AnPac Bio-Medical Science Co., Ltd. (ANPC) 2021年年度報告「NASDAQ」.pdf

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1、Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549 FORM 20-F(Mark One)REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)OR 12(g)OF THE SECURITIES EXCHANGE ACT OF 1934ORANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal y

2、ear ended December 31,2021ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934ORSHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this shell company reportFor the transition period from to Commission

3、 file number:001-39137 AnPac Bio-Medical Science Co.,Ltd.(Exact name of Registrant as specified in its charter)N/A(Translation of Registrants name into English)British Virgin Islands(Jurisdiction of incorporation or organization)801 Bixing Street,Bihu CountyLishui,Zhejiang Province 323006 The People

4、s Republic of China(Address of principal executive offices)Chris Chang Yu,Co-Chairman and Co-Chief Executive OfficerTel:+86-21-51085515chris_801 Bixing Street,Bihu CountyLishui,Zhejiang Province 323006The Peoples Republic of China(Name,Telephone,E-mail and Address of Company Contact Person)Securitie

5、s registered or to be registered pursuant to Section 12(b)of the Act:Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which RegisteredAmerican depositary shares(each representing one Class A ordinary share,par value US$0.01 pershare)Class A ordinary share,par value US$0.01 per share*ANPC

6、NASDAQ Capital Market*Not for trading,but only in connection with the listing on the NASDAQ Capital Market of the American depositary shares.Securities registered or to be registered pursuant to Section 12(g)of the Act:NoneSecurities for which there is a reporting obligation pursuant to Section 15(d

7、)of the Act:None(Title of Class)Indicate the number of outstanding shares of each of the issuers class the period covered by the annual report:Table of ContentsAs of December 31,2021,there were 19,377,502 ordinary shares in issue1,being the sum of(i)16,604,402 Class A ordinary shares,par value US$0.

8、01per share(including 3,397,447 shares reserved for issuance upon potential conversion of convertible bonds and convertible debentures),and(ii)2,773,100Class B ordinary shares,par value US$0.01 per share.Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405

9、of the Securities Act.Yes NoIf this report is an annual or transition report,indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)of theSecurities Exchange Act of 1934.Yes NoNote Checking the box above will not relieve any registrant required to fil

10、e reports pursuant to Section 13 or 15(d)of the Securities Exchange Act of1934 from their obligations under those Sections.Indicate by check mark whether the registrant:(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934during the preceding 12 m

11、onths(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filingrequirements for the past 90 days.Yes NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuan

12、t to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes NoIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or an

13、emerging growth company.Seedefinition of“large accelerated filer,”“accelerated filer,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filer Non-accelerated filer Emerging growth company If an emerging growth company that prepares its financial statem

14、ents in accordance with U.S.GAAP,indicate by check mark if the registrant has electednot to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of theExchange Act.The term“new or revised financial accounting standa

15、rd”refers to any update issued by the Financial Accounting Standards Board to its AccountingStandards Codification after April 5,2012.Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internalcontrol over fin

16、ancial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm thatprepared or issued its audit report.Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:U.S.GAA

17、P International Financial Reporting Standards as issued by the International Accounting Standards Board Other If“Other”has been checked in response to the previous question,indicate by check mark which financial statement item the registrant has elected tofollow.Item 17 Item 18If this is an annual r

18、eport,indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)Indicate by check mark whether the registrant has filed all documents and reports requi

19、red to be filed by Sections 12,13 or 15(d)of the SecuritiesExchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.Yes No Table of ContentsTABLE OF CONTENTSINTRODUCTION1FORWARD-LOOKING STATEMENTS2PART I3ITEM 1.IDENTITY OF DIRECTORS,SENIOR MANAGEMENT AND AD

20、VISERS3ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE3ITEM 3.KEY INFORMATION3ITEM 4.INFORMATION ON THE COMPANY48ITEM 4A.UNRESOLVED STAFF COMMENTS86ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS87ITEM 6.DIRECTORS,SENIOR MANAGEMENT AND EMPLOYEES105ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANS

21、ACTIONS115ITEM 8.FINANCIAL INFORMATION116ITEM 9.THE OFFER AND LISTING117ITEM 10.ADDITIONAL INFORMATION118ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK134ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES135PART II138ITEM 13.DEFAULTS,DIVIDEND ARREARAGES AND DELINQUENC

22、IES138ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS138ITEM 15.CONTROLS AND PROCEDURES138ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT140ITEM 16B.CODE OF ETHICS140ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES140ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AU

23、DIT COMMITTEES140ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS140ITEM 16F.CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT140ITEM 16G.CORPORATE GOVERNANCE141ITEM 16H.MINE SAFETY DISCLOSURE141PART III142ITEM 17.FINANCIAL STATEMENTS142ITEM 18.FINANCIAL STATEMENTS142ITEM 19

24、.EXHIBITS 142Table of Contents1INTRODUCTIONExcept where the context otherwise requires:“ADME test”refers to our immunology test named AnPac Defense Medical Examination;“ADRs”refers to the American depositary receipts that evidence our ADSs;“ADSs”refers to our American depositary shares,each of which

25、 represents one Class A ordinary share;“CDA test”refers to our cancer screening and detection test using the CDA technology;“CDA-based tests”refers to either or both of our CDA tests and combination tests;“China”or“PRC”refers to the Peoples Republic of China,excluding,for the purpose of this annual

26、report only,HongKong,Macau and Taiwan;“Class A ordinary shares”refers to our Class A ordinary shares of par value US$0.01 per share;“Class B ordinary shares”refers to our Class B ordinary shares of par value US$0.01 per share;“combination test”refers to a test that combines our CDA test with an auxi

27、liary test based on another cancer screening anddetection technology,such as biomarker-based test(which have historically been our primary combination test)and the ct-DNA test(which we refer to as the APCS(AnPac Pan Cancer Screening)test),using our proprietary algorithm;“detection”of cancers by our

28、CDA-based device or tests refers to the detection of the risk of whether cancer may occur orhas occurred,not to cancer diagnosis,and“detect”has the corresponding meaning;“RMB”or“Renminbi”refers to the legal currency of China;“shares”or“ordinary shares”refers to our ordinary shares,including Class A

29、and Class B ordinary shares,par valueUS$0.01 per share;“US$,”“U.S.dollars,”“$”or“dollars”refers to the legal currency of the United States;and“we,”“us,”“our company,”“our”or“AnPac Bio”refers to AnPac Bio-Medical Science Co.,Ltd.and its subsidiaries;Our reporting currency is the Renminbi.Certain of o

30、ur financial data in this annual report on Form 20-F are translated into U.S.dollars solely for the readers convenience.Unless otherwise noted,all convenience translations from Renminbi to U.S.dollars in thisannual report on Form 20-F were made at a rate of RMB 6.3726 to US$1.00,the exchange rate se

31、t forth in the H.10 statistical release ofthe Board of Governors of the Federal Reserve System on December 31,2021.We make no representation that any Renminbi or U.S.dollar amounts could have been,or could be,converted into U.S.dollars or Renminbi,as the case may be,at any particular rate,at the rat

32、estated above,or at all.The PRC government restricts or prohibits the conversion of Renminbi into foreign currency and foreign currencyinto Renminbi for certain types of transactions.Table of Contents2FORWARD-LOOKING STATEMENTSThis annual report on Form 20-F contains forward-looking statements that

33、reflect our current expectations and views of futureevents.All statements other than statements of historical facts are forward-looking statements.These forward-looking statements are madeunder the“safe-harbor”provisions of the U.S.Private Securities Litigation Reform Act of 1995.These statements in

34、volve known andunknown risks,uncertainties and other factors that may cause our actual results,performance or achievements to be materially differentfrom those expressed or implied by the forward-looking statements.You can identify some of these forward-looking statements by words or phrases such as

35、“believes,”“estimates,”“anticipates,”“expects,”“plans,”“projects,”“intends,”“potential,”“target,”“aim,”“predict,”“outlook,”“seek,”“goal”“objective,”“assume,”“contemplate,”“continue,”“positioned,”“forecast,”“likely,”“may,”“could,”“might,”“will,”“should,”“approximately”or other similarexpressions.We h

36、ave based these forward-looking statements largely on our current expectations and projections about future events andfinancial trends that we believe may affect our financial condition,results of operations,business strategy and financial needs.Theseforward-looking statements include,but are not li

37、mited to,statements about:the implementation of our business model and growth strategies;trends and competition in the cancer screening and detection market;our expectations regarding demand for and market acceptance of our cancer screening and detection tests and our ability toexpand our customer b

38、ase;the duration of COVID-19 and its impact on our business and financial performance;our ability to obtain and maintain intellectual property protections for our CDA technology and our continued research anddevelopment to keep pace with technology developments;our ability to obtain and maintain reg

39、ulatory approvals from the PRC National Medical Products Administration(the“NMPA”),U.S.Food and Drug Administration(the“FDA”)and the relevant U.S.states and to have our laboratoriescertified or accredited by authorities including under CLIA;our future business development,financial condition and res

40、ults of operations and our ability to obtain financing cost-effectively;potential changes of government regulations;general economic and business conditions in China and elsewhere;our ability to hire and maintain key personnel;andour relationship with our major business partners and customers.This a

41、nnual report on Form 20-F also contains estimates,projections and statistical data obtained from various government andprivate publications.This market data speaks as of the date it was published and includes projections that are based on a number ofassumptions and are not representations of facts.T

42、he cancer screening and detection market may not grow at the rates projected by marketdata,or at all.The failure of this market to grow at the projected rate may have a material adverse effect on our business and the marketprice of our ADSs.If any one or more of the assumptions underlying the market

43、 data proves to be incorrect,actual results may differ fromthe projections based on these assumptions.In addition,projections,assumptions and estimates of our future performance and the futureperformance of the industry in which we operate are necessarily subject to a high degree of uncertainty and

