Exhibit 99.1
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
INDEX TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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Unaudited condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021 | F-2 | |
F-3 | ||
F-4 | ||
F-5 | ||
F-6 | ||
Notes to unaudited condensed consolidated financial statements | F-7-F-36 |
F-1
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”), except for number of shares and per share data)
| December 31, 2021 | June 30, 2022 | June 30, 2022 | |||
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| RMB |
| RMB |
| US$ |
(Unaudited) | (Unaudited) | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents |
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Prepaid expenses |
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Accounts receivable, net |
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Amounts due from related parties, net |
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Inventories, net |
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Other current assets, net |
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Total current assets |
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Property and equipment, net |
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Land use rights, net |
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Intangible assets, net |
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Goodwill |
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| – |
| – |
Right-of-use assets | – | | | |||
Long-term investments |
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TOTAL ASSETS. |
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LIABILITIES AND SHAREHOLDERS’ DEFICIT |
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Current liabilities: |
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Short-term debts |
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Accounts payable |
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Advance from customers |
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Amounts due to related parties |
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Lease liability-current | – | | | |||
Accrued expenses and other current liabilities |
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Total current liabilities |
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Deferred tax liabilities |
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| – |
| – |
Lease liability-non-current | – | | | |||
Other long-term liabilities |
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TOTAL LIABILITIES. |
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Commitments and contingencies |
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Shareholders’ equity (deficit): |
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Class A Ordinary shares (US$ |
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Class B Ordinary shares (US$ | | | | |||
Additional paid-in capital |
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Accumulated deficit |
| ( |
| ( |
| ( |
Accumulated other comprehensive income |
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Total AnPac Bio-Medical Science Co., Ltd. shareholders’ equity (deficit) |
| ( |
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Non-controlling interests |
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Total shareholders’ equity |
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
| Six Months Ended June 30, | |||||
| 2021 | 2022 | 2022 | |||
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| RMB |
| RMB |
| US$ |
Revenues: |
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Revenues-third parties |
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Revenues-related parties |
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Total revenues |
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Cost of revenues |
| ( |
| ( |
| ( |
Gross Profit |
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Operating expenses: |
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Selling and marketing expenses |
| ( |
| ( |
| ( |
Research and development expenses |
| ( |
| ( |
| ( |
General and administrative expenses |
| ( |
| ( |
| ( |
Impairment of intangible assets | – | ( | ( | |||
Impairment of goodwill | – | ( | ( | |||
Loss from operations |
| ( |
| ( |
| ( |
Non-operating income and expenses: |
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Interest expense, net |
| ( |
| ( |
| ( |
Foreign exchange loss, net |
| ( |
| ( |
| ( |
Share of net loss in equity method investments |
| ( |
| ( |
| ( |
Other income, net |
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Change in fair value of convertible debt | ( | | | |||
Loss before income taxes |
| ( |
| ( |
| ( |
Income tax benefit |
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Net loss |
| ( |
| ( |
| ( |
Net loss attributable to non-controlling interests |
| ( |
| ( |
| ( |
Net loss attributable to ordinary shareholders |
| ( |
| ( |
| ( |
Loss per share: |
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Class A and B Ordinary shares - basic and diluted | ( | ( | ( | |||
Weighted average shares outstanding used in calculating basic and diluted loss per share |
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Ordinary shares - basic and diluted | | | | |||
Other comprehensive income, net of tax: |
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Foreign currency translation adjustments |
| ( |
| ( |
| ( |
Total comprehensive loss |
| ( |
| ( |
| ( |
Total comprehensive loss attributable to non-controlling interests |
| ( |
| ( |
| ( |
Total comprehensive loss attributable to ordinary shareholders |
| ( |
| ( |
| ( |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
F-3
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
Attributable to AnPac Bio- Medical Science Co., Ltd. Shareholders | ||||||||||||||||||||
Total | ||||||||||||||||||||
AnPac Bio- | ||||||||||||||||||||
Medical | ||||||||||||||||||||
Accumulated | Science Co., | |||||||||||||||||||
Additional | Other | Ltd. | ||||||||||||||||||
| Class A Ordinary Shares |
| Class B Ordinary Shares |
| Paid-in |
| Accumulated |
| Comprehensive |
| Shareholders’ |
| Noncontrolling |
| ||||||
Shares |
| Amount | Shares |
| Amount | Capital | Deficit | (Loss) Income | Equity | interest | Total Equity | |||||||||
Balance at January 1, 2021 | | | | | | ( | | | | | ||||||||||
Net loss |
| — | — |
| — |
| — | — |
| ( |
| — |
| ( |
| ( |
| ( | ||
Issuance of shares in private placements, net of offering costs |
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| — |
| — | |
| — |
| — |
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| — |
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Issuance shares for exercise of stock options | | | — | — | | — | — | | — | | ||||||||||
Issuance shares for exercise of stock options* | | | — | — | ( | — | — | — | — | — | ||||||||||
Issuance shares reserved for convertible loans | | | — | — | ( | — | — | — | — | — | ||||||||||
Conversion of convertible loans | — | — | — | — | | — | — | | — | | ||||||||||
Transfer Class B shares to Class A shares | | | ( | ( | — | — | — | — | — | — | ||||||||||
Share based compensation | — | — | — | — | | — | — | | — | | ||||||||||
Foreign currency translation differences |
| — | — |
| — |
| — | — |
| — |
| ( |
| ( |
| — |
| ( | ||
Balance at June 30, 2021 (unaudited) |
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| ( |
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| ( |
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Balance at June 30, 2021 (US$) |
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| ( |
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| ( |
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* | In the six months ended June 30, 2021, the Company issued |
F-4
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
Attributable to AnPac Bio- Medical Science Co., Ltd. Shareholders | ||||||||||||||||||||
Total | ||||||||||||||||||||
AnPac Bio- | ||||||||||||||||||||
Medical | ||||||||||||||||||||
Science Co., | ||||||||||||||||||||
Accumulated | Ltd. | |||||||||||||||||||
Additional | Other | Shareholders’ | ||||||||||||||||||
Class A Ordinary Shares | Class B Ordinary Shares | Paid-in | Accumulated | Comprehensive | Equity | Noncontrolling | Total | |||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| (Loss) Income |
| (Deficit) |
| interest |
| Equity | |
Balance at January 1, 2022 |
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| ( |
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| ( |
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Net loss |
| — |
| — |
| — |
| — |
| — |
| ( |
| — |
| ( |
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| ( |
Issuance of shares in private placements, net of offering costs |
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| — |
| — |
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| — |
| — |
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| — |
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Issuance shares for exercise of stock options |
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| — |
| — |
| ( |
| — |
| — |
| — |
| — |
| — |
Issuance shares reserved for convertible loan |
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| — |
