds from these loans to sustain the expansion of ourstore network. As of June 30, 2021, we had settled all loans borrowed from shareholders in full.

Our amount due to related parties primarily included payments we received on behalf of ourjoint ventures in normal course of business. As of December 31, 2018, 2019 and 2020 and June 30,2021, such amount was nil, nil, RMB8.9 million, and RMB6.6 million, respectively. The amountwas primarily non-trade in nature, and unsecured, interest-free and repayable on a regular basis. Asof June 30, 2021, our amount due to related parties decreased as compared to December 31, 2020,primarily because a number of our newly opened retail stores were still at their early stage ofdevelopment.

Our amount due from related parties primarily included payments we made on behalf of ourjoint ventures with respect to their day-to-day operating expenses and initial store openingexpenses, to a lesser extent. As of December 31, 2018, 2019 and 2020 and June 30, 2021, suchamount was nil, nil, RMB47.2 million and RMB128.9 million, respectively. The amount wasprimarily non-trade in nature, and unsecured, interest-free and repayable on a regular basis. In linewith the expansion of our store network, the amount due from related parties gradually increasedduring the Track Record Period.

Our Directors confirm that all related-party transactions during the Track Record Period wereentered into on an arm’s length basis, and they did not distort our results of operations or make ourhistorical results unreflective of our future performance. Our amount due from and to related partiesas of December 31, 2018, 2019 and 2020 and June 30, 2021, were all non-trade in nature. All thenon-trade balances with related parties will be settled prior to the [REDACTED]. For details on ourrelated party transactions, see note 27 to the Accountants’ Report in Appendix I to this document.

CAPITAL EXPENDITURES

Our capital expenditure are incurred primarily in connection with payment for purchase ofproperty, plant and equipment and leasehold improvements. In 2018, 2019, 2020 and the first halfof 2021, our total capital expenditures amounted to RMB16.2 million, RMB90.7 million,RMB316.5 million and RMB95.6 million, respectively. The increase in capital expenditure duringthe Track Record Period was mainly driven by our business expansion, particularly the rapidexpansion of our store network.

As we continue to expand our store network, we expect our capital expenditures to increasein the future. In 2021, our estimated total capital expenditure is expected to be approximatelyRMB54.2 million, primarily relating to new store openings and refurbishment of existing stores. Weintend to fund our future capital expenditures with our existing cash balance, [REDACTED] fromthis [REDACTED] and future cash generated from operations. Our actual capital expenditures maydiffer from the amounts set forth above due to various factors, including our future cash flows,results of operations and financial condition.


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CONTRACTUAL OBLIGATIONS

Capital Commitments

Our capital commitments outstanding as of December 31, 2018, 2019, 2020 and June 30, 2021not provided for in the financial statements were as follows:


June 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Contracted for . . . . . . . . . . . . . . . . . . . . . . . . . . . – 34,435 18,254 49,157

Capital investment commitment . . . . . . . . . . . . . . . . . – – 5,000 5,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 34,435 23,254 54,157

Our capital commitments during the Track Record Period were primarily attributable to ourestablishment of new self-owned stores.

KEY FINANCIAL RATIOS

The following table sets forth our key financial ratios as of the dates or for the periodsindicated:

As of/For the year ended December 31,

As of/For thesix months ended

June 30,

2018 2019 2020 2021

Current ratio(1) . . . . . . . . . . . . . . . . . . . . . . . 1.04 1.57 1.34 3.32

Revenue growth . . . . . . . . . . . . . . . . . . . . . . – 198.6% 254.9% 235.1%

Gross profit margin . . . . . . . . . . . . . . . . . . . . 32.1% 27.1% 30.4% 36.2%

Operating (loss)/profit margin . . . . . . . . . . . . . . (33.2%) (19.1%) (8.7%) 1.5%

Non-HKFRS adjusted EBITDA margin(2) . . . . . . . . (13.4%) (7.0%) 4.1% 12.9%

Notes:

(1) Current ratio is calculated using total current assets divided by total current liabilities at the end of the period.

(2) Adjusted EBITDA for the period divided by revenue for the same period and multiplied by 100.0%. For reconciliationof adjusted EBITDA from profit before tax, see “— Non-HKFRS Measures.”

See “— Management’s Discussion and Analysis of Results of Operations — Six MonthsEnded June 30, 2021 Compared with Six Months Ended June 30, 2020,” “— Management’sDiscussion and Analysis of Results of Operations —Year Ended December 31, 2020 Compared withYear Ended December 31, 2019” and “— Management’s Discussion and Analysis of Results ofOperations — Year ended December 31, 2019 Compared with Year ended December 31, 2018” fora discussion of the factors affecting our results of operations during the Track Record Period.


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OFF-BALANCE SHEET ARRANGEMENTS

We have not entered into any financial guarantees or other commitments to guarantee thepayment obligations of any third parties. We have not entered into any derivative contracts that areindexed to our shares and classified as Shareholder’s equity or that are not reflected in ourcombined financial statements. Furthermore, we do not have any retained or contingent interest inassets transferred to an unconsolidated entity that serves as credit, liquidity or market risk supportto such entity. We do not have any variable interest in any unconsolidated entity that providesfinancing, liquidity, market risk or credit support to us or engages in leasing, hedging or productdevelopment services with us.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the ordinary course of our business, we are exposed to various market risks, including creditrisk, liquidity risk, interest rate risk and currency risk. Our risk management strategy aims tominimize the potential adverse effects of such risks on our financial performances. We have controlpolicies in place and the exposure to these risks are monitored on an on-going basis by the Board.For details, see note 25 to the Accountants’ Report in Appendix I to this document.

Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractual obligationsresulting in a financial loss to us. Our exposure to credit risk is primarily attributable to trade andother receivables. Our exposure to credit risk arising from cash and cash equivalents is limitedbecause the counterparties are banks, financial institutions, Alipay and WeChat Pay with high creditrating and no past due history, for which we consider to have low credit risk.

Our exposure to credit risk arising from trade receivables is influenced mainly by theindividual characteristics of each customer rather than the industry or country. We have nosignificant concentration of credit risk because we have no significant exposure to individualcustomers. We measure loss allowances for trade receivables at an amount equivalent to lifetimeexpected credit losses (“ECLs”), which is calculated using a provision matrix. As we have notexperienced any significant credit losses in the past, our management consider the ECL rate fortrade receivables to be insignificant and close to zero.

In determining the ECL for other receivables, our directors have taken into account thehistorical default experience and forward-looking information, as appropriate. Our directors haveassessed that other receivables have not had a significant increase in credit risk since initialrecognition and risk of default is insignificant, and therefore, the ECL rate for other receivables isconsidered to be insignificant and close to zero.

For other receivables, our management makes periodic collective assessments as well as theindividual assessment on the recoverability of other receivables based on historical settlementrecords past experience. Our Directors believe that there is no material credit risk inherent in ouroutstanding balance of other receivables.

Liquidity Risk

We recorded net current assets of RMB7.3 million, RMB334.0 million, RMB323.9 million andRMB1,988.6 million, respectively, as of December 31, 2018, 2019, 2020 and June 30, 2021. Weregularly monitor our liquidity requirements to ensure that we maintain sufficient reserves of cashto meet our liquidity requirements in the short and longer term. Historically, we have reliedprincipally on loans and other borrowings, as well as equity financing, to fund our operations andbusiness development. For a detailed analysis on the remaining contractual maturities of ourfinancial liabilities, see note 25(b) to the Accountants’ Report in Appendix I to this document.


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We have carried out a review of our cash flow forecast for the 18 months period following thedate of issuance of the combined financial statements. Based on such forecast, our managementbelieves that adequate sources of liquidity exist to fund our working capital and future capitalexpenditures requirements, and other liabilities and commitments as they become due. In preparingthe cash flow forecast, our management has considered historical cash requirements, workingcapital and capital expenditures plans, estimated cash flows provided by operations, existing cashon hand, as well as other key factors, including utilization of credit facilities granted by financialinstitutions. Our management believes the assumptions used in the cash forecast are reasonable.

Currency Risk

As our principal activities are carried out in the PRC, our transactions are mainly denominatedin Renminbi, which is not freely convertible into foreign currencies. All foreign exchangetransactions involving Renminbi must take place through the People’s Bank of China or otherinstitutions authorized to buy and sell foreign exchange. The exchange rates adopted for the foreignexchange transactions are the rates of exchange quoted by the People’s Bank of China that aredetermined largely by supply and demand.

DIVIDEND

As we are a holding company incorporated under the laws of the Cayman Islands, the paymentand amount of any future dividends will depend on the availability of dividends received from oursubsidiaries. During the Track Record Period, we did not declare or distribute any dividend to ourshareholders. We do not have any dividend policy at present and have no present plan to pay anydividends to our Shareholders in the foreseeable future. However, we may distribute dividends inthe future by way of cash or by other means that we consider appropriate. Any dividends we paywill be determined at the absolute discretion of our Board, taking into account factors including ouractual and expected results of operations, cash flow and financial position, general businessconditions and business strategies, expected working capital requirements and future expansionplans, legal, regulatory and other contractual restrictions, and other factors that our Board deemsto be appropriate. Our shareholders may approve, in a general meeting, any declaration ofdividends, which must not exceed the amount recommended by our Board.

As advised by our Cayman Islands legal advisor, under Cayman Islands law, a position ofaccumulated losses does not necessarily restrict us from declaring and paying dividends to ourShareholders out of profits and reserves of our Company lawfully available for distribution,including share premium, provided this would not result in our Company being unable to pay itsdebts as they fall due in the ordinary course of business.

[REDACTED]

Our [REDACTED] mainly include [REDACTED] and professional fees paid to legal,accounting and other advisors for their services rendered in relation to the [REDACTED] and the[REDACTED]. The estimated total [REDACTED] (based on the mid-point of the [REDACTED]range and assuming that the [REDACTED] is not exercised) for the [REDACTED] areapproximately RMB[REDACTED], accounting for approximately [REDACTED]% of the[REDACTED] from the [REDACTED] (based on the mid-point of the [REDACTED] range andassuming that the [REDACTED] is not exercised), of which (i) approximately RMB[REDACTED]has been charged to our combined statements of profit or loss and other comprehensive incomeduring the Track Record Period, and (ii) approximately RMB[REDACTED] is expected to be


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charged to our combined statements of profit or loss and other comprehensive income for the yearsending December 31, 2021 and 2022 and the remaining amount of RMB[REDACTED] is expectedto be recognized directly as a deduction from equity upon the [REDACTED]. Our Directors do notexpect such expenses to have a material and adverse impact on our financial results for the yearending December 31, 2021.

UNAUDITED [REDACTED] ADJUSTED COMBINED NET TANGIBLE ASSETS

The following unaudited [REDACTED] statement of our adjusted combined net tangibleassets prepared in accordance with Rule 4.29 of the Listing Rules is to illustrate the effect of the[REDACTED] on our combined net tangible assets attributable to the shareholders as of June 30,2021 as if the [REDACTED] had taken place on that date.

The unaudited [REDACTED] statement of adjusted combined net tangible assets has beenprepared for illustrative purposes only and, because of its hypothetical nature, it may not give a truepicture of our combined net tangible assets had the [REDACTED] been completed as of June 30,2021 or any future dates:

Combined nettangible

liabilitiesattributable to

equityshareholders of

our Company asof June 30,

2021(1)

Estimated[REDACTED]

from the[REDACTED](2)

Estimated impactupon the

termination ofthe financial

liabilitiesmeasured at fair

value throughprofit or loss(3)

Unaudited[REDACTED]adjusted net

tangible assetsattributable to

equityshareholders ofour Company

Unaudited [REDACTED]adjusted net tangible assets

attributable to equityshareholders of our

Company per Share(4)(5)

RMB’000 RMB’000 RMB’000 RMB’000 RMB HK$

Based on an [REDACTED] ofHK$[REDACTED] per Share . . (7,114,174) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Based on an [REDACTED] ofHK$[REDACTED] per Share . . (7,114,174) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Notes:

(1) The combined net tangible liabilities attributable to equity shareholders of our Company as of June 30, 2021 is basedon the combined net liabilities attributable to equity shareholders of our Company of RMB7,111,589,000, afterdeducting intangible assets of RMB2,585,000 as shown in the Accountants’ Report as set out in Appendix I to thisdocument.

(2) The estimated [REDACTED] from the [REDACTED] are based on [REDACTED] expected to be issued under the[REDACTED] and the indicative [REDACTED] of HK$[REDACTED] per Share and HK$[REDACTED] perShare, being the low end and high end of the indicative [REDACTED] range respectively, after deduction of theestimated [REDACTED] fees and other estimated expenses related to the [REDACTED] paid or payable by ourGroup (excluding the [REDACTED] expenses charged to profit or loss during the Relevant Periods) and does nottake into account of any shares which may be issued upon the exercise of the [REDACTED], or shares which maybe allotted and repurchased by us pursuant to the general mandates granted to our Directors to issue or repurchaseShares.

The estimated [REDACTED] from the [REDACTED] is converted into Renminbi at an exchange rate of HK$1 toRMB0.8216 prevailing on October 29, 2021. No representation is made that Hong Kong dollar amounts have been,could have been or may be converted to Renminbi, or vice versa, at that rate or at any other rate or at all.

(3) The carrying amount of financial liabilities measured at fair value through profit or loss was RMB10,114,487,000 asof June 30, 2021 (as set out in Note 24 of Appendix I). Upon the [REDACTED] and completion of the[REDACTED], all these financial liabilities will be automatically converted into ordinary shares of our Company andwill be re-designated from liabilities to equity.


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(4) The unaudited [REDACTED] adjusted net tangible assets attributable to equity shareholders of our Company perShare is arrived at after adjustments as described in notes (2) and (3) and on the basis that a total of [REDACTED]Shares were in issue assuming that the [REDACTED] completed on June 30, 2021 without taking into account ofany shares which may be issued upon exercise of the [REDACTED], or shares which may be allotted and repurchasedby us pursuant to the general mandates granted to our Directors to issue or repurchase Shares.

(5) The unaudited [REDACTED] adjusted net tangible assets attributable to equity shareholders of our Company perShare is converted into Hong Kong dollars at an exchange rate of HK$1 to RMB0.8216 prevailing on October 29,2021. No representation is made that Renminbi amounts have been, could have been or may be converted to HongKong dollar, or vice versa, at that rate or at any other rate or at all.

(6) No adjustment has been made to the unaudited [REDACTED] adjusted net tangible assets attributable to equityshareholders of our Company to reflect any trading results or other transactions of our Group subsequent to June 30,2021.

DISCLOSURE REQUIRED UNDER THE LISTING RULES

Our Directors have confirmed that, as of the Latest Practicable Date, there were nocircumstances that would give rise to a disclosure required under Rules 13.13 to 13.19 in Chapter13 of the Listing Rules upon the [REDACTED] of the Shares on the Stock Exchange.

RECENT DEVELOPMENTS AND NO MATERIAL ADVERSE CHANGE

Save for the subsequent events described in note 30 to the Accountants’ Report in Appendix I,after due and careful consideration, our Directors confirm that there has been no material adversechange in our financial or trading position since June 30, 2021 and no event had occurred since June30, 2021 that would materially and adversely affect the information in the Accountants’ Report inAppendix I to this document.


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FUTURE PLANS

See “Business — Our Development Strategies” for a detailed description of our future plans.

USE OF [REDACTED]

The table below sets forth the estimated [REDACTED] of the [REDACTED] which we willreceive after deduction of [REDACTED] and estimated expenses payable by us in connection withthe [REDACTED] (assuming the [REDACTED] is not exercised):

Assuming an [REDACTED] of HK$[REDACTED] per[REDACTED](being the low end of the [REDACTED] range stated in thisdocument) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

HK$[REDACTED]

Assuming an [REDACTED] of HK$[REDACTED] per[REDACTED](being the mid-point of the [REDACTED] range stated in thisdocument) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

HK$[REDACTED]

Assuming an [REDACTED] of HK$[REDACTED] per[REDACTED](being the high end of the [REDACTED] range stated in thisdocument) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

HK$[REDACTED]

We intend to use the [REDACTED] as follows (based on the mid-point of the [REDACTED]range stated in this document):

• approximately [REDACTED]%, or HK$[REDACTED], will be used over the nextthree years to continue developing our store network and further deepening our marketpenetration. In the past few years, our industry had witnessed a significant growth.According to the Frost & Sullivan Report, the market size of specialty retail in China byGMV has experienced a fast expansion in recent years, increasing from RMB129.8billion to 195.2 billion from 2016 to 2020. More specifically, each major segment, beingfeatured variety, beauty and pop toys, of the specialty retail market, has undergone rapidgrowth during this period. It is estimated that the market size by GMV will reachRMB475 billion in 2025, representing an estimated CAGR of 19.5% from 2020 to 2025,according to the same source. In view of the huge market potential, we will continue toexpand the scale of our business and seize market opportunities in a timely manner, inorder to leverage our established brand awareness to drive long-term growth.Specifically, we plan to add approximately 290 and 270 new retail stores nationwide,respectively, for the year ending 2021 and 2022, among which there will beapproximately 152 and 110 KKV stores, 68 and 70 THE COLORIST stores, 26 and 40X11 stores, 44 and 50 KK Guan stores. We expect that the total number of newly openedstores under various brands in 2023 will be at least similar to the number of our newlyopened stores in 2022, subject to market conditions. For details about our planned storenetwork expansion, see “Business — Network Management and Operation — ExpansionPlan for Sales Channels.” In particular, we intend to allocate:

(i) approximately [REDACTED]%, or HK$[REDACTED], will be used over thenext three years to fund the initial capital expenditure and other associated costsin connection with the planned store network expansion;

FUTURE PLANS AND USE OF [REDACTED]

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(ii) approximately [REDACTED]%, or HK$[REDACTED], will be used over thenext three years to pay the rents for the new retail store to be opened during suchperiod; and

(iii) approximately [REDACTED]%, or HK$[REDACTED], will be used over thenext three years in connection with the hiring, training and retention of staff atstore level for the new retail stores to be opened;

• approximately [REDACTED]%, or HK$[REDACTED], will be used over the nextthree years to further invest in technology initiatives to strengthen our merchandiseselection capabilities, and to enhance the digitalization of our business, including:

(i) approximately [REDACTED]%, or HK$[REDACTED], will be used over thenext three years to use to pay the salaries and bonuses of our existing and newlyrecruited experts with regard to information technology. By offering competitivesalaries and remuneration, we intend to recruit experienced specialists with talentand experience in software development and data analytics technologies, in aneffort to strengthen our merchandise selection capabilities, and accelerate digitaltransformation of our business; and

(ii) approximately [REDACTED]%, or HK$[REDACTED], will be used over thenext three years to deploy a variety of intelligent devices and software in ourday-to-day operation, such as smart payment machines, POS terminals, and dataanalytics software to further realize automated, streamlined and digital operationboth at headquarters-level and store-level;

• approximately [REDACTED]%, or HK$[REDACTED], will be used over the nextthree years for expansion and optimization of our supply chains and distributionchannels, with a goal to sustain our business growth, including:

(i) approximately [REDACTED]%, or HK$[REDACTED], will be used over thenext three years to establish new regional warehouse centers in northeastern regionand northwestern region of China, as well as preposition warehouses nationwide,including funding the investment costs in connection with (i) construction of suchwarehouse facilities; and (ii) lease expenses expected to be incurred. We believesuch an enhanced warehouse network will further shorten cost of time related todistribution and transportation of merchandise, and improve inventory turnoverefficiency;

(ii) approximately [REDACTED]%, or HK$[REDACTED], will be used over thenext three years to deploy sales forecasting and automatic replenishment systems.Driven by merchandise sales trend, such systems will enable us to manage SKUsselection, distribution and restoration in a more efficient manner, in order to realizea closed loop from upstream supply chain to retail stores.

• the remaining approximately [REDACTED]%, or HK$[REDACTED], will be used forworking capital and general corporate purposes.

The allocation of the [REDACTED] above will be adjusted on a pro rata basis in the eventthat the [REDACTED] is fixed at a higher or lower level compared to the mid-point of theestimated [REDACTED] range.


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To the extent our [REDACTED] are either more or less than expected, we will increase ordecrease the allocation of the [REDACTED] to the purposes above on a pro rata basis.

To the extent that the [REDACTED] from the [REDACTED] are not immediately requiredfor the purposes above and to the extent permitted by the relevant law and regulations, we will onlyplace the [REDACTED] from the [REDACTED] in short-term interest-bearing accounts atlicensed banks in Hong Kong or the PRC. We will make an appropriate announcement if there isany change to the proposed use of [REDACTED] above or if any amount of the [REDACTED] willbe used for general corporate purpose.

If the [REDACTED] is fully exercised, our Company will receive additional [REDACTED]of approximately HK$[REDACTED] for [REDACTED] Shares to be allotted and issued upon thefull exercise of the [REDACTED] based on the [REDACTED] of HK$[REDACTED] per[REDACTED], being the mid-point of the [REDACTED] range, and after deducting the[REDACTED] payable by our Company. The additional amount raised will be applied to theabovementioned areas of use of [REDACTED] on pro rata basis.


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The following is the text of a report set out on pages I-[1] to I-[58] received from theCompany’s reporting accountants, KPMG, Certified Public Accountants, Hong Kong, for thepurpose of incorporation in this document.

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THEDIRECTORS OF KK TECHNOLOGY COMPANY HOLDINGS LIMITED, MORGANSTANLEY ASIA LIMITED AND CREDIT SUISSE (HONG KONG) LIMITED

Introduction

We report on the historical financial information of KK Technology Company HoldingsLimited (the “Company”) and its subsidiaries (together, the “Group”) set out on pages [I-[1] toI-[58]], which comprises the combined statements of financial position of the Group as at31 December 2018, 2019, 2020 and 30 June 2021, and the statements of financial position of theCompany as at 31 December 2019, 2020 and 30 June 2021 and the combined statements of profitor loss and other comprehensive income, the combined statements of changes in equity and thecombined statements of cash flows, for each of the years ended 31 December 2018, 2019, 2020 andthe six months ended 30 June 2021 (the “Relevant Periods”), and a summary of significantaccounting policies and other explanatory information (together, the “Historical FinancialInformation”). The Historical Financial Information set out on pages [I-[1] to I-[58]] forms anintegral part of this report, which has been prepared for inclusion in the document of the Companydated [date] (the “Document”) in connection with the [REDACTED] of shares of the Company onthe [REDACTED] of The Stock Exchange of Hong Kong Limited.

Directors’ responsibility for Historical Financial Information

The directors of the Company are responsible for the preparation of Historical FinancialInformation that gives a true and fair view in accordance with the basis of preparation andpresentation set out in Note 1 to the Historical Financial Information, and for such internal controlas the directors of the Company determine is necessary to enable the preparation of the HistoricalFinancial Information that is free from material misstatement, whether due to fraud or error.

Reporting accountants’ responsibility

Our responsibility is to express an opinion on the Historical Financial Information and toreport our opinion to you. We conducted our work in accordance with Hong Kong Standard onInvestment Circular Reporting Engagements 200 “Accountants’ Reports on Historical FinancialInformation in Investment Circulars” issued by the Hong Kong Institute of Certified PublicAccountants (“HKICPA”). This standard requires that we comply with ethical standards and planand perform our work to obtain reasonable assurance about whether the Historical FinancialInformation is free from material misstatement.

APPENDIX I ACCOUNTANTS’ REPORT

– I-1 –


Our work involved performing procedures to obtain evidence about the amounts anddisclosures in the Historical Financial Information. The procedures selected depend on the reportingaccountants’ judgement, including the assessment of risks of material misstatement of the HistoricalFinancial Information, whether due to fraud or error. In making those risk assessments, thereporting accountants consider internal control relevant to the entity’s preparation of HistoricalFinancial Information that gives a true and fair view in accordance with the basis of preparation andpresentation set out in Note 1 to the Historical Financial Information in order to design proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. Our work also included evaluating the appropriatenessof accounting policies used and the reasonableness of accounting estimates made by the directors,as well as evaluating the overall presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.

Opinion

In our opinion, the Historical Financial Information gives, for the purpose of the accountants’report, a true and fair view of the Group’s financial position as at 31 December 2018, 2019, 2020and 30 June 2021, the Company’s financial position as at 31 December 2019, 2020 and 30 June2021, and of the Group’s financial performance and cash flows for the Relevant Periods inaccordance with the basis of preparation and presentation set out in Note 1 to the HistoricalFinancial Information.

Review of stub period corresponding financial information

We have reviewed the stub period corresponding financial information of the Group whichcomprises the combined statement of profit or loss and other comprehensive income, the combinedstatement of changes in equity and the combined statement of cash flows for the six months ended30 June 2020 and other explanatory information (the “Stub Period Corresponding FinancialInformation”). The directors of the Company are responsible for the preparation and presentationof the Stub Period Corresponding Financial Information in accordance with the basis of preparationand presentation set out in Note 1 to the Historical Financial Information. Our responsibility is toexpress a conclusion on the Stub Period Corresponding Financial Information based on our review.We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410“Review of Interim Financial Information Performed by the Independent Auditor of the Entity”issued by the HKICPA. A review consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other review procedures. A review issubstantially less in scope than an audit conducted in accordance with Hong Kong Standards onAuditing and consequently does not enable us to obtain assurance that we would become aware ofall significant matters that might be identified in an audit. Accordingly, we do not express an auditopinion. Based on our review, nothing has come to our attention that causes us to believe that theStub Period Corresponding Financial Information, for the purpose of the accountants’ report, is notprepared, in all material respects, in accordance with the basis of preparation and presentation setout in Note 1 to the Historical Financial Information.


– I-2 –


Report on matters under the Rules Governing the Listing of Securities on The Stock Exchangeof Hong Kong Limited and the Companies (Winding Up and Miscellaneous Provisions)Ordinance

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying FinancialStatements as defined on page I-4 have been made.

Dividends

We refer to Note 23(d) to the Historical Financial Information which states that no dividendshave been paid by the Company in respect of the Relevant Periods.

No statutory financial statements for the Company

No statutory financial statements have been prepared for the Company since its incorporation.

[●]Certified Public Accountants

8th Floor, Prince’s Building10 Chater RoadCentral, Hong Kong

[Date]


– I-3 –


HISTORICAL FINANCIAL INFORMATION

Set out below is the Historical Financial Information which forms an integral part of thisaccountants’ report.

The combined financial statements of the Group for the Relevant Periods, on which theHistorical Financial Information is based, were audited by KPMG Huazhen LLP in accordance withHong Kong Standards on Auditing issued by the HKICPA (“Underlying Financial Statements”).


– I-4 –


COMBINED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVEINCOME(Expressed in Renminbi (“RMB”))

Year ended 31 DecemberSix months

ended 30 June

Note 2018 2019 2020 2020 2021


(Unaudited)

Revenue . . . . . . . . . . . . . . . . . . . . 4 155,309 463,744 1,645,904 502,357 1,683,160Cost of sales . . . . . . . . . . . . . . . . . . (105,517) (337,895) (1,146,191) (350,592) (1,073,204)

Gross profit . . . . . . . . . . . . . . . . . . 49,792 125,849 499,713 151,765 609,956

Other income . . . . . . . . . . . . . . . . . 5 78 9,069 34,888 11,241 26,654Selling and distribution expenses . . . . . . (54,959) (111,413) (395,250) (120,140) (469,883)Administrative and other operating

expenses . . . . . . . . . . . . . . . . . . . (46,491) (112,079) (281,894) (108,060) (140,975)

(Loss)/profit from operations . . . . . . . (51,580) (88,574) (142,543) (65,194) 25,752Finance costs . . . . . . . . . . . . . . . . . 6(a) (2,948) (8,232) (49,152) (17,684) (43,918)Share of losses from joint ventures . . . . . 14 – – (16,170) (829) (31,791)Fair value changes of financial liabilities

measured at fair value through profit orloss . . . . . . . . . . . . . . . . . . . . . . 24 (37,689) (437,552) (1,842,514) (445,459) (4,353,866)

Loss before taxation . . . . . . . . . . . . . 6 (92,217) (534,358) (2,050,379) (529,166) (4,403,823)Income tax . . . . . . . . . . . . . . . . . . 7 12,732 19,855 33,172 16,292 6,740

Loss for the year/period . . . . . . . . . . (79,485) (514,503) (2,017,207) (512,874) (4,397,083)

Attributable to:Equity shareholders of the

Company . . . . . . . . . . . . . . . . . . (79,485) (514,432) (2,016,324) (513,307) (4,371,827)Non-controlling interests . . . . . . . . . . . – (71) (883) 433 (25,256)

Loss for the year/period . . . . . . . . . . (79,485) (514,503) (2,017,207) (512,874) (4,397,083)

Other comprehensive income for theyear/period

Item that may be reclassified subsequentlyto profit or loss– Exchange differences on translation of

financial statements of entitiesoutside Mainland China . . . . . . . . . – 2 (18,647) (193) 17,536

Total comprehensive income for theyear/period . . . . . . . . . . . . . . . . . (79,485) (514,501) (2,035,854) (513,067) (4,379,547)

Attributable to:Equity shareholders of the

Company . . . . . . . . . . . . . . . . . . (79,485) (514,430) (2,034,983) (513,496) (4,354,303)Non-controlling interests . . . . . . . . . . . – (71) (871) 429 (25,244)

Total comprehensive income for theyear/period . . . . . . . . . . . . . . . . . (79,485) (514,501) (2,035,854) (513,067) (4,379,547)

Loss per share 10Basic and diluted . . . . . . . . . . . . . . . N/A N/A N/A N/A N/A

The accompanying notes form part of the Historical Financial Information.


– I-5 –


COMBINED STATEMENTS OF FINANCIAL POSITION(Expressed in RMB)

As at 31 DecemberAs at

30 June

Note 2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Non-current assetsProperty, plant and equipment . . . . . . 11 22,904 97,772 406,172 498,937Right-of-use assets . . . . . . . . . . . . 12 41,233 366,512 1,041,942 1,435,333Intangible assets. . . . . . . . . . . . . . 13 1,226 1,909 2,105 2,585Deferred tax assets . . . . . . . . . . . . 20(b) 12,996 33,186 68,226 91,511Investment in joint ventures . . . . . . . 14 – – 51,430 81,998Other receivables . . . . . . . . . . . . . 17 – 34,348 262,078 247,779

78,359 533,727 1,831,953 2,358,143- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Current assetsInventories . . . . . . . . . . . . . . . . . 16 69,624 477,893 740,860 985,404Trade and other receivables . . . . . . . 17 71,614 206,618 373,194 743,761Income tax recoverable. . . . . . . . . . 20(a) 302 417 37 37Restricted bank deposits . . . . . . . . . 18 – – 30 668Cash and cash equivalents . . . . . . . . 18 28,126 233,291 168,294 1,116,840

169,666 918,219 1,282,415 2,846,710- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Current liabilitiesTrade and other payables. . . . . . . . . 19 109,785 311,855 486,180 523,058Loans and borrowings . . . . . . . . . . 21 33,000 215,737 305,346 70,385Lease liabilities . . . . . . . . . . . . . . 22 19,321 56,393 165,325 248,780Current taxation . . . . . . . . . . . . . . 20(a) 264 264 1,628 15,859

162,370 584,249 958,479 858,082- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Net current assets . . . . . . . . . . . . 7,296 333,970 323,936 1,988,628- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Non-current liabilitiesLoans and borrowings . . . . . . . . . . 21 – 16,333 4,444 –Financial liabilities measured at fair

value through profit or loss . . . . . . 24 154,189 1,257,514 3,972,169 10,114,487Lease liabilities . . . . . . . . . . . . . . 22 32,504 305,406 889,085 1,213,854

186,693 1,579,253 4,865,698 11,328,341- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

NET LIABILITIES . . . . . . . . . . . (101,038) (711,556) (2,709,809) (6,981,570)

Capital and ReservesCapital . . . . . . . . . . . . . . . . . . . 23 11,835 10,128 10,135 7Reserves . . . . . . . . . . . . . . . . . . 23 (112,873) (722,647) (2,757,630) (7,111,596)

Total deficit attributable to equityshareholders of the Company . . . . (101,038) (712,519) (2,747,495) (7,111,589)

Non-controlling interests . . . . . . . . – 963 37,686 130,019

TOTAL DEFICIT . . . . . . . . . . . . (101,038) (711,556) (2,709,809) (6,981,570)



– I-6 –


STATEMENTS OF FINANCIAL POSITION OF THE COMPANY(Expressed in RMB)

As at 31 December As at 30 June

Note 2019 2020 2021

RMB’000 RMB’000 RMB’000

Non-current assetInvestment in subsidiaries . . . . . . . . . . . . . . . 15 27 27 27

Current assetsAmount due from subsidiaries. . . . . . . . . . . . . 17 – 929,486 2,877,672Loans receivable . . . . . . . . . . . . . . . . . . . . – – 248,547Cash and cash equivalents . . . . . . . . . . . . . . . – 218 59,430

– 929,704 3,185,649- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Current liabilitiesLoans and borrowings . . . . . . . . . . . . . . . . . – 247,946 –Other payables . . . . . . . . . . . . . . . . . . . . . 27 79,021 4

27 326,967 4- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Net current (liabilities)/assets . . . . . . . . . . . . (27) 602,737 3,185,645- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Non-current liabilityFinancial liabilities measured at fair value through

profit or loss . . . . . . . . . . . . . . . . . . . . . 24 – 945,768 10,114,487

NET LIABILITIES . . . . . . . . . . . . . . . . . . – (343,004) (6,928,815)

Share capital and Reserves . . . . . . . . . . . . . 23(b)Share capital . . . . . . . . . . . . . . . . . . . . . . . – 7 7Reserves . . . . . . . . . . . . . . . . . . . . . . . . . – (343,011) (6,928,822)

TOTAL DEFICIT . . . . . . . . . . . . . . . . . . . – (343,004) (6,928,815)



– I-7 –


COMBINED STATEMENTS OF CHANGES IN EQUITY(Expressed in RMB)

Attributable to equity shareholders of the Company

Note CapitalCapitalreserve

Exchangereserve

Accumulatedlosses Total

Non-controlling

interests Total deficit

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Note 23(a) Note 23(a) Note 23(c)

At 1 January 2018 . . . . . . . . 11,835 13,225 – (46,613) (21,553) – (21,553)Changes in equity for the year

ended 31 December 2018:Loss and total comprehensive

income for the year . . . . . . . – – – (79,485) (79,485) – (79,485)

At 31 December 2018 and1 January 2019 . . . . . . . . 11,835 13,225 – (126,098) (101,038) – (101,038)

Changes in equity for the yearended 31 December 2019:

Loss for the year . . . . . . . . . – – – (514,432) (514,432) (71) (514,503)Other comprehensive income . . . . – – 2 – 2 – 2

Total comprehensive income . . . . – – 2 (514,432) (514,430) (71) (514,501)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Capital contribution fromnon-controlling interests . . . . . 23(e) – – – – – 1,034 1,034

Re-designation from ordinary sharesto financial liabilities measured atfair value through profit or loss . . 24 (1,707) (95,344) – – (97,051) – (97,051)

At 31 December 2019 and1 January 2020 . . . . . . . . 10,128 (82,119) 2 (640,530) (712,519) 963 (711,556)


Loss for the year . . . . . . . . . – – – (2,016,324) (2,016,324) (883) (2,017,207)Other comprehensive income . . . . – – (18,659) – (18,659) 12 (18,647)

Total comprehensive income . . . . – – (18,659) (2,016,324) (2,034,983) (871) (2,035,854)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuance of ordinary shares . . . . . 23(a) 7 – – – 7 – 7Capital contribution from

non-controlling interests . . . . . 23(e) – – – – – 38,574 38,574Dividend paid to non-controlling

shareholders in respect of thecurrent year . . . . . . . . . . 23(d) – – – – – (980) (980)

At 31 December 2020 and1 January 2021 . . . . . . . . 10,135 (82,119) (18,657) (2,656,854) (2,747,495) 37,686 (2,709,809)

Changes in equity for the sixmonths ended 30 June 2021:

Loss for the period . . . . . . . . – – – (4,371,827) (4,371,827) (25,256) (4,397,083)Other comprehensive income . . . . – – 17,524 – 17,524 12 17,536

Total comprehensive income . . . . – – 17,524 (4,371,827) (4,354,303) (25,244) (4,379,547)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Reorganization . . . . . . . . . . 23(a) (10,128) 337 – – (9,791) – (9,791)Capital contribution from

non-controlling interests . . . . . 23(e) – – – – – 117,577 117,577

At 30 June 2021 . . . . . . . . . 7 (81,782) (1,133) (7,028,681) (7,111,589) 130,019 (6,981,570)



– I-8 –


(Unaudited) Attributable to equity shareholders of the Company

Note CapitalCapitalreserve

Exchangereserve


Non-controlling

interests Total deficit

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Note 23(a) Note 23(a) Note 23(c)

At 1 January 2020 . . . . . . . . 10,128 (82,119) 2 (640,530) (712,519) 963 (711,556)Changes in equity for the six

months ended 30 June 2020:Loss for the period . . . . . . . . – – – (513,307) (513,307) 433 (512,874)Other comprehensive income . . . . – – (189) – (189) (4) (193)

Total comprehensive income . . . . – – (189) (513,307) (513,496) 429 (513,067)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Capital contribution fromnon-controlling interests . . . . . 23(e) – – – – – 1,746 1,746

Dividend paid to non-controllingshareholders in respect of thecurrent period . . . . . . . . . 23(d) – – – – – (286) (286)

At 30 June 2020 . . . . . . . . . 10,128 (82,119) (187) (1,153,837) (1,226,015) 2,852 (1,223,163)



– I-9 –


COMBINED STATEMENTS OF CASH FLOWS(Expressed in RMB)

Year ended 31 DecemberSix months

ended 30 June

Note 2018 2019 2020 2020 2021


(Unaudited)Operating activitiesCash used in operations . . . . . . . . . . . 18(a) (24,892) (380,652) (313,946) (104,862) (354,019)Income tax paid . . . . . . . . . . . . . . . . (302) (450) (124) (218) (2,314)

Net cash used in operatingactivities . . . . . . . . . . . . . . . . . . (25,194) (381,102) (314,070) (105,080) (356,333)

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Investing activitiesPayment for purchase of property, plant

and equipment . . . . . . . . . . . . . . . (16,156) (90,739) (316,457) (105,496) (95,580)Payment for purchase of intangible

assets. . . . . . . . . . . . . . . . . . . . . (546) (1,539) (2,345) (1,511) (1,234)Interest income from loans to

franchisees . . . . . . . . . . . . . . . . . – 5,218 29,950 10,778 20,524Bank interest income . . . . . . . . . . . . . 75 114 485 70 429Payment for loans to franchisees . . . . . . – (34,776) (270,045) (70,805) –Repayment from loans to franchisees. . . . – – 32,822 – 14,299

Net cash used in investing activities . . . (16,627) (121,722) (525,590) (166,964) (61,562)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Financing activitiesInterest element of lease rental paid . . . . 18(b) (1,795) (5,537) (35,182) (13,330) (34,908)Capital element of lease rentals paid . . . . 18(b) (16,814) (53,095) (121,729) (22,143) (127,216)Interest expense paid for loans and

borrowings . . . . . . . . . . . . . . . . . 18(b) (1,153) (2,695) (13,970) (4,354) (9,010)Proceeds from loans and borrowings . . . . 18(b) 38,000 232,070 309,790 23,667 57,756Repayment of loans and borrowings . . . . 18(b) (20,000) (33,000) (232,070) (27,236) (297,161)Capital injection from non-controlling

shareholders . . . . . . . . . . . . . . . . . – – 232 232 –Proceeds from issuance of redemption

liabilities and convertible redeemablepreferred shares. . . . . . . . . . . . . . . 18(b) 70,000 568,722 872,141 116,486 1,788,452

Placement of restricted bank deposits . . . 18 – – (30) – (638)Payment arising from Reorganization . . . 1(b) – – – – (9,849)Dividend paid to non-controlling

shareholders of the Company . . . . . . . – – (980) (286) –

Net cash generated from financingactivities . . . . . . . . . . . . . . . . . . 68,238 706,465 778,202 73,036 1,367,426

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Net increase/(decrease) in cash and cashequivalents . . . . . . . . . . . . . . . . . 26,417 203,641 (61,458) (199,008) 949,531

Cash and cash equivalents at thebeginning of the year/period . . . . . . 1,709 28,126 233,291 233,291 168,294

Effect of foreign exchangerate change . . . . . . . . . . . . . . . . . – 1,524 (3,539) 1,358 (985)

Cash and cash equivalents at the end ofthe year/period . . . . . . . . . . . . . . 18 28,126 233,291 168,294 35,641 1,116,840



– I-10 –


NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1 BASIS OF PREPARATION AND PRESENTATION OF THE HISTORICAL FINANCIAL INFORMATION

(a) General information

KK Technology Company Holdings Limited (the “Company”) was incorporated in the Cayman Islands on 29 March2019 as an exempted company with limited liability under the Companies Law, Cap 22 (Law 3 of 1961, as consolidated andrevised) of the Cayman Islands.