44、risk due to a variety of factors,including those described in“Risk Factors”and elsewhere in this annual report.You should not place undue reliance on these forward-looking statements.Table of Contents3The forward-looking statements made in this annual report relate only to events or information as o

45、f the date on which thestatements are made in this annual report.Except as required by U.S.federal securities law,we undertake no obligation to update or revisepublicly any forward-looking statements,whether as a result of new information,future events or otherwise,after the date on which thestateme

46、nts are made or to reflect the occurrence of unanticipated events.You should read this annual report and the documents that wereference in this annual report and have filed as exhibits to this annual report,completely and with the understanding that our actual futureresults may be materially differe

47、nt from what we expect.Other sections of this annual report include additional factors which couldadversely impact our business and financial performance.Moreover,we operate in an evolving environment.New risk factors emergefrom time to time and it is not possible for our management to predict all r

48、isk factors,nor can we assess the impact of all factors on ourbusiness or the extent to which any factor,or combination of factors,may cause actual results to differ materially from those contained inany forward-looking statements.We qualify all of our forward-looking statements by these cautionary

49、statements.PART IITEM 1.IDENTITY OF DIRECTORS,SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONA.Selected Financial DataThe following selected consolidated statements of comprehensive income data and selected consolidated

50、 cash flows data forthe years ended December 31,2019,2020 and 2021,and selected consolidated balance sheets data as of December 31,2020 and 2021have been derived from our audited consolidated financial statements included elsewhere in this annual report beginning on page F-1.Ourselected consolidated

51、 balance sheets data as of December 31,2019 has been derived from our audited consolidated financial statements notincluded in this annual report.Our consolidated financial statements are prepared and presented in accordance with U.S.GAAP.Ourhistorical results do not necessarily indicate results exp

52、ected for any future periods.You should read this Selected Financial Data sectiontogether with our consolidated financial statements and the related notes and“Item 5.Operating and Financial Review and Prospects”below.Table of Contents4The following table presents our selected consolidated statements

53、 of comprehensive loss data for the years ended December 31,2019,2020 and 2021.For the year ended December 31,201920202021 RMB RMB RMB US$(in thousands)Selected Consolidated Statements of Comprehensive Loss Data:Revenues:Cancer screening and detection tests 10,381 18,445 14,947 2,345Physical checkup

54、 packages,net 464 2,064 1,654 260Technology services 1,284 201Retail revenue 101 16Total revenues 10,845 20,509 17,986 2,822Cost of revenues,cancer screening(1)(6,047)(7,628)(5,732)(899)Gross profit 4,798 12,881 12,254 1,923Operating expenses:Selling and marketing(1)(13,633)(19,674)(21,420)(3,361)Re

55、search and development(1)(9,839)(11,576)(16,204)(2,543)General and administrative(1)(69,088)(74,757)(80,676)(12,660)Impairment of long-term investments (1,320)(1,430)Impairment of intangible assets (3,828)(601)Impairment of goodwill (2,223)(349)Loss from operations (89,082)(94,556)(112,097)(17,591)N

56、on-operating income and expenses Interest expense,net (2,609)(1,143)(4,257)(668)Foreign exchange loss,net (3,219)(667)(202)(32)Share of net(loss)gain in equity method investments 190 (13)132 21Other income(expenses),net (1,823)9,096 990 155Gain from a step acquisition 3,240 508Change in fair value o

57、f convertible debt (5,296)6,630 (9,073)(1,424)Loss before income taxes (101,839)(80,653)(121,267)(19,031)Income tax benefit 218 88 1,180 185Net loss (101,621)(80,565)(120,087)(18,846)Net loss attributable to non-controlling interests (561)(90)(1,392)(218)Net loss attributable to ordinary shareholder

58、s (101,060)(80,475)(118,695)(18,628)Loss per share:Class A and Class B ordinary shares-basic and diluted (11.31)(7.19)(8.72)(1.37)Weighted average shares outstanding used in calculating basic and diluted loss per share:Class A and Class B ordinary shares-basic and diluted 8,937,600 11,190,079 13,605

59、,515 13,605,515Note:Table of Contents5(1)Share-based compensation expenses were allocated as follows:For the year ended December 31,201920202021 RMB RMB RMB US$(in thousands)Cost of revenues 327 327 305 48Selling and marketing expenses 5,393 1,113 3,523 553Research and development expenses 2,534 3,5

60、34 7,366 1,156General and administrative expenses 24,601 12,788 22,973 3,605Total share-based compensation expenses 32,855 17,762 34,167 5,362The following table presents our selected consolidated balance sheet data as of December 31,2019,2020 and 2021.As of December 31,201920202021 RMB RMB RMB US$(

61、in thousands)Selected Consolidated Balance Sheet Data:Current assets:Cash and cash equivalents 6,125 3,016 9,251 1,452Total current assets 22,171 21,288 23,549 3,696Total assets 52,982 49,887 67,489 10,592Current liabilities Short-term debt 38,568 8,232 33,759 5,298Amounts due to related parties 4,5

62、97 4,130 2,471 388Total current liabilities 66,197 43,524 62,906 9,872Total liabilities 68,906 46,610 66,171 10,385Total shareholders(deficit)equity (15,924)3,277 1,318 207The following table presents our selected consolidated cash flow data for the years ended December 31,2019,2020 and 2021.For the

63、 year ended December 31,201920202021 RMB RMB RMB US$(in thousands)Selected Consolidated Cash Flow Data:Net cash used in operating activities(48,600)(58,967)(71,709)(11,252)Net cash used in investing activities (3,461)(2,482)(3,932)(618)Net cash provided by financing activities 46,108 60,924 83,420 1

64、3,090Effect of foreign exchange rate changes on cash and cash equivalents (809)(2,584)(1,544)(241)Net increase(decrease)in cash and cash equivalents (6,762)(3,109)6,235 979Cash and cash equivalents at the beginning of the year 12,887 6,125 3,016 473Cash and cash equivalents at the end of the year 6,

65、125 3,016 9,251 1,452Non-GAAP Financial MeasureIn evaluating our business,we consider and use adjusted net loss,a non-GAAP measure,as a supplemental measure to review andassess our operating performance.The presentation of this non-GAAP financial measure is not intended to be considered in isolation

66、 or asa substitute for financial information prepared and presented in accordance with U.S.GAAP.We define adjusted net loss as net lossadjusted to add back share-based compensation expenses.Table of Contents6We believe that adjusted net loss helps to identify underlying trends in our business that c

67、ould otherwise be distorted by the effectof the expenses that we add back to net loss.We believe that adjusted net loss provides useful information about our operating results,enhances the overall understanding of our past performance and future prospects,and allows for greater visibility with respe

68、ct to keymetrics used by our management in its financial and operational decision-making.The non-GAAP financial measure“adjusted net loss”is not defined under U.S.GAAP,is not presented in accordance with U.S.GAAP and has limitations as an analytical tool.One of the key limitations of using adjusted

69、net loss is that it does not reflect all of theitems of income and expense that affect our operations.Share-based compensation has been and may continue to be incurred in ourbusiness and is not reflected in the presentation of adjusted net loss.Further,the non-GAAP financial measure“adjusted net los

70、s”maydiffer from the non-GAAP information used by other companies,including peer companies,and therefore their comparability may belimited.We compensate for these limitations by reconciling the non-GAAP financial measure to the nearest U.S.GAAP performancemeasure,all of which should be considered wh

71、en evaluating our performance.This non-GAAP financial measure should be viewed inaddition to,and not as a substitute for,our reported results prepared in accordance with U.S.GAAP and should be read only in conjunctionwith our consolidated financial statements prepared in accordance with U.S.GAAP tha

72、t are included elsewhere in this annual report.The table below sets forth a reconciliation of our net loss to adjusted net loss for the years indicated:Year ended December 31,201920202021 RMB RMB RMB US$(in thousands)Net loss(101,621)(80,565)(120,087)(18,846)Add:Change in fair value of convertible d

73、ebts 5,296 (6,630)9,073 1,424Share-based compensation expenses 32,855 17,762 34,167 5,362Adjusted net loss (63,470)(69,433)(76,847)(12,060)B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsRisks Related to Our BusinessWe are a dev

74、elopment-stage biotechnology company with a limited operating history,which makes it difficult to evaluate our prospectsand may increase the probability that we will not be successful.We commenced our operations in 2010.We achieved commercialization of our CDA test and started generating revenue in

75、Chinain 2015;we currently do not have commercial operations in the U.S.We are a development-stage biotechnology company with a limitedoperating history,and our history may not provide a meaningful basis for you to evaluate our business,financial performance andprospects.Table of Contents7Furthermore

76、,we may not have sufficient experience or resources to address the risks frequently encountered by development-stage biotechnology companies,which include our potential failure to:achieve and maintain profitability;acquire and retain customers and increase adoption of our cancer screening and detect

77、ion testsincluding primarily ourCDA test and combination tests(namely a combination of our CDA test and,on an auxiliary basis,biomarker-based or ct-DNA cancer screening and detection tests)by physicians,key opinion leaders,or KOLs(including research scientists anddoctors in the U.S.who are willing t

78、o validate our tests after research),patients,hospitals,medical institutions,healthcarepayers and others in the medical community;commercialize and/or increase the market adoption for our other products,such as a COVID-19 antibody test and our ADME(AnPac Defense Medical Examination)immunology test,a

79、nd extend the use of our CDA technology to screen pre-cancerdiseases and increase its adoption by the medical community;respond to competitive market conditions;attract,train,motivate and retain qualified personnel;protect our proprietary technologies and intellectual property rights;secure a stable

80、 supply of blood samples to support our research and clinical studies;keep up with evolving industry standards and market developments;obtain and maintain the regulatory licenses,certifications,and approvals required for us to further market our cancerscreening and detection tests and commercialize

81、our CDA device in China and to commercialize our tests and CDA device inthe United States;increase the awareness of our tests and protect our reputation;maintain adequate control of our operational costs;andmanage our relationships with our research partners.If we are unsuccessful in addressing any

82、one or more of these risks,they could adversely affect our business,financial conditionand results of operations and increase the probability that we will not be successful.We have incurred losses each year since our inception,we expect to continue to incur losses for the foreseeable future,and we m

83、ay notbe able to achieve and maintain profitability.Although our revenue grew rapidly in recent years,we have incurred losses each year since our inception.For the years endedDecember 31,2019,2020 and 2021,we incurred net losses of RMB101.6 million,RMB80.6 million and RMB120.1 million(US$18.8million

84、),respectively.As of December 31,2021,we had an accumulated deficit of RMB475.6 million(US$74.6 million).To the date ofthis annual report,we have financed our operations primarily with proceeds from equity and debt offerings,borrowings,and loans fromrelated parties.We have devoted and expect to cont

85、inue to devote substantially all of our resources to the research,development andcommercialization of our CDA technology,device and test.We expect to continue to incur losses for the foreseeable future.We cannotpredict the extent of these future losses,or when we may achieve profitability,if at all.