| — |
| ( |
| — |
| — |
| — |
| — |
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Issuance shares for service |
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| — |
| — |
| ( |
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Conversion of convertible loans |
| — |
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| — |
| — |
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| — |
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Share based compensation |
| — |
| — |
| — |
| — |
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| — |
| — |
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| — |
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Foreign currency translation differences |
| — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( |
| — |
| ( |
Balance at June 30, 2022 (unaudited) |
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| ( |
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Balance at June 30, 2022 (US$) |
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| ( |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
| Six Months Ended June 30, | |||||
| 2021 | 2022 | 2022 | |||
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| RMB |
| RMB |
| US$ |
Operating activities: |
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Net loss |
| ( |
| ( |
| ( |
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
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Share of net loss in equity method investments |
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Bad debt expense |
| ( |
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Losses on disposal of land use rights and property and equipment |
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Share-based compensation | | | | |||
Fair value loss (gain) on convertible loans |
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| ( |
| ( |
Impairment of intangible assets |
| — |
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Impairment of goodwill | — | | | |||
Amortization of right of use assets | — | | | |||
Deferred tax |
| ( |
| ( |
| ( |
Changes in operating assets and liabilities: | ||||||
Prepaid expenses | | ( | ( | |||
Accounts receivable |
| ( |
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Inventories |
| ( |
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Amounts due from related parties |
| ( |
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Other current assets |
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Accounts payable |
| ( |
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Amounts due to related parties |
| ( |
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Advance from customers |
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Accrued expenses and other current liabilities |
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Other long-term liabilities |
| ( |
| ( |
| ( |
Deferred tax liabilities |
| ( |
| — |
| — |
Lease liabilities | — | ( | ( | |||
Net cash used in operating activities |
| ( |
| ( |
| ( |
Investing activities: |
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Purchases of property and equipment |
| ( |
| ( |
| ( |
Purchases of intangible assets |
| ( |
| — |
| — |
Net cash used in investing activities | ( | ( | ( | |||
Financing activities: |
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Proceeds from short-term borrowings |
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| — |
| — |
Payment for related party loan | ( | ( | ( | |||
Proceeds from stock options exercised | | — | — | |||
Proceeds from private placement |
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Net cash provided by financing activities | | | | |||
Effect of exchange rate changes on cash and cash equivalents |
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| ( |
| ( |
Net increase (decrease) in cash and cash equivalents |
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| ( |
| ( |
Cash and cash equivalents at beginning of period | | | | |||
Cash and cash equivalents at end of period |
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Supplemental disclosure of cash flow information: |
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Interest paid |
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Supplemental disclosure of non-cash activities: |
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Issuance shares for private placement unpaid portion | | — | — | |||
Issuance shares for stock option exercised by employees |
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| — |
| — |
Issuance shares for stock option exercised by Dr. Chris Chang Yu |
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| — |
| — |
Issuance shares for related party loan to Dr. Chris Chang Yu |
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| — |
| — |
Reclassification of accounts payable to convertible loan |
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| — |
| — |
Conversion of convertible loans | | | | |||
Right of use assets obtained in exchange for lease liabilities | — | | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-6
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
AnPac Bio-Medical Science Co., Ltd. (the “Company”) was incorporated in the British Virgin Islands (“ the BVI”) in January 2010. The Company and its subsidiaries (collectively, the “Group”) are engaged in one business segment, marketing and selling a multi-cancer screening and detection test that uses innovative, patented cancer differentiation analysis (the “CDA”) technology and proprietary cancer-detection devices, primarily in the People’s Republic of China (the “PRC” or “China”). Dr. Chris Chang Yu is the Founder of the Group.
As of June 30, 2022, the details of the Group’s principal subsidiaries are as follows:
|
|
| Place of |
| ||||
Percentage of | Date of | Incorporation/ | ||||||
Major subsidiaries | Ownership | Incorporation | Acquisition | Major Operation | ||||
Changhe Bio-Medical Technology (Yangzhou) Co., Ltd. |
| % | March 2010 |
| the PRC |
| Cancer screening and detection tests | |
Changwei System Technology (Shanghai) Co., Ltd. |
| % | March 2011 |
| the PRC |
| Research and development | |
AnPac Bio-Medical Technology (Lishui) Co., Ltd. ("AnPac Lishui") |
| % | October 2012 |
| the PRC |
| Cancer screening detection tests and device manufacturing | |
AnPac Bio-Medical Technology (Shanghai) Co., Ltd. |
| % | April 2014 |
| the PRC |
| Cancer screening and detection tests | |
AnPac Technology USA Co., Ltd. (“AnPac US”) |
| % | September 2015 |
| the U.S. |
| Clinical trials for research on cancer screening and detection tests | |
Lishui AnPac Medical Laboratory Co., Ltd. |
| % | July 2016 |
| the PRC |
| Cancer screening and detection tests | |
Shiji (Hainan) Medical Technology Ltd. |
| % | March 2013 |
| the PRC |
| Cancer screening and detection research | |
Shanghai Muqing AnPac Health Technology Co., Ltd. (“AnPac Muqing”) |
| % | March 2019 |
| the PRC |
| Cancer screening and detection tests | |
Anpai (Shanghai) Healthcare Management and Consulting Co., Ltd. ("Anpai Shanghai”) | % | August 15, 2021* | the PRC | Cancer screening and detection tests | ||||
Shenzhen Anhengchuang Technology Co., Ltd. |
| % | May 17, 2022 |
| the PRC |
| Software application and technology services |
2.LIQUIDITY AND GOING CONCERN UNCERTAINTIES
The Group’s principal sources of liquidity have been cash generated from financing and operating activities. As of June 30, 2022, the Group had RMB
F-7
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
(US$
2.LIQUIDITY AND GOING CONCERN UNCERTAINTIES (CONTINUED)
The Group can make no assurances that required financings will be available for the amounts needed, or on terms commercially acceptable to the Group, if at all. If one or all of these events does not occur or subsequent capital raises are insufficient to bridge financial and liquidity shortfall, there would likely be a material adverse effect on the Group and its financial statements. The unaudited condensed consolidated financial statements have been prepared assuming that the Group will continue as a going concern and, accordingly, do not include any adjustments that might result from the outcome of this uncertainty.
3. | SUMMARY OF PRINCIPAL ACCOUNTING POLICIES |
(a) | Basis of presentation |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2021 and 2022 are not necessarily indicative of the results that may be expected for the full year. The information included in this interim report should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in the Company’s consolidated financial statements for the fiscal year ended December 31, 2021 included in its annual report filed with the SEC on May 16, 2022.
(b) | Principles of consolidation |
The accompanying unaudited condensed consolidated financial statements include the financial statements of the Group. All significant inter-company transactions and balances between the Company and its subsidiaries are eliminated upon consolidation.
F-8
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
Subsidiaries are those entities in which the Group, directly or indirectly, controls more than one half of the voting power, has the power to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of the board of directors, or has the power to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.