The Company is an investment holding company and has not carried on any business operations since the date of itsincorporation save for the group reorganization (the “Reorganization”) described below. The Company and its subsidiaries(together, “the Group”) are principally engaged in the retail and wholesale of a featured variety of cosmetics and beautyproducts, toys, food and beverages, and other household stationery (the “[REDACTED] Business”) mainly in the People’sRepublic of China (the “PRC”).

(b) Reorganization and basis of presentation

Prior to the incorporation of the Company, the [REDACTED] Business was carried out by Guangdong KuaikeElectronic Commerce Limited (廣東快客電子商務有限公司, “Guangdong Kuaike”) and its subsidiaries. To rationalise thecorporate structure in preparation of the [REDACTED] of the Company’s shares on The Stock Exchange of Hong KongLimited (the “Stock Exchange”), the Group is undergoing the Reorganization, as detailed in the section headed “History,Reorganization and Corporate Structure” in the Document.

As part of the Reorganization, the Company (i) acquired 100% equity interests in Guangdong Kuaike through awholly-owned subsidiary at a total cash consideration of RMB9,849,000, which effectively terminated previous contractualarrangements with Guangdong Kuaike and (ii) incorporated certain new subsidiaries to operate the [REDACTED] Business.The Reorganization was completed on 27 July 2021 and the Company became the holding company of the Group since then.

The Reorganization is merely a recapitalisation of [REDACTED] Business with no substantive change in theeconomic substance of the ownership and the business of the Group before and after the Reorganization. Accordingly, theHistorical Financial Information has been prepared and presented as a continuation of the financial information of the[REDACTED] Business with the assets and liabilities recognised and measured at their historical carrying amounts priorto the completion of the Reorganization.

(c) Subsidiaries

The combined statements of profit or loss and other comprehensive income, the combined statements of changes inequity and the combined statements of cash flows of the Group for the Relevant Periods as set out in this report include thefinancial performance and cash flows of the companies now comprising the Group as if the current group structure had beenin existence and unchanged throughout the Relevant Periods (or where the companies were incorporated/established at a datelater than 1 January 2018, for the period from the dates of incorporation/establishment to 30 June 2021). The combinedstatements of financial position of the Group as at 31 December 2018, 2019, 2020 and 30 June 2021 as set out in this reporthave been prepared to present the financial position of the companies now comprising the Group as at those dates as if thecurrent group structure had been in existence as at the respective dates taking into account the respective dates ofincorporation/establishment, where applicable. Intra-group balances, transactions and unrealised gain/loss on intra-grouptransactions are eliminated in full in preparing the Historical Financial Information.

As at the date of this report, no audited financial statements have been prepared for the Company, as it has not carriedon any business since the date of incorporation and is an investment holding company and not subject to statutory auditrequirements under the relevant rules and regulations in the jurisdiction of incorporation. The financial statements of thesubsidiaries of the Group for which there are statutory requirements were prepared in accordance with the relevantaccounting rules and regulations applicable to entities in the countries in which they were incorporated and/or established.


– I-11 –


Upon completion of the Reorganization and as at the date of this report, the Company has direct or indirect interestsin the following subsidiaries, all of which are private companies:

Company name

Place and date ofincorporation/establishment

Particulars of issued andpaid-up capital

Proportion of Ownershipinterest

Principalactivities

Held by theCompany

Held by thesubsidiaries

KK International Hong KongLimited (Note (d)) . . . . . . . .

Hong Kong1 August 2019

Issued and paid-up capitalof HK$10,000 consistingof 10,000 ordinaryshares

100% – Investmentholding

KK Technology (HK) CompanyLimited (Note (d)) . . . . . . . .

Hong Kong12 April 2019

Issued up capital ofUS$500,000,000 andpaid-up capital of HK$1


Vancl Supply Chain Limited(Note (d)) . . . . . . . . . . . .

Hong Kong24 December 2019



HKNY Investment HoldingLimited (Note (e)) . . . . . . . .

Hong Kong19 September 2014


– 100% Investmentholding

PT KKV International Indonesia(Notes (a) and (c)) . . . . . . . .

Indonesia11 September 2019

Issued and paid-up capitalof IDR2,500,000,000


PT KKV Retail Indonesia(Notes (a) and (c)) . . . . . . . .

Indonesia7 February 2020

Issued capital ofIDR10,000,000,000 andpaid-up capital ofIDR2,500,000,000

– 80% Retail oflifestyleproducts

Guangdong Kuaike ElectronicCommerce Co., Ltd.(廣東快客電子商務有限公司)(Notes (a), (b) and (f)) . . . . . .

PRC13 April 2015

Issued and paid-up capitalof RMB12,283,713


Dongguan Yueke EnterpriseManagement Service Co., Ltd.(東莞市悅客企業管理服務有限公司) (Notes (a), (b) and (c)) . . . .

PRC11 August 2015

Issued and paid-up capitalof RMB500,000

– 100% Commercemanagementservice

Dongguan Kuaike BusinessManagement Co., Ltd. (東莞市快客商業管理有限公司) (Notes (a), (b)and (c)) . . . . . . . . . . . .

PRC13 April 2016

Issued and paid-up capitalof RMB500,000


Shenzhen Colorist Cosmetics Co.,Ltd. (深圳市調色師化妝品有限公司) (Notes (a), (b)and (c)) . . . . . . . . . . . .

PRC29 August 2019


– 100% Retail andwholesale oflifestyleproducts

Shenzhen Mengke Supply ChainTechnology Co., Ltd. (深圳市盟客供應鏈科技有限公司) (Notes (a),(b) and (c)) . . . . . . . . . . .

PRC3 April 2020

Issued capital ofRMB1,000,000,000 andpaid-up capital ofRMB48,000,000

– 100% Provision ofsupply chainservices

Guangzhou Mengke Supply ChainTechnology Co., Ltd. (廣州市盟客供應鏈科技有限公司) (Notes (a),(b) and (c)) . . . . . . . . . . .

PRC11 November 2020

Issued capital ofRMB1,000,000,000 andpaid-up capital ofRMB200,000,000

– 100% Provision ofsupply chainservices

Guangdong Xingke CommerceManagement Co., Ltd. (廣東星客商業管理有限公司) (Notes (a), (b),(c) and (g)) . . . . . . . . . . .

PRC23 December 2020

Issued capital ofUS$100,000,000 andpaid-up capital ofUS$nil


Rongke Enterprise ManagementService (Guangdong) Co., Ltd.(榮客企業管理服務(廣東)有限公司)(Notes (a), (b) and (c)) . . . . . .

PRC16 December2020

Issued capital ofRMB5,000,000 andpaid-up capital ofRMBnil


Shenzhen Xinke Software TechnologyService Co., Ltd. (深圳市信客軟件技術服務有限公司) (Notes (a), (b)and (c)) . . . . . . . . . . . .

PRC5 November 2020




– I-12 –


Company name




Principalactivities

Held by theCompany


Guangzhou Kuaike CommerceManagement Co., Ltd. (廣州快客商業管理有限公司) (Notes (a), (b),(c) and (g)) . . . . . . . . . . .

PRC3 August 2020

Issued capital ofUS$200,000,000 andpaid-up capital ofUS$50,110,052


Guangdong Kuaike CommerceManagement Co., Ltd. (廣東快客商業管理有限公司) (Notes (a), (b),(c) and (g)) . . . . . . . . . . .

PRC9 June 2020

Issued capital ofUS$500,000,000 andpaid-up capital ofUS$75,000,000


Chengdu Kuaitaike Trade Co., Ltd.(成都快泰客貿易有限公司) (Notes(a), (b) and (c)) . . . . . . . . .

PRC12 December 2019



Kuaimaike (Chengdu) CommercialManagement Co., Ltd. (快麥客(成都)商業管理有限公司) (Notes (a),(b) and (c)) . . . . . . . . . . .

PRC25 December 2020



Guangzhou Leming CommercialManagement Co., Ltd. (廣州樂明商業管理有限公司) (Notes (a), (b)and (c)) . . . . . . . . . . . .

PRC10 November 2020



Hefei Siqingxiu Trading Co., Ltd. (合肥市思青秀商貿有限公司)(Notes (a), (b) and (c)) . . . . . .

PRC23 November 2020



Henan Kuaizhishao Trading Co., Ltd.(河南快之劭商貿有限公司)(Notes (a), (b) and (c)) . . . . . .

PRC27 October 2020



Sichuan Yueshang CommercialManagement Co., Ltd. (四川省悅商商業管理有限公司) (Notes (a), (b)and (c)) . . . . . . . . . . . .

PRC3 June 2020



Shantou Gaocai Anyi Trading Co.,Ltd. (汕頭市高彩安易商貿有限公司) (Notes (a), (b) and (c)) . . . .

PRC29 September 2020



Suzhou Purple Dolphin BrandManagement Co., Ltd. (蘇州紫海豚品牌管理有限公司) (Notes (a), (b),and (c)) . . . . . . . . . . . .

PRC15 October 2020



Shanghai Kuaicheng Trading Co.,Ltd. (上海快澄商貿有限責任公司)(Notes (a), (b) and (c)) . . . . . .

PRC04 December 2020



Shanxi Chuanghe Trading Co., Ltd.(山西創合貿易有限公司) (Notes(a), (b) and (c)) . . . . . . . . .

PRC12 November 2020



Beijing Quke Tongying Business Co.,Ltd. (北京趣客通盈商務有限公司)(Notes (a), (b) and (c)) . . . . . .

PRC30 October 2020



Hunan Yize Trading Co., Ltd. (湖南熠澤商貿有限責任公司) (Notes (a),(b) and (c)) . . . . . . . . . . .

PRC30 October 2020



Xinjiang Qianyufei CommercialManagement Co., Ltd. (新疆倩雨飛商業管理有限責任公司) (Notes (a),(b) and (c)) . . . . . . . . . . .

PRC21 October 2020




– I-13 –


Company name




Principalactivities

Held by theCompany


Beijing Juya Trading Co., Ltd. (北京巨牙商貿有限公司) (Notes (a), (b)and (c)) . . . . . . . . . . . .

PRC13 November2020



Wuhan Xinkuaimaoke Trading Co.,Ltd. (武漢新快貓客商貿有限公司)(Notes (a), (b) and (c)) . . . . . .

PRC22 April 2021



Beijing Jiuhao Internet TechnologyCo., Ltd. (北京玖號互聯網科技有限公司) (Notes (a), (b) and (c)) . . .

PRC10 March 2020



Sichuan Yuexi Brand ManagementCo., Ltd. (四川悅熙品牌管理有限公司) (Notes (a), (b) and (c)) . . . .

PRC17 March 2021



Notes:

(a) These entities were not subject to statutory audit requirement under the relevant rules and regulations in thejurisdiction of incorporation.

(b) The official names of these entities are in Chinese. The English translation of the names is for identificationonly.

(c) No audited financial statements have been prepared for these entities for the Relevant Periods.

(d) The statutory financial statements of these entities were audited by Sinosia & Co. Certified Public Accountants(漢拓會計師事務所) for the years ended 31 December 2019 and 2020.

(e) The statutory financial statements of these entities were audited by Sinosia & Co. Certified Public Accountants(漢拓會計師事務所) for the years ended 31 December 2018, 2019 and 2020.

(f) These entities voluntarily prepared their financial statements for the years ended 31 December 2018, 2019 and2020 in accordance with the Accounting Standards for Business Enterprises (the “PRC GAAP”), which wereaudited by Daxin Certified Public Accountants of Shenzhen (Limited Liability Partnership) (大信會計師事務所(特殊普通合夥)).

(g) These entities were established in the PRC as a wholly-foreign-owned enterprises.

(d) Basis of preparation

The Historical Financial Information has been prepared under the going concern basis notwithstanding the fact thatthe Group was at a net liability position during the Relevant Periods. As at 30 June 2021, the Group had net liabilities ofRMB6,981,570,000, including financial liabilities measured at fair value through profit or loss amounting toRMB10,114,487,000, which were recognised for the Group’s obligation to redeem the convertible redeemable preferredshares issued by the Company upon occurrence of certain contingent events. Having considered the Group’s plan to rolloverits banking facilities to finance its continuing operations and the fact that the above-mentioned financial liabilities measuredat fair value through profit or loss would be automatically terminated and be converted into equity upon [REDACTED], thedirectors of the Group are of the opinion that the Group will continue its operations and be able to settle its liabilities forthe at least the next 12 months, and therefore it is appropriate for the Historical Financial Information to be prepared on agoing concern basis.

The Historical Financial Information has been prepared in accordance with all applicable Hong Kong FinancialReporting Standards (“HKFRSs”) which collective term includes all applicable individual Hong Kong Financial ReportingStandards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of CertifiedPublic Accountants (“HKICPA”). Further details of the significant accounting policies adopted are set out in Note 2.


– I-14 –


The HKICPA has issued a number of new and revised HKFRSs during the Relevant Periods. For the purpose ofpreparing this Historical Financial Information, the Group has adopted all applicable new and revised HKFRSs that areeffective for the Relevant Periods, including HKFRS 16, Leases, and has early adopted Amendment to HKFRS 16,Covid-19-related rent concessions beyond 30 June 2021, consistently throughout the Relevant Periods. The revised and newaccounting standards and interpretations issued but not yet effective for the Relevant Periods are set out in Note 29.

The adoption of HKFRS 16 primarily affects the Group’s accounting as a lessee of leases for properties for retailstores and warehouses which are classified as operating leases under HKAS 17, Leases. Upon the adoption of HKFRS 16,according to the accounting policies described in Note 2(g), at the lease commencement date, the Group as a lessee recogniseright-of-use assets and lease liabilities for all fixed-rate leases, except for short-term leases with lease term of 12 monthsor less and lease of low-value assets.

The Historical Financial Information also complies with the applicable disclosure provisions of the Rules Governingthe Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The accounting policies set out below have been applied consistently to all periods presented in the HistoricalFinancial Information.

The Stub Period Corresponding Financial Information has been prepared in accordance with the same basis ofpreparation and presentation adopted in respect of the Historical Financial Information.

2 SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of measurement and functional and presentation currency

The measurement basis used in the preparation of the financial statements is the historical cost basis except forfinancial liabilities measured at fair value through profit or loss as explained in Note 2(m).

Item included in the financial statements of each entity in the Group are measured using the currency that best reflectsthe economic substance of the underlying events and circumstances relevant to the entity (the “Functional Currency”). TheHistorical Financial Information is presented in Renminbi (“RMB”), rounded to the nearest thousand except where otherwiseindicated. The functional currency of the Company is United States dollar.

(b) Use of estimates and judgements

The preparation of financial statements in conformity with HKFRSs requires management to make judgements,estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income andexpenses. The estimates and associated assumptions are based on historical experience and various other factors that arebelieved to be reasonable under the circumstances, the results of which form the basis of making the judgements aboutcarrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from theseestimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognised in the period in which the estimate is revised if the revision affects only that period, or in the period of therevision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of HKFRSs that have significant effect on the financialstatements and major sources of estimation uncertainty are discussed in Note 3.

(c) Subsidiaries and non-controlling interests

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has rights, tovariable returns from its involvement with the entity and has the ability to affect those returns through its power over theentity. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) areconsidered.

An investment in a subsidiary is consolidated into the Historical Financial Information from the date that controlcommences until the date that control ceases. Intra-group balances, transactions and cash flows and any unrealised profitsarising from intra-group transactions are eliminated in full in preparing the Historical Financial Information. Unrealisedlosses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent thatthere is no evidence of impairment.

Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company,and in respect of which the Group has not agreed any additional terms with the holders of those interests which would resultin the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financialliability.


– I-15 –


Non-controlling interests are presented in the combined statement of financial position within equity, separately fromequity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group arepresented on the face of the combined statement of profit or loss and other comprehensive income as an allocation of thetotal profit or loss and total comprehensive income for the year between non-controlling interests and the equity shareholdersof the Company.

Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equitytransactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within combinedequity to reflect the change in relative interests, but no gain or loss is recognised.

In the Company’s statement of financial position, investment in subsidiaries are stated at cost less impairment losses(see Note 2(h)(ii)).

(d) Joint ventures

A joint venture is an arrangement whereby the Group and other parties contractually agree to share control of thearrangement and have rights to the net assets of the arrangement.

An investment in a joint venture is accounted for in the combined financial statements under the equity method. Underthe equity method, the investment is initially recorded at cost, adjusted for any excess of the Group’s share of theacquisition-date fair values of the investee’s identifiable net assets over the cost of the investment (if any). The cost of theinvestment includes purchase price, other costs directly attributable to the acquisition of the investment, and any directinvestment into the joint venture that forms part of the Group’s equity investment. Thereafter, the investment is adjusted forthe post acquisition change in the group of investee’s net asset and any impairment loss relating to the investment (see Note2 (h)(ii)). Any acquisition-date excess over cost, the Group’s share of the post-acquisition, post-tax results of the investeesand any impairment losses for the year are recognised in the combined statement of profit or loss and other comprehensiveincome, whereas the Group’s share of the post-acquisition post-tax items of the investees’ other comprehensive income isrecognised in the combined statement of profit or loss and other comprehensive income.

When the Group’s share of losses exceeds its interest in the joint venture, the Group’s interest is reduced to nil andrecognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligationsor made payments on behalf of the investee. For this purpose, the Group’s interest is the carrying amount of the investmentunder the equity method, together with any other long-term interests that in substance form part of the Group’s netinvestment in the joint venture (after applying the ECL model to such other long-term interests where applicable (see Note2(h)(i)).

Unrealised profits and losses resulting from transactions between the Group and its joint venture are eliminated tothe extent of the Group’s interest in the investee, except where unrealised losses provide evidence of an impairment of theasset transferred, in which case they are recognised immediately in profit or loss.

When the Group ceases to have joint control over a joint venture, it is accounted for as a disposal of the entire interestin that investee, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former investeeat the date when joint control is lost is recognised at fair value and this amount is regarded as the fair value on initialrecognition of a financial asset.

(e) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see Note2(h)(ii)). Construction in progress represents property and equipment under construction, which is stated at cost less anyimpairment losses, and is not depreciated.

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determinedas the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or losson the date of retirement or disposal.

Depreciation is calculated to write off the cost of items of property, plant and equipment, less their estimated residualvalue, if any, using the straight-line method over their estimated useful lives as follows:

Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Over the shorter ofthe lease term or

the estimated usefullife of the asset

Motor vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-4 yearsOffice equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-5 yearsStore equipment, furniture and fittings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-12 years

Both the useful life of an asset and its residual value, if any, are reviewed at each reporting period.


– I-16 –


(f) Intangible assets

Intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (where the estimateduseful life is finite) and impairment losses (see Note 2(h)(ii)).

Amortisation of intangible assets with finite useful lives is charged to profit or loss on a straight-line basis over theassets’ estimated useful lives. The following intangible assets with finite useful lives are amortised from the date they areavailable for use and their estimated useful lives are as follows:

Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-6 yearsTrademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 years

Both the period and method of amortisation are reviewed annually.

(g) Leased assets

At inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or contains,a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange forconsideration. Control is conveyed where the customer has both the right to direct the use of the identified asset and to obtainsubstantially all of the economic benefits from that use.

As a lessee

Where the contract contains lease components and non-lease components, the Group has elected not to separatenon-lease components and accounts for each lease component and any associated non-lease components as a singlelease component for all leases.

At the lease commencement date, the Group recognises a right-of-use asset and a lease liability, except forshort-term leases that have a lease term of 12 months or less and leases of low-value assets which, for the Group areprimarily staff apartments with lease term of less than 12 months. When the Group enters into a lease in respect ofa low-value asset, the Group decides whether to capitalise the lease on a lease-by-lease basis. The lease paymentsassociated with those leases which are not capitalised are recognised as an expense on a systematic basis over thelease term.

Where the lease is capitalised, the lease liability is initially recognised at the present value of the leasepayments payable over the lease term, discounted using the interest rate implicit in the lease or, if that rate cannotbe readily determined, using a relevant incremental borrowing rate. After initial recognition, the lease liability ismeasured at amortized cost and interest expense is calculated using the effective interest method. Variable leasepayments that do not depend on an index or rate are not included in the measurement of the lease liability and henceare charged to profit or loss in the accounting period in which they are incurred.

The right-of-use asset recognised when a lease is capitalised is initially measured at cost, which comprises theinitial amount of the lease liability plus any lease payments made at or before the commencement date, and any initialdirect costs incurred. Where applicable, the cost of the right-of-use assets also includes an estimate of costs todismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located,discounted to their present value, less any lease incentives received. The right-of-use asset is subsequently stated atcost less accumulated depreciation and impairment losses (see Notes 2(e) and 2(h)(ii)). The right-of-use asset issubsequently depreciated using the straight-line method from the commencement date to the end of the lease term.The estimated useful lives of right-of-use asset are determined on the same basis as those of property, plant andequipment.

The lease liability is remeasured when there is a change in future lease payments arising from a change in anindex or rate, or there is a change in the Group’s estimate of the amount expected to be payable under a residual valueguarantee, or there is a change arising from the reassessment of whether the Group will be reasonably certain toexercise a purchase, extension or termination option. When the lease liability is remeasured in this way, acorresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss ifthe carrying amount of the right-of-use asset has been reduced to zero.

The lease liability is remeasured when there is a change in the scope of a lease or the consideration for a leasethat is not originally provided for in the lease contract (“lease modification”) that is not accounted for as a separatelease. In this case the lease liability is remeasured based on the revised lease payments and lease term using a reviseddiscount rate at the effective date of the modification. The only exceptions are any rent concessions which arose asa direct consequence of the COVID-19 pandemic and which satisfied the conditions set out in paragraph 46B ofHKFRS16, Leases. In such cases, the Group took advantage of the practical expedient set out in paragraph 46A ofHKFRS 16 and recognised the change in consideration as if it were not a lease modification.


– I-17 –


In the combined statement of financial position, the current portion of long-term lease liabilities is determinedas the present value of contractual payments that are due to be settled within 12 months after the reporting period.

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that havea lease term of 12 months or less and lease of low-value assets. The Group recognises the lease payments associatedwith these leases as an expense on a straight-line basis over the lease term.

(h) Credit losses and impairment of assets

(i) Credit losses from financial instruments

The Group recognises a loss allowance for expected credit losses (“ECLs”) on financial assets measured atamortised cost (including cash and cash equivalents and trade receivables and other receivables.)

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the presentvalue of all expected cash shortfalls (i.e. the difference between the cash flows due to the Group in accordancewith the contract and the cash flows that the Group expects to receive).

The expected cash shortfalls of fixed-rate financial assets and other receivables are discounted using theeffective interest rate determined at initial recognition or an approximation thereof where the effect ofdiscounting is material.

The maximum period considered when estimating ECLs is the maximum contractual period over whichthe Group is exposed to credit risk.

In measuring ECLs, the Group takes into account reasonable and supportable information that isavailable without undue cost or effort. This includes information about past events, current conditions andforecasts of future economic conditions.

ECLs are measured on either of the following bases:

– 12-month ECLs: these are losses that are expected to result from possible default events withinthe 12 months after the reporting date; and

– Lifetime ECLs: these are losses that are expected to result from all possible default events overthe expected lives of the items to which the ECL model applies.

Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs. ECLson these financial assets are estimated using a provision matrix based on the Group’s historical credit lossexperience, adjusted for factors that are specific to the debtors and an assessment of both the current andforecast general economic conditions at the reporting date.

For all other financial instruments, the Group recognises a loss allowance equal to 12-month ECLsunless there has been a significant increase in credit risk of the financial instrument since initial recognition,in which case the loss allowance is measured at an amount equal to lifetime ECLs.

Significant increases in credit risk

In assessing whether the credit risk of a financial instrument has increased significantly since initialrecognition, the Group compares the risk of default occurring on the financial instrument assessed at thereporting date with that assessed at the date of initial recognition. In making this reassessment, the Groupconsiders that a default event occurs when (i) the borrower is unlikely to pay its credit obligations to the Groupin full, without recourse by the Group to actions such as realising security (if any is held); or (ii) the financialasset is 30 days past due. The Group considers both quantitative and qualitative information that is reasonableand supportable, including historical experience and forward-looking information that is available withoutundue cost or effort.

In particular, the following information is taken into account when assessing whether credit risk hasincreased significantly since initial recognition:

– failure to make payments of principal or interest on their contractually due dates;

– an actual or expected significant deterioration in a financial instrument’s external or internalcredit rating (if available);


– I-18 –


– an actual or expected significant deterioration in the operating results of the debtor; and

– existing or forecast changes in the technological, market, economic or legal environment thathave a significant adverse effect on the debtor’s ability to meet its obligation to the Group.

Depending on the nature of the financial instruments, the assessment of a significant increase in creditrisk is performed on either an individual basis or a collective basis. When the assessment is performed on acollective basis, the financial instruments are grouped based on shared credit risk characteristics, such as pastdue status and credit risk ratings.

ECLs are remeasured at each reporting date to reflect changes in the financial instrument’s credit risksince initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profitor loss. The Group recognises an impairment gain or loss for all financial instruments with a correspondingadjustment to their carrying amount through a loss allowance account.

Basis of calculation of interest income

Interest income recognised in accordance with Note 2(r)(iii) is calculated based on the gross carryingamount of the financial asset unless the financial asset is credit-impaired, in which case interest income iscalculated based on the amortised cost (i.e. the gross carrying amount less loss allowance) of the financialasset.

At each reporting date, the Group assesses whether a financial asset is credit impaired. A financial assetis credit-impaired when one or more events that have a detrimental impact on the estimated future cash flowsof the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable events:

– significant financial difficulties of the debtor;

– a breach of contract, such as a default or past due event;

– becoming probable that the borrower will enter into bankruptcy or other financial reorganization;

– significant changes in the technological, market, economic or legal environment that have anadverse effect on the debtor.

Write-off policy

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent thatthere is no realistic prospect of recovery. This is generally the case when the Group determines that the debtordoes not have assets or sources of income that could generate sufficient cash flows to repay the amountssubject to the write-off.

Subsequent recoveries of an asset that was previously written off are recognised as a reversal ofimpairment in profit or loss in the period in which the recovery occurs.

(ii) Impairment of other non-current assets

Internal and external sources of information are reviewed at the end of each reporting period to identifyindications that the following assets may be impaired or, except in the case of an impairment loss previouslyrecognised no longer exists or may have decreased:

– intangible assets;

– property, plant and equipment;

– right-of-use assets; and

– investment in subsidiaries in the Company’s statement of financial position

If any such indication exists, the asset’s recoverable amount is estimated.


– I-19 –


– Calculation of recoverable amount

The recoverable amount of an asset is the greater of its fair value less costs of disposal and value inuse. In assessing value in use, the estimated future cash flows are discounted to their present value using apre-tax discount rate that reflects current market assessments of the time value of money and the risks specificto the asset. Where an asset does not generate cash inflows largely independent of those from other assets, therecoverable amount is determined for the smallest group of assets that generates cash inflows independently(i.e. a cash-generating unit).

– Recognition of impairment losses

An impairment loss is recognised in profit or loss if the carrying amount of an asset, or thecash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised inrespect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated tothe cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in theunit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced belowits individual fair value less costs of disposal (if measurable) or value in use (if determinable).

– Reversals of impairment losses

An impairment loss is reversed if there has been a favourable change in the estimates used to determinethe recoverable amount.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have beendetermined had no impairment loss been recognised in prior years. Reversals of impairment losses are creditedto profit or loss in the year in which the reversals are recognised.

(i) Inventories

Inventories are assets which are held for sale, including the products placed at stores, and low value consumables tobe consumed, in the ordinary course of business.

Inventories are carried at the lower of cost and net realisable value. Net realisable value is the estimated selling pricein the ordinary course of business less the estimated costs necessary to make the sale.

Cost of inventories is calculated using the weighted average cost formula and comprises all costs of purchase, costsof conversion and other costs incurred in bringing the inventories to their present location and condition.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in whichthe related revenue is recognised.

The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised asan expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories isrecognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

(j) Trade and other receivables

A receivable is recognised when the Group has an unconditional right to receive consideration. A right to receiveconsideration is unconditional if only the passage of time is required before payment of that consideration is due.

Receivables are stated at amortised cost using the effective interest method less allowance for credit losses (see Note2(h)(i)).

(k) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financialinstitutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and whichare subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Cash andcash equivalents are assessed for ECL in accordance with the policy set out in Note 2(h)(i).

(l) Trade and other payables

Trade and other payables are initially recognised at fair value and subsequently stated at amortised cost unless theeffect of discounting would be immaterial, in which case they are stated at cost.


– I-20 –


(m) Financial liabilities measured at fair value through profit or loss (“Financial liabilities at FVTPL”)

Redemption liabilities

Guangdong Kuaike issued certain preferential rights together with its shares to some investors. With thepreferential rights, the investors have the right to require Guangdong Kuaike to redeem all or part of the shares heldby them upon occurrence of certain contingent events, which are beyond the control of the Group. Upon thecompletion of a qualified [REDACTED], all the preferential rights issued to the investors would automaticallyexpire.

As the Group does not have an unconditional right to avoid occurrence of the contingent events, includingchange of control, the Group recognises the ordinary shares with preferential rights, including its obligation to paythe redemption amounts upon such events as financial liabilities, i.e. the redemption liabilities. The redemptionliabilities are designated as financial liabilities measured at fair value through profit or loss at initial recognition. Anytransaction costs and subsequent changes in fair value are recognised in the statements of profit or loss and othercomprehensive income. When the preferential rights of ordinary shareholders are terminated, the carrying amount ofthe financial liabilities at that time would be transferred to equity.

Convertible redeemable preferred shares

The Company issued certain convertible redeemable preferred shares to some investors. Also, as part of theReorganization, the Group would replace the preferential rights and the ordinary shares issued by Guangdong Kuaikewith the convertible redeemable preferred shares issued by the Company. For the convertible redeemable preferredshares issued, as the Company is obligated to redeem the preferred shares upon occurrence of the contingent events(such as change of control) which are beyond its control, the Group classifies the convertible redeemable preferredshares issued as financial liabilities and has designated as financial liabilities measured at fair value through profitor loss at initial recognition. Any transaction costs and subsequent changes in fair value are recognised in thestatements of profit or loss and other comprehensive income. If the convertible redeemable preferred shares areconverted into ordinary shares where the preferential rights are terminated, the carrying amount of the financialliabilities at that time would be transferred to equity.

(n) Interest-bearing borrowings

Interest-bearing borrowings are measured initially at fair value less transaction costs. Subsequent to initialrecognition, interest-bearing borrowings are stated at amortised cost using the effective interest method. Interest expense isrecognised in accordance with the Group’s accounting policy for borrowing costs (see Note 2(u)).

(o) Employee benefits

(i) Short-term employee benefits and contributions to defined contribution retirement plans

Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the costof non-monetary benefits are accrued in the period in which the associated services are rendered by employees. Wherepayment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

Contribution to appropriate local defined contribution retirement schemes pursuant to the relevant labour rulesand regulations in the Mainland China are recognised as an expense in profit or loss as incurred.

(ii) Termination benefits

Termination benefits are recognised at the earlier of when the Group can no longer withdraw the offer of thosebenefits and when it recognises restructuring costs involving the payment of termination benefits.

(p) Income tax

Income tax for the period comprises current tax and movements in deferred tax assets and liabilities. Current tax andmovements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to itemsrecognised in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognisedin other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantivelyenacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being thedifferences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases.Deferred tax assets also arise from unused tax losses and unused tax credits.


– I-21 –


All deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits willbe available against which the asset can be utilised, are recognised. Future taxable profits that may support the recognitionof deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existingtaxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity,and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or inperiods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adoptedwhen determining whether existing taxable temporary differences support the recognition of deferred tax assets arising fromunused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authorityand the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extentthat it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilised.Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other andare not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred taxliabilities, if the Company or the Group has the legally enforceable right to set off current tax assets against current taxliabilities and the following additional conditions are met:

– in the case of current tax assets and liabilities, the Company or the Group intends either to settle on a net basis,or to realise the asset and settle the liability simultaneously; or

– in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxationauthority on either:

– the same taxable entity; or

– different taxable entities, which, in each future period in which significant amounts of deferred taxliabilities or assets are expected to be settled or recovered, intend to realise the current tax assets andsettle the current tax liabilities on a net basis or realise and settle simultaneously.

(q) Provisions and contingent liabilities

Provisions are recognised when the Group or the Company has a legal or constructive obligation arising as a resultof a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliableestimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditureexpected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimatedreliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote.Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more futureevents are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(r) Revenue and other income

Income is classified by the Group as revenue when it arises from the sale of products and the provision of services.

Revenue is recognised when control over the product or service is transferred to the customer, at the amount ofpromised consideration to which the Group is expected to be entitled in exchange for the satisfaction of a specificperformance obligation, excluding those amounts collected on behalf of third parties. Revenue excludes value added tax orother sales taxes and is after deduction of any trade discounts.

The Group allocates the transaction price expected to be received from franchisees to different performanceobligations based on their relative standalone selling prices. In particular, the consideration in arrangements with franchiseesincludes sales-based amounts. Such sales-based amounts are excluded from the transaction price until the sales byfranchisees have occurred and would be allocated entirely to the service fee as they relate entirely to the Group’s promiseto provide management and logistics services to franchisees.

The Group takes advantage of the practical expedient in paragraph 63 of HKFRS 15, Revenue from Contracts withCustomers, and does not adjust the consideration for the effects of any significant financing component if the expected periodof financing is 12 months or less.

Further details of the Group’s revenue and other income recognition policies are as follows:

(i) Sales of products

– Retail sales in self-owned stores

Revenue from retail sales to customers in self-owned stores is recognised at the point when the endcustomer takes possession of and pays for the products.


– I-22 –


– Product sales to franchisees

The Group has entered into a series of franchise agreements with franchisees, primarily in the PRC,whereby the franchisees are authorised to operate the franchised stores and are authorised to sell, in their ownretail stores, the Group’s products. Revenue from sales to these franchisees is recognised at the point whenthey obtain the legal title of the product and become obliged to pay for the products, which is when thefranchisees sell the product to their customers (i.e. end customers who visit the stores) in the franchisees’stores.

For product sales to franchisees, the Group has determined that the franchisees are the customers of theGroup. The franchisees operate retail stores under the framework set out under the franchise agreements andis primarily responsible for fulfilling the promise to provide goods to the customers, and determining salesstrategy according to elements such as location, cities and seasons, etc. The franchisees employ and managetheir own staff to operate the stores and serve their customers, and bear the costs associated with storeoperation. The franchisees’ retail stores carry a wide range of merchandise as recommended from the Group’ssystem, and the franchisee may exercise discretion in selection of merchandise to be featured at their retailstores. The franchisees have the right to price their merchandise within a specified range of the recommendedretail price set by the Group.

In general, the Group does not have any obligation or practice to accept any return of unsold products,except for rare cases such as a latent defect subject to a product recall or certain limited seasonal items thathave passed their sales season.

(ii) Sales-based management and consultation service income

Franchisees are also required to pay sales-based management and consultation services income for their accessto such services. Sales-based management and consultation service income are recognised while the related productsales occur.

(iii) Interest income

Interest income is recognised as it accrues using the effective interest method.

(iv) Government grants

Government grants are recognised in the statements of financial position initially when there is reasonableassurance that they will be received and that the Group will comply with the conditions attaching to them. Grants thatcompensate the Group for expenses incurred are recognised as other income in profit or loss based on the timing ofwhen the related costs for which the grants are intended to compensate are incurred. Grants that compensate the Groupfor the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively recognisedin profit or loss over the useful life of the asset by way of reduced depreciation expense.

(s) Translation of foreign currencies

Foreign currency transactions during the period are translated at the foreign exchange rates ruling at the transactiondates. Monetary assets and liabilities denominated in foreign currencies and non-monetary assets and liabilities denominatedin foreign currencies that are stated at fair value are translated at the foreign exchange rates ruling at the end of the reportingperiod. Exchange gains and losses are recognised in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translatedusing the foreign exchange rates ruling at the transaction dates.

The results of foreign operations are translated into RMB at the average exchange rates for the period whichapproximating the foreign exchange rates ruling at the dates of the transactions. Statement of financial position items aretranslated into RMB at the closing foreign exchange rates at the end of the reporting period. The resulting exchangedifferences are recognised in other comprehensive income and accumulated separately in equity in the exchange reserve.

(t) Related parties

(a) A person, or a close member of that person’s family, is related to the Group if that person:

(i) has control or joint control over the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or the Group’s parent.


– I-23 –


(b) An entity is related to the Group if any of the following conditions applies:

(i) The entity and the Group are members of the same group (which means that each parent, subsidiary andfellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of amember of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or anentity related to the Group.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the keymanagement personnel of the entity (or of a parent of the entity).

(viii) The entity, or any member of a group of which it is a part, provides key management personnel servicesto the Group or to the Group’s parent.

Close members of the family of a person are those family members who may be expected to influence, or beinfluenced by, that person in their dealings with the entity.