86、If we are unable to generate sufficient revenue fromour business and control our costs and expenses to achieve and maintain profitability,the value of your investment in us could benegatively affected.Table of Contents8Our success depends heavily on the success of our CDA technology and related canc

87、er screening and detection test.We derive our revenue primarily from our CDA-based tests,which depend on our CDA technology.If we obtain relevantapprovals from the NMPA to sell our CDA device,we also anticipate generating revenue from the sales of our CDA device.We believethat our commercial success

88、 will depend upon our ability to achieve and maintain market acceptance of our current and future cancerscreening and detection tests,which will depend on a number of factors,including:our ability to further validate and improve the clinical utility and superiority of our CDA technology by increasin

89、g itssensitivity and specificity and through research studies and accompanying publications;the timing and scope of additional approvals from the NMPA for our CDA device and test and our ability to maintain theseapprovals;acceptance of our CDA test by physicians,KOLs,patients,hospitals,medical insti

90、tutions,healthcare payers and others in themedical community;our ability to obtain the Class III medical device registration certificate from the NMPA for our CDA device and enter anddevelop the China hospital market for our CDA device and test;sufficient coverage and reimbursement by third-party pa

91、yers for our services,which may depend on multiple factors such asthe enforceability of relevant laws that mandate the coverage of cancer or pre-cancer disease screening;our ability to maintain and expand our customer base in China,especially among insurance companies,corporate customersand the hosp

92、ital market;our sales and marketing capabilities,including our success in expanding our sales and marketing team and establishing ourown sales network in China;the amount and nature of competition from other early cancer screening and detection products and procedures;our ability to obtain regulator

93、y approvals for our U.S.laboratories to conduct commercial tests and successfully penetrate theU.S.market;andnegative publicity regarding our or our competitors tests and technologies resulting from defects or errors.If we are unsuccessful in addressing these or other factors that might affect the m

94、arket acceptance of our tests,our business andresults of operations will suffer.Table of Contents9We face risks related to natural disasters,health epidemics,civil and social disruption and other outbreaks,which could significantlydisrupt our operations.We are vulnerable to social and natural catast

95、rophic events that are beyond our control,such as natural disasters,healthepidemics,and other catastrophes,which may materially and adversely affect our business.Since December 2019,there has been anoutbreak of a novel strain of coronavirus(COVID-19)in China and around the world.COVID-19 is consider

96、ed to be highly contagiousand poses a serious public health threat.The World Health Organization labeled the coronavirus a pandemic on March 11,2020,given itsthreat beyond a public health emergency of international concern that the organization had declared on January 30,2020.In response tothis pand

97、emic,China,the United States and many other countries and jurisdictions have taken,and may continue to adopt,additionalrestrictive measures to contain the virus spread,such as quarantines,travel restrictions and work from home policies.These measureshave slowed down the development of the Chinese ec

98、onomy and the U.S.economy and adversely affected the global economic conditionsand financial markets.We currently derive all our revenues in China and we have one laboratory in the United States.The outbreak of thisvirus caused wide-ranging business disruptions and traffic restrictions in China and

99、the United States in 2020,and with its continuedspread globally,the virus adverse impact on business activities,travels and overall GDP in China,the United States and other parts of theworld has been unprecedented and is expected to continue in the foreseeable future.While the Chinese governments ef

100、forts have sloweddown the virus spread,there has been resurgences in China from time to time,particularly in winter and spring.As the pandemic expandsglobally,the world economy is suffering a noticeable slowdown.Commercial activities throughout the world have been and could continueto be curtailed w

101、ith decreased consumer spending,business operation disruptions,interrupted supply chains,difficulties in travel,andreduced workforces.As a result of the pandemic of COVID-19 in China,the United States and the world,our operations have been,and may continueto be,adversely impacted by disruptions in b

102、usiness activities,commercial transactions and general uncertainties surrounding the durationof the outbreaks and the various governments business,travel and other restrictions.These adverse effects could include our ability tomarket and conduct our tests in China,commercialize our tests in the Unit

103、ed States and carry out research studies and activities in Chinaand the United States.In addition,our business operations could be disrupted if any of our employees is suspected of contracting thecoronavirus or any other epidemic disease,since our employees could be quarantined and/or our offices be

104、 shut down for disinfection.Although we have validated a COVID-19 antibody test using Roches FDA authorized equipment,we have not begun to commercializeour offering of this test and we cannot guarantee the market acceptance of and demand for this test.We have no control over thedevelopment of the CO

105、VID-19 situations in China,the United States or around the world and therefore cannot assure you that we will beable to maintain a revenue growth in future periods.Resurgence of COVID-19 and followed lock-down policies in some cities could cut the demand and revenue depending on lengthof lock-down.S

106、tarting March 27,2022,the lockdown policy in Shanghai has forced us to temporarily halt operations in our Shanghaioffice.Most of the CDA tests are performed in our subsidiary located in Lishui,Zhejiang,which is not impacted by the resurgence ofCOVID-19.However,the close of our Shanghai office caused

107、 delay in the issuance and delivery of test reports to our customers,whichwill delay our revenue recognition in such period.The downturn brought by and the duration of the coronavirus pandemic is difficult toassess or predict and the actual effects will depend on many factors beyond our control,incl

108、uding the increased world-wide spread ofCOVID-19 and the relevant governments actions to contain COVID-19 or treat its impact.While China,the U.S.and many othercountries have been administering COVID-19 vaccines,it remains uncertain whether and when the vaccines will be able to effectivelycontain th

109、e pandemic.The extent to which COVID-19 continues to impact our results remains uncertain,and we are closely monitoring itsimpact on us.Our business,results of operations,financial condition and prospects could be adversely affected directly,as well as to theextent that the coronavirus or any other

110、epidemic harms the Chinese and the United States economies in general.We require substantial funding for our operations.If we cannot raise sufficient capital on acceptable terms,our business,financialcondition and prospects may be materially and adversely affected.We require substantial capital to e

111、xpand our business,pursue strategic investments and for other reasons,including to:increase our sales and marketing efforts to drive market adoption of our cancer screening and detection tests and addresscompetitive developments;Table of Contents10expand our technologies into other types of cancer s

112、creening and detection products,such as our CDA tests application inassistance in diagnosis,prognosis and recurrence;acquire or invest in technologies or other businesses in our industry;seek regulatory and marketing approvals for our cancer screening and detection tests and devices;conduct research

113、 studies for our CDA test and any additional cancer screening and detection tests;maintain,expand and protect our intellectual property portfolio;hire and retain additional personnel,such as scientific,quality control and marketing personnel;develop,acquire and improve operational,financial and mana

114、gement information systems,including personnel to supportour product development and help us comply with our obligations as a public company;add equipment and physical infrastructure to support our research and development programs;andfinance general and administrative expenses.We will be required t

115、o obtain further funding through public or private equity offerings,debt financings or other sources.Furtherfinancing may not be available to us on acceptable terms,or at all.If we fail to raise capital as and when needed it would have a negativeimpact on our financial condition and our ability to p

116、ursue our business strategy.In addition,if we raise funds by issuing debt securities orincurring additional borrowings,the terms of the debt securities issued or borrowings could impose significant restrictions on ouroperations,and we may be unable to repay the indebtedness when due.If we raise fund

117、s by issuing equity securities,your investment inour company could be diluted.For example,On May 31,2021,we issued US$0.7 million zero coupon convertible debentures to AscentInvestor Relations Inc.for settlement of accounts payable.On July 22,2021,we issued US$3.0 million zero coupon convertibledebe

118、ntures at a purchase price of US$2.7 million to certain investors,and the investors converted partial principal of this note into 114,234shares ADSs of our company on December 10,2021.These convertible debentures have placed certain restrictions on us,such asprohibiting us from effecting any issuanc

119、e of ADSs or the equivalent involving a variable rate transaction.Our principal sources of liquidity have been cash generated from financing and operating activities.As of December 31,2021,wehad RMB9.3 million(US$1.5 million)of cash and cash equivalents and a working capital deficit of RMB 39.4 mill

120、ion(US$6.2 million).For the years ended December 31,2019,2020 and 2021,we incurred continuous losses of RMB 101.6 million,RMB 80.6 million andRMB120.1 million(US$18.8 million),respectively.For the year ended December 31,2021,we incurred RMB 71.7 million(US$11.3million)of negative cash flows from ope