(c) | Use of estimates |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Areas where management uses subjective judgement include, but are not limited to allowance for doubtful accounts, share-based compensation, deferred tax and uncertain tax position, valuation of convertible loans, useful lives of intangible assets and property and equipment, and impairment of long-lived assets, goodwill and long-term investments. Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences could be material to the consolidated financial statements.
3. | SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
(d) | Accounts receivable, net of allowance for doubtful accounts |
Accounts receivable are recorded at their invoiced amounts, net of allowances for doubtful accounts. An allowance for doubtful accounts is recorded when the collection of the full amount is no longer probable. In evaluating the collectability of receivable balances, the Group considers specific evidence, including aging of the receivable, the customer’s payment history, its current creditworthiness and current economic trends. Accounts receivable are written off after all collection efforts have ceased. The Group regularly reviews the adequacy and appropriateness of the allowance for doubtful accounts.
Accounts receivable as of December 31, 2021 and June 30, 2022 were as follows:
December 31, | June 30, | |||||
| 2021 |
| 2022 | |||
| RMB |
| RMB |
| US$ | |
(Unaudited) | (Unaudited) | |||||
Accounts receivable | | | | |||
Allowance for doubtful accounts | ( | ( | ( | |||
Balance at end of period | | | |
Movement in the allowances for doubtful debts were as follows:
For the Year | ||||||
Ended | For the Six Months | |||||
| December 31, | Ended June 30, | ||||
|
| 2021 |
| 2022 | ||
|
| RMB |
| RMB |
| US$ |
(Unaudited) | (Unaudited) | |||||
Balance at beginning of period | | | | |||
Additional provision |
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| |
| |
Balance at end of period |
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| |
| |
F-9
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
(e) | Goodwill |
Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable assets acquired less liabilities assumed of an acquired business. The Group’s goodwill at December 31, 2021 arose from its business acquisition of Anpai Shanghai in 2021. Goodwill acquired in a business combination is not amortized, but instead tested for impairment at least annually, or more frequently if certain circumstances indicate a possible impairment may exist.
In accordance with ASC 350-20, Intangibles-Goodwill and Other, Goodwill, (“ASC 350-20”) the Group has assigned and assessed goodwill for impairment at the reporting unit level. A reporting unit is an operating segment or one level below the operating segment. The Group has determined that it has
F-10
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
3. | SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
(e) | Goodwill (continued) |
The Group has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step test in accordance with ASC 350-20. If the Group believes, as a result of the qualitative assessment, that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, the two-step quantitative impairment test described below is required. Otherwise, no further testing is required. In the qualitative assessment, the Group considers primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information related to the operations. In performing the two-step quantitative impairment test, the first step compares the carrying amount of the reporting unit to the fair value of the reporting unit based on either quoted market prices of the ordinary shares or estimated fair value using a combination of the income approach and the market approach. If the fair value of the reporting unit exceeds the carrying value of the reporting unit, goodwill is not impaired, and the Group is not required to perform further testing. If the carrying value of the reporting unit exceeds the fair value of the reporting unit, then the Group must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit’s goodwill. The fair value of the reporting unit is allocated to its assets and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit goodwill. If the carrying amount of the goodwill is greater than its implied fair value, the excess is recognized as an impairment loss.
For the six months ended June 30, 2021 and 2022, due to the slow development of Anpai Shanghai, the Group performed the two-step test for the reporting unit. In accordance with ASC 350-20, the Group recorded an impairment loss of
(f) | Impairment of Long-lived assets other than goodwill |
The Group evaluates its long-lived assets, including property and equipment and intangibles with finite lives, for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be fully recoverable. When these events occur, the Group evaluates the recoverability of long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available. The adjusted carrying amount of the assets become new cost basis and are depreciated over the assets’ remaining useful lives. Long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. For the six months ended June 30, 2022, due to the slow development of Anpai Shanghai, the Group evaluated the recoverability of long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition and determined that the fair value of intangible assets of Anpai Shanghai was
(g) | Fair value of financial instruments |
The Group applies ASC 820, Fair Value Measurements and Disclosures, (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.
ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
F-11
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
3. | SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
(g) | Fair value of financial instruments (continued) |
Level 2—Other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs which are supported by little or no market activity.
ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
The Group’s financial instruments include cash and cash equivalents, accounts receivables, accounts payable, other receivables, other payables and short-term debt. The carrying values of these financial instruments approximate their fair values due to their short-term maturities.
The Group elected the fair value option to account for its convertible loans. The Group engaged an independent valuation firm to perform the valuation. The fair value of the convertible loans as of December 31, 2021 and June 30, 2022 was RMB
As the inputs used in developing the fair value for Level 3 instruments are unobservable, and require significant management estimate, a change in these inputs could result in a significant change in the fair value measurement.
The following is a reconciliation of the beginning and ending balances for convertible loans measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of December 31, 2021 and June 30, 2022:
December 31, | June 30, | |||||
| 2021 |
| 2022 | |||
RMB | RMB | US$ | ||||
(Unaudited) | (Unaudited) | |||||
Opening balance |
| |
| |
| |
New convertible loans issued |
| |
| — |
| — |
Conversion of accounts payable to convertible loan | | — | — | |||
Conversion of convertible loans | ( | ( | ( | |||
Loss on change in fair value of convertible loan | | ( | ( | |||
Other comprehensive income -foreign exchange translations | ( | | | |||
Total |
| |
| |
| |
F-12
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
3. | SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
(h) | Revenue recognition |
The Group derives its revenues principally from customers through the Group’s cancer screening and detection test and physical checkup package services. Revenue is recognized when the Group satisfies the performance obligations in an amount of consideration to which the Group expects to be entitled to in exchange for those services. The Group evaluates the presentation of revenue on a gross or net basis based on whether it controls the services provided to customers and is the principal (i.e., “gross”), or the Group arranges for other parties to provide the service to the customers and is an agent (i.e., “net”). The Group presents value-added taxes as a reduction from revenues.
Revenue from cancer screening and detection tests
Revenue from cancer screening and detection test are primarily generated through administration of the tests to the Group’s customer constituents, the Group’s cancer screening and detection tests based on CDA technology and other cancer screening and detection technologies, such as biomarker-based tests, to its customers (primarily corporations and life insurance companies). A contract exists when the master service agreement has been executed and the customer submitting a service request, which is a placed order. The Group’s contracts have a single performance obligation which is satisfied upon rendering the cancer screening and detection tests and delivery of the cancer screening and detection test results to the customer or the customer’s employees as well as individual policy holders. The Group acts as the principal as it controls the cancer screening and detection tests before it is transferred to the customer and records revenue on a gross basis at a point in time, when the cancer screening and detection test results are delivered to the customer. The Group accrues
Revenue from physical checkup packages
The Group facilitates the procurement of physical checkup package services by corporations and life insurance companies for their employees and policy holders, respectively, from third-party physical checkup package service providers. The Group enters into contracts with corporations and life insurance companies and physical checkup service providers. The Group considers both the corporations and life insurance companies and the third-party physical checkup package service providers as its customers in this type of transaction. The Group’s performance obligation is to facilitate the corporations and life insurance companies and the third-party physical checkup package service providers to complete the purchase of physical checkup package services, which is not controlled by the Group prior to being transferred to the corporations and life insurance companies. The Group fulfills its performance obligation at a point in time when the employees and policy holders of corporations and life insurance companies, respectively, complete the physical checkups at which the Group records the net amount that it retains from such completed transaction as revenue.
