sehk21073002217.pdf - :: HKEX :: HKEXnews ::

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

Application Proof of

HeMo Bioengineering Limited禾木生物工程有限公司

(the “Company”)(Incorporated in the Cayman Islands with limited liability)

WARNING

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

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

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

(b) the publication of this document or supplemental, revised or replacement pages on the Stock Exchange’s websitedoes not give rise to any obligation of the Company, its sponsors, advisers or members of the underwriting syndicateto proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Company willproceed with the offering;

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

(d) the Application Proof is not the final listing document and may be updated or revised by the Company from time totime in accordance with the Rules Governing the Listing of the Securities on The Stock Exchange of Hong KongLimited;

(e) the Application Proof does not constitute a prospectus, offering circular, notice, circular, brochure or advertisementoffering to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to make offers tosubscribe for or purchase any securities, nor is it calculated to invite offers by the public to subscribe for or purchaseany securities;

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

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

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

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

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

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

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

IMPORTANT: If you are in any doubt about any of the contents of this [REDACTED], you should seek independent professional advice.

HeMo Bioengineering Limited禾木生物工程有限公司

(Incorporated in the Cayman Islands with limited liability)

[REDACTED]Number of [REDACTED] under the

[REDACTED]: [REDACTED] Shares (subject to the

[REDACTED])Number of [REDACTED] : [REDACTED] Shares (subject to [REDACTED])Number of [REDACTED] : [REDACTED] Shares (subject to [REDACTED]

and the [REDACTED])Maximum [REDACTED] : HK$[REDACTED] per [REDACTED] plus

[REDACTED] of [REDACTED], SFC[REDACTED] of [REDACTED] and StockExchange [REDACTED] of [REDACTED](payable in full on [REDACTED] in Hong Kongdollars and subject to refund)

Nominal value : US$0.001 per Share[REDACTED] : [•]

Joint Sponsors, [REDACTED]

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take noresponsibility for the contents of this [REDACTED], make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever forany loss howsoever arising from or in reliance upon the whole or any part of the contents of this [REDACTED].

A copy of this [REDACTED], having attached thereto the documents specified in the section headed “Documents Delivered to the Registrar of Companies andAvailable for Inspection” in Appendix V to this [REDACTED], has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of theCompanies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission of Hong Kongand the Registrar of Companies in Hong Kong take no responsibility for the contents of this [REDACTED] or any of the other documents referred to above.

The [REDACTED] is expected to be determined by agreement between us and the [REDACTED] (on behalf of the [REDACTED]) on or about [REDACTED],[[REDACTED], [REDACTED]] and, in any event, not later than [[REDACTED], [REDACTED], [REDACTED]]. The [REDACTED] will be not more than[REDACTED] per [REDACTED] and is currently expected to be not less than [REDACTED] per [REDACTED], unless otherwise announced. [REDACTED] applyingfor the Hong Kong [REDACTED] must pay, on application, the maximum [REDACTED] of [REDACTED] per [REDACTED], together with [REDACTED] of[REDACTED], SFC [REDACTED] of [REDACTED] and Stock Exchange [REDACTED] of [REDACTED], subject to refund if the [REDACTED] is less than[REDACTED] per [REDACTED]. If, for any reason, the [REDACTED] is not agreed between us and the [REDACTED] (on behalf of the [REDACTED]) on or before[REDACTED], [REDACTED]] (Hong Kong time), the [REDACTED] (including the Hong Kong [REDACTED]) will not proceed and will lapse.

The [REDACTED] (on behalf of the [REDACTED]), with our consent, may reduce the indicative [REDACTED] range stated in this [REDACTED] and/or reduce thenumber of [REDACTED] being offered pursuant to the [REDACTED] at any time on or prior to the morning of the last day for lodging [REDACTED] under the HongKong [REDACTED]. In such a case, notices of the reduction of the indicative [REDACTED] and/or the number of [REDACTED] will be published in the [South ChinaMorning Post] (in English) and the [Hong Kong Economic Times] (in Chinese) not later than the morning of the last day for lodging [REDACTED] under the Hong Kong[REDACTED]. Such notices will also be available on the website of the Stock Exchange at www.hkexnews.hk and on the website of our company at www.hemocorp.com.Further details are set out in the sections headed “[REDACTED]” and “[REDACTED]” in this [REDACTED]. Prior to making an [REDACTED] decision, prospective[REDACTED] should consider carefully all of the information set out in this [REDACTED], including the risk factors set out in the section headed “Risk Factors” inthis [REDACTED].

The obligations of the Hong Kong [REDACTED] under the Hong Kong [REDACTED] are subject to termination by the [REDACTED] (on behalf of the [REDACTED])if certain grounds arise prior to 8:00 a.m. on the [REDACTED]. Such grounds are set out in the section headed “ [REDACTED]” in this [REDACTED]. It is importantthat you refer to that section for further details.

The [REDACTED] have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States and may not be[REDACTED], sold, pledged or transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registrationrequirements of the U.S. Securities Act and applicable U.S. state securities laws. The [REDACTED] are being [REDACTED] and sold (i) within the United Statessolely to QIBs as defined in Rule 144A pursuant to an exemption from registration under the U.S. Securities Act and (ii) outside the United States in offshoretransactions in accordance with Regulation S.

[REDACTED]

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

IMPORTANT

* for identification purposes only [REDACTED]

[REDACTED]


IMPORTANT

– i –

[REDACTED]


IMPORTANT

– ii –

[REDACTED]


EXPECTED TIMETABLE(1)

– iii –

[REDACTED]



– iv –

[REDACTED]



– v –

[REDACTED]



– vi –

IMPORTANT NOTICE TO [REDACTED]

This [REDACTED] is issued by HeMo Bioengineering Limited solely in connection withthe [REDACTED] and the [REDACTED] and does not constitute an [REDACTED] to sell ora solicitation of an [REDACTED] to buy any securities other than the [REDACTED] by this[REDACTED] pursuant to the [REDACTED]. This [REDACTED] may not be used for thepurpose of, and does not constitute, an [REDACTED] or invitation in any other jurisdiction orin any other circumstances. No action has been taken to permit a [REDACTED] or thedistribution of this [REDACTED] in any jurisdiction other than Hong Kong. The distributionof this [REDACTED] in other jurisdictions are subject to restrictions and may not be madeexcept as permitted under the applicable securities laws of such jurisdictions pursuant toregistration with or authorization by the relevant securities regulatory authorities or anexemption therefrom.

You should rely only on the information contained in this [REDACTED] to make your[REDACTED] decision. We have not authorized anyone to provide you with information thatis different from what is contained in this [REDACTED]. Any information or representationnot made in this [REDACTED] must not be relied on by you as having been authorized by us,the Joint Sponsors, [REDACTED], any of our or their respective directors, officers orrepresentatives or any other person involved in the [REDACTED]. Information contained inour website, located at www.hemocorp.com, does not form part of this [REDACTED].

Page

EXPECTED TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

GLOSSARY OF TECHNICAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULESAND EXEMPTION FROM STRICT COMPLIANCE WITHTHE COMPANIES (WINDING UP AND MISCELLANEOUSPROVISIONS) ORDINANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

INFORMATION ABOUT THIS [REDACTED] AND THE [REDACTED] . . . . . . . . . . . 116


CONTENTS

– vii –

DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED] . . . . . . . . . . . . . . . . . 121

CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

INDUSTRY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

REGULATORY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE . . . . . . . . . . . . . . . . . 168

BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281

DIRECTORS AND SENIOR MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320

RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS . . . . . . . . . . . . . . 334

SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338

SUBSTANTIAL SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342

FUTURE PLANS AND [REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344

[REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352

[REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364

[REDACTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 376

APPENDIX I — ACCOUNTANTS’ REPORT OF THE GROUP . . . . . . . . . . . . . . . I-1

APPENDIX II — UNAUDITED PRO FORMA FINANCIAL INFORMATION . . . . II-1

APPENDIX III — SUMMARY OF OUR CONSTITUTION OF THE COMPANY

AND CAYMAN ISLANDS COMPANIES LAW . . . . . . . . . . . . . III-1

APPENDIX IV — STATUTORY AND GENERAL INFORMATION . . . . . . . . . . . . . IV-1

APPENDIX V — DOCUMENTS DELIVERED TO THE REGISTRAR OF

COMPANIES AND AVAILABLE FOR INSPECTION . . . . . . . V-1


CONTENTS

– viii –

This summary aims to give you an overview of the information contained in this[REDACTED]. As it is a summary, it does not contain all the information that may beimportant to you. You should read the whole document before you decide to [REDACTED] inthe [REDACTED].

There are risks associated with any [REDACTED]. Some of the particular risks in[REDACTED] in the [REDACTED] are set forth in the section headed “Risk Factors” of this[REDACTED]. You should read that section carefully before you decide to [REDACTED] inthe [REDACTED].

OUR MISSION

We are committed to developing and providing innovative interventional medical devicesto patients to improve their health and quality of life.

OVERVIEW

We have built a suite of innovative interventional medical devices targetingneuro-vascular and peripheral diseases in China and the broader Asia-Pacific region. Ourcomprehensive portfolio of neuro-interventional medical devices covers all of the ischemicstroke, hemorrhagic stroke and neuro access fields. We are a pioneer in mechanicalthrombectomy in China for acute ischemic stroke evidenced by our first-to-market domesticaspiration catheter Afentta®. Our Afentta® aspiration catheter, one of our major products, isthe first domestic aspiration catheter approved by the NMPA and commercialized in China.The 088 model of our other major product HMC1-NAS aspiration catheter has potentially theworld’s largest distal inner diameter among aspiration catheters in the market once approved.In addition, our peripheral interventional medical devices cover both vascular andnon-vascular interventions. Our Core Product Privi hemorrhoid cooling balloon is anon-vascular interventional medical device that employs only physical mechanism to treathemorrhoids, eliminating the need for medication or ingredients that may be associated withside effects. As of the Latest Practicable Date, we had three commercialized products, fouradditional approved products, three product candidates under registration review or in theclinical trial stage, and 12 products candidates in the pre-clinical stage.

• Neuro-interventional medical devices: We have a comprehensive suite of productscovering the ischemic stroke (comprising acute ischemic stroke and intracranialartery stenosis), hemorrhagic stroke and neuro access fields, providing holisticsolutions for neuro-interventional procedures. We obtained the Class III medicaldevice registration certificate for our Afentta® aspiration catheter in May 2021 andcommercialized it in July 2021, making it the first domestic aspiration catheterapproved by the NMPA and commercialized to treat acute ischemic stroke, or AIS,according to Frost & Sullivan. This gives us a strategic, first-mover advantage in thetreatment of AIS patients using ADAPT (namely, A Direct Aspiration First PassTechnique) therapy. We are also finalizing the clinical trial for our HMC1-NASaspiration catheter, which contains the 088 model with potentially the world’slargest distal inner diameter in the market once approved, according to Frost &Sullivan. In addition, we are conducting a clinical trial for our self-developed stentretriever. As of the Latest Practicable Date, we had successfully commercializedthree neuro-interventional products, namely our TracLine® access catheter,FocuStar® neuro balloon catheter – Rx and Afentta® aspiration catheter. Inaddition, we expect to commercialize another two and four neuro-interventionalmedical devices by the end of 2021 and 2022, respectively.

• Peripheral interventional medical devices: We have strategically tapped into theperipheral non-vascular devices market with our Privi hemorrhoid cooling balloon,which has obtained NMPA approval and will be commercialized in the fourthquarter of 2021. This product employs only physical mechanism to treathemorrhoids, eliminating the need for medication or ingredients that may be


SUMMARY

– 1 –

associated with side effects. It is therefore potentially suitable and safe for patientswith special medication requirements, including pregnant women and women duringthe lactation period. In addition, we have obtained NMPA approval for ourFocusLine® PTA balloon dilation catheter, a peripheral vascular device for thetreatment of peripheral artery diseases, and expect to commercialize this product in2022. We also have three other peripheral vascular product candidates at variousstages of development.

China’s neuro-interventional medical devices market is still at its early stage ofdevelopment and is under-penetrated with strong growth momentum. According to Frost &Sullivan, driven by improved infrastructure, an increasing number of capable physicians,increasing affordability of such treatment and favorable governmental policies, the volume ofneuro-interventional procedures in China increased at a CAGR of 15.8% from 91.4 thousandin 2016 to 164.2 thousand in 2020. This volume is expected to grow at a CAGR of 32.7% from2020 to 675.3 thousand in 2025 and further increase at a CAGR of 21.4% from 2025 to 1.78million in 2030. In addition, the number of mechanical thrombectomy procedures in Chinaincreased at a CAGR of 29.5% from 17.6 thousand in 2016 to 49.5 thousand in 2020. Thisnumber is expected to increase at a CAGR of 43.9% from 2020 to 305.2 thousand in 2025 andfurther at a CAGR of 23.6% from 2025 to 881.3 thousand in 2030.

Leveraging our comprehensive product portfolio, we believe that we are well positionedto lead the continued evolution of China’s AIS treatment paradigm by promoting the ADAPTtherapy. Based on various research studies, ADAPT has several advantages as a first-linetherapy in mechanical thrombectomy, including superior safety, higher first-passrecanalization rate, higher TICI 2b/3 recanalization rate, shorter treatment duration, ease ofuse and lower overall device cost compared to the stent retriever technique. As a result,ADAPT has been used increasingly in clinical practice in recent years. It is also expected thatADAPT’s Class of Recommendation (COR) in the AIS treatment guidelines in China willlikely be raised, indicating significant growth potential in China.

Meanwhile, hemorrhoid is one of the most common clinical anorectal diseases. In China,724.9 million people had hemorrhoids in 2020, and the prevalence rate of hemorrhoids inChina has exceeded 50% among adults, according to Frost & Sullivan. While there are somecommon therapies for hemorrhoids, many of them may not be sufficiently effective and safe tomeet the needs of various patient groups. In addition, along with the improvement indiagnostic technologies and knowledge, the population with peripheral artery diseases inChina increased from 45.9 million in 2016 to 50.7 million in 2020, and is expected to reach56.6 million in 2025 and 62.3 million in 2030.

As of the Latest Practicable Date, we had three commercialized products that hadgenerated revenue (namely, TracLine® access catheter, FocuStar® neuro balloon catheter – Rxand Afentta® aspiration catheter), four products for which we have obtained the NMPAapprovals (namely, Privi hemorrhoid cooling balloon, aspiration accessory, Mountix®

micro-catheter and FocusLine® PTA balloon dilation catheter) and 15 product candidates. Wedeveloped all of our products and product candidates in-house, except that we licensed intechnologies for our Privi hemorrhoid cooling balloon from Privi Medical and our Afentta®

and HMC1-NAS aspiration catheters and TracLine® access catheter from ICI. See“Business—Research and Development—In-licensing Arrangement” for details of ourin-licensing arrangements. The chart below sets forth the development status of these productsas of the Latest Practicable Date.


SUMMARY

– 2 –

Pro

duct

Indi

cati

on

Stag

eE

xpec

ted

Com

plet

ion

ofC

urre

ntSt

age

Exp

ecte

dC

omm

erci

al

Lau

nch

Tim

eP

re-c

linic

alC

linic

alR

egis

trat

ion

& A

ppro

val

Afe

ntta

®A

spir

atio

nC

athe

ter

(1)

Acu

teis

ch

em

ic s

tro

ke

N/A

Lau

nch

ed

HM

C1-

NA

SA

spir

atio

n C

athe

ter

(1)

Acu

teis

ch

em

ic s

tro

ke

Q3

20

21

20

22

HM

SR-N

AS

Asp

irat

ion

Cat

hete

r(2)

Acu

teis

ch

em

ic s

tro

ke

Q3

20

21

20

23

Asp

irat

ion

Acc

esso

ryA

ssis

tasp

irati

on

cath

ete

rfo

r

thro

mb

us

rem

ov

al

N/A

Q3

20

21

Sten

t R

etri

ever

(3)

Acu

teis

ch

em

ic s

tro

ke

Q2

20

22

20

23

Neu

ro D

rug

-Coa

ted

Bal

loon

Intr

acra

nia

lart

ery

sten

osi

sQ

42

02

12

02

5

Foc

uSta

r®N

euro

Bal

loon

Cat

hete

r–

Rx

Intr

acra

nia

lart

ery

sten

osi

sN

/AL

au

nch

ed

Neu

ro B

allo

onC

athe

ter

–O

TW

Intr

acra

nia

lart

ery

sten

osi

sQ

32

02

12

02

2

Neu

ro D

rug

Elu

ting

Sten

tIn

tracra

nia

lart

ery

sten

osi

s2

02

22

02

5

Bal

loon

-exp

anda

ble

Sten

tIn

tracra

nia

lart

ery

sten

osi

sQ

42

02

12

02

5

Tra

cLin

e®A

cces

sC

athe

ter

(1)

Pro

vid

eaccess

fo

ro

ther

neu

ro-

inte

rven

tio

nal

dev

ices

N/A

Lau

nch

ed

HM

SR-N

AC

Acc

ess

Cat

hete

r(2

)P

rov

ide

access

fo

ro

ther

neu

ro-

inte

rven

tio

nal

dev

ices

Q4

20

21

20

23

Mou

ntix

®M

icro

-Cat

hete

rA

ssis

tth

ed

eli

very

of

med

ical

dev

ice

N/A

Q3

20

21

Gui

ding

Cat

hete

rA

ssis

tth

ed

eli

very

of

med

ical

dev

ice

Q3

20

21

20

22

Mic

roG

uide

wir

efo

rIs

chem

iaA

ssis

tth

ed

eli

very

of

med

ical

dev

ices

20

22

20

23

Bal

loon

Gui

ding

Cat

hete

rA

ssis

tth

ed

eli

very

of

med

ical

dev

ices

Q4

20

21

20

22

Flo

wD

iver

ter

Hem

orr

hag

icst

rok

e2

02

22

02

5

Pri

viH

emor

rhoi

d C

oolin

gB

allo

on(4

)H

em

orr

ho

idN

/AQ

42

02

1

Per

iphe

ralD

rug

-Coa

ted

Bal

loon

Peri

ph

era

lv

asc

ula

rd

isease

20

22

20

26

Car

otid

Em

bolic

Pro

tect

ion

Dev

ice

Em

bo

lic

mate

rial

co

nta

inin

gan

d

rem

ov

al

20

22

20

23

Per

iphe

ralD

rug

Elu

ting

Sten

tP

eri

ph

era

lart

ery

sten

osi

s2

02

22

02

6

Foc

usL

ine®

PT

AB

allo

onD

ilati

onC

athe

ter

Peri

ph

era

lv

asc

ula

rd

isease

N/A

20

22

Lau

nch

ed

in C

hin

a

Incli

nic

al

tria

l

Desi

gn

sta

ge

Incli

nic

al

tria

l

Ap

pro

ved

inC

hin

a

Inan

imal

stu

dy

Ty

pe

test

ing

Ty

pe

test

ing

Lau

nch

ed

in C

hin

a

Desi

gn

sta

ge

Ap

pro

ved

inC

hin

a

Ty

pe

test

ing

Lau

nch

ed

in C

hin

a

Ty

pe

test

ing

Desi

gn

sta

ge

Un

der

NM

PA

reg

istr

ati

on

rev

iew

Desi

gn

sta

ge

Ap

pro

ved

inC

hin

a

Ty

pe

test

ing

Desi

gn

sta

ge

Desi

gn

sta

ge

Ap

pro

ved

inC

hin

a

Acu

teIs

chem

icSt

roke

Neu

roA

cces

s

Hem

orrh

agic

Stro

ke

Per

iphe

ral

Dis

ease

s

Co

reP

rod

uctC

hin

aS

tatu

sO

vers

eas

Sta

tus

Th

ese

dev

ices

are

,o

rare

exp

ecte

dto

be,

exem

pte

dfr

om

cli

nic

al

tria

lre

qu

irem

en

tsin

acco

rdan

ce

wit

hth

e C

ata

log

ue

of

Med

ical

Dev

ice

Exem

pte

dfr

om

Cli

nic

al

tria

ls

(《免于进行临床试验医疗器械目录》

)p

rom

ulg

ate

db

yth

e N

MP

A,

as

am

en

ded

Majo

rP

rod

ucts

Co

mm

erc

iali

zed

Not

es:

1.

Th

ese

pro

du

cts

were

dev

elo

ped

base

do

nte

ch

no

log

ies

in-l

icen

sed

fro

mIC

I. I

CI

ob

tain

ed

the U

.S.F

DA

’s a

pp

rov

al

in2

01

9fo

rit

sasp

irati

on

cath

ete

rw

ith

su

bst

an

tiall

ysi

mil

ar

stru

ctu

reand

sp

ecifi

cati

on

s as

ou

r A

fen

tta

®

asp

irati

on

cath

ete

r.2

.W

ew

ill

ap

ply

for

the

CE

Mark

ing

for

these

pro

du

cts

toco

mm

erc

iali

ze

them

inm

ark

ets

ou

tsid

eC

hin

a,w

ith

afo

cu

so

nth

eA

sia-P

acifi

cre

gio

n.

3.

We

wil

lap

ply

for

the

NM

PA

reg

istr

ati

on

cert

ificate

for

this

pro

du

ct

inC

hin

aan

dap

ply

fo

rth

e C

EM

ark

ing

toco

mm

erc

iali

ze

this

pro

du

ct

inm

ark

ets

ou

tsid

eC

hin

a,

wit

ha

focu

s o

nth

eA

sia -

Pacifi

cre

gio

n.

4.

Th

isp

rod

uct

was

dev

elo

ped

base

d o

nte

ch

no

log

ies

in-l

icen

sed

fro

m P

riv

i M

ed

ical.

Pri

vi

Med

ical

ob

tain

ed

the U

.S.F

DA

’s a

pp

rov

al

in2

01

8fo

rit

sp

rod

uct

wit

h s

ub

stan

tiall

ysi

mil

ar

stru

ctu

re a

nd

sp

ecifi

cati

on

s as

ou

r P

riv

i h

em

orr

ho

idco

oli

ng

ball

oo

n.

Intr

acra

nial

A

rter

ySt

enos

is


SUMMARY

– 3 –

We have built strong R&D, manufacturing and commercialization capabilities:

• R&D: Our R&D team is led by Dr. Wang, who has over 20 years of medical devicedevelopment and management experience. As a seasoned entrepreneur, Dr. Wanghas a proven track record in managing two successful medical devicecompanies—Biosensors International (previously listed on the SingaporeExchange’s Mainboard) and JW Medical Systems—where he also led teams in theR&D and commercialization of successful medical device products.

Our global R&D platform comprises our R&D center in Weihai and Beijing inChina, our newly-established R&D center in Singapore, and our collaboration witha third-party R&D center in Silicon Valley of the U.S. since December 2018. Ourin-house R&D team has solid technical knowledge and industry experience inidentifying, assessing and procuring innovative technologies globally, as well as richon-the-ground experience in developing new products in China. Most of our R&Dteam members have extensive experience in medical device R&D activities and usedto work at JW Medical Systems and Biosensors International alongside Dr. Wang,as well as other multinational pharmaceutical or medical device companies such asNovartis and Johnson & Johnson. Our newly established R&D team in Singaporewill initially focus on developing automated production lines for our Privihemorrhoid cooling balloon. At a later stage, they will also conduct R&D onneuroscience and AI technology with a focus on rehabilitation medical devices. Ourcollaboration with the U.S. R&D center focuses on the designs of various catheters,while our R&D team in China is responsible for continuous design improvementsand iterations and introducing the products into China. In addition, we benefit fromthe strong support of world-renowned and industry-leading experts in theneuro-interventional field who have provided us with invaluable advice andassistance in our clinical trials, and in educating the market.

• Manufacturing: We have established self-sufficient and GMP compliant productionfacilities located in Weihai, China for completely in-house manufacturing, whichenables us to achieve better quality control and cost-efficiency. We plan to expandour production capacity in China and Singapore in the coming years. Our leaders inthe manufacturing and quality control departments have more than 10 years ofexperience in medical device manufacturing and quality control. Most of ourmanufacturing and quality control team members worked with Dr. Wang at JWMedical Systems and Biosensors International, and these team members collectivelyhave over 10 years of experience in GMP and ISO 13485 inspections.

• Commercialization: Led by our experienced management, we have developed strongcommercialization capabilities. We commercialize our products primarily throughacademic promotion with KOLs, principal investigators and physicians. We havesuccessfully commercialized our TracLine® access catheter since April 2020, ourFocuStar® neuro balloon catheter – Rx since April 2021 and our Afentta® aspirationcatheter since July 2021. As of the Latest Practicable Date, these products hadreached 216 hospitals across 18 provinces and municipalities in China. Our leadersin the sales and marketing team have on average at least 15 years of work experiencein medical device commercialization at leading multinational medical devicecompanies such as Johnson & Johnson, Boston Scientific and Medtronic.

With our comprehensive product portfolio, strong R&D, manufacturing andcommercialization capabilities, visionary and seasoned management, as well as strong supportfrom industry pioneer KOLs and global leading healthcare investors, we believe that we arewell positioned to capture the growth opportunities of the neuro- and peripheralinterventional medical devices markets in China and the broader Asia-Pacific region.


SUMMARY

– 4 –

OUR SELECTED PRODUCTS AND PRODUCT CANDIDATES

Privi Hemorrhoid Cooling Balloon—Our Core Product

Our Privi hemorrhoid cooling balloon is our Core Product for the physical adjuvanttreatment of internal hemorrhoids and mixed hemorrhoids to alleviate the discomfort causedby the onset of hemorrhoids.

We completed a non-inferiority clinical trial in December 2018 comparing the safety andefficacy endpoints between patients treated with our Privi hemorrhoid cooling balloon andpatients treated with Tai Ning Suppositories (太寧栓), a drug for the treatment ofhemorrhoids. We enrolled a total of 191 patients for this clinical trial. Among the 189 patientswho completed the treatment, 85 patients were assigned to the test group using our productand 104 patients to the control group using Tai Ning Suppositories. The trial demonstratedthat our Privi hemorrhoid cooling balloon’s efficacy was not inferior to Tai NingSuppositories (太寧栓). We obtained the Class II medical device registration certificate for thisproduct from the Shandong MPA in February 2021, and expect to commercialize it in thefourth quarter of 2021. Separately, Privi Medical obtained the U.S. FDA’s 510(k) marketingapproval for this product in January 2018.

Our Privi hemorrhoid cooling balloon employs only physical mechanism to treathemorrhoids, eliminating the need for medication or ingredients that may be associated withside effects. We intend to engage a two-stage clinical trial to test the safety of our Privihemorrhoid cooling balloon on pregnant women and women during the lactation period inmainland China in 2022 and 2023.

For a detailed description of the product structure, operation procedure and clinical trialresults of our Privi hemorrhoid cooling balloon, see “Business—Our Products and ProductCandidates—Privi Hemorrhoid Cooling Balloon—Our Core Product.”

Aspiration Catheters

Our aspiration catheters are our product candidates for the revascularization ofintracranial vessels for patients with acute ischemic stroke through aspiration. Our majorproduct Afentta® aspiration catheter (with an inner diameter of 0.071 inch or smaller) wasapproved by the NMPA in May 2021 and commercialized in July 2021. It is the first domesticaspiration catheter approved by the NMPA and commercialized in China to treat acuteischemic stroke, and it contains the model of the largest distal inner diameter approved by theNMPA as of the Latest Practicable Date, according to Frost & Sullivan.

Separately, we are finalizing the clinical trial for our major product HMC1-NASaspiration catheter (with an inner diameter of 0.088 inch or smaller) to seek the NMPAapproval. The 088 model of this product has potentially the world’s largest distal innerdiameter among aspiration catheters in the market once approved, according to Frost &Sullivan. We expect to complete this clinical trial for this product in the third quarter of 2021and commercialize it in China in 2022.

In addition, we are currently designing our in-house developed HMSR-NAS aspirationcatheter with certain features different from our Afentta® and HMCI-NAS aspirationcatheters. We expect to apply for the CE Marking to commercialize this product in marketsoutside China, with a focus on the Asia-Pacific region, in 2023.

Based on relevant research studies, ADAPT (which uses aspiration as the first-lineapproach) has several advantages as a mechanical thrombectomy, including superior safety,higher first-pass recanalization rate, higher TICI 2b/3 recanalization rate, shorter treatmentduration, ease of use and lower overall device cost compared to the SR technique. In addition,some research studies have verified that aspiration catheters with a larger distal inner diametercan realize a higher rate of complete clot ingestion, which leads to a higher rate of first-passcomplete recanalization and fewer distal emboli. This presents significant market potential for


SUMMARY

– 5 –

our aspiration catheters, which contain relatively large models. For more details, including theproduct structure, operation procedure and clinical trial or development status of ouraspiration catheters and the ADAPT therapy, see “Business—Our Products and ProductCandidates—Aspiration Catheters.”

Stent Retriever

Our stent retriever is our product candidate that we developed in-house for intracranialvessel recanalization by removing occlusive thrombus in intracranial vessels for patients withacute ischemic stroke. We initiated the clinical trial on human subjects in July 2020 for thisproduct and expect to complete the clinical trial in the second quarter of 2022. We plan toenroll a total of 254 patients for our stent retriever’s overall head-to-head clinical trial againstthe SolitaireTM FR revascularization device, with 127 patients in each of the test group andthe control group. We expect to commercialize our stent retriever by 2023 after it is approvedby the NMPA. For a detailed description of the product structure, operation procedure andclinical trial status of our stent retriever, see “Business—Our Products and ProductCandidates—Stent Retriever.”

Access Catheters

Our access catheters are catheter devices that provide access for otherneuro-interventional devices, such as stent retriever, balloon, stent, coils and other kinds ofcatheters and guidewire, in the treatment procedures of acute ischemic stroke, intracranialatherosclerosis and hemorrhagic stroke. These other neuro-interventional devices can passthrough the access catheter to advance to the target site. Our TracLine® access catheter hasbeen commercialized in China since April 2020. We are also currently designing our in-housedeveloped HMSR-NAC access catheter. After the product design is completed, we plan toapply for the CE Marking to commercialize this product in markets outside China, with afocus on the Asia-Pacific region, in 2023. For a detailed description of the product structureand operation procedure of our TracLine® Access Catheter, see “Business—Our Products andProduct Candidates— TracLine® Access Catheter.”

OUR COMPETITIVE STRENGTHS

We believe the following strengths have contributed to our success and differentiated usfrom our competitors:

• Visionary, seasoned management team with proven track record in theinterventional medical devices industries;

• Innovative platform focused on the large, under-penetrated and fast-growing neuro-and peripheral interventional medical devices markets;

• Underpinned by ADAPT, we are well-positioned to lead the continued revolution ofChina’s AIS treatment paradigm;

• Robust in-house R&D capabilities with extensive R&D collaboration with globalpartners;

• Strong commercialization capabilities and self-sufficient manufacturing process; and

• Support from industry pioneer KOLs and global leading healthcare investors.

OUR STRATEGIES

We plan to implement the following strategies to grow our medical devices platform andstrengthen our market position in the neuro- and peripheral interventional markets:

• Strengthen our medical devices platform with disruptive technologies to fulfil unmetmedical needs;


SUMMARY

– 6 –

• Penetrate the broader Asia-Pacific markets and build a cross-border businessplatform;

• Improve the quality of life for the large patient population troubled withhemorrhoids;

• Advance the AIS treatment paradigm and solidify our first-mover advantage inADAPT in China; and

• Commercialize our neuro-interventional products through academic promotion.

RESEARCH AND DEVELOPMENT

We are committed to providing integrated solutions of medical devices in theinterventional field to both physicians and patients. Our R&D platform consists of ourpre-clinical R&D team in Weihai, Shandong Province, China, our clinical team in Beijing,China, our newly-established R&D center in Singapore, and our cooperation with athird-party R&D center based in Silicon Valley of the U.S. since December 2018. Most of ourR&D team members are industry veterans who have worked in reputable and industry-leadingcompanies.

In 2019, 2020 and the five months ended May 31, 2021, we incurred research anddevelopment expenses of RMB59.7 million, RMB18.1 million and RMB8.2 million,respectively. We also have a robust intellectual property portfolio. As of the Latest PracticableDate, we had five patents issued and 16 pending patent applications in China.

SALES AND CUSTOMERS

Our customers are our distributors. As of the Latest Practicable Date, we had twodistributors and 69 sub-distributors, covering 216 hospitals in 18 provinces and municipalitiesin China, currently for the distribution of our three commercialized products. In provincesand/or municipalities that have not strictly enforced the Two-invoice System, we have engageda distributor to sell our products to the sub-distributors, who then sell to hospitals. Inprovinces and/or municipalities where the Two-invoice System has been strictly enforced, ourdistributors either (i) sell our products to public hospitals directly without involving anysub-distributors as required by the Two-voice system, or (ii) sell our products to thesub-distributors, who then sell to private hospitals which are not subject to requirements ofthe Two-invoice System. See “Business—Sales, Distribution and Marketing” for moreinformation.

We began generating revenue in April 2020 from the sales of our TracLine® accesscatheter. We had three customers during the Track Record Period, and revenue generated fromour customers amounted to RMB2.8 million and RMB581 thousand in 2020 and the fivemonths ended May 31, 2021, respectively. Revenue generated from our largest customeramounted to RMB2.6 million and RMB517 thousand, representing 92.4% and 89.0% of ourtotal revenue during these same respective periods. See “Business—Our Customers” for moreinformation.

SUPPLIERS AND RAW MATERIALS

Our suppliers primarily include suppliers of raw materials and suppliers of productionand inspection equipment. In 2019, 2020 and the five months ended May 31, 2021, purchasesfrom our five largest suppliers amounted to RMB9.4 million, RMB6.9 million and RMB4.4million, respectively, representing 42.1%, 53.8% and 37.9% of our total purchases for theserespective periods; and purchases from our largest supplier amounted to RMB4.1 million,RMB3.0 million and RMB1.3 million, respectively, representing 18.4%, 23.0% and 11.3% ofour total purchases for these same respective periods.


SUMMARY

– 7 –

We primarily use raw materials and consumables such as jacket tubes, braid wire, alloywire, radiopaque markers and inner tubes for the manufacturing of our TracLine® accesscatheter and FocuStar® neuro balloon catheter – Rx for sale and other products for R&Dpurposes. In 2019, 2020 and the five months ended May 31, 2021, our raw materials andconsumables used under research and development expenses and cost of sales amounted toRMB6.7 million, RMB1.8 million and RMB802 thousand, respectively. See “Business—OurSuppliers and Raw Materials.”

INTELLECTUAL PROPERTY RIGHTS

As a medical device company focusing on innovative solutions in the neuro- andperipheral interventional field, intellectual property rights are crucial to our business. As ofthe Latest Practicable Date, we had five issued patents and 13 registered trademarks, as well as16 pending patent applications and 29 pending trademark applications. For more details, see“Business—Intellectual Property Rights” and “Appendix IV—Statutory and GeneralInformation—2. Intellectual Property Rights of Our Group” to this [REDACTED].

IN-LICENSING ARRANGEMENT

Licensing and Sub-licensing Arrangements for Our Privi Hemorrhoid Cooling Balloon

Through the licensing and sub-licensing arrangements, we have obtained the exclusiverights to develop and commercialize our Privi hemorrhoid cooling balloon within the PRCand worldwide. Pursuant to the licensing agreement dated February 21, 2017, Privi Medicalobtained an exclusive license in respect of a patent used for our Privi hemorrhoid coolingballoon from certain third-party licensors. Pursuant further to the sub-licensing agreementdated August 17, 2017, Privi Medical licensed this patent to our indirect subsidiary, Pu Lewei.We plan to acquire all equity interest in Privi Medical before the completion of the[REDACTED]. See “History, Development and Corporate Structure—Acquisition of HeMoSingapore and Privi Medical” for details on the relationships between HeMo Singapore, PriviMedical and us and the proposed acquisition.

Under the licensing agreement, the licensors granted Privi Medical a non-transferrable,royalty-bearing and revocable-for-cause licence to use relevant part of certain technology to(a) use, make, have made, manufacture, distribute, market, import, export, sell and have soldany products which incorporates the licensed technology for use within the field of providingtherapy for bleeding, pain and/or discomfort only, and (b) develop enhancements. Under thesub-licensing agreement, Privi Medical granted Pu Lewei a non-transferrable,non-sublicensable and royalty-bearing sub-licence to use this technology for similar purposes.The licensing agreement and the sub-licensing agreement also granted Privi Medical and PuLewei, respectively, certain other rights related to the patent used for our Privi hemorrhoidcooling balloon. The licensing agreement further required Privi Medical to achieve certainmilestones, which we believe Privi Medical is able to achieve. For more details of the licensingand sub-licensing arrangements, see “Business—Research and Development—In-licensingArrangement—Licensing and Sub-licensing Arrangements for Our Privi Hemorrhoid CoolingBalloon.”

Joint-Ownership of the CN Patent with Incept and In-licensing Arrangement with ICI

According to a license agreement dated September 2017 and amended in January 2019and May 2020, we in-licensed from ICI certain intellectual property for our Afentta® andHMC1-NAS aspiration catheters and TracLine® access catheter. Pursuant to the relevantassignment agreements in respect of the patent applications listed in this license agreement,the Chinese patent application underlying the licensed technology (the “CN PatentApplication”) was transferred from Incept to Hemo Jirui on April 18, 2018 and subsequentlytransferred again from Hemo Jirui to Hemo China and Incept on March 26, 2021. The CNPatent Application had been granted as a patent (the “CN Patent”) as of the LatestPracticable Date. HeMo China’s joint-ownership of the CN Patent enabled HeMo China to


SUMMARY

– 8 –

exclude others (except the other joint-owner) from making, using, selling, importing andoffering for sale any and all products that are covered by the granted claims under the CNPatent, including our Afentta® and HMC1-NAS aspiration catheters and TracLine® accesscatheter. In addition, HeMo China does not need to receive any permission or license from theother joint-owner—Incept—to make, use, sell, import and offer for sale the products that arecovered by the CN Patent.

According to the ICI License Agreement, ICI granted to HeMo Jirui a license based onIncept’s share of the ownership of the same CN Patent of implementing certain intellectualproperty for our Afentta® and HMC1-NAS aspiration catheters and TracLine® accesscatheter. For more details of the in-licensing arrangement with ICI, see “Business—Researchand Development—In-licensing Arrangement—Joint-Ownership of the CN Patent with Inceptand In-licensing Arrangement with ICI.” In addition, we have six pending patent applicationsthat are divisional applications that HeMo China and Incept filed on the basis of the CNPatent Application upon receipt of the notice of allowance by the authority. See“Business—Intellectual Property Rights” for more information on these patent applications.

COMPETITION

We operate in a market characterized by rapid technological developments and scientificdiscoveries. For our neuro-interventional medical device products, particularly our aspirationcatheters and stent retriever, we face competition from multinationals and local companies inChina and other Asia Pacific markets. We compete with multinationals primarily based onsupply stability due to our local manufacturing capability, cost advantages, competitivepricing, in-depth understanding of local markets, and rapid responses to local marketdemands. We compete with local companies primarily based on our product quality, designsand functionality, research and development capabilities, ability to identify and procureadvanced technologies globally, as well as strong clinical, manufacturing and sales executioncapabilities. We believe that our Afentta® aspiration catheter’s first-mover advantagecompared to other PRC domestic companies will allow us to benefit from the ADAPTtherapy’s growing recognition in China’s medical community. For our peripheral medicaldevice products, particularly our Privi hemorrhoid cooling balloon, we face competition fromindirect competitors whose treatment for hemorrhoids does not involve the use of medicaldevice. We compete primarily based on our product quality and safety, as our Privihemorrhoid cooling balloon uses only physical mechanism that demonstrate fast and effectiverelief upon deployment. For more details, see “Business—Competition.”

OUR FACILITIES, OFFICES AND PROPERTIES

We are headquartered in Singapore. We have also leased properties in Beijing, China asoffice premises, and in Weihai, Shandong Province, China for R&D, manufacturing and officeuse. As of the Latest Practicable Date, the production facilities in Weihai had a gross floorarea of approximately 6,216 sq.m. on rental-exempt properties leased from the localgovernment. We currently do not own any freehold property.

SUMMARY FINANCIAL INFORMATION

The following tables summarize our consolidated financial results during the TrackRecord Period and should be read in conjunction with the section headed “FinancialInformation” of this [REDACTED] and the Accountants’ Report in Appendix I to this[REDACTED].


SUMMARY

– 9 –

Summary of Consolidated Statements of Profit or Loss

Year ended December 31, Five months ended May 31,

2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000(Unaudited)

Revenue . . . . . . . . . . . . . . . . . . . . . . . – 2,839 235 581Cost of sales . . . . . . . . . . . . . . . . . . . – (690) (67) (270)

Gross Profit . . . . . . . . . . . . . . . . . . . . – 2,149 168 311Other income, net . . . . . . . . . . . . . . . 474 16,743 (895) 4,442Selling and distribution expenses . . . – (3,830) (518) (6,429)General and administrative expenses (9,157) (16,701) (3,914) (16,019)Research and development expenses (59,698) (18,065) (7,598) (8,227)

Loss from operations . . . . . . . . . . . . . (68,381) (19,704) (12,757) (25,922)Finance costs . . . . . . . . . . . . . . . . . . (7,546) (19,121) (4,275) (332)Changes in fair value of financial

liabilities . . . . . . . . . . . . . . . . . . . . (44,959) (576,611) (52,544) (217,256)

Loss before taxation . . . . . . . . . . . . . (120,886) (615,436) (69,576) (243,510)Income tax . . . . . . . . . . . . . . . . . . . . – – – –

Loss for the year/period . . . . . . . . . . (120,886) (615,436) (69,576) (243,510)

Attributable to:Equity shareholders of the

Company . . . . . . . . . . . . . . . . . . . . (107,999) (613,765) (67,822) (242,332)Non-controlling interests . . . . . . . . . (12,887) (1,671) (1,754) (1,178)

Loss for the year/period . . . . . . . . . . (120,886) (615,436) (69,576) (243,510)

We began generating revenue from April 2020 when we commercialized our first productTracLine® access catheter, and we commercialized our FocuStar® neuro balloon catheter— Rxin April and Afentta® aspiration catheter in July 2021. All of our revenue during the TrackRecord Period was from the sales of our TracLine® access catheter and FocuStar® neuroballoon catheter—Rx. As a result, we recorded net losses during the Track Record Period. Aswe launch additional products, ramp up our production, build up our sales team and enhancemarketing activities, we expect to increase our revenue and hence our profitability in thecoming years.


SUMMARY

– 10 –

Summary of Consolidated Statements of Financial Position

As of December 31, As of May 31,

2019 2020 2021

RMB’000 RMB’000 RMB’000Total non-current assets . . . . . . . . . . . . . . 13,608 11,210 14,054Total current assets . . . . . . . . . . . . . . . . . 42,549 332,373 624,089

Total assets . . . . . . . . . . . . . . . . . . . . . . . . 56,157 343,583 638,143

Total non-current liabilities . . . . . . . . . . . 2,440 1,575 2,602Total current liabilities . . . . . . . . . . . . . . . 359,205 1,265,197 1,748,375

Total liabilities . . . . . . . . . . . . . . . . . . . . . 361,645 1,266,772 1,750,977

Net current liabilities. . . . . . . . . . . . . . . . . (316,656) (932,824) (1,124,286)

Net liabilities . . . . . . . . . . . . . . . . . . . . . . (305,488) (923,189) (1,112,834)

Share capital . . . . . . . . . . . . . . . . . . . . . . . 659 843 872Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . (263,105) (918,934) (1,107,494)

Total equity attributable to equityshareholders of the Company . . . . . . . . . (262,446) (918,091) (1,106,622)

Non-controlling interests . . . . . . . . . . . . . . (43,042) (5,098) (6,212)

Total deficit . . . . . . . . . . . . . . . . . . . . . . . . (305,488) (923,189) (1,112,834)

We had net liabilities and deficit during the Track Record Period primarily because wehave not become profitable and because we accounted for the Preferred Shares issued toinvestors as financial liabilities at fair value through profit or loss.

Selected Data of Consolidated Statements of Cash Flows


2019 2020 2020 2021


Net cash used in operating activities . . . . . (133,170) (48,880) (9,399) (24,830)Net cash (used in)/generated from

investing activities . . . . . . . . . . . . . . . . . (20,843) (24,188) 10,186 19,861Net cash generated from/(used in)

financing activities . . . . . . . . . . . . . . . . . 82,427 320,484 (217) 323,157

Net (decrease)/increase in cash and cashequivalents . . . . . . . . . . . . . . . . . . . . . . . (71,586) 247,416 570 318,188

Cash and cash equivalents at thebeginning of the year/period . . . . . . . . . 85,556 12,767 12,767 251,601

Effects of foreign exchange rate changes . (1,203) (8,582) (336) (10,928)

Cash and cash equivalents at the end ofthe year/period . . . . . . . . . . . . . . . . . . . . 12,767 251,601 13,001 558,861

We had net cash used in operating activities during the Track Record Period, primarilyattributable to the significant research and development expenses, general and administrativeexpenses, as well as selling and distribution expenses we incurred during the relevant periodswhile our revenue was relatively small. We expect to improve our liquidity position byincreasing sales of our commercialized products, launching additional products andincreasing our production volume.


SUMMARY

– 11 –

Since inception, we mainly relied on capital contributions by our shareholders and equityfinancing as the major sources of liquidity. Our Directors believe that by taking into accountthe estimated [REDACTED] (based on the [REDACTED]) from the [REDACTED], cash andcash equivalents of RMB558.9 million and financial assets measured at fair value throughprofit or loss of RMB20.0 million as of May 31, 2021 and our past and expected cash burnrate, we can remain financially viable with sufficient cash to fund our operations for at least 5years from May 31, 2021. Our cash burn rate refers to the amount of cash operating costs,payment for property, plant and equipment, lease payments, and cash settlement in relation tothe Privi Medical Acquisition in accordance with the Term Sheet. We will continue to monitorour cash flows from operations closely and expect to raise our next round of financing, ifneeded, with a minimum buffer of 12 months.

KEY FINANCIAL RATIOS

The following table sets forth our key financial ratios as of the dates indicated.


2019 2020 2021

Current ratio . . . . . . . . . . . . . . . . . . . 0.1 0.3 0.4Quick ratio . . . . . . . . . . . . . . . . . . . . 0.1 0.3 0.3

See “Financial Information—Key Financial Ratios” for more information.

OUR ACQUISITION OF HEMO SINGAPORE AND PRIVI MEDICAL

As part of our strategy to build our strategic business hub and to implement ourexpansion plan in respect of our products, including our Core Product, in the Asia-Pacificregion, on July 16, 2021, our Company has acquired the beneficial interest in all the shares inissue of HeMo Singapore from Dr. Wang with 65% of the issued share capital being legallyand beneficially transferred to the Company and the remaining 35% of the issued share capitalbeing held on trust by Dr. Wang as trustee for the benefit of the Company as beneficiary.

Further, on July 2, 2021, HeMo Singapore has signed a legally-binding term sheet withthe existing shareholders of Privi Medical (including Dr. Wang holding approximately 11.86%equity interest and other shareholders which are Independent Third Parties) to acquire itsentire share capital. The acquisition of Privi Medical by HeMo Singapore is expected to becompleted prior to the [REDACTED]. HeMo Singapore and Privi Medical’s results ofoperations will be consolidated into our Group’s financial results upon the completion of theacquisitions.

For details of the acquisition of HeMo Singapore and Privi Medical, please refer tothe paragraph headed “History, Development and Corporate Structure—CorporateDevelopment—Acquisition of HeMo Singapore and Privi Medical” in this [REDACTED].

OUR CONTROLLING SHAREHOLDERS

Immediately before the completion of the [REDACTED] and assuming that the Series APreferred Shares, Series A+ Preferred Shares or Series C Preferred Shares are fully convertedinto Shares in accordance with the terms and conditions of the respective agreements inrespect of the [REDACTED] Investments (“Full Conversion of Preferred Shares”), Dr. Wangwill have an indirect interest, through Gold Ridge, in approximately 49.85% of the total issuedshare capital of our Company. Immediately following the completion of the [REDACTED]and assuming (i) the [REDACTED] is not exercised, and (ii) Full Conversion of PreferredShares, Dr. Wang will have an indirect interest, through Gold Ridge, in approximately[REDACTED]% of the total issued share capital of our Company. Accordingly, Dr. Wang andGold Ridge will continue to be our Controlling Shareholders upon the [REDACTED].


SUMMARY

– 12 –

As at the Latest Practicable Date, Dr. Wang has an 11.86% equity interest in PriviMedical. The business of Privi Medical does not and will not likely compete with our business,as Privi Medical is a dormant unlisted company which has no business activities except forgranting a sole sub-licence to our Group to exclusively use the patent in respect of our CoreProduct to distribute, market and sell it within the PRC. Privi Medical owns the exclusivelicence to use relevant part of certain technology in relation to our Core Product, Privihemorrhoid cooling balloon, including the licensed worldwide patent application, to use,make, manufacture, distribute, market, import, export and sell the Core Product. Further,upon the completion of the acquisition of Privi Medical prior to [REDACTED] as mentionedin the sub-section “Our Acquisition of HeMo Singapore and Privi Medical” above, PriviMedical will become a wholly-owned subsidiary of the Company. For further details, pleaserefer to the sub-section headed “Relationship with Our Controlling Shareholders—Disclosureunder Rule 8.10 of the Hong Kong Listing Rules” of this [REDACTED].

[REDACTED] INVESTMENTS

Our Company underwent several rounds of [REDACTED] Investments since ourincorporation. Our [REDACTED] Investments include: (i) Series A financing, (ii) Series A+financing, (iii) Series B financing, and (iv) Series C financing. Our [REDACTED] Investorsinclude certain Sophisticated Investors, such as dedicated, reputable and sizeable fundsspecializing in the healthcare, biotech, biomedical and biopharmaceutical sectors. For furtherdetails of the identity and background of the [REDACTED] Investors, please refer to thesub-section headed “History, Development and Corporate Structure—[REDACTED]Investments—Background Information about the [REDACTED] Investors”.

SUMMARY OF MATERIAL RISK FACTORS

There are certain risks involved in our business and industry and the [REDACTED],many of which are beyond our control. The details are set out in the section headed “RiskFactors.” You should read that section in its entirety carefully before you decide to[REDACTED] in our Shares. Some of the major risks we face are relating to:

• We have incurred net losses since our inception and may continue to do so for theforeseeable future, and you may lose substantially all of your [REDACTED] in usgiven the high risks involved in the medical device business.

• We had net operating cash outflows during the Track Record Period. We will need toobtain additional financing to fund our operations, and if we are unable to obtainadditional financing to fund our operations, we may be unable to complete thedevelopment and commercialization of our product candidates.

• We recorded net liabilities during the Track Record Period and may continue to haveliquidity risks.

• Our success depends on our ability to successfully complete clinical development,obtain regulatory approval and commercialize our product candidates in a timelymanner.

• All material aspects of the research, development and commercialization of medicaldevices products are heavily regulated and the regulatory approval processes arelengthy, time-consuming and inherently unpredictable.

• If physicians, hospitals and patients are not receptive to our products, our results ofoperations may be negatively affected.

• If we fail to maintain or expand the distribution network for our products, or tomaintain the relationship with our distributors, our sales could be adverselyaffected.


SUMMARY

– 13 –

• We rely on our production facilities in Weihai to manufacture our products. Anydamage to these facilities or interruption in production at such facilities could delayour commercialization efforts and business growth.

• If we fail to increase our production capacity as planned, our business prospectscould be materially and adversely affected.

• We have in-licensed intellectual property rights to certain of our products andproduct candidates and may continue to seek strategic alliances or enter intoadditional licensing arrangements or acquire technologies or products in the future.We cannot guarantee that we will realize the benefits of these arrangements.

• Our business, results of operations and financial position has been and couldcontinue to be adversely affected by the outbreak of COVID-19 and may beadversely affected by other epidemics or natural disasters.

DIVIDENDS

We did not distribute any dividend during the Track Record Period. We currently intendto retain all available funds and earnings, if any, to fund the growth of our business. We do nothave any dividend policy or intention to declare or pay any dividends in the near future. Anyfuture declarations and payments of dividends will be at the absolute discretion of ourDirectors and may be based on a number of factors, including our financial condition, futureearnings, capital requirements and surplus, contractual and legal restrictions, our ability toreceive dividend payments from our subsidiaries, and other factors that our Directors deemrelevant. See “Financial Information—Dividends” for more information.

[REDACTED]

We estimate that the [REDACTED] from the [REDACTED], after deducting the estimated[REDACTED], the [REDACTED] (assuming the full payment thereof) and other estimated[REDACTED] payable by us (assuming the [REDACTED] is not exercised), will beapproximately [REDACTED], assuming an indicative [REDACTED] of [REDACTED] (beingthe mid-point of the [REDACTED]). We expect to use these [REDACTED] for the followingpurposes:

• approximately [REDACTED] for the R&D, production capacity expansion andcommercialization of our Core Product, Privi hemorrhoid cooling balloon;

• approximately [REDACTED] for the R&D, production capacity expansion andcommercialization of our HMC1-NAS and Afentta® aspiration catheters;

• approximately [REDACTED] for the R&D, production capacity expansion andcommercialization of our stent retriever;

• approximately [REDACTED] for the production capacity expansion andcommercialization of our TracLine® access catheter, FocuStar® neuro ballooncatheter – Rx, Mountix® micro-catheter and aspiration accessory;

• approximately [REDACTED] for the R&D and commercialization of our otherproduct candidates;

• approximately [REDACTED] for potential strategic investments, acquisitions orin-licensing arrangements to further enhance our product portfolio and complementour R&D capabilities; and

• approximately [REDACTED] for working capital and general corporate purposes.

For further details, see “Future Plans and [REDACTED].”


SUMMARY

– 14 –

[REDACTED]

Our [REDACTED] primarily include [REDACTED] and commissions and professionalfees paid to legal, accounting and other advisors for services rendered in relation to the[REDACTED]. Assuming full payment of the [REDACTED], the estimated [REDACTED](based on the mid-point of the [REDACTED] and assuming that the [REDACTED] is notexercised) for the [REDACTED] are approximately [REDACTED], accounting forapproximately [REDACTED] of the [REDACTED] from the [REDACTED]. We incurred[REDACTED] of RMB[REDACTED] during the Track Record Period, which were recognizedas expenses. We expect to incur approximately [REDACTED]) of [REDACTED] subsequent tothe Track Record Period, of which approximately [REDACTED] will be capitalized and[REDACTED] will be recognized as expenses for the year ending December 31, 2021. The[REDACTED] above are the latest practicable estimate for reference only, and the actualamount may differ from this estimate.

[REDACTED]

RECENT DEVELOPMENTS

On July 1, 2021, Max Vision Corporation Limited entered into an equity transferagreement with Weihai Shengzhuo Enterprise Management Consulting Center (LimitedPartnership) (威海聖卓企業管理諮詢中心(有限合夥)) (“Weihai Shengzhuo”) and an equitytransfer agreement with Weihai Hongwang Enterprise Management Consulting Center(Limited Partnership) (威海弘望企業管理諮詢中心(有限合夥)) (“Weihai Hongwang”),pursuant to which Max Vision Corporation Limited has agreed to acquire approximately3.16% equity interests in HeMo China held by Weihai Shengzhuo and approximately 1.59%equity interests in HeMo China held by Weihai Hongwang at the consideration ofRMB23,697,879 and RMB20,136,009, respectively. The acquisition was legally completed andsettled on July 23, 2021. For further details, please refer to the sub-section headed “History,Development and Corporate Structure—Corporate Development—Acquisition of MinorityEquity Interests in HeMo China”.

We have adopted the RSU Scheme. Pursuant to the RSU Scheme, we have granted anaggregate of 16,418,934 RSUs, representing rights to receive 16,418,934 Shares upon vestingof the RSUs as at the Latest Practicable Date. On July 2, 2021, we allotted and issued a totalof 16,926,419 Shares to Adventure Wave Development Limited, a wholly-owned subsidiary ofthe RSU Trustee.

Our Company agreed to acquire the beneficial interest in all the shares in issue of HeMoSingapore at a nominal consideration of S$1. On July 16, 2021, the Company entered into anequity transfer agreement with Dr. Wang, pursuant to which, the Company agreed to acquirethe 65% of the issued shares of HeMo Singapore. Further, on July 16, 2021, the Company has


SUMMARY

– 15 –

entered into a deed of declaration of acknowledgement of trust with Dr. Wang, pursuant towhich the remaining 35% of the issued shares in HeMo Singapore are held by Dr. Wang astrustee on trust for the benefit of our Company as beneficiary. For details of the acquisition ofHeMo Singapore and proposed acquisition of Privi Medical, please refer to thesub-section headed “Our Acquisition of HeMo Singapore and Privi Medical” above and thesub-section headed “History, Development and Corporate Structure—CorporateDevelopment—Acquisition of HeMo Singapore and Privi Medical” in this [REDACTED].

Save as otherwise disclosed here, our Directors confirm that up to the date of this[REDACTED], there has been no material adverse change in our financial or trading positionsince May 31, 2021, the end of the period reported on in the Accountants’ Report set out inAppendix I to this [REDACTED].

COVID-19 Outbreak

Since early 2020, the outbreak of a novel strain of coronavirus causing coronavirusdisease 2019 (COVID-19) has materially and adversely affected the global economy. As of theLatest Practicable Date, the spread of COVID-19, including its variants, continued to affectmany countries and regions in the world, including China and Singapore. Our business,including our clinical, marketing and sales efforts, was impacted to various degrees byCOVID-19 in the first few months of 2020, including the operation of the offices andproduction facilities by us and our business partners, the supply of our raw materials, ourpatient enrollment process, our distribution and marketing network, and commercializationprogress of our products. Our business may continue to be impacted or disrupted by thepandemic and its future resurgence in numerous ways, including our business operation,product registration and other regulatory processes, and commercialization progress of ourproducts in China and other parts of the Asia-Pacific region. We consider the effect of theCOVID-19 outbreak on our business to have been relatively limited for 2020, and we currentlyexpect that the pandemic will not have a material adverse impact on our results of operationsfor the year of 2021.

It is difficult to predict the impact that COVID-19 will have on our business or ourindustry. Although we expect the situation to continue to improve with the sustainedimplementation of the disease prevention and containment policies and the development ofvaccines, it is uncertain whether the COVID-19 outbreak can continue to be largely containedin China and Singapore. See “Risk Factors—Risks Relating to Our Operations—Our business,results of operations and financial position has been and could continue to be adverselyaffected by the outbreak of COVID-19 and may be adversely affected by other epidemics ornatural disasters.”


SUMMARY

– 16 –

In this [REDACTED], unless the context otherwise requires, the following terms shallhave the meanings set out below.

“Accountants’ Report” the report of the Company’s reporting accountant,KPMG dated the date of this [REDACTED], the text ofwhich is set out in Appendix I to this [REDACTED]

“Articles” or “Articles ofAssociation”

the articles of association of the Company (as amendedfrom time to time), conditionally adopted on [•] 2021and effective upon the [REDACTED], a summary ofwhich is set out in Appendix III to this [REDACTED]

“Audit Committee” the audit committee of the Board

“Banking Ordinance” the Banking Ordinance, Chapter 155 of the Laws ofHong Kong (as amended, supplemented or otherwisemodified from time to time)

“Board” or “Board of Directors” the board of Directors

“business day” any day (other than a Saturday, Sunday or publicholiday) on which banks in Hong Kong are generallyopen for business

“BVI” the British Virgin Islands

“CAGR” compound annual growth rate

“Cayman Companies Act” the Companies Act (As Revised) of the Cayman Islands,Cap. 22 (Law 3 of 1961), as amended or supplemented orotherwise modified from time to time

[REDACTED]


DEFINITIONS

– 17 –

[REDACTED]

“China” or “the PRC” the People’s Republic of China excluding, for thepurpose of this [REDACTED], Hong Kong, MacauSpecial Administrative Region of the PRC and Taiwan

“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws ofHong Kong), as amended or supplemented from time totime

“Companies (Winding Up andMiscellaneous Provisions)Ordinance”

the Companies (Winding Up and MiscellaneousProvisions) Ordinance (Chapter 32 of the Laws of HongKong), as amended or supplemented from time to time

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

HeMo Bioengineering Limited (禾木生物工程有限公司),an exempted company with limited liability incorporatedin the Cayman Islands on June 21, 2017


DEFINITIONS

– 18 –

“Controlling Shareholders” has the meaning ascribed thereto in the Listing Rulesand, unless the context otherwise requires, refers to Dr.Wang and Gold Ridge

“Core Product” has the meaning ascribed thereto in Chapter 18A of theListing Rules, which, for purposes of this [REDACTED],refers to Privi hemorrhoid cooling balloon

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

“Dr. Wang” Dr. Wang Chicheng Jack (王吉成)

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

“[REDACTED]” the [REDACTED] and the [REDACTED]

“Gold Ridge” Gold Ridge International Ltd, an international companyincorporated in Samoa on October 5, 2015, and one ofour Controlling Shareholders

[REDACTED]

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

our Company and its subsidiaries from time to time or,where the context so requires in respect of the periodbefore our Company became the holding company of itspresent subsidiaries, the entities which carried on thebusiness of the present Group at the relevant time

“HeMo China” HeMo (China) Bioengineering Ltd. (禾木(中國)生物工程有限公司), a company incorporated in the PRC on April19, 2016 and a subsidiary of our Company

“HeMo Jirui” Weihai HeMo Jirui Biological Technology Ltd. (威海禾木吉瑞生物科技有限公司), a company incorporated in thePRC on March 13, 2018 and a subsidiary of ourCompany

“HeMo Singapore” HeMo Bioengineering Pte. Ltd., a private companyincorporated in Singapore with limited liability onNovember 26, 2020 and a subsidiary of our Company


DEFINITIONS

– 19 –

[REDACTED]

“HK$” or “Hong Kong dollar(s)” Hong Kong dollars, the lawful currency of Hong Kong

[REDACTED]

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

[REDACTED]

“Hong Kong Takeovers Code” or“Takeover Codes”

the Code on Takeovers and Mergers and ShareBuy-backs issued by the SFC, as amended, supplementedor otherwise modified from time to time

[REDACTED]

“IAS” International Accounting Standards

“ICI” Imperative Care, Inc., a company incorporated in theState of Delaware on October 6, 2015, and one of our[REDACTED] Investors


DEFINITIONS

– 20 –

“IFRSs” International Financial Reporting Standards issued bythe International Accounting Standards Board

“Independent Third Party(ies)” an individual(s) or a company(ies) who or which is/arenot connected (within the meaning of the Listing Rules)with any Directors, chief executive or substantialshareholders (within the meaning of the Listing Rules)of our Company, its subsidiaries or any of theirrespective associates

[REDACTED]


DEFINITIONS

– 21 –

[REDACTED]

“Joint Sponsors” Morgan Stanley Asia Limited, China InternationalCapital Corporation Hong Kong Securities Limited andCredit Suisse (Hong Kong) Limited

“Latest Practicable Date” July 23, 2021, being the latest practicable date prior tothe printing of this [REDACTED] for the purpose ofascertaining certain information contained in this[REDACTED]

[REDACTED]

“Listing Rules” the Rules Governing the Listing of Securities on theStock Exchange

“Main Board” the stock market (excluding the option market) operatedby the Stock Exchange which is independent from andoperated in parallel with the Growth Enterprise Marketof the Stock Exchange


DEFINITIONS

– 22 –

“Memorandum” or“Memorandum of Association”

the memorandum of association of the Company (asamended from time to time), conditionally adopted on[•] 2021 and effective upon the [REDACTED], asummary of which is set out in Appendix III to this[REDACTED]

“NBSC” National Bureau of Statistics of China

“NHFPC” National Health and Family Planning Commission ofthe PRC

“NMPA” National Medical Products Administration (國家藥品監督管理局), formerly known as China Food and DrugAdministration (CFDA)

“Nomination Committee” the nomination committee of our Board

[REDACTED]

“PRC Government” or “State” the central government of the PRC, including allpolitical subdivisions (including provincial, municipaland other regional or local government entities) and itsorgans or, as the context requires, any of them

“[REDACTED] Investment(s)” the [REDACTED] investment(s) in our Company madeby the [REDACTED] Investor(s), details of which are setout in the sub-section headed “History, Developmentand Corporate Structure—[REDACTED] Investments”in this [REDACTED]


DEFINITIONS

– 23 –

“[REDACTED] Investors” Easeplus Inc., Thirasia, AUT-XV Holdings Limited, LCHealthcare Fund II, L.P., PHC MedTech Investment,L.P., Tekful Limited, LAV Biosciences Fund V, L.P.,HBC Asia Healthcare Opportunities VI LLC, OctagonInvestments Master Fund L.P., Octagon PrivateOpportunities Fund L.P., OrbiMed Genesis MasterFund, L.P., OrbiMed New Horizons Master Fund, L.P.,TB Early Stage Technologies Holdings Limited, Mr.Qing Yang, Harmony Achieve Investments Limited andICI

“Preferred Shares” collectively, Series A Preferred Shares, Series A+Preferred Shares, Series B Preferred Shares and Series CPreferred Shares

“[REDACTED]” the date, expected to be on or about [REDACTED], onwhich the [REDACTED] will be determined and, in anyevent, not later than [REDACTED]

[REDACTED]

“Privi Medical” Privi Medical Pte. Ltd., a company incorporated inSingapore with limited liability on December 9, 2014,our subsidiary Pu Lewei is being held as to 15% by PriviMedical

“Pu Lewei” Weihai Pu Lewei Medical Device Co., Ltd. (威海普樂維醫療器械有限公司), a company incorporated in the PRC onOctober 27, 2017 and a subsidiary of our Company

“QIB” a qualified institutional buyer within the meaning ofRule 144A

“Remuneration Committee” the remuneration committee of our Board

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

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

“RSU(s)” the restricted share award as defined in the sectionheaded “Appendix IV—Statutory and GeneralInformation—D. RSU SCHEME—1. Summary ofTerms—(b) RSU Awards” in this [REDACTED]


DEFINITIONS

– 24 –

“RSU Scheme” the restricted share unit award scheme of the Companyconditionally approved and adopted by our Shareholderson June 22, 2021, the principal terms of which are setout in “Appendix IV—Statutory and GeneralInformation—D. RSU SCHEME” in this [REDACTED]

“RSU Scheme Rules” Restricted share awards scheme rules adopted by theCompany on June 22, 2021

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

“SAFE” State Administration of Foreign Exchange of the PRC(中華人民共和國外匯管理局)

“Series A Preferred Share(s)” the series A preferred shares of the Company, par valueUS$0.001 per share, having the rights, privileges,preferences and restrictions set forth in the Articles.

“Series A+ Preferred Share(s)” the series A+ preferred shares of the Company, par valueUS$0.001 per share, having the rights, privileges,preferences and restrictions set forth in the Articles

“Series B Preferred Share(s)” the series B preferred shares of the Company, par valueUS$0.001 per share, having the rights, privileges,preferences and restrictions set forth in the Articles

“Series C Preferred Share(s)” the series C preferred shares of the Company, par valueUS$0.001 per share, having the rights, privileges,preferences and restrictions set forth in the Articles

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” the Securities and Futures Ordinance (Chapter 571 ofthe Laws of Hong Kong), as amended or supplementedfrom time to time

“Shandong MPA” the Shandong province counterpart of the NMPA

“Share(s)” shares in the capital of our Company with a par value ofUS$0.001 each

“Shareholder(s)” holder(s) of the Shares


DEFINITIONS

– 25 –

“Sophisticated Investor(s)” has the meaning ascribed to it under Guidance LetterHKEX-GL92-18 issued by the Stock Exchange andrefers to AUT-XV Holdings Limited, OrbiMed GenesisMaster Fund, L.P. and OrbiMed New Horizons MasterFund, L.P.

[REDACTED]

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“subsidiaries” has the meaning ascribed thereto under the ListingRules, unless the context otherwise requires

“S$” Singapore dollar, the lawful currency of Singapore

“Track Record Period” the financial year ended December 31, 2019 andDecember 31, 2020 and the five months ended May 31,2021

[REDACTED]

“US$”, “USD” or “U.S. dollars” United States dollars, the lawful currency of the UnitedStates

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

“U.S. Securities Act” the United States Securities Act of 1933, as amendedfrom time to time, and the rules and regulationspromulgated thereunder

“VAT” value-added tax

In this [REDACTED], the terms “associate”, “close associate”, “connected person”, “core

connected person”, “connected transaction”, “controlling shareholder”, “subsidiary” and

“substantial shareholder” shall have the meanings given to such terms in the Listing Rules, unless

the context otherwise requires.


DEFINITIONS

– 26 –

The English translation of the PRC entities, enterprises, nationals, facilities, regulations in

Chinese included in this [REDACTED] is for identification purposes only. To the extent there is

any inconsistency between the Chinese names of the PRC entities, enterprises, nationals,

facilities, regulations and their English translations, the Chinese names shall prevail.

Certain amounts and percentage figures included in this [REDACTED] have been subject to

rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an

arithmetic aggregation of the figures preceding them and figures rounded to the nearest

thousand, million or billion may not be identical to figures that have been rounded differently to

them.


DEFINITIONS

– 27 –

This glossary contains explanations of certain terms used in this [REDACTED] thatrelate to our business and the industry in which we operate. These terms and their meaningsmay not always correspond to standard industry meaning or usage of these terms.

“acute ischemic stroke” or “AIS” a subtype of ischemic cerebrovascular diseases, which iscaused by thrombotic or embolic occlusion of a cerebralartery

“ADAPT” “A Direct Aspiration First Pass Technique,” which usesaspiration as the first approach for vessel recanalization

“ADAPT FAST study” a research study conducted by Dr. Aquilla Turk andpublished in 2014 to test the efficacy and safety of theADAPT technique for AIS mechanical thrombectomy

“2019 AHA/ASA Guidelines” Guidelines for the Early Management of Patients withAcute Ischemic Stroke: 2019 Update to the 2018Guidelines for the Early Management of Acute IschemicStroke, issued by the American Heart Association andAmerican Stroke Association

“angiography” an imaging technique that uses X-rays to view thesubject’s blood vessels after injecting contrast mediuminto the blood vessels

“aortic arch” the portion of the main artery that leaves the heart,ascends, and then descends back to create the arch

“aspiration” the drawing out or removal of target substance, such asthe thrombus in a blood vessel, using a sucking motion

“CE Marking” a certification mark that indicates conformity withhealth, safety, and environmental protection standardsfor products sold within the European Economic Area

“Class of Recommendation” or“COR”

class of recommendation, indicating the estimatedimportance and certainty of benefits of a treatmentmethod compared to its risks


GLOSSARY OF TECHNICAL TERMS

– 28 –

“COMPASS” a clinical trial named as a “comparison of directaspiration versus stent retriever as a first approach”,which is a multicenter, randomized, open label, blindedoutcome, non-inferiority clinical trial designed by Dr.Aquilla Turk to assess the clinical efficacy of theADAPT technique and was conducted from June 2015 toJuly 2017

“CRO” contract research organization, a company that providessupport to the pharmaceutical, biotechnology, andmedical device industries in the form of research servicesoutsourced on a contract basis

“DCB” drug-coated balloon

“DSA” digital subtraction angiography, a fluoroscopictechnique used in interventional radiology forvisualizing blood vessels

“embolization” in the context of a therapeutic medical procedure, refersto the purposeful and selective blocking of a bloodvessel

“endothermic” or “endothermicprocess”

a process is endothermic when it absorbs thermal energyfrom the surroundings

“ETIS trial” a clinical trial named as “Endovascular Treatment inIschemic Stroke trial”, a registry clinical trial conductedbetween 2010 and 2016 aiming to compare theperformance of ADAPT and stent retriever for treatmentof AIS patients with basilar artery occlusion

“external hemorrhoid” a type of hemorrhoids that occur outside the body in theveins around the anus and often result in pain andswelling

“femoral artery” a large artery in the thigh and the main arterial supply tothe thigh and leg

“full analysis set” or “FAS” a set of patients that includes all patients randomized totreatment who received at least one assigned treatment

“GCP” good clinical practice, an international ethical andscientific quality standard for the performance of aclinical trial on medicinal products involving humans



– 29 –

“GMP” good manufacturing practices, the aspect of qualityassurance that ensures that medicinal products areconsistently produced and controlled to the qualitystandards appropriate to their intended use and asrequired by the product specification

“hemorrhagic stroke” a condition where a blood vessel ruptures within thebrain (intracerebral hemorrhage) or into the spacesurrounding the brain (subarachnoid hemorrhage)

“ICH-GCP” International Conference on Harmonisation-GoodClinical Practice

“internal carotid artery” the blood vessel in the neck—a terminal branch of thecommon carotid artery—that supplies blood to the brain

“internal hemorrhoid” a type of varicose veins that occur above the pectinateline, which is caused by obstruction of venous return dueto constipation or other reasons. Internal hemorrhoidssimplex typically cause swelling without pain and mayresult in bright red rectal bleeding when defecating, andany inflammation can affect the area below the pectinateline, causing pain and other symptoms

“intracranial atherosclerosis” a condition where the arteries in the brain are hardenedand the blood flow is limited from reaching the brain dueto the accumulation of a stick substance made of fat andcholesterol inside these arteries

“ischemic stroke” a stroke caused by a blockage in an artery that suppliesblood to the brain

“KOLs” key opinion leaders, who are renowned physicians thatinfluence their peers’ medical practice

“LOE” level of evidence, referring to the level of scientificevidence supporting the treatment method based on thetype, quality and consistency of data from clinical trialsand other sources

“lower extremity artery” the blood vessel that supplies blood to certain parts ofthe lower limbs



– 30 –

“mechanical thrombectomy” or“MT”

an intravascular interventional therapy by inserting astent retriever into the occulated large intracranialvessels to remove occlusive thrombus through thecatheter and restore blood flow

“middle cerebral artery” the blood vessel that branches off the internal carotidartery and supplies blood to the brain

“mixed hemorrhoids” a type of hemorrhoids that are confluent internal andexternal hemorrhoids

“mm” millimeter, a unit of length

“mRS score” the modified Rankin Score, a 6-point scale ranging from0 to 5 used to measure the degree of disability in patientswho have had a stroke, where 0 means no symptoms and5 means severe disability

“mTICI” the modified treatment in cerebral ischemia score, ascore system developed from the original TICI scale. Itsimplifies the TICI 2 grade such that mTICI 2a indicatesthe reperfusion of less than half of the target vascularterritory while mTICI 2b indicates the reperfusion ofmore than half of the target vascular territory.

“neuro-interventional medicaldevices”

medical devices for treatment of neuro-vascular diseasesusing interventional endovascular techniques

“neuro-interventional procedure” an interventional procedure using endovascular surgerytechnology to diagnose and treat neuro-vascular diseases

“neuro-vascular disease(s)” also known as cerebrovascular disease(s), refer to alldisorders in which an area of the brain is temporarily orpermanently affected by bleeding or restricted bloodflow

“NIHSS” the National Institutes of Health Stroke Scale, which isused to objectively quantify the impairment caused by astroke. The NIHSS is composed of 11 items, each ofwhich scores a specific ability between a 0 and 4. Foreach item, a score of 0 typically indicates normalfunction in that specific ability, while a higher score isindicative of some level of impairment. The maximumpossible score is 42, with the minimum score being a 0



– 31 –

“nitinol” a metal alloy of nickel and titanium

“non-inferiority clinical trial” a randomized controlled clinical trial that compares anew treatment method with a standard active treatmentmethod, for the purpose of proving that the newtreatment method is not inferior to the comparator

“numeric pain rating scale” or“NRS”

a subjective measure in which individuals rate their painon an eleven-point numerical scale from 0 to 10

“OTC” over-the-counter, referring to medicine that are solddirectly to consumers without a prescription

“per protocol set” or “PPS” a set of patients that includes only the patients who havefulfilled the clinical trials protocol

“peripheral artery disease(s) or“PAD”

a type of diseases of blood vessels located outside of theheart or brain, which develops when plaque clogs ornarrows arteries that deliver blood to the arms, legs andinternal organs such as the stomach or kidneys

“principal investigator(s)” or“PI(s)”

individual(s) in charge of a clinical trial or a scientificresearch grant

“PTA” percutaneous transluminal angioplasty

“PTFE” polytetrafluoroethylene, a synthetic fluoropolymer oftetrafluoroethylene

“recanalization” the reopening of an occluded vessel

“revascularization” the restoration of perfusion to a body part or organ thathas suffered ischemia

“SMO” site management organization, an organization thatprovides clinical trial related services to medical devicecompanies having adequate infrastructure and staff tomeet the requirements of the clinical trial protocol

“Solumbra” a technique involving the use of aspiration catheters andstent retrievers in combination for the treatment of AIS

“sq.m.” square meter, a unit of area

“stenosis” an abnormal narrowing in a blood vessel



– 32 –

“stent retriever” or “SR” a major type of interventional medical devices used forthe treatment of acute ischemic stroke

“SWIM” SolitaireTM FR/stent with an intracranial supportcatheter for mechanical thrombectomy, a techniquecombining stent retriever and intracranial supportcatheter to treat AIS patients

“thrombectomy” a neuro-interventional procedure used to remove bloodclots from blood vessels

“thrombus” a blood clot formed within the blood vessel that impedesblood flow

“Two-invoice System” on December 26, 2016, eight government departmentsincluding the NMPA issued the Notice on Opinions onthe Implementation of the Two-invoice System in DrugProcurement by Public Medical Institutions (for TrialImplementation) (《關於在公立醫療機構藥品採購中推行兩票制的實施意見(試行)》) (the “Notice”). According tothis Notice, the “Two-invoice System” refers to issuingan invoice at the time from a pharmaceuticalmanufacturer to a circulating enterprise, and issuinganother invoice again at the time from a circulatingenterprise to a medical institution

“TICI”, “TICI 2b” and “TICI 3” the Thrombolysis in Cerebral Infarction scale, which isthe most widely applied scoring system to gradetechnical results of recanalization therapies in AIS. TICI2b and TICI 3 are conventionally subsumed as“successful recanalization”

“U.S. FDA” the U.S. Food and Drug Administration



– 33 –

We have included in this [REDACTED] forward-looking statements. Statements that arenot historical facts, including statements about our intentions, beliefs, expectations orpredictions for the future, are forward-looking statements.

This [REDACTED] contains certain forward-looking statements and information relatingto us and our subsidiaries that are based on the beliefs of our management as well asassumptions made by and information currently available to our management. All statementsother than statements of historical fact contained in this [REDACTED], including, withoutlimitation, those regarding our future financial position, strategies, plans, objectives, goalsand targets, future developments in the markets where we participate or are seeking toparticipate and any statements preceded by, followed by or that include the words “aim”,“anticipate”, “believe”, “could”, “estimate”, “expect”, “going forward”, “intend”, “may”,“ought to”, “plan”, “potential”, “predict”, “project”, “seek”, “should”, “will”, “would”,“vision”, “aspire”, “target”, “schedules”, “goal”, “outlook” and the negative of these wordsand other similar expressions, as they relate to us or our management, are intended to identifyforward-looking statements. Such statements reflect the current views of our managementwith respect to future events, operations, liquidity and capital resources, some of which maynot materialize or may change. These statements are subject to certain known and unknownrisks, uncertainties and assumptions, including but not limited to the risk factors as describedin this [REDACTED]. You are strongly cautioned that reliance on any forward-lookingstatements involves known and unknown risks and uncertainties. The risks and uncertaintiesfacing us which could affect the accuracy of forward-looking statements include, but are notlimited to, the following:

• our ability to complete the development of and obtain regulatory approvals for ourproduct candidates;

• our ability to successfully commercialize our approved products in a timely mannerand to enhance the sales of our commercialized products;

• our business strategies and plans to achieve these strategies, including our expansionplans;

• future developments, trends and conditions in the medical devices industry and themarkets in which we operate and our business prospects;

• general economic, political and business conditions in the markets in which weoperate;

• changes to the regulatory environment and future developments, trends andconditions in the medical devices industry and the markets in which we operate;

• our ability to retain senior management and key personnel, and recruit qualifiedresearch and development staff;


FORWARD-LOOKING STATEMENTS

– 34 –

• our future capital needs, capital expenditure plans and our ability to raise capital oncommercially acceptable terms;

• the actions of and developments affecting our competitors; and

• all other risks and uncertainties described in the section headed “Risk Factors.”

By their nature, certain disclosures relating to these and other risks are only estimatesand should one or more of these uncertainties or risks, among others, materialize, actualresults may vary materially from those estimated, anticipated or projected, as well as fromhistorical results. Specifically but without limitation, sales could decrease, costs couldincrease, capital costs could increase, capital investment could be delayed and anticipatedimprovements in performance might not be fully realized.

Subject to the requirements of applicable laws, rules and regulations, we do not have anyand undertake no obligation to update or otherwise revise the forward-looking statements inthis [REDACTED], whether as a result of new information, future events or otherwise. As aresult of these and other risks, uncertainties and assumptions, the forward-looking events andcircumstances discussed in this [REDACTED] might not occur in the way we expect or at all.Accordingly, you should not place undue reliance on any forward-looking information. Allforward-looking statements in this [REDACTED] are qualified by reference to the cautionarystatements in this section.

In this [REDACTED], statements of or references to our intentions or those of theDirectors are made as of the date of this [REDACTED]. Any such information may change inlight of future developments.

All forward-looking statements contained in this [REDACTED] are expressly qualified byreference to the cautionary statements set out in this section.


FORWARD-LOOKING STATEMENTS

– 35 –

An [REDACTED] in our Shares involves significant risks. These factors arecontingencies that may or may not occur, and we are not in a position to express a view on thelikelihood of any such contingency occurring. The information given is as of the date hereof orthe Latest Practicable Date will not be updated after the date hereof, and is subject to thecautionary statements in the section headed “Forward-looking Statements” in this[REDACTED]. We believe there are certain risks and uncertainties involved in our operations,some of which are beyond our control.

You should carefully consider all of the information set out in this [REDACTED] beforemaking an [REDACTED] in the Shares, including the risks and uncertainties described belowin respect of our business, our industry and the [REDACTED]. Any of the following riskscould have a material adverse effect on our business, financial condition, results of operationsand growth prospects. In any such event, the [REDACTED] of our Shares could decline, andyou may lose all or part of your [REDACTED]. Additional risks and uncertainties notpresently known to us or that we currently deem immaterial also may impair our business,financial condition and operating results. You should consider our business and prospects inlight of the challenges we face, including the ones discussed in this section.

Risks Relating to Our Financial Position and Need for Additional Capital

We have incurred net losses since our inception and may continue to do so for the foreseeablefuture, and you may lose substantially all of your [REDACTED] in us given the high risksinvolved in the medical device business.

Investment in medical device development is highly speculative. There are significantrisks that a product candidate may fail to obtain regulatory approval or fail to becomecommercially viable. We continue to incur significant expenses related to our businessoperations. We have generated revenue from three products –TracLine® access catheter sinceApril 2020, FocuStar® neuro balloon catheter – Rx since April 2021, and Afentta® aspirationcatheter since July 2021. Though we have commenced marketing for our Privi hemorrhoidcooling balloon, aspiration accessory, Mountix® micro-catheter and FocusLine® PTA balloondilation catheter, we had not sold these products as of the Latest Practicable Date. On theother hand, since our inception we have made substantial capital investments in developingour medical device products and incurred significant operating expenses. As a result, weincurred net losses of RMB120.9 million, RMB615.4 million and RMB243.5 million in 2019,2020 and the five months ended May 31, 2021, respectively. Substantially all of our operatinglosses were resulted from our research and development expenses, general and administrativeexpenses and finance costs associated with our operations.

We expect to continue incurring net losses in the foreseeable future. Our net losses mayincrease as we continue to conduct pre-clinical studies and clinical trials for our productcandidates, seek regulatory approvals for our product candidates, manufacture our productsfor clinical trials and commercial sale, commercialize our government approved products,develop additional products, expand geographically, attract and retain qualified personnel,


RISK FACTORS

– 36 –

and protect and expand our intellectual property portfolio, among others. We will also incur

costs associated with being a [REDACTED] in Hong Kong after the [REDACTED]. Our future

profitability will depend largely on the size and quality of our product portfolio, the

associated costs for developing and commercializing our products, our ability to market our

products, and the timing and amounts of payments we make or receive under our

arrangements with third parties. If any of our product candidates fails in clinical trials or fails

to obtain regulatory approvals, or if approved, fails to achieve market acceptance, we may

never become profitable. Even if we achieve profitability in the future, we may not be able to

sustain our profitability in the subsequent periods. Our failure to become and remain

profitable would decrease our value and could impair our ability to raise capital, maintain our

R&D efforts, expand our business or continue our operations. Consequently, you may lose

substantially all of your [REDACTED] in us.

We had net operating cash outflows during the Track Record Period. We will need to obtainadditional financing to fund our operations, and if we are unable to obtain additional financing tofund our operations, we may be unable to complete the development and commercialization ofour product candidates.

Our product candidates will require completion of clinical development, regulatory

review, manufacturing, significant marketing efforts and substantial investment before we can

generate product sales revenue. Our operations have consumed substantial cash since

inception. We had net cash used in operating activities of RMB133.2 million, RMB48.9

million and RMB24.8 million in 2019, 2020 and the five months ended May 31, 2021,

respectively. We cannot assure you that we will be able to generate positive cash flows from

operating activities in the future. Our liquidity and financial condition may be materially and

adversely affected by negative net cash flows, and we cannot assure you that we will have

sufficient cash from other sources to fund our operations. If we resort to other financing

activities to generate additional cash, we will incur financing costs and we cannot guarantee

that we will be able to obtain the financing on terms acceptable to us, or at all, and if we raise

capital by issuing equity securities, your interest in us may be diluted.

We expect to continue to have significant spending on R&D, clinical trials of our product

candidates, prosecution of patents and filing of other intellectual property rights, applying for

regulatory approvals, launching and commercializing any products approved by regulators,

establishing our presence in the Asia-Pacific markets, expanding our marketing and sales team

and building up our distribution network to address the Chinese and other markets. Our

existing cash and cash equivalents may not be sufficient to enable us to complete the

development or commercialization of all of our current product candidates and to expand our

product portfolio to build a platform of integrated solutions in the interventional field.

Accordingly, we will require further funding through public or private equity offerings or debt

financings or other sources. Our forecast for a period of time during which our financial

resources will be adequate to support our operations is a forward-looking statement and


RISK FACTORS

– 37 –

involves risks and uncertainties, and actual results could vary as a result of various factors,including factors discussed elsewhere in this section. We have based this estimate onassumptions that may prove to be wrong, and we could exhaust our available capital resourcessooner than we currently expect. We cannot assure you that our financial resources will beadequate to support our operations. Our future funding requirements will depend on manyfactors, including:

• the progress, timing, scope and costs of our clinical trials, including the ability totimely enroll patients in our planned and potential future clinical trials;

• the outcome, timing and cost of regulatory approvals of our product candidates;

• the number, characteristics and commercial viability of the product candidates thatwe may develop;

• the cost of filing, prosecuting, defending and enforcing any claims in patents orother intellectual property rights;

• the cost of establishing our presence and renting facilities in the Asia-Pacificmarket;

• selling and marketing costs associated with any existing or future productcandidates that may be approved, including the cost and timing of expanding ourmarketing and sales capabilities;

• the terms and timing of any potential future collaborations, licensing or otherarrangements that we may establish;

• cash requirements of any future acquisitions and/or the development of otherproduct candidates;

• the costs and timing for developing and establishing commercial-scale internal oroutsourced manufacturing activities; and

• our headcount growth and associated costs.

Adequate additional funding may not be available to us on acceptable terms, or at all. Ifwe are unable to raise capital when needed or on attractive terms, or at all, we would be forcedto delay, reduce or eliminate our R&D programs or future commercialization efforts and ourresults of operations could be adversely affected.

We recorded net liabilities during the Track Record Period and may continue to have liquidityrisks.

We had net liabilities of RMB305.5 million, RMB923.2 million and RMB1,112.8 millionas of December 31, 2019 and 2020 and May 31, 2021, respectively. The net liabilities were


RISK FACTORS

– 38 –

primarily due to our issuance of Series A Preferred Shares, Series A+ Preferred Shares, SeriesB Preferred Shares and Series C Preferred Shares classified as financial liabilities totalingRMB1,721.8 million as May 31, 2021, which would not be contractually redeemable within thenext twelve months period, subject to redemption and other clauses set out in Note 21 to theAccountants’ Report included in Appendix I to this [REDACTED]. These preferred shares willbe automatically converted into ordinary shares upon the closing of the [REDACTED]. A netliabilities position generally exposes us to liquidity risk. The [REDACTED] from the[REDACTED] may not be sufficient to meet all of our liquidity needs. As a development stagecompany, we may encounter difficulty seeking external debt or making equity offerings atcommercially reasonable terms, or at all. Any difficulty or failure to meet our liquidity needsas and when needed may have a material adverse effect on our business, financial condition,results of operations and prospects.

Raising additional capital may cause dilution to our Shareholders, restrict our operations orrequire us to relinquish rights to our technologies or product candidates.

We may seek additional funding through a combination of equity offerings, debtfinancings and other arrangements. To the extent that we raise additional capital through thesale of equity or convertible debt securities, your ownership interest may be diluted, and theterms may include liquidation or other preferences that adversely affect your rights as a holderof our Shares. The incurrence of additional indebtedness or the issuance of certain equitysecurities could result in increased fixed payment obligations and could also result in certainadditional restrictive covenants, such as limitations on our ability to incur additional debt orissue additional equity securities, limitations on our subsidiaries’ ability to distributedividends to us, limitations on our ability to acquire or license in intellectual property rights,and other operating restrictions that could adversely impact our ability to conduct ourbusiness. In addition, issuance of additional equity securities, or the possibility of suchissuance, may cause the [REDACTED] to decline. In the event that we enter intocollaborations or licensing arrangements in order to raise capital, we may be required toaccept unfavorable terms, including relinquishing or licensing to a third party on unfavorableterms our rights to intellectual properties or product candidates that we otherwise would seekto develop or commercialize ourselves or potentially reserve for future potential arrangementswhen we might be able to achieve more favorable terms.

Fair value changes in our preferred shares issued to investors and related valuation uncertaintymay materially affect our financial condition and results of operations.

Our preferred shares issued to investors during the Track Record Period are not traded inan active market and their fair value is determined by using valuation techniques. Thediscounted cash flow method was used to determine our total equity value and the hybridmodel was adopted to determine the fair value of these preferred shares. The hybrid method isa hybrid between the probability-weighted expected return method and the option pricingmethod (“OPM”), estimating the probability-weighted value across multiple scenarios butusing the OPM to estimate the allocation of value within one or more of those scenarios. Keyvaluation assumptions used to determine the carrying amount of the preferred shares included


RISK FACTORS

– 39 –

the discount rate, volatility, risk-free interest rate, expected probability of the [REDACTED]and discount for marketability. Please refer to Note 21 to the Accountants’ Report set out inAppendix I to this [REDACTED] for more details. Any change in the assumptions may lead todifferent valuation results and, in turn, changes in the fair value of these preferred shares.Further, our preferred shares will be automatically converted into Shares upon the closing ofthe [REDACTED]. To the extent we need to revalue the preferred shares prior to the closing ofthe [REDACTED], any change in fair value of these preferred shares and related valuationuncertainty could materially affect our financial position and performance. As of December31, 2019 and 2020 and May 31, 2021, we recorded preferred shares issued to investors ofRMB258.8 million, RMB1,215.3 million and RMB1,721.8 million, respectively. We alsorecorded fair value losses in preferred shares of RMB45.0 million, RMB572.1 million andRMB217.2 million in 2019, 2020 and the five months ended May 31, 2021, respectively. Thepreferred shares were initially recognized at fair value, and the increases in the fair value ofthese preferred shares were recognized as fair value loss on our consolidated statements ofprofit or loss. While the fair value loss of financial instruments is a non-cash item that will notrecur in financial years after the closing of the [REDACTED], we expect to recognizesignificant additional losses on the fair value changes of the preferred shares from May 31,2021 to the [REDACTED] because of the significant increase in the fair value of such financialinstruments during such period. After the automatic conversion of all preferred shares intoShares upon the closing of the [REDACTED], we do not expect to recognize any further gainsor losses on fair value changes from these preferred shares in the future.

Share-based compensation may dilute your [REDACTED] in us and result in significant expensesto us.

We adopted a RSU Scheme on June 22, 2021 to acknowledge the contribution of ourdirectors, senior management and employees as well as other eligible individuals. As of theLatest Practicable Date, we had 16,418,934 Shares underlying our outstanding RSUs,representing approximately [REDACTED] of the total issued Shares immediately following thecompletion of the [REDACTED], assuming the [REDACTED] is not exercised. For details, see“Appendix IV—Statutory and General Information—D. RSU Scheme” and Note 25 to theAccountants’ Report included in Appendix I to this [REDACTED]. In 2019, we incurredshare-based compensation of RMB2.6 million. We did not incur this expense in 2020 or thefive months ended May 31, 2021. To further incentivize our directors, senior management,employees and non-employees to contribute to us, we may grant additional RSUs or othershare-based compensation in the future. Any newly granted RSUs under the RSU Scheme andany other share-based compensation that we may grant from time to time may result in anincrease in our issued share capital, which may in turn result in dilution of our existingShareholders’ interest in our Company. Expenses incurred with respect to such RSUs andother share-based payment may also increase our operating expenses and therefore have amaterial adverse effect on our financial performance.


RISK FACTORS

– 40 –

Risks Relating to the Development of Our Product Candidates

Our success depends on our ability to successfully complete clinical development, obtainregulatory approval and commercialize our product candidates in a timely manner.

Our business substantially depends on the successful development, regulatory approvaland commercialization of our existing product candidates for the treatment of stroke, whichare still pending registration, in clinical development, pre-clinical stages (such as animalstudies), or the design or type testing stages, as well as other product candidates we maydevelop in the future. We have invested significant efforts and financial resources in thedevelopment of our existing product candidates.

Whether we can generate profit from our operating activities largely depends on thesuccessful commercialization of our product candidates. The success of our productcandidates will depend on a number of factors, including:

• successful completion of preclinical studies, enrollment of patients and completionof clinical trials;

• favorable safety and efficacy data from our clinical trials and other studies;

• receipt of regulatory approvals;

• establishing commercial manufacturing capabilities, either by building facilitiesourselves or making arrangements with third-party manufacturers;

• performance by CROs, or other third parties we may retain to conduct clinical trials,of their duties to us in a manner that complies with our protocols and applicablelaws and that protects the integrity of the resulting data;

• to the extent the development of our product candidates involves any in-licensingarrangement, the performance of obligations under the arrangement by the licensor,which may include, among other things, providing timely technical support andsharing relevant intellectual properties;

• obtaining and maintaining patents, trade secrets and other intellectual propertyprotection and regulatory exclusivity;

• ensuring that we do not infringe, misappropriate or otherwise violate the patent,trade secrets or other intellectual property rights of third parties;

• successfully launching our product candidates, if and when approved;

• obtaining favorable governmental and private medical reimbursement for ourproducts, if and when approved;


RISK FACTORS

– 41 –

• continued availability of government grants and favorable tax policies from relevantgovernmental authorities, which in turn may, in some circumstances, depend on ourability to meet certain milestone targets set by the same authorities;

• developments in the medical society’s acceptance of the treatment methods wepromote (such as the ADAPT therapy) and our ability to keep up with technologytrends;

• continuous support from our key personnel, in particular, Dr. Wang, our founder,chief executive officer and chief technology officer;

• competition with other neuro- and peripheral interventional products; and

• continued acceptable safety profile following regulatory approval.

If we do not achieve one or more of these factors in a timely manner or at all, we couldexperience significant delays, or be unable, to obtain regulatory approvals for our productcandidates or to successfully commercialize them. This failure would materially harm ourbusiness, and we may not be able to generate sufficient revenue and cash inflows to sustain ouroperations.

We may encounter difficulties enrolling patients in our clinical trials, which would delay orotherwise adversely affect our clinical development activities.

The timely completion of clinical trials in accordance with their protocols depends,among other things, on our ability to enroll a sufficient number of patients who remain in thetrials until their conclusion. We may experience difficulties in patient enrollment in ourclinical trials for a variety of reasons, including:

• the size and nature of the patient population;

• the patient eligibility criteria defined in the protocols;

• the size of the study population required for analysis of the trials’ primaryendpoints;

• the proximity of patients to trial sites;

• the design of the trials;

• our ability to recruit clinical trial investigators with the appropriate competence andexperience;


RISK FACTORS

– 42 –

• the patients’ perceptions as to the potential advantages and side effects of thepipeline products being studied in relation to other available products or therapies;and

• the risk that patients enrolled in clinical trials may drop out or fail to return forpost-treatment follow-up at a higher rate than anticipated.

Our clinical trials will likely compete with those of our competitors that are in the samefield as our product candidates. This competition will reduce the number and types of patientsavailable to us, because some patients who might have opted to enroll in our trials may insteadenroll in trials by our competitors. Because qualified clinical investigators and clinical trialsites are limited, we expect to conduct some of our clinical trials at the same clinical trial sitesthat some of our competitors use, which will reduce the number of patients who are availablefor our clinical trials at these sites. Even if we are eventually able to enroll a sufficient numberof patients in our clinical trials, delays in patient enrollment may result in increased costs ormay affect the timing or outcome of the planned clinical trials, which could preventcompletion of these trials or otherwise adversely affect our ability to advance the developmentof our product candidates.

Our clinical trials may fail to demonstrate the safety and efficacy of our product candidates tothe satisfaction of regulatory authorities or fail to otherwise produce positive results. As a result,we may incur additional costs or experience delays in completing, or ultimately be unable tocomplete, the development and commercialization of our product candidates.

Before obtaining regulatory approval for the marketing of our product candidates, wemust conduct extensive clinical trials to demonstrate their safety and efficacy in humans. Wemay experience numerous unexpected events during, or as a result of, clinical trials that coulddelay or prevent our ability to receive regulatory approval or commercialize our productcandidates, including:

• regulators, institutional review boards, or IRBs, or ethics committees may notauthorize us or our investigators to commence a clinical trial or conduct a clinicaltrial at a prospective trial site;

• our inability to reach agreements on acceptable terms with prospective CROs,SMOs, principal investigators, other technical service providers, and hospitals astrial centers, the terms of which can be subject to extensive negotiation and mayvary significantly among different service providers;

• manufacturing issues, including problems with manufacturing processes, quality ofraw materials and equipment, compliance with good manufacturing practice, orobtaining sufficient quantities of a product candidate for use in a clinical trial;


RISK FACTORS

– 43 –

• clinical trials of our product candidates may produce negative or inconclusiveresults, and we may decide, or regulators may require us, to conduct additionalclinical trials or delay or abandon product development programs;

• the number of patients required for clinical trials of our product candidates may belarger than we anticipate, enrollment may be insufficient or slower than weanticipate or patients may drop out at a higher rate than we anticipate;

• our third-party contractors may fail to comply with regulatory requirements or meettheir contractual obligations to us in a timely manner, or at all;

• we might have to suspend or terminate clinical trials of our product candidates forvarious reasons, including a finding of lack of clinical response or other unexpectedcharacteristics or a finding that participants are being exposed to unacceptablehealth risks;

• regulators, IRBs or ethics committees may require that we or our investigatorssuspend or terminate clinical research or not rely on the results of clinical researchfor various reasons, including non-compliance with regulatory requirements orrelevant guidelines;

• the cost of clinical trials of our product candidates may be greater than weanticipate; and

• the supply or quality of our product candidates, companion diagnostics or othermaterials necessary to conduct clinical trials of our product candidates may beinsufficient or inadequate.

If we are required to conduct additional clinical trials or other testing of our productcandidates beyond those that we currently contemplate, if we are unable to successfullycomplete clinical trials or other testing of our product candidates, if the results of these trialsor tests are not positive or are only modestly positive, or if they raise safety concerns, we may:

• be delayed in obtaining regulatory approval for our product candidates;

• not obtain regulatory approval at all;

• obtain approval for indications that are not as broad as intended;

• have the product removed from the market after obtaining regulatory approval;

• be subject to additional post-marketing testing requirements;

• be subject to restrictions on how the product is distributed or used; or


RISK FACTORS

– 44 –

• be unable to obtain reimbursement for use of the product.

If we experience delays in the completion of, or termination of, a clinical trial of any ofour product candidates, the commercial prospects of that product candidate will be harmed,and we may be delayed or unable to generate product sales revenues from that productcandidate. In addition, any delays in completing our clinical trials will increase our costs andslow down our product candidate development and approval process. Any of these incidentsmay harm our business, financial condition and prospects significantly.

If the third parties with which we contract for pre-clinical research and clinical trials do notperform in an acceptable manner, or if we suffer setbacks in these pre-clinical studies or clinicaltrials, we may be unable to develop and commercialize our product candidates as anticipated.

As is common practice in our industry, we rely on third parties, including, CROs, SMOs,principal investigators, hospitals, and other related service providers, to assist us inimplementing and monitoring our pre-clinical research and conducting clinical trials. We havebeen working with a CRO and certain SMOs, principal investigators, hospitals and otherrelated service providers. If any of these parties terminates its agreements with us, thedevelopment of the product candidates covered by those agreements could be substantiallydelayed. In addition, these third parties may not successfully carry out their contractualobligations, meet expected deadlines or follow regulatory requirements, including clinical,laboratory and manufacturing guidelines. Our reliance on these third parties may result indelays or failure in completing these studies if they fail to perform in accordance with thecontractual arrangements. Furthermore, if any of these parties fail to perform theirobligations under our agreements with them in the manner specified in those agreements, theNMPA and/or other comparable regulatory authorities may not accept the data generated bythose studies, which would increase the costs and time for the relevant product candidates’development. If any of the pre-clinical studies or clinical trials of our product candidates isaffected by any of the above-mentioned factors, we may be unable to meet our anticipateddevelopment or commercialization plans, which would have a material adverse effect on ourbusiness growth and prospects.

Undesirable adverse events caused by our product candidates could interrupt, delay or haltclinical trials, delay or prevent regulatory approvals, limit the commercial profile of an approvedlabel, or result in significant negative publicity or other adverse consequences following anyregulatory approval.

Undesirable or unintended adverse events caused by our product candidates could causeus or regulatory authorities to interrupt, delay or halt clinical trials and could result in a morerestrictive label or the delay or denial of regulatory approval by the NMPA or othercomparable regulatory authority, or could result in limitations or withdrawal followingapprovals. If results of our trials reveal a high and unacceptable severity or prevalence ofadverse events, our trials could be suspended or terminated and the NMPA or othercomparable regulatory authorities could order us to cease further development of, or denyapproval of, our product candidates.


RISK FACTORS

– 45 –

In addition, our products or product candidates may cause severe adverse events, or beperceived to cause severe adverse events if one or more regulators, such as the NMPA and/orother comparable regulatory authorities, determine that other companies’ products containingthe same or similar key parts or using the same delivery technologies as our products cause orare perceived to have caused severe adverse events. As a result, we may face a number ofnegative consequences, including:

• withdrawal, or limiting the approval, of our products candidates by relevantregulatory authorities;

• additional requirements from the regulatory authorities, such as changing the wayour products are distributed or administered, conducting additional clinical trials,changing the labelling or adding additional warnings on the labelling of suchproducts;

• regulatory requirements related to the development of risk evaluation andmitigation measures for the products, or if risk evaluation and mitigation measuresare already in place, the incorporation of additional requirements under the riskevaluation and mitigation measures;

• regulatory investigations and government enforcement actions;

• injury or death of patients;

• a severe decrease in the demand for, and sales of, our relevant products;

• suspension of our marketing activities, and recall or withdrawal of our relevantproducts from the marketplace;

• revocation of regulatory approvals for our relevant products or product candidatesor our relevant production facilities;

• damage to the brand names of our products and our reputation;

• failure to include our products into the relevant medical insurance coverage; and

• exposure to lawsuits and regulatory investigation relating to our relevant productsthat result in liabilities, fines or penalties.

As of the Latest Practicable Date, we were not aware of any serious adverse events thatwere certain or possibly related to the medical device, or any device defects that could lead toserious adverse events, which could affect the patient recruitment, the ability of enrolledsubjects to complete the trial or result in potential product liability claims. However, in theevent that any such adverse event occurs and is caused or perceived to be caused by ourproducts and/or product candidates, our reputation, business, financial condition and


RISK FACTORS

– 46 –

prospects may be materially and adversely affected. In this [REDACTED] and from time totime, we disclose clinical results for our product candidates, including the occurrence ofadverse events. The disclosure speaks only as of the date of the data cutoff used, and weundertake no duty to update such information unless required by applicable law.

Clinical product development involves a lengthy and expensive process with an uncertain outcomeand the initial or interim results of our clinical trials may not be predictive of the final resultsand may be subject to adjustments. Unsuccessful clinical trials or procedures relating to ourproduct candidates could have a material adverse effect on our prospects.

Clinical testing is expensive and can take multiple years to complete, and its outcome isinherently uncertain. There can be no assurance that these trials or procedures will becompleted in a timely or cost-effective manner or result in a commercially viable product orexpanded indication. Failure to successfully complete these trials or procedures in a timelyand cost-effective manner could have a material adverse effect on our prospects. Clinical trialsor procedures may experience significant setbacks even after earlier trials have shownpromising results.

Failure can occur at any time during the clinical trial process. The results of preclinicalstudies and early clinical trials of our product candidates may not be predictive of the resultsof later-stage clinical trials, and the initial or interim results of a trial may not be predictive ofthe final results. Product candidates in later stages of clinical trials may fail to show thedesired safety and efficacy traits despite having progressed through preclinical studies andinitial clinical trials. In addition, there can be significant variability in safety and/or efficacyresults between different trials of the same product candidate due to numerous factors,including changes in trial procedures set forth in protocols, differences in size and type of thepatient populations, including differences in physical conditions and the dropout rates, amongclinical trial participants. Moreover, some of the results of clinical trials can also be slightlydifferent from the raw data observed from the clinical trials, because the data generated fromcertain patients may be excluded in line with industry practice. The interpretation of somedata and results of clinical trials may also be dependent on the physicians’ subjectivejudgments, including, for example, whether certain adverse events occurred to the trialsubjects during the follow-up period were caused by our product candidates.

We cannot assure that the future clinical trial results of our product candidates will befavorable. Even if our future clinical trial results show favorable efficacy, not all patients maybenefit. For some of our products candidates, it is likely that they may not suit the conditionsof certain patients, and severe adverse events and complications may incur for some patientsafter the procedure.


RISK FACTORS

– 47 –

We may be exposed to potential product liability claims, product recalls and other risks relatingto our business operations, and our insurance coverage may be inadequate to protect us from allthe liabilities we may incur.

Our operations are subject to hazards and risks associated with our research andmanufacturing operations. We face an inherent risk of product liability from thecommercialization of our products in China, and the clinical testing and any futurecommercialization of our product candidates globally. For example, we may be sued if ourproducts or product candidates cause or are perceived to cause injury or are found to beotherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any suchproduct liability claims may include allegations of defects in manufacturing, defects in design,a failure to warn of dangers inherent in the medical device product, negligence, strict liabilityor a breach of warranties. Claims could also be asserted under applicable consumer protectionacts. If we cannot successfully defend ourselves against or obtain indemnification from ourcollaborators for product liability claims, we may incur substantial liabilities or be required tolimit commercialization of our products and product candidates. Even successful defensewould require significant financial and management resources. Regardless of the merits oreventual outcome, liability claims may result in:

• decreased demand for our products;

• injury to our reputation;

• withdrawal of clinical trial participants and inability to continue clinical trials;

• initiation of investigations by regulators;

• costs to defend the related litigation;

• a diversion of management’s time and our resources;

• substantial monetary awards to trial participants or patients, product recalls,withdrawals or labeling, marketing or promotional restrictions;

• loss of revenue;

• exhaustion of any available insurance and our capital resources;

• the inability to commercialize any product candidate; and

• a decline in our [REDACTED].

If we are unable to obtain sufficient product liability insurance at an acceptable cost,potential product liability claims could prevent or inhibit the commercialization of ourproducts and product candidates. We have purchased medical device clinical trial liability


RISK FACTORS

– 48 –

insurance for our HMC1-NAS aspiration catheter and our stent retriever. However, wecurrently do not hold any product liability insurance policy. In addition, we may not be able toacquire these types of insurance at a reasonable cost, our existing or future insurance coveragemay not be adequate to satisfy any liability that may arise, and we may not be able to obtainadditional or replacement insurance at a reasonable cost, or at all.

Our insurance policies may also have various exclusions, and we may be subject to aproduct liability claim for which we have no coverage. We may have to pay any amountsawarded by a court or negotiated in a settlement that exceed our coverage limits or that are notcovered by our insurance, and we may not have, or be able to obtain, sufficient capital to paythese liabilities. Even if our agreements with any collaborators entitle us to indemnificationagainst losses, this indemnification may not be available or adequate should any claim arise.

We may be unable to develop competitive, new products in a timely manner, or at all.

The development and commercialization of new products is highly competitive. For ourPrivi hemorrhoid cooling balloon, we face competition from various companies providingtreatment methods of hemorrhoids, including various kinds of suppositories, that aremainstream treatment widely accepted by patients. For our neuro-interventional medicaldevice products, we face competition from multinational and local neuro-interventionalmedical device companies, primarily in China and the Asia-Pacific market. A number ofcompanies in the local and global markets are currently selling neuro-interventional medicaldevices or pursuing the development of products similar to what we are developing orcommercializing. Potential competitors also include academic institutions, governmentagencies and other public and private research organizations that conduct research, seekpatent protection and establish collaborative arrangements for research, development,manufacturing and commercialization.

Our commercial opportunities could be reduced or eliminated if our competitors developand commercialize products that are safer, more effective, have fewer severe adverse events,more convenient and easier to use, or are less expensive than any products that wecommercialize or may develop. Our competitors may also be applying for marketing approvalsin China or other countries for medical device products with the same intended use as ourproducts and product candidates. The ability of the relevant authorities, such as the NMPAand the provincial counterparts of the NMPA, to concurrently review multiple marketingapplications for the same type of innovative medical device may be limited. When ourproducts and competing products are subject to the relevant authorities’ concurrent review,their schedule may be affected, and the registration process of our product may be prolonged.Moreover, our competitors may obtain approval from the NMPA or other comparableregulatory authorities for their products more rapidly than we do for ours, which could resultin our competitors establishing a strong market position before we are able to enter the marketand/or slow our regulatory approval.


RISK FACTORS

– 49 –

Many of our competitors may have well-established market presence and reputation,significantly greater financial resources and expertise in R&D, manufacturing, preclinicalstudies, clinical trials, obtaining regulatory approvals, establishing cost-effective distributionnetwork, and marketing and selling approved products than we do. Mergers and acquisitionsin the medical device industries may result in even more resources being concentrated among asmall number of our competitors. Smaller and other early-stage companies may also prove tobe significant competitors, particularly through collaborative arrangements with large andestablished companies. These third parties compete with us in recruiting and retainingqualified scientific and management personnel, establishing clinical trial sites and patientregistration for clinical trials, as well as in acquiring technologies complementary to, ornecessary for, our programs. Our business and results of operations will suffer if we fail tocompete effectively.

We may not be successful in developing, enhancing or adapting to new technologies andmethodologies.

We must keep pace with new technologies and methodologies to maintain ourcompetitive position. We must continue investing significant human and capital resources todevelop, in-license or acquire technologies that will allow us to enhance the scope and qualityof our clinical trials and optimize our product portfolio. We intend to continue enhancing ourtechnical capabilities in research, development and manufacturing, which are capital- andtime-intensive. We cannot assure you that we will be able to develop, enhance or adapt to newtechnologies and methodologies, successfully identify new technological opportunities,develop and bring new or enhanced products to market. For example, it may take time for theADAPT therapy to be accepted as the first line treatment for stroke in China. In addition, wemay not be able to obtain sufficient or any patent or other intellectual property protection forour new or enhanced products, or obtain the necessary regulatory approvals in a timely andcost-effective manner, or, if such products are introduced, those products may not achievemarket acceptance. Any such failure could harm our business and prospects.

Risks Relating to Extensive Government Regulations

All material aspects of the research, development and commercialization of medical devicesproducts are heavily regulated and the regulatory approval processes are lengthy, time-consumingand inherently unpredictable.

All jurisdictions in which we currently conduct and may intend to conduct our research,development and commercialization activities regulate these activities in great depth anddetail. While the regulators generally regulate product development and approval,manufacturing, and marketing, sales and distribution of products, the different regulatoryregimes make it complex and costly for us to comply with relevant requirements when seekingto operate in multiple jurisdictions. For example, China has strict and comprehensiveregulations and supervision on medical devices, including regulations on productdevelopment, registration, approval, manufacturing, packaging, licensing, sales andmarketing, and distribution of medical devices. In recent years, the regulatory framework in


RISK FACTORS

– 50 –

China regarding the medical device industry has undergone significant changes, and we expectthat it will continue to undergo significant changes. Any changes in applicable regulatoryrequirements in China or our other target markets may result in increased compliance costs onour business or cause delays in or prevent the successful development or commercialization ofour product candidates and reduce the benefits available to us for developing andmanufacturing our products and product candidates. We may be required to amend ourclinical trial protocols to reflect the changes in regulatory requirements and guidance. Suchamendments may require us to resubmit clinical trial protocols to IRBs or ethics committeesfor re-examination, which may impact the costs, timing or successful completion of ourclinical trials.

The process of obtaining regulatory approvals and compliance with applicable laws andregulations require substantial time and financial resources. Before obtaining regulatoryapprovals for the commercial sale of any product candidate for a target indication, we mustdemonstrate in preclinical studies and well-controlled clinical trial to the satisfaction of theNMPA or other comparable regulators that the product candidate is safe and effective for usefor that target indication and that our relevant manufacturing facilities, processes and controlsare adequate. Obtaining regulatory approvals is a lengthy, expensive and uncertain process,and approvals may not be obtained. When we submit a filing application to the NMPA orother comparable regulators, the regulators will decide whether to accept or reject thesubmission for filing. We cannot be certain that any submissions will be accepted for filing andreview by the regulators. The regulators may also slow down, suspend or cease review of ourapplications and any of these could prolong the registration process of our products.

Failure to comply with the applicable requirements at any time during the productdevelopment or approval processes or post the approvals may subject an applicant toadministrative or judicial sanctions. These sanctions could include a regulator’s refusal toapprove pending applications, withdrawal of an approval, license revocation, a clinical hold,voluntary or mandatory product recalls, product seizures, total or partial suspension ofproduction or distribution, injunctions, fines, refusals of government contracts, restitution,disgorgement or civil or criminal penalties. The failure to comply with these regulations couldhave a material adverse effect on our business, financial condition and prospects. Our productcandidates could fail to receive regulatory approval for many reasons, including:

• failure to begin or complete clinical trials due to disagreements with regulatoryauthorities;

• failure to demonstrate that a product candidate is safe and effective;

• failure of clinical trial results to meet the level of statistical significance required forregulatory approval;

• data integrity issues related to our clinical trials;


RISK FACTORS

– 51 –

• disagreement with our interpretation of data from preclinical studies or clinicaltrials;

• changes in approval policies or regulations that render our preclinical and clinicaldata insufficient for approval or require us to amend our clinical trial protocols;

• regulatory requests for additional analyses, reports, data, nonclinical studies andclinical trials, or questions regarding interpretations of data and results and theemergence of new information regarding our product candidates or other products;

• our failure to conduct a clinical trial in accordance with regulatory requirements orour clinical trial protocols;

• clinical sites, investigators or other participants in our clinical trials deviating froma trial protocol, failing to conduct the trial in accordance with regulatoryrequirements, or dropping out of a trial; and

• rejection by the relevant authorities to approve pending applications or supplementsto approved applications filed by us or suspension, revocation or withdrawal ofapprovals.

In the future, we may seek approval of our medical devices for commercial sale inSingapore and other Asia-Pacific markets, which will subject us to the regulatory regime ofthese jurisdictions. Regulatory requirements can vary widely from country to country andcould delay or prevent the introduction of our product candidates. Clinical trials conducted inone country may not be accepted by regulatory authorities in other countries, and obtainingregulatory approval in one country does not mean that regulatory approval will be obtained inany other country. Approval processes vary among countries and can involve additionalproduct testing and validation and additional administrative review periods. Seekingregulatory approval in additional jurisdictions could require additional non-clinical studies orclinical trials, which could be costly and time consuming. The regulatory approval processes inadditional jurisdictions may include all of the risks associated with obtaining the NMPAapprovals. For these reasons, we may not obtain regulatory approvals in additionaljurisdictions on a timely basis, or at all.

Even if our product candidates were to successfully obtain approvals from the regulatoryauthorities, any approval might significantly limit the approved indications for use, or requirethat precautions, contraindications or warnings be included on the product labeling, orrequire expensive and time-consuming post-approval clinical trials or surveillance asconditions of approval. Following an approval for commercial sale of our product candidates,certain changes to the product, such as changes in manufacturing processes and additionallabeling claims, may be subject to additional review and approval by the NMPA and/orcomparable regulatory authorities. Regulatory approvals for any of our product candidatesmay also be withdrawn. If we are unable to obtain regulatory approvals for our productcandidates in one or more jurisdictions, or if any approval contains significant limitations, our


RISK FACTORS

– 52 –

target markets will be reduced and our ability to realize the full market potential of ourproduct candidates will be harmed. Furthermore, we may not be able to obtain sufficientfunding or generate sufficient revenue and cash flows to continue the development of ourproduct candidate in the future.

Our products are subject to ongoing regulatory obligations and continued regulatory review,which may result in significant additional expenses and subject us to penalties for any failure tocomply with regulatory requirements.

Our products and any additional product candidates that are approved by the regulatorsare and will be subject to ongoing regulatory requirements with respect to manufacturing,labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct ofpost-market studies, submission of safety, efficacy, and other post-market information, andother requirements of regulatory authorities in China, Singapore and other applicablejurisdictions where our product candidates are or will be approved for marketing.