121、rations.The recent resurgence of COVID-19 and lockdown policies in Shanghai,China also hasnegative impact on our operation.The above-mentioned facts raise substantial doubt about the Groups ability to continue as a goingconcern.In assessing its liquidity,we monitor and analyze our cash on-hand,our a

122、bility to generate sufficient revenue sources in thefuture,and our operating and capital expenditure commitments.With respect to capital funding requirements,we budgeted capitalspending based on ongoing assessments of needs to maintain adequate cash.We intend to finance our future working capital re

123、quirementsand capital expenditures from financing activities until our operating activities generate positive cash flows,if ever.We expect continuouscapital financing through debt or equity issuances to support our working capital requirements.Subsequent to December 31,2021,weentered into investment

124、 agreements with several parties and we expect to raise an aggregate of RMB 265.8 million(US$41.7 million)within the following 30 months.We can make no assurances that required financings will be available for the amounts needed,or on terms commerciallyacceptable to us,if at all.If one or all of the

125、se events does not occur or subsequent capital raises are insufficient to bridge financial andliquidity shortfall,there would likely be a material adverse effect on us and our financial statements.Table of Contents11As of December 31,2021,we had short-term debt of RMB33.8 million(US$5.3 million).We

126、believe that our cash and cashequivalents on hand,borrowings and financing committed,and our anticipated cash flows generated from our operating activities will besufficient to meet our current and anticipated needs for general corporate purposes for at least the next 12 months.However,our estimatea

127、s to how long we expect these financial resources to be sufficient to fund our operations is based on assumptions that may prove to bewrong.Further,changing circumstances,some of which may be beyond our control,could cause us to consume capital significantly fasterthan we currently anticipate.Going

128、forward,we expect to need additional fundraising if our cash flows generated from operations do notincrease substantially.Our present and future funding requirements will depend on many factors,including:the scope,progress,timing,costs and results of the development of our CDA technology and our oth

129、er products;the costs of expanding our laboratory operations and offerings,including our sales and marketing efforts;our rate of progress in,and costs of the sales and marketing activities associated with,encouraging adoption of our cancerscreening and detection tests;our rate of progress in,and cos

130、t of research and development activities associated with,our CDA test,any additional cancerscreening and detection tests and other tests;the impact of competing technological and market developments;costs related to entering the U.S.market;the costs of preparing,filing and prosecuting patent applica

131、tions,maintaining and protecting our intellectual property rightsand defending against intellectual property related claims;the costs,timing and outcome of obtaining regulatory approvals and changes in regulatory policies or laws that may affectour operations;andthe costs of operating as a public co

132、mpany.Our ability to grow our China business is substantially dependent on our ability to penetrate the Chinese hospital market.In China,we currently can only conduct our cancer screening and detection tests on our devices in our own certified laboratories.Given these restrictions,our customer base

133、is primarily direct customers such as corporations and life insurance companies,as well assales agents such as health management companies and medical device dealers.But Chinas largest market for cancer screening anddetection tests is the hospital market,in which patients go to Chinese hospitals for

134、 cancer screening and other medical tests.Currently wecannot conduct our tests in hospitals.We have applied for an NMPA Class III medical device registration certificate for our CDA devicesto assist in multi-cancer diagnosis.If we receive this certificate,together with an updated medical device manu

135、facture license,we wouldbe permitted to place our devices within Chinese hospitals laboratories to conduct commercial tests there or sell our devices to thehospitals for the purposes of assisting in physicians diagnosis of specified multiple cancers.We expect to receive the Class III license bythe e

136、nd of the first quarter of 2023.Even if we obtain the certificate and license,we will need to successfully market our CDA device andtest to Chinese hospitals.Our ability to grow our China business depends substantially on our ability successfully to penetrate the Chinesehospital market,and we cannot

137、 assure you as to when or whether we will be able to do so.Our plans to enter the U.S.market may not be successful.Currently,we conduct commercial operations only in China,and the substantial majority of our business,assets,management andemployees are located in China.We have been making efforts to

138、enter the U.S.market.We commenced operations of our new laboratoryin Philadelphia,Pennsylvania with the completion of our facility renovation and first phase equipment installation in July 2020.Weobtained a CLIA Certificate of Registration for this laboratory in August 2020,and accreditation by the

139、College of American Pathologists,or CAP,and a Certificate of Accreditation under the Clinical Laboratory Improvement Amendments of 1988,Table of Contents12or CLIA for this new laboratory.Our U.S.operations currently include collaborating with U.S.health organizations to conduct researchtests of our

140、CDA technology,planning to commercialize our CDA tests.Although our strategy is to expand our U.S.operations and eventually commence commercial sales of our CDA-based tests andother tests(such as COVID-19 antibody tests)in the United States,this strategy is subject to a number of risks and uncertain

141、ties,including:our ability to secure research agreements with reputable U.S.hospitals,medical institutions and other health organizations toconduct research studies for our test;our ability to obtain sufficient blood samples for our planned research tests;the substantial costs and time required for

142、U.S.research tests and clinical studies;positive outcomes of our U.S.research tests sufficient to support the clinical validity,safety,and effectiveness of our tests inthe U.S.market;U.S.federal and state regulatory risks,including our ability to commence marketing of our CDA test as a laboratorydev

143、eloped test,or LDT,without premarket clearance,market authorization or approval from the United States Food andDrug Administration,or the FDA,our ability to comply with all applicable laws and other regulations,and costs and timingof obtaining relevant approvals;development of a U.S.infrastructure,i

144、ncluding sales and marketing resources,sufficient to commercialize our test;substantial competition in the U.S.cancer screening and detection market,including from companies with substantiallygreater resources than we have;andmarket acceptance of our test in the U.S.Our ability to successfully addre

145、ss these factors and penetrate the U.S.market,as well as the costs and timing of these efforts,arehighly uncertain.We expect that our commercial activities and revenues will continue to be derived solely from China for the foreseeablefuture.Our industry is subject to rapid change,and other companies

146、 or institutions may develop and market novel or improved early cancerscreening and detection methods,which may make our CDA technology less competitive or obsolete.Our CDA-based tests depend on the effectiveness of our CDA technology,and we may be unable to maintain the competitivenessof this techn

147、ology.Our industry is characterized by rapid changes,including technological and scientific breakthroughs,frequent newproduct introductions and enhancements and evolving industry standards,all of which could make our current CDA-based test obsolete.Inrecent years,there have been numerous advances in

148、 technologies relating to the diagnosis and treatment of cancer.We must continuouslyenhance our CDA technology and develop new tests to keep abreast of evolving standards of early cancer screening and detection.Othercompanies and institutions may possess significantly greater financial and other res

149、ources and research and development capabilities thanwe do.These other companies and institutions may devote significant resources to develop new methods of detecting cancers and pre-cancer symptoms,and these methods and related tests could represent significant competition for our CDA technology an

150、d cancerscreening and detection test,or even render our CDA technology obsolete.We may be unable to compete effectively against our competitors because their products and services may be superior.They mayalso have more expertise,experience,financial resources or stronger business relationships in de

151、veloping and marketing their products andservices,more mature technologies and products,greater market adoption and greater brand recognition than we do.Further,even if we dodevelop new marketable tests or services,our current and future competitors may develop tests and services that are more comme

152、rciallyattractive than ours and they may bring those tests and services to market sooner than we are able to.Table of Contents13We have recorded net working capital deficit and negative cash flows from operating activities and may continue to do so.We had net working capital deficit of RMB44.0 milli

153、on,RMB22.2 million and RMB39.4 million(US$6.2 million)as ofDecember 31,2019,2020 and 2021,respectively.We cannot assure you that we will not continue to have net working capital deficit in thefuture,which would expose us to liquidity risk.Our future liquidity and ability to make the additional capit

154、al investments necessary for ouroperations and business expansion will depend primarily on our ability to maintain sufficient cash generated from operating activities andto obtain adequate external financing.There can be no assurance that we will have such cash from operating activities or that we w

155、ill beable to renew existing loan facilities or obtain other sources of financing.We have experienced significant cash outflow from operating activities since our inception.We had net cash used in operatingactivities of RMB48.6 million,RMB59.0 million and RMB71.7 million(US$11.3 million)in 2019,2020

156、 and 2021,respectively.Our costof continuing operations could further reduce our cash position,and an increase in our net cash outflow from operating activities couldadversely affect our operations by reducing the amount of cash we have available to meet the cash needs for operating our business and

157、 tofund our investments in our business expansion.Our operating results may fluctuate significantly,which makes our future operating results difficult to predict and could cause ouroperating results to fall below expectations or any guidance we may provide.Our operating results may fluctuate signifi

158、cantly,which makes it difficult for us to predict our future operating results.Thesefluctuations may occur due to a variety of factors,many of which are outside of our control,including:the level of demand for our cancer screening and detection tests,which may vary significantly;the timing and cost

159、of,and level of investment in,research,development,regulatory approval and commercializationactivities relating to our CDA technology and our cancer screening and detection tests and device,which may change fromtime to time;the volume,customer mix and product mix for our cancer screening and detecti

160、on tests;the introduction of new cancer screening and detection tests and services by us or others in our industry;expenditures that we may incur to acquire,develop or commercialize additional tests,devices and technologies;coverage and reimbursement policies with respect to our cancer screening and

161、 detection tests and tests that compete with ourtests;changes in government regulations or in the status of our regulatory approvals or applications;future accounting pronouncements or changes in our accounting policies;andgeneral market conditions and other factors,including factors unrelated to ou

162、r operating performance or the operatingperformance of our competitors.The cumulative effects of the factors discussed above could result in large fluctuations and unpredictability in our annualoperating results.As a result,comparing our operating results on a period-to-period basis may not be meani

163、ngful.Investors should not relyon our past results as an indication of our future performance.If our cancer screening and detection or other tests or our competitors comparable tests do not meet customer expectations,ouroperating results,reputation and business could suffer.Our success depends on th