The Group also enters into arrangements to deliver both cancer screening and detection tests and physical checkup package services. The Group is the principal for the cancer screening and detection tests and the agent for physical checkup package services. Revenues for cancer screening and detection tests and physical checkup are both recognized at a point in time when the performance obligation is satisfied upon delivery of the cancer screening and detection test results to the end customers and completion of physical checkup respectively. As the Group acts as both the principal and agent in the arrangement, the Group allocates the transaction price to each performance obligation on a relative stand-alone selling price basis.
F-13
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
3. | SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
(h) | Revenue recognition (continued) |
Revenue from Technology services
The Group provides a series of technology services including but not limited to market research, designing, coding, developing, testing, etc. to a client for a contractual term of two years. As the series of services are an integral part of a project of which the goal is to enable the client to produce a cancer-treatment medical device, none of the mentioned services can be isolated and identified as a distinct performance obligation. The Group concluded that the combined services in the contract constitutes a single performance obligation. The contract price is fully allocated to the single performance obligation. Revenue from technology services is recognized over time. The Group uses input methods to measure the progress toward complete satisfaction of the performance obligation. Input methods measure progress based on resources consumed or efforts expended relative to total resources expected to be consumed or total efforts expected to be expended. The completion percentage is determined by costs incurred/total costs estimated to be incurred.
Retail revenue
The Group started its retail business of selling genetic testing kits and skin-care products in fiscal 2021. Customers pay upfront and the Group delivers the ordered products. Revenue is recognized at a point in time upon delivery.
All revenues are generated in the PRC.
Contract balances
The payment terms and conditions within the Group’s contracts vary by the type of services and customer.
Contract assets relate to the Group’s conditional right to consideration for completed performance obligations under the contract. Accounts receivable are recorded when the right to consideration becomes unconditional. The Group does
In instances where the timing of revenue recognition differs from the timing of invoicing, the Group has determined that its contracts generally do not include a significant financing component.
Contract liabilities represent considerations received from corporations, life insurance companies and technology services clients in advance of satisfying the Group’s performance obligations under the contract, which are presented in “advance from customers” in the consolidated balance sheets. Revenue recognized that was included in contract liabilities at the beginning of the period was RMB
PRC Value-Added Taxes (“VAT”) and surcharges
The services of the Group are subject to value-added taxes of
F-14
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
3. | SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
(h) | Revenue recognition (continued) |
Practical expedients
The Group has applied the following practical expedients:
(i) | The transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied has not been disclosed, as substantially all of the Group’s contracts have a duration of one year or less. |
(ii) | The Group recognizes incremental costs to obtain a contract as expenses when incurred because the amortization period would be one year or less. These costs are recorded within sales and marketing expenses. |
Disaggregation of revenue
| For the six months ended June 30, | |||||
| 2021 |
| 2022 |
| 2022 | |
RMB | RMB | US$ | ||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||
Cancer screening and detection tests | |
| |
| | |
Physical checkup packages | |
| |
| | |
Technology service | — |
| |
| | |
Retail revenue | — |
| |
| | |
Total revenues | |
| |
| |
(i) | Leases |
Leases are classified at the inception date as either a capital lease or an operating lease. The Group assesses a lease to be a capital lease if any of the following conditions exist: (a) ownership is transferred to the lessee by the end of the lease term, (b) there is a bargain purchase option, (c) the lease term is at least 75% of the property’s estimated remaining economic life, or (d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and an occurrence of an obligation at the inception of the lease. The Group has no capital leases for the years presented.
The Company adopted ASU No. 2016-02—Leases (Topic 842) since January 1, 2022, using a modified retrospective transition method permitted under ASU No. 2018-11. This transition approach provides a method for recording existing leases only at the date of adoption and does not require previously reported balances to be adjusted. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. Adoption of the new standard resulted in the recording of additional lease assets and lease liabilities on the consolidated balance sheets. The standard did not materially impact our consolidated net earnings and cash flows.
(j) | Share-based compensation |
The Group accounts for share-based compensation in accordance with ASC 718, Compensation – Stock Compensation (“ASC 718”). In accordance with ASC 718, the Group determines whether an award should be classified and accounted for as a liability award or an equity award. All the Group’s share-based awards were classified as equity awards and are recognized in the consolidated financial statements based on their grant date fair values.
F-15
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
3. | SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
(j) | Share-based compensation (continued) |
The Group has elected to recognize share-based compensation using the straight-line method for all share-based awards granted with graded vesting based on service conditions. The Group accounts for forfeitures as they occur in accordance with ASU No. 2016-09, Compensation — Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting. The Black-Scholes Model were applied in determining the estimated fair value of the options granted to employees and non-employees.
(k) | Income taxes |
The Group follows the liability method of accounting for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Group records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in tax expense in the period that includes the enactment date of the change in tax rate.
The Group accounted for uncertainties in income taxes in accordance with ASC 740. Interest and penalties related to unrecognized tax benefit recognized in accordance with ASC 740 are classified in the consolidated statements of comprehensive loss as income tax expenses.
(l) | Loss per share |
Loss per share is calculated in accordance with ASC 260, Earnings per Share. Basic loss per ordinary share is computed by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
Diluted loss per share is calculated by dividing net loss attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of the ordinary shares issuable upon the conversion of the share options, using the treasury stock method. Ordinary share equivalents are excluded from the computation of diluted loss per share if their effects would be anti-dilutive. Basic and diluted loss per ordinary share is presented in the Group’s consolidated statements of comprehensive loss.
The rights, including the liquidation and dividend rights, of the holders of our Class A and Class B ordinary shares are identical, except with respect to voting. Each Class A ordinary share is entitled to
The Group did not include share options in the computation of diluted earnings per share for the six months ended June 30, 2021 and 2022, because those share options were anti-dilutive..
F-16
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
3. | SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
(m) | Risks, Uncertainties and Concentrations |
COVID-19
Beginning in late 2019, an outbreak of a novel strain of coronavirus (COVID-19) first emerged in China and has spread globally. In March 2020, the World Health Organization (“WHO”) declared COVID-19 as a pandemic. Governments in affected countries imposed travel bans, quarantines and other emergency public health measures, which caused material disruption to businesses globally resulting in an economic slowdown.