(u) Borrowing costs

Borrowing costs are expensed in the period in which they are incurred.

(v) Segment reporting

Operating segments, and the amounts of each segment item reported in the Historical Financial Information, areidentified from the financial information provided regularly to the Group’s most senior executive management for thepurposes of allocating resources to, and assessing the performance of the Group’s various lines of business and geographicallocations.

Individually material operating segments are not aggregated for financial reporting purposes unless the segments havesimilar economic characteristics and are similar in respect of the nature of products and services, the nature of productionprocesses, the type or class of customers, the methods used to distribute the products or provide the services, and the natureof the regulatory environment. Operating segments which are not individually material may be aggregated if they share amajority of these criteria.

3 ACCOUNTING JUDGEMENTS AND ESTIMATES

In the process of applying the Group’s accounting policies, management has made the following accountingjudgements:

(a) Recognition of deferred tax assets

Deferred tax assets are recognised in respect of deductible temporary differences. As those deferred tax assets canonly be recognised to the extent that it is probable that future taxable profits will be available against which the deductibletemporary differences can be utilised, management’s judgment is required to assess the probability of future taxable profits.Management’s assessment is revised as necessary and additional deferred tax assets are recognised if it becomes probablethat future taxable profits will allow the deferred tax assets to be recovered.

(b) Impairments of non-current assets

In considering the impairment losses that may be required for certain property, plant and equipment and right-of-useassets, recoverable amount of these assets needs to be determined. The recoverable amount is the greater of fair value lesscosts of disposal and the value in use. It is difficult to precisely estimate fair value because quoted market prices for theseassets may not be readily available. In determining the value in use, expected cash flows generated by the asset arediscounted to their present value, which requires significant judgment relating to items such as level of revenue and amountof operating costs. The Group uses all readily available information in determining an amount that is reasonableapproximation of recoverable amount, including estimates based on reasonable and supportable assumptions and projectionsof items such as revenue and operating costs.


– I-24 –


(c) Write-down of inventories

The Group determines the write-down for obsolescence of inventories. These estimates are based on the currentmarket condition and the historical experience in selling goods of similar nature. It could change significantly as a resultof change in the market condition.

(d) Fair value measurement of financial instruments using valuation techniques

As disclosed in Note 24, the fair value of redemption liabilities and convertible redeemable preferred shares at eachbalance sheet dates were determined based on the valuation performed by an independent valuer, using valuation techniques.The Group uses its judgements to select a variety of methods and make assumptions that are mainly based on marketconditions existing at the respective valuation dates. The Group has used discounted cash flow to determine the businessvalue of the Group, followed by option pricing models to determine the fair value of financial instruments with preferredrights, which involved the use of significant accounting estimates and judgements.

4 REVENUE AND SEGMENT REPORTING

(a) Revenue

The Group principally engaged in the retail and wholesale of a featured variety of cosmetics and beauty products,toys, food and beverages, and other household stationery.

(i) Disaggregation of revenue

Disaggregation of revenue from contracts with customers by categories and brands of stores are as follows:

By major categories

Year ended 31 December Six months ended 30 June

2018 2019 2020 2020 2021


(Unaudited)

Retail sales from self-ownedstores . . . . . . . . . . . . . . 108,437 195,652 581,845 206,882 879,476

Sales to franchise stores . . . . . 40,613 240,596 946,548 249,717 721,564Sales-based management and

consultation service income. . 4,085 22,909 79,795 21,555 74,641Others . . . . . . . . . . . . . . . 2,174 4,587 37,716 24,203 7,479

Total . . . . . . . . . . . . . . . . 155,309 463,744 1,645,904 502,357 1,683,160

By brands of stores


2018 2019 2020 2020 2021


(Unaudited)

KK Guan . . . . . . . . . . . . . 153,135 357,231 320,885 157,939 120,105KKV . . . . . . . . . . . . . . . . – 81,878 834,734 221,930 1,048,589The COLORIST. . . . . . . . . . – 20,048 439,729 97,366 461,280X11 . . . . . . . . . . . . . . . . . – – 12,840 919 45,707Others . . . . . . . . . . . . . . . 2,174 4,587 37,716 24,203 7,479

Total . . . . . . . . . . . . . . . . 155,309 463,744 1,645,904 502,357 1,683,160


– I-25 –


All of the Group’s revenues are recognised by a point in time. For the six months ended 30 June 2021, revenue fromone customer of the Group represents approximately 12% of the Group’s total revenue. There was no revenue from individualcustomer contributing over 10% of total revenue of the Group during the years ended 31 December 2018, 2019, 2020 andthe six months ended 30 June 2020.

(b) Segment reporting

The Group manages its businesses as a whole by the most senior executive management for the purposes of resourceallocation and performance assessment. The Group has one operating segment, which is the sales of variable lifestyleproducts. The Group’s chief operating decision maker is the key management personnel of the Group who reviews theGroup’s results of operations in assessing performance of and making decisions about allocations to this segment.Accordingly, no reportable segment information is presented.

As substantially all of the Group’s operations and assets are in the PRC, no geographic information is presented.

5 OTHER INCOME


2018 2019 2020 2020 2021


(Unaudited)

Bank interest income . . . . . . . . . . . 75 114 485 70 429Government grants (Note) . . . . . . . . – 3,000 1,682 – 1,016Interest income from loans to

franchisees . . . . . . . . . . . . . . . – 5,218 29,950 10,778 20,524Others . . . . . . . . . . . . . . . . . . . 3 737 2,771 393 4,685

78 9,069 34,888 11,241 26,654

Note:

Government grants in the Relevant Periods mainly represented unconditional cash subsidies received by certainsubsidiaries from local government, for office site relocation, industrial development support and COVID-19-relatedsubsidy. There are no unfulfilled conditions or contingencies relating to such government grants.

6 LOSS BEFORE TAXATION

Loss before taxation is arrived at after crediting:

(a) Finance costs


2018 2019 2020 2020 2021


(Unaudited)

Interests on loans and borrowings . . . 1,153 2,695 13,970 4,354 9,010Interests on lease liabilities . . . . . . . 1,795 5,537 35,182 13,330 34,908

2,948 8,232 49,152 17,684 43,918


– I-26 –


(b) Staff costs (including directors’ emoluments)


2018 2019 2020 2020 2021


(Unaudited)

Contributions to defined contributionretirement plans . . . . . . . . . . . . 1,151 1,777 1,009 519 14,415

Salaries, wages and other benefits . . . 29,449 67,959 183,854 68,320 179,809

30,600 69,736 184,863 68,839 194,224

The PRC subsidiaries of the Group participate in defined contribution retirement benefit schemes (the “Schemes”)organised by the PRC municipal and provincial government authorities whereby the PRC subsidiaries are required to makecontributions at the applicable rate of the eligible employees’ salaries to the Schemes. The Group has accrued for the requiredcontributions which are remitted to the respective local government authorities when the contributions become due. The localgovernment authorities are responsible for the pension obligations payable to the retired employees covered under theSchemes.

The Group has no other material obligation for the payment of pension benefits beyond the contributions describedabove.

(c) Other items


2018 2019 2020 2020 2021


(Unaudited)

Amortisation (Note 13) . . . . . . . . . . . 300 673 1,513 572 754Depreciation

– Property, plant and equipment(Note 11) . . . . . . . . . . . . . . . . . 13,345 20,923 55,390 18,731 59,785

– Right-of-use assets (Note 12) . . . . . 17,168 34,675 166,037 63,089 157,147Impairment losses recognised on

– Property, plant and equipment(Note 11) . . . . . . . . . . . . . . . . . 1,244 6,502 13,626 9,091 12,208

– Right-of-use assets (Note 12) . . . . . 10,430 3,115 4,866 207 6,077Net foreign exchange (gain)/loss . . . . . . – (652) 1,986 1,081 (2,054)Loss on disposals of property, plant and

equipment and intangible assets . . . . – 183 2,479 463 6,804Auditors’ remuneration . . . . . . . . . . . 47 85 66 31 46Cost of inventories (Note 16). . . . . . . . 105,517 337,895 1,146,191 350,592 1,073,204[REDACTED] . . . . . . . . . . . . . . . . . . [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

7 INCOME TAX IN THE COMBINED STATEMENTS OF PROFIT OR LOSS AND OTHERCOMPREHENSIVE INCOME

(a) Taxation in the combined statements of profit or loss and other comprehensive income represents:


2018 2019 2020 2020 2021


(Unaudited)

Current tax . . . . . . . . . . . . . . . . . . 264 335 1,868 905 16,545Deferred tax . . . . . . . . . . . . . . . . . (12,996) (20,190) (35,040) (17,197) (23,285)

(12,732) (19,855) (33,172) (16,292) (6,740)


– I-27 –


(b) Reconciliation between income tax and accounting loss at applicable tax rates:


2018 2019 2020 2020 2021


(Unaudited)

Loss before taxation . . . . . . . . . . . . . (92,217) (534,358) (2,050,379) (529,166) (4,403,823)

Notional tax on loss before taxation,calculated at the standard tax ratesapplicable to the respective taxjurisdictions . . . . . . . . . . . . . . . . (23,054) (132,955) (484,472) (130,977) (727,320)

Effect of preferential income tax rate ofa subsidiary (note (v)) . . . . . . . . . . – – – – (8,178)

Tax effect of fair value changes offinancial liabilities measured at fairvalue through profit or loss . . . . . . . 9,422 109,388 436,819 111,365 718,388

Tax effect of non-deductible expenses. . . 900 2,476 12,207 2,679 9,466Tax effect of unused tax losses not

recognised . . . . . . . . . . . . . . . . . – 1,236 2,274 641 904

Total income tax . . . . . . . . . . . . . . . (12,732) (19,855) (33,172) (16,292) (6,740)

Notes:

(i) Pursuant to the rules and regulations of the Cayman Islands, the Group is not subject to any income tax in theCayman Islands.

(ii) The provision for Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profits for theRelevant Periods. No provision for Hong Kong Profits Tax was made as the Group’s subsidiaries in Hong Kongdid not generate assessable profits during the Relevant Periods.

(iii) The Corporate Income Tax (“CIT”) rate applicable to the subsidiaries registered in the PRC is 25% for theRelevant Periods.

(iv) The tax rate applicable to the subsidiaries registered in Indonesia is 22% for the Relevant Periods. Noprovision for Indonesia’s Corporate Income Tax was made as the Group’s subsidiaries in Indonesia did notgenerate any assessable profits for the Relevant Periods.

(v) Since 2021, Shenzhen Xinke Software Technology Service Co., Ltd. (“Shenzhen Xinke”) fulfilled the criteriarequired for preferential income tax rate granted to “Software Enterprise” in the PRC, which entitled it to anincome tax exemption for two years starting from its first profitable year and a 50% reduction to a rate of12.5% for the subsequent three years.


– I-28 –


8 DIRECTORS’ EMOLUMENTS

Details of emoluments of the directors of the Company during the Relevant Periods are as follows:

Year ended 31 December 2018

Directors’ fees

Salaries,allowancesand otherbenefitsin kind

Retirementscheme

contributionsDiscretionary

bonuses Total


Executive directorsMr. Wu Yuening (a) . . . . . . . . . . . – 467 25 – 492Mr. Guo Huibo (b) . . . . . . . . . . . . – 108 12 – 120Ms. Peng Yao (c) . . . . . . . . . . . . . – 300 51 17 368Ms. Shu Yanfang (c) . . . . . . . . . . . – 365 62 52 479Mr. Chen Shixin (c) . . . . . . . . . . . – 171 19 9 199

Total . . . . . . . . . . . . . . . . . . . . – 1,411 169 78 1,658


Directors’ fees


Retirementscheme


bonuses Total


Executive directorsMr. Wu Yuening (a) . . . . . . . . . . . – 543 30 144 717Mr. Guo Huibo (b) . . . . . . . . . . . . – 526 58 130 714Ms. Peng Yao (c) . . . . . . . . . . . . . – 442 64 130 636Ms. Shu Yanfang (c) . . . . . . . . . . . – 426 59 130 615Mr. Chen Shixin (c) . . . . . . . . . . . – 218 27 144 389

Total . . . . . . . . . . . . . . . . . . . . – 2,155 238 678 3,071


Directors’ fees


Retirementscheme


bonuses Total


Executive directorsMr. Wu Yuening (a) . . . . . . . . . . . – 615 2 – 617Mr. Guo Huibo (b) . . . . . . . . . . . . – 585 2 – 587Ms. Peng Yao (c) . . . . . . . . . . . . . – 857 2 303 1,162Ms. Shu Yanfang (c) . . . . . . . . . . . – 752 2 130 884Mr. Chen Shixin (c) . . . . . . . . . . . – 382 2 70 454Non-executive directorsMr. Zheng Rongqing (d). . . . . . . . . – – – – –Ms. Xiao Min (d) . . . . . . . . . . . . – – – – –Mr. Chen Xian (d) . . . . . . . . . . . . – – – – –Mr. Liang Jie (d) . . . . . . . . . . . . . – – – – –

Total . . . . . . . . . . . . . . . . . . . . – 3,191 10 503 3,704


– I-29 –


Six months ended 30 June 2021

Directors’ fees


Retirementscheme


bonuses Total


Executive directorsMr. Wu Yuening (a) . . . . . . . . . . . – 318 19 – 337Mr. Guo Huibo (b) . . . . . . . . . . . . – 356 19 – 375Ms. Peng Yao (c) . . . . . . . . . . . . . – 585 19 – 604Ms. Shu Yanfang (c) . . . . . . . . . . . – 518 19 – 537Mr. Chen Shixin (c) . . . . . . . . . . . – 287 19 – 306Non-executive directorsMr. Zheng Rongqing (d). . . . . . . . . – – – – –Ms. Xiao Min (d) . . . . . . . . . . . . – – – – –Mr. Chen Xian (d) . . . . . . . . . . . . – – – – –Mr. Liang Jie (d) . . . . . . . . . . . . . – – – – –

Total . . . . . . . . . . . . . . . . . . . . – 2,064 95 – 2,159

Six months ended 30 June 2020 (unaudited)

Directors’ fees


Retirementscheme


bonuses Total


Executive directorsMr. Wu Yuening (a) . . . . . . . . . . . – 308 2 – 310Mr. Guo Huibo (b) . . . . . . . . . . . . – 286 2 – 288Ms. Peng Yao (c) . . . . . . . . . . . . . – 421 2 – 423Ms. Shu Yanfang (c) . . . . . . . . . . . – 369 2 – 371Mr. Chen Shixin (c) . . . . . . . . . . . – 184 2 – 186

Total . . . . . . . . . . . . . . . . . . . . – 1,568 10 – 1,578

Notes:

(a) Mr. Wu Yuening was appointed as an executive director of the Company on 7 August 2020. He is the co-founder, akey management personnel of the Group and director of certain subsidiaries within the Group during the RelevantPeriods. His remuneration disclosed above include those for services rendered by him as a key managementpersonnel.

(b) Mr. Guo Huibo was appointed as an executive director of the Company on 29 March 2019. He is the co-founder, akey management personnel of the Group and director of certain subsidiaries within the Group during the RelevantPeriods. His remuneration disclosed above included those for services rendered by him as a key managementpersonnel.

(c) Ms. Peng Yao, Ms. Shu Yanfang and Mr. Chen Shixin were appointed as executive directors of the Company on7 August 2020. They are key management personnel of the Group during the Relevant Periods and their remunerationdisclosed above include those for services rendered by them as key management personnel.

(d) Mr. Zheng Rongqing, Ms. Xiao Min, Mr. Chen Xian and Mr. Liang Jie were appointed as non-executive directors ofthe Company on 7 August 2020 and resigned on 19 September 2021.


– I-30 –


(e) During the Relevant Periods, there were no amounts paid or payable by the Group to the directors or any of the highestpaid individuals set out in Note 9 below as an inducement to join or upon joining the Group or as a compensationfor loss of office. There was no arrangement under which a director waived or agreed to waive any remunerationduring the Relevant Periods.

9 INDIVIDUALS WITH HIGHEST EMOLUMENTS

Of the five individuals with the highest emoluments, three, three, two, two and two individuals were the directors forthe years ended 31 December 2018, 2019, 2020 and six months ended 30 June 2020 and 2021, whose emoluments aredisclosed in Note 8 above. The aggregate of the emoluments in respect of the other two, two, three, three and threeindividuals for the Relevant Periods are as follows:


2018 2019 2020 2020 2021


(Unaudited)

Salaries and other emoluments . . . . . . . 709 1,265 2,708 1,401 1,168Discretionary bonuses . . . . . . . . . . . . 32 – – – –Retirement scheme contributions . . . . . . 121 117 7 7 162

862 1,382 2,715 1,408 1,330

The emoluments of the above individuals with the highest emoluments for the years ended 31 December 2018, 2019,2020 and six months ended 30 June 2020 and 2021, respectively, are within the following band:


2018 2019 2020 2020 2021

(Unaudited)Number ofindividuals

Number ofIndividuals




HK$Nill to HK$1,000,000 . . . . . . . . . 2 2 3 3 3

10 LOSS PER SHARE

Loss per share information is not presented as its inclusion, for the purpose of this report, is not consideredmeaningful due to the Reorganization and the presentation of the results for the Relevant Periods using the basis ofpreparation and presentation as disclosed in Note 1.


– I-31 –


11 PROPERTY, PLANT AND EQUIPMENT

Leaseholdimprovements

Officeequipment Motor vehicles

Storeequipment,

furniture andfittings

Constructionin progress Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Cost:At 1 January 2018 . . . . . . . 10,338 860 – 5,404 – 16,602Additions

– Purchase. . . . . . . . . . . – 721 – 6,058 16,805 23,584– Transfer from

construction in progress. . 16,729 – – – (16,729) –Disposals . . . . . . . . . . . . . (3,551) – – (651) – (4,202)

At 31 December 2018 and1 January 2019 . . . . . . . . 23,516 1,581 – 10,811 76 35,984

Additions– Purchase. . . . . . . . . . . – 2,280 2,556 27,619 69,838 102,293– Transfer from

construction in progress. . 56,513 – – – (56,513) –Disposals . . . . . . . . . . . . . (4,929) – – (2,960) – (7,889)

At 31 December 2019 and1 January 2020 . . . . . . . . 75,100 3,861 2,556 35,470 13,401 130,388

Additions– Purchase. . . . . . . . . . . – 952 – 163,491 224,460 388,903– Transfer from

construction in progress. . 223,229 – – – (223,229) –Disposals . . . . . . . . . . . . . (14,174) (156) – (10,987) – (25,317)Exchange differences . . . . . . (2) (9) – – – (11)

At 31 December 2020 and1 January 2021 . . . . . . . . 284,153 4,648 2,556 187,974 14,632 493,963

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Additions– Purchase. . . . . . . . . . . 99,950 2,194 2,313 86,809 6,049 197,315– Transfer from

construction in progress. . 14,632 – – – (14,632) –Disposals . . . . . . . . . . . . . (29,553) (3,255) – (25,175) – (57,983)Exchange differences . . . . . . (1) (8) – – – (9)

At 30 June 2021 . . . . . . . . 369,181 3,579 4,869 249,608 6,049 633,286- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Accumulated depreciation:At 1 January 2018 . . . . . . . (1,643) (389) – (661) – (2,693)Charge for the year . . . . . . . (9,209) (420) – (3,716) – (13,345)Written back on disposals . . . 3,551 – – 651 – 4,202

At 31 December 2018 and1 January 2019 . . . . . . . . (7,301) (809) – (3,726) – (11,836)

Charge for the year . . . . . . . (15,034) (624) (71) (5,194) – (20,923)Written back on disposals . . . 4,929 – – 2,960 – 7,889

At 31 December 2019 and1 January 2020 . . . . . . . . (17,406) (1,433) (71) (5,960) – (24,870)

Charge for the year . . . . . . . (32,114) (1,070) (607) (21,599) – (55,390)Written back on disposals . . . 7,271 55 – 5,846 – 13,172Exchange differences . . . . . . –* –* – – – –

At 31 December 2020 . . . . . (42,249) (2,448) (678) (21,713) – (67,088)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -


– I-32 –


Leaseholdimprovements

Officeequipment Motor vehicles

Storeequipment,

furniture andfittings

Constructionin progress Total


At 1 January 2021 . . . . . . . (42,249) (2,448) (678) (21,713) – (67,088)Charge for the period . . . . . . (35,523) (639) (433) (23,190) – (59,785)Written back on disposals . . . 4,113 1,770 – 3,926 – 9,809Exchange differences . . . . . . –* (2) – – – (2)

At 30 June 2021 . . . . . . . . (73,659) (1,319) (1,111) (40,977) – (117,066)

Impairment losses:At 1 January 2018 . . . . . . . – – – – – –Charge for the year . . . . . . . (1,244) – – – – (1,244)

At 31 December 2018 and1 January 2019 . . . . . . . . (1,244) – – – – (1,244)

Charge for the year . . . . . . . (4,182) – – (2,320) – (6,502)

At 31 December 2019 and1 January 2020 . . . . . . . . (5,426) – – (2,320) – (7,746)

Charge for the year . . . . . . . (6,825) – – (6,801) – (13,626)Written back on disposals . . . 669 – – – – 669

At 31 December 2020 and1 January 2021 . . . . . . . . (11,582) – – (9,121) – (20,703)

Charge for the period . . . . . . (10,532) – – (1,676) – (12,208)Written back on disposals . . . 8,226 – – 7,402 – 15,628

At 30 June 2021 . . . . . . . . (13,888) – – (3,395) – (17,283)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Net book value:At 31 December 2018 . . . . . 14,971 772 – 7,085 76 22,904

At 31 December 2019 . . . . . 52,268 2,428 2,485 27,190 13,401 97,772

At 31 December 2020 . . . . . 230,322 2,200 1,878 157,140 14,632 406,172

At 30 June 2021 . . . . . . . . 281,634 2,260 3,758 205,236 6,049 498,937

* Less than RMB1,000

Directors of the Group conduct impairment testing on each individual store, which are considered as individualcash-generating units (“CGU”). As at the end of each reporting period, the recoverable amount of each CGU with indicationof impairment is estimated, based on value-in-use calculations by preparing cash flow projections of the relevant CGUderived from the most recent financial forecast approved by the management covering the remaining lease term. The cashflows are discounted using discount rates ranging from 15.3% to 18.8%. The discount rates used are pre-tax and reflectsspecific risks relating to the relevant CGU.

As at 31 December 2018, 2019, 2020 and 30 June 2021, the carrying amounts of certain CGUs exceeded theirrecoverable amounts, therefore, an impairment loss was allocated to the right-of-use assets (“ROUs”), leaseholdimprovements and store equipment, furniture and fittings, etc, within each CGU on a pro rata basis. An impairment loss ofRMB1,244,000, RMB6,502,000, RMB13,626,000 and RMB12,208,000 for property, plant and equipment and an impairmentloss of RMB10,430,000, RMB3,115,000, RMB4,866,000 and RMB6,077,000 for ROUs, were recognised in profit or loss in“Administrative and other operating expenses” (see Note 6(c)) for the years ended 31 December 2018, 2019, 2020 and thesix months ended 30 June 2021, respectively.


– I-33 –


12 RIGHT-OF-USE ASSETS

The Group leases properties for its office space, retail stores and warehouses. Information about leases for which theGroup is a lessee is detailed as follows:

Properties Warehouses Total

RMB’000 RMB’000 RMB’000

Cost:At 1 January 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,880 – 36,880Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,808 9,435 35,243

At 31 December 2018 and 1 January 2019 . . . . . . . . . . . . . . . . 62,688 9,435 72,123Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363,067 – 363,067Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,360) – (8,360)Exchange differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 – 2

At 31 December 2019 and 1 January 2020 . . . . . . . . . . . . . . . . 417,397 9,435 426,832Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 833,192 13,711 846,903Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,353) – (24,353)Exchange differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . (692) – (692)

At 31 December 2020 and 1 January 2021 . . . . . . . . . . . . . . . . 1,225,544 23,146 1,248,690Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 742,418 – 742,418Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (262,317) – (262,317)Exchange differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . (957) – (957)

At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,704,688 23,146 1,727,834- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Accumulated depreciation:At 1 January 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,292) – (3,292)Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,288) (880) (17,168)

At 31 December 2018 and 1 January 2019 . . . . . . . . . . . . . . . . (19,580) (880) (20,460)Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32,042) (2,633) (34,675)Written back on disposals . . . . . . . . . . . . . . . . . . . . . . . . . . 8,360 – 8,360

At 31 December 2019 and 1 January 2020 . . . . . . . . . . . . . . . . (43,262) (3,513) (46,775)Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (160,613) (5,424) (166,037)Written back on disposals . . . . . . . . . . . . . . . . . . . . . . . . . . 22,916 – 22,916Exchange differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 – 122

At 31 December 2020 and 1 January 2021 . . . . . . . . . . . . . . . . (180,837) (8,937) (189,774)Charge for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . (153,742) (3,405) (157,147)Written back on disposals . . . . . . . . . . . . . . . . . . . . . . . . . . 69,487 – 69,487Exchange differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 – 168

At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (264,924) (12,342) (277,266)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Impairment:At 1 January 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – –Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,430) – (10,430)

At 31 December 2018 and 1 January 2019 . . . . . . . . . . . . . . . . (10,430) – (10,430)Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,115) – (3,115)

At 31 December 2019 and 1 January 2020 . . . . . . . . . . . . . . . . (13,545) – (13,545)Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,866) – (4,866)Written back on disposals . . . . . . . . . . . . . . . . . . . . . . . . . . 1,437 – 1,437

At 31 December 2020 and 1 January 2021 . . . . . . . . . . . . . . . . (16,974) – (16,974)Charge for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,077) – (6,077)Written back on disposals . . . . . . . . . . . . . . . . . . . . . . . . . . 7,816 – 7,816

At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,235) – (15,235)- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Net book value:At 31 December 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,678 8,555 41,233

At 31 December 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360,590 5,922 366,512

At 31 December 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,027,733 14,209 1,041,942

At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,424,529 10,804 1,435,333


– I-34 –


Details of total cash outflow for leases and the maturity analysis of lease liabilities are set out in Notes 18(c) and 22,respectively.

The analysis of expense items in relation to leases recognised in profit or loss is as follows:


2018 2019 2020 2020 2021


(Unaudited)

Depreciation charge of right-of-use assetsby class of underlying asset:

Properties . . . . . . . . . . . . . . . . . . . 16,288 32,042 160,613 61,127 153,742Warehouses . . . . . . . . . . . . . . . . . . 880 2,633 5,424 1,962 3,405Interest on lease liabilities (Note 6(a)) . . 1,795 5,537 35,182 13,330 34,908Expense relating to short-term leases . . . 4,074 1,753 6,147 918 1,684Variable lease payments not included in

the measurement of lease liabilities . . . 111 2,443 5,286 1,487 3,402COVID-19-related rent concessions

received. . . . . . . . . . . . . . . . . . . – – (31,993) (15,804) (7,278)

The Group has obtained the right to use properties as its retail stores, warehouses and offices through tenancyagreements. The leases typically run for an initial period of 3 to 12 years.

13 INTANGIBLE ASSETS

Software Trademarks Total

RMB’000 RMB’000 RMB’000

Cost:At 1 January 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,039 11 1,050Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415 131 546

At 31 December 2018 and 1 January 2019 . . . . . . . . . . . . . . . . 1,454 142 1,596Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 586 953 1,539Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (365) – (365)

At 31 December 2019 and 1 January 2020 . . . . . . . . . . . . . . . . 1,675 1,095 2,770Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360 1,508 1,868Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (335) – (335)

At 31 December 2020 and 1 January 2021 . . . . . . . . . . . . . . . . 1,700 2,603 4,303Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695 539 1,234

At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,395 3,142 5,537- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Accumulated amortisation:At 1 January 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 5 70Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275 25 300

At 31 December 2018 and 1 January 2019 . . . . . . . . . . . . . . . . 340 30 370Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298 375 673Written back on disposals . . . . . . . . . . . . . . . . . . . . . . . . . . (182) – (182)

At 31 December 2019 and 1 January 2020 . . . . . . . . . . . . . . . . 456 405 861Charge for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432 1,081 1,513Written back on disposals . . . . . . . . . . . . . . . . . . . . . . . . . . (176) – (176)

At 31 December 2020 and 1 January 2021 . . . . . . . . . . . . . . . . 712 1,486 2,198Charge for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 593 754

At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 873 2,079 2,952- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Net book value:At 31 December 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,114 112 1,226

At 31 December 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,219 690 1,909

At 31 December 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 988 1,117 2,105

At 30 June 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,522 1,063 2,585

The amortisation charges for the Relevant Periods are included in “Administrative and other operating expenses” inthe combined statements of profit or loss and other comprehensive income.


– I-35 –


14 INVESTMENT IN JOINT VENTURES

The following table contains the particulars of a material joint venture of the Group:

Name of joint venture

Form ofbusinessstructure

Place ofincorporationand business

Particulars ofissued and paidup capital

Proportion of ownership interest

Principalactivity

Group’seffectiveinterest

Held by thecompany

Held by asubsidiary

Dongguan Star TradingCo., Ltd. (“東莞市星空貿易有限公司”)(“Dongguan Star”)

Incorporated PRC Registered capitalRMB2,000,000and paid upcapital ofRMBnil

50% – 50% Retail oflifestyleproducts

During the year ended 31 December 2020, the Group entered into a shareholder agreement with third-party investorsto establish Dongguan Star to carry out retail activities in the PRC.

The Group and third-party investors of Dongguan Star, as well as shareholders of other joint ventures of the Group,provided non-cash contributions to leasehold improvements, store equipment, furniture and fittings amounting toRMB69,095,000 and RMB62,359,000 for the year ended 31 December 2020 and the period ended 30 June 2021, respectively.

Summarised financial information of Dongguan Star adjusted for any differences in accounting policies, and areconciliation to the carrying amount in the combined financial statements, are disclosed below:

As at31 December

2020

As at30 June

2021

RMB’000 RMB’000

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,278 279,097Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458,882 1,069,129Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65,688) (303,859)Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (363,234) (957,843)Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,238 86,524Included in the above assets and liabilities:Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 9,267

As at31 December

2020

As at30 June

2021

RMB’000 RMB’000

Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,588 331,121Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,430) (55,443)Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,430) (55,443)Included in the above loss:Depreciation and amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38,223) (29,177)Reconciled to the Group’s interest in Dongguan StarGross amount of Dongguan Star’s net assets . . . . . . . . . . . . . . . . . . . . . . . . 65,238 86,524Group’s effective interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50% 50%Group’s share of Dongguan Star’s net assets. . . . . . . . . . . . . . . . . . . . . . . . 32,619 43,262


– I-36 –


Aggregate information of joint ventures that are not individually material:

As at31 December

2020

As at30 June

2021

RMB’000 RMB’000

Aggregate carrying amount of individually immaterial joint venturesin the combined financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,811 38,736

Aggregate amounts of the Group’s share of those joint ventures’ lossfrom operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,955) (4,070)

15 INVESTMENT IN SUBSIDIARIES

The Company


30 June

2019 2020 2021

RMB’000 RMB’000 RMB’000

Unlisted shares, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 27 27

Further details of the subsidiaries of the Group are set out in Note 1(c).

16 INVENTORIES


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Merchandise. . . . . . . . . . . . . . . . . . . . . . . . . 67,653 447,077 727,168 961,349Low-value consumables . . . . . . . . . . . . . . . . . . 1,971 30,816 13,692 24,055

69,624 477,893 740,860 985,404


2018 2019 2020 2020 2021


(Unaudited)

Carrying amount of inventories sold. . . . 103,177 336,077 1,144,795 350,592 1,063,223Write-down of inventories . . . . . . . . . 2,340 1,818 1,396 – 9,981

Cost of inventories recognised in thecombined statements of profit or lossand other comprehensive income . . . . 105,517 337,895 1,146,191 350,592 1,073,204


– I-37 –


17 TRADE AND OTHER RECEIVABLES

The Group


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

CurrentTrade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . – – 461 919Rental deposits (i) . . . . . . . . . . . . . . . . . . . . . . . . . 7,800 20,806 73,820 158,695Input VAT recoverable . . . . . . . . . . . . . . . . . . . . . . . – 32,565 55,527 75,725Amount due from Directors (ii) . . . . . . . . . . . . . . . . . 5,450 16,911 16,046 –Prepayments to suppliers . . . . . . . . . . . . . . . . . . . . . 5,441 78,296 72,292 184,023Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . 8,086 2,929 6,581 12,454Amount due from franchisees (iii) . . . . . . . . . . . . . . . . 44,837 54,683 91,374 173,143Amount due from joint ventures (iii) . . . . . . . . . . . . . . – – 47,172 128,881Loans to franchisees (iv) . . . . . . . . . . . . . . . . . . . . . – 428 9,921 9,921

71,614 206,618 373,194 743,761- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Non-currentLoans to franchisees (iv) . . . . . . . . . . . . . . . . . . . . . – 34,348 262,078 247,779

71,614 240,966 635,272 991,540

(i) The amount of rental deposits expected to be recovered or recognised as expense after more than one year as at 31December 2018, 2019, 2020 and 30 June 2021 are RMB7,248,000, RMB16,682,000, RMB69,338,000 andRMB129,552,000, respectively. All of the current portion of trade and other receivables, apart from rental deposits,are expected to be recovered or recognised as expense within one year.

(ii) Amount due from Directors are non-trade in nature, unsecured, interest-free and have been fully repaid as at 30 June2021.

(iii) Amount due from franchisees and joint ventures are unsecured, interest-free and will be recovered within one year.

(iv) Loans to franchisees are non-trade in nature, unsecured, interest-bearing and will be recovered within one to threeyears. Loans to franchisees are expected to be repaid prior to the [REDACTED].

Ageing analysis

As at the end of each reporting period, the ageing analysis of trade receivables based on the invoice date and net ofloss allowance, is as follows:


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Undue or within 3 months . . . . . . . . . . . . . . . . – – 461 919

Trade receivables are due within 30 to 90 days from the date of billing. Further details on the Group’s credit policyare set out in Note 25(a).

The Company

Amount due from subsidiaries as at 31 December 2020 and 30 June 2021 are non-trade in nature, unsecured,interest-free and recoverable on demand.


– I-38 –


18 CASH AND CASH EQUIVALENTS


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Cash on hand . . . . . . . . . . . . . . . . . . . . . . . . 35 1 46 93Cash at banks . . . . . . . . . . . . . . . . . . . . . . . . 26,318 231,517 156,231 1,103,263Cash equivalents (i) . . . . . . . . . . . . . . . . . . . . 1,773 1,773 12,047 14,152Less: restricted bank deposits (ii) . . . . . . . . . . . . – – (30) (668)

28,126 233,291 168,294 1,116,840

(i) Cash equivalents represents cash balances placed with third party platform.

(ii) Restricted bank deposits as at 30 June 2021 are pledge deposits of a rental contract, which are restricted towithdraw by the Group at any time.

(iii) As at 31 December 2018, 2019, 2020 and 30 June 2021, cash and cash equivalents situated in the PRCamounted to RMB26,318,000, RMB199,885,000, RMB124,317,000 and RMB1,086,007,000, respectively.Remittance of funds out of the PRC is subject to relevant rules and regulations of foreign exchange controlpromulgated by the PRC government.

(a) Reconciliation of loss before taxation to cash used in operations:

Year ended 31 DecemberSix months ended

30 June

Note 2018 2019 2020 2020 2021


(Unaudited)

Loss before taxation . . . . . . . (92,217) (534,358) (2,050,379) (529,166) (4,403,823)Adjustments for:Depreciation of property,

plant and equipment . . . . . . 6(c) 13,345 20,923 55,390 18,731 59,785Depreciation of right-of-use

assets . . . . . . . . . . . . . . . 6(c) 17,168 34,675 166,037 63,089 157,147Amortisation . . . . . . . . . . . . 6(c) 300 673 1,513 572 754Interest expenses . . . . . . . . . 6(a) 2,948 8,232 49,152 17,684 43,918Unrealised net exchange

(gain)/loss . . . . . . . . . . . . – (1,523) 3,539 (1,358) 986Fair value changes of financial

liabilities measured at fairvalue through profit or loss . . 24 37,689 437,552 1,842,514 445,459 4,353,866

Interest income from loans tofranchisees. . . . . . . . . . . . 5 – (5,218) (29,950) (10,778) (20,524)

Bank interest income . . . . . . . 5 (75) (114) (485) (70) (429)Gain on reassessment of

right-of-use assets andlease liabilities . . . . . . . . . – – – – (13,897)

Loss on disposals of property,plant and equipment andintangible assets . . . . . . . . 6(c) – 183 2,479 463 6,804

Impairment loss on property,plant and equipment . . . . . . 6(c) 1,244 6,502 13,626 9,091 12,208

Impairment loss on right-of-useassets . . . . . . . . . . . . . . . 6(c) 10,430 3,115 4,866 207 6,077

Write-down of inventories . . . . 16 2,340 1,818 1,396 – 9,981COVID-19-rent concessions

received . . . . . . . . . . . . . 12 – – (31,993) (15,804) (7,278)Changes in working capital:Increase in inventories . . . . . . (51,530) (410,087) (264,363) (106,087) (254,525)Increase in trade and other

receivables . . . . . . . . . . . (42,882) (140,558) (158,229) (40,209) (369,421)Increase in trade and other

payables . . . . . . . . . . . . . 76,348 197,533 80,941 43,314 64,352

Cash used in operations . . . . . (24,892) (380,652) (313,946) (104,862) (354,019)


– I-39 –


(b) Reconciliation of liabilities arising from financing activities

The table below details changes in the Group’s liabilities from financing activities, including both cash and non-cashchanges. Liabilities arising from financing activities are liabilities for which cash flows were, or future cash flows will be,classified in the Group’s combined statements of cash flows as cash flows from financing activities.