Our manufacturing facilities are required to comply with extensive regulatoryrequirements from the NMPA and other comparable authorities. As such, we are and willcontinue to be subject to reviews and inspections by the regulators in order to assess ourcompliance with applicable laws and requirements and adherence to commitments we made inany application materials filed with the NMPA or other authorities. Accordingly, we mustcontinue to devote time, money and effort in all aspects of regulatory compliance.

The regulatory approvals for our products are and may be subject to limitations on theindicated uses for which our product may be marketed. The approvals we obtain may also besubject to other conditions which may require potentially costly post-marketing testing andsurveillance to monitor the safety and efficacy of our products or product candidates. Suchlimitations and conditions could adversely affect the commercial prospects of our products.

The NMPA or comparable regulatory authorities may seek to impose a consent decree orwithdraw marketing approvals if we fail to maintain compliance with ongoing regulatoryrequirements or if problems occur after the products reach the market. Later discovery ofpreviously unknown problems with our products or with our manufacturing processes mayresult in revisions to the approved labeling or requirements to add new safety information;imposition of post-market studies or clinical studies to assess new safety risks; or impositionof distribution restrictions or other restrictions. Other potential consequences include:

• restrictions on the marketing or manufacturing of our products, withdrawal of theproduct from the market, or voluntary or mandatory product recalls;

• fines, untitled or warning letters, or holds on clinical trials;

• refusal by the NMPA or comparable regulatory authorities to approve pendingapplications or supplements to approved applications filed by us or suspension orrevocation of license approvals or withdrawal of approvals;


RISK FACTORS

– 53 –

• product seizure or detention, or refusal to permit the import or export of ourproducts and product candidates; and

• injunctions or the imposition of civil or criminal penalties.

The NMPA and other regulatory authorities strictly regulate the marketing, labeling,advertising and promotion of products placed on the market. Products may be promoted onlyfor their approved indications and for use in accordance with the provisions of the approvedlabel. The NMPA and other regulatory authorities actively enforce the laws and regulationsprohibiting the promotion of off-label uses, and a company that is found to have improperlypromoted off-label uses may be subject to significant liability. The policies of the NMPA andother regulatory authorities may change and additional government regulations may beenacted that could prevent, limit or delay regulatory approval of our product candidates. Wecannot predict the likelihood, nature or extent of governmental policies or regulations thatmay arise from future legislation or administrative actions in China or abroad, where theregulatory environment is constantly evolving. If we are slow in adapting or unable to adapt tochanges in existing requirements or to new requirements or policies promulgated, or if we areunable to maintain regulatory compliance, we may lose the regulatory approvals that we haveobtained and we may not achieve or sustain profitability.

The manufacture of our products is highly complex and subject to strict quality controls. If ourproducts are not manufactured in compliance with the relevant quality standards, our businessand reputation could be harmed.

The manufacture of many of our products is highly complex and subject to strict qualitycontrols, due in part to rigorous regulatory requirements. In addition, quality is extremelyimportant due to the serious and costly consequences of a product failure. We have establisheda quality control system throughout the production process and have adopted standardizedoperating procedures to prevent quality issues with respect to our products and operationprocesses. For further details of our quality control system, see “Business—Quality Control.”Despite our quality control system and procedures, we cannot eliminate the risk of productdefects or failure. Quality defects may fail to be detected or remediated because of a numberof factors, many of which are outside of our control, including:

• manufacturing errors;

• technical or mechanical malfunctions in the manufacture process;

• human error or malfeasance by our quality control personnel;

• tampering by third parties; and

• quality issues with the raw materials we produce or purchase.


RISK FACTORS

– 54 –

Furthermore, if contaminants are discovered in our supply of our products or productcandidates or in the manufacturing facilities, such manufacturing facilities may need to beclosed for an extended period of time to investigate and remedy the contamination. Stabilityfailures and other issues relating to the manufacture of our products or product candidatescould occur in the future. Although closely managed, disruptions can occur duringimplementation of new equipment and systems to replace aging equipment, as well as duringproduction line transfers and expansions.

As we expand into new markets, we may face unanticipated surges in demand for ourproducts which could strain our production capacity. If these problems arise or if weotherwise fail to meet our internal quality standards or those of the NMPA or otherapplicable regulatory authorities, which include detailed record-keeping requirements, ourreputation could be damaged, we could become subject to a safety alert or a recall, we couldincur product liability and other costs, product approvals could be delayed, and our businesscould otherwise be adversely affected. Failure to detect quality defects in our products or toprevent such defective products from being delivered to end-users could result in patient injuryor death, product recalls or withdrawals, license revocation or regulatory fines, productliabilities or other problems that could seriously harm our reputation and business, expose usto liability, and materially and adversely affect our revenue and profitability.

In addition, our manufacturing and warehousing facilities, as well as those of oursuppliers and logistics partners, could be materially damaged by earthquakes, hurricanes,volcanoes, fires, and other natural disasters or catastrophic circumstances, which could have amaterial adverse effect on our business.

We may be unable to maintain or renew all the permits, licenses and certificates required for ourR&D, production and business operations.

Companies manufacturing medical devices in China are required to obtain permits andlicenses issued by various government authorities, including the medical device productionpermit (醫療器械生產許可證) and the medical device operation permit (醫療器械經營許可證)or the medical device operation recordation certificate (醫療器械經營備案憑證) if suchmanufacturing companies store and sell medical devices in places other than their domicilesand the places of production of medical devices. A company engaged in online sale of medicaldevices through its own website is required to obtain the Qualification Certificate forInternet-based Drug Information Services (互聯網藥品信息服務資格證) in accordance withthe PRC law. Please refer to “Regulatory Overview—Laws and Regulations Relating toMedical Devices—Regulations Relating to Advertisements of Medical Devices” in this[REDACTED] for details. The permits, licenses and certificates that we have obtainedgenerally are subject to periodic reviews and renewals by the relevant government authorities,and the standards of such reviews and renewals may change from time to time. There can beno assurance that the relevant authorities will approve our applications or renewalapplications in the future. Any failure by us to obtain the necessary permits, licenses andcertificates, or procure such renewals and otherwise maintain all the licenses, permits andcertificates required for our business at any time could disrupt our business, which could have


RISK FACTORS

– 55 –

a material adverse effect on our business, financial condition and operating results. If we arerequired to obtain additional licenses, permits or certificates for our production of productsand product candidates as a result of any change in the interpretation or implementation ofexisting laws and regulations or the promulgation of new laws and regulations, we may not beable to successfully obtain these licenses, permits or certificates in a timely manner, or at all.As a result, our business operations could be interrupted or otherwise seriously affected.

We may be adversely affected by the uncertainties and changes in the laws and regulations in themarkets we operate. In particular, recently enacted and future legislation may make it moredifficult and costly for us to obtain regulatory approvals for, and commercialize, our productcandidates and affect the prices we may obtain.

In China and possibly other jurisdictions in our target markets, a number of legislativeand regulatory changes and proposed changes regarding healthcare could prevent or delayregulatory approval of our product candidates, restrict or regulate post-approval activities andaffect our ability to profitably sell our products and any product candidates for which weobtain regulatory approval. In recent years, there have been and will likely continue to beefforts to enact administrative or legislative changes to healthcare laws and policies, includingmeasures which may result in more rigorous coverage criteria and downward pressure on theprice that we receive for any approved product. Any reduction in reimbursement fromgovernment programs may result in a similar reduction in payments from private payors. Theimplementation of cost containment measures or other healthcare reforms may prevent usfrom being able to generate revenue, attain profitability, or commercialize our products.

Legislative and regulatory proposals have been made to expand post-approvalrequirements and restrict sales and promotional activities for medical devices. We cannot besure whether additional legislative changes will be enacted, or whether NMPA regulations,guidance or interpretations will be changed, or what the impact of such changes on theregulatory approvals of our product candidates, if any, may be. For example, according to theRegulations on the Supervision and Administration of Medical Devices (2021 Revision) (《醫療器械監督管理條例(2021修訂)》) effective on June 1, 2021, medical device companies arerequired to establish a quality management system and monitor and evaluate post-approvalrisks and adverse events caused by the products. The impact of these more specificrequirements and whether they will adversely affect the registration of our products with theNMPA remains unclear as of the Latest Practicable Date. Furthermore, on July 19, 2019, theGeneral Office of the State Council issued the Circular on the Reform Plan for theManagement of High-Value Medical Consumables (Guo Ban Fa No.[2019]37) (《關於印發〈治理高值醫用耗材改革方案〉的通知》(國辦發[2019]37號)), which encourages local governmentsto adopt the Two-invoice System on a case-by-case basis in order to reduce the circulation ofhigh-value medical consumables and promote the transparency of purchase and sales. Pleaserefer to “Regulatory Overview—Laws and Regulations Relating to MedicalDevices—Two-invoice System” for details. The impact of these more specific requirements andwhether it will adversely affect the registration of our products with the NMPA is yet to beobserved.


RISK FACTORS

– 56 –

Risks Relating to Commercialization and Distribution of Our Products

We may face challenges in marketing and distributing our Privi hemorrhoid cooling balloon.

We expect to commercialize our Core Product Privi hemorrhoid cooling balloon in thefourth quarter of 2021. We plan to market and distribute this product by building an OTCnetwork in cooperation with reputable pharmaceutical companies and pharmacies, as well asthrough online channels. We have no prior experience collaborating with these channels andmay not effectively manage the costs, risks and uncertainties associated with thesecollaborations. As a result, we may face challenges in marketing and distributing our Privihemorrhoid cooling balloon.

There is no assurance that we can successfully establish or maintain an OTC network in atimely or cost-effective manner, if at all. In addition, incidents associated with pharmacies,such as any unintentional distribution of counterfeits and damaged or expired products bythem, could have negative impact on our reputation and sales of our product. Further,pharmacists working at the pharmacies may provide auxiliary services such as providingproduct introduction and patient counseling, and we cannot guarantee that they will be able toprovide accurate information related to the use, target patient groups, target indication orother aspects of our product, particularly given that our Privi hemorrhoid cooling balloonuses physical mechanism distinct from common therapies in the market. Any such incidentscould negatively affect our marketing efforts and the future sales and patient perception ofour Privi hemorrhoid cooling balloon. See also “—We have relatively limited experience inmarketing and sales of our products, and may be unable to successfully build and grow ourmarketing force and sales network” for more information on risks associated with onlinechannels.

If physicians, hospitals and patients are not receptive to our products, our results of operationsmay be negatively affected.

Physicians and hospitals play important roles in recommending and deciding whatproducts should be used on patients. Physicians’ and hospitals’ receptiveness to our productsdepends on our ability to convince them as to the therapeutic values, advantages, convenience,safety and cost-effectiveness of our products as compared to current treatment options andour competitors’ products, as well as to train physicians and hospitals on the proper use andapplication of our products, in which our marketing and sales team and our distributors couldplay an important role. If our products and product candidates (upon commercialization) arenot widely accepted, or, even though accepted, are not considered superior to or at leastcomparable with current treatment options or our competitors’ products, by physician andhospital communities, the sales of our existing and future commercialized products maydecline, and we may not be able to effectively market our product candidates upon theircommercialization. For example, our Privi hemorrhoid cooling balloon uses purely physicalmechanism to treat hemorrhoids, distinct from common therapies such as suppositories andsurgeries. Physicians and patients may be reluctant to use our product absent similar products


RISK FACTORS

– 57 –

in the market. Accordingly, we may not be able to effectively market and ramp up future salesof our Privi hemorrhoid cooling balloon in a timely manner as we anticipated.

In addition, physicians face a learning process to become proficient in the use andapplication of some of our products and product candidates, which may take longer thanexpected and therefore affect our ability to sell our products. Encouraging physicians todedicate the time and energy necessary for adequate training remains challenging, and we maynot be successful in these efforts. Currently, only a limited number of hospitals and physiciansin China are proficient in the use of our aspiration catheters. If physicians are not properlytrained, they may misuse or ineffectively use our products. This may also result inunsatisfactory patient outcomes, patient injury, negative publicity or lawsuits against us, anyof which could have a significant adverse effect on our reputation, business, financialcondition, results of operations and prospects. Following completion of training, we also relyon trained physicians to advocate the benefits of our products in the marketplace. If we do notreceive support from such physicians, other physicians and hospitals may not use ourproducts, and our results of operations may be adversely affected.

We may be unable to achieve broad market acceptance or maintain good reputation necessary forour products and product candidates, which would have a material adverse impact on our resultsof operations and profitability.

The commercial success of our current and future products depends upon the degree ofmarket acceptance they achieve, particularly among hospitals and physicians. See “—Ifphysicians and hospitals are not receptive to our products, our results of operations may benegatively affected.”

Furthermore, some of our product candidates employ newly developed technologies andtechniques, which may not be swiftly accepted by the market. For example, the ADAPTtherapy, which promotes the direct use of an aspiration catheter to treat acute ischemic stroke,is a treatment recently developed and introduced to the market. We cannot assure you that itwill successfully receive broad acceptance from patients or physicians as anticipated. As analternative, traditional stroke treatment options such as the stent retriever-only procedures,Solumbra and SWIM (namely, stent with an intracranial support catheter for mechanicalthrombectomy) techniques and the relevant products promoted by our competitors may stillhave a competitive advantage over the ADAPT therapy, given the traditional treatmentoptions’ established market acceptance and the fact that physicians may have more knowledgeand experience in these thrombectomy procedures.

If our products and any future approved product candidates fail to gain sufficient marketacceptance by physicians, patients, third-party payors and others in the industry, the sales ofour products will be adversely affected. In addition, physicians, patients and third-partypayors may prefer other novel products to ours. If our products and product candidates do notachieve an adequate level of acceptance, we may not generate significant product sales


RISK FACTORS

– 58 –

revenues and we may not become profitable. The degree of market acceptance of our productsand product candidates, if approved for commercial sale, will depend on a number of factors,including:

• clinical indications and patient groups for which our products and productcandidates are approved;

• where physicians, hospitals and patients consider our products and productcandidates to be safe and effective;

• potential and perceived advantages of our products and product candidates overalternative products, or vice versa;

• prevalence and severity of any adverse effects or complications;

• product labeling or other requirements of regulatory authorities;

• limitations or warnings contained in the labeling approved by regulatory authorities;

• timing of market introduction of our products and product candidates as well ascompetitive products;

• cost of treatment in relation to alternative treatment options;

• availability of adequate coverage, reimbursement and pricing by third-party payorsand government authorities;

• willingness of patients to pay out-of-pocket in the absence of coverage andreimbursement by third-party payors and government authorities; and

• effectiveness of our sales and marketing efforts and our network of distributors andsub-distributors.

If any products that we commercialize fail to achieve market acceptance amongphysicians, patients, hospitals, or others in the industry or if we fail to maintain goodrelationships with them, we may be unable to generate significant revenue. Even if ourproducts achieve market acceptance, we may be unable to maintain that market acceptanceover time if new products or technologies are introduced that are more favorably received andmore cost effective than our products, these will render our products obsolete.

We have relatively limited experience in marketing and sales of our products, and may be unableto successfully build and grow our marketing force and sales network.

We have relatively limited experience in launching and commercializing our productcandidates and sales and marketing of our products. For example, we have limited experience


RISK FACTORS

– 59 –

in building a commercial team specifically addressing the Chinese or other markets,conducting a comprehensive market analysis, obtaining licenses and approvals, or managingand monitoring distributors and sales force for our product candidates in relevant markets. Asa result, our ability to successfully commercialize our product candidates may involve moreinherent risks, take longer and cost more than it would if we were a company with sufficientexperience launching product candidates.

As of the Latest Practicable Date, we had three commercialized products, TracLine®

access catheter, FocuStar® neuro balloon catheter – Rx and Afentta® aspiration catheter, andwe had obtained the NMPA approval for the commercialization of four other products. Underour academic marketing model for most of our products and product candidates, our in-housemarketing force currently works with physicians and hospitals by not only providingprofessional advice and training but also offering technical help throughout the process. Wealso plan to monitor and improve the efficacy of our products by incorporating hospitals andphysicians’ feedback on our products into the design modification of our products andadjustment of their manufacturing processes. We incurred selling and distribution expenses ofRMB3.8 million in 2020 and RMB6.4 million in the five months ended May 31, 2021. Thesuccess of our marketing model depends on our ability to attract, motivate and retainqualified and professional employees in our marketing and sales team who are experts andexperienced in the relevant fields and are able to communicate effectively with medicalprofessionals. We have to compete with other medical device companies to recruit, train andretain marketing and sales personnel, and the competition for experienced marketing,promotion and sales personnel is intense. If we are unable to attract, motivate and retain asufficient number of qualified sales personnel to support our marketing model, the salesvolume or margins of our existing and future products may be adversely affected and we maybe unable to extend our hospital coverage, deepen our market penetration and expand ourtarget markets as contemplated. We currently also plan to pursue collaborative arrangementswith third parties, including certain online platforms, regarding some of our products.However, there can be no assurance that we will be able to establish or maintain suchcollaborative arrangements, and even if we are able to do so, the third parties may not haveeffective sales forces or offer terms under these collaborative arrangements that arecommercially favorable to us. Any revenue we receive will depend upon the efforts of thesethird parties. We would have little or no control over the marketing and sales efforts of thethird parties, and our revenue from product sales may be lower than if we had commercializedour products ourselves. In case our products are sold using third-party online platforms, thesales and perception of our products can further be negatively affected by other factorsbeyond our control, including users’ experience in using the platforms and any counterfeitsavailable for sale on these channels. We also face competition in our search for third parties toassist us with the sales and marketing efforts for our products. There can be no assurance thatwe will be able to develop and successfully maintain our in-house sales and commercialdistribution capabilities or establish or maintain relationships with physicians, hospitals andother third parties to successfully commercialize our products, and as a result, our revenueand profitability could be materially and adversely affected.


RISK FACTORS

– 60 –

We plan to expand our sales network to cover more hospitals and pharmacies to increaseour market share and penetration in the China market and expand our operations inSingapore and other Asia-Pacific markets to drive future growth. We may seek to expand oursales network to cover additional hospitals which are not able to independently conductinterventional procedures and hospitals and pharmacies in lower-tier cities in China and otheremerging markets where we have limited experience or resources. This marketing strategycould require us to strengthen our sales and marketing efforts, and we may not be able to doso, for the reasons stated above. If we are unable to expand our sales network effectively, oursales volume and business prospects could be materially and adversely affected.

We also cannot assure you that our pre-launch efforts will guarantee immediate marketsuccess for our future products or the distribution channel for our products would be effective.There may be circumstances during the actual sales of our products that we did not anticipateprior to commercialization that may require us to adjust our sales and marketing strategies,recruit additional personnel or incur unforeseen costs and expenses to address thosecircumstances. In such event, our business prospects and sales of relevant products could bematerially and adversely affected.

If we fail to maintain or expand the distribution network for our products, or to maintain therelationship with our distributors, our sales could be adversely affected.

We rely on third-party distributors, including sub-distributors, to distribute our products.Our ability to maintain and grow our business will depend on our ability to maintain effectivedistribution channels that ensure timely distribution of our products to the relevant markets.However, we have relatively limited control over our distributors and sub-distributors, whomay fail to distribute our products in the manner we contemplate. For example, we haveentered into agreements with our two distributors, one of whom in turn has entered intoagreements with the sub-distributors. We or our distributors may terminate the distributionagreements for various reasons, including a distributor’s change of business or any materialbreach of its obligations under the agreement. If PRC price controls or other factorssubstantially reduce the margins our distributors can obtain through the resale of ourproducts to hospitals and medical institutions, our distributors may terminate theirrelationships with us.

As of December 31, 2019, we had no distributor. In 2020 and the five months ended May31, 2021, the aggregate sales to our distributors were RMB2.8 million and RMB581 thousand,respectively, representing all of our revenue during the same respective periods. Sales to ourlargest distributor were RMB2.6 million and RMB0.5 million, representing 92.4% and 89.0%of our revenue in 2020 and the five months ended May 31, 2021, respectively. As of the LatestPracticable Date, we had two distributors and 69 sub-distributors. We expect to continue togenerate a significant portion of our revenue from a limited number of distributors in theforeseeable future, and it is possible that the portion of our revenues attributable to one singledistributor may increase in the future. We cannot guarantee that our largest distributor willeffectively operate its distribution network in the PRC, or that its sales of our products willnot decrease or it will continue to maintain amicable relationship with us. In addition, we do


RISK FACTORS

– 61 –

not prohibit our largest distributor from selling products manufactured by our competitors.Although hospitals generally determine which products to purchase based on productspecification and quality, our distributors may promote products manufactured by ourcompetitors, helping our competitors’ products to establish a stronger market position thanours in the same geographic region. In such case, our sales would be adversely affected.Furthermore, the distribution agreements with our distributors will expire in December 2021.We cannot assure you that our business relationship with these distributors will continue uponexpiry of the existing distribution agreements, as these distributors are not obliged to renewtheir agreements with us. While we believe alternative distributors are readily available, if thedistribution of our products is interrupted due to under-performance of the distributors orour inability to find replacement distributor in a timely manner, our sales volume and businessprospects could be adversely affected.

The growth and success of our business depends on the performance of us and our distributors ingovernment-administered bidding and tender processes.

Our future growth and success significantly depend on our ability to successfully executeour sales and marking strategies, including forming strategic partnerships with third parties,to market our products to hospitals and other medical institutions through our distributorsand sub-distributors. Although none of our commercialized products is currently required toparticipate in government-administered public tender processes, governmental authorities,hospitals and medical institutions may organize such public tenders for our products in thefuture. The procedures of these public tenders may vary from region to region and fromhospital to hospital, and there could be uncertainties with respect to the timing of suchprocedures. As a result, we are primarily dependent on experienced local distributors and/orsub-distributors to assist us during these procedures. However, we may not always be able tolocate a sufficient number of experienced local distributors and sub-distributors to sell ourproducts to hospitals and other medical institutions.

Furthermore, even if we could locate a sufficient number of experienced distributors andsub-distributors, our bids during the public tender process in future (if required) may not besuccessful and our products may not be chosen for a number of reasons, including where: (i)our prices are not competitive; (ii) our products fail to meet the technical or qualityrequirements imposed by the hospitals or are less clinically effective than competing products;(iii) our reputation and perceived safety and effectiveness of our products are adverselyaffected by unforeseeable events; or (iv) our service quality or any other aspect of ouroperation fails to meet the relevant requirements. If we fail in the tender process, we may facedifficulties in maintaining the existing level of sales of our products, and we may find itdifficult to sell our products and our revenue may decline, thereby materially and adverselyaffecting our results of operations and financial condition.


RISK FACTORS

– 62 –

Downward changes in pricing of our products may have a material adverse effect on our businessand results of operations.

We generally price our products and product candidates (upon commercialization) bytaking into consideration a variety of factors, including bargaining power and preferences ofhospitals, prices of similar or comparable products offered by our products’ costs, prices ofcompeting products, and our target patients’ receptiveness to our products, some of which arebeyond our control:

• If relevant governmental authorities issue pricing guidance for our products andproduct candidates (upon commercialization), it may negatively affect the price atwhich we can sell our products and therefore have a material adverse effect on ourbusiness and results of operations. In addition, our products may in the future beincluded in the centralized procurement programs, which could negatively impactthe prices of our products. We may also face downward pricing pressure if ourproducts are included in the medical insurance reimbursement list, even if suchinclusion in the medical insurance reimbursement list is expected to increase thesales volume of our products.

• When setting the prices for our products, hospitals may gain more bargaining powerdepending on the availability of alternative products, demands of patients and thepreferences of physicians. If hospitals seek to lower retail prices of our products,not only the profitability of our products that we sell directly to hospitals may beadversely affected, but also the profitability of our distributors may be reduced andour distributors may have less incentive to purchase and promote our products. As aresult, we may need to lower the order price we set for our distributors.

• Along with our increasing efforts to promote our commercialized products,including the TracLine® access catheter, FocuStar® neuro balloon catheter – Rx andAfentta® aspiration catheter, our products approved for commercialization and ourproduct candidates (upon commercialization), as well as our competitors’continuous development of comparable products, awareness of these medicaldevices is expected to increase. When more alternatives become available, hospitalsand patients may have more options, creating pricing pressure on our products.

• In addition, with the development of technologies and increasing competition in theindustry, we may experience reduced pricing from our existing products, particularlyalong with the launch of new products that can replace or further improve the safetyand efficacy profile of our existing products, while the manufacturing and materialcosts may remain constant or increase. If we are unable to successfully introducemore advanced and/or more profitable new products to the market, or if we fail toeffectively control our operating and manufacturing costs, our business, financialcondition and results of operations could be materially and adversely affected.


RISK FACTORS

– 63 –

Failure to have our products included in the medical insurance reimbursement list could adverselyaffect our sales.

Our ability to sell our products and commercialize our pipeline products depends in parton the availability of governmental and private health insurance in China. For example,practice varies among provinces in the PRC for the reimbursement of interventional medicaldevices. China has a complex medical insurance system that is currently undergoing reform.Governmental insurance coverage or the reimbursement rates in China for treatment optionsusing new interventional medical devices such as our products and product candidates aresubject to uncertainty and vary from region to region, as local government approvals for thiscoverage must be obtained in each geographic region. In addition, the PRC government maychange, reduce or eliminate the governmental insurance coverage currently available fortreatment options using our products. Please refer to the paragraphs headed “RegulatoryOverview—Laws and Regulations Relating to Medical Devices—National Medical InsuranceProgram” in this [REDACTED] for more details.

We cannot assure you that our products and product candidates (uponcommercialization) will be included in the medical insurance reimbursement list at all times,or at all. To the extent that our products are not included in the medical insurancereimbursement list or if any such insurance schemes are changed or canceled which result inany removal of our products from medical insurance catalogue, our sales may be adverselyimpacted or not able to achieve our expected levels, which may have a material adverse effecton our business, results of operations and financial condition.

Risks Relating to Our Procurement and Product Manufacture

We rely on our production facilities in Weihai to manufacture our products. Any damage to thesefacilities or interruption in production at such facilities could delay our commercializationefforts and business growth.

Our principal production facilities are located in Weihai, Shandong Province, China. Weplan to expand our production facilities in the near future. See “Business—Our ProductionFacilities and Processes—Production Facilities” for details of our production facilities andexpansion plan. The facilities may encounter unanticipated expenses due to a number offactors, including regulatory requirements. Our manufacturing facilities will be subject toongoing, periodic inspection by the NMPA and/or its local counterpart or other comparableregulatory agencies to ensure compliance with relevant laws and regulations. Failure to complywith applicable regulations could also result in sanctions being imposed on us, including fines,injunctions, civil penalties, requirement to suspend or put on hold one or more of our clinicaltrials, failure of regulatory authorities to grant marketing approval of our product candidates,delays, suspension or withdrawal of approvals, supply disruptions, license revocation, seizuresor recalls of products or product candidates, operating restrictions and criminal prosecutions,any of which could harm our business.


RISK FACTORS

– 64 –

Our facilities may be harmed or rendered inoperable by physical damage from fire,floods, earthquakes, typhoons, tornadoes, power loss, telecommunications failures, break-ins,and similar events. If our manufacturing facilities or the equipment are damaged or destroyed,we may not be able to quickly or inexpensively replace our manufacturing capacity or replaceit at all. In the event of a temporary or protracted loss of the facilities or equipment, we mightnot be able to transfer manufacturing to a third party in a timely manner, or at all. Even if wecould transfer manufacturing to a third party, the shift would likely be expensive andtime-consuming, particularly since the new facility would need to comply with the necessaryregulatory requirements and we would need regulatory agency approval before selling anyproducts manufactured at that facility. Such an event could delay our clinical trials or reduceour product sales. Any interruption in manufacturing operations at our manufacturingfacilities could result in our inability to satisfy the demands of our clinical trials orcommercialization. Any disruption that impedes our ability to manufacture our products orproduct candidates in a timely manner could materially harm our business, financial conditionand operating results.

Currently, we do not maintain insurance coverage against damage to our property andequipment. We may suffer expenses or losses, and may be unable to meet our requirements forour products and product candidates if there were a catastrophic event or failure of ourmanufacturing facilities or processes.

If we fail to increase our production capacity as planned, our business prospects could bematerially and adversely affected.

Our current utilization rate is relatively low as we just launched our first commercializedproduct in April 2020. However, as we launch more products and expand our distributionnetwork, we may need to increase, or scale up, our production capacity and utilization rate tomeet anticipated market demand. Advances in manufacturing techniques may render ourfacilities and equipment inadequate or obsolete, and therefore we may also need to developadvanced manufacturing techniques and process controls in order to fully utilize our facilities.Also, the production of our products requires our manufacturing staff ’s experience andtechnique. Typically, we require new employees to undergo approximately three months oftraining before working on our production lines. To enhance our production capacity, we alsoneed to employ more workers. If we are unable to do so, or if the process to do so is delayed,or if the cost of this scale up is not economically feasible for us or we cannot find athird-party supplier, we may not be able to supply our products in a sufficient quantity to meetfuture demand, which would limit our development and commercialization activities and ouropportunities for growth.

We may need to expand our production capacity as we launch more products afterobtaining medical device registration certificates from the NMPA and/or its local and foreigncounterpart, as applicable. For example, we plan to procure additional production equipmentfor our various projects at our Weihai facilities and construct two additional productionfacilities in China and Singapore for our Privi hemorrhoid cooling balloon in the comingyears. See “Business—Our Production Facilities and Processes—Production Facilities” for a


RISK FACTORS

– 65 –

detailed discussion on our expansion plans. Our ability to successfully implement ourexpansion plan is subject to a number of risks, including our ability to obtain the requisitepermits, licenses and approvals for the construction and operation of the new productionlines, the risk of construction delays, as well as our ability to timely recruit sufficient qualifiedstaff to support the increase in production capacity. Consequently, there can be no assurancethat we will be able to increase our overall production capacity or develop advancedmanufacturing techniques and process controls in the manner we contemplate, or at all. In theevent that we fail to increase our production capacity or develop advanced manufacturingtechniques and process controls, we may not capture the expected growth in demand for ourproducts, or to successfully commercialize new products, each of which could materially andadversely affect our business prospects. Moreover, our plan to increase our productioncapacity requires significant capital investment, and the actual costs of our expansion planmay exceed our original estimates, which could materially and adversely affect the realizationof expected return on our expenditures.

There can be no assurance that our production facilities will produce products insufficient volume in the event of any significant change in market demand. In such event, wemay have to engage third parties to produce a portion of such products. Consequently, we areexposed to the risks of increased pricing for our sub-contracted production and that the thirdparties may not manufacture products meeting our specifications or in sufficient volume tomeet market demand. As a result, our sales volumes and margins for the relevant productscould be materially and adversely affected.

Fluctuations in prices of our raw materials may adversely affect our profitability.

We rely on our suppliers for our business, which exposes us to risks associated withfluctuations in prices of raw materials, and reductions in the availability of raw materials maydisrupt our operations. During the Track Record Period, all of our raw materials weregenerally available and sufficient for our demands, and the prices of these raw materials fromour suppliers were relatively stable. However, we cannot assure you that this will continue tobe the case in the future. The prices of raw materials may be affected by a number of factors,including market supply and demand, the PRC or international environmental and regulatoryrequirements, natural disasters, pandemic such as the outbreak of COVID-19 and the PRCand global economic conditions. A significant increase in the costs of raw materials mayincrease our cost of sales and negatively affect our profit margins and, more generally, ourbusiness, financial conditions, results of operations and prospect.

We rely on a limited number of major raw material suppliers and may experience supplyinterruptions that could harm our ability to manufacture products.

We purchase certain of the materials and components used in the manufacture of ourproducts from external suppliers, and we purchase each principal raw material from onesupplier for reasons of quality assurance, cost effectiveness, availability, or constraintsresulting from regulatory requirements.


RISK FACTORS

– 66 –

General economic conditions could adversely affect the financial viability of oursuppliers, resulting in their inability to provide materials and components used in themanufacture of our products. While we work closely with suppliers to monitor their financialviability, assure continuity of supply, and maintain high quality and reliability, these effortsmay not be successful. In addition, due to the rigorous regulations and requirements of theNMPA and/or foreign regulatory authorities regarding the manufacture of our products(including the need for approval of any change in supply arrangements), we may havedifficulty establishing additional or replacement sources in a timely manner or at all if theneed arises. Our suppliers are also subject to various regulations and are required to obtainand maintain various qualifications, government licenses and approvals. If the supply of anyraw materials is disrupted or cannot meet our demands, or if any of our suppliers loses itsqualification or eligibility because of a supplier’s failure to comply with regulatoryrequirements, the manufacturing of our products could be delayed or interrupted, and there isno guarantee that we could find alternative suppliers from which we are able to source thesame type of raw materials with adequate quality and comparable prices in a timely manner,or at all.

Certain suppliers may also elect to no longer service us or service medical devicecompanies in general due to the high regulatory or technical requirements. For example, someof our suppliers are located outside China. As a result, trade sanctions or regulatoryembargoes imposed by foreign countries or China could also result in delays or shortages thatcould harm our business. Regulatory agencies in China or other jurisdictions may also fromtime to time limit or ban the use of certain materials in the manufacture of our products forvarious reasons. In these circumstances, transition periods typically provide time to arrangefor alternative materials. However, the substantial change in the regulatory environment andmarket supply and demand may lead to a shortage of available raw materials and a significantincrease in their price. If we are unable to identify alternative materials or suppliers and secureapproval for their use in a timely manner, our business and financial condition could beharmed. A change in suppliers could require significant effort or investment in circumstanceswhere the items supplied are integral to product performance or incorporate uniquetechnology, and the loss of any existing supply contract could have a material adverse effecton us. A reduction in, or lack of availability of, raw materials or interruptions in the supplychain may also impact our profitability to the extent that we are required to pay higher pricesfor, or are unable to secure adequate supplies of, the necessary raw materials.

Failure to predict and maintain appropriate inventory could have a material adverse effect on ourfinancial condition and results of operations.

To operate our business successfully and meet our customers’ demands and expectations,we must maintain a certain level of inventory for our products to ensure immediate deliverywhen required. Furthermore, we generally maintain at least six months of raw materials forour commercial production. However, our internal forecasts based on which we maintain ourinventory levels are inherently uncertain. If our forecast demand is lower than the actualdemand, we may be unable to maintain an adequate inventory level of our products orproduce our products in a timely manner, and may lose sales and market share to our


RISK FACTORS

– 67 –

competitors. On the other hand, we may be exposed to increased inventory risks due toaccumulated excess inventory of our products or raw materials (for example, our TracLine®

access catheter products typically have a shelf life of three years and are subject toexpiration). Excess inventory levels may increase our inventory holding costs, risk ofinventory obsolescence or write-offs.

In addition, we actively monitor our inventory level and track the flow of our productsthrough an online distribution platform where we can monitor the flow of our products tohospitals on a real-time basis. However, there is no guarantee that the inventory informationwe collect is complete and accurate or that such information would allow us to effectivelymanage our inventory level. If we fail to maintain and predict inventory levels in line with thelevel of demand for our products, our business, financial condition and results of operationswill be materially and adversely affected.

Risks Relating to Our Intellectual Property Rights

We have in-licensed intellectual property rights to certain of our products and product candidatesand may continue to seek strategic alliances or enter into additional licensing arrangements oracquire technologies or products in the future. We cannot guarantee that we will realize thebenefits of these arrangements.

We have entered into licensing arrangements, and may from time to time establish or seekstrategic alliances, form joint ventures or collaborations, or enter into additional licensingarrangements with third parties or acquire technologies or products that we believe willcomplement or augment our development and commercialization efforts with respect to ourproduct candidates and any future product candidates that we may develop. For example,through the licensing and sub-licensing arrangements, we (through our subsidiary Pu Lewei)and Privi Medical have obtained the exclusive rights to develop and commercialize our Privihemorrhoid cooling balloon within the PRC. Pursuant to relevant provisions under thearrangements, we are required to achieve cumulative S$1,000,000 gross revenue of our Privihemorrhoid cooling balloon by December 31, 2026. While we believe we are able to achievesuch a milestone, we cannot assure you that we can do so in a timely or cost-effective manner,if at all. In addition, while we believe we maintain good relationship with the licensors, thereis no guarantee that our request for time extension for the achievement of the milestone couldalways be granted. In case we fail to achieve the milestone and our request for time extensionis rejected, the licensors are entitled to terminate the licensing agreement with us and we couldlose the rights in relation to our Privi hemorrhoid cooling balloon as a result.

Similarly, under a license agreement entered into with ICI, we have been granted anexclusive, fully paid-up, non-royalty bearing license from ICI under certain intellectualproperty with respect to our Afentta® and HMC1-NAS aspiration catheters and TracLine®

access catheter in the PRC, Hong Kong and Macau. The licensed patent is currently jointlyowned by Incept, an affiliate of ICI, and our subsidiary, HeMo China. We may notsuccessfully develop, obtain the approval for, commercialize, or secure market acceptance ofany of our products (including our in-licensed products) or may incur significant delays in


RISK FACTORS

– 68 –

doing so. Moreover, we may encounter competition from the licensor, as it may, under suchlicense agreement, register and sell in China certain competing “imported products” usingintellectual property licensed to us. See “Business—Research and Development—In-licensingArrangement—Joint-Ownership of the CN Patent with Incept and In-licensing Arrangementwith ICI” for more information.

Going forward, we may continue to seek strategic alliances or enter into additionallicensing arrangements or acquire technologies or products, in the process of which we mayface significant competition. The negotiation process for the collaborations, alliances,licensing or acquisition arrangements can also be time-consuming and complex. Moreover, wemay not be successful in our efforts to establish a strategic partnership or other alternativearrangements for our product candidates because they may be deemed to be at too early adevelopment stage for collaborative effort and third parties may not view our productcandidates as having the requisite potential to demonstrate safety and efficacy or commercialviability. If and when we collaborate with a third party for development andcommercialization of a product candidate, we may need to relinquish some or all of thecontrol over the future success of that product candidate to the third party. For any productsor product candidates that we may seek to in-license or acquire from third parties, we may facesignificant competition from other medical device companies with greater resources orcapabilities than us, and any agreement that we do enter into may not result in the anticipatedbenefits. Even when we reach licensing arrangements with counterparties, if there are anyamendments to the terms of such license agreements, our business, financial condition, resultsof operations and prospects could be materially affected. For example, a significant increasein the licensing fee may adversely affect our results of operation, and we may fail to operateour business in the target markets if there are any additional limitations on the geographicalcoverage of the licensed patents, products and technologies.

Further, collaborations involving our products and product candidates are subject tonumerous risks, which may include the following:

• collaborators have significant discretion in determining the efforts and resourcesthat they will apply to a collaboration;

• collaborators may not pursue development and commercialization of our productcandidates or may elect not to continue or renew development or commercializationprograms based on clinical trial results, or change their strategic focus due to theacquisition of competitive products, availability of funding, or other externalfactors, such as a business combination that diverts resources or creates competingpriorities;

• collaborators may delay clinical trials, provide insufficient funding for a clinicaltrial, stop a clinical trial, abandon a product candidate, repeat or conduct newclinical trials, or require a new design of a product candidate for clinical testing;


RISK FACTORS

– 69 –

• collaborators could independently develop, or develop with third parties, productsthat compete directly or indirectly with our products or product candidates;

• collaborators with marketing and distribution rights to one or more products maynot commit sufficient resources to their marketing and distribution;

• collaborators may not properly prepare, file, prosecute, maintain, enforce or defendour intellectual property rights (if they are responsible for taking these actions) ormay use our intellectual property or proprietary information in a way that gives riseto actual or threatened litigation that could jeopardize or invalidate our intellectualproperty or proprietary information or expose us to potential liability;

• disputes may arise between us and a collaborator that cause the delay or terminationof the research, development or commercialization of our product candidates, orthat result in costly litigation or arbitration that diverts management attention andresources;

• collaborations may be terminated and, if terminated, may result in a need foradditional capital to pursue further development or commercialization of theapplicable product candidates; and

• collaborators may own, either by themselves or jointly with us, intellectual propertycovering our products or any intellectual property that result from or in connectionwith the collaboration, and in such cases, we may not have the exclusive or primaryright to prosecute, commercialize, license, transfer or otherwise dispose of suchintellectual property in the best interests of our business. Absent contractualarrangements to the contrary, our joint ownership of intellectual property with ourcollaborators could further constrain or even prevent us from maintaining,exploiting, licensing, enforcing and defending our intellectual property rights in amanner consistent with the best interests of our business.

As a result, we may not be able to realize the benefit of current or future collaborations,strategic partnerships or the license of our third-party products, as we could be unable tosuccessfully commercialize the products and product candidates, integrate such products withour existing operations and company culture, which could delay our timelines or otherwiseadversely affect our business. We also cannot be certain that, following a strategic transactionor license, we will achieve the revenue or specific net income that justifies such transaction. Ifwe are unable to reach agreements with suitable collaborators on a timely basis, on acceptableterms, or at all, we may have to curtail the development of a product candidate, reduce ordelay its development investments or the investments for one or more of our otherdevelopment programs, delay the product candidate’s potential commercialization or reducethe scope of any sales or marketing activities, or increase our expenditures and undertakedevelopment or commercialization activities at our own expense. If we elect to fund andundertake development or commercialization activities on our own, we may need to obtainadditional expertise and additional capital, which may not be available to us on acceptable


RISK FACTORS

– 70 –

terms or at all. If we fail to enter into collaborations and do not have sufficient funds orexpertise to undertake the necessary development and commercialization activities, we maynot be able to further develop our product candidates or bring them to market and generateproduct sales revenue, which would harm our business prospects, financial condition andresults of operations.

We may lose our competitive advantages if we are unable to obtain and maintain protection ofour intellectual property rights (including patent rights), or if the scope of these intellectualproperty rights obtained is not sufficiently broad.

Our success depends in large part on our ability to protect our proprietary technology,products and product candidates from competition by obtaining, maintaining and enforcingour intellectual property rights, including patent rights. We seek to vigorously protect thetechnology, products and product candidates that we consider commercially important byfiling patent applications in the PRC, the United States and other countries, relying on tradesecrets or medical regulatory protection or employing a combination of these methods;however, there can be no assurance that these measures will, in all cases, be successful toachieve their objectives. This process is also expensive and time-consuming, and we may not beable to file and prosecute all necessary or desirable patent applications at a reasonable cost orin a timely manner. We may also fail to identify patentable aspects of our R&D output beforeit is too late to obtain patent protection. In addition, our competitors may develop andcommercialize competitive products in such fields and territories, and our patents may not besufficiently broad to allow us to block the competitive products.

Patents may be invalidated and patent applications may not be granted for a number ofreasons, including known or unknown prior deficiencies in the patent application, or the lackof novelty or inventive step of the claimed invention. Although we enter into non-disclosureand confidentiality agreements or include such provisions in our relevant agreements withparties who have access to confidential or patentable aspects of our R&D output, such as ouremployees, consultants, advisors and other third parties, any of these parties may breach suchagreements and disclose such output before a patent application is filed, jeopardizing ourability to obtain patent protection or the validity of any patent obtained. Patent applicationsin China and other jurisdictions are typically not published until 18 months after filing, or insome cases, not at all.

For instance, under the Patent Law of the PRC (中華人民共和國專利法) promulgated bythe Standing Committee of the National People’s Congress, as amended, patent applicationsare maintained in confidence until their publication at the end of 18 months from the filingdate, which is the same for many other countries around the world. The publication ofdiscoveries in the scientific or patent literature frequently occurs substantially later than thedate on which the underlying discoveries were made and the date on which patent applicationswere filed. Therefore, we cannot be certain that we were the first to make the inventionsclaimed in our patents or pending patent applications or that we were the first to file forpatent protection of such inventions.


RISK FACTORS

– 71 –

Furthermore, the PRC and, recently, the United States have adopted the “first-to-file”system under which whoever first files a patent application will be awarded the patent if allother patentability requirements are met. Under the first-to-file system, even after reasonableinvestigation we may be unable to determine with certainty whether any of our products,processes, technologies, inventions, improvement and other related matters have become thesubject of patent applications of third parties, because such third parties may have filed apatent application without our knowledge while we are still developing that product.Therefore, depending on local laws, any patents that we obtain could potentially bechallenged, for instance, on the basis that the claimed invention lacks an inventive step in viewof the disclosure in the third party application, notwithstanding that the application waspublished subsequent to the filing date of our patent application. Additionally, a patent onlyconfers a right to stop others from using the claimed invention. Therefore, even if wesuccessfully obtain patent protection, there remains a risk that we may be infringing a thirdparty’s patent.

In addition, we may be involved in claims and disputes of intellectual propertyinfringement in other jurisdictions in which we operate. In addition, under PRC patent law,any organization or individual (such as us) that applies for a patent in a foreign country for aninvention or utility model accomplished in China is required to report to the CNIPA, forconfidentiality examination. Otherwise, if an application is later filed in China, the patentright will not be granted.

The coverage claimed in a patent application can be significantly reduced before thepatent is issued. Even if patent applications we license or own currently or in the future are tobe issued as patents, they may not be issued in a form that will provide us with any meaningfulprotection, prevent competitors or other third parties from competing with us, or otherwiseprovide us with any competitive advantage. In addition, the patent position of medical devicecompanies generally is uncertain, involves complex legal and factual questions, and has beenthe subject of much litigation in the past. As a result, the issuance, scope, validity,enforceability and commercial value of our patent rights may be uncertain.

The issuance of a patent is not conclusive as to its inventorship, scope, validity orenforceability, and our patents may be challenged in the courts or patent offices in the PRCand other countries. We may be subject to a third-party pre-issuance submission of prior artto the CNIPA or other related intellectual property offices, or become involved in post-grantproceedings such as opposition, revocation and re-examination, or inter partes review, orinterference or derivation proceedings or similar proceedings in foreign jurisdictionschallenging our patent rights. An adverse determination in any such submission, proceeding orlitigation could reduce the scope of, or invalidate, our patent rights, or allow third parties tocommercialize our technology, products or product candidates and compete directly with uswithout payment to us, in the relevant jurisdictions. Moreover, we may have to participate ininterference proceedings declared by the related intellectual property offices to determinepriority of invention or in post-grant challenge proceedings, such as oppositions in a foreignpatent office, that challenge the priority of our invention or other features of patentability ofour patents and patent applications. Such challenges may result in loss of patent rights, loss of


RISK FACTORS

– 72 –

exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, whichcould limit our ability to stop others from using or commercializing similar or identicaltechnology and products, or limit the duration of the patent protection of our technology,products and product candidates. Such proceedings also may result in substantial costs andrequire significant time from our scientists, experts and management, even if the eventualoutcome is favorable to us. Consequently, we do not know whether any of our technologies,products or product candidates will be protectable or remain protected by valid andenforceable patents. Our competitors or other third parties may be able to circumvent ourpatents by developing similar or alternative technologies or products in a non-infringingmanner.

Furthermore, although various extensions may be available, the life of a patent and theprotection it affords is limited (typically 20 years since the earliest filing date). We may facecompetition for any approved product candidates even if we successfully obtain patentprotection once the patent life has expired for the product. The issued patents and pendingpatent applications, if issued, for our products and product candidates are expected to expireon various dates as described in “Business—Intellectual Property Rights” of this[REDACTED]. Upon the expiration of our issued patents or patents that may issue from ourpending patent applications, we will not be able to assert such patent rights against potentialcompetitors and our business and results of operations may be adversely affected.

Given the time required for the development, testing and regulatory review of newproduct candidates, patents protecting such product candidates might expire before or shortlyafter such product candidates are commercialized. As a result, our patents and patentapplications may not provide us with sufficient rights to exclude others from commercializingproducts similar or identical to ours. Moreover, some of our patents and patent applicationsare, and may in the future be, jointly owned with third parties. If we are unable to obtain anexclusive license to any such third-party joint-owners’ interest in such patents or patentapplications or to obtain such joint-owners’ agreement not to commercialize products and notto license a third party to commercialize such products, such joint-owners may be able tocommercialize the patented products themselves or license their rights to other third parties,including our competitors, and our competitors could market competing products andtechnology. In addition, we may need the cooperation of any such joint-owners of our patentsin order to enforce such patents against third parties, and such cooperation may not beprovided to us. Any of the foregoing could have a material adverse effect on our competitiveposition, business, financial condition, results of operations and prospects.

Failure to adequately protect our intellectual property rights may disrupt our business.

Filing, prosecuting, maintaining and defending patents on products and productcandidates in all countries throughout the world could be prohibitively expensive for us, andour intellectual property rights in some countries can have a different scope and strength fromthose in some other countries. In addition, the laws of certain countries do not protectintellectual property rights to the same extent as the laws of certain other countries do.Consequently, we may not be able to prevent third parties from practicing our inventions in all


RISK FACTORS

– 73 –

countries, or from selling or importing medical products made using our inventions in andinto certain jurisdictions. Competitors may use our technologies in jurisdictions where we havenot obtained patent protection to develop and sell their own products and further, may exportinto or import from these jurisdictions otherwise infringing products. Competitors may alsoengage in these activities in jurisdictions where we have patent protection but whereenforcement rights or mechanisms are not as strong as those in certain other countries. Theseproducts may compete with our products and product candidates and our patent rights orother intellectual property rights may not be effective or adequate to prevent them fromcompeting.

As of the Latest Practicable Date, we had five issued patents and 13 registeredtrademarks, as well as 16 pending patent applications and 29 pending nationals trademarkapplications. One of these patents is jointly owned by Incept and our subsidiary, HeMo China.Any of our intellectual property rights may be the subject of a governmental or third-partyobjection, which could prevent the maintenance or issuance of the same. If we areunsuccessful in obtaining trademark protection for our primary brands, we may be required tochange our brand names, which could materially and adversely affect our business. Moreover,as our products mature, our reliance on our trademarks to differentiate us from ourcompetitors will increase, and as a result, if we are unable to prevent third parties fromadopting, registering or using trademarks and trade dress that infringe, dilute or otherwiseviolate our trademark rights, our business could be materially and adversely affected.

Many companies have encountered challenges in protecting and defending intellectualproperty rights. The legal systems of some countries do not favor the enforcement of patents,trade secrets and other intellectual property, particularly those relating to products, whichcould make it difficult in those jurisdictions for us to stop the infringement ormisappropriation of our patents or other intellectual property rights, or the marketing ofcompeting products in violation of our proprietary rights. Proceedings to enforce ourintellectual property and proprietary rights in overseas jurisdictions may result in substantialcosts and divert our efforts and management attention from other aspects of our business, putour patents at risk of being invalidated or interpreted narrowly, put our patent applications atrisk of not being issued, and also provoke third parties to assert claims against us.

We may not prevail in any lawsuits that we initiate and the damages or other remediesawarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce ourintellectual property rights around the world may be inadequate to obtain a significantcommercial advantage from the intellectual property that we develop or license in.

Many countries have compulsory licensing laws under which a patent owner may becompelled to grant licenses to third parties in certain circumstances. In addition, manyjurisdictions limit the enforceability of patents against government agencies or governmentcontractors. In certain jurisdictions, the patent owner may have limited remedies, which couldmaterially diminish the value of such patent. If we or any of our licensors are forced to granta license to third parties with respect to any patents relevant to our business, our competitive


RISK FACTORS

– 74 –

position may be impaired, and our business, financial condition, results of operations andprospects may be adversely affected.

We may become involved in lawsuits to protect or enforce our intellectual property, which couldbe expensive, time consuming and unsuccessful. Our patent rights relating to our products andproduct candidates could be found invalid or unenforceable.

Competitors may infringe our patent rights or misappropriate or otherwise violate ourintellectual property rights. To counter infringement or unauthorized use, litigation may benecessary in the future to enforce or defend our intellectual property rights, to protect ourtrade secrets or to determine the validity and scope of our own intellectual property rights orthe proprietary rights of others, if these rights are asserted against us. This can be expensiveand time consuming. Any claims that we assert against perceived infringers could also provokethese parties to assert counterclaims against us, alleging that we infringe upon theirintellectual property rights. Many of our current and potential competitors have the ability todedicate substantially greater resources to enforce and/or defend their intellectual propertyrights than we can. Accordingly, despite our efforts, we may not be able to prevent thirdparties from infringing upon or misappropriating our intellectual property. An adverse resultin any litigation proceeding could put our patents, as well as any patents that may issue in thefuture from our pending patent applications, at risk of being invalidated, held unenforceableor interpreted narrowly. Furthermore, because of the substantial amount of discoveryrequired, if applicable, in connection with intellectual property litigation, some of ourconfidential information could be compromised by disclosure during this type of litigationwhich is subject to sealing orders.

Defendant counterclaims alleging invalidity or unenforceability are commonplace, and athird party can assert invalidity or unenforceability of a patent on numerous grounds. Thirdparties may also raise similar claims before administrative bodies in China or otherjurisdictions. Such proceedings could result in revocation or amendment to our patents in sucha way that they no longer cover and protect our products or product candidates. The outcomefollowing legal assertions of invalidity and unenforceability is unpredictable. With respect tothe validity of our patents, for example, we, our patent counsel, and the patent examiner couldbe unaware of invalidating prior art during prosecution. If a defendant were to prevail on alegal assertion of invalidity and/or unenforceability, we would lose at least part, and perhapsall, of the patent protection on our products or product candidates. Such a loss of patentprotection could have a material adverse impact on our business.

We may not be able to prevent misappropriation of our trade secrets or confidentialinformation, particularly in countries where the laws may not protect those rights as fully aswe expect. Furthermore, due to a substantial amount of discovery required in connection withintellectual property litigation, there is a risk that some of our trade secrets or otherconfidential information could be compromised by disclosure during the litigation.


RISK FACTORS

– 75 –

We may need to defend ourselves against intellectual property rights infringement claims, whichcould be costly and time consuming, harm our ability to generate future revenues and profits andresult in negative publicity against us.

We may receive from time to time complaints alleging infringement of patents,trademarks or other intellectual property rights by us and we may be involved in intellectualproperty right infringement (including misappropriation and/or other intellectual propertyviolation) claims. We may be involved in disputes or subject to lawsuits arising from claimsthat our products are made from certain raw materials, use certain processes or methods orhave designs that infringe upon third parties’ intellectual property rights (including patents).

Additionally, our commercialization of our design, product or other technologies couldbe found to infringe upon third parties existing intellectual property rights, and we may haveintellectual property ownership disputes with third parties. For example, we understand thatcertain third-party issued patents in China have claims that may cover certain features of ourstent retriever. The relevant third parties may initiate legal proceedings alleging that we areinfringing or violating their intellectual property rights in connection with ourcommercialization of this product in China. As advised by our PRC intellectual property legaladvisor, the claims of these third-party patents that may cover our product features are highlylikely to be found invalid by courts or other competent authorities in China. In addition, someof these third-party patents are utility model patents unexamined by the regulators, andtherefore are not stable intellectual property rights and are vulnerable to invalidation.

However, the outcome of relevant legal proceedings could be uncertain. Anyinfringement claims and related litigation could be time-consuming, disruptive to our abilityto generate revenues or enter into new market opportunities and may result in significantlyincreased costs as a result of our defense against those claims or our attempt to license theintellectual property rights or rework our products to avoid infringement of third party rights.The foregoing possible infringement claims and related litigation, if adjudicated not favorableto us, may prevent or delay our product development or commercialization process, and hencehave an adverse impact on our business and operating results.

Intellectual property-related negative publicities, with or without merits, may also harmour brand image and reputation. We may also fail to own or apply for key trademarks in atimely fashion, or at all, which may affect our ability to prevent third parties from infringingour rights and diluting our trademarks, or taking actions that may damage our reputation andbrand.

Obtaining and maintaining our patent protection depends on compliance with various proceduraland other requirements of relevant patent agencies, and our patent protection could be reduced oreliminated for non-compliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the CNIPA, USPTOand other patent agencies in several stages over the lifetime of the patent. The CNIPA,USPTO and various governmental patent agencies require compliance with a number of


RISK FACTORS

– 76 –

procedural, documentary, fee payment, and other similar provisions during the patentapplication process. Although an inadvertent lapse can in many cases be cured by payment ofa late fee or by other means in accordance with the applicable rules, non-compliance can resultin abandonment or lapse of the patent or patent application, resulting in partial or completeloss of patent rights in the relevant jurisdiction. Non-compliance events that could result inabandonment or lapse of a patent or patent application include failure to respond to officialactions within prescribed time limits, non-payment or inadequate payment of fees, and failureto properly legalize and submit formal documents. In any such event, our competitors mightbe able to enter the market, which would have a material adverse effect on our business.

Changes in patent law or in interpretations of patent law could diminish the value of patents ingeneral, thereby impairing our ability to protect our products and product candidates.

Local laws and regulations governing patents could change in unpredictable ways thatwould weaken our ability to obtain new patents or to enforce our existing patents and patentsthat we might obtain in the future. Recent U.S. court rulings have narrowed the scope ofpatent protection available in certain circumstances and weakened the rights of patent ownersin certain situations. There could be similar changes in the laws of other jurisdictions that mayimpact the value of our patent rights or our other intellectual property rights. In addition toincreasing uncertainty with regard to our ability to obtain patents in the future, thiscombination of events has created uncertainty with respect to the value of patents onceobtained, if any.

Failure to protect the confidentiality of our trade secrets could harm our competitive position.We may also be subject to claims that our employees have wrongfully used or disclosed tradesecrets of their former employers.

In addition to our issued patents and pending patent applications, we rely on tradesecrets, including unpatented know-how, technology and other proprietary information, tomaintain our competitive position and to protect our products and product candidates. Weseek to protect these trade secrets, in part, by entering into confidentiality and IP ownershipagreements or include such undertakings in the agreement with parties that have access tothem, such as our employees. However, any of these parties may breach such agreements anddisclose our proprietary information, and we may not be able to obtain adequate remedies forsuch breaches. Enforcing a claim that a party illegally disclosed or misappropriated a tradesecret can be difficult, expensive and time-consuming, and the outcome is unpredictable. Ifany of our trade secrets were lawfully obtained or independently developed by a competitor,we would have no right to prevent them from using that technology or information to competewith us and our competitive position would be harmed.

Furthermore, a number of our employees, including our senior management, werepreviously employed at other medical device companies, including our competitors orpotential competitors. Some of these employees, including our senior management, executedproprietary rights, non-disclosure or non-competition agreements in connection with suchprevious employment. Although we try to ensure that our employees do not use the


RISK FACTORS

– 77 –

proprietary information or know-how of others in their work for us, we may be subject toclaims that we or these employees have used or disclosed intellectual property, including tradesecrets or other proprietary information, of any such employee’s former employer. We are notaware of any material threatened or pending claims related to these matters or concerning theagreements with our senior management, but in the future litigation may be necessary todefend against such claims. If we fail in defending any such claims, in addition to payingmonetary damages, we may lose valuable intellectual property rights or personnel. Even if weare successful in defending against such claims, litigation could result in substantial costs andbe a distraction to management.

In addition, while our employment agreements typically provide that intellectualproperty developed by our employees, consultants and contractors belong to us or areassigned to us, we may be unsuccessful in executing such an agreement with each party who infact develops intellectual property that we regard as our own, which may result in claims by oragainst us related to the ownership of such intellectual property. If we fail in prosecuting ordefending any such claims, in addition to paying monetary damages, we may fail to securerights to valuable intellectual property. Even if we are successful in prosecuting or defendingagainst such claims, litigation could result in substantial costs and be a distraction to ourmanagement and scientific personnel and could have a material adverse effect on our business,financial condition and results of operations.

Intellectual property rights do not necessarily protect us from all potential threats to ourcompetitive advantages.

The degree of protection afforded by our intellectual property rights is uncertain becauseintellectual property rights have limitations and may not adequately protect our business orpermit us to maintain our competitive advantages. For example:

• others may be able to offer competing products relying on work-around solutions oralternative technologies;

• we might not have been the first to file patent applications covering certain of ourinventions, which could result in the patent authorities not granting our patentapplications or invalidating our issued patents;

• we, or our license partners or current or future collaborators, might not have beenthe first to make the inventions covered by the issued patents or pending patentapplications that we license or may own in the future;

• we, or our license partners or current or future collaborators, might not have beenthe first to file patent applications covering certain of our or their inventions;

• others may independently develop similar or alternative technologies or duplicateany of our technologies without infringing, misappropriating or otherwise violatingour owned or licensed intellectual property rights;


RISK FACTORS

– 78 –

• it is possible that our pending licensed patent applications or those that we may ownin the future will not lead to issued patents;

• our issued patents may be held invalid or unenforceable, as a result of legalchallenges by our competitors, if for instance the claimed invention had previouslybeen disclosed to the public or is deemed to be obvious in view of such disclosure;

• our competitors might use the invention (including to conduct research anddevelopment activities) in jurisdictions where we do not have patent rights and thenuse the information learned from these activities to develop competitive products forcommercialization in our major markets. If our patents do not cover suchcompetitive products, we will not be able to prevent sale of these products;

• we may fail to apply for or obtain adequate intellectual property protection in all thejurisdictions in which we operate; and

• the patents of others may have an adverse effect on our business, for example bypreventing us from commercializing one or more of our products candidates.

Any of the aforementioned threats to our competitive advantage could have a materialadverse effect on our business, financial condition and results of operations.

Risks Relating to Our Operations

Our business, results of operations and financial position has been and could continue to beadversely affected by the outbreak of COVID-19 and may be adversely affected by otherepidemics or natural disasters.

Since early 2020, a growing number of countries and regions around the world haveencountered an outbreak of novel coronavirus disease, or COVID-19, a highly contagiousdisease known to cause respiratory illness. The disease quickly spread globally, and theaffected cases and death tolls continued to increase, which has been characterized as a globalpandemic by the World Health Organization. Significant resurgence in COVID-19 cases hascaused governments around the world to implement unprecedented measures such as citylockdowns, travel restrictions, quarantines and business shutdowns. The COVID-19 outbreakis expected to have an unprecedented impact on the global economy as it has significantlyreduced market liquidity and depressed economic activities.

The COVID-19 pandemic has affected China, where we primarily conduct our businessand engage in preclinical studies and clinical trials, and Singapore, where our headquarter islocated, and it continues to affect China and other regions where some of our suppliers andother business partners are located. The COVID-19 outbreak has caused and may continue tocause a long-term adverse impact on the economy and social conditions in China, Singaporeand other affected countries, which may have an indirect impact on our industry and causetemporary suspension of projects and shortage of labor and raw materials. This could severely


RISK FACTORS

– 79 –

disrupt our operations and have a material adverse effect on our business, financial conditionand results of operations. We are uncertain as to when the COVID-19 outbreak will becontained globally and what long-term impact it may have on our business operations.

Our business, including our clinical, marketing and sales efforts, was impacted to variousdegrees by COVID-19, particularly in the first few months of 2020, and our business maycontinue to be impacted or disrupted by the pandemic and its future resurgence in numerousways, including: (i) requirements for us and our distributors, suppliers and other businesspartners to quarantine employees, close facilities or take extra security precautions forbusiness operations in case any of our or their employees (as the case may be) were testedpositive for the COVID-19 virus, which may result in higher costs or delays in production; (ii)potential delays or interruptions in the supply of raw materials; (iii) delays in patientenrollment and the overall progress for our clinical trials; (iv) delays or interruptions in thesupply of the resources for our clinical trials due to travel restrictions or other diseasecontainment measures of affected cities; (v) diversion of medical resources required for ourclinical trials for the treatment of patients with COVID-19; (vi) delays in registration of ourproducts with provincial and local governments, as well as the delays of our products’ sales insome provinces; (vii) delays in expansion of our distribution network as we could not conducton-site due diligence or on-site demonstration of our products to the distributor candidates;(viii) interruptions and delays in our sales to hospitals as our employees and representativesfrom our sub-distributors were not allowed to have, or need to go through COVID-19 testingbefore having, face-to-face communication with physicians or on-site demonstration of ourproducts; (ix) potentially lower demand by hospitals for neuro-interventional products, asmany patients rescheduled their visits to hospitals to avoid cross-infections; (x) temporaryclosure or flexible working hours of competent regulatory authorities, such as administrationand registration authorities, which may delay regulatory submissions and required approvalsof our pipeline products, and could cause us to incur additional costs and affect our ability tocarry out our operations as planned; and (xi) commercialization plans for our productsapproved by regulators and expansion of our production facilities could also be disrupted. Ifwe are not able to effectively and efficiently develop and commercialize our productcandidates as planned, we may be unable to grow our business and generate revenue from salesof our product candidates as anticipated, our business operations, financial condition andprospects may subsequently be materially and adversely affected.

The COVID-19 outbreak has negatively impacted our business and financialperformance, especially by delaying our clinical trials progress and sales and marketing relatedwork. The COVID-19 outbreak may have a negative impact on the local, national and globaleconomy and financial and market conditions.

The full effects of the current COVID-19 pandemic or future outbreaks on our businessor our industry will depend on a number of factors outside our control, including theeffectiveness of vaccines and the rate at which people are vaccinated, the extent to which thecurrent pandemic continues to spread, particularly resurgence in cities in which we haveoffices or production facilities or are conducting clinical trials and other countries and regionsfrom which we source our raw materials, the level of the medical resources needed to treat


RISK FACTORS

– 80 –

COVID-19 patients in those countries, and the impact of the COVID-19 pandemic on ouremployees, subjects participating in our clinical trials, our CROs and SMOs and other serviceproviders that are necessary to continue our clinical trials. Furthermore, we cannot predictwhen the COVID-19 outbreak will become completely under control and we cannot guaranteethat the vaccines can be widely available and effective in putting the COVID-19 outbreakunder control or the outbreak will not worsen. Having considered that the past occurrences ofepidemics, depending on their scale, have caused different degrees of damage to the nationaland local economies in China and Singapore, the COVID-19 outbreak and any other publichealth crisis in China, especially in the cities where we have presence, as well as Singapore,may result in material disruptions to our operations, which in turn may materially andadversely affect our financial condition and results of operations.

In addition, any future occurrence of force majeure events, natural disasters or outbreaksof other epidemics and contagious diseases, including avian influenza, severe acute respiratorysyndrome, swine influenza caused by the H1N1 virus, or H1N1 influenza or the Ebola virus,may materially and adversely affect our business, financial condition and results ofoperations. Moreover, the PRC has experienced natural disasters such as earthquakes, floodsand droughts in the past few years. Any future occurrence of severe natural disasters in Chinaor Singapore may materially and adversely affect its economy and our business. We cannotassure you that any future occurrence of natural disasters or outbreaks of epidemics andcontagious diseases or the measures taken by the Chinese government, the Singaporegovernment or other countries in response to such contagious diseases will not seriouslydisrupt our operations or those of our customers, which may materially and adversely affectour business, financial condition and results of operations.

Our future success depends on our management and our ability to attract, retain and motivateskilled personnel for our R&D, manufacturing, and sales and marketing teams.

We are highly dependent on Dr. Wang, our founder, chairman, chief executive officer andchief technology officer, and other management members to help us successfully implementour business strategies, including the development, manufacturing and commercialization ofour product candidates. In particular, Dr. Wang’s industry experience and expertise, renownedindustry reputation, and extensive business network and resources are crucial to our success.We do not maintain key person insurance for our management members. If we lose the serviceof any of them, we may not be able to locate suitable or qualified replacements in a timelymanner, or at all. If any of them leaves us for any reason including starting their own businessthat competes with our business, our business, results of operations and prospects may bematerially and adversely affected.

We compete for qualified personnel with other biotechnology companies including ourcompetitors, universities and research institutions. The success of our business also relies onour ability to attract, hire, retain and motivate qualified scientific, technical, clinical,manufacturing, and sales and marketing personnel, as well as other consultants, includingscientific and clinical advisers, who assist us in formulating our development andcommercialization strategies. Our key employees and consultants may terminate their


RISK FACTORS

– 81 –

agreements with us at any time. The loss of the services of any of them could impede theachievement of our research, development and commercialization objectives.

Furthermore, replacing executive officers, key employees and consultants may be difficultand may take an extended period of time because of the limited number of individuals in ourindustry with the breadth of skills and experience required to successfully develop, obtainregulatory approval for and commercialize our products. Competition to hire from a limitedpool is intense, and we may face difficulties for hiring and retaining talents and highly skilledpersonnel from time to time as our competitors may offer more attractive salary package,higher positions and better training opportunities to such talents. As a result, we may beunable to hire, train, retain or motivate these key personnel or consultants on acceptable termsgiven the competition among numerous medical device companies for similar personnel. Wealso experience competition for the hiring of research and development and clinical personnelfrom universities and research institutions. Our consultants may be engaged by ourcompetitors and may have commitments under consulting or advisory contracts with otherentities that may limit their availability to us. If we are unable to continue to attract and retainhigh quality personnel, our ability to pursue our growth strategy will be limited.

We have a limited operating history, which may make it difficult to evaluate our current businessand predict our future performance.

We are a development-stage medical device company with a relatively short operatinghistory. Our operations to date have focused on recruiting staff, planning business strategies,raising capital, establishing our intellectual property portfolio, and conducting pre-clinicalstudies and clinical trials of certain interventional medical devices, and we just launched ourfirst few commercialized products. We have limited experience in the manufacturing, productregistration, and sales and marketing in relation to our products, and we did not generate anyrevenue until April 2020. With respect to many of our product candidates, we are also still inearly stages of their lifecycle.

As a result of our limited operating history, and particularly in light of the rapidlyevolving nature of our industry, it may make it difficult to evaluate our current business andreliably predict our future performance. Our historical results of operations might not beindicative of our future performance, and we may encounter unforeseen expenses, difficulties,complications, delays and other known and unknown factors. If we cannot address these risksand difficulties successfully, our business and prospects will suffer.

If we determine our intangible assets (including goodwill) to be impaired, our results ofoperations and financial condition may be adversely affected.

As of December 31, 2019 and 2020 and as of May 31, 2021, we had intangible assets ofRMB357 thousand, RMB331 thousand and RMB279 thousand, respectively, which comprisedin-licensed technology and software. We further expect to record additional intangible assetsonce we complete the acquisition of Privi Medical, primarily related to the goodwill we mayrecognize and intellectual property acquired in relation to the acquisition.


RISK FACTORS

– 82 –

Goodwill is not amortized but it is tested for impairment annually, or more frequently ifevents or changes in circumstances indicate that it might be impaired and is carried at cost lessaccumulated impairment losses. The value of goodwill is based on a number of assumptionsmade by the management. If any of these assumptions does not materialize, or if theperformance of our business is not consistent with such assumptions, we may be required tohave a significant write-off of our goodwill and record a significant impairment loss.Furthermore, our determination on whether goodwill is impaired requires an estimation of thevalue in use of the cash-generating units to which the goodwill is allocated, which depends onthe expected future cash flows from the cash-generating units. If we determine the expectedfuture cash flow to decrease, our goodwill may be impaired.

Intellectual property acquired in a business combination, such as our acquisition of PriviMedical, is recognized at fair value at the acquisition date. Intellectual property has a finiteuseful life and is carried at cost less accumulated amortization. Intellectual property is testedwhenever events or changes in circumstances indicate that the carrying amount of suchintellectual property exceeds its recoverable amount. The value of intangible assets is based ona number of assumptions made by our management. There are inherent uncertainties in theestimates, judgments and assumptions used in assessing the carrying value of intangible assets.Certain factors, including economic, legal, regulatory, competitive, reputational, contractual,and other factors, might have a negative impact on the carrying value of our intangible assets.If any of our assumptions does not materialize, or if the performance of our business is notconsistent with such assumptions, we may be required to have a significant write-off of ourintangible assets and record a significant impairment loss. Any significant impairment of anyof our intangible assets, including goodwill, could have a material adverse effect on ourbusiness, financial condition and results of operations. For more information regarding ourimpairment policy in relation to intangible assets, see Note 2(g) headed “Intangible Assets(other than goodwill)” and Note 2(i)(ii) headed “Impairment of other assets” of theAccountants’ Report set out in Appendix I to this [REDACTED].

We may experience difficulties in managing our growth and expanding our operationssuccessfully.

As our development and commercialization plans and strategies evolve, we need torecruit a significant number of additional managerial, operational, manufacturing, sales,marketing, financial and other personnel. Our growth will impose significant addedresponsibilities on members of management, including:

• identifying, recruiting, integrating, maintaining and motivating additionalemployees;

• managing our internal development efforts effectively, including the clinical andregulatory review process for our product candidates, while complying with ourcontractual obligations to contractors and other third parties; and


RISK FACTORS

– 83 –

• improving our operational, financial and management controls, reporting systemsand procedures.

Our future financial performance and our ability to commercialize our products andproduct candidates will depend, in part, on our ability to effectively manage our growth. Wecurrently rely, and for the foreseeable future will continue to rely, in substantial part on certainindependent organizations, advisors and consultants to provide certain services. There can beno assurance that the services of these independent organizations, advisors and consultantswill continue to be available to us on a timely basis when needed, or that we can find qualifiedreplacements. There can be no assurance that we will be able to manage our existingconsultants or find other competent outside contractors and consultants on economicallyreasonable terms, or at all. If we are not able to effectively manage our growth, we may not beable to achieve our research, development and commercialization goals and become profitable.

The medical device industry in China is rapidly evolving, and we may be unable to maintain orenhance our market share in this industry.

The medical device industry in China is rapidly evolving due to China’s economic growth,changes in government policies and funding levels, among other. We endeavor to maintain orenhance our market share in the industry by investing in research and development activities,building a robust distribution network and establishing good working relationships withhospitals and physicians.

However, we may not be able to predict or adequately respond to changes in marketconditions in a timely manner, which could have a material adverse effect on our business,financial condition, results of operation and return on capital expenditures. As a result, wemay experience a decline in our growth rates, reduced revenues, inability to maintain orincrease our market share in the interventional medical device markets. Any failure tomaintain or enhance our market position could adversely affect our relationships withphysicians and hospital administrators and our long-term ability to market and sell ourproducts or conduct clinical trials for our new products.

If we engage in acquisitions or strategic partnerships, this may increase our capital requirements,dilute our Shareholders, cause us to incur debt or assume contingent liabilities, and subject us toother risks.

From time to time, we may engage in various acquisitions and strategic partnerships,including licensing or acquiring complementary products, intellectual property rights,technologies or businesses. Any completed, in-process or potential acquisition or strategicpartnership may entail numerous risks, including:

• increased operating expenses and cash requirements;

• the assumption of additional indebtedness or contingent or unforeseen liabilities;


RISK FACTORS

– 84 –

• the issuance of our equity securities;

• assimilation of operations, intellectual property and products of an acquiredcompany, including difficulties associated with integrating new personnel;

• the diversion of our management’s attention from our existing product programsand initiatives in pursuing such a strategic merger or acquisition;

• retention of key employees, the loss of key personnel, and uncertainties in ourability to maintain key business relationships;

• risks and uncertainties associated with the other party to such a transaction,including the prospects of that party and their existing products and productcandidates and regulatory approvals; and/or

• our inability to generate revenue from acquired technology and/or productssufficient to meet our objectives in undertaking the acquisition or even to offset theassociated acquisition and maintenance costs.

In addition, if we undertake acquisitions, we may issue securities that dilute your[REDACTED] in our Company, assume or incur debt obligations, incur large one-timeexpenses and acquire intangible assets that could result in significant future amortizationexpense.

We also may not be able to integrate the targets we acquired to achieve the expectedoperational or economic synergies with our existing operations and to fulfill the contemplatedpurposes of these acquisitions. These synergies are inherently uncertain, and are subject tosignificant business, economic and competitive uncertainties and contingencies, many ofwhich are difficult to predict and are beyond our control. If we achieve the expected benefits,they may not be achieved within the anticipated time frame. Moreover, the synergies from ouracquisitions may be offset by costs incurred in the acquisition, increases in other expenses,operating losses or problems in the business unrelated to our collaboration. As a result, therecan be no assurance that these synergies will be achieved.

Additionally, the targets we acquire may not provide us with the intellectual propertyrights, technology, R&D capability, production capacity or sales and marketing infrastructurewe had anticipated, or they may be subject to unforeseen liabilities. We may be unable tosuccessfully increase the efficiencies of the acquired businesses in the manner we contemplatedor devote more resources and management attention than desirable to the integration andmanagement of the acquired businesses. Hence, there can be no guarantee that we will be ableto enhance our post-acquisition performance or grow our business through our recent orfuture acquisitions.


RISK FACTORS

– 85 –

We and our Directors, management and employees may be subject to litigation, legal orcontractual disputes, fines, governmental investigations or other proceedings, which coulddistract our management’s attention and cause substantial costs and liabilities to us.

We and our Directors, management and employees may from time to time become subjectto various litigation, legal or contractual disputes, fines, investigations or administrativeproceedings arising in the ordinary course of our business. For example, we may be subject tovarious disputes with or claims from our suppliers, customers, contractors, employees,business partners and other third parties that we engage for our business operations. On-goingor threatened litigation, legal or contractual disputes, investigations or administrativeproceedings may divert our management’s attention and consume their time and our otherresources. In addition, any similar claims, disputes or legal proceedings involving us or ourDirectors, management or employees may result in damages or liabilities, as well as legal andother costs and may cause a distraction to our management. Furthermore, any litigation, legalor contractual disputes investigations or administrative proceedings which are initially not ofmaterial importance may escalate and become important to us, due to a variety of factors,such as the facts and circumstances of the cases, the likelihood of loss, the monetary amountat stake and the parties involved. If any verdict or award is rendered against us or if we settlewith any third parties, we could be required to pay significant monetary damages, assumeother liabilities and even to suspend or terminate the related business projects. In addition,negative publicity arising from litigation, legal or contractual disputes, investigations oradministrative proceedings may damage our reputation and adversely affect the image of ourbrands and products. Consequently, our business, financial condition and results ofoperations may be materially and adversely affected.

We may be subject, directly or indirectly, to applicable anti-kickback, false claims laws,physician payment transparency laws, fraud and abuse laws or similar healthcare and securitylaws and regulations in China and other jurisdictions, which could expose us to criminalsanctions, civil penalties, contractual damages, reputational harm and reduced sales.

Healthcare providers and physicians play a primary role in the recommendation andprescription of any products for which we obtain regulatory approval. Our operations aresubject to various applicable anti-kickback, false claims laws, physician payment transparencylaws, fraud and abuse laws or similar healthcare and security laws and regulations, includingcriminal law of the PRC, Regulations on the Supervision and Administration of MedicalDevices (2021 Revision) (《醫療器械監督管理條例(2021修訂)》) and the AdministrativeMeasures for the Registration of Medical Devices (《醫療器械註冊管理辦法》). As our businessexpands, the applicability of the applicable anti-bribery laws to our operations will increase.These laws may impact, among other things, our proposed sales, marketing and educationprograms. In addition, we may be subject to patient privacy regulation. Violations of fraudand abuse laws may be punishable by criminal and/or civil sanctions, including penalties, finesand/or exclusion or suspension from governmental healthcare programs and debarment fromcontracting with the PRC government.


RISK FACTORS

– 86 –

Law enforcement authorities are increasingly focused on enforcing fraud and abuse laws,and we cannot guarantee that our practices will not be challenged under these laws. Efforts toensure that our business arrangements with third parties comply with applicable healthcarelaws and regulations will involve substantial costs. Governmental authorities could concludethat our business practices may not comply with current or future statutes, regulations or caselaw involving applicable fraud and abuse or other healthcare laws and regulations. If any suchactions are instituted against us, and we are not successful in defending ourselves or assertingour rights, those actions could have a significant impact on our business, including theimposition of civil, criminal and administrative penalties, damages, disgorgement, monetaryfines, possible exclusion from participation in governmental healthcare programs, contractualdamages, reputational harm, diminished profits and future earnings, and curtailment of ouroperations, any of which could adversely affect our ability to operate our business and ourresults of operations. In addition, we are subject to equivalents of each of the healthcare lawsdescribed above in other jurisdictions, among others, some of which may be broader in scopeand may apply to healthcare services reimbursed by any source, not just governmental payors,including private insurers. There are ambiguities as to what is required to comply with theserequirements, and if we fail to comply with an applicable law requirement, we could be subjectto penalties.

If any of the physicians or other providers or entities with whom we do business arefound to be not in compliance with applicable laws, they may be subject to criminal, civil oradministrative sanctions, including exclusions from government funded healthcare programs,which may also adversely affect our business.

If our employees, distributors or agents engage in bribery or corrupt practices or other improperconduct, we may be subject to liability and our reputation and business could be harmed.

Our procedures and controls to monitor compliance with anti-bribery law may fail toprotect us from reckless or criminal acts committed by our employees, distributors or agents.We could be liable for actions taken by our employees, distributors or agents that violateanti-bribery, anti-corruption and other related laws and regulations in China or otherjurisdictions. The regulators may seize the products involved in any illegal or improperconduct engaged in by our employees, distributors or agents. We may be subject to claims,fines or suspension of our operations and our reputation, our sales activities or the price ofour Shares could be adversely affected, if we are associated with any negative publicity as aresult of illegal or improper actions, or allegations of illegal or improper actions, taken by ouremployees or distributors.

It is also possible that the Chinese government or regulators in other jurisdictions couldadopt new or different regulations affecting the way in which medical devices are sold toaddress bribery, corruption or other concerns. Any such new or different regulations couldpossibly increase the costs incurred by us, our distributors in selling our products or imposerestrictions on our sales and marketing activities, which could in turn increase our costs. Aswe currently depend substantially on distributors for the sale of our products, any misconduct


RISK FACTORS

– 87 –

by our distributors or changes in the regulatory environment regarding the sale of medicaldevices could have a material adverse impact on our business, financial condition and resultsof operations.

Failure to comply with environmental, health and safety laws and regulations could result inpenalties or significant compliance costs to us.

We are subject to numerous environmental, health and safety laws and regulations,including those governing laboratory procedures and the handling, use, storage, treatment anddisposal of hazardous materials and wastes. Our operation may involve the use of hazardousand flammable chemical materials and special equipment and may also produce a modestamount of hazardous waste, which we process through services of qualified third-partycontractors. We cannot eliminate the risk of contamination or injury from these materials. Inthe event of contamination or injury resulting from our use of hazardous materials, we couldbe held liable for any resulting damages, and any liability could exceed our resources. We couldalso incur significant costs associated with civil or criminal fines and penalties.

Although we maintain workers’ compensation insurance to cover our costs and expensesdue to injuries to our employees resulting from the use of or exposure to hazardous materials,this insurance may not provide adequate coverage against potential liabilities. We do notmaintain insurance for environmental liability or toxic tort claims that may be asserted againstus in connection with our storage, use or disposal of biological or hazardous materials.

In addition, we may be required to incur substantial costs to comply with current orfuture environmental, health and safety laws and regulations. These current or future laws andregulations may impair our research, development or production efforts. Failure to complywith these laws and regulations also may result in substantial fines, penalties or othersanctions.

We are exposed to risks in connection with the wealth management products we purchased.

We had financial assets measured at fair value through profit or loss of RMB20.0million, RMB43.0 million and RMB20.0 million as of December 31, 2019 and 2020 and May31, 2021, respectively, which were mainly related to the wealth management products wepurchased. Pursuant to the Guidance on Regulating Financial Institution’s Asset ManagementBusiness (《關於規範金融機構資產管理業務的指導意見》) promulgated by the People’s Bank ofChina, the China Banking and Insurance Regulatory Commission, the China SecurityRegulatory Commission and SAFE on April 27, 2018, financial institutions selling wealthmanagement products shall not guarantee the returns of principal and interest of suchproducts. As a result, the returns of our investments on the wealth management products werenot guaranteed, and therefore were measured at fair value through profit or loss. We areexposed to credit risks in relation to these financial assets, which may adversely affect theirfair value. Net changes in their fair value are recorded as our net other income or losses, andtherefore directly affect our results of operations. We may continue to invest in wealthmanagement products in the future when we believe that we have surplus cash on-hand and the


RISK FACTORS

– 88 –

potential investment returns are attractive. However, there can be no assurance that ourinternal management and investment strategy will be effective and adequate with respect toour purchased wealth management products. We cannot guarantee that we will not experiencelosses with respect to such investments in the future or that such losses or other potentiallynegative consequences due to such investments will not have material adverse effects on ourbusiness, results of operations and prospects.

Our internal computer systems may fail or suffer security breaches.

Despite the implementation of security measures, our internal computer systems arevulnerable to damage from computer viruses and unauthorized access. Although to ourknowledge we have not experienced any material system failure or security breach to date, ifsuch an event were to occur and cause interruptions in our operations, it could result in amaterial disruption of our development programs and our business operations.

In the ordinary course of our business, we collect or have access to sensitive data. Forexample, certain of our authorized persons are allowed by hospitals (namely, clinical trialsites) to view (instead of copying or transferring) legally protected patient health informationand personally identifiable information about the patients for the clinical trials of our productcandidates. Clinical trial data provided by hospitals to us are generally de-identified. Wemaintain data security utilizing online systems with encryption setups and using outsourcedvendors that have entered into confidentiality agreements with us. Our confidential dataencompasses a wide variety of business critical information including R&D information,commercial information and business and financial information. Because information systems,networks and other technologies are critical to many of our operating activities, shutdowns orservice disruptions at our Company or vendors that provide information systems, networks, orother services to us pose increasing risks. Such disruptions may be caused by events such ascomputer hacking, phishing attacks, ransomware, dissemination of computer viruses, wormsand other destructive or disruptive software, denial of service attacks and other maliciousactivity, as well as power outages, natural disasters (including extreme weather), terroristattacks or other similar events. Such events could have an adverse impact on us and ourbusiness, including loss of data and damage to equipment and data. In addition, systemredundancy may be ineffective or inadequate, and our disaster recovery planning may not besufficient to cover all eventualities. Significant events could result in a disruption of ouroperations, damage to our reputation or a loss of revenues. In addition, we may not haveadequate insurance coverage to compensate for any losses associated with such events.

We could be subject to risks caused by misappropriation, misuse, leakage, falsification orintentional or accidental release or loss of information maintained in the information systemsand networks of our Company and our vendors, including personal information of ouremployees and patients, and company and vendor confidential data. In addition, outsideparties may attempt to penetrate our systems or those of our vendors or fraudulently induceour personnel or the personnel of our vendors to disclose sensitive information in order togain access to our data and/or systems. Like other companies, we have on occasionexperienced, and will continue to experience, threats to our data and systems, including


RISK FACTORS

– 89 –

malicious codes and viruses, phishing, and other cyber-attacks. The number and complexity ofthese threats continue to increase over time. If a material breach of our informationtechnology systems or those of our vendors occurs, the market perception of the effectivenessof our security measures could be harmed and our reputation and credibility could bedamaged. We could be required to expend significant financial and other resources to repair orreplace information systems or networks. In addition we could be subject to regulatory actionsand/or claims made by individuals and groups in private litigation involving privacy issuesrelated to data collection and use practices and other data privacy laws and regulations,including claims for misuse or inappropriate disclosure of data, as well as unfair or deceptivepractices. Although we develop and maintain systems and controls designed to prevent theseevents from occurring, and we have a process to identify and mitigate threats, includingregular data backup and software update, the development and maintenance of these systems,controls and processes is costly and requires ongoing monitoring and updating as technologieschange and efforts to overcome security measures become increasingly sophisticated.Moreover, despite our efforts, the possibility of these events occurring cannot be eliminatedentirely. As we outsource more of our information systems to vendors, engage in moreelectronic transactions with payors and patients, and rely more on cloud-based informationsystems, the related security risks will increase and we will need to expend additional resourcesto protect our technology and information systems.

If we or our business partners fail to protect patient data and privacy, our reputation will bedamaged and we may be subject to fines or other regulatory punishments.

The personal information of patients or subjects for our clinical trials is highly sensitiveand we are subject to strict requirements under the applicable privacy protect regulations inthe relevant jurisdictions. Whilst we have adopted security policies and measures to protectour proprietary data and patients’ privacy, privacy leakage incidents might not be avoided dueto human error, employee misconduct or system breakdown. We also cooperate with thirdparties including principal investigators, hospitals, CROs, SMOs and other technical serviceproviders for our clinical trials. Any leakage or abuse of patient data by our third-partypartners may be perceived by the patients as a result of our failure. Any failure or perceivedfailure by us to prevent information security breaches or to comply with privacy policies orprivacy-related legal obligations, or any compromise of information security that results in theunauthorized release or transfer of personally identifiable information or other patient data,could cause our customers to lose trust in us and could expose us to legal claims. Whilst wehave made efforts to ensure our compliance with the applicable privacy regulations in variousjurisdictions, we may not be capable of adjusting our internal policies in a timely manner andany failure to comply with applicable regulations could also result in regulatory enforcementactions against us.


RISK FACTORS

– 90 –

If we or the third parties on whom we rely fail to maintain the necessary licenses for thedevelopment, manufacturing, sales and distribution of our products, our ability to conduct ourbusiness could be materially impaired.

We are required to obtain, maintain and renew various permits, licenses and certificatesto develop, produce, promote and sell our products. Third parties, such as researchinstitutions, distributors and suppliers on whom we may rely to develop, produce, promote,sell and distribute our products, may be subject to similar requirements. We and third partieson whom we rely may also be subject to regular inspections, examinations, inquiries or auditsby regulatory authorities, and an adverse outcome of such inspections, examinations, inquiriesor audits may result in the loss or non-renewal of the relevant permits, licenses andcertificates. Moreover, the criteria used in reviewing applications for, or renewals of permits,licenses and certificates may change from time to time, and there can be no assurance that weor the third parties on whom we rely will be able to meet new criteria that may be imposed toobtain or renew the necessary permits, licenses and certificates. Many of such permits, licensesand certificates are material to the operation of our business, and if we or parties on whom werely fail to maintain or renew material permits, licenses and certificates, our ability to conductour business could be materially impaired. Furthermore, if the interpretation orimplementation of existing laws and regulations change, or new regulations come into effect,requiring us or parties on whom we rely to obtain any additional permits, licenses orcertificates that were previously not required to operate our business, there can be noassurance that we or parties on whom we rely will successfully obtain such permits, licenses orcertificates.

Business disruptions could seriously harm our future revenue and financial condition and increaseour costs and expenses.

Our operations, and those of our third-party research institution collaborators, suppliersand other contractors and consultants, could be subject to natural or man-made disasters orbusiness interruptions. In addition, we partially rely on our third-party research institutioncollaborators for providing technological services to facilitate the R&D of our productcandidates, and they may be affected by government shutdowns or withdrawn funding. Theoccurrence of any of these business disruptions could seriously harm our operations andfinancial condition and increase our costs and expenses. Our ability to obtain supplies of ourproducts and product candidates could be disrupted if the operations of these suppliers areaffected by a man-made or natural disaster or other business interruption. We currently do notmaintain property damage and business interruption insurance coverage on these facilities.Damage or extended periods of interruption to our corporate, R&D or manufacturingfacilities due to fire, natural disaster, power loss, communications failure, unauthorized entryor other events could cause us to cease or delay development or commercialization of some orall of our product candidates.


RISK FACTORS

– 91 –

Our growth prospects could be adversely affected if we fail to effectively expand our businessinto markets outside China.

We plan to broaden our sales and expand our presence in China, Singapore and otherAsia-Pacific markets by commercializing our pipeline products, such as the aspirationcatheters and access catheter products, to increase our international visibility and establishour local presence in the these markets. We are in the process of conducting various clinicaltrials and obtaining regulatory approvals in China, and we are in the design stage for certainproducts for which we plan to apply for the CE Marking to commercialize outside China inthe foreseeable future. However, our limited experience in multi-national operations mayexpose us to risks and uncertainties, including the risks associated with the following:

• dealing with regulatory regimes, regulatory bodies and government policies whichmay differ materially from those in the PRC or with which we may be unfamiliar;

• substantial time that may be required for us to obtain approval for registering andselling our products in additional countries, especially in developed countries;

• commercializing our products in new markets where we have limited experience withthe dynamics and no sales and marketing infrastructure;

• higher costs for new product development and reliance on overseas partners for thedevelopment, commercialization and marketing of our products;

• product liability litigation and regulatory scrutiny arising from the marketing andsale of products in overseas markets and the costs incurred dealing with suchprocedures, as well as our ability to obtain insurance to adequately protect us fromany resulting liabilities;

• changes in a specific country’s or region’s political and cultural climate or economiccondition;

• unexpected changes in or failure to comply with laws and regulations in localjurisdictions;

• concerns of local governments and regulators on our research and trial sites or therelevant management arrangements;

• inadequate intellectual property protection in certain jurisdictions;

• unexpected changes in tariffs, trade barriers and regulatory requirements;

• economic weakness and inflation;

• difficulty in effective enforcement of contractual provisions in local markets;


RISK FACTORS

– 92 –

• compliance with tax, employment, immigration and labor laws for employeestraveling abroad;

• the effects of applicable foreign tax structures and potentially adverse taxconsequences;

• currency fluctuations, which could result in increased operating expenses andreduced revenue;

• workforce uncertainty and labor unrest; and

• business interruptions resulting from geo-political actions, including war andterrorism, trade conflicts, or natural disasters such as earthquakes, volcanoes,typhoons, floods, hurricanes and fires.

Our trust arrangement with respect to HeMo Singapore may be subject to risks.

On July 16, 2021, our Company entered into an equity transfer agreement with Dr. Wangto acquire from him the entire issued share capital of HeMo Singapore. After the transfer, webecame the legal and beneficial owner of 65% equity interest in HeMo Singapore. A trustarrangement was also established with respect to the remaining 35% equity interest in HeMoSingapore such that Dr. Wang, as the trustee, holds this 35% equity interest in HeMoSingapore on trust for the benefit of our Company, as beneficiary. For more details, see“History, Development and Corporate Structure—Corporate Development—Acquisition ofHeMo Singapore and Privi Medical.” We adopted this trust arrangement primarily tooptimize HeMo Singapore’s accessibility and eligibility to government assistance, grants,subsidies, incentives and resources which are only made available to Singapore localenterprises.

Pursuant to the trust deed, we have control over the voting power attached to the 35%equity interest in HeMo Singapore and the interest in these shares belongs solely to us andvests in us absolutely. However, if any conflicts of interest concerning HeMo Singapore arisebetween our Company and Dr. Wang, given the nature of the trust arrangement and Dr. Wangbeing the legal owner of the 35% equity interest, Dr. Wang may be able to prevent or delayHeMo Singapore from entering into transactions that might be otherwise desirable, such astakeovers or changes in the control or management of HeMo Singapore.

In addition, the Singapore government may consider that our trust arrangement (whichin its form conforms to the legal requirements on qualifications for certain governmentassistance schemes and grants) should not entitle HeMo Singapore to a portion or all of suchbenefits due to our Company being the beneficial owner of the 35% equity interest in HeMoSingapore. Further, these government assistance schemes and grant benefits may be affectedby the Singapore government’s policy considerations, which are subject to changes anddevelopment that are beyond our control. We cannot assure you that any potential policychanges would be favorable to our business, or that HeMo Singapore’s trust arrangement will


RISK FACTORS

– 93 –

qualify us for these government assistance schemes and grant benefits after any of such policychanges. Any reduction, elimination or discretionary application of the government assistanceschemes and grant benefits as such may adversely affect our business, results of operationsand financial condition.

Our business significantly depends on our reputation and customer perception of us, and anynegative publicity on us or failure to maintain and enhance our recognition may adversely affectour business prospects.

Our reputation and customer perception of our brand are critical to our business.Maintaining and enhancing our reputation and recognition depend primarily on the qualityand consistency of our products, as well as continued promotion efforts. Our promotionefforts may be expensive and ineffective. In addition, our reputation and customer perceptionof our Company could suffer in the event that:

• our products fail to gain acceptance by patients, doctors and hospitals;

• our products are defective or dysfunctional;

• lawsuits or regulatory investigations are instituted against us or relating to ourproducts or industry;

• we provide poor or ineffective customer service; or

• we are subject to product liability claims.

If we are unable to maintain and further enhance our reputation and recognition, ourability to attract and retain customers may be impeded and our business prospects may bematerially and adversely affected. Any negative incident or negative publicity concerning us,our Shareholders, Directors, officers, employees, principal investigators, KOLs, distributors,suppliers and other business partners, regardless of its veracity, could harm our image anddiminish the trust from our customers and the market, which could in turn result in decreasedsales of our products and materially and adversely affect our business. In addition, to theextent our employees, principal investigators, KOLs, distributors, suppliers and other businesspartners were non-compliant with any laws or regulations, we may also suffer negativepublicity or harm to our reputation. We may be required to spend significant time and incursubstantial costs in response to allegations and negative publicity, and may not be able todiffuse them to the satisfaction of our investors and customers.


RISK FACTORS

– 94 –

Risks Relating to Doing Business in China

Changes in the political and economic policies of the PRC government may materially andadversely affect our business, financial condition and results of operations and may result in ourinability to sustain our growth and expansion strategies.

Due to our extensive operations in China, our business, results of operations, financialcondition and prospects may be influenced to a significant degree by economic, political, legaland social conditions in China. China’s economy differs from the economies of developedcountries in many respects, including with respect to the amount of government involvement,level of development, growth rate, control of foreign exchange and allocation of resources.

While the PRC economy has experienced significant growth over the past 30 years,growth has been uneven across different regions and among various economic sectors ofChina. The PRC government has implemented various measures to encourage economicdevelopment and guide the allocation of resources. Some of these measures may benefit theoverall PRC economy, but may have a negative effect on us. For example, our financialcondition and results of operations may be adversely affected by government control overcapital investments or changes in tax regulations that are currently applicable to us. Inaddition, in the past the PRC government implemented certain measures, including interestrate increases, to control the pace of economic growth. These measures may cause decreasedeconomic activity in China, which may adversely affect our business and results of operation.More generally, if the business environment in China deteriorates from the perspective ofdomestic or international investment, our business in China may also be adversely affected.

There are uncertainties regarding the interpretation and enforcement of PRC laws, rules andregulations.

Our operations are primarily conducted in China, and are governed by PRC laws, rulesand regulations. The PRC legal system is a civil law system based on written statutes. Unlikethe common law system, prior court decisions may be cited for reference but have limitedprecedential value.

In 1979, the PRC government began to promulgate a comprehensive system of laws, rulesand regulations governing economic matters in general. The overall effect of legislation overthe past three decades has significantly enhanced the protections afforded to various forms offoreign investment in China. However, China has not developed a fully integrated legalsystem, and recently enacted laws, rules and regulations may not sufficiently cover all aspectsof economic activities in China or may be subject to significant degrees of interpretation byPRC regulatory agencies. In particular, because these laws, rules and regulations are relativelynew and often give the relevant regulator significant discretion in how to enforce them, andbecause of the limited number of published decisions and the non-binding nature of suchdecisions, the interpretation and enforcement of these laws, rules and regulations involveuncertainties and can be inconsistent and unpredictable. In addition, the PRC legal system isbased in part on government policies and internal rules, some of which are not published on a


RISK FACTORS

– 95 –

timely basis or at all, and which may have a retroactive effect. As a result, we may not be awareof our violation of these policies and rules until after the occurrence of the violation.

Additionally, the reform of the medical device approval system since 2017 may faceimplementation challenges. The timing and full impact of such reforms is uncertain and couldprevent us from commercializing our product candidates in a timely manner. In addition, anyadministrative and court proceedings in China may be protracted, resulting in substantialcosts and diversion of resources and management attention. Since PRC administrative andcourt authorities have significant discretion in interpreting and implementing statutory andcontractual terms, it may be more difficult to evaluate the outcome of administrative andcourt proceedings and the level of legal protection we enjoy than in more developed legalsystems. These uncertainties may impede our ability to enforce the contracts we have enteredinto and could materially and adversely affect our business, financial condition and results ofoperations.

You may experience difficulties in effecting service of legal process and enforcing judgmentsagainst us and our management.

We are incorporated under the laws of the Cayman Islands, and substantially all of ourassets are located in the PRC. In addition, a majority of our senior management personneland some of our Directors reside within the PRC, and substantially all of their assets arelocated within the PRC. As a result, it may not be possible to effect service of process withinthe United States or elsewhere outside the PRC upon our Directors and senior managementpersonnel, including with respect to matters arising under the U.S. federal securities laws orapplicable state securities laws.

On July 3, 2008, the Supreme People’s Court of the PRC and the government of HongKong Special Administrative Region entered into the Arrangement on Reciprocal Recognitionand Enforcement of Judgments in Civil and Commercial Matters by the Courts of theMainland and of the Hong Kong Special Administrative Region Pursuant to Choice of CourtAgreements between Parties Concerned (關於內地與香港特別行政區法院相互認可和執行當事人協議管轄的民商事案件判決的安排) (the “Arrangement”). Under the Arrangement, whereany designated PRC court or any designated Hong Kong court has made an enforceable finaljudgment requiring payment of money in a civil or commercial case under a choice of courtagreement in writing, any party concerned may apply to the relevant PRC court or Hong Kongcourt for recognition and enforcement of the judgment. A choice of court agreement inwriting is defined as any agreement in writing entered into between parties after the effectivedate of the Arrangement in which a Hong Kong court or a PRC court is expressly selected asthe court having sole jurisdiction for the dispute.

On January 18, 2019, the Supreme People’s Court and the government of the Hong KongSpecial Administrative Region entered into the Arrangement on Reciprocal Recognition andEnforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainlandand of the Hong Kong Special Administrative Region (關於內地與香港特別行政區法院相互認可和執行民商事案件判決的安排) (the “New Arrangement”), which seeks to establish a


RISK FACTORS

– 96 –

mechanism with further clarification on and certainty for recognition and enforcement ofjudgments in a wider range of civil and commercial matters between Hong Kong SpecialAdministrative Region and the China. The New Arrangement discontinued the requirementsfor a choice of court agreement for bilateral recognition and enforcement. The NewArrangement will only take effect after the promulgation of a judicial interpretation by theSupreme People’s Court and the completion of the relevant legislative procedures in the HongKong Special Administrative Region. The New Arrangement will, upon its effectiveness,supersede the Arrangement. Therefore, before the New Arrangement becomes effective it maybe difficult or impossible to enforce a judgment rendered by a Hong Kong court in China ifthe parties in the dispute do not agree to enter into a choice of court agreement in writing. Asa result, it may be difficult or impossible for investors to effect service of process against ourassets or management in China in order to seek recognition and enforcement of foreignjudgments in China. In addition, the PRC has not entered into a treaty for the reciprocalrecognition and enforcement of court judgments with the United States, the United Kingdom,Japan and most other western countries, and Hong Kong has no arrangement for thereciprocal enforcement of judgments with the United States. As a result, recognition andenforcement in the PRC or Hong Kong of judgment of a court in the United States or anyother jurisdictions mentioned above in relation to any matter that is not subject to a bindingarbitration provision may be difficult or impossible.

In general, it is also difficult to pursue shareholder claims, such as fraud claims, as amatter of law or practicality in China, because there are significant legal and other obstaclesto obtaining information needed for shareholder investigations or litigation outside China orotherwise with respect to foreign entities. Although the local authorities in China mayestablish a regulatory cooperation mechanism with the securities regulatory authorities ofanother country or region to implement cross-border supervision and administration, suchregulatory cooperation may not be efficient in the absence of mutual and practicalcooperation mechanism. According to Article 177 of the PRC Securities Law which becameeffective in March 2020, no overseas securities regulator is allowed to directly conductinvestigation or evidence collection activities within the territory of the PRC. Accordingly,without the consent of the competent PRC securities regulators and relevant authorities, noorganization or individual may provide the documents and materials relating to securitiesbusiness activities to overseas parties.

We may be treated as a resident enterprise for PRC tax purposes under the EIT Law, and thedividends payable to investors and gains on the sale of our Shares by our investors may be subjectto PRC tax. Under the EIT Law of the PRC, our offshore subsidiaries may therefore be subjectto PRC income tax on their worldwide taxable income.

Under applicable PRC tax laws, regulations and statutory documents, non-PRC residentindividuals and enterprises are subject to different tax obligations with respect to dividendsreceived from us or gains realized upon the sale or other disposition of our Shares. Non-PRCindividuals are generally subject to PRC individual income tax under the Individual IncomeTax Law of the PRC (中華人民共和國個人所得稅法) with respect to PRC source income orgains at a rate of 20% unless specifically exempted by the tax authority of the State Council or


RISK FACTORS

– 97 –

reduced or eliminated by an applicable tax treaty. We are required to withhold related tax fromdividend payments. Pursuant to applicable regulations, domestic non-foreign-investedenterprises issuing shares in Hong Kong may generally, when distributing dividends, withholdindividual income tax at the rate of 10%. However, withholding tax on distributions paid by usto non-PRC individuals may be imposed at other rates pursuant to applicable tax treaties (andup to 20% if no tax treaty is applicable) if the identity of the individual holder of our Sharesand the tax rate applicable thereto are known to us.

Non-PRC resident enterprises that do not have establishments or premises in the PRC, orthat have establishments or premises in the PRC but their income is not related to suchestablishments or premises are subject to PRC EIT at the rate of 10% on dividends receivedfrom PRC companies and gains realized upon disposition of equity interests in the PRCcompanies pursuant to the EIT Law and other applicable PRC tax regulations and statutorydocuments, which may be reduced or eliminated under special arrangements or applicabletreaties between the PRC and the jurisdiction where the non-resident enterprise resides.Pursuant to applicable regulations, we intend to withhold tax at a rate of 10% from dividendspaid to non-PRC resident enterprise holders of our Shares (including [REDACTED]).Non-PRC resident enterprises that are entitled to be taxed at a reduced rate under anapplicable income tax treaty will be required to apply to the PRC tax authorities for a refundof any amount withheld in excess of the applicable treaty rate, and payment of such refundwill be subject to the PRC tax authorities’ verification. As of the Latest Practicable Date, therewere no specific rules on how to levy tax on gains realized by non-resident enterprise holdersof our Shares through the sale or transfer by other means of our Shares.

There remains significant uncertainty as to the interpretation and application of therelevant PRC tax laws by the PRC tax authorities, including whether and how individualincome tax or EIT on gains derived by holders of our Shares from their disposition of ourShares may be collected. If any such tax is collected, the value of our Shares may be materiallyand adversely affected. Under the EIT Law, an enterprise established outside the PRC with“de facto management bodies” within China is considered a “resident enterprise,” meaningthat it is treated in a manner similar to a Chinese enterprise for PRC EIT, purposes. Theimplementing rules of the EIT Law define “de facto management bodies” as “managementbodies that exercise substantial and overall management and control over the production andoperations, personnel, accounting, and properties” of the enterprise. In addition, the NoticeRegarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises asPRC Tax Resident Enterprises on the Basis of De Facto Management Bodies (國家稅務局關於境外註冊中資控股企業依據實際管理機構標準以定為居民企業有關問題的通知), or Circular 82,specifies that certain Chinese-controlled offshore incorporated enterprises, defined asenterprises incorporated under the laws of foreign countries or territories and that have PRCenterprises or enterprise groups as their primary controlling shareholders, will be classified asresident enterprises if all of the following are located or resident in China: (i) seniormanagement personnel and departments that are responsible for daily production, operationand management; (ii) financial and personnel decision-making bodies; (iii) key properties,accounting books, company seal, and minutes of board meetings and shareholders’ meetings;and (iv) half or more of senior management or directors having voting rights. State


RISK FACTORS

– 98 –

Administration of Taxation of the PRC, or SAT, has subsequently provided further guidanceon the implementation of Circular 82.

As substantially all of the operational management of our Company is currently based inthe PRC, our offshore subsidiaries may be deemed to be “PRC resident enterprises” for thepurpose of the EIT Law. If our offshore subsidiaries are deemed PRC resident enterprises,they could be subject to the EIT at 25% on our global income, except that the dividends wereceive from our PRC subsidiaries may be exempt from the EIT to the extent such dividendincome constitutes “dividends received by a PRC resident enterprise from its directly investedentity that is also a PRC resident enterprise.” It is, however, unclear what type of enterprisewould be deemed a “PRC resident enterprise” for such purposes. The EIT on our subsidiaries’global income could significantly increase our tax burden and adversely affect our cash flowsand profitability.

The discontinuation of any government grants or preferential tax treatment currently availableto us could adversely affect our results of operations, cash flow and business development.

Local government authorities in China have from time to time provided financialincentives to our PRC subsidiaries to encourage our R&D activities and contribution to thelocal economic development. In 2019, 2020 and the five months ended May 31, 2021, werecorded RMB3.6 million, RMB5.3 million and RMB0.5 million of government grants,respectively. The timing, amount and criteria for the government grants are determined at thesole discretion of the local government authorities, which may decide to reduce or eliminatethe grants at any time. In addition, some of the government grants are made on a project basisand subject to the satisfaction of certain conditions, such as completion of the relevantprojects. We cannot guarantee that we will satisfy all relevant conditions and continue toobtain the relevant grants. We have also enjoyed rental exemption for the properties on whichour manufacturing facilities in Weihai, Shandong Province, China are located, and we cannotguarantee to renew this exemption after it expires in March 2022.

In addition, we enjoyed pre-tax deduction of 75% of our qualifying research anddevelopment expenses in 2019 and 2020, pursuant to the relevant laws and regulationspromulgated by the State Administration of Taxation of the PRC which has been effectivefrom 2018. During the Track Record Period, we incurred losses before income taxes in China,the amounts of which, in a period of five or ten years, as the case may be for our relevantsubsidiaries, may be used to offset future taxable profits of the companies in which the lossesarose. Our eligibility to receive these preferential tax treatment requires that we continue toqualify for them and is subject to changing tax laws and rules.

The discontinuation of financial incentives currently available to us could have anadverse effect on our results of operations, cash flows and business development. In addition,as long as we continue to receive these financial incentives, our profitability could fluctuatefrom period to period depending on the potential changes in these financial incentives inaddition to any business or operational factors.


RISK FACTORS

– 99 –

Payment of dividends by our PRC subsidiaries is subject to restrictions under PRC law andregulations.

Under PRC law and regulations, we may only pay dividends out of distributable profits.Distributable profits are our after-tax profits, less any recovery of accumulated losses andappropriations to statutory and other reserves that we are required to make. As a result, wemay not have sufficient or any distributable profit to enable us to make dividend distributionsto our Shareholders, including in periods for which our financial statements indicate we areprofitable. Any distributable profit not distributed in a given year is retained and available fordistribution in subsequent years.

Moreover, our operating subsidiaries in the PRC may not have distributable profit asdetermined under PRC GAAP. Accordingly, we may not receive sufficient distributions fromour subsidiaries for us to pay dividends. Failure by our operating subsidiaries to pay usdividends could adversely impact our ability to make dividend distributions to ourShareholders and our cash flow, including periods in which we are profitable.

Relevant government authorities may require us to make additional social security or housingprovident fund contributions, or impose late payment penalties on us.

Pursuant to the PRC laws and regulations, we are required to make mandatory socialsecurity and housing fund contributions for our employees in China. During the Track RecordPeriod, we did not pay social security and housing provident fund in full for some of ouremployees in China. As a result, we may be required by competent authorities to pay theoutstanding amount and could be subject to late payment penalties. In addition, during theTrack Record Period, we engaged third-party human resources agencies to make socialsecurity and housing fund contributions for certain of our employees. The social security andhousing fund contributions made through the third parties may not be deemed by the relevantauthorities as contributions made by us, and as a result, we may be required by the relevantauthorities to pay the outstanding amount, and could be subject to late payment penalties orenforcement application made to the court. As of the Latest Practicable Date, no competentgovernment authorities had taken any administrative action against us with respect to theseincidences. We have not made any provision for the social security and housing provident fundunderpayment or potential penalties. We cannot assure you that the competent localgovernment authorities will not require us to pay the outstanding amount within a specifiedtime limit or impose late fees or fines on us, which may materially and adversely affect ourfinancial condition and results of operations.

The Chinese government’s restrictions on currency exchange may limit our ability to utilize ourrevenue effectively.

The PRC government imposes controls on the convertibility of RMB into foreigncurrencies and, in certain cases, the remittance of currency out of China. A substantialportion of our revenue is denominated in RMB. Shortages in availability of foreign currencymay then restrict our ability to remit sufficient foreign currency to our offshore entities for our


RISK FACTORS

– 100 –

offshore entities to pay dividends or make other payments or otherwise to satisfy our foreigncurrency denominated obligations. The RMB is currently convertible under the “currentaccount,” which includes dividends, trade and service-related foreign exchange transactions,but not under the “capital account,” which includes foreign direct investment and loans,including loans we may secure from our onshore subsidiaries. Currently, we and our PRCsubsidiaries may purchase foreign currency for settlement of “current account transactions,”including payment of dividends to us, without the approval of SAFE by complying withcertain procedural requirements. However, the relevant PRC governmental authorities maylimit or eliminate our ability to purchase foreign currencies in the future for current accounttransactions. Since a portion of our revenue is denominated in RMB, any existing and futurerestrictions on currency exchange may limit our ability to utilize revenue generated in RMB tofund our business activities outside of the PRC or pay dividends in foreign currencies toholders of our Shares. Foreign exchange transactions under the capital account remain subjectto limitations and require approvals from, or registration with, SAFE and other relevant PRCgovernmental authorities. This could affect our ability to obtain foreign currency through debtor equity financing for our subsidiaries.

Fluctuations in exchange rates of the Renminbi could result in foreign currency exchange lossesto us.

Certain of our bank balances and cash, other receivables, financial instruments issued toinvestors and other payables are denominated in foreign currencies. Therefore, we are exposedto foreign currency risk. We recorded a net foreign exchange loss of RMB3.8 million in 2019,and recorded net foreign exchange gains of RMB11.1 million and RMB3.8 million in 2020 andthe five months ended May 31, 2021. The exchange rates of RMB against US dollars and otherforeign currencies fluctuates is affected by, among other things, the policies of the PRCGovernment and changes in China’s and international political and economic conditions, aswell as supply and demand in the local market. It is difficult to predict how market forces orgovernment policies may impact the exchange rate between RMB, US dollars, HK dollars orother currencies in the future. In addition, the PBOC regularly intervenes in the foreignexchange market to limit fluctuations in RMB exchange rates and achieve policies goals. Thereremains significant international pressure on the PRC Government to adopt a more flexiblecurrency policy, which, together with domestic policy considerations, could result in asignificant appreciation of RMB against US dollars, HK dollars or other foreign currencies.

The [REDACTED] from the [REDACTED] will be received in HK dollars. As a result, anyappreciation of RMB against US dollars, HK dollars or any other foreign currencies mayresult in the decrease in the value of our [REDACTED] from the [REDACTED]. In addition,there are limited instruments available for us to reduce our foreign currency risk exposure atreasonable costs. Any of these factors could materially and adversely affect our business,financial condition, results of operations and prospects, and could reduce the value of, anddividends payable on, our Shares in foreign currency terms.


RISK FACTORS

– 101 –

Regulations relating to offshore investment activities by PRC residents may subject us topenalties or sanctions imposed by the PRC government, including restrictions on our PRCsubsidiaries’ abilities to pay dividends or make distributions to us and our ability to increase ourinvestments in our PRC subsidiaries.

The SAFE has promulgated several regulations requiring PRC residents to register withPRC government authorities before engaging in direct or indirect offshore investmentactivities, including Circular of the State Administration of Foreign Exchange on theAdministration of Foreign Exchange Involved in Overseas Investment, Financing andRoundtrip Investment through Special Purpose Vehicles Conducted by domestic Residents inChina via Special-Purpose Companies (關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知) (“SAFE Circular 37”), issued and effective on July 4, 2014. SAFECircular 37 requires PRC residents to register with local branches of the SAFE in connectionwith their direct establishment or indirect control of an offshore entity, for the purpose ofoverseas investment and financing, with assets or equity interests of onshore companies oroffshore assets or interests held by the PRC residents, referred to in SAFE Circular 37 as a“special purpose vehicle.” SAFE Circular 37 further requires amendment to the registration inthe event of any significant changes with respect to the special purpose vehicle. If ashareholder who is a PRC citizen or resident does not complete the registration with the localSAFE branches, the PRC subsidiaries of the special purpose vehicle may be prohibited fromdistributing their profits and proceeds from any reduction in capital or liquidation to thespecial purpose vehicle, and the special purpose vehicle may be restricted to contributeadditional capital to its PRC subsidiaries. Moreover, failure to comply with the various SAFEregistration requirements described above may result in liabilities for the PRC resident underPRC laws for evasion of applicable foreign exchange restrictions, including (1) the requirementby the SAFE to return the foreign exchange remitted overseas within a period of timespecified by the SAFE, with a fine of up to 30% of the total amount of foreign exchangeremitted overseas and deemed to have been evasive and (2) in circumstances involving seriousviolations, a fine of no less than 30% of and up to the total amount of remitted foreignexchange deemed evasive.

We may not at all times be fully aware or informed of the identities of all ourbeneficiaries who are PRC nationals, and may not always be able to compel our beneficiariesto comply with the requirements of SAFE Circular 37. As a result, we cannot assure you thatall of our Shareholders or beneficiaries who are PRC nationals will at all times comply with,or in the future make or obtain and applicable registrations or approvals required by SAFECircular 37 or other related regulations. Under the relevant rules, failure to comply with theregistration procedures set forth in the SAFE Circular 37 may result in restrictions on theforeign exchange activities of the relevant PRC enterprise and may also subject the relevantPRC residents to penalties under the PRC foreign exchange administration regulations.

The political relationships between China and other countries may affect our business operations.

We have purchased raw materials for our products from suppliers primarily in the U.S.and China and licensed in technologies from ICI which is based in the U.S. Our business is


RISK FACTORS

– 102 –

therefore subject to constantly changing international economic, regulatory, social andpolitical conditions, and local conditions in those foreign countries and regions. Tensions andpolitical concerns between China and the other relevant countries or regions may adverselyaffect our business, financial condition, results of operations, cash flows and prospects.

China’s political relationships with those foreign countries and regions may affect theprospects of our relationship with third parties. There have also been concerns on therelationships among China and other Asia-Pacific countries, which may result in or intensifypotential conflicts in relation to territorial disputes, and the trade disputes between the UnitedStates and China. The ongoing trade tensions between the United States and China may havetremendous negative impact on the economies of not merely the two countries concerned, butthe global economy as a whole. It is unclear whether these challenges and uncertainties will becontained or resolved, and what effects they may have on the global political and economicconditions in the long term, and on our business. There can be no assurance that our existingor potential service providers or collaboration partners will not alter their perception of us ortheir preferences as a result of adverse changes to the state of political relationships betweenChina and the other relevant countries or regions.