A new COVID-19 subvariant (Omicron) outbreak hit China in March 2022, spreading more quickly and easily than previous strains. As a result, a new round of lockdowns, quarantines, and travel restrictions were imposed upon different provinces or cities in China by the relevant local government authorities. The Company temporarily closed its Shanghai office and suspended offline marketing activities on April 1, 2022 as well. As required by the local authorities in Shanghai, employees located in Shanghai worked remotely. Beginning June 1, 2022, the Company reopened its Shanghai office and resumed offline marketing activities. For the six months ended June 30, 2022, the COVID-19 pandemic had an adverse impact on the Company’s financial positions and operating results. During the six months ended June 30, 2022, the Company’s revenue decreased to RMB
Starting in December 2022, China announced an easing of its COVID-19 restriction policy. Authorities downgraded the management of COVID-19 from category A to category B and lifted the restriction measures related to the COVID-19 pandemic, such as the reduction in travel and tourists, conventions and business events, closures and restrictions on business operations. The reopening of China’s economy from the stringent COVID-19 restrictions is expected to boost economic growth in Asia and beyond, but management is unable at this time to determine the future impact of the COVID-19 pandemic on its future operations, financial condition, liquidity, and results of operations.
Concentration of credit risk
Financial instruments that potentially subject the Group to significant concentration of credit risk consist primarily of cash and cash equivalents and accounts receivables. As of December 31, 2021 and June 30, 2022, the aggregate amounts of cash and cash equivalents of RMB
Accounts receivables, unsecured and denominated in RMB, are exposed to credit risk. As of December 31, 2021, two customers accounted for
F-17
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
3. | SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
(m) | Risks, Uncertainties and Concentrations (continued) |
Business, customer, supplier, political and economic risks
The Group participates in a dynamic industry and believes that changes in any of the following areas could have a material adverse effect on the Group’s future financial position, results of operations or cash flows: changes in the overall demand for services; competitive pressures due to new entrants; advances and new trends in industry standards; changes in certain strategic relationships or customer relationships; regulatory considerations; intellectual property considerations; and risks associated with the Group’s ability to attract and retain employees necessary to support its growth. The Group’s operations could be also adversely affected by significant political, economic and social uncertainties in the PRC. The Group is also reliant on contract manufacturers that manufacture key components of its CDA device used in its diagnostic testing.
For the six months ended June 30, 2021, two customers accounted for
For the six months ended June 30, 2021, four suppliers accounted for
As of December 31, 2021, four suppliers accounted for
Currency convertibility risk
A significant portion of the Group’s expenses, assets and liabilities are denominated in RMB. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China (the “PBOC”). However, the unification of the exchange rates does not imply that the RMB may be readily convertible into U.S. dollar or other foreign currencies. All foreign exchange transactions continue to take place either through the PBOC or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approvals of foreign currency payments by the PBOC or other institutions require submitting a payment application form together with relevant documents.
Additionally, the value of the RMB is subject to changes in central government policies and international economic and political developments affecting supply and demand in the PRC foreign exchange trading system market.
Foreign currency exchange rate risk
From July 21, 2005, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. For U.S. dollar against RMB, there was depreciation of
F-18
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
3. | SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED) |
(m) | Risks, Uncertainties and Concentrations (continued) |
The functional currency of the Company and AnPac US is the US$ and the reporting currency of the Company and AnPac US the RMB. Most of the revenues and costs of the Group are denominated in RMB, while a portion of cash and cash equivalents and convertible loans are denominated in US$. It is difficult to predict how market forces or PRC or the U.S. government policy may impact the exchange rate between the Renminbi and the US$ in the future. Any significant fluctuation of the valuation of RMB may materially affect the Group’s cash flows, revenues, earnings and financial position, and the value of any dividends payable on the ADS in US$.
(n) | Recent accounting pronouncements |
The Group is an emerging growth company (“EGC”) as defined by the Jumpstart Our Business Startups Act (“JOBS Act”). The JOBS Act provides that an EGC can take advantage of extended transition periods for complying with new or revised accounting standards. This allows an EGC to delay adoption of certain accounting standards until those standards would otherwise apply to private companies. The Group elected to take advantage of the extended transition periods. However, this election will not apply should the Group cease to be classified as an EGC.
In October 2020, the FASB issued ASU 2020-10, “Codification Improvements,” this ASU affects a wide variety of Topics in the Codification. They apply to all reporting entities within the scope of the affected accounting guidance. More specifically, this ASU, among other things, contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the amendments arose because the FASB provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option only was included in the Other Presentation Matters Section (Section 45) of the Codification. The option to disclose information in the notes to financial statements should have been codified in the Disclosure Section as well as the Other Presentation Matters Section (or other Section of the Codification in which the option to disclose in the notes to financial statements appears). Those amendments are not expected to change current practice. The amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early application of the amendments is permitted for and varies based on the entity. The amendments should be applied retrospectively and at the beginning of the period that includes the adoption date. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
F-19
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
4. | OTHER CURRENT ASSETS, NET |
Other current assets consist of the following:
December 31, | June 30, | |||||
| 2020 |
| 2022 | |||
RMB | RMB |
| US$ | |||
(Unaudited) | (Unaudited) | |||||
Tax recoverable |
| |
| |
| |
Deposits and others | | | | |||
| | | ||||
Allowance for doubtful accounts- deposits and others | ( | ( | ( | |||
Total |
| |
| |
| |
Movement in the allowances for doubtful debts were as follows:
For the year ended | For the six months ended | |||||
December 31, | June 30, | |||||
| 2021 |
| 2022 | |||
RMB | RMB |
| US$ | |||
(Unaudited) | (Unaudited) | |||||
Balance at beginning of period | | | | |||
Additional provision | | | | |||
Balance at end of period | | | |
5. | INTANGIBLE ASSETS, NET |
Intangible assets, net consist of the following:
December 31, |
| June 30, | ||||
2021 | 2022 | |||||
| RMB |
| RMB |
| US$ | |
| (Unaudited) |
| (Unaudited) | |||
Software |
| |
| |
| |
Customer relationship |
| |
| |
| |
Medical license |
| |
| |
| |
Total |
| |
| |
| |
Less: Accumulated amortization |
| ( |
| ( |
| ( |
Less: Impairment-medical license |
| ( |
| ( |
| ( |
Less: Impairment-Customer relationship |
| — |
| ( |
| ( |
Intangible assets, net |
| |
| |
| |
Amortization expense for six months ended June 30, 2021 and 2022 amounted to RMB
F-20
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
5. | INTANGIBLE ASSETS, NET (CONTINUED) |