Otherborrowings

Leaseliabilities

Redemptionliabilities Total

RMB’000 RMB’000 RMB’000 RMB’000

(Note 21) (Note 22) (Note 24)

At 1 January 2018 . . . . . . . . . . . . . . . . . . . . . . . . 15,000 33,396 46,500 94,896- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Changes from financing cash flows:Capital element of lease rentals paid . . . . . . . . . . . . . . – (16,814) – (16,814)Interest element of lease rentals paid . . . . . . . . . . . . . . – (1,795) – (1,795)Proceeds from loans and borrowings. . . . . . . . . . . . . . . 38,000 – – 38,000Repayment of loans and borrowings . . . . . . . . . . . . . . . (20,000) – – (20,000)Payment of interest on loans and borrowings . . . . . . . . . . (1,153) – – (1,153)Proceeds from the issuance of redemption liabilities . . . . . – – 70,000 70,000

Total changes from financing cash flows . . . . . . . . . . . . 16,847 (18,609) 70,000 68,238- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Other changes:Interest expenses (Note 6(a)) . . . . . . . . . . . . . . . . . . . 1,153 1,795 – 2,948Fair value changes of financial liabilities measured at fair

value through profit or loss . . . . . . . . . . . . . . . . . . – – 37,689 37,689Additions to lease liabilities . . . . . . . . . . . . . . . . . . . – 35,243 – 35,243

Total other changes . . . . . . . . . . . . . . . . . . . . . . . . 1,153 37,038 37,689 75,880- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

At 31 December 2018 . . . . . . . . . . . . . . . . . . . . . . . 33,000 51,825 154,189 239,014


– I-40 –


Bank loansOther

borrowingsLease

liabilitiesRedemption

liabilities Total


(Note 21) (Note 21) (Note 22) (Note 24)

At 1 January 2019. . . . . . . . . . . . . . . . – 33,000 51,825 154,189 239,014- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Changes from financing cash flows:Capital element of lease rentals paid . . . . . . – – (53,095) – (53,095)Interest element of lease rentals paid . . . . . – – (5,537) – (5,537)Proceeds from loans and borrowings . . . . . . 49,000 183,070 – – 232,070Repayment of loans and borrowings . . . . . . – (33,000) – – (33,000)Payment of interest on loans and borrowings . – (2,695) – – (2,695)Proceeds from the issuance of redemption

liabilities . . . . . . . . . . . . . . . . . . . . – – – 568,722 568,722

Total changes from financing cash flows . . . 49,000 147,375 (58,632) 568,722 706,465- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Other changes:Interest expenses

(Note 6(a)) . . . . . . . . . . . . . . . . . . . – 2,695 5,537 – 8,232Fair value changes of financial liabilities

measured at fair value through profit orloss . . . . . . . . . . . . . . . . . . . . . . . – – – 437,552 437,552

Re-designation from ordinary shares tofinancial liabilities measured at fair valuethrough profit or loss . . . . . . . . . . . . . – – – 97,051 97,051

Additions to lease liabilities. . . . . . . . . . . – – 363,067 – 363,067Exchange difference . . . . . . . . . . . . . . . – – 2 – 2

Total other changes . . . . . . . . . . . . . . . . – 2,695 368,606 534,603 905,904- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

At 31 December 2019 . . . . . . . . . . . . . 49,000 183,070 361,799 1,257,514 1,851,383


– I-41 –


Bank loansOther

borrowingsLease


liabilities

Convertibleredeemablepreferred

shares Total


(Note 21) (Note 21) (Note 22) (Note 24) (Note 24)

At 1 January 2020 . . . . . . 49,000 183,070 361,799 1,257,514 – 1,851,383- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Changes from financingcash flows:

Capital element of leaserentals paid . . . . . . . . . – – (121,729) – – (121,729)

Interest element of leaserentals paid . . . . . . . . . – – (35,182) – – (35,182)

Proceeds from loans andborrowings . . . . . . . . . 61,843 247,947 – – – 309,790

Repayment of loans andborrowings . . . . . . . . . (49,000) (183,070) – – – (232,070)

Payment of interest on loansand borrowings . . . . . . . (4,998) (8,972) – – – (13,970)

Proceeds from the issuanceof redemption liabilitiesand convertibleredeemable preferredshares . . . . . . . . . . . . – – – 206,486 665,655 872,141

Total changes fromfinancing cash flows . . . . 7,845 55,905 (156,911) 206,486 665,655 778,980

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -


(Note 6(a)) . . . . . . . . . 4,998 8,972 35,182 – – 49,152Fair value changes of

financial liabilitiesmeasured at fair valuethrough profit or loss . . . – – – 1,562,401 280,113 1,842,514

Additions to lease liabilities . – – 846,903 – – 846,903COVID-19-related rent

concessions received(Note 12) . . . . . . . . . . – – (31,993) – – (31,993)

Exchange difference . . . . . – – (570) – – (570)

Total other changes . . . . . . 4,998 8,972 849,522 1,562,401 280,113 2,706,006- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

At 31 December 2020 . . . . 61,843 247,947 1,054,410 3,026,401 945,768 5,336,369


– I-42 –


Bank loansOther

borrowingsLease


liabilities

Convertibleredeemablepreferred

shares Total



At 1 January 2021 . . . . . . 61,843 247,947 1,054,410 3,026,401 945,768 5,336,369- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Changes from financingcash flows:

Capital element of leaserentals paid . . . . . . . . . – – (127,216) – – (127,216)

Interest element of leaserentals paid . . . . . . . . . – – (34,908) – – (34,908)

Proceeds from loans andborrowings . . . . . . . . . 57,756 – – – – 57,756

Repayment of loans andborrowings . . . . . . . . . (49,214) (247,947) – – – (297,161)

Payment of interest on loansand borrowings . . . . . . . (6,267) (2,743) – – – (9,010)

Proceeds from the issuanceof convertible redeemablepreferred shares. . . . . . . – – – – 1,788,452 1,788,452

Total changes fromfinancing cash flows . . . . 2,275 (250,690) (162,124) – 1,788,452 1,377,913

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -


(Note 6(a)) . . . . . . . . . 6,267 2,743 34,908 – – 43,918Fair value changes of

financial liabilitiesmeasured at fair valuethrough profit or loss . . . – – – – 4,353,866 4,353,866

Transfer (Note 24) . . . . . . – – – (3,026,401) 3,026,401 –Additions to lease liabilities . – – 742,418 – – 742,418Reassessment of lease

liabilities . . . . . . . . . . – – (198,911) – – (198,911)COVID-19-related rent

concessions received(Note 12) . . . . . . . . . . – – (7,278) – – (7,278)

Exchange difference . . . . . – – (789) – – (789)

Total other changes . . . . . . 6,267 2,743 570,348 (3,026,401) 7,380,267 4,933,224- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

At 30 June 2021 . . . . . . . 70,385 – 1,462,634 – 10,114,487 11,647,506


– I-43 –


Bank loansOther

borrowingsLease


liabilities Total


(Note 21) (Note 21) (Note 22) (Note 24)

At 1 January 2020 . . . . . . . . . . . 49,000 183,070 361,799 1,257,514 1,851,383- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Changes from financing cash flows:Capital element of lease rentals

paid . . . . . . . . . . . . . . . . . . – – (22,143) – (22,143)Interest element of lease rentals

paid . . . . . . . . . . . . . . . . . . – – (13,330) – (13,330)Proceeds from interest-bearing

loans and borrowings . . . . . . . . 23,667 – – – 23,667Repayment of the interest-bearing

borrowings . . . . . . . . . . . . . . (27,236) – – – (27,236)Payment of interest on loans and

borrowings . . . . . . . . . . . . . . (1,342) (3,012) – – (4,354)Proceeds from the issuance of

redemption liabilities. . . . . . . . . – – – 116,486 116,486

Total changes from financingcash flows . . . . . . . . . . . . . . . (4,911) (3,012) (35,473) 116,486 73,090

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Other changes:Interest expenses (Note 6(a)) . . . . . 1,342 3,012 13,330 – 17,684Fair value changes of financial

liabilities measured at fair valuethrough profit or loss . . . . . . . . – – – 445,459 445,459

Addition to lease liabilities . . . . . . – – 419,653 – 419,653COVID-19-related rent concessions

received (Note 12) . . . . . . . . . . – – (15,804) – (15,804)Exchange difference . . . . . . . . . . – – 17 – 17

Total other changes . . . . . . . . . . . 1,342 3,012 417,196 445,459 867,009- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

At 30 June 2020 (unaudited). . . . . 45,431 183,070 743,522 1,819,459 2,791,482

(c) Total cash outflows for leases

Amounts included in the combined statements of cash flows for leases comprise the following:


2018 2019 2020 2020 2021


(Unaudited)

Within operating cash flows. . . . . . . (4,185) (4,196) (11,433) (2,405) (5,086)Within financing cash flows. . . . . . . (18,609) (58,632) (156,911) (35,473) (162,124)

Total cash outflow for leases . . . . . . (22,794) (62,828) (168,344) (37,878) (167,210)


– I-44 –


19 TRADE AND OTHER PAYABLES


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Trade payables . . . . . . . . . . . . . . . . . . . . . . . 10,323 135,601 240,707 297,518Staff costs payables . . . . . . . . . . . . . . . . . . . . 5,313 18,261 45,757 56,737Other payables and accrued charges . . . . . . . . . . . 29,013 116,105 132,840 94,545Amount due to franchisees . . . . . . . . . . . . . . . . 61,399 37,917 52,917 46,303Amount due to joint ventures . . . . . . . . . . . . . . . – – 8,881 6,555VAT payables . . . . . . . . . . . . . . . . . . . . . . . . 3,737 3,971 5,078 21,400

109,785 311,855 486,180 523,058

The ageing analysis of the trade payables based on the invoice date is as follows:


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Unbilled or within 3 months . . . . . . . . . . . . . . . 9,810 134,330 235,325 296,5123 to 6 months . . . . . . . . . . . . . . . . . . . . . . . . 33 276 2,789 –6 to 12 months . . . . . . . . . . . . . . . . . . . . . . . 12 225 1,712 830Over 12 months . . . . . . . . . . . . . . . . . . . . . . 468 770 881 176

10,323 135,601 240,707 297,518

20 INCOME TAX IN THE COMBINED STATEMENTS OF FINANCIAL POSITION

(a) Current taxation in the combined statements of financial position represents:


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

At the beginning of the year/period . . . . . . . . . . . – (38) (153) 1,591Provision for income tax for the year/period . . . . . . 264 335 1,868 16,545Income tax paid . . . . . . . . . . . . . . . . . . . . . . (302) (450) (124) (2,314)

At the end of the year/period . . . . . . . . . . . . . . . (38) (153) 1,591 15,822

Reconciliation to the combined statements offinancial position:

Income tax payable . . . . . . . . . . . . . . . . . . . . 264 264 1,628 15,859Income tax recoverable . . . . . . . . . . . . . . . . . . (302) (417) (37) (37)

(38) (153) 1,591 15,822


– I-45 –


(b) Deferred tax assets recognised:

(i) Movement of each component of deferred tax assets

The components of deferred tax assets recognised in the combined statements of financial position and themovements during the Relevant Periods are as follows:

Deferred tax arisingfrom:

Impairmentlosses

Timingdifferencein relation

to leasearrangements

Property,plant andequipment

Unusedtax losses Others Total


At 1 January 2018 . . . . . – – – – – –Credited to profit or loss . . 3,503 416 26 9,051 – 12,996

At 31 December 2018and 1 January 2019 . . . 3,503 416 26 9,051 – 12,996

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Credited/(charged) toprofit or loss . . . . . . . 2,859 (798) 324 17,535 270 20,190

At 31 December 2019and 1 January 2020 . . . 6,362 (382) 350 26,586 270 33,186

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Credited/(charged) toprofit or loss . . . . . . . 4,972 7,684 325 22,068 (9) 35,040

At 31 December 2020and 1 January 2021 . . . 11,334 7,302 675 48,654 261 68,226

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Credited/(charged) toprofit or loss . . . . . . . 7,067 (4,238) – 20,101 355 23,285

At 30 June 2021 . . . . . . 18,401 3,064 675 68,755 616 91,511

(ii) Reconciliation to the combined statements of financial position


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Net deferred tax asset recognised in thecombined statements of financial position . . 12,996 33,186 68,226 91,511


– I-46 –


(c) Deferred tax assets not recognised:

In accordance with the accounting policy set out in Note 2(p), the Group has not recognised deferred tax assets inrespect of cumulative tax losses of certain subsidiaries located in the PRC, Hong Kong and Indonesia as it is not probablethat future taxable profits against which the losses or temporary differences can be utilised will be available in the relevanttax jurisdiction and entity.

The following table presents the Group’s unrecognised tax losses and the expiration information at the reportingdates:


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 4,630 4,630 4,6302025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – 2,392 2,392No expiry date . . . . . . . . . . . . . . . . . . . . . . . – 475 10,633 16,111

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 5,105 17,655 23,133

21 LOANS AND BORROWINGS


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Unsecured loans– Bank loans (a) . . . . . . . . . . . . . . . . . . . . . – 49,000 61,843 70,385– Other borrowings (b) . . . . . . . . . . . . . . . . . 33,000 183,070 247,947 –

33,000 232,070 309,790 70,385

At 31 December 2018, 2019, 2020 and 30 June 2021, the loans and borrowings were repayable as follows:


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Within 1 year . . . . . . . . . . . . . . . . . . . . . . . . 33,000 215,737 305,346 70,385After 1 year but within 2 years . . . . . . . . . . . . . . – 16,333 4,444 –

33,000 232,070 309,790 70,385


– I-47 –


Notes:

(a) All the interest-bearing loans and borrowings are carried at amortised cost. None of the non-currentinterest-bearing loans and borrowings are expected to be settled within one year.

(b) Other borrowings are unsecured, interest-bearing and repayable within one year (see Note 25(b)).

(c) Certain banking facilities of the Group are subject to financial covenants. The Group regularly monitors itscompliance with these covenants and was adherent to the term loans’ repayment schedule and does notconsider it to be probable that the bank will exercise its discretion to demand repayment so long as the Groupcontinues to meet these requirements. Further details of the Group’s management of liquidity risk are set outin Note 25(b).

22 LEASE LIABILITIES

The following table shows the remaining contractual maturities of the Group’s lease liabilities at the end of eachreporting period:

As at 31 December2018



As at 30 June2021

Presentvalue of

theminimum

leasepayments

Totalminimum

leasepayments

Presentvalue of

theminimum

leasepayments

Totalminimum

leasepayments

Presentvalue of

theminimum

leasepayments

Totalminimum

leasepayments

Presentvalue of

theminimum

leasepayments

Totalminimum

leasepayments

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Within 1 year . . . . . . 19,321 21,197 56,393 72,222 165,325 210,590 248,780 313,030- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

After 1 year but within2 years . . . . . . . . 16,473 17,527 70,527 82,704 208,369 244,094 276,833 328,004

After 2 years butwithin 5 years . . . . 12,265 13,231 153,864 174,511 467,784 526,397 650,091 734,751

After 5 years . . . . . . 3,766 4,099 81,015 86,221 212,932 228,335 286,930 308,345

32,504 34,857 305,406 343,436 889,085 998,826 1,213,854 1,371,100- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

51,825 56,054 361,799 415,658 1,054,410 1,209,416 1,462,634 1,684,130

Less: total futureinterest expenses . . . (4,229) (53,859) (155,006) (221,496)

Present valueof lease liabilities . . 51,825 361,799 1,054,410 1,462,634


– I-48 –


23 CAPITAL RESERVES, DIVIDENDS AND NON-CONTROLLING INTERESTS

(a) Capital and capital reserve

For the purpose of this report, the capital of the Group as at 1 January 2018, 31 December 2018, 31 December 2019,31 December 2020 and 30 June 2021 represented the aggregate amount of the nominal value of the registered capital andpaid-in capital of the companies now comprising the Group after considering elimination of investment in subsidiaries. Theexcess of capital contributions made by equity shareholders over the nominal value of the registered capital and paid-incapital were recognised as capital reserve in the Group’s combined statements of changes in equity.

The Company was incorporated as an exempted company with limited liability in the Cayman Islands on 29 March2019 with authorised share capital of US$50,000 divided into 500,000,000 shares with a par value of US$0.0001 each. Asat 30 June 2021, 11,408,430 ordinary shares have been issued, equivalent to RMB7,000.

Pursuant to a restructuring agreement entered into by Guangdong Kuaike, the Company and the shareholders ofGuangdong Kuaike, a capital reduction of Guangdong Kuaike was implemented for the purpose of restoring and aligningshareholders’ previous shareholding interests in Guangdong Kuaike to the Company. During the period ended 30 June 2021,as part of the Reorganization, (i) a capital reduction of Guangdong Kuaike from shareholder through reduction of itsregistered capital which then the reduction amount were applied for settlement for the corresponding number ofnon-redeemable preferred shares issued by the Company; (ii) the Company acquired 100% equity interests in GuangdongKuaike through a wholly-owned subsidiary at a total cash consideration of RMB9,849,000 to shareholder of GuangdongKuaike (Note 1(b)), representing the amount of registered capital of Guangdong Kuaike as at 29 June 2021.

(b) Movements in components of equity

Details of the changes in the Company’s individual components of equity are set out below:

The Company

Sharecapital

Capitalreserve

Exchangereserve



At 29 March 2019 (date ofincorporation), 31 December 2019and 1 January 2020 . . . . . . . . . – – – – –


Loss for the year . . . . . . . . . . . . . – – – (291,302) (291,302)Other comprehensive income . . . . . . – – (51,709) – (51,709)

Total comprehensive income . . . . . . – – (51,709) (291,302) (343,011)Issuance of ordinary shares . . . . . . . 7 – – – 7

At 31 December 2020 and 1 January2021 . . . . . . . . . . . . . . . . . . . 7 – (51,709) (291,302) (343,004)

Changes in equity for the six monthsended 30 June 2021:

Loss for the period . . . . . . . . . . . . – – – (6,492,208) (6,492,208)Other comprehensive income . . . . . . – – (97,053) – (97,053)

Total comprehensive income . . . . . . – – (97,053) (6,492,208) (6,589,261)

Issuance of ordinary shares . . . . . . . –* 3,450 – – 3,450At 30 June 2021 . . . . . . . . . . . . . 7 3,450 (148,762) (6,783,510) (6,928,815)

* Less than RMB1,000

(c) Exchange reserve

The exchange reserve comprises all foreign exchange differences arising from the translation of the financialstatements of foreign operations in accordance with the accounting policies in Note 2(s).

(d) Dividends

No dividend was declared or paid by the Company during the Relevant Periods.

Dividends in respect of the year ended 31 December 2020 were declared and paid by Xinjiang Qianyufei CommercialManagement Co., Ltd. and Guizhou Xianke Goods Partnership, the subsidiaries of the Group, amounting to RMB205,000and RMB1,758,000, among which RMB101,000 and RMB879,000 were attributable to the non-controlling shareholders ofthese subsidiaries.


– I-49 –


(e) Capital contribution from non-controlling interests

Capital contribution from non-controlling interests represents cash and non-cash contributions of leaseholdimprovements, store equipment, and furniture and fittings by non-controlling shareholders.

(f) Capital management

The Group’s primary objective when managing its capital is to safeguard the Group’s ability to continue as a goingconcern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, by pricing productsand services commensurately with the level of risk and by securing access to finance at a reasonable cost.

The Group actively and regularly reviews and manages its capital structure to maintain a balance between highershareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by asound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

The directors of the Company review its capital structure by considering the cost and the risks associates with eachclass of capital. Based on recommendations of the directors of the Company, the Group will continue to balance its overallcapital structure through issuance of shares and obtaining and renewing existing debt financing.

24 FINANCIAL LIABILITIES MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Redemption liabilities . . . . . . . . . . . . . . . . . . . 154,189 1,257,514 3,026,401 –Convertible redeemable preferred shares . . . . . . . . – – 945,768 10,114,487

154,189 1,257,514 3,972,169 10,114,487

As at 30 June 2021, the Group has completed several rounds of financing by issuing shares as shown in the belowtable:

Year Issued bySeries of

FinancingNumber of

shares issued Type of shares issuedConsideration

received

RMB’000

2017. . . . . GuangdongKuaike

series A* 2,170,971 Ordinary shares withpreferential rights

46,500


series B* 3,586,145 Ordinary shares withpreferential rights

70,000


series C* 4,134,164 Ordinary shares withpreferential rights

267,892


series D* 3,180,092 Ordinary shares withpreferential rights

300,830


series D* 788,108 Ordinary shares withpreferential rights

116,486


series E* 506,062 Ordinary shares withpreferential rights

90,000

2020. . . . . the Company series D 208,545 Convertible redeemablepreferred shares

34,885

2020. . . . . the Company series E 3,546,762 Convertible redeemablepreferred shares

630,770

2021. . . . . the Company series F 3,355,089 Convertible redeemablepreferred shares

1,788,452

21,475,938 3,345,815


– I-50 –


* As part of the Reorganization as discussed in Note 1, the investors exchanged the ordinary shares and thepreferential rights they held in Guangdong Kuaike, with the Group for the convertible redeemable preferredshares issued by the Company. The exchange achieved by a reduction of capital of Guangdong Kuaike,acquisition of all voting rights and shareholders’ right in Guangdong Kuaike by the Company, issuance ofconvertible redeemable preferred shares as the result of the investors exercising the warrants issued by theCompany. In substance, the Company and the investors entered into a swap to exchange the shares issued byGuangdong Kuaike with preferential rights with convertible redeemable preferred shares to be issued by theCompany. This exchange has been completed as at 30 June 2021.

The contractual rights and obligations in respect of the convertible redeemable preferred shares, including theredemption rights exercisable upon occurrence contingent events, are substantially with the same as those of the shares andpreferential rights issued by Guangdong Kuaike. The overall effect of the swap as stated above would have minimal impacton net cash inflows to/outflows from the Group.

(a) Conversion feature

Each preferred share shall automatically be converted into ordinary shares, at the then applicable preferred shareconversion price upon the closing of a qualified [REDACTED]. The initial conversion price will be the applicable preferredshare issue price (i.e., a 1-to-1 initial conversion ratio), which will be subject to adjustments to reflect stock dividends, stocksplits and other events.

(b) Redemption feature

The preferred shares are redeemable by the holders if the Company fails to complete a qualified [REDACTED] priorto a specified no-[REDACTED] redemption date or upon an occurrence of some specified contingent events. Theredemption price shall equal the following:

For each series A/B/C/D/E/F preferred shares redeemed, the redemption price shall be equal to the higher of: (i) onehundred percent (100%) of the series A/B/C/D/E/F issue price (as adjusted for any share subdivisions, share dividends,combinations, recapitalisations and similar transactions) and a simple interest rate of ten percent (10%) calculated from theseries A/B/C/D/E/F issue date till the date of full payment of the redemption price (calculated on a pro rata basis in caseof a partial year); or (ii) such series A/B/C/D/E/F redeeming shareholder’s pro rata share of the net assets, in each case, plusall declared but unpaid dividends on each such redeeming series A/B/C/D/E/F preferred share.

(c) Liquidation preference

In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary or anydeemed liquidation event as defined in the agreement between the Company and the investors, the fair market value of allassets and funds of the Company legally available for distribution to the shareholders (after satisfaction of all creditors’claims and claims that may be preferred by applicable Law) (collectively, the “Residual Assets”) shall be distributed to theshareholders as follows:

For each series B/C/D/E/F shareholder, the amount equal to the higher of: (i) pro rata share of Residual Assets; or(ii) one hundred percent (100%) of the series B/C/D/E/F issue price (as adjusted for any share subdivisions, share dividends,combinations, recapitalisations and similar transactions) and a simple interest rate of ten percent (10%) calculated from theseries B/C/D/E/F issue date till the date of full payment of the redemption price (calculated on a pro rata basis in case ofa partial year), plus all declared but unpaid dividends.

For each series A shareholder, the amount equal to one hundred percent (100%) of the series A issue price (as adjustedfor any share subdivisions, share dividends, combinations, recapitalisations and similar transactions).

The Group has designated the ordinary shares with preferential rights and convertible redeemable preferred sharesdescribed above as financial liabilities at fair value through profit or loss. See Note 2(m) for the relevant accounting policy.

The redemption features of the convertible redeemable preferred shares issued by the Company after theReorganization would be terminated immediately after the consummation of a qualified [REDACTED]. Upon thetermination of the Group’s redemption obligations, the redemption liabilities or the financial liabilities arising from theconvertible redeemable preferred shares would be reclassified to equity.

The key assumptions used in the fair value measurement are set out as below:


30 June

2018 2019 2020 2021

Risk-free rate . . . . . . . . . . . . . . . . . . . . . . . . 2.8% 2.6% 2.8% 2.8%Expected volatility . . . . . . . . . . . . . . . . . . . . . 34.5% 35.8% 46.4% 46.0%


– I-51 –


The movements of carrying amount of redemption liabilities and convertible redeemable preferred shares are set outas below:


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

At the beginning of the year/period . . . . . . . . . . . 46,500 154,189 1,257,514 3,972,169Addition . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000 568,722 872,141 1,788,452Re-designation from ordinary shares* . . . . . . . . . . – 97,051 – –Fair value changes . . . . . . . . . . . . . . . . . . . . . 37,689 437,552 1,842,514 4,353,866

At the end of the year/period . . . . . . . . . . . . . . . 154,189 1,257,514 3,972,169 10,114,487

* During the year ended 31 December 2019, certain existing shareholders sold a total 1,707,386 ordinary shares,which were then re-designated and reclassified as series C preferred shares, to certain new investors. As aresult, capital and capital reserve were reduced by the amount of fair value of the series C preferred sharesamounting to RMB97,051,000.

25 FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS

Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’s business. TheGroup’s exposure to these risks and the financial risk management policies and practices used by the Group to manage theserisks are described below.

(a) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial lossto the Group. The Group’s credit risk is primarily attributable to trade and other receivables.

The Group’s exposure to credit risk arising from cash and cash equivalents is limited because the counterparties arebanks, financial institutions, Alipay and WeChat Pay with high credit rating and no past due history, for which the Groupconsiders to have low credit risk.

The Group’s exposure to credit risk arising from trade receivables is influenced mainly by the individualcharacteristics of each customer rather than the industry or country in which the customers operate and therefore significantconcentrations of credit risk primarily arise when the Group has significant exposure to individual customers. The Group hasno significant concentration of credit risk in industries or countries in which the customers operate. The Group measures lossallowances for trade receivables at an amount equal to lifetime ECLs, which is calculated using a provision matrix. Giventhe Group has not experienced any significant credit losses in the past, management consider the ECL rate to be insignificantand close to zero.

In determining the ECL for other receivables, the directors of the Group has taken into account the historical defaultexperience and forward-looking information, as appropriate. The directors of the Group has assessed that other receivableshave not had a significant increase in credit risk since initial recognition and risk of default is insignificant, and therefore,the ECL rate is considered to be insignificant and close to zero.

The Group does not provide any guarantees which would expose the Group to credit risk.

(b) Liquidity risk

Individual operating entities within the Group are responsible for their own cash management, including theshort-term investment of cash surpluses and the raising of loans to cover expected cash demands, subject to approval by themanagement and directors when the borrowings exceed certain predetermined levels of authority. The Group’s policy is toregularly monitor its liquidity requirements to ensure that the Group maintains sufficient reserves of cash to meet its liquidityrequirements in the short and longer term.


– I-52 –


The following tables show the remaining contractual maturities as at 31 December 2018, 2019, 2020 and 30 June 2021of the Group’s financial liabilities, which are based on contractual undiscounted cash flows (including interest paymentscomputed using contractual rates or, if floating, based on rates current at the end of the reporting period) and the earliestdate the Group can be required to pay:

As at 31 December 2018

Contractual undiscounted cash outflow

Within1 year

More than1 year butless than 2

years

More than2 years but

less than5 years

More than5 years Total

Carryingamount


Trade and other payables. . . 109,785 – – – 109,785 109,785Loans and borrowings . . . . 33,000 – – – 33,000 33,000Lease liabilities . . . . . . . . 21,197 17,527 13,231 4,099 56,054 51,825

163,982 17,527 13,231 4,099 198,839 194,610



Within1 year

More than1 year butless than2 years


less than5 years


Carryingamount


Trade and other payables. . . 311,855 – – – 311,855 311,855Loans and borrowings . . . . 225,770 16,633 – – 242,403 232,070Lease liabilities . . . . . . . . 72,222 82,704 174,511 86,221 415,658 361,799

609,847 99,337 174,511 86,221 969,916 905,724



Within1 year



less than5 years


Carryingamount


Trade and other payables. . . 486,180 – – – 486,180 486,180Loans and borrowings . . . . 307,914 4,487 – – 312,401 309,790Lease liabilities . . . . . . . . 210,590 244,094 526,397 228,335 1,209,416 1,054,410

1,004,684 248,581 526,397 228,335 2,007,997 1,850,380


– I-53 –


As at 30 June 2021


Within1 year



less than5 years


Carryingamount


Trade and other payables. . . 523,058 – – – 523,058 523,058Loans and borrowings . . . . 70,385 – – – 70,385 70,385Lease liabilities . . . . . . . . 313,030 328,004 734,751 308,345 1,684,130 1,462,634

906,473 328,004 734,751 308,345 2,277,573 2,056,077

In addition to the above, the Group was also exposed to liquidity risk arising from the financial liabilities measuredat fair value through profit or loss at 31 December 2018, 2019, 2020 and 30 June 2021, which are further detailed in Note24.

(c) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate becauseof changes in market interest rates. The Group’s interest rate risk arises primarily from its loans and borrowings. Since theGroup’s loans and borrowings are all fixed-rate liabilities, the Group is not exposed to significant cash flow interest riskduring the Relevant Periods.

(i) Interest rate profile

The following table details the interest rate profile of the Group’s borrowings at the end of the reporting period:

At 31 December As at 30 June

2018 2019 2020 2021

Effectiveinterest

rate RMB’000

Effectiveinterest

rate RMB’000

Effectiveinterest

rate RMB’000

Effectiveinterest

rate RMB’000

Fixed rate borrowings:

Lease liabilities . . . . .4.75%-4.90% 51,825

4.75%-4.90% 361,799

4.75%-4.90% 1,054,410

4.75%-4.90% 1,462,634

Other borrowings . . . . 24.00% 33,0007.50%-14.40% 183,070 8.00% 247,947 – –

Bank loans . . . . . . . . – – 6.30% 49,0004.53%-7.50% 61,843

4.53%-7.50% 70,385

Total borrowings . . . . . 84,825 593,869 1,364,200 1,533,019

(d) Currency risk

Foreign exchange risk arises when future commercial transactions or recognised assets and liabilities are denominatedin a currency that is not the Group entities functional currency. The Group manages its foreign exchange risk by performingregular reviews of the Group’s net foreign exchange exposures and tries to minimise these exposures through natural hedges,wherever possible, and may enter into forward foreign exchange contracts, when necessary.

The Group operates mainly in the PRC with most of their transactions settled in RMB. Management considers thatthe business is not exposed to any significant foreign exchange risk as there are no significant financial assets or liabilitiesof the Group denominated in currencies other than the respective functional currencies of the Group’s entities.


– I-54 –


(e) Fair value measurement

(i) Financial liabilities measured at fair value

Fair value hierarchy

The following table presents the fair value of the Group’s financial instruments measured at the end ofthe reporting period on a recurring basis, categorised into the three-level fair value hierarchy as defined inHKFRS 13, Fair value measurement. The level into which a fair value measurement is classified is determinedwith reference to the observability and significance of the inputs used in the valuation technique as follows:

• Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjusted quoted pricesin active markets for identical assets or liabilities at the measurement date.

• Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputs which failto meet Level 1, and not using significant unobservable inputs. Unobservable inputs are inputsfor which market data are not available.

• Level 3 valuations: Fair value measured using significant unobservable inputs.

The following table presents the Group’s financial liabilities that are measured at fair value at the endof each reporting dates:

For the year ended 31 December

For theperiod ended

30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Level 3Financial liabilities at FVTPL

– Redemption liabilities. . . . . . . . . (154,189) (1,257,514) (3,026,401) –– Convertible redeemable

preferred shares . . . . . . . . . . . . – – (945,768) (10,114,487)

(154,189) (1,257,514) (3,972,169) (10,114,487)

During the years ended 31 December 2018, 2019, 2020 and six months ended 30 June 2021, there wereno transfers between Level 1 and Level 2, or transfers into or out of Level 3. The Group’s policy is to recognisetransfers between levels of fair value hierarchy as at the end of the reporting period in which they occur.

Information about Level 3 fair value measurements

The Group adopts an option pricing allocation model and equity allocation model when measuring theredemption liabilities and convertible redeemable preferred shares. The fair value of such financial liabilitiesat FVTPL is affected by changes in expected volatility and discount rate, which are the significantunobservable inputs in the fair value measurement.

If the Group’s expected volatility applied in the valuation had been 1% higher or lower thanmanagement’s estimation as at 31 December 2018, 2019, 2020 and 30 June 2021, the values of the financialliabilities at FVTPL would (decrease)/increase its fair value by the amounts listed in table below:


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Expected volatility increase 1% . . . . . (33) (687) 377 1,107Expected volatility decrease 1% . . . . . 17 637 (444) (1,238)


– I-55 –


If the Group’s discount rate applied in the valuation had been 1% lower or higher than management’sestimation as at 31 December 2018, 2019, 2020 and 30 June 2021, the carrying amounts of the FVTPLliabilities would increase/(decrease) by the amounts listed in table below:


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Risk-free rate decrease 1% . . . . . . . . . . . . . . . . 2,052 6,170 5,767 10,704Risk-free rate increase 1% . . . . . . . . . . . . . . . . (1,952) (5,985) (5,521) (10,102)

The movements of balances of FVTPL liabilities during the Relevant Periods were disclosed in Note 24.

(ii) Fair value of financial assets and liabilities carried at other than fair value

The carrying amounts of the Group’s financial assets and liabilities carried at cost or amortised cost are notmaterially different from their fair values at 31 December 2018, 2019, 2020 and 30 June 2021.

26 CAPITAL COMMITMENT

Capital commitments outstanding at 31 December 2018, 2019, 2020 and 30 June 2021 not provided for in theHistorical Financial Information were as follows:


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Contracted for . . . . . . . . . . . . . . . . . . . . . . . – 34,435 18,254 49,157Capital investment commitment . . . . . . . . . . . . . – – 5,000 5,000

– 34,435 23,254 54,157

27 MATERIAL RELATED PARTY TRANSACTIONS

Parties are considered to be related if one party has the ability, directly or indirectly, control the other party or exercisesignificant influence over the other party in making financial and operation decisions. Parties are also considered to berelated if they are under common control or joint control in the controlling shareholders’ families. Members of keymanagement and their close family members of the Group are also considered as related parties.

The following significant transactions were carried out between the Group and its related parties during the RelevantPeriods. In the opinion of the directors of the Company, the related party transactions were carried out in the normal courseof business and at terms negotiated between the Group and the respective related parties.

Names of the major related parties Relationships

Mr. Wu Yuening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DirectorMr. Guo Huibo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DirectorShanghai Black Algae Investment Management Center (Limited Partnership) (上海黑藻投資管理中心(有限合夥)) (“Shanghai Black Algae”) . . . . . . . . . . . . . . . . . .

Shareholders withsignificant influenceto the Group

Dongguan Star . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Joint ventureXian Jinding Huijie Business Information Consulting Co., Ltd. (西安金鼎匯捷商務信息諮詢有限公司) (“Xian Jinding”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Joint venture

Wenzhou City Benju Trading Co., Ltd. (溫州市本巨貿易有限公司) (“Wenzhou Benju”). Joint ventureShantou Gaocai Anyi Trading Co., Ltd. (汕頭市高彩安易商貿有限公司) (“Shantou

Gaocai”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Joint venture

Ningxia Qishuntong Trading Co., Ltd. (寧夏啟順通商貿有限公司) (“NingxiaQishuntong”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Joint venture

Xining Zhongai Trade Co., Ltd. (西寧中愛商貿有限責任公司) (“Xining Zhongai”) . . . Joint ventureWuhan Shengke Trading Co., Ltd. (武漢盛客商貿有限公司) (“Wuhan Shengke”) . . . . Joint ventureLanzhou Dianle Trading Co., Ltd. (蘭州點樂商貿有限公司) (“Lanzhou Dianle”) . . . . . Joint ventureYunnan Yanyan Trade Co., Ltd. (雲南延延商貿有限公司) (“Yunnan Yanyan”) . . . . . . Joint ventureFuzhou Wenke Trading Co., Ltd. (福州文客商貿有限公司) (“Fuzhou Wenke”) . . . . . . Joint venture


– I-56 –


(a) Significant transactions with related parties

In addition to the related party transactions disclosed elsewhere in the Historical Financial Information, the Groupentered into the following significant related party transactions during the Relevant Periods:


2018 2019 2020 2020 2021


(Unaudited)Loans proceeds from:

Shanghai Black Algae . . . . . . . . . 38,000 183,070 247,947 – –

Loans repaid to:Shanghai Black Algae . . . . . . . . . 20,000 33,000 183,070 – 247,947

Sales to:Ningxia Qishuntong . . . . . . . . . . – – 2,107 – 5,971Xining Zhongai. . . . . . . . . . . . . – – 12,324 68 8,947Wuhan Shengke . . . . . . . . . . . . – – 14,354 2,498 13,885Lanzhou Dianle . . . . . . . . . . . . – – 4,698 – 23,464Dongguan Star . . . . . . . . . . . . . – – 92,497 8,688 211,780Yunnan Yanyan . . . . . . . . . . . . . – – 16,475 443 27,937Wenzhou Benju. . . . . . . . . . . . . – – – – 21,159Xian Jinding . . . . . . . . . . . . . . – – – – 18,448Fuzhou Wenke . . . . . . . . . . . . . – – – – 2,721

– – 142,455 11,697 334,312

(b) Significant year-end/period-end balances with related parties

As of 31 December 2018, 2019, 2020 and 30 June 2021, the Group had the following significant year-end/period-endbalances with related parties:


30 June

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Loans from:Shanghai Black Algae . . . . . . . . . . . . . . . . . . (33,000) (183,070) (247,947) –

Other receivables from:Mr. Wu Yuening . . . . . . . . . . . . . . . . . . . . . 5,450 12,457 12,457 –Mr. Guo Huibo. . . . . . . . . . . . . . . . . . . . . . – 4,454 3,589 –Wenzhou Benju . . . . . . . . . . . . . . . . . . . . . – – 406 11,807Dongguan Star . . . . . . . . . . . . . . . . . . . . . – – 46,766 107,100Xian Jinding . . . . . . . . . . . . . . . . . . . . . . . – – – 82Wuhan Shengke . . . . . . . . . . . . . . . . . . . . . – – – 5,961Yunnan Yanyan. . . . . . . . . . . . . . . . . . . . . . – – – 3,931

5,450 16,911 63,218 128,881

Other payables to:Yunnan Yanyan. . . . . . . . . . . . . . . . . . . . . . – – (3,854) –Xian Jinding . . . . . . . . . . . . . . . . . . . . . . . – – (905) –Wuhan Shengke . . . . . . . . . . . . . . . . . . . . . – – (62) –Ningxia Qishuntong . . . . . . . . . . . . . . . . . . . – – (1,039) (1,291)Lanzhou Dianle . . . . . . . . . . . . . . . . . . . . . – – (1,051) (2,724)Xining Zhongai . . . . . . . . . . . . . . . . . . . . . – – (1,970) (2,332)Fuzhou Wenke . . . . . . . . . . . . . . . . . . . . . . – – – (208)

– – (8,881) (6,555)


– I-57 –


(c) Key management personnel compensation

Remuneration for key management personnel of the Group, including amounts paid to the Directors of the Companyand the five highest paid employees are disclosed in Notes 8 and 9.

28 IMMEDIATE AND ULTIMATE CONTROLLING PARTY

As at the date of this report, the directors consider the immediate controlling party of the Group to be MOGR HoldingCo., Ltd. and Starlight Holding Co., Ltd. which are incorporated in the British Virgin Islands and the ultimate controllingparty of the Group to be Mr. Wu Yuening and Mr. Guo Huibo.

