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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

For the month of October 2021

Commission File Number: 001-39137

AnPac Bio-Medical Science Co., Ltd.

(Registrant’s name)

801 Bixing Street, Bihu County

Lishui, Zhejiang Province 323006

The People’s Republic of China

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F  Form 40-F 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b) (1): 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b) (7): 

Incorporation By Reference

This report on Form 6-K is hereby incorporated by reference into the Company’s registration statements on Form S-8 (file No. 333-259748), Form F-1 (file No. 333-249170), Form F-3 (file No. 333-256630), Form S-8 (file No. 333-238679).

Explanatory Note:

The Registrant is filing this Report on Form 6-K to report its financial results for the six months ended June 30, 2021 and to discuss its recent corporate developments.

Attached as exhibits to this Report on Form 6-K are:

(1)the unaudited condensed interim consolidated financial statements and related notes as Exhibit 99.1;
(2)Management’s Discussion and Analysis of Financial Condition and Results of Operations as Exhibit 99.2;
(3)the press release dated October 1, 2021; and
(4)Interactive Data File disclosure as Exhibit 101 in accordance with Rule 405 of Regulation S-T.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements in this current report with respect to the Company’s current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of the Company. Forward-looking statements include, but are not limited to, those statements using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “aim,” “intend,” “seek,” “may,” “might,” “could” or “should,” and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s assumptions, judgments and beliefs in light of the information currently available to it. The Company cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, including but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission. Therefore, investors should not place undue reliance on such forward-looking statements. Actual results may differ significantly from those set forth in the forward-looking statements.

All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

Exhibit Index:

99.1

Unaudited Consolidated Financial Statements and Related Notes for the Six Months Ended June 30, 2021 and 2020

99.2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

99.3

Press release dated October 1, 2021 (previously filed)

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

104.

Cover Page Interactive Data File — the cover page XBRL tags are embedded within the Exhibit 101 Inline XBRL document set

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

AnPac Bio-Medical Science Co., Ltd.

 

(Registrant)

 

 

Date: October 12, 2021

By:

/s/ Chris Chang Yu

Name:

Dr. Chris Chang Yu

Title:

Chairman of the Board of Directors and Chief Executive Officer

0001786511--12-312021Q2false6-KAnPac Bio-Medical Science Co., Ltd.2021-06-3091926601322203427731002863100110.010.0113222034919266027731002863100P0Y

Table of Contents

Exhibit 99.1

ANPAC BIO-MEDICAL SCIENCE CO., LTD.

INDEX TO UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

    

Unaudited condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020

F-2

Unaudited condensed consolidated statements of operations and comprehensive loss for the six months ended June 30, 2021 and 2020

F-3

Unaudited condensed consolidated statements of shareholders’ equity for the six months ended June 30, 2020

F-4

Unaudited condensed consolidated statements of shareholders’ equity for the six months ended June 30, 2021

F-5

Unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020

F-6

Notes to unaudited condensed consolidated financial statements

F-7-F-32

F-1

Table of Contents

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, 2020

June 30, 2021

June 30, 2021

    

RMB

    

RMB

    

US$

(Unaudited)

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

  

3,016

8,579

1,329

Advances to suppliers

 

5,588

 

5,043

 

781

Accounts receivable, net

 

7,792

 

10,114

 

1,566

Amounts due from related parties

 

1,277

 

8,262

 

1,280

Inventories, net

 

312

 

451

 

70

Other current assets, net

 

3,303

 

8,260

 

1,280

Total current assets

 

21,288

 

40,709

 

6,306

Property and equipment, net

 

19,267

 

19,466

 

3,015

Land use rights, net

 

1,166

 

1,152

 

178

Intangible assets, net

 

4,596

 

4,293

 

665

Goodwill

 

2,223

 

2,223

 

344

Long-term investments, net

 

883

 

670

 

104

Other assets

 

464

 

459

 

71

TOTAL ASSETS.