The estimated aggregate amortization expense for each of the five succeeding years is as follows:
Twelve months ending June 30, |
| RMB |
2023 |
| |
2024 |
| |
2025 |
| |
2026 |
| |
2027 |
| |
Thereafter |
| |
Total |
| |
6. LONG-TERM INVESTMENTS, NET
Long-term investments, net consisted of the following:
| December 31, | June 30, | ||||
| 2021 |
| 2022 | |||
RMB | RMB | US$ | ||||
(Unaudited) | (Unaudited) | |||||
Equity method investments |
|
|
|
|
| |
AnPac Beijing Health Management Co., Ltd (“AnPac Beijing”) | |
| |
| |
Equity method investments
On October 19, 2017, the Company and third parties established AnPac Beijing, of which the Company initially owned
On May 15, 2021, the Company and third parties established Advanced Life Therapeutics Co., Ltd. (“Advanced Life”), of which the Company owned
F-21
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
7. SHORT-TERM DEBTS
December 31, | June 30, | |||||
| 2021 |
| 2022 | |||
RMB | RMB | US$ | ||||
(Unaudited) | (Unaudited) | |||||
Short-term bank and other borrowings (i) |
| |
| |
| |
Convertible loan (ii) |
| |
| |
| |
Total |
| |
| |
| |
(i) The short-term borrowings of RMB
(ii) On May 31, 2021, the Company issued a convertible note in the principal amount of RMB
On July 22, 2021, the Company issued convertible debentures (the “Convertible Debentures”) to certain investors in a registered direct offering in an aggregate principal amount of US $
For the six months ended June 30, 2021 and 2022, due to the change in fair value of the Convertible Debentures, the Company recognized unrealized losses of RMB
F-22
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
8. | LEASE |
The Group has several operating leases for offices. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Effective on January 1, 2022, the Group adopted the new lease accounting standard using a modified retrospective transition method which allowed the Group not to recast comparative periods presented in its consolidated financial statements. In addition, the Group elected the package of practical expedients, which allowed the Group to not reassess whether any existing contracts contain a lease, to not reassess historical lease classification as operating or finance leases, and to not reassess initial direct costs. The Group has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. The Group combines the lease and non-lease components in determining the ROU assets and related lease obligation. Adoption of this standard resulted in the recording of operating lease ROU assets and corresponding operating lease liabilities as disclosed below and had no impact on accumulated deficit as of January 1, 2022. ROU assets and related lease obligations are recognized at commencement date based on the present value of remaining lease payments over the lease term.
Supplemental balance sheet information related to operating leases was as follows:
As of | ||
June 30, 2022 | ||
| RMB | |
(Unaudited) | ||
Right-of-use assets, net |
| |
Operating lease liabilities - current |
| |
Operating lease liabilities - non-current |
| |
Total operating lease liabilities |
| |
The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of June 30, 2022:
Remaining lease term and discount rate:
Weighted average remaining lease term (years) |
|
| |
Weighted average discount rate |
| | % |
The following is a schedule of maturities of lease liabilities are as follows:
Twelve months ending June 30, |
| RMB |
2023 |
| |
2024 |
| |
2025 |
| |
2026 |
| |
2027 |
| |
2028 |
| |
Thereafter |
| |
Total future minimum lease payments |
| |
Less: imputed interest |
| |
Total |
| |
F-23
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
9. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
December 31, | June 30, | |||||
| 2021 |
| 2022 | |||
RMB | RMB | US$ | ||||
(Unaudited) | (Unaudited) | |||||
Salary and welfare payable |
| |
| |
| |
Payable for acquisition of noncontrolling interests |
| |
| |
| |
Accrued rental |
| |
| |
| |
Accrued expenses |
| |
| |
| |
Value added tax and other taxes payable |
| |
| |
| |
Payable for property and equipment |
| |
| |
| |
Accrued utilities |
| |
| |
| |
Other payables |
| |
| |
| |
Total |
| |
| |
| |
10. | SHAREHOLDERS’ EQUITY |
Ordinary Shares
On October 29, 2019, the board of directors of the Company (the "Board") approved the re-designation of the authorized share capital of
As of December 31, 2021 and June 30, 2022, the Company is authorized to issue
Conversion of convertible loans
On February 17, 2021, the Group issued
F-24
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
10. | SHAREHOLDERS’ EQUITY (CONTINUED) |
Conversion of convertible loans (continued)
On March 16, 2022, the Company issued
On April 27,2022, the Company issued
Shares issued for services
On July 28, 2020, the Group entered into a service agreement with a public relation (“PR”) firm for its public relations services. Pursuant to the service agreement, the Group required to pay
On June 1, 2022, the Group entered into a service agreement with a PR. Pursuant to the service agreement, the Group required to pay US$
Shares issued for reserve
On July 30, 2020, the Company deposited
Private placements
On February 20, 2021, the Company entered into a share purchase agreement with Dr. Yu, under which Dr. Yu purchased
On February 21, 2021, the Company entered into a share subscription agreement with a third-party Chinese investor, under which the Company issued
F-25
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
10.SHAREHOLDERS’ EQUITY (CONTINUED)
Private placements (continued)
On May 12, 2021, the Company entered into a share subscription agreement with a third-party Chinese investor, under which the Group issued
On June 22, 2021, the Company entered into a share subscription agreement with a third-party Chinese investor, under which the Group issued
On September 22, 2021, Dr. Yu executed an Offset Agreement with the Company, pursuant to which the purchase price associated with Dr Yu’s options to purchase
On November 15, 2021, the Company closed a registered direct offering of
On March 16, 2022, the Company entered into a share subscription agreement with a third-party investor, under which the Company issued
On March 29, 2022, the Company entered into a share subscription agreement with a third-party Chinese investor, under which the Company issued
F-26
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
10. | SHAREHOLDERS’ EQUITY (CONTINUED) |
On May 27, 2022, the Company entered into investment agreements with
Transfer of Class B ordinary shares to Class A ordinary shares
During the year ended December 31, 2021,
11. | SHARE BASED COMPENSATION |
On October 31, 2019, the Board and the Company’s shareholders approved the 2019 Share Incentive Plan (“2019 Plan”) which authorized the compensation committee or such other committee to grant share options to purchase
During the year ended December 31, 2020, the Company issued options to purchase
During the year ended December 31, 2021, the Company issued options to purchase
F-27
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
11. | SHARE BASED COMPENSATION (CONTINUED) |
During the six months ended June 30, 2022, the Company issued options to purchase
Employees
The options granted to employees are measured based on the grant date fair value of the equity instrument. They are accounted for as equity awards and contain only service vesting conditions. The following table summarized the Group’s employee share option activities:
Weighted | ||||||||||
Weighted | Average | |||||||||
Weighted | Average | Remaining | Aggregate | |||||||
Number of | Average | Grant date | Contractual | Intrinsic | ||||||
| Options |
| Exercise Price |
| Fair Value |
| Term |
| Value | |
| US$ per | US$ per | ||||||||
option | option | Years | US$ | |||||||
Share options outstanding at December 31, 2021 |
| |
| |
| |
|
| | |
Granted |
| | | | — | — | ||||
Exercised |
| ( | — | — | — | — | ||||
Share options outstanding at June 30, 2022 |
| | | | | |||||
Vested and exercisable at June 30, 2022 |
| | | | |
The aggregate intrinsic value in the table above represents the difference between the exercise price of the awards and the fair value of the underlying Class A ordinary shares at each reporting date, for those awards that had exercise price below the estimated fair value of the relevant Class A ordinary shares .