29 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOTYET EFFECTIVE FOR THE PERIOD ENDED 30 JUNE 2021

Up to the date of this report, the HKICPA has issued a number of amendments, and a new standard, HKFRS 17,Insurance Contracts, which are not yet effective for the period ended 30 June 2021 and which have not been adopted in theHistorical Financial Information. These developments include the following which may be relevant to the Group.

Effective foraccounting periods

beginning on or after

Amendments to HKFRS 3, Reference to the Conceptual Framework . . . . . . . . . . . 1 January 2022

Amendments to HKAS 16, Property, Plant and Equipment: Proceeds before IntendedUse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 January 2022

Amendments to HKAS 37, Onerous Contracts – Cost of Fulfilling a Contract . . . . . . 1 January 2022

Annual Improvements to HKFRSs 2018-2020 Cycle . . . . . . . . . . . . . . . . . . . . . 1 January 2022

Amendments to HKAS 1, Classification of liabilities as current or non-current . . . . . 1 January 2023

Amendments to HKAS 1 and HKFRS Practice Statement 2, Disclosure of accountingpolicies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 January 2023

Amendments to HKAS 8, Definition of accounting estimates . . . . . . . . . . . . . . . . 1 January 2023

Amendments to HKAS 12, Deferred tax related to assets and liabilities arising from asingle transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 January 2023

The Group is in the process of making an assessment of what the impact of these developments is expected to be inthe period of initial application. So far, the Group has concluded that the adoption of them is unlikely to have a significantimpact on the Historical Financial Information.

30 SUBSEQUENT EVENTS

Completion of the Reorganization

The Reorganization as mentioned in Note 1 and detailed in the section headed “History, Reorganization and CorporateStructure” in the Document had been completed in July 2021.

SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company or its subsidiaries comprising the Group inrespect of any period subsequent to 30 June 2021.


– I-58 –


(A) BASES

Our Directors have prepared the estimate of the combined profit/(loss) attributable to equityholders of our Company for the year ending December 31, 2021 (the “Profit/(Loss) Estimate”)based on the audited combined results of our Group for the [ten months ended October 31, 2021]and the unaudited combined results based on the management accounts of our Group for the [twomonths ending December 31, 2021]. The Profit/(Loss) Estimate has been prepared on the basis ofthe accounting policies consistent in all material aspects with those currently adopted by our Groupas summarized in the Accountant’s Report, the text of which is set out in Appendix I to thisdocument.

(B) PROFIT/(LOSS) ESTIMATE FOR THE YEAR ENDING DECEMBER 31, 2021

On the basis set out in Appendix IA to this document, and in the absence of unforeseencircumstances, we estimate that our unaudited combined profit/(loss) attributable to equity holdersof our Company is as follows:

Estimated combined profit/(loss) attributable toequity holders of our Company for the yearending December 31, 2021

Not [less/more] than RMB[●]

APPENDIX IA PROFIT/(LOSS) ESTIMATE

– IA-1 –


(C) LETTER FROM THE REPORTING ACCOUNTANT

The following is the text of a letter received from [KPMG], Certified Public Accountants,Hong Kong, for the purpose of incorporation in this document.

[8th FloorPrince’s Building10 Chater RoadCentralHong Kong]

[Date]

The DirectorsKK Technology Company Holdings Limited

Morgan Stanley Asia LimitedCredit Suisse (Hong Kong) Limited

Dear Sirs,

KK Technology Company Holdings Limited (“the Company”)

[Profit/(loss) Estimate] for Year Ended [31 December 2021]

We refer to the estimate of the [combined profit/(loss)] attributable to equity holders of theCompany for the year ended [31 December 2021] (“the Profit/(loss) Estimate”) set forth in thesection headed “Financial Information” in the document of the Company dated [date] (“theDocument”).

Directors’ Responsibilities

The Profit/(loss) Estimate has been prepared by the directors of the Company based on theaudited [combined] results of the Company and its subsidiaries (collectively referred to as “theGroup”) for the [ten] months ended [31 October 2021] and the unaudited [combined] results basedon the management accounts of the Group for the [two] months ended [31 December 2021].

The Company’s directors are solely responsible for the Profit/(loss) Estimate.

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethicsfor Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants(“HKICPA”), which is founded on fundamental principles of integrity, objectivity, professionalcompetence and due care, confidentiality and professional behaviour.

The firm applies Hong Kong Standard on Quality Control 1 “Quality Control for Firms ThatPerform Audits and Reviews of Financial Statements, and Other Assurance and Related ServicesEngagements” issued by the HKICPA and accordingly maintains a comprehensive system of qualitycontrol including documented policies and procedures regarding compliance with ethicalrequirements, professional standards and applicable legal and regulatory requirements.


– IA-2 –


Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion on the accounting policies and calculations of theProfit/(loss) Estimate based on our procedures. We conducted our engagement in accordance withHong Kong Standard on Investment Circular Reporting Engagements 500 “Reporting on ProfitForecasts, Statements of Sufficiency of Working Capital and Statements of Indebtedness” and withreference to Hong Kong Standard on Assurance Engagements 3000 (Revised) “AssuranceEngagements Other Than Audits or Reviews of Historical Financial Information” issued by theHKICPA. Those standards require that we plan and perform our work to obtain reasonable assuranceas to whether, so far as the accounting policies and calculations are concerned, the Company’sdirectors have properly compiled the Profit/(loss) Estimate in accordance with the bases adopted bythe directors and as to whether the Profit/(loss) Estimate is presented on a basis consistent in allmaterial respects with the accounting policies normally adopted by the Group. Our work issubstantially less in scope than an audit conducted in accordance with Hong Kong Standards onAuditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

[Opinion

In our opinion, so far as the accounting policies and calculations are concerned, theProfit/(loss) Estimate has been properly compiled in accordance with the bases adopted by thedirectors as set out in Appendix IA of the Document and is presented on a basis consistent in allmaterial respects with the accounting policies normally adopted by the Group as set out in ouraccountants’ report dated [date], the text of which is set out in Appendix I of the Document.]

Yours faithfully,

[KPMG]Certified Public AccountantsHong Kong


– IA-3 –


(D) LETTER FROM THE JOINT SPONSORS

The following is the text of a letter, prepared for inclusion in this document, received from theJoint Sponsors, in relation to the Group’s Profit/(Loss) Estimate for the year ended December 31,2021.

[●], 2022

The DirectorsKK Technology Company Holdings LimitedPO Box 309Ugland HouseGrand Cayman, KY1-1104Cayman Islands

Dear Sirs,

We refer to the estimate of the combined profit/(loss) attributable to the equity holders of KKTechnology Company Holdings Limited (the “Company”, together with its subsidiaries, hereinaftercollectively referred to as the “Group”) for the year ended December 31, 2021 (the “Profit/(Loss)Estimate”) as set out in the document issued by the Company dated [●], 2022 (the “Document”).

The Profit/(Loss) Estimate, for which you as the directors of the Company (the “Directors”)are solely responsible, has been prepared based on [●].

We have discussed with you the bases made by the Directors as set out in Appendix [IA] tothe Document upon which the Profit/(Loss) Estimate has been made. We have also considered theletter dated [●], 2022 addressed to you and us from KPMG regarding the accounting policies andcalculations upon which the Profit/(Loss) Estimate has been made.

On the basis of the information comprising the Profit/(Loss) Estimate and on the basis of theaccounting policies and calculations adopted by you and reviewed by KPMG, we are of the opinionthat the Profit/(Loss) Estimate, for which you as Directors are solely responsible, has been madeafter due and careful enquiry.

Yours faithfully,For and on behalf of

Morgan Stanley Asia Limited[Name]

[Title]

For and on behalf ofCredit Suisse (Hong Kong) Limited

[Name][Title]


– IA-4 –


The information set forth in this appendix does not form part of the Accountants’ Report fromKPMG, Certified Public Accountants, Hong Kong, the Company’s reporting accountants, as setforth in Appendix I to this document, and is included herein for illustrative purpose only.

The unaudited [REDACTED] financial information should be read in conjunction with thesection headed “Financial Information” in this document and the Accountants’ Report set forth inAppendix I to this document.

A. UNAUDITED [REDACTED] STATEMENT OF ADJUSTED NET TANGIBLE ASSETS

The following unaudited [REDACTED] statement of adjusted net tangible assets of the Groupis prepared in accordance with Rule 4.29 of the Listing Rules and is set out below for the purposeof illustrating the effect of the [REDACTED] on the combined net tangible liabilities of the Groupattributable to equity shareholders of the Company as if it had taken place on June 30, 2021.

This unaudited [REDACTED] statement of adjusted net tangible assets has been prepared forillustrative purposes only and because of its hypothetical nature, it may not give a true picture ofthe financial position of the Group had the [REDACTED] been completed as at June 30, 2021 orat any future dates.

Combined nettangible liabilities

attributable toequity

shareholders ofthe Company asat June 30, 2021

Estimated[REDACTED] from the

[REDACTED]

Estimated impactupon the

termination of thefinancial liabilitiesmeasured at fair

value throughprofit or loss

Unaudited[REDACTED] adjustednet tangible assets

attributable toequity

shareholders ofthe Company

Unaudited [REDACTED]adjusted net tangibleassets attributable to

equity shareholders of theCompany per Share

RMB’000 RMB’000 RMB’000 RMB’000 RMB HKD


Based on an [REDACTED]of HK$[REDACTED] per[REDACTED] Share . . . (7,114,174) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Based on an [REDACTED]of HK$[REDACTED] per[REDACTED] Share . . . (7,114,174) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Notes:

(1) The combined net tangible liabilities attributable to equity shareholders of the Company as at June 30, 2021 is basedon the combined net liabilities attributable to equity shareholders of the Company of RMB7,111,589,000, afterdeducting intangible assets of RMB2,585,000 as shown in the Accountants’ Report as set out in Appendix I to thisdocument.

(2) The estimated [REDACTED] from the [REDACTED] are based on [REDACTED] expected to be issued under the[REDACTED] and the indicative [REDACTED] of HK$[REDACTED] per Share and HK$[REDACTED] perShare, being the low end and high end of the indicative [REDACTED] respectively, after deduction of the estimated[REDACTED] fees and other estimated expenses related to the [REDACTED] paid or payable by the Group(excluding the [REDACTED] expenses charged to profit or loss during the Relevant Periods) and does not take intoaccount of any shares which may be issued upon the exercise of the [REDACTED], or shares which may be allottedand repurchased by us pursuant to the general mandates granted to our Directors to issue or repurchase Shares.

The estimated [REDACTED] from the [REDACTED] is converted into Renminbi at an exchange rate of HK$1 toRMB0.8216 prevailing on October 29, 2021. No representation is made that Hong Kong dollar amounts have been,could have been or may be converted to Renminbi, or vice versa, at that rate or at any other rate or at all.

APPENDIX II UNAUDITED [REDACTED] FINANCIAL INFORMATION

– II-1 –


(3) The carrying amount of financial liabilities measured at fair value through profit or loss was RMB10,114,487,000 asat June 30, 2021 (as set out in Note 24 of Appendix I). Upon the [REDACTED] and completion of the[REDACTED], all these financial liabilities will be automatically converted into ordinary shares of the Company andwill be re-designated from liabilities to equity.

(4) The unaudited [REDACTED] adjusted net tangible assets attributable to equity shareholders of the Company perShare is arrived at after adjustments as described in notes (2) and (3) and on the basis that a total of [REDACTED]Shares were in issue assuming that the [REDACTED] completed on June 30, 2021 without taking into account ofany shares which may be issued upon exercise of the [REDACTED], or shares which may be allotted and repurchasedby us pursuant to the general mandates granted to our Directors to issue or repurchase Shares.

(5) The unaudited [REDACTED] adjusted net tangible assets attributable to equity shareholders of the Company perShare is converted into Hong Kong dollars at an exchange rate of HK$1 to RMB0.8216 prevailing on October 29,2021. No representation is made that Renminbi amounts have been, could have been or may be converted to HongKong dollar, or vice versa, at that rate or at any other rate or at all.

(6) No adjustment has been made to the unaudited [REDACTED] adjusted net tangible assets attributable to equityshareholders of the Company to reflect any trading results or other transactions of the Group subsequent to June 30,2021.


– II-2 –


[REDACTED]


– II-3 –


[REDACTED]


– II-4 –


[REDACTED]


– II-5 –


SUMMARY OF THE CONSTITUTION OF THE COMPANY

1 Memorandum of Association

The Memorandum of Association of the Company was conditionally adopted on [●] and states,inter alia, that the liability of the members of the Company is limited, that the objects for which theCompany is established are unrestricted and the Company shall have full power and authority tocarry out any object not prohibited by the Companies Act or any other law of the Cayman Islands.

The Memorandum of Association is available on display specified in Appendix V in thesection headed “Documents available on display”.

2 Articles of Association

The Articles of Association of the Company were conditionally adopted on [●] and includeprovisions to the following effect:

2.1 Classes of Shares

The share capital of the Company consists of ordinary shares. The capital of the Company atthe date of adoption of the Articles is [US$50,000] divided into [12,500,000,000] shares of[US$0.000004] each.

2.2 Directors

(a) Power to allot and issue Shares

Subject to the provisions of the Companies Act and the Memorandum and Articles ofAssociation, the unissued shares in the Company (whether forming part of its original or anyincreased capital) shall be at the disposal of the Directors, who may offer, allot, grant optionsover or otherwise dispose of them to such persons, at such times and for such consideration,and upon such terms, as the Directors shall determine.

Subject to the provisions of the Articles of Association and to any direction that may begiven by the Company in general meeting and without prejudice to any special rightsconferred on the holders of any existing shares or attaching to any class of shares, any sharemay be issued with or have attached thereto such preferred, deferred, qualified or other specialrights or restrictions, whether in regard to dividend, voting, return of capital or otherwise, andto such persons at such times and for such consideration as the Directors may determine.Subject to the Companies Act and to any special rights conferred on any shareholders orattaching to any class of shares, any share may, with the sanction of a special resolution, beissued on terms that it is, or at the option of the Company or the holder thereof, liable to beredeemed.

APPENDIX III SUMMARY OF THE CONSTITUTION OF THE COMPANYAND CAYMAN ISLANDS COMPANY LAW

– III-1 –


(b) Power to dispose of the assets of the Company or any subsidiary

The management of the business of the Company shall be vested in the Directors who,in addition to the powers and authorities by the Articles of Association expressly conferredupon them, may exercise all such powers and do all such acts and things as may be exercisedor done or approved by the Company and are not by the Articles of Association or theCompanies Act expressly directed or required to be exercised or done by the Company ingeneral meeting, but subject nevertheless to the provisions of the Companies Act and of theArticles of Association and to any regulation from time to time made by the Company ingeneral meeting not being inconsistent with such provisions or the Articles of Association,provided that no regulation so made shall invalidate any prior act of the Directors whichwould have been valid if such regulation had not been made.

(c) Compensation or payment for loss of office

Payment to any Director or past Director of any sum by way of compensation for lossof office or as consideration for or in connection with his retirement from office (not beinga payment to which the Director is contractually entitled) must first be approved by theCompany in general meeting.

(d) Loans to Directors

There are provisions in the Articles of Association prohibiting the making of loans toDirectors or their respective close associates which are equivalent to the restrictions imposedby the Companies Ordinance.

(e) Financial assistance to purchase Shares

Subject to all applicable laws, the Company may give financial assistance to Directorsand employees of the Company, its subsidiaries or any holding company or any subsidiary ofsuch holding company in order that they may buy shares in the Company or any suchsubsidiary or holding company. Further, subject to all applicable laws, the Company may givefinancial assistance to a trustee for the acquisition of shares in the Company or shares in anysuch subsidiary or holding company to be held for the benefit of employees of the Company,its subsidiaries, any holding company of the Company or any subsidiary of any such holdingcompany (including salaried Directors).

(f) Disclosure of interest in contracts with the Company or any of its subsidiaries

No Director or proposed Director shall be disqualified by his office from contractingwith the Company either as vendor, purchaser or otherwise nor shall any such contract or anycontract or arrangement entered into by or on behalf of the Company with any person,company or partnership of or in which any Director shall be a member or otherwise interestedbe capable on that account of being avoided, nor shall any Director so contracting or beingany member or so interested be liable to account to the Company for any profit so realised byany such contract or arrangement by reason only of such Director holding that office or thefiduciary relationship thereby established, provided that such Director shall, if his interest insuch contract or arrangement is material, declare the nature of his interest at the earliest


– III-2 –


meeting of the board of Directors at which it is practicable for him to do so, either specificallyor by way of a general notice stating that, by reason of the facts specified in the notice, he isto be regarded as interested in any contracts of a specified description which may be made bythe Company.

A Director shall not be entitled to vote on (nor shall be counted in the quorum in relationto) any resolution of the Directors in respect of any contract or arrangement or any otherproposal in which the Director or any of his close associates (or, if required by the ListingRules, his other associates) has any material interest, and if he shall do so his vote shall notbe counted (nor is he to be counted in the quorum for the resolution), but this prohibition shallnot apply to any of the following matters, namely:

(i) the giving to such Director or any of his close associates of any security orindemnity in respect of money lent or obligations incurred or undertaken by himor any of them at the request of or for the benefit of the Company or any of itssubsidiaries;

(ii) the giving of any security or indemnity to a third party in respect of a debt orobligation of the Company or any of its subsidiaries for which the Director or anyof his close associates has himself/themselves assumed responsibility in whole orin part and whether alone or jointly under a guarantee or indemnity or by the givingof security;

(iii) any proposal concerning an offer of shares, debentures or other securities of or bythe Company or any other company which the Company may promote or beinterested in for subscription or purchase where the Director or any of his closeassociates is/are or is/are to be interested as a participant in the underwriting orsub-underwriting of the offer;

(iv) any proposal or arrangement concerning the benefit of employees of the Companyor any of its subsidiaries including:

(A) the adoption, modification or operation of any employees’ share scheme orany share incentive scheme or share option scheme under which the Directoror any of his close associates may benefit; or

(B) the adoption, modification or operation of a pension or provident fund orretirement, death or disability benefits scheme which relates both toDirectors, their close associates and employees of the Company or any of itssubsidiaries and does not provide in respect of any Director or any of hisclose associates, as such any privilege or advantage not generally accordedto the class of persons to which such scheme or fund relates; and

(v) any contract or arrangement in which the Director or any of his close associatesis/are interested in the same manner as other holders of shares or debentures orother securities of the Company by virtue only of his/their interest in shares ordebentures or other securities of the Company.


– III-3 –


(g) Remuneration

The Directors shall be entitled to receive by way of remuneration for their services suchsum as shall from time to time be determined by the Directors, or the Company in generalmeeting, as the case may be, such sum (unless otherwise directed by the resolution by whichit is determined) to be divided amongst the Directors in such proportions and in such manneras they may agree, or failing agreement, equally, except that in such event any Directorholding office for less than the whole of the relevant period in respect of which theremuneration is paid shall only rank in such division in proportion to the time during suchperiod for which he has held office. Such remuneration shall be in addition to any otherremuneration to which a Director who holds any salaried employment or office in theCompany may be entitled by reason of such employment or office.

The Directors shall also be entitled to be paid all expenses, including travel expenses,reasonably incurred by them in or in connection with the performance of their duties asDirectors including their expenses of travelling to and from board meetings, committeemeetings or general meetings or otherwise incurred whilst engaged on the business of theCompany or in the discharge of their duties as Directors.

The Directors may grant special remuneration to any Director who shall perform anyspecial or extra services at the request of the Company. Such special remuneration may bemade payable to such Director in addition to or in substitution for his ordinary remunerationas a Director, and may be made payable by way of salary, commission or participation inprofits or otherwise as may be agreed.

The remuneration of an executive Director or a Director appointed to any other officein the management of the Company shall from time to time be fixed by the Directors and maybe by way of salary, commission or participation in profits or otherwise or by all or any ofthose modes and with such other benefits (including share option and/or pension and/orgratuity and/or other benefits on retirement) and allowances as the Directors may from timeto time decide. Such remuneration shall be in addition to such remuneration as the recipientmay be entitled to receive as a Director.

(h) Retirement, appointment and removal

The Directors shall have power at any time and from time to time to appoint any personto be a Director, either to fill a casual vacancy or as an addition to the existing Directors. AnyDirector so appointed shall hold office only until the next general meeting of the Company andshall then be eligible for re-election at that meeting, but shall not be taken into account indetermining the number of Directors and which Directors are to retire by rotation at suchmeeting.

The Company may by ordinary resolution remove any Director (including a ManagingDirector or other executive Director) before the expiration of his period of officenotwithstanding anything in the Articles of Association or in any agreement between theCompany and such Director (but without prejudice to any claim for compensation or damagespayable to him in respect of the termination of his appointment as Director or of any otherappointment of office as a result of the termination of this appointment as Director). The


– III-4 –


Company may also by ordinary resolution appoint another person in his place. Any Directorso appointed shall hold office during such time only as the Director in whose place he isappointed would have held the same if he had not been removed.

The Company may also by ordinary resolution elect any person to be a Director, eitherto fill a casual vacancy or as an addition to the existing Directors. No person shall, unlessrecommended by the Directors, be eligible for election to the office of Director at any generalmeeting unless, during the period, which shall be at least seven days, commencing no earlierthan the day after the despatch of the notice of the meeting appointed for such election andending no later than seven days prior to the date of such meeting, there has been given to theSecretary of the Company notice in writing by a member of the Company (not being theperson to be proposed) entitled to attend and vote at the meeting for which such notice is givenof his intention to propose such person for election and also notice in writing signed by theperson to be proposed of his willingness to be elected.

There is no shareholding qualification for Directors nor is there any specified age limitfor Directors.

The office of a Director shall be vacated:

(i) if he resigns his office by notice in writing to the Company at its registered officeor its principal office in Hong Kong;

(ii) if an order is made by any competent court or official on the grounds that he is ormay be suffering from mental disorder or is otherwise incapable of managing hisaffairs and the Directors resolve that his office be vacated;

(iii) if, without leave, he is absent from meetings of the Directors (unless an alternateDirector appointed by him attends) for 12 consecutive months, and the Directorsresolve that his office be vacated;

(iv) if he becomes bankrupt or has a receiving order made against him or suspendspayment or compounds with his creditors generally;

(v) if he ceases to be or is prohibited from being a Director by law or by virtue of anyprovision in the Articles of Association;

(vi) if he is removed from office by notice in writing served upon him signed by notless than three-fourths in number (or, if that is not a round number, the nearestlower round number) of the Directors (including himself) for the time being thenin office; or

(vii) if he shall be removed from office by an ordinary resolution of the members of theCompany under the Articles of Association.

At every annual general meeting of the Company one-third of the Directors for the timebeing, or, if their number is not three or a multiple of three, then the number nearest to, butnot less than, one-third, shall retire from office by rotation, provided that every Director(including those appointed for a specific term) shall be subject to retirement by rotation at


– III-5 –


least once every three years. A retiring Director shall retain office until the close of themeeting at which he retires and shall be eligible for re-election thereat. The Company at anyannual general meeting at which any Directors retire may fill the vacated office by electinga like number of persons to be Directors.

(i) Borrowing powers

The Directors may from time to time at their discretion exercise all the powers of theCompany to raise or borrow or to secure the payment of any sum or sums of money for thepurposes of the Company and to mortgage or charge its undertaking, property and assets(present and future) and uncalled capital or any part thereof.

(j) Proceedings of the Board

The Directors may meet together for the despatch of business, adjourn and otherwiseregulate their meetings and proceedings as they think fit in any part of the world. Questionsarising at any meeting shall be determined by a majority of votes. In the case of an equalityof votes, the chairperson of the meeting shall have a second or casting vote.

2.3 Alteration to constitutional documents

No alteration or amendment to the Memorandum or Articles of Association may be madeexcept by special resolution.

2.4 Variation of rights of existing shares or classes of shares

If at any time the share capital of the Company is divided into different classes of shares, allor any of the rights attached to any class of shares for the time being issued (unless otherwiseprovided for in the terms of issue of the shares of that class) may, subject to the provisions of theCompanies Act, be varied or abrogated either with the consent in writing of the holders of not lessthan three-fourths in nominal value of the issued shares of that class or with the sanction of a specialresolution passed at a separate meeting of the holders of the shares of that class. To every suchseparate meeting all the provisions of the Articles of Association relating to general meetings shallmutatis mutandis apply, but so that the quorum for the purposes of any such separate meeting andof any adjournment thereof shall be a person or persons together holding (or representing by proxyor duly authorised representative) at the date of the relevant meeting not less than one-third innominal value of the issued shares of that class.

The special rights conferred upon the holders of shares of any class shall not, unless otherwiseexpressly provided in the rights attaching to or the terms of issue of such shares, be deemed to bevaried by the creation or issue of further shares ranking pari passu therewith.

2.5 Alteration of capital

The Company may, from time to time, whether or not all the shares for the time beingauthorised shall have been issued and whether or not all the shares for the time being issued shallhave been fully paid up, by ordinary resolution, increase its share capital by the creation of newshares, such new capital to be of such amount and to be divided into shares of such respectiveamounts as the resolution shall prescribe.


– III-6 –


The Company may from time to time by ordinary resolution:

(a) consolidate and divide all or any of its share capital into shares of a larger amountthan its existing shares. On any consolidation of fully paid shares and division intoshares of larger amount, the Directors may settle any difficulty which may arise asthey think expedient and in particular (but without prejudice to the generality ofthe foregoing) may as between the holders of shares to be consolidated determinewhich particular shares are to be consolidated into each consolidated share, and ifit shall happen that any person shall become entitled to fractions of a consolidatedshare or shares, such fractions may be sold by some person appointed by theDirectors for that purpose and the person so appointed may transfer the shares sosold to the purchaser thereof and the validity of such transfer shall not bequestioned, and so that the net proceeds of such sale (after deduction of theexpenses of such sale) may either be distributed among the persons who wouldotherwise be entitled to a fraction or fractions of a consolidated share or sharesrateably in accordance with their rights and interests or may be paid to theCompany for the Company’s benefit;

(b) cancel any shares which at the date of the passing of the resolution have not beentaken or agreed to be taken by any person, and diminish the amount of its sharecapital by the amount of the shares so cancelled subject to the provisions of theCompanies Act; and

(c) sub-divide its shares or any of them into shares of smaller amount than is fixed bythe Memorandum of Association, subject nevertheless to the provisions of theCompanies Act, and so that the resolution whereby any share is sub-divided maydetermine that, as between the holders of the shares resulting from suchsub-division, one or more of the shares may have any such preferred or otherspecial rights, over, or may have such deferred rights or be subject to any suchrestrictions as compared with the others as the Company has power to attach tounissued or new shares.

The Company may by special resolution reduce its share capital or any capital redemptionreserve in any manner authorised and subject to any conditions prescribed by the Companies Act.

2.6 Special resolution – majority required

A “special resolution” is defined in the Articles of Association to have the meaning ascribedthereto in the Companies Act, for which purpose, the requisite majority shall be not less thanthree-fourths of the votes of such members of the Company as, being entitled to do so, vote inperson or, in the case of corporations, by their duly authorised representatives or, where proxies areallowed, by proxy at a general meeting of which notice specifying the intention to propose theresolution as a special resolution has been duly given and includes a special resolution approved inwriting by all of the members of the Company entitled to vote at a general meeting of the Companyin one or more instruments each signed by one or more of such members, and the effective date ofthe special resolution so adopted shall be the date on which the instrument or the last of suchinstruments (if more than one) is executed.


– III-7 –


In contrast, an “ordinary resolution” is defined in the Articles of Association to mean aresolution passed by a simple majority of the votes of such members of the Company as, beingentitled to do so, vote in person or, in the case of corporations, by their duly authorisedrepresentatives or, where proxies are allowed, by proxy at a general meeting held in accordancewith the Articles of Association and includes an ordinary resolution approved in writing by all themembers of the Company aforesaid.

2.7 Voting rights

Subject to any special rights, privileges or restrictions as to voting for the time being attachedto any class or classes of shares, at any general meeting on a poll every member present in person(or, in the case of a member being a corporation, by its duly authorised representative) or by proxyshall have one vote for each share registered in his name in the register of members of the Company.

Where any member is, under the Listing Rules, required to abstain from voting on anyparticular resolution or restricted to voting only for or only against any particular resolution, anyvotes cast by or on behalf of such member in contravention of such requirement or restriction shallnot be counted.

In the case of joint registered holders of any share, any one of such persons may vote at anymeeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto;but if more than one of such joint holders be present at any meeting personally or by proxy, thatone of the said persons so present being the most or, as the case may be, the more senior shall alonebe entitled to vote in respect of the relevant joint holding and, for this purpose, seniority shall bedetermined by reference to the order in which the names of the joint holders stand on the registerin respect of the relevant joint holding.

A member of the Company in respect of whom an order has been made by any competent courtor official on the grounds that he is or may be suffering from mental disorder or is otherwiseincapable of managing his affairs may vote by any person authorised in such circumstances to doso and such person may vote by proxy.

Save as expressly provided in the Articles of Association or as otherwise determined by theDirectors, no person other than a member of the Company duly registered and who shall have paidall sums for the time being due from him payable to the Company in respect of his shares shall beentitled to be present or to vote (save as proxy for another member of the Company), or to bereckoned in a quorum, either personally or by proxy at any general meeting.

At any general meeting a resolution put to the vote of the meeting shall be decided by wayof a poll save that the chairperson of the meeting may allow a resolution which relates purely to aprocedural or administrative matter as prescribed under the Listing Rules to be voted on by a showof hands.

If a recognised clearing house (or its nominee(s)) is a member of the Company it mayauthorise such person or persons as it thinks fit to act as its proxy(ies) or representative(s) at anygeneral meeting of the Company or at any general meeting of any class of members of the Companyprovided that, if more than one person is so authorised, the authorisation shall specify the numberand class of shares in respect of which each such person is so authorised. A person authorisedpursuant to this provision shall be entitled to exercise the same rights and powers on behalf of the


– III-8 –


recognised clearing house (or its nominee(s)) which he represents as that recognised clearing house(or its nominee(s)) could exercise as if it were an individual member of the Company holding thenumber and class of shares specified in such authorisation, including, where a show of hands isallowed, the right to vote individually on a show of hands.

2.8 Annual general meetings and extraordinary general meetings

The Company shall hold a general meeting as its annual general meeting each year, within aperiod of not more than 15 months after the holding of the last preceding annual general meeting(or such longer period as the Stock Exchange may authorise). The annual general meeting shall bespecified as such in the notices calling it.

The board of Directors may, whenever it thinks fit, convene an extraordinary general meeting.General meetings shall also be convened on the written requisition of any one or more membersholding together, as at the date of deposit of the requisition, shares representing not less thanone-tenth of the paid up capital of the Company which carry the right of voting at general meetingsof the Company. The written requisition shall be deposited at the principal office of the Companyin Hong Kong or, in the event the Company ceases to have such a principal office, the registeredoffice of the Company, specifying the objects of the meeting and the resolutions to be added to themeeting agenda, and signed by the requisitionist(s). If the Directors do not within 21 days from thedate of deposit of the requisition proceed duly to convene the meeting to be held within a further21 days, the requisitionist(s) themselves or any of them representing more than one-half of the totalvoting rights of all of them, may convene the general meeting in the same manner, as nearly aspossible, as that in which meetings may be convened by the Directors provided that any meetingso convened shall not be held after the expiration of three months from the date of deposit of therequisition, and all reasonable expenses incurred by the requisitionist(s) as a result of the failure ofthe Directors shall be reimbursed to them by the Company.

2.9 Accounts and audit

The Directors shall cause to be kept such books of account as are necessary to give a true andfair view of the state of the Company’s affairs and to show and explain its transactions andotherwise in accordance with the Companies Act.

The Directors shall from time to time determine whether, and to what extent, and at what timesand places and under what conditions or regulations, the accounts and books of the Company, or anyof them, shall be open to inspection by members of the Company (other than officers of theCompany) and no such member shall have any right of inspecting any accounts or books ordocuments of the Company except as conferred by the Companies Act or any other relevant law orregulation or as authorised by the Directors or by the Company in general meeting.

The Directors shall, commencing with the first annual general meeting, cause to be preparedand to be laid before the members of the Company at every annual general meeting a profit and lossaccount for the period, in the case of the first account, since the incorporation of the Company and,in any other case, since the preceding account, together with a balance sheet as at the date to whichthe profit and loss account is made up and a Director’s report with respect to the profit or loss ofthe Company for the period covered by the profit and loss account and the state of the Company’saffairs as at the end of such period, an auditor’s report on such accounts and such other reports andaccounts as may be required by law. Copies of those documents to be laid before the members of


– III-9 –


the Company at an annual general meeting shall not less than 21 days before the date of the meeting,be sent in the manner in which notices may be served by the Company as provided in the Articlesof Association to every member of the Company and every holder of debentures of the Companyprovided that the Company shall not be required to send copies of those documents to any personof whose address the Company is not aware or to more than one of the joint holders of any sharesor debentures.

2.10 Auditors

The Company shall at every annual general meeting appoint an auditor or auditors of theCompany who shall hold office until the next annual general meeting. The removal of an auditorbefore the expiration of his period of office shall require the approval of an ordinary resolution ofthe members in general meeting. The remuneration of the auditors shall be fixed by the Companyat the annual general meeting at which they are appointed provided that in respect of any particularyear the Company in general meeting may delegate the fixing of such remuneration to the Directors.

2.11 Notice of meetings and business to be conducted thereat

An annual general meeting shall be called by not less than 21 days’ notice in writing and anyextraordinary general meeting shall be called by not less than 14 days’ notice in writing. The noticeshall be exclusive of the day on which it is served or deemed to be served and of the day for whichit is given, and shall specify the time, place and agenda of the meeting, particulars of the resolutionsand the general nature of the business to be considered at the meeting. The notice convening anannual general meeting shall specify the meeting as such, and the notice convening a meeting topass a special resolution shall specify the intention to propose the resolution as a special resolution.Notice of every general meeting shall be given to the auditors and all members of the Company(other than those who, under the provisions of the Articles of Association or the terms of issue ofthe shares they hold, are not entitled to receive such notice from the Company).

Notwithstanding that a meeting of the Company is called by shorter notice than that mentionedabove, it shall be deemed to have been duly called if it is so agreed:

(a) in the case of a meeting called as an annual general meeting, by all members of theCompany entitled to attend and vote thereat or their proxies; and

(b) in the case of any other meeting, by a majority in number of the members having a rightto attend and vote at the meeting, being a majority together holding not less than 95%in nominal value of the shares giving that right.

If, after the notice of a general meeting has been sent but before the meeting is held, or afterthe adjournment of a general meeting but before the adjourned meeting is held (whether or notnotice of the adjourned meeting is required), the Directors, in their absolute discretion, consider thatit is impractical or unreasonable for any reason to hold a general meeting on the date or at the timeand place specified in the notice calling such meeting, it may change or postpone the meeting toanother date, time and place.


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The Directors also have the power to provide in every notice calling a general meeting thatin the event of a gale warning or a black rainstorm warning is in force at any time on the day ofthe general meeting (unless such warning is cancelled at least a minimum period of time prior tothe general meeting as the Directors may specify in the relevant notice), the meeting shall bepostponed without further notice to be reconvened on a later date.

Where a general meeting is postponed:

(a) the Company shall endeavour to cause a notice of such postponement, which shallset out the reason for the postponement in accordance with the Listing Rules, to beplaced on the Company’s website and published on the Stock Exchange’s websiteas soon as practicable, but failure to place or publish such notice shall not affectthe automatic postponement of a general meeting due to a gale warning or blackrainstorm warning being in force on the day of the general meeting;

(b) the Directors shall fix the date, time and place for the reconvened meeting and atleast seven clear days’ notice shall be given for the reconvened meeting; and suchnotice shall specify the date, time and place at which the postponed meeting willbe reconvened and the date and time by which proxies shall be submitted in orderto be valid at such reconvened meeting (provided that any proxy submitted for theoriginal meeting shall continue to be valid for the reconvened meeting unlessrevoked or replaced by a new proxy); and

(c) only the business set out in the notice of the original meeting shall be transactedat the reconvened meeting, and notice given for the reconvened meeting does notneed to specify the business to be transacted at the reconvened meeting, nor shallany accompanying documents be required to be recirculated. Where new businessis to be transacted at such reconvened meeting, the Company shall give a freshnotice for such reconvened meeting in accordance with the Articles of Association.

2.12 Transfer of shares

Transfers of shares may be effected by an instrument of transfer in the usual common formor in such other form as the Directors may approve which is consistent with the standard form oftransfer as prescribed by the Stock Exchange.

The instrument of transfer shall be executed by or on behalf of the transferor and, unless theDirectors otherwise determine, the transferee, and the transferor shall be deemed to remain theholder of the share until the name of the transferee is entered in the register of members of theCompany in respect thereof. All instruments of transfer shall be retained by the Company.

The Directors may refuse to register any transfer of any share which is not fully paid up oron which the Company has a lien. The Directors may also decline to register any transfer of anyshares unless:

(a) the instrument of transfer is lodged with the Company accompanied by the certificate forthe shares to which it relates (which shall upon the registration of the transfer becancelled) and such other evidence as the Directors may reasonably require to show theright of the transferor to make the transfer;


– III-11 –


(b) the instrument of transfer is in respect of only one class of shares;

(c) the instrument of transfer is properly stamped (in circumstances where stamping isrequired);

(d) in the case of a transfer to joint holders, the number of joint holders to whom the shareis to be transferred does not exceed four;

(e) the shares concerned are free of any lien in favour of the Company; and

(f) a fee of such amount not exceeding the maximum amount as the Stock Exchange mayfrom time to time determine to be payable (or such lesser sum as the Directors may fromtime to time require) is paid to the Company in respect thereof.

If the Directors refuse to register a transfer of any share they shall, within two months afterthe date on which the transfer was lodged with the Company, send to each of the transferor and thetransferee notice of such refusal.

The registration of transfers may, on 10 business days’ notice (or on 6 business days’ noticein the case of a rights issue) being given by advertisement published on the Stock Exchange’swebsite, or, subject to the Listing Rules, by electronic communication in the manner in whichnotices may be served by the Company by electronic means as provided in the Articles ofAssociation or by advertisement published in the newspapers, be suspended and the register ofmembers of the Company closed at such times for such periods as the Directors may from time totime determine, provided that the registration of transfers shall not be suspended or the registerclosed for more than 30 days in any year (or such longer period as the members of the Companymay by ordinary resolution determine provided that such period shall not be extended beyond 60days in any year).

2.13 Power of the Company to purchase its own shares

The Company is empowered by the Companies Act and the Articles of Association to purchaseits own shares subject to certain restrictions and the Directors may only exercise this power onbehalf of the Company subject to the authority of its members in general meeting as to the mannerin which they do so and to any applicable requirements imposed from time to time by the StockExchange and the Securities and Futures Commission of Hong Kong. Shares which have beenrepurchased will be treated as cancelled upon the repurchase.

2.14 Power of any subsidiary of the Company to own shares

There are no provisions in the Articles of Association relating to the ownership of shares bya subsidiary.