 

49,887

 

68,972

 

10,683

LIABILITIES AND SHAREHOLDERS’ DEFICIT

 

 

  

 

  

Current liabilities:

 

  

 

  

 

  

Short-term debt

 

8,232

 

11,674

 

1,808

Accounts payable

 

2,127

 

1,209

 

186

Advances from customers

 

3,682

 

5,091

 

788

Amounts due to related parties

 

4,130

 

1,220

 

189

Accrued expenses and other current liabilities

 

25,353

 

27,121

 

4,201

Total current liabilities

 

43,524

 

46,315

 

7,172

Deferred tax liabilities

 

1,045

 

1,001

 

155

Other long-term liabilities

 

2,041

 

1,121

 

174

TOTAL LIABILITIES.

 

46,610

 

48,437

 

7,501

Commitments and contingencies

 

  

 

  

 

  

Shareholders’ equity:

  

  

  

Class A Ordinary shares (US$0.01 par value per share; 70,000,000 shares authorized, 9,192,660 and 13,222,034 shares issued and outstanding as of December 31, 2020 and June 30, 2021, respectively)

 

618

 

879

 

136

Class B Ordinary shares (US$0.01 par value per share; 30,000,000 authorized, 2,863,100 and 2,773,100 shares issued and outstanding as of December 31, 2020 and June 30, 2021)

191

185

29

Additional paid-in capital

 

354,295

 

429,523

 

66,525

Accumulated deficit

 

(356,951)

 

(413,987)

 

(64,118)

Accumulated other comprehensive income

 

4,795

 

4,259

 

660

Total AnPac Bio-Medical Science Co., Ltd. shareholders’ equity

 

2,948

 

20,859

 

3,232

Noncontrolling interests

 

329

 

(324)

 

(50)

Total shareholders’ equity

 

3,277

 

20,535

 

3,182

TOTAL LIABILITIES AND EQUITY

 

49,887

 

68,972

 

10,683

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-2

Table of Contents

ANPAC BIO-MEDICAL SCIENCE CO., LTD.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OPERATIONS OF COMPREHENSIVE LOSS

(Amounts in thousands of RMB and US$, except for number of shares and per share data)

Six Months Ended June 30,

2020

2021

2021

   

RMB

   

RMB

   

US$

Revenues:

  

  

  

Cancer screening and detection tests

 

4,036

 

9,240

 

1,431

Physical checkup packages, net

 

15

 

16

 

2

Total revenues

 

4,051

 

9,256

 

1,433

Cost of revenues

 

(2,214)

 

(3,574)

 

(554)

Gross Profit

 

1,837

 

5,682

 

879

Operating expenses:

 

 

 

Selling and marketing

 

(4,673)

 

(10,812)

 

(1,675)

Research and development

 

(7,433)

 

(5,616)

 

(870)

General and administrative

 

(49,825)

 

(41,570)

 

(6,438)

Impairment of long-term investments

(820)

Loss from operations

 

(60,914)

 

(52,316)

 

(8,104)

Non-operating income and expenses:

 

 

 

Interest expense, net

 

(517)

 

(2,220)

 

(344)

Foreign exchange loss, net

 

(2,045)

 

(173)

 

(27)

Share of net gain (loss) in equity method investments

 

108

 

(120)

 

(19)

Other (expense) income, net

 

(33)

 

1,442

 

223

Change in fair value of convertible debt

7,289

(4,346)

(673)

Loss before income taxes

 

(56,112)

 

(57,733)

 

(8,944)

Income tax benefit

 

35

 

44

 

7

Net loss

 

(56,077)

 

(57,689)

 

(8,937)

Net loss attributable to noncontrolling interests

 

(18)

 

(653)

 

(101)

Net loss attributable to ordinary shareholders

 

(56,059)

 

(57,036)

 

(8,836)

Loss per share:

 

 

 

Ordinary shares - basic and diluted

(5.12)

(4.58)

(0.71)

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

 

 

 

Ordinary shares - basic and diluted

10,952,271

12,453,065

12,453,065

Net loss

(56,077)

(57,689)

(8,937)

Other comprehensive income, net of tax:

 

 

 

Fair value change relating to Company’s own credit risk on convertible loan

(108)

Foreign currency translation differences

 

3,572

 

(536)

 

(83)

Total comprehensive loss

 

(52,613)

 

(58,225)

 

(9,020)

Total comprehensive loss attributable to noncontrolling interests

 

(18)

 

(653)

 

(101)

Total comprehensive loss attributable to ordinary shareholders

 

(52,595)

 

(57,572)

 

(8,919)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-3

Table of Contents

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

AnPacBio-

Medical

Science Co.,

Accumulated

Ltd.