For the six months ended June 30, 2021 and 2022, the total fair value of the equity awards vested were RMB
F-28
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
11. | SHARE BASED COMPENSATION (CONTINUED) |
Non-employees
The options granted to non-employees are accounted for as equity awards with service and/or performance vesting conditions. The following table summarized the Group’s nonemployee share option activity:
Weighted | ||||||||||
Weighted | Weighted | Average | ||||||||
Average | Average | Remaining | Aggregate | |||||||
Number of | Exercise | Grant date | Contractual | Intrinsic | ||||||
| Options |
| Price |
| Fair Value |
| Term |
| Value | |
US$ per | US$ per | |||||||||
option | option | Years | US$ | |||||||
Share options outstanding at December 31, 2021 |
| | |
| |
|
| | ||
Granted |
| | — |
| | — | — | |||
Exercised |
| ( |
| — |
| — | — | — | ||
Share options outstanding at June 30, 2022 |
| | |
| |
|
| | ||
Vested and exercisable at June 30, 2022 |
| | | | |
The aggregate intrinsic value in the table above represents the difference between the exercise price of the awards and the fair value of the underlying Class A ordinary shares at each reporting date, for those awards that had exercise price below the estimated fair value of the relevant Class A ordinary shares.
The total fair value of the equity awards vested during the six months ended June 30, 2021 and 2022 were RMB
Fair value of options
The Group used the Black-Scholes simplified method instead of binomial model for valuation of new options issued for the six months ended June 30, 2021 and 2022. The assumptions used to value the share options granted to employees and nonemployee were as follows:
| For the six months ended June 30, | |||
2021 |
| 2022 | ||
Risk-free interest rate |
| |||
Expected volatility range |
| |||
Fair market value per ordinary share as at grant dates |
| US$ |
| US$ |
F-29
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
11. | SHARE BASED COMPENSATION (CONTINUED) |
The following table sets forth the amount of share-based compensation expense included in each of the relevant financial statement line items:
For the six months ended June 30, | ||||||
| 2021 |
| 2022 |
| 2022 | |
RMB | RMB | US$ | ||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||
Cost of revenues |
| |
| — |
| — |
Selling and marketing expenses |
| |
| |
| |
Research and development expenses |
| |
| |
| |
General and administrative expenses |
| |
| |
| |
Total share-based compensation expenses |
| |
| |
| |
12. | INCOME TAXES |
BVI
The Company is incorporated in the BVI and conducts its primary business operations through its subsidiaries in the PRC and the U.S. Under the current laws of the BVI, the Company is not subject to tax on income or capital gains. Additionally, upon payments of dividends by the Company to its shareholders, no BVI withholding tax will be imposed.
PRC
The Group’s subsidiaries in the PRC are subject to the statutory rate of
Dividends, interests, rent and royalties payable by the Group’s PRC subsidiaries, to non-PRC resident enterprises, and proceeds from any such non-resident enterprise investor’s disposition of assets (after deducting the net value of such assets) shall be subject to
F-30
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
12. | INCOME TAXES (CONTINUED) |
United States
AnPac US is subject to the U.S. federal corporate income tax at a rate of
The Group’s loss before income taxes consisted of:
For the six months ended June 30, | ||||||
| 2021 |
| 2022 |
| 2022 | |
RMB | RMB | US$ | ||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||
Non-PRC |
| ( |
| ( |
| ( |
PRC |
| ( |
| ( |
| ( |
Total |
| ( |
| ( |
| ( |
The current and deferred components of income tax benefit appearing in the consolidated statements of comprehensive income are as follows:
For the six months ended June 30, | ||||||
| 2021 |
| 2022 |
| 2022 | |
RMB | RMB | US$ | ||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||
Current tax provision |
| — |
| ( |
| ( |
Deferred tax benefit |
| |
| |
| |
Total |
| |
| |
| |
The reconciliation of tax computed by applying the statutory income tax rate of
For the six months ended June 30, | ||||||
| 2021 |
| 2022 |
| 2022 | |
RMB | RMB | US$ | ||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||
Loss before income taxes |
| ( |
| ( |
| ( |
Income tax benefit computed at the statutory income tax rate at |
| |
| |
| |
Non-deductible expenses |
| ( |
| ( |
| ( |
International rate differences |
| ( |
| ( |
| ( |
Preferential tax rate differences |
| ( |
| ( |
| ( |
Change in valuation allowance |
| ( |
| ( |
| ( |
Income tax benefit |
| |
| |
| |
F-31
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
12. INCOME TAXES (CONTINUED)
Deferred Taxes
The significant components of deferred taxes were as follows:
December 31, | June 30, | |||||
| 2021 |
| 2022 |
| 2022 | |
RMB | RMB | US$ | ||||
(Unaudited) | (Unaudited) | |||||
Deferred tax assets: |
|
|
|
|
|
|
Net loss carryforward |
| |
| |
| |
Accrued expenses |
| |
| |
| |
Provision for doubtful accounts | | | | |||
Valuation allowance |
| ( |
| ( |
| ( |
Total deferred tax assets. |
| — |
| — |
| — |
Deferred tax liabilities: |
|
|
| |||
Long-lived assets arising from acquisitions |
| ( |
| — |
| — |
Total deferred tax liabilities. |
| ( |
| — |
| — |
The Group operates through several subsidiaries. A valuation allowance is considered for each of the entities.
Realization of the net deferred tax assets is dependent on factors including future reversals of existing taxable temporary differences and adequate future taxable income, exclusive of reversing deductible temporary differences and tax loss carry forwards. The Group evaluates the potential realization of deferred tax assets on an entity-by-entity basis. As of December 31, 2021 and June 30, 2022, each entity within the Group were in cumulative loss position, valuation allowances were provided against deferred tax assets in entities where it was determined it was more likely than not that the benefits of the deferred tax assets will not be realized.