2.15 Dividends and other methods of distribution

Subject to the Companies Act and the Articles of Association, the Company in general meetingmay declare dividends in any currency but no dividends shall exceed the amount recommended bythe Directors. No dividend may be declared or paid other than out of profits and reserves of theCompany lawfully available for distribution, including share premium.


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Unless and to the extent that the rights attached to any shares or the terms of issue thereofotherwise provide, all dividends shall (as regards any shares not fully paid throughout the periodin respect of which the dividend is paid) be apportioned and paid pro rata according to the amountspaid up on the shares during any portion or portions of the period in respect of which the dividendis paid. For these purposes no amount paid up on a share in advance of calls shall be treated as paidup on the share.

The Directors may from time to time pay to the members of the Company such interimdividends as appear to the Directors to be justified by the profits of the Company. The Directorsmay also pay half-yearly or at other intervals to be selected by them any dividend which may bepayable at a fixed rate if they are of the opinion that the profits available for distribution justify thepayment.

The Directors may retain any dividends or other monies payable on or in respect of a shareupon which the Company has a lien, and may apply the same in or towards satisfaction of the debts,liabilities or engagements in respect of which the lien exists. The Directors may also deduct fromany dividend or other monies payable to any member of the Company all sums of money (if any)presently payable by him to the Company on account of calls, instalments or otherwise.

No dividend shall carry interest against the Company.

Whenever the Directors or the Company in general meeting have resolved that a dividend bepaid or declared on the share capital of the Company, the Directors may further resolve: (a) thatsuch dividend be satisfied wholly or in part in the form of an allotment of shares credited as fullypaid up on the basis that the shares so allotted are to be of the same class as the class already heldby the allottee, provided that the members of the Company entitled thereto will be entitled to electto receive such dividend (or part thereof) in cash in lieu of such allotment; or (b) that the membersof the Company entitled to such dividend will be entitled to elect to receive an allotment of sharescredited as fully paid up in lieu of the whole or such part of the dividend as the Directors may thinkfit on the basis that the shares so allotted are to be of the same class as the class already held bythe allottee. The Company may upon the recommendation of the Directors by ordinary resolutionresolve in respect of any one particular dividend of the Company that notwithstanding the foregoinga dividend may be satisfied wholly in the form of an allotment of shares credited as fully paidwithout offering any right to members of the Company to elect to receive such dividend in cash inlieu of such allotment.

Any dividend, interest or other sum payable in cash to a holder of shares may be paid bycheque or warrant sent through the post addressed to the registered address of the member of theCompany entitled, or in the case of joint holders, to the registered address of the person whose namestands first in the register of members of the Company in respect of the joint holding or to suchperson and to such address as the holder or joint holders may in writing direct. Every cheque orwarrant so sent shall be made payable to the order of the holder or, in the case of joint holders, tothe order of the holder whose name stands first on the register of members of the Company inrespect of such shares, and shall be sent at his or their risk and the payment of any such cheque orwarrant by the bank on which it is drawn shall operate as a good discharge to the Company inrespect of the dividend and/or bonus represented thereby, notwithstanding that it may subsequentlyappear that the same has been stolen or that any endorsement thereon has been forged. TheCompany may cease sending such cheques for dividend entitlements or dividend warrants by postif such cheques or warrants have been left uncashed on two consecutive occasions. However, the


– III-13 –


Company may exercise its power to cease sending cheques for dividend entitlements or dividendwarrants after the first occasion on which such a cheque or warrant is returned undelivered. Any oneof two or more joint holders may give effectual receipts for any dividends or other monies payableor property distributable in respect of the shares held by such joint holders.

Any dividend unclaimed for six years from the date of declaration of such dividend may beforfeited by the Directors and shall revert to the Company.

The Directors may, with the sanction of the members of the Company in general meeting,direct that any dividend be satisfied wholly or in part by the distribution of specific assets of anykind, and in particular of paid up shares, debentures or warrants to subscribe securities of any othercompany, and where any difficulty arises in regard to such distribution the Directors may settle itas they think expedient, and in particular may disregard fractional entitlements, round the same upor down or provide that the same shall accrue to the benefit of the Company, and may fix the valuefor distribution of such specific assets and may determine that cash payments shall be made to anymembers of the Company upon the footing of the value so fixed in order to adjust the rights of allparties, and may vest any such specific assets in trustees as may seem expedient to the Directors.

2.16 Proxies

Any member of the Company entitled to attend and vote at a meeting of the Company shallbe entitled to appoint another person who must be an individual as his proxy to attend and voteinstead of him and a proxy so appointed shall have the same right as the member to speak at themeeting. A proxy need not be a member of the Company.

Instruments of proxy shall be in common form or in such other form as the Directors may fromtime to time approve provided that it shall enable a member to instruct his proxy to vote in favourof or against (or in default of instructions or in the event of conflicting instructions, to exercise hisdiscretion in respect of) each resolution to be proposed at the meeting to which the form of proxyrelates. The instrument of proxy shall be deemed to confer authority to vote on any amendment ofa resolution put to the meeting for which it is given as the proxy thinks fit. The instrument of proxyshall, unless the contrary is stated therein, be valid as well for any adjournment of the meeting asfor the meeting to which it relates provided that the meeting was originally held within 12 monthsfrom such date.

The instrument appointing a proxy shall be in writing under the hand of the appointor or hisattorney authorised in writing or if the appointor is a corporation either under its seal or under thehand of an officer, attorney or other person authorised to sign the same.

The instrument appointing a proxy and (if required by the Directors) the power of attorney orother authority (if any) under which it is signed, or a notarially certified copy of such power orauthority, shall be delivered at the registered office of the Company (or at such other place as maybe specified in the notice convening the meeting or in any notice of any adjournment or, in eithercase, in any document sent therewith) not less than 48 hours before the time appointed for holdingthe meeting or adjourned meeting at which the person named in the instrument proposes to vote or,in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, not less than48 hours before the time appointed for the taking of the poll and in default the instrument of proxyshall not be treated as valid. No instrument appointing a proxy shall be valid after the expiration


– III-14 –


of 12 months from the date named in it as the date of its execution. Delivery of any instrumentappointing a proxy shall not preclude a member of the Company from attending and voting inperson at the meeting or poll concerned and, in such event, the instrument appointing a proxy shallbe deemed to be revoked.

2.17 Calls on shares and forfeiture of shares

The Directors may from time to time make calls upon the members of the Company in respectof any monies unpaid on their shares (whether on account of the nominal amount of the shares orby way of premium or otherwise) and not by the conditions of allotment thereof made payable atfixed times and each member of the Company shall (subject to the Company serving upon him atleast 14 days’ notice specifying the time and place of payment and to whom such payment shall bemade) pay to the person at the time and place so specified the amount called on his shares. A callmay be revoked or postponed as the Directors may determine. A person upon whom a call is madeshall remain liable on such call notwithstanding the subsequent transfer of the shares in respect ofwhich the call was made.

A call may be made payable either in one sum or by instalments and shall be deemed to havebeen made at the time when the resolution of the Directors authorising the call was passed. The jointholders of a share shall be jointly and severally liable to pay all calls and instalments due in respectof such share or other monies due in respect thereof.

If a sum called in respect of a share shall not be paid before or on the day appointed forpayment thereof, the person from whom the sum is due shall pay interest on the sum from the dayappointed for payment thereof to the time of actual payment at such rate, not exceeding 15% perannum, as the Directors may determine, but the Directors shall be at liberty to waive payment ofsuch interest wholly or in part.

If any call or instalment of a call remains unpaid on any share after the day appointed forpayment thereof, the Directors may at any time during such time as any part thereof remains unpaidserve a notice on the holder of such shares requiring payment of so much of the call or instalmentas is unpaid together with any interest which may be accrued and which may still accrue up to thedate of actual payment.

The notice shall name a further day (not being less than 14 days from the date of service ofthe notice) on or before which, and the place where, the payment required by the notice is to bemade, and shall state that in the event of non-payment at or before the time and at the placeappointed, the shares in respect of which such call was made or instalment is unpaid will be liableto be forfeited.

If the requirements of such notice are not complied with, any share in respect of which suchnotice has been given may at any time thereafter, before payment of all calls or instalments andinterest due in respect thereof has been made, be forfeited by a resolution of the Directors to thateffect. Such forfeiture shall include all dividends and bonuses declared in respect of the forfeitedshares and not actually paid before the forfeiture. A forfeited share shall be deemed to be theproperty of the Company and may be re-allotted, sold or otherwise disposed of.


– III-15 –


A person whose shares have been forfeited shall cease to be a member of the Company inrespect of the forfeited shares but shall, notwithstanding the forfeiture, remain liable to pay to theCompany all monies which at the date of forfeiture were payable by him to the Company in respectof the shares, together with (if the Directors shall in their discretion so require) interest thereon atsuch rate not exceeding 15% per annum as the Directors may prescribe from the date of forfeitureuntil payment, and the Directors may enforce payment thereof without being under any obligationto make any allowance for the value of the shares forfeited, at the date of forfeiture.

2.18 Inspection of register of members

The register of members of the Company shall be kept in such manner as to show at all timesthe members of the Company for the time being and the shares respectively held by them. Theregister may, on 10 business days’ notice (or on 6 business days’ notice in the case of a rights issue)being given by advertisement published on the Stock Exchange’s website, or, subject to the ListingRules, by electronic communication in the manner in which notices may be served by the Companyby electronic means as provided in the Articles of Association or by advertisement published in thenewspapers, be closed at such times and for such periods as the Directors may from time to timedetermine either generally or in respect of any class of shares, provided that the register shall notbe closed for more than 30 days in any year (or such longer period as the members of the Companymay by ordinary resolution determine provided that such period shall not be extended beyond 60days in any year).

Any register of members kept in Hong Kong shall during normal business hours (subject tosuch reasonable restrictions as the Directors may impose) be open to inspection by any member ofthe Company without charge and by any other person on payment of a fee of such amount notexceeding the maximum amount as may from time to time be permitted under the Listing Rules asthe Directors may determine for each inspection.

2.19 Quorum for meetings and separate class meetings

No business shall be transacted at any general meeting unless a quorum is present when themeeting proceeds to business, but the absence of a quorum shall not preclude the appointment,choice or election of a chairperson which shall not be treated as part of the business of the meeting.

Two members of the Company present in person or by proxy shall be a quorum providedalways that if the Company has only one member of record the quorum shall be that one memberpresent in person or by proxy.

A corporation being a member of the Company shall be deemed for the purpose of the Articlesof Association to be present in person if represented by its duly authorised representative being theperson appointed by resolution of the directors or other governing body of such corporation or bypower of attorney to act as its representative at the relevant general meeting of the Company or atany relevant general meeting of any class of members of the Company.

The quorum for a separate general meeting of the holders of a separate class of shares of theCompany is described in paragraph 2.4 above.


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2.20 Rights of minorities in relation to fraud or oppression

There are no provisions in the Articles of Association concerning the rights of minorityshareholders in relation to fraud or oppression.

2.21 Procedure on liquidation

If the Company shall be wound up, and the assets available for distribution amongst themembers of the Company as such shall be insufficient to repay the whole of the paid-up capital,such assets shall be distributed so that, as nearly as may be, the losses shall be borne by themembers of the Company in proportion to the capital paid up, or which ought to have been paid up,at the commencement of the winding up on the shares held by them respectively. If in a windingup the assets available for distribution amongst the members of the Company shall be more thansufficient to repay the whole of the capital paid up at the commencement of the winding up, theexcess shall be distributed amongst the members of the Company in proportion to the capital paidup at the commencement of the winding up on the shares held by them respectively. The foregoingis without prejudice to the rights of the holders of shares issued upon special terms and conditions.

If the Company shall be wound up, the liquidator may with the sanction of a special resolutionof the Company and any other sanction required by the Companies Act, divide amongst themembers of the Company in specie or kind the whole or any part of the assets of the Company(whether they shall consist of property of the same kind or not) and may, for such purpose, set suchvalue as he deems fair upon any property to be divided as aforesaid and may determine how suchdivision shall be carried out as between the members or different classes of members of theCompany. The liquidator may, with the like sanction, vest the whole or any part of such assets intrustees upon such trusts for the benefit of the members of the Company as the liquidator, with thelike sanction and subject to the Companies Act, shall think fit, but so that no member of theCompany shall be compelled to accept any assets, shares or other securities in respect of whichthere is a liability.

2.22 Untraceable members

The Company shall be entitled to sell any shares of a member of the Company or the sharesto which a person is entitled by virtue of transmission on death or bankruptcy or operation of lawif: (a) all cheques or warrants, not being less than three in number, for any sums payable in cashto the holder of such shares have remained uncashed for a period of 12 years; (b) the Company hasnot during that time or before the expiry of the three month period referred to in (d) below receivedany indication of the whereabouts or existence of the member; (c) during the 12 year period, at leastthree dividends in respect of the shares in question have become payable and no dividend duringthat period has been claimed by the member; and (d) upon expiry of the 12 year period, theCompany has caused an advertisement to be published in the newspapers or subject to the ListingRules, by electronic communication in the manner in which notices may be served by the Companyby electronic means as provided in the Articles of Association, giving notice of its intention to sellsuch shares and a period of three months has elapsed since such advertisement and the StockExchange has been notified of such intention. The net proceeds of any such sale shall belong to theCompany and upon receipt by the Company of such net proceeds it shall become indebted to theformer member for an amount equal to such net proceeds.


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SUMMARY OF CAYMAN ISLANDS COMPANY LAW AND TAXATION

1 Introduction

The Companies Act is derived, to a large extent, from the older Companies Acts of England,although there are significant differences between the Companies Act and the current CompaniesAct of England. Set out below is a summary of certain provisions of the Companies Act, althoughthis does not purport to contain all applicable qualifications and exceptions or to be a completereview of all matters of corporate law and taxation which may differ from equivalent provisions injurisdictions with which interested parties may be more familiar.

2 Incorporation

The Company was incorporated in the Cayman Islands as an exempted company with limitedliability on March 29, 2019 under the Companies Act. As such, its operations must be conductedmainly outside the Cayman Islands. The Company is required to file an annual return each year withthe Registrar of Companies of the Cayman Islands and pay a fee which is based on the size of itsauthorised share capital.

3 Share Capital

The Companies Act permits a company to issue ordinary shares, preference shares,redeemable shares or any combination thereof.

The Companies Act provides that where a company issues shares at a premium, whether forcash or otherwise, a sum equal to the aggregate amount of the value of the premia on those sharesshall be transferred to an account called the “share premium account”. At the option of a company,these provisions may not apply to premia on shares of that company allotted pursuant to anyarrangement in consideration of the acquisition or cancellation of shares in any other company andissued at a premium. The Companies Act provides that the share premium account may be appliedby a company, subject to the provisions, if any, of its memorandum and articles of association, insuch manner as the company may from time to time determine including, but without limitation:

(a) paying distributions or dividends to members;

(b) paying up unissued shares of the company to be issued to members as fully paid bonusshares;

(c) in the redemption and repurchase of shares (subject to the provisions of section 37 of theCompanies Act);

(d) writing-off the preliminary expenses of the company;

(e) writing-off the expenses of, or the commission paid or discount allowed on, any issueof shares or debentures of the company; and

(f) providing for the premium payable on redemption or purchase of any shares ordebentures of the company.


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No distribution or dividend may be paid to members out of the share premium account unlessimmediately following the date on which the distribution or dividend is proposed to be paid thecompany will be able to pay its debts as they fall due in the ordinary course of business.

The Companies Act provides that, subject to confirmation by the Grand Court of the CaymanIslands, a company limited by shares or a company limited by guarantee and having a share capitalmay, if so authorised by its articles of association, by special resolution reduce its share capital inany way.

Subject to the detailed provisions of the Companies Act, a company limited by shares or acompany limited by guarantee and having a share capital may, if so authorised by its articles ofassociation, issue shares which are to be redeemed or are liable to be redeemed at the option of thecompany or a shareholder. In addition, such a company may, if authorised to do so by its articlesof association, purchase its own shares, including any redeemable shares. The manner of such apurchase must be authorised either by the articles of association or by an ordinary resolution of thecompany. The articles of association may provide that the manner of purchase may be determinedby the directors of the company. At no time may a company redeem or purchase its shares unlessthey are fully paid. A company may not redeem or purchase any of its shares if, as a result of theredemption or purchase, there would no longer be any member of the company holding shares. Apayment out of capital by a company for the redemption or purchase of its own shares is not lawfulunless immediately following the date on which the payment is proposed to be made, the companyshall be able to pay its debts as they fall due in the ordinary course of business.

There is no statutory restriction in the Cayman Islands on the provision of financial assistanceby a company for the purchase of, or subscription for, its own or its holding company’s shares.Accordingly, a company may provide financial assistance if the directors of the company consider,in discharging their duties of care and to act in good faith, for a proper purpose and in the interestsof the company, that such assistance can properly be given. Such assistance should be on anarm’s-length basis.

4 Dividends and Distributions

With the exception of section 34 of the Companies Act, there are no statutory provisionsrelating to the payment of dividends. Based upon English case law which is likely to be persuasivein the Cayman Islands in this area, dividends may be paid only out of profits. In addition, section34 of the Companies Act permits, subject to a solvency test and the provisions, if any, of thecompany’s memorandum and articles of association, the payment of dividends and distributions outof the share premium account (see paragraph 3 above for details).

5 Shareholders’ Suits

The Cayman Islands courts can be expected to follow English case law precedents. The rulein Foss v. Harbottle (and the exceptions thereto which permit a minority shareholder to commencea class action against or derivative actions in the name of the company to challenge (a) an act whichis ultra vires the company or illegal, (b) an act which constitutes a fraud against the minority wherethe wrongdoers are themselves in control of the company, and (c) an action which requires aresolution with a qualified (or special) majority which has not been obtained) has been applied andfollowed by the courts in the Cayman Islands.


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6 Protection of Minorities

In the case of a company (not being a bank) having a share capital divided into shares, theGrand Court of the Cayman Islands may, on the application of members holding not less thanone-fifth of the shares of the company in issue, appoint an inspector to examine into the affairs ofthe company and to report thereon in such manner as the Grand Court shall direct.

Any shareholder of a company may petition the Grand Court of the Cayman Islands whichmay make a winding up order if the court is of the opinion that it is just and equitable that thecompany should be wound up.

Claims against a company by its shareholders must, as a general rule, be based on the generallaws of contract or tort applicable in the Cayman Islands or their individual rights as shareholdersas established by the company’s memorandum and articles of association.

The English common law rule that the majority will not be permitted to commit a fraud on theminority has been applied and followed by the courts of the Cayman Islands.

7 Disposal of Assets

The Companies Act contains no specific restrictions on the powers of directors to dispose ofassets of a company. As a matter of general law, in the exercise of those powers, the directors mustdischarge their duties of care and to act in good faith, for a proper purpose and in the interests ofthe company.

8 Accounting and Auditing Requirements

The Companies Act requires that a company shall cause to be kept proper books of accountwith respect to:

(a) all sums of money received and expended by the company and the matters in respect ofwhich the receipt and expenditure takes place;

(b) all sales and purchases of goods by the company; and

(c) the assets and liabilities of the company.

Proper books of account shall not be deemed to be kept if there are not kept such books asare necessary to give a true and fair view of the state of the company’s affairs and to explain itstransactions.

9 Register of Members

An exempted company may, subject to the provisions of its articles of association, maintainits principal register of members and any branch registers at such locations, whether within orwithout the Cayman Islands, as its directors may from time to time think fit. There is no requirementunder the Companies Act for an exempted company to make any returns of members to the Registrarof Companies of the Cayman Islands. The names and addresses of the members are, accordingly,not a matter of public record and are not available for public inspection.


– III-20 –


10 Inspection of Books and Records

Members of a company will have no general right under the Companies Act to inspect orobtain copies of the register of members or corporate records of the company. They will, however,have such rights as may be set out in the company’s articles of association.

11 Special Resolutions

The Companies Act provides that a resolution is a special resolution when it has been passedby a majority of at least two-thirds of such members as, being entitled to do so, vote in person or,where proxies are allowed, by proxy at a general meeting of which notice specifying the intentionto propose the resolution as a special resolution has been duly given, except that a company mayin its articles of association specify that the required majority shall be a number greater thantwo-thirds, and may additionally so provide that such majority (being not less than two-thirds) maydiffer as between matters required to be approved by a special resolution. Written resolutions signedby all the members entitled to vote for the time being of the company may take effect as specialresolutions if this is authorised by the articles of association of the company.

12 Subsidiary Owning Shares in Parent

The Companies Act does not prohibit a Cayman Islands company acquiring and holding sharesin its parent company provided its objects so permit. The directors of any subsidiary making suchacquisition must discharge their duties of care and to act in good faith, for a proper purpose and inthe interests of the subsidiary.

13 Mergers and Consolidations

The Companies Act permits mergers and consolidations between Cayman Islands companiesand between Cayman Islands companies and non-Cayman Islands companies. For these purposes,(a) “merger” means the merging of two or more constituent companies and the vesting of theirundertaking, property and liabilities in one of such companies as the surviving company, and (b)“consolidation” means the combination of two or more constituent companies into a consolidatedcompany and the vesting of the undertaking, property and liabilities of such companies to theconsolidated company. In order to effect such a merger or consolidation, the directors of eachconstituent company must approve a written plan of merger or consolidation, which must then beauthorised by (a) a special resolution of each constituent company and (b) such other authorisation,if any, as may be specified in such constituent company’s articles of association. The written planof merger or consolidation must be filed with the Registrar of Companies of the Cayman Islandstogether with a declaration as to the solvency of the consolidated or surviving company, a list ofthe assets and liabilities of each constituent company and an undertaking that a copy of thecertificate of merger or consolidation will be given to the members and creditors of each constituentcompany and that notification of the merger or consolidation will be published in the CaymanIslands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares(which, if not agreed between the parties, will be determined by the Cayman Islands court) if theyfollow the required procedures, subject to certain exceptions. Court approval is not required for amerger or consolidation which is effected in compliance with these statutory procedures.


– III-21 –


14 Reconstructions

There are statutory provisions which facilitate reconstructions and amalgamations approvedby a majority in number representing 75% in value of shareholders or creditors, depending on thecircumstances, as are present at a meeting called for such purpose and thereafter sanctioned by theGrand Court of the Cayman Islands. Whilst a dissenting shareholder would have the right to expressto the Grand Court his view that the transaction for which approval is sought would not provide theshareholders with a fair value for their shares, the Grand Court is unlikely to disapprove thetransaction on that ground alone in the absence of evidence of fraud or bad faith on behalf ofmanagement and if the transaction were approved and consummated the dissenting shareholderwould have no rights comparable to the appraisal rights (i.e. the right to receive payment in cashfor the judicially determined value of his shares) ordinarily available, for example, to dissentingshareholders of United States corporations.

15 Take-overs

Where an offer is made by a company for the shares of another company and, within fourmonths of the offer, the holders of not less than 90% of the shares which are the subject of the offeraccept, the offeror may at any time within two months after the expiration of the said four months,by notice require the dissenting shareholders to transfer their shares on the terms of the offer. Adissenting shareholder may apply to the Grand Court of the Cayman Islands within one month ofthe notice objecting to the transfer. The burden is on the dissenting shareholder to show that theGrand Court should exercise its discretion, which it will be unlikely to do unless there is evidenceof fraud or bad faith or collusion as between the offeror and the holders of the shares who haveaccepted the offer as a means of unfairly forcing out minority shareholders.

16 Indemnification

Cayman Islands law does not limit the extent to which a company’s articles of association mayprovide for indemnification of officers and directors, except to the extent any such provision maybe held by the Cayman Islands courts to be contrary to public policy (e.g. for purporting to provideindemnification against the consequences of committing a crime).

17 Liquidation

A company may be placed in liquidation compulsorily by an order of the court, or voluntarily(a) by a special resolution of its members if the company is solvent, or (b) by an ordinary resolutionof its members if the company is insolvent. The liquidator’s duties are to collect the assets of thecompany (including the amount (if any) due from the contributories (shareholders)), settle the listof creditors and discharge the company’s liability to them, rateably if insufficient assets exist todischarge the liabilities in full, and to settle the list of contributories and divide the surplus assets(if any) amongst them in accordance with the rights attaching to the shares.

18 Stamp Duty on Transfers

No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islandscompanies except those which hold interests in land in the Cayman Islands.


– III-22 –


19 Taxation

Pursuant to section 6 of the Tax Concessions Act (As Revised) of the Cayman Islands, theCompany may obtain an undertaking from the Financial Secretary of the Cayman Islands:

(a) that no law which is enacted in the Cayman Islands imposing any tax to be levied onprofits, income, gains or appreciations shall apply to the Company or its operations; and

(b) in addition, that no tax to be levied on profits, income, gains or appreciations or whichis in the nature of estate duty or inheritance tax shall be payable:

(i) on or in respect of the shares, debentures or other obligations of the Company; or

(ii) by way of the withholding in whole or in part of any relevant payment as definedin section 6(3) of the Tax Concessions Act (As Revised).

The Cayman Islands currently levy no taxes on individuals or corporations based upon profits,income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty.There are no other taxes likely to be material to the Company levied by the Government of theCayman Islands save certain stamp duties which may be applicable, from time to time, on certaininstruments executed in or brought within the jurisdiction of the Cayman Islands. The CaymanIslands are not party to any double tax treaties that are applicable to any payments made by or tothe Company.

20 Exchange Control

There are no exchange control regulations or currency restrictions in the Cayman Islands.

21 General

Maples and Calder (Hong Kong) LLP, the Company’s legal advisors on Cayman Islands law,have sent to the Company a letter of advice summarising aspects of Cayman Islands company law.This letter, together with a copy of the Companies Act, is available on display as referred to in thesection headed “Documents available on display” in Appendix V. Any person wishing to have adetailed summary of Cayman Islands company law or advice on the differences between it and thelaws of any jurisdiction with which he/she is more familiar is recommended to seek independentlegal advice.


– III-23 –


FURTHER INFORMATION ABOUT OUR GROUP

1. Incorporation of Our Company

Our Company was incorporated in the Cayman Islands under the Cayman Islands CompaniesAct as an exempted company with limited liability on March 29, 2019. We have registered with theRegistrar of Companies in Hong Kong as a non-Hong Kong company under Part 16 of theCompanies Ordinance with the address of principal place of business in Hong Kong at Level 54,Hopewell Centre,183 Queen’s Road East, Hong Kong. Ms. Chan Wai Ling has been appointed asour authorized representative for the acceptance of service of process and notices in Hong Kong.Our registered office is at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.

As we were incorporated in the Cayman Islands, our corporate structure and Memorandumand Articles of Association are subject to the relevant laws and regulations of the Cayman Islands.A summary of the relevant laws and regulations of the Cayman Islands and of the Memorandum andArticles of Association is set out in the section headed “Summary of the Constitution of ourCompany and Cayman Islands Company Law” in Appendix III to this document.

2. Changes in Our Share Capital

As of the date of incorporation of our Company, our authorized share capital wasUSD50,000.00 divided into 500,000,000 Shares of a par value of USD0.0001 each.

The following sets out the changes in our Company’s share capital from the incorporation ofour Company to the date of the issue of this document.

On March 29, 2019, our Company completed the issuance of an aggregate of 10,000,000Shares with a par value of USD0.0001 each to the following Shareholders:

Shareholders Class of SharesNumber of

Shares

MOGR Investment Co., Ltd. . . . . . . . . . . . . Ordinary Shares 5,999,999

Starryland Investment Co., Ltd. . . . . . . . . . . Ordinary Shares 4,000,000

Vistra (Cayman) Limited . . . . . . . . . . . . . . Ordinary Shares 1

On August 7, 2020, our Company repurchased 2,473,653 Ordinary Shares from StarlightHolding Co., Ltd..

APPENDIX IV STATUTORY AND GENERAL INFORMATION

– IV-1 –


On August 7, 2020, our Company completed the issuance of the following Shares with a parvalue of USD0.0001 each to the following Shareholders:


Shares

MOGR . . . . . . . . . . . . . . . . . . . . . . . . Ordinary Shares 2,356,312

KK Brothers . . . . . . . . . . . . . . . . . . . . . Ordinary Shares 1,124,309

Series E Preferred Shares 797,025

Class A2 Preferred Share 1

Class B3 Preferred Share 1

Class C2 Preferred Share 1

Class PRE-D2 Preferred Share 1

Class D1 Preferred Share 1

X Adventure Fund I L.P. . . . . . . . . . . . . . . Series D Preferred Shares 83,694

N5Capital Fund II L.P. . . . . . . . . . . . . . . . Series D Preferred Shares 124,851

eWTP . . . . . . . . . . . . . . . . . . . . . . . . . Series E Preferred Shares 79,703



CMC Krypton . . . . . . . . . . . . . . . . . . . . Series E Preferred Shares 2,191,819

INCE Capital Partners, L.P. . . . . . . . . . . . . . Series E Preferred Shares 398,513

Lighthouse Capital International Inc. . . . . . . . Series E Preferred Shares 31,881

Lighthousecap Fellow L.P. . . . . . . . . . . . . . Series E Preferred Shares 7,970

Lighthousecap International INC. . . . . . . . . . Series E Preferred Shares 39,851

SCGC Capital Holding Company Limited. . . . . Class Seed1 Preferred Share 1

Bright Vision (Shenzhen) EnterpriseManagement Partnership (LimitedPartnership). . . . . . . . . . . . . . . . . . . . .

Class A1 Preferred Share 1



Hangzhou Chuangqian Investment Partnership(Limited Partnership) . . . . . . . . . . . . . . .





Class E1 Preferred Share 1

Bright Deshang (Shenzhen) Venture CapitalCenter (Limited Partnership) . . . . . . . . . . .


Shenzhen Hongtai Growth Venture CapitalCenter (Limited Partnership) . . . . . . . . . . .


Suzhou Wuyue Tianxia Venture Capital Center(Limited Partnership) . . . . . . . . . . . . . . .



Shanghai Yiqian Enterprise ManagementConsulting Partnership(Limited Partnership) . . . . . . . . . . . . . . .


On October 22, 2020, our Company completed the issuance of an aggregate of 1 Class E2Preferred Share with a par value of USD0.0001 to Shenzhen Hongtai Growth Venture Capital Center(Limited Partnership).

The respective classes of Preferred Shares are golden shares of our Company (the “GoldenShare(s))”, where each Golden Share entitled its holder the voting rights as if such holder holdssuch number of voting Ordinary Shares after the full exercise of their relevant RestructuringWarrants. Please refer to “History, Reorganization and Corporate Structure — Our CorporateHistory and Major Shareholding Changes of our Group” and “— Reorganization” for details of theRestructuring Warrants and the Reorganization.


– IV-2 –


On April 9, 2021, our Company completed the issuance of an aggregate of 2,037,019 SeriesF Preferred Shares with a par value of USD0.0001 to the following Shareholders:


Shares

KK Brothers . . . . . . . . . . . . . . . . . . . . . Series F Preferred Shares 1,198,246

Bright Capital Limited . . . . . . . . . . . . . . . . Series F Preferred Shares 239,649

CMC II . . . . . . . . . . . . . . . . . . . . . . . . Series F Preferred Shares 179,737

Harvest International Premium Value (SecondaryMarket) Fund SPC on behalf of Harvest NewRetail Investment SP . . . . . . . . . . . . . . .

Series F Preferred Shares 119,825

Kamet Thrive 3 Limited . . . . . . . . . . . . . . . Series F Preferred Shares 119,825

Guolian Securities Global Investment SPC forthe account of Guolian International ChinaConsumer Fund I SP . . . . . . . . . . . . . . .


ZUIKAKU CO., LIMITED . . . . . . . . . . . . . Series F Preferred Shares 59,912

On May 28, 2021, our Company completed the issuance of an aggregate of 599,123 Series FPreferred Shares with a par value of USD0.0001 to Shanghai Yukuang Enterprise ManagementConsultation Partnership (Limited Partnership).

On May 31, 2021, our Company repurchased and cancelled:

(a) 1 Class Seed1 Preferred Share from SCGC Capital Holding Company Limited;

(b) 1 Class A1 Preferred Share, 1 Class B2 Preferred Share and 1 Class C7 Preferred Sharefrom Bright Vision (Shenzhen) Enterprise Management Partnership (LimitedPartnership);

(c) 1 Class A2 Preferred Share, 1 Class B3 Preferred Share, 1 Class C2 Preferred Share, 1Class PRE-D2 Preferred Share and 1 Class D1 Preferred Share from KK Brothers;

(d) 1 Class B1 Preferred Share, 1 Class C3 Preferred Share, 1 Class PRE-D3 PreferredShare, 1 Class D2 Preferred Share, 1 Class E1 Preferred Share from HangzhouChuangqian Investment Partnership (Limited Partnership);

(e) 1 Class C1 Preferred Share and 1 Class PRE-D1 Preferred Share from eWTP;

(f) 1 Class C4 Preferred Share from Bright Deshang (Shenzhen) Venture Capital Center(Limited Partnership);

(g) 1 Class C5 Preferred Share and 1 Class E2 Preferred Share from Shenzhen HongtaiGrowth Venture Capital Center (Limited Partnership);

(h) 1 Class C6 Preferred Share and 1 Class PRE-D4 Preferred Share from Suzhou WuyueTianxia Venture Capital Center (Limited Partnership); and

(i) 1 Class D3 Preferred Share from Shanghai Yiqian Enterprise Management ConsultingPartnership (Limited Partnership).


– IV-3 –


On May 31, 2021, our Company completed the issuance of the following Shares with a parvalue of USD0.0001 to the following Shareholders:


Shares

Red Earth Innovation International CompanyLimited . . . . . . . . . . . . . . . . . . . . . . .

Series Seed Preferred Shares 401,462

KK Brothers . . . . . . . . . . . . . . . . . . . . . Series A Preferred Shares 1,890,846

Series B Preferred Shares 507,473

Series C Preferred Shares 390,865

Series Pre-D Preferred Shares 482,187

Series D Preferred Shares 1,074,397

Bright Galaxy Limited . . . . . . . . . . . . . . . . Series A Preferred Shares 24,021

Series B Preferred Shares 169,158


Shanghai Weili Enterprise ManagementConsultation Partnership (LimitedPartnership). . . . . . . . . . . . . . . . . . . . .

Series B Preferred Shares 1,691,578



Series D Preferred Shares 253,681

Series E Preferred Shares 56,229

eWTP . . . . . . . . . . . . . . . . . . . . . . . . . Series C Preferred Shares 2,864,333


Oriental Grow Limited . . . . . . . . . . . . . . . Series C Preferred Shares 1,086,329


Shanghai Chongyi Enterprise ManagementConsultation Partnership (LimitedPartnership). . . . . . . . . . . . . . . . . . . . .

Series C Preferred SharesSeries E Preferred Shares

970,396449,833

Bright Desun Limited . . . . . . . . . . . . . . . . Series C Preferred Shares 73,222

Shanghai Yiqian Enterprise ManagementConsulting Partnership (Limited Partnership) .

Series D Preferred Shares 292,929

INCE Capital Partners, L.P. . . . . . . . . . . . . . Series F Preferred Shares 119,825

Angara Innovation Limited . . . . . . . . . . . . . Series F Preferred Shares 479,298

Pluto Connection Limited . . . . . . . . . . . . . . Series F Preferred Shares 179,737

CMBC INTERNATIONAL HOLDINGSLIMITED . . . . . . . . . . . . . . . . . . . . . .


Starwin Fund SPC – SUNRISE FUND SP . . . . Series F Preferred Shares 35,947

On June 4, 2021, our Company repurchased and cancelled 155,772 Series F Preferred Sharesfrom KK Brothers.

On June 4, 2021, our Company completed the issuance of an aggregate of 239,649 Series FPreferred Shares with a par value of USD0.0001 to Redview Capital Investment XI Limited.

On September 10, 2021, Bright Capital Limited irrevocably surrendered the 239,649 Series FPreferred Shares to our Company for cancellation and for no consideration. Accordingly, ourCompany cancelled such 239,649 Series F Preferred Shares on the same day.

On [●], our Company [implemented] the Share Subdivision whereby each existing issued andunissued share capital with par value of USD0.0001 in the authorized share capital of our Companywere subdivided into 25 ordinary shares with par value of USD0.000004 each and the authorizedshare capital of our Company [was] altered to USD[50,000] divided into [12,500,000,000] Shareswith par value of USD0.000004 each. The total number of issued Shares in our Company[increased] from [34,814,658] Shares to [870,366,450] Shares.


– IV-4 –


For further details of the consideration relating to the allotment of Preferred Shares above,please see the section headed “[REDACTED] Investments” in this document.

Save as disclosed above, there has been no alternation in our share capital within two yearsimmediately preceding the date of this document.

Save as disclosed above and as mentioned in the paragraph headed “– 3. Resolutions of ourShareholders” below, there has been no alteration in our share capital within the two yearsimmediately preceding the date of this document.

3. Resolutions of Our Shareholders

Pursuant to a shareholders’ resolution of our Company dated [●]:

(a) the Memorandum and Articles of Association were approved and adopted;

(b) conditional upon all the conditions set out in “Structure of the [REDACTED]” in thisdocument being fulfilled:

(i) the [REDACTED] was approved and the Board (or any committee thereofestablished by the Board pursuant to the Articles) was authorized to make or effectthe same as it thinks fit;

(ii) the Board (or any committee thereof established by the Board pursuant to theArticles) was authorized to allot, issue and approve the transfer of such number ofShares in connection with the [REDACTED]; and

(iii) the Board (or any committee thereof established by the Board pursuant to theArticles) was authorized to agree to the Price per [REDACTED] with the[REDACTED]

(c) subject to the [REDACTED] becoming unconditional, a general unconditional mandatewas given to our Directors to exercise all the powers of our Company to allot, issue anddeal with the Shares with an aggregate nominal value of not more than the sum of 20%of the aggregate nominal value of our share capital in issue immediately following thecompletion of the [REDACTED] and the aggregate nominal value of our share capitalrepurchased by us (if any) under the general mandate to repurchase Shares, suchmandate to remain in effect until the conclusion of the next annual general meeting ofour Company unless otherwise renewed by an ordinary resolution of our Shareholdersin a general meeting, either unconditionally or subject to conditions, or the expiration ofthe period within which the next annual general meeting of our Company is requiredunder any applicable laws of the Cayman Islands or the Memorandum and the Articlesto be held, or the date on which it is varied or revoked by an ordinary resolution of ourShareholders in a general meeting, whichever is the earliest; and

(d) subject to the [REDACTED] becoming unconditional, a general unconditional mandatewas given to the Directors authorizing them to exercise all the powers of our Companyto repurchase its own Shares on the Stock Exchange or on any other approved stockexchange on which our Shares may be [REDACTED] with a total nominal value of notmore than 10% of the aggregate nominal value of our share capital in issue immediately


– IV-5 –


following the completion of the [REDACTED] (excluding any Shares which may beissued pursuant to the exercise of the [REDACTED]), such mandate to remain in effectuntil the conclusion of the next annual general meeting of our Company unless otherwiserenewed by an ordinary resolution of our Shareholders in a general meeting, eitherunconditionally or subject to conditions, or the expiration of the period within which thenext annual general meeting of our Company is required by any applicable laws of theCayman Islands or the Memorandum and the Articles to be held, or the date on whichit is varied or revoked by an ordinary resolution of our Shareholders in a generalmeeting, whichever is the earliest.