Furthermore, in the event that China or other jurisdictions where our suppliers arelocated impose import tariffs, trade restrictions or other trade barriers affecting theimportation of such components or raw materials, we may not be able to obtain a steadysupply of necessary components or raw materials at competitive prices, and our business andoperations may be materially and adversely affected. Certain principal raw materials andequipment we imported from the U.S. are subject to tariffs, which, however, could be exemptedsubject to approval of the customs authority. As of the Latest Practicable Date, we hadobtained this approval for all of our raw material and equipment purchases from the U.S.,though we cannot assure you that we can continue to do so.

Our products may also be subject to punitive tariffs or other trade barriers for our rawmaterial and equipment purchases from the U.S. For example, nitinol materials are currentlyon the List of Imports from the United States Subject to Additional 10% Tariffs (對美加徵10%關稅商品清單) issued by the Customs Tariff Commission of the State Council in August 2018,under which, as advised by our PRC Legal Advisor, if we import nitinol materials produced byour designated manufacturer in the U.S., our products would be imposed an additional 10%tariff, and would not be subject to any exemption. Any increase in the tariff or traderestrictions will increase our costs and may adversely affect our sales of products in the globalmarket.

Risks Relating to the [REDACTED]

No [REDACTED] market currently exists for our Shares, and an active [REDACTED] for ourShares may not develop and the [REDACTED] for our Shares may decline.

No [REDACTED] currently exists for our Shares. The initial [REDACTED] for ourShares to the [REDACTED] will be the result of negotiations between our Company and


RISK FACTORS

– 103 –

[REDACTED] (on behalf of the [REDACTED]), and the [REDACTED] may differsignificantly from the [REDACTED] of the Shares following the [REDACTED]. We haveapplied to the Stock Exchange for the [REDACTED] of, and permission to [REDACTED] in,the [REDACTED], however, does not guarantee that an [REDACTED] for our Shares willdevelop, or if it does develop, that it will be sustained following the [REDACTED], or that the[REDACTED] of the Shares will rise following the [REDACTED].

The [REDACTED] and [REDACTED] of our Shares may be volatile, which could lead tosubstantial losses to [REDACTED].

The [REDACTED] and [REDACTED] of our Shares may be subject to significantvolatility in response to various factors beyond our control, including the [REDACTED] ofthe securities in Hong Kong and elsewhere in the world. In particular, the business andperformance and the [REDACTED] of the shares of other companies engaging in similarbusiness may affect the [REDACTED] of our Shares. In addition to market and industryfactors, the [REDACTED] of our Shares may be highly volatile for specific business reasons,such as the results of clinical trials of our product candidates, the results of our applicationsfor approval of our product candidates, regulatory developments affecting our industry,healthcare, health insurance and other related matters, fluctuations in our revenue, earnings,cash flows, investments and expenditures, relationships with our suppliers, movements oractivities of key personnel, or actions taken by competitors. Moreover, shares of othercompanies [REDACTED] with significant operations and assets in China have experiencedprice volatility in the past, and our Shares may be subject to [REDACTED] not directly relatedto our performance.

On April 30, 2018, the Stock Exchange adopted new rules under Chapter 18A of ListingRules, or Chapter 18A. Chapter 18A permits for the first time listing on the Stock Exchange ofpre-revenue, loss making “Biotech Companies” [REDACTED]. As required by Chapter 18A,our [REDACTED]. Biotech Companies listed under Chapter 18A are generally viewed as beingearly stage and significantly riskier than those companies traditionally listed on the StockExchange. The trading market for Biotech Companies (including the depth and liquidity forthat market) may take time to develop and could be subject to significant and adverse changes.[REDACTED] the shares of other Biotech Companies could be subject to significant volatilityunrelated to company specific performance or corporate developments. For example, adverseannouncements by another unrelated Chapter 18A Biotech Company could adversely impactthe [REDACTED] for the Shares. Moreover, shares of other companies listed on the StockExchange with significant operations and assets in China have experienced price volatility inthe past, and it is possible that [REDACTED] may be subject to [REDACTED] not directlyrelated to our performance.


RISK FACTORS

– 104 –

There will be a gap of several days between [REDACTED] of our Shares, and the [REDACTED]of our Shares when [REDACTED] begins could be lower than the [REDACTED].

The initial [REDACTED] to the [REDACTED] of our Shares sold in the [REDACTED] isexpected to be determined on the [REDACTED]. However, the Shares will not commence[REDACTED] on the Stock Exchange until they are delivered, which is expected to be notmore than [five] Business Days after the [REDACTED]. As a result, [REDACTED] may not beable to [REDACTED] or otherwise [REDACTED] in the Shares during that period.Accordingly, holders of our Shares are subject to the risk that the [REDACTED] of the Shareswhen [REDACTED] begins could be lower than the [REDACTED] as a result of adversemarket conditions or other adverse developments that may occur between the time of sale andthe time [REDACTED] begins.

Future sales or perceived sales of a substantial number of our Shares in the [REDACTED]following the [REDACTED] could materially and adversely affect the price of our Shares andour ability to raise additional capital in the future, and may result in dilution of your[REDACTED].

Prior to the [REDACTED], there has not been a [REDACTED] market for our Shares.Future sales or perceived sales by our existing Shareholders of our Shares after the[REDACTED] could result in a significant decrease in the prevailing [REDACTED] of ourShares. Only a limited number of the Shares currently outstanding will be available for sale orissuance immediately after the [REDACTED] due to contractual and regulatory restrictions ondisposal and new issuance. Nevertheless, after these restrictions lapse or if they are waived,future sales of significant amounts of our Shares in the [REDACTED] or the perception thatthese sales may occur could significantly decrease the prevailing [REDACTED] of our Sharesand our ability to raise equity capital in the future.

In addition, our Shareholders would experience dilution in their shareholding upon offeror sale of additional share capital or share capital-linked securities by our Company in futureofferings. If additional funds are raised through our issuance of new share capital or sharecapital-linked securities other than on a pro rata basis to existing Shareholders, theshareholding of such Shareholders may be reduced and such new securities may confer rightsand privileges that take priority over those conferred by the [REDACTED].

As the [REDACTED] of our [REDACTED] is higher than our net tangible book value per share,purchasers of our Shares in the [REDACTED] may experience immediate dilution upon suchpurchases. Purchasers of Shares may also experience further dilution in shareholding if we issueadditional Shares in the future.

The [REDACTED] of the [REDACTED] is higher than the net tangible asset value perShare immediately prior to the [REDACTED]. Therefore, purchasers of the [REDACTED] inthe [REDACTED] will experience an immediate dilution, and our existing Shareholders willreceive an increase in consolidated net tangible assets per Share of their Shares. In order toexpand our business, we may consider offering and issuing additional Shares in the future.Purchasers of the [REDACTED] may experience dilution in the net tangible asset value per


RISK FACTORS

– 105 –

share of their Shares if we issue additional Shares in the future at a price that is lower than thenet tangible asset value per Share at that time.

Our Controlling Shareholders have significant influence over us and their interests may not bealigned with the interest of our other shareholders.

Immediately following the [REDACTED], our Controlling Shareholders will hold inaggregate approximately [REDACTED]% of our Shares, assuming the [REDACTED] is notexercised. Our Controlling Shareholders will, through their voting power at the Shareholders’meetings and their delegates on the Board, have significant influence over our business andaffairs, including decisions in respect of mergers or other business combinations, acquisitionor disposition of assets, issuance of additional shares or other equity securities, timing andamount of dividend payments, and our management. Our Controlling Shareholders may notact in the best interests of our minority Shareholders. In addition, without the consent of ourControlling shareholders, we could be prevented from entering into transactions that could bebeneficial to us. This concentration of ownership may also discourage, delay or prevent achange in control of our Company, which could deprive our Shareholders of an opportunityto receive a premium for the Shares as part of a sale of our Company and may significantlyreduce the [REDACTED] of our Shares.

We cannot make fundamental changes to our business without the [REDACTED].

Under Chapter 18A of its Rules Governing the Listing of Securities on the StockExchange, [REDACTED], we will not be able to effect any acquisition, disposal or othertransaction or arrangement or a series of acquisitions, disposals or other transactions orarrangements, which would result in a fundamental change in our principal business activitiesas set forth in this [REDACTED]. As a result, we may be unable to take advantage of certainstrategic transactions that we might otherwise choose to pursue in the absence of Chapter18A. Were any of our competitors that are not listed on the Stock Exchange to take advantageof such opportunities in our place, we may be placed at a competitive disadvantage, whichcould have a material adverse effect on our business, financial condition and results ofoperations.

We cannot assure you that we will declare and distribute any dividends in the future.

We intend to retain most, if not all, of our available funds and any future earnings afterthe [REDACTED] to fund the development and commercialization of our pipeline productcandidates. As a result, we do not expect to pay any cash dividends in the foreseeable future.Therefore, you should not rely on an [REDACTED] in our Shares as a source for any futuredividend income.

Our Board has complete discretion as to whether to distribute dividends. Even if ourBoard declares and pays dividends, the timing, amount and form of future dividends, if any,will depend on our future results of operations and cash flow, our capital requirements and


RISK FACTORS

– 106 –

surplus, the amount of distributions (if any) received by us from our subsidiaries, ourfinancial condition, contractual restrictions and other factors deemed relevant by our Board.Accordingly, the return on your [REDACTED] in our Shares will likely depend entirely uponany future price appreciation of our Shares. There is no guarantee that our Shares willappreciate in value after the [REDACTED] or even maintain the price at which you purchasedthe Shares. You may not realize a return on your [REDACTED] in our Shares and you mayeven lose your entire [REDACTED] in our Shares.

Our management has significant discretion as to how we will use the [REDACTED] of the[REDACTED], and you may not necessarily agree with how we use them.

Our management may spend the [REDACTED] from the [REDACTED] in ways withwhich you may not agree or which do not yield a favorable return to our shareholders. We planto use the [REDACTED] from the [REDACTED] to, among others, conduct R&D activities forour product candidates, commercialize our products approved by regulators, expand ourproduction capacity, and expand our product portfolio. For details, see “Future Plans and[REDACTED].” However, our management will have discretion as to the actual application ofour [REDACTED]. You are entrusting your funds to our management, whose judgment youmust depend on, for the specific uses we will make of the [REDACTED] from this[REDACTED].

We are a Cayman Islands exempted company and, because judicial precedent regarding the rightsof shareholders is more limited under the laws of the Cayman Islands than other jurisdictions,you may have difficulties in protecting your shareholder rights.

Our corporate affairs are governed by our Memorandum and Articles, the CaymanCompanies Act and common law of the Cayman Islands. The rights of Shareholders to takelegal action against our Directors and us, actions by minority Shareholders and the fiduciaryresponsibilities of our Directors to us under Cayman Islands law are to a large extentgoverned by the common law of the Cayman Islands. The common law of the Cayman Islandsis derived in part from comparatively limited judicial precedent in the Cayman Islands as wellas from English common law, which has persuasive, but not binding, authority on a court inthe Cayman Islands. The laws of the Cayman Islands relating to the protection of the interestsof minority shareholders differ in some respects from those established under statutes andjudicial precedent in existence in the jurisdictions where minority Shareholders may belocated. See “Appendix III—Summary of our Constitution and Cayman Islands CompaniesLaw” for more information. As a result of all of the above, minority Shareholders may enjoydifferent remedies when compared to the laws of the jurisdiction such shareholders are locatedin.

Facts, forecasts and statistics in this [REDACTED] relating to the interventional market may notbe fully reliable.

Facts, forecasts and statistics in this [REDACTED] relating to the interventional field inand outside China are obtained from various sources that we believe are reliable, including


RISK FACTORS

– 107 –

official government publications as well as a report prepared by Frost & Sullivan that wecommissioned. However, we cannot guarantee the quality or reliability of these sources.Neither we, the [REDACTED], the Joint Sponsors, the [REDACTED] nor our or theirrespective affiliates or advisers have verified the facts, forecasts and statistics nor ascertainedthe underlying economic assumptions relied upon in those facts, forecasts and statisticsobtained from these sources. Due to possibly flawed or ineffective collection methods ordiscrepancies between published information and factual information and other problems, theindustry statistics in this [REDACTED] may be inaccurate and you should not place unduereliance on it. We make no representation as to the accuracy of such facts, forecasts andstatistics obtained from various sources. Moreover, these facts, forecasts and statistics involverisk and uncertainties and are subject to change based on various factors and should not beunduly relied upon.

You should read the entire document carefully, and we strongly caution you not to place anyreliance on any information contained in press articles or other media regarding us or the[REDACTED].

Subsequent to the date of this [REDACTED] but prior to the completion of the[REDACTED], there may be press and media coverage regarding us and the [REDACTED],which may contain, among other things, certain financial information, projections, valuationsand other forward- looking information about us and the [REDACTED]. We have notauthorized the disclosure of any such information in the press or media and do not acceptresponsibility for the accuracy or completeness of such press articles or other media coverage.We make no representation as to the appropriateness, accuracy, completeness or reliability ofany of the projections, valuations or other forward-looking information about us. To theextent such statements are inconsistent with, or conflict with, the information contained inthis [REDACTED], we disclaim responsibility for them. Accordingly, prospective[REDACTED] are cautioned to make their [REDACTED] decisions on the basis of theinformation contained in this [REDACTED] only and should not rely on any otherinformation.

You should rely solely upon the information contained in this [REDACTED], the[REDACTED] and any formal announcements made by us in Hong Kong in making your[REDACTED] decision regarding our Shares. We do not accept any responsibility for theaccuracy or completeness of any information reported by the press or other media, nor thefairness or appropriateness of any forecasts, views or opinions expressed by the press or othermedia regarding our Shares, the [REDACTED] or us. We make no representation as to theappropriateness, accuracy, completeness or reliability of any such data or publication.Accordingly, prospective [REDACTED] should not rely on any such information, reports orpublications in making their decisions as to whether to [REDACTED] in our [REDACTED].By applying to purchase our Shares in the [REDACTED], you will be deemed to have agreedthat you will not rely on any information other than that contained in this [REDACTED] andthe [REDACTED].


RISK FACTORS

– 108 –

In preparation for the [REDACTED], we have sought the following waivers from strictcompliance with the relevant provisions of the Listing Rules and exemptions from compliancewith the Companies (Winding Up and Miscellaneous Provisions) Ordinance.

WAIVER IN RESPECT OF MANAGEMENT PRESENCE IN HONG KONG

Pursuant to Rule 8.12 of the Listing Rules, we must have sufficient management presencein Hong Kong. This normally means that at least two of our Company’s executive Directorsmust be ordinarily resident in Hong Kong.

Since our Company have our principal operations in the PRC and our headquarter is inSingapore, our Company’s sole executive Director has been and is expected to continue toparticipate in the day-to-day management of our Group’s operations in the PRC andSingapore. As such, our Company will not be able to comply with the requirements of Rule8.12 of the Listing Rules for sufficient management presence in Hong Kong.

Accordingly, we have applied to the Stock Exchange for[, and the Stock Exchange hasgranted,] a waiver from strict compliance with the requirements under Rule 8.12 of the ListingRules. In order to maintain effective communication with the Stock Exchange, we will put inplace the following measures in order to ensure that regular communication is maintainedbetween the Stock Exchange and us:

(a) we have appointed two authorized representatives pursuant to Rule 3.05 of theListing Rules, who will act as our Company’s principal channel of communicationwith the Stock Exchange. Each of our authorized representatives will be readilycontactable by the Stock Exchange by telephone and/or email to deal promptly withany enquiries from the Stock Exchange. Both of our Company’s authorizedrepresentatives are duly authorized to communicate on behalf of us with the StockExchange. At present, the two authorized representatives are Dr. Wang and Ms.Siow Yuet Chew Grace. We will inform the Stock Exchange promptly in respect ofany changes in our Company’s authorized representatives;

(b) each of the authorized representatives will have all necessary means to contact allthe Directors promptly at all times, as and when the Stock Exchange wishes tocontact the Directors on any matters;

(c) all the Directors who are not ordinarily resident in Hong Kong have or can apply forvalid travel documents to visit Hong Kong for business purposes and would be ableto meet with the Stock Exchange upon reasonable notice;

(d) we will retain a Hong Kong legal advisor to advise on matters relating to theapplication of the Listing Rules and other applicable Hong Kong laws andregulations after [REDACTED];


WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES ANDEXEMPTION FROM STRICT COMPLIANCE WITH THE COMPANIES(WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE

– 109 –

(e) we have appointed Somerley Capital Limited as our compliance advisor (the“Compliance Advisor”), pursuant to Rule 3A.19 of the Listing Rules, who will act asan additional channel of communication with the Stock Exchange. We will ensurethat our Compliance Advisor shall have access at all times to our authorizedrepresentatives, Directors and members of the senior management. We will alsoprocure that such persons provide promptly to the Compliance Advisor suchinformation and assistance as the compliance advisor may need or may reasonablyrequest in connection with the performance of the Compliance Advisor’s duties asset forth in Chapter 3A of the Listing Rules; and

(f) each Director will provide his or her mobile phone numbers, office phone numbers,fax numbers and e-mail address, where available, to the Stock Exchange.

EXEMPTION IN RESPECT OF FINANCIAL STATEMENTS IN THIS [REDACTED]

Section 342(1)(b) of the Companies (Winding Up and Miscellaneous Provisions)Ordinance requires all [REDACTED] to include matters specified in Part I of the ThirdSchedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and to setout the reports specified in Part II of the Third Schedule to the Companies (Winding Up andMiscellaneous Provisions) Ordinance.

Paragraph 27 of Part I of the Third Schedule to the Companies (Winding Up andMiscellaneous Provisions) Ordinance requires a company to include in its [REDACTED] astatement as to the gross trading income or sales turnover (as may be appropriate) of thecompany during each of the three financial years immediately preceding the issue of the[REDACTED] including an explanation of the method used for the computation of suchincome or turnover, and a reasonable breakdown of the more important trading activities.

Paragraph 31 of Part II of the Third Schedule to the Companies (Winding Up andMiscellaneous Provisions) Ordinance further requires a company to include in its[REDACTED] a report prepared by our Company’s auditors with respect to the profits andlosses of the company and the assets and liabilities of the company for each of the threefinancial years immediately preceding the [REDACTED] of the [REDACTED].

Section 342A(1) of the Companies (Winding Up and Miscellaneous Provisions)Ordinance provides that the SFC may issue, subject to such conditions (if any) as the SFCthinks fit, a certificate of exemption from compliance with the relevant requirements underthe Companies (Winding Up and Miscellaneous Provisions) Ordinance if, having regard to thecircumstances, the SFC considers that the exemptions will not prejudice the interests of the[REDACTED] and compliance with any or all of such requirements would be irrelevant orunduly burdensome, or is otherwise unnecessary or inappropriate.



– 110 –

Rule 4.04(1) of the Listing Rules provides that the Accountants’ Report contained in the[REDACTED] must include, among other things, the consolidated results of the company andits subsidiaries in respect of each of the three financial years immediately preceding the[REDACTED] of the [REDACTED] or such shorter period as may be acceptable to the StockExchange.

Rule 18A.03(3) provides that a biotech company must have been in operation in itscurrent line of business for at least two financial years prior to [REDACTED] undersubstantially the same management.

Rule 18A.06 provides that an eligible biotech company shall comply with Rule 4.04 of theListing Rules modified so that references to the “three financial years” or “three years” in thatrule shall instead reference to “two financial years” or “two years”, as the case may be.

Guidance Letter HKEX-GL92-18 of the Stock Exchange provides that biotechcompanies applying for a listing under Chapter 18A of the Listing Rules with an accountants’report covering two financial years must apply for a certificate of exemption from strictcompliance with the relevant disclosure requirements under the Third Schedule to theCompanies (Winding Up and Miscellaneous Provisions) Ordinance.

We are primarily engaged in the research and development, application andcommercialization of biotech products. We are a biotech company as defined under Chapter18A of the Listing Rules and is seeking the [REDACTED] under Chapter 18A of the ListingRules.

In compliance with the above-mentioned requirements under the Listing Rules, theAccountants’ Report of our Company set out in Appendix I to this [REDACTED] is currentlyprepared to cover the two financial years ended December 31, 2019 and 2020 and the fivemonths ended May 31, 2021.

As such, the Joint Sponsors have applied on behalf of our Company to the SFC[, andhave obtained] a certificate of exemption from strict compliance with section 342(1)(b) of theCompanies (Winding Up and Miscellaneous Provisions) Ordinance in relation to therequirements of paragraph 27 of Part I and paragraph 31 of Part II of the Third Schedule tothe Companies (Winding Up and Miscellaneous Provisions) Ordinance regarding the inclusionof the Accountants’ Report covering the full three financial years immediately preceding the[REDACTED] of this [REDACTED] on the following grounds:

(a) We are primarily engaged in the research and development, application andcommercialization of biotech products, and fall within the scope of biotechcompany as defined under Chapter 18A of the Listing Rules;



– 111 –

(b) The Accountants’ Report for each of the two financial years ended December 31,2019 and 2020 and the five months ended May 31, 2021 has been prepared and is setout in Appendix I to the [REDACTED] in accordance with Rule 18A.06 of theListing Rules;

(c) Notwithstanding that the financial results set out in the [REDACTED] are only twoyears ended December 31, 2019 and 2020 and five months ended May 31, 2021 inaccordance with Chapter 18A of the Listing Rules, other information required to bedisclosed under the Listing Rules and requirements under the Companies (WindingUp and Miscellaneous Provisions) Ordinance has been adequately disclosed in the[REDACTED] pursuant to the relevant requirements;

(d) Chapter 18A of the Listing Rules provides track record period for biotechcompanies in terms of financial disclosure is two years, and preparation of thefinancial results for the year ended December 31, 2018 would require additionalwork to be performed by our Company and the reporting accountants, strictcompliance with the requirements of section 342(1)(b) of the Companies (WindingUp and Miscellaneous Provisions) Ordinance and paragraph 27 of Part I andparagraph 31 of Part II of the Third Schedule to the Companies (Winding Up andMiscellaneous Provisions) Ordinance would be unduly burdensome for ourCompany; and

(e) the Accountants’ Report covering the two years ended December 31, 2019 and 2020and the five months ended May 31, 2021, together with other disclosure in this[REDACTED], has already provided the [REDACTED] with adequate andreasonably up-to-date information in the circumstances to form a view on the trackrecord of our Company. The Directors confirm that all information which isnecessary for the [REDACTED] to make an informed assessment of the business,assets and liabilities, financial position, management and prospects of our Companyhas been included in this [REDACTED]. Therefore, the exemption would notprejudice the interest of the [REDACTED].

The SFC has [granted] a certificate of exemption under section 342A of the Companies(Winding Up and Miscellaneous Provisions) Ordinance exempting our Company from strictcompliance with section 342(1)(b) in relation to paragraph 27 of Part I and paragraph 31 ofPart II of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions)Ordinance on the conditions that particulars of the exemption are set out in this[REDACTED].



– 112 –

WAIVER IN RESPECT OF INVESTMENTS AND ACQUISITIONS AFTER THE TRACKRECORD PERIOD

Pursuant to Rules 4.04(2) and 4.04(4)(a) of the Listing Rules, the accountants’ report tobe included in a [REDACTED] must include the income statements and balance sheets of anysubsidiary or business acquired, agreed to be acquired or proposed to be acquired since thedate to which its latest audited accounts have been made up in respect of each of the threefinancial years immediately preceding the [REDACTED] of the [REDACTED].

Pursuant to Rule 18A.06, a Biotech Company (as defined in the Listing Rules) mustcomply with rule 4.04 modified so that references to “three financial years” or “three years” inthat rule shall instead reference to “two financial years” or “two years”, as the case may be.

The Stock Exchange will ordinarily grant a waiver in relation to acquisitions of abusiness or subsidiary subject to the following conditions: (i) the percentage ratio (as definedunder Rule 14.04(9) of the Listing Rules) of the acquired or to be acquired business orsubsidiary are all less than 5% by reference to the most recent financial year of the applicant’strading record period; (ii) the historical financial information of the acquired or to beacquired business or subsidiary is not available or would be unduly burdensome to obtain orprepare; and (iii) the [REDACTED] should include at least the information that would berequired for a discloseable transaction under Chapter 14 of the Listing Rules on eachacquisition.

Acquisition and proposed acquisition after Track Record Period

Our Company has acquired the beneficial interest in all the shares in issue of HeMoSingapore from Dr. Wang (the “HeMo Singapore Acquisition”) at a nominal consideration ofS$1, with 65% shares in HeMo Singapore being transferred legally and beneficially from Dr.Wang to our Company, and 35% shares in HeMo Singapore being held by Dr. Wang as thetrustee on trust for the benefit of our Company as beneficiary. The HeMo SingaporeAcquisition was legally completed and settled on July 16, 2021.

On July 2, 2021, HeMo Singapore has entered into a legally-binding term sheet with allthe existing shareholders of Privi Medical (the “Sellers”) to acquire from them the entireissued share capital of Privi Medical (the “Privi Medical Acquisition”). The Sellers include Dr.Wang who holds approximately 11.86% of the shareholding interests in Privi Medical andremaining shareholders who are Independent Third Parties of our Group. Privi Medical ownsthe exclusive licence (the “Exclusive Licence”) to use relevant part of certain technology inrelation to the Core Product, Privi hemorrhoid cooling balloon, of our Company, includingthe licensed worldwide patent application, to use, make, manufacture, distribute, market,import, export and sell the Core Product. Apart from owning the above-mentioned exclusivelicence in relation the Core Product, Privi Medical does not conduct any business activities.



– 113 –

For further details of the HeMo Singapore Acquisition, Privi Medical Acquisition andthe trust arrangement, please refer to the sub-section headed “History, Development andCorporate Structure—Acquisition of HeMo Singapore and Privi Medical” in this[REDACTED].

Conditions for granting the waiver

We [have applied] to the Stock Exchange for[, and the Stock Exchange has granted], awaiver from strict compliance with Rules 4.04(2) and 4.04(4)(a) of the Listing Rules in respectof the HeMo Singapore Acquisition and the Privi Medical Acquisition on the followinggrounds:

The percentage ratios of each of the HeMo Singapore Acquisition and the Privi MedicalAcquisition are all less than 5% by reference to the most recent audited financial year of theTrack Record Period

The applicable percentage ratios calculated in accordance with Rule 14.07 of the ListingRules for each of the HeMo Singapore Acquisition and the Privi Medical Acquisition are allless than 5% by reference to the most recent audited financial year of the Track RecordPeriod.

Accordingly, our Company believes that the HeMo Singapore Acquisition and the PriviMedical Acquisition have not resulted in any significant changes to its financial position sinceMay 31, 2021, and all information that is reasonably necessary for [REDACTED] to make aninformed assessment of its activities or financial position will be included in this[REDACTED] prior to the proposed [REDACTED]. As such, our Company considers that awaiver from compliance with the requirements under Rules 4.04(2) and 4.04(4)(a) of theListing Rules would not prejudice the interests of the [REDACTED].

The historical financial information of HeMo Singapore and Privi Medical would be undulyburdensome to obtain or prepare

To the knowledge of our Company and based on the information in respect of HeMoSingapore and Privi Medical which is made available to our Company as at the date of thissubmission, HeMo Singapore and Privi Medical may not maintain sufficient accountingrecords, information or data for the purpose of audit in accordance with IFRS:

– since HeMo Singapore has been inactive with no business activities since itsincorporation on November 26, 2020 and it has not had any revenue it has beenexempted from preparing audited financial accounts under the applicable Singaporelaws; and



– 114 –

– as Privi Medical is a dormant unlisted company which has been conducting minimalbusiness activities, it has been exempted from statutory audit requirements and noaudited financial accounts are required to be prepared under the applicableSingapore laws.

Based on the above-mentioned reasons, it would create practical difficulties to preparethe necessary financial information and supporting documents for disclosure in this[REDACTED]. As such, our Company believes that it would be unduly burdensome for us todisclose the consolidated audited financial information of HeMo Singapore and Privi Medicalas required under Rules 4.04(2) and 4.04(4)(a) of the Listing Rules.

Immaterial and not meaningful historical financial information

In addition, having considered HeMo Singapore and Privi Medical have not commencedsubstantive business activities and that our Company will provide alternative disclosure of theHeMo Singapore Acquisition and the Privi Medical Acquisition as set out below, ourCompany believes that it would not provide additional meaningful information to the[REDACTED] by inclusion of the consolidated financial information of HeMo Singaporeduring the Track Record Period in this [REDACTED].

Alternative disclosure of the HeMo Singapore Acquisition and the Privi Medical Acquisition inthis [REDACTED]

Our Company has provided alternative information about the HeMo SingaporeAcquisition and the Privi Medical Acquisition in the section headed “History, Developmentand Corporate Structure—Acquisition of HeMo Singapore and Privi Medical” in this[REDACTED]. Such information includes that which would be required for discloseabletransaction under Chapter 14 of the Listing Rules that our Directors consider to be material,including, for example, consideration, basis for determining consideration, reasons andbenefits for the HeMo Singapore Acquisition and the Privi Medical Acquisition. Since therelevant percentage ratios of each of the HeMo Singapore Acquisition and the Privi MedicalAcquisition are less than 5% by reference to the most recent audited financial year of theTrack Record Period, our Company believes that the proposed disclosure as mentioned aboveis adequate for [REDACTED] to form an informed assessment of our Company.



– 115 –

[REDACTED]


INFORMATION ABOUT THIS [REDACTED] AND THE [REDACTED]

– 116 –

[REDACTED]



– 117 –

[REDACTED]



– 118 –

[REDACTED]



– 119 –

[REDACTED]



– 120 –

DIRECTORS

Name Residential Address Nationality

Executive Director

Dr. Wang Chicheng Jack(王吉成)

70 Bayshore Road 20-09Singapore 469989

Singaporean

Non-executive Directors

Dr. Wang Shunlong (王順龍) Room A, 35/F, Block 5Bel-Air On The PeakNo.68 Bel-Air Peak AveHong Kong

Hong Kong

Mr. Sheng Li (盛利) Room 603, Unit 2, Building 14Courtyard 6, East Qingheying RoadChaoyang DistrictBeijing, PRC

Chinese

Mr. Zhang Jiecheng (張劼鋮) Room 602, No. 12, Lane 1018Huimin Road, Yangpu DistrictShanghai, PRC

Chinese

Independent Non-executive Directors

Mr. Tan Boon Kheng(陳文慶)

9 Jubilee RoadSingapore 128535

Singaporean

His Excellency Dato’ SeriDr. Douglas Foo PeowYong, BBM (符標雄)

8 Goodman RoadSingapore 438973

Singaporean

Professor Tan Huay Cheem(陳淮沁)

House 38 Eng Kong DriveSavoy ParkSingapore 599366

Singaporean

Please see the section headed “Directors and Senior Management” in this [REDACTED]

for further details.


DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

– 121 –

PARTIES INVOLVED IN THE [REDACTED]

Joint Sponsors Morgan Stanley Asia Limited46/F, International Commerce Centre1 Austin Road WestKowloonHong Kong

China International Capital CorporationHong Kong Securities Limited29/F, One International Finance Centre1 Harbour View StreetCentralHong Kong

Credit Suisse (Hong Kong) LimitedLevel 88, International Commerce Centre1 Austin Road WestKowloonHong Kong

[REDACTED]



– 122 –

[REDACTED]



– 123 –

[REDACTED]

Legal Advisors to Our Company As to Hong Kong and U.S. laws:Cleary Gottlieb Steen & Hamilton (Hong Kong)37/F, Hysan Place500 Hennessy RoadCauseway BayHong Kong

As to PRC law:Jingtian & GongchengSuite 45/F, K.Wah Centre,1010 Huaihai Road (M),Xuhui District,Shanghai, PRC

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

As to PRC intellectual property laws:Zhongzi Law Office6-8F, New Era BuildingNo. 26 Pinganli XidajieXicheng DistrictBeijing, PRC



– 124 –

Legal advisors tothe [REDACTED]

As to Hong Kong and U.S. laws:Clifford Chance27/F Jardine HouseOne Connaught PlaceCentralHong Kong

As to PRC law:Commerce & Finance Law Offices12-14th Floor, China WorldOffice 2, No. 1Jianguomenwai Avenue,Beijing 100004, China

Reporting Accountants KPMGCertified Public Accountants8th Floor, Prince’s Building10 Chater Road, CentralHong Kong

Industry Consultant Frost & Sullivan (Beijing) Inc., Shanghai Branch Co.2504 Wheelock Square1717 Nanjing Xi Lu,Jing’an DistrictShanghai, PRC

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

[REDACTED]



– 125 –

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

Principal place of business and headoffice in the PRC

Room 301-351, Building AChuangXin ChuangYe Base213 HuoJu RoadWeihai, PRC

Principal place of businessin Hong Kong

Level 54, Hopewell Centre183 Queen’s Road EastHong Kong

Company’s Website www.hemocorp.com(The information on the Company’s website doesnot form part of this [REDACTED])

Company Secretary Ms. Siow Yuet Chew Grace(ACG) (ACS)Level 54, Hopewell Centre183 Queen’s Road EastHong Kong

Authorized Representatives Dr. Wang Chicheng Jackc/o 8 Kaki Bukit Avenue 1#03-08, Singapore 417941

Ms. Siow Yuet Chew GraceLevel 54, Hopewell Centre183 Queen’s Road EastHong Kong

Audit Committee His Excellency Dato’ Seri Dr. Douglas Foo PeowYong, BBM (Chairman)Mr. Tan Boon KhengProfessor Tan Huay Cheem


CORPORATE INFORMATION

– 126 –

Remuneration Committee His Excellency Dato’ Seri Dr. Douglas Foo PeowYong, BBM (Chairman)Mr. Tan Boon KhengProfessor Tan Huay Cheem

Nomination Committee Mr. Tan Boon Kheng (Chairman)His Excellency Dato’ Seri Dr. Douglas Foo PeowYong, BBMProfessor Tan Huay Cheem

[REDACTED]

Principal Banks Credit Suisse AG1 Raffles Link #05-02Singapore 039393

Industrial and Commercial Bank of China,Weihai BranchNo. 188 Wenhua West RoadWeihaiShandong, PRC


CORPORATE INFORMATION

– 127 –

The information set out in this section and other sections of this [REDACTED] is derivedfrom the market research report (the “Frost & Sullivan Report”) prepared by Frost & Sullivan(Beijing) Inc., Shanghai Branch Co. (“Frost & Sullivan”), which was commissioned by us,and from various official government publications and other publicly available publications,unless otherwise indicated. We believe that the sources of the information in this section andother sections of this [REDACTED] are appropriate for such information, and we have takenreasonable care in extracting and reproducing such information. We have no reason to believethat such information is false or misleading or that any fact has been omitted that wouldrender such information false or misleading. The information from official and non-officialsources has not been independently verified by us, the Joint Sponsors, [REDACTED], any oftheir respective directors and advisers, or any other persons or parties involved in the[REDACTED], save for Frost & Sullivan, and no representation is given as to its accuracy.Accordingly, the information from official and non-official sources contained herein may notbe accurate and should not be unduly relied upon. Our Directors confirm that, after makingreasonable enquiries, there is no adverse change in the market information since the date ofthe Frost & Sullivan Report that would qualify, contradict or have a material impact on theinformation in this section.

NEURO-VASCULAR DISEASES AND PROCEDURES

Overview of Neuro-vascular Diseases and Treatment

Neuro-vascular diseases refer to all disorders in which an area of the brain is temporarilyor permanently affected by bleeding or restricted blood flow, mainly including ischemic andhemorrhagic neuro-vascular diseases. A neuro-interventional surgery treats the blood vesselsby means of thrombus removal, dilation and embolization through femoral artery puncturewith the support of digital subtraction angiography, primarily including stent retriever,aspiration catheter, self- or balloon-expandable stent, endovascular coil, balloon dilatationcatheter, and flow diverter.

In recent years, interventional therapies are developing rapidly to treat diseases such asneuro-vascular diseases, and are progressively replacing traditional surgeries due to theiradvantages including minimal invasiveness, shorter procedures, less post-proceduralcomplications and faster patient recovery. The neuro-interventional market is at the emergingstage of its lifecycle and will step toward the rapid growth stage with the acceleratedexpansion of its applications and technology developments. With people’s enhanced healthawareness, escalating incidence and prevalence of neuro-vascular diseases, increased patientaffordability, improved physician clinical practice, and favourable policies driving domesticmedical devices in substitution for imported ones, it is expected that the neuro-interventionalmarket in China will experience vigorous growth in the coming years.

China’s Neuro-interventional Medical Devices Market

The volume of neuro-interventional procedures increased at a CAGR of 15.8% from 91.4thousand in 2016 to 164.2 thousand in 2020, and is expected to grow at a CAGR of 32.7% to675.3 thousand in 2025 and further at a CAGR of 21.4% from 2025 to 1.78 million in 2030.The size of China’s neuro-interventional medical devices market increased at a CAGR of13.2% from RMB3.0 billion in 2016 to RMB5.0 billion in 2020, and is expected to grow atCAGR of 26.5% to RMB16.2 billion in 2025 and further at a CAGR of 18.1% from 2025 toRMB37.1 billion in 2030. The following chart sets forth the size of China’sneuro-interventional medical devices market for the periods indicated.


INDUSTRY OVERVIEW

– 128 –

3.0 3.6 4.2 4.9 5.0 6.17.7

9.912.5

16.2

20.3

24.6

28.8

33.0

37.1Billion RMB

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

2016-2020

2020-2025E

2025E-2030E

13.2%

26.5%

18.1%

Period CAGR

Historical and Forecasted Market Size of Neuro-interventional Devices in China, 2016-2030E

* Market size represents the ex-factory price of medical devices.

Source: Literature Review, Expert Interview and Frost & Sullivan Analysis

China’s neuro-interventional medical devices market is driven primarily by the followingfactors:

• Rapid growth of the patient population. People in China have reported high incidenceof neuro-vascular diseases and high mortality rate from these diseases, and cases ofthese diseases continue to increase due to the aging population. Whileneuro-vascular diseases need neuro-intervention surgeries to restore blood flow ofthe ischemic and hemorrhagic brain tissues, most patients are not surgery eligibledue to their age and numerous complications. The increasing demand forneuro-interventional procedures reflects its minimally invasive nature and hence asafer option to patients.

• Continuous development of innovative medical devices. The development ofneuro-interventional therapies highly relies on the upgrading of devices andemerging innovative products. For example, in the past years, medical devices suchas stent retrievers, aspiration catheters and access catheters have greatly changed thetreatment paradigm of acute ischemic stroke. More innovative neuro-interventionalmedical devices are expected to be used in clinical practice and benefit morepatients.

• Improved infrastructure and increasing number of capable physicians.Neuro-interventional therapies as emerging therapies were mainly carried out in keyhospitals with a fairly low penetration rate. Over the past few years, with thepromotion and upgrading of neuro-interventional devices, these devices have beenused by more hospitals and physicians in China, resulting in an increase in thepenetration rate. In addition, the number of qualified physicians capable ofperforming neuro-interventional procedures has also been increasing to benefitmore patients and fulfil the unmet clinical needs of the neuro-interventional therapymarket.

China’s neuro-interventional medical devices market has high entry barriers:

• R&D. The R&D of neuro-interventional medical devices requires multi-disciplinaryexpertise in materials and mechanical design. Raw materials, such as alloy materialsand hydrophilic polymer materials, need to realize good biocompatibility.

• Manufacturing and quality control. Medical device manufacturing is a complicatedprocess, especially for neuro-interventional devices. Techniques such as laserengraving and alloy braiding are essential to the manufacturing and pose high entry


INDUSTRY OVERVIEW

– 129 –

barriers to new entrants. Moreover, a high-standard and stringent quality controlsystem is necessary to ensure the product’s safety and efficacy.

• Clinical regulation and registration. Neuro-interventional devices that arecategorized as Class III medical devices generally require stringent productregistration and testing and may require clinical trials. It may take several years tomeet regulatory requirements and obtain the NMPA registration certificates andproduction permits.

• Commercialization. Successful commercialization of neuro-interventional medicaldevices requires a differentiated marketing strategy and a sales and marketing teamwith in-depth medical and clinical knowledge. It is crucial for the sale and marketingteam to be able to promote the clinical benefits and features of newneuro-interventional medical devices and therapies to physicians.

Acute Ischemic Stroke

Overview

There are two main types of stroke: ischemic stroke and hemorrhagic stroke. Acuteischemic stroke, or AIS, occurs when the blood flow through a brain artery is blocked by aclot, a mass of thickened blood. AIS accounts for 69.6% to 70.8% of the stroke incidents inChina. With the growing and aging population, the number of new cases of AIS continues toincrease. The following chart shows the volume of AIS incidence in China for the periodsindicated.

2.9 3.13.3 3.4 3.6 3.8 4.0 4.1

4.34.6

4.85.0

5.35.6

5.8Million

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

2016-2020

2020-2025E

2025E-2030E

5.1%

4.9%

5.1%

Period CAGR

Incidence of Acute Ischemic Stroke (AIS) in China, 2016-2030E

Source: Literature Review, Frost & Sullivan Analysis

Treatment Paradigm for AIS

Intravenous thrombolysis (IVT) and mechanical thrombectomy (MT) are the maintreatment methods for intracranial vascular diseases. IVT utilizes thrombolytic drugs such asrecombinant tissue plasminogen activators (rt-PA) to treat patients with AIS by intravenousadministration. IVT is typically applied within six hours after the onset of symptoms, and isthe standard treatment for all eligible patients. According to the 2019 AHA/ASA Guidelines,patients eligible for IVT should receive IVT even if MT is being considered (COR I, LOE A).According to the Guidelines for Early Intervention Therapy for AIS in China (2018 version),patients eligible for both IVT and MT should receive IVT prior to MT (COR I, LOE A). MTprocedures, as the first-line endovascular therapy, can be operated jointly with IVT orindependently when thrombolysis is not applicable in certain cases. Currently, MT consists ofstent retriever (SR) alone, aspiration (mainly ADAPT) alone, and the combination of stentretriever and aspiration.


INDUSTRY OVERVIEW

– 130 –

• Aspiration (mainly ADAPT) is a type of neuro-interventional procedures using theaspiration catheters to directly aspirate thrombus and restore the occluded vessel.Aspiration devices employ vacuum aspiration to remove occlusive clot. It is one ofthe most innovative and fastest growing therapies in recent years with promisingefficacy and safety.

• Stent retriever (SR) is a type of stroke treatment devices. A stent retriever is aself-expanding stent that is deployed in the occluded vessel within thrombus,entangling it within the stent struts. The stent and thrombus are then withdrawnback into the catheter.

• Combined techniques consist of several types of procedure methods such as SWIMand Solumbra, which realize revascularization by the combination use of stentretriever and auxiliary aspiration from catheters. After the stent retriever is released,the combined techniques continuously use the negative pressure of the draw-backsystem and then withdraw the stent. They can prevent thrombus from falling off thestent, and clot debris that may cause further occlusion.

In the U.S., ADAPT has been included in the COR I list of the 2019 AHA/ASAGuidelines. In China, according to the Guidelines for Early Intervention Therapy for AIS inChina (2018 version), artery mechanical thrombectomy (mainly stent retriever) should beconsidered as the treatment method for AIS patients with large artery occlusion after carefulevaluation of potential benefits and risks (with COR II, LOE B). In addition, for specificpatients, it may be reasonable to use interventional direct aspiration thrombectomy alone(mainly ADAPT) or in combination with other procedures (with COR II, LOE C). The CORof ADAPT in the AIS treatment guidelines in China is likely to be raised and catch up withthat of the U.S., indicating significant growth potential in China.

In the U.S., ADAPT procedures alone accounted for the largest portion (41.3%) in thetotal number of the AIS MT procedures in 2019, while SR technique alone and thecombination of aspiration and SR techniques accounted for 29.3% and 29.3%, respectively, ofthe AIS MT procedures in the same year. In contrast, the development of ADAPT in China isstill at a very early stage. Between 2017 to 2019 the number of ADAPT procedures conductedin China was only one-eleventh of that of stent retriever procedures, indicating significantgrowth potential for the ADAPT therapy in China. As more physicians will obtain trainingand accumulate abundant clinical experience in using the ADAPT technique, it is expectedthat the ADAPT therapy will experience rapid growth in China and the gap in using theADAPT therapy between China and the U.S. will gradually narrow.

The head-to-head COMPASS trial was designed to test whether patients treated withADAPT as the first pass have non-inferior functional outcomes compared to those treatedwith the SR technique as first line. The primary endpoint of the trial was noninferiority ofpatient functional outcome (namely, the proportion of patients achieving functionalindependence) at 90 days. The clinical trial results showed that 52% of the patients in theADAPT group achieved independence in daily function over 50% of the patients in the SRgroup. That is, ADAPT as first pass had non-inferior functional outcome at 90 days comparedto SR as the first-line approach. In addition, ADAPT showed a shorter treatment durationand lower treatment device cost with statistical significance, compared to the SR technique.The trail results of COMPASS, which were published in 2019, support the use of ADAPT asan alternative to SR as first-line therapy for stroke thrombectomy. The following chart showsa comparison of clinical trial results of the ADAPT and SR techniques in the COMPASS trialconducted by Dr. Aquilla Turk as the principal investigator.


INDUSTRY OVERVIEW

– 131 –

ADAPT SR

Patients independencein daily functionModified Rankin Scale score of 0-2 at 90 days

Percentage of patients with successful reperfusion

after first-line treatment TICI 2b or greater on first pass

Percentage of patients with successful reperfusion

within 45 min of accessTICI 2b or greater within 45 min of access

Treatment Duration (min)Time from groin puncture to final revascularization

Improved (lower) NIHSS at 24 h

All-cause mortality at 3 months

Any identified intracranial hemorrhage

Procedure-related serious adverse events

Data primary, list price secondary ($) mean

Data primary, list price secondary ($) median

67 (50%)69 (52%)

57% (75/131)

76% (101/133)

25 (21–30)

7·5 (9·0; n=133)

22% (30/134)

36% (48/134)

13% (17/134)

9,540

6,633

51% (65/129)

68% (91/134)

35 (30 –41)

7·3 (8·9; n=132)

22% (30/136)

34% (46/135)

14% (19/136)

14,081

12,790.40

Effi

cacy

Safe

tyC

ost

Note: The star marks represent statistical significance (P<0.05), indicating strong evidence against the nullhypothesis that patients treated with ADAPT as first pass achieve inferior outcomes compared to those treatedwith a SR first-line approach.


The advantages of ADAPT as a first-line approach have also been verified by a numberof other research studies, including the ETIS clinical trial and the ADAPT FAST study. See“Business—Our Competitive Strengths—Underpinned by ADAPT, We Are Well-positioned toLead the Continued Revolution of China's AIS Treatment Paradigm” and “Business—OurProducts and Product Candidates—Aspiration Catheters—ADAPT (A Director AspirationFirst Pass Technique)” for more information.

China’s AIS Neuro-interventional Medical Devices Market

The volume of MT procedures increased at a CAGR of 29.5% from 17.6 thousand in2016 to 49.5 thousand in 2020, and is expected to increase at a CAGR of 43.9% from 2020 to305.2 thousand in 2025 and further at a CAGR of 23.6% from 2025 to 881.3 thousand in 2030.The following chart sets forth the volume of MT procedures in China for the periodsindicated.

17.6 23.7 32.7 45.8 49.572.4

107.1151.7

216.7

305.2

407.2

516.9

633.8

757.8

881.3

Thousand

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

2016-2020

2020-2025E

2025E-2030E

29.5%

43.9%

23.6%

Period CAGR

Historical and Forecasted Volume of Mechanical Thrombectomy Procedures in China, 2016-2030E



INDUSTRY OVERVIEW

– 132 –

The size of China’s MT devices market increased at a CAGR of 27.8% from RMB0.4billion in 2016 to RMB1.0 billion in 2020, and is expected to increase at a CAGR of 39.6%from 2020 to RMB5.1 billion in 2025 and further at a CAGR of 21.2% from 2025 to RMB13.4billion in 2030. The following chart sets forth the size of MT devices market in China for theperiods indicated.

0.4 0.5 0.7 0.9 1.01.4

2.02.8

3.7

5.1

6.8

8.4

10.1

11.8

13.4

Billion RMB

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

2016-2020

2020-2025E

2025E-2030E

27.8%

39.6%

21.2%

Period CAGR

Historical and Forecasted Market Size of Mechanical Thrombectomy Devices in China, 2016-2030E



Unlike drugs, the provincial government is responsible for the government-sponsoredmedical insurance reimbursement list and insurance coverage policies for neuro-interventionaldevices, which may vary from province to province.

Competitive Landscape of AIS Medical Devices Market in China


As of the Latest Practicable Date, four registration certificates for aspiration cathetersfrom three manufacturers had been approved by the NMPA, as set forth below:

Device Type

Product Name Manufacturer Approved IndicationApproval

DatePrice/RMB(1)

Product manufacturing

location

AIS

Aspiration

Catheter

Afentta® HemoRevascularization of

patients with AISMay 2021 NA China

AIS

Aspiration

Catheter

Penumbra

System MAXPenumbra Revascularization of

patients with AISMay 2018 ~48,000 U.S.

AIS

Aspiration

Catheter

Penumbra

System

SOFIA®

Aspiration

Catheter

PenumbraRevascularization of

patients with AISApril 2021 ~44,800 U.S.

AIS

Aspiration

Catheter

MicroVentionRevascularization of

patients with AISJuly 2021 NA U.S.

Note:(1) The price represents the median price published online.

Source: NMPA, Frost & Sullivan Analysis


INDUSTRY OVERVIEW

– 133 –

As of the Latest Practicable Date, four aspiration catheters were in clinical trials and onewas in registration review by the NMPA, as set forth below:

Product Type Product Name Phase

HeartCare Medical Aspiration Catheter NA In Registration Review(1)

Hemo Aspiration Catheter HMC1-NAS Clinical Trial

Wallaby Medical Aspiration Catheter NA Clinical Trial

Achieva Medical Aspiration Catheter NA Clinical Trial

Zenith Vascular Aspiration Catheter NA Clinical Trial

Manufacturer

Note:(1) This product was exempted from clinical trial in human subjects through a clinical evaluation with peer products

in accordance with relevant regulations in China

Source: Chinese Clinical Trial Registry, Public Company Disclosure and Frost & Sullivan Analysis

Stent Retrievers

As of the Latest Practicable Date, 14 stent retrievers had been approved by the NMPA,among which nine were manufactured by international companies and five by domesticcompanies, as set forth below:

Manufactured by international companies:

ManufacturerApproved Indication

Approval Date (1)

Medtronic

SolitaireTM FR

SolitaireTM 2

SolitaireTM Platinum

Solitaire™ X

StrykerTrevoTM ProVue

TrevoTM XP ProVue

Johnson & Johnson

ReVive SE

EmboTrap

Acandis APERIO

AIS

AIS

AIS

AIS

AIS

AIS

AIS

AIS

AIS

October 2013 ~32,125

~38,800

~55,000

NA

~40,000

~49,500

~32,400

~56,250

~44,800

April 2015

September 2019

March 2021

December 2015

January 2020

July 2014

April 2020

January 2016

Price/RMBProduct Name




INDUSTRY OVERVIEW

– 134 –

Manufactured by domestic companies:

Manufacturer Product NameApproved Indication

Approval Date Price/RMB (1)

Genesis

MedtechReco Thrombectomy Device AIS May 2018 ~28,600

HeartCare

MedicalCaptor™ Thrombectomy Device AIS August 2020 ~32,000

Tonbridge

MedicalThrombite ™ Thrombectomy Device AIS September 2020 ~33,000

Skynor Medical SkyFlow ® Thrombectomy Device AIS May 2021 ~35,880

Recan Intracranial Stent Retriever AIS July 2021 NA



As of the Latest Practicable Date, three stent retrievers were in clinical trials, all of whichare from domestic companies, as set forth below:

Product NameProduct TypeManufacturer Phase

Hemo Stent Retriever NA Clinical Trial

Stent Retriever Tigertriever Clinical Trial

Stent Retriever ShenYi Stent Retriever Clinical Trial

MicroPort

Peijia Medical

Source: Chinese Clinical Trial Registry, Public Company Disclosure and Frost & Sullivan Analysis

Intracranial Artery Stenosis

Overview

Intracranial artery stenosis is a narrowing of an artery inside the brain, which causesdecreased blood flow to the area of the brain that the affected vessels supply. Withouttreatment, intracranial artery stenosis can greatly increase a person’s chance of suffering fromAIS and transient ischemic attack (TIA). Approximately 30% to 50% of the ischemic strokecases are related to intracranial artery stenosis. The following chart sets forth the prevalenceof intracranial artery stenosis in China for the periods indicated.


INDUSTRY OVERVIEW

– 135 –

14.9 15.716.7

17.318.0

18.9 19.820.7

21.6 22.623.6 24.6

25.726.8

27.9Million

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

2016-2020

2020-2025E

2025E-2030E

4.8%

4.7%

4.3%

Period CAGR

Prevalence of Intracranial Artery Stenosis in China, 2016-2030E

Source: NBSC, NHFPC and Frost & Sullivan Analysis

Treatment of Intracranial Artery Stenosis

Treatments options for intracranial artery stenosis vary according to the severity of thestenosis and whether the patient is experiencing stroke-like symptoms. Patients typically arefirst treated with medication and are encouraged to make lifestyle changes to reduce their riskof stroke. Procedure treatment for intracranial artery stenosis is typically recommended whenstenosis of an artery is greater than 50% and is performed to prevent stroke by removing orreducing the plaque build-up and enlarging the artery lumen to allow more blood flow to thebrain. The balloon/stent angioplasty procedure is an important treatment for intracranialartery stenosis. It is a minimally invasive endovascular procedure that compresses the plaqueand widens the lumen of the artery, using a balloon dilatation catheter or a self- orballoon-expandable stent.

The following chart sets forth the volume of intracranial artery stenosis interventionalprocedures in China for the periods indicated.

15.6 18.8 22.7 27.6 27.3 34.1 44.058.6

79.1

109.9

148.4

195.9

246.8

296.1

349.5Thousand

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

2016-2020

2020-2025E

2025E-2030E

15.0%

32.1%

26.0%

Period CAGR

Historical and Forecasted Volume of Intracranial Artery Stenosis Intervention Procedures in China, 2016-2030E

Source: NBSC, NHFPC and Frost & Sullivan Analysis


INDUSTRY OVERVIEW

– 136 –

The size of China’s intracranial artery stenosis interventional devices market increased ata CAGR of 7.5% from RMB0.3 billion in 2016 to RMB0.4 billion in 2020, and is expected togrow at a CAGR of 29.7% from 2020 to RMB1.6 billion in 2025 and further at a CAGR of25.8% from 2025 to RMB5.0 billion in 2030. The following chart sets forth the size ofintracranial artery stenosis interventional devices market in China for the periods indicated.

0.3 0.4 0.4 0.4 0.4 0.50.7

0.9 1.1

1.6

2.1

2.8

3.5

4.2

5.0Billion RMB

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

2016-2020

2020-2025E

2025E-2030E

7.5%

29.7%

25.8%

Period CAGR

Historical and Forecasted Market Size of Intervention Devices for the Treatment of Intracranial Artery Stenosis in China, 2016-2030E



Hemorrhagic Stroke

Overview

A hemorrhagic stroke occurs when a blood vessel breaks and bleeding occurs in an areaof the brain. Hemorrhagic stroke accounts for approximately 20% of all stroke cases. One ofthe major causes of hemorrhagic stroke is intracranial aneurysm. Intracranial aneurysm is aweak or thin spot on an artery in the brain that balloons or bulges out and fills with blood.The bulging aneurysm can put pressure on the nerves or brain tissues, manifested as fatigue,peripheral visual impairment, thinking problems, verbal complications, loss of balance andcoordination, among others. The most serious sequela of intracranial aneurysms is aneurysmrupture and subsequent subarachnoid hemorrhage (SAH), with a mortality rate of 50% and a30%–50% probability of causing a neurological disease.

The prevalence of unruptured intracranial aneurysms is estimated to be approximately2% in the general population. The prevalence of intracranial aneurysm, including unrupturedand hemorrhagic stroke, in China increased from 48.9 million in 2016 to 51.7 million in 2020,and is expected to further increase to 54.9 million in 2025 and 57.9 million in 2030.

Treatment of Intracranial Aneurysm

Main treatment paradigm of aneurysm subarachnoid hemorrhage in China mainlyincludes general medical management, neurosurgical clipping and endovascular coiling andusing flow diverter. Neuro-surgical clipping is a technique that blocks the blood supply in anintracranial aneurysm using a metal clip. Endovascular coiling is a procedure performed toblock blood flow into an aneurysm. Endovascular coiling is typically considered as the firstchoice for narrow necked aneurysms, while coil-assisted stents are used in combination withthe coil when more neck coverage is needed for wide-necked aneurysms. Instead of focusing onthe aneurysm sac filling and aneurysm neck coverage, flow diverters can interfere and divertthe blood flow of the parent vessel and thus facilitate parent vessel reconstruction to treatlarge widenecked aneurysms.


INDUSTRY OVERVIEW

– 137 –

A flow diverter is an emerging minimally invasive device used to treat intracranialaneurysm. It has high mesh density, which increases the metal coverage of the aneurysm neck.It can induce thrombosis in the aneurysm by interfering with the hemodynamic changes in theneck and aneurysm, which can achieve a thorough and lasting embolization effect.

The size of China’s hemorrhagic disease neuro-interventional devices market increased ata CAGR of 13.1% from RMB1.8 billion in 2016 to RMB3.0 billion in 2020, and is expected togrow a CAGR of 20.4% from 2020 to RMB7.5 billion in 2025 and further at a CAGR of11.0% from 2025 to RMB12.7 billion in 2030. The following chart sets forth the size ofhemorrhagic disease neuro-interventional devices market in China for the periods indicated.

1.8 2.22.6 2.9 3.0

3.54.3

5.1

6.3

7.5

8.9

10.1

11.111.9

12.7Billion RMB

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

2016-2020

2020-2025E

2025E-2030E

13.1%

20.4%

11.0%

Period CAGR

Historical and Forecasted Market Size of Neurointerventional Devices for the Hemorrhagic Disease in China, 2016-2030E



CHINA’S NEURO-INTERVENTIONAL ACCESS MEDICAL DEVICES MARKET

Overview of Neuro-interventional Access Medical Devices

Access devices are used to establish the access from the femoral artery to the intracraniallesion, and play an important role in neuro-interventional procedures. This process is realizedby the combined use of devices including catheters, guidewires and some assistant accessories.Neuro-interventional access devices mainly include guiding catheters, intermediate catheters,micro catheters, balloon catheters and micro guidewires. Intermediate catheters are widelyused in neuro-interventional procedures including ischemic and hemorrhagic procedures.

The size of China’s neuro-interventional access devices market increased at a CAGR of14.6% from RMB0.4 billion in 2016 to RMB0.8 billion in 2020, and is expected to grow at aCAGR of 26.6% from 2020 to RMB2.5 billion in 2025 and further at a CAGR of 18.4% from2025 to RMB5.8 billion in 2030. The following chart sets forth the size of theneuro-interventional access devices market in China for the periods indicated.


INDUSTRY OVERVIEW

– 138 –

0.4 0.5 0.60.8 0.8 1.0

1.31.7

1.9

2.5

3.1

3.7

4.4

5.1

5.8

Billion RMB

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

2016-2020

2020-2025E

2025E-2030E

14.6%

26.6%

18.4%

Period CAGR

Historical and Forecasted Market Size of Neuro-interventional AccessDevices in China, 2016-2030E



Competitive Landscape of China’s Intermediate Catheter Market

As of the Latest Practicable Date, 24 intermediate catheter products had been approvedby the NMPA, eight of which were manufactured by international companies and 16 weremanufactured by domestic companies, as set forth below:

Manufactured by international companies:

Product Name Approval Date (1)

Medtronic

Intermediate

Catheter Navien™ Intracranial Support Catheter December 2014

Intermediate

Catheter React™ 68 Catheter December 2019

Intermediate

Catheter React™ 71 Catheter September 2020

Johnson & Johnson

Intermediate

Catheter REVIVE™ Intermediate Catheter June 2017

Intermediate

Catheter ENVOY® DA Guiding Catheter November 2017

Stryker

Intermediate

Catheter Distal Access Catheter December 2015

Intermediate

Catheter AXS Catalyst™ Distal Access Catheter June 2018

Intermediate

Catheter SOFIA™ Distal Access Catheter January 2019MicroVention

Stryker

Product TypeManufacturer

~12,420

~39,000

~67,500

~10,999

~11,000

~14,100

~16,000

~39,000

Price/RMB




INDUSTRY OVERVIEW

– 139 –

Manufactured by domestic companies:

(1)

Intermediate

Catheter Intracranial support catheter December 2019 ~12,800

Intermediate

Catheter ExtraFlex™ distal access guiding catheter December 2019 ~25,000

HemoIntermediate

Catheter TracLine® access catheter March 2020 ~18,000

Intermediate

Catheter YinShe intracranial support catheter September 2020 ~22,000

Intermediate

Catheter Distal access guiding catheter March 2021 ~8,500

Achieva Medical

Intermediate

Catheter Tethys™ intermediate guiding catheter October 2020

Intermediate

Catheter Distal access guiding catheter June 2021

Zenith VascularIntermediate

Catheter Distal access catheter October 2020 ~29,000

NPMEDIntermediate

Catheter Farender distal access catheter November 2020 ~25,000

Price/RMBApproval DateProduct NameProduct Type

Tonbridge Medical

Heartcare Medical

~25,000

N/A

Recan

MicroPortIntermediate

Catheter U-track intracranial support catheter December 2020 ~23,000

Intermediate

CatheterEsperance® distal access catheter January 2021 ~33,800

Intermediate

CatheterIntracranial support catheter March 2021 ~28,900

Puhui MedicalIntermediate

CatheterHuiTong TM support catheter April 2021 N/A

Intermediate

CatheterFreble™ intermediate catheter June 2021 N/A

Intermediate

CatheterSkySurfer® distal access catheter June 2021 N/A

TJWY Medical

Skynor Medical

Intermediate

CatheterDistal access catheter July 2021 N/AKai Medtech

Neurocare Medical

Wallaby Medical

Manufacturer



PERIPHERAL DISEASES AND CHINA’S PERIPHERAL INTERVENTIONAL MEDICALDEVICES MARKET

Hemorrhoids

Overview of China’s Hemorrhoid Therapy Market

Hemorrhoids is one of the most common clinical anorectal diseases. The prevalence rateof hemorrhoids in China has exceeded 50% among adults. Hemorrhoids that are locatedwithin the dentate line are internal hemorrhoids, and those outside the dentate line areexternal haemorrhoids. Mixed haemorrhoids have no obvious boundary between inside andoutside dentate line. Internal hemorrhoids are classified into Grades I to IV depending onhemorrhoidal vessels’ prominence and severity of the prolapse. The following diagram setsforth the clinical manifestation and treatment options of Grade I-IV internal hemorrhoids.


INDUSTRY OVERVIEW

– 140 –

Grade I II III IV

Clinical ManifestationProminent hemorrhoidal

vessels with engorgement,

but no prolapse.

Hemorrhoidal tissue prolapses

only with straining but can be

reduced spontaneously.

Hemorrhoidal tissue prolapses beyond the dentate line with

straining and can only be reduced manually. Itching,

staining from mucous discharge, soilage, and

swelling may occur.

Prolapsed tissue are evident that cannot be reduced manually. Chronic inflammatory changes

with maceration, mucosal atrophy, friability, and ulceration

are commonly observed.

Treatment

Internal hemorrhoids ligation

Internal hemorrhoids injection

Transanal hemorrhoid artery ligation

Hemorrhoidectomy

Hemorrhoid stapler surgery

: Applicable; : Applicable but depending on degree

Device Therapy

Surgical Hemorrhoidectomy


The population with hemorrhoids in China reached 724.9 million in 2020, and is expectedto grow to 735.7 million in 2025 and further to 745.6 million in 2030. Patients with internalhemorrhoids accounted for approximately 59.9%, among whom the proportion of Grade I andII hemorrhoids reached approximately 80%. The prevalence rate of hemorrhoids in pregnantwomen is estimated to be approximately 59.3%.

The size of China’s hemorrhoid therapy market increased at a CAGR of 9.0% fromRMB3.5 billion in 2016 to RMB5.0 billion in 2020, and is expected to increase at a CAGR of8.4% from 2020 to RMB7.4 billion in 2025 and further at a CAGR of 6.4% from 2025 toRMB10.2 billion in 2030. The following chart sets forth the size of China’s hemorrhoidtherapy market for the periods indicated.

3.53.9 4.1 4.4

5.05.5

5.96.4

6.97.4

8.08.5

9.19.6

10.2Billion RMB

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

2016-2020

2020-2025E

2025E-2030E

9.0%

8.4%

6.4%

Period CAGR

Historical and Forecasted Market Size of Hemorrhoid Therapy Market in China, 2016-2030E



Treatment of Hemorrhoids and Pain Points

Hemorrhoids therapies mainly include conservative therapy, device therapy and surgicalhemorrhoidectomy. The conservative therapy targets patients with Grade I to IV hemorrhoidsand may be used in combination with other therapies in all disease stages. The device therapymainly treats patients with Grade I to III or surgically ineligible Grade IV hemorrhoids. Thesurgical hemorrhoidectomy is mainly for patients with Grade I to III hemorrhoids whoreceived ineffective treatment with the conservative or device therapy. Rubber band ligation is


INDUSTRY OVERVIEW

– 141 –

the most frequently used device therapy owing to its low reoccurrence. Conventional surgicalexcision is still the most common surgical procedure for grade III-IV hemorrhoid patients. Thefollowing table provides more information on OTC therapies for hemorrhoids treatment inChina.

Device Topical OralCategory Hand-held device Suppository Ointment Patch Laxatives Herbal Capsule

Representative Product

Telescopic compression

balloon

Titanoreine

(複方角菜酸酯栓,太寧栓)Mayinglong Musk Hemorrhoids

Suppository

(馬應龍麝香痔瘡栓)Jiuhua hemorrhoid suppository

(九華痔瘡栓)

HuaZhi Shuan hemorrhoid

suppository

(敬修堂化痔栓)

Rongchang Gangtai Shuan Anti-

Hemorrhoids Suppository

(榮昌肛泰栓)

Mayinglong Musk

Hemorrhoids

(馬應龍麝香痔瘡膏)Rongchang Gangtai

Ruangao Ointment Anti-

Hemorrhoids

(榮昌肛泰軟膏)Xiongdan Zhiling Ointment

(熊膽痔靈膏)

Rongchang Gangtai

Tie Anti-

Hemorrhoids

(榮昌肛泰貼)

Bisacodyl Enteric-

coated Tablets

(比沙可啶腸溶片)Tongbianling capsule

(通便靈膠囊)

Ma Yinglong Huaiyu

Qingre Hemostatic

Capsules

(馬應龍槐榆清熱止血膠囊)

Baiqi Hemorrhoids

capsule

(百琦痔瘡膠囊)

Hemorrhoid Grade

Grade I-III internal &

mixed hemorrhoid

Grade I-III internal & mixed

hemorrhoid or post-surgical

Grade I-III external & mixed

hemorrhoid or post-surgicalGrade I-III Grade I-IV Grade I-IV

Pregnancy Suitability

Suitable Caution or consult physiciansCaution or consult

physicians

Caution or consult

physicians

Not suitable or consult

physicians

Caution or consult

physicians

Mechanism Type Physical Chemical Chemical Chemical Chemical Chemical

Features

• Easy to operate

• Less side effects

compared to topical

and oral therapies

• Not suitable for external

hemorrhoid patients

• Long-term use may cause

allergic reactions

• Not suitable for internal

hemorrhoid patients

• Long-term use may

cause allergic reactions

• Convenient

application on

the stomach

instead of the

anus

• Generally suitable

for all patients

• Typically used in

conjunction with

other therapies

• Generally suitable

for all patients

• Typically used in

conjunction with

other therapies


The following table provides more information on the device therapy for hemorrhoidstreatment in China.

Device

Category

Features

Hand-held device Ligation Injection

Representative Product

Telescopic compression balloon Rubber band ligation

15% NaCl

Shaobei

50% glucose

Xiaozhiling

95% ethanol

Hemorrhoid Grade

Grade I-III internal & mixed hemorrhoid Grade I-III internal hemorrhoid Grade I-III internal & mixed hemorrhoid

Pregnancy Suitability

Suitable Not suitableSome chemicals are not suitable,

need to consult a physician

Administration Method

Self-administered Performed by a surgeon Performed by a surgeon

• Cheaper than other device therapies

• Easy and timely self-administration

• Less pain and bleeding compared to other

devices

• Superior treatment outcome compared to self-care

and other device therapies

• Shorter treatment cycle compared to other device

therapies

• Mixed results for external and mixed hemorrhoid

• Multiple chemicals options for patient groups

• Less pain and bleeding than ligation

• Mixed results for external and mixed hemorrhoid


The current hemorrhoids therapies in the market have the following pain points:

• Large prevalence with high burden. Hemorrhoids are highly prevalent in China with724.9 million patients in 2020, presenting significant demand for treatment given itsdistracting symptoms of recurrent bleeding, pain and discomfort. In addition, theexisting therapies offer patients insufficient treatment options, as these therapiesrequire early intervention and otherwise patients’ conditions might worsen.


INDUSTRY OVERVIEW

– 142 –

• Patients’ low willingness to seek medical treatment. Patients with hemorrhoidstypically have limited desire to seek medical treatment due to factors such as socialstigma. The lack of early diagnosis and proper treatment leads to the deterioratingdisease, making many patients with Grade III to IV hemorrhoids unable to seekother therapies except immediate hemorrhoidectomy. Moreover, hemorrhoidspatients at a more advanced stage may resist seeing a doctor for fear of impairedquality of life resulting from surgical complications, such as bleeding and infection.

• Limited medical education to patients. Many patients acquire medical informationonline and prefer home diagnosis. Those patients may follow instructions lackingsupport from evidence-based medicine. The limitation in medical education will notonly prevent timely treatment of the patients, but also complicate the disease,making it even harder to treat and manage.

• Limitations of traditional treatment methods. Traditional hemorrhoids therapiesmainly include medication and surgery. The conservative treatment, such asmedication and lifestyle modification, can only reduce inflammation or relievesymptoms and may not be suitable for patients such as pregnant women. Althoughsurgeries have a shorter treatment cycle, bleeding and excessive pain may lead to alengthy post-operation recovery period with limited mobility and lower sleepquality. Therefore, there is a great demand for innovative therapies for hemorrhoidsin China.

Peripheral Artery Diseases

Overview of Peripheral Artery Diseases

Peripheral artery diseases, or PAD, refer to diseases of blood vessels located outside ofthe heart or brain, which develops when plaque clogs or narrows arteries that deliver blood tothe arms, legs and internal organs such as the stomach or kidneys. PAD is the third leadingcause of atherosclerotic vascular morbidity after a coronary heart disease or stroke. In China,PAD is increasingly prevalent driven by the aging population and increasing public awareness.Early detection and treatment can prevent heart attacks, stroke, mini-stroke (or transientischemia, which is lack of oxygen to the brain), leg ischemia and possible amputation.

With the improvement of people’s overall living standards and the aging population,PAD has gradually become a severe health issue in China. Along with the improvement indiagnostic technologies and knowledge, the prevalence of PAD in China increased from 45.9million in 2016 to 50.7 million in 2020, and is expected to reach 56.6 million in 2025 and 62.3million in 2030.

Treatment of PAD

With the development of peripheral interventional procedures, vascular intervention hasbecome the first choice or combination therapy for many specific diseases. The currentinterventional therapies include balloons, stents and atherectomy.

Peripheral artery balloon catheters, such as the percutaneous transluminal angioplasty(PTA) balloon catheter and drug-coated balloon (DCB) catheter, are a main type of medicaldevices used in the peripheral interventional procedures. PTA balloon catheter has aninflatable balloon at its tip which is used during a minimally invasive catheterizationprocedure. This procedure is intended to enlarge a narrowed vessel opening. The deflatedballoon is positioned at the narrowed space, inflated for a short period of time, and thendeflated.


INDUSTRY OVERVIEW

– 143 –

China’s PAD Interventional Medical Devices Market

The size of China’s PAD interventional medical devices market increased at a CAGR of14.8% from RMB1.5 billion in 2016 to RMB2.6 billion in 2020, and is expected to grow at aCAGR of 21.9% from 2020 to RMB7.1 billion in 2025 and further at a CAGR of 11.4% from2025 to RMB12.2 billion in 2030. The following chart sets forth the size of China’s PADinterventional medical devices market for the periods indicated.

1.5 1.7 2.1 2.4 2.63.4

4.2

5.2

6.0

7.17.9

8.9

10.0

11.0

12.2Billion RMB

2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

2016-2020

2020-2025E

2025E-2030E

14.8%

21.9%

11.4%

Period CAGR

Historical and Forecasted Market Size of Intervention Devices for the Treatment of Peripheral Artery Diseases in China, 2016-2030E



SOURCE OF INFORMATION

In connection with the [REDACTED], we have commissioned Frost & Sullivan, anindependent third party, to conduct research and analysis of the interventional medicaldevices markets in China and produce the relevant industry report. The Frost & SullivanReport has been prepared by Frost & Sullivan independent of our influence. We have agreed topay Frost & Sullivan a fee of [REDACTED] for the preparation of this report, which weconsider to be in line with market rates for similar reports. Except as otherwise noted, all dataand forecasts in this section have been derived from the Frost & Sullivan Report and werebased on literature review, expert interview and analysis, as well as other official andnon-official public available sources by Frost & Sullivan. In compiling and preparing the Frost& Sullivan Report, Frost & Sullivan made the following key assumptions: (i) the overall social,economic and political environment in China is expected to remain stable during the forecastperiod; (ii) China’s economic and industrial development is likely to grow steadily over thenext decade; (iii) key industry drivers, such as accelerated aging population, growing demandfrom healthcare institutions, the increasing prevalence of chronic diseases, and continuoustechnology innovation, are likely to drive the growth of China’s medical devices market duringthe forecast period; and (iv) no extreme force majeure or industry regulation will dramaticallyor fundamentally affect the market. For the avoidance of doubt, the impact of the COVID-19pandemic has been taken into account when compiling information in the Frost & SullivanReport. In this section, Frost & Sullivan presents certain historical market information for fiveyears (2016 to 2020), which is a longer period than the Track Record Period. We believe thisapproach provides a more accurate reflection of the trends affecting our industry and markets.


INDUSTRY OVERVIEW

– 144 –

PRC REGULATORY OVERVIEW

Medical device industry of the PRC is subject to a large number of laws and regulationsand extensive government supervision. Such laws and regulations encompass the areasincluding manufacturing, sales of medical devices, labor and intellectual property. Principalregulatory authorities of the industry are the NMPA and its local regulatory branches. InMarch 2018, the State Council Institutional Reform Proposal passed by the First Session ofthe Thirteenth National People’s Congress of the PRC decided the China Food and DrugAdministration (the “CFDA”) shall cease to exist, and the National Medical ProductsAdministration (the “NMPA”, including its predecessor, the CFDA) was established toundertake the duties of the former CFDA.

LAWS AND REGULATIONS RELATING TO MEDICAL DEVICES

Regulation and Classification of Medical Devices

Pursuant to the Regulations on the Supervision and Administration of Medical Devices(2021 Revision) (《醫療器械監督管理條例(2021修訂)》), which was issued on February 9, 2021and came into effect on June 1, 2021, the food and drug supervision and administration of theState Council shall be responsible for the supervision of medical devices of the PRC. Allrelevant departments of the State Council shall be responsible for the supervision of medicaldevices within their respective scope of duties. Food and drug supervision and administrationdepartments of the local people’s governments at the county level and above are responsiblefor the supervision of medical devices within their own administrative jurisdictions. Therelevant departments of the local people’s governments at the county level and above areresponsible for the supervision of medical devices within their respective scope of duties.

In the PRC, medical devices have been classified into three categories based on the degreeof risk. Class I medical devices shall refer to those devices with low risk and whose safety andeffectiveness can be ensured through routine administration. Class II medical devices shallrefer to those devices with medium risk and whose safety and effectiveness should be strictlycontrolled. Class III medical devices shall refer to those devices with high risk and whosesafety and effectiveness must be strictly controlled with special measures. The classification ofspecific medical devices is stipulated in the Medical Device Classification Catalog (《醫療器械分類目錄》), which was issued by the NMPA on August 31, 2017 and became effective onAugust 1, 2018.

Registration and Filings of Medical Device Products

Pursuant to the Regulations on the Supervision and Administration of Medical Devices(2021 Revision) and the Regulations of Medical Devices and the Administrative Measures forthe Registration of Medical Devices (《醫療器械註冊管理辦法》) promulgated by the NMPAon July 30, 2014 and coming into effect on October 1, 2014, for the filings of the Class Imedical devices, the parties undergoing the filings of medical devices shall submit the filingmaterials to the food and drug supervision and administration departments of the local


REGULATORY OVERVIEW

– 145 –

people’s government at the districted city level. In case of any amendment to matters stated inthe filings, such amendment shall be filed with the original filing department. The Class II andClass III medical devices shall be subject to the product registration administration. Class IImedical devices shall be examined by the food and drug supervision and administrationdepartments of the people’s governments of the provinces, autonomous regions ormunicipality where such applicants are located. A registration certificate for such medicaldevice shall be issued upon approval. Class III medical devices shall be examined by theNMPA. A registration certificate for such medical device shall be issued upon approval. Incase of any substantial change of the designs, raw materials, production technologies, scopesof application and application methods, etc., of the registered Class II or Class III medicaldevices, which may affect the safety and effectiveness of such medical devices, the registrantsshall apply to the original registration departments for changing registration.

The registration certificate for a medical device is valid for five years and the registrantshall apply to the food and drug supervision and administration departments for renewal sixmonths prior to its expiration date.

Clinical trials are not required for the filing of the Class I medical devices, but necessaryfor the application for the registration of the Class II and Class III medical devices. However,medical devices may be exempt from clinical trials under any of the following circumstances:

• The medical device has clear working mechanisms, finalized design and maturemanufacturing processes, and the medical devices of the same type that are availableon the market have been used in clinical application for years without records of anyserious adverse events, and the medical device will not change the general purposes;

• The safety and effectiveness of such medical devices can be proved throughnon-clinical evaluation; or

• The safety and effectiveness of such medical devices can be proved through theanalysis and evaluation of the data obtained from the clinical trials or clinicalapplication of the same categories of medical devices.

The medical device catalog of clinical trial exemption shall be formulated, amended andpromulgated by the NMPA. Medical device products that are not included in the exemptioncatalog shall be analyzed and evaluated through the data obtained from the clinical trials orclinical application of the same categories of medical devices. Where the safety andeffectiveness of such medical devices can be proved, the applicant may specify in the course ofregistration application and submit relevant proofing materials.

In addition, pursuant to the Notice of the Newly Revised Catalogue of Medical DevicesExempted from Clinical Trials (《關於公佈新修訂免於進行臨床試驗醫療器械目錄的通告》)issued by the NMPA on 28 September, 2018, medical device products that are not included inthe exemption catalog shall go through clinical trials before registration.


REGULATORY OVERVIEW

– 146 –

Production Permit of Medical Devices

Pursuant to the Regulations of Medical Devices and the Administrative Measures on theProduction of Medical Devices (《醫療器械生產監督管理辦法》) (the “Production Measures”)promulgated by the NMPA, amended and coming into effect on November 17, 2017, amanufacturer of medical device shall satisfy all of the following conditions:

• possessing production sites, environmental conditions, production equipment andprofessional technicians that are suitable for such medical device produced;

• possessing organizations or professional examination staff and examinationequipment that carry out quality examination for such medical device produced;

• formulating a management system which ensures the quality of such medical device;

• having capability of after-sale services that is suitable for such medical deviceproduced; and

• satisfying the requirements as prescribed in production R&D and productiontechnique documents.

The enterprises engaging in the production of Class I medical devices shall make filingsfor such Class I medical devices with the food and drug supervision and administrationdepartments of the local people’s governments at the districted city level and submit proofingmaterials of qualification to engage in the production of such medical devices. The enterprisesengaging in the production of Class II and Class III medical devices shall apply for productionlicenses to the food and drug supervision and administration departments of the local people’sgovernments of the provinces, autonomous regions or municipalities, and submit proofingmaterials of qualification to engage in the production of such medical devices and registrationcertificates for such medical devices produced.

A production permit for a medical device is valid for five years and the registrant shallapply to the original departments that issued such permit for renewal six months prior to itsexpiration date.

Pursuant to the Production Measures and the Standards on Production and QualityManagement of Medical Devices (《醫療器械生產質量管理規範》) (the “Standards onProduction and Quality Management”) promulgated by the NMPA on December 29, 2014 andcoming into effect on March 1, 2015, an enterprise engaging in the production of medicaldevices shall establish and effectively maintain a quality control system in accordance to therequirements of the Standards on Production and Quality Management. The enterpriseengaging in the production of medical devices shall regularly conduct comprehensiveself-inspection on the operation of quality management system in accordance with therequirements of the Standards on Production and Quality Management and submit aself-inspection report to the food and drug supervision and administration departments of the


REGULATORY OVERVIEW

– 147 –

local people’s governments of the provinces, autonomous regions, municipalities or at thedistricted city level before the end of every year. The enterprise shall establish its procurementcontrol procedure and assess its suppliers by establishing an examination system to ensure thepurchased products are in compliance with the statutory requirements. The enterprise shallrecord the procurement, production and inspection of raw materials. Such records shall betrue, accurate, complete and traceable. The enterprise shall apply risk management to thewhole process of design and development, production, sales and after-sale services. Themeasures being adopted shall be applicable to risks associated with the related products.

Pursuant to The Notice of Four Guidelines including On-site Inspection Guidelines forthe Standards on Production and Quality Management of Medical Devices (《關於印發〈醫療器械生產質量管理規範現場檢查指導原則〉等4個指導原則的通知》) promulgated by the NMPA onSeptember 25, 2015 and coming into effect on September 25, 2015, during the course ofon-site verification of the registration of medical devices and on-site inspection of productionpermit (including changing production permit), the inspection team shall, in accordance withthe guidelines, issue recommended conclusions for on-site inspections, which shall be dividedinto “Passed,” “Failed” or “Reassessment after rectification.” During the supervision andinspection, if it is found that the requirements of the key items or ordinary items that mayhave direct impact on product quality are not satisfied, the enterprise shall suspendproduction and go through rectification. If it is found that the requirements of the ordinaryitems are not satisfied, and it does not directly affect product quality, the enterprise shallrectify in a prescribed time. The regulatory authorities shall examine and verify therecommended conclusions and on-site inspection materials submitted by the inspection group,and issue the final inspection results.

Good Clinical Practice for Medical Devices

On March 1, 2016, the NMPA and the National Health and Family PlanningCommission jointly promulgated the Good Clinical Practice for Medical Devices (《醫療器械臨床試驗質量管理規範》), which became effective on June 1, 2016. The regulation includes fullprocedures of clinical trial of medical devices, including, among others, the protocol design,conduct, monitoring, verification, inspection, and data collection, recording, analysis andconclusion and reporting procedure of a clinical trial. For conducting clinical trials of medicaldevices, an applicant shall organize to formulate scientific and reasonable clinical trialprotocols based on the categories, risks and intended use of the medical devices for the clinicalstudy. The applicant shall be responsible for (i) organizing to develop and revise theresearcher’s manual, clinical trial protocols, informed consent form, case report form, relevantstandard operating procedures and other relevant documents, and (ii) organizing necessarytraining for the clinical trials. The applicant shall select the clinical trial institutions and itsresearchers from the qualified medical device clinical trial institutions according to thecharacteristics of the medical devices to be used in the clinical study. The applicant shall beresponsible for initiating, applying, organizing and monitoring such clinical trials, and shallbe responsible for the authenticity and reliability of the clinical trials. For a new productcandidate that has not been approved for marketing either in China or overseas, and whosesafety and effectiveness have not been medically proven, a feasibility trial on a small sample


REGULATORY OVERVIEW

– 148 –

size of patients shall be conducted first. Upon preliminary confirmation of the safety of theproduct candidate, subsequent clinical trials shall be conducted and the sample sizes ofpatients shall be of statistical significance.

Permit for Medical Device Operation

Pursuant to the Measures for the Supervision and Administration of Medical DevicesOperation (《醫療器械經營監督管理辦法》), promulgated by the NMPA on July 30, 2014 andamended on November 17, 2017 and coming into effect on November 17, 2017, an enterpriseengaging in the operation of medical devices shall have business premises and storageconditions suitable for the operation scale and scope, and shall have a quality control systemand department or personnel suitable for the medical devices it operates. An enterpriseengaged in the operation of Class II medical devices shall file with the municipal level foodand drug supervision and administration department and provide proofing materials forsatisfying the relevant conditions of engaging in the operation of medical devices, while anenterprise engaged in the operation of Class III medical devices shall apply for an operationpermit to the municipal level food and drug supervision and administration department andprovide proofing materials for satisfying the relevant conditions of engaging in the operationof such medical devices.

An operation permit is valid for five years and may be renewed pursuant to the relevantregulations. An enterprise engaging in medical devices operation shall not operate or use anymedical device that has not been legally registered, without qualification certificate,out-dated, invalid or disqualified.

Special Procedures for Examination and Approval of Innovative Medical Devices

On October, 2017, the General Office of the CPC Central Committee and the GeneralOffice of the State Council jointly issued the Opinions on Deepening the Reform of theEvaluation and Approval Systems and Encouraging Innovation on Drugs and MedicalDevices (《關於深化審評審批制度改革鼓勵藥品醫療器械創新的意見》) (the “InnovationOpinions”), which aims to encourage the innovation for medical devices. Pursuant to theInnovation Opinions, the priority review and approval will be applicable to innovative medicaldevices supported by the National Science and Technology Major Projects and the NationalKey R&D Program of China, and the clinical trials of which have been conducted by theNational Clinical Research Center, and approved by the management department of theNational Clinical Research Center.

Pursuant to the Special Procedures for Examination and Approval of Innovative MedicalDevices (《創新醫療器械特別審查程序》) which were promulgated by the NMPA on November2, 2018 and came into effect on December 1, 2018, special procedures shall be applicable to theexamination and approval for medical devices in the following circumstances:

• The applicant legally owns the invention patent of the core technology of theproduct through its technological innovation activities in the PRC, or legally obtains


REGULATORY OVERVIEW

– 149 –

the invention patent or the right of use thereof through transfer in the PRC, and theinterval between the date of application for the special examination and approval ofinnovative medical devices and the date of authorized publication should not exceedfive years; or the patent administration department of the State Council hasdisclosed the application for the invention patent of the core technology and thePatent Search and Consultation Center of the National Intellectual PropertyAdministration of the PRC (國家知識產權局專利檢索諮詢中心) has issued thepatent search report setting out the novelty and innovation of the core technologysolution of the product.

• The applicant has developed the prototype product and completed the preliminaryresearch under a true and controllable process that generated complete and traceabledata.

• The product (a) has major working mechanism or mechanism of action which is thefirst of its kind in the PRC, (b) has fundamental improvement in productperformance or safety compared with similar products, (c) is of an internationallyleading standard in terms of techniques and has significant clinical value.

The Center for Medical Device Evaluation of the NMPA (國家藥品監督管理局醫療器械技術審評中心) shall give priority to the innovative medical devices in their technical review uponreceiving the registration application, after which the NMPA shall give priority to the productin their administrative approval.

Two-invoice System

On December 26, 2016, eight government departments including the NMPA issued theNotice on Opinions on the Implementation of the “Two-invoice System” in Drug Procurementby Public Medical Institutions (for Trial Implementation) (《關於在公立醫療機構藥品採購中推行兩票制的實施意見(試行)》) (the “Notice”). According to the Notice, the “Two-invoiceSystem” refers to issuing invoice at the time from a pharmaceutical manufacturer to acirculating enterprise, and issuing invoice again at the time from a circulating enterprise to amedical institution. The Notice requires public medical institutions to gradually implementthe “Two-invoice System” for drug procurements and encourages other medical institutions topromote the “Two-invoice System” so that the “Two-invoice System” would strive to be widelypromoted nationwide by 2018.

On March 5, 2018, six government departments including National Health and FamilyPlanning Commission of the PRC issued the Notice on Consolidating the Achievements ofCancelling Drug Markups and Deepening Comprehensive Reforms in Public Hospitals (《關於鞏固破除以藥補醫成果持續深化公立醫院綜合改革的通知》), which stipulates the implementationof the centralized purchase of high value medical consumables, and that the “Two-invoiceSystem” in relation to high-value medical consumables shall be gradually implemented.


REGULATORY OVERVIEW

– 150 –

On July 19, 2019, the General Office of the State Council issued the Notice on Printingand Distributing the Reform Plan for the Management of High-value Medical Consumables(《關於印發〈治理高值醫用耗材改革方案〉的通知》), which encourages local governments toadopt the “Two-invoice System” combined with actual situation in order to reduce thecirculation of high-value medical consumables and promote the transparency of purchase andsales. This task is expected to be completed by the end of 2020.

Some provinces, including but not limited to Ningxia Province, Hainan Province,Liaoning Province, Sichuan Province, Guangdong Province, Hunan Province, GuizhouProvince, Gansu Province, Jiangxi Province, Heilongjiang Province, Fujian Province, ShaanxiProvince and Anhui Province, have implemented the “Two-invoice System” in the field ofmedical consumables. Among them, Fujian Provincial Medical Security ManagementCommittee Office (福建省醫療保障管理委員會辦公室) issued the Notice on the Sharing ofTransparent Procurement Results of Medical Devices (Medical Consumables) across theProvince (《關於開展醫療器械(醫用耗材)陽光採購結果全省共享工作的通知》) on 23 July, 2018,which stipulates medical consumables procurement strictly implements the “Two-invoiceSystem” and encourages the implementation of the “One Invoice System.” On July 23, 2018,eight local government departments of Shaanxi Province including Deepen Medical andHealthcare System Reform Leading Group Office of Shaanxi Province (陝西省深化醫藥衛生體制改革領導小組辦公室) issued the Notice on Further Promoting the “Two-invoice System” onMedicines and Medical Consumables (《關於進一步推進藥品和醫用耗材「兩票制」的通知》),which stipulates that on the basis of the full implementation of the “Two-invoice System” ofmedical consumables in the urban public medical institutions, the primary medical andhealthcare institutions of the county and below the county shall begin to implement the“Two-invoice System” in the procurement of medical consumables from August 1, 2018. OnNovember 15, 2017, five local government departments of Anhui Province including the Foodand Drug Administration of Anhui Province (安徽省食品藥品監督管理局) issued the Opinionson Implementation of the “Two-invoice System” in Medical Consumables Procurement byPublic Medical Institutions in Anhui Province (for Trial Implementation) (《安徽省公立醫療機構醫用耗材採購「兩票制」實施意見(試行)》), pursuant to which the Class II or above publicmedical institutions shall begin to implement the “Two-invoice System” in the procurement ofmedical consumables from December 1, 2017.

Overseas Clinical Trial Data of Medical Devices

On January 10, 2018, the NMPA issued the Technical Guidelines for Accepting OverseasClinical Trial Data of Medical Devices (《接受醫療器械境外臨床試驗數據技術指導原則》) (the“Technical Guidelines”). According to the Technical Guidelines, the overseas clinical trial datarefers to all research data or research data of the same stage which generated from theconfirmation process of the safety and effectiveness of the medical devices to be registered inChina under normal use conditions in the overseas clinical trial institutions in accordancewith the requirements of the country (region) where the clinical trial is conducted.


REGULATORY OVERVIEW

– 151 –

Three basic principles to accept overseas clinical trial data are as follow: (i) Ethicalprinciple: Overseas clinical trials shall follow the ethical guidelines established by theDeclaration of Helsinki. Applicants are also required to state the ethics of the country(region) in which the clinical trial is conducted and codes and standards established by lawsand regulations of the aforesaid country (region) or international codes and standards; (ii)Legal principle: Overseas clinical trials shall be conducted in a country (region) with clinicaltrial quality management, and are in accordance with the regulatory requirements for clinicaltrials of medical devices (including In vitro diagnostic reagents) in China; and (iii) Scientificprinciple: Overseas clinical trial data shall be true, scientific, reliable and traceable. Applicantsshall provide complete trial data and shall not filter.

According to the Technical Guidelines, the overseas clinical trial data submitted by theapplicant shall at least include clinical trial protocols, ethical opinions, and clinical trialreport which shall include analysis and conclusions on the complete clinical trial data. If theoverseas clinical trial data meets the relevant requirements of registration in China, and thedata is scientific, complete and sufficient, such data will be accepted. If the overseas clinicaltrial data meets the basic requirements of the Technical Guidelines, but additionalinformation needs to be supplemented according to the relevant technical requirements forregistration in China, supplementary clinical trials can be conducted within or outside China.As the supplementary clinical trial data and original overseas clinical trial data are inaccordance with the relevant technical requirements of registration in China aftercomprehensive evaluation, overseas clinical trial data will be accepted.

Regulations Relating to Advertisements of Medical Devices

Pursuant to the Regulations on the Supervision and Administration of Medical Devices(2021 Revision) (《醫療器械監督管理條例(2021修訂)》), the medical device advertisement shallbe authentic and lawful and shall be based on the instructions of medical devices that havebeen registered or filed with the drug regulatory authority and shall not contain any false,exaggerated or misleading content. Before publishing medical devices advertisement, thecontent of advertisement shall be examined by the advertisement examination organappointed by the people’s government of the province, autonomous region or municipalitydirectly under the Central Government, and the approval number of medical deviceadvertisement shall be obtained; no advertisement may be published without the examination.

The State Administration for Market Regulation (the “SAMR”) promulgated the InterimAdministrative Measures for Censorship of Advertisements for Drugs, Medical Devices,Dietary Supplements and Foods for Special Medical Purpose (《藥品、醫療器械、保健食品、特殊醫學用途配方食品廣告審查管理暫行辦法》) (the “Interim Measures for Advertisements”)on December 24, 2019, which came into effect on March 1, 2020 and replaced the Measuresfor the Examination of Medical Devices Advertisements (《醫療器械廣告審查辦法》) and theStandards for the Examination and Publication of Medical Appliance Advertisements (《醫療器械廣告審查發佈標準》).


REGULATORY OVERVIEW

– 152 –

According to the Interim Measures for Advertisements, no advertisement for any drug,medical device, dietary supplement or food for special medical purpose may be publishedwithout censorship. The SAMR shall be responsible for organizing and guiding the censorshipof advertisements for drugs, medical devices, dietary supplements and foods for specialmedical purpose. Departments for market regulation and drug administration of provinces,autonomous regions and municipalities directly under the central government shall beresponsible for the censorship of advertisements for drugs, medical devices, dietarysupplements and foods for special medical purpose and may legally entrust otheradministrative authorities with specifically carrying out advertisement censorship.Advertisements for drugs, medical devices, dietary supplements and foods for special medicalpurpose shall be authentic and legal, and shall not contain any false or misleading content.

Pursuant to the Measures Regarding the Administration of Drug Information Serviceover the Internet (《互聯網藥品信息服務管理辦法》) which was promulgated by the NMPA onNovember 17, 2017 and came into effect on the same day, the activities of providing medical(including medical devices) information services to Internet users through the Internet areregulated. Where any website intends to provide drug information services through Internet, itshall, prior to applying for an operation permit or record-filing from the competent authorityin charge of information industry under the State Council or the telecom administrativeauthority at the provincial level, file an application with the food and drug administrationdepartments of the province, autonomous region, or municipality directly under the CentralGovernment where the sponsor of the website is located pursuant to the principle ofterritorial supervision and management, and shall be subject to the examination and approvalthereof for obtaining the qualifications for providing Internet-based drug informationservices. Each food and drug administration of the province, autonomous region, ormunicipality directly under the Central Government shall review the Internet websites thatapply for providing Internet-based drug information services within its scope of duties andissue the Qualification Certificate for Internet-based Drug Information Services to eligiblewebsites.

National Medical Insurance Program

The national medical insurance program was adopted pursuant to the Decision of theState Council on the Establishment of the Urban Employee Basic Medical Insurance Program(《關於建立城鎮職工基本醫療保險制度的決定》) issued by the State Council on December 14,1998, under which all employers in urban cities are required to enroll their employees in theUrban Employee Basic Medical Insurance Program and the insurance premium is jointlycontributed by the employers and employees. Pursuant to the Opinions on the Establishmentof the New Rural Cooperative Medical System (《關於建立新型農村合作醫療制度意見的通知》) forwarded by the General Office of the State Council on January 16, 2003, Chinalaunched the New Rural Cooperative Medical System to provide medical insurance for ruralresidents in selected areas which has spread to the whole nation thereafter. The State Councilpromulgated the Guiding Opinions of the State Council about the Pilot Urban Resident BasicMedical Insurance (《國務院關於開展城鎮居民基本醫療保險試點的指導意見》) on July 10,2007, under which urban residents of the pilot district, rather than urban employees, may


REGULATORY OVERVIEW

– 153 –

voluntarily join Urban Resident Basic Medical Insurance. In 2015, the PRC governmentannounced the Outline for the Planning of the National Medical and Health Service System(2015-2020) (《全國醫療衛生服務體系規劃綱要 (2015-2020年)》) which aims to establish a basicmedical and health care system that covers both rural and urban citizens by 2020.

On January 3, 2016, the State Council issued the Opinions on Integrating the BasicMedical Insurance Systems for Urban and Rural Residents (《國務院關於整合城鄉居民基本醫療保險制度的意見》) to integrate the Urban Resident Basic Medical Insurance and the NewRural Cooperative Medical System and the establishment of a unified Basic MedicalInsurance for Urban and Rural Residents, which will cover all urban and rural non-workingresidents except for rural migrant workers and persons in flexible employment arrangementswho participate in the basic medical insurance for urban employees.

With regard to reimbursement for medical devices and diagnostic tests, the Notice ofOpinion on the Diagnosis and Treatment Management, Scope and Payment Standards ofMedical Service Facilities Covered by the National Urban Employees Basic Medical InsuranceScheme (Lao She Bu Fa [1999] No. 22) (《關於印發〈城鎮職工基本醫療保險診療項目管理、醫療服務設施範圍和支付標準意見〉的通知》(勞社部發[1999]22號)) prescribes the coverage ofdiagnostic and treatment devices and diagnostic tests where part of the fees are paid throughthe basic medical insurance scheme. It also includes a negative list that precludes certaindevices and medical services from governmental reimbursement. Detailed reimbursementcoverage and rate for medical devices and medical services (including diagnostic tests and kits)are subject to each province’s local policies.

Reform Plan on High-Value Medical Consumables

On July 19, 2019, the General Office of the State Council issued the Circular on ReformPlan on Managing High-Value Medical Consumables (《關於印發〈治理高值醫用耗材改革方案〉的通知》) (the “Circular on High-Value Medical Consumables”). According to theCircular on High-Value Medical Consumables, high-value medical consumables are defined asmedical consumables directly used on human, with strict requirement on safety, in greatdemand clinically, relatively highly-priced, and that can pose heavy burdens on patients. TheCircular on High-Value Medical Consumables releases several reform initiatives aiming atmanaging high-value medical consumables, including: (i) the classification and codes ofhigh-value medical consumables in the national medical insurance system will be unifiedgradually, and rules on unique device identification in full life cycle of the high-value medicalconsumables, including but not limited to registration, procurement and usage, will beimplemented by the National Healthcare Security Administration, the National MedicalProducts Administration, and the National Health Commission of the PRC by the end of2020; (ii) the mechanism for including high-value medical consumables in basic medicalinsurance shall be built, and a list of high-value medical consumables shall be compiled, tostrengthen the dynamic adjustment mechanism. The access regulations shall be promulgatedby the National Health Commission and the Ministry of Finance by the end of June 2020; (iii)the price markups placed on medical consumables at public hospitals will be abolished, and allmedical consumables, including high-value medical consumables will be sold at procurement


REGULATORY OVERVIEW

– 154 –

price at all public hospitals by the end of 2019; and (iv) the medical insurance payment policyshall be formulated and implemented by the National Healthcare Security Administration, theMinistry of Finance and the National Health Commission of the PRC. Meanwhile, themedical insurance payment standards on high-value medical consumables will be formulatedand the dynamic adjustment mechanism will be established. The medical insurance funds andpatients will share the cost of high-value medical consumables according to the medicalinsurance payment standards, and medical institutions shall further reduce procurement pricesunder the guidance of the Circular on High-Value Medical Consumables.

The National Healthcare Security Administration has issued the Interim Measures forthe Administration of Medical Consumables for Basic Medical Insurance (Draft forComment) (《基本醫療保險醫用耗材管理暫行辦法(徵求意見稿)》) (the “Draft for Comment”)for public comment by July 7, 2020. The Draft for Comment encompasses 29 articlesorganized into six chapters, namely general provisions, determination of the Catalogue ofMedical Consumables for Basic Medical Insurance, use of the Catalogue of MedicalConsumables for Basic Medical Insurance, medical insurance payments for medicalconsumables, administration and supervision of medical consumables for basic medicalinsurance, and supplementary provisions. Among others, the Draft for Comment clearly statesthat medical consumables included in the Catalogue of Medical Consumables for BasicMedical Insurance can be paid with the medical insurance funds upon satisfaction of all fiveconditions, including “the purpose is to diagnose and treat diseases”. In addition, the Draftfor Comment mandates the establishment and improvement of the supervision mechanismover enterprises producing medical consumables listed on the catalogue, adding that behaviorsof these enterprises in respect of data and information reporting, promotion of the use ofmedical consumables, compliance with agreements, etc. shall be linked to the administrationof the Catalogue of Medical Consumables for Basic Medical Insurance. Also, the creditcommitment system for enterprises shall be improved, and punishments shall be meted out onthose discredited enterprises.

Medical Device Product Export Sales Certificate

Pursuant to the Regulations on the Administration of Export Sales Certificates ofMedical Devices (《醫療器械產品出口銷售證明管理規定》) promulgated by the NMPA on June1, 2015 and coming into effect on September 1, 2015, if the registration certificate for amedical device and production permit for a medical device have been obtained in China, or themedical device registration and production filing have been completed, the food and drugsupervision and administration department may issue a Medical Device Product Export SalesCertificate (醫療器械產品出口銷售證明) to the relevant manufacturing enterprise. The validityterm of the Medical Device Product Export Sales Certificate should not exceed the earliestdeadline for the various documents submitted by the enterprise in the application materials,and the maximum validity term shall also not exceed two years.


REGULATORY OVERVIEW

– 155 –

Medical Device Recalls

Pursuant to the Administrative Measures for Medical Device Recalls (《醫療器械召回管理辦法》), which was promulgated by the NMPA on January 25, 2017 and came into effect onMay 1, 2017, in light of the severity harm, medical device recalls are divided into: (i) class Irecall where the circumstances leading to the recall may cause or have caused serious healthhazards; (ii) class II recall where the circumstances leading to the recall may cause or havecaused temporary or reversible health hazards; or (iii) class III recall where the circumstancesleading to the recall are less likely to cause harm but recall is still necessary. Medical devicemanufacturers shall determine the recall class based on the specific situation and properlydesign and implement the recall plan based on the recall class and the sale and use of themedical devices.

In terms of class I recall, the recall notice shall be published on the NMPA website andmajor media. In terms of class II and class III recalls, the recall notice shall be published onthe website of the food and drug administrative authority of the provinces, autonomousregions or municipalities and be linked to the NMPA website.

OTHER LAWS AND REGULATIONS

Hospital Classification

The Hospital Classification Management Measures (for Trial Implementation) (《醫院分級管理辦法(試行)》) (the “Classification Measures”) promulgated by the Ministry of Healthdivides the hospitals into three classes and 10 grades. Class III hospitals are the highest leveland are further divided into Special, A, B and C grades. The Class I and Class II hospitals arealso further divided into A, B and C grades respectively. The Class III hospitals are aboveregional hospitals that provide high-level specialist medical and healthcare services to severalregions and perform advanced teaching and research works. The Class II hospitals areregional hospitals that provide comprehensive medical and healthcare services to a number ofcommunities and undertake certain teaching and research works. The Class I hospitals areprimary hospitals or healthcare centers that directly provide preventive, medical care,healthcare, and rehabilitation services to communities of a certain population.

The Classification Measures has been abolished according to the Catalogue of AbolishedRegulations of the Health Departments issued by the Ministry of Health on April 13, 1998.However, the hospitals are still classified according to the Classification Measures in practice.

Regulations Relating to Labor and Social Protection

Pursuant to the Labor Law of the PRC (《中華人民共和國勞動法》) promulgated by theStanding Committee of the National People’s Congress on July 5, 1994 and amended andcoming into effect on December 29, 2018, the Labor Contract Law of the PRC (《中華人民共和國勞動合同法》) amended by the Standing Committee of the National People’s Congress onDecember 28, 2012 and coming into effect on July 1, 2013 and the Implementation Rules of


REGULATORY OVERVIEW

– 156 –

the Labor Contract Law of the PRC (《中華人民共和國勞動合同法實施條例》) promulgated bythe State Council and coming into effect on September 18, 2008, an employer shall strictlycomply with the national standards, provide training to its employees, protect their laborrights and perform its labor obligations. An employer shall enter into a written labor contractwith its employees. Labor contracts shall be categorized into labor contracts with fixed term,labor contracts without fixed term and labor contracts to be expired upon completion ofcertain tasks. The remuneration payable by an employer to its employees shall not be less thanlocal minimum wage.

Pursuant to the Social Insurance Law of the PRC (《中華人民共和國社會保險法》)promulgated by the Standing Committee of the National People’s Congress on October 28,2010, amended and coming into effect on December 29, 2018, the Administrative Regulationson Housing Provident Fund of the PRC (《中華人民共和國住房公積金管理條例》) amended bythe State Council and coming into effect on March 24, 2019 and the Provisional Regulationson Collection and Payment of Social Insurance Premiums (《社會保險費徵繳暫行條例》)amended by the State Council and coming into effect on March 24, 2019, a domesticenterprise shall pay premium for basic pension insurance, unemployment insurance, maternityinsurance, work injury insurance, basic medical insurance and housing provident fund for itsemployees at the applicable rates based on the amounts stipulated by the laws. If it fails to payrequired amount of premium to local administrative authorities on time or in full, it may berequired to settle the overdue amount or subject to fine.

Production Safety

Pursuant to the Production Safety Law of the PRC (《中華人民共和國安全生產法》)amended by the Standing Committee of the National People’s Congress on August 31, 2014and coming into effect on December 1, 2014, an enterprise shall (i) provide production safetyconditions as stipulated in this law and other relevant laws, administrative regulations,national and industry standards, (ii) establish a comprehensive production safetyaccountability system and production safety rules, and (iii) develop production safetystandards to ensure production safety. Any entity that fails to provide required productionsafety conditions is prohibited from engaging in production activities.

The person-in-charge of an enterprise shall be fully responsible for the safety ofproduction of the enterprise. An enterprise having more than 100 employees shall establish adepartment or engage in personnel managing production safety specifically. Personnel who isresponsible for managing production safety shall inspect the safety of production regularlybased on the characteristics of production of the enterprise and shall deal with any safetyissue identified during the inspection in a timely manner. Any unsolved issue shall be reportedto the person-in-charge in a timely manner and the person-in-charge shall solve such issueimmediately. The inspection and measures taken shall be duly recorded. Enterprises andinstitutions shall provide their employees with training on production safety and shalltruthfully inform their employees of any potential risks in relation to the workplace andduties, preventive measures and emergency measures. In addition, an enterprise shall provide


REGULATORY OVERVIEW

– 157 –

its employees with protective equipment that meet the national or industry standards andsupervise and train them to use such equipment.

Regulations Relating to Intellectual Properties

Trademarks

The Trademark Law of the PRC (《中華人民共和國商標法》) amended by the StandingCommittee of the National People’s Congress on April 23, 2019 and coming into effect onNovember 1, 2019 and the Implementation Rules of the Trademark Law of the PRC (《中華人民共和國商標法實施條例》) amended by the State Council on April 29, 2014 and coming intoeffect on May 1, 2014, stipulate the application, examination and approval, renewal,alternation, transfer, use and invalidation of trademark registration, and protect thetrademark rights entitled to trademark registrants. According to the aforesaid laws andregulations, the registration of a trademark shall be valid for 10 years from the date ofapproval. Upon the expiry of the trademark registration, a renewal shall be made inaccordance with requirements within 12 months if necessary. If the renewal is not made withinthe stipulated period, the valid period may be extended for a further period of six months.Each renewal of registration of trademark shall be valid for 10 years from the next day of theexpiry of the previous trademark registration. If the renewal have not been handled uponexpiration, the registered trademarks will be deregistered. A trademark registrant may licenseothers the right to use his/her trademark by entering into a trademark license agreement.

Patents

Pursuant to the Patent Law of the PRC (《中華人民共和國專利法》) amended by theStanding Committee of the National People’s Congress on October 17, 2020 and coming intoeffect on June 1, 2021 and the Implementation Rules of the Patent Law of the PRC (《中華人民共和國專利法實施細則》) amended by the State Council on January 9, 2010 and coming intoeffect on February 1, 2010, patents in China are divided into invention patent, utility patentand design patent. Invention patent refers to new technical solutions for a product, method orits improvement; utility patent refers to new technical solutions for the shape, structure or thecombination of both shape and structure of a product, which is applicable for practical use;design patent refers to new designs of the shape, pattern or the combination of shape andpattern, or the combination of the color, the shape and pattern of the entirety or a portion ofa product with esthetic feeling and industrial application value. Invention patent shall be validfor 20 years from the date of application while utility patent shall be valid for 10 years anddesign patent shall be valid for 15 years from the date of application. The patent right entitledto its owner shall be protected by the laws. Any person shall be licensed or authorized by thepatent owner before using such patent. Otherwise, the use constitutes an infringement of thepatent right.


REGULATORY OVERVIEW

– 158 –

Copyrights

Pursuant to the Copyright Law of the PRC (《中華人民共和國著作權法》) amended by theStanding Committee of the National People’s Congress on November 11, 2020 and cominginto effect on June 1, 2021, Chinese citizens, legal persons or unincorporated organizationsshall, whether published or not, enjoy copyright in their works, which include, among others,works of literature, art, and science created in writing or oral or other forms. A copyrightholder shall enjoy a number of rights, including the right of publication, the right ofauthorship and the right of reproduction.

Pursuant to the Measures for the Registration of Computer Software Copyright (《計算機軟件著作權登記辦法》) promulgated by the National Copyright Administration on February20, 2002 and the Regulation on Computers Software Protection (《計算機軟件保護條例》)amended by the State Council on January 30, 2013 and coming into effect on March 1, 2013,the National Copyright Administration is mainly responsible for the registration andmanagement of software copyright in China and recognizes the China Copyright ProtectionCenter as the software registration organization. The China Copyright Protection Center shallgrant certificates of registration to computer software copyright applicants in compliancewith the regulations of the Measures for the Registration of Computer Software Copyrightand the Regulation on Computers Software Protection.

The software copyright shall exist from the date on which its development has beencompleted. In the case of software copyright of a natural person, the term of protection shallbe the lifetime of such person and fifty years after his death, expiring on December 31 of thefiftieth year after his death. In the case of a piece of joint software, the term of protectionshall expire on December 31 of fiftieth year after the death of the last surviving developer.

In the case of software copyright of a legal entity or other organization, the term ofprotection shall be fifty years, expiring on December 31 of the fiftieth year after the firstpublication of such software; however, if any such software has not been published withinfifty years from the date on which its development has been completed, it shall be no longerprotected.

Domain Names

Pursuant to the Administrative Measures for Internet Domain Names (《互聯網域名管理辦法》) promulgated by the Ministry of Industry and Information Technology on August 24,2017 and coming into effect on November 1, 2017, the establishment of any domain name rootserver and institution for operating domain name root servers, managing the registration ofdomain name and providing registration services in relation to domain name within theterritory of China shall be subject to the approval of the Ministry of Industry andInformation Technology or provincial, autonomous regional and municipal communicationsadministration. The registration of domain name shall follow the principle of “first apply firstregister.” The permit of a domain name root server operating institution, domain nameregistry or domain name registrar shall be valid for five years. The Notice of the Ministry of


REGULATORY OVERVIEW

– 159 –

Industry and Information Technology on Regulating the Use of Domain Names in InternetInformation Services (《工業和信息化部關於規範互聯網信息服務使用域名的通知》) promulgated bythe Ministry of Industry and Information Technology on November 27, 2017 and coming into effect onJanuary 1, 2018 specifies the obligation of anti-terrorism and maintaining network security of internetinformation service providers.

Regulations Relating to Tax

Enterprise Income Tax (the “EIT”)

Pursuant to the EIT Law (《中華人民共和國企業所得稅法》) amended by the StandingCommittee of the National People’s Congress and coming into effect on December 29, 2018and the Implementation Rules of the EIT Law (《中華人民共和國企業所得稅法實施條例》)amended by the State Council and coming into effect on April 23, 2019, a domestic enterprisewhich is established within the PRC in accordance with the laws or established in accordancewith any laws of foreign country (region) but with an actual management entity within thePRC shall be regarded as a resident enterprise. A resident enterprise shall be subject to an EITof 25% of any income generated within or outside the PRC. A preferential EIT rate shall beapplicable to any key industry or project which is supported or encouraged by the State. Highand new technology enterprises which are supported by the State may enjoy a reduced EITrate of 15%. A non-resident enterprise refers to an enterprise established under the law of aforeign country (region), whose actual institution of management is not within the PRC butwhich has offices or establishments within the PRC; or which does not have any offices orestablishments within the PRC but has income sources in the PRC, and shall pay enterpriseincome tax on its incomes derived from the PRC at a rate of 20%. The Implementing Rules ofthe Enterprise Income Tax Law reduced the tax rate applicable to the aforesaid non-residententerprises from 20% to 10%.

Value Added Tax (the “VAT”)

The major PRC law and regulation governing value-added tax are the InterimRegulations on Value-added Tax of the PRC (《中華人民共和國增值稅暫行條例》) issued onDecember 13, 1993 by the State Council, and coming into effect on January 1, 1994, andrecently revised on November 19, 2017, as well as the Implementation Rules for the InterimRegulations on Value-Added Tax of the PRC (《中華人民共和國增值稅暫行條例實施細則》)issued on December 25, 1993 by the MOF and coming into effect on the same day and recentlyrevised on October 28, 2011, any entities and individuals engaged in the sale of goods, supplyof processing, repair and replacement services, and import of goods within the territory of thePRC are taxpayers of VAT and shall pay the VAT in accordance with the law and regulation.The rate of VAT for sale of goods is 17% unless otherwise specified, such as the rate of VATfor transportation services is 11%.

Pursuant to the Circular on the Pilot Program for Overall Implementation of theCollection of Value Added Tax Instead of Business Tax (《關於全面推開營業稅改徵增值稅試點的通知》) issued by the Ministry of Finance and the State Taxation Administration on March


REGULATORY OVERVIEW

– 160 –

23, 2016 and coming into effect on May 1, 2016, entities and individuals engaged in sales ofservices, intangible assets or real property within the territory of the PRC are value-addedtaxpayers, and shall pay value-added tax rather than business tax.

On April 4, 2018, the Ministry of Finance and the State Taxation Administration issuedthe Circular of the Ministry of Finance and the State Administration of Taxation onAdjusting Value-added Tax Rates (《財政部、稅務總局關於調整增值稅稅率的通知》), whichcame into effect on May 1, 2018. As of May 1, 2018, where a taxpayer engages in a taxablesales activity for the value-added tax purpose or imports goods, the previous applicable 17%and 11% rates are adjusted to be 16 % and 10 % respectively.

On March 20, 2019, the Ministry of Finance, the State Taxation Administration and theGeneral Administration of Customs issued the Announcement on Policies for Deepening theVAT Reform (《關於深化增值稅改革有關政策的公告》), or Announcement 39, which came intoeffect on April 1, 2019, to further slash VAT rates. According to Announcement 39, (i) the 16%or 10% VAT previously imposed on sales and imports by general VAT taxpayers is reduced to13% or 9% respectively; (ii) the 10% purchase VAT credit rate allowed for the procuredagricultural products is reduced to 9%; (iii) the 13% purchase VAT credit rate allowed for theagricultural products procured for production or commissioned processing is reduced to 10%;and (iv) the 16% or 10% export VAT refund rate previously granted to the exportation ofgoods or labor services is reduced to 13% or 9%, respectively.

Regulations Relating to Product Liability and Protection of Consumers’ Rights

Pursuant to the Product Quality Law of the PRC (《中華人民共和國產品質量法》)amended by the Standing Committee of the National People’s Congress and coming intoeffect on December 29, 2018, producers and sellers shall establish and improve their internalproduct quality management systems, and rigorously implement job post-related qualitystandards and quality responsibilities and corresponding measures for their assessment.Producers and sellers are responsible for the product quality according to the provisions of thelaws.

The market regulation departments of the State Council are responsible for thesupervision and administration of the quality of products of the whole country. All relevantdepartments of the State Council shall be responsible for the supervision of product qualitywithin their own functions and duties.

Quality of products shall pass standard examinations and it is not allowed to pass offsub-standard products as standard ones. Industrial products which may be hazardous to thehealth of the people and the safety of lives and property shall conform to the State and tradestandards for ensuring the health of the people and safety of lives and property. In absence ofsuch State or trade standards, the products shall conform to the minimum requirements forensuring the health of the people and the safety of lives and property. It shall be prohibited toproduce or sell industrial products that do not meet the requirements and demands forphysical health and safety of body and property. Producers or sellers shall be responsible for


REGULATORY OVERVIEW

– 161 –

any compensation arising from their unlawful acts such as production or sales of defective,eliminated or ineffective products, faking the place of origin or quality marks, mixing oradulterating products or passing off imitations as genuine, substandard products as qualityones or non-conforming products as conforming. Proceeds from the sales may be confiscated,the business license may be revoked and penalties may be imposed. If the case is serious,criminal responsibilities shall be investigated. Producers or sellers shall be liable for anydamage to any person or property due to the defects of products resulting from the default ofthe producers or sellers.