164、e markets confidence in our ability to provide reliable,high-quality cancer screening and detectiontests and other tests.We believe that our customers are likely to be particularly sensitive to defects or errors in our tests,in particular ifTable of Contents14our tests fail to accurately detect the

165、risk of pre-and early-stage cancers from blood samples,and we cannot guarantee that our tests willmeet their expectations.We may be subject to legal claims arising from any defects or errors in our tests.Furthermore,if comparable testsoffered by competing companies fail to perform to expectations,co

166、nsumers may have lower confidence in cancer screening and detectiontests in general.As a result,the failure of our tests or our competitors tests to perform as expected could significantly impair our operatingresults,business prospects and reputation.We do not carry product liability or professional

167、 liability insurance.If we were to be sued for product liability or professional liability,we could face substantial liabilities that exceed our resources.We could face product liability claims if someone alleges that our cancer screening and detection tests or other tests gaveinaccurate or misleadi

168、ng information regarding the patients risk of cancer or otherwise failed to perform as designed.A claimant couldallege that our test results caused unnecessary treatment or other costs or resulted in the patient missing the best opportunity or timing fortreatment.A patient could also allege other me

169、ntal or physical injury or that our testing provided inaccurate or misleading informationconcerning the screening and detection,assistance in diagnosis,prognosis or recurrence of,or available therapies for,a cancer or otherdiseases.We may also be subject to liability for errors in,a misunderstanding

170、 of or inappropriate reliance upon,the information we providein the ordinary course of our business activities.Product liability or professional liability claims could result in substantial damages and becostly and time-consuming for us to defend and could divert our managements attention.We do not

171、carry product liability or professional liability insurance.Even if we purchase these kinds of insurance,the insurancemay not fully protect us from the financial impact of defending against product liability or professional liability claims.Any productliability or professional liability claim brough

172、t against us,with or without merit,could increase our insurance rates or prevent us fromsecuring insurance coverage.Additionally,any product liability or professional liability lawsuit could damage our reputation,or cause ourresearch partners to terminate existing agreements and cause potential rese

173、arch partners to seek other partners,or cause us to lose ourcurrent or potential customers.Any of these developments could adversely impact our results of operations,business prospects andfinancial condition.We may be subject to liability claims for defective services provided by third-party physica

174、l checkup centers,which could harm ourreputation and adversely impact our results of operations.In addition to our cancer screening and detection tests,we also provide annual physical checkup packages to our customers.Wetypically outsource the physical checkup services in these packages(other than c

175、ancer screening and detection tests)to third-party physicalcheckup centers.As a result,the administration of the physical checkup services by these third parties may subject us to litigation andliability for personal damages to consumers.Potential judgments,settlements or costs relating to these cla

176、ims,complaints or lawsuits couldsubject us to significant fees and costs in defending ourselves,adversely affecting our results of operations.In addition,our business,reputation and growth prospects could suffer if we face negative publicity in connection with these liability claims.We may be unable

177、 to support demand for our cancer screening and detection tests and manage our future growth effectively,whichcould make it difficult to execute our business strategy.Since our inception,we have experienced rapid growth,and we anticipate further growth in our business operations.Our growthcould stra

178、in our organizational,administrative and operational infrastructure.As the sales volume of our cancer screening and detectiontests grows,we will face increased demands on our capacity and efficiency for sample intake,testing results analysis and other laboratoryoperations,quality control,customer se

179、rvice,and general workflow management processes.To effectively manage our future growth,weplan to continue to improve our technology,as well as our operational,financial and management controls.We also plan to hire,train andmanage additional qualified scientists,laboratory technicians and sales and

180、customer service personnel.We will also need to maintain thequality and expected turnaround time of our tests.The time and resources required for these improvements,and failure to achieve them ina timely and effective manner,could adversely affect our operations,making it difficult for us to execute

181、 our business strategy.Table of Contents15We have limited selling and marketing resources and limited sales,marketing,customer support,manufacturing and commerciallaboratory experience,which may restrict our success in commercializing our cancer screening and detection tests.To grow our business as

182、planned,we must expand our sales,marketing,customer support,manufacturing and commerciallaboratory management capabilities,which will require developing and administering our commercial infrastructure and/or collaborativecommercial arrangements and partnerships.We have limited experience in these re

183、spects,and we may encounter difficulties in retainingand managing the specialized workforce that these activities require.For example,our customer base is large and diverse,which requiresus to retain a sales team with established industry expertise and experience.We rely on third-party suppliers for

184、 the supply of bloodsamples for our tests and for reagents that we use in the auxiliary biomarker-based tests that form part of our combination tests.Weengaged third parties to conduct substantially all of the biomarker-based tests as part of our combination tests in 2018.We later graduallyphased ou

185、t this outsourcing arrangement beginning in 2019 and now perform our combination tests primarily in-house.We also engagethird parties to conduct physical checkups.We also rely on contract manufacturers that manufacture key components of our CDA device.While we primarily rely on our own sales and mar

186、keting personnel to market our tests,we also engage sales agents,including companieswe invested in.However,we may not be able to effectively manage and maintain our relationships with these third parties,includingensuring their compliance with our controls and procedures.Our future growth will also

187、impose significant added responsibilities on ourmanagement.If we fail to meet these demands,it would negatively affect our business growth and profitability.We may seek to partnerwith others to assist us with our sales,marketing and manufacturing functions.However,we may be unable to find appropriat

188、e thirdparties that meet our requirements,in a timely manner or on terms acceptable to us.In addition,our third-party business partners may notperform as we expect or our arrangements with them may otherwise prove to be detrimental to our results.Our third-party arrangementsmay also be terminated pr

189、ematurely,including due to factors out of our control.As a result of such developments,our business andprospects may be harmed.If we are unable to attract and retain qualified key management,scientists,staff and consultants,our ability to implement our businessplan may be adversely affected.We are h

190、ighly dependent upon certain of our key management,scientists,staff and consultants,particularly Dr.Chris Yu,ourfounder,co-Chairman and co-Chief Executive Officer(“CEO”),and Dr.He Yu,our co-founder and chief medical officer.Dr.Chris Yuresigned from his position as sole CEO of the Company and Chairma

191、n of the Board of Directors(the“Board”)on April 6,2022 and wasre-appointed as co-chairman of the Board and co-CEO of the Company on May 7,2022.Dr.He Yu and each of our key management andscientific personnel may terminate his or her employment with us.Our success is also largely attributable to the q

192、ualified and experiencedkey management and scientific personnel that we have been able to train,attract and retain.If we lose any of our key management andscientific personnel,we may be unable to find replacements suitable to us.The loss of their services could significantly delay or preventour achi

193、evement of our technology development,sales and other business objectives.We do not carry any key-man life insurance.Inaddition,we face intense competition for qualified individuals from numerous biotechnology and pharmaceutical companies,universities,governmental entities and other research institu

194、tions.Our limited operating history and the uncertainties attendant to being a development-stage biotechnology company with limited capital resources could limit our ability to attract and retain personnel.We may be unable toattract and retain suitably qualified individuals,and our failure to do so

195、could have an adverse effect on our ability to implement ourbusiness plan.Our future success depends on our ability to promote our brand and protect our reputation.We believe that enhancing and maintaining awareness of our“AnPac”brand is critical to achieving widespread acceptance of ourcancer scree

196、ning and detection tests,gaining trust for our testing services and attracting new customers.Successful promotion of our branddepends largely on the quality of the services we offer and the effectiveness of our branding and marketing efforts.Currently,we relyprimarily on our own sales and marketing

197、team to promote our brand and our cancer screening and detection tests,and we also engagesales agents,including companies we invested in.We expect our branding and marketing efforts will require us to incur significantexpenses and devote substantial resources.We cannot guarantee that our marketing e

198、fforts will be successful.Brand promotion activitiesmay not yield increased revenue in the near term,and,even if they do,any revenue increases may not offset the expenses we incur topromote our brand.Our failure to establish and promote our brand and any damage to our reputation will hinder our grow

199、th.Table of Contents16In addition,some companies that we established in China together with third parties and some of our sales agents for our CDAtestover which we do not have effective controlshare with us the“AnPac”trading name and its Chinese characters that we use.Giventhis shared use,any negati

200、ve publicity related to these companies as well as their products and services,whether with merit or not andwhether or not related to us,could adversely impact our brand and reputation.Furthermore,negative publicity about other market playersor isolated incidents such as fraudulent behaviors,whether

201、 or not factually correct,may result in negative perception of the early cancerscreening and detection industry as a whole and undermine the credibility we have established,which may negatively affect our businessand results of operations.If we are unable to effectively protect our intellectual prop

202、erty,our business would be harmed.We rely on patent protection as well as trademark,trade secret and other intellectual property rights protection and contractualrestrictions to protect our proprietary devices,tests and technologies,all of which provide limited protection and may not adequatelyprote

203、ct our rights.If we fail to effectively protect and/or maintain our patented devices,tests and technologies,our competitive positionand prospects could be adversely affected.Furthermore,we could incur substantial litigation costs in our attempts to recover or restrict useof our patents and other int

204、ellectual property.We cannot assure investors that any of our currently pending or future patent applications will result in granted patents,and wecannot predict how long it will take for such patents to be issued,if at all.It is possible that,for any of our patents that have been issued orthat may

205、be issued in the future,our competitors may design their products around our patented technologies.Further,we cannot assureyou that other persons will not challenge any patents granted to us or that courts or regulatory agencies will hold our patents to be valid,enforceable,and/or infringed.We canno

206、t guarantee you that we will be successful in defending challenges made against our patents andpatent applications.Any successful third-party challenge or challenges to our patents could result in the unenforceability or invalidity ofthese patents,or these patents being interpreted narrowly and/or i