4. Corporate Reorganization

The companies comprising our Group underwent the Reorganization in preparation for the[REDACTED]. See “History, Reorganization and Corporate Structure” in this document forinformation relating to the Reorganization.

5. Changes in the Share Capital of Our Subsidiaries

Our subsidiaries during the Track Record Period are set out in the Accountants’ Report inAppendix I to this document. The following alterations in the share capital of our subsidiaries havetaken place within the two years immediately preceding the date of this document:

(1) Guangdong Kuaike Electronic

On April 9, 2021, the registered capital of Guangdong Kuaike Electronic was increased fromRMB25,401,845.00 to RMB510,509,622.05. On June 1, 2021, the registered capital of GuangdongKuaike Electronic was reduced from RMB510,509,622.05 to RMB12,283,713.13.

(2) Shenzhen Mengke Supply Chain Technology Co., Ltd. (深圳市盟客供應鏈科技有限公司)

On June 15, 2020, the registered capital of Shenzhen Mengke Supply Chain Technology Co.,Ltd. increased from RMB20 million to RMB100 million. On August 7, 2020, the registered capitalof Shenzhen Mengke Supply Chain Technology Co., Ltd. increased from RMB100 million toRMB1,000 million. On May 8, 2021, the registered capital of Shenzhen Mengke Supply ChainTechnology Co., Ltd. increased from RMB1,000 million to RMB3,000 million.

(3) Guangdong Kuaike Commerce Management Co., Ltd. (廣東快客商業管理有限公司)

On August 13, 2020, the registered capital of Guangdong Kuaike Commerce Management Co.,Ltd. was increased from USD50 million to USD300 million. On May 28, 2021, the registered capitalof Guangdong Kuaike Commerce Management Co., Ltd. was increased from USD300 million toUSD500 million.

(4) Guangzhou Kuaike Commerce Management Co., Ltd. (廣州快客商業管理有限公司)

On May 28, 2021, the registered capital of Guangzhou Kuaike Commerce Management Co.,Ltd. was increased from USD100 million to USD200 million.

Save as disclosed above, there has been no alteration in the share capital of our subsidiarieswithin the two years preceding the date of this document.


– IV-6 –


6. Particulars of our subsidiaries

Particulars of our subsidiaries are set forth in Note 1 to the Accountants’ Report, the text ofwhich is set forth in Appendix I to this document.

Set out below is certain information of our non-wholly owned subsidiaries as of the LatestPracticable Date:

No. Name of non-wholly owned subsidiaryIdentity of other minority

shareholders(1)

Approximateshareholding held by

other minorityshareholders

1 . . . Kauimaike (Chengdu) CommercialAdministration Corporation Limited (快麥客 (成都) 商業管理有限公司)

Chengdu Jukunda Technology Co., Ltd.(成都鉅坤達科技有限公司)

49%

2 . . . Guangzhou Leming CommercialAdministration Corporation Limited (廣州樂明商業管理有限公司)

Mingle (Guangzhou) InvestmentPartnership (Limited Partnership) (明樂(廣州)投資合夥企業(有限合夥))

49%

3 . . . Hefei Siqingxiu Commercial and TradingCorporation Limited (合肥市思青秀商貿有限公司)

Hefei Yishangjiapin Trading Co., Ltd. (合肥依尚佳品商貿有限公司)

49%

4 . . . Henan Kuaizhishao Commercial andTrading Corporation Limited (河南快之劭商貿有限公司)

Henan Shaoye Trading Co., Ltd. (河南劭葉商貿有限公司)

49%

5 . . . Sichuan Yueshang CommercialAdministration Corporation Limited (四川省悅商商業管理有限公司)

Chengdu Shangwen Brand ManagementCo., Ltd. (成都商問品牌管理有限公司)

49%

6 . . . Shantou Gaocai Anyi Trading Co., Ltd. (汕頭市高彩安易商貿有限公司)

Shantou Gaocai Information ConsultationCentre (汕頭市高彩信息諮詢中心)

49%

7 . . . Suzhou Zihaitun Brand ManagementCorporation Limited (蘇州紫海豚品牌管理有限公司)

Shanghai Houyan Brand Management Co.,Ltd. (上海後衍品牌管理有限公司)

49%

8 . . . Shanxi Chuanghe Commercial CorporationLimited (山西創合貿易有限公司)

Shanxi Yingxuan International Trade Co.,Ltd. (山西穎璇國際貿易有限公司)

49%

9 . . . Hunan Yize Commercial and TradingLimited Liability Corporation Limited(湖南熠澤商貿有限責任公司)

Changsha Baiyu Commercial Trading Co.,Ltd. (長沙市柏榆商貿有限公司)

49%

10 . . . Xinjiang Qianyufei CommercialAdministration Limited LiabilityCompany (新疆倩雨飛商業管理有限責任公司)

Xinjiang Qianyufei Commercial TradingCo., Ltd. (新疆倩雨飛商貿有限公司)

49%

11 . . . Beijing Juya Commercial and TradingCorporation Limited (北京巨牙商貿有限公司)

Weifang Zhuojian Information TechnologyPartnership (Limited Partnership) (濰坊卓見信息技術合夥企業(有限合夥))

49%

12 . . . Shanghai Kuaicheng Commercial andTrading Limited Liability CorporationLimited (上海快澄商貿有限責任公司)

Shanghai Chenglian Commercial andTrading Co., Ltd. (上海澄聯商貿有限公司)

49%

13 . . . Wuhan Xinkuaimaoke Commercial andTrading Corporation Limited (武漢新快貓客商貿有限公司)

Wuhan Kuaikuaimao CommercialManagement Co., Ltd. (武漢市快快貓商業管理有限公司)

49%

14 . . . Wenzhou Bencheng Commerce Co., Ltd.(溫州市本成商貿有限公司)

Wenzhou Yaner Commerce Co., Ltd.(溫州市衍洱商貿有限公司)

49%

15 . . . Beijing Quke Tongying Business Co., Ltd.(北京趣客通盈商務有限責任公司)

Beijing Hanchuang Future Trading Co.,Ltd. (北京瀚創未來商貿有限公司)

49%

16 . . . Dongguan Fuli Trading Co., Ltd. (東莞市賦麗貿易有限公司)

Dongguan Qianying CommerceManagement Partnership (LimitedPartnership) (東莞市千盈商業管理合伙企業(普通合伙))

24.5%

Liu Lequan (劉樂全) 24.5%17 . . . PT KKV Retail Indonesia PT. BRIDGESINDO MITRA

INTERNASIONAL20%


– IV-7 –


Note:

(1) To the best of our knowledge, information and belief, having made all reasonable enquiries, none of the other minorityshareholders was a connected person of our Company as of the Latest Practicable Date (other than being substantialshareholders of our subsidiaries).

7. Repurchase of our own securities

(a) Provisions of the Listing Rules

The Listing Rules permit companies with a primary [REDACTED] on the Stock Exchange torepurchase their securities on the Stock Exchange subject to certain restrictions, the more importantof which are summarized below:

(i) Shareholders’ approval

All proposed repurchases of Shares (which must be fully paid up) by a company with aprimary [REDACTED] on the Stock Exchange must be approved in advance by an ordinaryresolution of the Shareholders in general meeting, either by way of general mandate or by specificapproval of a particular transaction.

Pursuant to a resolution of the Shareholders passed at an extraordinary general meeting of ourCompany held on [●], a general unconditional mandate (the “Repurchase Mandate”) was given tothe Directors authorizing any repurchase by our Company of Shares on the Stock Exchange or onany other stock exchange on which the Shares may be [REDACTED] and which is recognized bythe SFC and the Stock Exchange for this purpose, of not more than 10% of the number of Sharesin issue immediately following the completion of the [REDACTED] but excluding any Shareswhich may be issued pursuant to the exercise of the [REDACTED] until the conclusion of our nextannual general meeting, or the date by which our next annual general meeting is required by theArticles of Association or any applicable law to be held, or the passing of an ordinary resolutionby the Shareholders revoking or varying the authority given to the Directors, whichever occurs first.

(ii) Source of funds

Repurchases must be funded out of funds legally available for the purpose in accordance withour Articles and the applicable laws of Hong Kong. A [REDACTED] may not repurchase its ownsecurities on the Stock Exchange for a consideration other than cash or for settlement otherwisethan in accordance with the Listing Rules of the Stock Exchange from time to time. Under theCayman Islands Companies Act, the par value of any Shares bought back by us may be providedfor out of our profits or out of the proceeds of a fresh issue of Shares made for the purpose of thepurchase or, if so authorized by the Articles of Association and subject to the provisions of theCayman Islands Companies Act, out of capital. Any premium payable on a purchase over the parvalue of our Shares to be bought back must be provided for out of our profits or from sums standingto the credit of our share premium account or, if authorized by the Articles of Association andsubject to the provisions of the Cayman Islands Companies Act, out of capital.

(iii) [REDACTED] restrictions

The total number of Shares which our Company may repurchase is up to 10% of the totalnumber of our Shares in issue immediately after the completion of the [REDACTED] (but nottaking into account any Shares which may be issued pursuant to the exercise of the [REDACTED]).Our Company may not issue or announce a proposed issue of Shares for a period of 30 days


– IV-8 –


immediately following a repurchase of Shares without the prior approval of the Stock Exchange.Our Company is also prohibited from repurchasing Shares on the Stock Exchange if the repurchasewould result in the number of [REDACTED] Shares which are in the hands of the public fallingbelow the relevant prescribed minimum percentage as required by the Stock Exchange. OurCompany is required to procure that the broker appointed by our Company to effect a repurchaseof Shares discloses to the Stock Exchange such information with respect to the repurchase as theStock Exchange may require. As required by the prevailing requirements of the Listing Rules, anissuer shall not purchase its shares on the Stock Exchange if the purchase price is higher by 5% ormore than the average closing market price for the five preceding [REDACTED] days on which itsshares were [REDACTED] on the Stock Exchange.

(iv) Status of repurchased Shares

All repurchased Shares (whether effected on the Stock Exchange or otherwise) will beautomatically [REDACTED] and the certificates for those Shares must be cancelled and destroyed.Under the Articles and as permitted under the Cayman Islands Companies Act, the Shares we boughtback shall be treated as canceled and the amount of our Company’s issued share capital shall bereduced by the aggregate par value of the bought back shares accordingly although the authorizedshare capital of our Company will not be reduced.

(v) Suspension of repurchase

Pursuant to the Listing Rules, our Company may not make any repurchases of Shares afterinside information has come to its knowledge until the information is made publicly available. Inparticular, under the requirements of the Listing Rules in force as of the date hereof, during theperiod of one month immediately preceding the earlier of:

(i) the date of the Board meeting (as such date is first notified to the Stock Exchange inaccordance with the Listing Rules) for the approval of our Company’s results for anyyear, half year, quarterly or any other interim period (whether or not required under theListing Rules); and

(ii) the deadline for our Company to publish an announcement of our Company’s results forany year or half-year under the Listing Rules, or quarterly or any other interim period(whether or not required under the Listing Rules), and in each case ending on the dateof the results announcement, our Company may not repurchase Shares on the StockExchange unless the circumstances are exceptional.

(vi) Procedural and reporting requirements

As required by the Listing Rules, repurchases of Shares on the Stock Exchange or otherwisemust be reported to the Stock Exchange not later than 30 minutes before the earlier of thecommencement of the morning [REDACTED] session or any pre-opening session on the StockExchange business day following any day on which our Company may make a purchase of Shares.The report must state the total number of Shares purchased the previous day, the purchase price perShare or the highest and lowest prices paid for such purchases. In addition, our Company’s annualreport is required to disclose details regarding repurchases of Shares made during the year,including a monthly analysis of the number of shares repurchased, the purchase price per Share orthe highest and lowest price paid for all such purchases, where relevant, and the aggregate pricespaid.


– IV-9 –


(vii) Connected parties

A company is prohibited from knowingly repurchasing securities on the Stock Exchange froma core connected person (as defined in the Listing Rules) and a core connected person shall notknowingly sell its securities to the company on the Stock Exchange.

(b) Reasons for repurchases

The Directors believe that it is in the best interests of our Company and Shareholders for theDirectors to have general authority from the Shareholders to enable the Directors to repurchaseShares in the market. Such repurchases may, depending on market conditions and fundingarrangements at the time, lead to an enhancement of the net asset value per Share and/or earningsper Share and will only be made where the Directors believe that such repurchases will benefit ourCompany and our Shareholders.

(c) Funding of repurchases

In repurchasing securities, our Company may only apply funds legally available for suchpurpose in accordance with the Articles, the Listing Rules and the applicable laws and regulationsof the Cayman Islands.

On the basis of the current financial position as disclosed in this document and taking intoaccount the current working capital position, the Directors consider that, if the Repurchase Mandatewere to be exercised in full, it might have a material adverse effect on the working capital and/orthe gearing position of our Company as compared with the position disclosed in this document. TheDirectors, however, do not propose to exercise the Repurchase Mandate to such an extent as would,in the circumstances, have a material adverse effect on the working capital requirements or thegearing levels of our Company which in the opinion of the Directors are from time to timeappropriate for our Company.

The exercise in full of the Repurchase Mandate, on the basis of [REDACTED] Shares in issueimmediately following the completion of the [REDACTED] (but not taking into account anyShares which may be issued pursuant to the exercise of the [REDACTED]), could accordinglyresult in up to [REDACTED] Shares being repurchased by our Company during the period priorto the earliest occurrence of (1) the conclusion of the next annual general meeting of our Company;(2) the expiration of the period within which the next annual general meeting of our Company isrequired by the Articles or any applicable laws of Hong Kong to be held; or (3) the revocation orvariation of the Repurchase Mandate by an ordinary resolution of the Shareholders in generalmeeting.

(d) General

None of the Directors or, to the best of their knowledge having made all reasonable enquiries,any of their close associates currently intends to sell any Shares to our Company.

The Directors have undertaken to the Stock Exchange that, so far as the same may beapplicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules and theapplicable laws and regulations of Hong Kong. We have not repurchased any Shares since ourincorporation.


– IV-10 –


If, as a result of any repurchase of Shares, a Shareholder’s proportionate interest in the votingrights of our Company is increased, such increase will be treated as an acquisition for the purposesof the Hong Kong Code on Takeovers and Mergers (the “Takeovers Code”). Accordingly, aShareholder or a group of Shareholders acting in concert could obtain or consolidate control of ourCompany and become obliged to make a mandatory offer in accordance with rule 26 of theTakeovers Code. Save as aforesaid, the Directors are not aware of any consequences which wouldarise under the Takeovers Code as a consequence of any repurchases pursuant to the RepurchaseMandate. Any repurchase of Shares which results in the number of Shares held by the public beingreduced to less than 25% of our Shares then in issue could only be implemented with the approvalof the Stock Exchange to waive the Listing Rules requirements regarding the public shareholdingreferred to above. It is believed that a waiver of this provision would not normally be given otherthan in exceptional circumstances.

No core connected person has notified our Company that he or she has a present intention tosell Shares to our Company, or has undertaken not to do so, if the Repurchase Mandate is exercised.

FURTHER INFORMATION ABOUT OUR BUSINESS

1. Summary of Material Contracts

We have entered into the following contracts (not being contracts entered into in the ordinarycourse of business) within the two years preceding the date of this document that are or may bematerial:

(a) On March 24, 2020, Guangdong Kuaike Electronic Commerce Co., Ltd. (廣東快客電子商務有限公司) entered into a capital increase agreement (the “Shanghai Yiqian CapitalIncrease and Subscription Agreement”) with Dongguan Yueke EnterpriseManagement Service Co., Ltd. (東莞市悅客企業管理服務有限公司), Dongguan KuaikeBusiness Management Co., Ltd. (東莞市快客商業管理有限公司), Mr. Wu Yuening (吳悅寧), Mr. Guo Huibo (郭惠波), Guangzhou Kuaike Enterprise Management Partnership(Limited Partnership) (廣州快客企業管理合夥企業(有限合夥)), Gongqingcheng YuekeInvestment Management Partnership (Limited Partnership) (共青城悅客投資管理合夥企業(有限合夥)), KK Brothers Hong Kong Limited, Shenzhen Capital Group Co., Ltd (深圳市創新投資集團有限公司), Suzhou Wuyue Tianxia Venture Capital Center (LimitedPartnership) (蘇州五嶽天下創業投資中心(有限合夥)), Inspiring Holdings I Limited (啟程控股一號有限公司), Redefine Capital Limited, Shenzhen Hongtai Growth VentureCapital Center (Limited Partnership) (深圳洪泰成長創業投資中心(有限合夥)),Hangzhou Chuangqian Investment Partnership (Limited Partnership) (杭州創乾投資合夥企業(有限合夥)), X Adventure Fund I L.P., Bright Vision (Shenzhen) EnterpriseManagement Partnership (Limited Partnership) (璀璨遠見(深圳)企業管理合夥企業(有限合夥)), Bright Deshang (Shenzhen) Venture Capital Center (Limited Partnership) (璀璨德商(深圳)創業投資中心(有限合夥)), Shanghai Yiqian Enterprise ManagementConsulting Partnership (Limited Partnership) (上海沂乾企業管理諮詢合夥企業(有限合夥)) and Shanghai Black Algae Investment Management Center (Limited Partnership)(上海黑藻投資管理中心(有限合夥)) (the “Parties to the Shanghai Yiqian CapitalIncrease and Subscription Agreement”). For further details of the Shanghai YiqianCapital Increase and Subscription Agreement, please refer to the section headed“History, Reorganization and Corporate Structure – 7. Onshore Series Pre-D, Series Dand Series D+ Financing – Capital Increase of Guangdong Kuaike Electronic – (a)Capital Increase of Guangdong Kuaike Electronic”.


– IV-11 –


(b) On July 10, 2020, our Company entered into the Series E Preferred Shares PurchaseAgreement with KK Technology (HK) Company Limited, Guangdong KuaikeCommerce Management Co., Ltd. (廣東快客商業管理有限公司), Guangdong KuaikeElectronic Commerce Co., Ltd. (廣東快客電子商務有限公司), Mr. Wu Yuening (吳悅寧), Mr. Guo Huibo (郭惠波), MOGR Holding Co., Ltd., Starlight Holding Co., Ltd.,VANCL Supply Chain Limited (凡客供應鏈有限公司), KK International Hong KongLimited, HKNY Investment Holding Limited (集中美投資集團有限公司), PT KKVInternational Indonesia, PT KKV Retail Indonesia, Guangzhou Kuaike EnterpriseManagement Partnership (Limited Partnership) (廣州快客企業管理合夥企業(有限合夥)), Gongqingcheng Yueke Investment Management Partnership (Limited Partnership)(共青城悅客投資管理合夥企業(有限合夥)), Dongguan Kuaike Business ManagementCo., Ltd. (東莞市快客商業管理有限公司), Dongguan Yueke Enterprise ManagementService Co., Ltd. (東莞市悅客企業管理服務有限公司), Shenzhen Colorist CosmeticsCo., Ltd. (深圳市調色師化妝品有限公司), Shenzhen Mengke Supply Chain TechnologyCo., Ltd. (深圳市盟客供應鏈科技有限公司), Chengdu Kuaitaike Trading Co., Ltd. (成都快泰客貿易有限公司), Dongguan Star Trading Co., Ltd. (東莞市星空貿易有限公司),Wuhan Shengke Trading Co., Ltd. (武漢盛客商貿有限公司), Sichuan Yueshang BusinessManagement Co., Ltd. (四川省悅商商業管理有限公司), Guizhou Xianke DepartmentStore Partnership (Limited Partnership) (貴州賢客百貨合夥企業(有限合夥)), KunmingLinke Business Partnership (Limited Partnership) (昆明琳客商貿合夥企業(有限合夥)),Chongqing Fuxinjin Business Partnership (Limited Partnership) (重慶富信金商貿合夥企業(有限合夥)), CMC Krypton Holdings Limited, KK Brothers Hong Kong Limited,INCE Capital Partners, L.P, Lighthouse Capital International Inc., Lighthousecap FellowL.P., Lighthousecap International Inc. and eWTP Tech Innovation Fund L.P. (the“Parties to the Series E Preferred Shares Purchase Agreement”). For further detailsof the Series E Preferred Shares Purchase Agreement, please refer to the section headed“History, Reorganization and Corporate Structure – 8. Offshore and Onshore Series EFinancing – Allotment and Issue of Preferred Shares and Warrants by our Company andCapital Increase of Guangdong Kuaike Electronic”.

(c) On September 27, 2020, Guangdong Kuaike Electronic Commerce Co., Ltd. (廣東快客電子商務有限公司) entered into a supplemental shares purchase agreement withDongguan Yueke Enterprise Management Service Co., Ltd (東莞市悅客企業管理服務有限公司), Dongguan Kuaike Business Management Co., Ltd. (東莞市快客商業管理有限公司), Mr. Wu Yuening (吳悅寧), Mr. Guo Huibo (郭惠波), Guangzhou KuaikeEnterprise Management Partnership (Limited Partnership) (廣州快客企業管理合夥企業(有限合夥)), Gongqingcheng Yueke Investment Management Partnership (LimitedPartnership) (共青城悅客投資管理合夥企業(有限合夥)), KK Brothers Hong KongLimited, Shenzhen Capital Group Co., Ltd. (深圳市創新投資集團有限公司), SuzhouWuyue Tianxia Venture Capital Center (Limited Partnership) (蘇州五嶽天下創業投資中心(有限合夥)), Redefine Capital Limited, Shenzhen Hongtai Growth Venture CapitalCenter (Limited Partnership) (深圳洪泰成長創業投資中心(有限合夥)), HangzhouChuangqian Investment Partnership (Limited Partnership) (杭州創乾投資合夥企業(有限合夥)), Bright Vision (Shenzhen) Enterprise Management Partnership (LimitedPartnership) (璀璨遠見(深圳)企業管理合夥企業(有限合夥)), Bright Deshang(Shenzhen) Venture Capital Center (Limited Partnership) (璀璨德商(深圳)創業投資中心(有限合夥)), Shanghai Yiqian Enterprise Management Consulting Partnership (LimitedPartnership) (上海沂乾企業管理諮詢合夥企業(有限合夥)) and Shanghai Black AlgaeInvestment Management Center (Limited Partnership) (上海黑藻投資管理中心(有限合夥)). For further details of the supplemental shares purchase agreement, please refer to


– IV-12 –


the section headed “History, Reorganization and Corporate Structure – 8. Offshore andOnshore Series E Financing – Allotment and Issue of Preferred Shares and Warrants byour Company and Capital Increase of Guangdong Kuaike Electronic”.

(d) On August 6, 2020, our Company entered into the August 2020 Preferred Share andWarrant Purchase Agreement with KK Technology (HK) Company Limited, GuangdongKuaike Commerce Management Co., Ltd. (廣東快客商業管理有限公司), GuangdongKuaike Electronic Commerce Co., Ltd. (廣東快客電子商務有限公司), GongqingchengYueke Investment Management Partnership (Limited Partnership) (共青城悅客投資管理合夥企業(有限合夥), Mr. Wu Yuening (吳悅寧), Mr. Guo Huibo (郭惠波), MOGRHolding Co., Ltd., Starlight Holding Co., Ltd., SCGC Capital Holding Company Limited(SCGC資本控股有限公司), KK Brothers Hong Kong Limited, Bright Vision (Shenzhen)Enterprise Management Partnership (Limited Partnership) (璀璨遠見(深圳)企業管理合夥企業(有限合夥)), Bright Deshang (Shenzhen) Venture Capital Center (LimitedPartnership) (璀璨德商(深圳)創業投資中心(有限合夥)), Hangzhou ChuangqianInvestment Partnership (Limited Partnership) (杭州創乾投資合夥企業(有限合夥)),eWTP Tech Innovation Fund L.P., Shenzhen Hongtai Growth Venture Capital Center(Limited Partnership) (深圳洪泰成長創業投資中心(有限合夥)), Suzhou Wuyue TianxiaVenture Capital Center (Limited Partnership) (蘇州五嶽天下創業投資中心(有限合夥)),Shanghai Yiqian Enterprise Management Consulting Partnership (Limited Partnership)(上海沂乾企業管理諮詢合夥企業(有限合夥)), N5Capital Fund II, L.P., X AdventureFund I L.P., VANCL Supply Chain Limited (凡客供應鏈有限公司), KK InternationalHong Kong Limited, HKNY Investment Holding Limited (集中美投資集團有限公司),PT KKV International Indonesia, PT KKV Retail Indonesia, Guangzhou KuaikeEnterprise Management Partnership (Limited Partnership) (廣州快客企業管理合夥企業(有限合夥)), Gongqingcheng Yueke Investment Management Partnership (LimitedPartnership) (共青城悅客投資管理合夥企業(有限合夥)), Dongguan Kuaike BusinessManagement Co., Ltd. (東莞市快客商業管理有限公司), Dongguan Yueke EnterpriseManagement Service Co., Ltd (東莞市悅客企業管理服務有限公司), Shenzhen ColoristCosmetics Co., Ltd. (深圳市調色師化妝品有限公司), Shenzhen Mengke Supply ChainTechnology Co., Ltd. (深圳市盟客供應鏈科技有限公司), Chengdu Kuaitaike TradingCo., Ltd. (成都快泰客貿易有限公司), Dongguan Star Trading Co., Ltd. (東莞市星空貿易有限公司), Wuhan Shengke Trading Co., Ltd. (武漢盛客商貿有限公司), SichuanYueshang Business Management Co., Ltd. (四川省悅商商業管理有限公司), GuizhouXianke Department Store Partnership (Limited Partnership) (貴州賢客百貨合夥企業(有限合夥)), Kunming Linke Business Partnership (Limited Partnership) (昆明琳客商貿合夥企業(有限合夥)) and Chongqing Fuxinjin Business Partnership (Limited Partnership)(重慶富信金商貿合夥企業(有限合夥)) (the “Parties to the August 2020 PreferredShare and Warrant Purchase Agreement”). For further details of the August 2020Preferred Share and Warrant Purchase Agreement, please refer to the section headed“History, Reorganization and Corporate Structure – 7. Onshore Series Pre-D, Series Dand Series D+ Financing – Capital Increase of Guangdong Kuaike Electronic – (b)Allotment and Issuance of Shares by our Company”.

(e) On August 7, 2020, the Parties to the Series E Preferred Share Purchase Agreemententered into a shareholders’ agreement pursuant to which certain shareholders’ rightswere granted to the Series E Investors.


– IV-13 –


(f) On October 22, 2020, the Parties to the Series E Preferred Shares Purchase Agreemententered into a supplemental shareholders’ agreement pursuant to which certainshareholders’ rights were granted to the Series E Investors.

(g) On March 30, 2021, our Company entered into the First Series F Share and WarrantPurchase Agreement with KK Technology Company Limited, Guangdong KuaikeCommerce Management Co., Ltd. (廣東快客商業管理有限公司), Guangzhou KuaikeCommerce Management Co., Ltd. (廣州快客商業管理有限公司), Guangdong KuaikeElectronic Commerce Co., Ltd. (廣東快客電子商務有限公司), Mr. Wu Yuening (吳悅寧), Mr. Guo Huibo (郭惠波), MOGR Holding Co., Ltd., Starlight Holding Co., Ltd.,Harvest International Premium Value (Secondary Market) Fund SPC on behalf ofHarvest New Retail Investment SP, Kamet Thrive 3 Limited, Guolian Securities GlobalInvestment SPC for the account of Guolian International China Consumer Fund I SP, KKBrothers Hong Kong Limited, CMC Krypton II Holdings Limited, ZUIKAKU CO.,LIMITED, Bright Capital Limited and Qidian Equity Investment (Guangdong)Partnership (Limited Partnership) (奇點股權投資 (廣東) 合夥企業 (有限合夥)) (the“Parties to the First Series F Share and Warrant Purchase Agreement”). For furtherdetails of the First Series F Share and Warrant Purchase Agreement, please refer to thesection headed “History, Reorganization and Corporate Structure – 9. Offshore Series F,Series F+ and Series F++ Financing – (a) Series F Financing”.

(h) On April 9, 2021, the Parties to the First Series F Share and Warrant Purchase Agreemententered into a shareholders’ agreement pursuant to which certain shareholders’ rightswere granted to the Series F Investors.

(i) On April 9, 2021, our Company entered into the Restructuring Agreement withGuangdong Kuaike Electronic Commerce Co., Ltd. (廣東快客電子商務有限公司), Mr.Wu Yuening (吳悅寧), MOGR Holding Co., Ltd., Mr. Guo Huibo (郭惠波), StarlightHolding Co., Ltd., Guangzhou Kuaike Enterprise Management Partnership (LimitedPartnership) (廣州快客企業管理合夥企業(有限合夥)), Gongqingcheng YuekeInvestment Management Partnership (Limited Partnership) (共青城悅客投資管理合夥企業(有限合夥), KK Technology (HK) Company Limited, Guangdong Kuaike CommerceManagement Co., Ltd. (廣東快客商業管理有限公司), Guangzhou Kuaike CommerceManagement Co., Ltd. (廣州快客商業管理有限公司), Guandong Xingke CommerceManagement Co., Ltd. (廣東星客商業管理有限公司), KK Brothers Hong Kong Limited,Shenzhen Capital Group Co., Ltd. (深圳市創新投資集團有限公司), SCGC CapitalHolding Company Limited (SCGC資本控股有限公司), Suzhou Wuyue Tianxia VentureCapital Center (Limited Partnership) (蘇州五嶽天下創業投資中心(有限合夥)), InspiringHoldings I Limited (啟程控股一號有限公司), N5Capital Fund II, L.P., Redefine CapitalLimited, eWTP Tech Innovation Fund L.P., Shenzhen Hongtai Growth Venture CapitalCenter (Limited Partnership) (深圳洪泰成長創業投資中心(有限合夥)), HangzhouChuangqian Investment Partnership (Limited Partnership) (杭州創乾投資合夥企業(有限合夥)), X Adventure Fund I L.P., Bright Vision (Shenzhen) Enterprise ManagementPartnership (Limited Partnership) (璀璨遠見(深圳)企業管理合夥企業(有限合夥)),Bright Deshang (Shenzhen) Venture Capital Center (Limited Partnership) (璀璨德商(深圳)創業投資中心(有限合夥)), Shanghai Black Algae Information TechnologyPartnership (Limited Partnership) (上海黑藻信息科技合夥企業(有限合夥)), ShanghaiYiqian Enterprise Management Consulting Partnership (Limited Partnership) (上海沂乾企業管理諮詢合夥企業(有限合夥)), CMC Krypton Holdings Limited, INCE CapitalPartners, L.P., Lighthousecap International Inc., Lighthousecap Fellow L.P. andLighthouse Capital International Inc.. For further details of the Reorganization, pleaserefer to the section headed “History, Reorganization and Corporate Structure”.


– IV-14 –


(j) On May 28, 2021, our Company entered into the Second Series F Preferred SharePurchase Agreement with KK Technology (HK) Company Limited, Guangdong KuaikeCommerce Management Co., Ltd. (廣東快客商業管理有限公司), Guangzhou KuaikeCommerce Management Co., Ltd. (廣州快客商業管理有限公司), Guandong XingkeCommerce Management Co., Ltd. (廣東星客商業管理有限公司), Guangdong KuaikeElectronic Commerce Co., Ltd. (廣東快客電子商務有限公司), Mr. Wu Yuening (吳悅寧), Mr. Guo Huibo (郭惠波), MOGR Holding Co., Ltd., Starlight Holding Co., Ltd.,Angara Innovation Limited, Pluto Connection Limited, CMBC International HoldingsLimited, STARWIN FUND SPC – SUNRISE FUND SP and INCE Capital Partners, L.P.(the “Parties to the Second Series F Preferred Share Purchase Agreement”). Forfurther details of the Second Series F Preferred Share Purchase Agreement, please referto the section headed “History, Reorganization and Corporate Structure – 9. OffshoreSeries F, Series F+ and Series F++ Financing – (b) Series F+ Financing”.

(k) On May 31, 2021, the Parties to the Second Series F Preferred Share PurchaseAgreement entered into a shareholders’ agreement pursuant to which certainshareholders’ rights were granted to the Series F+ Investors.

(l) On June 4, 2021, our Company entered into the Third Series F Preferred Share PurchaseAgreement with KK Technology (HK) Company Limited, Guangdong KuaikeCommerce Management Co., Ltd. (廣東快客商業管理有限公司), Guangzhou KuaikeCommerce Management Co., Ltd. (廣州快客商業管理有限公司), Guandong XingkeCommerce Management Co., Ltd. (廣東星客商業管理有限公司), Guangdong KuaikeElectronic Commerce Co., Ltd. (廣東快客電子商務有限公司), Mr. Wu Yuening (吳悅寧), Mr. Guo Huibo (郭惠波), MOGR Holding Co., Ltd., Starlight Holding Co., Ltd. andRedview Capital Investment XI Limited (the “Parties to the Third Series F PreferredShare Purchase Agreement”). For further details of the Second Series F PreferredShare Purchase Agreement, please refer to the section headed “History, Reorganizationand Corporate Structure – 9. Offshore Series F, Series F+ and Series F++ Financing –(c) Series F++ Financing”.

(m) On June 4, 2021, the Parties to the Third Series F Preferred Share Purchase Agreemententered into a shareholders’ agreement pursuant to which certain shareholders’ rightswere granted to the Series F+ Investors.

(n) On June 4, 2021, our Company entered into a share repurchase agreement with KKBrothers, pursuant to which our Company agreed to repurchase, and KK Brothers agreedto sell, 155,772 Series F Preferred Shares for an aggregate purchase price ofUS$13,000,000.

(o) [REDACTED].

2. Intellectual Property Rights of Our Group

As of the Latest Practicable Date, the following intellectual property rights which we considerare material to our Group’s business:

(a) Trademarks

As of the Latest Practicable Date, our Group had registered the following key trademarkswhich we consider to be material to our Group’s business:

No. Trademark Registered Owner Class(es)Place of

Registration

1. . . . Guangdong Kuaike Electronic 3, 9, 10, 16, 21, 35, 42 PRC

2. . . . Guangdong Kuaike Electronic 1, 2, 3, 4, 5, 6, 9, 10, 11,13, 17, 19, 20, 21, 23,24, 26, 27, 28, 29, 35,31, 34, 36, 37, 38, 39,40, 41, 42, 43, 44, 45

PRC


– IV-15 –


No. Trademark Registered Owner Class(es)Place of

Registration

3. . . . Guangdong Kuaike Electronic 1, 2, 4, 5, 6, 7, 8, 9, 10,11, 13, 15, 16, 17, 18,19, 20, 21, 22, 23, 24,26, 27, 28, 29, 30, 31,34, 35, 36, 37, 38, 39,40, 41, 42, 43, 44, 45

PRC

4. . . . Guangdong Kuaike Electronic 1, 2, 3, 4, 5, 6, 7, 8, 9, 10,11, 12, 13, 14, 15, 16,17, 18, 19, 20, 21, 22,23, 25, 26, 27, 28, 29,30, 31, 32, 33, 34, 35,36, 37, 38, 39, 40, 41,42, 43, 44, 45

PRC

5. . . . Guangdong Kuaike Electronic 6, 7, 8, 9, 10, 11, 12, 13,14, 15, 16, 17, 24

PRC

6. . . . Guangdong Kuaike Electronic 8, 9, 10, 16, 18, 20, 21, 35 PRC

7. . . . Guangdong Kuaike Electronic 3, 35 PRC

8. . . . Guangdong Kuaike Electronic 35 PRC

9. . . . Guangdong Kuaike Electronic 35 PRC

(b) Patents

As of the Latest Practicable Date, we had registered the following patents which we considerto be material to our Group’s business:

No. Title Registered Owner Nature of PatentPlace of

Registration

1. . . . Bottle(瓶子)

Guangdong KuaikeElectronic

Design Patent (外觀專利) PRC

2. . . . Display cabinet(陳列櫃)

Shenzhen Colorist(深圳調色師)


3. . . . Display wall(陳列牆)



4. . . . Display box(展示盒)



5. . . . Makeup display box(化妝品展示盒)



6. . . . A kind of display cabinet(一種展示櫃)


Utility Model (實用新型) PRC

7. . . . Display box and displaycabinet (展示盒及展示櫃)


Utility Model (實用新型) PRC


– IV-16 –


(c) Copyrights

As of the Latest Practicable Date, we had registered the following copyrights which weconsider to be material to our Group’s business:

No. Title Registered Owner Nature of CopyrightPlace of

Registration

1. . . . THE COLORIST 調色師 Shenzhen Colorist(深圳調色師)

Artwork (美術作品) PRC

2. . . . THE COLORIST Shenzhen Colorist(深圳調色師)


3. . . . Makeup rating radar chart(美妝評分雷達圖)



4. . . . KK trademark logo design(KK商標標識設計圖)



5. . . . X11 trademark logo design(X11商標標識設計圖)



6. . . . KKV trademark logo design(KKV商標標識設計圖)



7. . . . THE COLORIST 調色師trademark logo design(THE COLORIST調色師商標標識設計圖)



8. . . . THE COLORIST 調色師store image design(THE COLORIST調色師品牌門店形象設計圖)



9. . . . KKV store image design(KKV品牌門店形象設計圖)



10. . . X11 store image design(X11品牌門店形象設計圖)



11. . . KK Group logo design (KK集團LOGO標識設計圖)



12. . . Guan Bu Zhu Zui trademarklogo design (管不住嘴商標標識設計圖)



13. . . THE COLORIST 調色師女孩 Guangdong KuaikeElectronic


14. . . KK Guan iOS App softwareV3.2.1 (KK館iOS App軟件V3.2.1)


N/A PRC

15. . . KK Guan Android Appsoftware V3.2.0 (KK館安卓 APP軟件V3.2.0)


N/A PRC

16. . . Xin Ke KPOS store cashiermanagement system V1.0(信客KPOS門店收銀管理系統 V1.0)

Shenzhen Xin Ke (深圳信客) N/A PRC

17. . . Xin Ke unified authoritymanagement system V1.0(信客統一權限管理系統V1.0)


18. . . Xin Ke Keewood buildingblock low codedevelopment system V1.0(信客Keewood積木低代碼開發系統 V1.0)


19. . . Xin Ke TERP enterpriseresource managementsystem V1.0 (信客TERP企業資源管理系統 V1.0)


20. . . Xin Ke KVCM store visualdisplay system V1.0 (信客KVCM門店可視化陳列系統 V1.0)



– IV-17 –


FURTHER INFORMATION ABOUT OUR DIRECTORS AND SUBSTANTIALSHAREHOLDERS

1. Disclosure of Interests

(a) Interests and short positions of the Directors and the chief executive of our Company in theshares, underlying shares and debentures of our Company and its associated corporations

(i) Interest in the Shares or underlying shares of our Company

Immediately following completion of the [REDACTED] (without taking into account theShares to be allotted and issued upon the exercise of the [REDACTED]), the interests or shortpositions of Directors or chief executives of our Company in the Shares, underlying Shares anddebentures of our Company or its associated corporations (within the meaning of Part XV of theSFO) which will be required to be notified to our Company and the Stock Exchange pursuant toDivisions 7 and 8 of Part XV of the SFO (including interests or short positions which they weretaken or deemed to have under such provisions of the SFO) or which will be required under Section352 of the SFO to be entered in the register referred to in that section, or which will be requiredunder the Model Code for Securities Transactions by Directors of [REDACTED] as set out inAppendix 10 to the Listing Rules (“Model Code”) once our Shares are [REDACTED], will be asfollows:

Name of Director/chief executive Nature of Interest

Number of Sharesupon

[REDACTED]

Approximatepercentage ofshareholdinginterest upon[REDACTED]

Mr. Wu(1) . . . . . . . . . . . . . . . . . . Interest in controlled corporation;Interest held jointly with other

persons

[REDACTED] [REDACTED]

Mr. Guo(1) . . . . . . . . . . . . . . . . . . Interest in controlled corporation;Interest held jointly with other

persons

[REDACTED] [REDACTED]

Mr. Liang Jie (梁捷)(2) . . . . . . . . . . . Founder of a discretionary trust [REDACTED] [REDACTED]

Notes:

(1) MOGR is wholly owned by Mr. Wu, chairman of our Board, executive Director and chief executive officer. Starlightis wholly owned by Mr. Guo, our executive Director and president. On September 23, 2021, Mr. Wu and Mr. Guosigned the acting in concert confirmation, pursuant to which, Mr. Wu and Mr. Guo confirmed, among other things,that they had been acting in concert in our Group with each other since January 2017, and they would continue toact in the same manner in our Group upon [REDACTED] until the date when Mr. Wu or Mr. Guo cease to hold anyequity interest in our Company, or when the acting in concert arrangement is terminated in writing by Mr. Wu andMr. Guo, whichever is earlier. By virtue of the SFO, each of Mr. Wu and Mr. Guo together with their respectivecontrolled corporation (being MOGR and Starlight) is deemed to be interested in the total Shares directly held byMOGR and Starlight.