Additional

Other

Shareholders’

    

Class A Ordinary Shares

     

Class B Ordinary Shares

    

Paid-in

    

Accumulated

    

Comprehensive

    

Equity

    

Noncontrolling

    

Shares

    

Amount

Shares

     

Amount

Capital

Deficit

(Loss) Income

(Deficit)

interest

Total Equity

Balance at January 1, 2020

7,004,900

466

2,863,100

191

257,736

(276,476)

2,110

(15,973)

49

(15,924)

Net loss

 

 

 

 

(56,059)

 

 

(56,059)

 

(18)

 

(56,077)

Issuance of ordinary shares, net of offering costs

 

1,333,360

90

 

 

75,099

 

 

 

75,189

 

 

75,189

Share based compensation

17,548

17,548

17,548

Fair value change relating to Company’s own credit risk on convertible loan

(108)

(108)

(108)

Foreign currency translation differences

 

 

 

 

 

3,572

 

3,572

 

 

3,572

Capital contribution from noncontrolling interest holders

 

 

 

 

 

 

 

370

 

370

Balance at June 30, 2020 (unaudited)

 

8,338,260

556

 

2,863,100

 

191

350,383

 

(332,535)

 

5,574

 

24,169

 

401

 

24,570

Balance at June 30, 2020 (US$)

 

79

 

 

27

49,593

 

(47,067)

 

789

 

3,421

 

57

 

3,478

F-4

Table of Contents

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

AnPacBio-

Medical

Accumulated

Science Co.,

Additional

Other

Ltd.

Class A Ordinary Shares

Class B Ordinary Shares

Paid-in

Accumulated

Comprehensive

Shareholders’

Noncontrolling

Total

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Deficit

    

(Loss) Income

    

Equity

    

interest

    

Equity

Balance at January 1, 2021

 

9,192,660

 

618

 

2,863,100

 

191

 

354,295

 

(356,951)

 

4,795

 

2,948

 

329

 

3,277

Net loss

 

 

 

 

 

 

(57,036)

 

 

(57,036)

 

(653)

 

(57,689)

Issuance of shares in private placements, net of offering costs

 

1,243,774

 

80

 

 

 

33,239

 

 

 

33,319

 

 

33,319

Issuance shares for exercise of stock options

 

640,600

 

41

 

 

 

7,767

 

 

 

7,808

 

 

7,808

Issuance shares for exercise of stock options*

 

55,000

 

4

 

 

 

(4)

 

 

 

 

 

Issuance shares for convertible loans

 

2,000,000

 

130

 

 

 

(130)

 

 

 

 

 

Conversion of convertible loans

 

 

 

 

 

18,459

 

 

 

18,459

 

18,459

 

  

Transfer Class B shares to Class A shares

 

90,000

 

6

 

(90,000)

 

(6)

 

 

 

 

 

 

Share based compensation

 

 

 

 

 

15,897

 

 

 

15,897

 

 

15,897

Foreign currency translation differences

 

 

 

 

 

 

 

(536)

 

(536)

 

 

(536)

Balance at June 30, 2021 (unaudited)

 

13,222,034

 

879

 

2,773,100

 

185

 

429,523

 

(413,987)

 

4,259

 

20,859

 

(324)

 

20,535

Balance at June 30, 2021 (US$)

 

 

136

 

29

66,525

 

(64,118)

 

660

 

3,232

 

(50)

 

3,182

*For the six months ended June 30, 2021, the Group issued 55,000 Class A ordinary shares for certain employees’ exercise of stock options with outstanding proceeds receivable for option exercised of approximately RMB 4.0 million (or US$ 0.6 million). Due to inability to timely collect the funds from these employees, the Group accounted such outstanding proceeds as a reduction of the capital as of June 30, 2021 (Debit to additional paid-in capital). Subsequently, these employees entered in agreements with the Group to cancel the option exercise transaction. As a result, these shares were cancelled on September 23, 2021.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-5

Table of Contents

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,

2020

2021

2021

    

RMB

    

RMB

    

US$

Operating activities:

  

  

  

Net loss

 

(56,077)

 

(57,689)

 

(8,937)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

1,513

 

1,401

 

217

Share of net loss (gain) in equity method investments

 

(108)

 

120

 

19

Bad debt expense

 

(116)

 

(1)

 

Losses on disposal of land use rights and property and equipment

 

26

 

21

 

3

Foreign exchange loss, net

 

3,858

 

 

Share-based compensation

17,548

15,897

2,462

Fair value loss (gain) on convertible loans

 

(7,289)

 

4,346

 

673

Inventory provision

 

37

 

 

Impairment of long-term investment

820

Deferred tax

 

 

(44)

 

(7)

Changes in operating assets and liabilities:

Advances to suppliers

(6,432)

498

77

Accounts receivable

 

(808)

 

(2,321)

 

(359)

Inventories

 

71

 

(140)

 

(22)

Amounts due from related parties

 

(350)

 

(717)

 

(111)

Other current assets

 

(1,049)

 

4,465

 

692

Other assets

 

138

 

 

Accounts payable

 

(291)

 

(911)

 

(142)

Amounts due to related parties

 

(2,588)

 

(127)

 

(20)

Advance from customers

 

(87)

 

1,409

 

218

Accrued expenses and other current liabilities

 

(2,531)

 

6,453

 

999

Other long-term liabilities

 

(171)

 

(913)

 

(141)

Deferred tax liabilities

 

(45)

 

(44)

 

(7)

Net cash used in operating activities

 

(53,931)

 

(28,297)

 

(4,386)

Investing activities:

 

  

 

  

 

Purchases of property and equipment

 

(1,180)

 

(1,231)

 

(191)

Purchases of intangible assets

 

(9)

 

(9)

 

(1)

Proceeds from disposal of land use rights

 

17

 

 

Proceeds from short-term investments

191,147

Purchase of short-term investments

 

(191,147)

 

 

Net cash used in investing activities

 

(1,172)

 

(1,240)

 

(192)

Financing activities:

 

 

 

Proceeds from short-term borrowings

 

 

12,941

 

2,004

Payment for short-term borrowings

(8,000)

Proceeds from long-term borrowings

984

Payment for related party loan

    

    

(4,515)

    

(699)

Proceeds from stock options exercised

 

 

538

 

83

Capital contribution from noncontrolling interest holders

 

370

 

 

Proceeds from private placement

 

 

25,982

 

4,024

Payment for convertible loans

(17,752)

Proceeds from issuance of ordinary shares

100,655

Payment for initial public offering costs

(17,374)

Net cash provided by financing activities

 

58,883

 

34,946

 

5,412

Effect of exchange rate changes on cash and cash equivalents

 

62

 

154

 

28

Net increase in cash and cash equivalents

 

3,842

 

5,563

 

862

Cash and cash equivalents at beginning of period

6,125

3,016

467

Cash and cash equivalents at end of period

 

9,967

 

8,579

 

1,329

Supplemental disclosure of cash flow information:

 

 

 

Interest paid

 

17,752

 

2,059

 

319

 

 

 

Supplemental disclosure of non-cash activities:

 

 

 

Issuance shares for private placement unpaid portion

2,841

440

Issuance shares for stock option exercised by employees

 

 

1,144

 

179

Issuance shares for stock option exercised by Dr. Chris Chang Yu

 

 

6,125

 

949

Issuance shares for related party loan to Dr. Chris Chang Yu

 

 

4,496

 

694

Reclassification of accounts payable to convertible loan

 

 

4,548

 

705

Conversion of convertible loans

18,459

2,859

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-6

Table of Contents

ANPAC BIO-MEDICAL SCIENCE CO., LTD.

NOTES TO THE 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 in January 2010. The Company and its subsidiaries (collectively, the “Group”) are engaged in 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 in the People’s Republic of China (the “PRC” or “China”). Dr.  Chris Chang Yu is the Founder of the Group (the “Founder”).

For the year ended June 30, 2021, the details of the Group’s principal subsidiaries are as follows:

    

Percentage of

    

Date of

    

Place of

    

Major subsidiaries

Ownership

Incorporation

Incorporation

Major Operation

Changhe Bio-Medical Technology (Yangzhou) Co., Ltd.