207、n a manner adverse to our interests.Our ability to establish or maintain atechnological or competitive advantage over our competitors and/or market entrants may be diminished because of these uncertainties.Forthese and other reasons,our intellectual property may not provide us with any competitive a

208、dvantage.For example:we might not have been the first to make the inventions claimed or disclosed by our pending patent applications or issuedpatents;we might not have been the first to file patent applications for these inventions.To determine the priority of these inventions,we may have to partici

209、pate in interference proceedings or derivation proceedings declared by the United States Patent andTrademark Office,which could result in substantial costs to us,and could possibly result in a loss or narrowing of our patentrights.We cannot assure you that our patent applications or granted patents

210、will have priority over any other patent or patentapplication involved in such a proceeding,or will be held valid as an outcome of the proceeding;other persons may independently develop similar or alternative products and technologies or duplicate any of our productsand technologies,which can potent

211、ially impact our market share and revenue,regardless of whether our intellectual propertyrights are successfully enforced against these other persons;it is possible that our pending patent applications will not result in granted patents,and even if these pending patentapplications are issued as pate

212、nts,they may not provide intellectual property protection of commercially viable products orproduct features,may not provide us with any competitive advantages,or may be challenged and invalidated by third parties,patent offices,and/or the courts;we may be unaware of or unfamiliar with prior art and

213、/or interpretations of prior art that could potentially impact the validityor scope of our patents or pending patent applications,or patent applications that we intend to file;we take efforts and enter into agreements with employees,consultants,collaborators,and advisors to confirm ownership andchai

214、n of title in intellectual property rights.However,an inventorship or ownership dispute could arise that mayTable of Contents17permit one or more third parties to practice or enforce our intellectual property rights,including possible efforts to enforcerights against us;we may elect not to maintain

215、or pursue intellectual property rights that,at some point in time,may be considered relevant toor enforceable against a competitor;we may not develop additional proprietary products and technologies that are patentable,or we may develop additionalproprietary products and technologies that are not pa

216、tentable;the patents or other intellectual property rights of others may have an adverse effect on our business;andwe apply for patents relating to our devices,tests and technologies,as we deem appropriate.However,we or ourrepresentatives or their agents may fail to apply for patents on important de

217、vices,tests and technologies in a timely fashionor at all,or we or our representatives or their agents may fail to apply for patents in potentially relevant jurisdictions.To the extent our intellectual property offers inadequate protection,or is found to be invalid or unenforceable,we would beexpose

218、d to a greater risk of direct or indirect competition.If our intellectual property does not provide adequate coverage over ourcompetitors products,our competitive position and our business could be adversely affected.In addition to patent protections,we also try to protect our trade secrets,know-how

219、 and other proprietary information throughnon-disclosure and confidentiality provisions in our agreements with parties who have access to them,such as our employees,consultantsand research partners.These agreements may not be enforceable or may not provide meaningful protection for our trade secrets

220、,know-how and/or other proprietary information in the event of unauthorized uses or disclosure or other breaches of the provisions,and we maynot be able to prevent such unauthorized uses or disclosure.Moreover,if a party having an agreement with us has an overlapping orconflicting obligation to a th

221、ird party,our rights in and to certain intellectual property could be undermined.In addition,monitoringunauthorized disclosure and uses of our trade secrets is difficult,and we do not know whether the steps we have taken to prevent suchdisclosure and uses are,or will be,adequate.If we were to enforc

222、e a claim that a third-party had illegally obtained and was using our tradesecrets,it would be expensive and time-consuming,and the outcome would be unpredictable,and any remedy may be inadequate.Inaddition,courts outside the United States may be less willing to protect trade secrets.In addition,com

223、petitors could purchase our devices and tests and attempt to replicate and/or improve some or all of thecompetitive advantages we derive from our development efforts,willfully infringe our intellectual property rights,and design their devicesand tests around our protected technologies or develop the

224、ir own competitive technologies that fall outside of our intellectual propertyrights.If our intellectual property does not adequately protect our market share against competitors devices and tests,our competitiveposition could be adversely affected,as could our business.We may be involved in lawsuit

225、s to protect or enforce our patents,which could be expensive,time-consuming and unsuccessful.Competitors may infringe our patents.In the event of infringement or unauthorized use,we may file one or more infringementlawsuits,which can be expensive and time-consuming.An adverse result in any such liti

226、gation proceedings could put one or more of ourpatents at risk of being invalidated,being found to be unenforceable,and/or being interpreted narrowly.Adverse results of these typescould also put our patent applications at risk of not being issued and/or impact the validity or enforceability position

227、s of our other patents.Furthermore,because of the substantial amount of discovery required in connection with intellectual property litigation,there is a risk thatpart of our confidential information could be compromised by disclosure.Many of our competitors are larger than we are and have substanti

228、ally greater resources.They are,therefore,likely to be able tosustain the costs of complex patent litigation longer than we could.In addition,the uncertainties associated with litigation could have amaterial adverse effect on our ability to raise the funds necessary to continue our operations,contin

229、ue our internal research programs,pursue,obtain or maintain intellectual property rights,or enter into research and development partnerships that would help to validate andcommercialize our tests.Table of Contents18In addition,patent litigation can be very costly and time-consuming.An adverse outcom

230、e in such litigation or proceedings mayexpose us or any of our future development partners to loss of our proprietary position,expose us to significant liabilities,or require us toseek licenses that may not be available on commercially acceptable terms,if at all.We may be subject to intellectual pro

231、perty infringement or misappropriation claims by third parties,which may force us to incursubstantial legal expenses and,if determined adversely against us,could materially disrupt our business.The validity,enforceability and scope of intellectual property rights protection in biotechnology industri

232、es,particularly in China,are uncertain and still evolving.We cannot be certain that our devices,tests and technologies do not or will not infringe patents,copyrightsor other intellectual property rights held by third parties.From time to time,we may be subject to legal proceedings and claims allegin

233、ginfringement of patents,trademarks or copyrights,or misappropriation of creative ideas or formats,or other infringement of proprietaryintellectual property rights.Any such proceeding and claims could result in significant costs to us and divert the time and attention of ourmanagement and technical

234、personnel from the operation of our business.These types of claims could also potentially adversely impact ourreputation and our ability to conduct business and raise capital,even if we are ultimately absolved of all liability.Moreover,third partiesmaking claims against us may be able to obtain inju

235、nctive relief against us,which could block our ability to offer one or more devices ortests and could result in a substantial award of damages against us.In addition,since we may indemnify customers or collaborationpartners,we may have additional liability in connection with any infringement or alle

236、ged infringement of third-party intellectual property.Intellectual property litigation can be very expensive,and we may not have the financial means to defend ourselves or our customers orcollaboration partners.Because patent applications can take many years to issue,there may be pending application

237、s,some of which are unknown to us,that may result in issued patents upon which our devices,tests or proprietary technologies may infringe.Moreover,we may fail to identifyissued patents of relevance or incorrectly conclude that an issued patent is invalid or not infringed by our technology or any of

238、our devicesor tests.There is a substantial amount of litigation involving patents and other intellectual property rights in our industry.If a third-partyclaims that we or any of our customers or collaboration partners infringe upon a third-partys intellectual property rights,we may have to:seek to o

239、btain licenses that may not be available on commercially reasonable terms,if at all;abandon any product alleged or held to infringe,or redesign our products or processes to avoid potential assertion ofinfringement;pay substantial damages including,in exceptional cases,treble damages and attorneys fe

240、es,if a court decides that thedevice,test or proprietary technology at issue infringes upon or violates the third-partys rights;pay substantial royalties or fees or grant cross-licenses to our technology;anddefend litigation or administrative proceedings that may be costly whether we win or lose,and

241、 which could result in asubstantial diversion of our financial and management resources.We may be subject to claims that our employees,consultants,or independent contractors have wrongfully used or disclosedconfidential information of third parties.Some of our employees were previously employed at o

242、ther life science companies,including our potential competitors.Althoughwe try to ensure that our employees,consultants,and independent contractors do not use the proprietary information or know-how ofothers in their work for us,and we are not currently subject to any claims that our employees,consu

243、ltants,or independent contractors havewrongfully used or disclosed confidential information of third parties,we may in the future be subject to such claims.Litigation may benecessary to defend against these claims.If we fail in defending any such claims,in addition to paying monetary damages,we may

244、losevaluable intellectual property rights or personnel,which could adversely impact our business.Even if we are successful in defendingagainst such claims,litigation could result in substantial costs and be a distraction to management and other employees.Table of Contents19If our laboratories and ot

245、her facilities become damaged or inoperable,our ability to conduct our laboratory analysis and our researchand development efforts may be jeopardized.We currently derive substantially all of our revenue from cancer screening and detection tests conducted at our laboratory locatedin Lishui,Zhejiang P

246、rovince,China.We also intend to sell our CDA device in China after obtaining relevant approvals from the NMPA.We use our own facilities in Lishui to assemble our CDA device,in addition to engaging third-party contract manufacturers to manufactureits key components.In the United States,we intend to p

247、erform all our research and commercial tests in our new laboratory in Philadelphia,Pennsylvania.Our facilities and equipment,or those of our third-party contract manufacturers,could be harmed or rendered inoperable bynatural or man-made disasters,including fire,earthquake,power loss,communications f

248、ailure or terrorism.These types of developmentscould render it difficult or impossible for us to operate our cancer screening and detection tests and assemble our device for some period oftime.If we are unable to perform our tests or to reduce the backlog of analysis that could develop if our facili

249、ties are inoperable,for even ashort period of time,it could result in a loss of customers or harm to our reputation,and we may be unable to regain those customers orrepair our reputation.We have purchased property insurance,but not any business interruption insurance.Damages to,or interruptions inth