Pursuant to the Tort Law of the PRC (《中華人民共和國侵權責任法》) promulgated by theStanding Committee of the National People’s Congress on December 26, 2009 and cominginto effect on July 1, 2010, a patient may make a claim against a medical institution orproducer for any damage arising from defects of a medical device. In respect of any claimmade by a patient, the medical institution is entitled to make a claim against the producerafter the settlement of the compensation paid to the patient. On May 28, 2020, the Civil Codeof the PRC (《中華人民共和國民法典》) was adopted by the third session of the 13th NationalPeople’s Congress, and became effective on January 1, 2021 and simultaneously replaced theTort Law of the PRC. The Civil Code of the PRC does not make material changes on thesubstance of aforementioned provisions of the Tort Law of the PRC.

The Law of the PRC on the Protection of the Rights and Interests of Consumers (《中華人民共和國消費者權益保護法》) was promulgated on October 31, 1993 and was recentlyamended on October 25, 2013 to protect consumers’ rights when they purchase or use goodsand accept services. All business operators must comply with this law when they manufactureor sell goods and/or provide services to customers. Under the amendments made on October25, 2013, all business operators must pay high attention to protecting customers’ privacy andmust strictly keep confidential any consumer information they obtain during their businessoperations. In addition, in extreme situations, medical product manufacturers and operatorsmay be subject to criminal liability if their goods or services lead to the death or injuries ofcustomers or other third parties.

Regulations Relating to Foreign Investment

On March 15, 2019, the National People’s Congress promulgated the Foreign InvestmentLaw of the PRC (《中華人民共和國外商投資法》), which came into effect on January 1, 2020and replaced the major former laws and regulations governing foreign investment in the PRC.Pursuant to the Foreign Investment Law of the PRC, “foreign investments” refer to theinvestment activity directly or indirectly conducted by a foreign natural person, enterprise orother organization within PRC, which include any of the following circumstances: (i) foreigninvestors setting up foreign-invested enterprises in the PRC solely or jointly with otherinvestors, (ii) foreign investors obtaining shares, equity interests, property portions or othersimilar rights and interests of enterprises within the PRC, (iii) foreign investors investing innew projects in the PRC solely or jointly with other investors, and (iv) investment of othermethods as specified in laws, administrative regulations, or as stipulated by the State Council.


REGULATORY OVERVIEW

– 162 –

On December 26, 2019, the State Council promulgated the Regulations on Implementingthe Foreign Investment Law of the PRC (《中華人民共和國外商投資法實施條例》), which cameinto effect in January 2020. After the Regulations on Implementing the Foreign InvestmentLaw of the PRC came into effect, the Regulations on Implementing the Sino-Foreign EquityJoint Venture of the PRC (《中華人民共和國中外合資經營企業法實施條例》), ProvisionalRegulations on the Duration of Sino-Foreign Equity Joint Venture (《中外合資經營企業合營期限暫行規定》), the Regulations on Implementing the Wholly Foreign-owned Enterprise Law ofthe PRC (《中華人民共和國外資企業法實施細則》) and the Regulations on Implementing theSino-foreign Cooperative Joint Venture of the PRC (《中華人民共和國中外合作經營企業法實施細則》) have been repealed simultaneously.

According to the Foreign Investment Law and its implementation rules promulgated bythe State Council on December 26, 2019 and coming into effect on January, 2020, Chinaadopts a system of pre-entry national treatment plus negative list with respect to foreigninvestment administration. The negative list will be issued by or upon approval by the StateCouncil. Foreign investment beyond the negative list will be granted national treatment.Foreign investors shall not invest in the prohibited industries as specified in the negative list,while foreign investment must satisfy certain conditions stipulated in the negative list forinvestment in the restricted industries. The current industry entry clearance requirementsgoverning investment activities in the PRC by foreign investors are set out in two categories,namely the Special Administrative Measures (Negative List) for Foreign Investment Access(《外商投資准入特別管理措施(負面清單)》), the latest amended version of which was jointlypromulgated by the Ministry of Commerce and the National Development and ReformCommission on June 23, 2020 and coming into effect as of July 23, 2020, and the EncouragedIndustry Catalogue for Foreign Investment (2020 version) (《鼓勵外商投資產業目錄(2020年版)》), which was jointly promulgated by the Ministry of Commerce and the NationalDevelopment and Reform Commission on December 27, 2020. Industries not listed in thesetwo categories are generally deemed “permitted” for foreign investment unless otherwiserestricted by other PRC laws.

The Interim Administrative Measures on the Record-filing of the Incorporation andChanges of Foreign-invested Enterprises (2018 Revision) (《外商投資企業設立及變更備案管理暫行辦法(2018年修訂)》) (the “Interim Administrative Measures”) promulgated by the Ministryof Commerce on June 29, 2018 and coming into effect on June 30, 2018 specify theincorporation and changes of foreign-invested enterprises which are not subject to the specialmanagement measures for the access of foreign investment implemented by the State.Foreign-invested enterprises or their investors shall provide true, accurate and completeinformation for filling and fill in undertakings for filing and reporting in accordance withthese measures. No false statement, misleading statement or material omission is allowed.

On December 30, 2019, the Ministry of Commerce and the State Administration forMarket Regulation, jointly promulgated the Measures for Information Reporting on ForeignInvestment (《外商投資信息報告辦法》), which came into effect on January 1 and replaced theInterim Administrative Measures. Since January 1, 2020, for carrying out investment activities


REGULATORY OVERVIEW

– 163 –

directly or indirectly in China, the foreign investors or foreign-invested enterprises shallsubmit investment information to the commerce authorities pursuant to these measures.

REGULATION OF FOREIGN EXCHANGE

On January 29, 1996, the State Council promulgated the Administrative Regulations onForeign Exchange of the PRC (《中華人民共和國外匯管理條例》) which became effective onApril 1, 1996 and was recently amended on August 5, 2008. Foreign exchange payments undercurrent account items shall, pursuant to the administrative provisions of the foreign exchangecontrol department of the State Council on payments of foreign currencies and purchase offoreign currencies, be made using self-owned foreign currency or foreign currency purchasedfrom financial institutions engaging in conversion and sale of foreign currencies by presentingthe valid document. Domestic entities and domestic individuals making overseas directinvestments or engaging in issuance and trading of overseas securities and derivatives shallprocess registration formalities pursuant to the provisions of the foreign exchange controldepartment of the State Council.

Pursuant to the Circular on Relevant Issues Concerning Foreign Exchange Control onDomestic Residents’ Offshore Investment and Financing and Roundtrip Investment throughSpecial Purpose Vehicles (《關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知》) (Circular NO. 37) issued by the State Administration of Foreign Exchange(the “SAFE”) on July 4, 2014，PRC residents shall register with local branches of SAFE inconnection with their direct establishment or indirect control of an offshore entity, for thepurpose of overseas investment and financing, with their legally owned assets or equityinterests in domestic enterprises or offshore assets or interests, referred to be a “specialpurpose vehicle” in Circular No. 37. Circular No. 37 further requires amendment to theregistration in the event of any significant changes with respect to the special purpose vehicle,such as increase or decrease of capital contributed by PRC residents, share transfer orexchange, merger, division or other material event. In the event that a PRC shareholderholding interests in a special purpose vehicle fails to fulfill the required registration, the PRCsubsidiary of that special purpose vehicle may be prohibited from making profit distributionsto the offshore parent and from carrying out subsequent cross-border foreign exchangeactivities, and the special purpose vehicle may be restricted in its ability to contributeadditional capital into its PRC subsidiary. Furthermore, failure to comply with the variousregistration requirements described above could result in liability under PRC law for evasionof foreign exchange controls.

On November 19, 2012, the SAFE issued the Circular of Further Improving andAdjusting Foreign Exchange Administration Policies on Foreign Direct Investment (《國家外匯管理局關於進一步改進和調整直接投資外匯管理政策的通知》), or the SAFE Circular 59, whichcame into effect on December 17, 2012 and was recently revised on December 30, 2019. TheSAFE Circular 59 aims to simplify the foreign exchange procedure and promote thefacilitation of investment and trade. According to the SAFE Circular 59, the opening ofvarious special purpose foreign exchange accounts, such as pre-establishment expensesaccounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of


REGULATORY OVERVIEW

– 164 –

RMB proceeds derived by foreign investors in the PRC, and remittance of foreign exchangeprofits and dividends by a foreign-invested enterprise to its foreign shareholders no longerrequire the approval or verification of SAFE, as well multiple capital accounts for the sameentity may be opened in different provinces. On February 13, 2015, the SAFE issued theNotice on Further Simplifying and Improving Foreign Exchange Administration Policies inRespect of Direct Investment (《關於進一步簡化和改進直接投資外匯管理政策的通知》), underwhich local banks will examine and handle foreign exchange registration for overseas directinvestment, including the initial foreign exchange registration and amendment registration,from June 1, 2015.

On May 11, 2013, the SAFE issued the Administrative Provisions on Foreign Exchange inDomestic Direct Investment by Foreign Investors (《外國投資者境內直接投資外匯管理規定》),or the SAFE Circular 21, which became effective on May 13, 2013, recently amended onDecember 30, 2019. The SAFE Circular 21 specifies that the administration by SAFE or itslocal branches over direct investment by foreign investors in the PRC must be conducted byway of registration and banks must process foreign exchange business relating to the directinvestment in the PRC based on the registration information provided by SAFE and itsbranches.

According to the Notice on Relevant Issue Concerning the Administration of ForeignExchange for Overseas Listing (《關於境外上市外匯管理有關問題的通知》) issued by the SAFEon December 26, 2014, the domestic companies shall register the overseas listed with theforeign exchange control bureau located at its registered address in 15 working days aftercompletion of the overseas listing and issuance. The funds raised by the domestic companiesthrough overseas listing may be repatriated to China or deposited overseas, provided that theintended use of the fund shall be consistent with the contents of the document and otherpublic disclosure documents.

According to the Notice of the State Administration of Foreign Exchange on Reformingthe Management Mode of Foreign Exchange Capital Settlement of Foreign InvestmentEnterprises (《國家外匯管理局關於改革外商投資企業外匯資本金結匯管理方式的通知》), or theSAFE Circular 19 promulgated on March 30, 2015, coming into effect on June 1, 2015 andpartially abolished on December 30, 2019, foreign-invested enterprises could settle theirforeign exchange capital on a discretionary basis according to the actual needs of theirbusiness operations. Whilst, foreign-invested enterprises are prohibited to use the foreignexchange capital settled in RMB (i) for any expenditures beyond the business scope of theforeign invested enterprises or forbidden by laws and regulations; (ii) for direct or indirectsecurities investment; (iii) to provide entrusted loans (unless permitted in the business scope),repay loans between enterprises (including advances by third parties) or repay RMB bankloans that have been on-lent to a third party; and (iv) to purchase real estate not for self-usepurposes (save for real estate enterprises).


REGULATORY OVERVIEW

– 165 –

On June 9, 2016, SAFE issued the Notice of the State Administration of ForeignExchange on Reforming and Standardizing the Foreign Exchange Settlement ManagementPolicy of Capital Account (《國家外匯管理局關於改革和規範資本項目結匯管理政策的通知》),or the SAFE Circular 16, which came into effect on the same day. The SAFE Circular 16provides that discretionary foreign exchange settlement applies to foreign exchange capital,foreign debt offering proceeds and remitted foreign listing proceeds, and the correspondingRMB capital converted from foreign exchange may be used to extend loans to related partiesor repay inter-company loans (including advances by third parties). However, there remainsubstantial uncertainties with respect to SAFE Circular 16’s interpretation andimplementation in practice.

On October 23, 2019, SAFE promulgated the Notice on Further Facilitating Cross-BoardTrade and Investment (《國家外匯管理局關於進一步促進跨境貿易投資便利化的通知》), whichbecame effective on the same date (except for Article 8.2, which became effective on January 1,2020). The notice cancelled restrictions on domestic equity investments made with capitalfunds by non-investing foreign-funded enterprises. In addition, restrictions on the use offunds for foreign exchange settlement of domestic accounts for the realization of assets havebeen removed and restrictions on the use and foreign exchange settlement of foreign investors’security deposits have been relaxed. Eligible enterprises in the pilot area are also allowed touse revenues under capital accounts, such as capital funds, foreign debts and overseas listingrevenues for domestic payments without providing materials to the bank in advance forauthenticity verification on an item by item basis, while the use of funds should be true, incompliance with applicable rules and conforming to the current capital revenue managementregulations.

REGULATIONS RELATING TO ENVIRONMENTAL PROTECTION

Environment Protection

The Environmental Protection Law of the PRC (《中華人民共和國環境保護法》), or theEnvironmental Protection Law, which was promulgated by the Standing Committee of theNational People’s Congress on December 26, 1989, came into effect on the same day and lastamended on April 24, 2014, outlines the authorities and duties of various environmentalprotection regulatory agencies. The Ministry of Environmental Protection is authorized toissue national standards for environmental quality and emissions, and to monitor theenvironmental protection scheme of the PRC. Meanwhile, local environment protectionauthorities may formulate local standards which are more rigorous than the nationalstandards, in which case, the concerned enterprises must comply with both the nationalstandards and the local standards.


REGULATORY OVERVIEW

– 166 –

Environmental Impact Appraisal

According to the Administration Rules on Environmental Protection of ConstructionProjects (《建設項目環境保護管理條例》), which was promulgated by the State Council onNovember 29, 1998, amended on July 16, 2017 and became effective on October 1, 2017,depending on the impact of the construction project on the environment, an constructionemployer shall submit an environmental impact report or an environmental impact statement,or file a registration form. As to a construction project, for which an environmental impactreport or the environmental impact statement is required, the construction employer shall,before the commencement of construction, submit the environmental impact report or theenvironmental impact statement to the relevant authority at the environmental protectionadministrative department for approval. If the environmental impact assessment documents ofthe construction project have not been examined or approved upon examination by theapproval authority in accordance with the law, the construction employer shall not commencethe construction.

According to the Environmental Impact Appraisal Law of PRC (《中華人民共和國環境影響評價法》), or the Environmental Impact Appraisal Law, which was promulgated by theStanding Committee of the National People’s Congress on October 28, 2002, recentlyamended on December 29, 2018, for any construction projects that have an impact on theenvironment, an entity is required to produce either a report, or a statement, or a registrationform of such environmental impacts depending on the seriousness of effect that may beexerted on the environment.


REGULATORY OVERVIEW

– 167 –

OVERVIEW AND HISTORY

As a company which is committed to developing and providing innovative interventionalmedical devices to patients to improve their health and quality of life, we have built a suite ofinnovative interventional medical devices targeting neuro-vascular and peripheral diseases inChina and the broader Asia-Pacific region. Our Group was founded and managed by Dr.Wang, being our chairman, executive Director, chief executive officer and chief technologyofficer, and backed by a group of sophisticated healthcare, venture capital and private equityfunds, including Sophisticated Investors. Dr. Wang, being our founder and a veteran that isreputable and well recognized in the industry, is mainly responsible for the research anddevelopment of our medical devices as well as the day-to-day management and operations ofour Group. For further details on Dr. Wang’s relevant experience, please refer to the sectionheaded “Directors and Senior Management” in this [REDACTED].

Our Company was incorporated as an exempted company with limited liability in theCayman Islands on June 21, 2017, and through various acquisitions and intragroup transfers,became the ultimate holding company of our various subsidiaries. Further details of ourcorporate structure and the acquisitions are set out in the section headed “CorporateDevelopment” below.

KEY MILESTONES

The following table illustrates the key milestones of our history and businessdevelopments:

Year Event

2017 . . . . . . . . . . . . . . . . . . . . . Our Company was incorporated.

We in-licensed technologies of our Core Product,Privi hemorrhoid cooling balloon and obtained anexclusive license to develop and commercialize ourCore Product in China in August 2017.

We completed our Series A financing and raised atotal of US$27,000,000 in September 2017.

We in-licensed technologies of our aspiration catheterand access catheter from ICI in September 2017.

2018 . . . . . . . . . . . . . . . . . . . . . We completed clinical trial on human subjects for theCore Product.

We commenced clinical trial for HMC1-NASaspiration catheter in October 2018.


HISTORY, DEVELOPMENT AND CORPORATE STRUCTURE

– 168 –

Year Event

2019 . . . . . . . . . . . . . . . . . . . . . We obtained the Class III medical device certificatefrom the NMPA for FocusLine® percutaneoustransluminal angioplasty (PTA) balloon dilationcatheter in July 2019.

2020 . . . . . . . . . . . . . . . . . . . . . . We completed our Series A+ financing and raised atotal of US$11,495,890 in April 2020.

We obtained the Class III medical device registrationcertificate from the NMPA for TracLine® accesscatheter in March 2020 and commercialized it in April2020.

We commenced clinical trial on human subjects forstent retriever in July 2020.

We completed our Series B financing and raised atotal of US$50,000,000 in October 2020.

We obtained the Class III medical device registrationcertificate from the NMPA for FocuStar® neuroballoon catheter - Rx in December 2020.

2021 . . . . . . . . . . . . . . . . . . . . . . We completed our Series C financing and raised atotal of US$50,000,000 in January 2021.

We obtained the Class II medical device registrationcertificates from Shandong MPA for the Core Productand neuro aspiration accessory in February 2021.

We commercialized our FocuStar® neuro ballooncatheter - Rx in April 2021.

We obtained the Class III medical device registrationcertificate from NMPA for Afentta® aspirationcatheter in May 2021.

We obtained the Class III medical device registrationcertificate from NMPA for Mountix® micro catheterin June 2021.

We acquired the entire share capital in HeMoSingapore from Dr. Wang on July 16, 2021 by way oftransfer of 65% of the issued shares of HeMoSingapore and establishing a trust in respect of 35%of the issued shares of HeMo Singapore held by Dr.Wang as trustee on trust for the benefit of ourCompany as beneficiary.



– 169 –

CORPORATE DEVELOPMENT

Establishment of Our Company

Our Company was incorporated as an exempted company with limited liability in theCayman Islands on June 21, 2017. Upon incorporation, one Share was allotted and issued tothe initial subscriber (an Independent Third Party) at US$0.2 par value, and was subsequentlytransferred to Gold Ridge, a limited liability company incorporated in Samoa which is directlywholly-owned by Dr. Wang, on the same day.

Further Issuance of Shares

On September 13, 2017, our Company subdivided each issued and unissued ordinaryshares of US$0.2 par value each into 200 Shares of US$0.001 par value each. In addition, ourCompany allotted and issued a total of 99,999,800 Shares of US$0.001 each on the same dayat an aggregate consideration of US$99,999.80 to Gold Ridge. Upon completion of the sharesubdivision and the share subscription, Gold Ridge held in aggregate 100,000,000 Shares ofUS$0.001 each.

On May 27, 2020, our Company allotted and issued a total of 18,321,378 Shares ofUS$0.001 each at an aggregate consideration of US$18,321.38 to ICI pursuant to the ICILicense Agreement.

Incorporation of Major Subsidiaries

The following table sets out our principal operating subsidiaries which made a materialcontribution to our results of operations during the Track Record Period:

Name

Date ofincorporation andcommencement of

businessPlace of

incorporation

Equity interestattributable to our

Group as at theLatest Practicable

Date Principal business activities Registered capital

HeMo China(1). April 19, 2016 PRC 98.65% Research anddevelopment,manufacture andoperation of medicaldevice and equipment

US$23,191,100

HeMo Jirui . . March 13, 2018 PRC 98.65% Research anddevelopment,operation of medicaldevice and equipment

RMB7,000,000

Pu Lewei . . . . October 27,2017

PRC 83.85%(2) Research anddevelopment,operation and sales ofmedical device andequipment

RMB1,000,000



– 170 –

Notes:(1) Upon establishment of our Company and after various acquisitions and intragroup transfers, HeMo

China has become an indirect subsidiary of our Company. For further details of the corporate structureof our Group, please refer to the sub-section headed “Corporate Structure” below in this section.

(2) Pu Lewei is a joint venture company which is held as to 85% by HeMo China and 15% by Privi Medical.Upon completion of the Privi Medical Acquisition (as defined below), our Company will control 98.65%of the equity interests in Pu Lewei.

Acquisition of Minority Equity Interests in HeMo China

On July 1, 2021, Max Vision Corporation Limited entered into an equity transferagreement with Weihai Shengzhuo Enterprise Management Consulting Center (LimitedPartnership) (威海聖卓企業管理諮詢中心(有限合夥)) (“Weihai Shengzhuo”) and an equitytransfer agreement with Weihai Hongwang Enterprise Management Consulting Center(Limited Partnership) (威海弘望企業管理諮詢中心(有限合夥)) (“Weihai Hongwang”),pursuant to which Max Vision Corporation Limited has agreed to acquire approximately3.16% equity interests in HeMo China held by Weihai Shengzhuo and approximately 1.59%equity interests in HeMo China held by Weihai Hongwang at the consideration ofRMB23,697,879 and RMB20,136,009 respectively. The general partner of Weihai Shengzhuoand Weihai Hongwang is Weihai Zhonghe Enterprise Management Co., Ltd. (威海市衆合企業管理諮詢有限公司), which is ultimately held by our senior management, Zhang Xinbo andMeng Chun, with Dr. Wang being its executive director and legal representative. Theconsideration was determined after arm’s length negotiations between the parties withreference to the valuation of HeMo China.

Weihai Shengzhuo and Weihai Hongwang were first established to serve as shareholdingplatforms of our Company for the benefit of our employees and business partners and toincentivize them to further promote our Group’s development. The limited partners of WeihaiShengzhuo and Weihai Hongwang are the management, consultants, and business partners ofour Group, who are all Independent Third Parties. For the purpose of the [REDACTED], ourGroup decided to acquire the minority interests in HeMo China from these shareholdingplatforms.

The acquisition was legally completed and settled on July 23, 2021. All applicablerequisite regulatory approvals have been obtained. As of the Latest Practicable Date, HeMoChina was indirectly held as to 98.65% by our Company and 1.35% by Weihai Shengzhuo.

Acquisition of HeMo Singapore and Privi Medical

Our Company agreed to acquire the beneficial interest in all the shares in issue of HeMoSingapore in the following manner (the “HeMo Singapore Acquisition”) at a nominalconsideration of S$1:

(a) transfer of the legal and beneficial ownership of 65% of the issued shares of HeMoSingapore from Dr. Wang to our Company pursuant to an equity transfer agreemententered into by our Company and our controlling shareholder and executiveDirector, Dr. Wang, on July 16, 2021. After the transfer, our Company becomes thelegal and beneficial owner of 65% of the shares in HeMo Singapore; and



– 171 –

(b) establishment of a trust in respect of the remaining 35% of the issued shares inHeMo Singapore (the “Concerned Shares”) pursuant to a deed of declaration andacknowledgement of trust entered into between Dr. Wang as the trustee and ourCompany as the beneficiary on July 16, 2021 (the “Trust Deed”), whereby theConcerned Shares are held by Dr. Wang as trustee on trust for the benefit of ourCompany as beneficiary.

Pursuant to the Trust Deed, our Company has control over the voting power attached tothe Concerned Shares as Dr. Wang shall exercise voting powers and other rights in respect ofthe Concerned Shares in such manner as our Company from time to time directs and shall notvote at any meetings of HeMo Singapore in respect of the Concerned Shares contrary to anydirections of our Company. Further, under the Trust Deed, Dr. Wang holds the ConcernedShares and all dividends, rights and interests accruing to or to accrue upon the same or any ofthem upon trust, exclusively, for the sole benefit, and to the order of our Company inaccordance with the terms of the Trust Deed. Dr. Wang shall at all times deal with theConcerned Shares and the dividends and proceeds thereof and any rights or privileges now orhereafter appertaining thereto in accordance with the instructions from time to time given toDr. Wang by our Company and not otherwise. The interest in the Concerned Shares belongssolely to our Company and vests in our Company absolutely. The reason for having such trustarrangement is to optimize the HeMo Singapore's accessibility and eligibility to governmentassistance, grants, subsidies, incentives and resources which are only made available toSingapore local enterprise.

HeMo Singapore has not commenced business activities since its incorporation. TheHeMo Singapore Acquisition was legally completed and settled on July 16, 2021. Aftercompletion of the HeMo Singapore Acquisition, HeMo Singapore is deemed to be awholly-owned subsidiary of our Company as our Company is entitled to all the economicbenefits associated with the ownership interest in the Concerned Shares held by Dr. Wang ontrust through the trust arrangement. The results of operations of HeMo Singapore will beconsolidated into our Group’s financial results under the applicable accounting principles.

On July 2, 2021, HeMo Singapore entered into a legally-binding term sheet (the “TermSheet”) with all the existing shareholders of Privi Medical to acquire the entire issued sharecapital of Privi Medical, which owns the exclusive licence (the “Exclusive Licence”) to userelevant part of certain technology in relation to the Core Product, Privi hemorrhoid coolingballoon, of our Company, including the licensed worldwide patent application, to use, make,manufacture, distribute, market, import, export and sell the Core Product (the “Privi MedicalAcquisition”, together with the HeMo Singapore Acquisition, the “Acquisitions”). Apart fromholding the Exclusive Licence, Privi Medical has no other business activities. Pursuant to theTerm Sheet, the aggregate consideration is S$2,500,000, which has been determined based oncommercial negotiations with reference to the value of the Exclusive License. The PriviMedical Acquisition is expected to be completed prior to the [REDACTED]. Upon completionof the Privi Medical Acquisition, Privi Medical will be deemed as a wholly-owned subsidiaryof our Company.



– 172 –

Our Directors believe that the terms of the Acquisitions are fair and reasonable and inthe interests of the Shareholders as a whole. To the best of our Directors’ knowledge,information and belief, having made all reasonable enquiries, save as Dr. Wang being the soleshareholder of HeMo Singapore and holding 11.86% of shareholding in Privi Medical, othershareholders of Privi Medical and their respective ultimate beneficial owners are third partiesindependent from our Company and our connected persons. our Company will use its internalresources to satisfy the consideration in relation to the Acquisitions. No regulatory approvalwill be required for the Acquisitions.

The Board considers that the Acquisitions will allow our Group to have better controlover the intellectual property rights in relation to the Privi Product and enable HeMoSingapore, as a strategic business hub of our Group, to implement the expansion plan of ourCompany in respect of its products, including the Core Product, in the Asia-Pacific Region.For further information on the business and development plan of our Group in Singapore,please refer to the sub-section headed “Business—Our Production Facilities andProcesses—Production Facilities” and “Our Strategies—Penetrate the broader Asia-Pacificmarkets and build a cross-border business platform” in this [REDACTED].

[REDACTED] INVESTMENTS

We completed Series A financing, Series A+ financing, Series B financing and Series Cfinancing during the period from September 2017 to January 2021.

Overview

(1) Series A Financing

On September 22, 2017, we entered into a Series A Preferred Share subscriptionagreement with Gold Ridge, Easeplus Inc. (“Easeplus”) and Thirasia (together with Easeplus,the “Series A Preferred Shareholders”), pursuant to which our Company allotted and issued (i)13,333,333 Series A Preferred Shares to Gold Ridge; (ii) 40,000,000 Series A Preferred Sharesto Easeplus; and (iii) 36,666,667 Series A Preferred Shares to Thirasia at an aggregateconsideration of US$27,000,000.

(2) Series A+ Financing

On April 25, 2020, we entered into the Series A+ Preferred Share subscription letter withGold Ridge (the “Series A+ Preferred Shares Subscriber” or “Series A+ PreferredShareholder”), pursuant to which our Company allotted and issued to the Series A+ PreferredShares Subscriber (i) 3,500,000 Series A Preferred Shares in consideration of services providedby Dr. Wang as the executive chairman of HeMo China from January 1, 2017 to December 31,2019; and (ii) 17,195,850 Series A+ Preferred Shares, at an aggregate consideration ofUS$11,495,890.



– 173 –

(3) Series B Financing

On October 10, 2020, we entered into the Series B Preferred Share subscriptionagreement (the “Series B Preferred Share Subscription Agreement”) with Series B PreferredShares Subscribers (as defined below), pursuant to which our Company allotted and issuedSeries B Preferred Shares to AUT-XV Holdings Limited (“AUT-XV”), LC Healthcare Fund II,L.P. (“LC”), PHC MedTech Investment, L.P. and Tekful Limited (together with AUT-XV, LCand PHC MedTech Investment, L.P. (“PHC”), the “Series B Preferred Shares Subscriber(s)” orthe “Series B Preferred Shareholders”), at an aggregate consideration of US$50,000,000.Number of Series B Preferred Shares subscribed by each Series B Preferred Shares Subscriberand further details of the Series B financing are set forth in the sub-section headed“Shareholding Structure” in this section.

Pursuant to the Series B Preferred Share Subscription Agreement, our Company hasallotted and issued 4,329,248 Shares to ICI at nil consideration on October 16, 2020 pursuantto the anti-dilution right of ICI under the Series B Preferred Share Subscription Agreement.Such right will automatically cease to be effective upon [REDACTED].

(4) Series C Financing

On January 5, 2021, we entered into the Series C Preferred Share subscription agreementthe “Series C Preferred Share Subscription Agreement”) with Series C Preferred SharesSubscribers (as defined below), pursuant to which our Company allotted and issued Series CPreferred Shares to Gold Ridge, AUT-XV, LC, LAV Biosciences Fund V, L.P. (“LAV”), HBCAsia Healthcare Opportunities VI LLC (“HBC”), Octagon Investments Master Fund L.P.,Octagon Private Opportunities Fund L.P., OrbiMed Genesis Master Fund, L.P., OrbiMedNew Horizons Master Fund, L.P., TB Early Stage Technologies Holdings Limited(“TrustBridge”), Mr. Qing Yang and Harmony Achieve Investments Limited (altogether,“Series C Preferred Shares Subscriber(s)” or the “Series C Preferred Shareholders”, andtogether with Series A Preferred Shareholders, Series A+ Preferred Shareholder and Series BPreferred Shareholders, the “Preferred Shareholders”), at an aggregate consideration ofUS$50,000,000. Number of Series C Preferred Shares subscribed by each Series C PreferredShares Subscriber and further details of Series C financing are set forth in the sub-sectionheaded “Shareholding Structure” in this section.

Pursuant to the Series C Preferred Share Subscription Agreement, our Company hasallotted and issued 4,549,393 Shares to ICI at nil consideration on January 12, 2021 pursuantto the anti-dilution right of ICI under the Series C Preferred Share Subscription Agreement.Such right will automatically cease to be effective upon [REDACTED].



– 174 –

Shareholding Structure

The below table is a summary of the capitalization of our Company as at the LatestPracticable Date:

Shareholders Shares

Series APreferredShares(1)

Series A+PreferredShares(2)

Series BPreferredShares(3)

Series CPreferredShares(4) Subtotal

Ownershippercentage asof the LatestPracticable

Date

Ownershippercentageas of the

[REDACTED](5)

Gold Ridge . . . . . . . 100,000,000 50,166,666(6) 17,195,850 – 2,113,905 169,476,421 49.85% [REDACTED]ICI . . . . . . . . . . . 27,200,019 – – – – 27,200,019 8.00% [REDACTED]Easeplus . . . . . . . . – 40,000,000 – – – 40,000,000 11.77% [REDACTED]Thirasia . . . . . . . . . – 3,333,334(6) – – – 3,333,334 0.98% [REDACTED]AUT-XV . . . . . . . . – – – 24,893,177 314,423 25,207,600 7.41% [REDACTED]LC . . . . . . . . . . . – – – 14,935,906 188,654 15,124,560 4.45% [REDACTED]PHC . . . . . . . . . . – – – 4,978,635 – 4,978,635 1.46% [REDACTED]Tekful Limited . . . . . – – – 4,978,635 – 4,978,635 1.46% [REDACTED]LAV . . . . . . . . . . . – – – – 14,156,641 14,156,641 4.16% [REDACTED]HBC . . . . . . . . . . – – – – 7,078,322 7,078,322 2.08% [REDACTED]Octagon Investments

Master Fund L.P. . . . – – – – 1,769,580 1,769,580 0.52% [REDACTED]Octagon Private

Opportunities FundL.P. . . . . . . . . . . – – – – 1,769,580 1,769,580 0.52% [REDACTED]

OrbiMed GenesisMaster Fund, L.P. . . – – – – 2,123,496 2.123,496 0.63% [REDACTED]

OrbiMed New HorizonsMaster Fund, L.P.. . . – – – – 1,415,664 1,415,664 0.42% [REDACTED]

TrustBridge . . . . . . . – – – – 3,539,160 3,539,160 1.04% [REDACTED]Mr. Qing Yang . . . . . – – – – 353,916 353,916 0.10% [REDACTED]Harmony Achieve

Investments Limited . – – – – 568,262 568,262 0.17% [REDACTED]Adventure Wave

DevelopmentLimited(7) (“AdventureWave”) . . . . . . . . 16,926,419 – – – – 16,926,419 4.98% [REDACTED]

[REDACTED]shareholders . . . . . [REDACTED] – – – – [REDACTED] – [REDACTED]

Total . . . . . . . . . . [REDACTED] 93,500,000 17,195,850 49,786,353 35,391,603 [REDACTED] 100% 100%

Notes:(1) Based on the assumption that one Series A Preferred Share is convertible into one Share.(2) Based on the assumption that one Series A+ Preferred Share is convertible into one Share.(3) Based on the assumption that one Series B Preferred Share is convertible into one Share.(4) Based on the assumption that one Series C Preferred Share is convertible into one Share.



– 175 –

(5) Assuming the [REDACTED] is not exercised and the RSUs under the RSU Scheme have not been vested.(6) 33,333,333 Series A Preferred Shares have been subsequently transferred from Thirasia to Gold Ridge

on July 19, 2019.(7) Adventure Wave is the wholly-owned subsidiary of a professional trustee services company (“RSU

Trustee”) and holds the shares on trust for the benefit of the participants of the RSU Scheme. Forfurther details, please refer to the section headed “Statutory and General Information—D. RSUScheme” in Appendix IV to this [REDACTED] for details.

Principal Terms of the [REDACTED] Investments

The below table summarizes the principal terms of the [REDACTED] Investments:

Series A financing Series A+ financing Series B financing Series C financing

Cost per PreferredShare paid . . . . . . . .

US$0.30 US$0.6685 US$1.0043 US$1.4128

Amount ofconsideration paid. . .

US$27,000,000 US$11,495,890 US$50,000,000 US$50,000,000

Date of the subscriptionagreements/letters . . .

September 22,2017

April 25, 2020 October 10,2020

January 5, 2021

Date on whichinvestment was fullysettled . . . . . . . . . . .

September 26,2017

April 25, 2020 October 16,2020

January 12,2021

Discount to the[REDACTED](1). . . . .

[REDACTED] [REDACTED] [REDACTED] [REDACTED]

Post-money valuation ofour Company . . . . . .

US$57.0 million US$153.1million(2)

US$284.3million(3)

US$456.4million(4)

[REDACTED] from the[REDACTED]Investments . . . . . . .

The proceeds from the [REDACTED] Investments were mainly used forthe operation of the business of our Group, licensing fees and clinicaltrial of our Core Product and key product, R&D of our pipelineproducts, manufacturing capacity expansion. As at May 31, 2021,approximately 37.1% of the [REDACTED] from the [REDACTED]Investments were utilized. We intend to continue to utilize theremaining [REDACTED] from the [REDACTED] Investments afterthe [REDACTED].

Basis of determiningthe consideration . . .

The basis of determination for the consideration for the [REDACTED]Investments were from arm’s length negotiations between ourCompany and the [REDACTED] Investors after taking intoconsideration the timing of the investments and the status of ourbusiness and operating entities.



– 176 –

Series A financing Series A+ financing Series B financing Series C financing

Strategic benefits of the[REDACTED]Investors brought toour Company . . . . . .

At the time of the [REDACTED] Investments, our Directors were of theview that our Company could benefit from the additional capital thatwould be provided by the [REDACTED] Investors’ investments in ourCompany and the [REDACTED] Investors’ knowledge and experience.

(1) Assuming the [REDACTED] is fixed at [REDACTED] per [REDACTED], being the mid-point of theindicative [REDACTED] range, on the basis of our enlarged share capital immediately upon completionof the [REDACTED].

(2) The increase from the post-money valuation of Series A financing to the pre-money valuation of SeriesA+ financing was mainly because (i) we in-licensed technologies of our Core Product, Privi hemorrhoidcooling balloon, (ii) we in-licensed technologies of our aspiration catheter and access catheter from ICI,(iii) we commenced clinical trial for HMC1-NAS aspiration catheter, and (iv) we obtained the Class IIImedical device certificate from the NMPA for FocusLine® percutaneous transluminal angioplasty(PTA) balloon dilation catheter.

(3) The increase from the post-money valuation of Series A+ financing to the pre-money valuation ofSeries B financing was mainly because our TracLine® access catheter has obtained the approval fromNMPA and was commercialized. We also commenced clinical trial on human subjects for our stentretriever.

(4) The increase from the post-money valuation of Series B financing to the pre-money valuation of SeriesC financing was mainly because (i) we obtained the Class III medical device registration certificate forour FocuStar® neuro balloon catheter – Rx, (ii) we established HeMo Singapore, and (iii) the sales andmarketing personnel has joined us.

Lock-up Period

The equity securities of our Company acquired by the [REDACTED] Investors in the[REDACTED] Investments will be subject to a lock-up period of not exceeding 180 days fromthe [REDACTED] as may be requested by our Company or such [REDACTED], except forwith the prior written consent of our Company, the Joint Sponsors and the [REDACTED].

Rights of [REDACTED] Investors

Each Preferred Shares shall be converted into such number of Shares of our Companyimmediately before the completion of the [REDACTED] as determined by dividing theoriginal [REDACTED] of such Preferred Share by the corresponding initial conversion priceas follows: (i) US$0.30 for Series A Preferred Shares; (ii) US$0.6685 for Series A+ PreferredShares; (iii) US$1.0043 for Series B Preferred Shares; and (iv) US$1.4128 for Series CPreferred Shares. All the Shareholders (including the [REDACTED] Investors) of ourCompany are bound by the third amended and restated shareholders agreement dated January12, 2021 (as amended from time to time) which superseded all previous agreements among thecontracting parties in respect of the Shareholders’ rights in our Company.

The principal special rights granted to the [REDACTED] Investors pursuant to the thirdamended and restated shareholders’ agreement and the fifth amended and restatedmemorandum and articles of association include the customary protective provisions,pre-emptive rights, rights of first refusal and co-sale, drag-along rights, divestment rights,anti-dilution rights, prior consent for certain corporate actions, directors’ nomination rights,information rights, inspection rights etc. The divestment right will be terminated when our



– 177 –

Company files its [REDACTED], while all other special rights shall automatically cease to beeffective and be discontinued immediately prior to or upon the completion of the[REDACTED].

Background Information about the [REDACTED] Investors

Our [REDACTED] Investors include Sophisticated Investors, such as dedicated, reputableand sizeable funds specializing in the healthcare, biotech, biomedical and biopharmaceuticalsectors. The background information on our [REDACTED] Investors which made meaningfulinvestment in our Company is set out below:

3H

Easeplus, PHC and Harmony Achieve Investments Limited are all operated under 3HHealth Investment (as defined below), which is a life science investment firm specializing inequity investments in the life sciences and healthcare sectors and technologies. 3H HealthInvestment focuses on China, and partners with entrepreneurs to realize the growth potential.

Specifically, Easeplus, a company incorporated under the laws of the British VirginIslands and is wholly-owned by 3H Health Investment Fund I., L.P., a Cayman Islandsexempted limited partnership fund, with 3H Health Investment GP I Ltd. acts as its generalpartner. 3H Health Investment GP I Ltd. also acts as PHC’s general partner. HarmonyAchieve Investments Limited is a company incorporated under the Laws of the British VirginIslands, which is wholly-owned by 3H Health Investment Fund II, L.P., a Cayman Islandsexempted limited partnership fund, with 3H Health Investment GP II Ltd. acts as its generalpartner (together with 3H Health Investment GP I Ltd., the “3H Health Investment”). Both3H Health Investment Fund I., L.P. and 3H Health Investment Fund II, L.P. are managed by3H Health Investment, which is indirectly wholly-owned by our Director, Dr. Wang Shunlong.3H therefore will be connected persons of our Company upon [REDACTED].

Hillhouse

AUT-XV Holdings Limited is an exempted company incorporated under the laws of theCayman Islands. AUT-XV Holdings Limited is ultimately managed and controlled byHillhouse Investment Management Limited (“Hillhouse”), an exempted companyincorporated under the laws of Cayman Islands. Founded in 2005, Hillhouse is a global firmof investment professionals and operating executives who are focused on building andinvesting in high quality business franchises that achieve sustainable growth. Independentproprietary research and industry expertise, in conjunction with world-class operating andmanagement capabilities, are key to Hillhouse's investment approach. Hillhouse partners withexceptional entrepreneurs and management teams to create value, often with a focus onenacting innovation and technological transformation. Hillhouse invests in the healthcare,consumer, consumer technology, TMT, financials and business services sectors in companiesacross all equity stages. Hillhouse and its group members manage assets on behalf of globalinstitutional clients. AUT-XV Holdings Limited is a Sophisticated Investor.



– 178 –

ICI

Imperative Care, Inc., headquartered in Campbell, California, was founded in 2015 todevelop innovative solutions for patient needs along the continuum of stroke care. ICI isultimately owned by limited partners, investment funds and individuals who are IndependentThird Parties, save for Dr. Wang who is interested in a small percentage of shareholding inICI. In 2020, ICI began the U.S. commercial launch of its first two 510(k)-cleared productplatforms, a line of novel access catheters called large distal platform designed to facilitatesmooth, consistent navigation into blood vessels of the brain for treatment of ischemic andhemorrhagic conditions and the ZOOM aspiration system, a family of products designed tofacilitate clot removal during ischemic stroke. In addition, ICI is developing a broad portfolioof innovative technologies designed to elevate the standard of care for stroke patients.

Legend Capital

LC Healthcare Fund II, L.P., a Cayman Islands exempted limited partnership managedby Legend Capital Management Co., Ltd. and its affiliates (“Legend Capital”). LegendCapital, founded in April 2001, is the independent venture capital investment subsidiary underLegend Holdings. In February 2012, Legend Capital took the new Chinese name “Junlian (君聯)”. Legend Capital is now managing several US$ funds and RMB funds with a total assetsunder management of US$9 billion, and focusing on innovation and growth enterprises withoperations in China or related to China. By 2021, Legend Capital has invested in over 550companies, nearly 90 are successfully listed on domestic or overseas capital market.

Other [REDACTED] Investors

Thirasia is an exempted company incorporated with limited liability under the laws of theCayman Islands and is engaged in investment holding. Thirasia is wholly-owned by DelosCapital Fund II, LP, an exempted limited partnership registered as private fund under thePrivate Funds Act (As Revised) of the Cayman Islands, with Delos Capital GP II, LP, anexempted company incorporated under the laws of Cayman Islands, being its general partner.Delos Capital GP II, LP is indirectly wholly-owned by Delos Capital Holdings Limited, anexempted company incorporated with limited liability under the laws of the Cayman Islands,which is in turn ultimately held as to 50% by Mr. Henry Chen and 50% by three otherindividuals. To the best knowledge of our Directors, Thirasia and its beneficial owners areIndependent Third Parties.

Tekful Limited, an investment company, is a limited liability company incorporated inBVI and is mainly engaged in investment business, which is wholly-owned by Mr. Cai DongChen, an Independent Third Party.

LAV Biosciences Fund V, L.P. (“LAV”) is a Cayman Islands exempted limitedpartnership. LAV is a discretionary fund, which is ultimately controlled by Dr. Yi Shi (施毅),who is the founder and a managing partner of Lilly Asia Ventures, a leading Asia-based life



– 179 –

science investment firm with portfolios covering all major sectors of the biomedical andhealthcare industry including biopharmaceuticals, medical devices, diagnostics and healthcareservices. Founded in 2008, LAV is one of the biomedical venture firms with the longesthistories in China. LAV is managed by a team of professionals with substantial biomedicaldomain expertise, as well as extensive investing experiences.

HBC Asia Healthcare Opportunities VI LLC is an investment vehicle managed byHudson Bay Capital Management LP (“Hudson Bay”). Hudson Bay is a multi-billion dollarasset management firm operating in New York and London. With over 100 employees,Hudson Bay has been managing assets on behalf of outside investors since 2006. The firminvests across multiple strategies by utilizing rigorous fundamental analysis, and seeks toidentify value and growth opportunities that are uncorrelated to each other and marketindices. Hudson Bay promotes an integrated team culture emphasizing collaboration andcross-pollination of ideas across sectors and strategies. Its dedicated investment team seeks toachieve outstanding performance by investing in companies that are poised for growth or areundervalued while maintaining a focus on risk management. Hudson Bay has previouslyinvested in biotech companies listed on the Stock Exchange.

Octagon Investments Master Fund LP and Octagon Private Opportunities Fund L.P.operate as private investment funds, with Octagon Investments GP, LLC acting as theirgeneral partner. Octagon Capital Advisors LP (“Octagon Capital”), a Delaware limitedpartnership and registered investment advisor with the U.S. Securities Exchange Commission,serves as the investment manager to Octagon Investments Master Fund LP and OctagonPrivate Opportunities Fund L.P. Founded in 2019, Octagon Capital is a multi-stage investmentmanager dedicated to evidence-based investing in public and private healthcare companies.Octagon Capital strives to build concentrated, long-term investments and work with ourportfolio management teams as partners. Octagon Capital manages capital on behalf of globalinstitutions such as university endowments, non-profit foundations, family offices, pensionfunds and established asset managers.

OrbiMed Genesis Master Fund, L.P. (“Genesis”) and OrbiMed New Horizons MasterFund, L.P. (“Horizons”, and together with Genesis, the “OrbiMed Funds”) are each exemptedlimited partnerships incorporated under the laws of the Cayman Islands with OrbiMedAdvisors LLC acting as the investment manager. OrbiMed Advisors LLC (“Advisors”)exercises voting and investment power through a management committee comprised of Carl L.Gordon, Sven H. Borho and W. Carter Neild. Advisors and its affiliates (collectively“OrbiMed”) manages public and private company investments of over US$17 billionworldwide. OrbiMed invests globally in the healthcare industry with investments range fromearly-stage private companies or start-ups to large multinational corporations. OrbiMedFunds are dedicated healthcare and biotech funds and thus Sophisticated Investors.

TrustBridge is an exempted company incorporated under the laws of Cayman Islands andis principally engaged in equity investments. TrustBridge is controlled by TB ManagementInvestment Holdings Limited, a limited company registered in the British Virgin Island, whichis in turn ultimately controlled by Mr. Li Shujun, an Independent Third Party.



– 180 –

Mr. Qing Yang is an Independent Third Party to the best knowledge of our Directors.

To the best knowledge, information and belief of our Directors, save for the[REDACTED] Investment and save as disclosed above, none of [REDACTED] Investors ortheir ultimate beneficial owners has any other relationship with our Group or any connectedperson of our Company.

[REDACTED]

Compliance with Interim Guidance

On the basis that (i) the consideration for the [REDACTED] Investments was settled morethan 28 clear days before the date of [REDACTED] (ii) the divestment right granted to the[REDACTED] Investors will be terminated when our Company files its [REDACTED], and (iii)all other special rights granted to the [REDACTED] Investors will terminate prior to the[REDACTED], the Joint Sponsors are not aware of any circumstances or incidences that couldlead to their belief that the [REDACTED] Investments are not in compliance with the InterimGuidance on [REDACTED] Investments issued by the Stock Exchange on October 13, 2010and as updated in March 2017 and the Guidance Letter HKEx-GL43-12 issued by the StockExchange in October 2012 and as updated in July 2013 and March 2017.



– 181 –

ADOPTION OF THE RSU SCHEME AND ESTABLISHMENT OF THE EMPLOYEETRUST

On June 22, 2021, we adopted the RSU Scheme. As at the Latest Practicable Date,pursuant to the RSU Scheme, we have granted an aggregate of 16,418,934 restricted shareaward (each a “RSU”, or collectively “RSUs”), representing rights to receive 16,418,934Shares upon vesting of the RSUs, to certain grantees who are our employees and externaladvisors of our Group.

On June 24, 2021, our Company entered into a trust deed with the RSU Trustee, pursuantto which the RSU Trustee has agreed to act as the trustee to administer the RSU Scheme andto hold the Shares which will subsequently be used to satisfy the vesting of the outstandinggranted under the RSU Scheme. On July 2, 2021, our Company allotted and issued a total of16,926,419 Shares to Adventure Wave, a wholly-owned subsidiary of the RSU Trustee at a parvalue of US$0.001 each. Please refer to the section headed “Statutory and GeneralInformation—D. RSU Scheme” in Appendix IV to this [REDACTED] for details.

PRC COMPLIANCE

SAFE Registration in the PRC

According to the SAFE Circular 37 promulgated by the SAFE on July 4, 2014 and witheffect from the same date, which replaced the Circular on Relevant Issues Concerning ForeignExchange Control on Domestic Resident’s Corporate Financing and Roundtrip InvestmentThrough Offshore Special Purpose Vehicles (《關於境內居民通過境外特殊目的公司融資及返程投資外匯管理有關問題的通知》) (the “SAFE Circular 75”), the domestic resident shall conductforeign exchange registration for offshore investment with the SAFE before a domesticresident contributes its legally owned onshore or offshore assets and equity into a specialpurpose vehicle (“SPV”), and modify corresponding registration information accordinglywhen any change of stipulated circumstances occurs. Failure to comply with relevantregulations on foreign exchange registration could result in punishment and subject the PRCsubsidiaries of such SPV to restrictions on foreign exchange activities, including but notlimited to restriction on distribution of dividends to offshore Shareholders.

Our PRC legal advisors, Jingtian & Gongcheng, have advised us that our ControllingShareholder, Dr. Wang, is not required to make registration for the investment in ourCompany under SAFE Circular 37.

M&A Rules

The Ministry of Commerce (the “MOFCOM”), the State-owned Assets Supervision andAdministration Commission of the State Council, the State Administration of Taxation, theState Administration for Industry & Commerce, the China Securities Regulatory Commission,and the SAFE jointly promulgated the Rules on the Merger and Acquisition of DomesticEnterprises by Foreign Investors (《關於國外投資者併購境內企業的規定》) (the “M&A Rules”)



– 182 –

on August 8, 2006, which came into effect on September 8, 2006 and was amended byMOFCOM on June 22, 2009. Under the M&A Rules, (i) if any domestic company, enterpriseor natural person merges or acquires its affiliated domestic companies in the name of thecompanies in foreign countries legally established or controlled by the aforesaid domesticcompanies, enterprises or natural persons, it shall be subject to the approval of MOFCOM,(ii) any overseas listing transactions of SPVs shall be approved by the Securities RegulatoryAdministration of the State Council (the “CSRC”), while SPVs refer to overseas companiescontrolled directly or indirectly by PRC domestic subsidiaries or natural persons for thepurpose of realizing an overseas listing of the interest in PRC domestic subsidiaries that isactually owned by them.

Our PRC legal advisors, Jingtian & Gongcheng, have advised us that HeMo China wasestablished as a foreign-owned enterprise by means of direct investment rather than themerger or acquisition by our Company under the M&A Rules. As such, unless new laws andregulations are enacted or MOFCOM and CSRC publish new provisions or interpretations onthe M&A Rules to the contrary in the future, the establishment of wholly foreign-ownedenterprise is not subject to the M&A Rules and approval from MOFCOM or CSRC for the[REDACTED] is not required under the M&A Rules.

CORPORATE STRUCTURE

The corporate structure of our Group immediately before the completion of the[REDACTED] (assuming the [REDACTED] is not exercised) is as follows:

49.85%

100%

13.40% 0.98% 8.00% 7.41% 1.46% 4.45% 4.16%

100%

100%

100%

98.65%

85%

2.08% 1.05% 1.04% 1.04% 0.10% 4.98%

Offshore

OnshoreHeMo China

(PRC)

HeMo Jirui

(PRC)Pu Lewei(2)

(PRC)

Gold

Ridge3H(4) Thirasia ICI Hillhouse Tekful LC LAV

Company

(Cayman)

Tree House

(BVI)

Max Vision

(HK)

HBC OrbiMed(5) Octagon(6)TrustBridgeQing

YangAdventure

Wave

Dr Wang

HeMo Singapore(1)

(Singapore)

Weihai Shengzhuo(3)

(PRC)

1.35%

65%35%

(1) Our Company has acquired 65% of the issued shares in HeMo Singapore from Dr. Wang and theremaining 35% of the issued shares in HeMo Singapore is held by Dr. Wang as trustee on trust for thebenefit of our Company as beneficiary.



– 183 –

(2) Pu Lewei is a joint venture company which is held as to 15% by Privi Medical. As at the LatestPracticable Date, Privi Medical is held as to approximately 11.86% by Dr. Wang and other IndependentThird Parties to the best knowledge of our Directors.

(3) Weihai Shengzhuo is a limited partnership. The general partner of Weihai Shengzhuo is Weihai ZhongheEnterprise Management Consulting Co., Ltd. (威海市衆合企業管理諮詢有限公司), which is ultimatelyheld by our senior management, Zhang Xinbo as to 51% and Meng Chun as to 49%. The limited partnerholding 30% or more of equity in Weihai Shengzhuo is Yu Zhengrui, who is an Independent Third Partyto the best knowledge of our Directors.

(4) This represents the aggregate of 11.77%, 1.46% and 0.17 of shares held by Easeplus, PHC and HarmonyAchieve Investments Limited in our Company respectively.

(5) This represents the aggregate of 0.63% and 0.42% of shares held by OrbiMed Genesis Master Fund, L.P.and OrbiMed New Horizons Master Fund, L.P. in our Company respectively.

(6) This represents the aggregate of 0.52% and 0.52% held by Octagon Investments Master Fund L.P. and

Octagon Private Opportunities Fund L.P. in our Company respectively.

The corporate structure of our Group immediately following the completion of the[REDACTED] (assuming the [REDACTED] is not exercised and the Acquisitions by ourCompany have been completed) is as follows:

[REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]

100%

100%

100%

65%

100%

100%

98.65%

15%

85%

Offshore

OnshoreHeMo China

(PRC)

HeMo Jirui

(PRC)Pu Lewei(1)

(PRC)

HeMo Singapore(1)

(Singapore)

Privi Medical

(Singapore)

Gold

Ridge3H(3) Thirasia ICI Hillhouse Tekful LC LAV

Company

(Cayman)

Tree House

(BVI)

Max Vision

(HK)

HBC OrbiMed(4) Octagon(5)TrustBridge

Qing

YangPublic

Dr Wang

1.35% Weihai Shengzhuo(2)

(PRC)

35%

Adventure Wave

(1) Assuming prior to [REDACTED], HeMo Singapore has acquired the entire issued share capital of PriviMedical. For further details of the trust arrangement in relation to HeMo Singapore, please refer toNote (1) to the corporate structure of our Group immediately before the completion of the[REDACTED].

(2) Please refer to Note (3) to the corporate structure of our Group immediately before the completion ofthe [REDACTED].






– 184 –

OUR MISSION

We are committed to developing and providing innovative interventional medical devicesto patients to improve their health and quality of life.

OVERVIEW


• Neuro-interventional medical devices: We have a comprehensive suite of productscovering the ischemic stroke (comprising acute ischemic stroke and intracranialartery stenosis), hemorrhagic stroke and neuro access fields, providing holisticsolutions for neuro-interventional procedures. We obtained the Class III medicaldevice registration certificate for our Afentta® aspiration catheter in May 2021 andcommercialized it in July 2021, making it the first domestic aspiration catheterapproved by the NMPA and commercialized to treat AIS, according to Frost &Sullivan. This gives us a strategic, first-mover advantage in the treatment of AISpatients using ADAPT (namely, A Direct Aspiration First Pass Technique) therapy.We are also finalizing the clinical trial for our HMC1-NAS aspiration catheter,which contains the 088 model with potentially the world’s largest distal innerdiameter in the market once approved, according to Frost & Sullivan. In addition,we are conducting a clinical trial for our self-developed stent retriever. As of theLatest Practicable Date, we had successfully commercialized threeneuro-interventional products, namely our TracLine® access catheter, FocuStar®

neuro balloon catheter – Rx and Afentta® aspiration catheter. In addition, weexpect to commercialize another two and four neuro-interventional medical devicesby the end of 2021 and 2022, respectively.


BUSINESS

– 185 –

• Peripheral interventional medical devices: We have strategically tapped into theperipheral non-vascular devices market with our Privi hemorrhoid cooling balloon,which has obtained NMPA approval and will be commercialized in the fourthquarter of 2021. This product employs only physical mechanism to treathemorrhoids, eliminating the need for medication or ingredients that may beassociated with side effects. It is therefore potentially suitable and safe for patientswith special medication requirements, including pregnant women and women duringthe lactation period. In addition, we have obtained NMPA approval for ourFocusLine® PTA balloon dilation catheter, a peripheral vascular device for thetreatment of peripheral artery diseases, and expect to commercialize this product in2022. We also have three other peripheral vascular product candidates at variousstages of development.

China’s neuro-interventional medical devices market is still at its early stage ofdevelopment and is under-penetrated with strong growth momentum. According to Frost &Sullivan, driven by improved infrastructure, an increasing number of capable physicians,increasing affordability of such treatment and favorable governmental policies, the volume ofneuro-interventional procedures in China increased at a CAGR of 15.8% from 91.4 thousandin 2016 to 164.2 thousand in 2020. This volume is expected to grow at a CAGR of 32.7% from2020 to 675.3 thousand in 2025 and further increase at a CAGR of 21.4% from 2025 to 1.78million in 2030. In addition, the number of mechanical thrombectomy procedures in Chinaincreased at a CAGR of 29.5% from 17.6 thousand in 2016 to 49.5 thousand in 2020. Thisnumber is expected to increase at a CAGR of 43.9% from 2020 to 305.2 thousand in 2025 andfurther at a CAGR of 23.6% from 2025 to 881.3 thousand in 2030.

Leveraging our comprehensive product portfolio, we believe that we are well positionedto lead the continued evolution of China’s AIS treatment paradigm by promoting the ADAPTtherapy. Based on various research studies, ADAPT has several advantages as a first-linetherapy in mechanical thrombectomy, including superior safety, higher first-passrecanalization rate, higher TICI 2b/3 recanalization rate, shorter treatment duration, ease ofuse and lower overall device cost compared to the stent retriever technique. As a result,ADAPT has been used increasingly in clinical practice in recent years. It is also expected thatADAPT’s Class of Recommendation (COR) in the AIS treatment guidelines in China willlikely be raised, indicating significant growth potential in China.

Meanwhile, hemorrhoid is one of the most common clinical anorectal diseases. In China,724.9 million people had hemorrhoids in 2020, and the prevalence rate of hemorrhoids inChina has exceeded 50% among adults, according to Frost & Sullivan. While there are somecommon therapies for hemorrhoids, many of them may not be sufficiently effective and safe tomeet the needs of various patient groups. In addition, along with the improvement indiagnostic technologies and knowledge, the population with peripheral artery diseases inChina increased from 45.9 million in 2016 to 50.7 million in 2020, and is expected to reach56.6 million in 2025 and 62.3 million in 2030.


BUSINESS

– 186 –

As of the Latest Practicable Date, we had three commercialized products that hadgenerated revenue (namely, TracLine® access catheter, FocuStar® neuro balloon catheter – Rxand Afentta® aspiration catheter), four products for which we have obtained the NMPAapprovals (namely, Privi hemorrhoid cooling balloon, aspiration accessory, Mountix®

micro-catheter and FocusLine® PTA balloon dilation catheter) and 15 product candidates. Wedeveloped all of our products and product candidates in-house, except that we licensed intechnologies for our Privi hemorrhoid cooling balloon from Privi Medical and our Afentta®

and HMC1-NAS aspiration catheters and TracLine® access catheter from ICI. See“—Research and Development—In-licensing Arrangement” for details of our in-licensingarrangements. The chart below sets forth the development status of these products as of theLatest Practicable Date.


BUSINESS

– 187 –

Pro

duct

Indi

cati

on

Stag

eE

xpec

ted

Com

plet

ion

ofC

urre

ntSt

age

Exp

ecte

dC

omm

erci

al

Lau

nch

Tim

eP

re-c

linic

alC

linic

alR

egis

trat

ion

& A

ppro

val

Afe

ntta

®A

spir

atio

nC

athe

ter

(1)

Acu

teis

ch

em

ic s

tro

ke

N/A

Lau

nch

ed

HM

C1-

NA

SA

spir

atio

n C

athe

ter

(1)

Acu

teis

ch

em

ic s

tro

ke

Q3

20

21

20

22

HM

SR-N

AS

Asp

irat

ion

Cat

hete

r(2)

Acu

teis

ch

em

ic s

tro

ke

Q3

20

21

20

23

Asp

irat

ion

Acc

esso

ryA

ssis

tasp

irati

on

cath

ete

rfo

r

thro

mb

us

rem

ov

al

N/A

Q3

20

21

Sten

t R

etri

ever

(3)

Acu

teis

ch

em

ic s

tro

ke

Q2

20

22

20

23

Neu

ro D

rug

-Coa

ted

Bal

loon

Intr

acra

nia

lart

ery

sten

osi

sQ

42

02

12

02

5

Foc

uSta

r®N

euro

Bal

loon

Cat

hete

r–

Rx

Intr

acra

nia

lart

ery

sten

osi

sN

/AL

au

nch

ed

Neu

ro B

allo

onC

athe

ter

–O

TW

Intr

acra

nia

lart

ery

sten

osi

sQ

32

02

12

02

2

Neu

ro D

rug

Elu

ting

Sten

tIn

tracra

nia

lart

ery

sten

osi

s2

02

22

02

5

Bal

loon

-exp

anda

ble

Sten

tIn

tracra

nia

lart

ery

sten

osi

sQ

42

02

12

02

5

Tra

cLin

e®A

cces

sC

athe

ter

(1)

Pro

vid

eaccess

fo

ro

ther

neu

ro-

inte

rven

tio

nal

dev

ices

N/A

Lau

nch

ed

HM

SR-N

AC

Acc

ess

Cat

hete

r(2

)P

rov

ide

access

fo

ro

ther

neu

ro-

inte

rven

tio

nal

dev

ices

Q4

20

21

20

23

Mou

ntix

®M

icro

-Cat

hete

rA

ssis

tth

ed

eli

very

of

med

ical

dev

ice

N/A

Q3

20

21

Gui

ding

Cat

hete

rA

ssis

tth

ed

eli

very

of

med

ical

dev

ice

Q3

20

21

20

22

Mic

roG

uide

wir

efo

rIs

chem

iaA

ssis

tth

ed

eli

very

of

med

ical

dev

ices

20

22

20

23

Bal

loon

Gui

ding

Cat

hete

rA

ssis

tth

ed

eli

very

of

med

ical

dev

ices

Q4

20

21

20

22

Flo

wD

iver

ter

Hem

orr

hag

icst

rok

e2

02

22

02

5

Pri

viH

emor

rhoi

d C

oolin

gB

allo

on(4

)H

em

orr

ho

idN

/AQ

42

02

1

Per

iphe

ralD

rug

-Coa

ted

Bal

loon

Peri

ph

era

lv

asc

ula

rd

isease

20

22

20

26

Car

otid

Em

bolic

Pro

tect

ion

Dev

ice

Em

bo

lic

mate

rial

co

nta

inin

gan

d

rem

ov

al

20

22

20

23

Per

iphe

ralD

rug

Elu

ting

Sten

tP

eri

ph

era

lart

ery

sten

osi

s2

02

22

02

6

Foc

usL

ine®

PT

AB

allo

onD

ilati

onC

athe

ter

Peri

ph

era

lv

asc

ula

rd

isease

N/A

20

22

Lau

nch

ed

in C

hin

a

Incli

nic

al

tria

l

Desi

gn

sta

ge

Incli

nic

al

tria

l

Ap

pro

ved

inC

hin

a

Inan

imal

stu

dy

Ty

pe

test

ing

Ty

pe

test

ing

Lau

nch

ed

in C

hin

a

Desi

gn

sta

ge

Ap

pro

ved

inC

hin

a

Ty

pe

test

ing

Lau

nch

ed

in C

hin

a

Ty

pe

test

ing

Desi

gn

sta

ge

Un

der

NM

PA

reg

istr

ati

on

rev

iew

Desi

gn

sta

ge

Ap

pro

ved

inC

hin

a

Ty

pe

test

ing

Desi

gn

sta

ge

Desi

gn

sta

ge

Ap

pro

ved

inC

hin

a

Acu

teIs

chem

icSt

roke

Neu

roA

cces

s

Hem

orrh

agic

Stro

ke

Per

iphe

ral

Dis

ease

s

Co

reP

rod

uctC

hin

aS

tatu

sO

vers

eas

Sta

tus

Th

ese

dev

ices

are

,o

rare

exp

ecte

dto

be,

exem

pte

dfr

om

cli

nic

al

tria

lre

qu

irem

en

tsin

acco

rdan

ce

wit

hth

e C

ata

log

ue

of

Med

ical

Dev

ice

Exem

pte

dfr

om

Cli

nic

al

tria

ls

(《免于进行临床试验医疗器械目录》

)p

rom

ulg

ate

db

yth

e N

MP

A,

as

am

en

ded

Majo

rP

rod

ucts

Co

mm

erc

iali

zed

Not

es:

1.

Th

ese

pro

du

cts

were

dev

elo

ped

base

do

nte

ch

no

log

ies

in-l

icen

sed

fro

mIC

I. I

CI

ob

tain

ed

the U

.S.F

DA

’s a

pp

rov

al

in2

01

9fo

rit

sasp

irati

on

cath

ete

rw

ith

su

bst

an

tiall

ysi

mil

ar

stru

ctu

reand

sp

ecifi

cati

on

s as

ou

r A

fen

tta

®

asp

irati

on

cath

ete

r.2

.W

ew

ill

ap

ply

for

the

CE

Mark

ing

for

these

pro

du

cts

toco

mm

erc

iali

ze

them

inm

ark

ets

ou

tsid

eC

hin

a,w

ith

afo

cu

so

nth

eA

sia-P

acifi

cre

gio

n.

3.

We

wil

lap

ply

for

the

NM

PA

reg

istr

ati

on

cert

ificate

for

this

pro

du

ct

inC

hin

aan

dap

ply

fo

rth

e C

EM

ark

ing

toco

mm

erc

iali

ze

this

pro

du

ct

inm

ark

ets

ou

tsid

eC

hin

a,

wit

ha

focu

s o

nth

eA

sia -

Pacifi

cre

gio

n.

4.

Th

isp

rod

uct

was

dev

elo

ped

base

d o

nte

ch

no

log

ies

in-l

icen

sed

fro

m P

riv

i M

ed

ical.

Pri

vi

Med

ical

ob

tain

ed

the U

.S.F

DA

’s a

pp

rov

al

in2

01

8fo

rit

sp

rod

uct

wit

h s

ub

stan

tiall

ysi

mil

ar

stru

ctu

re a

nd

sp

ecifi

cati

on

s as

ou

r P

riv

i h

em

orr

ho

idco

oli

ng

ball

oo

n.

Intr

acra

nial

A

rter

ySt

enos

is


BUSINESS

– 188 –

Product types Approval progress for our products and product candidates

Acute Ischemic StrokeProducts

• We developed our two major products—Afentta® andHMC1-NAS aspiration catheters based on technologylicensed in from ICI.

We obtained the Class III medical device registrationcertificate from the NMPA for our Afentta® aspirationcatheter in May 2021 and have commercialized this productsince July 2021. ICI obtained the U.S. Food and DrugAdministration (“U.S. FDA”) 510(k) marketing approval in2019 for its aspiration catheter with substantially similarstructure and specifications as our Afentta® aspirationcatheter.

We are finalizing the clinical trial for our HMC1-NASaspiration catheter, which is expected to be completed inthe third quarter of 2021. We will seek to obtain the ClassIII medical device registration certificate from the NMPAand expect to commercialize this product in China in 2022.

We are developing our HMSR-NAS aspiration catheter,which is currently at the design stage. After the productdesign is completed, we will apply for the CE Marking tocommercialize this product in markets outside China, witha focus on the Asia-Pacific region, in 2023.

• Our aspiration accessory obtained the Class II medicaldevice registration certificate from the Shandongcounterpart of the NMPA (“Shandong MPA”) in February2021. We expect to commercialize this product in the thirdquarter of 2021.

• Our stent retriever, is undergoing a clinical trial which weexpect to complete in the second quarter of 2022. Afterthat, we will seek to obtain the Class III medical deviceregistration certificate from the NMPA to commercializethis product in China, and seek to obtain the CE Markingto commercialize it outside China (focusing on theAsia-Pacific region). Such commercialization is expected totake place in 2023.


BUSINESS

– 189 –


Intracranial ArteryStenosis Products

• Our neuro drug-coated balloon is at the animal study stage.

• We obtained the Class III medical device registrationcertificate from the NMPA for our FocuStar® neuroballoon catheter – Rx in December 2020 and we havecommercialized this product since April 2021.

• Our neuro balloon catheter – OTW is at the type testingstage, which is expected to be completed in the thirdquarter of 2021.

• Our neuro drug eluting stent is at the type testing stage.

• Our balloon-expandable stent is at the type testing stage.

Neuro AccessProducts

• We obtained the Class III medical device registrationcertificates from the NMPA for our TracLine® accesscatheter in March 2020. We have commercialized thisproduct since April 2020.

• Our HMSR-NAC access catheter is at the design stage.Upon completion, we will apply for the CE Marking tocommercialize this product, which we expect to be in 2023,focusing on the Asia-Pacific region outside China.

• Our Mountix® micro-catheter obtained the Class IIImedical device registration certificate from the NMPA inJune 2021, and we expect to commercialize this product inthe third quarter of 2021.

• Our guiding catheter is at the type testing stage, which isexpected to be completed in the third quarter of 2021.

• Our micro guidewire for ischemia is at the design stage.

• Our balloon guiding catheter is type testing ready and isexpected to obtain the NMPA approval in the fourthquarter of 2021.

Hemorrhagic StrokeProducts

• Our flow diverter is at the design stage.


BUSINESS

– 190 –


Peripheral Products • Our Privi hemorrhoid cooling balloon obtained the Class IImedical device registration certificate from the ShandongMPA in February 2021. We expect to commercialize thisproduct in the fourth quarter of 2021. Privi Medicalobtained the U.S. FDA’s 510(k) marketing approval in 2018for its product with substantially similar structure andspecifications as our Privi hemorrhoid cooling balloon.

• Our peripheral drug-coated balloon is at the type testingstage.

• Our carotid embolic protection device and peripheral drugeluting stent are both at the design stage.

• Our FocusLine® PTA balloon dilation catheter obtainedthe Class III medical device registration certificate from theNMPA in July 2019. We expect to commercialize thisproduct in 2022.

We have built strong R&D, manufacturing and commercialization capabilities:

• R&D: Our R&D team is led by Dr. Wang, who has over 20 years of medical devicedevelopment and management experience. As a seasoned entrepreneur, Dr. Wanghas a proven track record in managing two successful medical devicecompanies—Biosensors International (previously listed on the SingaporeExchange’s Mainboard) and JW Medical Systems—where he also led teams in theR&D and commercialization of successful medical device products.

Our global R&D platform comprises our R&D center in Weihai and Beijing inChina, our newly-established R&D center in Singapore, and our collaboration witha third-party R&D center in Silicon Valley of the U.S. since December 2018. Ourin-house R&D team has solid technical knowledge and industry experience inidentifying, assessing and procuring innovative technologies globally, as well as richon-the-ground experience in developing new products in China. Most of our R&Dteam members have extensive experience in medical device R&D activities and usedto work at JW Medical Systems and Biosensors International alongside Dr. Wang,as well as other multinational pharmaceutical or medical device companies such asNovartis and Johnson & Johnson. Our newly established R&D team in Singaporewill initially focus on developing automated production lines for our Privihemorrhoid cooling balloon. At a later stage, they will also conduct R&D onneuroscience and AI technology with a focus on rehabilitation medical devices. Ourcollaboration with the U.S. R&D center focuses on the designs of various catheters,while our R&D team in China is responsible for continuous design improvementsand iterations and introducing the products into China. In addition, we benefit fromthe strong support of world-renowned and industry-leading experts in the


BUSINESS

– 191 –

neuro-interventional field who have provided us with invaluable advice andassistance in our clinical trials, and in educating the market.

• Manufacturing: We have established self-sufficient and GMP compliant productionfacilities located in Weihai, China for completely in-house manufacturing, whichenables us to achieve better quality control and cost-efficiency. We plan to expandour production capacity in China and Singapore in the coming years. Our leaders inthe manufacturing and quality control departments have more than 10 years ofexperience in medical device manufacturing and quality control. Most of ourmanufacturing and quality control team members worked with Dr. Wang at JWMedical Systems and Biosensors International, and these team members collectivelyhave over 10 years of experience in GMP and ISO 13485 inspections.

• Commercialization: Led by our experienced management, we have developed strongcommercialization capabilities. We commercialize our products primarily throughacademic promotion with KOLs, principal investigators and physicians. We havesuccessfully commercialized our TracLine® access catheter since April 2020, ourFocuStar® neuro balloon catheter – Rx since April 2021 and our Afentta® aspirationcatheter since July 2021. As of the Latest Practicable Date, these products hadreached 216 hospitals across 18 provinces and municipalities in China. Our leadersin the sales and marketing team have on average at least 15 years of work experiencein medical device commercialization at leading multinational medical devicecompanies such as Johnson & Johnson, Boston Scientific and Medtronic.

With our comprehensive product portfolio, strong R&D, manufacturing andcommercialization capabilities, visionary and seasoned management, as well as strong supportfrom industry pioneer KOLs and global leading healthcare investors, we believe that we arewell positioned to capture the growth opportunities of the neuro- and peripheralinterventional medical devices markets in China and the broader Asia-Pacific region.

OUR COMPETITIVE STRENGTHS

We believe the following strengths have contributed to our success and differentiated usfrom our competitors:

Visionary, Seasoned Management Team with Proven Track Record in the Interventional MedicalDevices Industries

Our founder and chairman Dr. Wang is a highly reputable industry veteran in the field ofinterventional medical devices. Dr. Wang has over 20 years of medical device development andmanagement experience. As a seasoned serial entrepreneur, Dr. Wang has a proven trackrecord in managing two successful medical device companies where he led the team in theR&D and commercialization of innovative medical devices. While serving as the chiefoperating officer and chief executive officer of Biosensors International (previously listed onthe Singapore Exchange’s Mainboard), he led the establishment of the company’s coronary


BUSINESS

– 192 –

intervention product line and its launch of EXCEL—the world’s first biodegradable polymercoated drug-eluting stent, which has become the mainstream technology to treatcardiovascular stenosis, according to Frost & Sullivan. Dr. Wang also founded JW MedicalSystems in 2003 and served as its chief executive officer until July 2015. JW Medical Systemsis one of China’s top three companies focused on biodegradable polymer drug-eluting stents inChina, in terms of revenue, according to Frost & Sullivan.

As of the Latest Practicable Date, Dr. Wang had 14 issued patents in the U.S. related tomedical devices such as stent and balloon. In addition, Dr. Wang was awarded multiple prizesfor his outstanding technological achievements, including the first prize “Science andTechnology Award” from Shanghai municipal government in 2010, the second prize “NationalTechnological Invention Award” from the State Council in 2011 and the “Taishan LeadingIndustrial Talent Award” from Shandong provincial government in 2017.

Other members of our management team also have extensive work experience in R&D,regulatory affairs, manufacturing and commercialization at leading medical device orpharmaceutical companies such as Johnson & Johnson, Boston Scientific, Novartis, Sanofi,JW Medical Systems and Biosensors International. A majority of our management teammembers have a long history of working alongside with Dr. Wang, dating back to his tenure atJW Medical Systems and Biosensors International.

Our management team members have on average over 10 years of experience in themedical devices industry. Their wealth of experience enables us to identify and access leadingtechnologies globally, attract international partners for collaboration, and successfully launchproducts with competitive advantages.

Innovative Platform Focused on the Large, Under-Penetrated and Fast-Growing Neuro- andPeripheral Interventional Medical Devices Markets

We strive to become a leading interventional medical devices platform. We haveestablished a platform of innovative solutions strategically focused on the neuro- andperipheral interventional medical devices markets in China and the rest of the Asia-Pacificregion.

Neuro-interventional Medical Devices Market

China’s neuro-interventional medical devices market is still at its early stage ofdevelopment and is under-penetrated with strong growth momentum. According to Frost &Sullivan, neuro-vascular diseases are among the leading causes of fatality and disability inChina. Driven by the enhanced penetration of neuro-interventional treatment, increasingaffordability of such treatment and favorable governmental policies, the volume ofneuro-interventional procedures in China increased at a CAGR of 15.8% from 91.4 thousandin 2016 to 164.2 thousand in 2020. This volume is expected to grow at a CAGR of 32.7% from2020 to 675.3 thousand in 2025 and further at a CAGR of 21.4% from 2025 to 1.8 million in2030. In addition, the number of mechanical thrombectomy procedures in China increased at


BUSINESS

– 193 –

a CAGR of 29.5% from 17.6 thousand in 2016 to 49.5 thousand in 2020. This number isexpected to increase at a CAGR of 43.9% from 2020 to 305.2 thousand in 2025 and further ata CAGR of 23.6% from 2025 to 881.3 thousand in 2030. While currently the market isdominated by multinational manufacturers, a number of Chinese domestic companiesincluding us have obtained regulatory approvals and commercialized neuro-interventionalproducts, which has paved the way for domestic substitution and expedited market penetrationin the near future. We believe we are poised to capture the growth momentum in this market,based on our comprehensive portfolio of innovative product offerings, strong R&D andcommercialization capabilities.

We are a pioneer in mechanical thrombectomy in China for acute ischemic strokeevidenced by our first-to-market domestic aspiration catheter Afentta®. We obtained the ClassIII medical device registration certificate for our Afentta® aspiration catheter in May 2021and commercialized it in July 2021, making it the first domestic aspiration catheter approvedby the NMPA and commercialized in China to treat AIS, according to Frost & Sullivan. Thisgives us a first-mover strategic advantage in treating AIS with the ADAPT therapy. We arealso finalizing the clinical trial for our HMC1-NAS aspiration catheter, which contains the088 model (namely, a model with an inner diameter of 0.088 inch) with potentially the world’slargest distal inner diameter once approved, according to Frost & Sullivan. In addition, we areconducting a clinical trial for our self-developed stent retriever. Its spiral half-open andhalf-closed ring-shaped structure can minimize injury to vessel walls, thus presenting a saferoption compared to other mainstream products.

We have a comprehensive suite of products covering the ischemic stroke (comprisingacute ischemic stroke and intracranial artery stenosis), hemorrhagic stroke and neuro accessfields, providing holistic solutions for neuro-interventional procedures. As of the LatestPracticable Date, we had successfully commercialized three products, including our TracLine®

access catheter, FocuStar® neuro balloon catheter – Rx and Afentta® aspiration catheter. Inaddition, we expect to commercialize another two and four neuro-interventional medicaldevices by the end of 2021 and 2022, respectively.

Peripheral Interventional Medical Devices Market

Beginning in 2017, we strategically tapped into the peripheral non-vascular devicesmarket with our Privi hemorrhoid cooling balloon to address unmet medical needs in aday-to-day setting. According to Frost & Sullivan, the population with hemorrhoids in Chinawas 724.9 million in 2020, and the prevalence rate of hemorrhoids in China has reached over50% among adults. While there are some common therapies for hemorrhoids, many of themmay not be sufficiently effective and safe to meet the needs of various patient groups. Thisgives us an edge in entering an enormous market with a differentiated product. Our Privihemorrhoid cooling balloon employs only physical mechanism to treat hemorrhoids,eliminating the need for medication or ingredients that may be associated with side effects.Therefore, this product is potentially suitable and safe for patients with special medicationrequirements, including pregnant women and women during the lactation period. In addition,our Privi hemorrhoid cooling balloon provides effective and precise treatment for the target


BUSINESS

– 194 –

internal hemorrhoids in different locations and can efficiently stop bleeding and relievediscomfort. Furthermore, the patient’s privacy is safeguarded since the product can bepersonally applied and potentially be bought online. We expect to commercialize this productin the fourth quarter of 2021. We will also conduct additional clinical trials from 2022 to 2023to assess this product’s safety when applied to pregnant women and women during thelactation period.

Separately, we have obtained the NMPA approval for our FocusLine® PTA balloondilation catheter, a peripheral vascular device for the treatment of peripheral artery diseases,and expect to commercialize this product in 2022. Currently, we also have three otherperipheral vascular product candidates at various stages of development.

Underpinned by ADAPT, We Are Well-positioned to Lead the Continued Revolution of China’sAIS Treatment Paradigm

ADAPT is a newer-generation technique that utilizes aspiration as the first-line approachto revascularizing an occluded vessel, and if this strategy fails, then the aspiration catheter canbe used in conjunction with a stent retriever to obtain revascularization, in which case theaspiration catheter already in place serves as an access catheter for the deployment of a stentretriever. While using a stent retriever as the first-line approach, or the SR technique, remainsa common AIS therapy, ADAPT has several advantages as a first-line approach in mechanicalthrombectomy according to various research studies:

• Superior safety: In the ETIS clinical trial, the rate of procedure-related complicationfor the ADAPT group was 4.3%, significantly lower than that of 25.9% for the SRgroup. In addition, according to the ADAPT FAST study, ADAPT causes onlyminimal clot disruption and fragmentation, which generally allows the extraction ofthe whole occlusive embolus with a single pass and hence may reduce the frequencyand number of distal downstream emboli. Moreover, clot extraction with ADAPTplaces little or no traction on the parent artery and regional penetrating arteries andtherefore, the likelihood of blood vessel injury caused by ADAPT is relatively low.

• Higher first-pass recanalization rate: According to the COMPASS clinical trial, 57%of the cases using ADAPT to revascularize the occluded vessel reached TICI 2b orbetter results upon first pass, compared to 52% in the stent retriever group,supporting the use of direct aspiration as an alternative to stent retriever as first-linetherapy for stroke thrombectomy.

• Higher TICI 2b/3 recanalization rate: In the COMPASS clinical trial, approximately34% of the cases using ADAPT reached TICI 3 within 45 minutes, compared to 23%in the stent retriever group. Similarly, in the ETIS clinical trial, 54.3% of the casesusing ADAPT reached TICI 3, significantly higher than that of 31.5% for the SRgroup. In addition, in the ADAPT FAST study, ADAPT was shown to be effective inopening cerebral vessel occlusions with aspiration alone in approximately 75% ofcases. Also, in the cases in which aspiration was unable to open the vessel, the


BUSINESS

– 195 –

adjunctive use of a stent retriever improved the success to at least 95% successfulrevascularization to the TICI 2b or 3 level.

• Shorter treatment duration: In the COMPASS clinical trial, the average time fromgroin puncture to final recanalization for ADAPT was 25 minutes, in comparisonwith 35 minutes for the SR technique.

• Ease of use: Compared to the SR procedure, ADAPT requires less devices and fewersteps. If the first pass aspiration fails to remove the thrombus, as the aspirationcatheter is close to the thrombus, repeated aspiration can be attempted immediately,or a stent retriever can be used as a back-up device. This minimizes traction on thecerebral vessels and eliminates the need to backtrack through the carotid siphon,which typically is required when only a stent retriever is used and if it fails at thefirst attempt.

• Lower overall device cost: According to the results of the COMPASS clinical trial,the mean and median list prices of the devices used in ADAPT were 32.2% and49.1% lower than those for the SR technique, respectively, primarily becauseADAPT mainly uses aspiration catheters and requires less devices than the SRtechnique.

Attributable to the above advantages, ADAPT has been used increasingly in clinicalpractice in recent years. For example, ADAPT is categorized under the COR Irecommendation list for stroke treatment in the 2019 AHA/ASA Guidelines. While it is onlydesignated in the COR II/LOE C category under the Guidelines for Early InterventionTherapy for AIS in China (2018 version), it is expected that this COR will likely be raised andcatch up with that of the U.S. In addition, ADAPT, the SR technique and a combination ofthe stent retriever and aspiration catheter accounted for 41.3%, 29.3% and 29.3%, respectively,of the total number of AIS mechanical thrombectomy procedures in the U.S. in 2019according to Frost & Sullivan. In contrast, according to the same source, between 2017 and2019 the number of ADAPT procedures conducted in China was only one-eleventh of that ofSR procedures. The lag in ADAPT's adoption in China is attributable to the relatively lateentry of aspiration catheters into China, the limited pool of physicians experienced in usingsuch devices and the limitations of existing aspiration catheters in the market. Prior to ourAfentta® aspiration catheter's approval, the limited sizes and relatively small distal innerdiameters of existing catheters in the market presented to physicians with a very limitednumber of choices of aspiration devices. These all indicate significant growth potential forADAPT in China.

Leveraging our comprehensive product portfolio, we believe that we are well-positionedto lead the continued revolution of China’s AIS treatment paradigm by promoting ADAPT.Our Afentta® aspiration catheter contains the model of the largest distal inner diameterapproved by the NMPA, and our HMC1-NAS aspiration catheter contains the 088 model withpotentially the world’s largest distal inner diameter if approved, according to Frost &Sullivan. Some research studies have verified that aspiration catheters with a larger distal


BUSINESS

– 196 –

inner diameter can offer a higher rate of complete clot ingestion, which leads to a higher rateof first-pass complete recanalization and fewer distal emboli.

In addition, our Afentta® and HMC1-NAS aspiration catheters have a number ofinnovative features. For example, our ultra-soft and ultra-thin aspiration catheters show goodkink-resistance, biocompatibility and trackability, and can maintain the circular shape whenbending, allowing physicians to more easily navigate through tortuous vasculature. Ouraspiration catheters’ beveled tip design also helps to increase the aspiration efficiency andoffer superior vascular protection. Besides, the radiopaque marker on the distal tip providesthe physician with visual confirmation to better track the catheter.

Moreover, we are conducting a clinical trial for our self-developed stent retriever. Weexpect to commercialize this product in 2023, which can then be used together with ouraspiration catheters in ADAPT or in other mechanical thrombectomy procedures.

Robust In-house R&D Capabilities with Extensive R&D Collaboration with Global Partners

As of the Latest Practical Date, we had a portfolio of 22 products and productcandidates, supported by our strong R&D capabilities. Our R&D team possesses deep industryknowledge and experience. Our R&D platform is led by Dr. Wang, and consists of our R&Dteam in Weihai, Shandong Province and Beijing, China, our newly-established R&D team inSingapore, and our collaboration with an R&D center based in Silicon Valley of the U.S. Ourin-house R&D team has solid technical knowledge and industry experience in identifying,assessing and procuring innovative technologies globally, as well as rich on-the-groundexperience in developing new products in China. Most of our R&D team members haveextensive experience in medical device R&D activities and used to work at JW MedicalSystems and Biosensors International alongside Dr. Wang, as well as other multinationalpharmaceutical or medical device companies such as Novartis and Johnson & Johnson. Inaddition, many of them developed or contributed to the development of a number ofstent-related medical devices, including China’s first coronary stent and EXCEL—the world’sfirst biodegradable polymer coated drug-eluting stent.

Our newly-established R&D team in Singapore will initially focus on developingautomated production lines for our Privi hemorrhoid cooling balloon. At a later stage, theywill also conduct R&D on neuroscience and AI technology. Our collaboration with the U.S.R&D center focuses on the designs of various catheters, while our R&D team in China isresponsible for continuous design improvements and iterations.

As an invaluable addition to our in-house R&D capabilities, we have in-licensedtechnologies for certain of our products from ICI, a U.S. med-tech company focused ondeveloping medical devices for the treatment of stroke. ICI’s management team valued ourstrong R&D, manufacturing and commercialization capabilities and therefore chose us as theirpartner in China. ICI has become a shareholder of our Company, and we endeavor tocollaborate with ICI to bring more innovative technologies in stroke care to China and the


BUSINESS

– 197 –

other Asia-Pacific markets. We are also in conversation with other medical device companiesfor further collaboration opportunities in stroke prevention, alternative treatment, andrehabilitation.

Strong Commercialization Capabilities and Self-sufficient Manufacturing Process

Led by our experienced management, we have developed strong commercializationcapabilities. We commercialize our products primarily through academic promotion withKOLs, principal investigators and physicians. We have successfully commercialized ourTracLine® access catheter since April 2020, FocuStar® neuro balloon catheter – Rx since April2021 and Afentta® aspiration catheter since July 2021. As of the Latest Practicable Date, theseproducts had reached 216 hospitals across 18 provinces and municipalities in China. Ourleaders in the sales and marketing team have on average at least 15 years of work experience inmedical device commercialization at renowned multinational medical device companies suchas Johnson & Johnson, Boston Scientific and Medtronic.

We have established self-sufficient and GMP compliant production facilities located inWeihai, Shandong Province, China for completely in-house manufacturing, which enables usto achieve better quality control and cost-efficiency. For example, we have manufactured ourexisting products at our own production facilities in Weihai, Shandong Province. Ouradditional products for which we have obtained NMPA approval and plan to commercializefrom the third quarter of 2021 to the year of 2022 will also be manufactured in-house. Ourleaders in the manufacturing and quality control departments have more than 10 years ofexperience in medical device manufacturing and quality control. Most of our manufacturingand quality control team members worked with Dr. Wang at JW Medical Systems andBiosensors, and these team members collectively have over 10 years of experience in GMP andISO 13485 inspections.

As of the Latest Practicable Date, we had a designed annual production capacity of30,000 units of aspiration and access catheters, 10,000 units of balloon catheters, and 40,000units of our Privi hemorrhoid cooling balloon. We plan to significantly increase ourproduction capacity in the coming year. See “—Our Production Facilities andProcesses—Production Facilities” for more information on our expansion plans.

Support From Industry Pioneer KOLs and Global Leading Healthcare Investors

We benefit from strong support of world-renowned and industry-leading experts in theneuro-interventional field, who have provided us with invaluable advice and assistance in ourclinical trials and in educating the market. Among the KOLs we engage with that haveprovided us with support and advice, Dr. Aquilla Turk is a pioneer in ADAPT and theprincipal investigator of the COMPASS clinical trial on ADAPT. Dr. Turk has also providedus with invaluable assistance in conducting the RECOVER clinical trial for our HMC1-NASaspiration catheter in China. Another KOL we engage with is a leading expert in acuteischemic stroke treatment in China and holds important positions at various prestigious


BUSINESS

– 198 –

expert institutes, and he is also the principal investigator of the RECOVER clinical trial forour HMC1-NAS aspiration catheter.

In addition, our resourceful shareholders include global leading healthcare investors suchas Hillhouse Capital, Legend Capital, 3H Health, LAV, Hudson Bay, OrbiMed and Octagon.They have also provided us with industry expertise, capital resources, business opportunitiesand solid corporate governance guidance.

OUR STRATEGIES

We plan to implement the following strategies to grow our medical devices platform andstrengthen our market position in the neuro- and peripheral interventional markets.

Strengthen Our Medical Devices Platform with Disruptive Technologies to Fulfil Unmet MedicalNeeds

We focus on innovative interventional medical devices to address unmet medical needs inboth life-threatening and day-to-day settings. We aim to identify unmet medical needs thatcould be well addressed with the latest innovative interventional medical devices. Leveragingour resources within the medical community, we expect to gain first-hand knowledge of unmetmedical needs resulting from outdated or unaffordable treatment options and will seek outinnovative medical device solutions to improve patients’ quality of life. In particular, ourseasoned R&D team with in-depth knowledge in clinical practice and neuro-vascular andperipheral diseases will continue to identify therapeutic areas and indications with significantunmet medical needs, and conduct on-the-ground market research to verify such clinicalneeds. We will further carry out scientific study, including literature search, symposium reviewand meta-analysis, to identify the latest medical device developments that have the potential tobe translated into products of clinical value. Once we have a clear target, we will conductin-house R&D or enter into in-licensing or other arrangements with business partners, to offerdisruptive medical devices to the market.

In addition, we envision building up a comprehensive global R&D platform combininginnovative global technology and localized innovation across China, Singapore and the U.S.Our existing R&D team in China will continue to work on product development andoptimization and localization of global technologies. In addition to working on automatingthe production of our Privi hemorrhoid cooling balloon, our recently established R&D teamin Singapore will also conduct R&D in neuroscience and AI technology with a focus onrehabilitation medical devices and the optimization and clinical application expansion of ourexisting products. We also intend to deepen our collaboration with our partner R&D center inthe U.S. to identify and assess first-in-class and best-in-class innovative medical devices toadvance our market position in the field of interventional medical devices.


BUSINESS

– 199 –

Penetrate the Broader Asia-Pacific Markets and Build a Cross-Border Business Platform

We aim to leverage the advantages of being headquartered in Singapore and penetrate thebroader Asia-Pacific markets. We believe Singapore possesses distinct advantages as a hub forinnovative medical device companies like us. Utilizing the CE Marking we aim to obtain forour product candidates, we plan to commercialize these products first in Singapore and then inother markets in the Asia-Pacific region outside China. In addition, we will leverage ourpresence in Singapore—a bridge between East and West—to more efficiently access bothEastern and Western technologies and talent.

We intend to build a cross-border business platform focusing on the Asia-Pacific region,to penetrate local markets and realize synergies from exchanges of experience and resources.For example, with the support of our R&D efforts in China, Singapore and the U.S., we planto tap into the KOLs networks across the Asia-Pacific region and the U.S. to gain insights intolatest technology developments, as well as local unmet medical needs and different regulatory,economic and cultural environments in the Asia-Pacific region. In addition, we haveindependently developed our balloon technology that both (i) supported our R&D activities inChina for our neuro drug-coated balloon and peripheral drug coated balloon and (ii)benefited our product design and development of the Privi hemorrhoid cooling balloon. Basedon this experience, we plan to further enhance the internal sharing of our catheter and stentproduct technologies, R&D staff experience and resources across our teams in China andSingapore.

Improve the Quality of Life for the Large Patient Population Troubled With Hemorrhoids

We plan to expand the clinical applications of our Privi hemorrhoid cooling balloon topatient groups with special medication requirements, including pregnant women and womenduring the lactation period, for whom common hemorrhoid therapies in the market may notbe safe or effective. In 2020, over four million pregnant women with Grade I or II internalhemorrhoids in China needed optimal treatment to alleviate the symptoms caused byhemorrhoids, according to Frost & Sullivan. To address these unmet medical needs, we plan toinitiate a two-stage clinical trial in 2022 and 2023 to evaluate the safety and efficacy of ourPrivi hemorrhoid cooling balloon for pregnant women and women during the lactation period.

We expect to have a designed annual production capacity of 40,000 units for our Privihemorrhoid cooling balloon in the second half of 2021, and will increase this annualproduction capacity to 600,000 units in 2022. To more effectively capture the massivehemorrhoids treatment market, we are developing automated production lines for our Privihemorrhoid cooling balloon. We plan to construct two additional production facilities, one inChina and the other in Singapore, in two to three years and expect to complete the relevantR&D and commission the automated production lines for this product by 2025. As a result, weexpect our designed annual production capacity for this product to increase to over 10 millionunits by 2025.


BUSINESS

– 200 –

We believe that our Privi hemorrhoid cooling balloon will be a routine medical solutionoption for patients. To expedite its commercialization and extend its market reach, we will firstcarry out academic promotion, reach patients through physicians, and build a loyal andrecurring customer base. As a next step, we will market the product through new mediaadvertising and by cooperation with large online marketplace platforms. In addition, we planto build our OTC network in cooperation with reputable pharmaceutical companies andpharmacies to ensure that patients have convenient access to our products for their day-to-daytreatment.

Advance the AIS Treatment Paradigm and Solidify Our First-Mover Advantage in ADAPT inChina

We are committed to advancing the treatment for AIS in China by promoting ADAPT asthe preferred first-line therapy. Towards this end, we intend to promote the clinical benefits ofADAPT through: (i) conducting on-site training and presentations to neurosurgeons, (ii)publishing papers in scientific journals in respect of subgroup analysis and case studies, (iii)conducting post-marketing clinical studies of our aspiration catheters and carrying outmarket surveys to collect feedback from physicians, and (iv) hosting or participating insymposia and seminars at industry conferences and key hospitals.

To fully capture the market potential presented by ADAPT in the Asia-Pacific region, weaim to launch two additional aspiration catheters in the near future. We are finalizing theclinical trial for our HMC1-NAS aspiration catheter and expect to commercialize this productin China in 2022. In addition, we are designing our HMSR-NAS aspiration catheter and, afterthe design is completed, will apply for the CE Marking to commercialize this product outsideChina (with a focus on the Asia-Pacific region) in 2023. As a supplement to our aspirationcatheters, we are conducting a clinical trial for our proprietary stent retriever and aim tocommercialize this product in 2023.

In anticipation of the commercialization of our aspiration catheters, we expect toprocure additional production lines to increase our annual production capacity. In line withthis establishment of additional production lines, we will also hire and train additionalmanufacturing and quality control staff.

Commercialize Our Neuro-interventional Products Through Academic Promotion

In light of the rapidly developing medical infrastructure for neuro-interventionaltreatment in China, we plan to commercialize our neuro-interventional medical devicesprimarily through academic promotion. We will provide continued training to our sales andmarketing team on medical industry and technology insights to facilitate and enhance theirengagement with KOLs, principal investigators and physicians, and will seek to form amicableand stable relationships with key decision makers to promote the commercial adoption of ourproducts.


BUSINESS

– 201 –

We plan to hire additional talent with medical and scientific background and industryexperience for our sales and marketing team. Through this team, we will endeavor toaccurately promote the clinical benefits of ADAPT for stroke treatment to KOLs andphysicians in China and work towards achieving their endorsement of ourneuro-interventional products.

In the coming two to three years, we aim to sell our neuro-interventional products tosubstantially all of the model advanced stroke centers and advanced stroke centers establishedby the Stroke Prevention and Treatment Committee of the National Health Commission, aswell as major hospitals in key tier-2 and tier-3 cities with abundant patient inflow. To achievethis target, we will increase the market awareness and penetration of our products throughacademic promotion initiatives including: (i) expanding our sales and marketing team to coverhospitals in lower-tier cities, (ii) collaborating with KOLs to promote the clinical benefits ofADAPT and advance its COR in China’s stroke treatment guidelines, (iii) activelyparticipating in academic activities such as seminars and symposia to promote our productsand brand recognition, (iv) providing on-site ADAPT training to physicians, and (v)conducting online academic activities, including case studies, to introduce our products andADAPT through well-known digital media in the industry.

OUR PRODUCTS AND PRODUCT CANDIDATES

As a company committed to becoming a leading innovative interventional medical deviceplatform in the Asia–Pacific region, we offer a broad range of interventional solutionsspanning ischemic stroke (comprising acute ischemic stroke and intracranial artery stenosis),hemorrhagic stroke, neuro access related medical devices and peripheral devices, with apipeline of 22 products and product candidates as of the Latest Practicable Date.

Privi hemorrhoid cooling balloon, a peripheral non-vascular interventional medicaldevice for the treatment of hemorrhoid, is our Core Product. In addition, our major productsinclude our Afentta® aspiration catheter and HMC1-NAS aspiration catheter for thetreatment of ischemic stroke.

As of the Latest Practicable Date, we had commercialized three products:

• TracLine® access catheter since April 2020;

• FocuStar® neuro balloon catheter – Rx since April 2021; and

• Afentta® aspiration catheters since July 2021.

We have also obtained approval for four additional products, namely, Privi hemorrhoidcooling balloon, aspiration accessory, Mountix® micro-catheter and FocusLine® PTA balloondilation catheter, which are expected to be commercialized (namely, generating revenue)between the third quarter of 2021 and the year of 2022.


BUSINESS

– 202 –

We completed a double-center clinical trial to evaluate the safety and short termeffectiveness of our Core Product—Privi hemorrhoid cooling balloon—in December 2018. Inaddition, we are conducting multi-center clinical trials for our HMC1-NAS aspirationcatheter, one of our major products, and our stent retriever. We are also carrying out R&Dactivities for our other product candidates.

All of our product candidates are subject to approval by relevant authorities such as theNMPA and/or its local and foreign counterparts, before commercialization in relevantjurisdictions. As of the Latest Practicable Date, we had not received any material comments orconcerns raised by the relevant regulatory authorities with respect to our product candidates,and therefore we believe we are on track to apply for the relevant approvals to commercializeour product candidates.

Privi Hemorrhoid Cooling Balloon—Our Core Product

Our Privi hemorrhoid cooling balloon is our Core Product for the physical adjuvanttreatment of internal hemorrhoids and mixed hemorrhoids to alleviate the discomfort causedby the onset of hemorrhoids. After activation and upon deployment of our product near thetarget hemorrhoid(s), the expanded balloon can put pressure on the hemorrhoid(s) to stop thebleeding while the low temperature solutions inside the balloon can cool the hemorrhoid(s)through heat exchange to relieve pain and discomfort. We commenced clinical trialpreparation work for our Privi hemorrhoid cooling balloon in August 2017, and completed thetype testing in April 2018. We initiated a non-inferiority clinical trial in September 2018comparing the safety and efficacy endpoints between patients treated with this product andpatients treated with Tai Ning Suppositories (太寧栓), a drug for the treatment ofhemorrhoids. We enrolled a total of 191 patients for this clinical trial. Among the 189 patientswho completed the treatment, 85 patients were assigned to the test group using our productand 104 patients to the control group using Tai Ning Suppositories. The clinical trial protocolhas been approved by the ethics committees of two hospitals that participated in the clinicaltrial. We filed the clinical trial protocol with the Shandong MPA in August 2018 beforecommencing the clinical trial. We completed the clinical trial in December 2018 and obtainedthe Class II medical device registration certificate from the Shandong MPA in February 2021.We expect to commercialize our Privi hemorrhoid cooling balloon in the fourth quarter of2021. Separately, Privi Medical obtained the U.S. FDA’s 510(k) marketing approval for thisproduct in January 2018.

In addition, we searched for and worked with reputable local suppliers to manufacturecomponents of this product, including the water bag, endothermic mixing chamber, introducertube, and telescopic compression balloon. The licensed technology did not provide theappropriate method for injecting the endothermic solutions into the water bag, and we optedfor syringe pumps filling after conducting relevant research. We further solved the potentialblockage at the tip of the water bag while filling urea by adding an anti-clogging cap at the tipof the water bag. In addition, by conducting research in different components, we effectivelyaddressed certain issues that occurred while packaging the endothermic mixing chamber,filling the urea, and assembling the water bag and the introducer tube. Furthermore, we


BUSINESS

– 203 –

optimized the product design and technical requirements of this product, and formulatedquality control standards for each component. After completing the clinical trial of thisproduct in December 2018, we conducted further R&D activities in response to variousregulatory inquiries raised by the Shandong MPA prior to its issuance of the Class II medicaldevice registration certificate. Moreover, we have been conducting R&D to develop andoptimize automated production lines for this product to increase the production capacity andefficiency in anticipation of potential additional application and extensive market demand forthis product, and to lower the manufacturing costs and reduce the defective rate. In particular,our R&D includes adjusting the outer diameter of the introducer tube to adapt to theautomated production requirements, employing automated consecutive filling of the solutioninto the water bags to enhance the production efficiency, and seeking out the adhesive suitablefor automated production.

We did not incur any R&D expenses for our Privi hemorrhoid cooling balloon in 2017.We incurred R&D expenses for this product of RMB6.0 million, RMB4.3 million and RMB0.6million in 2018, 2019 and 2020, respectively, accounting for 40.7%, 13.0% and 3.3% of ourtotal R&D expenses (excluding the license fees in respect of our in-licensed products) duringthe same respective years. The R&D expenses for 2018 are based on our management accountsfor that year, which were not audited by independent auditors. The R&D expenses we incurredfor our Privi hemorrhoid cooling balloon in 2018, 2019 and 2020 were primarily for thepreparation of its type testing, clinical trial and the application for the Class II medical deviceregistration certificate. When calculating the total R&D expenses, we did not take intoaccount the license fees payable by us in respect of our in-licensed products during the sameyear, given that these license fees are in substance the consideration payable for the rights touse the intellectual property and know-how relating to the in-licensed products, rather thanthe expenses we incurred to conduct R&D activities for our products.

Our Privi hemorrhoid cooling balloon employs only physical mechanism to treathemorrhoids, eliminating the need for medication or ingredients that may be associated withside effects. We intend to engage in further R&D, including clinical trials, to test the safety ofour Privi hemorrhoid cooling balloon when it is applied to patients with specialcharacteristics, including pregnant women and women during the lactation period. Theprincipal investigator considers that our Privi hemorrhoid cooling balloon may be applied topregnant women and women during the lactation period. We intend to conduct a two-stageclinical trial of our Privi hemorrhoid cooling balloon on pregnant women and women duringthe lactation period in mainland China in 2022 and 2023, for which we are still preparing theclinical trial protocol. To determine the sample size and plans for our clinical trial protocol,we have sought advice from KOLs in the obstetrics and gynecology field and the anorectalsurgery field pertaining to the current therapies for pregnant women with hemorrhoids, theincidence rate of hemorrhoids in the obstetrics and gynecology department of hospitals,potential product improvements, and clinical trial related risk factors.


BUSINESS

– 204 –

Product Structure and Advantages

Our Privi hemorrhoid cooling balloon consists of (i) a telescopic compression balloon,(ii) an introducer tube, (iii) an endothermic mixing chamber, and (iv) a squeeze plate. Thefollowing diagram illustrates the structure of this product.

Endothermic mixing chamber

Squeeze plate

Introducer tube

Telescopic compression balloonTelescopic compression balloon

Introducer tube

Squeeze plate

Endothermic mixing chamber

Our Privi hemorrhoid cooling balloon has the following advantages:

• Safe. Our Privi hemorrhoid cooling balloon addresses the symptoms using purelyphysical treatment methods, which does not cause any direct injury to the patient’smucosa and has no risk of drugs entering the patient’s bloodstream or causing anyindirect side effect. This product is therefore safe and suitable for treating patientswho need to be cautious about taking medications or using medicated ointments,including pregnant patients with hemorrhoids. This safe treatment is not available inother hemorrhoid therapies in the market, according to Frost & Sullivan.

• Precise. The introducer tube and the telescopic compression balloon (with varyingdiameters) can access and locate internal hemorrhoids in different areas and applypressure on such internal hemorrhoids. As such, our Privi hemorrhoid coolingballoon offers a more precise treatment targeting the specific location of internalhemorrhoids as compared to other therapies (including suppository) in the market,according to Frost & Sullivan.

• Efficient. Pressure can be applied continuously to the bleeding area when thetelescopic compression balloon of this product is filled with fluid, and this pressurecan be maintained at a stable level. As such, hemorrhoids can be treated speedilyand bleeding and discomfort can be relieved quickly by the continuous applicationof this treatment. Other therapies (including suppository) in the market cannot offerthis continuous treatment for hemorrhoids, because the drugs essential for thetreatment will usually be partially lost in the colon, which will lead to prolongedtreatment.


BUSINESS

– 205 –

• Private. No special odor will be released during and after the treatment as thesolution of this product is kept and sealed in the telescopic compression balloon.Therefore, patients’ privacy in treating hemorrhoids can be safeguarded. In contrast,to our best knowledge, many medicated ointments and suppository that treathemorrhoids in the market contain Chinese herbs and Western medicine whichrelease certain odors. In addition, our product can be personally applied by thepatient and potentially be bought online, which helps maintain privacy.

Operation Procedure

An operation procedure typically involves the following steps:

• the user activates the device by compressing it to start an endothermic process,which absorbs heat and causes the temperature of the solutions to decrease;

• the user then deploys the compliant balloon near the target hemorrhoid(s) andpresses the squeeze plate to inject the low temperature solutions into the balloon toexpand it to the expected size;

• the expanded balloon exerts pressure on the hemorrhoid(s) to stop the bleeding. Atthe same time, the low temperature solutions inside the balloon cools thehemorrhoid(s) through heat exchange to relieve pain and discomfort;

• based on the specific conditions of the hemorrhoid(s), the expanded balloon will beleft at the target hemorrhoid(s) for five to eight minutes, throughout which thesqueeze plate should not be loosened; and

• the user will loosen the squeeze plate and retrieve the balloon together with theintroducer tube, and the treatment process is completed.

This product should be used twice a day to achieve optimal treatment results.

Summary of Clinical Trial Results

We have completed the double-center clinical trial in December 2018 to evaluate thesafety and short-term effectiveness of our Privi hemorrhoid cooling balloon by comparing thesafety and efficacy endpoints between patients treated with our product and patients treatedwith Tai Ning Suppositories. Two hospitals participated in this clinical trial. In this clinicaltrial, each patient participated in a three-day treatment procedure, which also includedfollow-up visits with the patients during these three days and on the fourth day (namely, oneday after the completion of the treatment). The trial results showed our Privi hemorrhoidcooling balloon is non-inferior to Tai Ning Suppositories for the treatment of hemorrhoids.


BUSINESS

– 206 –

From September 2018 to December 2018, we enrolled a total of 191 patients for theclinical trial and 189 of these patients completed the trial study (including 85 patients for ourproduct and 104 patients for Tai Ning Suppositories). All of the subjects enrolled in theclinical trial met the following conditions:

• the patient was aged between 18 and 75 years old;

• the patient suffered from Grade I, II or III internal hemorrhoids or mixedhemorrhoids;

• the patient suffered from pain or bleeding;

• the hemorrhoids recurred monthly or frequently; and

• the patient was willing to participate in the clinical trial and abide by the trialprotocol and signed the informed consent form.

Safety Assessment

The trial assesses the occurrence of adverse events and serious adverse events. An adverseevent refers to any adverse medical event that occurs any time from the patient’s admission tothe clinical trial until the last follow-up visit, regardless of whether the adverse medical eventwas caused by the medical device. A serious adverse event includes death and any seriousdeterioration that affects the patient’s health or physical conditions. Throughout the clinicaltrial, no adverse events or serious adverse events were observed for patients in the test groupor the control group.

Efficacy Indicators

The efficacy of our Privi hemorrhoid cooling balloon is evaluated primarily by thetreatment effectiveness rate on the fourth day after the patient is treated with this product orTai Ning Suppositories. The treatment is considered effective if the patient (a) was cured, (b)showed significant improvement or (c) showed improvement.

Treatment effectiveness rate

Within the test group that was treated with our Privi hemorrhoid cooling balloon, 79 outof the 85 subjects (92.9%) were effectively treated. This compares with 93 out of 105 subjects(88.6%) in the control group that were effectively treated with Tai Ning Suppositories. Therelative treatment efficacy rate of our product compared to Tai Ning Suppositories, whichmeans the difference between the effectiveness rate of our product and that of Tai NingSuppositories, was 4.4%. Statistical analysis showed that the 8% statistically recognizedthreshold of non-inferiority provided in the clinical trial protocol fell within the 95%confidence interval of the relative treatment efficacy rate of 4.4%, which indicates that ourPrivi hemorrhoid cooling balloon is non-inferior to Tai Ning Suppositories in terms of


BUSINESS

– 207 –

treatment effectiveness rate. The table below sets forth details of the primary efficacy resultsfor patients treated with our product and Tai Ning Suppositories.

Status of patients after treatment

Privi hemorrhoidcooling balloon

(N=85)

Tai NingSuppositories

(N=105)

Cured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65(76.5%) 58(55.2%)Significant improvement . . . . . . . . . . . . . . . . . . . . . . . 9(10.6%) 10(9.5%)Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5(5.9%) 25(23.8%)Ineffective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6(7.1%) 12(11.4%)Unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0(0.0%) 0(0.0%)Effective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79(92.9%) 93(88.6%)

The efficacy of our Privi hemorrhoid cooling balloon is also evaluated by (i) an 11-point

(from 0 to 10) numeric pain rating scale (NRS) that patients use to assess the level of pain

before and after the subsequent treatments on the first, second, third and fourth days after the

initial treatment, (ii) intensity of bleeding on the first, second, third and fourth days after the

initial treatment, (iii) the time between the beginning of the treatment and the moment when

the pain was significantly or partially relieved, (iv) the cumulative time of symptom presence

on the first, second and third days after the initial treatment, (v) the defecation frequency

before, and on the first, second and third days after, the initial treatment, and (vi) the patient’s

satisfaction with the treatment during the four-day follow-ups.

Level of pain

The following chart demonstrates the changes in the subjects’ pain score after being

treated with our Privi hemorrhoid cooling balloon and Tai Ning Suppositories during the

follow-up period. The subjects rated the level of pain they felt with an NRS ranging from 0 to

10, with 0 meaning no feeling or pain and 10 meaning severe pain. They were asked to rate

their pain both pre- and post-treatment, for the initial treatment, the subsequent treatments

during the three-day treatment period, and on the fourth day (namely, one day after the

treatment is completed). The full analysis set (“FAS”) results indicated statistically significant

difference between the test group and the control group post the initial treatment, post the


BUSINESS

– 208 –

treatments on the first and second days, and on the fourth day, with subjects treated with ourproduct showing greater effectiveness.

The product Control arm

0.0

0.5

1.0

1.5

2.0

2.5

1.6

1.3

1.5

2.1

2.0

2.1

1.2

0.7 0.6

0.8

0.5

1.1

0.60.9

0.3 0.2

0.60.5

1.0

1.0

0.3

1.4

1.31.0

1.7

1.50.9

0.90.9

1.3

Baseli

ne

Initi

al Tre

atmen

t

Day1-b

efore

the 1

st tre

atmen

t

Day1-a

fter t

he 1st

treatm

ent

Day1-b

efore

the 2

nd trea

tmen

t

Day1-a

fter t

he 2nd tr

eatm

ent

Day2-b

efore

the 2

nd trea

tmen

t

Day2-a

fter t

he 2nd tr

eatm

ent

Day2-b

efore

the 1

st tre

atmen

t

Day2-a

fter t

he 1st

treatm

ent

Day3-b

efore

the 2

nd trea

tmen

t

Day3-a

fter t

he 2nd tr

eatm

ent

Day4

Day3-b

efore

the 1

st tre

atmen

t

Day3-a

fter t

he 1st

treatm

ent

Pain versus time

Pai

n sc

ore

Intensity of bleeding

The following chart demonstrates the improvements in the subjects’ bleeding after beingtreated with our Privi hemorrhoid cooling balloon and Tai Ning Suppositories during thefollow-up period. The patients were rated for the level of bleeding with a score ranging from 0to 6, with 0 meaning no bleeding while 6 meaning severe bleeding. The FAS results and theanalysis results of the per protocol set (“PPS”) showed no statistically significant differencebetween the test group and control group during the 4-day follow-up period. This shows thatour product is non-inferior to Tai Ning Suppositories in stopping bleeding related tohemorrhoids. In other words, our product is similarly effective as Tai Ning Suppositories instopping bleeding related to hemorrhoids.


0

1

2

3 2.7

2.5

1.5

1.3

0.7 0.40.4

0.9

Baseline Day1 Day2 Day3 Day4

Bleeding versus time

Lev

el o

f ble

edin

g


BUSINESS

– 209 –

Time to relief

The following chart demonstrates the time it took for the subjects’ symptoms to berelieved on the first, second and third days of being treated with our Privi hemorrhoid coolingballoon and Tai Ning Suppositories. The FAS and PPS results showed statistically significantdifference between the test group and the control group both immediately after the initialtreatment and after each of the subsequent treatments conducted on the first, second andthird day after the initial treatment, with subjects treated with our product requiring less timefor symptom relief for each treatment.


0.0

5.0

10.0

15.0

20.0

25.0

8.6

3.04.3

19.5

2.8

19.5

3.1

18.1

2.9

19

3.3

16.3

3.1

12.6

Initial treatment

Day1-the 1st treatment

Day1-the 2nd treatment


Day2-the 2nd treatment


Day3-the 2ndt treatment

Time to relief

Tim

e in

Min

ute

Symptoms presence time

The following chart shows the daily cumulative time of symptom presence of the subjectson the first, second and third days of being treated with our Privi hemorrhoid cooling balloonand Tai Ning Suppositories. The FAS and PPS results showed statistically significantdifference between the test group and the control group for the cumulative time of symptompresence of the subjects on the second and third days after the initial treatment, with subjectstreated with our product experiencing less cumulative time of symptom presence.


0.0

100.0

34.7

21.616.6

55.5

16.1

48.2

Day1 Day2 Day3

Acc

umla

ted

tim

e in

min

ute


BUSINESS

– 210 –

In terms of the frequency of defecation, the FAS and PPS results showed no statisticallysignificant difference between the test group and the control group before the treatment andon the first, second and third days of treatment.

In general, during the four-day follow-up period, the FAS results showed statisticallysignificant difference between the test group and the control group in terms of the subjects’satisfaction with the treatment results, while the PPS results showed no statistically significantdifference in this respect.

Material Communications with Regulatory Authorities

We completed the type testing of our Privi hemorrhoid cooling balloon in April 2018 andfiled its clinical trial protocol with the Shandong MPA in August 2018 before commencing theclinical trial. We completed the clinical trial in December 2018 and obtained the Class IImedical device registration certificate from the Shandong MPA in February 2021. As advisedby our PRC Legal Advisor, the Shandong MPA, the local counterpart of the NMPA inShandong Province, is the competent authority to issue the Class II medical device registrationcertificate for our Privi hemorrhoid cooling balloon. See “Regulatory Overview—Laws andRegulations Relating to Medical Devices—Registration and Filings of Medical DeviceProducts” for the regulatory framework governing the authority of the NMPA and its localcounterpart. As of the Latest Practicable Date, we were not aware of any material concernfrom the Shandong MPA in connection with our Privi hemorrhoid cooling balloon.

Further Development Plan

We intend to engage in a two-stage clinical trial to test the safety of our Privi hemorrhoidcooling balloon on pregnant women and women during the lactation period. We are stillpreparing the clinical trial protocol for this trial. Our Privi hemorrhoid cooling balloon isclassified as a Class II medical device with medium risk whose safety and efficacy must bestrictly controlled according to the relevant regulations. As advised by our PRC LegalAdvisor, in the event of any substantial change in the scope of application of a registeredClass II medical device that may affect the safety and efficacy of that medical device, theregistrant is required to apply to the original registration authority for such a change withrespect to the registration. Expanding the application of our Privi hemorrhoid coolingballoon to patients with special characteristics (such as pregnant women and women duringthe lactation period) requires us to demonstrate the safety and efficacy of this extendedapplication, because at a relatively low temperature the balloon of this product will be incontact with human body. As such, the application of this product to pregnant women andwomen during the lactation period constitutes a substantial change in the scope of applicationof the originally registered Product with the Shandong MPA and we need to apply for suchchange in our Class II medical device registration. In addition, according to F&S, it iscommon for expanding the application of medical devices to patients with specialcharacteristics to be considered as expansion of their indications. Furthermore, as advised byour PRC Legal Advisor after consulting the Shandong MPA, this change in registration needs


BUSINESS

– 211 –

to be made with the Shandong MPA, which was the original registration authority of the Privihemorrhoid cooling balloon. See “Regulatory Overview—Laws and Regulations Relating toMedical Devices—Registration and Filings of Medical Device Products” for moreinformation.