As of June 30, 2022 the Group had net operating loss carryforwards of RMB
F-32
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
13. RELATED PARTY TRANSACTIONS AND BALANCES
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. The related parties that had transactions for the six months ended June 30, 2021 and 2022, or balances with the Group as of December 31, 2021 and June 30, 2022 consisted of:
Related Party |
| Nature of the party |
| Relationship with the Group |
Dr. Yu |
| Individual |
| Co-Founder and Chairman with majority voting control* |
Ms. Lin Yu |
| Individual |
| Director of the Group* |
Anpai (Shanghai) Healthcare Management and Consulting Co., Ltd. (“Anpai”) |
| Health management |
| Equity investee of the Group |
AnPac Beijing |
| Health management |
| Equity investee of the Group |
Jiaxing Zhijun Sihang Investment Partnership Enterprises (limited partnership) (“Jiaxing Zhijun”) |
| Private equity investment |
| Shareholder |
Jiaxing Zhijun Investment Management Co., Ltd. (“Zhijun”) |
| Investment management |
| General partner of the shareholder |
CRS |
| Investor |
| Controlled by Dr. Chris Chang Yu |
Jiangsu AnPac |
| Health management |
| Equity investee of the Group |
Shanghai Yulin Information Technology Co., Ltd. (“Shanghai Yulin”) |
| Information technology |
| Controlled by Ms. Lin Yu |
Weidong Dai |
| Individual |
| Director of the Group |
Xuedong Du |
| Individual |
| Director of the Group |
Rouou Ying |
| Individual |
| Supervisor of AnPac Lishui |
Xing Pu |
| Individual |
| Director of AnPac Lishui |
Shanghai Muqing Industrial Co., Ltd. (“Shanghai Muqing Industrial”) |
| Investor |
| Equity investee of AnPac Muqing |
Shanghai Muqing Jiahe Healthcare Management Co., Ltd. (Shanghai Muqing Jiahe) |
| Health management |
| Controlled by Shanghai Muqing industrial |
Advanced Life |
| Investor |
| The Group has a |
Annadi Life Therapeutics Co., Ltd (“Annadi”) |
| Health management |
| Controlled by Advance |
* Dr. Yu resigned from his position as the Chief Executive Officer (“CEO”) of the Company and Chairman of the Board on April 6, 2022 and was appointed as Co-Chairman and Co-CEO in May 2022. Ms. Lin Yu resigned from her position as director of the Board on July 19, 2021.
F-33
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
13. | RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED) |
(a) | Related party balances |
As of December 31, | As of June 30, | |||||
| 2021 |
| 2022 |
| 2022 | |
RMB | RMB | US$ | ||||
(Unaudited) | (Unaudited) | |||||
Due from related parties: |
|
|
|
|
|
|
Shanghai Yulin | | | | |||
Shanghai Muqing Jiahe | | | | |||
AnPac Beijing | | — | — | |||
Xuedong Du | | | | |||
Annadi | — | | | |||
Rouou Ying |
| — |
| |
| |
Total | | | | |||
Allowance | ( | ( | ( | |||
Due from related parties, net | | | |
As of December 31, | As of June 30, | |||||
| 2021 |
| 2022 |
| 2022 | |
RMB | RMB | US$ | ||||
(Unaudited) | (Unaudited) | |||||
Due to related parties: |
|
|
|
|
|
|
CRS |
| — |
| |
| |
Zhijun |
| |
| |
| |
Jiaxing Zhijun | | | | |||
Jiangsu AnPac | | | — | |||
Weidong Dai | | | — | |||
AnPac Beijing | — | | | |||
Shanghai Muqing Industrial | | | | |||
Advanced Life | | — | — | |||
Annadi | | — | — | |||
Total |
| |
| |
| |
F-34
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
13. | RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED) |
(b) | Related party transactions |
For the six months ended June 30, 2021 and 2022, related party transactions consisted of the following:
For the six months ended June 30, | ||||||
| 2021 |
| 2022 |
| 2022 | |
RMB | RMB | US$ | ||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||
Revenue received from AnPac Beijing |
| — | — |
| — | |
Revenue received from Jiangsu AnPac |
| | |
| — | |
Revenue received from Anpai. |
| | — |
| — | |
Revenue received from Annadi |
| — | |
| | |
Consulting service received from AnPac Beijing |
| | |
| | |
Consulting service received from Jiangsu AnPac | | — | — | |||
Rent from Shanghai Muqing industrial | | | | |||
Interest expense to Jiaxing Zhijun | | — | — | |||
Repayment of loan to CRS | | — | — |
(c) | Guarantor |
The Group’s short-term borrowings of RMB
14. | COMMITMENTS AND CONTINGENCIES |
(a) | Litigation |
In the ordinary course of the business, the Group is subject to periodic legal or administrative proceedings. The Group accrues the liability when the loss is probable and reasonably estimable. On October 14, 2020, Cao Wang (a former employee) filed a lawsuit against Dr. Chis Chang Yu and the Company for a debt dispute of approximately RMB
15. SUBSEQUENT EVENTS
On August 2, 2022, the Company’s board passed a preliminary plan to divest Changwei System Technology (Shanghai) Co., Ltd., a subsidiary focusing on research and development. On September 1, 2022, the Company sold its
On September 25, 2022, the Company entered into an investment agreement with Shanghai Stonedrop Investment Management center (an existing shareholder of the Company) who agreed to invest a total of US$
F-35
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
the investment agreement signed on April 2, 2022. The Company has not received any money for this investment agreement till the filing date.
15. SUBSEQUENT EVENTS (CONTINUED)
On September 25, 2022, the Company signed an investment agreement with Dr. Yu, who agreed to invest a total of US $
On September 26, 2022, the Company signed investment agreements with
On October 3, 2022, the Company announced changes to its Board composition and management team. Mr. Haohan Xu was appointed as a director, Co-Chairperson of the Board and Co-Chief Executive Officer of the Company. Ms. Xiaoyu Li was appointed as a director and as Co-Chief Financial Officer of the Company. Mr. Tianruo (Robert) Pu was appointed as a director, Chairperson of the Audit Committee and member of the Compensation committee as well as the Nominating and Corporate Governance Committee. Mr. Zhigang (Frank) Zhao was appointed as a director, Chairperson of the Compensation Committee and member of the Audit Committee as well as the Nominating and Corporate Governance Committee. Mr. Honggang (Harvey) Tian was appointed as a director, chairperson of the nominating and corporate governance committee and member of the audit committee as well as compensation committee. In relation to the above appointments, each of Xing Pu, Ren Luo, Jianhua Shao and Guo Feng resigned as director and/or officers of the Company.
On October 12, 2022, the Company and Hunan Weitou Scientific Technology Co., Ltd. (“Weitou”) agreed to cancel the investment agreement signed on April 4, 2022, in which Weitou agreed to invest $
On October 18, 2022, the Company announced that its Board authorized it to change the ratio of the Company’s ADSs to its Class A ordinary shares from one (1) ADS representing one (1) Class A ordinary share to
On January 13, 2023, the Company received a Staff determination letter (the “Letter”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company of the Staff’s determination to delist the Company’s securities from The Nasdaq Capital Market due to the Company’s failure to comply with the minimum $
In December 2022 and January 2023, the Company signed definitive investment agreements with several third-party investors. The investors agreed to purchase
F-36
ANPAC BIO-MEDICAL SCIENCE CO., LTD.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of RMB and US$, except for number of shares and per share data)
F-37