250、e operations of,our laboratories and other facilities could have a material adverse impact on our results of operations and financialcondition.Furthermore,our facilities and the equipment we use to perform our research and development work could be unavailable orcostly and time-consuming to repair o

251、r replace.It would be difficult,time-consuming and expensive to rebuild our facilities and purchaseour equipment,to locate and qualify a new facility or equipment or to license or transfer our proprietary technology to a third-party,particularly in light of licensure and accreditation requirements.E

252、ven in the unlikely event that we are able to find a third party with suchqualifications to enable us to conduct our test,we may be unable to negotiate commercially reasonable terms.Security threats to our information technology infrastructure could expose us to liability and damage our reputation a

253、nd business.Because our testing services and research and development activities enable us to access customers and research partnersproprietary information,it is essential to our business strategy that our information technology infrastructure remains secure and isperceived by our customers and rese

254、arch partners to be secure.Despite our security measures,we may face cyber-attacks that attempt topenetrate our network security,sabotage or otherwise disable our research,tests and services,misappropriate our or our customers andresearch partners proprietary information,which may include personally

255、 identifiable information,or cause interruptions of our internalsystems and services.We have not purchased any cyber insurance.Any cyber-attacks could negatively affect our reputation,damage ournetwork infrastructure and our ability to deploy our products and services,harm our relationship with cust

256、omers and research partners thatare affected,and expose us to significant financial liabilities.We depend on third-party suppliers,sales agents,service providers and research partners for different aspects of our business.We depend on third parties for different aspects of our business,including sup

257、plying blood samples for our research studies andreagents required for biomarkers used in our combination tests,performing a portion of auxiliary biomarker-based tests in our combinationtests,sales of our cancer screening and detection tests to our customers,and collecting blood samples for our comm

258、ercial cancer screeningand detection tests.Selecting,managing and supervising these third-party suppliers,sales agents and service providers requires significantresources and expertise.Poor performance by these third parties,including their failure to provide services or products according toapplica

259、ble legal and regulatory requirements,the terms of our contracts or otherwise below standard,could significantly and negativelyaffect the quality of our cancer screening and detection tests and damage our reputation.Decreases in the level of sales agents purchasesof tests from us for resale to the e

260、nd-customers could adversely affect our revenue growth.In addition,the service or cooperativeagreements we have with third-party suppliers,sales agents and service providers are subject to a term,and are not on an exclusive basis.If these third parties do not continue to maintain or expand their coo

261、peration with us,we would be required to seek new suppliers and salesagents,which could cause delays in services to us and negatively affect the quality and availability of our cancer screening and detectiontests.Any of the above factors could adversely impact our results of operations and financial

262、 position.In addition,certain of our research partners,which are primarily renowned hospitals and medical institutions,collaborate with usand provide blood samples that we use to conduct various research studies.These partners may cease cooperation with us in the future,especially if they enter into

263、 similar agreements or arrangements with our competitors.If we are unable to readily access sufficient bloodsamples to conduct our commercial tests and research studies,we may be unable to compete effectively with other laboratories that havegreater access to blood samples,and our business,financial

264、 condition and results of operations may be harmed.Table of Contents20We rely on third-party contract manufacturers for the manufacturing of key components of our CDA devices.We design and configure all of the key components of our CDA device and have outsourced the manufacturing of thesecomponents

265、of our CDA devices to third-party contract manufacturers.Our revenue is generated primarily from our CDA tests conductedusing our CDA devices.Our contract manufacturers may fail to deliver these key components for reasons beyond our control.Forexample,they may encounter financial difficulties or exp

266、erience disruptions in their manufacturing operations due to equipmentbreakdowns,labor disputes or shortages,raw material shortages,cost increases or other similar reasons.If they fail to timely deliver thosekey components for us to assemble our CDA device or maintain the quality of their products,o

267、ur ability to conduct our commercial CDA-based tests could be adversely affected.Currently,we do not have any long-term or exclusive supply contracts with any of our contractmanufacturers.Our contract manufacturers may cease to provide us with the key components of our CDA devices.Since qualifying a

268、 newcontract manufacturer could be costly and time-consuming,the termination of a contract manufacturer could cause disruption to ourbusiness and adversely impact our results of operations.We rely on commercial courier delivery services to transport blood samples to our laboratory facilities in a ti

269、mely and cost-efficientmanner,and if these delivery services are disrupted,our business will be harmed.Our business depends on our ability to quickly and reliably deliver test results to our customers.We rely on commercial courierdelivery services to transport blood samples to our laboratory facilit

270、ies timely and cost efficiently.Blood samples are typically receivedwithin a few days in China for analysis in our laboratories.Disruptions in third-party delivery service,whether due to labor disruptions,bad weather,natural disaster,health epidemics,terrorist acts or threats or for other reasons,co

271、uld adversely affect specimen integrity andour ability to process blood samples and conduct tests in a timely manner and to service our customers satisfactorily,and ultimately ourreputation and our business.In addition,if we are unable to continue to obtain expedited delivery services on commerciall

272、y reasonableterms,our operating results may be adversely affected.Material weaknesses in our internal control over financial reporting have been identified,and if we fail to implement and maintain aneffective system of internal controls over financial reporting,we may be unable to accurately report

273、our results of operations,meet ourreporting obligations or prevent fraud.As a result of the initial public offering,we have become subject to the reporting requirements of the Exchange Act,the Sarbanes-Oxley Act of 2002 and the rules and regulations of the Nasdaq Stock Market.The Sarbanes-Oxley Act

274、requires,among other things,thatwe maintain effective disclosure controls and procedures and internal controls over financial reporting.Commencing with our year endedDecember 31,2021,we must perform system and process evaluation and testing of our internal controls over financial reporting to allowm

275、anagement to report on the effectiveness of our internal controls over financial reporting in our Form 20-F filing for that year,as requiredby Section 404 of the Sarbanes-Oxley Act.In addition,when we cease to be an“emerging growth company”as the term is defined in theJumpstart Our Business Startups

276、 Act,our independent registered public accounting firm may be required to attest to and report on theeffectiveness of our internal control over financial reporting.Our management may conclude that our internal control over financialreporting is not effective.Moreover,even if our management concludes

277、 that our internal control over financial reporting is effective,ourindependent registered public accounting firm,after conducting its own independent testing,may issue a report that is qualified if it is notsatisfied with our internal controls or the level at which our controls are documented,desig

278、ned,operated or reviewed,or if it interprets therelevant requirements differently from us.This will require that we incur substantial additional professional fees and internal costs toexpand our accounting and finance functions and that we expend significant management efforts.We may experience diff

279、iculty in meetingthese reporting requirements in a timely manner.In the course of preparing and auditing our consolidated financial statements for the year ended December 31,2021,we identifiedfour material weaknesses in our internal control over financial reporting as of December 31,2021,the materia

280、l weaknesses identified were(i)lack of accounting staff and resources with appropriate knowledge of U.S.GAAP and SEC reporting and compliance requirements;(ii)lack of financial reporting policies and procedures to establish formal risk assessment process and internal control framework;(iii)lackof pr

281、oper accounts receivable aging policy and review of the allowance for doubtful accounts;and(iv)deficiencies noted in(a)IT policy;(b)risk and vulnerability assessment.(c)program change and security patch management;(d)backup and recovery management;(e)audittrail and separation of duty management;(f)p

282、assword management.Following the identification of these material weaknesses,we plan totake measures to remedy our information technology general control.For details,see“Item 15.Controls and ProceduresInternal ControlOver Financial Reporting.”However,we cannot assure you that all these measures will

283、 be sufficient to remediate our material weakness intime,or at all.Table of Contents21To remedy our identified material weaknesses,we have started to undertake steps to strengthen our internal control over financialreporting,including:(i)hiring additional qualified accounting and financial reporting

284、 personnel with U.S.GAAP and SEC reportingexperience,(ii)obtaining advisory services from professional consultants with experience in the requirements of the Sarbanes Oxley Actof 2002 and internal audit guidance on SEC reporting,(iii)expanding the capabilities of our existing accounting and financia

285、l reportingpersonnel through continuous training and education in the accounting and reporting requirements under U.S.GAAP,and SEC rules andregulations,(iv)developing,communicating and implementing an accounting policy manual for our accounting and financial reportingpersonnel for our recurring tran

286、sactions and period-end closing processes,and(v)establishing effective monitoring and oversight controlsfor non-recurring and complex transactions to ensure the accuracy and completeness of our companys consolidated financial statementsand related disclosures.However,these measures have not been ful

287、ly implemented and we concluded that the material weakness in ourinternal control over financial reporting has not been remediated as of December 31,2021.We will continue to implement measures toremediate the material weaknesses.In addition,our internal control over financial reporting will not prev

288、ent or detect all errors and all fraud.A control system,nomatter how well designed and operated,can provide only reasonable,not absolute,assurance that the control systems objectives will bemet.Because of the inherent limitations in all control systems,no evaluation of controls can provide absolute

289、assurance that misstatementsdue to error or fraud will not occur or that all control issues and instances of fraud will be detected.Our business may suffer if we are unable to collect payments from our corporate customers on a timely basis.We typically offer credit terms of one to three months to ou

290、r sales agents and other corporate customers.Any downturn in thebusinesses of our sales agents and other corporate customers could reduce their willingness or ability to pay us.The failure of any of oursales agents or other corporate customers to make timely payments could require us to recognize an

291、 allowance for doubtful accounts.Forexample,we had allowance for doubtful accounts receivable of RMB177,000,RMB304,000 and RMB1,145,000(US$180,000)as ofDecember 31,2019,2020 and 2021,respectively.We cannot guarantee that we will be able to collect these doubtful accounts.As a result,our results of o