Based on our PRC Legal Advisor’s interview with the Shandong MPA in July 2021,Shandong MPA confirmed that:

(i) our Privi hemorrhoid cooling balloon is classified as a Class II medical device, andthe Shandong MPA has the power to issue the Class II medical device registrationcertificate;

(ii) the Shandong MPA, being the original registration authority issuing the Class IImedical device registration certificate of our Privi hemorrhoid cooling balloon, hasthe power to review and determine whether there is a substantial change to the scopeof application of the product and whether the registrant is required to make aregistration change with the Shandong MPA; and

(iii) any substantial change to the scope of application that may affect the safety andefficacy of a registered Class II medical device will be subject to a change ofregistration with the original registration authority, and the Shandong MPArequires us to submit materials related to the safety and efficacy of the product forreview and approval, including clinical research and clinical trial materials, forexpanding the scope of application of our Privi hemorrhoid cooling balloon topregnant women and women during the lactation period to be a substantial changein the product’s scope of application. In addition, the Shandong MPA requires us tomake a change registration, instead of a new product registration, for our Privihemorrhoid cooling balloon for this new indication.

Market Opportunity and Competition

According to Frost & Sullivan, the population with hemorrhoids in China increased from713.5 million in 2016 to 724.9 million in 2020, and is expected to further grow to 735.7 millionin 2025 and to 745.6 million in 2030. Among the total number of patients suffering fromhemorrhoids, internal hemorrhoids are estimated to take up about 59.9% and the proportionof Grade I/II hemorrhoids is estimated to be 80%, according to Frost & Sullivan. In addition,the size of the hemorrhoid therapy market in China increased from RMB3.5 billion in 2016 toRMB5.0 billion in 2020 at a CAGR of 9.0%. This market size is expected to increase at aCAGR of 8.4% from 2020 to RMB7.4 billion in 2025 and further increase at a CAGR of 6.4%from 2025 to RMB10.2 billion in 2030, according to Frost & Sullivan.

In addition, Frost & Sullivan estimates that approximately 59.3% of pregnant womenhave hemorrhoids in mainland China. As the fetus grows, the uterus expands which maysuppress the rectum and trigger the onset of hemorrhoids. Further, the percentage of pregnantwomen having symptomatic level Grade I/II internal hemorrhoids that require medicationsreached approximately 28.4% of pregnant women in mainland China in 2020. In addition,


BUSINESS

– 212 –

pregnant women and women during the lactation period typically need to comply with strictrestrictions and clinical treatment guidance and avoid using chemical drugs to treathemorrhoids unless necessary. See “Industry Overview—Peripheral Diseases and China’sPeripheral Interventional Medical Devices Market—Hemorrhoids” for more details on thetrends for the hemorrhoids market.


Our aspiration catheters are our product candidates for the revascularization ofintracranial vessels for patients with acute ischemic stroke through aspiration. Whileaspiration is a revascularization technique that has been long utilized in the heart andperiphery, its use in the intracranial vasculature has been constrained by the lack of cathetersmade of suitable materials. The shortcoming has been overcome in recent years with theavailability of catheters that are large enough to provide adequate aspiration force to removethe thrombus while also flexible and soft enough to safely navigate the cerebral vasculature.

We licensed in the technology and patent for developing our major products Afentta®

aspiration catheter and HMC1-NAS aspiration catheter from ICI in 2017. We completed thetype testing and animal study for these products in June 2018.

Our major product Afentta® aspiration catheter (with an inner diameter of 0.071 inch orsmaller) was approved by the NMPA in May 2021 and commercialized in July 2021. It is thefirst domestic aspiration catheter approved by the NMPA and commercialized in China totreat acute ischemic stroke, and it contains the model of the largest distal inner diameterapproved by the NMPA as of the Latest Practicable Date, according to Frost & Sullivan.

Separately, we are finalizing the clinical trial for our major product HMC1-NASaspiration catheter (with an inner diameter of 0.088 inch or smaller) to seek the NMPAapproval. The 088 model of our HMC1-NAS aspiration catheter has potentially the world’slargest distal inner diameter among aspiration catheters in the market once approved,according to Frost & Sullivan. We expect to complete this clinical trial in the third quarter of2021. See “—Ongoing Clinical Trial” below for more information on this clinical trial. Weexpect to commercialize this product in China in 2022.

In addition, we are currently designing our in-house developed HMSR-NAS aspirationcatheter with certain features different from our Afentta® and HMCI-NAS aspirationcatheters. We expect to commercialize this product in 2023.

Product Structure of Afentta® and HMC1-NAS Aspiration Catheters

Our Afentta® and HMC1-NAS aspiration catheters typically consist of (i) the keycomponent—an intracranial thrombus aspiration catheter, and (ii) the accessories—such as anintroducer sheath and a rotating Y-connector hemostasis valve. However, not all models ofour Afentta® and HMC1-NAS aspiration catheters products contain the accessories, which


BUSINESS

– 213 –

depends on the actual clinical needs. The following diagrams illustrate the structure of ourAfentta® and HMC1-NAS aspiration catheters.

radiopaque marker distal catheter

strain relief

proximal catheter

hub

distal tip

Key Component: Intracranial Thrombus Aspiration Catheter

• The intracranial thrombus aspiration catheter is a single lumen, braid- andcoil-reinforced, variable stiffness catheter that facilitates the removal of intracranialclot through aspiration when connected to a vacuum source. Using specificallydesigned polymer materials, the catheter is a composite with smooth transitioningacross its multiple sections, and it is ultra-soft, ultra-thin while having sufficientradial force to resist the negative pressure. The catheter also shows goodkink-resistance, biocompatibility and trackability. The catheter is able to maintainthe circular shape even when it bends. In addition, the multiple sections of wiremesh supporting structure inside the catheter result in strong proximal end pushingforce, smooth distal end pushing, and seamless transitioning from the proximal endto the distal end. These features allow physicians to more easily navigate throughtortuous vasculature and push the catheter to the M2 segment of the middle cerebralartery.


BUSINESS

– 214 –

• The catheter used in our Afentta® and HMC1-NAS aspiration catheters is designedto generally have a larger inner diameter compared to peer catheter products withthe same outer diameter. In addition, the beveled tip design of our cathetergenerally offers greater surface area than peer products with flat tips do, and thisincreases the force acting to remove the thrombus. The beveled tip also allows ouraspiration catheters to have better alignment along the vessel walls and a higherangle of interaction with the thrombus face. All of these features allow the catheterto achieve better aspiration results as indicated by, among others, higherrecanalization rate at the first attempt; reduced stent retriever usage as a backupdevice; higher overall recanalization rate; and a lower discharge and 90-day mRSscore.

• The catheter has a hydrophilic coating to enhance tracking through the vasculature.The beveled distal tip allows for atraumatic tracking past vessel branches duringinsertion. A radiopaque marker provides the user with visual confirmation of thedistal tip location under fluoroscopy.

The primary models of our Afentta® and HMC1-NAS aspiration catheter have thefollowing features and advantages, including that different models can be used together tofacilitate each other in the operation procedure.

• 035 model: serves as an aspiration catheter, can reach the M2 segment of the middlecerebral artery to remove relatively small clot, and navigates catheters of largerinner diameters to reach the distal thrombus site to remove the clot;

• 071 model: provides stronger aspiration and better aspiration effect compared topeer products due to its relatively large cross-section area; and

• 088 model: can be first used for quick recanalization for large volume thrombuslocated in the proximal segment of the internal carotid artery. It can also navigate tothe C4 segment or above of the inner carotid artery, and even through the curves ofthe carotid siphon to get closer to the clot for recanalization due to its longer, softerdistal catheter design. Compared with other guiding catheters which can only reachthe C1-C2 segment of the internal carotid artery, the 088 model makes a significantdifference in supporting revascularization and providing proximal support for othermodels of aspiration catheters passing through.

In general, during the ADAPT procedure, the aspiration catheter of the largest caliberthat the vessel can accommodate will be selected. This aspiration catheter is advanced to theonset of thrombus, together with the other aspiration catheter with a different size and otherneuro-interventional devices the operator may choose. This triaxial system can readily passthrough the U-turn bend at the carotid siphon. In addition, this triaxial system helps differentmodels to either guide each other at the distal side or support each other at the proximal sideto reach the target position and realize the recanalization.


BUSINESS

– 215 –

Operation Procedure of our Afentta® and HMC1-NAS Aspiration Catheters

While the actual procedure using our Afentta® and HMC1-NAS aspiration cathetersvaries and is subject to conditions including the availability of medical devices, the patient’sconditions and the physician’s experience, an operation procedure typically involves thefollowing steps:

• According to the diameter of the target vessel and the length of the interventionpath to the target lesion, the physician will select a catheter system with anappropriate size;

• In the preparation stage, the 0.035-inch guidewire, auxiliary catheter and 088aspiration catheter are pre-loaded together as part of the “catheter set” (definedbelow);

• The physician inserts the short sheath to the femoral artery puncture point andslides the introducer sheath to slightly exceed the far end tip of the 088 aspirationcatheter. The introducer sheath should be used together with the 088 model all thetime to avoid any damage to the catheter tip;

• The physician then pushes the introducer sheath, the 088 model, the auxiliarycatheter and the 0.035-inch guidewire (collectively, the “catheter set”) into the shortsheath. With the X-ray guidance, the catheter set is pushed through the short sheathinto the vessel;

• With the X-ray guidance, the physician will then advance the catheter set. When the088 aspiration catheter reaches the target position, the 0.035-inch guidewire and theauxiliary catheter will be withdrawn and replaced by a 0.014-inch guidewire,together with one or two aspiration catheters. The selection of aspiration catheterswill depend on the occlusion position, target vessel size and the physician'spreferences;

• The guidewire and aspiration catheters will facilitate each other and be advanced tothe target position. After the largest aspiration catheter that the target vessel canaccommodate is placed close to the clot, the physician will first remove theaspiration catheter of a small size and the guidewire, followed by connecting theaspiration catheter to the aspiration pump or a syringe. The physician then opensthe negative pressure pump with the connector valve closed and adjusts the negativepressure to an appropriate level before beginning the aspiration. The physicianopens the valve when carrying on the aspiration and closes the valve aftercompleting the aspiration; and

• After the treatment, the physician will inject a contrast medium through the cathetersystem to obtain an angiogram to verify that the clot has been removed completely.


BUSINESS

– 216 –

The mTICI evaluation will be conducted. Once it is confirmed that the clot isremoved, the catheter set can be withdrawn through the short sheath.

The following charts illustrate in further detail the thrombus aspiration process of ourAfentta® and HMC1-NAS aspiration catheters during the main part of the operationprocedure.

Ongoing Clinical Trial

We have engaged in the RECOVER clinical trial, a multi-center head-to-head clinicaltrial of our HMC1-NAS aspiration catheter against the SolitaireTM FR revascularizationdevice. We initiated this clinical trial in October 2018 and had completed the enrollment of204 patients (including 102 subjects in the test group and 102 in the control group) by January2021. Physicians in 20 hospitals in China conducted acute stroke treatment procedures on the204 subjects using our HMC1-NAS aspiration catheter. We have completed the relevantfollow-ups and are finalizing the clinical trial for this product.

Patients enrolled for our HMC1-NAS aspiration catheter’s clinical trial must meet thefollowing conditions:

• the patient was 18 or older;

• the patient suffered from acute anterior circulation ischemic stroke, and the digitalsubtraction angiography (“DSA”) before the randomization indicated acutethrombus at the intracranial segment of the internal carotid artery or the M1 or M2segment of the middle cerebral artery;


BUSINESS

– 217 –

• the patient had no apparent disability before the disease onset (with an mRS scorebetween zero and one);

• the patient had an NIHSS score of at least six;

• the treatment can be initiated within eight hours of symptom onset; and

• the patient or its legal guardian signed the informed consent form.


We completed the type testing and animal study for our major products, Afentta®

aspiration catheter and HMC1-NAS aspiration catheter, in June 2018.

Our Afentta® aspiration catheter has been approved by the NMPA. To our knowledge,our licensor ICI obtained the U.S. FDA’s 510(k) marketing approval in 2019 for its aspirationcatheter with substantially similar structure and specifications as our Afentta® aspirationcatheter, and ICI has commenced sales of its product in the United States. In addition, a thirdparty’s imported aspiration catheter has been approved by the NMPA and sold in China.Furthermore, in collaboration with researchers in the United States, our R&D team conductedcomprehensive studies and testing on the Afentta® aspiration catheter, including toxicologicalevaluation and relevant physical and mechanical testing, through which we accumulated a vastamount of data to facilitate the design of the Afentta® aspiration catheter. Based on theseexisting data, including animal study data, and other evidence to support the safety andefficacy of our Afentta® aspiration catheter, we obtained from the NMPA the Class IIImedical device registration certificate for our Afentta® aspiration catheter in May 2021.

Separately, after we complete the clinical study report for our major product HMC1-NASaspiration in the third quarter of 2021, we will seek to obtain the NMPA medical deviceregistration certificate to commercialize this product in China in 2022.

In addition, after we complete the product design of our in-house developedHMSR-NAS aspiration in the third quarter of 2021, we will apply for the CE Marking tocommercialize this product in markets outside China (with a focus on the Asia-Pacific region)in 2023.

As of the Latest Practicable Date, there had not been any material unexpected or adversechanges since the date we received the relevant regulatory approval for our Afentta®

aspiration catheter, and we were not aware of any material concern from relevant authoritiesin connection with our HMC1-NAS or HMSR-NAS aspiration catheter.


BUSINESS

– 218 –

Further Development Plan

After the commercialization of our Afentta® and HMC1-NAS aspiration catheters inChina, we plan to conduct post-marketing clinical studies and monitor real-world clinical datato further demonstrate the clinical benefits of ADAPT while increasing the penetration ofdirect aspiration as a first-line therapy in mechanical thrombectomy for AIS treatment and themarket share of our aspiration catheters.

ADAPT (A Direct Aspiration First Pass Technique)

ADAPT utilizes aspiration as the first-line approach to revascularizing an occludedvessel, and if this strategy fails, then the aspiration catheter can be used in conjunction with astent retriever to obtain revascularization, in which case the large-bore catheter already inplace serves as a conduit for the stent retriever. It is a recent endovascular treatment forischemic stroke due to large vessel occlusion that has been gaining popularity primarilyattributable to the rapidity of the technique and the potential for cost savings in comparisonwith standard thrombectomy methods. ADAPT has been shown in various clinical studies tobe effective in opening cerebral vessel occlusions with aspiration alone. If aspiration does notremove the thrombus, the aspiration catheter already in place close to the clot can be used inconjunction with a stent retriever to recanalize the vessel. This creates a safer procedurebecause the stent retriever is pulled into the aspiration catheter in the occluded vessel,reducing the risk of distal emboli entering new territories and minimizing traction on thecerebral vessels.

Dr. Aquilla Turk, a pioneer in studying the clinical efficacy of ADAPT, has provided uswith assistance in the RECOVER clinical trial of our HMC1-NAS aspiration catheter productin China, primarily by sharing his experience in the COMPASS clinical trial, visiting ourclinical trial sites, and providing technical guidance on the application of ADAPT. He hadalso designed a randomized controlled trial, a comparison of direct aspiration versus stentretriever as a first approach (“COMPASS”) to assess ADAPT’s clinical efficacy. COMPASSwas a multi-center clinical trial conducted from June 2015 to July 2017, which enrolled 270patients in total. 134 of the patients were assigned to treatment with ADAPT (the “aspirationgroup”) and the remaining 136 to treatment with a stent retriever as the first approach (the“stent retriever group”). The result was published in the article entitled Aspirationthrombectomy versus stent retriever thrombectomy as first-line approach for large vesselocclusion (COMPASS): a multicentre, randomised, open label, blinded outcome, non-inferioritytrial in March 2019. The clinical trial showed that the primary efficacy endpoint of an mRSscore between 0 to 2 at 90 days was achieved by 69 patients (52%) in the aspiration group and67 patients (50%) in the stent retriever group; the secondary efficacy endpoints and outcomesand the safety indicators also did not show significant differences between the two treatmentapproaches. In the article, Dr. Turk concluded that ADAPT demonstrated a non-inferiorfunctional outcome at 90 days compared with the stent retriever first-line approach.


BUSINESS

– 219 –

In addition, based on relevant research studies, ADAPT has several advantages as amechanical thrombectomy, including superior safety, higher first-pass recanalization rate,higher TICI 2b/3 recanalization rate, shorter treatment duration, ease of use and lower overalldevice cost compared to the SR technique. Some research studies have verified that aspirationcatheters with a larger distal inner diameter can realize a higher rate of complete clotingestion, which leads to a higher rate of first-pass complete recanalization and fewer distalemboli. As shown in Figure A and Figure B below, aspiration catheters with a distal innerdiameter ranging from 0.054 inch to 0.088 inch were applied in a patient-specificcerebrovascular replica to remove the clot analogs in the middle cerebral artery. Outcomemeasures mainly include the first-pass rate of complete clot ingestion and the extent ofrecanalization. In Figure A, aspiration through the large-bore 0.088 inch catheter achieved thehighest rate (100%) of first-pass recanalization for soft clots compared with catheters withsmaller distal inner diameters and stent retriever-balloon guided catheters (SR-BGC). InFigure B, the rate of complete ingestion is a function of distal inner diameters. The dots onthe solid curve represents aspiration catheters of four different distal inner diameters. Thedotted curves represent the 95% confidence interval. The figure demonstrated that the 0.088inch catheter realized the highest rate of up to 90%.

Source: J. NeuroIntervent. Surg. 2019.


ADAPT has been proven as a simple and fast method to achieve good angiographic andclinical outcomes, and aspiration catheters have great growth potential as a treatment for AIS.According to the Guidelines for Early Intervention Therapy for AIS in China (2018 version),for specific patients, it may be reasonable to use interventional direct aspirationthrombectomy alone (mainly ADAPT) or in combination with other procedures (COR II,LOE C). In contrast, the 2019 AHA/ASA Guidelines for the early management of acuteischemic stroke for healthcare professionals, issued by the American Heart Association andAmerican Stroke Association, provided that direct aspiration is not inferior to a stent retrieverfor patients meeting certain criteria and therefore gave direct aspiration COR I. This indicatesthat the COR of aspiration thrombectomy in the AIS treatment guidelines in China will likelybe raised in China as well, according to Frost & Sullivan.


BUSINESS

– 220 –

ADAPT, the SR technique and a combination of the stent retriever and aspirationcatheter respectively accounted for 41.3%, 29.3% and 29.3% of the total number of AISmechanical thrombectomy procedures in the U.S. in 2019, according to Frost & Sullivan. Incontrast, according to the same source, from 2017 to 2019 the number of ADAPT proceduresconducted in China was only one-eleventh of the SR procedures. The lag in ADAPT adoptionin China is attributable to the relatively late entry of aspiration catheters into China, thelimited pool of physicians experienced in using such devices and the limitations of existingaspiration catheters in the market. Prior to our Afentta® aspiration catheter’s approval, thelimited sizes and relatively small distal inner diameters of existing catheters in the marketpresented to physicians with a very limited number of choice of aspiration devices. These allindicate that the ADAPT therapy has significant growth potential.

According to Frost & Sullivan, as of the Latest Practicable Date, the NMPA had issuedonly four registration certificates to aspiration catheters from three manufacturers, namelyPenumbra System MAX, Penumbra System and SOFIA® Aspiration Catheter frominternational manufactures were approved by the NMPA in May 2018, April 2021 and July2021, respectively, and our Afentta® aspiration catheter was approved by the NMPA in May2021. In addition, we and four other manufacturers were undergoing clinical trials or pendingrelevant regulatory approvals for relevant aspiration catheter products. Our Afentta®

aspiration catheter has been commercialized since July 2021. We are finalizing the clinical trialfor our HMC1-NAS aspiration catheter to apply for the NMPA approval. In addition, ourHMSR-NAS aspiration catheter is at the design stage.

The following chart compares the features of our Afentta® and HMC1-NAS aspirationcatheters and a competitive product in the Chinese market.

Current product

Product in

pipeline

WorkingLength

Tip designDimensionDistal inner

diameter (inch) (1)

DimensionDistal outer

diameter(largest

catheter, inch) (2)

Ability to reach the

target position(largest

catheter)

Shelf life

Manufacturing Location

Afentta ® HMC1-

NAS

Afentta ®

®

:

117 -158 cm

Beveled

design, arc

design on top

with soft

material at the

distal end.

0.083 inch

Afentta 071:

M1

HMC1-NAS

088: Above

ICA-C4 (3)

3 years China

ACE

068/064/060

5Max/4Max/3

Max

- 132 -153 cm

Flat design /

Beveled tip

design (ACE

068)

0.084 inch ACE068: M18

monthsU.S.

0.068

0.035

0.035

Pipeline

0.088

Current

product

0.071

Our

Company

Penumbra

Notes:(1) Larger distal inner diameter indicates higher aspiration efficiency.(2) Smaller distal outer diameter indicates greater ability to reach higher positions.(3) HMC1-NAS 088 inch aspiration catheter can reach higher intracranial positions, including the ICA C4

segment or above, while other devices in mechanical thrombectomy, such as guiding catheter and long sheath


BUSINESS

– 221 –

with the same diameter, can only reach around ICA C1-C2 segments. Due to its design, the HMC1-NAS 088inch model can serve two different functions—aspiration and guiding/long sheath—in mechanicalthrombectomy.

Source: Website of Penumbra, Public Information, Frost & Sullivan Analysis

WE MAY NOT BE ABLE TO ULTIMATELY DEVELOP AND MARKET OURASPIRATION CATHETERS SUCCESSFULLY.

Stent Retriever

Our stent retriever is our product candidate that we developed in-house for intracranialvessel recanalization by removing occlusive thrombus in intracranial vessels for patients withacute ischemic stroke. Upon deployment of its self-expandable stent, the stent retrievercaptures and clears the target thrombus and offers immediate blood flow restoration. As amechanical thrombectomy device, the stent retriever can be used independently or, in theADAPT therapy, as a substitute if aspiration is unsuccessful.

We began the design of our stent retriever in January 2018, and completed the typetesting in October 2018. We completed the animal study in January 2019 and initiated theclinical trial on human subjects in July 2020 for this product. As provided in the clinical trialprotocol, we plan to enroll a total of 254 patients for our stent retriever’s overall head-to-headclinical trial against the SolitaireTM FR revascularization device, with 127 patients in each ofthe test group and the control group. The clinical trial protocol has been approved by theethics committees of various hospitals that have participated in the clinical trial. We filed theclinical trial protocol of our stent retriever with the Shandong MPA before the relevanthospitals participated in the clinical trial. We expect to commercialize our stent retriever by2023 after it is approved by the NMPA.

Product Structure

The stent retriever is a cylindrical device that consists of (i) a stent mounted on a pushwire, both of which are made of Nitinol, and (ii) an introducer sheath. The following diagramillustrates the structure of our stent retriever.

effective length of the stent


BUSINESS

– 222 –

The Stent Mounted on a Push Wire

• The stent frame has undergone laser cutting, heat treatment and polishing, so thatthe stent frame could be easily compressed into a smaller size for delivery via amicro-catheter, while maintaining its strength, durability and flexibility.

• When the stent is deployed at the target intracranial location of the clot, it graduallyexpands to its memorized and cylindrical shape once it is warmed up by the patient’sbody temperature, so as to facilitate the clot capture and removal. The stent frame isdesigned to provide sufficient radial force for expansion within the vessel toeffectively capture and remove the clot. The polished surface of the stent minimizesdamages to the vessel caused by frictions between the stent and the endotheliumduring the clot removal procedure.

• The stent has several radiopaque markers on the proximal, middle and distal ends,allowing the physician to locate the stent and to visualize the distal end during theoperation procedure.

• The push wire is designed to have a gradient of outer diameter near the far end,wrapped with a coils and filmed with a layer of polytetrafluoroethylene (PTFE) toensure that it has both optimal flexibility and axial stiffness.

Introducer Sheath

• When the stent is in use, the introducer sheath connects the stent with themicro-catheter. When the stent is not in use, the stent is contained within the sheath.

Based on the above structure, our stent retriever has the following potential advantagescompared to other mainstream products in the market:

• Effectiveness. Our stent retriever uses a spiral structure(which expands into a square), while the other productstypically use a vertical structure (which expands into arectangle). As such, our stent retriever has bettermalleability to help capture and remove the clot.

• Visibility. Compared with other products which typicallyonly have markers on distal and proximal, our stentretriever has three other markers in the middle of thestent.


BUSINESS

– 223 –

• Flexibility. Our stent offerings include eight different models, covering vesseldiameters ranging from 3 mm (millimeters) to 6 mm and clot length ranging from10 mm to 40 mm. This broad spectrum of offerings provides physicians with theflexibility to choose an ideal size that satisfies the specific conditions of the patient.

Operation Procedure

While the actual procedure using the stent retriever varies and is subject to conditions

including the availability of medical devices, the patient’s conditions and the physician’s

experience, an operation procedure typically involves the following steps:

• The physician first inserts a short sheath into the femoral artery, and then sends a0.035 inch guidewire through the piercing sheath for introducing a suitable guidingcatheter as close as possible to the thrombus site;

• The physician selects a micro-catheter suitable for advancing the stent retriever tothe thrombus site and connects a RHV to the micro-catheter for continuousflushing;

• A stent retriever is delivered through the micro-catheter by advancing the push wirein a smooth and continuous manner. The stent retriever is navigated within amicro-catheter and positioned through the clot to the far end of the clot. The distalend of the stent should be aligned with the far end of the micro-catheter. The stentshould be positioned in a way such that once it fully expands, it can cover all sides ofthe blood clot;

• Once at the site of the blood clot, the micro-catheter is slowly and slightlywithdrawn until the stent is released from within the catheter and fully self-expandswithin the clot. This immediately pushes the clot against the wall of the artery, thusinstantaneously reestablishing blood flow to the brain. The stent retriever should bedeployed in the target location for at least five minutes, which allows ensnaring ofthe clot within the tines of the stent to completely capture the clot; and

• The stent retriever is then used to grab the clot; and as the wire is pulled back, thestent retriever is retrieved back into the micro-catheter, and the clot is removedalong with it. Angiography is typically required to assess the revascularization statusof the treated vessel.

In case the clot could not be fully removed at once, the same stent retriever can be usedagain to capture the remaining clot. Typically, the same stent retriever could not be used formore than three times. The physician should conduct careful inspection of the device before


BUSINESS

– 224 –

each use to ensure the stent retriever is not deformed or broken, which might cause iatrogenicinjury. The graph below illustrates the operation of our stent retriever when removing the clotin a stent thrombectomy procedure.

Ongoing Clinical Trial

As of the Latest Practicable Date, we had enrolled a total of 147 patients out of theplanned 254 patients for the clinical trial for our stent retriever. We expect to complete theclinical trial in the second quarter of 2022. After we complete the clinical trial, we will applyfor the Class III medical device registration certificate from the NMPA for this product.

All of the clinical trial subjects enrolled for the clinical trial met the following conditions:

• the patient was 18 or older;

• the patient suffered from acute anterior circulation ischemic stroke, and the DSAbefore the randomization indicated acute thrombus at the intracranial segment ofthe internal carotid artery or the M1 or M2 segment of the middle cerebral artery;

• the patient had no apparent disability before the disease onset (with a modifiedRankin scale, or mRS, score between zero and one);

• the patient had a National Institute of Health stroke scale, or NIHSS, score of atleast six;

• the treatment can be initiated within eight hours of symptom onset; and

• the patient or its legal agent signed the informed consent form.


We completed the type testing in October 2018 and the animal study in January 2019 forour stent retriever, and initiated its clinical trial on human subjects in July 2020. Tocommercialize our stent retriever, we expect to submit the application for the NMPA’sapproval after we complete the clinical trial by the second quarter of 2022. We will seek toobtain the Class III medical device registration certificate from the NMPA to commercialize


BUSINESS

– 225 –

this product in China, and seek to obtain the CE Marking to commercialize it outside China(focusing on the Asia-Pacific region). Such commercialization is expected to take place in2023. As of the Latest Practicable Date, we were not aware of any material concern fromrelevant authorities in connection with our stent retriever.


According to Frost & Sullivan, the incidence of acute ischemic stroke in China increasedfrom 2.9 million in 2016 to 3.6 million in 2020, and is expected to further grow to 4.6 millionin 2025 and 5.8 million in 2030. Due to the proven clinical safety and efficacy, as well as thegrowing acceptance and knowledge among physicians, of medical devices such as stentretrievers, the number of mechanical thrombectomy procedures in China increased at a CAGRof 29.5% from 17.6 thousand in 2016 to 49.5 thousand in 2020, and is expected to increase at aCAGR of 43.9% from 2020 to 305.2 thousand in 2025 and further at a CAGR of 23.6% from2025 to 881.3 thousand in 2030, according to Frost & Sullivan.

While the stent retriever is a major device of mechanical thrombectomy for theendovascular treatment of acute ischemic stroke, the stent retriever market in China is still ata relatively early stage of development. According to the Guidelines for Early InterventionTherapy for Acute Ischemic Stroke in China (2018 version) (《急性缺血性卒中血管內治療中國指南2018》), it is reasonable to use interventional direct aspiration thrombectomy alone(mainly ADAPT) or in combination with other procedures (COR II, LOE C) for specificpatients. Artery mechanical thrombectomy (mainly stent retriever) should be considered foracute ischemic stroke patients with large artery occlusion after careful evaluation of potentialbenefits and risks (COR II, LOE B).

The efficacy of the stent retriever has been proven by multiple comprehensiveevidence-based clinical applications globally, and its clinical application in China hasincreased rapidly since 2015. According to Frost & Sullivan, as of the Latest Practicable Date,a total of 14 stent retrievers had obtained the NMPA approval in China, with ninemanufactured by international companies and five by domestic companies. In addition, as ofthe Latest Practicable Date, there were another three stent retrievers from domesticcompanies, including our stent retriever, that were either undergoing clinical trials or at thepre-launch stage. For details, see “Industry Overview—Neuro-vascular Diseases andProcedures—Acute Ischemic Stroke—Competitive Landscape of AIS Medical Devices Marketin China—Stent Retrievers” in this [REDACTED].

WE MAY NOT BE ABLE TO ULTIMATELY DEVELOP AND MARKET THE STENTRETRIEVER SUCCESSFULLY.

Access Catheters

Our access catheters are catheter devices that provide access for otherneuro-interventional devices, such as stent retriever, balloon, stent, coils and other kinds ofcatheters and guidewire, in the treatment procedures of acute ischemic stroke, intracranial


BUSINESS

– 226 –

atherosclerosis and hemorrhagic stroke. These other neuro-interventional devices can passthrough the access catheter to advance to the target site. Our TracLine® access catheter hasbeen commercialized in China since April 2020. We are also currently designing our in-housedeveloped HMSR-NAC access catheter. Upon completion of the product design, we will applyfor the CE Marking to commercialize this product, which we expect to be in 2023, focusing onthe Asia-Pacific region outside China.

Product Structure of TracLine® Access Catheter

Our TracLine® access catheter typically consists of distal tip, marker, distal section, midsection, proximal section and hub. The following diagram illustrates the structure of ourTracLine® access catheter.

• Similar to our aspiration catheters, the access catheter used in our TracLine® accesscatheter is a single lumen, braid- and coil-reinforced, variable stiffness catheter. Byleveraging specifically designed polymer materials, the catheter is a composite withsmooth transitioning across its multiple sections. It is also ultra-soft, ultra-thinwhile having sufficient radial force to resist the negative pressure and inwardpressure. The catheter shows good kink-resistance, biocompatibility andtrackability. The catheter is able to maintain the circular shape even when it bends.In addition, the multiple sections of wire mesh supporting structure inside thecatheter result in strong proximal end pushing force, smooth distal end pushing, andseamless transitioning from the proximal end to the distal end. These features allowphysicians to more easily navigate through tortuous vasculature.

• The access catheter is designed to generally have a larger inner diameter comparedto that of peer catheter products with the same outer diameter, allowing it toaccommodate neuro-interventional devices of larger diameter.


BUSINESS

– 227 –

• In addition, with our proprietary design, the ultra-soft beveled tip design of ourcatheter generally provides enhanced support, which allows the neuro-interventionaldevices to move back and forth while minimizing damages to endothelium.

Operation Procedure of TracLine® Access Catheter

As our TracLine® access catheter provides an access within the vessel in which otherneuro-interventional devices could pass through or be retrieved, physicians typically use ourTracLine® access catheter in combination with a specific neuro-interventional proceduraldevice, such as stent retriever, balloon catheter, coils and flow diverter. The graphs belowillustrate the operation of our TracLine® access catheter in combination with otherneuro-interventional procedural devices.

®

®

®

®

®

®

®


Our TracLine® access catheter obtained the Class III medical device registrationcertificate in early 2020 and has been commercialized in China since April 2020. As of theLatest Practicable Date, there had not been any material unexpected or adverse changes sincethe date we received the relevant regulatory approval.


Access catheters play an important role in the neuro-interventional procedures.According to Frost & Sullivan, the number of intracranial artery stenosis neuro-interventionalprocedures in China increased at a CAGR of 15.0% from 15.6 thousand in 2016 to 27.3thousand in 2020, and is expected to further increase at a CAGR of 32.1% from 2020 to 109.9thousand in 2025 and at a CAGR of 26.0% from 2025 to 349.5 thousand in 2030. In addition,the market size for neuro interventional access devices in China increased at a CAGR of 7.5%from RMB0.3 billion in 2016 to RMB0.4 billion in 2020 and is expected to further increase ata CAGR of 29.7% from 2020 to RMB1.6 billion in 2025 and at a CAGR of 25.8% from 2025to RMB5.0 billion in 2030.

According to Frost & Sullivan, among different types of access catheters, intracranialsupport catheters (such as our TracLine® access catheter) play a key role in the operationprocedure because its delicate design allows the catheter to reach the designated site, providessufficient supporting force and has enough lumen space to load other devices. Among the 23


BUSINESS

– 228 –

intracranial support catheter products that had been approved by the NMPA as of the LatestPracticable Date, eight of them are from international manufacturers and 15 are fromdomestic manufacturers.

The following chart compares the features of our TracLine® access catheter with somecompetitive products in the market.

Manufacturer Approved application

Head-end design

Catheter’s length of the

distal soft segment1

5F catheter’s outer

diameter

6F catheter’s inner

diameter/ Square

Specifications coverage

Product manufacturing

location

TracLine®

access

catheter

Inclined/straight 15-23 cm 5F/0.068 inch0.071 inch/

1.8034 mm25-8F China

NavienTM

access

catheter

Flat/straight

and curved8 cm 5F/0.070 inch 0.072 inch/NA 5-6F U.S.

SofiaTM

access

catheter

Flat/straight 17-19 cm 5F/0.068 inch 0.070 inch/NA 5-6FU.S.

Our Company

Medtronic

MicroVention

Note:1. Longer length of the distal soft segment indicates greater ability to pass through tortuous vessels.

Source: Websites of the Companies, Frost & Sullivan Analysis

Other Products and Product Candidates

Neuro Drug-Coated Balloon (DCB)

Our neuro drug-coated balloon can be used to treat intracranial artery stenosis toimprove the blood supply to the brain and reduce the incidence of re-stenosis of theintracranial artery. In the interventional therapy, our neuro drug-coated balloon is deliveredto the target lesion site after being inserted into the skin and pushed along the blood vessels.After the product is accurately positioned, the physician can pressurize and dilate the balloonsuch that the drug can be applied on the target lesion site. The drug is used to inhibitneointimal hyperplasia, or the proliferation of smooth muscle cells, and reduce the incidenceof re-stenosis. The dilated balloon also expands the target blood vessel to restore the bloodflow.


BUSINESS

– 229 –

Our neuro drug-coated balloon uses the balloon catheter of rapid exchange (Rx) designand consists of a distal section, a balloon, the drug coating, radiopaque markers, an innertube, a distal catheter, a supporting wire and a strain relief. The dual radiopaque markers inthe balloon not only help the physician identify the location of the balloon under X-rayimaging, but also allow the physician to monitor the length of the balloon when it opens. Theproduct can be used together with a guiding catheter with a minimum inner diameter of 1.42mm (or 0.056 inch) and a guidewire of a maximum outer diameter of 0.36 mm (or 0.014 inch).

We have completed the type testing and are currently conducting animal study for ourneuro drug-coated balloon. We expect to obtain the medical device registration certificatefrom the NMPA and commercialize this product in 2025. As of the Latest Practicable Date, wewere not aware of any material adverse changes in the regulatory approval for this product.

As of the Latest Practicable Date, no neuro drug-coated balloon product forneuro-vascular application had been approved by the NMPA, according to Frost & Sullivan.We believe that, once launched, our neuro drug-coated balloon will become a highlycompetitive product in the market and will form a significant part of our integrated solutionsto stroke patients.

WE MAY NOT BE ABLE TO ULTIMATELY DEVELOP AND MARKET THENEURO DRUG-COATED BALLOON SUCCESSFULLY.

Neuro Balloon Catheters

Our neuro balloon catheters include both the rapid exchange (Rx) design and theover-the-wire (OTW) design, and are designed to treat intracranial artery stenosis, namely thenarrowing of an artery inside the brain, to improve the blood flow inside that artery.

Our FocuStar® neuro balloon catheter – Rx consists of a distal section, a balloon,radiopaque markers, an inner tube, a distal catheter, a supporting wire, an anti-deformationprotection section and a hub. The neuro balloon catheter – OTW consists of a distal section, aballoon, radiopaque markers, an inner tube, a distal catheter, a proximal catheter, ananti-deformation protection section and a hub. For both designs of our neuro ballooncatheters, the dual radiopaque markers in the balloon not only help the physician identify thelocation of the balloon under X-ray imaging, but also allow the physician to monitor thelength of the balloon when it inflates. For our FocuStar® neuro balloon catheter – Rx alone,we apply coating to the product to make its surface smoother, thereby improving thepushability of the product. We designed the balloon to have an ultra-thin wall, such that theballoon shows better flexibility and good pressure-resistance at the same time. We alsodesigned the tip of the catheter to be short, soft and thin, thereby increasing its ability tonavigate tortuous vessels. Our FocuStar® neuro balloon catheter – Rx has different models:the diameter of the balloon ranges from 1.5 mm to 4.5 mm and the length from 6 mm to 25mm, and the effective length of the catheter can be as long as 153 cm. Our neuro ballooncatheter – OTW can be used together with a guiding catheter with a minimum inner diameterof 1.42 mm (or 0.056 inch). Depending on the specific model of the neuro balloon catheter –OTW used, a guidewire with a maximum outer diameter of 0.36 mm (or 0.014 inch) or 0.41mm (or 0.016 inch) can be used together.


BUSINESS

– 230 –

The graphs below are illustrative pictures of our neuro balloon catheters and theoperation procedure of our FocuStar® neuro balloon catheter – Rx, respectively.

FocuStar® neuro balloon catheter – Rx

For our FocuStar® neuro balloon catheter – Rx, we obtained the Class III medical deviceregistration certificate in December 2020 and have commercialized this product in China sinceApril 2021. As of the Latest Practicable Date, there had not been any material unexpected oradverse changes since the date we received the relevant regulatory approval.

For our neuro balloon catheter – OTW, we are currently at the type testing stage andexpect to obtain the medical device registration certificate from the NMPA in the third quarterof 2022 and then commercialize this product in 2022. As of the Latest Practicable Date, wewere not aware of any material adverse changes in the regulatory approval for this product.

As of the Latest Practicable Date, ten neuro balloon catheters (including our FocuStar®

neuro balloon catheter – Rx) had been approved by the NMPA to treat intracranial arterystenosis, of which nine products are from domestic manufacturers (including us) and one isfrom an international manufacturer, according to Frost & Sullivan. We believe that, oncelaunched, our neuro balloon catheter – OTW will further strengthen our market position andwill form a significant part of our integrated solutions to stroke patients.

WE MAY NOT BE ABLE TO ULTIMATELY DEVELOP AND MARKET THENEURO BALLOON CATHETER - OTW SUCCESSFULLY.

Neuro Drug Eluting Stent

Our neuro drug eluting stent, coated with rapamycin, is designed to treat intracranialartery stenosis and help reduce the incidence of re-stenosis after the stent is planted.

Our neuro drug eluting stent consists of the metal frame coated with rapamycin and theballoon catheter of the rapid exchange (Rx) design as the delivery system. In the minimallyinvasive interventional procedure, with the aid of medical imaging equipment, the physiciantypically pushes the product along the guidewire and balloon catheter that have alreadyreached the target lesion site through the femoral artery, lower extremity artery, aortic archand internal carotid artery. Once the neuro drug eluting stent is in place, the balloon is dilatedto provide sufficient support to expand and push the stent against the inner wall of thenarrowed target blood vessel. The balloon catheter will then be deflated and withdrawn and


BUSINESS

– 231 –

the neuro drug eluting stent will expand the blood vessel to restore its blood flow. The drug onthe stent will be gradually released to inhibit neointimal hyperplasia, so as to prevent there-stenosis of the blood vessel.

We are currently at the type testing stage for our neuro drug eluting stent and expect toobtain the medical device registration certificate from the NMPA and commercialize thisproduct in 2025. As of the Latest Practicable Date, we were not aware of any material adversechanges in the regulatory approval for this product.

As of the Latest Practicable Date, only two drug-eluting stents had been approved by theNMPA for treating intracranial artery stenosis, both in 2020, according to Frost & Sullivan.We believe that, once launched, our neuro drug-eluting stent will form a significant part ofour integrated solutions to stroke patients.

WE MAY NOT BE ABLE TO ULTIMATELY DEVELOP AND MARKET THENEURO DRUG ELUTING STENT SUCCESSFULLY.

Mountix® Micro-Catheter

Our Mountix® micro-catheter is a neuro access product designed to assist the delivery ofdiagnostic devices and materials and/or therapeutic devices and materials to the target lesions,including those in the neuro-vascular and peripheral vascular systems. It is used primarily fortherapeutic embolization and angiography. Our Mountix® micro-catheter is friendly to use,and has good kink-resistance and distal flexibility, and therefore physicians are able to bettercontrol the Mountix® micro-catheter during the operation procedures.

Our Mountix® micro-catheter consists of a hub, a stress release tube, a catheter,radiopaque markers and a hydrophilic coating. The segment gradient design increases thecontrollability of the catheter, the coil reinforcement design increases its flexibility, and thepolymer materials used in the distal end provide strong support to the distal catheter. At thedistal end of the Mountix® micro-catheter, the radiopaque markers of platinum iridium alloynot only can help monitor the catheter during the procedure but also avoid impairing theflexibility of the catheter. The hydrophilic coating provides lubrication between the catheterand the blood vessels while the inner PTFE layer ensures a long-lasting unimpeded flow withinthe catheter. The graph below is an illustrative picture of our Mountix® micro-catheter.


BUSINESS

– 232 –

We obtained the NMPA medical device registration certificate in June 2021 and expect tocommercialize this product in the third quarter of 2021. As of the Latest Practicable Date,there had not been any material unexpected or adverse changes since the date we received therelevant regulatory approval.

As of the Latest Practicable Date, 28 micro-catheters (including our Mountix®

micro-catheter) had been approved by the NMPA, which are from ten domestic manufacturersand eight international manufacturers, according to Frost & Sullivan. Our Mountix®

micro-catheter will form a significant part of our integrated solutions to stroke patients.

WE MAY NOT BE ABLE TO ULTIMATELY MARKET THE MOUNTIX®

MICRO-CATHETER.

Guiding Catheter

Our guiding catheter is a neuro access product used to provide an access channel to assistthe delivery of medical devices and materials to target locations in the neuro-vasculature.

Our guiding catheter is a single lumen catheter consisting of a sheath, a distal end, ananti-deformation protection section and a hub. It provides strong support, with goodresilience. We designed our guiding catheter to maintain the balance between flexibility andpushability, such that it can not only provide an access channel for medical devices such asguidewire, balloon and stent, but also provide sufficient support to facilitate the delivery ofthese devices into the target vessels. It also provides an access channel for the injection ofcontrast agents. The graph below is an illustrative picture of our guiding catheter.

We are currently at the type testing stage for our guiding catheter and expect to obtainthe medical device registration certificate from the NMPA in the third quarter of 2021 andcommercialize the product in 2022. As of the Latest Practicable Date, we were not aware ofany material adverse changes in the regulatory approval for this product.

As of the Latest Practicable Date, 15 guiding catheters from both domestic andinternational manufacturers had been approved by the NMPA, according to Frost & Sullivan.Once launched, our guiding catheter will form a significant part of our integrated solutions tostroke patients.


BUSINESS

– 233 –

WE MAY NOT BE ABLE TO ULTIMATELY DEVELOP AND MARKET THEGUIDING CATHETER SUCCESSFULLY.

Micro Guidewire for Ischemia

Our micro guidewire for ischemia is a neuro access product used to assist the delivery ofdiagnostic and therapeutic devices to the target lesions, including those in the neuro-vascularand peripheral vascular systems. It can guide the catheter to navigate the tortuous arterysystem and enter into small blood vessels and lacuna. It is an important tool in changingcatheters during the procedure.

Our micro guidewire for ischemia consists of a torque device and a guidewire. Inside theguidewire is a core wire made of 304 stainless steel, which enhances the guidewire’spushability. The flat structure design of the guidewire’s distal end improves its torsionperformance and flexibility. The distal end of the guidewire also contains a tungsten-filledpolymer cover, which not only makes a smoother surface but also allows radiopaque imaging.The hydrophilic coating facilitates a smoother movement in the blood vessels and theinteraction between devices and enhances the trackability of the micro guidewire for ischemiawhen it navigates through different blood vessels.

We are currently at the design stage for our micro guidewire for ischemia product andexpect to obtain the medical device registration certificate from the NMPA and commercializeit in 2023. As of the Latest Practicable Date, we were not aware of any material adversechanges in the regulatory approval for this product.

As of the Latest Practicable Date, 16 micro guidewire for ischemia products had beenapproved by the NMPA, which are from four domestic manufacturers and eight internationalmanufacturers, according to Frost & Sullivan. Our micro guidewire for ischemia will form asignificant part of our integrated solutions to stroke patients.

WE MAY NOT BE ABLE TO ULTIMATELY DEVELOP AND MARKET THEMICRO GUIDEWIRE FOR ISCHEMIA SUCCESSFULLY.

FocusLine® PTA Balloon Dilation Catheter

Our FocusLine® PTA balloon dilation catheter is a balloon dilation catheter of the OTWdesign. It can be used in a medical procedure called percutaneous transluminal angioplasty, orPTA, which treats diseases of the peripheral vascular system caused by blocked blood vessels.

Our FocusLine® PTA balloon catheter consists of a balloon, radiopaque markers, aninner tube, an outer tube and a hub. To minimize damages to the vessels, the balloon’sdiameter and length after dilation are the same as those of the vessel’s narrow proximal endand distal end. Under the fluoroscopic guidance, the physician inserts the balloon catheterinto an artery in the patients groin or arm and advance the balloon to the site of occlusion.The balloon will then be inflated to push the fatty deposits in the artery against the artery wall


BUSINESS

– 234 –

to reopen the vessel. After the X-ray imaging shows the blockage is opened and the blood isflowing freely through the artery, the catheter will be withdrawn and the balloon will be takenout together. The balloon shows both high flexibility and satisfactory rated burst pressure. Wealso apply single-sided welding to the catheter, thereby improving the pushability of thecatheter. Our FocusLine® PTA balloon catheter comes in different models of variousdimensions. The diameter of the balloon ranges from 2.0 mm to 8.0 mm. The graph below isan illustrative picture of our FocusLine® PTA balloon dilation catheter.

We obtained the Class III medical device registration certificate for our FocusLine® PTAballoon dilation catheter in July 2019. We further obtained the medical device productionpermit for this product in February 2021. We expect to commercialize this product in 2022. Asof the Latest Practicable Date, there had not been any material unexpected or adverse changessince the date we received the relevant regulatory approval.

As of the Latest Practicable Date, 71 PTA balloon dilation catheters had been approvedby the NMPA, including 26 from domestic manufacturers and 45 from internationalmanufacturers. Our FocusLine® PTA balloon dilation catheter is part of our strategicportfolio to penetrate the peripheral artery diseases market in China.

WE MAY NOT BE ABLE TO ULTIMATELY MARKET THE FOCUSLINE® PTABALLOON DILATION CATHETER.

RESEARCH AND DEVELOPMENT

We are committed to providing integrated solutions of medical devices in theinterventional field to both physicians and patients. Our R&D platform consists of ourpre-clinical R&D team in Weihai, Shandong Province, China, our clinical team in Beijing,China, our newly-established R&D center in Singapore, and our cooperation with athird-party R&D center based in Silicon Valley of the U.S. pursuant to the terms of a serviceagreement since December 2018.

As part of our R&D platform, we have also cooperated with a well-known U.S. companyin conducting R&D activities at its R&D center based in Silicon Valley, the United States.This U.S. R&D center we cooperate with focuses on the designs of various catheter products,and our R&D team in China improves these designs and introduces the products into China.This U.S. R&D center focuses on evaluating and accessing and disruptive technologies in thevascular interventional field, such as catheter products, and has a team proficient in projectmanagement such as FDA registration processes. Under our cooperation agreement with theU.S. R&D center, consultants at this U.S. R&D center must maintain strict confidentiality of


BUSINESS

– 235 –

all technical data, and we own the patent rights resulting from the research and developmentactivities completed under this agreement.

Through Privi Medical, we have licensed in technologies for our Privi hemorrhoidcooling balloon from certain third-party licensors (collectively, the “Privi Licensors”). Inaddition, we have licensed in technologies for our Afentta® and HMC1-NAS aspirationcatheters and TracLine® access catheter from ICI. We developed in-house all of our otherproducts, including our stent retriever and balloon structure products. We will continue todevelop products in-house as well as in-license or acquire disruptive technologies focused onthe neuro- and peripheral interventional fields. As of the Latest Practicable Date, we had threecommercialized products—TracLine® access catheter, FocuStar® neuro balloon catheter – Rxand Afentta® aspiration catheter, four additional products that had obtained the NMPAmedical device registration certificates, and 15 other product candidates in various stages ofdevelopment. As of the same date, we had five issued patents and 16 pending patentapplications in China.

In 2019, 2020 and the five months ended May 31, 2021, we incurred research anddevelopment expenses of RMB59.7 million, RMB18.1 million and RMB8.2 million,respectively. We will continue to expand and optimize our product portfolio and hire morequalified R&D staff to strengthen our R&D capabilities.

Our Research and Development Team

Our R&D team is led by Dr. Wang, our founder, chairman, chief executive officer andchief technology officer, who has over 20 years of R&D experience in endovascularintervention and med-tech engineering. Including Dr. Wang, our R&D team had 48 membersas of the Latest Practicable Date, many of whom have seasoned knowledge and proven recordin product development and eight of whom had a master’s degree or above. Our R&D team inChina consists of our pre-clinical R&D team in Weihai, Shandong Province and our clinicalteam in Beijing. Most of our pre-clinical R&D team members had over 10 years’ experience inmedical device R&D activities and many of them worked at JW Medical Systems and/orBiosensors International. While at JW Medical Systems and Biosensors International, ourpre-clinical R&D team members developed or contributed to the development of a number ofstent-related medical devices, including China’s first coronary stent and EXCEL—the world’sfirst biodegradable polymer drug-eluting stent. Our clinical team members are generally alsoveterans in clinical trial management and commercialization; they have collectively more than10 years’ experience working in multinational pharmaceutical and medical device companiessuch as Novartis and Johnson & Johnson. Our R&D team in China mainly conducts R&D incatheter, balloon and stent products. We also have a newly established R&D team inSingapore, which will initially focus on developing automated production lines for our Privihemorrhoid cooling balloon. At a later stage, this team will conduct R&D in neuroscience andAI technology with a focus on rehabilitation medical devices and the optimization and clinicalapplication expansion of our existing products.


BUSINESS

– 236 –

In-licensing Arrangement

Licensing and Sub-licensing Arrangements for Our Privi Hemorrhoid Cooling Balloon

Through the licensing and sub-licensing arrangements, we have obtained the exclusiverights to develop and commercialize our Privi hemorrhoid cooling balloon within the PRCand worldwide. Pursuant to the licensing agreement (the “Privi Licensing Agreement”) datedFebruary 21, 2017 among the Privi Licensors and Privi Medical as the licensee, Privi Medicalobtained an exclusive license in respect of a patent titled “Device for Insertion into a BodyCavity and Method of Fabrication Thereof ” used for our Privi hemorrhoid cooling balloon.Pursuant further to the sub-licensing agreement (the “Privi Sub-licensing Agreement”) datedAugust 17, 2017, Privi Medical licensed this patent to our indirect subsidiary, Pu Lewei. Weplan to acquire all equity interest in Privi Medical before the completion of the [REDACTED].See “History, Development and Corporate Structure—Corporate Development— Acquisitionof HeMo Singapore and Privi Medical” for details on the relationships between HeMoSingapore, Privi Medical and us and the proposed acquisitions. To our best knowledge, thePrivi Licensors are Independent Third Parties of our Group.


BUSINESS

– 237 –

The salient terms of the Privi Licensing Agreement and the Privi Sub-licensingAgreement are set forth below.

Privi Licensing Agreement Privi Sub-licensing Agreement

Type of patentlicence

Exclusive license Sole sub-license

Grant of licence Privi Medical was granted a non-transferrable,royalty-bearing and revocable-for-cause licenceto use relevant part of certain technology(including the worldwide patent applicationtitled “Device for Insertion into a Body Cavityand Method of Fabrication Thereof,” or theLicensed Technology) to:

(a) use, make, have made, manufacture,distribute, market, import, export, sell andhave sold any products that incorporates theLicensed Technology for use within the fieldof providing therapy for bleeding, painand/or discomfort only; and

(b) develop enhancements.

Privi Medical has granted Pu Leweia non-transferrable,non-sublicensable androyalty-bearing sub-licence to usecertain technology (including thepatent application, any Chinesepatent applications claimingcommon priority with or from thepatent applications, and any and allpatents granted pursuant to theforegoing patent applications withinthe PRC) to:

(a) use, make, manufacture,distribute, market, import, sell:

• any product for use withinthe field of providing therapyfor bleeding, pain and/ordiscomfort for hemorrhoidsonly which incorporate thesub-licensed patent; and

• other products incorporatingenhancements made by thesub-licensor and/or thesub-licensee or any membersof sub-licensee, its officersand representatives; and

(b) develop enhancements.


BUSINESS

– 238 –


Rights indevelopment

In the development and commercialization ofour Privi hemorrhoid cooling balloon, PriviMedical owns the intellectual property rights inany improvements it makes to the LicensedTechnology it develops under the licensingagreement, whereas the Privi Licensors’ and theiraffiliates the rights to own any improvementsthey make. Privi Medical has granted the PriviLicensors and their affiliates an irrevocable,non-exclusive, royalty-free, fully paid up,perpetual licence to use any improvements whichit develops for R&D purposes.

In the development andcommercialization of our Privihemorrhoid cooling balloon, PriviMedical owns all interests and rightsof enhancements Pu Lewei developsunder the sub-licensing agreement,which grants Pu Lewei a royalty-freesole licence to use the patentsgranted for and technologies of PuLewei’s enhancements within thePRC.

Right to prosecuteinfringement

Both Privi Medical and the Privi Licensors havethe right to prosecute third party infringement ofthe licensed patent at their own expense,provided that Privi Medical should not file a suitwithout giving prior written notice to andconducting close consultation with the PriviLicensors, or enter into settlement or takematerial actions that would affect validity of thelicensed patent without prior written consent ofthe Licensors.

The Privi Licensors and PriviMedical have the first right toprosecute third party infringementof the sub-licensed patent at theirown expense within the PRC. PuLewei may, at its own expense,prosecute the third-partyinfringement of the sub-licensedpatent, provided that Pu Leweishould not file a suit without priorwritten notice to and closeconsultation with Privi Medical. PuLewei is not allowed to enter intosettlement or take material actionsthat would affect validity of thesub-licensed patent without priorwritten consent of Privi Medical.


BUSINESS

– 239 –


Paymentobligations

i. Licence fee: Privi Medical made license feepayments to Privi Licensors of S$20,000 in2017, excluding prevailing goods andservices tax.

ii. Royalties (with applicable annual minimumpayments): Privi Medical is required to paythe Privi Licensors the royalty consisting ofthe following three categories:

• payable within 30 days of the end of eachhalf year from of the effective date of thelicensing agreement commencing with thehalf year of the first sale of our Privihemorrhoid cooling balloon: 1% of grossrevenue until cumulative gross revenue ofS$10,000,000; this will be increased to 2%of gross revenue subsequently, plusprevailing goods and service tax;

• payable within 30 days of the end of eachhalf year from the effective date of thelicensing agreement: 40% of sub-licensingreceipts prior to the relevant regulatoryapproval; this will be reduced to 20% ofsublicensing receipts after the relevantregulatory approval is obtained, plusprevailing goods and service tax; and

• payable within 30 days of the end of eachhalf year from the effective date of thelicensing agreement until December 31,2020 in certain territories: 20% ofsub-licensing receipts prior to therelevant regulatory approval; this will bereduced to 10% after the relevantapproval is obtained, plus prevailinggoods and service tax.

i. Equity interests: Privi Medical’scapital contribution to thesub-licensee, which is equivalentto 15% of non-dilutive shares inthe sub-licensee;

ii. Royalties: starting from theeffective date of thesub-licensing agreement:

• by March 10th each year, paythe royalty amounting to 1%of the net sales of our Privihemorrhoid cooling balloon(excluding tax) fromSeptember last year to theend of February in thecurrent year; and

• by September 10th each year,pay the royalty amounting to1% of the net sales of ourPrivi hemorrhoid coolingballoon (excluding tax) fromMarch to August in thecurrent year.


BUSINESS

– 240 –


Term andtermination

The license under the licensing agreement iseffective until the last patent to expire, or for aperiod of 20-years, whichever is earlier, and maybe terminated by the Licensors for cause. Thetermination events include: (i) Privi Medicalcommitting breach of the licensing agreementand failing to remedy such breach (if capable ofremedy) within a specified period of time, (ii)encumbrancer taking possession of or a receiverbeing appointed in relation to any of PriviMedical’s property or assets, (iii) Privi Medical’screditors commencing voluntary arrangement,(iv) Privi Medical going into liquidation, (v)Privi Medical ceasing or threatening to cease tocarry on business, as well as (vi) Privi Medicalbeing unable to meet its on-going commercialobligations (including making royalty paymentswhen due as mentioned in paragraph above) andcertain milestones as set out in the licensingagreement.

The term of the sub-license underthe sub-licensing agreement is aperiod of 20 years from August 17,2017, the date on which thesub-licensing agreement has beenexecuted. Privi Medical is entitled toterminate the sub-licensingagreement for cause. Thetermination events include the sameevents as stated in items (i) to (v)above in relation to Pu Lewei(instead of Privi Medical),non-payment of royalty payments byPu Lewei as mentioned above, aswell as the termination of thelicensing agreement.

In addition to milestones that had been met, the Privi Licensing Agreement, which was

amended by the parties on July 29, 2021, requires Privi Medical to achieve cumulative

S$1,000,000 gross revenue of our Privi hemorrhoid cooling balloon by December 31, 2026. In

the event that the milestone is not met, the Privi Licensors are entitled to terminate the Privi

Licensing Agreement. However, we believe that Privi Medical is able to achieve such milestone

due to the following grounds:

• The hemorrhoids market in China is substantial. According to Frost & Sullivan, thenumber of non-pregnant patients with internal hemorrhoids in China is expected tobe approximately 435.1 million in 2021 and 436.2 million in 2022, whereas thenumber of pregnant patients with internal hemorrhoids in China is expected to beapproximately 4.8 million in 2021 and 4.6 million in 2022;

• Our Privi hemorrhoid cooling balloon has various advantages that we expect willhelp its marketability. We intend to achieve the milestone throughcommercialization of this product in China. We expect to commercialize thisproduct in the fourth quarter of 2021; and

• We are currently expanding our production capacity for our Privi hemorrhoidcooling balloon by developing automated production lines, among others. Ourdesigned annual production capacity for this product is currently 40,000 units,which is expected to increase to over 10 million units by 2025.


BUSINESS

– 241 –

Joint-Ownership of the CN Patent with Incept and In-licensing Arrangement with ICI

We have formed in-depth strategic cooperation with ICI, which is one of our[REDACTED] Investors and Shareholders. ICI is an independent third party based in theUnited States focused on the development of next-generation stroke treatment products. OurHong Kong subsidiary, Max Vision Corporation Limited (“Max Vision”), and ICI enteredinto a license agreement on September 26, 2017, covering the licensing of a number oftechnologies based on certain U.S. and international patent applications and the assignmentof rights to certain patent applications. This license agreement was later amended and restatedby Max Vision and ICI on January 31, 2019 and by Max Vision, ICI, HeMo Jirui and ourCompany on May 27, 2020 (as so amended, the “ICI License Agreement”).

Pursuant to the relevant assignment agreements in respect of the patent applicationslisted in this license agreement, the Chinese patent application 201780003461.6 (entitled:“enhanced flexibility neuro-vascular catheter”) (the “CN Patent Application”) was transferredfrom Incept to Hemo Jirui on April 18, 2018 and subsequently transferred again from HemoJirui to HeMo China and Incept on March 26, 2021. The CN Patent Application had beengranted as a patent (the “CN Patent”) as of the Latest Practicable Date. See more informationon this patent in “—Intellectual Property Rights” below. HeMo China’s joint-ownership ofthe CN Patent enabled HeMo China to exclude others (except the other joint-owner) frommaking, using, selling, importing and offering for sale any and all products that are covered bythe granted claims under the CN Patent, including our Afentta® and HMC1-NAS aspirationcatheters and TracLine® access catheter. In addition, HeMo China does not need to receiveany permission or license from the other joint-owner—Incept—to make, use, sell, import andoffer for sale the products that are covered by the CN Patent.

According to the ICI License Agreement, ICI granted to HeMo Jirui a license based onIncept’s share of the ownership of the CN Patent of implementing certain intellectualproperty for our Afentta® and HMC1-NAS aspiration catheters and TracLine® accesscatheter. The principal terms of the ICI License Agreement are as follows:

• Exclusive License to our Company: ICI (which received an exclusive license underthe CN Patent Application under a separate license agreement with Incept) grantedto our Company an exclusive, fully paid-up, non-royalty bearing license under theCN Patent Application and any applications in the licensed territory claimingpriority to this patent and know-how provided to our Company prior to May 27,2020 to manufacture, develop and commercialize certain aspiration catheter andaccess catheter products. The license is limited to the development, manufacturingand commercialization of technologies and therapeutics for prevention, diagnosisand treatment of stroke and associated complications in the PRC, Hong Kong andMacau. In accordance with the ICI License Agreement, our Company cansublicense the rights to any of its affiliates.


BUSINESS

– 242 –

• ICI’s Retained Rights: ICI retained the exclusive right, under the CN PatentApplication, to manufacture, develop and sell (i) certain licensed products that areimported and registered with the NMPA, or the imported products, in the licensedfield within the licensed territory, provided that HeMo China has the first right tonegotiate an exclusive distribution relationship with ICI for these products, (ii) anyimprovement products, which are products that infringe ICI’s intellectual propertyrelating to any added functionality, improvements or combinations beyond thelicensed products in the licensed field within the licensed territory, and (iii) anylicensed products and improvement products outside the licensed territory.

• Exclusive License to ICI: Our Company granted to ICI an exclusive, royalty-freelicense under our Company’s patents filed in the licensed territory, and know-howprovided to ICI, prior to May 27, 2020 that are necessary or, solely for theknow-how, useful for the research, development, manufacture or commercializationof the licensed products. This license is limited to developing, manufacturing andcommercializing the licensed products in the licensed field outside the licensedterritory and, only with respect to imported products, in the licensed territory. As ofthe Latest Practicable Date, HeMo China owned the patent of “Catheter hub(Christmas tree type)” and joint-ownership in the patent applications titled“enhanced flexibility neuro-vascular catheter,” which are related to our Afentta®

and HMC1-NAS aspiration catheters. See “—Intellectual Property Rights” belowfor more details.

• Consideration: (i) Equity interest: We provided ICI with an 18% equity interest inHeMo Jirui. ICI has ceased to hold an 18% equity interest in HeMo Jirui andinstead holds 8% equity interest in our Company. See “History, Development andCorporate Structure—[REDACTED] Investments—Shareholding Structure” formore information on ICI’s investments in us; (ii) Upfront Payment: We paid ICI anon-refundable upfront payment of US$10 million in 2017; and (iii) MilestonePayments: We made milestone payments to ICI of US$5 million on February 4, 2019and US$10 million on April 30, 2019. No additional compensation is payable by usto ICI under the ICI License Agreement. Our Company is solely responsible for,controls, and bears all costs and expenses related to the research, development,manufacture and commercialization of licensed products in the licensed territory.

• Term of License: The ICI License Agreement is effective beginning from September26, 2017 and will continue to be in full force and effect unless earlier terminated byICI or our Company. ICI has the rights to terminate the ICI License Agreement atany time: (i) if (a) our Company is in material breach of our obligations under theagreement and this material breach is not cured within 90 days after our receipt ofthe notice of breach from ICI, and (b) ICI itself is not in material breach, whichbreach remains as uncured at the time of the termination notice; or (ii) if ourCompany files or is served with a petition for bankruptcy, insolvency or similararrangement or is engaged in any other insolvency event. Our Company has similarrights to terminate the ICI License Agreement. The license granted by ICI to our


BUSINESS

– 243 –

Company, and vice versa, will immediately terminate upon such termination of theICI License Agreement by ICI or our Company.

Product Development

Our research and development process typically involves the following steps:

• Project proposal and approval: Before embarking on the research and development ofa new medical device, we would form a team dedicated to assessing the projectproposal. The assessment team typically includes our management members andpersonnel from our R&D, quality control, manufacturing, business and financedepartments. Our R&D department first prepares a product feasibility researchproposal to be submitted to the assessment team, and the relevant departments willconduct market research for the proposed product. Based on the market informationreceived, our R&D department will finalize the product feasibility research report,covering existing products in the market, product design and other technicalparameters, manufacturing adaptability and clinical assessment. After reviewing thisreport, the assessment team will determine whether to proceed with the project.

• Design planning and development: We carry out new medical device product designplanning and development in accordance with our internal control protocol, whichwas prepared with reference to the risk management standards underISO13485:2016.

• Type testing: After the product design is finalized, we need to obtain the type testingreport and pre-evaluation opinion issued by the relevant governmental authorities,before proceeding to the animal studies and clinical trial.

• Animal studies: Some of our products (such as our stent retriever) requirepre-clinical animal studies before they can proceed into clinical studies according toapplicable law. We work with government-approved animal study labs in China toconduct animal studies. The third-party animal labs typically provide facilities,equipment and animals as well as regular veterinarians to perform the studies.Pursuant to our cooperation agreements with these labs, they are required tomaintain strict confidentiality of the animal study data and we own all of thesedata. Based on the animal study results, we will then review the design of ourproduct or make improvements to its safety and efficacy.

• Clinical trial: Following a type testing evaluation and/or animal studies of our newproducts, we conduct clinical trials for some of our products in accordance withapplicable law to measure their clinical safety and efficacy before applying forgovernment approvals. We typically conduct clinical trials in cooperation withthird-party medical institutions and follow the general clinical practice (“GCP”)and the International Conference on Harmonisation-Good Clinical Practice(“ICH-GCP”) standards for all of our clinical trial practices. Our research and


BUSINESS

– 244 –

development team selects qualified clinical trial institutions to carry out clinicaltrials on human subjects. Before beginning the clinical trial, we would prepare aclinical trial protocol that describes in detail the clinical trial’s purpose, design,timeline, methods, procedures and risks. We then discuss the clinical trial protocolwith the selected clinical trial institutions and principal investigators. Following thisdiscussion, we would prepare and provide a proposal to the ethics committee ofeach participating clinical trial institution, which includes our clinical trial protocol,patient consent forms, investigator report forms and form agreements with theparticipating clinical trial institution. During the clinical trial, our research anddevelopment team monitors the trial progress and patient reactions pursuant toclinical the clinical trial protocol. We currently have two products in clinical trial,namely our HMC1-NAS aspiration catheter and our stent retriever, and we haveengaged well-respected principal investigators to conduct the trials. In addition, weengage reputable CROs to coordinate the clinical trial process. We also engagetechnical service providers to provide image analysis and statistical analysis, amongothers, to assist in our clinical trials and analyzing and interpreting the clinical trialdata.

Collaboration with Clinical Trial Institutions

The NMPA maintains a catalog of hospitals that it has approved as clinical trial centers.From this catalog, we select the hospitals that we believe have the requisite credentials,expertise, technology, equipment, patient demographics and clinical trial capacity to conductour clinical trials. We typically enter into an agreement with each participating institution fora clinical trial that sets out the purpose, timeline, procedures and methods of the clinical trial,payment terms, and each party’s obligations. We first jointly prepare and develop a clinicaltrial protocol with our principal investigator(s) in accordance with the GCP and ICH-GCPstandards for the participating institutions to follow. We also submit the clinical trial protocolto each participating institution’s ethics committee, which may require us to revise the clinicaltrial protocol or other documents before their approval. Once the protocol is approved, anysubsequent amendments to the protocol must be reevaluated and approved by the ethicscommittees and the clinical trials are required to be conducted pursuant to the approvedprotocol.

We collaborate with clinical trial institutions for the development of our variousproducts. We have completed the clinical trial for our Privi hemorrhoid cooling balloon in twohospitals. In addition, we are conducting a clinical trial for our stent retriever with a total of254 patients in approximately 20 hospitals. We have completed the patient enrollment andfollow-up visits and are finalizing the clinical trial for our HMC1-NAS aspiration catheter on204 patients which was conducted in 20 hospitals. Under our clinical trials agreements withthe participating institutions, these institutions are required to conduct clinical trials strictlyin accordance with the protocol, collect data, and issue case reports at the end of each clinicaltrial. The lead clinical trial institution will gather case reports from all participatinginstitutions and prepare formal reports of the clinical trials. We make scheduled payments forthe institutions’ services. We generally own all the intellectual property and clinical trial data,


BUSINESS

– 245 –

and the participating institutions may use the clinical trial data for academic conference andpublications with our prior written approval.

Relationships with CROs, SMOs and Other Service Providers

We engage CROs and SMOs to support our clinical trials. We select CROs and SMOsconsidering factors such as their qualification, expertise, professional experience andreputation in the industry. We have engaged a CRO for the clinical trial of Privi hemorrhoidcooling balloon, a CRO and an SMO for our HMC1-NAS aspiration catheter’s clinical trialand an SMO for our stent retriever’s clinical trial. Under the relevant agreements, the CROsare typically responsible for project management, trial initiation, monitoring theimplementation of the clinical trial, file management, clinical trial report preparation, andtrial quality management. The CROs are also required to ensure the compliance of the clinicaltrial process with applicable regulations or standards and to protect the integrity and accuracyof the clinical trial results. The SMOs typically work as the clinical research coordinator andare responsible for certain administrative tasks to facilitate the investigators in conducting theclinical trials. We are responsible for the clinical trial preparation, subject enrollment, andclinical trial implementation and management. In addition, we provide the CROs with ourclinical trial protocols and facilitate their collaboration with the participating clinical trialinstitutions. We make scheduled payments for relevant services provided by the CROs, SMOsand other service providers.

We have also engaged other technical service providers, including data management,imaging analysis and statistics service providers, for our clinical trials. In addition, we haveengaged certain consultants who provide technical consulting service during the productdesign stage for some of our product candidates. Under our agreements with these serviceproviders, we generally own all intellectual property and clinical trial data, and the serviceproviders must maintain strict confidentiality the information they acquired during clinicaltrials.

Relationship with Principal Investigators and KOLs

We collaborate with principal investigators to conduct clinical trials for our products,including our Privi hemorrhoid cooling balloon, HMC1-NAS aspiration catheter and stentretriever. The clinical trial for our Privi hemorrhoid cooling balloon was led by a principalinvestigator who is a renowned colorectal surgeon in China and has undertaken severalprojects sponsored by the national fund and the government. The clinical trials for our stentretriever and HMC1-NAS aspiration catheter are led by principal investigators who arewell-recognized neuro-interventional specialists from reputable Class IIIA hospitals in China.The principal investigator for the RECOVER clinical trial of our HMC1-NAS aspirationcatheter is a leading expert in acute ischemic stroke treatment in China and holds importantpositions at various prestigious expert institutes. The principal investigators we work with notonly provide us with update on clinical progress and important feedback on clinical needs butalso present the clinical use of our products in academic settings, which we believe can invitewider discussion of our products and product candidates and in turn contribute to our


BUSINESS

– 246 –

research and development efforts. In addition, we also maintain continuous communicationswith principal investigators, KOLs, physicians and hospitals and host or participate inmeetings with them with respect to our latest research and development efforts, productdevelopment and product pipeline. For example, Dr. Aquilla Turk, a pioneer in the study ofclinical efficacy of the ADAPT therapy, has provided us with assistance in the RECOVERclinical trial of our HMC1-NAS aspiration catheter in China, primarily by sharing hisexperience in the COMPASS clinical trial, visiting our clinical trial sites, and providingtechnical guidance on the application of ADAPT.

OUR PRODUCTION FACILITIES AND PROCESSES

Production Facilities

We manufacture, assemble and test our products in-house at our production facilitieslocated in Weihai, Shandong Province, China. As of the Latest Practicable Date, theproduction facilities in Weihai had a gross floor area of approximately 6,216 sq.m. onrental-exempt properties leased from the local government, and we had a team of 44employees dedicated to the manufacturing of our products. Our leaders in the manufacturingand quality control departments have more than 10 years of experience in medical devicemanufacturing and quality control. Most of our manufacturing and quality control teammembers worked with Dr. Jack Wang at JW Medical Systems and Biosensors International,and they collectively have over 10 years of experience in Good Manufacturing Practice (GMP)and ISO 13485 inspections.

Our production facilities in Weihai can be used to manufacture disposable sterile Class IIand Class III medical devices. As of the Latest Practicable Date, we had obtained theproduction permit to manufacture our TracLine® access catheter, FocuStar® neuro ballooncatheter – Rx, Afentta® aspiration catheter, Privi hemorrhoid cooling balloon, aspirationaccessory, Mountix® micro-catheter, and FocusLine® PTA balloon dilation catheter.

The following table sets forth the designed annual production capacity, pro rataproduction capacity, actual production volume and utilization rate related to the commercialmanufacturing of our TracLine® access catheter during the Track Record Period.

Year ended December 31,Five months ended

May 31,

2019 2020 2021

Designed annual production capacity(units/annum) . . . . . . . . . . . . . . . . . . . . – 30,000 30,000

Pro rata production capacity (units)(1) . . – 22,500 12,500Production volume (units) . . . . . . . . . . . . – 1,621 1,460Utilization rate (%)(2) . . . . . . . . . . . . . . . – 5.4% 3.2%


BUSINESS

– 247 –

Notes:(1) The pro rata production capacity is calculated based on the designed annual production capacity divided by 12

and multiplied by the number of months the production facilities are in commercial production in a givenyear.

(2) Utilization rate equals actual production volume divided by pro-rata production capacity. The utilization ratefor 2020 and the five months ended May 31, 2021 was relatively low, primarily because we were still rampingup sales of our TracLine® access catheter.

Our TracLine® access catheter, and Afentta® and HMC1-NAS aspiration catheters uponcommercialization, will share the same production lines and, accordingly, the annualproduction capacity of our TracLine® access catheters in our Weihai production facilities canbe allocated for the production of our Afentta® and HMC1-NAS aspiration catheters.

As of the Latest Practicable Date, our Weihai production facilities also had an annualproduction capacity of 10,000 balloon catheter products, such as our FocuStar® neuro ballooncatheter – Rx and neuro balloon catheter – OTW. Our balloon catheter products (includingour FocusLine® PTA balloon dilation catheter) share the same production line and thus theproduction capacity. Our production capacity for balloon products is estimated based on ourcurrently available manpower and could potentially increase as we hire additional staff formanufacturing. For the five months ended May 31, 2021, we produced 433 units of FocuStar®

neuro balloon catheter — Rx.

We also expect to have a designed annual production capacity in 2021 of 40,000 units ofour Privi hemorrhoid cooling balloon after it is commercialized. Our production capacity forPrivi hemorrhoid cooling balloon is estimated based on our currently available manpower andcould potentially increase as we hire additional staff for manufacturing.

All the steps in our manufacturing process have complied with the GMP for MedicalDevices and the Sterile Medical Devices Implementation Rules promulgated by the NMPA.Our production facilities and our manufacture process are subject to periodic inspection bythe NMPA to ensure compliance with GMP, which is typically the pre-requisite to obtainmarketing approvals for our products. We have implemented quality management systems aspart of our manufacturing process. See “—Quality Control” for more information.

Typically, we require our employees to undergo health checks before they start producingmedical devices, and we require new employees to undergo approximately three months oftraining before they commence working at our production lines. We believe that thiscomprehensive training process enables us to increase our utilization rate and maintain ourproduction quality.

The machines we use for manufacturing our neuro- and peripheral interventional medicaldevices mainly include the balloon wrapping machine, wire braiding machine and stent lasercutting machine. We have multiple machinery suppliers so we are not dependent on any onesupplier. Since we maintain our machines on a regular basis, we have not experienced anymaterial or prolonged interruptions due to equipment or machinery failure as of the LatestPracticable Date.


BUSINESS

– 248 –

We plan to expand our production facilities as follows:

• Increase our catheter products’ designed annual production capacity to 60,000 unitsin the second half of 2021 and 100,000 units in 2022 by purchasing additionalproduction lines. We will also build a new cleanroom workshop for our catheterproduction by the end of 2021.

• Increase our balloon products’ designed annual production capacity to 100,000 unitsby the end of 2022 by purchasing additional equipment and hiring additional staff.

• Increase the designed annual production capacity for our Privi hemorrhoid coolingballoon to 600,000 units in 2022 by purchasing additional equipment and rentingadditional premises as a production site in Weihai, Shandong Province. In addition,we plan to build new production facilities in China and Singapore beginning in 2023and expect to commission the automated production lines for our Privi hemorrhoidcooling balloon in 2024. As a result, we expect to increase our designed annualproduction capacity for this product to over 10 million units by 2025.

• Procure production equipment to achieve a designed annual production capacity of25,000 units for our stent retriever at our production facilities in Weihai, ShandongProvince in 2023.

We plan to finance our expansion plans primarily with [REDACTED] from the[REDACTED], as well as our existing cash and cash equivalents on hand and cash flowgenerated from operating activities. See “Future Plans and [REDACTED]” for moreinformation. The above expansion plans, including the expected production capacity and theexpansion timeline, are subject to change according to market conditions and demand, ourability to obtain the regulatory approvals for our products as we anticipated, our ability toobtain the necessary premises and construction and operating licenses and permits, theavailability of funding and other factors, including factors beyond our control.

Manufacturing Process

Set forth below are the manufacturing processes for our major types of products.

Privi Hemorrhoid Cooling Balloon

Producing a Privi hemorrhoid cooling balloon requires the following key steps:

Production

of mixing

chamber

Preparation of endothermic

solution

Assembly of balloon and

mixing chamber

Assembly of introducer

tube

Product assembling and Pre-packaging

Packaging and

inspection

Preparation for raw material

quality examination

• After we prepare to raw materials and conduct the quality examination, we willprepare the benzoate solution.


BUSINESS

– 249 –

• Production of mixing chamber: We cut the biaxially oriented polypropylene, orBOPP, film into appropriate size to produce the water bag, in which we fill in thebenzoate solution before sealing the water bag.

• Assembly of balloon and mixing chamber: We put the pre-manufactured telescopiccompression balloon on top of the mixing chamber and affix the balloon to themixing chamber by applying glue to the base of the balloon.

• Assembly of introducer tube: We insert the balloon into the introducer tube andglue the balloon to the introducer tube.

• Product assembling and pre-packaging: We put the water bag and urea into theouter bag and seal the outer bag before putting the protective cap on top of theintroducer tube.

• Packaging and inspection: We conduct a comprehensive quality inspection on thePrivi hemorrhoid cooling balloon before packaging and placing it in storage.

Afentta® and HMC1-NAS Aspiration Catheters and TracLine® Access Catheter

The manufacturing processes of Afentta® and HMC1-NAS aspiration catheters andTracLine® access catheters are generally the same. Producing these products requires thefollowing key steps, a substantial majority of which are conducted in class 10,000 ppm (ISOclass 7) cleanroom workshops:

Coil transfer

Labeling &

installation

Braid

transferFilming

Hub

assembling

Work-in-progress quality inspection and

inner-packaging

SterilizationPackaging &

inspection

Preparation for raw material

quality examination

• We first prepare the raw materials and conduct quality examinations.

• Coil transfer: Using the coil winder, we first transfer the coils made of nickel alloyonto pre-processed PTFE-coated bushing mandrel.

• Labeling and installation: We install and fixate radiopaque markers and certainparts of the outer tube on the PTFE-coated bushing mandrel.

• Braid transfer: We transfer pre-made braids to the PTFE-coated bushing mandrel.

• Filming: We put the coils and braids inside the outer tube and use the filmingmachine to fuse together the outer tube, the coils, the braids and the PTFE-coatedbushing mandrel.

• Hub assembling: We use special adhesive to stick the hub to the filmed tubeproduced in the prior step.


BUSINESS

– 250 –

• Work-in-progress quality inspection and inner-packaging: We conduct under themicroscope a quality inspection on the exterior of each catheter, and package thecatheters that have passed this inspection in Tyvek bags.

• Sterilization: We sterilize the device using ethylene oxide.

• Packaging and inspection: We conduct a comprehensive quality inspection on thecatheter and place a label on each catheter that has passed the inspection beforeadding an outer package and placing it in storage.

Stent Retriever

Producing a stent retriever requires the following key steps:

• Preparation: We first examine the quality of the raw materials such as metal tubeand push wire that are required to make a stent retriever.

• Laser cutting: We cut the metal tube using laser technology to form a frame.

• Heat treatment: We use heat treatment technology to shape the products into havingspecific diameters

• Electrochemical polishing: We use electrochemical method to polish the frame toremove any micro-cracks.

• Washing: We wash the frame to remove any debris and chemical residuals.

• Product assembling and Pre-packaging: We assemble the frame with the push wireand pre-package the finished product.


• Packaging and inspection: After we add an outer package to the sterilized andexamined stent retriever, we conduct a comprehensive quality inspection on the stentretriever before placing it in storage.


BUSINESS

– 251 –

Balloon Catheter

Producing a balloon catheter requires the following key steps, which apply to theproduction of our FocuStar® neuro balloon catheter – Rx, Neuro Balloon Catheter – OTW,and FocusLine® PTA balloon dilation catheter.

• Preparation: We first examine the quality of the raw materials that are required tomake a balloon catheter

• Balloon molding: We place the tube in the balloon mold and perform blow moldingaccording to pre-set process parameters.

• Labeling and installation: We install and fixate radiopaque markers on the innertube using marker installation equipment.

• Assembling: We connect and assemble the relevant parts using our bondingequipment.

• Quality inspection and Pre-packaging: We conduct a comprehensive qualityinspection on the work in progress products after they are assembled, andpre-package the device.


• Labeling, packaging and inspection: After we label and add an outer package to thesterilized and examined balloon catheter, we conduct a comprehensive qualityinspection on each balloon catheter before placing it in storage.

SALES, DISTRIBUTION AND MARKETING

Our Sales and Marketing Team and Strategies

We have commercialized in China our TracLine® access catheter since April 2020,FocuStar® neuro balloon catheter – Rx since April 2021 and Afentta® aspiration cathetersince July 2021 after we obtained the medical device registration certificates from the NMPA.We have also obtained medical device registration certificates for our Privi hemorrhoidcooling balloon, aspiration accessory, Mountix® micro-catheter and FocusLine® PTA balloondilation catheter from the NMPA or Shandong MPA, as applicable, which we expect tocommercialize from the third quarter of 2021 to the year of 2022. In addition, we expect tocommercialize our HMC1-NAS aspiration catheter, neuro balloon catheter – OTW, guidingcatheter and balloon guiding catheter in 2022 once approved by regulators.


BUSINESS

– 252 –

As of the Latest Practicable Date, we had an in-house sales and marketing team of 19employees. To support the marketing and sales of our commercialized products and productsthat we will launch in the next few years, we are seeking to significantly expand our sales andmarketing team and sales network.

For our neuro-interventional medical devices, we plan to adopt a marketing strategy thatprimarily targets hospitals with stroke centers. When stroke happens, the earlier the patient istreated, the more efficacious the treatment will be, and the critical window for saving thepatient’s life is a time-frame measured by seconds, rather than by days or years. Therefore, webelieve the stroke patients typically need to be sent to the hospitals in their close proximityand, accordingly, the markets for our products are widely scattered, including a huge numberof lower-tier cities and hospitals in China. Our major products are primarily used forrevascularization of patients with acute ischemic stroke secondary to intracranial large vesselocclusive diseases within eight hours of symptom onset. Our integrated solutions also includea number of other products and product candidates focused on stroke treatment. As the firststep of our marketing and sales strategy, we plan to focus our sales efforts on hospitals with astroke center approved and established by the Stroke Prevention and Treatment Committee ofthe National Health Commission. In particular, we expect to primarily promote andcommercialize our products to hospitals designated as model advanced stroke centers, whichwe believe can help establish our and our products’ academic and industry reputation. We alsoplan to expand our sales and marketing network to cover hospitals designated as advancedstroke centers, which we expect to generate a significant portion of our sales revenue in thenear future. As of the Latest Practicable Date, there were approximately 30 model advancedstroke centers and 532 advanced stroke centers (including 157 advanced stroke centers underdevelopment) in China. In addition, to address the broad markets, we plan to establish aspecial sales force focused on penetrating into second-tier cities (particularly those with largepopulation and relatively good economic conditions) and second-tier hospitals. We will alsocooperate with leading pharmaceutical companies to develop relatively large local markets(including community hospitals) and leverage local sales agents to cover hospitals in othersecond-tier cities.

For our Core Product, Privi hemorrhoid cooling balloon, we currently plan to adopt amarketing strategy that quickly and effectively raises market awareness of this product. Wewill first carry out academic promotion, reach the patients through physicians, and build aloyal and recurring customer base. As the product is easy to use that patients can operate ontheir own, we believe our Privi hemorrhoid cooling balloon is particularly suitable for sellingon online channels, which provide easy access and can maintain the privacy for patients. Wemay establish our own online stores, access reputable third-party online flagship stores orapply for other third-party channel access. In addition, we plan to build our OTC network byform strategic partnership with reputable pharmaceutical companies and pharmacies. OurPrivi hemorrhoid cooling balloon can benefit from these strategic partners’ pre-existingmarket presence and network to reach more patients. Moreover, we intend to participate in thetender process organized by provincial government and hospitals, if any, such that ourproducts can access hospitals.


BUSINESS

– 253 –

Our Marketing Model

For our neuro-interventional medical devices, consistent with industry practice, wemarket our products to hospitals through medical evidence driven academic promotion. Weregularly meet with KOLs, principal investigators and physicians to discuss and demonstrateour products and update them on our research and development efforts and product pipeline,hold or participate in physician education programs and other academic activities in theneuro-interventional field. We believe that these academic communications help us tomaintain good working relationships with our potential customers and KOLs, familiarizethem with our products, and increase our market recognition; and if the KOLs form positiveopinions on our products, they may recommend our products when publishing articles,delivering speeches at industry conferences, and providing training to other physicians.

For our Privi hemorrhoid cooling balloon, consistent with industry practice, ourmarketing is primarily focused on online and offline advertising, including through socialmedia, to promote our product to potential patients. We will also conduct academicpromotion to physicians for our peripheral vascular products for the treatment of peripheralartery diseases.

We actively participate in academic conferences and industry exhibitions. These channelsprovide us with opportunities to educate and train physicians and collect their feedback. Theyalso serve as a platform for us to present the innovative and advanced features of ourproducts. For example, we participated in the seventh Annual Scientific Session of ChineseStroke Association and Tiantan International Stroke Conference (“CSA & TISC”) in July2021, the China Neuro-intervention Internet Broadcast Conference in March and June 2021,and the sixth Annual Conference of Chinese Interventional Neuroradiology Society of CSAand the 17th Conference of Tiantan Voice on Cerebrovascular Diseases in December 2020.During these conferences, we launched our new products TracLine® access catheter,FocuStar® neuro balloon catheter – Rx and Afentta® aspiration catheter, reputable physiciansshared their experience using our products, and a pioneer of the ADAPT therapy that weinvited introduced our products and mature products in overseas markets and demonstratedthe strength of our product designs and clinical performance through case studies. Inaddition, we have operated a case study column on a well-known online neuro-interventionaldiseases platform, participated in regular training held by reputable Class III hospital inChina, and held regional case study salons. Through these academic activities, we are able toraise the physicians’ recognition of our products and brand and promote our products andproduct candidates to more physicians and distributors.


BUSINESS

– 254 –

Our Sales Arrangements

For our neuro-interventional medical devices, in line with industry practice, we use anetwork of independent distributors for the sales of medical devices to hospitals. Prior tolaunching our TracLine® access catheter in April 2020, we did not have any sales revenue sincewe did not have any commercialized products. For our Privi hemorrhoid cooling balloon, weplan to sell the product directly to hospitals or pharmacies and through distributors that sellthe device to hospitals, in accordance with relevant regulations.

We currently sell our commercialized products to third-party distributors in China. Inprovinces and/or municipalities that have not strictly enforced the Two-invoice System, wehave engaged a distributor to sell our products to the sub-distributors, who then sell tohospitals. In provinces and/or municipalities where the Two-invoice System has been strictlyenforced, our distributors either (i) sell our products to public hospitals directly withoutinvolving any sub-distributors as required by the Two-invoice system, or (ii) sell our productsto the sub-distributors, who then sell to private hospitals which are not subject torequirements of the Two-invoice system. See “—Sales to Distributors—DistributionAgreements” below for further details.

Our well-trained marketing and sales personnel collaborate with our distributors to sellour products. Our marketing and sales team leads our academic promotion, includingproviding training to physicians and hospital executives and researchers. Our marketing andsales team works with our distributors to design our product distribution strategies, introduceour products to physicians and hospital executives, provide follow-up technical support andpromote sales to the hospitals. In addition, our distributors are also responsible for providingfeedback from customers on our products. By working closely with our distributors, we gainvaluable insights into operations of the sub-distributors and demands of physicians, whichhelps ensure the effectiveness of our marketing activities. Our distributors sometimes sell ourcommercialized products as a package with other third-party medical devices that theydistribute. After we launch our other products, we expect to promote to the hospitals ourintegrated solutions consisting primarily of our products for the clinical treatment of stroke.

In addition, we expect to provide after-sales services to our customers such as technologycollaboration and support, product use follow-up, customer complaint response and feedback.

Sales to Distributors

We are in the process of establishing our distribution network and will expand thenetwork as we roll out our products. We had two distributors in each of 2020 and the fivemonths ended May 31, 2021. As of the Latest Practicable Date, we had two distributors and 69sub-distributors, covering 216 hospitals in 18 provinces and municipalities in China, currentlyfor the distribution of our three commercialized products.


BUSINESS

– 255 –

We generally require our distributors to make prepayment, except that in 2020, in a saleto a hospital through a distributor, we provided a credit term of approximately six months tothe distributor. The ownership of products is immediately transferred to our distributors whenthe distributors receive our products. Our distributors generally cannot return unsoldproducts. During the Track Record Period and up to the Latest Practicable Date, we had notexperienced any material customer complaint or product returns. If our distributors breachthe distribution agreements with us and fail to remedy such breach within a specified period oftime, we can terminate our business relationship with such distributors. During the TrackRecord Period and up to the Latest Practicable Date, none of our distributors had materiallybreached our contract terms that caused the termination of any distribution agreement.

Selection and Management of Distributors

We generally seek distributors based on their qualifications, experience, expertise andreputation in the medical device industry. We pay particular attention to the distributors’experience in marketing and distributing neuro-interventional medical devices and theirability to sell our products as part of integrated solutions to the hospitals. We also assess thedistributors’ sales staff and management to ensure that they have the appropriate qualificationand skills to promote our products. To our best knowledge, during the Track Record Period,none of our distributors had any past or present relationship with our Group, ourshareholders, directors, senior management or any of their respective associates.

We primarily rely on our distribution agreements and internal policies to manage ourdistributors, ensure that our sales to distributors reflect genuine market demand and monitorour distributors’ compliance with the distribution agreements, applicable laws and regulationsand our internal policies. One of our distributors has used sub-distributors. We have access toview this distributor’s inventory system, thus gaining real time information on its inventorylevel and its sales of our products to the sub-distributors. In addition, we require thedistributor to ensure that its sub-distributors regularly upload data on the sub-distributors’sales to the hospitals so that we can monitor the end-market demand for our products. Wetypically re-assess the qualifications of our distributors when our distribution agreements withthem are due for renewal. See “—Distribution Agreements” below for more information onour management of distributors and sub-distributors.


BUSINESS

– 256 –

Distribution Agreements

We have entered into distribution agreements with our distributors. Our distributors canenter into sub-distribution agreements with their sub-distributors upon our prior approvaland need to ensure that the sub-distributors are not allowed to distribute our products toother distributors. We do not have contractual relationships with our sub-distributors. Thefollowing table sets forth key terms in our distribution agreement:

Item Descriptions

Term . . . . . . . . . . . . . The distribution agreements are valid until December 31, 2021.

Relationship withdistributor . . . . . . .

Our distributors are Independent Third Parties. One of ourdistributors has engaged sub-distributors for the sale of ourproducts across China. The other distributor is allowed to eitherengage sub-distributors for the sale of our products or selldirectly to hospitals, though this distributor has only sold tohospitals directly. Our relationship with our distributors is notthat of a principal and an agent, but that of a supplier andcustomer.

Exclusivity . . . . . . . . The distributor is prohibited from (i) promoting and selling ourproducts that are not authorized under the agreement, (ii)promoting and selling products outside the designatedgeographic region or hospitals, or (iii) selling products to anythird party that is not approved by us.

Target sales amount . A target order amount is mutually agreed and set for each year.

Minimum purchaseamount . . . . . . . . .

None.

Payment and creditterms . . . . . . . . . . .

The distributor is required to make payment in full prior toshipping, except that in 2020, in a sale to a hospital through adistributor, we provided a credit term of approximately sixmonths to the distributor.

Transportation anddelivery . . . . . . . . .

We generally agree to deliver the products to locations specifiedby the distributor. The ownership of the products is transferredat the point the distributor receives the products.

Warranty . . . . . . . . . . We do not provide warranties for our products.


BUSINESS

– 257 –

Item Descriptions

Productreturn/exchange . . .

We generally do not accept product returns.

We may accept product exchanges in certain limitedcircumstances. For our products not near the expiration date,we accept exchanges for products with packaging or qualitydefects.

For our products near the expiration date, after receiving properpaperwork from the distributor and if there is no damage to thepackaging or product, we accept exchanges depending on thetime-to-expiry of the product upon delivery: if the product hassix to 18 months remaining until expiry, we generally accept theproduct’s exchange for free; and if the product has over 18months remaining until expiry, we generally accept free productexchange within 5% of the distributor’ annual purchase (otherthan any short time-to-expiry caused by the distributor’negligence in inventory management) and only accept productexchanges exceeding this level in special circumstances throughnegotiation with the distributor.

Regulatorycompliance . . . . . .

The distributor is required to comply with all applicable lawsand regulations, including those relating to anti-bribery andanti-kickbacks. We provide relevant training to the distributorand require the distributor to provide similar training to itssub-distributors.

Termination . . . . . . . The distribution agreement will be automatically extended forhalf a year, during which time the parties can renew thedistribution agreement. The agreement may be terminated bymutual agreement of the parties.

The agreement may also be terminated by us when, among otherthings, the distributor undergoes certain fundamental changes,or materially breaches the agreement, including: (i) selling ourproducts that have not been authorized by us or selling ourproducts to a third party that we have approved in writing, (ii)selling counterfeits of our products or selling our products notpurchased from us, and (iii) selling expired or damagedproducts.


BUSINESS

– 258 –

Item Descriptions

Within 60 days upon termination of the agreement, we arerequired to repurchase, or appoint a designated third-party topurchase, any and all remaining inventory of the relevantproducts. For each day overdue, we are required to pay thedistributor liquidated damages equal to 1‰ of the total value ofthe inventory to be repurchased. The distributor retains theright to sell the inventory and the agreement shall remain validuntil the inventory depletes.

We have adopted various measures to maintain certain degree of management over oursub-distributors engaged by our distributors. Under our distribution agreement with ourdistributors, our distributors may not sell or otherwise provide our products to anysub-distributors that have not been approved by us in advance. We require our distributors toconduct due diligence on sub-distributor candidates to ensure that they generally do not fallshort of our requirements on them, including qualifications, experience, track records,financial position, and compliance with applicable laws and regulations. We require ourdistributors to ensure that the sub-distributors sell authorized products only in designatedgeographic regions within the specified authorization period. Sale of unauthorized productsor sale by a sub-distributor to unauthorized geographic regions or hospitals will lead totermination of the sub-distribution agreement by our distributors. Under the distributionagreement, we also require our distributors to monitor the sub-distributors’ sources ofproducts, sales data, inventory levels, and compliance with their contractual obligations andapplicable laws and regulations and timely report the same to us. We did not provide anydiscounts or sales rebates to our distributors in 2020, but may do so from time to time alongwith our marketing strategies.

We have launched our TracLine® access catheter, FocuStar® neuro balloon catheter – Rxand Afentta® aspiration catheter. We also expect to launch a number of products in theforeseeable future. These products typically have relatively complex product specifications,which require efficient inventory management and delivery to satisfy the requirements of thehospitals and other end-customers. We believe it is more efficient to collaborate with anestablished distributor to manage the inventory and the logistical needs of a large number ofsub-distributors and the hospitals and other end-customers across different regions,particularly when we are still at the early stage of commercialization. Therefore, we sold ourproducts during the Track Record Period primarily through one large distributor, which is amedical device company majority owned by a publicly listed pharmaceutical company inChina and has engaged sub-distributors to distribute our products. This distributor is anIndependent Third Party. Sales to this distributor in 2020 and the five months ended May 31,2021 accounted for 92.4% and 89.0% of our total revenue, respectively. We expect to continueto generate a significant portion of our revenue from this distributor and both parties intendto renew the current distribution agreement upon its expiry in December 2021. Wecommunicate with this distributor on a regular basis regarding the management andmonitoring of sub-distributors and do not expect any material adverse change in, ortermination of, our relationship with this distributor in the foreseeable future.


BUSINESS

– 259 –

Distributors typically prefer to work with a limited number of medical devicemanufacturers to maintain operation efficiency, particularly manufacturers with high qualityproducts and large product portfolio such as our Company. Therefore, although we do notprohibit our largest distributor from selling products manufactured by our competitors, webelieve this will not have a material adverse impact on their sales of our products. Also,hospitals decide on which products they will purchase from the distributors based on productspecifications and quality. This arrangement is in line with the industry norm according toFrost & Sullivan. For more details, see “Risk Factors—Risks Relating to Commercializationand Distribution of Our Products—If we fail to maintain or expand the distribution networkfor our products, or to maintain the relationship with our distributors, our sales could beadversely affected.”

As our business scale increases, we also plan to enter into collaborations with moredistributors to diversify our sales network and distribution channels. We are in negotiationwith several distributors in different regions with various product specialties. By the end of2021, we plan to introduce more distributors and sub-distributors to build up distributionchannels for our various products in different regions.

The Two-invoice System is currently implemented in certain provinces, autonomousregions and municipalities in China (collectively referred to as “provincial areas”). See“Regulatory Overview—Laws and Regulations Relating to Medical Devices—Two-invoiceSystem” for more details. In line with industry practice, we generally sell products tothird-party distributors. As advised by our PRC Legal Advisor, as of the Latest PracticableDate, the implementation progress of the “Two-invoice System” for medical consumablesvaries across provincial areas that have adopted the system. Some provincial areas have notstrictly enforced the Two-invoice System with respect to medical consumables, includingBeijing, Shanghai and Shandong. During the Track Record Period, our sales in Beijing andShandong accounted for a majority of our total revenue. In provincial areas that have notstrictly enforced the Two-invoice System for medical consumables while our product salesaccounted for a relatively high percentage of our total revenue, in line with industry practice,we may cooperate with distributors who in turn sell our products to their sub-distributors.These sub-distributors will then sell our products to hospitals and/or stroke centers. Asadvised by our PRC Legal Advisor, in provincial areas that have strictly enforced theTwo-invoice System for medical consumables, if the competent authority determines that weviolate the relevant provisions under the Two-invoice System, we may be subject toadministrative fines or penalties, and/or may be disqualified from participating in the biddingprocess organized in the relevant provincial area. The applicable laws and regulations do notstipulate the maximum amount of administrative fines and penalties to be imposed, and theactual amount is subject to the extensive discretion of local authorities. As such, we areextremely cautious in ensuring our compliance with the relevant requirements under theTwo-invoice System. In case that any provincial area where our products are sold starts tostrictly enforce the Two-invoice System for medical consumables, we plan to swiftly enter intodistribution agreements with entities that were previously sub-distributors, which will thendirectly sell our products to the hospital and/or stroke centers. To ensure their compliance, wefurther plan to require our distributors to promise in the distribution agreement that they will


BUSINESS

– 260 –

comply with all applicable laws and regulations, including the Two-invoice System, during the

term of cooperation. Our Directors confirm that, as of the Latest Practicable Date, we (i) had

not been determined by any regulators to have violated or circumvented any national and/or

local regulations, rules or policies related to the Two-invoice System, and (ii) had not been

disqualified from participating in any bidding process organized in the relevant provincial

area.

Pricing

As of the Latest Practicable Date, there was no centralized procurement requirement or

pricing guidance set by relevant PRC government authorities on our neuro-interventional

medical device products, though we cannot guarantee that this will not change. See “Risk

Factors—Risks Relating to Commercialization and Distribution of Our Products—The

growth and success of our business depends on the performance of us and our distributors in

government-administered bidding and tender processes” for more details. We determine the

prices at which we sell our products to our distributors by taking into account factors such as

our products’ costs, prices of competing products, and our target patients’ receptiveness to the

products. The prices at which our distributor sells our products to its sub-distributors are

determined by our distributor from time to time, and the distributor is required to timely

update us on these prices.

For our Privi hemorrhoid cooling balloon, we intend to determine the pricing by taking

into consideration its production cost, clinical treatment performance, the prices of

comparable products from major market players, and customer receptiveness to our product.

OUR CUSTOMERS

Our customers during the Track Record Period were our distributors. We began

generating revenue in April 2020 from the sales of our TracLine® access catheter. We had three

customers during the Track Record Period, and revenue generated from our customers

amounted to RMB2.8 million and RMB581 thousand in 2020 and five months ended May 31,

2021, respectively, representing all of our total revenue during these periods; and revenue

generated from our largest customer amounted to RMB2.6 million and RMB517 thousand,

representing 92.4% and 89.0% of our total revenue during these same respective periods. We

regularly communicate with our distributors to resolve issues or complaints that they or the

end-customers may have.

To the best knowledge of our Directors, each of our customers during the Track Record

Period was an Independent Third Party. None of our Directors and, to the best knowledge of

our Directors, none of our Shareholders who owns more than 5.0% of the Shares in issue, nor

any of their respective associates, had any interest in any of our two only customers during the

Track Record Period.


BUSINESS

– 261 –

The table below sets forth the basic information of our customers for the periods

indicated.


2020 2021

Customer Background Sales amount

Approximately% of our total

revenue Sales amount

Approximately% of our total

revenue

(RMB in

thousands)

(RMB in

thousands)

Customer A . . A public company's subsidiarythat engages in distribution ofmedical devices

2,623 92.4% 517 89.0%

Customer B . . A public company's subsidiarythat engages in distribution ofmedical devices

216 7.6% – –

Customer C . . A private company that engages indistribution of medical devices

– – 64 11.0%

Total . . . . . . 2,839 100.0% 581 100.0%

OUR SUPPLIERS AND RAW MATERIALS

Suppliers

Our suppliers primarily include suppliers of raw materials, CRO and SMO services and

suppliers of production and inspection equipment. In 2019, 2020 and five months ended May

31, 2021, purchases from our five largest suppliers amounted to RMB9.4 million, RMB6.9

million and RMB4.4 million, respectively, representing 42.1%, 53.8% and 37.9% of our total

purchases for these respective periods; and purchases from our largest supplier amounted to

RMB4.1 million, RMB3.0 million and RMB1.3 million, respectively, representing 18.4%,

23.0% and 11.3% of our total purchases for these respective periods.

To the best knowledge of our Directors, each of our five largest suppliers during the

Track Record Period was an Independent Third Party. None of our Directors and, to the best

knowledge of our Directors, none of our Shareholders who owns more than 5.0% of the

Shares in issue, nor any of their respective associates, had any interest in any of our five

largest suppliers during the Track Record Period.


BUSINESS

– 262 –

The table below sets forth the basic information of our top five suppliers during theTrack Record Period:

For the year ended December 31, 2019

Supplier Primary products purchasedPurchaseamount

Approximate %of our total

purchase

(RMB in

thousands)

Supplier A . . . Medical management services 4,119 18.4Supplier B . . . Medical materials 2,050 9.2Supplier C . . . Medical materials 1,169 5.2Supplier D . . . Medical materials 1,050 4.7Supplier E . . . Medical materials 1,021 4.6

Total . . . . . . . 9,409 42.1




purchase

(RMB in

thousands)

Supplier F . . . Medical materials 2,958 23.0Supplier C . . . Medical materials 1,232 9.6Supplier A . . . Medical management services 1,202 9.3Supplier G . . . Medical management services 1,022 7.9Supplier H . . . Medical materials 512 4.0

Total . . . . . . . 6,926 53.8

For the five months ended May 31, 2021



purchase

(RMB in

thousands)

Supplier C . . . Medical materials 1,329 11.3Supplier I . . . Equipment 1,267 10.8Supplier F . . . Medical materials 689 5.9Supplier J . . . Medical materials 666 5.7Supplier K . . . Equipment 492 4.2

Total . . . . . . . 4,443 37.9


BUSINESS

– 263 –

Raw materials

We primarily use raw materials and consumables such as jacket tubes, braid wire, alloywire, radiopaque markers and inner tubes for the manufacturing of our TracLine® accesscatheter, FocuStar® neuro balloon catheter – Rx and Afentta® aspiration catheter for sale andother products for R&D purposes. We source our principal raw materials from a number ofsuppliers primarily in the United States and China. We are actively seeking alternativesuppliers for our raw materials or manufacturing part of the polymer materials ourselves. Wegenerally keep at least six months of raw materials to ensure that we have sufficient time tosecure alternative supplies. In our quality agreements with the suppliers, we also require themto provide us advance notice if they wish to cease the supplies. We have more than three yearsof business relationship with each of our top five suppliers during the Track Record Period.However, we cannot assure that we will be able to maintain good relationships with all thesuppliers of our principal raw materials on commercially reasonable terms, if at all. While webelieve that the fluctuations in prices of raw materials do not have material impacts on theprices of our products, we are still subject to risks associated with shortage of raw materials.In 2019, 2020 and the five months ended May 31, 2021, our raw materials and consumablesused under research and development expenses and cost of sales amounted to RMB6.7million, RMB1.8 million and RMB802 thousand, respectively. For details of relevant risks, see“Risk Factors—Risks Relating to Our Procurement and Product Manufacture—We rely on alimited number of major raw material suppliers and may experience supply interruptions thatcould harm our ability to manufacture products” and “Risk Factors—Risks Relating to OurProcurement and Product Manufacture—Fluctuations in prices of our raw materials mayadversely affect our profitability” in this [REDACTED].

In accordance with our qualified suppliers control procedures, we require the suppliers ofour raw materials to comply with our quality standards and review their compliance statusannually. Our production department provides the list of required materials to ourprocurement personnel, who in turn makes monthly procurement plans and places orders withthe suppliers. Our procurement department is responsible for managing suppliers. We typicallyengage reputable large-scale raw materials suppliers who maintain relevant qualifications. Werequire the supplier candidates to send us sample raw materials for inspection and trialproduction. We select and assess the performance of our raw material suppliers generallybased on their production capacity, technological capabilities, quality of raw materials, costs,accounts payable payment terms, and after-sale services.

Procurement Arrangements

For our principal raw materials, we generally enter into a quality agreement with eachsupplier, and place purchase orders with the supplier based our production need. The qualityagreement will remain in effect until the supply relationship is terminated. Under the qualityagreement, the supplier is required to provide us with its quality control system qualifications.In addition, the supplier is required to ensure that every shipment to us provides certainpacking and labeling information and inspection report and meets our specifications andquality requirements. The supplier is not allowed to modify the product specifications and


BUSINESS

– 264 –

manufacturing processes without our prior written approval. The supplier is required to

maintain a traceability system to trace the manufacturing of each lot of the raw materials and

the components used in those raw materials. In addition, the supplier is required to ensure that

all the relevant manufacturing and quality control personnel are competent, all equipment

used is appropriately designed and placed, and all inspection, measuring and test equipment

used is suitable for its intended purposes. In the event the products have non-conformities or

quality issues, the supplier is required to timely notify us, conduct investigations, and, upon

our prior written approval, implement corrective and/or preventive measures to address the

causes of the problems.

During the Track Record Period and up to the Latest Practicable Date, we had not

experienced any material difficulties in procuring our major raw materials and had not

experienced significant fluctuations in the prices of our supplies. To our best knowledge, our

suppliers did not materially breach their procurement and quality agreements with us during

the Track Record Period.

INVENTORY MANAGEMENT

Our inventories consist of raw materials, work-in-progress and finished goods. We

generally maintain six months’ inventory of raw materials and regularly monitor our

inventory level to avoid understocking and overstocking. Our products generally have a shelf

life of two to three years. As of the Latest Practicable Date, we stored substantially all our

inventories in two leased warehouses, both located in Weihai, Shandong Province. We store

raw materials, packaging materials, finished goods, returned products, office supplies and

consumables separately in the warehouses. Our commercialized products are sold on a first-in

first-out basis. Our ERP system tracks details of the procurement, consumption in

production, and sales of our inventories. We also physically count our inventories monthly,

semi-annually and annually to identify products that are damaged or misplaced, or have

expired or are about to expire. We believe that our inventory control system and policies have

been effective, and we did not experience any material shortage in supply or overstock of

inventories during the Track Record Period and up to the Latest Practicable Date.

QUALITY CONTROL

Our quality control department manages our product quality in accordance with our

quality control policies. As of the Latest Practicable Date, our quality control team had 14

employees dedicated to the quality control of our products.

Our quality control system is ISO 13485:2016 certified and has been formed in

accordance with the requirements of ISO 13485:2016 and the Good Manufacturing Practice

(GMP) for Medical Devices and the Sterile Medical Devices Implementation Rules

promulgated by the NMPA. We have established an quality control policies that cover

procurement, monitoring and measuring equipment, substandard products, production


BUSINESS

– 265 –

process, product monitoring and measuring, production protection, design and development,

risk management, and data collection and analysis. We implement quality controls throughout

the design and development, production, sales and after-sales services.

Design Quality Control

We have established our risk management control protocol in accordance the

requirements of ISO014971:2007. This protocol covers the entire lifecycle of our new medical

devices, from product design and development to post-commercialization, as discussed below:

• Design planning: We prepare a project feasibility analysis report and a design anddevelopment planning report based on latest industry developments and marketresearch results;

• Design inputs: We take into consideration the needs of physicians and patients, aswell as expected functions, efficacy and safety requirements and applicableregulatory framework;

• Design outputs: We produce a design and development output list, which includesproduct standards or inspection protocols referenced; procurement documentationand quality principal requirements for raw materials; drawings and documentationthat guide our production, including production process charts, methods andenvironment; production equipment and inspection apparatus materials; productquality protocols; sample verification reports (including physical, biological, animaland other features’ testing); packaging the storage requirements; and productlabeling and user manuals;

• Design verification: We verify the design and development according to the planningin our project proposal and keep relevant verification records, including verificationrelated to expiry dates, packaging, sterilization, and any key and special steps of theproduction process;

• Design validation: We assess the design and development according to the planningin our project proposal. In addition, we produce and submit samples to third partiesfor registration inspection and biocompatibility testing to validate whether theproduct meets our designed standards; and

• Design transfer: We complete the transition from design and development to massproduction according to the requirements of our product design and developmentcontrol protocol. We take measures to ensure that our design and developmentoutput is suitable for mass production and our production capacity can meet therequirements of products, such as conducting trial production.


BUSINESS

– 266 –

Process Quality Control

We implement strict quality controls throughout our manufacturing process, whichprimarily include:

• Raw material control: We have established quality standards and inspectionprocedures for our principal raw materials. Only raw materials that have passed thequality standard inspection by our quality control department can be used forproduction. In addition, we also require our suppliers to provide quality reports forthe raw materials supplied;

• Production environment control: For certain of our products, we have implementedenvironment control protocols to control the production environment for ourproduction facilities. We clean our production facilities and monitor our productionenvironment according to the protocols, and we only carry out production when theproduction environment meet our requirements of the protocols;

• Process water: We use purified water during our production process and routinelymonitor the quality of the purified water in accordance with our purified waterquality standards;

• Key and special production process control: We set quality control checkpoints for thekey and special steps of our production processes. Our technicians working in theseprocesses have to undergo relevant training and pass qualification tests. Weroutinely conduct validation and maintenance of our key equipment and productiongear and also routinely conduct retrospective qualification and re-qualification ofthe key and special processes in products realization of the key and special steps ofour production processes;

• Production process and quality control: We monitor the entire production processand conduct quality control inspection at each step of the production process toensure the work-in-progress meets relevant quality standards before passing it to thenext step of the production process. We conduct comprehensive quality inspection atthe end of the production process to ensure each finished good meets our qualitystandard. We have designated quality control staff to supervise the qualityinspection and control of the work-in-progress for each step of the productionprocess; and

• Finished goods control: We only sell products that pass the inspection of our qualitycontrol department with an inspection report. We require our finished products tomeet our quality standards and product technological requirements.


BUSINESS

– 267 –

In addition, we perform statistical analysis on certain quality parameters related to theraw materials, work in progress and finished goods to monitor trends of change, if any, ofsuch parameters and we will take preventive measures immediately if the parameters exceedtheir corresponding pre-set warning levels.

During the Track Record Period and up to the Latest Practicable Date, we had notreceived any material quality complaints from our customers and our products had not beensubject to any material claim, litigation or investigation. In addition, during the Track RecordPeriod and up to the Latest Practicable Date, we did not experience any material productreturn or exchange.

COMPETITION

We operate in a market characterized by rapid technological developments and scientificdiscoveries.

For our neuro-interventional medical device products, particularly our aspirationcatheters and stent retriever, we face competition from multinationals and local companies inChina and other Asia Pacific markets. According to Frost & Sullivan, multinationals have adominant share in the neuro-intervention market in China and other Asia Pacific markets. Wecompete with multinationals primarily based on supply stability due to our localmanufacturing capability, cost advantages, competitive pricing, in-depth understanding oflocal markets, and rapid responses to local market demands. We compete with local companiesprimarily based on our product quality, designs and functionality, research and developmentcapabilities, ability to identify and procure advanced technologies globally, as well as strongclinical, manufacturing and sales execution capabilities. We believe that our Afentta®

aspiration catheter’s first-mover advantage compared to other PRC domestic companies willallow us to benefit from the ADAPT therapy’s growing recognition in China’s medicalcommunity. In addition, we have developed a comprehensive portfolio of products and plan tocontinue expanding our portfolio to provide integrated solutions to physicians and patients.

For our Privi hemorrhoid cooling balloon, we face competition from indirect competitorswhose treatment for hemorrhoids does not involve the use of a medical device. Our maincompetitors include companies producing topical surgical solutions for the treatment ofhemorrhoids and various kinds of suppositories. We compete primarily based on our productquality and safety, as our Privi hemorrhoid cooling balloon uses only physical mechanism thatdemonstrate fast and effective relief upon deployment. In addition, we also compete withinternational and domestic companies in respect of peripheral vascular medical devices for thetreatment of peripheral artery diseases.

Apart from high-quality products and product candidates, our in-house manufacturingcapabilities and stringent quality control systems also help to maintain our competitiveness.We also seek to acquire additional products in the neuro- and peripheral interventional fieldsand expand our footprints in other Asia-Pacific markets, leveraging our decades of industryexperience and extensive resources. We believe our continued investment in providing high


BUSINESS

– 268 –

quality services to the market will help to build our brand recognition and reputation as aleader in the industry. For more information on market competition and trend, see “IndustryOverview—Peripheral Diseases and China’s Peripheral Interventional Medical DevicesMarket” and “Industry Overview—Neuro-vascular Diseases and Procedures—China’sNeuro-interventional Medical Devices Market” in this [REDACTED].