 

100

%  

March 2010

 

the PRC

 

Cancer screening and detection tests

Changwei System Technology (Shanghai) Co., Ltd.

 

100

%  

March 2011

 

the PRC

 

Research and development

AnPac Bio-Medical Technology (Lishui) Co., Ltd.

 

100

%

October 2012

 

the PRC

 

Cancer screening detection tests and device manufacturing

Shanghai Xinshenpai Technology Co., Ltd.*

 

100

%  

October 2013

 

the PRC

 

Cancer screening and detection tests

AnPac Bio-Medical Technology (Shanghai) Co., Ltd.

 

100

%

April 2014

 

the PRC

 

Cancer screening and detection tests

AnPac Technology USA Co., Ltd. (“AnPac US”)

 

100

%  

September 2015

 

the U.S.

 

Clinical trials for research on cancer screening and detection tests

Lishui AnPac Medical Laboratory Co., Ltd.

 

100

%  

July 2016

 

the PRC

 

Cancer screening and detection tests

Shiji (Hainan) Medical Technology Ltd.

 

100

%  

March 2013

 

the PRC

 

Cancer screening and detection tests

Penghui Health Management Co., Ltd.*

 

100

%  

May 2018

 

the PRC

 

Cancer screening and detection tests

Shenzhen Anchun Biomedical Technology Co., Ltd.*

51

%  

December 2017

the PRC

Cancer screening and detection tests

Shanghai Muqing AnPac Health Technology Co., Ltd.

 

51

%  

March 2019

 

the PRC

 

Cancer screening and detection tests

* Shenzhen Anchun Biomedical Technology Co., Ltd., Shanghai Xinshenpai Technology Co., Ltd. and Penghui Health Management Co., Ltd. were deregistered in December 2020. Since these entities were inactive, the deregistration does not have a material impact to the Group’s consolidated financial statements for the six months ended June 30, 2020 and 2021.

2.     SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

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, 2020 and 2021 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, 2020 included in its annual report in filed with the SEC on April 30, 2021.

The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances between the Company and its subsidiaries are eliminated upon consolidation.

F-7

Table of Contents

ANPAC BIO-MEDICAL SCIENCE CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Amounts in thousands of RMB and US$, except for number of shares and per share data)

2.     SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Principles of consolidation

The accompanying  unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries.

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.

All intercompany transactions and balances are eliminated upon consolidation.

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 positions, 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.

Foreign currency

The functional currency of the Group and AnPac US is the United States dollar and its reporting currency is Renminbi (“RMB”). The functional currency of the Group’s PRC subsidiaries is the RMB as determined based on the criteria of Accounting Standards Codification (“ASC”) 830, Foreign Currency Matters.

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

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

(e)

Convenience translation

Amounts in US$ are presented for the convenience of the reader and are translated at the noon buying rate of US$1.00 to RMB6.4566 on June 30, 2021, representing the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be converted, realized or settled into US$ at such rate or at any other rate.

F-8

Table of Contents

ANPAC BIO-MEDICAL SCIENCE CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Amounts in thousands of RMB and US$, except for number of shares and per share data)

2.     SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

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 June 30, 2021 and December 31, 2020 were as follows:

December 31,

June 30,

    

2020

    

2021

   

RMB

   

RMB

   

US$

(Unaudited)

(Unaudited)

Accounts receivable

8,096

10,417

1,613

Allowance for doubtful accounts

(304)

(303)

(47)

Balance at end of period

7,792

10,114

1,566

Movement in the allowances for doubtful debts were as follows:

For the Year

Ended

For the Six Months

December 31,

Ended June 30,

    

2020

    

2021

    

RMB

    

RMB

    

US$

(Unaudited)

(Unaudited)

Balance at beginning of period

177

304

47

Additional provision

 

758

 

 

Recovery

(1)

Write-offs

 

(631)

 

 

Balance at end of period

 

304

 

303

 

47

Long-term investments

The Group’s long-term investments include equity method investments and equity investments without readily determinable fair values.