292、perations and financial condition may be adversely affected.We have granted,and may continue to grant,stock incentive awards,which may result in increased share-based compensationexpenses.We have adopted our 2010 share incentive plan,or 2010 Plan,and Amended and Restated 2019 share incentive plan,or

293、 2019Plan,so that we can grant share-based compensation awards to our directors,officers,employees and consultants to incentivize theirperformance and align their interests with ours.The maximum number of Class A ordinary shares that may be issued pursuant to allawards under our 2019 Plan is 1,885,3

294、00.We have also separately issued options to our directors,officers,employees and consultantsunder our 2010 Plan.As of the date of this annual report,options to purchase 1,432,300 Class A ordinary shares under the 2010 Plan andthe 2019 Plan had been granted and were outstanding.We believe the granti

295、ng of stock incentive awards is of significant importance to our ability to attract and retain our management,employees and consultants,and we will continue to grant stock incentive awards to our management,employees and consultants in thefuture.As a result,our expenses associated with share-based c

296、ompensation may increase,which may have an adverse effect on our resultsof operations.In addition,the granting,vesting and exercise of the awards under these stock incentive plans will have a dilutive effect onyour shareholding in our company.We may be subject to litigation and other claims and lega

297、l proceedings,and may not always be successful in defending ourselvesagainst these claims or proceedings.We are subject to lawsuits and other claims in the ordinary course of our business.We have been,and may in the future be,subject to lawsuits and other legal proceedings brought by our customers,c

298、ompetitors,employees,business partners,investors,othershareholders of the companies we invest in,or other entities against us,in matters relating to intellectual property rights,contractualdisputes,competition claims and employment disputes,among others.We may also be subject to regulatory proceedin

299、gs,such as any non-compliance with licensing requirements,advertising practices,and protection of data privacy of the tested individuals.We may not besuccessful in defending ourselves,and the outcomes of these lawsuits and proceedings may be unfavorable to us.Lawsuits and regulatoryproceedings again

300、st us may also generate negative publicity that significantly harms our reputation,which may adversely affect ourcustomer base,market position and our relationships with our research partners and other business partners.In addition toTable of Contents22the related costs,managing and defending litiga

301、tion and other legal proceedings and related indemnity obligations can significantly divertour managements attention from operating our business.We may also need to pay damages or settle lawsuits or other claims with asubstantial amount of cash,negatively affecting our liquidity.As a result,our busi

302、ness,financial condition and results of operations couldbe adversely affected.We have limited business insurance coverage.Our business insurance is limited,and we do not carry business interruption insurance to cover our operations.We havedetermined that the costs of insuring for related risks and t

303、he difficulties associated with acquiring such insurance on commerciallyreasonable terms make it impractical.Any uninsured damage to our facilities or technology infrastructures or disruption of our businessoperations could require us to incur substantial costs and divert our resources,which could h

304、ave an adverse effect on our business,financial condition and results of operations.Risks Relating to Government RegulationsPRCAs a biotechnology company,we are required to comply with extensive regulations and obtain and maintain a number of permits andlicenses to carry on our business in China;fut

305、ure government regulation may place additional burdens on our efforts to commercializeour cancer screening and detection tests and device.As a biotechnology company,we are subject to extensive government regulation and supervision in China.Violation of applicablelaws and regulations may materially a

306、nd adversely affect our business.For example,we are required to obtain a medical institutionpractice license from the PRC National Health Commission,or the NHC,for our laboratories to conduct cancer screening and detectiontests in China.We also need to obtain a medical device manufacture license and

307、 a medical device registration certificate from the NMPAfor the manufacturing and commercial use and sale of our CDA device.Each of our current NHC medical institution practice licenses and our NMPA Class II medical device manufacture license andregistration certificate has a five-year term.We are a

308、pplying for a Class III medical device registration certificate from the NMPA.Afterwe obtain this license,we will apply to update our medical device manufacture license to include the manufacture of Class III medicaldevices.In December 2021,our first-Class III medical device,a medical device for lun

309、g cancer assisting in diagnosis utility,hassuccessfully passed rigorous tests at a medical device testing lab designated by NMPA.The medical device is planned to start clinical trialin selected hospitals in late second quarter or third quarter of 2022.If we are unable to renew our existing licenses

310、and certificates orobtain the Class III medical device license or update our medical device manufacture license,or obtain or renew any other material permitsor approvals required for our operations,we may be unable to continue to sell our cancer screening and detection tests or to commercializeour C

311、DA device in China and,as a result,our business may be adversely affected.In addition,Chinas regulatory framework governing biotechnology companies is subject to change and amendment from time totime.Any such change or amendment could materially and adversely impact our business,financial condition

312、and prospects.The PRCgovernment has introduced various reforms to the Chinese healthcare system in recent years and may continue to do so,with an overallobjective of expanding basic medical insurance coverage and improve the quality and reliability of healthcare services.The specificregulatory chang

313、es under the reforms still remain uncertain.The implementing measures to be issued may not be sufficiently effective toachieve the stated goals,and as a result,we may not be able to benefit from these reforms to the level we expect,if at all.Moreover,thereforms could give rise to regulatory developm

314、ents,such as more burdensome administrative procedures,which may have an adverseeffect on our business and prospects.If we are unable to maintain our medical device or laboratory related licenses and certificates,our growth strategy may becompromised.Pursuant to the Regulation on the Supervision and

315、 Administration of Medical Devices as amended by the PRC State Council inDecember 2020,which came into effect in June 2021,medical devices are classified into three classes according to their risk levels.Class II medical devices are medical devices with moderate risks that must be strictly controlle

316、d and regulated to ensure their safety andeffectiveness.Class III medical devices are medical devices with relatively high risks that must be strictly controlled and regulatedTable of Contents23through special measures to ensure their safety and effectiveness.In addition,the Measures for the Supervi

317、sion and Administration of theOperation of Medical Devices,issued on March 10,2022,regulate entities that engage in business activities involving medical devices inthe PRC in accordance with the medical devices risk levels.The Class II medical device registration certificate and the Class III medica

318、ldevice registration certificate are required for an entity to conduct business activities involving these medical devices.We have obtained the Class II medical device registration certificate from the NMPA,which allows us to conduct our tests in ourlicensed laboratories.To perform our CDA test outs

319、ide of our laboratories and market them to Chinese hospitals,in December 2018,weapplied for a Class III medical device registration certificate from the NMPA for our CDA device.We expect to receive Class III licenseby the end of the first quarter of 2023.In August,2021,the Company filed a second cla

320、ss III medical device license application with 11types of cancer auxiliary diagnosis utility with NMPA,which includes lung,esophageal,gastric,rectal,colon,liver,breast,cervical,thyroid,pancreatic and brain cancers.After we obtain this license,we will update our medical device manufacture license,whi

321、ch webelieve is a relatively straightforward procedure.However,there is no assurance that we will receive this NMPA approvals on a timelybasis,or at all.If we fail to maintain and renew our Class II medical device registration certificate or if we are unable to obtain theClass III medical device lic

322、ense and update our medical device manufacture license,our ability to grow our business could be adverselyaffected.We believe our NHC medical institution practice license and NMPA Class II medical device registration certificate andmanufacture license are effective and cover our current commercializ

323、ed CDA test,which provides a cancer risk assessment.However,thePRC laws and regulations governing cancer screening and detection devices and tests are subject to uncertainties and regulatory discretion,including changes in interpretation and application,such as in respect of restrictions on foreign

324、investments in clinical laboratories.Thereis also a risk that the relevant regulatory authorities could disagree with our assessment of the commercial activities permitted by ourcertificates and licenses.For more information on this,see“Item 4.Information on the CompanyB.Business OverviewPRCRegulati

325、onsOther Significant PRC Regulations Affecting Our Business Activities in China.”Moreover,if we begin to commercializeour CDA test for other purposes such as assisting in diagnosis,prognosis and recurrence,this regulatory uncertainty and risk would begreater.If the relevant regulatory authorities we

326、re to assert that our current or future commercial cancer screening and detection tests werenot permitted by our licenses or revoke any of our NMPA or NHC licenses and certificates and require us to take remedial actions to theirsatisfaction,or if we were unable to obtain amended or additional requi

327、red licenses or approvals,then our business and financial resultswould be adversely affected.We are subject to ongoing obligations and continued regulatory review and to future changes in laws,regulations or enforcementpolicies in China.We are subject to ongoing obligations and continued regulatory

328、review in relation to our laboratories and our medical devices.Even if the NMPA grants our application for a Class III medical device registration certificate and allows us to update our medical devicemanufacture license accordingly,or if we successfully maintain and renew our Class II medical devic

329、e manufacture license andregistration certificate,our CDA device will be subject to extensive and ongoing regulatory requirements.In addition,there could be a subsequent discovery of previously unknown problems with our device(including problems withthird-party manufacturers or manufacturing process

330、es)or failure to comply with existing or future regulatory requirements(including inrespect of our conducting of cancer screening and detection tests).For example,if we were found to have conducted any of these tests inpremises other than a licensed laboratory,we could be subject to confiscation of

331、revenue from the relevant tests as well as other penalties.For more information on this,see“Item 4.Information on the CompanyB.Business OverviewPRC RegulationsRegulation onMedical Devices and Medical InstitutionsMedical Institutions Laws and Regulations.”Any government investigation of allegedviolat

332、ions of law could require us to expend significant time and resources and could result in adverse government actions(includingpenalties on us)and negative publicity on our brand.Moreover,laws,regulations and enforcement policies in China,including those regulating medical institutions,devices andsup

333、plies,are evolving.Changes in these areas could impose more stringent requirements on us,including fines or other penalties,andincrease our compliance and other operating costs.Changes in government regulations could also prevent,limit or delay regulatoryapprovals in relation to our CDA device.If we are unable to maintain regulatory compliance,any regulatory approval that has beenobtained may be l