INTELLECTUAL PROPERTY RIGHTS

As a medical device company focusing on innovative solutions in the neuro- andperipheral interventional fields, intellectual property rights are crucial to our business. Ourfuture commercial success and competitiveness depends on our ability to maintain and protectour patents and preserve the confidentiality of our know-how and trade secrets and operatewithout infringing third-party intellectual property. As of the Latest Practicable Date, we hadfive issued patents and 13 registered trademarks, as well as 16 pending patent applications and29 pending trademark applications. The following table sets forth the issued patents as of theLatest Practicable Date:

Patent No. Name of the Patent Patent Type Related ProductsPlace of

RegistrationRegistration

AuthorityRegistered

Owner Issuance Date Expiry Date

ZL201830441305.5 Catheter hub(Christmastree type)

Design Afentta® andHMC1-NASaspirationcatheters

PRC CNIPA HeMo China December 4,2018

August 10,2028

ZL201920481888.3 Stent retrieverwithradiopaquemarkers

Utility model Stent retriever PRC CNIPA HeMo China May 19, 2020 April 11,2029

ZL201920572214.4 Balloonstructure

Utility model BalloonGuidingCatheter

PRC CNIPA HeMo China May 19, 2020 April 25,2029

ZL202021383146.6 Micro catheter Utility model Mountix®

Micro-catheter

PRC CNIPA HeMo China February 12,2021

July 15, 2030

201780003461.6(PCT/US2017/019453) . . . . .

Enhancedflexibilityneuro-vascularcatheter

Invention Afentta® andHMC1-NASaspirationcatheters andTracLine®

accesscatheter

PRC CNIPA HeMo Chinaand Incept

May 28, 2021 February 24,2037


BUSINESS

– 269 –

The following table sets forth our patent applications as of the Latest Practicable Date:

Patent Application No. Name of the Patent Patent Type Related ProductsPlace of


Authority Registered OwnerApplication

Date

201910336819.8 . . Balloon guidingcatheter

Invention Balloon guidingcatheter

PRC CNIPA HeMo China April 25,2019

201911297389.X . . Manufacturingprocess of theballooncatheter

Invention FocuStar® neuroballoon catheter-Rx

PRC CNIPA HeMo China December17, 2019

201911297372.4 . . Retrieversystem

Invention Related to a futurestent retriever

PRC CNIPA HeMo China December17, 2019

201911297455.3 . . Retriever withcurvedopening

Invention Stent retriever PRC CNIPA HeMo China December17, 2019

202010677736.8 . . Micro-catheter Invention Mountix®

Micro-catheterPRC CNIPA HeMo China July 15,

2020202120666712.2 . . . Thrombus

aspirationcatheterdevice

Utility Related to a futureaspirationcatheter

PRC CNIPA HeMo China April 1,2021

202120952033.1 . . . Guidewire Utility Micro guidewire PRC CNIPA HeMo China March 7,2021

202110643094.4 . . . Aneurysminterventionalembolizationdeliverydevice

Invention Related to a futureaspirationcatheter

PRC CNIPA HeMo China June 9, 2021

202121287055.7 . . . Aneurysminterventionalembolizationdeliverydevice

Utility Related to a futureaspirationcatheter

PRC CNIPA HeMo China June 9, 2021

202121423526.2 . . . Imaging ringand catheter

Utility HMSR-NASaspirationcatheter

PRC CNIPA HeMo China June 25,2021


BUSINESS

– 270 –

Patent Application No. Name of the Patent Patent Type Related ProductsPlace of


Authority Registered OwnerApplication

Date

202110631198.3(1) . Enhancedflexibilityneuro-vascularcatheter

Invention Afentta® andHMC1-NASaspirationcatheters andTracLine® accesscatheter


February24, 2017




February24, 2017




February24, 2017




February24, 2017




February24, 2017




February24, 2017

Note:(1) These patent applications are divisional applications that HeMo China and Incept filed on the basis of the CN

Patent Application (201780003461.6) upon receipt of the notice of allowance by the authority.


BUSINESS

– 271 –

For further details of our intellectual property, please refer to “Appendix IV—Statutoryand General Information—2. Intellectual Property Rights of our Group” to this[REDACTED].

The term of patents in China is 20 years for an invention and 10 years for a utility modelor industry design (15 years for designed that are filed on or after June 1, 2021) from the filingdate of the earliest non-provisional patent application on which the patent is based. Thepatent term in China cannot be extended and has become extendable for invention patents thatare granted on or after June 1, 2021. The protection afforded by a patent varies, dependingupon factors such as the type of patent, the scope of its coverage, the availability of anypatent term extension or adjustment, the availability of legal remedies in a particular countryor jurisdiction, and the validity and enforceability of the patent.

We also rely on know-how and trade secrets to protect certain aspects of ourtechnologies. We have entered into confidentiality agreements, non-competition agreementsand intellectual property ownership agreements with our employees and other relevantpersons to protect our intellectual property, know-how and trade secrets. See “—Employees”for more information on these agreements. In addition, we have established an internal policygoverning the confidentiality of all company information and taken measures to maintain thephysical security of our confidential information. There are risks, however, that we may fail tosafeguard our know-how and trade secrets in the future. See “Risk Factors—Risks Relating toOur Intellectual Property Rights—Failure to protect the confidentiality of our trade secretscould harm our competitive position. We may also be subject to claims that our employeeshave wrongfully used or disclosed trade secrets of their former employers” for moreinformation.

Despite the patent protection afforded by law and the measures we have taken, we maystill face challenges in defending and maintaining our intellectual property and avoid beinginvolved in intellectual property infringement proceedings. During the Track Record Periodand up to the Latest Practicable Date, we were not involved in any intellectual property rightrelated legal proceedings that were material to our Group. However, there are risks if we fail toprotect our intellectual property rights in the future. See “Risk Factors—Risks Relating toOur Intellectual Property Rights—We may lose our competitive advantages if we are unable toobtain and maintain protection of our intellectual property rights (including patent rights), orif the scope of these intellectual property rights obtained is not sufficiently broad” for moreinformation.


BUSINESS

– 272 –

HEALTH, SAFETY, SOCIAL AND ENVIRONMENTAL MATTERS

We are subject to various health, safety, social and environmental laws and regulationsand regular inspection by local governmental authorities. We believe we have adequate policiesensuring compliance with all health, safety, social and environmental protection laws andregulations. These policies include management systems and procedures relating to emissionsof water and other media; process safety management; handling, use, storage, treatment anddisposal of hazardous substances; waste water treatment; worker health and safetyrequirements; third-party safety management; and emergency planning and response.

Our operations may involve the use of hazardous and flammable chemical materials andspecial equipment and may also produce a modest amount of hazardous waste. We process thehazardous waste through services of qualified third-party contractors. Furthermore, wereduce the pollution generated in-house primarily through improvements of ourmanufacturing process and techniques and the selection of raw materials, and we manage theproduction waste by the classification of recyclables and non-recyclables. In addition, we haveobtained a work safety standardization certificate from the Emergency Management Bureauof the High-tech Industrial Development Zone of Weihai, and we regularly conduct medicalexaminations for our employees who are exposed to the adverse environment. We have alsoimplemented production safety related policies to avoid employee injuries and illnesses. Weundertake regular safety inspections and fire inspections to identify potential risks of ourfacilities, and conduct quality control of the manufacturing process and analysis of productadverse events to reduce potential risks of our products. To ensure our operation processes’compliance with relevant laws and regulations, our quality control team formulates andimplements relevant policies, standards and metrics, and provides regular training to ouremployees to raise their health, safety, social and environmental protection awareness; andcarries out incident response planning and implementation.

Our annual cost of compliance with the applicable health, safety, social andenvironmental laws and regulations was immaterial during the Track Record Period. Duringthe Track Record Period and up to the Latest Practicable Date, we had been in compliancewith the relevant PRC laws and regulations in all material aspects, and had not been subject toany material claim or penalty in relation to health, safety, social and environmentalprotection.


BUSINESS

– 273 –

EMPLOYEES

As of the Latest Practicable Date, we had 156 employees. The following table sets forththe number of our full-time employees by function as of the Latest Practicable Date.

FunctionNumber ofemployees

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44Quality control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14General, administrative and others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

Our success depends on our ability to attract retain and motivate qualified personnel. We

hire our employees primarily through online recruitment, headhunters, job fairs, and internal

referrals. We plan to recruit additional staff for our R&D, manufacturing, quality controls,

and sales and marketing teams to support our business growth. We generally provide on-board

and regular on-the-job training to our employees to ensure their self-development. We also

regularly evaluate our employees’ performance. As part of our retention policy, we offer our

employees competitive remuneration packages, including salary, employee share incentive

plans and performance-based bonus. We failed to make full contributions to social security

and housing provident funds as required by the PRC laws and regulations. Please refer to

“Risk Factors—Risks Relating to Doing Business in China—Relevant government authorities

may require us to make additional social security or housing provident fund contributions, or

impose late payment penalties on us” for more information.

In compliance with applicable laws and regulations, we enter into employment contracts

with our employees covering matters such as term, wages and other employee benefits,

workplace safety, confidentiality obligations, and grounds for termination. In addition, we

enter into standard confidentiality agreements with all of our employees, and non-compete

agreements and intellectual property ownership agreements with our senior executives, key

R&D staff and other employees who have access to our trade secrets or confidential

information about our business. Pursuant to the intellectual property ownership agreements,

we own all the rights to all inventions, technology know-how and trade secrets derived during

the course of our employees’ work with us.

We maintain a safe work environment through a series of occupational health and safety

procedures, including implementing precautionary measures at our production facilities,

regularly inspecting our equipment and facilities to identify and address potential safety

issues, and providing regular safety training to our employees.


BUSINESS

– 274 –

None of our employees are represented by labor unions. We believe that we have

maintained good working relationships with our employees. During the Track Record Period

and up to the Latest Practicable Date, we had not experienced any strikes, labor disputes or

industrial actions which have had a material effect on our business, and were not subject to

any material claims, lawsuits, penalties or administrative actions relating to non-compliance

with occupational health and safety laws or regulations.

PROPERTIES

We are headquartered in Singapore, with the premises at 8 Kaki Bukit Ave 1 #03-08

Singapore, with an aggregated leased gross floor area of approximately 2,191 sq.m. used for

R&D, office and potentially manufacturing purposes. We have also leased properties in

Beijing, China as office premises, and in Weihai, Shandong Province, China for R&D,

manufacturing and office use, and these leased properties in China have an aggregate gross

floor area of approximately 6,694 sq.m. The following table sets forth a summary of our

leased properties.

Location UsageLeased Area

(sq.m.) Expiry Date

Weihai, China . . . . Office, R&D and manufacturing 5,336 March 31, 2022Weihai, China . . . . Office, R&D and manufacturing 881 March 31, 2022Beijing, China . . . . Office 327 October 14, 2022Shanghai, China . . Office 151 April 30, 2024Singapore . . . . . . . Office, R&D and manufacturing 2,191 April 14, 2026

Pursuant to the applicable PRC laws and regulations, property lease agreements must be

registered with the relevant PRC government authorities. As of the Latest Practicable Date, we

had not completed the relevant property leasing registrations for our four leased properties in

China. According to our PRC Legal Advisor, the failure to complete this registration process

does not affect the validity of the relevant property lease agreements, and a maximum penalty

of RMB10,000 may be imposed for the non-registration of each lease agreement. During the

Track Record Period and up to the Latest Practicable Date, we had not been subject to any

penalties arising from the non-registration of our lease agreements, and had not experienced

any dispute arising out of, or in relation to, our leased properties.

INSURANCE

We maintain insurance policies based on our business operation needs. For example, we

have purchased medical device clinical trial liability insurance for our HMC1-NAS aspiration

catheter and stent retriever. We do not carry property loss insurance, product liability

insurance or key person insurance. We consider that the coverage from the insurance policies

maintained by us is in line with the industry norm. During the Track Record Period, we had

not made, or been the subject of, any material insurance claims.


BUSINESS

– 275 –

LICENSES AND PERMITS

We are required to obtain various licenses and permits from government authorities as

required under applicable laws and regulations. As advised by our PRC Legal Advisor, as of

the Latest Practicable Date, we had obtained all requisite licenses and permits that are

material for our operations, and these licenses and permits all remained in full effect.

The following table sets forth our key licenses as of the Latest Practicable Date.

License Validity Period Holder

Medical Device RegistrationCertificate for FocusLine®

PTA balloon dilation catheter . July 30, 2019—July 29, 2024 HeMo ChinaMedical Device Registration

Certificate for TracLine®

access catheter . . . . . . . . . . . . .March 11, 2020—March 10,2025 HeMo Jirui

Medical Device RegistrationCertificate for FocuStar®

neuro balloon catheter – Rx . .December 11, 2020—December10, 2025 HeMo China

Medical Device RegistrationCertificate for Privihemorrhoid cooling balloon . .

February 7, 2021—February 6,2026 Pu Lewei

Medical Device RegistrationCertificate for Afentta®

aspiration catheter . . . . . . . . . May 12, 2021—May 11, 2026 HeMo JiruiMedical Device Registration

Certificate for Mountix®

micro-catheter . . . . . . . . . . . . . June 4, 2021—June 3, 2026 HeMo ChinaMedical Device Registration

Certificate for aspirationaccessory . . . . . . . . . . . . . . . . .

February 18, 2021—February 17,2026 HeMo China

We intend to apply for renewal of the above key licenses and permits prior to their

respective expiry dates. The successful renewal of our existing licenses and permits will be

subject to our fulfilment of relevant requirements. Our Directors are not aware of any reason

that would cause or lead to the non-renewal of these licenses and permits. As advised by our

PRC Legal Advisor, as of the Latest Practicable Date, there was no legal impediment for us to

renew these licenses and permits as long as we comply with the relevant legal requirements.


BUSINESS

– 276 –

LEGAL PROCEEDINGS AND REGULATORY COMPLIANCE

We may from time to time become involved in legal, arbitral or administrative

proceedings arising in the ordinary course of our business. During the Track Record Period

and up to the Latest Practicable Date, none of us or our Directors were involved in any

litigation, arbitration or administrative proceedings that would have a material adverse effect

on our business, financial condition or results of operations. As of the Latest Practicable

Date, we were not aware of any pending or threatened litigation, arbitration or administrative

proceedings against us or our Directors that have a material adverse effect on our business,

financial condition or results of operations.

During the Track Record Period, we engaged third-party human resources agencies to

make social security and housing fund contributions for certain of our employees and we did

not pay social security and housing provident fund in full for some of our employees in China.

As a result, the social security and housing fund contributions made through the third parties

may not be deemed to be paid by us, and we may be required by competent authorities to pay

the outstanding amount and could be subject to late payment penalties. For more details, see

“Risk Factors—Risks related to doing business in China—Relevant government authorities

may require us to make additional social security or housing provident fund contributions, or

impose late payment penalties on us.” Our Directors believe that such non-compliance would

not have a material adverse effect on our business or results of operations, considering that: (i)

we had not received any notice of administrative action against us from competent

government authorities with respect to these incidences; (ii) we have made full social security

and housing fund contribution since early this year; and (iii) as advised by our PRC Legal

Advisor, considering relevant regulatory policies and the facts stated above, the likelihood that

we are subject to centralized collection of historical arrears for social security contributions is

remote. As a result, we did not make any provisions in connection with these incidences during

the Track Record Period. We have enhanced our internal control measures to ensure

compliance with relevant PRC laws and regulations, including designating our human

resources department to review and monitor social security and housing fund contributions on

a monthly basis. In addition, we will consult our human resources advisor and PRC legal

counsel on a regular basis for advice on relevant PRC laws and regulations to keep us abreast

of relevant regulatory developments.

As confirmed by our PRC Legal Advisor, save as disclosed above, during the Track

Record Period and up to the Latest Practicable Date, we had complied with applicable PRC

laws and regulations in all material aspects. Our Directors confirmed that, save as disclosed

above, we were not involved in any material or systematic non-compliance incidents.


BUSINESS

– 277 –

RISK MANAGEMENT

We recognize that risk management is critical to our success. Our key risks include:

• Strategic risk: our inability to execute our business strategies efficiently or at all, asa result of the inefficiency of our business operation procedures;

• Financial risk: risks resulting from inappropriate actions in relation to financialpolicies, operations and management;

• Market risk: risks of suffering losses due to changing market conditions that are notin our favor;

• Operational risk: risks of suffering losses due to the uncertainties related to ourmanufacturing and operation processes; and

• Compliance and legal risk: risks resulting from violation of applicable laws andregulations, as well as our internal policies.

We are also exposed to credit, liquidity, interest rate and foreign exchange risks that mayarise in the ordinary course of our business. For details, see “Financial Information—Marketand Other Financial Risks” in this [REDACTED].

In order to identify, assess and control these risks, we have implemented risk managementpolicies and procedures that we believe are appropriate to: (i) enhance our risk managementcapabilities to the level compatible with our business development goals; (ii) ensure reliableand effective reporting; (iii) achieve effective and efficient operations; (iv) comply withapplicable laws and regulations; and (v) help establish our crisis management plans that couldprotect our business from material loss from human errors or risks from natural disasters. OurAudit Committee and ultimately our Board of Directors supervise the implementation of ourrisk management policies. Our chief executive officer office is primarily responsible foroverseeing the effectiveness of our risk management policies and procedures, includingformulating our overall risk management targets, determining our risk appetite and tolerance,reviewing and approving our significant incidences’ risk assessment results and response plans,and administering the annual reporting of our comprehensive risk management work. Ourrelevant departments, under the guidance and coordination of our chief executive officeroffice, are responsible for implementing the risk management policies to identify, analyze andassess the risks.

Our intellectual property management department conducts record keeping, informationgathering and regular status updates to keep track of all of our intellectual propertyapplications, including for trademark, copyright or patent registrations, for our products andproduct candidates. It is also responsible for coordinating with relevant external intellectualproperty advisers to make filings and handle matters related to the maintenance andabandonment of our intellectual property rights in compliance with of relevant laws andregulations.


BUSINESS

– 278 –

INTERNAL CONTROL OVER BUSINESS OPERATIONS

Our Board of Directors is responsible for establishing our internal control system andreviewing its effectiveness. We have adopted or plan to implement, among others, the followinginternal control measures:

• adopt various measures and procedures regarding our business operations, includingintellectual property protection, financial reporting, supply chain and procurementmanagement, and risk management system. We provide periodic training on thesemeasures and procedures to our employees as part of our employee trainingprogram and regularly monitor the implementation of these measures andprocedures in our R&D, manufacturing and product commercialization processes.

• establish an Audit Committee responsible for overseeing our financial records, riskmanagement and internal control procedures, assisting and monitoring the auditingprocess (including making recommendations to our Board of Directors on theappointment and removal of external auditors), and performing other duties andresponsibilities as assigned by our Board of Directors or required by relevant lawsand regulations. Our Audit Committee consists of three members, namely, Dr.Douglas Foo Peow Yong, Mr. Tan Boon Kheng and Professor Tan Huay Cheem.Please see “Directors and Senior Management—Committees under the Board ofDirectors—Audit Committee” for the qualifications and experience of these auditcommittee members as well as the responsibilities of our audit committee;

• with the assistance of internal and external legal advisors, our Directorscontinuously monitor our compliance with relevant laws and regulations;

• engage Somerley Capital Limited as our compliance advisor to provide advice to ourDirectors and management team until the end of the first fiscal year after the[REDACTED] regarding matters relating to the Listing Rules. Our complianceadvisor is expected to ensure our use of the [REDACTED] from the [REDACTED]complies with the section entitled “Future Plans and [REDACTED]” in this[REDACTED] after the [REDACTED], as well as to provide support and adviceregarding the requirements of relevant regulatory authorities in a timely fashion;

• adopt internal policies governing the confidentiality of information. Patients’ data,including legally protected patient health information and personally identifiableinformation, are collected and stored at the hospitals (namely, clinical trial sites). Inaccordance with the GCP and relevant regulations, hospitals generally strictly limitaccess to the clinical trial data to certain authorized persons, such the relevant CRO,SMO and our authorized clinical research assistants (CRAs) or clinical researchcoordinators (CRCs). Clinical trial data provided to us by hospitals are generallyde-identified. Our CRAs and CRCs can only view patients’ personally identifiabledata relevant to our clinical trials but are not allowed by hospitals to copy or


BUSINESS

– 279 –

transfer these data. Additionally, we require external parties and our employeesinvolved in the clinical trials to comply with confidentiality requirements; and

• adopt various internal regulations against corrupt and fraudulent activities, whichinclude the code of conduct for our employees and anti-fraud rules. Major measuresinclude authorizing our chief executive officer office to execute our anti-fraudmeasures, including handling complaints, ensuring protection for and awarding thewhistle-blower and conducting internal investigations; cultivating and maintainingthe company-wide culture of honesty and integrity; and timely rectifying identifiedcorrupt or fraudulent activities and establishing and routinely assessing preventativemeasures to avoid future non-compliance. Our human resources departmentoversees the implementation of the code of conduct for our employees and takesdisciplinary actions against non-compliance.

We plan to provide our Directors, senior management and relevant employees withregular compliance training with a view to proactively identifying any concerns or issuesrelating to any potential non-compliance. We believe that we have established adequateinternal procedures, systems and controls in relation to compliance with anti-corruption andanti-bribery law and other applicable laws and regulations.


BUSINESS

– 280 –

You should read the following discussion and analysis in conjunction with ourconsolidated financial statements included in the Accountants’ Report in Appendix I to this[REDACTED], together with the accompanying notes. Our consolidated financial informationhas been prepared in accordance with the IFRSs, which may differ in material aspects fromgenerally accepted accounting principles in other jurisdictions. You should read the entireAccountants’ Report and not merely rely on the information contained in this section.

The following discussion and analysis contain forward-looking statements that reflect thecurrent views with respect to future events and financial performance. These statements arebased on assumptions and analysis made by us in light of our experience and perception ofhistorical trends, current conditions and expected future developments, as well as other factorsthat we believe are appropriate under the circumstances. However, whether the actual outcomeand developments will meet our expectations and predictions depends on a number of risks anduncertainties over which we do not have control. In evaluating our business, you shouldcarefully consider the information provided in “Forward-looking Statements” and “RiskFactors” in this [REDACTED].

OVERVIEW


• Neuro-interventional medical devices: We have a comprehensive suite of productscovering the ischemic stroke (comprising acute ischemic stroke and intracranialartery stenosis), hemorrhagic stroke and neuro access fields, providing holisticsolutions for neuro-interventional procedures. We obtained the Class III medicaldevice registration certificate for our Afentta® aspiration catheter in May 2021 andcommercialized it in July 2021, making it the first domestic aspiration catheterapproved by the NMPA and commercialized to treat AIS, according to Frost &Sullivan. This gives us a strategic, first-mover advantage in the treatment of AIS


FINANCIAL INFORMATION

– 281 –

patients using ADAPT therapy. We are also finalizing the clinical trial for ourHMC1-NAS aspiration catheter, which contains the 088 model with potentially theworld’s largest distal inner diameter in the market once approved, according to Frost& Sullivan. In addition, we are conducting a clinical trial for our self-developedstent retriever. As of the Latest Practicable Date, we had successfullycommercialized three neuro-interventional products, namely our TracLine® accesscatheter, FocuStar® neuro balloon catheter – Rx and Afentta® aspiration catheter.In addition, we expect to commercialize another two and four neuro-interventionalmedical devices by the end of 2021 and 2022, respectively.

• Peripheral interventional medical devices: We have strategically tapped into theperipheral non-vascular devices market with our Privi hemorrhoid cooling balloon,which has obtained NMPA approval and will be commercialized in the fourthquarter of 2021. This product employs only physical mechanism to treathemorrhoids, eliminating the need for medication or ingredients that may beassociated with side effects. It is therefore potentially suitable and safe for patientswith special medication requirements, including pregnant women and women duringthe lactation period. In addition, we have obtained NMPA approval for ourFocusLine® PTA balloon dilation catheter, a peripheral vascular device for thetreatment of peripheral artery diseases, and expect to commercialize this product in2022. We also have three other peripheral vascular product candidates at variousstages of development.

We began generating revenue in April 2020. Our revenue was RMB2.8 million in 2020 andRMB581 thousand in the five months ended May 31, 2021.

BASIS OF PREPARATION AND PRESENTATION

Our historical financial information for the years ended December 31, 2019 and 2020 andthe five months ended May 31, 2021 has been prepared in accordance with all applicableIFRSs issued by the International Accounting Standards Board (“IASB”). The preparation ofthe historical financial information in conformity with IFRSs requires the use of certaincritical accounting estimates. It also requires management to exercise its judgment in theprocess of applying our accounting policies. For the purpose of preparing our historicalfinancial information, we have adopted all applicable new and revised IFRSs that wereeffective during the Track Record Period, except for any new standards or interpretations thatare effective for the accounting period beginning on January 1, 2021. The revised and newaccounting standards and interpretations issued but not yet effective for the accounting periodbeginning on January 1, 2021 are set out in Note 29 to the Accountants’ Report included inAppendix I to this [REDACTED]. Inter-company transactions, balances and unrealized gainsor losses on transactions between companies in our Group are eliminated on consolidation.



– 282 –

SIGNIFICANT FACTORS AFFECTING OUR RESULTS OF OPERATIONS

We believe that the key factors affecting our results of operations, financial position andcash flow and period-to-period comparison of our operating performance include thefollowing:

Growth of the Neuro- and Peripheral Interventional Medical Devices Markets

We operate in the markets for interventional medical devices, including neuro- andperipheral interventional medical devices, and therefore our growth is dependent on theoverall development of these markets in China and other Asia-Pacific markets where we mayexpand into, as well as our ability to compete effectively.

Our neuro-interventional products and product candidates are primarily indicated for thetreatment of stroke, especially acute ischemic stroke. China has a large population of strokepatients and the market for neuro-interventional medical devices has great growth potential.According to Frost & Sullivan, the volume of neuro-interventional procedures in Chinaincreased at a CAGR of 15.8% from 91.4 thousand in 2016 to 164.2 thousand in 2020. Thisvolume is expected to grow at a CAGR of 32.7% from 2020 to 675.3 thousand in 2025 andfurther increase at a CAGR of 21.4% from 2025 to 1.8 million in 2030. In addition, thenumber of mechanical thrombectomy procedures in China increased from 17.6 thousand in2016 to 49.5 thousand in 2020 at a CAGR of 29.5%. This number is expected to increase at aCAGR of 43.9% from 2020 to 305.2 thousand in 2025 and further increase at a CAGR of23.6% from 2025 to 881.3 thousand in 2030, according to Frost & Sullivan.

Our Core Product, Privi hemorrhoid cooling balloon, is indicated for the treatment ofhemorrhoids. In China, 724.9 million people had hemorrhoids in 2020, and the prevalence rateof hemorrhoids in China has exceeded 50% among adults, according to Frost & Sullivan. Inaddition, with the improvement of the overall living standards of the society and the aging ofthe population, peripheral artery diseases have gradually become a severe health issue inChina. According to Frost & Sullivan, the total number of patients with peripheral arterydiseases was 50.7 million in 2020 and is projected to reach 56.6 million in 2025 and 62.3million in 2030.

With our comprehensive portfolio covering neuro- and peripheral interventional medicaldevices and the competitive advantages of our various products, we believe that we are wellpositioned to capture the growth opportunities of these devices in China and otherAsia-Pacific markets.

Our Ability to Develop and Commercialize Our Products

Our growth and business prospects depend on our ability to develop product candidatesand successfully commercialize our products upon regulatory approval. As of the LatestPracticable Date, we had generated revenue from sales of our TracLine® access catheter sinceApril 2020, FocuStar® neuro balloon catheter – Rx since April 2021 and Afentta® aspiration



– 283 –

catheter since July 2021. In addition, as of the Latest Practicable Date, we had obtainedregulatory approvals for four other products, which we expect to commercialize from the thirdquarter of 2021 to the year of 2022. As of the Latest Practicable Date, we also had 15 productcandidates. Whether our product candidates can demonstrate favorable safety and efficacyclinical trial results, and whether we can obtain the requisite regulatory approvals for ourproduct candidates in a timely manner, or at all, are crucial for our business prospects.

The sales of our commercialized products will significantly affect our profitability andcash flow from operations and depend on market acceptance and competitiveness of ourproducts. Acceptance of our products by patients, hospitals and physicians is primarilyaffected by our ability to convince them about the distinctive features, safety, efficacy, costeffectiveness and other competitive advantages of our products as compared to traditionaltreatment options and competitive products. If our products are not well accepted by themarket, we may be unable to increase the sales of our commercialized products and recoverthe significant investments we made in developing our product candidates.

Government Healthcare Spending, Medical Insurance Coverage and Pricing Policies

The market acceptance and sales volume of our current and future products can besignificantly affected by the pricing of our medical device products, which in turn will beaffected by government policies, the level of governmental healthcare spending and whetherour products are or will be covered by government medical insurance schemes. In line with theoverall growth of the healthcare service industry, the Chinese government has promulgated aseries of policies in recent years to stimulate development of China’s healthcare infrastructureand improve patients’ accessibility to healthcare services. For instance, the Health andWellness Plan of the Thirteenth Five-Year Plan (《“十三五”衛生與健康規劃》) aims toimplement an expanded national reimbursement list for innovative medical devices. In recentyears, the Chinese government also introduced medical device incentive policies such asimport substitution and clinical exemption, which cover neuro- and peripheral interventionalmedical devices. In December 2019, the NMPA issued the Guidelines on ConditionalApproval for Medical Devices (《醫療器械附條件批准上市指導原則》) to address the urgentmarket needs of medical devices to treat life-threatening diseases, which accelerated theregulatory review process and allows conditional approval for such medical devices. Thesefavorable government policies are expected to support further expansion of the interventionalmedical devices market in China.

In addition, government medical insurance schemes have increased their populationcoverage and funding for patients’ medical treatment, resulting in considerable growth in bothpatient enrollment and average spending. For example, our TracLine® access catheter has beencovered in the government medical insurance scheme of certain provincial areas. If ourproducts and product candidates (upon commercialization) are included in the governmentalinsurance coverage in the future, the demand for these products will increase, therebyincreasing our sales volume of these products and enhancing our financial performance.However, there are uncertainties as to whether the government will continue to increase its



– 284 –

healthcare spending, and whether our products can be included in the governmental insurancecoverage, and different province areas may have different practices for the reimbursement ofour products.

PRC regulations and medical insurance plans can also significantly affect the pricing ofour medical device products, such as by imposing reimbursement caps, which could affectpatients’ access to our products as well as our profitability. In addition, we may need to lowerthe prices of our products to have them included in the government medical insurancecoverage, which may not necessarily lead to an increase in our sales volume sufficient to offsetthe price cut. As of the Latest Practicable Date, there was no centralized procurementrequirement or pricing guidance set by relevant Chinese government authorities on ourproducts, though we cannot guarantee that this will not change. If the relevant Chinesegovernment authorities implement tendering or bidding processes or issue pricing guidancefor any of our current or future products, either at the national or provincial level, ourprofitability and results of operations may be adversely affected.

Cost Structure

Our results of operations are significantly affected by our cost structure which primarilyconsists of research and development expenses, selling and distribution expenses, general andadministrative expenses and finance costs.

The development of medical devices requires significant investments of resources over aprolonged period of time with an uncertain outcome, and we intend to continue makingsustained investments in pre-clinical studies, clinical trials, as well as regulatory filings for ourproduct candidates. Our research and development expenses include primarily staff costs,third-party contracting costs, material costs, license fees, and depreciation and amortization.In 2019, 2020 and the five months ended May 31, 2021, our research and developmentexpenses were RMB59.7 million, RMB18.1 million and RMB8.2 million, respectively. We willcontinue to advance the development of our product candidates and potentially in-licenseadditional products, and as a result, our research and development expenses are expected toremain significant.

Our selling and distribution expenses consist primarily of staff costs, marketdevelopment expenses, as well as travelling expenses. We began incurring selling anddistribution expenses in 2020, which amounted to RMB3.8 million in the year. In the fivemonths ended May 31, 2021, we incurred selling and distribution expenses of RMB6.4million. We anticipate that our selling and distribution expenses will increase as we expandour marketing and sales team and the hospital coverage of our distribution network; continueto commercialize, promote and market our products; and establish and increase our presencein other Asia-Pacific markets.



– 285 –

Our general and administrative expenses consist primarily of staff costs, professionalservice fees, [REDACTED], and travelling and transportation expenses. We incurred generaland administrative expenses of RMB9.2 million, RMB16.7 million and RMB16.0 million in2019, 2020 and the five months ended May 31, 2021. We expect our general and administrativeexpenses to continue to increase in the foreseeable future to support the commercialization ofour product candidates, if approved.

Our finance costs during the Track Record Period consisted primarily of interest onloans from related parties, interest on lease liabilities and issuance cost of preferred shares. Weincurred finance costs of RMB7.5 million, RMB19.1 million and RMB332 thousand in 2019,2020 and the five months ended May 31, 2021, respectively. Our finance costs may increase ifwe incur borrowings to fund our operations, particularly our R&D, commercialization andexpansion of production facilities in the future.

Our cost of sales was insignificant in 2020 and the five months ended May 31, 2021. Ourcost of sales primarily includes costs of raw materials and consumables, staff costs, testingfees and depreciation expenses. As we ramp up sales of our commercialized products and rollout additional products, our cost of sales is expected to increase in absolute amount anddecrease as a percentage of our revenue.

We expect our cost structure to evolve as we continue to expand our pipeline and launchmore commercialized products, increase our headcount and incur additional share-basedcompensation expenses. The increases in the costs and expenses will likely be a result of theincreases in the headcount, employee salaries and benefits, and costs for expandedinfrastructure. We also anticipate increased costs and expenses in relation to legal,compliance, accounting, insurance, and investor and public relations expenses associated withbeing a [REDACTED] in Hong Kong.

Funding for Our Operations

We have historically funded our operations primarily by equity financing. With thecommercialization of TracLine® access catheter in April 2020 and the recentcommercialization of our FocuStar® neuro balloon catheter – Rx and Afentta® aspirationcatheter, we have been able to fund part of our operations with revenue generated from salesthese products. However, with the continuing expansion of our business, including in otherAsia-Pacific markets, potential in-licensing or acquisition of additional products, as well asthe development of our product candidates, we may require further funding through public orprivate equity offerings, debt financing or other sources. Any fluctuation in our ability to raisecapital will affect our business growth, ability to compete effectively, cash flows and results ofoperations.



– 286 –

SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL JUDGMENTS ANDESTIMATES

Our discussion and analysis of our financial condition and results of operations is basedon our financial statements, which have been prepared in accordance with accountingprinciples that conform with IFRSs issued by the IASB. The preparation of these financialstatements requires us to make estimates, assumptions and judgments that affect the reportedamounts of assets, liabilities, income and expenses. We based our estimates and associatedassumptions on historical experience and various other factors that are believed to bereasonable under the circumstances, the results of which form the basis for making thejudgements about carrying values of assets and liabilities that are not readily apparent fromother sources. Our actual results may differ from these estimates.

We reviewed the estimates and underlying assumptions on an ongoing basis. We recognizethe revisions to accounting estimates in the period in which the estimate is revised, if therevision only affects that period, or in the period of the revision and future periods if therevision affects both current and future periods.

Our most critical accounting policies, judgments and estimates are summarized below.See Note 2 and Note 3 to the Accountants' Report in Appendix I to this [REDACTED] for adescription of our significant accounting policies, judgments and estimates.

Significant Accounting Policies

Revenue and Other Income

We classify income as revenue when it arises from the sale of goods, the provision ofservices in the ordinary course of our business.

We recognize revenue when control over a product or service is transferred to thecustomer at the amount of promised consideration to which we are expected to be entitled,excluding those amounts collected on behalf of third parties. Revenue excludes value-addedtax or other sales taxes and is after deduction of any trade discounts.

Product Revenue

We recognize revenue when the customer takes possession of and accepts the products. Ifthe products are a partial fulfilment of a contract covering other goods and/or services, thenthe amount of revenue recognized is an appropriate proportion of the total transaction priceunder the contract, allocated between all the goods and services promised under the contracton a relative stand-alone selling price basis.



– 287 –

Interest income

Interest income is recognized as it accrues using the effective interest method. Forfinancial assets measured at amortized cost or fair value through other comprehensive income(recycling) that are not credit-impaired, the effective interest rate is applied to the grosscarrying amount of the asset. For credit-impaired financial assets, the effective interest rate isapplied to the amortized cost (namely, gross carrying amount net of loss allowance) of theasset.

Government Grants

We recognize government grants in the statement of financial position initially whenthere is reasonable assurance that they will be received and that we will comply with theconditions attaching to them. Grants that compensate us for expenses incurred are recognizedas income in profit or loss on a systematic basis in the same periods in which the expenses areincurred. Grants that compensate us for the cost of an asset are initially recognized asdeferred income and are subsequently recognized in profit or loss over the useful life of therelated asset.

Preferred Shares

We classify preferred shares as financial liabilities if they are redeemable on a specificdate or at the option of the holders of preferred shares (including options that are onlyexercisable in case of occurrence of some triggering events that are beyond our control).

At initial recognition, if there is an embedded derivative should be separated from thehost of such preferred shares, but we are unable to measure the embedded derivativeseparately either at acquisition or at the end of a subsequent financial reporting period, wedesignate the entire hybrid contract at fair value through profit or loss. Changes in thecarrying amount of the liabilities are recognized in profit or loss. Transaction costs that relateto the issue of preferred shares are included in profit or loss.

If the preferred shares are converted into ordinary shares, the carrying amount of thefinancial liabilities upon conversion is transferred to share capital and share premium.

Share-based Payments

We have granted share-based payment awards to an employee that are settled in ourshares but are contingently cash-settleable upon the occurrence of specified contingent eventssuch as change of control over our Company. Such awards are classified as equity-settled,unless a contingent event triggering cash outflows becomes probable. During the Track RecordPeriod, we determined that the likelihood of the occurrence of the specified contingent eventswas less than probable, and therefore the share-based payment awards were classified asequity-settled.



– 288 –

For share-based payment awards that are classified as equity-settled, we generallyrecognize the grant-date fair value of equity-settled share-based incentive scheme granted toemployees as an expense, with a corresponding increase in equity, over the vesting period ofthe awards. The amount recognized as an expense is adjusted to reflect the number of awardsfor which the related service and non-market performance conditions are expected to be met,such that the amount ultimately recognized is based on the number of awards that meet therelated service and non-market performance conditions at the vesting date. For share-basedpayment awards with non-vesting conditions, the grant-date fair value of the share-basedpayment is measured to reflect such conditions and there is no true-up for the differencesbetween expected and actual outcomes.

Critical Accounting Judgment and Estimates

Research and Development Expenses

Development expenses incurred on our product in the pipeline are capitalized anddeferred only when we can demonstrate (i) the technical feasibility of completing theintangible asset so that it will be available for use or sale; (ii) our intention to complete andour ability to use or sell the asset; (iii) how the asset will generate future economic benefits;(iv) the availability of resources to complete the product pipeline and (v) the ability tomeasure reliably the expenditure during the development. Development expenses that do notmeet these criteria are expensed when incurred. We assess the progress of each of the researchand development projects and determine when the criteria for capitalization are met.

Fair Value Measurement

A. Financial assets and liabilities measured at fair value

The following table presents the fair value of our financial instruments measured at theend of the reporting periods on a recurring basis, categorized into the three-level fair valuehierarchy as defined under IFRS 13, Fair Value Measurement. The level into which a fairvalue measurement is classified is determined with reference to the observability andsignificance of the inputs used in the valuation technique as follows:

Level 1 valuations: Fair value measured using only Level 1 inputs, i.e., unadjustedquoted prices in active markets for identical assets or liabilitiesat the measurement date

Level 2 valuations: Fair value measured using Level 2 inputs, i.e., observableinputs which fail to meet Level 1, and not using significantunobservable inputs. Unobservable inputs are inputs for whichmarket data are not available

Level 3 valuations: Fair value measured using significant unobservable inputs



– 289 –

We have engaged Asia-Pacific Consulting and Appraisal Limited, an external valuer to

perform valuations for the financial instruments, including preferred shares issued to investors

and derivative financial liabilities. A valuation report with analysis of changes in fair value

measurement is prepared by the team at each interim and annual reporting date, and is

reviewed and approved by our management. The following tables present our financial assets

and financial liabilities that were measured at fair value as of the dates indicated:

Fair value as ofDecember 31,

2019Fair value measurements as of

December 31, 2019 categorized into

Level 1 Level 2 Level 3

RMB’000 RMB’000 RMB’000 RMB’000

Recurring fair value measurementsFinancial assets:Wealth management products . . . . 20,000 – – 20,000Financial liabilities:Preferred shares issued to investors 258,758 – – 258,758

Fair value as ofDecember 31,

2020Fair value measurements as of



RMB’000 RMB’000 RMB’000 RMB’000

Recurring fair value measurementsFinancial assets:Wealth management products . . . . 43,000 – – 43,000Financial liabilities:Preferred shares issued to investors 1,215,325 – – 1,215,325Derivative financial liabilities . . . . 33,368 – – 33,368

Fair value as ofMay 31, 2021

Fair value measurements as ofMay 31, 2021 categorized into


RMB’000 RMB’000 RMB’000 RMB’000

Recurring fair value measurementsFinancial assets:Wealth management products . . . . 20,000 – – 20,000Financial liabilities:Preferred shares issued to investors 1,721,792 – – 1,721,792



– 290 –

Financial assets at fair value through profit or loss

We have a team headed by the finance manager performing valuation for wealth

management products, which are categorized into Level 3 of the fair value hierarchy. The team

reports directly to the head of finance department. A valuation analysis of changes in fair

value measurement is prepared by the team periodically, and is reviewed and approved by the

head of finance department. Due to the short period and low expected return rate ranging

from 2.10% to 3.50% per annum, we considered the fair value of wealth management products

to be approximately the cost. See Note 26(e)(i)(aa) to the Accountants’ Report included in

Appendix I to this [REDACTED] for a summary of significant unobservable inputs to the

valuation of these wealth management products together with a quantitative sensitivity

analysis at the end of the relevant periods.

Preferred shares issued to investors

The financial instruments issued by us represent preferred shares which are not traded in

an active market and their fair value is determined by using valuation techniques. Our

preferred shares issued to investors are grouped under Level 3 hierarchy. The discounted cash

flow method was used to determine our total equity value and the hybrid method was adopted

to determine the fair value of the financial instrument. The hybrid method is a hybrid between

the probability-weighted expected return method and the option pricing method (“OPM”),

estimating the probability-weighted value across multiple scenarios but using the OPM to

estimate the allocation of value within one or more of those scenarios. Key valuation

assumptions include discount rate, volatility, risk-free interest rate, expected probability of the

[REDACTED] and discount for lack of marketability. See Note 21 to the Accountants’ Report

included in Appendix I to this [REDACTED] for key valuation assumptions and the

movements of the preferred shares issued to investors.

If the carrying amount of preferred shares issued to investors had been 10% higher/lower,

the loss before taxation for the years ended December 31, 2019 and 2020 and the five months

ended May 31, 2021 would have been approximately RMB25,876,000 higher/lower,

RMB121,533,000 higher/lower, and RMB172,179,000 higher/lower, respectively.

Derivative financial liabilities

The fair value of the derivative financial liabilities is determined based on the present

value of the anti-dilution percentage multiplied by foreseeable financing amount discounted

by the weighted average of the estimated rate of return required by the equity and debt

providers of us yielded as of the valuation dates, and the significant unobservable input used

in the fair value measurement is discount rate. The effect of the changes of the discount rate

was immaterial.



– 291 –

B. Fair value of financial assets and liabilities carried at other than fair value

The carrying amounts of our financial instruments carried at cost were not materiallydifferent from their fair values as of December 31, 2019 and 2020 and May 31, 2021.

In respect of the valuation of the level 3 financial assets at fair value, with reference tothe SFC’s “Guidance note on directors’ duties in the context of valuations in corporatetransactions,” the Directors have (i) reviewed the terms of the relevant financial assets, (ii)engaged an independent valuer, provided necessary information for the valuer to performvaluation procedures and discussed with the valuer on the relevant assumptions, (iii) carefullyconsidered all information that require management assessment and estimates, (iv) reviewedthe valuation working papers and results prepared by the valuer. Based on the above, theDirectors are of the view that the valuation of level 3 financial assets is fair and reasonableand the financial statements of our Group are properly prepared.

Details of information on level 3 fair value measurements during the Track RecordPeriod are disclosed in Note 26 to the Accountants’ Report in Appendix I to this[REDACTED]. The Reporting Accountant’s opinion on the Historical Financial Information,as a whole, of our Group for the Track Record Period is set out on pages I-2 and I-3 ofAppendix I to this [REDACTED].



– 292 –

DESCRIPTION OF SELECTED COMPONENTS OF CONSOLIDATED STATEMENTSOF PROFIT OR LOSS

The following table sets forth a summary of our consolidated statements of profit or lossfor the periods indicated.


2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

(Unaudited)

Revenue . . . . . . . . . . . . . . . . . . . – 2,839 235 581Cost of sales . . . . . . . . . . . . . . . – (690) (67) (270)

Gross profit . . . . . . . . . . . . . . . . – 2,149 168 311Other income, net . . . . . . . . . . . 474 16,743 (895) 4,442Selling and distribution

expenses . . . . . . . . . . . . . . . . . – (3,830) (518) (6,429)General and administrative

expenses . . . . . . . . . . . . . . . . . (9,157) (16,701) (3,914) (16,019)Research and development

expenses . . . . . . . . . . . . . . . . . (59,698) (18,065) (7,598) (8,227)

Loss from operations . . . . . . . . . (68,381) (19,704) (12,757) (25,922)Finance costs . . . . . . . . . . . . . . (7,546) (19,121) (4,275) (332)Changes in fair value of

financial liabilities . . . . . . . . . (44,959) (576,611) (52,544) (217,256)

Loss before taxation . . . . . . . . . (120,886) (615,436) (69,576) (243,510)Income tax . . . . . . . . . . . . . . . . – – – –

Loss for the year/period . . . . . . (120,886) (615,436) (69,576) (243,510)


Company . . . . . . . . . . . . . . . . (107,999) (613,765) (67,822) (242,332)Non-controlling interests . . . . . (12,887) (1,671) (1,754) (1,178)

Loss for the year/period . . . . . . (120,886) (615,436) (69,576) (243,510)

Revenue

We began generating revenue in April 2020, and all of our revenue in 2020 and the five

months ended May 31, 2021 was from the sales of our TracLine® access catheter beginning

from April and our FocuStar® neuro balloon catheter – Rx beginning from April 2021.



– 293 –

Cost of Sales

We began incurring cost of sales in April 2020, and all of our cost of sales during the

Track Record Period was related to the sales of our TracLine® access catheter and our

FocuStar® neuro balloon catheter – Rx. The cost of sales consisted primarily of: (i) cost of

raw materials and consumables used to manufacture our products; (ii) staff costs including

salaries, wages and other benefits, and contributions to defined contribution retirement plan;

(iii) depreciation expenses of property, plant and equipment; (iv) testing fees related to testing

and inspection of products; and (v) others, such as rental and utility costs related to our

manufacturing facility. The following table sets forth a breakdown of our cost of sales for the

periods indicated.

Year endedDecember 31, Five months ended May 31,

2020 2020 2021

RMB’000 % RMB’000 % RMB’000 %

(Unaudited)

Cost of raw materials andconsumables . . . . . . . . . . . . . 434 62.9 39 58.2 111 41.1

Staff costs . . . . . . . . . . . . . . . . 132 19.1 16 23.9 111 41.1Depreciation expenses . . . . . . 64 9.3 7 10.4 24 8.9Testing fees . . . . . . . . . . . . . . . 6 0.9 – – – –Others . . . . . . . . . . . . . . . . . . . 54 7.8 5 7.5 24 8.9

Total . . . . . . . . . . . . . . . . . . . . 690 100.0 67 100.0 270 100.0

Gross Profit and Gross Profit Margin

Our gross profit represents our revenue less our cost of sales. Our gross profit margin

represents our gross profit as a percentage of our revenue. The following table sets forth a

breakdown of our gross profit and gross profit margin for the periods indicated.

Year endedDecember 31, Five months ended May 31,

2020 2020 2021

RMB’000 RMB’000 RMB’000

(Unaudited)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,149 168 311Gross profit margin . . . . . . . . . . . . . . . . . . . . . . . 75.7% 71.5% 53.5%



– 294 –

Other Income, Net

Our net other income consisted primarily of (i) government grants provided by the

government authorities in the PRC primarily to support our R&D activities; (ii) net foreign

exchange gains and losses arising from the inter-company balance due from HeMo China to

our Company and Max Vision, which paid license fees in U.S. dollars to ICI on behalf of

HeMo China, as well as net foreign exchange gains and losses arising from our payment for

raw materials in U.S. dollars; (iii) net realized and unrealized gains on financial assets

measured at fair value through profit or loss, related to wealth management products we

purchased (see Note 16 to the Accountants’ Report included in Appendix I to this

[REDACTED] for more information on these financial assets); and (iv) interest income on

bank deposits. The following table sets forth a breakdown of our net other income for the

periods indicated.


2019 2020 2020 2021

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

(Unaudited)

Government grants . . . 3,554 749.8 5,286 31.6 2,790 (311.7) 486 10.9Net foreign exchange

(loss)/gain . . . . . . . (3,796) (800.8) 11,055 66.0 (3,897) 435.4 3,761 84.7Net realized and

unrealized gains onfinancial assetsmeasured at fair valuethrough profit or loss 532 112.2 255 1.5 186 (20.8) 215 4.8

Interest income on bankdeposits . . . . . . . . . 188 39.6 168 1.0 26 (2.9) 12 0.3

Others . . . . . . . . . . . (4) (0.8) (21) (0.1) – – (32) (0.7)

Total . . . . . . . . . . . . 474 100.0 16,743 100.0 (895) 100.0 4,442 100.0



– 295 –

Selling and Distribution Expenses

Our selling and distribution expenses consisted of (i) staff costs related to our marketing

and sales team; (ii) market development expenses incurred in marketing our products; (iii)

travelling expenses; and (iv) others, such as rental, related to our marketing and promotion

activities. The following table sets forth a breakdown of our selling and distribution expenses

for the periods indicated.


2020 2020 2021

RMB’000 % RMB’000 % RMB’000 %

(Unaudited)

Staff costs . . . . . . . . . 1,935 50.5 423 81.7 3,854 59.9Market development

expenses . . . . . . . . . 1,352 35.3 70 13.5 1,997 31.1Travelling expenses . . 193 5.0 14 2.7 224 3.5Others . . . . . . . . . . . . 350 9.2 11 2.1 354 5.5

Total . . . . . . . . . . . . . 3,830 100.0 518 100.0 6,429 100.0

General and Administrative Expenses

Our general and administrative expenses consisted primarily of (i) staff costs related to

our administrative employees; (ii) professional service expenses, including legal and human

resources service fees; (iii) [REDACTED] incurred for the [REDACTED]; (iv) travelling and

transportation expenses; and (iv) others, such as renovation expenses, rental, depreciation and

amortization and office supplies. The following table sets forth a breakdown of our general

and administrative expenses for the periods indicated.


2019 2020 2020 2021

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

(Unaudited)

Staff costs . . . . . . . . . 5,838 63.8 7,461 44.7 3,050 77.9 4,322 27.0Professional service fees 1,149 12.5 781 4.7 160 4.1 762 4.8[REDACTED] . . . . . . – – 5,313 31.8 – – 10,091 63.0Travelling and

transportationexpenses . . . . . . . . 507 5.5 1,224 7.3 152 3.9 53 0.3

Others . . . . . . . . . . . 1,663 18.2 1,922 11.5 552 14.1 791 4.9

Total . . . . . . . . . . . . 9,157 100.0 16,701 100.0 3,914 100.0 16,019 100.0



– 296 –


Our research and development expenses consisted primarily of (i) staff costs related to

our research and development employees; (ii) third-party contracting costs, primarily

payments to CROs, SMOs, hospitals and other service providers, as well as pre-clinical testing

fees and registration fees; (iii) material costs, mainly for materials used to develop our product

candidates and conduct clinical trials; (iv) license fees paid to ICI; (v) depreciation and

amortization of our R&D facilities; and (vi) others, such as rental, travel and transportation

expenses incurred for our clinical trials and R&D activities. The following table sets forth a

breakdown of our research and development expenses for the periods indicated.


2019 2020 2020 2021

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

(Unaudited)

Staff costs . . . . . . . . . 10,803 18.1 9,371 51.9 4,368 57.5 4,460 54.2Third party contracting

costs . . . . . . . . . . . 9,321 15.6 4,750 26.3 1,756 23.1 2,200 26.8Material costs . . . . . . 6,704 11.2 1,319 7.3 369 4.9 691 8.4License fees . . . . . . . . 26,924 45.1 – – – – – –Depreciation and

amortization . . . . . . 1,102 1.9 1,130 6.2 474 6.2 239 2.9Others . . . . . . . . . . . 4,844 8.1 1,495 8.3 631 8.3 637 7.7

Total . . . . . . . . . . . . 59,698 100.0 18,065 100.0 7,598 100.0 8,227 100.0

Finance Costs

Our finance costs consisted primarily of (i) interest on loans from related parties, which

we borrowed in 2019 from Weihai Hongwang (a partnership organization, of which the limited

partners are the management, consultants and business partners of our Group, who are all

Independent Third Parties) and Gold Ridge (a shareholding entity controlled by Dr. Wang);

(ii) interest on lease liabilities, mainly related to our office premises in Beijing and Shanghai;

and (iii) issuance cost of preferred shares for our Series A+, Series B and Series C financings.



– 297 –

For more details on our finance costs, please refer to Notes 6 and 20 to the Accountants’

Report included in Appendix I to this [REDACTED] and “—Indebtedness.” The following

table sets forth a breakdown of our finance costs for the periods indicated.


2019 2020 2020 2021

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

(Unaudited)

Interest on loans fromrelated parties . . . . . 7,517 99.6 4,270 22.3 4,270 99.9 – –

Interest on leaseliabilities . . . . . . . . 29 0.4 16 0.1 5 0.1 17 5.1

Issuance cost ofpreferred shares . . . . – – 14,835 77.6 – – 255 76.8

Other finance cost . . . . – – – – – – 60 18.1

Total . . . . . . . . . . . . 7,546 100.0 19,121 100.0 4,275 100.0 332 100.0

Changes in Fair Value of Financial Liabilities

Changes in fair value of financial liabilities related to (i) preferred shares we issued to

investors of our Series A, Series A+, Series B and Series C financings and (ii) derivative

financial liabilities in respect of ICI’s non-dilutive rights. We no longer had derivative

financial liabilities as of May 31, 2021 because ICI’s non-dilutive rights will terminate upon

the [REDACTED] based on our latest articles of association, given that we do not expect to

have another round of financing before the [REDACTED]. The following table sets forth a

breakdown of the changes in fair value of financial liabilities for the periods indicated.


2019 2020 2020 2021

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

(Unaudited)

Changes in fair value ofpreferred shares . . . . 44,959 100.0 572,051 99.2 52,544 100.0 217,244 100.0

Changes in fair value ofderivative financialliabilities . . . . . . . . – – 4,560 0.8 – – 12 0.0

Total . . . . . . . . . . . . 44,959 100.0 576,611 100.0 52,544 100.0 217,256 100.0



– 298 –

Income Tax

Our principal applicable taxes and tax rates are set forth as follows:

PRC

Our subsidiaries established in the PRC (excluding Hong Kong) are subject to PRCCorporate Income Tax rate of 25% during the Track Record Period. We did not incur incometax expenses during the Track Record Period. According to the relevant laws and regulationspromulgated by the State Administration of Taxation of the PRC which has been effectivefrom January 1, 2018 to December 31, 2020, an additional 75% of their qualified research anddevelopment expenses we incurred are allowed to be deducted from taxable income under thePRC income tax law and its relevant regulations. Since January 1, 2021, an additional 100% ofqualified research and development expenses incurred are allowed to be deducted from taxableincome under the PRC income tax law and relevant regulations.

Cayman Islands and British Virgin Islands

Pursuant to the laws of the Cayman Islands and British Virgin Islands respectively, weare not subject to any income tax in the Cayman Islands or the British Virgin Islands. Inaddition, upon our payment of dividends to our shareholders, no Cayman Islands or BritishVirgin Islands withholding tax will be imposed.

Hong Kong

Our subsidiaries incorporated in Hong Kong are subject to Hong Kong profit tax at16.5% of the estimated assessable profit. No provision for Hong Kong profits tax has beenmade, as our subsidiaries incorporated in Hong Kong did not have assessable profits which aresubject to Hong Kong profit tax during the Track Record Period.

RESULTS OF OPERATIONS

Five Months Ended May 31, 2021 Compared to Five Months Ended May 31, 2020

Revenue

Our revenue increased significantly from RMB0.2 million in the five months ended May31, 2020 to RMB0.6 million in the same period of 2021, primarily because we begangenerating revenue from April 2020.

Cost of Sales

Our cost of sales increased significantly from RMB67 thousand in the five months endedMay 31, 2020 to RMB270 thousand in the same period of 2021, in line with the increase in therevenue.



– 299 –


Our gross profit increased by 85.1% from RMB168 thousand in the five months endedMay 31, 2020 to RMB311 thousand in the same period of 2021. Our gross profit margindecreased from 71.5% in the five months ended May 31, 2020 to 53.5% in the same period of2021, primarily due to increased headcount of manufacturing and quality control staff andhigher testing fees related to testing and inspection of our Tracline® access catheter.

Other Income, Net

We recorded net other income of negative RMB895 thousand in the five months endedMay 31, 2020 and net other income of RMB4.4 million in the same period of 2021. Thischange was primarily due to a net foreign exchange gain of RMB3.8 million in the five monthsended May 31, 2021 compared to a net foreign exchange loss of RMB3.9 million in the sameperiod of 2020, resulting primarily from foreign exchange fluctuations on the inter-companybalance due from HeMo China to our Company and Max Vision, which paid license fees toICI on behalf of HeMo China.


Our selling and distribution expenses increased significantly from RMB518 thousand inthe five months ended May 31, 2020 to RMB6.4 million in the same period of 2021, primarilydue to a RMB3.4 million increase in staff costs primarily as a result of the increasedheadcount and a RMB1.9 million increase in market development expenses to build up oursales team and market our Tracline® access catheter and FocuStar® neuro balloon catheter –Rx.


Our general and administrative expenses increased significantly from RMB3.9 million inthe five months ended May 31, 2020 to RMB16.0 million in the same period of 2021, primarilydue to the [REDACTED] of [REDACTED] incurred in connection with our [REDACTED] inthe five months ended May 31, 2021.


Our research and development increased by 8.3% from RMB7.6 million in the fivemonths ended May 31, 2020 to RMB8.2 million in the same period of 2021, primarily due to aRMB444 thousand increase in third-party contracting costs and a RMB322 thousand increasein material costs incurred for our product candidate development and clinical trials.

Finance Costs

Our finance costs decreased by 92.2% from RMB4.3 million in the five months endedMay 31, 2020 to RMB332 thousand in the same period of 2021, primarily because we had aRMB4.3 million interest on loans from related parties in the five months ended May 31, 2020;



– 300 –

the principal of the loan from Weihai Hongwang was converted into equity interest in HeMoChina and the principal and accrued interest of the loan from Gold Ridge were converted intoour Company's preferred shares in 2020.

Change in Fair Value of Financial Liabilities

We recorded fair value losses in financial liabilities of RMB52.5 million and RMB217.3million in the five months ended May 31, 2020 and 2021, respectively, primarily attributable tothe fair value increase resulting from our additional equity financings and because weobtained marketing approval for more products.

Loss before Taxation

For the reasons described above, our loss before taxation changed from RMB69.6 millionin the five months ended May 31, 2020 to RMB243.5 million in the same period of 2021.

Income Tax

We did not have any income tax expense in the five months ended May 31, 2020 and 2021.

Loss for the Period

For the reasons described above, our loss for the period changed from RMB69.6 millionin the five months ended May 31, 2020 to RMB243.5 million in the same period of 2021.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Revenue

Our revenue increased from nil in 2019 to RMB2.8 million in 2020, primarily due to thesales of our Tracline® access catheter which was launched in China in April 2020.

Cost of Sales

Our cost of sales was RMB690 thousand in 2020, primarily consisting of cost of rawmaterials and consumables used of RMB434 thousand and staff costs of RMB132 thousand.


In 2020, our gross profit was RMB2.1 million, and our gross profit margin was 75.7%.

Other Income, Net

Our net other income increased substantially from RMB474 thousand in 2019 toRMB16.7 million in 2020, primarily attributable to our net foreign exchange gain of RMB11.1million in 2020 compared to a net foreign exchange loss of RMB3.8 million in 2019, both ofwhich were primarily related to the inter-company balance arising from license fees paid onbehalf of HeMo China by our Company and Max Vision to ICI.



– 301 –


We did not have any selling and distribution expenses in 2019. Our selling and

distribution expenses were RMB3.8 million in 2020, consisting mainly of staff costs of

RMB1.9 million and market development expenses of RMB1.4 million, to build up our sales

team and market our Tracline® access catheter.


Our general and administrative expenses increased significantly from RMB9.2 million in

2019 to RMB16.7 million in 2020, primarily due to (i) our incurrence of [REDACTED] of

[REDACTED] in connection with the [REDACTED] in 2020; and (ii) a RMB1.6 million

increase in staff costs primarily attributable to our headcount increase and remuneration to

management.


Our research and development expenses decreased by 69.7% from RMB59.7 million in

2019 to RMB18.1 million in 2020, primarily due to (i) our settlement of RMB26.9 million in

license fees in 2019; and (ii) a RMB4.6 million decrease in third-party contracting costs and a

RMB5.4 million decrease in material costs as a result of slowdown in patient recruitment for

our clinical trials caused by the COVID-19 pandemic.

Finance Costs

Our finance costs increased significantly from RMB7.5 million in 2019 to RMB19.1

million in 2020, primarily due to a RMB14.8 million issuance cost of preferred shares for our

Series A+ and Series B financings in 2020.

Change in Fair Value of Financial Liabilities

We recorded fair value losses in financial liabilities of RMB45.0 million in 2019, in

relation to preferred shares we issued to investors. We recorded fair value losses in financial

liabilities of RMB576.6 million in 2020, mainly resulting from a RMB572.1 million fair value

loss in preferred shares issued to investors and a RMB4.6 million fair value loss in derivative

financial liabilities related to ICI’s anti-dilutive rights, both due to our Company’s increased

valuation following additional financings and because we obtained marketing approval for

more products.

Loss before Taxation

For the reasons described above, our loss before taxation increased significantly from

RMB120.9 million in 2019 to RMB615.4 million in 2020.



– 302 –

Income Tax

We did not have any income tax expense in 2019 and 2020.

Loss for the Year

For the reasons described above, our loss for the year changed from RMB120.9 million in

2019 to RMB615.4 million in 2020.

DESCRIPTION OF CERTAIN SELECTED ITEMS FROM THE CONSOLIDATED

STATEMENTS OF FINANCIAL POSITION

The following table sets forth selected information from our consolidated statements of

financial position as of the dates indicated.


2019 2020 2021

RMB’000 RMB’000 RMB’000

Total non-current assets . . . . . . . . . . 13,608 11,210 14,054Total current assets . . . . . . . . . . . . . 42,549 332,373 624,089

Total assets . . . . . . . . . . . . . . . . . . . . 56,157 343,583 638,143

Total non-current liabilities . . . . . . . 2,440 1,575 2,602Total current liabilities . . . . . . . . . . . 359,205 1,265,197 1,748,375

Total liabilities . . . . . . . . . . . . . . . . . 361,645 1,266,772 1,750,977

Net current liabilities . . . . . . . . . . . . (316,656) (932,824) (1,124,286)

Net liabilities . . . . . . . . . . . . . . . . . . (305,488) (923,189) (1,112,834)

Share capital . . . . . . . . . . . . . . . . . . . 659 843 872Reserves . . . . . . . . . . . . . . . . . . . . . . (263,105) (918,934) (1,107,494)

Total equity attributable to equityshareholders of the Company . . . . (262,446) (918,091) (1,106,622)

Non-controlling interests . . . . . . . . . (43,042) (5,098) (6,212)

Total deficit . . . . . . . . . . . . . . . . . . . . (305,488) (923,189) (1,112,834)



– 303 –

NET CURRENT LIABILITIES

The following table sets forth our current assets, current liabilities and net current

liabilities as of the dates indicated.


2019 2020 2021

RMB’000 RMB’000 RMB’000

Current assetsInventories . . . . . . . . . . . . . . . . . . . . 7,175 12,561 16,719Trade and other receivables . . . . . . . 2,607 5,672 11,438Balance due from a related party . . . – 19,539 17,071Financial assets measured at fair

value through profit or loss . . . . . 20,000 43,000 20,000Cash and cash equivalents . . . . . . . . 12,767 251,601 558,861

Total current assets . . . . . . . . . . . . . . 42,549 332,373 624,089

Current liabilitiesTrade and other payables . . . . . . . . . 14,661 16,032 25,788Lease liabilities . . . . . . . . . . . . . . . . . 384 472 795Loans from related parties . . . . . . . . 85,402 – –Preferred shares issued to investors . 258,758 1,215,325 1,721,792Derivative financial liabilities . . . . . – 33,368 –

Total current liabilities . . . . . . . . . . . 359,205 1,265,197 1,748,375

Net current liabilities . . . . . . . . . . . . (316,656) (932,824) (1,124,286)

Our net current liabilities increased substantially from RMB316.7 million as of

December 31, 2019 to RMB932.8 million as of December 31, 2020, primarily due to (i) a

RMB956.6 million increase in preferred shares issued to investors and (ii) our recognition of

RMB33.4 million in derivative financial liabilities as of December 31, 2020, representing

non-dilutive rights of ICI. See Note 22 to the Accountants’ Report included in Appendix I to

this [REDACTED] for more information on the non-dilutive rights. These factors were offset

in part by (i) a RMB238.8 million increase in cash and cash equivalents, mainly attributable to

proceeds from our issuance of preferred shares; (ii) a RMB85.4 million decrease in loans from

related parties, as the principal of the loan from Weihai Hongwang was converted into equity

interest in HeMo China and the principal and interest of the loan from Gold Ridge was

converted into our Company’s preferred shares in 2020; (iii) a RMB23.0 million increase in

financial assets measured at fair value through profit or loss, as we purchased more wealth

management products from reputable banks; and (iv) a RMB19.5 million increase in balance

due from a related party, which represents operation funds we provided to HeMo Singapore,

which is unsecured, interest free and has no fixed term of repayment; we had acquired HeMo

Singapore as of the Latest Practicable Date.



– 304 –

Our net current liabilities increased by 20.5% from RMB932.8 million as of December

31, 2020 to RMB1,124.3 million as of May 31, 2021, primarily due to (i) a RMB506.5 million

increase in preferred shares issued to investors; and (ii) a RMB23 million reduction in

financial assets measured at fair value through profit or loss, as we purchased less wealth

managed products. These factors were offset in part by (i) a RMB307.3 million increase in

cash and cash equivalents, mainly attributable to proceeds from our issuance of preferred

shares; and (ii) the fact that we recognized RMB33.4 million of derivative financial liabilities

as of December 31, 2020 while we did not have this item as of May 31, 2021, because ICI’s

non-dilutive rights will terminate upon the [REDACTED] based on our latest articles of

association, given that we do not expect to have another round of financing before the

[REDACTED].

Inventories

Our inventories include raw materials, work-in-progress and finished goods. We generally

maintain at least six months’ inventory of raw materials and regularly monitor our inventory

level to avoid understocking and overstocking. Our ERP system tracks details of the

procurement, consumption in production, and sales of our inventories. We also physically

count our inventories regularly to identify products that are damaged or misplaced, or have

expired or are about to expire. For more details, see “Business—Inventory Management.” The

following table sets forth a breakdown of our inventories as of the dates indicated.


2019 2020 2021

RMB’000 RMB’000 RMB’000

Raw materials . . . . . . . . . . . . . . . . . . 7,175 11,513 13,519Work-in-progress . . . . . . . . . . . . . . . – 430 404Finished goods . . . . . . . . . . . . . . . . . – 618 2,796

Total . . . . . . . . . . . . . . . . . . . . . . . . . 7,175 12,561 16,719

Our inventories increased by 75.1% from RMB7.2 million as of December 31, 2019 to

RMB12.6 million as of December 31, 2020, primarily due to raw materials purchased to

prepare for the manufacturing and subsequent sales of our TracLine® access catheter.

Our inventories increased by 33.1% from RMB12.6 million as of December 31, 2020 to

RMB16.7 million as of May 31, 2021, primarily due to raw materials purchased and finished

goods manufactured to prepare for the subsequent sales of our TracLine® access catheter and

FocuStar® neuro balloon catheter - Rx.

As we only commenced production and sales in April 2020 and are still at an early stage

of product commercialization, our inventory turnover days in 2019 and 2020 and the five

months ended May 31, 2021 would not be meaningful.



– 305 –

Trade and Other Receivables

Our trade and other receivables consist of receivables from third parties, prepayments to

suppliers, prepayments for [REDACTED], value-added tax recoverable, deposits and other

receivables. The following table sets forth a breakdown of our trade and other receivables as of

the dates indicated.


2019 2020 2021

RMB’000 RMB’000 RMB’000

Trade receivables due from thirdparties . . . . . . . . . . . . . . . . . . . . . . – 244 –

Prepayments to suppliers . . . . . . . . . 232 538 2,400Prepayments for [REDACTED] . . . . – 1,328 3,830Value-added tax recoverable . . . . . . . 1,226 3,259 4,730Deposits . . . . . . . . . . . . . . . . . . . . . . 649 303 378Others . . . . . . . . . . . . . . . . . . . . . . . . 500 – 100

Total . . . . . . . . . . . . . . . . . . . . . . . . . 2,607 5,672 11,438

Our trade and other receivables increased significantly from RMB2.6 million as of

December 31, 2019 to RMB5.7 million as of December 31, 2020, primarily (i) because we had

RMB1.3 million in prepayment for [REDACTED] as of December 31, 2020, which we did not

have in the previous year; and (ii) due to a RMB2.0 million increase in value-added tax

recoverable in 2020, resulting from our increased purchase of raw materials.

Our trade and other receivables increased significantly from RMB5.7 million as of

December 31, 2020 to RMB11.4 million as of May 31, 2021, primarily due to (i) a RMB2.5

million increase in prepayment for [REDACTED]; (ii) a RMB1.9 million increase in

prepayments to suppliers as we purchased more raw materials; and (iii) a RMB1.5 million

increase in value-added tax recoverable, resulting from our increased purchase of raw

materials.

Since we only commenced our sales in April 2020 and are still at an early stage of product

commercialization, our average trade receivables turnover days in 2019 and 2020 and the five


We had no impairment losses allowance on trade receivables during the Track Record

Period.



– 306 –

The following table sets forth an aging analysis of our trade receivables based on the

invoice date and net of credit losses as of the dates indicated.


2019 2020 2021

RMB’000 RMB’000 RMB’000

Within 3 months . . . . . . . . . . . . . . . . – 231 –3 to 6 months . . . . . . . . . . . . . . . . . . – 13 –

Total . . . . . . . . . . . . . . . . . . . . . . . . . – 244 –

Financial Assets Measured at Fair Value Through Profit or Loss

As of December 31, 2019 and 2020 and as of May 31, 2021, our financial assets measured

at fair value through profit or loss were RMB20.0 million, RMB43.0 million and RMB20.0

million, respectively, which were our investments in wealth management products at variable

interest rates and with a maturity term within one year, that we purchased from commercial

banks in the PRC. The pay-out of these wealth management products is linked to financial

assets including primarily bonds, deposits, money market funds and certain investment plans

and asset management plans managed by other financial institutions. We purchase wealth

management products as an auxiliary means to improve utilization of our cash-on-hand, and

made these investments as approved by our senior management. We have implemented an

internal policy to oversee the approval process for the purchase of wealth management

products. Under the relevant policy, the purchase of wealth management products needs to be

approved by the head of our finance department, Mr. Chun Meng. See “Directors and Senior

Management—Senior Management” for information on Mr. Meng.



– 307 –

Trade and Other Payables

Our trade and other payables mainly included (i) trade payables, (ii) interest payables for

loans from related parties, Weihai Hongwang and Gold Ridge (See “—Related Party

Transactions” and Note 20 to the Accountants’ Report included in Appendix I to this

[REDACTED] for details on the loans and their accrued interest), (iii) salary and welfare

payables, (iv) payables for [REDACTED] and (vi) other payables and accruals. The following

table sets forth a breakdown of our trade and other payables as of the dates indicated.


2019 2020 2021

RMB’000 RMB’000 RMB’000

Trade payables . . . . . . . . . . . . . . . . . 3,059 2,117 3,266Interest payables . . . . . . . . . . . . . . . . 7,517 1,195 1,195Salary and welfare payables . . . . . . . 3,752 4,172 5,231Payables for [REDACTED] . . . . . . . . – 6,642 14,197Other payables and accruals . . . . . . . 333 1,906 1,899

Total . . . . . . . . . . . . . . . . . . . . . . . . . 14,661 16,032 25,788

Our trade and other payables increased by 9.4% from RMB14.7 million as of December

31, 2019 to RMB16.0 million as of December 31, 2020, mainly due to our accrual of RMB6.6

million in [REDACTED] in 2020, partially offset by a RMB6.3 million decrease in interest

payables related to loans from related parties; the principal of the loan from Weihai

Hongwang was converted into equity interest in HeMo China and the principal and accrued

interest of the loan from Gold Ridge were converted into our Company's preferred shares in

2020.

Our trade and other payables increased by 60.9% from RMB16.0 million as of December

31, 2020 to RMB25.8 million as of May 31, 2021, primarily due to (i) a RMB7.6 million

increase in payables for [REDACTED]; (ii) a RMB1.1 million increase in trade payables related

to our purchase of raw materials; and (iii) a RMB1.1 million increase in salary and welfare

payables primarily as a result of increased headcount.

Since we only commenced sales in April 2020 and are still at an early stage of product

commercialization, our average trade payables turnover days in 2019 and 2020 and the five




– 308 –

The following table sets forth an aging analysis of our trade payables based on the invoicedate as of the dates indicated.


2019 2020 2021

RMB’000 RMB’000 RMB’000

Within 3 months . . . . . . . . . . . . . . . . 2,408 1,930 1,4123 to 6 months . . . . . . . . . . . . . . . . . . 177 – 1,6706 to 12 months . . . . . . . . . . . . . . . . . 348 – –Over 12 months but within

24 months . . . . . . . . . . . . . . . . . . . 126 187 166Over 24 months . . . . . . . . . . . . . . . . – – 18

Total . . . . . . . . . . . . . . . . . . . . . . . . . 3,059 2,117 3,266

Loans from Related Parties

Our loans from related parties were borrowed from Weihai Hongwang and Gold Ridge in2019. The principal of the loan from Weihai Hongwang was converted into equity interest inHeMo China and the principal and accrued interest of the loan from Gold Ridge wereconverted into our Company’s preferred shares in 2020. See Note 20 to the Accountants’Report included in Appendix I to this [REDACTED] for more information.

Preferred Shares Issued to Investors

Our preferred shares issued to investors represent our (i) Series A preferred shares issuedto several independent investors in September 2017, (ii) Series A+ preferred shares issued toGold Ridge in April 2020 to settle the principal and interest of our loan from it, (iii) Series Bpreferred shares issued to several independent investors in October 2020, and (iv) Series Cpreferred shares issued to several independent investors in January 2021. We accounted forthese preferred shares as financial liabilities at fair value through profit or loss. See Note 21 tothe Accountants’ Report included in Appendix I to this [REDACTED] for more information.

LIQUIDITY AND CAPITAL RESOURCES

Our primary uses of cash are to fund the development of our product candidates, ourclinical trials, purchase of plant and equipment, purchase of raw materials, administrativeexpenses and other recurring expenses. Since our inception, we relied on loans from relatedparties and equity financings as the major sources of liquidity. We also generated a modestportion cash from sales of our commercialized products. We monitor our cash position on aregular basis and strive to maintain an optimal liquidity that can meet our working capitalneeds. We expect to generate more net cash from our operating activities, through increasingsales revenue of the existing commercialized products and by launching new products. As ofMay 31, 2021, we had cash and cash equivalents of RMB558.9 million.



– 309 –

Cash Flows

The following table sets forth a summary of our consolidated statements of cash flowsfor the periods indicated.


2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

(Unaudited)

Net cash used in operating activities . (133,170) (48,880) (9,399) (24,830)Net cash (used in)/generated from

investing activities . . . . . . . . . . . . . (20,843) (24,188) 10,186 19,861Net cash generated from/(used in)

financing activities . . . . . . . . . . . . . 82,427 320,484 (217) 323,157

Net (decrease)/increase in cash andcash equivalents . . . . . . . . . . . . . . . (71,586) 247,416 570 318,188

Cash and cash equivalents at thebeginning of the year/period . . . . . 85,556 12,767 12,767 251,601

Effects of foreign exchange ratechanges . . . . . . . . . . . . . . . . . . . . . . (1,203) (8,582) (336) (10,928)

Cash and cash equivalents at the endof the year/period . . . . . . . . . . . . . . 12,767 251,601 13,001 558,861

Operating Activities

In the five months ended May 31, 2021, we had net cash used in operating activities ofRMB24.8 million, which was primarily attributable to our loss before taxation of RMB243.5million, as adjusted primarily to add back change in fair value of preferred shares ofRMB217.2 million, as well as due to changes in working capital. The negative changes inworking capital mainly consisted of a RMB4.2 million increase in inventories as we purchasedmore raw materials and a RMB2.7 million increase in trade and other receivables and balancedue from a related party, primarily due to prepayments for [REDACTED] and accrued intereston the loan from Weihai Hongwang, partially offset by a RMB6.2 million increase in tradeand other payables primarily as a result of the increase in payables for [REDACTED].

In 2020, we had net cash used in operating activities of RMB48.9 million, which wasprimarily attributable to our loss before taxation of RMB615.4 million, as adjusted primarilyto add back changes in fair value of preferred shares of RMB572.1 million, as well as due tochanges in working capital. The negative changes in working capital mainly consisted of (i) aRMB19.8 million increase in trade and other receivables and balance due from a related partyas a result of prepayments for [REDACTED] and accrued interest on loans from relatedparties; (ii) a RMB5.4 million increase in inventories as we purchased more raw materials; and(iii) a RMB5.0 million decrease in trade and other payables.



– 310 –

In 2019, we had net cash used in operating activities of RMB133.2 million, which was

primarily attributable to our loss before taxation of RMB120.9 million, as adjusted primarily

to add back change in fair value of preferred shares of RMB45.0 million, as well as

attributable to changes in working capital. The negative changes in working capital mainly

consisted of a RMB67.7 million decrease in trade and other payables primarily as a result of

our payment of license fees to ICI.

Investing Activities

In the five months ended May 31, 2021, our net cash generated from investing activities

was RMB19.9 million, primarily attributable to RMB109.2 million in proceeds from sale of

wealth management products, partially offset by RMB86.0 million in payment for purchase of

wealth management products.

In 2020, our net cash used in investing activities was RMB24.2 million, primarily

attributable to RMB127.0 million in payment for purchase of wealth management products,

partially offset by RMB104.3 million proceeds from sale of wealth management products.

In 2019, our net cash used in investing activities was RMB20.8 million, primarily

attributable to RMB187.5 million in payment for purchase of wealth management products,

partially offset by RMB168.0 million in proceeds from sale of wealth management products.

Financing Activities

In the five months ended May 31, 2021, our net cash generated from financing activities

was RMB323.2 million, primarily attributable to RMB323.4 million in proceeds from issuance

of preferred shares from Series C financing.

In 2020, our net cash generated from financing activities was RMB320.5 million,

primarily attributable to RMB334.4 million in proceeds from issuance of preferred shares,

partially offset by RMB13.4 million in payment for costs related to issuance of preferred

shares and the proposed issuance of new shares.

In 2019, our net cash generated from financing activities was RMB82.4 million, primarily

attributable to RMB82.9 million in proceeds from loans from related parties.

WORKING CAPITAL

Taking into account our bank balances and cash, capital contribution and [REDACTED]from the [REDACTED], our Directors are of the opinion that we have sufficient working

capital to cover at least 125% of our costs, including research and development expenses,

selling and distribution expenses, administrative expenses, finance costs and other expenses for

at least the next 12 months from the date of this [REDACTED].



– 311 –

Our Directors believe that by taking into account the estimated [REDACTED] of

[REDACTED] (based on the [REDACTED]) from the [REDACTED], cash and cash

equivalents of RMB558.9 million and financial assets measured at fair value through profit or

loss of RMB20.0 million as of May 31, 2021 and our past and expected cash burn rate, we can

remain financially viable with sufficient cash to fund our operations for at least 5 years from

May 31, 2021. Our cash burn rate refers to the amount of cash operating costs, payment for

property, plant and equipment, lease payments, and cash settlement in relation to the Privi

Medical Acquisition in accordance with the Term Sheet. We will continue to monitor our cash

flows from operations closely and expect to raise our next round of financing, if needed, with

a minimum buffer of 12 months.

CASH OPERATING COSTS


2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

(Unaudited)

R&D costsR&D costs for our Core Products

– Staff cost . . . . . . . . . . . . . . . . . . . 2,835 1,517 1,288 132– Third-party Contracting Costs . . 270 – – –– Material costs . . . . . . . . . . . . . . . 1 – – –– Others . . . . . . . . . . . . . . . . . . . . . 351 50 22 –

R&D costs for our other products andproduct candidates– Staff cost . . . . . . . . . . . . . . . . . . . 5,334 5,982 2,244 3,489– Third-party Contracting Costs . . 6,643 5,992 1,971 997– Material costs . . . . . . . . . . . . . . . 10,082 1,514 733 1,479– Others . . . . . . . . . . . . . . . . . . . . . 4,119 1,119 276 410

Workforce employment costs (1) . . . . . 4,628 6,282 1,378 7,167Product marketing costs . . . . . . . . . . . – 790 20 2,731Direct production costs . . . . . . . . . . . . – 6,609 3,173 3,945Professional service fees . . . . . . . . . . . 1,117 14,288 161 416[REDACTED] . . . . . . . . . . . . . . . . . . . – – – 5,363Any other significant costs . . . . . . . . . 3,595 3,967 847 1,785

Note:(1) Represents total staff costs mainly including salaries and bonus.



– 312 –

INDEBTEDNESS

The following table sets forth a breakdown of our financial indebtedness as of the datesindicated.


2019 2020 2021

RMB’000 RMB’000 RMB’000

Non-currentLease liabilities . . . . . . . . . . . . . . . . . – 340 731

CurrentInterest payables . . . . . . . . . . . . . . . . 7,517 1,195 1,195Lease liabilities . . . . . . . . . . . . . . . . . 384 472 795Loans from related parties . . . . . . . . 85,402 – –Preferred shares issued to investors . 258,758 1,215,325 1,721,792

Subtotal . . . . . . . . . . . . . . . . . . . . . . 352,061 1,216,992 1,723,782

Total . . . . . . . . . . . . . . . . . . . . . . . . . 352,061 1,217,332 1,724,513

We did not have any material mortgages, charges, debentures, loan capital, debt

securities, loans, bank overdrafts or other similar indebtedness, finance lease or hire purchase

commitments, liabilities under acceptances (other than normal trade bills), acceptance credits,

which are either guaranteed, unguaranteed, secured or unsecured, or guarantees or other

contingent liabilities as of the Latest Practicable Date.

CAPITAL EXPENDITURES

We regularly incur capital expenditures to purchase property, plant and equipment for

our facilities and purchase intangible assets such as software for our business operations. The

following table sets forth a breakdown of our capital expenditures for the periods indicated.


2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

Payment for purchases of property,plant and equipment . . . . . . . . . . . . 1,229 1,374 – 3,354

Payment for purchases of intangibleassets . . . . . . . . . . . . . . . . . . . . . . . . 146 69 – –

Total . . . . . . . . . . . . . . . . . . . . . . . . . . 1,375 1,443 – 3,354



– 313 –

We expect to incur capital expenditures of approximately RMB17.0 million for the year

ending December 31, 2021, which will be used primarily for the expansion of our production

facilities and procurement of R&D equipment in Weihai, Shandong Province. See “Business—

Our Production Facilities and Processes—Production Facilities” for more information. We

intend to fund our capital expenditures primarily with [REDACTED] from the [REDACTED],

as well as our existing cash and cash equivalents on hand and cash flow generated from

operating activities. We may adjust our capital expenditures for any given period according to

our development plans or in light of market conditions and other factors we believe to be

appropriate.

CONTRACTUAL COMMITMENTS

As of May 31, 2021, we had no capital commitment.

CONTINGENT LIABILITIES

As of December 31, 2019 and 2020 and May 31, 2021, we did not have any contingent

liabilities. We confirm that as of the Latest Practicable Date, there had been no material

changes or arrangements to our contingent liabilities.

RELATED PARTY TRANSACTIONS

The below table sets forth our outstanding balances with our material related party

transactions as of the dates indicated.


2019 2020 2021

RMB’000 RMB’000 RMB’000

Interest payable . . . . . . . . . . . . . . . . 7,517 1,195 1,195Loans from related parties . . . . . . . . 85,402 – –Balance due from a related party . . . – 19,539 17,071

The loans from related parties of RMB85.4 million as of December 31, 2019 represent

loans due to Gold Ridge and Weihai Hongwang. Interest payable represents interest on these

loans. The principal of the loan from Weihai Hongwang was converted into equity interest in

HeMo China and the principal and interest of the loan from Gold Ridge were converted into

our Company’s preferred shares in 2020. The interest payable as of May 31, 2021 was accrued

interest on the loan from Weihai Hongwang, which interest had been converted into equity

interest in HeMo China as of the Latest Practicable Date. The balance due from a related

party represents the operation funds due from HeMo Singapore, which is unsecured,

interest-free and has no fixed term of repayment. We had acquired HeMo Singapore as of the

Latest Practicable Date.



– 314 –

Our Directors confirm that all material related party transactions during the Track

Record Period were conducted on an arm’s length basis, and would not distort our results of

operations over the Track Record Period or make our historical results over the Track Record

Period not reflective of our expectations for our future performance. Details of our

transactions with related parties during the Track Record Period are set out in Note 27(b) and

(c) to the Accountants’ Report included in Appendix I to this [REDACTED].

KEY FINANCIAL RATIOS

The following table sets forth our key financial ratios as of the dates indicated.


2019 2020 2021

Current ratio(1) . . . . . . . . . . . . . . . . . 0.1 0.3 0.4Quick ratio(2) . . . . . . . . . . . . . . . . . . 0.1 0.3 0.3

Notes:(1) Current ratio represents current assets divided by current liabilities as of the same date.(2) Quick ratio represents current assets less inventories and divided by current liabilities as of the same

date.

Our current ratio increased significantly from 0.1 as of December 31, 2019 to 0.3 as ofDecember 31, 2020 and further increased to 0.4 as of May 31, 2021. Our quick ratio increasedfrom 0.1 as of December 31, 2019 to 0.3 as of December 31, 2020 and as of May 31, 2021.These increases were primarily due to significant increases in our cash and cash equivalents aswe raised additional funds through equity financing. Our relatively low current ratios andquick ratios were mainly attributable to our issuance of preferred shares, which wererecognized as current liabilities.

OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS

During the Track Record Period and up to the Latest Practicable Date, we had notentered into any off-balance sheet transactions.

MARKET AND OTHER FINANCIAL RISKS

We are exposed to a variety of financial risks, including credit risk, liquidity risk, interestrate risk and currency risk. We manage and monitor these exposures to ensure appropriatemeasures are implemented on a timely and effective manner. As of the Latest Practicable Date,we did not hedge or consider necessary to hedge any of these risks. See Note 26 to theAccountants’ Report included in Appendix I to this [REDACTED] for more information.



– 315 –

Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractualobligations resulting in our financial loss. Our credit risk is primarily attributable to tradereceivables. Our exposure to credit risk arising from cash and cash equivalents and wealthmanagement products is limited because the counterparties are reputable banks which weconsidered to have low credit risks.

Our exposure to credit risk is mainly influenced by the individual characteristics of ourcustomers. Individual credit evaluations are performed on all customers requiring credit overa certain amount, taking into account several factors including the customer’s past paymenthistory and financial position and other factors. We normally do not grant any credit terms toour customers and do not obtain collateral from our customers, and therefore all tradereceivables are past due. We measure loss allowances for trade receivables at an amount equalto lifetime expected credit losses, which is calculated using a provision matrix. As ofDecember 31, 2020, net trade receivables are all past due but not impaired as no customer isexpected to have significant financial difficulty. None of the other items within trade andother receivables contains past due or impaired assets. The maximum exposure to credit risk isrepresented by the carrying amount of each financial asset in the statement of financialposition.

Liquidity Risk

In the management of the liquidity risk, our policy is to regularly monitor our liquidityrequirements to ensure that we maintain sufficient reserves of cash to meet our liquidityrequirements in the short and longer term. See Note 26(b) to the Accountants’ Reportincluded in Appendix I to this [REDACTED] for an analysis of the remaining contractualmaturities at the end of each reporting period of our non-derivative financial liabilities.

Interest Rate Risk

We are exposed to the risk that the fair value or future cash flows of a financialinstrument fluctuates due to changes in market interest rates. Our interest rate risk arisesprimarily from cash at banks, wealth management products issued by banks, loans fromrelated parties and lease liabilities. We are exposed to cash flow interest rate risk and fair valueinterest rate risk due to the instruments bearing interest at variable rates and fixed rates. Weregularly review our strategy on interest rate risk management in light of the prevailing marketcondition. See Note 26(c) to the Accountants’ Report set out in Appendix I to this[REDACTED] for our interest rate profile and a sensitivity analysis.

As of December 31, 2019 and 2020 and May 31, 2021, it is estimated that a generaldecrease/increase of 100 basis points in interest rates, with all other variables held constant,would have increased/decreased our loss after tax and accumulated losses by approximatelyRMB328 thousand, RMB2.9 million and RMB5.8 million, respectively.



– 316 –

Currency Risk

We are exposed to currency risk primarily through cash at banks, prepayments and otherreceivables, trade and other payables that are denominated in a foreign currency i.e. a currencyother than the functional currency of the operations to which the transactions relate. Thecurrencies giving rise to this risk are primarily U.S. dollars. The following table indicates theinstantaneous change in our loss after taxation and accumulated losses that would arise ifforeign exchange rates to which we have significant exposure at the end of the reporting periodhad changed at that date, assuming that all other risk variables remained constant.


2019 2020 2021

Increase/(decrease)in foreignexchange

rates

Effect onloss aftertax and

accumulatedlosses


rates


accumulatelosses


rates


accumulatelosses

RMB’000 RMB’000 RMB’000

U.S. dollars . . . . . . . . 10% (19) 10% 1,185 10% 1,004

DIVIDENDS

We did not distribute any dividend during the Track Record Period. We have not

generated any profit and did not generate any revenue until April 2020. We currently intend to

retain all available funds and earnings, if any, to fund the growth of our business. We do not

have any dividend policy or intention to declare or pay any dividends in the near future. Any

future declarations and payments of dividends will be at the absolute discretion of our

Directors and may be based on a number of factors, including our financial condition, future

earnings, capital requirements and surplus, contractual and legal restrictions, our ability to

receive dividend payments from our subsidiaries, and other factors that our Directors deem

relevant. Under the PRC law and the Articles of Association of each of our PRC subsidiaries,

the general reserve requires annual appropriations of 10% of after-tax profits at each year-end

until the balance reaches 50% of our relevant PRC subsidiary’s registered capital. As advised

by our Cayman Islands counsel, under the Companies Act and the Memorandum and Articles,

our Company may declare and pay a dividend out of either profits or share premium account,

provided always that in no circumstances may a dividend be declared or paid if such payment

would result in our Company being unable to pay its debts as they fall due in the ordinary

course of business.

DISTRIBUTABLE RESERVES

As of May 31, 2021, our Group had no retained profits under IFRSs as reserves available

for distribution to our equity shareholders.



– 317 –

[REDACTED]

[REDACTED]



– 318 –

[REDACTED]

NO MATERIAL ADVERSE CHANGE

Our Directors have confirmed, after performing all the due diligence work which our

Directors consider appropriate, that, as of the date of this [REDACTED], there had been no

material adverse change in our financial, operational or trading position or prospects since

May 31, 2021 and up to the date of this [REDACTED].

DISCLOSURE REQUIRED UNDER THE LISTING RULES

Our Directors have confirmed that, as of the Latest Practicable Date, they were not aware

of any circumstance that would give rise to a disclosure requirement under Rules 13.13 to

13.19 of the Listing Rules.



– 319 –

BOARD OF DIRECTORS

Our Board consists of seven Directors, comprising one executive Director, threenon-executive Directors and three independent non-executive Directors. The table below setsforth certain information of each of our Directors:

Name Age Position

Time ofjoining

our Group

Date ofappointmentas Director Roles and responsibilities

Dr. Wang ChichengJack (王吉成)

60 Executive Director,Chairman, the chiefexecutive officer andthe chief technologyofficer

April 19, 2016 June 21, 2017 Responsible for the overallstrategic planning andbusiness direction of ourGroup and managementof our Group.

Dr. Wang Shunlong (王順龍)

57 Non-executive Director September 26,2017

September 26,2017

Responsible for providingoverall guidance on thebusiness and strategicdevelopment of ourGroup and supervisingthe management of ourBoard

Mr. Sheng Li (盛利) 42 Non-executive Director April 25, 2020 April 25, 2020 Responsible for providingoverall guidance on thebusiness and strategicdevelopment of ourGroup and supervisingthe management of ourBoard


DIRECTORS AND SENIOR MANAGEMENT

– 320 –

Name Age Position

Time ofjoining

our Group

Date ofappointmentas Director Roles and responsibilities

Mr. Zhang Jiecheng(張劼鋮)

31 Non-executive Director October 16,2020

October 16,2020

Responsible for providingoverall guidance on thebusiness and strategicdevelopment of ourGroup and supervisingthe management of ourBoard

Mr. Tan Boon Kheng(陳文慶)

61 Independentnon-executiveDirector

Date of this[REDACTED]


Responsible for supervisingand providingindependent judgment tothe Board

His Excellency Dato’Seri Dr. DouglasFoo Peow Yong,BBM (符標雄)





Professor Tan HuayCheem (陳淮沁)





Executive Director

Dr. WANG Chicheng Jack (王吉成), aged 60, is the founder, chairman, the chief executive

officer and the chief technology officer of the Company. He was appointed as a Director on

June 21, 2017. He is primarily responsible for the overall strategic planning and business

direction of our Group and management of our Group. Dr. Wang has held multiple

directorships at our subsidiaries as set out below:

Name of subsidiaries Position Period

TreeHouse Director December 2015—PresentMax Vision Director July 2017—PresentHeMo Jirui Executive Director May 2020—PresentHeMo China Director April 2016—PresentHeMo Singapore Director November 2020—PresentPu Lewei Chairman of the board of

directorsAugust 2017—Present



– 321 –

Dr. Wang has 20 years of medical device development and management experience. Prior

to founding the Company, Dr. Wang served various positions from September 2001 to July

2015, including vice president for R&D, chief operating officer and chief executive officer at

Biosensors International Group, Ltd. (“Biosensors International”), a medical device company

formerly listed on the Singapore Stock Exchange. Dr. Wang founded JW Medical Systems Ltd.

(“JW Medical”) as chief executive officer in China in 2003, a medical device company

focusing on coronary drug eluting stents (DES), which became a subsidiary of Biosensors

International in 2007. JW Medical has become the top three companies which focusing on

developing, manufacturing and commercializing biodegradable-polymer drug coated DES in

China. In addition, Dr. Wang has 14 issued patents in US.

Since Dr. Wang founded the Company, he had led the R&D team to successfully acquire

and develop the products listed in the Company’s product portfolio including obtaining

in-licenses of the Afentta® aspiration catheter and TracLine® access catheter from ICI,

in-license of the Core Product from Privi Medical, facilitating the technology transfers

thereto, formulating product R&D plans and provide technical guidance, as well as setting up

the operational team in China and Singapore. Dr. Wang is also primarily responsible for the

overall management and business development of the Group including, but not limited to,

formulating corporate strategies, development direction and business policies and obtaining

financing from [REDACTED] Investors.

Dr. Wang became the Shandong Taishan Industrial Leading Talents in December 2017,

received the second national innovation award from the State Council of the People’s Republic

of China in December 2011, the first science and technology award from Shanghai Municipal

Government in November 2010, and the highest science and technology award from Weihai

Municipal Government in September 2008.

Dr. Wang received his bachelor’s degree in chemical engineering from Tsinghua

University (清華大學) in November 1982 and his PhD degree from Case Western Reserve

University in May 1994.

Non-executive Directors

Dr. WANG Shunlong (王順龍), aged 57, was appointed as a Director on September 26,

2017 and was redesignated as a non-executive Director on July 22, 2021. Dr. Wang Shunlong is

primarily responsible for providing overall guidance on the business and strategic

development of our Group and supervising the management of our Board. Dr. Wang

Shunlong has also served as a director of HeMo China since August 2017.

Dr. Wang Shunlong has over 20 years of experience in healthcare investment and private

equity fund management, with healthcare sector expertise and outstanding investment track

record. Dr. Wang Shunlong is currently the Chairman and founding managing partner of 3H

Health Investment from January 2016. Dr. Wang Shunlong worked at Hony Capital from



– 322 –

January 2005 to June 2015, which he joined as the head of investments before being promoted

to an executive Director, and thereafter, managing director. Dr. Wang Shunlong has previously

worked at various companies which focus on medical science and research and development.

Dr. Wang Shunlong graduated from Tsinghua University (清華大學) in July 1985 with a

bachelor’s degree in engineering and subsequently in April 1991 with a doctorate degree in

engineering.

Mr. SHENG Li (盛利), aged 42, was appointed as a Director on April 25, 2020 and was

redesignated as a non-executive Director on July 22, 2021. Mr. Sheng is primarily responsible

for providing overall guidance on the business and strategic development of our Group and

supervising the management of our Board. Mr. Sheng has also served as a director of HeMo

China since April 2020.

Mr. Sheng has over 15 years of extensive experience in healthcare investment in the China

market. Mr. Sheng currently serves as founding managing partner of 3H Health Investment

from August 2016. Prior to that, Mr. Sheng worked at Hony Capital from May 2006 to March

2016, where he first joined as an analyst and was promoted several times to the position of

investment director of the health industry department.

Mr. Sheng graduated from China Pharmaceutical University (中國藥科大學) with a

bachelor’s degree in biomedical sciences in July 2001, and a master of business administration

degree from Tsinghua University in July 2006.

Mr. ZHANG Jiecheng (張劼鋮), aged 31, was appointed as a Director on October 16,

2020 and was redesignated as a non-executive Director on July 22, 2021. Mr. Zhang is

primarily responsible for providing overall guidance on the business and strategic

development of our Group and supervising the management of our Board. Mr. Zhang has

also served as a director of HeMo China since November 2020.

Mr. Zhang joined Hillhouse Capital Group in June 2015 and is currently serving as an

executive Director of Hillhouse Capital Group. He has also served as the non-executive

director of Suzhou Basecare Medical Corporation Limited (a company listed on the Stock

Exchange with stock code 2170) since July 23, 2020.

Mr. Zhang received his bachelor’s degree in management from Shanghai University of

Finance and Economics (上海財經大學) in the PRC in July 2012.

Independent Non-executive Directors

Mr. TAN Boon Kheng (陳文慶), aged 61, also known as Tan George, was appointed as an

independent non-executive Director. He is primarily responsible for supervising and providing

independent judgment to our Board.



– 323 –

Mr. Tan is the managing director and the chief executive officer of Asiatic Group(Holdings) Limited (“Asiatic”), which is listed on Singapore Stock Exchange (stock code:5CR), where he led Asiatic to be a leading independent power provider in the private sectorenergy market and a reputable provider of fire protection solution in the region. Besidesinfrastructure business, Mr. Tan also led the Group in providing cosmetic and orthopaedicsurgery solutions, with exclusive rights to distribute medical limb lengthening implants usingthe Fitbone technique to hospitals in Singapore.

Mr. Tan was recognized as one of the top outstanding leaders in the Asia CorporateExcellence & Sustainability Awards 2014. He was also appointed as the honorary chairpersonof Cheng Hong Welfare Service Society, a non-profit organisation in Singapore in 2016 to helpthe needy and destitute people in the society through healthcare, lifestyle and financialsupport.

Mr. Tan graduated from Singapore Polytechnic in April 1980 with a diploma inmechanical engineering and he attended the executive education programme in GlobalBusiness Leadership and International Relations at the McDonough School of Business ofGeorgetown University from April to November in 2015.

Dr. Douglas Foo Peow Yong (符標雄), aged 52, was appointed as an independentnon-executive Director. He is primarily responsible for supervising and providing independentjudgment to our Board.

Dr. Foo has more than 10 years of experience in financial management and corporategovernance. Dr. Foo is the founder and chairman of Sakae Holdings Ltd. (“Sakae”), which islisted on the Singapore Stock Exchange (stock code: 5DO). He is responsible for spearheadingand managing Sakae’s overall and global strategic direction, supervising its operations andmajor financial decisions, as well as reviewing financial reports. Dr. Foo was a member of theaudit and risk committee of MOH Holdings Pte Ltd from April 2010 to October 2017 and thechairman of the audit sub-committee of Alexandra Health System Pte. Ltd. from October2012 to September 2017, where he had provided valuable advice and shared best practices toaddress audit observations and findings and strengthen internal financial and operationalprocesses. He has also served as a member of the Corporate Governance Council of theMonetary Authority of Singapore from March 2017 to August 2018. Dr. Foo was aNominated Member of Parliament of Singapore from September 2018 to June 2020. OnMarch 5, 2019, Dr. Foo was appointed as Singapore’s Non-Resident High Commissioner tothe United Republic of Tanzania by the President of the Republic of Singapore HerExcellency Halimah Yacob. Dr. Foo also serves on numerous boards for corporate,governmental and non-profit organizations, including the president of the SingaporeManufacturing Federation, the vice president of the Singapore National EmployersFederation, the vice-chairman of the Singapore Business Federation, a nominatedrepresentative to the ASEAN Business Advisory Council, a member of Malaysia-SingaporeBusiness Council, and the chairman of Workplace Safety and Health Council(Manufacturing) Committee.



– 324 –

In addition, Dr. Foo is the recipient of various illustrious accolades and awards, which

are testament of his outstanding management and entrepreneurial efforts. He was awarded

Rotary-ASME Entrepreneur of the Year in 2002, International Management Action Award in

2007, ASEAN-China Young Entrepreneur Award in 2011, and Asia Corporate Excellence &

Sustainability Awards in 2015—Entrepreneur of the Year. He was also awarded the Public

Service Star Award in 2013 by His Excellency the President of the Republic of Singapore for

his tireless efforts in his philanthropic and voluntary contributions to the society.

Dr. Foo obtained his bachelor’s degree in business administration (finance) from the

Royal Melbourne Institute of Technology in November 1995.

Compulsory Winding-up Order against Griffin Real Estate Investment Holdings Pte. Ltd.

(“Griffin Real Estate”) of which Dr. Foo was one of the directors

Under Rule 13.51(2)(l) of the Listing Rules, a director must disclose his directorship in

any company which has been dissolved or put into liquidation (otherwise than by a member’s

voluntary winding-up when the company, in the case of a Hong Kong company, was solvent)

or bankruptcy or been the subject of an analogous proceeding during the period when he was

one of its directors or within 12 months after his ceasing to act as one of its directors. Dr. Foo

was one of the directors of Griffin Real Estate.

Griffin Real Estate was incorporated in the Republic of Singapore and was principally

engaged in investment property holding. Sakae invested in Griffin Real Estate and as Sakae’s

chairman, Dr. Foo was appointed as Sakae’s representative on the board of Griffin Real

Estate.

Sakae commenced legal proceedings on the grounds of minority oppression in the High

Court of Singapore starting from December, 2013 against various defendants in connection

with the affairs of Griffin Real Estate and another associate, Gryphon Capital Management

Pte. Ltd. The legal proceedings were concluded and Griffin Real Estate was ordered by the

High Court of Singapore to be compulsorily wound up on April 20, 2017 and liquidation

proceeding commenced. Sakae filed a proof of debt of S$3,525,072.89 with the liquidators of

Griffin Real Estate. Arising from the liquidation of Griffin Real Estate, Sakae received an

amount of $11,358,000 from the liquidator during its financial year ended June 30, 2020,

being the partial return of capital relating to Sakae’s investment in Griffin Real Estate.

Revocation of the business license of Sakae Catering (Shanghai) Co. Ltd.

Dr. Foo was also one of the directors of Sakae Catering (Shanghai) Co. Ltd.

(星遠朋餐飲(上海)有限公司), the business license of which was revoked in 2005 due to

non-compliance with de-registration procedure. To the best knowledge of Dr. Foo, there has

been no outstanding liabilities and unsatisfied judgments against the entity.



– 325 –

Professor TAN Huay Cheem (陳淮沁), aged 58, was appointed as an independentnon-executive Director. He is primarily responsible for supervising and providing independentjudgment to our Board.

Professor Tan is the Senior Consultant cardiologist of Department of Cardiology at theNational University Heart Centre, Singapore (NUHCS), the Professor of Medicine at YongLoo Lin School of Medicine, National University of Singapore (NUS). He is a foundingmember of the Asia Interventional Cardiovascular Therapeutics (AICT) global interventionalcardiology meeting and has served as the president of the Asia Pacific Society ofInterventional Cardiology from 2014 to 2019. He has also served as the president of SingaporeCardiac Society from 2003 to 2005 and is currently the Chairman of the Singapore HeartFoundation.

Professor Tan was awarded the long service medal and the Public Administration medalby the Ministry of Health of Singapore in 2016. He also received the Distinguished SeniorClinician Award from the Ministry of Health in 2017. Professor Tan is an active clinicalresearcher who has been regularly invited as a lecturer in many international cardiologymeetings and is a visiting professor to 11 hospitals in China, and University of Mandalay inMyanmar.

Professor Tan has obtained his Master of Medicine in Internal Medicine at the NationalUniversity of Singapore in July 1992 and obtained his membership at Royal College ofPhysician (United Kingdom) in July 1992. He completed his interventional cardiologyfellowship training at Duke University Medical Centre, North Carolina, U.S. in 1995; andreceived the Fellowship of American College of Cardiology (FACC) in 2001, Fellowship ofSociety of Coronary Angiography and Intervention (FSCAI) in 2002, and Fellowship of RoyalCollege of Physician (FRCP) in 2004. He also received vascular ultrasonography training at StVincent’s Hospital, Sydney, Australia in March 2002.

GENERAL

Save as disclosed in this [REDACTED], each of our Directors have confirmed that:

(i) he or she does not and has not held any other directorships in listed companiesduring the three years immediately prior to the Latest Practicable Date;

(ii) there is no other information in respect of such Director to be disclosed pursuant toRule 13.51(2) of the Listing Rules; and

(iii) there is no other material matter relating to our Directors that needs to be broughtto the attention of our Shareholders.

None of the Directors has any interests in a business apart from our Group’s businesswhich competes or is likely to compete, directly or indirectly, with our Group’s business andwould require disclosure under Rule 8.10 of the Listing Rules.



– 326 –

SENIOR MANAGEMENT

The senior management team of our Group and the details of experience of each of oursenior management members are as follows:

Name Age Position

Time ofjoining

our Group

Date ofappointment as

seniormanagement

Responsibilitieswithin our Group

Dr. Wang ChichengJack (王吉成)

60 Executive Director,Chairman, thechief executiveofficer and thechief technologyofficer

April 19,2016

June 21,2017

Responsible for theoverall strategicplanning and businessdirection of ourGroup andmanagement of ourGroup.

Mr. Meng Chun(孟春)

56 President and generalmanager of Chinaregion

August 10,2017

August 10,2017

Responsible for theoperation of theGroup in China

Mr. Zhang Xinbo(張新波)

48 Vice president andthe productiongeneral manager ofthe Weihaioperation

April 19,2016

August 10,2017

Responsible forproduction andquality functions ofthe Group’s factory inWeihai

Dr. Xin Yi (信怡) 42 Vice president December15, 2020

December15, 2020

Responsible for sales,marketing and clinicaltrial functions inHeMo China

Dr. WANG Chicheng Jack (王吉成), aged 60, is the executive Director, Chairman, thechief executive officer and the chief technology officer of the Company. For further details,please see the paragraph headed “Board of Directors—Executive Directors” in this section.

Mr. MENG Chun (孟春), aged 56, has been appointed as the president, and also thegeneral manager of China region on August 10, 2017. He is primarily responsible for theoperation of the Group in China. Mr. Meng concurrently holds various positions at oursubsidiaries, including serving as a general manager of HeMo China since August 2017 and ageneral manger at HeMo Jirui since May 2020.

Mr. Meng has over 20 years of experience in the medical industry. Prior to joining theGroup, he served as a vice president in Asahi Intecc Co., Ltd. from 2016 to 2017, where he wasresponsible for the overall operation of China. From June 2007 to January 2015, he served as avice president in JW Medical and was responsible for the overall and implementation ofmarketing strategy and execution of innovative sales plan.



– 327 –

Mr. Meng received his bachelor’s degree in clinical medicine from Capital MedicalUniversity (首都醫科大學) (formerly known as Beijing Second Medical College (北京第二醫學院)) in August 1987. He also received a master’s degree in business administration from theUniversity of Illinois in May 2003.

Mr. ZHANG Xinbo (張新波), aged 48, has been appointed as the vice president, and alsothe production general manager of the Weihai operation on August 10, 2017. He is primarilyresponsible for production and quality functions of the Group’s factory in Weihai. Mr. Zhanghas held various positions at our subsidiaries as set out below:

Name of subsidiaries Position Period

HeMo China . . . . . Production general manager August 2017—PresentHeMo Jirui . . . . . . Supervisor May 2020—PresentPu Lewei . . . . . . . . General manager August 2017—Present

Mr. Zhang has over 20 years of management and operation experience in the medicalindustry. Prior to joining the Group, Mr. Zhang served various roles including manager anddirector at JW Medical from August 2003 to July 2015.

Mr. Zhang received his bachelor’s degree in fermentation engineering from TianjinUniversity of Commerce in July 1996 and his master’s degree in pharmaceutical engineering inShandong University（山東大學）in June 2011. He also obtained the qualification ofpracticing pharmacist from Shandong Provincial Department of Human Resources and SocialSecurity and certified quality engineer from Shandong Provincial Personnel Department inOctober 2002 and June 2006, respectively.

Dr. XIN Yi (信怡), aged 42, has been appointed as the vice president on December 15,2020. She is primarily responsible for sales, marketing and clinical trial functions in HeMoChina.

Dr. Xin has over 13 years of experience in international medical device companies.

From July 2006 to June 2011, Dr. Xin worked at Johnson and Johnson Medical Shanghai,Ltd. (强生(上海)醫療器材有限公司). She subsequently worked at BSC Int’l Medical Trade(Shanghai) Co., Ltd. (波科國際醫療貿易(上海)有限公司) from September 2012 to May 2013.From June 2013 to September 2017, Dr. Xin worked at Covidien Healthcare InternationalTrading (Shanghai) Co., Ltd. (柯惠醫療器材國際貿易(上海)有限公司) as the marketingmanager. From February 2018 to November 2019, she worked at Braun Medical (Shanghai)International Trade Co., Ltd. (貝朗醫療(上海)國際貿易有限公司) as the neurosurgerymarketing director. From December 2019 to November 2020, she worked at KaVo SybronDental China (卡瓦盛邦(上海)牙科醫療器械有限公司) as marketing director.

Dr. Xin obtained a bachelor’s degree in medicine from China Medical University in July2001. She also obtained a doctoral degree in medicine with focus on pediatrics from FudanUniversity in June 2006.



– 328 –

Each of our senior management members has confirmed that he or she does not and has

not held any other directorships in any public companies the securities of which are listed on

any securities market in Hong Kong or overseas in the last three years immediately prior to the

Latest Practicable Date.

COMPANY SECRETARY

Ms. SIOW Yuet Chew Grace (蕭月秋), aged 54, will be appointed as the company

secretary of the Company on the [REDACTED], and responsible for the corporate secretarial

functions of the Company.

Ms. Siow possesses more than 20 years of experience in the company secretary

profession. Ms. Siow is currently the director of corporate services of Tricor Services Limited,

a member of Tricor Group. Ms. Siow has been an associate member of the Chartered

Governance Institute (CGI) (formerly “The Institute of Chartered Secretaries and

Administrators” (ICSA)) and the Hong Kong Chartered Governance Institute since May 1994

and August 1994, respectively. She was also awarded the Chartered Governance Professional

qualification of (HKCGI) (formerly “The Hong Kong Institute of Chartered Secretaries”

(ICSA)) The Chartered Governance Institute and The Hong Kong Chartered Governance

Institute (HKCGI) (The Hong Kong Institute of Chartered Secretaries" (HKICS)) in

September 2018.

Ms. Siow holds a Master of Business Administration degree from the University of

Stirling in the United Kingdom.

COMMITTEES UNDER THE BOARD OF DIRECTORS

We [have] established the following committees under our Board of Directors: Audit

Committee, Remuneration Committee and Nomination Committee. The committees operate

in accordance with their respective terms of reference established by our Board of Directors.

Audit Committee

We [have] established the Audit Committee with written terms of reference in compliance

with the Code on Corporate Governance Practices, as set out in Appendix 14 to the Listing

Rules. The Audit Committee consists of three independent non-executive Directors, Dr.

Douglas Foo Peow Yong, Mr. Tan Boon Kheng and Professor Tan Huay Cheem. The

chairman of the Audit Committee is Dr. Douglas Foo Peow Yong.



– 329 –

The primary duties of the Audit Committee are to review and supervise the financial

reporting process, internal control and risk management systems of our Group, review the

financial information of our Group and consider issues relating to the external auditors and

their appointment.

Remuneration Committee

We [have] established the Remuneration Committee with written terms of reference in

compliance with the Code on Corporate Governance Practices, as set out in Appendix 14 to

the Listing Rules. The Remuneration Committee consists of three independent non-executive

Directors, Dr. Douglas Foo Peow Yong, Mr. Tan Boon Kheng and Professor Tan Huay

Cheem. The chairman of the Remuneration Committee is Dr. Douglas Foo Peow Yong.

The primary duties of the Remuneration Committee are to evaluate and make

recommendations to the Board on the remuneration policy covering the Directors and senior

management of our Group.

Nomination Committee

We [have] established the Nomination Committee with written terms of reference in

compliance with the Code on Corporate Governance Practices, as set out in Appendix 14 to

the Listing Rules. The Nomination Committee consists of three independent non-executive

Directors, Mr. Tan Boon Kheng, Dr. Douglas Foo Peow Yong and Professor Tan Huay

Cheem. The chairman of the Nomination Committee is Mr. Tan Boon Kheng.

The primary duties of the Nomination Committee are to identify, screen and recommend

to the Board appropriate candidates to serve as directors of our Company, to oversee the

process for evaluating the performance of the Board and to review the structure, size and

composition of the Board, assess the independence of the independent non-executive

Directors.

DIRECTORS AND SENIOR MANAGEMENT’S REMUNERATION

Our Directors and senior management members receive compensation in the form of

salaries, bonuses, contributions to pension schemes, housing and other allowances and

benefits-in-kind from the Company subject to applicable laws, rules and regulations. The

aggregate amount of compensation (including fees, salaries, bonuses, contributions to pension

schemes, housing and other allowances) and benefits in kind paid to the Directors for the two

years ended December 31, 2019 and 2020 and for the five months ended May 31, 2021 were

approximately RMB2.6 million, RMB4.9 million and RMB2.0 million respectively.



– 330 –

The aggregate amount of compensation (including fees, salaries, bonuses, contributionsto pension schemes, housing and other allowances) and benefits-in-kind paid to the fivehighest paid individual employees of our Group for the two years ended December 31, 2019and 2020 and for the five months ended May 31, 2021 were approximately RMB6.3 million,RMB8.5 million and RMB5.1 million respectively.

Under the arrangements currently in force, we estimate the aggregate of the remunerationand benefits in kind payable to the Directors for the financial year ending December 31, 2021to be RMB5 million. The executive Director receive compensation in the form of salaries,bonuses, contributions to pension schemes, housing and other allowances and benefits-in-kindsubject to applicable laws, rules and regulations. Please refer to the section headed “AppendixIV—Statutory and General Information—C. Further Information about our Directors andSubstantial Shareholders—2. Particulars of Service Contracts” in this [REDACTED] forfurther details on the executive Director’s compensation.

During the Track Record Period, (i) no remuneration was paid by our Group to, orreceivable by, our Directors or five highest paid individuals as an inducement to join or uponjoining our Group, (ii) no compensation was paid by our Group to, or receivable by, ourDirectors or the five highest paid individuals for the loss of any office in connection with themanagement of affairs of any subsidiary, and (iii) none of our Directors waived anyemoluments.

Save as disclosed above, the Directors are not entitled to receive any other special benefitsfrom our Company. The compensation of the Directors is determined by the Board which,following [REDACTED], will receive recommendations from the Remuneration Committeewhich will take into account applicable laws, rules and regulations.

COMPLIANCE ADVISER

We have appointed Somerley Capital Limited as our compliance adviser (the“Compliance Adviser”) upon the [REDACTED] in compliance with Rule 3A.19 of the ListingRules. We have entered into a compliance adviser’s agreement with the Compliance Adviser,the material terms of which are as follows:

(i) the term of the appointment will commence on the [REDACTED] and end on thedate on which our Company complies with Rule 13.46 of the Listing Rules in respectof our financial results for the first full financial year commencing after the[REDACTED], or until the agreement is terminated, whichever is the earlier;

(ii) pursuant to Rule 3A.23 of the Listing Rules, the Compliance Adviser will, inter alia,advise our Company with due care and skill on a timely basis when consulted by ourCompany in the following circumstances:

• before the publication by our Company of any regulatory announcement,circular or financial report;



– 331 –

• where a transaction, which might be a notifiable or connected transactionunder Chapters 14 or 14A of the Listing Rules, is contemplated by ourCompany including share issues and share repurchases;

• where our Company proposes to use the [REDACTED] of the [REDACTED] ina manner different from that detailed in this [REDACTED] or where thebusiness activities, developments or results of our Company deviate from anyforecast, estimate, or other information in this [REDACTED]; and

• where the Hong Kong Stock Exchange makes an inquiry of our Companyunder Rule 13.10 of the Listing Rules;

(iii) the Compliance Adviser will, as soon as reasonably practicable, inform us of anyamendment or supplement to the Listing Rules announced by the Hong Kong StockExchange from time to time, and of any amendment or supplement to the applicablelaws and guidelines;

(iv) the Compliance Adviser will act as an additional channel of communicationbetween our Company and the Hong Kong Stock Exchange; and

(v) each of our Company and the Compliance Adviser has the right to terminate theagreement if the other party commits a material breach of the agreement.