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ANPAC BIO-MEDICAL SCIENCE CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Amounts in thousands of RMB and US$, except for number of shares and per share data)

2.     SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Investments in entities in which the Group can exercise significant influence but does not own a majority equity interest or control are accounted for using the equity method of accounting in accordance with ASC 323, Investments-Equity Method and Joint Ventures (“ASC 323”). Under the equity method, the Group initially records its investment at cost and the difference between the cost of the equity investee and the amount of the underlying equity in the net assets of the equity investee is accounted for as if the investee were a consolidated subsidiary. The share of earnings or losses of the investee are recognized in the consolidated statements of comprehensive loss. Equity method adjustments include the Group’s proportionate share of investee income or loss, adjustments to recognize certain differences between the Group’s carrying value and its equity in net assets of the investee at the date of investment, impairments, and other adjustments required by the equity method. The Group assesses its equity investment for other-than-temporary impairment by considering factors as well as all relevant and available information including, but not limited to, current economic and market conditions, the operating performance of the investees including current earnings trends, the general market conditions in the investee’s industry or geographic area, factors related to the investee’s ability to remain in business, such as the investee’s liquidity, debt ratios, and cash burn rate and other company-specific information.

Investments in equity securities without readily determinable fair values are measured at cost minus impairment adjusted by observable price changes in orderly transactions for the identical or a similar investment of the same issuer. These investments are measured at fair value on a nonrecurring basis when there are events or changes in circumstances that may have a significant adverse effect. An impairment loss is recognized in the consolidated statements of comprehensive loss equal to the amount by which the carrying value exceeds the fair value of the investment.

For the six months ended June 30, 2020 and 2021, the Group recognized an impairment on its equity investment in Jiangsu Anpac Health Management Co., Ltd. of RMB820 and Nil, respectively.

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, 2020 and June 30, 2021 was related to its business acquisition in November 2017. Goodwill acquired in a business combination are 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 one reporting unit, which is also its only reportable segment.

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ANPAC BIO-MEDICAL SCIENCE CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Amounts in thousands of RMB and US$, except for number of shares and per share data)

2.     SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (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, 2020 and 2021, the Group performed a qualitative assessment for the reporting unit. Based on the requirements of ASC 350-20, the Group evaluated all relevant qualitative and quantitative factors, weighed all factors in their entirety and concluded that it was not more-likely-than-not that the fair value of the reporting unit was less than its carrying amount. Therefore, no goodwill impairment was recognized as of December 31, 2020 and June 30, 2021.

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. Given no events or changes in circumstances indicating the carrying amount of long-lived assets may not be recovered through the related future net cash flows, the Group did not provide any impairment loss for the six months ended June 30, 2020 and 2021.

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.

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

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ANPAC BIO-MEDICAL SCIENCE CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Amounts in thousands of RMB and US$, except for number of shares and per share data)

2.     SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

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 included in short term debts as of December 31, 2020 and June 30, 2021 was RMB2,232 and RMB5,674 calculated using the binomial tree model. The convertible loans are classified as level 3 instruments as the valuation was determined based on unobservable inputs which are supported by little or no market activity and reflect the Group’s own assumptions in measuring fair value. Significant estimates used in developing the fair value of the convertible loans include time to maturity, risk-free interest rate, straight debt discount rate, probability to convert and expected timing of conversion. Refer to Note 8 for additional information.

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 31,2020 and June 30, 2021:

December 31,

June 30,

June 30,

    

2020

    

2021

    

2021

RMB

RMB

US$

(Unaudited)

(Unaudited)

Opening balance

 

24,568

 

2,232

 

346

New convertible loans issued

 

1,830

 

12,941

 

2,004

Conversion of accounts payable to convertible loan

4,548

705

Repayments

 

(17,261)

 

 

Conversion of convertible loans

(18,459)

(2,859)

Loss on change in fair value of convertible loan

532

4,346

673

Gain on settlement of convertible loan

(7,162)

Other comprehensive income -foreign exchange translations

(275)

66

10

Total

 

2,232

 

5,674

 

879

Revenue recognition

The Group adopted ASC 606, Revenue from Contracts with Customers and subsequent amendments to the initial (“ASC 606”).

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ANPAC BIO-MEDICAL SCIENCE CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Amounts in thousands of RMB and US$, except for number of shares and per share data)

2.     SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

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 i.e. 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 of the cancer screening and detection tests and delivery of the cancer screening and detection test results to the customer. 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.