(2) KK Brothers is wholly owned by Diligent Shine Inc., which is in turn wholly owned by Verticillata Inc.. VerticillataInc. is held as to 100% by TMF (Cayman) Ltd, the trustee of the Liang Family Trust. Liang Family Trust is a trustestablished by Mr. Liang Jie, our non-executive Director, for the benefit of himself and his family. By virtue of SFO,each of Diligent Shine Inc., Verticillata Inc., TMF (Cayman) Limited and Mr. Liang Jie is deemed to be interestedin the Shares held by KK Brothers.


– IV-18 –


(b) Interests and short positions of the substantial shareholders in the Shares and underlyingshares of our Company

Save as disclosed in the section headed “Substantial Shareholders”, immediately following thecompletion of the [REDACTED] (assuming the [REDACTED] is not exercised), our Directors arenot aware of any other person (not being a Director or chief executive of our Company) who willhave an interest or short position in the Shares or the underlying Shares which would fall to bedisclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of theSFO, or who is, directly or indirectly, interested in 10% or more of the issued voting shares of ourCompany.

Save as set out above, as of the Latest Practicable Date, our Directors or chief executive werenot aware of any other person, not being a Director or chief executive of our Company would,immediately following the completion of the [REDACTED] (assuming the [REDACTED] is notexercised), be interested, directly or indirectly, in 10% or more of the nominal value of any classof share capital carrying rights to vote in all circumstances at general meetings of our Company.

2. Particulars of Service Contract and Letters of Appointment

(a) Executive Directors

Each executive Director has entered into a service contract with our Company under whichthey agreed to act as executive Directors for an initial term of three years commencing from the[REDACTED], which may be terminated by not less than one month’s notice in writing served byeither the executive Director or our Company.

The appointments of the executive Directors are subject to the provisions of retirement androtation of Directors under the Articles.

(b) Non-executive Director and Independent Non-executive Directors

Each non-executive Directors and the independent non-executive Directors has signed anappointment letter with our Company for a term of three year with effect from the [REDACTED].Under their respective appointment letters, each of the independent non-executive Directors isentitled to a fixed Director’s fee while the non-executive Director is not entitled to anyremuneration. The appointments are subject to the provisions of retirement and rotation of Directorsunder the Articles.

(c) Others

(i) Save as disclosed above, none of the Directors has entered into any service contract withany member of our Group (excluding contracts expiring or determinable by the employerwithin one year without payment of compensation other than statutory compensation).

(ii) During the year ended December 31, 2020, the aggregate of the remuneration andbenefits in kind payable to the Directors was approximately RMB3.70 million. Detailsof the Directors’ remuneration are also set out in note 8 of the Accountants’ Report setout in Appendix I to this document. Save as disclosed in this document, no otheremoluments have been paid or are payable in respect of the year ended December 31,2020 by our Company to the Directors.


– IV-19 –


(iii) Under the arrangements currently in force, the aggregate of the remuneration andbenefits in kind payable to the Directors for the year ending December 31, 2021 isestimated to be approximately RMB5.28 million.

(iv) None of the Directors or any past Directors of any members of our Group has been paidany sum of money for the three years ended December 31, 2020 and the six monthsended June 30, 2021 (i) as an inducement to join or upon joining our Company or (ii)for loss of office as a Director of any member of our Group or of any other office inconnection with the management of the affairs of any member of our Group.

(v) There has been no arrangement under which a Director has waived or agreed to waiveany remuneration or benefits in kind for the three years ended December 31, 2020 andthe six months ended June 30, 2021.

(vi) None of the Directors has been or is interested in the promotion of, or in the propertyproposed to be acquired by, our Company, and no sum has been paid or agreed to be paidto any of them in cash or shares or otherwise by any person either to induce him tobecome, or to qualify him as, a Director, or otherwise for services rendered by him/herin connection with the promotion or formation of our Company.

3. Fees or commissions received

Save as disclosed in this document, none of the Directors or any of the persons whose namesare listed under the section headed “– Other Information – 8. Consents of Experts” below hadreceived any commissions, discounts, agency fee, brokerages or other special terms in connectionwith the issue or sale of any capital of any member of our Group within the two years immediatelypreceding the date of this document.

4. Miscellaneous

Save as disclosed in this document:

(a) none of the Directors or chief executive of our Company has any interest or shortpositions in the Shares, underlying Shares or debentures of our Company or anyassociated corporation (within the meaning of Part XV of the SFO) which will have tobe notified to us and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV ofthe SFO (including interests and short positions which he/she is taken or deemed to haveunder such provisions of the SFO) or which will be required, pursuant to section 352 ofthe SFO, to be entered into the register referred to in that section, or which will berequired to be notified to us and the Stock Exchange pursuant to the Model Code, in eachcase once our Shares are [REDACTED] on the Stock Exchange;

(b) none of our Directors nor any of the parties listed in the section headed “– OtherInformation – 8. Consents of Experts” below has any direct or indirect interest in thepromotion of our Company, or in any assets which have within the two yearsimmediately preceding the date of this document been acquired or disposed of by orleased to any member of our Group, or are proposed to be acquired or disposed of byor leased to any member of our Group;


– IV-20 –


(c) none of our Directors nor any of the parties listed in the section headed “– OtherInformation – 8. Consents of Experts” below is materially interested in any contract orarrangement subsisting at the date of this document which is significant in relation to thebusiness of our Group taken as a whole;

(d) other than pursuant to the [REDACTED], none of the parties listed in the section headed“– Other Information – 8. Consents of Experts” below:

(i) is interested legally or beneficially in any of our Shares or any shares of any of oursubsidiaries; or

(ii) has any right or option (whether legally enforceable or not) to subscribe for or tonominate persons to subscribe for securities in any member of our Group.

(e) none of our Directors or their respective close associates (as defined under the ListingRules) or any of our Shareholders (who to the knowledge of our Directors owns morethan 5% of our number of issued shares) has any interest in our five largest suppliers orour five large customers.

RSU SCHEME

A. RSU Scheme

Summary of Terms

Our Company has adopted an RSU Scheme by a resolution of our Board on August 12, 2021.The RSU Scheme is not subject to the provisions of Chapter 17 of the Listing Rules as the RSUScheme does not involve the grant of options by our Company to subscribe for new Shares.

1. Purposes of the RSU Scheme

The purpose of the RSU Scheme is to recognize and reward RSU Participants (as definedbelow) for their contribution to our Group, to attract suitable personnel, and to provide incentivesto them to remain with and further contribute to our Group.

2. Awards

An award of RSUs under the RSU Scheme (the “Award(s)”) gives a RSU Participant aconditional right upon vesting of the Award to obtain either non-voting ordinary shares of[US$0.000004] each in the share capital of our Company, which will be converted to OrdinaryShares on a one-for-one basis on the [REDACTED], (the “Non-voting Ordinary Shares”) orOrdinary Shares (as applicable) or an equivalent value in cash with reference to the value of theNon-voting Ordinary Shares or Ordinary Shares (as applicable) on or about the date of vesting, asdetermined by the Board in its absolute discretion, less any tax, fees, levies, stamp duty and otherapplicable charges. An award may include, if so specified by the Board in its entire discretion, cashand non-cash income, dividends or distributions and/or the sale proceeds of non-cash and non-scripdistributions in respect of those Non-voting Ordinary Shares or Ordinary Shares (as applicable)from the date that the Award is granted to the date that it vests.


– IV-21 –


3. RSU Scheme Limit and Conversion of Non-voting Ordinary Shares

The total number of Shares underlying the RSU Scheme shall not exceed 2,657,335Non-voting Ordinary Shares (the “RSU Limit”). Without prejudice to the generality of theaforementioned, our Company will not further issue new Non-voting Ordinary Shares or OrdinaryShares (as applicable) for the purpose of the RSU Scheme.

Upon completion of the [REDACTED] and the [REDACTED], the 2,657,335 Non-votingOrdinary Shares which are reserved under this Scheme will be automatically converted to OrdinaryShares ranking para passu in all respects with the existing fully paid Ordinary Shares in issue ona one-for-one basis on the [REDACTED] pursuant to the Second Amended and RestatedMemorandum and Articles of Association of our Company, as amended and or restated from timeto time.

In the event of any alteration in the capital structure of our Company, such as capitalizationissue, rights issue, consolidation, sub-division and reduction of the share capital of our Company,the Board may make equitable adjustments that it considers appropriate, at its sole discretion, asfurther described in the paragraph headed “Reorganization of Capital Structure” below.

4. RSU Participants in the RSU Scheme

Participants of the RSU Scheme (the “RSU Participant(s)”) include the following:

(i) full-time employees (including directors, officers and members of senior management)of our Group; and

(ii) any person who, in the sole opinion of the Board, has contributed or will contribute toany member of our Group (including business partners of any member of our Group,such as suppliers, customers or any persons who provide technical support, consultancy,advisory or other services to any member of our Group).

5. Term of the RSU Scheme

Subject to any early termination as may be determined by the Board pursuant to thetermination clause of the RSU Scheme, the RSU Scheme shall be valid and effective for a periodof 10 years commencing on the Adoption Date, after which no Awards will be granted, but theprovisions of the RSU Scheme shall in all other respects remain in full force and effect and theAwards granted during the term of the RSU Scheme may continue to be valid and exercisable inaccordance with their terms of grant.

6. Administration of the RSU Scheme

The RSU Scheme shall be subject to the administration of the Board. The Board shall havethe sole and absolute right to (i) interpret and construe the provisions of the RSU Scheme, (ii)determine the persons who will be granted Awards under the RSU Scheme, the terms and conditionson which Awards are granted and when the RSUs granted pursuant to the RSU Scheme may vest,(iii) make such appropriate and equitable adjustments to the terms of the Awards granted under theRSU Scheme as it deems necessary and (iv) make such other decisions or determinations as it shalldeem appropriate in the administration of the RSU Scheme. The Board may by resolution delegateany or all of its powers in the administration of the RSU Scheme to an administration committeeor any other committee as authorized by the Board for such purpose. All decisions, determinationsand interpretations made by the Board shall be final, conclusive and binding on all parties.


– IV-22 –


7. Appointment of RSU Trustee

Our Company has appointed Futu Trustee Limited, a trustee service provider and anIndependent Third Party, to administer the granting and vesting of RSUs granted to the granteespursuant to the RSU Scheme.

8. Grant of RSU

On and subject to the terms of the RSU Scheme and the terms and conditions that the Boardimposes, the Board shall be entitled at any time during the term of the RSU Scheme to make an offerof the grant of an Award in accordance with the RSU Scheme (the “Grant”) to any RSU Participant,as the Board may in its absolute discretion determine.

The amount of an Award may be determined at the sole and absolute discretion of the Boardand may differ among selected RSU Participants.

Awards may be granted on such terms and conditions (e.g. by linking the vesting of RSUs tothe attainment or performance of milestones by any member of our Group, any Participant whoaccepts a Grant in accordance with the RSU Scheme (the “Grantee”) or any group of Grantees) asthe Board may determine, provided that such terms and conditions shall be consistent with any otherterms and conditions of the RSU Scheme.

Nil consideration is required to be paid by the selected RSU Participants for the grant of anAward.

After the Board has selected the RSU Participants, it will inform the RSU Trustee of thename(s) of the person(s) selected, the number of Shares underlying the RSUs to be granted to eachof them, the vesting schedule, the lock-up arrangements upon vesting (as applicable where theRSUs shall vest immediately upon acceptance of the Grant as determined by the Board) and otherterms and conditions (if any) that the Award is subject to as determined by the Board.

Subject to limitations and conditions of the RSU Scheme, the Board may authorize the RSUTrustee by written notification to grant to each of the selected RSU Participants an offer of Grantby way of a letter or any such notice or document in such form as the Board may from time to timedetermine (the “Notice of Grant”), which shall attach a notice of Award, subject to conditions asthe Board thinks fit.

9. Acceptance of Award

A Grant shall be deemed to have been accepted and to have taken effect on the date of theNotice of Grant, unless the selected RSU Participant notifies the Board in writing otherwise within7 days of the Notice of Grant.

10. Restrictions on Grants

No Grant shall be made to, nor shall any Grant be capable of acceptance by, any selected RSUParticipant at a time when the selected RSU Participant would or might be prohibited from dealingin the Shares by the Listing Rules (where applicable) or by any other applicable rules, regulationsor law.


– IV-23 –


Upon completion of the [REDACTED], a Grant must not be made after inside information hascome to the knowledge of our Company until such inside information has been announced inaccordance with the requirements of the Listing Rules. In particular, during the period commencingone month immediately preceding the earlier of:

(i) the date of the meeting of the Board (as such date is first notified to the Stock Exchangein accordance with the Listing Rules) for the approval of our Company’s results for anyyear, half-year, quarterly or any other interim period (whether or not required under theListing Rules); and

(ii) the deadline for our Company to publish an announcement of its results for any year orhalf-year under the Listing Rules, or quarterly or any other interim period (whether ornot required under the Listing Rules), and ending on the date of the resultsannouncement,

no Award may be granted. Such period will cover any period of delay in the publication of aresults announcement.

The Board may not grant any Awards to any RSU Participants in any of the followingcircumstances:

(i) requisite approvals from any applicable regulatory authorities for the Grant have notbeen obtained; or

(ii) applicable securities laws, rules or regulations require that a document or other offeringdocument(s) be issued in respect of the Grant or the RSU Scheme, unless the Boarddetermines otherwise;

(iii) the Grant would result in a breach of any applicable securities laws, rules or regulationsby any member of our Group or any of its directors; or

(iv) the Grant would result in breach of the RSU Limit or other rules of the RSU Scheme.

11. Grant to Directors

Upon completion of the [REDACTED], where any Award is proposed to be granted to aDirector, including the Director’s spouse or by or on behalf of any minor child (natural or adopted)and any other dealings in which for the purpose of Part XV of the Securities and Futures Ordinance(Chapter 517 of the Laws of Hong Kong) he is or is to be treated as interested, it shall not be grantedon any day on which the financial results of our Company are published or during the periods of:

(a) the shorter of: (i) 60 days immediately preceding the publication date of the annualresults, or (ii) if shorter, the period from the end of the relevant financial year up to thepublication date of the results; and

(b) the shorter of: (i) 30 days immediately preceding the publication date of the quarterlyresults (if any) and half-year results, or (ii) if shorter, the period from the end of therelevant quarterly or half-year period up to the publication date of the results.


– IV-24 –


12. Grant to Connected Persons

Upon completion of the [REDACTED], any Grant to any Director, chief executive orsubstantial shareholder of our Company, or any of their respective associates (as defined under theListing Rules), shall be subject to compliance with the requirements of the Listing Rules.Notwithstanding the foregoing, any grant of an Award to a Director pursuant to Rule 14A.95 of theListing Rules will be exempted from reporting, announcement and independent Shareholders’approval requirements if the Award forms part of the relevant Director’s remuneration under hisservice contract.

13. Rights attached to Awards

The RSUs do not carry any right to vote at general meetings of our Company. No Grantee shallenjoy any of the rights of a Shareholder by virtue of the grant of an Award pursuant to the RSUScheme, unless and until such Non-voting Ordinary Shares or Ordinary Shares (as applicable)underlying the Award are actually transferred to the Grantee upon the vesting of the RSU, and theGrantee who receives Non-voting Ordinary Shares upon vesting of the Award would not have thevoting right as a shareholder of our Company until such Non-voting Ordinary Shares have beenconverted to Ordinary Shares. Unless otherwise specified by the Board in its entire discretion in theNotice of Grant, Grantees do not have any rights to any cash or non-cash income, dividends ordistributions and/or the sale proceeds of non-cash and non-scrip distributions from any Non-votingOrdinary Shares or Ordinary Shares (as applicable) underlying an Award.

14. Rights attached to Shares

Any Non-voting Ordinary Shares or Ordinary Shares (as applicable) to be transferred to aGrantee or his wholly owned entity upon the vesting of RSUs granted pursuant to the RSU Schemeshall be subject to all the provisions of the Memorandum and Articles of Association of ourCompany and shall rank pari passu in all respects with the existing fully paid Non-voting OrdinaryShares or Ordinary Shares (as applicable) in issue on the date of transfer, or, if that date falls ona day when the register of members of our Company is closed, the first day of the re-opening ofthe register of members, and accordingly shall entitle the holder of such Non-voting OrdinaryShares or Ordinary Shares (as applicable) to participate in all dividends or other distributions paidor made on or after the date of transfer.

15. Awards to be Personal to the Grantee

Any Award granted pursuant to the RSU Scheme shall be personal to the Grantee and shall notbe assignable or transferable, except as pursuant to an assignment or transfer from a Grantee to acompany wholly owned by him or her or between two companies both of which are wholly ownedby him, provided that, following the Grantee’s death, the RSUs may be transferred by will or by thelaws of testacy and distribution. The terms of the RSU Scheme and the Notice of Grant shall bebinding upon the Grantee’s executors, administrators, heirs, successors and assigns.

Notwithstanding the above, no Grantee shall in any way sell, transfer, assign, charge,mortgage, encumber, hedge or create any interest in favor of any other person over or in relationto any RSU or any property held by the RSU Trustee on trust for the Grantees, Awards, or anyinterest or benefits therein.


– IV-25 –


16. Vesting

Subject to the terms of the RSU Scheme and the specific terms and conditions applicable toeach Award, the RSUs granted in an Award shall be subject to a vesting period (if any) and thesatisfaction of performance and/or other conditions (if any) to be determined by the Board in itsabsolute discretion which shall be stated in the Notice of Grant.

If any conditions applicable to an Award are not satisfied, the RSU shall automatically lapseon the date on which such conditions are not satisfied, as determined by the Board in its absolutediscretion.

The Non-voting Ordinary Shares or Ordinary Shares (as applicable) underlying the RSUs aresubject to a 180-day lockup period upon the [REDACTED], during which period the Grantee(s)shall not dispose of, nor enter into any agreement to dispose of or otherwise create any options,rights, interests or encumbrances in respect of, any of such Non-voting Ordinary Shares or OrdinaryShares (as applicable).

Upon fulfillment or waiver of the vesting period and vesting criteria (if any) applicable to aGrantee, a vesting notice shall be sent to the Grantee by the Board, or by the RSU Trustee underthe authorization and instruction by the Board confirming (a) the extent to which the vesting periodand conditions have been fulfilled or waived, (b) the number of Shares (and, if applicable, the cashor non-cash income, dividends or distributions and/or the sale proceeds of non-cash and non-scripdistributions in respect of these Shares) or the amount of cash the Grantee will receive, and (c)where the Grantee will receive Shares, the lock-up arrangements for such Shares (if applicable).

The RSUs which have been vested shall be satisfied at the Board’s absolute discretion withina reasonable period from the vesting date of such RSU, either by:

(a) the Board directing and procuring the RSU Trustee to transfer the Non-voting OrdinaryShares or the Ordinary Shares (as applicable) underlying the Award (and, if applicable,the cash or non-cash income, dividends or distributions and/or the sale proceeds ofnon-cash and non-scrip distributions in respect of those Non-voting Ordinary Shares orthe Ordinary Shares (as applicable)) to the Grantee or his wholly owned entity from thetrust fund established for the RSU Scheme; and/or

(b) the Board directing and procuring the RSU Trustee to pay to the Grantee in cash anamount which is equivalent to the value of the Ordinary Shares (as converted from theNon-voting Ordinary Shares) (and, if applicable, the cash or non-cash income, dividendsor distributions and/or the sale proceeds of non-cash and non-scrip distributions inrespect of those Ordinary Shares) set out in paragraph (a) above by making on-marketsales of such Ordinary Shares and after deduction or withholding of any tax, fees, levies,stamp duty and other charges applicable to the entitlement of the Grantee and the salesof any Ordinary Shares to fund such payment and in relation thereto.

Notwithstanding the foregoing, if our Company, the RSU Trustee or any Grantee would ormight be prohibited from dealing in the Non-voting Ordinary Shares or the Ordinary Shares (asapplicable) by the Listing Rules (where applicable) or by any other applicable laws, regulations orrules within the period specified above, the date on which the relevant Non-voting Ordinary Sharesor the Ordinary Shares (as applicable) shall be transferred or issued and allotted (as the case maybe) to the Grantee shall occur as soon as possible after the date when such dealing is permitted bythe Listing Rules or by any other applicable laws, regulations or rules.


– IV-26 –


The Board shall have the sole and absolute discretion to determine whether or not a Granteeshall have any rights to any cash or non-cash income, dividends or distributions and/or the saleproceeds of non-cash and non-scrip distributions from any Shares underlying an Award prior tovesting of the Award.

17. Rights on a Takeover

In the event an offer by way of voluntary offer, takeover or otherwise (other than by way ofscheme of arrangement) is made to all the Shareholders (or all such Shareholders other than theofferor and/or any person controlled by the offeror and/or any person acting in association orconcert with the offeror) and such offer becomes or is declared unconditional prior to the vestingdate of any RSU, a Participant’s RSU will vest immediately, even if the vesting period has not yetcommenced.

18. Rights on a Scheme of Arrangement

In the event a general offer for Shares by way of scheme of arrangement is made to all theShareholders and has been approved by the necessary number of Shareholders at the requisitemeetings prior to the vesting of any RSU, a Participant’s RSU will vest immediately, even if thevesting period has not yet commenced.

19. Rights on a Voluntary Winding-up

In the event a notice is given by our Company to its Shareholders to convene a Shareholders’meeting for the purpose of considering and, if thought fit, approving a resolution to voluntarilywind-up our Company prior to the vesting date of any RSU, the Board shall determine at itsdiscretion whether such RSU shall vest and the period when such RSU shall vest. If the Boarddetermines that such RSU shall vest, it shall notify the Grantee that the RSU shall vest and theperiod within which such RSU shall vest.

20. Rights on a Compromise or Arrangement

In the event a compromise or arrangement, other than a scheme of arrangement contemplatedabove, between our Company and the Shareholders and/or creditors is proposed in connection witha scheme for the reconstruction of our Company or its amalgamation with any other company orcompanies, the Board shall determine at its discretion whether such RSU shall vest and the periodwhen such RSU shall vest. If the Board determines that such RSU shall vest, it shall notify theGrantee that the RSU shall vest and the period within which such RSU shall vest.

21. Lapse of RSU

The uninvested RSUs shall automatically lapse upon the earliest of:

(i) the date of termination of the Grantee’s employment or service by any member of ourGroup;

(ii) the date on which the offer (or, as the case may be, revised offer) referred to in thesubsection headed “17. Rights on a Takeover” of this section closes;


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(iii) the record date for determining entitlements under the scheme of arrangement referredto in the subsection headed “18. Rights on a Scheme of Arrangement” of this section;

(iv) the date of commencement of a winding-up of our Company;

(v) the date on which the Grantee commits a breach of the terms and conditions referred toin the subsection headed “15. Awards to be Personal to the Grantee” of this section;

(vi) the date on which it is no longer possible to satisfy any outstanding conditions tovestings; or

(vii) the time when the Board has decided that the unvested RSUs shall not be vested in theGrantee in accordance with the rules of the RSU Scheme and the terms and conditionsas set out in the Notice of Grant.

The Board shall have the right to determine what constitutes valid grounds on which ourCompany or any of our Company’s subsidiaries would be entitled to terminate the Grantee’semployment or office (the “Cause”), whether the Grantee’s employment has been terminated forCause and the effective date of such termination, and such determination by the Board shall be finaland conclusive.

If the Grantee’s employment or service with our Company or any of our Company’ssubsidiaries is terminated for any reason other than for Cause (including by reason of resignation,retirement, death, disability or non-renewal of the employment or service agreement upon itsexpiration for any reason other than for Cause), the Board shall determine at its absolute discretionand shall notify the Grantee whether any unvested RSU granted to such Grantee shall vest and theperiod within which such RSU shall vest. If the Board determines that such RSU shall not vest, suchRSU shall automatically lapse with effect from the date on which the Grantee’s employment orservice is terminated.

Notwithstanding the aforesaid, in each case, the Board may in its absolute discretion decidethat any RSU shall not lapse or shall be subject to such conditions or limitations as the Board maydecide.

22. Reorganization of Capital Structure

In the event of any alteration in the capital structure of our Company, such as capitalizationissue, rights issue, consolidation, sub-division and reduction of the share capital of our Company,the Board may make equitable adjustments that it considers appropriate, at its sole discretion,including:

(i) make arrangements for the grant of substitute RSUs of equivalent fair value to an Awardin the purchasing or surviving company;

(ii) reach such accommodation with the Grantee as it considers appropriate, including thepayment of cash compensation to the Grantee equivalent to the fair value of any RSUto the extent not vested;

(iii) waive any conditions to the vesting of any RSU not already vested; or

(iv) permit the continuation of an Award in accordance with its original terms.


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23. Amendment of the RSU Scheme

The terms of the RSU Scheme may be altered, amended or waived in any respect by the Boardprovided that such alteration, amendment or waiver shall not affect any subsisting rights of anyGrantee thereunder. Any alteration, amendment or waiver to the RSU Scheme of a material natureshall be approved by the Shareholders. The Board shall have the right to determine whether anyproposed alteration, amendment or waiver is material and such determination shall be conclusive.

24. Termination of the RSU Scheme

The RSU Scheme may be terminated at any time prior to the expiry of its term by the Boardprovided that such termination shall not affect any subsisting rights of any Grantee hereunder. Forthe avoidance of doubt, no further Awards shall be granted after the RSU Scheme is terminated butin all other respects the provisions of the RSU Scheme shall remain in full force and effect. AllRSUs granted prior to such termination and not vested on the date of termination shall remain valid.In such event, the Board shall notify the RSU Trustee and all Grantees of such termination and howthe Non-voting Ordinary Shares held by the RSU Trustee and other interests or benefits in relationto the outstanding RSUs shall be dealt with, provided that Non-voting Ordinary Shares held by theRSU Trustee shall not be transferred to our Company and our Company shall not otherwise hold anyNon-voting Ordinary Shares or any interest in Non-voting Ordinary Shares whatsoever (other thaninterest in the proceeds of sale of such shares of our Company).

25. General

An application has been made to the [REDACTED] of the Stock Exchange for the[REDACTED] of, and permission to deal in, the Shares underlying any Awards which may begranted pursuant to the RSU Scheme. As of the Latest Practicable Date, no RSU has been grantedor agreed to be granted by our Company pursuant to the RSU Scheme.

Our Company will issue announcements according to applicable Listing Rules, disclosingparticulars of any RSUs granted under the RSU Scheme, including the date of grant, number ofShares involved, the vesting period and comply with Chapter 14A of the Listing Rules. Details ofthe RSU Scheme, including particulars and movements of the RSUs granted during each financialyear of our Company, and our employee costs arising from the grant of the RSUs will be disclosedin our annual report.

All reference to Non-voting Ordinary Share under the RSU (except for references under theclause in relation to the share capital of our Company) shall mean Ordinary Share upon theautomatic conversion of Non-voting Ordinary Shares into Ordinary Shares pursuant to the SecondAmended and Restated Memorandum and Articles of Association of our Company as and when thecontext requires, as amended and or restated from time to time, as and where applicable.


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OTHER INFORMATION

1. Estate Duty

Our Directors have been advised that no material liability for estate duty is likely to fall onour Group under the laws of the Cayman Islands or PRC.

2. Litigation

As of the Latest Practicable Date, we are not aware of any other litigation or claims orarbitration proceedings of material importance pending or threatened against us or any of ourDirectors that could have a material adverse effect on our financial condition or results ofoperations.

3. Application for [REDACTED]

The Joint Sponsors have made an application on behalf of our Company to the [REDACTED]for the [REDACTED] of, and permission to deal in, the Shares in issue and to be issued or soldas mentioned in this document.

4. Joint Sponsors

Each of the Joint Sponsors is independent from our Company pursuant to Rule 3A.07 of theListing Rules. The fees payable by our Company to each of the Joint Sponsors for acting as thesponsors for the [REDACTED] are US$500,000.

5. No Material Adverse Change

The Directors confirm that there has been no material adverse change in the financial ortrading position or prospects of our Group since June 30, 2021 (being the date to which the latestaudited combined financial statements of our Group were prepared).

6. Preliminary expenses

Our Company did not incur any material preliminary expense in relation to the incorporationof our Company.

7. Promoter

Our Company has no promoter for the purpose of the Listing Rules. Save as disclosed in thisdocument, within the two years immediately preceding the date of this document, no cash, securitiesor other benefit has been paid, allotted or given nor are any proposed to be paid, allotted or givento any promoters in connection with the [REDACTED] and the related transactions described inthis document.


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8. Consents of Experts

The following are the qualifications of the experts who have given opinion or advice whichare contained in this document:

Name Qualification

Morgan Stanley Asia Limited . . . . . . . . . . Licensed corporation under the SFO to conduct type 1 (dealing insecurities), type 4 (advising on securities), type 5 (advising on futurecontracts), type 6 (advising on corporate finance) and type 9 (assetmanagement) of the regulated activities as defined under the SFO

Credit Suisse (Hong Kong) Limited . . . . . . Licensed corporation under the SFO to carry on type 1 (dealing insecurities), type 2 (dealing in futures contracts), type 4 (advising onsecurities), type 5 (advising on futures contracts), type 6 (advising oncorporate finance) and type 9 (asset management) of the regulatedactivities as defined under the SFO

KPMG . . . . . . . . . . . . . . . . . . . . . . . Certified Public AccountantsPublic Interest Entity Auditor registered in accordance with the FinancialReporting Council Ordinance

Haiwen & Partners . . . . . . . . . . . . . . . . Company’s PRC legal advisers as to PRC laws

Jingtian & Gongcheng . . . . . . . . . . . . . . Company’s PRC legal advisers as to PRC laws

Maples and Calder (Hong Kong) LLP . . . . . Company’s Cayman Islands legal advisor

Frost & Sullivan (Beijing) Inc., ShanghaiBranch Co. . . . . . . . . . . . . . . . . . . .

Industry consultant

Shenzhen Anzhi Electrical Fire FightingSafety Inspection Co., Ltd.(深圳市安智電氣消防安全檢測有限公司) . .

Company’s fire safety consultant

Save as disclosed in this document, as of the Latest Practicable Date, none of the expertsnamed above has any shareholding in any member of our Group or the right (whether legallyenforceable or not) to subscribe for or to nominate persons to subscribe for securities in any memberof our Group.

Each of Morgan Stanley Asia Limited, Credit Suisse (Hong Kong) Limited, KPMG, Haiwen& Partners, Jingtian & Gongcheng, Maples and Calder (Hong Kong) LLP and Frost & Sullivan(Beijing) Inc., Shanghai Branch Co. has given and has not withdrawn its respective written consentto the issue of this document with the inclusion of its report and/or letter and/or opinion and/or thereferences to its name included in this document in the form and context in which it is respectivelyincluded.

9. Binding Effect

This document shall have the effect, if an application is made in pursuance of this document,of rendering all persons concerned bound by all of the provisions (other than the penal provisions)of sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions) Ordinanceso far as applicable.


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10. Bilingual document

The English and Chinese language versions of this document are being published separatelyin reliance upon the exemption provided by section 4 of the Companies (Exemption of Companiesand Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of HongKong).

11. Taxation of holders of Shares

(a) Hong Kong

The sale, purchase and transfer of shares registered with our Hong Kong register of memberswill be subject to Hong Kong stamp duty. The current rate charged on each of the purchaser andseller is 0.1% of the consideration or, if higher, of the value of the shares being sold or transferred.Profits from dealings in the shares arising in or derived from Hong Kong may also be subject toHong Kong profits tax.

(b) Cayman Islands

Under present Cayman Islands law, there is no stamp duty payable in the Cayman Islands ontransfers of shares in our Company.

(c) Consultation with professional advisors

[REDACTED] in the [REDACTED] are urged to consult their professional tax advisors ifthey are in any doubt as to the taxation implications of subscribing for, purchasing, holding ordisposing of, and dealing in our Shares (or exercising rights attached to them). None of ourCompany, our Directors or the other parties involved in the [REDACTED] accept responsibility forany tax effects on, or liabilities of, any person resulting from the subscription, purchase, holdingor disposal of, dealing in or the exercise of any rights in relation to our Shares.

12. Disclaimer

(a) Save as disclosed in this document, within the two years immediately preceding the dateof this document:

(i) no share or loan capital of our Company or any of our subsidiaries has been issuedor agreed to be issued or is proposed to be fully or partly paid either for cash orfor a consideration other than cash;

(ii) no share or loan capital of our Company or any of our subsidiaries is under optionor is agreed conditionally or unconditionally to be put under option;

(iii) no founders, management or deferred shares of our Company or any of oursubsidiaries have been issued or agreed to be issued;

(iv) no commissions, discounts, brokerages or other special terms have been granted oragreed to be granted in connection with the issue or sale of any share or loancapital of our Company or any of our subsidiaries; and

(v) no commission has been paid or is payable for subscription, agreeing to subscribe,procuring subscription or agreeing to procure subscription of any share in ourCompany or any of our subsidiaries.


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(b) Save as disclosed in this document, our Group had not issued any debentures nor did ithave any outstanding debentures nor any convertible debt securities.

(c) Save as disclosed in this document, none of the Directors or the parties listed in “OtherInformation – 8. Consents of Experts” is:

(i) interested in our promotion, or in any assets which have, within the two yearsimmediately preceding the date of this document, been acquired or disposed of byor leased to our Company, or are proposed to be acquired or disposed of by orleased to our Company; or

(ii) materially interested in any contract or arrangement subsisting as of the date of thisdocument which is significant to our business.

(d) Our Directors confirm that:

(i) there is no arrangement under which future dividends are waived or agreed to bewaived; and

(ii) there has not been any interruption in the business of our Group which may haveor has had a significant effect on the financial position of our Group in the 12months preceding the date of this document.

(e) Our principal register of members will be maintained by our Principal [REDACTED],in the Cayman Islands and our Hong Kong register of members will be maintained byour [REDACTED]. Unless the Directors otherwise agree, all transfer and otherdocuments of title of Shares must be lodged for registration with and registered by our[REDACTED].

(f) All necessary arrangements have been made to enable our Shares to be admitted into[REDACTED] for clearing and settlement.

(g) No company within our Group is presently [REDACTED] on any stock exchange or[REDACTED] on any [REDACTED] system.


– IV-33 –


DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES

The documents attached to the copy of this document delivered to the Registrar of Companiesin Hong Kong for registration were:

(a) a copy of the [REDACTED];

(b) a copy of each of the material contracts referred to in the section headed “Statutory andGeneral Information – Further Information about our Business – 1. Summary of MaterialContracts” in Appendix IV to this document; and

(c) the written consents referred to in the section headed “Statutory and General Information– Other Information – 8. Consents of Experts” in Appendix IV to this document.

DOCUMENTS AVAILABLE ON DISPLAY

Copies of the following documents will be available on display on the website of the StockExchange at www.hkexnews.hk and our website at https://www.kkgroup.cn up to and includingthe date which is 14 days from the date of this document:

(a) the Memorandum and the Articles of Association;

(b) the Accountants’ Report of our Group and the report on the unaudited [REDACTED]financial information prepared by KPMG, the texts of which are set forth in AppendixI and Appendix II to this document, respectively;

(c) the audited combined financial statements of our Company for the three years endedDecember 31, 2018, 2019 and 2020 and the six months ended June 30, 2021;

(d) the letter from KPMG and the Joint Sponsors relating to the profit/(loss) estimate, thetexts of which are set forth in Appendix IA to this document;

(e) the legal opinion from Haiwen & Partners and Jingtian & Gongcheng, our PRC LegalAdvisers, in respect of certain aspects of our Company;

(f) the letters of advice prepared by Maples and Calder (Hong Kong) LLP, our CaymanIslands legal advisor, summarizing certain aspects of the Cayman Islands Companies Actreferred to in Appendix III to this document and their view on certain Cayman mattersas set out in this document;

(g) the Cayman Islands Companies Act;

(h) the report issued by Frost & Sullivan, the summary of which is set forth in the sectionheaded “Industry Overview” in this document;

(i) the material contracts referred to the section headed “Statutory and General Information– Further Information about Our Business – 1. Summary of Material Contracts” inAppendix IV to this document;

APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OFCOMPANIES IN HONG KONG AND AVAILABLE ON DISPLAY

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(j) the service contracts and letters of appointment with our Directors referred to in sectionheaded “Statutory and General Information – Further Information about Our Directorsand Substantial Shareholders – 2. Particulars of Service Contract and Letters ofAppointment” in Appendix IV to this document;

(k) the written consents referred to in the section headed “Statutory and General Information– Other Information – 8. Consents of Experts” in Appendix IV to this document; and

(l) the RSU Scheme.

APPENDIX V DOCUMENTS DELIVERED TO THE REGISTRAR OFCOMPANIES IN HONG KONG AND AVAILABLE ON DISPLAY

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