COMPLIANCE WITH CORPORATE GOVERNANCE CODE

We aim to achieve high standards of corporate governance which are crucial to ourdevelopment and safeguard the interests of our Shareholders. To accomplish this, we expect tocomply with the Corporate Governance Code set out in Appendix 14 of the Listing Rules afterthe [REDACTED].

Board Diversity Policy

We [have adopted] a diversity policy (the “Board Diversity Policy”) which sets out theobjective and approach to achieve and maintain diversity of our Board in order to enhance theeffectiveness of our Board. Pursuant to the Board Diversity Policy, we seek to achievediversity of our Board through the consideration of a number of factors when selectingcandidates to our Board, including but not limited to professional experience, skills,knowledge, gender, age, cultural and education background, ethnicity and length of service.

Our Directors have a balanced mix of knowledge and skills, including in management,strategic development, business development, sales and marketing, finance, investments andthe R&D of medical devices business. They obtained degrees in various areas such asengineering, medicine, biomedical sciences and management. Our Directors range from 31 to61 years old. After due consideration, our Board believes that based on our existing businessmodel and the background of our Directors, although the Board currently has no female



– 332 –

representation, the composition of the Board satisfies the principles under the BoardDiversity Policy. Nevertheless, in recognizing the particular importance of gender diversity,our Company confirms that the Nomination Committee will, within the following few yearsfrom the [REDACTED], identify and recommend at least one female candidate to our Boardfor consideration on her appointment as a director of our Company.

In addition, we will also continue to ensure that there is gender diversity when recruitingstaff at mid to senior level so that we will have a pipeline of female senior management. OurGroup will continue to emphasize training of female talent and providing long-termdevelopment opportunities for our female staff.

Our Board is responsible for reviewing the diversity of our Board. After the[REDACTED], our Board will monitor the implementation of the Board Diversity Policy andreview the Board Diversity Policy from time to time to ensure its continued effectiveness. Wewill also disclose in our annual corporate governance report a summary of the BoardDiversity Policy together with information regarding the implementation of the BoardDiversity Policy.



– 333 –

OVERVIEW

Immediately before the completion of the [REDACTED], Dr. Wang, our founder,chairman, the chief executive officer and the chief technology officer, through itswholly-owned subsidiary Gold Ridge, has an indirect interest in (i) 100,000,000 Shares, (ii)50,166,666 Series A Preferred Shares, (iii) 17,195,850 Series A+ Preferred Shares and (iv)2,113,905 Series C Preferred Shares. Immediately before the completion of the [REDACTED]and assuming that the Series A Preferred Shares, Series A+ Preferred Shares or Series CPreferred Shares are fully converted into Shares in accordance with the terms and conditionsof the respective agreements in respect of the [REDACTED] Investments (“Full Conversion ofPreferred Shares”), Dr. Wang will have an indirect interest, through Gold Ridge, inapproximately 49.85% of the total issued share capital of our Company. Immediatelyfollowing the completion of the [REDACTED] and assuming (i) the [REDACTED] is notexercised, and (ii) Full Conversion of Preferred Shares, Dr. Wang will have an indirectinterest, through Gold Ridge, in approximately [REDACTED]% of the total issued sharecapital of our Company. Therefore, Dr. Wang and Gold Ridge will continue to be ourControlling Shareholders after [REDACTED]. For more information on Gold Ridge’sshareholding, please see the section “Substantial Shareholders”. For details of theshareholding structure of our Company, please refer to the section headed “History,Development and Corporate Structure” of this [REDACTED].

INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS

Having considered the following factors, our Directors are satisfied that we are capable ofcarrying on our business independently from our Controlling Shareholders and theirrespective close associates after the [REDACTED].

Management Independence

Upon [REDACTED], our Board will consist of seven Directors. For more information,please see the section headed “Directors and Senior Management”. Dr. Wang is also the soledirector of Gold Ridge, which is an investment holding vehicle without substantive businessoperations.

Our Directors consider that our Board and senior management will function effectivelyand independently of our Controlling Shareholders and their close associates for the followingreasons:

(a) our daily management and operations are carried out by a senior management team.Most of our senior management held positions as senior management in our Groupthroughout the Track Record Period and will continue to form our coremanagement team and discharge their duties to our Shareholders as a whole, uponand after [REDACTED]. Each of our senior management members possesses therelevant management and/or industry-related experience and will be able to makedecisions


RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

– 334 –

that are in our best interest. Please refer to the section headed “Directors and SeniorManagement” for details of their management experience;

(b) each of our Directors is fully aware of the fiduciary duties of a Director whichrequire, among other things, that he or she must act for the benefit and in the bestinterests of our Group and must not allow any conflict between his or her duties as aDirector and his or her personal interest;

(c) in the event that any Director to his knowledge is in any way, whether directly orindirectly, interested in a contract or arrangement or proposed contract orarrangement with our Company, the interested Director(s) is required to declare thenature of his/her interest before voting at the relevant meeting(s) in respect of thattransaction;

(d) our Board comprises seven Directors, including three independent non-executiveDirectors, which represent at least one-third of the members of our Board. Ourindependent non-executive Directors have extensive experience in corporatemanagement and governance, and they are being appointed to ensure that our Boardwill only make decisions after due consideration of independent and impartialopinion / and certain matters of our Company must always be referred to theindependent Directors for review;

(e) should there be a conflict of interest or a connected transaction between ourCompany (on one hand) and Gold Ridge (on the other hand), Dr. Wang, as thecommon director, will abstain from voting on, and will not be counted in thequorum for, the relevant board resolution(s) of our Company. There would besufficient quorum for the board meetings of our Company if the Dr. Wang abstainfrom voting due to conflict of interest; and

(f) we have adopted a series of corporate governance measures to manage conflicts ofinterest, if any, between our Group and our Controlling Shareholders that wouldsupport our independent management; see “Corporate Governance Measures” inthis section.

Operational Independence

Our Group has our own operational structure consisting of separate departments, eachwith clear division of responsibilities. We have established internal control procedures tofacilitate the effective operation of our business. We have our own customers with whom wecommunicate and maintain relationship independently. We have sufficient capital, retail andsales networks, marketing capabilities and employees to operate our business independentlyfrom our Controlling Shareholders. We have our own departments specializing in respectiveareas which have been in operation, such as research and development, sales and marketing,information technology, finance, administration, staffing, company secretarial function, andare expected to continue to operate separately and independently from our Controlling



– 335 –

Shareholders and their close associates. Save as disclosed in this [REDACTED], our Groupholds all material licenses and permits necessary to carry on our business and is not dependentupon our Controlling Shareholders or their close associates for any such licenses or permits.

Financial Independence

We have our own finance department responsible for the treasury function. We also haveour own financial management system and internal control system with the ability to operateindependently of our Controlling Shareholders and their respective close associates from afinancial perspective.

As at the Latest Practicable Date, we did not obtain any borrowings, guarantees, orfinancial assistance from our Controlling Shareholders and their respective close associatesand we did not have any outstanding loans granted or guaranteed by any of them to us.

Based on the above, our Directors are of the view that they and our senior managementare capable of carrying on our business independently of, and do not place undue reliance on,our Controlling Shareholders and their respective close associates after [REDACTED].

DISCLOSURE UNDER RULE 8.10 OF THE HONG KONG LISTING RULES

As of the Latest Practicable Date and save as already disclosed, our ControllingShareholders do not have any interest in a business which competes, or is likely to compete,either directly or indirectly, with our business, or would otherwise require disclosure underRule 8.10 of the Listing Rules.

As at the Latest Practicable Date, Dr. Wang is interested in 11.86% of the issued shares ofPrivi Medical. The business of Privi Medical does not and is not likely to compete with ourbusiness due to Privi Medical being a dormant unlisted company which has no businessactivities except for holding the patent licence in respect of our Core Product. Privi Medicalowns the exclusive licence to use relevant part of certain technology in relation to the CoreProduct, Privi hemorrhoid cooling balloon, of our Company, including the licensed worldwidepatent application, to use, make, manufacture, distribute, market, import, export and sell theCore Product. Further, Privi Medical has granted a sole sub-licence to our Group toexclusively use the patent in respect of our Core Product to distribute, market and sell itwithin mainland China region. Privi Medical has not granted and will not grant any sublicenseto third parties in relation to such patent rights within mainland China region. For furtherdetails in relation to the patent licensing and sub-licensing arrangements in relation to ourCore Product, please refer to the section headed “Business—Research andDevelopment—In-licensing Arrangement—Licensing and Sub-licensing Arrangements forOur Privi Hemorrhoid Cooling Balloon” in this [REDACTED].

Further, HeMo Singapore, a subsidiary of our Company, has entered into thelegally-binding Term Sheet in relation to the Privi Medical Acquisition prior to [REDACTED]as mentioned in the sub-section headed “History, Development and Corporate Structure—Acquisition of HeMo Singapore and Privi Medical”. Upon the completion of the PriviMedical Acquisition prior to [REDACTED], Privi Medical will be a subsidiary of ourCompany.



– 336 –

CORPORATE GOVERNANCE MEASURES

Our Directors recognize the importance of good corporate governance in protecting ourShareholders’ interests. We have adopted the following measures to ensure good corporategovernance standards and to avoid potential conflicts of interest between our Group and ourControlling Shareholders:

(a) where our Directors reasonably request the advice of independent professionals,such as financial advisors, the appointment of such independent professionals willbe made at our Company’s expense;

(b) we have appointed Somerley Capital Limited as our compliance advisor to provideadvice and guidance to us in respect of compliance with the applicable laws, as wellas the Hong Kong Listing Rules, including various requirements relating tocorporate governance;

(c) our Company has established internal control mechanisms to identify connectedtransactions. Upon and after the [REDACTED], if our Company enters intoconnected transactions with a Controlling Shareholder or any of his/its associates,our Company will comply with the applicable Listing Rules;

(d) where a Board or Shareholders’ meeting is to be held for considering proposedtransactions in which any of our Directors or Controlling Shareholders or any oftheir respective associates has a material interest, the relevant Director orControlling Shareholders will not vote on the resolutions and shall not be countedin the quorum in the voting;

(e) the independent non-executive Directors will review, on an annual basis, whetherthere is any conflict of interests between our Group and the ControllingShareholders (the “Annual Review”) and provide impartial and professional adviceto protect the interests of our minority Shareholders;

(f) our Controlling Shareholders will undertake to provide all information necessary,including all relevant financial, operational and market information and any othernecessary information as required by the independent non-executive Directors forthe Annual Review; and

(g) our Company will disclose decisions on matters reviewed by the independentnon-executive Directors either in its annual reports or by way of announcements.

Based on the above, our Directors are satisfied that we have sufficient corporategovernance measures in place to manage conflicts of interest that may arise between ourGroup and our Controlling Shareholders, and to protect our minority Shareholders’ interestsafter the [REDACTED].



– 337 –

AUTHORIZED AND ISSUED SHARE CAPITAL

Authorized Share Capital

The authorized share capital of our Company immediately following the completion ofthe [REDACTED] is as follows:

Number of Shares Description of SharesAggregate nominal

value of Shares

(US$)

804,126,194 Shares of US$0.001 each 804,126.194

93,500,000 Series A Preferred Shares of US$0.001 each 93,500.000

17,195,850 Series A+ Preferred Shares of US$0.001 each 17,195.850

49,786,353 Series B Preferred Shares of US$0.001 each 49,786.353

35,391,603 Series C Preferred Shares of US$0.001 each 35,391.603

1,000,000,000 Shares in total 1,000,000.000

Issued Share Capital

The issued share capital of our Company as of the date of this [REDACTED] and

immediately following the completion of the [REDACTED] is as follows:

Number of Shares Description of Shares

Aggregatenominal value

of Shares % of the issued share capital

(US$)

[340,000,244] Shares in issue as at the date ofthis [REDACTED] (assumingall Preferred Shares areconverted into Shares)

[340,000.244] [[REDACTED]%]

[REDACTED] Shares to be issued under the[REDACTED]

[REDACTED] [[REDACTED]%]

[REDACTED] Shares in total [REDACTED] 100%


SHARE CAPITAL

– 338 –

ASSUMPTIONS

The above table assumes that the [REDACTED] becomes unconditional and the Shares

are issued pursuant to the [REDACTED]. The above does not take into account any Shares

which may be issued and/or sold pursuant to the exercise of the [REDACTED] or any Shares

which may be issued or repurchased by our Company pursuant to the general mandates

granted to our Directors to issue or repurchase Shares as described below.

RANKING

The [REDACTED] are ordinary shares in our share capital and rank equally with all

Shares currently in issue or to be issued and, in particular, will rank in full for all dividends or

other distributions declared, made or paid on the Shares in respect of a record date which falls

after the date of this [REDACTED].

GENERAL MANDATE TO ISSUE SHARES

Subject to the conditions stated in the section headed “[REDACTED]” in this

[REDACTED], our Directors have been granted a general unconditional mandate to allot,

issue and deal with Shares or securities convertible into Shares or options, warrants or similar

rights to subscribe for Shares or such convertible securities and to make or grant offers,

agreements or options which would or might require the exercise of such powers, provided

that the aggregate nominal value of Shares allotted or agreed to be allotted by the Directors

other than pursuant to:

(a) a rights issue;

(b) any scrip dividend scheme or similar arrangement providing for the allotment ofShares in lieu of the whole or part of a dividend on Shares in accordance with ourArticles;

(c) a specific authority granted by the Shareholders in general meeting of ourCompany,

shall not exceed the aggregate of:

(i) 20% of the total nominal value of our share capital in issue immediately followingthe completion of the [REDACTED] (excluding any Shares to be issued pursuant tothe exercise of the [REDACTED]); and

(ii) the total nominal value of our share capital repurchased by us (if any) under thegeneral mandate to repurchase Shares referred to in the section headed “GeneralMandate to Repurchase Shares” below.


SHARE CAPITAL

– 339 –

This general mandate to issue Shares will expire:

(1) at the conclusion of the next annual general meeting of our Company unlessrenewed by an ordinary resolution of the Shareholders in general meeting eitherunconditionally or subject to condition; or

(2) at the end of the period within which we are required by any applicable laws of theCayman Islands or our Articles to hold the next annual general meeting of ourCompany; or

(3) when varied or revoked by an ordinary resolution of our Shareholders in generalmeeting of our Company,

whichever is the earliest.

For further details of this general mandate, please see the section headed “Statutory andGeneral Information—A. Further Information About the Group—4. Resolutions in Writingof Our Shareholders” in Appendix IV to this [REDACTED].

GENERAL MANDATE TO REPURCHASE SHARES

Subject to the conditions stated in the section headed “[REDACTED]”, our Directorshave been granted a general unconditional mandate to exercise all of our powers to repurchaseShares with a total nominal value of not more than 10% of the total nominal value of ourshare capital in issue immediately following the completion of the [REDACTED].

This general mandate relates only to repurchases made on the Stock Exchange, or on anyother stock exchange on which the Shares are listed (and which is recognized by the SFC andthe Stock Exchange for this purpose), and made in accordance with the Listing Rules. Asummary of the relevant Listing Rules is set out in the section headed “Statutory and GeneralInformation—A. Further Information about our Group—6. Repurchase of our OwnSecurities” in Appendix IV to this [REDACTED].

This general mandate to repurchase Shares will expire:

(i) at the conclusion of the next annual general meeting of our Company unlessrenewed by an ordinary resolution of the Shareholders in general meeting eitherunconditionally or subject to condition; or

(ii) at the end of the period within which we are required by any applicable laws of theCayman Islands or our Articles to hold the next annual general meeting of ourCompany; or


SHARE CAPITAL

– 340 –

(iii) when varied or revoked by an ordinary resolution of our Shareholders in generalmeeting of our Company,

whichever is the earliest.

For further details of this general mandate, please see the section headed “Statutory andGeneral Information—A. Further Information about our Group—6. Repurchase of our OwnSecurities” in Appendix IV to this [REDACTED].


SHARE CAPITAL

– 341 –

SUBSTANTIAL SHAREHOLDERS

So far as our Directors are aware, immediately following the completion of the[REDACTED], and assuming that the [REDACTED] is not exercised, the following personswill have an interest or a short position in the Shares which will be required to be disclosed toour Company and the Stock Exchange pursuant to the provisions of Division 2 and 3 of PartXV of the SFO or will be, directly or indirectly, interested in 10% or more of the nominalvalue of any class of share capital carrying rights to vote in all circumstances at generalmeetings of our Company:

Name of Shareholder Nature of interest

Shares held immediatelyfollowing the completion of

the [REDACTED](1)

Shares held immediatelyfollowing completion of

the [REDACTED](2)

Number Percentage Number Percentage

Gold Ridge Beneficial owner 169,476,421 [REDACTED]% 169,476,421 [REDACTED]%

Dr. Wang ChichengJack(3)

Interest incontrolledcorporation 169,476,421 [REDACTED]% 169,476,421 [REDACTED]%

Easeplus Inc.(4) BeneficialOwner 40,000,000 [REDACTED]% 40,000,000 [REDACTED]%

3H Health Investment Fund I, L.P.(4) Interest incontrolledcorporation 40,000,000 [REDACTED]% 40,000,000 [REDACTED]%

3H Health Investment GP I Ltd(4)(5) Interest incontrolledcorporation 44,978,635 [REDACTED]% 44,978,635 [REDACTED]%

Dragon Warrior InvestmentsLimited(4)(5)(6)


Dr. Wang Shunlong(4) (5)(6) Interest incontrolledcorporation 45,546,897 [REDACTED]% 45,546,897 [REDACTED]%

AUT-XV Holdings Limited BeneficialOwner 25,207,600 [REDACTED]% 25,207,600 [REDACTED]%

Hillhouse Investment Fund V, Ltd. Interest incontrolledcorporation 25,207,600 [REDACTED]% 25,207,600 [REDACTED]%

Hillhouse Investment Management,Ltd.(7)


ICI BeneficialOwner 27,200,019 [REDACTED]% 27,200,019 [REDACTED]%



– 342 –

Note:(1) Assuming the [REDACTED] is not exercised.(2) Assuming the [REDACTED] is fully exercised.(3) Gold Ridge is wholly-owned by Dr. Wang.(4) Easeplus Inc. is wholly-owned by 3H Health Investment Fund I, L.P., the general partner of which is 3H

Health Investment GP I Ltd. 3H Health Investment GP I Ltd is wholly-owned by Dr. Wang Shunlongthrough Dragon Warrior Investments Limited. Therefore, under the SFO, Easeplus Inc. is interested in11.77% of our Shares, and Dr. Wang Shunlong, Dragon Warrior Investments Limited, 3H HealthInvestment GP I Ltd. and 3H Health Investment Fund I, L.P. are deemed to be interested in 11.77% ofour Shares through Easeplus Inc. as at the Latest Practicable Date.

(5) 3H Health Investment GP I Ltd. is the general partner of PHC MedTech Investment, L.P. 3H HealthInvestment GP I Ltd. is wholly-owned by Dr. Wang Shunlong through Dragon Warrior InvestmentsLimited. Therefore, under the SFO, PHC MedTech Investment, L.P. is interested in 1.46% of our Shares,and Dr. Wang Shunlong, Dragon Warrior Investments Limited. 3H Health Investment GP I Ltd. aredeemed to be interested in 1.46% of our Shares through PHC MedTech Investment, L.P. as at the LatestPracticable Date.

(6) Harmony Achieve Investments Limited is wholly-owned by 3H Health Investment Fund II, L.P., and itsgeneral partner is 3H Health Investment GP II Ltd. 3H Health Investment GP II Ltd is wholly-ownedby Dr. Wang Shunlong through Dragon Warrior Investments Limited. Therefore, under the SFO, 3HHealth Investment Fund II, L.P. and 3H Health Investment GP II Ltd are deemed to be interested in0.17% of our Shares, and Dr. Wang Shunlong and Dragon Warrior Investments Limited are deemed tobe interested in 0.17% of our Shares through Harmony Achieve Investments Limited as at the LatestPracticable Date.

(7) To the best of our Directors' knowledge, Hillhouse Investment Fund V, Ltd. owns AUT-XV HoldingsLimited. Hillhouse Investment Management, Ltd. is the sole management company of HillhouseInvestment Fund V, Ltd. Therefore, under the SFO, Hillhouse Investment Fund V, Ltd. and HillhouseInvestment Management, Ltd. are deemed to be interested in our Shares as at the Latest PracticableDate.

Save as disclosed herein, our Directors are not aware of any persons who will,immediately following completion of the [REDACTED] (assuming the [REDACTED] is notexercised), have interests or short positions in Shares or underlying Shares which would fall tobe disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO or, will be,directly or indirectly, interested in 10% or more of the issued voting shares of our Company.



– 343 –

FUTURE PLANS

See “Business—Our Strategies” for a detailed description of our future plans andstrategies.

[REDACTED]

The [REDACTED] from the [REDACTED] which we will receive, after deducting the[REDACTED], the discretionary incentive fee (assuming the full payment of the discretionaryincentive fee) and the other estimated expenses in relation to the [REDACTED] (assuming the[REDACTED] is not exercised), will be:

• approximately [REDACTED] (equivalent to [REDACTED]), assuming an[REDACTED] of [REDACTED] (being the minimum [REDACTED];

• approximately [REDACTED] (equivalent to [REDACTED]), assuming an[REDACTED] of [REDACTED] (being the mid-point of the [REDACTED]); or

• approximately [REDACTED] (equivalent to [REDACTED]), assuming an[REDACTED] of [REDACTED] (being the maximum [REDACTED]).

The [REDACTED] from the [REDACTED] that we will receive, after deducting the[REDACTED], the discretionary incentive fee (assuming the full payment of the discretionaryincentive fee) and the other estimated expenses paid and payable by us in connection with the[REDACTED] (assuming that the [REDACTED] is fully exercised), will be approximatelyHK$[REDACTED] (equivalent to [REDACTED]), assuming an [REDACTED] ofHK$[REDACTED] (being the mid-point of the [REDACTED]).

We intend to use the [REDACTED] of [REDACTED] (equivalent to [REDACTED]),assuming an [REDACTED] of [REDACTED] (being the mid-point of the [REDACTED]), fromthe [REDACTED] (assuming the [REDACTED] is not exercised) for the following purposes,subject to changes in light of our evolving business needs and changing market conditions:


FUTURE PLANS AND [REDACTED]

– 344 –

Allocation of the estimated[REDACTED] Proposed main purposes

Approximately[REDACTED], orapproximately[REDACTED](equivalent to[REDACTED])

For the following purposes related to our Core Product,Privi hemorrhoid cooling balloon:

• Approximately [[REDACTED]%], or [REDACTED],for further R&D in relation to the clinical trialrequired for this product’s indication expansion topregnant women and women during the lactationperiod, for which we are preparing the clinical trialprotocol;

• Approximately [[REDACTED]%], or [REDACTED],for R&D to optimize our Privi hemorrhoid coolingballoon’s manufacturing process by developingautomated production lines for this product, includingconducting relevant research in intelligentmanufacturing and carrying out customization,testing and improvements of the manufacturingprocess, thereby increasing our production capacityand manufacturing efficiency and reducing the defectrate;

• Approximately [[REDACTED]%], or [REDACTED], toexpand our production capacity for this productincluding: (i) procuring new manufacturing equipmentcompatible with our future automated productionlines, (ii) constructing two new production facilities,including manufacturing plants and warehouses, inChina and Singapore, and (iii) expanding ourmanufacturing and quality control teams; see“Business—Our Production Facilities andProcesses—Production Facilities” for moreinformation on our expansion plans; and



– 345 –


• Approximately [[REDACTED]%], or [REDACTED], toestablish marketing and sales channels. We believe ourPrivi hemorrhoid cooling balloon will be a routinemedical solution option for the patients. To moreeffectively capture the massive hemorrhoids marketwhere the patients need regular treatment, we intendto (i) conduct academic promotion and reach patientsthrough physicians, (ii) market this product throughnew media advertising and by cooperating with largeonline marketplace platforms, and (iii) build our OTCnetwork in cooperation with reputable pharmaceuticalcompanies and pharmacies;

Approximately[REDACTED]%, orapproximately[REDACTED](equivalent to[REDACTED])

For the following purposes related to our major productsHMC1-NAS and Afentta® aspiration catheters:

A. For our major product HMC1-NAS aspirationcatheter:

• Approximately [[REDACTED]%], or[REDACTED], for (i) the NMPA registration forour HMC1-NAS aspiration catheter, and (ii)post-marketing clinical studies for ourHMC1-NAS aspiration catheter to collectreal-world clinical data, to further support theclinical application of this product; and



– 346 –


• Approximately [[REDACTED]%], or[REDACTED], for the sales and marketingactivities of our HMC1-NAS aspiration catheterand to promote the ADAPT therapy in China,including (i) expanding our sales and marketingteam to cover hospitals in lower-tier cities, (ii)collaborating with KOLs to promote the clinicalbenefits of ADAPT and advance its COR inChina’s stroke treatment guidelines, (iii) activelyparticipating in academic activities such asseminars and symposia to promote our productsand brand recognition, (iv) providing on-siteADAPT treatment training to physicians, and (v)conducting online academic activities, includingcase studies, to introduce our products and theADAPT therapy through well-known digitalmedia in the industry;

B. For our major product, Afentta® aspiration catheter:

• Approximately [[REDACTED]%], or[REDACTED], for post-marketing clinical studiesfor our Afentta® aspiration catheter to collectreal-world clinical data, to further support theclinical application of this product;

• Approximately [[REDACTED]]%, or[REDACTED], for the sales and marketingactivities of our Afentta® aspiration catheter andto promote the ADAPT therapy in Chinathrough measures similar to those for ourHMC1-NAS aspiration catheter discussed above;



– 347 –


C. For both our HMC1-NAS and Afentta® aspirationcatheters:

• Approximately [[REDACTED]%], or[REDACTED], to expand the productioncapacity of our aspiration catheters, includingconstructing a new cleanroom workshop andprocuring additional catheter productsproduction lines (which can also be used toproduce access catheters and micro-catheters), aswell as hiring and training additionalmanufacturing and quality control staff, toimprove our production efficiency and achieveeconomies of scale


For the following purposes related to our stent retriever:

• Approximately [[REDACTED]%], or [REDACTED],for the ongoing clinical trial of our stent retriever. Formore details on the clinical trial, please see“Business—Our Products and ProductCandidates—Stent Retriever—Ongoing Clinical Trial”for more information;

• Approximately [[REDACTED]%], or [REDACTED], toprocure additional manufacturing equipment for ourstent retriever and hire and train additionalmanufacturing and quality control staff, to improveour production efficiency and achieve economies ofscale;

• Approximately [[REDACTED]%], or [REDACTED],for the academic promotion related to our stentretriever in China, including (i) providing on-site themechanical thrombectomy training to physicians and(ii) participating in academic activities such asseminars and symposiums in relation to mechanicalthrombectomy, to promote our products and increaseour brand recognition; and



– 348 –


• Approximately [[REDACTED]%], or [REDACTED],for the CE Marking application for our stent retrieverand its commercialization in the Asia-Pacific marketsoutside China;

Approximately[[REDACTED]]%, orapproximately[REDACTED](equivalent to[REDACTED])

For the following purposes related to our other approvedproducts, including our TracLine® access catheter,FocuStar® neuro balloon catheter—Rx, Mountix®

micro-catheter and aspiration accessory:

• Approximately [[REDACTED]%], or [REDACTED], toprocure additional manufacturing equipment forballoon catheters and hiring and train additionalmanufacturing and quality control staff, to improveour production efficiency and achieve economies ofscale; and

• Approximately [[REDACTED]%], or [REDACTED],for the academic promotion of our TracLine® accesscatheter, FocuStar® neuro balloon catheter—Rx,Mountix® micro-catheter and aspiration accessory,including providing on-site training to physicians inrelation to neuro-interventional treatment and otherinitiatives similar as those for aspiration catheters asdiscussed above;

Approximately[[REDACTED]]%, orapproximately[REDACTED](equivalent to[REDACTED])

For the further R&D (including pre-clinical studies andclinical trials) and commercialization of our other productcandidates, mainly including neuro drug-coated balloon,neuro drug eluting stent, balloon-expandable stent,HMSR-NAS aspiration catheter, HMSR-NAC accesscatheter, flow diverter and peripheral drug-coated balloon:

• Approximately [[REDACTED]%], or [REDACTED],for the pre-clinical study, clinical trial and registrationof our neuro drug-coated balloon;

• Approximately [[REDACTED]%], or [REDACTED],for the type testing, pre-clinical, clinical trial andregistration of our neuro drug eluting stent;



– 349 –


• Approximately [[REDACTED]%], or [REDACTED],for the type testing, pre-clinical study, clinical trialand registration of our balloon-expandable stent;

• Approximately [[REDACTED]%], or [REDACTED],for the CE Marking application for our HMSR-NASaspiration catheter and its commercialization in theAsia-Pacific markets outside China;

• Approximately [[REDACTED]%], or [REDACTED],for the CE Marking application for our HMSR-NACaccess catheter and its commercialization in theAsia-Pacific markets outside China;

• Approximately [[REDACTED]%], or [REDACTED],for the design, type testing, pre-clinical study, clinicaltrial and registration of our flow diverter; and

• Approximately [[REDACTED]%], or [REDACTED],for the design, type testing, pre-clinical, clinical trialand registration of our peripheral drug-coatedballoon;


For potential strategic investments, acquisitions orin-licensing arrangements to further enhance our productportfolio and complement our R&D capabilities. As of theLatest Practicable Date, we had not identified any specificstrategic investment, acquisition or in-licensing target. Ourfocus of strategic investment, acquisition or in-licensingopportunities may vary depending on customer demand,market conditions and industry trends. We will considerthese opportunities based on potential targets’ size,product portfolio, market size, R&D capabilities,ownership structure, history and potential synergy with us.Following the strategic investment, acquisition orin-licensing, we would take measures to achieve the desiredbusiness growth and synergies between the targets and ourexisting platform; and



– 350 –



For working capital and general corporate purposes.

The above allocation of the [REDACTED] will be adjusted on a pro rata basis in the

event that the [REDACTED] is fixed at a higher or lower level compared to the mid-point of

the estimated [REDACTED]. To the event that our [REDACTED] are either more or less than

expected, we will increase or decrease the allocation of the [REDACTED] to the above

purposes on a pro rata basis.

To the extent that the [REDACTED] are not immediately applied to the above purposes,

we intend to deposit the [REDACTED] in interest-bearing accounts with licensed commercial

banks or financial institutions.

The additional [REDACTED] will be allotted to the above purposes on a pro rata basis in

the event that the [REDACTED] is exercised.



– 351 –

[REDACTED]


[REDACTED]

– 352 –

[REDACTED]


[REDACTED]

– 353 –

[REDACTED]


[REDACTED]

– 354 –

[REDACTED]


[REDACTED]

– 355 –

[REDACTED]


[REDACTED]

– 356 –

[REDACTED]


[REDACTED]

– 357 –

[REDACTED]


[REDACTED]

– 358 –

[REDACTED]


[REDACTED]

– 359 –

[REDACTED]


[REDACTED]

– 360 –

[REDACTED]


[REDACTED]

– 361 –

[REDACTED]


[REDACTED]

– 362 –

[REDACTED]


[REDACTED]

– 363 –

[REDACTED]


[REDACTED]

– 364 –

[REDACTED]


[REDACTED]

– 365 –

[REDACTED]


[REDACTED]

– 366 –

[REDACTED]


[REDACTED]

– 367 –

[REDACTED]


[REDACTED]

– 368 –

[REDACTED]


[REDACTED]

– 369 –

[REDACTED]


[REDACTED]

– 370 –

[REDACTED]


[REDACTED]

– 371 –

[REDACTED]


[REDACTED]

– 372 –

[REDACTED]


[REDACTED]

– 373 –

[REDACTED]


[REDACTED]

– 374 –

[REDACTED]


[REDACTED]

– 375 –

[REDACTED]


[REDACTED]

– 376 –

[REDACTED]


[REDACTED]

– 377 –

[REDACTED]


[REDACTED]

– 378 –

[REDACTED]


[REDACTED]

– 379 –

[REDACTED]


[REDACTED]

– 380 –

[REDACTED]


[REDACTED]

– 381 –

[REDACTED]


[REDACTED]

– 382 –

[REDACTED]


[REDACTED]

– 383 –

[REDACTED]


[REDACTED]

– 384 –

[REDACTED]


[REDACTED]

– 385 –

[REDACTED]


[REDACTED]

– 386 –

[REDACTED]


[REDACTED]

– 387 –

[REDACTED]


[REDACTED]

– 388 –

[REDACTED]


[REDACTED]

– 389 –

[REDACTED]


[REDACTED]

– 390 –

[REDACTED]


[REDACTED]

– 391 –

[REDACTED]


[REDACTED]

– 392 –

[REDACTED]


[REDACTED]

– 393 –

[REDACTED]


[REDACTED]

– 394 –

[REDACTED]


[REDACTED]

– 395 –

[REDACTED]


[REDACTED]

– 396 –

[REDACTED]


[REDACTED]

– 397 –

[REDACTED]


[REDACTED]

– 398 –

[REDACTED]


[REDACTED]

– 399 –

The following is the text of a report set out on pages I-1 to I-[•], received from the

Company’s reporting accountants, KPMG, Certified Public Accountants, Hong Kong, for the

purpose of incorporation in this [REDACTED].

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THEDIRECTORS OF HEMO BIOENGINEERING LIMITED AND MORGAN STANLEY ASIALIMITED, CHINA INTERNATIONAL CAPITAL CORPORATION HONG KONGSECURITIES LIMITED AND CREDIT SUISSE (HONG KONG) LIMITED

Introduction

We report on the historical financial information of HeMo Bioengineering Limited (the“Company”) and its subsidiaries (together, the “Group”) set out on pages I-4 to I-[•], whichcomprises the consolidated statements of financial position of the Group and the statementsof financial position of the Company as at December 31, 2019 and 2020 and May 31, 2021,and the consolidated statements of profit or loss, the consolidated statements of profit or lossand other comprehensive income, the consolidated statements of changes in equity and theconsolidated cash flow statements, for each of the years ended December 31, 2019 and 2020and the five months ended May 31, 2021 (the “Track Record Period”), and a summary ofsignificant accounting policies and other explanatory information (together, the “HistoricalFinancial Information”). The Historical Financial Information set out on pages I-4 to I-[•]forms an integral part of this report, which has been prepared for inclusion in the[REDACTED] of the Company dated [•] (the “[REDACTED]”) in connection with the[REDACTED] of shares of the Company on the [REDACTED].

Directors’ responsibility for Historical Financial Information

The directors of the Company are responsible for the preparation of Historical FinancialInformation that gives a true and fair view in accordance with the basis of preparation andpresentation set out in Note 1 to the Historical Financial Information, and for such internalcontrol as the directors of the Company determine is necessary to enable the preparation ofthe Historical Financial Information that is free from material misstatement, whether due tofraud or error.

Reporting accountants’ responsibility

Our responsibility is to express an opinion on the Historical Financial Information andto report our opinion to you. We conducted our work in accordance with Hong KongStandard on Investment Circular Reporting Engagements 200 “Accountants’ Reports onHistorical Financial Information in Investment Circulars” issued by the Hong Kong Institute


APPENDIX I — ACCOUNTANTS’ REPORT OF THE GROUP

– I-1 –

of Certified Public Accountants (the “HKICPA”). This standard requires that we comply withethical standards and plan and perform our work to obtain reasonable assurance aboutwhether the Historical Financial Information is free from material misstatement.

Our work involved performing procedures to obtain evidence about the amounts anddisclosures in the Historical Financial Information. The procedures selected depend on thereporting accountants’ judgement, including the assessment of risks of material misstatementof the Historical Financial Information, whether due to fraud or error. In making those riskassessments, the reporting accountants consider internal control relevant to the entity’spreparation of Historical Financial Information that gives a true and fair view in accordancewith the basis of preparation and presentation set out in Note 1 to the Historical FinancialInformation in order to design procedures that are appropriate in the circumstances, but notfor the purpose of expressing an opinion on the effectiveness of the entity’s internal control.Our work also included evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by the directors, as well as evaluating the overallpresentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide abasis for our opinion.

Opinion

In our opinion, the Historical Financial Information gives, for the purpose of theaccountants’ report, a true and fair view of the Group’s financial position and the Company’sfinancial position as at December 31, 2019 and 2020 and May 31, 2021 and of the Group’sfinancial performance and cash flows for the Track Record Period in accordance with thebasis of preparation and presentation set out in Note 1 to the Historical FinancialInformation.

Review of stub period corresponding financial information

We have reviewed the stub period corresponding financial information of the Groupwhich comprises the consolidated statement of profit or loss, the consolidated statement ofprofit or loss and other comprehensive income, the consolidated statement of changes inequity and the consolidated cash flow statement for the five months ended May 31, 2020 andother explanatory information (the “Stub Period Corresponding Financial Information”). Thedirectors of the Company are responsible for the preparation and presentation of the StubPeriod Corresponding Financial Information in accordance with the basis of preparation andpresentation set out in Note 1 to the Historical Financial Information. Our responsibility is toexpress a conclusion on the Stub Period Corresponding Financial Information based on ourreview. We conducted our review in accordance with Hong Kong Standard on ReviewEngagements 2410 “Review of Interim Financial Information Performed by the IndependentAuditor of the Entity” issued by the HKICPA. A review consists of making enquiries,primarily of persons responsible for financial and accounting matters, and applying analyticaland other review procedures. A review is substantially less in scope than an audit conducted inaccordance with Hong Kong Standards on Auditing and consequently does not enable us to



– I-2 –

obtain assurance that we would become aware of all significant matters that might be

identified in an audit. Accordingly, we do not express an audit opinion. Based on our review,

nothing has come to our attention that causes us to believe that the Stub Period

Corresponding Financial Information, for the purpose of the accountants’ report, is not

prepared, in all material respects, in accordance with the basis of preparation and

presentation set out in Note 1 to the Historical Financial Information.

Report on matters under the Rules Governing the Listing of Securities on The Stock Exchange of

Hong Kong Limited and the Companies (Winding Up and Miscellaneous Provisions) Ordinance

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying

Financial Statements as defined on page I-4 have been made.

Dividends

We refer to note 24(b) to the Historical Financial Information which states that no

dividends have been paid by the Company in respect of the Track Record Period.

No statutory financial statements for the Company

No statutory financial statements have been prepared for the Company since its

incorporation.

KPMG

Certified Public Accountants

8th Floor, Prince’s Building

10 Chater Road

Central, Hong Kong

[•] 2021



– I-3 –

HISTORICAL FINANCIAL INFORMATION

Set out below is the Historical Financial Information which forms an integral part of this

accountants’ report.

The consolidated financial statements of the Group for the Track Record Period, on

which the Historical Financial Information is based, were audited by KPMG Huazhen LLP

(畢馬威華振會計師事務所(特殊普通合夥)) in accordance with Hong Kong Standards on

Auditing issued by the HKICPA (the “Underlying Financial Statements”).

The Historical Financial Information is presented in Renminbi (“RMB”) and all values

are rounded to the nearest thousand yuan (RMB’000) except when otherwise indicated.



– I-4 –

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

(Expressed in RMB)


Note 2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

(Unaudited)

Revenue . . . . . . . . . . . . . . . . 4 – 2,839 235 581Cost of sales . . . . . . . . . . . . – (690) (67) (270)

Gross profit . . . . . . . . . . . . . – 2,149 168 311Other income, net . . . . . . . . 5 474 16,743 (895) 4,442Selling and distribution

expenses . . . . . . . . . . . . . . – (3,830) (518) (6,429)General and administrative

expenses . . . . . . . . . . . . . . (9,157) (16,701) (3,914) (16,019)Research and development

expenses . . . . . . . . . . . . . . (59,698) (18,065) (7,598) (8,227)

Loss from operations . . . . . . (68,381) (19,704) (12,757) (25,922)Finance costs . . . . . . . . . . . . 6(a) (7,546) (19,121) (4,275) (332)Change in fair value of

financial liabilities . . . . . . 6(b) (44,959) (576,611) (52,544) (217,256)

Loss before taxation . . . . . . . (120,886) (615,436) (69,576) (243,510)Income tax . . . . . . . . . . . . . . 7 – – – –

Loss for the year/period . . . . (120,886) (615,436) (69,576) (243,510)


Company . . . . . . . . . . . . . (107,999) (613,765) (67,822) (242,332)Non-controlling interests

(“NCI”) . . . . . . . . . . . . . . . (12,887) (1,671) (1,754) (1,178)

Loss for the year/period . . . . (120,886) (615,436) (69,576) (243,510)

Loss per share 10Basic and diluted (RMB) . . 1.21 5.37 0.69 1.91



– I-5 –

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER

COMPREHENSIVE INCOME

(Expressed in RMB)


Note 2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

(Unaudited)

Loss for the year/period . . . . (120,886) (615,436) (69,576) (243,510)Other comprehensive income

for the year/period, net oftax

Items that may bereclassified subsequentlyto profit or loss:

Exchange differences ontranslation of financialstatements of foreignoperations . . . . . . . . . . . . (1,684) 10,903 (3,555) 19,703

Total comprehensive incomefor the year/period . . . . . . (122,570) (604,533) (73,131) (223,807)


Company . . . . . . . . . . . . . (109,683) (602,862) (71,377) (222,629)Non-controlling interests . . (12,887) (1,671) (1,754) (1,178)

Total comprehensive incomefor the year/period . . . . . . (122,570) (604,533) (73,131) (223,807)



– I-6 –

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in RMB)

As at December 31,As at

May 31,

Note 2019 2020 2021

RMB’000 RMB’000 RMB’000

Non-current assetsProperty, plant and equipment . . . . . . . . . 11 9,207 9,202 11,265Intangible assets . . . . . . . . . . . . . . . . . . . . 357 331 279Other non-current assets . . . . . . . . . . . . . 12 4,044 1,677 2,510

13,608 11,210 14,054

Current assetsInventories . . . . . . . . . . . . . . . . . . . . . . . . 13 7,175 12,561 16,719Trade and other receivables . . . . . . . . . . . 14 2,607 5,672 11,438Balance due from a related party . . . . . . . 15 – 19,539 17,071Financial assets measured at fair value

through profit or loss (“FVPL”) . . . . . 16 20,000 43,000 20,000Cash and cash equivalents . . . . . . . . . . . . 17 12,767 251,601 558,861

42,549 332,373 624,089

Current liabilitiesTrade and other payables . . . . . . . . . . . . . 18 14,661 16,032 25,788Lease liabilities . . . . . . . . . . . . . . . . . . . . . 19 384 472 795Loans from related parties . . . . . . . . . . . . 20 85,402 – –Preferred shares issued to investors . . . . . 21 258,758 1,215,325 1,721,792Derivative financial liabilities . . . . . . . . . 22 – 33,368 –

359,205 1,265,197 1,748,375

Net current liabilities . . . . . . . . . . . . . . . . . (316,656) (932,824) (1,124,286)

Total assets less current liabilities . . . . . . (303,048) (921,614) (1,110,232)



– I-7 –


May 31,

Note 2019 2020 2021

RMB’000 RMB’000 RMB’000

Non-current liabilitiesLease liabilities . . . . . . . . . . . . . . . . . . . . . 19 – 340 731Deferred income . . . . . . . . . . . . . . . . . . . . 23 2,440 1,235 1,871

2,440 1,575 2,602

NET LIABILITIES . . . . . . . . . . . . . . . . . (305,488) (923,189) (1,112,834)

Capital and reservesShare capital . . . . . . . . . . . . . . . . . . . . . . . 24 659 843 872Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (263,105) (918,934) (1,107,494)

Total equity attributable to equityshareholders of the Company . . . . . . . . . (262,446) (918,091) (1,106,622)

Non-controlling interests . . . . . . . . . . . . . . (43,042) (5,098) (6,212)

TOTAL DEFICIT . . . . . . . . . . . . . . . . . . . (305,488) (923,189) (1,112,834)



– I-8 –

STATEMENTS OF FINANCIAL POSITION OF THE COMPANY

(Expressed in RMB)


May 31,

Note 2019 2020 2021

RMB’000 RMB’000 RMB’000

Non-current assetsInvestments in subsidiaries . . . . . . . . . . . . 73,250 232,829 227,238Amounts due from subsidiaries . . . . . . . . 174,405 163,123 159,205

247,655 395,952 386,443

Current assetsTrade and other receivables . . . . . . . . . . . – 1,328 3,830Balance due from a related party . . . . . . . 15 – 19,539 17,071Cash and cash equivalents . . . . . . . . . . . . 17 5,060 224,914 537,678

5,060 245,781 558,579

Current liabilitiesTrade and other payables . . . . . . . . . . . . . 7,061 5,044 13,190Loans from related parties . . . . . . . . . . . . 20 69,762 – –Preferred shares issued to investors . . . . . 21 258,758 1,215,325 1,721,792Derivative financial liabilities . . . . . . . . . 22 – 33,368 –

335,581 1,253,737 1,734,982

Net current liabilities . . . . . . . . . . . . . . . . (330,521) (1,007,956) (1,176,403)

Total assets less current liabilities . . . . . . (82,866) (612,004) (789,960)

NET LIABILITIES . . . . . . . . . . . . . . . . . (82,866) (612,004) (789,960)

Capital and reservesShare capital . . . . . . . . . . . . . . . . . . . . . . . 24 659 843 872Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (83,525) (612,847) (790,832)

TOTAL DEFICIT . . . . . . . . . . . . . . . . . . . (82,866) (612,004) (789,960)



– I-9 –

CO

NS

OL

IDA

TE

DS

TA

TE

ME

NT

SO

FC

HA

NG

ES

INE

QU

ITY

(Ex

pres

sed

inR

MB

)

Att

ribu

tabl

eto

equi

tysh

areh

olde

rsof

the

Com

pany

Not

eSh

are

capi

tal

Shar

epr

emiu

mC

apit

alre

serv

eE

xcha

nge

rese

rve

Acc

umul

ated

loss

esTo

tal

Non

-co

ntro

lling

inte

rest

sTo

tald

efic

it

RM

B’0

00R

MB

’000

RM

B’0

00R

MB

’000

RM

B’0

00R

MB

’000

RM

B’0

00R

MB

’000

Bal

ance

atJa

nuar

y1,

2019

....

....

.65

9–

48,9

8264

3(2

04,8

58)

(154

,574

)(3

0,93

7)(1

85,5

11)

Cha

nges

ineq

uity

for

the

year

ende

dD

ecem

ber

31,2

019:

Tota

lcom

preh

ensi

vein

com

efo

rth

eye

ar..

....

....

....

....

....

..–

––

(1,6

84)

(107

,999

)(1

09,6

83)

(12,

887)

(122

,570

)E

quit

y-se

ttle

dsh

are-

base

dtr

ansa

ctio

ns25

––

2,59

3–

–2,

593

–2,

593

Cap

ital

inje

ctio

nin

toa

non-

who

llyow

ned

subs

idia

ry..

....

....

....

.–

–(7

82)

––

(782

)78

2–

Bal

ance

atD

ecem

ber

31,2

019

....

...

659

–50

,793

(1,0

41)

(312

,857

)(2

62,4

46)

(43,

042)

(305

,488

)



– I-10 –

Att

ribu

tabl

eto

equi

tysh

areh

olde

rsof

the

Com

pany

Not

eSh

are

capi

tal

Shar

epr

emiu

mC

apit

alre

serv

eE

xcha

nge

rese

rve

Acc

umul

ated

loss

esTo

tal

Non

-co

ntro

lling

inte

rest

sTo

tald

efic

it

RM

B’0

00R

MB

’000

RM

B’0

00R

MB

’000

RM

B’0

00R

MB

’000

RM

B’0

00R

MB

’000

Bal

ance

atJa

nuar

y1,

2020

....

....

.65

9–

50,7

93(1

,041

)(3

12,8

57)

(262

,446

)(4

3,04

2)(3

05,4

88)

Cha

nges

ineq

uity

for

the

year

ende

dD

ecem

ber

31,2

020:

Tota

lcom

preh

ensi

vein

com

efo

rth

eye

ar..

....

....

....

....

.–

––

10,9

03(6

13,7

65)

(602

,862

)(1

,671

)(6

04,5

33)

Equ

ity-

sett

led

shar

eba

sed

tran

sact

ions

2525

6,01

4(6

,039

)–

––

––

Cap

ital

cont

ribu

tion

byN

CI

thro

ugh

capi

taliz

atio

nof

loan

....

....

...

20(i

)–

–7,

282

––

7,28

28,

358

15,6

40A

cqui

siti

onof

NC

Iby

issu

ing

ofth

eC

ompa

ny’s

shar

es..

....

....

....

2213

050

,383

(132

,799

)–

–(8

2,28

6)31

,257

(51,

029)

Issu

ance

ofad

diti

onal

shar

esto

the

equi

tysh

areh

olde

rw

ith

non-

dilu

tive

righ

t...

....

....

....

....

....

.22

2922

,192

––

–22

,221

–22

,221

Bal

ance

atD

ecem

ber

31,2

020

....

...

843

78,5

89(8

0,76

3)9,

862

(926

,622

)(9

18,0

91)

(5,0

98)

(923

,189

)



– I-11 –

Att

ribu

tabl

eto

equi

tysh

areh

olde

rsof

the

Com

pany

Not

eSh

are

capi

tal

Shar

epr

emiu

mC

apit

alre

serv

eE

xcha

nge

rese

rve

Acc

umul

ated

loss

esTo

tal

Non

-co

ntro

lling

inte

rest

sTo

tald

efic

it

RM

B’0

00R

MB

’000

RM

B’0

00R

MB

’000

RM

B’0

00R

MB

’000

RM

B’0

00R

MB

’000

Bal

ance

atJa

nuar

y1,

2021

....

....

.84

378

,589

(80,

763)

9,86

2(9

26,6

22)

(918

,091

)(5

,098

)(9

23,1

89)

Cha

nges

ineq

uity

for

the

five

mon

ths

ende

dM

ay31

,202

1:To

talc

ompr

ehen

sive

inco

me

for

the

peri

od..

....

....

....

....

....

––

–19

,703

(242

,332

)(2

22,6

29)

(1,1

78)

(223

,807

)Is

suan

ceof

addi

tion

alsh

ares

toth

eeq

uity

shar

ehol

der

wit

hno

n-di

luti

veri

ght.

....

....

....

....

....

...

2229

33,1

33–

––

33,1

62–

33,1

62C

apit

alco

ntri

buti

onfr

omN

CI

....

..24

(d)

––

936

––

936

641,

000

Bal

ance

atM

ay31

,202

1..

....

....

.87

211

1,72

2(7

9,82

7)29

,565

(1,1

68,9

54)

(1,1

06,6

22)

(6,2

12)

(1,1

12,8

34)

Bal

ance

atJa

nuar

y1,

2020

....

....

.65

9–

50,7

93(1

,041

)(3

12,8

57)

(262

,446

)(4

3,04

2)(3

05,4

88)

Cha

nges

ineq

uity

for

the

five

mon

ths

ende

dM

ay31

,202

0(U

naud

ited

):To

talc

ompr

ehen

sive

inco

me

for

the

peri

od..

....

....

....

....

....

––

–(3

,555

)(6

7,82

2)(7

1,37

7)(1

,754

)(7

3,13

1)E

quit

y-se

ttle

dsh

are

base

dtr

ansa

ctio

ns25

256,

014

(6,0

39)

––

––

–A

cqui

siti

onof

NC

Iby

issu

ance

ofth

eC

ompa

ny’s

shar

es..

....

....

....

2213

050

,383

(132

,799

)–

–(8

2,28

6)31

,257

(51,

029)

Bal

ance

atM

ay31

,202

0(U

naud

ited

)..

814

56,3

97(8

8,04

5)(4

,596

)(3

80,6

79)

(416

,109

)(1

3,53

9)(4

29,6

48)



– I-12 –

CONSOLIDATED CASH FLOW STATEMENTS

(Expressed in RMB)


Note 2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

(Unaudited)

Operating activitiesLoss before taxation . . . . . . (120,886) (615,436) (69,576) (243,510)Adjustments for:Depreciation of property,

plant and equipment andright-of-use assets . . . . . . 6(d) 1,708 1,838 743 820

Amortization of intangibleassets . . . . . . . . . . . . . . . . 6(d) 41 95 39 52

Interest on loans fromrelated parties . . . . . . . . . 6(a) 7,517 4,270 4,270 –

Interest on lease liabilities . . 6(a) 29 16 5 17Foreign exchange loss . . . . . 398 549 – 535Net realized and unrealized

gains on financial assetsmeasured at FVPL . . . . . . 5 (532) (255) (186) (215)

Change in fair value ofpreferred shares . . . . . . . . 6(b) 44,959 572,051 52,544 217,244

Change in fair value ofderivative financialliabilities . . . . . . . . . . . . . . 6(b) – 4,560 – 12

Equity settled share-basedpayment . . . . . . . . . . . . . . 25 2,593 – – –

Issuance cost of preferredshares . . . . . . . . . . . . . . . . 6(a) – 14,835 – 255

Changes in working capital:Increase in inventories . . . . . (2,629) (5,386) (2,242) (4,158)Increase in trade and other

receivables and balancedue from a related party . . (300) (19,775) (1,750) (2,736)

(Decrease)/increase in tradeand other payables . . . . . . (67,721) (5,037) 7,628 6,218

Increase/(decrease) indeferred income . . . . . . . . 1,653 (1,205) (874) 636

Cash used in operations . . . . (133,170) (48,880) (9,399) (24,830)Income tax paid . . . . . . . . . . 7 – – – –

Net cash used in operatingactivities . . . . . . . . . . . . . . (133,170) (48,880) (9,399) (24,830)



– I-13 –


Note 2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000

(Unaudited)

Investing activitiesPayment for purchases of

property, plant andequipment . . . . . . . . . . . . . (1,229) (1,374) – (3,354)

Payment for purchases ofintangible assets . . . . . . . . (146) (69) – –

Proceeds from sale of wealthmanagement products . . . 168,032 104,255 75,186 109,215

Payment for purchase ofwealth managementproducts . . . . . . . . . . . . . . (187,500) (127,000) (65,000) (86,000)

Net cash (used in)/generatedfrom investing activities . . (20,843) (24,188) 10,186 19,861

Financing activitiesProceeds from loans from

related parties . . . . . . . . . 17(b) 82,947 – – –Proceeds from issuance of

preferred shares . . . . . . . . 17(b) – 334,381 – 323,393Capital element of lease

rentals paid . . . . . . . . . . . 17(b) (491) (495) (212) (211)Interest element of lease

rentals paid . . . . . . . . . . . 17(b) (29) (16) (5) (17)Payment of issuance cost of

preferred shares and theproposed issuance of newshares . . . . . . . . . . . . . . . . – (13,386) – (1,008)

Proceeds from injectionfrom NCI . . . . . . . . . . . . . – – – 1,000

Net cash generated from/(used in) financingactivities . . . . . . . . . . . . . . 82,427 320,484 (217) 323,157

Net (decrease)/increase incash and cash equivalents. . (71,586) 247,416 570 318,188

Cash and cash equivalents atthe beginning of theyear/period . . . . . . . . . . . . 85,556 12,767 12,767 251,601

Effect of foreign exchangerate changes . . . . . . . . . . . (1,203) (8,582) (336) (10,928)

Cash and cash equivalents atthe end of the year/period . 12,767 251,601 13,001 558,861



– I-14 –

NOTES TO THE HISTORICAL FINANCIAL INFORMATION(Expressed in RMB unless otherwise indicated)

1 BASIS OF PREPARATION AND PRESENTATION OF HISTORICAL FINANCIAL INFORMATION

HeMo Bioengineering Limited (the “Company”) was incorporated in the Cayman Islands as an exemptedcompany with limited liability on June 21, 2017 under the Companies Act, Cap 22 (Act 3 of 1961, as consolidatedand revised) of the Cayman Islands.

The Company is an investment holding company. During the Track Record Period, the Company and itssubsidiaries (together, the “Group”) are principally engaged in the research and development, application andcommercialization of biotech products, and offering a broad range of interventional solutions spanning ischemicstroke, hemorrhagic stroke, neuro access related medical devices and peripheral devices.

As at the date of this report, no audited financial statements have been prepared for the Company.

As at the date of this report, the Company has direct or indirect interests in the following principalsubsidiaries, all of which are private companies:

Proportion ofownership interest

Company name

Place and date ofincorporation/establishment/

operation

Particulars ofregistered andpaid-up capital

Group’seffectiveinterests

Directlyheld by theCompany

Indirectlyheld by theCompany Principal activities

HeMo (China) Bioengineering Ltd(“HeMo China”) 禾木(中國)生物工程有限公司 (i) (ii) and (iii) . . . . .

Weihai, thePeople’s Republicof China (“PRC”)April 19, 2016

USD21,600,826/USD23,191,100

93.90% – 93.90% Design, research anddevelopment,production and salesof medical devices

Weihai HeMo Jirui BiologicalTechnology (“HeMo Jirui”) 威海禾木吉瑞生物科技有限公司 (i) (ii) and(iii) . . . . . . . . . . . . . . . . .

Weihai PRCMarch 13, 2018

RMB7,000,000/RMB7,000,000

93.90% – 100.00% Design, research anddevelopment,production and salesof medical devices

Weihai Pu Lewei Medical Device Co.,Ltd. (“Pu Lewei”) 威海普樂維醫療器械有限公司 (i) (ii) and (iii) . . . .

Weihai PRCOctober 27, 2017

RMB1,000,000/RMB1,000,000

79.80% – 85.00% Production and salesof medical devices,accessories andconsumables

Notes:(i) The English translation of the names is for identification only. The official names of the entities are in

Chinese.(ii) These entities were registered as limited liability companies under the laws and regulations in the PRC.(iii) The statutory financial statements of HeMo China, HeMo Jirui and Pu Lewei for the years ended

December 31, 2019 and 2020 prepared in accordance with the Accounting Standards for BusinessEnterprises applicable to enterprises in the PRC were audited by Shandong Blue Sea Certified PublicAccountants (General partnership) (山東藍海會計師事務所 (普通合夥)).

All companies comprising the Group have adopted December 31, as their financial year end date.

The Historical Financial Information has been prepared in accordance with all applicable InternationalFinancial Reporting Standards (“IFRSs”) which collective term includes all applicable individual InternationalFinancial Reporting Standards, International Accounting Standards and Interpretations issued by the InternationalAccounting Standards Board (“IASB”). Further details of the significant accounting policies adopted are set out innote 2.



– I-15 –

The IASB has issued a number of new and revised IFRSs. For the purpose of preparing this HistoricalFinancial Information, the Group has adopted all applicable new and revised IFRSs that are effective during theTrack Record Period, except for any new standards or interpretations that are not yet effective for the accountingperiod beginning on January 1, 2021. The revised and new accounting standards and interpretations issued but notyet effective for the accounting period beginning January 1, 2021 are set out in note 29. The Historical FinancialInformation also complies with the applicable disclosure provisions of the Rules Governing the Listing of Securitieson The Stock Exchange of Hong Kong Limited. The accounting policies set out below have been appliedconsistently to all periods presented in the Historical Financial Information. The Stub Period CorrespondingFinancial Information has been prepared in accordance with the same basis of preparation and presentationadopted in respect of the Historical Financial Information.

2 SIGNIFICANT ACCOUNTING POLICIES

(a) Going concern

The Historical Financial Information has been prepared assuming the Group will continue as a goingconcern notwithstanding that the Group recorded net liabilities of RMB1,112,834,000 as at May 31, 2021,which is primarily due to the classification of Series A preferred shares, Series A+ preferred shares, Series Bpreferred shares and Series C preferred shares totaling RMB1,721,792,000 as financial liabilities as set out inNote 21. The holders of these preferred shares have confirmed that their shares will automatically beconverted into ordinary shares upon the closing of the [REDACTED] of the Company’s shares. The directorsare of the opinion that the preferred shares are not expected to have cash flow impact to the Group andtherefore the Group has sufficient resources for its operation for the next twelve months.

(b) Basis of measurement

The measurement basis used in the preparation of the financial statements is the historical cost basisexcept that the financial assets and liabilities are stated at their fair value as explained in the accountingpolicies set out below:

– Financial assets measured at FVPL (see note 2(e));

– Preferred shares issued to investors (see note 2(m)) and

– Derivative financial liabilities (see note 2(n)).

(c) Use of estimates and judgments

The preparation of financial statements in conformity with IFRSs requires management to makejudgements, estimates and assumptions that affect the application of policies and reported amounts of assets,liabilities, income and expenses. The estimates and associated assumptions are based on historical experienceand various other factors that are believed to be reasonable under the circumstances, the results of which formthe basis of making the judgements about carrying values of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates are recognized in the period in which the estimate is revised if the revision affects only that period,or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of IFRSs that have significant effect on thefinancial statements and major sources of estimation uncertainty are discussed in Note 3.



– I-16 –

(d) Subsidiaries and non-controlling interests

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, orhas rights, to variable returns from its involvement with the entity and has the ability to affect those returnsthrough its power over the entity. When assessing whether the Group has power, only substantive rights (heldby the Group and other parties) are considered.

An investment in a subsidiary is consolidated into the consolidated financial statements from the datethat control commences until the date that control ceases. Intra-group balances, transactions and cash flowsand any unrealized profits arising from intra-group transactions are eliminated in full in preparing theHistorical Financial Information. Unrealized losses resulting from intra-group transactions are eliminated inthe same way as unrealized gains but only to the extent that there is no evidence of impairment.

Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly tothe Company, and in respect of which the Group has not agreed any additional terms with the holders of thoseinterests which would result in the Group as a whole having a contractual obligation in respect of thoseinterests that meets the definition of a financial liability. For each business combination, the Group can electto measure any non-controlling interests either at fair value or at the non-controlling interests’ proportionateshare of the subsidiary’s net identifiable assets.

Non-controlling interests are presented in the consolidated statements of financial position withinequity, separately from equity attributable to the equity shareholders of the Company. Non-controllinginterests in the results of the Group are presented on the face of the consolidated statements of profit or lossand the consolidated statements of profit or loss and other comprehensive income as an allocation of the totalprofit or loss and total comprehensive income for the year between non-controlling interests and the equityshareholders of the Company.

Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted foras equity transactions, whereby adjustments are made to the amounts of controlling and non-controllinginterests within consolidated equity to reflect the change in relative interests, but no adjustments are made togoodwill and no gain or loss is recognized.

When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest inthat subsidiary, with a resulting gain or loss being recognized in profit or loss. Any interest retained in thatformer subsidiary at the date when control is lost is recognized at fair value and this amount is regarded as thefair value on initial recognition of a financial asset (see note 2(e)).

In the Company’s statement of financial position, an investment in a subsidiary is stated at cost lessimpairment losses (see Note 2(i)(ii)).

(e) Other investments in debt and equity securities

The Group’s policies for investments in debt and equity securities, other than investments insubsidiaries, associates and joint ventures, are set out below.

Investments in debt and equity securities are recognized/derecognized on the date the Group commits topurchase/sell the investment. The investments are initially stated at fair value plus directly attributabletransaction costs, except for those investments measured at fair value through profit or loss (FVPL) for whichtransaction costs are recognized directly in profit or loss. For an explanation of how the Group determines fairvalue of financial instruments, see note 26(e). These investments are subsequently accounted for as follows,depending on their classification.



– I-17 –

Investments other than equity investments

Non-equity investments held by the Group are classified into one of the following measurementcategories:

– amortized cost, if the investment is held for the collection of contractual cash flows whichrepresent solely payments of principal and interest. Interest income from the investment iscalculated using the effective interest method (see note 2(t)(ii)).

– fair value through other comprehensive income (FVOCI)-recycling, if the contractual cash flowsof the investment comprise solely payments of principal and interest and the investment is heldwithin a business model whose objective is achieved by both the collection of contractual cashflows and sale. Changes in fair value are recognized in other comprehensive income, except for therecognition in profit or loss of expected credit losses, interest income (calculated using theeffective interest method) and foreign exchange gains and losses. When the investment isderecognized, the amount accumulated in other comprehensive income is recycled from equity toprofit or loss.

– fair value through profit or loss (FVPL) if the investment does not meet the criteria for beingmeasured at amortized cost or FVOCI (recycling). Changes in the fair value of the investment(including interest) are recognized in profit or loss.

Equity investments

An investment in equity securities is classified as FVPL unless the equity investment is not heldfor trading purposes and on initial recognition of the investment the Group makes an election todesignate the investment at FVOCI (non-recycling) such that subsequent changes in fair value arerecognized in other comprehensive income. Such elections are made on an instrument-by-instrumentbasis, but may only be made if the investment meets the definition of equity from the issuer’sperspective. Where such an election is made, the amount accumulated in other comprehensive incomeremains in the fair value reserve (non-recycling) until the investment is disposed of. At the time ofdisposal, the amount accumulated in the fair value reserve (non-recycling) is transferred to retainedearnings. It is not recycled through profit or loss. Dividends from an investment in equity securities,irrespective of whether classified as at FVPL or FVOCI, are recognized in profit or loss as other income.

(f) Property, plant and equipment

Property, plant and equipment including right-of-use assets arising from leases of underlying officepremises (see Note 2(h)), are stated at cost less accumulated depreciation and impairment losses (see note2(i)(ii)).

The cost of self-constructed items of property, plant and equipment includes the cost of materials,direct labor, the initial estimate, where relevant, of the costs of dismantling and removing the items andrestoring the site on which they are located, and borrowing costs (see note 2(v)).

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment aredetermined as the difference between the net disposal proceeds and the carrying amount of the item and arerecognized in profit or loss on the date of retirement or disposal.

Depreciation is calculated to write off the cost of items of property, plant and equipment, less theirestimated residual value, if any, using the straight-line method over their estimated useful lives as follows:

– Machinery and equipment 7-8 years

– Office supplies and furniture 5 years

– Electronic equipment 3 years

– Right-of-use assets Over the lease term



– I-18 –

Where parts of an item of property, plant and equipment have different useful lives, the cost or

valuation of the item is allocated on a reasonable basis between the parts and each part is depreciated

separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

(g) Intangible assets (other than goodwill)

Expenditure on research activities is recognized as an expense in the period in which it is incurred.Expenditure on development activities is capitalized if the product or process is technically and commerciallyfeasible and the Group has sufficient resources and the intention to complete development. The expenditurecapitalized includes the costs of materials, direct labor, and an appropriate proportion of overheads andborrowing costs, where applicable (see Note 2(v)). Capitalized development costs are stated at cost lessaccumulated amortization and impairment losses (see Note 2(i)(ii)). Other development expenditure isrecognized as an expense in the period in which it is incurred.

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortization(where the estimated useful life is finite) and impairment losses (see Note 2(i)(ii)).

Amortization of intangible assets with finite useful lives is charged to profit or loss on a straight-linebasis over the assets’ estimated useful lives. The following intangible assets with finite useful lives areamortized from the date they are available for use and their estimated useful lives are as follows:

– Software 2-10 years

The useful life of in-licensing know-how is estimated based on the shorter of the expected life cycle of

the know-how and the licensed period.

Both the period and method of amortization are reviewed annually.

(h) Leased assets

As a lessee

At inception of a contract, the Group assesses whether the contract is, or contains, a lease. Acontract is, or contains, a lease if the contract conveys the right to control the use of an identified assetfor a period of time in exchange for consideration. Control is conveyed where the customer has both theright to direct the use of the identified asset and to obtain substantially all of the economic benefitsfrom that use.

Where the contract contains lease component(s) and non-lease component(s), the Group haselected not to separate non-lease components and accounts for each lease component and any associatednon-lease components as a single lease component for all leases.

At the lease commencement date, the Group recognizes a right-of-use asset and a lease liability,except for short-term leases that have a lease term of 12 months or less and leases of low-value assets.When the Group enters into a lease in respect of a low-value asset, the Group decides whether tocapitalize the lease on a lease-by-lease basis. The lease payments associated with those leases which arenot capitalized are recognized as an expense on a systematic basis over the lease term.

Where the lease is capitalized, the lease liability is initially recognized at the present value of thelease payments payable over the lease term, discounted using the interest rate implicit in the lease or, ifthat rate cannot be readily determined, using a relevant incremental borrowing rate. After initialrecognition, the lease liability is measured at amortized cost and interest expense is calculated using theeffective interest method. Variable lease payments that do not depend on an index or rate are notincluded in the measurement of the lease liability and hence are charged to profit or loss in theaccounting period in which they are incurred.



– I-19 –

The right-of-use asset recognized when a lease is capitalized is initially measured at cost, whichcomprises the initial amount of the lease liability plus any lease payments made at or before thecommencement date, and any initial direct costs incurred. Where applicable, the cost of the right-of-useassets also includes an estimate of costs to dismantle and remove the underlying asset or to restore theunderlying asset or the site on which it is located, discounted to their present value, less any leaseincentives received. The right-of-use asset is subsequently stated at cost less accumulated depreciationand impairment losses (see Notes 2(f) and 2(i)(ii)).

The lease liability is remeasured when there is a change in future lease payments arising from achange in an index or rate, or there is a change in the Group’s estimate of the amount expected to bepayable under a residual value guarantee, or there is a change arising from the reassessment of whetherthe Group will be reasonably certain to exercise a purchase, extension or termination option. When thelease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount ofthe right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset hasbeen reduced to zero.

The lease liability is remeasured when there is a change in the scope of a lease or the considerationfor a lease that is not originally provided for in the lease term contract (“lease modification”) that is notaccounted for as a separate lease. In this case the lease liability is remeasured based on the revised leasepayments and lease term using a revised discount rate at the effective date of the modification. The onlyexceptions are rent concessions that occurred as a direct consequence of the COVID-19 pandemic andmet the conditions set out in paragraph 46B of IFRS 16 Lease. In such cases, the Group has takenadvantage of the practical expedient not to assess whether the rent concessions are lease modificationsand recognized the change in consideration as negative variable lease payments in profit or loss in theperiod in which the event on condition that triggers the rent concessions occurred.

(i) Credit losses and impairment of assets

(i) Credit losses from financial instruments

The Group recognizes a loss allowance for expected credit losses (ECLs) on financial assetsmeasured at amortized cost (including cash and cash equivalents, trade and other receivables, contractassets).

Financial assets measured at fair value, including equity securities, investments in wealthmanagement products and derivative financial assets at FVPL, are not subject to the ECL assessment.

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as thepresent value of all expected cash shortfalls (i.e. the difference between the cash flows due to theGroup in accordance with the contract and the cash flows that the Group expects to receive).

The expected cash shortfalls are discounted using the following discount rates where theeffect of discounting is material:

– fixed-rate financial assets, trade and other receivables: effective interest ratedetermined at initial recognition or an approximation thereof; and

– variable-rate financial assets: current effective interest rate.

The maximum period considered when estimating ECLs is the maximum contractual periodover which the Group is exposed to credit risk.

In measuring ECLs, the Group takes into account reasonable and supportable informationthat is available without undue cost or effort. This includes information about past events, currentconditions and forecasts of future economic conditions.



– I-20 –

ECLs are measured on either of the following bases:

– 12-month ECLs: these are losses that are expected to result from possible defaultevents within the 12 months after the reporting date; and

– lifetime ECLs: these are losses that are expected to result from all possibledefault events over the expected lives of the items to which theECL model applies.

Loss allowances for trade receivables and contract assets are always measured at an amount

equal to lifetime ECLs. ECLs on these financial assets are estimated using a provision matrix

based on the Group’s historical credit loss experience, adjusted for factors that are specific to the

debtors and an assessment of both the current and forecast general economic conditions at the

reporting date.

For all other financial instruments, the Group recognizes a loss allowance equal to

12-month ECLs unless there has been a significant increase in credit risk of the financial

instrument since initial recognition, in which case the loss allowance is measured at an amount

equal to lifetime ECLs.

Significant increases in credit risk

In assessing whether the credit risk of a financial instrument has increased significantly

since initial recognition, the Group compares the risk of default occurring on the financial

instrument assessed at the reporting date with that assessed at the date of initial recognition. In

making this reassessment, the Group considers that a default event occurs when the borrower is

unlikely to pay its credit obligations to the Group in full, without recourse by the Group to

actions such as realizing security (if any is held). The Group considers both quantitative and

qualitative information that is reasonable and supportable, including historical experience and

forward-looking information that is available without undue cost or effort.

In particular, the following information is taken into account when assessing whether credit

risk has increased significantly since initial recognition:

– failure to make payments of principal or interest on their contractually due dates;

– an actual or expected significant deterioration in a financial instrument’s external orinternal credit rating (if available);

– an actual or expected significant deterioration in the operating results of the debtor;and

– existing or forecast changes in the technological, market, economic or legalenvironment that have a significant adverse effect on the debtor’s ability to meet itsobligation to the Group.

Depending on the nature of the financial instruments, the assessment of a significantincrease in credit risk is performed on either an individual basis or a collective basis. When theassessment is performed on a collective basis, the financial instruments are grouped based onshared credit risk characteristics, such as past due status and credit risk ratings.

ECLs are remeasured at each reporting date to reflect changes in the financial instrument’scredit risk since initial recognition. Any change in the ECL amount is recognized as animpairment gain or loss in profit or loss. The Group recognizes an impairment gain or loss for allfinancial instruments with a corresponding adjustment to their carrying amount through a loss



– I-21 –

allowance account, except for investments in debt securities that are measured at FVOCI(recycling), for which the loss allowance is recognized in other comprehensive income andaccumulated in the fair value reserve (recycling).

Basis of calculation of interest income

Interest income recognized in accordance with note 2(t)(ii) is calculated based on the grosscarrying amount of the financial asset unless the financial asset is credit-impaired, in which caseinterest income is calculated based on the amortized cost (i.e. the gross carrying amount less lossallowance) of the financial asset.

At each reporting date, the Group assesses whether a financial asset is credit-impaired. Afinancial asset is credit-impaired when one or more events that have a detrimental impact on theestimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable events:

– significant financial difficulties of the debtor;

– a breach of contract, such as a default or past due event;

– it becoming probable that the borrower will enter into bankruptcy or other financialreorganisation;

– significant changes in the technological, market, economic or legal environment thathave an adverse effect on the debtor; or

– the disappearance of an active market for a security because of financial difficultiesof the issuer.

Write-off policy

The gross carrying amount of a financial asset or contract asset is written off (eitherpartially or in full) to the extent that there is no realistic prospect of recovery. This is generally thecase when the Group determines that the debtor does not have assets or sources of income thatcould generate sufficient cash flows to repay the amounts subject to the write-off.

Subsequent recoveries of an asset that was previously written off are recognized as areversal of impairment in profit or loss in the period in which the recovery occurs.

(ii) Impairment of other assets

Internal and external sources of information are reviewed at the end of each reporting period toidentify indications that the following assets may be impaired or, except in the case of goodwill, animpairment loss previously recognized no longer exists or may have decreased:

– property, plant and equipment, including right-of-use assets;

– intangible assets;

– prepayments for equipment;

– investments in subsidiaries, in the Company’s statement of financial position.



– I-22 –

If any such indication exists, the asset’s recoverable amount is estimated. In addition, forgoodwill, intangible assets that are not yet available for use and intangible assets that haveindefinite useful lives, the recoverable amount is estimated annually whether or not there is anyindication of impairment.

– Calculation of recoverable amount

The recoverable amount of an asset is the greater of its fair value less costs of disposal andvalue in use. In assessing value in use, the estimated future cash flows are discounted to theirpresent value using a pre-tax discount rate that reflects current market assessments of the timevalue of money and the risks specific to the asset. Where an asset does not generate cash inflowslargely independent of those from other assets, the recoverable amount is determined for thesmallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

– Recognition of impairment losses

An impairment loss is recognized in profit or loss if the carrying amount of an asset, or thecash-generating unit to which it belongs, exceeds its recoverable amount. Impairment lossesrecognized in respect of cash-generating units are allocated first to reduce the carrying amount ofany goodwill allocated to the cash-generating unit (or group of units) and then, to reduce thecarrying amount of the other assets in the unit (or group of units) on a pro rata basis, except thatthe carrying value of an asset will not be reduced below its individual fair value less costs ofdisposal (if measurable) or value in use (if determinable).

– Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been afavorable change in the estimates used to determine the recoverable amount. An impairment lossin respect of goodwill is not reversed.

A reversal of an impairment loss is limited to the asset’s carrying amount that would havebeen determined had no impairment loss been recognized in prior years. Reversals of impairmentlosses are credited to profit or loss in the year in which the reversals are recognized.

(j) Inventories

Inventories are assets which are held for sale in the ordinary course of business, in the process ofproduction for such sale or in the form of materials or supplies to be consumed in the production process or inthe rendering of services.

Inventories are carried at the lower of cost and net realizable value.

Cost is calculated using the first-in first-out method and comprises all costs of purchase, costs ofconversion and other costs incurred in bringing the inventories to their present location and condition.

Net realizable value is the estimated selling price in the ordinary course of business less the estimatedcosts of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognized as an expense in theperiod in which the related revenue is recognized.

The amount of any write-down of inventories to net realizable value and all losses of inventories arerecognized as an expense in the period the write-down or loss occurs. The amount of any reversal of anywrite-down of inventories is recognized as a reduction in the amount of inventories recognized as an expensein the period in which the reversal occurs.



– I-23 –

(k) Trade and other receivables

A receivable is recognized when the Group has an unconditional right to receive consideration. A rightto receive consideration is unconditional if only the passage of time is required before payment of thatconsideration is due. If revenue has been recognized before the Group has an unconditional right to receiveconsideration, the amount is presented as a contract asset.

Receivables are stated at amortized cost using the effective interest method less allowance for creditlosses (see note 2(i)(i)).

(l) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and otherfinancial institutions, and short-term, highly liquid investments that are readily convertible into knownamounts of cash and which are subject to an insignificant risk of changes in value, having been within threemonths of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part ofthe Group’s cash management are also included as a component of cash and cash equivalents for the purposeof the consolidated cash flow statement. Cash and cash equivalents are assessed for expected credit losses(ECL) in accordance with the policy set out in note 2(i)(i).

(m) Preferred shares

Preferred shares are classified as financial liabilities if they are redeemable on a specific date or at theoption of the holders of preferred shares (including options that are only exercisable in case of occurrence ofsome triggering events that are beyond the control of the Group).

At initial recognition, if there is an embedded derivative should be separated from the host of suchpreferred shares, but the Group is unable to measure the embedded derivative separately either at acquisitionor at the end of a subsequent financial reporting period, the Group designates the entire hybrid contract as atfair value through profit or loss. Changes in the carrying amount of the liabilities are recognized in profit orloss. Transaction costs that relate to the issue of preferred shares are included in profit or loss.

If the preferred shares are converted into ordinary shares, the carrying amount of the financialliabilities upon conversion is transferred to share capital and share premium.

(n) Derivative financial instruments

Derivative financial instruments are recognized at fair value. At the end of each reporting period thefair value is remeasured. The gain or loss on remeasurement to fair value is recognized immediately in profitor loss.

(o) Trade and other payables

Trade and other payables are initially recognized at fair value and subsequently stated at amortized costunless the effect of discounting would be immaterial, in which case they are stated at cost.

(p) Interest-bearing borrowings

Interest-bearing borrowings are measured initially at fair value less transaction costs. Subsequent toinitial recognition, interest-bearing borrowings are stated at amortized cost using the effective interestmethod. Interest expense is recognized in accordance with the Group’s accounting policy for borrowing costs(see note 2(v)).



– I-24 –

(q) Employee benefits

(i) Short-term employee benefits and contributions to defined contribution retirement plans

Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirementplans and the cost of non-monetary benefits are accrued in the period in which the associated servicesare rendered by employees. Where payment or settlement is deferred and the effect would be material,these amounts are stated at their present values.

(ii) Termination benefit

Termination benefits are recognized at the earlier of when the Group can no longer withdraw theoffer of those benefits and when it recognizes restructuring costs involving the payment of terminationbenefits.

(iii) Share-based payments

The Company grants share-based payment awards to an employee that are settled in theCompany’s shares but are contingently cash-settleable upon the occurrence of specified contingentevents such as change of control over the Company. Such awards are classified as equity-settled, unlessthe contingent event triggering cash outflows becomes probable. Throughout the Track Record Period,the Company has determined that the likelihood of occurrence of the specified contingent events wasless than probable, and therefore the share-based payment awards has been classified as equity-settled.

For share-based payment awards that are classified as equity-settled, the grant-date fair value ofequity-settled share-based incentive scheme granted to employees is generally recognized as an expense,with a corresponding increase in equity, over the vesting period of the awards. The amount recognizedas an expense is adjusted to reflect the number of awards for which the related service and non-marketperformance conditions are expected to be met, such that the amount ultimately recognized is based onthe number of awards that meet the related service and non-market performance conditions at thevesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value ofthe share-based payment is measured to reflect such conditions and there is no true-up for thedifferences between expected and actual outcomes.

(r) Income tax

Income tax for the period comprises current tax and movements in deferred tax assets and liabilities.Current tax and movements in deferred tax assets and liabilities are recognized in profit or loss except to theextent that they relate to items recognized in other comprehensive income or directly in equity, in which casethe relevant amounts of tax are recognized in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted orsubstantively enacted at the end of the reporting period, and any adjustment to tax payable in respect ofprevious years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively,being the differences between the carrying amounts of assets and liabilities for financial reporting purposesand their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extentthat it is probable that future taxable profits will be available against which the asset can be utilized, arerecognized. Future taxable profits that may support the recognition of deferred tax assets arising fromdeductible temporary differences include those that will arise from the reversal of existing taxable temporarydifferences, provided those differences relate to the same taxation authority and the same taxable entity, andare expected to reverse either in the same period as the expected reversal of the deductible temporary



– I-25 –

difference or in periods into which a tax loss arising from the deferred tax asset can be carried back orforward. The same criteria are adopted when determining whether existing taxable temporary differencessupport the recognition of deferred tax assets arising from unused tax losses and credits, that is, thosedifferences are taken into account if they relate to the same taxation authority and the same taxable entity,and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilized.

The limited exceptions to recognition of deferred tax assets and liabilities are those temporarydifferences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilitiesthat affect neither accounting nor taxable profit (provided they are not part of a business combination), andtemporary differences relating to investments in subsidiaries to the extent that, in the case of taxabledifferences, the Group controls the timing of the reversal and it is probable that the differences will not reversein the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse inthe future.

The amount of deferred tax recognized is measured based on the expected manner of realization orsettlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enactedat the end of the reporting period. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and isreduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow therelated tax benefit to be utilized. Any such reduction is reversed to the extent that it becomes probable thatsufficient taxable profits will be available.

Current tax balances and deferred tax balances, and movements therein, are presented separately fromeach other and are not offset. Current tax assets are offset against current tax liabilities, and deferred taxassets against deferred tax liabilities, if the Company or the Group has the legally enforceable right to set offcurrent tax assets against current tax liabilities and the following additional conditions are met:

– in the case of current tax assets and liabilities, the Company or the Group intends either to settleon a net basis, or to realize the asset and settle the liability simultaneously; or

– in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the sametaxation authority on either:

– the same taxable entity; or

– different taxable entities, which, in each future period in which significant amounts ofdeferred tax liabilities or assets are expected to be settled or recovered, intend to realize thecurrent tax assets and settle the current tax liabilities on a net basis or realize and settlesimultaneously.

(s) Provisions and contingent liabilities

Provisions are recognized when the Group has a legal or constructive obligation arising as a result of apast event, it is probable that an outflow of economic benefits will be required to settle the obligation and areliable estimate can be made. Where the time value of money is material, provisions are stated at the presentvalue of the expenditure expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot beestimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow ofeconomic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence ornon-occurrence of one or more future events are also disclosed as contingent liabilities unless the probabilityof outflow of economic benefits is remote.



– I-26 –

(t) Revenue and other income

Income is classified by the Group as revenue when it arises from the sale of goods, the provision ofservices in the ordinary course of the Group’s business.

Revenue is recognized when control over a product or service is transferred to the customer, at theamount of promised consideration to which the Group is expected to be entitled, excluding those amountscollected on behalf of third parties. Revenue excludes value added tax or other sales taxes and is afterdeduction of any trade discounts.

Further details of the Group’s revenue and other income recognition policies are as follows:

(i) Product revenue

Revenue is recognized when the customer takes possession of and accepts the products. If theproducts are a partial fulfilment of a contract covering other goods and/or services, then the amount ofrevenue recognized is an appropriate proportion of the total transaction price under the contract,allocated between all the goods and services promised under the contract on a relative stand-aloneselling price basis.

(ii) Interest income

Interest income is recognized as it accrues using the effective interest method. For financial assetsmeasured at amortized cost or FVOCI (recycling) that are not credit-impaired, the effective interest rateis applied to the gross carrying amount of the asset. For credit-impaired financial assets, the effectiveinterest rate is applied to the amortized cost (i.e. gross carrying amount net of loss allowance) of theasset (see note 2(i)(i)).

(iii) Government grants

Government grants are recognized in the statement of financial position initially when there isreasonable assurance that they will be received and that the Group will comply with the conditionsattaching to them. Grants that compensate the Group for expenses incurred are recognized as income inprofit or loss on a systematic basis in the same periods in which the expenses are incurred. Grants thatcompensate the Group for the cost of an asset are initially recognized as deferred income and aresubsequently recognized in profit or loss over the useful life of the related asset.

(u) Translation of foreign currencies

The functional currency of the Company, and other subsidiaries incorporated in Hong Kong and BVI isUnited States dollars (“USD”) and the functional currency of other group entities is RMB. As the Group’soperation are primarily located in the PRC and most of the Group’s transactions are conducted anddenominated in Renminbi (“RMB”), the Historical Financial Information is presented in RMB, rounded tothe nearest thousand, unless otherwise stated.

Foreign currency transactions during the period are translated at the foreign exchange rates ruling at thetransaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at theforeign exchange rates ruling at the end of the reporting period. Exchange gains and losses are recognized inprofit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currencyare translated using the foreign exchange rates ruling at the transaction dates. The transaction date is the dateon which the Group initially recognizes such non-monetary assets or liabilities.



– I-27 –

The results of foreign operations are translated into RMB, the Group’s reporting currency, at theexchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Statement offinancial position items are translated into RMB at the closing foreign exchange rates at the end of thereporting period. The resulting exchange differences are recognized in other comprehensive income andaccumulated separately in equity in the exchange reserve.

(v) Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of an assetwhich necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized aspart of the cost of that asset. Other borrowing costs are expensed in the period in which they are incurred.

The capitalization of borrowing costs as part of the cost of a qualifying asset commences whenexpenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessaryto prepare the asset for its intended use or sale are in progress. Capitalization of borrowing costs is suspendedor ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use orsale are interrupted or complete.

(w) Related parties

(a) A person, or a close member of that person’s family, is related to the Group if that person:

(i) has control or joint control over the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or the Group’s parent.

(b) An entity is related to the Group if any of the following conditions applies:

(i) The entity and the Group are members of the same group (which means that each parent,subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or jointventure of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the thirdentity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either theGroup or an entity related to the Group.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a)(i) has significant influence over the entity or is a member of thekey management personnel of the entity (or of a parent of the entity).

(viii) The entity, or any member of a group of which it is a part, provides key managementpersonnel services to the Group or to the Group’s parent.

Close members of the family of a person are those family members who may be expected toinfluence, or be influenced by, that person in their dealings with the entity.



– I-28 –

(x) Segment report

Operating segments, and the amounts of each segment item reported in the financial statements, areidentified from the financial information provided regularly to the Group’s most senior executive managementfor the purposes of allocating resources to, and assessing the performance of, the Group’s various lines ofbusiness and geographical locations.

Individually material operating segments are not aggregated for financial reporting purposes unless thesegments have similar economic characteristics and are similar in respect of the nature of products andservices, the nature of production processes, the type or class of customers, the methods used to distribute theproducts or provide the services, and the nature of the regulatory environment. Operating segments which arenot individually material may be aggregated if they share a majority of these criteria.

3 ACCOUNTING JUDGEMENT AND ESTIMATES

(a) Critical accounting judgement in applying the Group’s accounting policies

In the process of applying the Group’s accounting policies, management has made the followingaccounting judgement:

Research and development expenses

Development expenses incurred on the Group’s product in the pipeline are capitalized anddeferred only when the Group can demonstrate (i) the technical feasibility of completing the intangibleasset so that it will be available for use or sale, (ii) the Group’s intention to complete and the Group’sability to use or sell the asset, (iii) how the asset will generate future economic benefits, (iv) theavailability of resources to complete the product pipeline and (v) the ability to measure reliably theexpenditure during the development. Development expenses which do not meet these criteria areexpensed when incurred. Management assess the progress of each of the research and developmentprojects and determine when the criteria for capitalization are met.

(b) Sources of estimation uncertainty

Key sources of estimation uncertainty are as follows:

Fair value of financial instruments

The financial instruments issued by the Group represents preferred shares which are not traded inan active market and the respective fair value is determined by using valuation techniques. Thediscounted cash flow method was used to determine the total equity value of the Group and the hybridmethod was adopted to determine the fair value of the financial instrument. The hybrid method is ahybrid between the probability-weighted expected return method (“PWERM”) and the option pricingmethod (“OPM”), estimating the probability-weighted value across multiple scenarios but using theOPM to estimate the allocation of value within one or more of those scenarios. Key assumptions, suchas discount rate, volatility, risk-free interest rate, expected probability of [REDACTED] and discount forlack of marketability (“DLOM”) are disclosed in Note 21.



– I-29 –

4 REVENUE

During the Track Record Period, the Group derives revenue principally from the sale of medical devicesthrough distributors.

(a) Disaggregation of revenue


2019 2020 2020 2021


Revenue from contracts withcustomers within the scope ofIFRS15 recognized at point intime

Sales of medical devices . . . . . . – 2,839 235 581

During the Track Record Period, the Group’s customers with whom transactions have exceeded 10% of

the Group’s revenue in the respective periods are set out below:


2019 2020 2020 2021


Customer A . . . . . . . . . . . . . . –* 2,623 224 517Customer B . . . . . . . . . . . . . . –* –* –* 64

* Less than 10% of the Group’s revenue in the respective year/periods

The Group has applied the practical expedient in paragraph 121 of IFRS 15 and therefore theinformation about remaining performance obligations is not disclosed for contracts that have an originalexpected duration of one year or less.

(b) Geographic information

All of the non-current assets of the Group are physically located in the PRC. The geographical locationof customers is based on the location at which the customers operate, and the revenue of the Group is allderived from customers in the PRC during the Track Record Period.

(c) Segment reporting

IFRS 8, Operating Segments, requires identification and disclosure of operating segment informationbased on internal financial reports that are regularly reviewed by the Group’s chief operating decision makerfor the purpose of resources allocation and performance assessment. On this basis, as for the purpose ofmaking decisions about resources allocation and performance assessment, the Group’s management reviewson the operating results of the Group as a whole, the Group has determined that it only has one operatingsegment which is the sale of medical devices during the Track Record Period.



– I-30 –

5 OTHER INCOME, NET


2019 2020 2020 2021


Government grants . . . . . . . . . . . . . 3,554 5,286 2,790 486Net foreign exchange (loss)/gain . . . . (3,796) 11,055 (3,897) 3,761Net realized and unrealized gains on

financial assets measured at FVPL . 532 255 186 215Interest income on bank deposits . . . . 188 168 26 12Others . . . . . . . . . . . . . . . . . . . . . (4) (21) – (32)

474 16,743 (895) 4,442

6 LOSS BEFORE TAXATION

Loss before taxation is arrived at after charging:


Note 2019 2020 2020 2021


(a) Finance costsInterest on loans from related

parties . . . . . . . . . . . . . . . 17(b) 7,517 4,270 4,270 –Interest on lease liabilities . . . . 17(b) 29 16 5 17Issuance cost of preferred

shares . . . . . . . . . . . . . . . – 14,835 – 255Other finance cost . . . . . . . . . – – – 60

7,546 19,121 4,275 332

(b) Change in fair value of financialliabilities– preferred shares . . . . . . . . . 21 44,959 572,051 52,544 217,244– derivative financial liabilities . 22 – 4,560 – 12

44,959 576,611 52,544 217,256

(c) Staff costsSalaries, wages and other

benefits . . . . . . . . . . . . . . 13,100 19,196 7,806 13,365Contributions to defined

contribution retirement plan(i) . . . . . . . . . . . . . . . . . 948 87 87 724

Equity-settled share-basedpayment cost . . . . . . . . . . . 25 2,593 – – –

16,641 19,283 7,893 14,089

(i) Employees of the Group are required to participate in a defined contribution retirement schemeadministered and operated by the local municipal governments where the subsidiaries are registered.The Group contributes funds which are calculated on certain percentages of the average employee salaryas agreed by the respective local municipal governments to the scheme to fund the retirement benefits ofthe employees.



– I-31 –

According to <The notification about progressively relief corporate social insurance> (Department ofhuman resource and social security [2020]11) and <notification about extension of implementation period forabout progressively relief corporate social insurance> (Department of human resource and social security[2020]49), certain subsidiaries in the Group are entitled to relief of social insurance contribution fromFebruary 2020 to December 2020.

The Group has no further material obligation for payment of other retirement benefits beyond theabove contributions.


Note 2019 2020 2020 2021


(d) Other itemsAmortization of intangible

assets . . . . . . . . . . . . . . . . 41 95 39 52Depreciation expenses . . . . . . 11 1,708 1,838 743 820[REDACTED] . . . . . . . . . . . – 5,313 – 10,091Research and development cost

(other than depreciation ofproperty, plant andequipment and amortizationof intangible assets) . . . . . . 58,596 16,935 7,124 7,988

Cost of inventories (i) . . . . . . 13(b) – 690 67 270

Note:(i) Cost of inventories includes RMB196,000 and RMB23,000 (unaudited) and RMB135,000 for the year

ended December 31, 2020 and the five months ended May 31, 2020 and 2021, respectively, relating tostaff costs and depreciation, which are also included in the respective total amounts disclosed separatelyabove.

7 INCOME TAX IN THE CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

(a) Taxation in the consolidated statements of profit or loss:


2019 2020 2020 2021


Current tax . . . . . . . . . . . . . . – – – –Deferred tax . . . . . . . . . . . . . – – – –

– – – –



– I-32 –

(b) Reconciliation between tax expense and accounting loss at applicable tax rates:


2019 2020 2020 2021


Loss before taxation . . . . . . . . (120,886) (615,436) (69,576) (243,510)

Notional tax calculated at taxrate of 25% . . . . . . . . . . . . (30,222) (153,859) (17,394) (60,878)

Tax effect of:– Different tax rates in foreign

tax jurisdictions . . . . . . . . 13,622 150,537 14,539 56,311– Non-deductible expenses . . . 7,068 278 202 13– Deductible temporary

differences not recognized asdeferred tax assets . . . . . . . 894 3 (248) 505

– Additional deductibleallowance for research anddevelopment expenses (note(iv)) . . . . . . . . . . . . . . . (5,059) (3,224) (1,169) (1,790)

– Unrecognized deductiblelosses . . . . . . . . . . . . . . . 13,697 6,265 4,070 5,839

Income tax expenses . . . . . . . . – – – –

Notes:(i) The subsidiaries of the Group established in the Mainland China (excluding Hong Kong) are

subject to PRC Corporate Income Tax rate of 25% during the Track Record Period.(ii) Pursuant to the rules and regulations of the Cayman Islands and the British Virgin Islands

(“BVI”), the Company and the Group’s BVI subsidiaries are not subject to income tax in thosejurisdictions.

(iii) The Company’s subsidiary incorporated in Hong Kong is subject to Hong Kong profit tax at16.5% of the estimated assessable profit. No provision for Hong Kong Profits Tax has been made,as the subsidiary of the Group incorporated in Hong Kong did not have assessable profits whichare subject to Hong Kong Profits Tax during the Track Record Period.

(iv) Effective from January 1, 2018 to December 31, 2020, an additional 75% of qualified research anddevelopment expenses incurred is allowed to be deducted from taxable income under the PRCincome tax law and its relevant regulations. From January 1, 2021, an additional 100% ofqualified research and development expenses incurred is allowed to be deducted from taxableincome under the PRC income tax law and its relevant regulations.

(c) Deferred tax assets not recognized

As at December 31, 2019 and 2020 and May 31, 2021, the Group has unused tax losses of approximatelyRMB99 million and RMB124 million and RMB148 million, respectively, available for offset against futureprofits. No deferred tax assets have been recognized in respect of the tax losses due to the unpredictability offuture profits streams.

Pursuant to the notice of the Ministry of Finance and the State Administration of Taxation onextending the loss carrying forward period of high-tech enterprises and high-tech small and mediumenterprises (Cai Shui [2018] No. 76), with effect from January 1, 2018, qualified high-tech enterprises andhigh-tech small and medium enterprises, the unutilized tax losses incurred in the previous 5 years can beutilized in 10 years from the year of loss. HeMo China was qualified as high-tech small and medium enterpriseand the unused tax losses of HeMo China will be expired in 10 years from the year of loss.



– I-33 –

The unused tax losses will be expired as follows:

As at December 31, As at May 31,

2019 2020 2021

RMB’000 RMB’000 RMB’0002023 . . . . . . . . . . . . . . . . . . . . . . 11,664 7,151 7,1512024 . . . . . . . . . . . . . . . . . . . . . . 26,886 26,886 26,8862025 . . . . . . . . . . . . . . . . . . . . . . – 20 202026 . . . . . . . . . . . . . . . . . . . . . . – – 1,6782028 . . . . . . . . . . . . . . . . . . . . . . 32,775 32,775 32,7752029 . . . . . . . . . . . . . . . . . . . . . . 27,898 27,898 27,8982030 . . . . . . . . . . . . . . . . . . . . . . – 29,554 29,5542031 . . . . . . . . . . . . . . . . . . . . . . – – 21,678

99,223 124,284 147,640

8 DIRECTORS’ EMOLUMENTS

Details of directors’ emoluments during the Track Record Period are as follows:


Directors’fees

Salaries,allowances

and benefitsin kind

Discretionarybonuses

Retirementscheme

contributions

Equity-settledshare-based

payment(Note 25) Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Executive Director and

Chairman:Wang Chicheng Jack (i) . . . – – – – 2,593 2,593Non-executive Director:Wang Shunlong (ii) . . . . . . – – – – – –

– – – – 2,593 2,593


Directors’fees

Salaries,allowances

and benefitsin kind


Retirementscheme

contributions



RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Executive Director and Chairman:Wang Chicheng Jack (i) . . . . . . . . – 4,931 – – – 4,931Non-executive directors:Wang Shunlong (ii) . . . . . . . . . . – – – – – –Sheng Li (iii) . . . . . . . . . . . . . . – – – – – –Zhang Jiecheng (iv) . . . . . . . . . . – – – – – –

– 4,931 – – – 4,931



– I-34 –

For the five months ended May 31, 2021

Directors’fees

Salaries,allowances

and benefitsin kind


Retirementscheme

contributions



RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Executive Director and Chairman:Wang Chicheng Jack (i) . . . . . . . . – 2,005 – – – 2,005Non-executive Directors:Wang Shunlong (ii) . . . . . . . . . . – – – – – –Sheng Li (iii) . . . . . . . . . . . . . . – – – – – –Zhang Jiecheng (iv) . . . . . . . . . . – – – – – –

– 2,005 – – – 2,005

Five months ended May 31, 2020 (Unaudited)

Directors’fees

Salaries,allowances

and benefitsin kind


Retirementscheme

contributions



RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Executive Director and Chairman:Wang Chicheng Jack (i) . . . . . . . . – 2,096 – – – 2,096Non-executive Directors:Wang Shunlong (ii) . . . . . . . . . . – – – – – –Sheng Li (iii) . . . . . . . . . . . . . . – – – – – –Zhang Jiecheng (iv) . . . . . . . . . . – – – – – –

– 2,096 – – – 2,096

Notes:(i) Wang Chicheng Jack was appointed as an executive director of the Company on June 21, 2017.(ii) Wang Shunlong was appointed as a non-executive director of the Company on September 26, 2017.(iii) Sheng Li was appointed as a non-executive director of the Company on April 25, 2020.(iv) Zhang Jiecheng was appointed as a non-executive director of the Company on October 16, 2020.

9 INDIVIDUALS WITH HIGHEST EMOLUMENTS

During the Track Record Period, of the five individuals with the highest emoluments, one is a director for eachof the years ended December 31, 2019 and 2020 and the five months ended May 31, 2020 and 2021, whoseemoluments are disclosed in note 8. The aggregate of the emoluments in respect of the remaining individuals duringthe Track Record Period are as follows:


2019 2020 2020 2021


Salaries, allowances and benefits inkind . . . . . . . . . . . . . . . . . . . . . 2,962 2,851 1,205 2,720

Discretionary bonuses . . . . . . . . . . . 709 692 – 402

3,671 3,543 1,205 3,122



– I-35 –

The emoluments of the individuals who are not directors and who are amongst the five highest paid

individuals of the Group are within the following bands:


2019 2020 2020 2021

Number ofindividuals




(Unaudited)HK$ Nil to HK$1,000,000 . . . . . . . . 3 3 4 4HK$1,000,001 to HK$1,500,000 . . . . – 1 – –HK$1,500,001 to HK$2,000,000 . . . . 1 – – –

4 4 4 4

10 LOSS PER SHARE

(a) Basic loss per share

The calculation of the basic loss per share during the Track Record Period is based on the loss for theyear/period attributable to ordinary equity shareholders of the Company divided by the weighted averagenumber of ordinary shares in issue during the Track Record Period:

(i) Loss of the year/period attributable to ordinary equity shareholders of the Company


2019 2020 2020 2021


Loss of the year/period attributable toall equity shareholders of theCompany . . . . . . . . . . . . . . . . . . (120,886) (615,436) (69,576) (243,510)

Allocation of loss of the year/periodattributable to preferred sharesissued for share based payment(Note 25) . . . . . . . . . . . . . . . . . – 15,531 400 6,520

Loss of the year/period attributable toordinary equity shareholders of theCompany . . . . . . . . . . . . . . . . . . (120,886) (599,905) (69,176) (236,990)

(ii) Weighted average number of ordinary shares for the purpose of basic loss per share


2019 2020 2020 2021

(Unaudited)Issued ordinary shares at the beginning

of the year/period . . . . . . . . . . . . 100,000,000 100,000,000 100,000,000 122,650,626Effect of ordinary shares issued during

the year/period. . . . . . . . . . . . . . . – 11,782,007 364,001 1,219,061

Weighted average number of ordinaryshares for the year/period . . . . . . . 100,000,000 111,782,007 100,364,001 123,869,687



– I-36 –

(b) Diluted loss per share

The preferred shares issued to investors (Note 21) were excluded from the calculation of diluted loss pershare because their effect would have been anti-dilutive. The diluted loss per share is the same as the basic lossper share during the Track Record Period.

11 PROPERTY, PLANT AND EQUIPMENT

(a) Reconciliation of carrying amount

Machineryand

equipment

Officesupplies and

furnitureElectronicequipment

Right-of-useassets

Constructionin progress Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Cost:At January 1, 2019 . . . . . . 7,350 58 362 875 1,779 10,424Additions . . . . . . . . . . . . 1,036 – 31 – – 1,067Transferred in from

construction in progress . . 1,779 – – – (1,779) –

At December 31, 2019 . . . . . 10,165 58 393 875 – 11,491Additions . . . . . . . . . . . . 464 – 141 923 305 1,833Transferred in from

construction in progress . . 305 – – – (305) –

At December 31, 2020 . . . . . 10,934 58 534 1,798 – 13,324Additions . . . . . . . . . . . . 1,717 73 168 925 – 2,883Disposals . . . . . . . . . . . . – – – (875) – (875)

At May 31, 2021 . . . . . . . . 12,651 131 702 1,848 – 15,332

Accumulated depreciation:At January 1, 2019 . . . . . . (462) (8) (106) – – (576)Charge for the year . . . . . . (1,055) (10) (143) (500) – (1,708)

At December 31, 2019 . . . . . (1,517) (18) (249) (500) – (2,284)Charge for the year . . . . . . (1,246) (10) (92) (490) – (1,838)

At December 31, 2020 . . . . . (2,763) (28) (341) (990) – (4,122)Charge for the period . . . . . (550) (6) (46) (218) – (820)Written back on disposals . . – – – 875 – 875

At May 31, 2021 . . . . . . . . (3,313) (34) (387) (333) – (4,067)

Net book value:At December 31, 2019 . . . . . 8,648 40 144 375 – 9,207

At December 31, 2020 . . . . . 8,171 30 193 808 – 9,202

At May 31, 2021 . . . . . . . . 9,338 97 315 1,515 – 11,265



– I-37 –

(b) Right-of-use assets

The analysis of the net book value of right-of-use assets by class of underlying asset is as follows:


2019 2020 2021

RMB’000 RMB’000 RMB’000Right-of-use assets:

– Leased office premises . . . . . . . . 375 808 1,515

The analysis of expense items in relation to leases recognized in profit or loss is as follows:


2019 2020 2021

RMB’000 RMB’000 RMB’000Depreciation charge of leased office

premises . . . . . . . . . . . . . . . . . . 500 490 218Interest on lease liabilities (Note 6(a)) 29 16 17

Details of total cash outflow for leases and the maturity analysis of lease liabilities are set out in Notes

17(c) and 19, respectively.

12 OTHER NON-CURRENT ASSETS


2019 2020 2021

RMB’000 RMB’000 RMB’000Prepayments for equipment . . . . . . . . . . . 464 124 1,396Value-added tax recoverable . . . . . . . . . . . 3,461 1,526 711Others . . . . . . . . . . . . . . . . . . . . . . . . . 119 27 403

4,044 1,677 2,510

13 INVENTORIES

(a) Inventories in the consolidated statements of financial position comprise:


2019 2020 2021

RMB’000 RMB’000 RMB’000Raw materials . . . . . . . . . . . . . . . . 7,175 11,513 13,519Work in progress . . . . . . . . . . . . . . – 430 404Finished goods . . . . . . . . . . . . . . . – 618 2,796

7,175 12,561 16,719



– I-38 –

(b) The analyses of the amounts of inventories recognized as expenses and included in the consolidatedstatements of profit or loss are as follows:


2019 2020 2020 2021


Carrying amounts of inventoriessold . . . . . . . . . . . . . . . . . – 690 67 270

14 TRADE AND OTHER RECEIVABLES


2019 2020 2021

RMB’000 RMB’000 RMB’000Trade receivables due from third parties . . . – 244 –Prepayments to suppliers . . . . . . . . . . . . . 232 538 2,400[REDACTED] . . . . . . . . . . . . . . . . . . . . – 1,328 3,830Value-added tax recoverable . . . . . . . . . . . 1,226 3,259 4,730Deposits . . . . . . . . . . . . . . . . . . . . . . . . 649 303 378Others . . . . . . . . . . . . . . . . . . . . . . . . . 500 – 100

2,607 5,672 11,438

Aging analysis of trade receivables

As of the end of each of the Track Record Period, the aging analysis of the Group’s trade receivables,

based on the invoice date and net of credit losses, is as follows:


2019 2020 2021

RMB’000 RMB’000 RMB’000Within 3 months . . . . . . . . . . . . . . – 231 –3 to 6 months . . . . . . . . . . . . . . . . – 13 –

– 244 –

15 BALANCE DUE FROM A RELATED PARTY

Balance due from a related party represents the operation funds due from HeMo Bioengineering Pte. Ltd(“HeMo Singapore”), which is unsecured, interest free and has no fixed term of repayment. As disclosed in note30(ii), the Company acquired the entire equity interests of HeMo Singapore subsequent to Track Record Period. Thebalance due from HeMo Singapore will be eliminated in consolidation after the completion of acquisition of HeMoSingapore.

16 FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets measured at fair value through profit or loss represent wealth management productspurchased from banks in the PRC with variable interest, and will mature within one year as of the end of each of thereporting period.



– I-39 –

17 CASH AND CASH EQUIVALENTS

(a) Cash and cash equivalents comprise:

The Group


2019 2020 2021

RMB’000 RMB’000 RMB’000Cash at bank . . . . . . . . . . . . . . . . . 12,767 251,601 558,861

The Company


2019 2020 2021

RMB’000 RMB’000 RMB’000Cash at bank . . . . . . . . . . . . . . . . . 5,060 224,914 537,678

(b) Reconciliation of liabilities arising from financing activities

Loans fromrelated parties

Interestpayable

Preferredshares issued to

investorsLease

liabilities Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000(Note 20) (Note 18) (Note 21) (Note 19)

At January 1, 2019 . . . . . . . . . . – – 210,336 875 211,211

Changes from financing cash flows:Proceeds from loans from related

parties . . . . . . . . . . . . . . . . 82,947 – – – 82,947Capital element of lease rentals paid . – – – (491) (491)Interest element of lease rentals paid . – – – (29) (29)

Total changes from financing cashflows . . . . . . . . . . . . . . . . 82,947 – – (520) 82,427

Exchange adjustments . . . . . . . . . 2,455 – 3,463 – 5,918

Other changes:Interest expenses . . . . . . . . . . . – 7,517 – 29 7,546Change in fair value of preferred

shares . . . . . . . . . . . . . . . . – – 44,959 – 44,959

Total other changes . . . . . . . . . . – 7,517 44,959 29 52,505

At December 31, 2019 . . . . . . . . . 85,402 7,517 258,758 384 352,061

At January 1, 2020 . . . . . . . . . . 85,402 7,517 258,758 384 352,061



– I-40 –

Loans fromrelated parties

Interestpayable

Preferredshares issued to

investorsLease

liabilities Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000(Note 20) (Note 18) (Note 21) (Note 19)

Changes from financing cash flows:Proceeds from issuance of preferred

shares . . . . . . . . . . . . . . . . – – 334,381 – 334,381Capital element of lease rentals paid . – – – (495) (495)Interest element of lease rentals paid . – – – (16) (16)

Total changes from financing cashflows . . . . . . . . . . . . . . . . – – 334,381 (511) 333,870

Exchange adjustments . . . . . . . . . 1,040 – (31,259) – (30,219)

Other changes:Reclassification of loans from related

parties as preferred shares andnon-controlling interests . . . . . . (86,442) (10,592) 81,394 – (15,640)

Additions . . . . . . . . . . . . . . . – – – 923 923Interest expenses . . . . . . . . . . . – 4,270 – 16 4,286Change in fair value of preferred

shares . . . . . . . . . . . . . . . . – – 572,051 – 572,051

Total other changes . . . . . . . . . . (86,442) (6,322) 653,445 939 561,620

At December 31, 2020 . . . . . . . . . – 1,195 1,215,325 812 1,217,332

At January 1, 2021 . . . . . . . . . . – 1,195 1,215,325 812 1,217,332Changes from financing cash flows:Proceeds from issuance of preferred

shares . . . . . . . . . . . . . . . . – – 323,393 – 323,393Capital element of lease rentals paid . – – – (211) (211)Interest element of lease rentals paid . – – – (17) (17)

Total changes from financing cashflows . . . . . . . . . . . . . . . . – – 323,393 (228) 323,165

Exchange adjustments . . . . . . . . . – – (34,170) – (34,170)

Other changes:Additions . . . . . . . . . . . . . . . – – – 925 925Interest expenses . . . . . . . . . . . – – – 17 17Change in fair value of preferred

shares . . . . . . . . . . . . . . . . – – 217,244 – 217,244

Total other changes . . . . . . . . . . – – 217,244 942 218,186

At May 31, 2021 . . . . . . . . . . . – 1,195 1,721,792 1,526 1,724,513



– I-41 –

(c) Total cash outflow for leases

Amounts included in the cash flow statement for leases comprise the following:


2019 2020 2020 2021


Lease rental paid withinfinancing cash flows . . . . . . . 520 511 217 228

18 TRADE AND OTHER PAYABLES

The Group


2019 2020 2021

RMB’000 RMB’000 RMB’000Trade payables . . . . . . . . . . . . . . . . . . . (i) 3,059 2,117 3,266Interest payables . . . . . . . . . . . . . . . . . 7,517 1,195 1,195Salary and welfare payables . . . . . . . . . . 3,752 4,172 5,231[REDACTED] . . . . . . . . . . . . . . . . . . . – 6,642 14,197Other payables and accruals . . . . . . . . . . 333 1,906 1,899

14,661 16,032 25,788

(i) The aging analysis of the Group’s trade payables, based on the invoice date, is as follows:


2019 2020 2021

RMB’000 RMB’000 RMB’000Within 3 months . . . . . . . . . . . . . . 2,408 1,930 1,4123 to 6 months . . . . . . . . . . . . . . . . 177 – 1,6706 to 12 months . . . . . . . . . . . . . . . . 348 – –Over 12 months but within 24 months . 126 187 166Over 24 months . . . . . . . . . . . . . . . – – 18

3,059 2,117 3,266



– I-42 –

19 LEASE LIABILITIES

The following table shows the remaining contractual maturities of the Group’s lease liabilities at the end ofeach of the Track Record Period.

As at December 31, 2019 As at December 31, 2020 As at May 31, 2021

Presentvalue of the

minimumlease

payments

Totalminimum

leasepayments

Presentvalue of the

minimumlease

payments

Totalminimum

leasepayments

Presentvalue of the

minimumlease

payments

Totalminimum

leasepayments

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Within 1 year . . . . . . . . . 384 390 472 483 795 813

After 1 year but within2 years . . . . . . . . . . . – – 340 362 462 491

After 2 year but within3 years . . . . . . . . . . . – – – – 269 303

– – 340 362 731 794

384 390 812 845 1,526 1,607

Less: total future interestexpenses . . . . . . . . . . (6) (33) (81)

Present value of leaseliabilities . . . . . . . . . . 384 812 1,526

20 LOANS FROM RELATED PARTIES

The Group


2019 2020 2021

RMB’000 RMB’000 RMB’000Loan from Weihai Hongwang (i) . . . . . . . . 15,640 – –Loan from Gold Ridge (ii) . . . . . . . . . . . . 69,762 – –

85,402 – –

(i) Weihai Hongwang Enterprise Management Consulting Center (Limited Partnership) (“WeihaiHongwang”) is a partnership organization which the limited partners are the management, consultantsand business partners of the Group. In 2019, Weihai Hongwang granted loans of RMB15,640,000 toHeMo China with an annual interest rate of 15%. On April 25, 2020, Weihai Hongwang entered into aninvestment agreement with HeMo China to acquire 1.59% interest of HeMo China at a consideration ofRMB16,835,000. The loan principal of RMB15,640,000 has been converted into equity of HeMo Chinaduring the year ended December 31, 2020. As detailed in note 30, the interest of HeMo China held byWeihai Hongwang was subsequently acquired by the Group.

(ii) On April 26, 2019, Gold Ridge provided the Company a loan from related parties amounting toUSD10,000,000 (equivalent to RMB67,307,000) with an annual interest rate of 15%. On April 25, 2020,Gold Ridge entered a subscription letter with the Company that the Company issued 17,195,850 SeriesA+ preferred shares to Gold Ridge at a consideration of USD11,496,000, settled by the aggregatedamount of the loan principal and accrued interest.



– I-43 –

21 PREFERRED SHARES ISSUED TO INVESTORS

Series A Preferred shares

On September 22, 2017, the Company issued 90,000,000 Series A preferred shares at cash considerationof USD 27,000,000 (equivalent to RMB178,451,600) to several independent investors.

Series A+ Preferred shares

On April 25, 2020, the Company issued 17,195,850 Series A+ preferred shares to Gold Ridge to settlethe loan from related parties together with accrued interests amounting to USD11,496,000 (equivalent toRMB81,394,000) (note 20).

Series B Preferred shares

On October 16, 2020, the Company issued 49,786,353 Series B preferred shares at cash consideration ofUSD 50,000,000 (equivalent to RMB334,381,000) to several independent investors.

Series C Preferred shares

On January 12, 2021, the Company issued 35,391,603 Series C preferred shares at cash consideration ofUSD 50,000,000 (equivalent to RMB323,393,000) to several independent investors.

The Series A preferred shares, Series A+ preferred shares, Series B and Series C preferred shares,(collectively, the “Preferred Shares”) are redeemable by the investors upon specified contingent eventsincluding change of control. The holders of the Preferred Shares are entitled to discretionary dividends, inaddition to the redemption options.

Upon the closing of a qualified [REDACTED] as defined in the related agreements the preferred shareswill automatically be converted into ordinary shares, or as elected by holders of Preferred Shares at any timeafter the date of issuance, the Preferred Shares are convertible into fully-paid and non-assessable ordinaryshares, all are based on the then effective conversion price without paying any additional consideration.

The Company accounts for the preferred shares issued to investors as financial liabilities at fair valuethrough profit or loss.

The movements of the preferred shares issued to investors are set out below:

The Group and Company

Note

Series APreferred

Shares

Series A+Preferred

Shares

Series BPreferred

Shares

Series CPreferred

Shares Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000At January 1, 2019 . . . . . . . . 210,336 – – – 210,336Changes in fair value through

profit or loss . . . . . . . . . . 6(b) 44,959 – – – 44,959Exchange realignment . . . . . . 3,463 – – – 3,463

At December 31, 2019 . . . . . . 258,758 – – – 258,758



– I-44 –

Note

Series APreferred

Shares

Series A+Preferred

Shares

Series BPreferred

Shares

Series CPreferred

Shares Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000At January 1, 2020 . . . . . . . . 258,758 – – – 258,758

Issuance for cash . . . . . . . . . – – 334,381 – 334,381Conversion of loans from related

parties into Preferred Shares . . 20 – 81,394 – – 81,394Changes in fair value through

profit or loss . . . . . . . . . . 6(b) 431,197 56,700 84,154 – 572,051Exchange realignment . . . . . . (16,738) (6,385) (8,136) – (31,259)

At December 31, 2020 . . . . . . . 673,217 131,709 410,399 – 1,215,325

Note

Series APreferred

Shares

Series A+Preferred

Shares

Series BPreferred

Shares

Series CPreferred

Shares Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000At January 1, 2021 . . . . . . . . 673,217 131,709 410,399 – 1,215,325

Issuance for cash . . . . . . . . . – – – 323,393 323,393Changes in fair value through

profit or loss . . . . . . . . . . 6(b) 114,280 21,168 53,810 27,986 217,244Exchange realignment . . . . . . (16,168) (3,163) (9,856) (4,983) (34,170)

At May 31, 2021 . . . . . . . . . 771,329 149,714 454,353 346,396 1,721,792

The fair value of the preferred shares issued to investors is determined using a hybrid method (see

note 3(b)) and the significant unobservable input used in the fair value measurement is discount rate,

volatility, risk-free interest rate, expected probability of [REDACTED] and discount for lack of

marketability (“DLOM”).