Revenue from physical checkup packages

The Group facilitates corporations and life insurance companies to procure physical checkup package services 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. Therefore, 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 and 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.

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 the customers.

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ANPAC BIO-MEDICAL SCIENCE CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Amounts in thousands of RMB and US$, except for number of shares and per share data)

2.     SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

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 not have contract assets for the years presented.

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 and life insurance companies in advance of satisfying the Group’s performance obligations under the contract, which are presented in “advance from customers” in the consolidated balance sheets. As of December 31, 2020 and June 30, 2021, advance from customers amounted to RMB3,682 and RMB5,091 (US$788), respectively.

PRC Value-Added Taxes (“VAT”) and surcharges

The services of the Group are subject to 6% of Value-Added Taxes. The Group is subject to education surtax and urban maintenance and construction tax, on the services provided in the PRC.

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.

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 uses the accelerated method for all awards granted with graded vesting. 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 Group, with the assistance of an independent third-party valuation firm, determined the fair value of the stock options granted to employees. The binomial option pricing model and Black-Scholes Model were applied in determining the estimated fair value of the options granted to employees and non-employees.

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.

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ANPAC BIO-MEDICAL SCIENCE CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Amounts in thousands of RMB and US$, except for number of shares and per share data)

2.     SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Segment reporting

The Group’s Chief Executive Officer is the chief operating decision-maker that reviews the consolidated financial results when making decisions about allocating resources and assessing the performance of the Group as a whole and hence, the Group has only one reportable segment in accordance with ASC 280, Segment Reporting. The Group operates and manages its business as a single segment. As the Group’s long-lived assets are substantially all located in the PRC and all the Group revenues are derived from within the PRC, no geographical segments are presented.

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 one vote; and each Class B ordinary share is entitled to ten votes and is convertible into one Class A ordinary share at any time by the holder thereof. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. For the six months ended June 30, 2020 and 2021, the net loss per share amounts are the same for Class A and Class B common ordinary shares because the holders of each class are entitled to equal per share dividends or distributions in liquidation.

The Group did not include share options in the computation of diluted earnings per share for the six months ended June 30, 2020 and 2021, because those share options were anti-dilutive for loss per share.

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ANPAC BIO-MEDICAL SCIENCE CO., LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Amounts in thousands of RMB and US$, except for number of shares and per share data)

2.     SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Risks, Uncertainties and Concentrations

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, 2020 and June 30, 2021, the aggregate amounts of cash and cash equivalents of RMB2,366 and RMB695 (US$ 108), respectively, were held at major financial institutions located in the PRC and RMB650 and RMB7,884 (US$ 1,221), respectively, were deposited with major financial institutions located outside the PRC. Management believes that these financial institutions are of high credit quality and continually monitors the credit worthiness of these financial institutions. Historically, deposits in Chinese banks are secured due to the state policy on protecting depositors’ interests. However, China promulgated a new Bankruptcy Law in August 2006 that came into effect on June 1, 2007 which contains a separate article expressly stating that the State Council may promulgate implementation measures for the bankruptcy of Chinese banks based on the Bankruptcy Law. Under the new Bankruptcy Law, a Chinese bank may go into bankruptcy. In addition, since China’s concession to the World Trade Organization, foreign banks have been gradually permitted to operate in China and have been significant competitors against Chinese banks in many aspects, especially since the opening of the Renminbi business to foreign banks in late 2006. Therefore, the risk of bankruptcy of those Chinese banks in which the Group has deposits has increased. In the event of bankruptcy of one of the banks which holds the Group’s deposits, the Group is unlikely to claim its deposits back in full since the bank is unlikely to be classified as a secured creditor based on PRC laws.

Accounts receivables, unsecured and denominated in RMB, derived from sales of the Group’s cancer screening and detection test and physical checkup package services, are exposed to credit risk. As of December 31, 2020, two customers accounted for 49% and 11% of total accounts receivables, respectively. As of June 30, 2021, two customers accounted for 57%  and 23% of total accounts receivables, respectively.   The risk is mitigated by credit evaluations the Group performs on its customers.

Business, customer, political, social 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, 2020, three customers accounted for 23%, 19% and