Key valuation assumptions used to determine carrying amount of the preferred shares issued to

investors are as follows:

The Group and the Company


2019 2020 2021

Discount rate . . . . . . . . . . . . . . . . . 25.5% 19.5% 18.5%Volatility . . . . . . . . . . . . . . . . . . . . 38.0% 50.8% 52.6%Risk-free interest rate . . . . . . . . . . . . 1.6% 0.4% 0.7%Expected probability of [REDACTED] . 50% 80% 85%Discount for lack of marketability . . . 15% 9% 8%



– I-45 –

22 DERIVATIVE FINANCIAL LIABILITIES

On September 22, 2017, the Company signed a license agreement with Imperative Care Inc. (“ICI”). As part ofthe consideration for the license, ICI received a non-dilutive 18% equity interest of HeMo Jirui. On May 27, 2020,the license agreement was amended, ICI transferred all of its 18% equity interest in HeMo Jirui to HeMo China for18,321,378 ordinary shares of the Company with par value of USD0.001 each. Since then, ICI became an ordinaryshareholder of the Company, and owned 8% equity interest of the Company with a non-dilutive right. The differencebetween the carrying amount of the exchanged ordinary shares in HeMo Jirui and the fair value of the Company’sordinary shares with non-dilutive rights as at the date of issuing the shares of the Company, was included in equity.

In 2020 and 2021, based on the non-dilutive right owned by ICI, the Company issued 4,329,248 and 4,549,393additional ordinary shares to ICI with par value of USD0.001 each as Preferred shares were issued to certaininvestors.

The Group recognized the non-dilutive right granted as derivative financial liabilities and measured thenon-dilutive right at fair value. The movements of the derivative financial liabilities during the Track Record Periodare as follows:

Derivativefinancial liabilities

RMB’000At January 1, 2019 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . –Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,029Changes in fair value due to exercise of non-dilutive right . . . . . . . . . . . . . . . . . . . . (22,221)Changes in fair value recognized in profit or loss during the year . . . . . . . . . . . . . . . 4,560Exchange realignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . –

At December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,368Changes in fair value due to exercise of non-dilutive right . . . . . . . . . . . . . . . . . . . . (33,162)Changes in fair value recognized in profit or loss during the period . . . . . . . . . . . . . . 12Exchange realignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (218)

At May 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . –

Valuation techniques and significant assumptions adopted for determining the fair value of the non-dilutive

right was set out in Note 26(e).

23 DEFERRED INCOME

The Group received grants from the local government on certain R&D projects, which have been recognized asdeferred income and are subsequently recognized in profit or loss over the useful life of the related assets. Themovements of deferred income during the Track Record Period are as follows:

RMB’000At January 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,520Recognized as other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,866)

At December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,440Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,910Recognized as other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,115)

At December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,235Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,110Recognized as other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (474)

At May 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,871



– I-46 –

24 CAPITAL, RESERVES AND DIVIDENDS

(a) Movements in components of equity

The reconciliation between the opening and closing balances of each component of the Group’sconsolidated equity is set out in the consolidated statement of changes in equity. Details of the changes in theCompany’s equity between the beginning and the end of the year/period are set out below:

The Company

NoteSharecapital

Sharepremium

Capitalreserve

Exchangereserve

Accumulatedlosses Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Balance at January 1, 2019 . . 659 – 3,446 60 (34,642) (30,477)

Changes in equity for the yearended December 31, 2019:

Total comprehensive incomefor the year . . . . . . . . . – – – (500) (54,482) (54,982)

Equity-settled share-basedtransactions . . . . . . . . . 25 – – 2,593 – – 2,593

Balance at December 31, 2019 . 659 – 6,039 (440) (89,124) (82,866)

Balance at December 31, 2019and January 1, 2020 . . . . . 659 – 6,039 (440) (89,124) (82,866)

Changes in equity for the yearended December 31, 2020:

Total comprehensive incomefor the year . . . . . . . . . – – – (2,532) (599,340) (601,872)

Equity-settled share-basedtransactions . . . . . . . . . 25 25 6,014 (6,039) – – –

Acquisition of NCI by issuingof the Company’s shares . . 22 130 50,383 – – – 50,513

Issuance of additional sharesto equity shareholder withnon-dilutive right . . . . . . 22 29 22,192 – – – 22,221

Balance at December 31, 2020 . 843 78,589 – (2,972) (688,464) (612,004)

Balance at December 31, 2020and January 1, 2021 . . . . . 843 78,589 – (2,972) (688,464) (612,004)

Changes in equity for the fivemonths ended May 31, 2021:

Total comprehensive incomefor the year . . . . . . . . . – – – 14,122 (225,240) (211,118)

Issuance of additional sharesto equity shareholder withnon-dilutive right . . . . . . 22 29 33,133 – – – 33,162

Balance at May 31, 2021 . . . 872 111,722 – 11,150 (913,704) (789,960)



– I-47 –

(b) Dividends

The directors of the Company did not propose any declaration of dividend during the Track RecordPeriod.

(c) Share capital

Authorized

The Company was incorporated in the Cayman Islands as an exempted company with limitedliability on June 21, 2017 with authorized share capital of USD1,000,000 divided into 1,000,000,000ordinary shares with par value of USD0.001 each.

On September 22, 2017, the authorized share capital of the Company was USD1,000,000 dividedinto (i) 910,000,000 ordinary shares of a nominal or par value of USD0.001 each, and (ii) 90,000,000convertible Series A Preferred Shares of a par value of USD0.001 each.

On April 25, 2020, the authorized share capital of the Company was USD1,000,000 divided into(i) 889,304,150 ordinary shares of a nominal or par value of USD0.001 each, (ii) 93,500,000 convertibleSeries A Preferred Shares of a par value of USD0.001 each, and (iii) 17,195,850 convertible Series A+Preferred Shares of a par value of USD0.001 each.

On October 16, 2020, the authorized share capital of the Company was USD1,000,000 dividedinto (i) 839,517,797 ordinary shares of a nominal or par value of USD0.001 each, (ii) 93,500,000convertible Series A Preferred Shares of a par value of USD0.001 each, (iii) 17,195,850 convertibleSeries A+ Preferred Shares of a par value of USD0.001 each, and (iv) 49,786,353 convertible Series BPreferred Shares of a par value of USD0.001 each.

On January 12, 2021, the authorized share capital of the Company was USD1,000,000 dividedinto (i) 804,126,194 ordinary shares of a nominal or par value of USD0.001 each, (ii) 93,500,000convertible Series A Preferred Shares of a par value of USD0.001 each, (iii) 17,195,850 convertibleSeries A+ Preferred Shares of a par value of USD0.001 each, (iv) 49,786,353 convertible Series BPreferred Shares of a par value of USD0.001 each, and (v) 35,391,603 convertible Series C PreferredShares of a par value of USD0.001 each.

After issuing several preferred shares, as at May 31, 2021, the authorized share capital of theCompany was USD1,000,000 divided into (i) 804,126,194 ordinary shares of a nominal or par value ofUS$0.001 each, and (ii) 195,873,806 convertible Preferred Shares of a nominal or par value ofUSD0.001 each, 93,500,000 of which are designated Series A Preferred Shares, 17,195,850 of which aredesignated Series A+ Preferred Shares, 49,786,353 of which are designated Series B Preferred Shares,and 35,391,603 of which are designated Series C Preferred Shares.



– I-48 –

Issued and fully paid

Ordinary shares Series A Preferred Shares Total

Number ofshares

Sharecapital

Number ofshares

Sharecapital

Sharecapital

RMB’000 RMB’000 RMB’000Issued:At January 1, 2019,

December 31, 2019 andJanuary 1, 2020 . . . . . . . . 100,000,000 659 – – 659

Issuance of ordinary sharesto equity shareholderswith non-dilutive right(Note 22) . . . . . . . . . . . . 22,650,626 159 – – 159

Equity-settled preferred share(Note 25) . . . . . . . . . . . . – – 3,500,000 25 25

At December 31, 2020 . . . . . . 122,650,626 818 3,500,000 25 843Issuance of ordinary shares to

equity shareholders withnon-dilutive right (Note 22) 4,549,393 29 – – 29

At May 31, 2021 . . . . . . . . . 127,200,019 847 3,500,000 25 872

(d) Nature and purpose of reserves

(i) Share premium

The application of the share premium account is governed by the Companies Act of the CaymanIslands.

(ii) Exchange reserve

The exchange reserve comprises all foreign exchange differences arising from the translation ofthe financial statements of the Company and certain subsidiaries within the Group. The reserve is dealtwith in accordance with the accounting policies set out in Note 2(u).

(iii) Capital reserve

The capital reserve primarily comprises the following:

– Equity settled share-based transaction (see Note 24(d)(iii));

– Difference between consideration paid/received for acquisition/disposal of non-controllinginterests without change in control.

(e) Capital management

The Group’s objectives in the aspect of managing capital are to safeguard the Group’s ability tocontinue as a going concern in order to provide returns for shareholders and benefits for other stakeholdersand to maintain an optimal capital structure to reduce the cost of capital.

The Group defines “capital” as including all components of equity, loans from related parties andredeemable preferred shares recognized as financial liabilities as at the end of each of the Track Record Periodand “debt” as lease liabilities. On this basis, the amount of capital employed at December 31, 2019 and 2020and at May 31, 2021 was RMB38,672,000 and RMB292,136,000 and RMB608,958,000, respectively and thedebt-to-capital ratio is 1.0% and 0.3% and 0.3%, respectively.



– I-49 –

The Group actively and regularly reviews and manages its capital structure to maintain a balancebetween the higher shareholders returns that might be possible with higher levels of borrowings and theadvantages and security afforded by a sound capital position, and makes adjustments to the capital structurein light of changes in economic conditions.

25 SHARE-BASED PAYMENT

On February 1, 2018, pursuant to the approval of the Board of Directors, the Company authorized theissuance of 3,500,000 Series A Preferred Shares to Gold Ridge, which is wholly owned by Wang Chicheng Jack, as aconsideration of services provided by Wang Chicheng Jack as Executive Director and Chairman from the year 2017to 2019. The Series A Preferred Shares vested at the end of the three-year service period and came with terms andconditions consistent with Series A Preferred Shares to independent investors as disclosed in Note 21.

The number and fair values of the grant at the grant date are as follows:

Number ofshares Fair value Subscription price

RMB’000 US$Series A Preferred shares granted to

Executive Director and Chairman . . . . . . 3,500,000 6,039 –

The fair value of services received in return for equity interest granted was measured by reference to the fairvalue of equity interest granted. Key assumptions used in determining the fair value of equity interest granted aredisclosed in Note 21.

Equity-settled share-based payment expenses recognized in the consolidated statement of profit or loss duringthe Track Record Period:

The Group and the Company


2019 2020 2020 2021


General and administrative expense . . 2,593 – – –

26 FINANCIAL RISK MANAGEMENT AND FAIR VALUES OF FINANCIAL INSTRUMENTS

Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’sbusiness. The Group’s exposure to these risks and the financial risk management policies and practices used by theGroup to manage these risks are described below.

(a) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in afinancial loss to the Group. The Group’s credit risk is primarily attributable to trade receivables. The Group’sexposure to credit risk arising from cash and cash equivalents and wealth management products is limitedbecause the counterparties are reputable banks, for which the Group considered have low credit risks.

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of itscustomer.

Individual credit evaluations are performed on all customers requiring credit over a certain amount.These take into account the customer’s past payment history, financial position and other factors. TheCompany will not normally grant any credit terms to its customers. Normally, the Company does not obtaincollateral from customers.



– I-50 –

The Company measures loss allowances for trade receivables at an amount equal to lifetime ECLs,which is calculated using a provision matrix. The Company will not normally grant any credit terms to itscustomers and therefore all trade receivables are past due.

As at December 31, 2020, net trade receivables are all past due but not impaired as no customer isexpected to have significant financial difficulty. All other items within trade and other receivables do notcontain past due or impaired assets.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset inthe statement of financial position.

(b) Liquidity risk

The Group’s policy is to regularly monitor its liquidity requirement, to ensure that it maintainssufficient reserves of cash to meet its liquidity requirements in the short and longer term.

The following tables show the remaining contractual maturities at the end of each reporting period ofthe Group’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows(including interest payments computed using contractual rates or, if floating, based on rates current at the endof the respective reporting periods) and the earliest date the Group can be required to pay:

At December 31, 2019 Contractual undiscounted cash outflow

Within1 year or on

demand

More than1 year butless than2 years

More than2 years but

less than5 years

More than5 years Total

Carryingamount

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000Trade and other

payables . . . . . . . 14,661 – – – 14,661 14,661Loans from related

parties . . . . . . . . . 85,402 – – – 85,402 85,402Preferred shares issued

to investors . . . . . . 258,758 – – – 258,758 258,758Lease liabilities . . . . . 390 – – – 390 384

Total . . . . . . . . . . 359,211 – – – 359,211 359,205

At December 31, 2020 Contractual undiscounted cash outflow

Within1 year or on

demand



less than5 years


Carryingamount


payables . . . . . . . 16,032 – – – 16,032 16,032Preferred shares issued

to investors . . . . . . 1,215,325 – – – 1,215,325 1,215,325Lease liabilities . . . . 483 362 – – 845 812

Total . . . . . . . . . . 1,231,840 362 – – 1,232,202 1,232,169



– I-51 –

At May 31, 2021 Contractual undiscounted cash outflow

Within1 year or on

demand



less than5 years


Carryingamount


payables . . . . . . . 25,788 – – – 25,788 25,788Preferred shares issued

to investors . . . . . . 1,721,792 – – – 1,721,792 1,721,792Lease liabilities . . . . 813 491 303 – 1,607 1,526

Total . . . . . . . . . . 1,748,393 491 303 – 1,749,187 1,749,106

(c) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate because of changes in market interest rates. The Group’s interest rate risk arises primarily from cashat banks, wealth management products issued by banks, loans from related parties and lease liabilities.Instruments bearing interest at variable rates and fixed rates expose the Group to cashflow interest rate riskand fair value interest rate risk respectively. The Group regularly reviews its strategy on interest rate riskmanagement in the light of the prevailing market condition. The Group’s interest rate profile as monitored bymanagement is set out in below:

The following table details the interest rate profile of the Group’s financial assets and liabilities as of theend of each of the reporting period.

(i) Interest rate profile

At December 31, At May 31,

2019 2020 2021

Effectiveinterest rate



% RMB’000 % RMB’000 % RMB’000Fixed rate instruments:Loans from related parties . . 15% (85,402) – – – –Lease liabilities . . . . . . . . 4.75% (384) 4.75% (812) 4.75% (1,526)

(85,786) (812) (1,526)Variable rate instruments:Cash at bank . . . . . . . . . 0.01%-2.3% 12,767 0.01%-1.49% 251,601 0.01%-0.35% 558,861Wealth management products 2.8%-3.5% 20,000 2.4% 43,000 3.42% 20,000

32,767 294,601 578,861

(53,019) 293,789 577,335



– I-52 –

(ii) Sensitivity analysis

The effect on the Group’s loss after tax for each year of the Track Record Period and accumulatedlosses as at the end of each reporting period that an increase/decrease of 100 basis points in interestrates would have.

As at December 31, 2019 and 2020 and May 31, 2021, it is estimated that a generaldecrease/increase of 100 basis points in interest rates, with all other variables held constant, would haveincreased/decreased the Group’s loss after tax and accumulated losses by approximately RMB328,000and RMB2,946,000 and RMB5,789,000.

The sensitivity analysis above indicates the instantaneous change in the Group’s loss after tax andaccumulated losses that would arise assuming that the change in interest rates had occurred at the end ofthe reporting periods and had been applied to re-measure those financial instruments held by the Groupwhich expose the Group to fair value interest rate risk at the end of the reporting periods. In respect ofthe exposure to cash flow interest rate risk arising from floating rate non-derivative instruments held bythe Group at the end of the reporting periods, the impact on the Group’s loss after tax and accumulatedlosses is estimated as an annualized impact on interest expense or income of such a change in interestrates.

(d) Currency risk

The Group is exposed to currency risk primarily through cash at banks, prepayments and otherreceivables, trade and other payables that are denominated in a foreign currency i.e. a currency other than thefunctional currency of the operations to which the transactions relate. The currencies giving rise to this riskare primarily United States dollars (“USD”).

(i) Exposure to currency risk

The following table details the Group’s exposure at the end of each reporting period to currencyrisk arising from recognized assets or liabilities denominated in a currency other than the functionalcurrency of the entity to which they relate. For presentation purposes, the amounts of the exposure areshown in Renminbi, translated using the spot rate at the year end date. Differences resulting from thetranslation of the financial statements of foreign operations into the Group’s presentation currency areexcluded.


2019 2020 2021

USD USD USDRMB’000 RMB’000 RMB’000

Cash and cash equivalents . . . . 7 13,239 12,921Trade and other payables . . . . . (195) (1,390) (2,885)

Gross exposure arising fromrecognized assets andliabilities . . . . . . . . . . . . . . (188) 11,849 10,036



– I-53 –

(ii) Sensitivity analysis

The following table indicates the instantaneous change in the Group’s loss after taxation andaccumulated losses that would arise if foreign exchange rates to which the Group has significantexposure at the end of the reporting period had changed at that date, assuming all other risk variablesremained constant.


2019 2020 2021

Increase/(decrease) in

foreignexchange

rates

Effect on lossafter tax andaccumulated

losses


foreignexchange

rates


losses


foreignexchange

rates


lossesRMB’000 RMB’000 RMB’000

USD . . . . . . . . . . . . . 10% (19) 10% 1,185 10% 1,004

Results of the analysis as presented in the above table represent an aggregation of the

instantaneous effects on each of the Group entities’ loss after tax and equity measured in the respective

functional currencies, translated into RMB at the exchange rate ruling at the end of the reporting period

for presentation purposes. The analysis is performed on the same basis during the Track Record Period.

(e) Fair value measurement

(i) Financial assets and liabilities measured at fair value

Fair value hierarchy

The following table presents the fair value of the Group’s financial instruments measured atthe end of the reporting periods on a recurring basis, categorized into the three-level fair valuehierarchy as defined in IFRS 13, Fair value measurement. The level into which a fair valuemeasurement is classified is determined with reference to the observability and significance of theinputs used in the valuation technique as follows:

– Level 1 valuations: Fair value measured using only Level 1 inputs i.e. unadjustedquoted prices in active markets for identical assets or liabilitiesat the measurement date

– Level 2 valuations: Fair value measured using Level 2 inputs i.e. observable inputswhich fail to meet Level 1, and not using significantunobservable inputs. Unobservable inputs are inputs for whichmarket data are not available

– Level 3 valuations: Fair value measured using significant unobservable inputs

The Group has engaged Asia-Pacific Consulting and Appraisal Limited, an external valuer

to perform valuations for the financial instruments, including preferred shares issued to investors,

and derivative financial liabilities. A valuation report with analysis of changes in fair value

measurement is prepared by the team at each interim and annual reporting date, and is reviewed

and approved by the management.



– I-54 –

Fair value atDecember 31,

2019Fair value measurements as at



RMB’000 RMB’000 RMB’000 RMB’000Recurring fair value

measurementsFinancial assets:Wealth management

products (Note16) . . . . . . . . . . 20,000 – – 20,000

Financial liabilities:Preferred shares

issued to investors(Note 21) . . . . . 258,758 – – 258,758

Fair value atDecember 31,

2020Fair value measurements as at





products (Note16) . . . . . . . . . . 43,000 – – 43,000


issued to investors(Note 21) . . . . . 1,215,325 – – 1,215,325

Derivative financialliabilities(Note 22) . . . . . 33,368 – – 33,368

Fair value atMay 31, 2021

Fair value measurements as atMay 31, 2021 categorized into




products(Note 16) . . . . . 20,000 – – 20,000


issued to investors(Note 21) . . . . . 1,721,792 – – 1,721,792

During the Track Record Period, there were no transfers between Level 1 and Level 2, or

transfers into or out of Level 3. The Group’s policy is to recognize transfers between levels of fair

value hierarchy as at the end of each of the reporting period in which they occur.



– I-55 –

Information about Level 3 fair value measurements

(aa) Financial assets at fair value through profit or loss

The Group has a team headed by the finance manager performing valuation for wealthmanagement products which are categorized into Level 3 of the fair value hierarchy. The teamreports directly to the head of finance department. A valuation analysis of changes in fair valuemeasurement is prepared by the team periodically, and is reviewed and approved by the head offinance department.

Below is a summary of significant unobservable inputs to the valuation of these wealthmanagement products together with a quantitative sensitivity analysis at the end of Track RecordPeriod:

December 31, 2019

Valuation techniques Significant unobservable inputs

Wealth managementproducts . . . . . . . . Discounted cash flow method Interest return rate

December 31, 2020



May 31, 2021



Due to the short period and low expected return rate ranging from 2.10% to 3.50% perannum, the Group considered the fair value of wealth management products approximatesto the cost.

(bb) Preferred shares issued to investors

The Group’s preferred shares issued to investors are grouped under Level 3 hierarchy. Thediscounted cash flow method was used to determine the total equity value of the Group and thehybrid method was adopted to determine the fair value of the financial instrument. Key valuationassumptions and the movements of the preferred shares issued to investors are presented in Note21.

If the carrying amount of preferred shares issued to investors had been 10% higher/lower,the loss before taxation for the year ended December 31, 2019 and 2020 and May 31, 2021 wouldhave been approximately RMB25,876,000 higher/lower, RMB121,533,000 higher/lower, andRMB172,179,000 higher/lower, respectively.

(cc) Derivative financial liabilities

The fair value of the Derivative financial liabilities is determined based on the present valueof the anti-dilution percentage multiplied by foreseeable financing amount discounted by theweighted average of the estimated rate of return required by equity and debt providers (“WACC”)of the Company yield as at the Valuation Dates and the significant unobservable input used in thefair value measurement is discount rate. The effect of the change of discount rate was immaterial.



– I-56 –

(ii) Fair value of financial assets and liabilities carried at other than fair value

The carrying amounts of the Group’s financial instruments carried at cost were not materiallydifferent from their fair values as at December 31, 2019 and 2020 and May 31, 2021.

27 MATERIAL RELATED PARTY TRANSACTIONS

(a) Key management personnel remuneration

Remuneration for key management personnel of the Group, including amounts paid to the Company’sdirectors as disclosed in Note 8 and certain of the highest paid employees as disclosed in Note 9, is as follows:


2019 2020 2020 2021


Salaries, allowances and benefitsin kind . . . . . . . . . . . . . . . 1,856 6,728 2,813 3,883

Discretionary bonuses . . . . . . . 421 548 – 306Equity settled share-based

payment . . . . . . . . . . . . . . 2,593 – – –

4,870 7,276 2,813 4,189

(b) Related party transactions

During the Track Record Period, the directors are of the view that the following individuals orcompanies are related parties:

Names of related parties Nature of relationship

Wang Chicheng Jack The ultimate controlling party

Weihai Hongwang EnterpriseManagement Consulting Center(Limited Partnership)

Entity controlled by members of key managementpersonnel

Gold Ridge International Ltd Parent company of the Company

HeMo Singapore Entity under control of the ultimate controlling party

In addition to the transactions disclosed elsewhere in the Historical Financial Information, the Grouphas entered into the following material related parties transactions during the Track Record Period:


2019 2020 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000Loans received from related

parties . . . . . . . . . . . . . . . . 82,947 – – –Interest on loans from related

parties . . . . . . . . . . . . . . . . 7,517 4,270 4,270 –Operation funds advanced to a

related party . . . . . . . . . . . . – 24,470 – –Operation funds advanced to the

Group by a related party . . . . – 4,931 – 2,005



– I-57 –

(c) Related party balances

The outstanding balances arising from the above transactions as at the end of each of the Track RecordPeriod are as follows:

Note As at December 31, As at May 31,

2019 2020 2021

RMB’000 RMB’000 RMB’000Interest payable . . . . . . . . . . . . . . 18 7,517 1,195 1,195Loans from related parties (i) . . . . . 20 85,402 – –Balance due from a related

party (ii) . . . . . . . . . . . . . . . . . 15 – 19,539 17,071

Notes:(i) Loans from related parties represent the loans due to Gold Ridge and Weihai Hongwang (See note

20).(ii) Balance due from a related party represents the operation funds due from HeMo Singapore (See

note 15).

28 IMMEDIATE AND ULTIMATE CONTROLLING PARTY

As at May 31, 2021, the directors consider the immediate parent and ultimate controlling party of the Groupto be Gold Ridge, which is incorporated in Cayman Island. This entity does not produce financial statementsavailable for public use.

29 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUTNOT YET EFFECTIVE FOR THE TRACK RECORD PERIOD

Up to the date of issue of this report, the IASB has issued a number of amendments, new standards andinterpretations which are not yet effective for the Track Record Period and which have not been adopted in theHistorical Financial Information as follows:

Effective foraccounting periods

beginning on orafter

Amendments to IFRS 3, Reference to the Conceptual Framework . . . . . . . . . . . . . . . . January 1, 2022Amendments to IAS 16, Property, Plant and Equipment:

Proceeds before Intended Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . January 1, 2022Amendments to IAS 37, Onerous Contracts-Cost of Fulfilling a Contract . . . . . . . . . . . January 1, 2022Annual Improvements to IFRSs 2018-2020 Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . January 1, 2022IFRS 17, Insurance contracts and related Amendments . . . . . . . . . . . . . . . . . . . . . . . January 1, 2023Amendments to IAS 1 and IFRS Practice Statement 2, Disclosure of

Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . January 1, 2023Amendments to IAS 8, Definition of Accounting Estimates . . . . . . . . . . . . . . . . . . . January 1, 2022Amendments to IAS 12, Deferred Tax related to Assets and Liabilities arising from a

Single Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . January 1, 2023Amendments to IAS 1, Classification of Liabilities as Current or Non-current . . . . . . . January 1, 2023Amendments to IFRS 4, Extension of the temporary exemption from applying IFRS 9 . . January 1, 2023Amendments to IFRS 10 and IAS 28, Sale or contribution of assets between an investor

and its associate or joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . To be determined

The Group is in the process of making an assessment of what the impact of these amendments, new standardsand interpretations is expected to be in the period of initial application. So far, the Group has concluded that theadoption of them is unlikely to have a significant impact on the Group’s results of operations and financial position.



– I-58 –

30 SUBSEQUENT EVENTS

(i) Acquisition of NCI in HeMo China

On July 1, 2021, the Group entered into an equity transfer agreement with Weihai Shengzhuo EnterpriseManagement Consulting Center (Limited Partnership) (“Weihai Shengzhuo”) and an equity transferagreement with and Weihai Hongwang, pursuant to which, the Company has agreed to acquire the 3.16%equity interests in HeMo China held by Weihai Shengzhuo and 1.59% equity interests in HeMo China held byWeihai Hongwang at the consideration of RMB23,698,000 and RMB20,136,000, respectively. The acquisitionwas legally completed in July 2021.

(ii) Adoption of RSU Scheme

On June 22, 2021, the Company adopted the restricted share unit award scheme (“RSU Scheme”). OnJune 24, 2021, the Company entered into a trust deed with a RSU trustee, pursuant to which the RSU trusteehas agreed to act as the trustee to administer the RSU Scheme and to hold the ordinary shares which willsubsequently be used to satisfy the vesting of the outstanding granted under the RSU Scheme. On July 2,2021, the Company allotted and issued a total of 16,926,419 ordinary shares to Adventure Wave DevelopmentLimited, a wholly-owned subsidiary of the RSU Trustee at a par value of US$0.001 each. As of the reportdate, the Company has granted an aggregate of 16,418,934 restricted share award (each a “RSU”, orcollectively “RSUs”), representing rights to receive 16,418,934 ordinary shares upon vesting of the RSUs, tocertain grantees who are the employees and external advisors of the Group, including certain shareholders ofWeihai Shengzhuo and Weihai Hongwang.

(iii) Acquisition of equity interests controlled by ultimate controller

On July 16, 2021, the Company acquired the entire equity interests of HeMo Singapore from WangChicheng Jack, of which 65% will be held by the Company and the remaining 35% is held by Wang Chicheng

Jack on behalf of the Company.

SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company and its subsidiariesin respect of any period subsequent to May 31, 2021 and up to the date of this report.



– I-59 –

The following information does not form part of the Accountants’ Report received from theCompany’s reporting accountants, KPMG, Certified Public Accountants, Hong Kong, as set outin Appendix I to this [REDACTED], and is included herein for illustrative purposes only. Theunaudited pro forma financial information should be read in conjunction with the section headed“Financial information” in this [REDACTED] and the historical financial information includedin the Accountants’ Report set out in Appendix I to this [REDACTED].

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NETTANGIBLE ASSETS

The following unaudited pro forma statement of adjusted net tangible assets of theGroup prepared in accordance with Rule 4.29 of the Listing Rules and with reference toAccounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion inInvestment Circulars” issued by the Hong Kong Institute of Certified Public Accountants andis set out below to illustrate the effect of the [REDACTED] on the consolidated net tangibleliabilities of the Group as at May 31, 2021 as if the [REDACTED] had taken place on May 31,2021.

The unaudited pro forma statement of adjusted consolidated net tangible assets has beenprepared for illustrative purposes only and because of its hypothetical nature, it may not givea true picture of the financial position of the Group had the [REDACTED] been completed asat May 31, 2021 or at any future date.

[REDACTED]


APPENDIX II — UNAUDITED PRO FORMA FINANCIAL INFORMATION

– II-1 –

[REDACTED]



– II-2 –

B. REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report received from the reporting accountants, KPMG,Certified Public Accountants, Hong Kong, in respect of the Group’s pro forma financialinformation for the purpose in this [REDACTED].

[REDACTED]



– II-3 –

[REDACTED]



– II-4 –

[REDACTED]



– II-5 –

Set out below is a summary of certain provisions of the Memorandum and Articles ofAssociation of the Company and of certain aspects of Cayman company law.

The Company was incorporated in the Cayman Islands as an exempted company withlimited liability on June 21, 2017 under the Companies Act, Cap 22 (Act 3 of 1961, asconsolidated and revised) of the Cayman Islands (the “Companies Act”). The Company’sconstitutional documents consist of its Amended and Restated Memorandum of Associationand its Amended and Restated Articles of Association.

SUMMARY OF THE CONSTITUTION OF THE COMPANY

1. Memorandum of Association

The Memorandum of Association of the Company was conditionally adopted on [•] andstates, inter alia, that the liability of the members of the Company is limited, that the objectsfor which the Company is established are unrestricted and the Company shall have full powerand authority to carry out any object not prohibited by the Companies Act or any other law ofthe Cayman Islands.

The Memorandum of Association is available for inspection at the address specified inAppendix V in the section headed “Documents available for inspection”.

2. Articles of Association

The Articles of Association of the Company were conditionally adopted on [•] andinclude provisions to the following effect:

2.1 Classes of Shares

The share capital of the Company consists of ordinary shares. The capital of theCompany at the date of adoption of the Articles is US$[1,000,000] divided into[1,000,000,000] shares of US$0.001 each.

2.2 Directors

(a) Power to allot and issue Shares

Subject to the provisions of the Companies Act and the Memorandum andArticles of Association, the unissued shares in the Company (whether forming partof its original or any increased capital) shall be at the disposal of the Directors, whomay offer, allot, grant options over or otherwise dispose of them to such persons, atsuch times and for such consideration, and upon such terms, as the Directors shalldetermine.


APPENDIX III — SUMMARY OF OUR CONSTITUTION ANDCAYMAN ISLANDS COMPANIES LAW

– III-1 –

Subject to the provisions of the Articles of Association and to any directionthat may be given by the Company in general meeting and without prejudice to anyspecial rights conferred on the holders of any existing shares or attaching to anyclass of shares, any share may be issued with or have attached thereto suchpreferred, deferred, qualified or other special rights or restrictions, whether inregard to dividend, voting, return of capital or otherwise, and to such persons atsuch times and for such consideration as the Directors may determine. Subject to theCompanies Act and to any special rights conferred on any shareholders or attachingto any class of shares, any share may, with the sanction of a special resolution, beissued on terms that it is, or at the option of the Company or the holder thereof,liable to be redeemed.

(b) Power to dispose of the assets of the Company or any subsidiary

The management of the business of the Company shall be vested in theDirectors who, in addition to the powers and authorities by the Articles ofAssociation expressly conferred upon them, may exercise all such powers and do allsuch acts and things as may be exercised or done or approved by the Company andare not by the Articles of Association or the Companies Act expressly directed orrequired to be exercised or done by the Company in general meeting, but subjectnevertheless to the provisions of the Companies Act and of the Articles ofAssociation and to any regulation from time to time made by the Company ingeneral meeting not being inconsistent with such provisions or the Articles ofAssociation, provided that no regulation so made shall invalidate any prior act ofthe Directors which would have been valid if such regulation had not been made.

(c) Compensation or payment for loss of office

Payment to any Director or past Director of any sum by way of compensationfor loss of office or as consideration for or in connection with his retirement fromoffice (not being a payment to which the Director is contractually entitled) mustfirst be approved by the Company in general meeting.

(d) Loans to Directors

There are provisions in the Articles of Association prohibiting the making ofloans to Directors or their respective close associates which are equivalent to therestrictions imposed by the Companies Ordinance.

(e) Financial assistance to purchase Shares

Subject to all applicable laws, the Company may give financial assistance toDirectors and employees of the Company, its subsidiaries or any holding companyor any subsidiary of such holding company in order that they may buy shares in the



– III-2 –

Company or any such subsidiary or holding company. Further, subject to allapplicable laws, the Company may give financial assistance to a trustee for theacquisition of shares in the Company or shares in any such subsidiary or holdingcompany to be held for the benefit of employees of the Company, its subsidiaries,any holding company of the Company or any subsidiary of any such holdingcompany (including salaried Directors).

(f) Disclosure of interest in contracts with the Company or any of its subsidiaries

No Director or proposed Director shall be disqualified by his office fromcontracting with the Company either as vendor, purchaser or otherwise nor shallany such contract or any contract or arrangement entered into by or on behalf ofthe Company with any person, company or partnership of or in which any Directorshall be a member or otherwise interested be capable on that account of beingavoided, nor shall any Director so contracting or being any member or so interestedbe liable to account to the Company for any profit so realised by any such contractor arrangement by reason only of such Director holding that office or the fiduciaryrelationship thereby established, provided that such Director shall, if his interest insuch contract or arrangement is material, declare the nature of his interest at theearliest meeting of the board of Directors at which it is practicable for him to do so,either specifically or by way of a general notice stating that, by reason of the factsspecified in the notice, he is to be regarded as interested in any contracts of aspecified description which may be made by the Company.

A Director shall not be entitled to vote on (nor shall be counted in the quorumin relation to) any resolution of the Directors in respect of any contract orarrangement or any other proposal in which the Director or any of his closeassociates (or, if required by the Listing Rules, his other associates) has any materialinterest, and if he shall do so his vote shall not be counted (nor is he to be countedin the quorum for the resolution), but this prohibition shall not apply to any of thefollowing matters, namely:

(i) the giving to such Director or any of his close associates of any security orindemnity in respect of money lent or obligations incurred or undertakenby him or any of them at the request of or for the benefit of the Companyor any of its subsidiaries;

(ii) the giving of any security or indemnity to a third party in respect of a debtor obligation of the Company or any of its subsidiaries for which theDirector or any of his close associates has himself/themselves assumedresponsibility in whole or in part and whether alone or jointly under aguarantee or indemnity or by the giving of security;



– III-3 –

(iii) any proposal concerning an offer of shares, debentures or other securitiesof or by the Company or any other company which the Company maypromote or be interested in for subscription or purchase where theDirector or any of his close associates is/are or is/are to be interested as aparticipant in the underwriting or sub-underwriting of the offer;

(iv) any proposal or arrangement concerning the benefit of employees of theCompany or any of its subsidiaries including:

(A) the adoption, modification or operation of any employees’ sharescheme or any share incentive scheme or share option scheme underwhich the Director or any of his close associates may benefit; or

(B) the adoption, modification or operation of a pension or providentfund or retirement, death or disability benefits scheme which relatesboth to Directors, their close associates and employees of theCompany or any of its subsidiaries and does not provide in respect ofany Director or any of his close associates, as such any privilege oradvantage not generally accorded to the class of persons to whichsuch scheme or fund relates; and

(v) any contract or arrangement in which the Director or any of his closeassociates is/are interested in the same manner as other holders of sharesor debentures or other securities of the Company by virtue only ofhis/their interest in shares or debentures or other securities of theCompany.

(g) Remuneration

The Directors shall be entitled to receive by way of remuneration for theirservices such sum as shall from time to time be determined by the Directors, or theCompany in general meeting, as the case may be, such sum (unless otherwisedirected by the resolution by which it is determined) to be divided amongst theDirectors in such proportions and in such manner as they may agree, or failingagreement, equally, except that in such event any Director holding office for lessthan the whole of the relevant period in respect of which the remuneration is paidshall only rank in such division in proportion to the time during such period forwhich he has held office. Such remuneration shall be in addition to any otherremuneration to which a Director who holds any salaried employment or office inthe Company may be entitled by reason of such employment or office.



– III-4 –

The Directors shall also be entitled to be paid all expenses, including travelexpenses, reasonably incurred by them in or in connection with the performance oftheir duties as Directors including their expenses of travelling to and from boardmeetings, committee meetings or general meetings or otherwise incurred whilstengaged on the business of the Company or in the discharge of their duties asDirectors.

The Directors may grant special remuneration to any Director who shallperform any special or extra services at the request of the Company. Such specialremuneration may be made payable to such Director in addition to or in substitutionfor his ordinary remuneration as a Director, and may be made payable by way ofsalary, commission or participation in profits or otherwise as may be agreed.

The remuneration of an executive Director or a Director appointed to anyother office in the management of the Company shall from time to time be fixed bythe Directors and may be by way of salary, commission or participation in profits orotherwise or by all or any of those modes and with such other benefits (includingshare option and/or pension and/or gratuity and/or other benefits on retirement)and allowances as the Directors may from time to time decide. Such remunerationshall be in addition to such remuneration as the recipient may be entitled to receiveas a Director.

(h) Retirement, appointment and removal

The Directors shall have power at any time and from time to time to appointany person to be a Director, either to fill a casual vacancy or as an addition to theexisting Directors. Any Director so appointed shall hold office only until the nextgeneral meeting of the Company and shall then be eligible for re-election at thatmeeting, but shall not be taken into account in determining the number of Directorsand which Directors are to retire by rotation at such meeting.

The Company may by ordinary resolution remove any Director (including aManaging Director or other executive Director) before the expiration of his periodof office notwithstanding anything in the Articles of Association or in anyagreement between the Company and such Director (but without prejudice to anyclaim for compensation or damages payable to him in respect of the termination ofhis appointment as Director or of any other appointment of office as a result of thetermination of this appointment as Director). The Company may also by ordinaryresolution appoint another person in his place. Any Director so appointed shall holdoffice during such time only as the Director in whose place he is appointed wouldhave held the same if he had not been removed.



– III-5 –

The Company may also by ordinary resolution elect any person to be aDirector, either to fill a casual vacancy or as an addition to the existing Directors.No person shall, unless recommended by the Directors, be eligible for election to theoffice of Director at any general meeting unless, during the period, which shall be atleast seven days, commencing no earlier than the day after the despatch of the noticeof the meeting appointed for such election and ending no later than seven days priorto the date of such meeting, there has been given to the Secretary of the Companynotice in writing by a member of the Company (not being the person to beproposed) entitled to attend and vote at the meeting for which such notice is given ofhis intention to propose such person for election and also notice in writing signed bythe person to be proposed of his willingness to be elected.

There is no shareholding qualification for Directors nor is there any specifiedage limit for Directors.

The office of a Director shall be vacated:

(i) if he resigns his office by notice in writing to the Company at its registeredoffice or its principal office in Hong Kong;

(ii) if an order is made by any competent court or official on the grounds thathe is or may be suffering from mental disorder or is otherwise incapable ofmanaging his affairs and the Directors resolve that his office be vacated;

(iii) if, without leave, he is absent from meetings of the Directors (unless analternate Director appointed by him attends) for 12 consecutive months,and the Directors resolve that his office be vacated;

(iv) if he becomes bankrupt or has a receiving order made against him orsuspends payment or compounds with his creditors generally;

(v) if he ceases to be or is prohibited from being a Director by law or by virtueof any provision in the Articles of Association;

(vi) if he is removed from office by notice in writing served upon him signedby not less than three-fourths in number (or, if that is not a round number,the nearest lower round number) of the Directors (including himself) forthe time being then in office; or

(vii) if he shall be removed from office by an ordinary resolution of themembers of the Company under the Articles of Association.



– III-6 –

At every annual general meeting of the Company one-third of the Directors forthe time being, or, if their number is not three or a multiple of three, then thenumber nearest to, but not less than, one-third, shall retire from office by rotation,provided that every Director (including those appointed for a specific term) shall besubject to retirement by rotation at least once every three years. A retiring Directorshall retain office until the close of the meeting at which he retires and shall beeligible for re-election thereat. The Company at any annual general meeting at whichany Directors retire may fill the vacated office by electing a like number of personsto be Directors.

(i) Borrowing powers

The Directors may from time to time at their discretion exercise all the powersof the Company to raise or borrow or to secure the payment of any sum or sums ofmoney for the purposes of the Company and to mortgage or charge its undertaking,property and assets (present and future) and uncalled capital or any part thereof.

(j) Proceedings of the Board

The Directors may meet together for the despatch of business, adjourn andotherwise regulate their meetings and proceedings as they think fit in any part of theworld. Questions arising at any meeting shall be determined by a majority of votes.In the case of an equality of votes, the chairperson of the meeting shall have asecond or casting vote.

2.3 Alteration to constitutional documents

No alteration or amendment to the Memorandum or Articles of Association may bemade except by special resolution.

2.4 Variation of rights of existing shares or classes of shares

If at any time the share capital of the Company is divided into different classes ofshares, all or any of the rights attached to any class of shares for the time being issued(unless otherwise provided for in the terms of issue of the shares of that class) may,subject to the provisions of the Companies Act, be varied or abrogated either with theconsent in writing of the holders of not less than three-fourths in nominal value of theissued shares of that class or with the sanction of a special resolution passed at aseparate meeting of the holders of the shares of that class. To every such separatemeeting all the provisions of the Articles of Association relating to general meetings shallmutatis mutandis apply, but so that the quorum for the purposes of any such separatemeeting and of any adjournment thereof shall be a person or persons together holding(or representing by proxy or duly authorized representative) at the date of the relevantmeeting not less than one-third in nominal value of the issued shares of that class.



– III-7 –

The special rights conferred upon the holders of shares of any class shall not, unlessotherwise expressly provided in the rights attaching to or the terms of issue of suchshares, be deemed to be varied by the creation or issue of further shares ranking paripassu therewith.

2.5 Alteration of capital

The Company may, from time to time, whether or not all the shares for the timebeing authorized shall have been issued and whether or not all the shares for the timebeing issued shall have been fully paid up, by ordinary resolution, increase its sharecapital by the creation of new shares, such new capital to be of such amount and to bedivided into shares of such respective amounts as the resolution shall prescribe.

The Company may from time to time by ordinary resolution:

(a) consolidate and divide all or any of its share capital into shares of a largeramount than its existing shares. On any consolidation of fully paid shares anddivision into shares of larger amount, the Directors may settle any difficultywhich may arise as they think expedient and in particular (but withoutprejudice to the generality of the foregoing) may as between the holders ofshares to be consolidated determine which particular shares are to beconsolidated into each consolidated share, and if it shall happen that anyperson shall become entitled to fractions of a consolidated share or shares,such fractions may be sold by some person appointed by the Directors for thatpurpose and the person so appointed may transfer the shares so sold to thepurchaser thereof and the validity of such transfer shall not be questioned, andso that the net proceeds of such sale (after deduction of the expenses of suchsale) may either be distributed among the persons who would otherwise beentitled to a fraction or fractions of a consolidated share or shares rateably inaccordance with their rights and interests or may be paid to the Company forthe Company’s benefit;

(b) cancel any shares which at the date of the passing of the resolution have notbeen taken or agreed to be taken by any person, and diminish the amount of itsshare capital by the amount of the shares so cancelled subject to the provisionsof the Companies Act; and

(c) sub-divide its shares or any of them into shares of smaller amount than is fixedby the Memorandum of Association, subject nevertheless to the provisions ofthe Companies Act, and so that the resolution whereby any share is sub-dividedmay determine that, as between the holders of the shares resulting from suchsub-division, one or more of the shares may have any such preferred or other



– III-8 –

special rights, over, or may have such deferred rights or be subject to any suchrestrictions as compared with the others as the Company has power to attach tounissued or new shares.

The Company may by special resolution reduce its share capital or any capitalredemption reserve in any manner authorized and subject to any conditions prescribed bythe Companies Act.

2.6 Special resolution – majority required

A “special resolution” is defined in the Articles of Association to have the meaningascribed thereto in the Companies Act, for which purpose, the requisite majority shall benot less than three-fourths of the votes of such members of the Company as, beingentitled to do so, vote in person or, in the case of corporations, by their duly authorizedrepresentatives or, where proxies are allowed, by proxy at a general meeting of whichnotice specifying the intention to propose the resolution as a special resolution has beenduly given and includes a special resolution approved in writing by all of the members ofthe Company entitled to vote at a general meeting of the Company in one or moreinstruments each signed by one or more of such members, and the effective date of thespecial resolution so adopted shall be the date on which the instrument or the last of suchinstruments (if more than one) is executed.

In contrast, an “ordinary resolution” is defined in the Articles of Association tomean a resolution passed by a simple majority of the votes of such members of theCompany as, being entitled to do so, vote in person or, in the case of corporations, bytheir duly authorized representatives or, where proxies are allowed, by proxy at a generalmeeting held in accordance with the Articles of Association and includes an ordinaryresolution approved in writing by all the members of the Company aforesaid.

2.7 Voting rights

Subject to any special rights, privileges or restrictions as to voting for the time beingattached to any class or classes of shares, at any general meeting on a poll every memberpresent in person (or, in the case of a member being a corporation, by its duly authorizedrepresentative) or by proxy shall have one vote for each share registered in his name in theregister of members of the Company.

Where any member is, under the Listing Rules, required to abstain from voting onany particular resolution or restricted to voting only for or only against any particularresolution, any votes cast by or on behalf of such member in contravention of suchrequirement or restriction shall not be counted.



– III-9 –

In the case of joint registered holders of any share, any one of such persons mayvote at any meeting, either personally or by proxy, in respect of such share as if he weresolely entitled thereto; but if more than one of such joint holders be present at anymeeting personally or by proxy, that one of the said persons so present being the most or,as the case may be, the more senior shall alone be entitled to vote in respect of therelevant joint holding and, for this purpose, seniority shall be determined by reference tothe order in which the names of the joint holders stand on the register in respect of therelevant joint holding.

A member of the Company in respect of whom an order has been made by anycompetent court or official on the grounds that he is or may be suffering from mentaldisorder or is otherwise incapable of managing his affairs may vote by any personauthorized in such circumstances to do so and such person may vote by proxy.

Save as expressly provided in the Articles of Association or as otherwise determinedby the Directors, no person other than a member of the Company duly registered andwho shall have paid all sums for the time being due from him payable to the Company inrespect of his shares shall be entitled to be present or to vote (save as proxy for anothermember of the Company), or to be reckoned in a quorum, either personally or by proxyat any general meeting.

At any general meeting a resolution put to the vote of the meeting shall be decidedby way of a poll save that the chairperson of the meeting may allow a resolution whichrelates purely to a procedural or administrative matter as prescribed under the ListingRules to be voted on by a show of hands.

If a recognised clearing house (or its nominee(s)) is a member of the Company itmay authorise such person or persons as it thinks fit to act as its proxy(ies) orrepresentative(s) at any general meeting of the Company or at any general meeting of anyclass of members of the Company provided that, if more than one person is soauthorized, the authorisation shall specify the number and class of shares in respect ofwhich each such person is so authorized. A person authorized pursuant to this provisionshall be entitled to exercise the same rights and powers on behalf of the recognisedclearing house (or its nominee(s)) which he represents as that recognised clearing house(or its nominee(s)) could exercise as if it were an individual member of the Companyholding the number and class of shares specified in such authorisation, including, wherea show of hands is allowed, the right to vote individually on a show of hands.

2.8 Annual general meetings and extraordinary general meetings

The Company shall hold a general meeting as its annual general meeting each year,within a period of not more than 15 months after the holding of the last precedingannual general meeting (or such longer period as the Stock Exchange may authorise).The annual general meeting shall be specified as such in the notices calling it.



– III-10 –

The board of Directors may, whenever it thinks fit, convene an extraordinarygeneral meeting. General meetings shall also be convened on the written requisition ofany one or more members holding together, as at the date of deposit of the requisition,shares representing not less than one-tenth of the paid up capital of the Company whichcarry the right of voting at general meetings of the Company. The written requisitionshall be deposited at the principal office of the Company in Hong Kong or, in the eventthe Company ceases to have such a principal office, the registered office of the Company,specifying the objects of the meeting and the resolutions to be added to the meetingagenda, and signed by the requisitionist(s). If the Directors do not within 21 days fromthe date of deposit of the requisition proceed duly to convene the meeting to be heldwithin a further 21 days, the requisitionist(s) themselves or any of them representingmore than one-half of the total voting rights of all of them, may convene the generalmeeting in the same manner, as nearly as possible, as that in which meetings may beconvened by the Directors provided that any meeting so convened shall not be held afterthe expiration of three months from the date of deposit of the requisition, and allreasonable expenses incurred by the requisitionist(s) as a result of the failure of theDirectors shall be reimbursed to them by the Company.

2.9 Accounts and audit

The Directors shall cause to be kept such books of account as are necessary to give atrue and fair view of the state of the Company’s affairs and to show and explain itstransactions and otherwise in accordance with the Companies Act.

The Directors shall from time to time determine whether, and to what extent, and atwhat times and places and under what conditions or regulations, the accounts and booksof the Company, or any of them, shall be open to inspection by members of the Company(other than officers of the Company) and no such member shall have any right ofinspecting any accounts or books or documents of the Company except as conferred bythe Companies Act or any other relevant law or regulation or as authorized by theDirectors or by the Company in general meeting.

The Directors shall, commencing with the first annual general meeting, cause to beprepared and to be laid before the members of the Company at every annual generalmeeting a profit and loss account for the period, in the case of the first account, since theincorporation of the Company and, in any other case, since the preceding account,together with a balance sheet as at the date to which the profit and loss account is madeup and a Director’s report with respect to the profit or loss of the Company for theperiod covered by the profit and loss account and the state of the Company’s affairs as atthe end of such period, an auditor’s report on such accounts and such other reports andaccounts as may be required by law. Copies of those documents to be laid before themembers of the Company at an annual general meeting shall not less than 21 days beforethe date of the meeting, be sent in the manner in which notices may be served by theCompany as provided in the Articles of Association to every member of the Company



– III-11 –

and every holder of debentures of the Company provided that the Company shall not berequired to send copies of those documents to any person of whose address the Companyis not aware or to more than one of the joint holders of any shares or debentures.

2.10 Auditors

The Company shall at every annual general meeting appoint an auditor or auditorsof the Company who shall hold office until the next annual general meeting. The removalof an auditor before the expiration of his period of office shall require the approval of anordinary resolution of the members in general meeting. The remuneration of the auditorsshall be fixed by the Company at the annual general meeting at which they are appointedprovided that in respect of any particular year the Company in general meeting maydelegate the fixing of such remuneration to the Directors.

2.11 Notice of meetings and business to be conducted thereat

An annual general meeting shall be called by not less than 21 days’ notice in writingand any extraordinary general meeting shall be called by not less than 14 days’ notice inwriting. The notice shall be exclusive of the day on which it is served or deemed to beserved and of the day for which it is given, and shall specify the time, place and agenda ofthe meeting, particulars of the resolutions and the general nature of the business to beconsidered at the meeting. The notice convening an annual general meeting shall specifythe meeting as such, and the notice convening a meeting to pass a special resolution shallspecify the intention to propose the resolution as a special resolution. Notice of everygeneral meeting shall be given to the auditors and all members of the Company (otherthan those who, under the provisions of the Articles of Association or the terms of issueof the shares they hold, are not entitled to receive such notice from the Company).

Notwithstanding that a meeting of the Company is called by shorter notice thanthat mentioned above, it shall be deemed to have been duly called if it is so agreed:

(a) in the case of a meeting called as an annual general meeting, by all members ofthe Company entitled to attend and vote thereat or their proxies; and

(b) in the case of any other meeting, by a majority in number of the membershaving a right to attend and vote at the meeting, being a majority togetherholding not less than 95% in nominal value of the shares giving that right.

If, after the notice of a general meeting has been sent but before the meeting is held,or after the adjournment of a general meeting but before the adjourned meeting is held(whether or not notice of the adjourned meeting is required), the Directors, in theirabsolute discretion, consider that it is impractical or unreasonable for any reason to holda general meeting on the date or at the time and place specified in the notice calling suchmeeting, it may change or postpone the meeting to another date, time and place.



– III-12 –

The Directors also have the power to provide in every notice calling a generalmeeting that in the event of a gale warning or a black rainstorm warning is in force at anytime on the day of the general meeting (unless such warning is cancelled at least aminimum period of time prior to the general meeting as the Directors may specify in therelevant notice), the meeting shall be postponed without further notice to be reconvenedon a later date.

Where a general meeting is postponed:

(a) the Company shall endeavour to cause a notice of such postponement, whichshall set out the reason for the postponement in accordance with the ListingRules, to be placed on the Company’s website and published on the StockExchange’s website as soon as practicable, but failure to place or publish suchnotice shall not affect the automatic postponement of a general meeting due toa gale warning or black rainstorm warning being in force on the day of thegeneral meeting;

(b) the Directors shall fix the date, time and place for the reconvened meeting andat least seven clear days’ notice shall be given for the reconvened meeting; andsuch notice shall specify the date, time and place at which the postponedmeeting will be reconvened and the date and time by which proxies shall besubmitted in order to be valid at such reconvened meeting (provided that anyproxy submitted for the original meeting shall continue to be valid for thereconvened meeting unless revoked or replaced by a new proxy); and

(c) only the business set out in the notice of the original meeting shall betransacted at the reconvened meeting, and notice given for the reconvenedmeeting does not need to specify the business to be transacted at thereconvened meeting, nor shall any accompanying documents be required to berecirculated. Where new business is to be transacted at such reconvenedmeeting, the Company shall give a fresh notice for such reconvened meeting inaccordance with the Articles of Association.

2.12 Transfer of shares

Transfers of shares may be effected by an instrument of transfer in the usualcommon form or in such other form as the Directors may approve which is consistentwith the standard form of transfer as prescribed by the Stock Exchange.

The instrument of transfer shall be executed by or on behalf of the transferor and,unless the Directors otherwise determine, the transferee, and the transferor shall bedeemed to remain the holder of the share until the name of the transferee is entered inthe register of members of the Company in respect thereof. All instruments of transfershall be retained by the Company.



– III-13 –

The Directors may refuse to register any transfer of any share which is not fully paidup or on which the Company has a lien. The Directors may also decline to register anytransfer of any shares unless:

(a) the instrument of transfer is lodged with the Company accompanied by thecertificate for the shares to which it relates (which shall upon the registration ofthe transfer be cancelled) and such other evidence as the Directors mayreasonably require to show the right of the transferor to make the transfer;

(b) the instrument of transfer is in respect of only one class of shares;

(c) the instrument of transfer is properly stamped (in circumstances wherestamping is required);

(d) in the case of a transfer to joint holders, the number of joint holders to whomthe share is to be transferred does not exceed four;

(e) the shares concerned are free of any lien in favour of the Company; and

(f) a fee of such amount not exceeding the maximum amount as the StockExchange may from time to time determine to be payable (or such lesser sum asthe Directors may from time to time require) is paid to the Company in respectthereof.

If the Directors refuse to register a transfer of any share they shall, within twomonths after the date on which the transfer was lodged with the Company, send to eachof the transferor and the transferee notice of such refusal.

The registration of transfers may, on 10 business days’ notice (or on 6 business days’notice in the case of a rights issue) being given by advertisement published on the StockExchange’s website, or, subject to the Listing Rules, by electronic communication in themanner in which notices may be served by the Company by electronic means as providedin the Articles of Association or by advertisement published in the newspapers, besuspended and the register of members of the Company closed at such times for suchperiods as the Directors may from time to time determine, provided that the registrationof transfers shall not be suspended or the register closed for more than 30 days in anyyear (or such longer period as the members of the Company may by ordinary resolutiondetermine provided that such period shall not be extended beyond 60 days in any year).

2.13 Power of the Company to purchase its own shares

The Company is empowered by the Companies Act and the Articles of Associationto purchase its own shares subject to certain restrictions and the Directors may onlyexercise this power on behalf of the Company subject to the authority of its members in



– III-14 –

general meeting as to the manner in which they do so and to any applicable requirementsimposed from time to time by the Stock Exchange and the Securities and FuturesCommission of Hong Kong. Shares which have been repurchased will be treated ascancelled upon the repurchase.

2.14 Power of any subsidiary of the Company to own shares

There are no provisions in the Articles of Association relating to the ownership ofshares by a subsidiary.

2.15 Dividends and other methods of distribution

Subject to the Companies Act and the Articles of Association, the Company ingeneral meeting may declare dividends in any currency but no dividends shall exceed theamount recommended by the Directors. No dividend may be declared or paid other thanout of profits and reserves of the Company lawfully available for distribution, includingshare premium.

Unless and to the extent that the rights attached to any shares or the terms of issuethereof otherwise provide, all dividends shall (as regards any shares not fully paidthroughout the period in respect of which the dividend is paid) be apportioned and paidpro rata according to the amounts paid up on the shares during any portion or portionsof the period in respect of which the dividend is paid. For these purposes no amount paidup on a share in advance of calls shall be treated as paid up on the share.

The Directors may from time to time pay to the members of the Company suchinterim dividends as appear to the Directors to be justified by the profits of theCompany. The Directors may also pay half-yearly or at other intervals to be selected bythem any dividend which may be payable at a fixed rate if they are of the opinion that theprofits available for distribution justify the payment.

The Directors may retain any dividends or other monies payable on or in respect ofa share upon which the Company has a lien, and may apply the same in or towardssatisfaction of the debts, liabilities or engagements in respect of which the lien exists. TheDirectors may also deduct from any dividend or other monies payable to any member ofthe Company all sums of money (if any) presently payable by him to the Company onaccount of calls, instalments or otherwise.

No dividend shall carry interest against the Company.

Whenever the Directors or the Company in general meeting have resolved that adividend be paid or declared on the share capital of the Company, the Directors mayfurther resolve: (a) that such dividend be satisfied wholly or in part in the form of anallotment of shares credited as fully paid up on the basis that the shares so allotted are to



– III-15 –

be of the same class as the class already held by the allottee, provided that the membersof the Company entitled thereto will be entitled to elect to receive such dividend (or partthereof) in cash in lieu of such allotment; or (b) that the members of the Companyentitled to such dividend will be entitled to elect to receive an allotment of sharescredited as fully paid up in lieu of the whole or such part of the dividend as the Directorsmay think fit on the basis that the shares so allotted are to be of the same class as theclass already held by the allottee. The Company may upon the recommendation of theDirectors by ordinary resolution resolve in respect of any one particular dividend of theCompany that notwithstanding the foregoing a dividend may be satisfied wholly in theform of an allotment of shares credited as fully paid without offering any right tomembers of the Company to elect to receive such dividend in cash in lieu of suchallotment.

Any dividend, interest or other sum payable in cash to a holder of shares may bepaid by cheque or warrant sent through the post addressed to the registered address ofthe member of the Company entitled, or in the case of joint holders, to the registeredaddress of the person whose name stands first in the register of members of the Companyin respect of the joint holding or to such person and to such address as the holder or jointholders may in writing direct. Every cheque or warrant so sent shall be made payable tothe order of the holder or, in the case of joint holders, to the order of the holder whosename stands first on the register of members of the Company in respect of such shares,and shall be sent at his or their risk and the payment of any such cheque or warrant bythe bank on which it is drawn shall operate as a good discharge to the Company inrespect of the dividend and/or bonus represented thereby, notwithstanding that it maysubsequently appear that the same has been stolen or that any endorsement thereon hasbeen forged. The Company may cease sending such cheques for dividend entitlements ordividend warrants by post if such cheques or warrants have been left uncashed on twoconsecutive occasions. However, the Company may exercise its power to cease sendingcheques for dividend entitlements or dividend warrants after the first occasion on whichsuch a cheque or warrant is returned undelivered. Any one of two or more joint holdersmay give effectual receipts for any dividends or other monies payable or propertydistributable in respect of the shares held by such joint holders.

Any dividend unclaimed for six years from the date of declaration of such dividendmay be forfeited by the Directors and shall revert to the Company.

The Directors may, with the sanction of the members of the Company in generalmeeting, direct that any dividend be satisfied wholly or in part by the distribution ofspecific assets of any kind, and in particular of paid up shares, debentures or warrants tosubscribe securities of any other company, and where any difficulty arises in regard tosuch distribution the Directors may settle it as they think expedient, and in particularmay disregard fractional entitlements, round the same up or down or provide that thesame shall accrue to the benefit of the Company, and may fix the value for distribution ofsuch specific assets and may determine that cash payments shall be made to any members



– III-16 –

of the Company upon the footing of the value so fixed in order to adjust the rights of allparties, and may vest any such specific assets in trustees as may seem expedient to theDirectors.

2.16 Proxies

Any member of the Company entitled to attend and vote at a meeting of theCompany shall be entitled to appoint another person who must be an individual as hisproxy to attend and vote instead of him and a proxy so appointed shall have the sameright as the member to speak at the meeting. A proxy need not be a member of theCompany.

Instruments of proxy shall be in common form or in such other form as theDirectors may from time to time approve provided that it shall enable a member toinstruct his proxy to vote in favour of or against (or in default of instructions or in theevent of conflicting instructions, to exercise his discretion in respect of) each resolutionto be proposed at the meeting to which the form of proxy relates. The instrument ofproxy shall be deemed to confer authority to vote on any amendment of a resolution putto the meeting for which it is given as the proxy thinks fit. The instrument of proxy shall,unless the contrary is stated therein, be valid as well for any adjournment of the meetingas for the meeting to which it relates provided that the meeting was originally held within12 months from such date.

The instrument appointing a proxy shall be in writing under the hand of theappointor or his attorney authorized in writing or if the appointor is a corporation eitherunder its seal or under the hand of an officer, attorney or other person authorized to signthe same.

The instrument appointing a proxy and (if required by the Directors) the power ofattorney or other authority (if any) under which it is signed, or a notarially certified copyof such power or authority, shall be delivered at the registered office of the Company (orat such other place as may be specified in the notice convening the meeting or in anynotice of any adjournment or, in either case, in any document sent therewith) not lessthan 48 hours before the time appointed for holding the meeting or adjourned meeting atwhich the person named in the instrument proposes to vote or, in the case of a poll takensubsequently to the date of a meeting or adjourned meeting, not less than 48 hours beforethe time appointed for the taking of the poll and in default the instrument of proxy shallnot be treated as valid. No instrument appointing a proxy shall be valid after theexpiration of 12 months from the date named in it as the date of its execution. Deliveryof any instrument appointing a proxy shall not preclude a member of the Company fromattending and voting in person at the meeting or poll concerned and, in such event, theinstrument appointing a proxy shall be deemed to be revoked.



– III-17 –

2.17 Calls on shares and forfeiture of shares

The Directors may from time to time make calls upon the members of the Companyin respect of any monies unpaid on their shares (whether on account of the nominalamount of the shares or by way of premium or otherwise) and not by the conditions ofallotment thereof made payable at fixed times and each member of the Company shall(subject to the Company serving upon him at least 14 days’ notice specifying the time andplace of payment and to whom such payment shall be made) pay to the person at the timeand place so specified the amount called on his shares. A call may be revoked orpostponed as the Directors may determine. A person upon whom a call is made shallremain liable on such call notwithstanding the subsequent transfer of the shares inrespect of which the call was made.

A call may be made payable either in one sum or by instalments and shall be deemedto have been made at the time when the resolution of the Directors authorising the callwas passed. The joint holders of a share shall be jointly and severally liable to pay allcalls and instalments due in respect of such share or other monies due in respect thereof.

If a sum called in respect of a share shall not be paid before or on the day appointedfor payment thereof, the person from whom the sum is due shall pay interest on the sumfrom the day appointed for payment thereof to the time of actual payment at such rate,not exceeding 15% per annum, as the Directors may determine, but the Directors shall beat liberty to waive payment of such interest wholly or in part.

If any call or instalment of a call remains unpaid on any share after the dayappointed for payment thereof, the Directors may at any time during such time as anypart thereof remains unpaid serve a notice on the holder of such shares requiringpayment of so much of the call or instalment as is unpaid together with any interestwhich may be accrued and which may still accrue up to the date of actual payment.

The notice shall name a further day (not being less than 14 days from the date ofservice of the notice) on or before which, and the place where, the payment required bythe notice is to be made, and shall state that in the event of non-payment at or before thetime and at the place appointed, the shares in respect of which such call was made orinstalment is unpaid will be liable to be forfeited.

If the requirements of such notice are not complied with, any share in respect ofwhich such notice has been given may at any time thereafter, before payment of all callsor instalments and interest due in respect thereof has been made, be forfeited by aresolution of the Directors to that effect. Such forfeiture shall include all dividends andbonuses declared in respect of the forfeited shares and not actually paid before theforfeiture. A forfeited share shall be deemed to be the property of the Company and maybe re-allotted, sold or otherwise disposed of.



– III-18 –

A person whose shares have been forfeited shall cease to be a member of theCompany in respect of the forfeited shares but shall, notwithstanding the forfeiture,remain liable to pay to the Company all monies which at the date of forfeiture werepayable by him to the Company in respect of the shares, together with (if the Directorsshall in their discretion so require) interest thereon at such rate not exceeding 15% perannum as the Directors may prescribe from the date of forfeiture until payment, and theDirectors may enforce payment thereof without being under any obligation to make anyallowance for the value of the shares forfeited, at the date of forfeiture.

2.18 Inspection of register of members

The register of members of the Company shall be kept in such manner as to show atall times the members of the Company for the time being and the shares respectively heldby them. The register may, on 10 business days’ notice (or on 6 business days’ notice inthe case of a rights issue) being given by advertisement published on the StockExchange’s website, or, subject to the Listing Rules, by electronic communication in themanner in which notices may be served by the Company by electronic means as providedin the Articles of Association or by advertisement published in the newspapers, be closedat such times and for such periods as the Directors may from time to time determineeither generally or in respect of any class of shares, provided that the register shall not beclosed for more than 30 days in any year (or such longer period as the members of theCompany may by ordinary resolution determine provided that such period shall not beextended beyond 60 days in any year).

Any register of members kept in Hong Kong shall during normal business hours(subject to such reasonable restrictions as the Directors may impose) be open toinspection by any member of the Company without charge and by any other person onpayment of a fee of such amount not exceeding the maximum amount as may from timeto time be permitted under the Listing Rules as the Directors may determine for eachinspection.

2.19 Quorum for meetings and separate class meetings

No business shall be transacted at any general meeting unless a quorum is presentwhen the meeting proceeds to business, but the absence of a quorum shall not precludethe appointment, choice or election of a chairperson which shall not be treated as part ofthe business of the meeting.

Two members of the Company present in person or by proxy shall be a quorumprovided always that if the Company has only one member of record the quorum shall bethat one member present in person or by proxy.



– III-19 –

A corporation being a member of the Company shall be deemed for the purpose ofthe Articles of Association to be present in person if represented by its duly authorizedrepresentative being the person appointed by resolution of the directors or othergoverning body of such corporation or by power of attorney to act as its representative atthe relevant general meeting of the Company or at any relevant general meeting of anyclass of members of the Company.

The quorum for a separate general meeting of the holders of a separate class ofshares of the Company is described in paragraph 2.4 above.

2.20 Rights of minorities in relation to fraud or oppression

There are no provisions in the Articles of Association concerning the rights ofminority shareholders in relation to fraud or oppression.

2.21 Procedure on liquidation

If the Company shall be wound up, and the assets available for distribution amongstthe members of the Company as such shall be insufficient to repay the whole of thepaid-up capital, such assets shall be distributed so that, as nearly as may be, the lossesshall be borne by the members of the Company in proportion to the capital paid up, orwhich ought to have been paid up, at the commencement of the winding up on the sharesheld by them respectively. If in a winding up the assets available for distribution amongstthe members of the Company shall be more than sufficient to repay the whole of thecapital paid up at the commencement of the winding up, the excess shall be distributedamongst the members of the Company in proportion to the capital paid up at thecommencement of the winding up on the shares held by them respectively. The foregoingis without prejudice to the rights of the holders of shares issued upon special terms andconditions.

If the Company shall be wound up, the liquidator may with the sanction of a specialresolution of the Company and any other sanction required by the Companies Act,divide amongst the members of the Company in specie or kind the whole or any part ofthe assets of the Company (whether they shall consist of property of the same kind ornot) and may, for such purpose, set such value as he deems fair upon any property to bedivided as aforesaid and may determine how such division shall be carried out as betweenthe members or different classes of members of the Company. The liquidator may, withthe like sanction, vest the whole or any part of such assets in trustees upon such trusts forthe benefit of the members of the Company as the liquidator, with the like sanction andsubject to the Companies Act, shall think fit, but so that no member of the Companyshall be compelled to accept any assets, shares or other securities in respect of whichthere is a liability.



– III-20 –

2.22 Untraceable members

The Company shall be entitled to sell any shares of a member of the Company orthe shares to which a person is entitled by virtue of transmission on death or bankruptcyor operation of law if: (a) all cheques or warrants, not being less than three in number, forany sums payable in cash to the holder of such shares have remained uncashed for aperiod of 12 years; (b) the Company has not during that time or before the expiry of thethree month period referred to in (d) below received any indication of the whereabouts orexistence of the member; (c) during the 12 year period, at least three dividends in respectof the shares in question have become payable and no dividend during that period hasbeen claimed by the member; and (d) upon expiry of the 12 year period, the Company hascaused an advertisement to be published in the newspapers or subject to the ListingRules, by electronic communication in the manner in which notices may be served by theCompany by electronic means as provided in the Articles of Association, giving notice ofits intention to sell such shares and a period of three months has elapsed since suchadvertisement and the Stock Exchange has been notified of such intention. The netproceeds of any such sale shall belong to the Company and upon receipt by the Companyof such net proceeds it shall become indebted to the former member for an amount equalto such net proceeds.

SUMMARY OF CAYMAN ISLANDS COMPANY LAW AND TAXATION

1. Introduction

The Companies Act is derived, to a large extent, from the older Companies Acts ofEngland, although there are significant differences between the Companies Act and thecurrent Companies Act of England. Set out below is a summary of certain provisions of theCompanies Act, although this does not purport to contain all applicable qualifications andexceptions or to be a complete review of all matters of corporate law and taxation which maydiffer from equivalent provisions in jurisdictions with which interested parties may be morefamiliar.

2. Incorporation

The Company was incorporated in the Cayman Islands as an exempted company withlimited liability on 21 June 2017 under the Companies Act. As such, its operations must beconducted mainly outside the Cayman Islands. The Company is required to file an annualreturn each year with the Registrar of Companies of the Cayman Islands and pay a fee whichis based on the size of its authorized share capital.

3. Share Capital

The Companies Act permits a company to issue ordinary shares, preference shares,redeemable shares or any combination thereof.



– III-21 –

The Companies Act provides that where a company issues shares at a premium, whetherfor cash or otherwise, a sum equal to the aggregate amount of the value of the premia onthose shares shall be transferred to an account called the “share premium account”. At theoption of a company, these provisions may not apply to premia on shares of that companyallotted pursuant to any arrangement in consideration of the acquisition or cancellation ofshares in any other company and issued at a premium. The Companies Act provides that theshare premium account may be applied by a company, subject to the provisions, if any, of itsmemorandum and articles of association, in such manner as the company may from time totime determine including, but without limitation:

(a) paying distributions or dividends to members;

(b) paying up unissued shares of the company to be issued to members as fully paidbonus shares;

(c) in the redemption and repurchase of shares (subject to the provisions of section 37of the Companies Act);

(d) writing-off the preliminary expenses of the company;

(e) writing-off the expenses of, or the commission paid or discount allowed on, anyissue of shares or debentures of the company; and

(f) providing for the premium payable on redemption or purchase of any shares ordebentures of the company.

No distribution or dividend may be paid to members out of the share premium accountunless immediately following the date on which the distribution or dividend is proposed to bepaid the company will be able to pay its debts as they fall due in the ordinary course ofbusiness.

The Companies Act provides that, subject to confirmation by the Grand Court of theCayman Islands, a company limited by shares or a company limited by guarantee and having ashare capital may, if so authorized by its articles of association, by special resolution reduceits share capital in any way.

Subject to the detailed provisions of the Companies Act, a company limited by shares ora company limited by guarantee and having a share capital may, if so authorized by its articlesof association, issue shares which are to be redeemed or are liable to be redeemed at the optionof the company or a shareholder. In addition, such a company may, if authorized to do so byits articles of association, purchase its own shares, including any redeemable shares. Themanner of such a purchase must be authorized either by the articles of association or by anordinary resolution of the company. The articles of association may provide that the mannerof purchase may be determined by the directors of the company. At no time may a company



– III-22 –

redeem or purchase its shares unless they are fully paid. A company may not redeem orpurchase any of its shares if, as a result of the redemption or purchase, there would no longerbe any member of the company holding shares. A payment out of capital by a company for theredemption or purchase of its own shares is not lawful unless immediately following the dateon which the payment is proposed to be made, the company shall be able to pay its debts asthey fall due in the ordinary course of business.

There is no statutory restriction in the Cayman Islands on the provision of financialassistance by a company for the purchase of, or subscription for, its own or its holdingcompany’s shares. Accordingly, a company may provide financial assistance if the directors ofthe company consider, in discharging their duties of care and to act in good faith, for a properpurpose and in the interests of the company, that such assistance can properly be given. Suchassistance should be on an arm’s-length basis.

4. Dividends and Distributions

With exception of section 34 of the Companies Act, there are no statutory provisionsrelating to the payment of dividends. Based upon English case law which is likely to bepersuasive in the Cayman Islands in this area, dividends may be paid only out of profits. Inaddition, section 34 of the Companies Act permits, subject to a solvency test and theprovisions, if any, of the company’s memorandum and articles of association, the payment ofdividends and distributions out of the share premium account (see paragraph 3 above fordetails).

5. Shareholders’ Suits

The Cayman Islands courts can be expected to follow English case law precedents. Therule in Foss v. Harbottle (and the exceptions thereto which permit a minority shareholder tocommence a class action against or derivative actions in the name of the company to challenge(a) an act which is ultra vires the company or illegal, (b) an act which constitutes a fraudagainst the minority where the wrongdoers are themselves in control of the company, and (c)an action which requires a resolution with a qualified (or special) majority which has not beenobtained) has been applied and followed by the courts in the Cayman Islands.

6. Protection of Minorities

In the case of a company (not being a bank) having a share capital divided into shares,the Grand Court of the Cayman Islands may, on the application of members holding not lessthan one-fifth of the shares of the company in issue, appoint an inspector to examine into theaffairs of the company and to report thereon in such manner as the Grand Court shall direct.

Any shareholder of a company may petition the Grand Court of the Cayman Islandswhich may make a winding up order if the court is of the opinion that it is just and equitablethat the company should be wound up.



– III-23 –

Claims against a company by its shareholders must, as a general rule, be based on thegeneral laws of contract or tort applicable in the Cayman Islands or their individual rights asshareholders as established by the company’s memorandum and articles of association.

The English common law rule that the majority will not be permitted to commit a fraudon the minority has been applied and followed by the courts of the Cayman Islands.

7. Disposal of Assets

The Companies Act contains no specific restrictions on the powers of directors todispose of assets of a company. As a matter of general law, in the exercise of those powers, thedirectors must discharge their duties of care and to act in good faith, for a proper purpose andin the interests of the company.

8. Accounting and Auditing Requirements

The Companies Act requires that a company shall cause to be kept proper books ofaccount with respect to:

(a) all sums of money received and expended by the company and the matters in respectof which the receipt and expenditure taken place;

(b) all sales and purchases of goods by the company; and

(c) the assets and liabilities of the company.

Proper books of account shall not be deemed to be kept if there are not kept such booksas are necessary to give a true and fair view of the state of the company’s affairs and toexplain its transactions.

9. Register of Members

An exempted company may, subject to the provisions of its articles of association,maintain its principal register of members and any branch registers at such locations, whetherwithin or without the Cayman Islands, as its directors may from time to time think fit. There isno requirement under the Companies Act for an exempted company to make any returns ofmembers to the Registrar of Companies of the Cayman Islands. The names and addresses ofthe members are, accordingly, not a matter of public record and are not available for publicinspection.



– III-24 –

10. Inspection of Books and Records

Members of a company will have no general right under the Companies Act to inspect orobtain copies of the register of members or corporate records of the company. They will,however, have such rights as may be set out in the company’s articles of association.

11. Special Resolutions

The Companies Act provides that a resolution is a special resolution when it has beenpassed by a majority of at least two-thirds of such members as, being entitled to do so, vote inperson or, where proxies are allowed, by proxy at a general meeting of which notice specifyingthe intention to propose the resolution as a special resolution has been duly given, except thata company may in its articles of association specify that the required majority shall be anumber greater than two-thirds, and may additionally so provide that such majority (being notless than two-thirds) may differ as between matters required to be approved by a specialresolution. Written resolutions signed by all the members entitled to vote for the time being ofthe company may take effect as special resolutions if this is authorized by the articles ofassociation of the company.

12. Subsidiary Owning Shares in Parent

The Companies Act does not prohibit a Cayman Islands company acquiring and holdingshares in its parent company provided its objects so permit. The directors of any subsidiarymaking such acquisition must discharge their duties of care and to act in good faith, for aproper purpose and in the interests of the subsidiary.

13. Mergers and Consolidations

The Companies Act permits mergers and consolidations between Cayman Islandscompanies and between Cayman Islands companies and non-Cayman Islands companies. Forthese purposes, (a) “merger” means the merging of two or more constituent companies and thevesting of their undertaking, property and liabilities in one of such companies as the survivingcompany, and (b) “consolidation” means the combination of two or more constituentcompanies into a consolidated company and the vesting of the undertaking, property andliabilities of such companies to the consolidated company. In order to effect such a merger orconsolidation, the directors of each constituent company must approve a written plan ofmerger or consolidation, which must then be authorized by (a) a special resolution of eachconstituent company and (b) such other authorisation, if any, as may be specified in suchconstituent company’s articles of association. The written plan of merger or consolidationmust be filed with the Registrar of Companies of the Cayman Islands together with adeclaration as to the solvency of the consolidated or surviving company, a list of the assetsand liabilities of each constituent company and an undertaking that a copy of the certificateof merger or consolidation will be given to the members and creditors of each constituentcompany and that notification of the merger or consolidation will be published in the Cayman



– III-25 –

Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares(which, if not agreed between the parties, will be determined by the Cayman Islands court) ifthey follow the required procedures, subject to certain exceptions. Court approval is notrequired for a merger or consolidation which is effected in compliance with these statutoryprocedures.

14. Reconstructions

There are statutory provisions which facilitate reconstructions and amalgamationsapproved by a majority in number representing 75% in value of shareholders or creditors,depending on the circumstances, as are present at a meeting called for such purpose andthereafter sanctioned by the Grand Court of the Cayman Islands. Whilst a dissentingshareholder would have the right to express to the Grand Court his view that the transactionfor which approval is sought would not provide the shareholders with a fair value for theirshares, the Grand Court is unlikely to disapprove the transaction on that ground alone in theabsence of evidence of fraud or bad faith on behalf of management and if the transactionwere approved and consummated the dissenting shareholder would have no rights comparableto the appraisal rights (i.e. the right to receive payment in cash for the judicially determinedvalue of his shares) ordinarily available, for example, to dissenting shareholders of UnitedStates corporations.

15. Take-overs

Where an offer is made by a company for the shares of another company and, within fourmonths of the offer, the holders of not less than 90% of the shares which are the subject of theoffer accept, the offeror may at any time within two months after the expiration of the saidfour months, by notice require the dissenting shareholders to transfer their shares on the termsof the offer. A dissenting shareholder may apply to the Grand Court of the Cayman Islandswithin one month of the notice objecting to the transfer. The burden is on the dissentingshareholder to show that the Grand Court should exercise its discretion, which it will beunlikely to do unless there is evidence of fraud or bad faith or collusion as between the offerorand the holders of the shares who have accepted the offer as a means of unfairly forcing outminority shareholders.

16. Indemnification

Cayman Islands law does not limit the extent to which a company’s articles of associationmay provide for indemnification of officers and directors, except to the extent any suchprovision may be held by the Cayman Islands courts to be contrary to public policy (e.g. forpurporting to provide indemnification against the consequences of committing a crime).



– III-26 –

17. Liquidation

A company may be placed in liquidation compulsorily by an order of the court, orvoluntarily (a) by a special resolution of its members if the company is solvent, or (b) by anordinary resolution of its members if the company is insolvent. The liquidator’s duties are tocollect the assets of the company (including the amount (if any) due from the contributories(shareholders)), settle the list of creditors and discharge the company’s liability to them,rateably if insufficient assets exist to discharge the liabilities in full, and to settle the list ofcontributories and divide the surplus assets (if any) amongst them in accordance with therights attaching to the shares.

18. Stamp Duty on Transfers

No stamp duty is payable in the Cayman Islands on transfers of shares of CaymanIslands companies except those which hold interests in land in the Cayman Islands.

19. Taxation

Pursuant to section 6 of the Tax Concessions Act (As Revised) of the Cayman Islands,the Company may obtain an undertaking from the Financial Secretary of the Cayman Islands:

(a) that no law which is enacted in the Cayman Islands imposing any tax to be levied onprofits, income, gains or appreciations shall apply to the Company or its operations;and

(b) in addition, that no tax to be levied on profits, income, gains or appreciations orwhich is in the nature of estate duty or inheritance tax shall be payable:

(i) on or in respect of the shares, debentures or other obligations of the Company;or

(ii) by way of the withholding in whole or in part of any relevant payment asdefined in section 6(3) of the Tax Concessions Act (As Revised).

The Cayman Islands currently levy no taxes on individuals or corporations based uponprofits, income, gains or appreciations and there is no taxation in the nature of inheritance taxor estate duty. There are no other taxes likely to be material to the Company levied by theGovernment of the Cayman Islands save certain stamp duties which may be applicable, fromtime to time, on certain instruments executed in or brought within the jurisdiction of theCayman Islands. The Cayman Islands are not party to any double tax treaties that areapplicable to any payments made by or to the Company.



– III-27 –

20. Exchange Control

There are no exchange control regulations or currency restrictions in the Cayman Islands.

21. General

Maples and Calder (Hong Kong) LLP, the Company’s legal advisers on Cayman Islandslaw, have sent to the Company a letter of advice summarising aspects of Cayman Islandscompany law. This letter, together with a copy of the Companies Act, is available forinspection as referred to in the section headed “Documents available for inspection” inAppendix V. Any person wishing to have a detailed summary of Cayman Islands company lawor advice on the differences between it and the laws of any jurisdiction with which he/she ismore familiar is recommended to seek independent legal advice.



– III-28 –

A. FURTHER INFORMATION ABOUT OUR GROUP

1. Incorporation of Our Company

We were incorporated in the Cayman Islands under the Cayman Companies Act asexempted company with limited liability on June 21, 2017. We have established aprincipal place of business in Level 54, Hopewell Centre, 183 Queen’s Road East, HongKong and was registered as a non-Hong Kong company under Part 16 of the CompaniesOrdinance on July 12, 2021 under the same address. Ms. Siow Yuet Chew Grace and Ms.Ho Siu Pik have been appointed as our authorized representatives for the acceptance ofservice of process and notices on our behalf in Hong Kong.

As we were incorporated in the Cayman Islands, our operations are subject to therelevant laws of the Cayman Islands and our constitution comprising our Memorandumand the Articles. A summary of certain provisions of our constitution and relevantaspects of the Cayman Companies Act is set out in Appendix III to this [REDACTED].

2. Changes in our share capital

As at the date of incorporation of our Company, the authorized share capital of ourCompany US$1,000,000.00 was divided into 5,000,000 shares of a nominal or par valueof US$0.20 each. On June 21, 2017, our Company allotted and issued one ordinary shareof the purchase value of US$0.20 to Vistra (Cayman) Limited. On the same day, Vistra(Cayman) Limited transferred one ordinary share of our Company it held to Gold Ridge.

On September 13, 2017, one ordinary share of our Company with par value ofUS$0.20 was subdivided into 200 shares with par value of US$0.001 each. On the sameday, 99,999,800 Shares were allotted to Gold Ridge at a total consideration ofUS$99,999.80.

In connection with the Series A financing, our Company allotted and issued a totalof 90,000,000 Series A Preferred Shares at a purchase price of US$0.30 per Share to theinvestors at the closing on September 26, 2017.

The following sets out the changes in our Company’s share capital within the twoyears immediately preceding the issue of this [REDACTED].

In connection with the Series A+ financing, the authorized share capital of ourCompany, being 910,000,000 Shares and 90,000,000 Series A Preferred Shares with a parvalue of US$0.001 each was reclassified and re-designated to 889,304,150 Shares,93,500,000 Series A Preferred Shares and 17,195,850 Series A+ Preferred Shares and ourCompany allotted and issued (i) 3,500,000 Series A Preferred Shares in consideration ofservices provided by Dr. Wang as the executive chairman of HeMo China from January 1,2017 to December 31, 2019, and (ii) 17,195,850 Series A+ Preferred Shares at a purchaseprice of US$0.6685 per Share to Gold Ridge at the closing on April 25, 2020.


APPENDIX IV — STATUTORY AND GENERAL INFORMATION

– IV-1 –

On May 27, 2020, our Company allotted and issued 18,321,378 Shares of par valueof US$0.001 each to ICI at a total consideration of US$18,321.378.

In connection with the Series B financing, the authorized share capital of ourCompany, being 889,304,150 Shares, 93,500,000 Series A Preferred Shares and 17,195,850Series A+ Preferred Shares, was reclassified and re-designated to (i) 839,517,797 Shares,(ii) 93,500,000 Series A Preferred Shares, (iii) 17,195,850 Series A+ Preferred Shares, and(iv) 49,786,353 Series B Preferred Shares and our Company allotted and issued49,786,353 Series B Preferred Shares at a purchase price of US$1.0043 per Share to theinvestors at the closing on October 16, 2020.

On October 16, 2020, we also allotted and issued 4,329,248 Shares of par value ofUS$0.001 to ICI with no consideration paid.

In connection with the Series C financing, the authorized share capital of ourCompany, being (i) 839,517,797 Shares, (ii) 93,500,000 Series A Preferred Shares, (iii)17,195,850 Series A+ Preferred Shares, and (iv) 49,786,353 Series B Preferred Shares, wasreclassified and re-designated to (i) 804,126,194 Shares with a par value of US$0.001, (ii)93,500,000 Series A Preferred Shares, (iii) 17,195,850 Series A+ Preferred Shares, (iv)49,786,353 Series B Preferred Shares, and (v) 35,391,603 Series C Preferred Shares andour Company allotted and issued 35,391,603 Series C Preferred Shares at a purchaseprice of US$1.4128 per Share to the investors at the closing on January 12, 2021.

On January 12, 2021, we further allotted and issued 4,549,393 Shares of par value ofUS$0.001 each to ICI at nil consideration.

On July 2, 2021, we further allotted and issued 16,926,419 Shares of par value ofUS$0.001 each to Adventure Wave Development Limited, which is wholly-owned by aprofessional trustee services company (the “RSU Trustee”) pursuant to the RSU Scheme.Before the [REDACTED], the issued share capital of our Company will be US$340,000,244 divided into 340,000,244 Shares of a par value of US$0.001 each, all fullypaid or credited as fully paid and 659,999,756 Shares of a par value of US$0.001 eachwill remain unissued.

Immediately following the completion of the [REDACTED] (but not taking intoaccount any Shares which may be issued pursuant to the exercise of the [REDACTED]),our issued share capital will be [REDACTED] divided into [REDACTED] Shares, all fullypaid or credited as fully paid and [REDACTED] Shares will remain [REDACTED].

Save as disclosed above and as mentioned in the paragraph headed “4. Resolutionsin writing of our Shareholders” below, there has been no alteration in our share capitalwithin the two years immediately preceding the date of this [REDACTED].



– IV-2 –

3. Changes in the share capital of our subsidiaries

A summary of the corporate information and particulars of our subsidiaries are setout in the Accountants’ Report set out in Appendix I to this [REDACTED].

The following sets out the changes in the share capital of our subsidiaries during thetwo years immediately preceding the date of this [REDACTED]

HeMo China

On June 22, 2020, the registered capital of HeMo China was increased fromUS$21,046,132 to US$23,191,100.

HeMo Singapore

On November 26, 2020, HeMo Singapore was incorporated and 1,000,000shares in the share capital of HeMo Singapore worth of S$1,000,000 were allottedand issued to Dr. Wang, which have been subsequently transferred to the Company.

Save as disclosed above, there has been no alteration in the share capital of oursubsidiaries within the two years immediately preceding the date of this[REDACTED].

4. Resolutions in writing of our Shareholders

Written resolutions of our Shareholders were passed on [•] 2021, pursuant to which,among others:

(a) the Memorandum and Articles were approved and adopted conditional upon[REDACTED];

(b) conditional upon all the conditions set out in “[REDACTED]” in this[REDACTED] being fulfilled:

(i) the [REDACTED] and the [REDACTED] were approved and the Board (orany committee thereof established by the Board pursuant to the Articles)was authorized to make or effect such modifications as it thinks fit;

(ii) the Board (or any committee thereof established by the Board pursuant tothe Articles) was authorized to allot, issue and approve the transfer ofsuch number of Shares in connection with the [REDACTED]; and



– IV-3 –

(iii) the Board (or any committee thereof established by the Board pursuant tothe Articles) was authorized to agree to the [REDACTED] with the[REDACTED]; and

(c) a general unconditional mandate was given to our Directors to exercise all thepowers of our Company to allot, issue and deal with Shares or securitiesconvertible into Shares and to make or grant offers or agreements or options(including any warrants, bonds, notes and debentures conferring any rights tosubscribe for or otherwise receive Shares) which might require Shares to beallotted, issued or dealt with, otherwise than pursuant to the [REDACTED], aright issue or pursuant to the exercise of any subscription rights attaching toany warrants which may be allotted and issued by our Company from time totime on a specific authority granted by the Shareholders in general meeting or,pursuant to the allotment and issue of Shares in lieu of the whole or part of adividend on Shares in accordance with the Articles, Shares not exceed 20% ofthe aggregate nominal value of the Shares in issue immediately followingcompletion of the [REDACTED], such mandate to remain in effect until (i) theconclusion of the next annual general meeting of our Company unless renewedby an ordinary resolution of the Shareholders in general meeting eitherunconditionally or subject to condition, or (ii) the expiration of the periodwithin which the next annual general meeting of our Company is required to beheld by the Articles or any applicable laws or (iii) when revoked or varied by anordinary resolution of Shareholders in general meeting of the Company,whichever is the earliest;

(d) a general unconditional mandate was given to the Directors authorizing themto exercise all the powers of our Company to repurchase its own Shares on theStock Exchange or on any other approved stock exchange on which thesecurities of our Company may be listed and which is recognized by the SFCand the Stock Exchange for this purpose, such number of Shares will representup to 10% of the aggregate nominal value of the Shares in issue immediatelyfollowing the completion of the [REDACTED], such mandate to remain ineffect until whichever is the earliest of (i) the conclusion of the next annualgeneral meeting of our Company unless renewed by an ordinary resolution ofthe Shareholders in general meeting either unconditionally or subject tocondition, or (ii) the expiration of the period within which the next annualgeneral meeting of our Company is required to be held by the Articles or anyapplicable laws, or (iii) when revoked or varied by an ordinary resolution ofShareholders in general meeting of the Company; and

(e) the general mandate mentioned in paragraph (c) above be extended by theaddition to the aggregate nominal value of the share capital of our Companywhich may be allotted, or agreed conditionally or unconditionally to beallotted and issued by our Directors pursuant to such general mandate of anamount representing the aggregate nominal value of the share capital of our



– IV-4 –

Company repurchased by our Company pursuant to the mandate to purchaseshares referred to in paragraph (d) above.

5. Particulars of our Subsidiaries

Particulars of our subsidiaries are set out at Note 1 of Section II to theAccountants’ Report in Appendix I to this [REDACTED].

6. Repurchases of our own securities

(a) Provisions of the Listing Rules

The Listing Rules permit companies with a primary listing on the StockExchange to repurchase their securities on the Stock Exchange subject to certainrestrictions, the more important of which are summarized below:

(i) Shareholders’ approval

All proposed repurchases of Shares (which must be fully paid up) by acompany with a primary listing on the Stock Exchange must be approved inadvance by an ordinary resolution of the shareholders in general meeting,either by way of general mandate or by specific approval of a particulartransaction.

Pursuant to a written resolution passed by our then Shareholders on [•]2021, a general unconditional mandate (the “Repurchase Mandate”) was givento the Directors authorizing any repurchase by us of Shares on the StockExchange or on any other stock exchange on which the securities of ourCompany may be listed and which is recognized by the SFC and the StockExchange for this purpose, of not more than 10% of the aggregate nominalvalue of our share capital in issue immediately following the completion of the[REDACTED] but excluding any Shares which may be issued pursuant to theexercise of the [REDACTED], such mandate to expire at the earliest of (i) theconclusion of the next annual general meeting of our Company unless renewedby an ordinary resolution of the Shareholders in general meeting eitherunconditionally or subject to condition, or (ii) the expiration of the periodwithin which the next annual general meeting of our Company is required to beheld by our Articles or any other applicable laws, or (iii) when revoked orvaried by an ordinary resolution of Shareholders in general meeting of theCompany.



– IV-5 –

(ii) Source of funds

Repurchases must be funded out of funds legally available for suchpurpose in accordance with our Memorandum and Articles, the Listing Rulesand the applicable laws of the Cayman Islands. A listed company may notrepurchase its own securities on the Stock Exchange for a consideration otherthan cash or for settlement otherwise than in accordance with the trading rulesof the Stock Exchange from time to time. Under the Cayman Companies Act,the par value of any Shares repurchased by us may be provided for out of ourprofits, out of share premium, or out of the proceeds of a fresh issue of Sharesmade for the purpose of the repurchase or, if so authorized by the Articles andsubject to the provisions of the Cayman Companies Act, out of capital. Anypremium payable on a repurchase over the par value of the Shares to berepurchased must be provided for out of our profits or from sums standing tothe credit of our share premium account or, if authorized by the Articles andsubject to the provisions of the Cayman Companies Act, out of capital.

(iii) Trading restrictions

The total number of Shares which we may repurchase is up to 10% of thetotal number of our Shares in issue immediately after the completion of the[REDACTED] (but not taking into account any Shares which may be issuedpursuant to the exercise of the [REDACTED]). We may not issue or announce aproposed issue of Shares for a period of 30 days immediately following arepurchase of Shares, whether on the Stock Exchange or otherwise, without theprior approval of the Stock Exchange. We are also prohibited fromrepurchasing Shares on the Stock Exchange if the repurchase would result inthe number of listed Shares which are in the hands of the public falling belowthe relevant prescribed minimum percentage as required by the StockExchange. We are required to procure that the broker appointed by us to effecta repurchase of Shares discloses to the Stock Exchange such information withrespect to the repurchase as the Stock Exchange may require. An issuer shallnot purchase its shares on the Stock Exchange if the purchase price is higher by5% or more than the average closing market price for the five preceding tradingdays on which its shares were traded on the Stock Exchange.

(iv) Status of repurchased Shares

All repurchased Shares (whether effected on the Stock Exchange orotherwise) will be automatically delisted and the certificates for those Sharesmust be cancelled and destroyed. Under Cayman Companies Act, unless, priorto the repurchase the directors of the company resolve to hold the sharesrepurchased by the Company as treasury shares, the repurchased shares shallbe treated as cancelled and the amount of the company’s issued share capital



– IV-6 –

shall be reduced by the aggregate value of the repurchased shares accordinglyalthough the authorized share capital of the company will not be reduced.

(v) Suspension of repurchase

Pursuant to the Listing Rules, we may not make any repurchases of Sharesat any time after inside information has come to our knowledge until theinformation is made publicly available. In particular, under the requirements ofthe Listing Rules in force as of the date hereof, during the period of one monthimmediately preceding the earlier of:

(i) the date of the Board meeting (as such date is first notified to theStock Exchange in accordance with the Listing Rules) for theapproval of our results for any year, half year, quarterly or any otherinterim period (whether or not required under the Listing Rules); and

(ii) the deadline for us to publish an announcement of our results for anyyear or half-year under the Listing Rules, or quarterly or any otherinterim period (whether or not required under the Listing Rules), andin each case ending on the date of the results announcement, we maynot repurchase Shares on the Stock Exchange unless thecircumstances are exceptional.

(vi) Procedural and reporting requirements

As required by the Listing Rules, repurchases of Shares on the StockExchange or otherwise must be reported to the Stock Exchange not later than30 minutes before the earlier of the commencement of the morning tradingsession or any pre-opening session on the Stock Exchange business dayfollowing any day on which we may make a purchase of Shares. The reportmust state the total number of Shares purchased the previous day, the purchaseprice per Share or the highest and lowest prices paid for such purchases. Inaddition, our annual report is required to disclose details regarding repurchasesof Shares made during the year, including a monthly analysis of the number ofshares repurchased, the purchase price per Share or the highest and lowestprice paid for all such purchases, where relevant, and the aggregate prices paid.

(vii) Connected parties

A company is prohibited from knowingly repurchasing securities on theStock Exchange from a “core connected person”, that is, a director, chiefexecutive or substantial shareholder of the company or any of its subsidiariesor any of their respective close associates (as defined in the Listing Rules) and acore connected person shall not knowingly sell its securities to the company onthe Stock Exchange.



– IV-7 –

(b) Reasons for repurchases

The Directors believe that it is in the best interests of our Company and theShareholders for the Directors to have general authority from the Shareholders toenable the Directors to repurchase Shares in the market. Such repurchases may,depending on market conditions and funding arrangements at the time, lead to anenhancement of the net asset value per Share and/or earnings per Share and willonly be made where the Directors believe that such repurchases will benefit ourCompany and our Shareholders.

(c) Funding of repurchases

In repurchasing securities, we may only apply funds legally available for suchpurpose in accordance with the Articles, the Listing Rules and the applicable laws ofthe Cayman Islands.

On the basis of the current financial position as disclosed in this [REDACTED]and taking into account the current working capital position, the Directors considerthat, if the Repurchase Mandate were to be exercised in full, it might have a materialadverse effect on our working capital and/or gearing position as compared with theposition disclosed in this [REDACTED]. The Directors, however, do not propose toexercise the Repurchase Mandate to such an extent as would, in the circumstances,have a material adverse effect on our working capital requirements or gearing levelswhich in the opinion of the Directors are from time to time appropriate for us.

The exercise in full of the Repurchase Mandate, on the basis of [REDACTED]Shares in issue immediately following the completion of the [REDACTED] (but nottaking into account any Shares which may be issued pursuant to the exercise of the[REDACTED], could accordingly result in [REDACTED] Shares being repurchasedby us during the period prior to the earliest of (i) the conclusion of the next annualgeneral meeting of our Company unless renewed by an ordinary resolution of theShareholders in general meeting either unconditionally or subject to condition; (ii)the expiration of the period within which we are required by any applicable laws orour Articles to hold our next annual general meeting; or (iii) the revocation orvariation of the mandate by an ordinary resolution of the Shareholders in generalmeeting of the Company (the “Relevant Period’’).

(d) General

None of the Directors or, to the best of their knowledge having made allreasonable enquiries, any of their associates currently intends to sell any Shares tous or our subsidiaries.



– IV-8 –

The Directors have undertaken to the Stock Exchange that, so far as the samemay be applicable, they will exercise the Repurchase Mandate in accordance with theListing Rules and the applicable laws of the Cayman Islands.

If, as a result of any repurchase of Shares, a shareholder’s proportionateinterest in our voting rights is increased, such increase will be treated as anacquisition for the purposes of the Takeovers Code. Accordingly, a shareholder or agroup of shareholders acting in concert could obtain or consolidate control of theCompany and become obliged to make a mandatory offer in accordance with rule 26of the Takeovers Code. Save as aforesaid, the Directors are not aware of anyconsequences which would arise under the Takeovers Code as a consequence of anyrepurchases pursuant to the Repurchase Mandate. Any repurchase of Shares whichresults in the number of Shares held by the [REDACTED] being reduced to less than25% of our Shares in issue could only be implemented with the approval of theStock Exchange to waive the Listing Rules requirements regarding the[REDACTED] shareholding referred to above. It is believed that a waiver of thisprovision would not normally be given other than in exceptional circumstances.

No connected person has notified us that he or she has a present intention tosell Shares to us, or has undertaken not to do so, if the Repurchase Mandate isexercised.

B. FURTHER INFORMATION ABOUT OUR BUSINESS

1. Summary of Material Contracts

We have entered into the following contracts (not being contracts entered into in theordinary course of business) within the two years preceding the date of this[REDACTED] that are or may be material:

(a) the Series B Preferred Share subscription agreement entered into by and amongour Company, Tree House Enterprises Limited, Max Vision CorporationLimited, HeMo China, AUT-XV Holdings Limited, LC Healthcare Fund II,L.P., PHC MedTech Investment, L.P. and Tekful Limited dated October 10,2020, pursuant to which the Series B Preferred Shares Subscribers have agreedto subscribe for 49,786,353 Series B Preferred Shares at an aggregateconsideration of US$50,000,000;

(b) the Series C Preferred Share subscription agreement entered into by and amongour Company, Tree House Enterprises Limited, Max Vision CorporationLimited, HeMo China, HeMo Jirui, LAV Biosciences Fund V, L.P., HBC AsiaHealthcare Opportunities VI LLC, Octagon Investments Master Fund L.P.,Octagon Private Opportunities Fund L.P., OrbiMed Genesis Master Fund,L.P., OrbiMed New Horizons Master Fund, L.P., TB Early Stage TechnologiesHoldings Limited, Mr. Qing Yang, Gold Ridge, Harmony Achieve Investments



– IV-9 –

Limited, AUT-XV Holdings Limited and LC Healthcare Fund II, L.P. datedJanuary 5, 2021, pursuant to which the Series C Preferred Shares Subscribershave agreed to subscribe for Series C Preferred Shares at an aggregateconsideration of US$50,000,000;

(c) the third amended and restated shareholders’ agreement entered into by andamong our Company, Tree House Enterprises Limited, Max VisionCorporation Limited, HeMo China, HeMo Jirui, Gold Ridge, Easeplus Inc.,Thirasia, Imperative Care, Inc., AUT-XV Holdings Limited, LC HealthcareFund II, L.P., PHC MedTech Investment, L.P., Tekful Limited, LAVBiosciences Fund V, L.P., HBC Asia Healthcare Opportunities VI LLC,Octagon Investments Master Fund L.P., Octagon Private Opportunities FundL.P., OrbiMed Genesis Master Fund, L.P., OrbiMed New Horizons MasterFund, L.P., TB Early Stage Technologies Holdings Limited, Mr. Qing Yang andHarmony Achieve Investments Limited dated January 12, 2021;

(d) the equity transfer agreement entered into between Max Vision CorporationLimited and Weihai Shengzhuo Enterprise Management Consulting Center(Limited Partnership) (威海聖卓企業管理諮詢中心(有限合夥)) (“WeihaiShengzhuo”) dated July 1, 2021, pursuant to which Max Vision CorporationLimited has agreed to acquire approximately 3.16% equity interests in HeMoChina held by Weihai Shengzhuo at the consideration of RMB23,697,879;

(e) the equity transfer agreement entered into between Max Vision CorporationLimited and Weihai Hongwang Enterprise Management Consulting Center(Limited Partnership) (威海弘望企業管理諮詢中心(有限合夥)) (“WeihaiHongwang”) dated July 1, 2021, pursuant to which Max Vision CorporationLimited has agreed to acquire approximately 1.59% equity interests in HeMoChina held by Weihai Hongwang at the consideration of RMB20,136,009;

(f) the equity transfer agreement entered into between Dr. Wang and the Companydated July 16, 2021, pursuant to which Dr. Wang has agreed to transfer the 65%of shares in HeMo Singapore to the Company at a nominal consideration ofS$1;

(g) the deed of declaration and acknowledgement of trust entered into between Dr.Wang and the Company dated July 16, 2021, whereby the remaining 35% sharesin HeMo Singapore are to be held by Dr. Wang as trustee on trust for thebenefit of the Company as beneficiary;

(h) the binding term sheet entered into between HeMo Singapore as purchaser andSusilo Dharmawan, Dr. Wang, Tee Chee Keong (Zheng Zhiqiang), Wang Yao,Angela Renayanti Dharmawan, Prusothman M Sina Raja, AccelerateTechnologies Pte. Ltd., Sigic LLC and Keith Zhengtao, as shareholders of PriviMedical (the “Privi Shareholders”) dated July 2, 2021, pursuant to which HeMo



– IV-10 –

Singapore has agreed to acquire the entire issued share capital of Privi Medicalfrom the Privi Shareholders at an aggregate consideration of S$2.5 million; and

(i) the [REDACTED].

2. Intellectual Property Rights of our Group

As of the Latest Practicable Date, we have registered the following intellectualproperty rights which, in the opinion of our Directors, are material to our business.

(a) Trademarks

As of the Latest Practicable Date, we had registered the following trademarkswhich we consider to be material to the business of our Group:

No. TrademarkRegistration

Number Name of Registered Proprietor ClassPlace of

Registration Date of Registration Expiry Date

1. 305206077 HeMo (China)Bioengineering Ltd.

10 HongKong

March 3, 2020 March 2, 2030


16 HongKong

March 8, 2021 March 7, 2021


35 PRC December 28, 2020 December 27, 2030






10 PRC January 7, 2021 January 6, 2031

















– IV-11 –

No. TrademarkRegistration

Number Name of Registered Proprietor ClassPlace of

Registration Date of Registration Expiry Date


35 PRC March 7, 2021 March 6, 2031


35 PRC March 7, 2021 March 6, 2031

As of the Latest Practicable Date, we had applied for registration of the

following trademarks which we consider material to the business of our Group:

No. TrademarkPlace of

Application Name of Applicant Class Date of ApplicationApplication

Number

1. PRC HeMo (China)Bioengineering Ltd.

10 March 16, 2020 44620468


35 March 16, 2020 44622330


35 March 16, 2020 44620887


35 March 16, 2020 44640830


35 March 16, 2020 44617863


10 November 10, 2020 51148272


10 November 10, 2020 51150909


35 November 10, 2020 51130094


23 November 10, 2020 51158836


42 May 12, 2021 55987039


41 May 12, 2021 56006273


35 May 12, 2021 56011607


35 May 12, 2021 55980129


10 May 12, 2021 55982800


10 May 12, 2021 55981599


10 May 12, 2021 56008563



– IV-12 –

No. TrademarkPlace of

Application Name of Applicant Class Date of ApplicationApplication

Number


10 May 12, 2021 56008550


9 May 12, 2021 55985807


9 May 12, 2021 55993567

(b) Domain Names

As of the Latest Practicable Date, we had registered the following domainnames which we consider to be material to the business of our Group:

No. Domain Name Registered Owner Date of Registration Expiry Date

1. hemocompany.com HeMo (China)Bioengineering Ltd.

August 30, 2020 August 30, 2024

2. hemochina.vip HeMo (China)Bioengineering Ltd.

December 7, 2017 December 7, 2024

3. hemochina.com HeMo (China)Bioengineering Ltd.

April 9, 2016 April 9, 2025

4. hemochina.com.cn HeMo (China)Bioengineering Ltd.


5. hemochina.net HeMo (China)Bioengineering Ltd.


6. hemochina.cn HeMo (China)Bioengineering Ltd.

April 9, 2016 April 9, 2025

7. hemocorp.com HeMo (China)Bioengineering Ltd.

August 30, 2020 August 30, 2024

8. hemolimited.com HeMo (China)Bioengineering Ltd.

August 30, 2020 August 30, 2024

9. hemogroup.net HeMo (China)Bioengineering Ltd.

August 19, 2020 August 19, 2022

10. hemobioeng.com HeMo (China)Bioengineering Ltd.

July 17, 2018 July 17, 2024



– IV-13 –

No. Domain Name Registered Owner Date of Registration Expiry Date

11. hemochina.online HeMo (China)Bioengineering Ltd.


12. hemochina.group HeMo (China)Bioengineering Ltd.


13. hemochina.info HeMo (China)Bioengineering Ltd.


14. hemochina.org HeMo (China)Bioengineering Ltd.


(c) Patents

For the details of our patents as of the Latest Practicable Date, please refer to“Business—Intellectual Property Rights” in this [REDACTED].

C. FURTHER INFORMATION ABOUT OUR DIRECTORS AND SUBSTANTIALSHAREHOLDERS

1. Disclosure of Interests

(a) Interests and short positions of the Directors and the chief executive of theCompany in the Shares, underlying Shares and debentures of the Company andits associated corporations

Immediately following the completion of the [REDACTED] and adoption ofthe RSU Scheme (without taking into account any Shares which may be issued uponthe exercise of the [REDACTED]), the interests or short positions of our Directorsor chief executives in the Shares, underlying Shares and debentures of the Companyor its associated corporations (within the meaning of Part XV of the SFO) whichwill be required to be notified to us and the Stock Exchange pursuant to Divisions 7and 8 of Part XV of the SFO (including interests or short positions which they weretaken or deemed to have under such provisions of the SFO) or which will berequired, under Section 352 of the SFO, to be entered in the register referred to inthat section, or which will be required, under the Model Code for



– IV-14 –

Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 tothe Listing Rules (“Model Code”), once the Shares are [REDACTED] will be asfollows:

Interest in Shares

Name of Director Nature of interestNumber of Shares or

underlying Shares

Approximatepercentage of

shareholding interest

Dr. Wang ChichengJack

Interest in controlledcorporation

100,000,000 Shares50,166,666 Series APreferred Shares17,195,850 Series A+Preferred Shares2,113,905 Series CPreferred Shares

[REDACTED]%

Dr. Wang Shunlong Interest in controlledcorporation

40,000,000 Series APreferred Shares4,978,635 Series BPreferred Shares568,262 Series CPreferred Shares

[REDACTED]%

(b) Interests and short positions of the Substantial Shareholders in the Shares andunderlying Shares of the Company

Save as disclosed in the section headed “Substantial Shareholders” in this[REDACTED], our Directors or chief executive are not aware of any other person,not being a Director or chief executive of our Company, who has any an interest orshort position in the Shares and underlying Shares of our Company which, once theShares are [REDACTED], would fall to be disclosed to our Company under theprovisions of Divisions 2 and 3 of Part XV of the SFO, or, who is, directly orindirectly, interested in 10% or more of the nominal value of any class of sharecapital carrying rights to vote in all circumstances at general meetings of ourCompany.



– IV-15 –

(c) Interests of the Substantial Shareholders of Any Member of Our Group (Otherthan Our Company)

So far as the Directors are aware, immediately following the completion of the[REDACTED], no persons will, directly or indirectly, be interested in 10% or moreof the nominal value of the share capital carrying rights to vote in all circumstancesat general meetings of any member of the Group (other than us).

2. Particulars of Service Contracts

(a) Executive Directors

The executive Director [has] entered into a service contract with us under whichhe agreed to act as executive Director for an initial term of three years or until thethird annual general meeting of our Company since the [REDACTED], subject tothe Articles and the Listing Rules (whichever is sooner), which may be terminated bynot less than three months’ notice in writing served by either the executive Directoror us.

The appointment of the executive Director is subject to the provisions ofretirement and rotation of Directors under the Articles.

(b) Non-executive Director and Independent Non-executive Directors

Each of the non-executive Directors and the independent non-executiveDirectors [has] signed an appointment letter with us for an initial term of threeyears or until the third annual general meeting of our Company since the[REDACTED], subject to the Articles and the Listing Rules (whichever is sooner).Under their respective appointment letters, each of the independent non-executiveDirectors is entitled to a fixed Director’s fee while the non-executive Directors arenot entitled to any remuneration. The appointments are subject to the provisions ofretirement and rotation of Directors under the Articles.

(c) Others

(i) Save as disclosed above, none of the Directors has entered into any servicecontract with any member of our Group (excluding contracts expiring ordeterminable by the employer within one year without payment ofcompensation other than statutory compensation).

(ii) During the year ended December 31, 2020, the aggregate of theremuneration and benefits in kind payable to the Directors wasapproximately RMB4.9 million. Details of the Directors’ remunerationare also set out in note 8 of the Accountants’ Report set out in Appendix Ito this [REDACTED]. Save as disclosed in this [REDACTED], no other



– IV-16 –

emoluments have been paid or are payable, in respect of the year endedDecember 31, 2020 by us to the Directors.

(iii) Under the arrangement currently in force, the aggregate of theremuneration and benefits in kind payable to the Directors for the yearending December 31, 2021 is estimated to be approximately RMB5million.

(iv) None of the Directors or any past Directors of any members of ourGroup has been paid any sum of money for the Track Record Period (i) asan inducement to join or upon joining us or (ii) for loss of office as aDirector of any member of our Group or of any other office in connectionwith the management of the affairs of any member of our Group.

(v) There has been no arrangement under which a Director has waived oragreed to waive any remuneration or benefits in kind during the TrackRecord Period.

(vi) None of the Directors has been or is interested in the promotion of, or inthe property proposed to be acquired by, us, and no sum has been paid oragreed to be paid to any of them in cash or shares or otherwise by anyperson either to induce him to become, or to qualify him as, a Director, orotherwise for services rendered by him in connection with the promotionor formation of the Company.

3. Substantial Shareholders

For information on the persons who will, immediately following the completion ofthe [REDACTED], (without taking into account any Shares which may be issued uponthe exercise of the [REDACTED]), have or deemed or taken to have an interest and/orshort position in the Shares or the underlying Shares which would fall to be disclosedunder the provisions of Division 2 and 3 of Part XV of the SFO, please refer to“Substantial Shareholders” of this [REDACTED].

Save as set out in the section headed “Substantial Shareholder” in this[REDACTED], as of the Latest Practicable Date, our Directors are not aware of anyperson who will, immediately following the completion of the [REDACTED], beinterested, directly or indirectly, in 10% or more of the nominal value of any class ofshare capital carrying rights to vote in all circumstances at general meetings of anymember of our Group or had option in respect of such capital.



– IV-17 –

4. Fees or commissions received

Save as disclosed in this [REDACTED], none of the Directors or any of the personswhose names are listed under the paragraph headed “E. Other Information—8. Consentsof Experts” below had received any commissions, discounts, agency fee, brokerages orother special terms in connection with the issue or sale of any capital of any member ofour Group within the two years immediately preceding the date of this [REDACTED].

5. Disclaimers

Save as disclosed in the sub-sections headed “C. Further Information about ourDirectors and Substantial Shareholders—1. Disclosure of Interests” in this Appendix IVand the sub-sections headed “History, Development and CorporateStructure—Acquisition of HeMo Singapore and Privi Medical” and “SubstantialShareholder” in this [REDACTED]

(a) except for Dr. Wang and Dr. Wang Shunlong, none of our Directors or chiefexecutives has any interests and short positions in the Shares, underlyingShares and debentures of the Company or its associated corporation (withinthe meaning of Part XV of the SFO) which will have to be notified to us andthe Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO(including interests and short positions which he is taken or deemed to haveunder such provisions of SFO) or which will be required, pursuant to section352 of the SFO, to be entered in the register referred to therein, or will berequired, pursuant to the Model Code for Securities Transactions by Directorsand Listed Companies to be notified to us and the Stock Exchange, in each caseonce our Shares are [REDACTED] on the Stock Exchange;

(b) so far as is known to any of our Directors or chief executives, no person has aninterest or short position in the Shares and underlying Shares which would fallto be disclosed to us and the Stock Exchange under the provisions of Divisions2 and 3 of Part XV of the SFO, or is, directly or indirectly, interested in 10% ormore of the nominal value of any class of share capital carrying rights to votein all circumstances at general meetings of any other member of the Group;

(c) none of our Directors nor any of the parties listed in the paragraph headed “E.Other Information—7. Qualification of Experts” below is interested in ourpromotion, or in any assets which have, within the two years immediatelypreceding the issue of this [REDACTED], been acquired or disposed of by orleased to us, or are proposed to be acquired or disposed of by or leased to us;

(d) save in connection with the [REDACTED], none of our Directors nor any ofthe parties listed in the paragraph headed “E. Other Information—7.Qualification of Experts” below is materially interested in any contract or



– IV-18 –

arrangement subsisting at the date of this [REDACTED] which is significant inrelation to the business of our Group;

(e) save in connection with the [REDACTED], none of the parties listed in theparagraph headed “E. Other Information—7. Qualification of Experts” below:(i) is interested legally or beneficially in any of our Shares or any shares in anyof our subsidiaries; or (ii) has any right or option (whether legally enforceableor not) to subscribe for or to nominate persons to subscribe for securities inany member of our Group; and

(f) none of our Directors or their respective associates (as defined under theListing Rules) or any of our Shareholders (who to the knowledge of ourDirectors owns more than 5% of our issued share capital) has any interest inour five largest suppliers or our five largest customers.

D. RSU SCHEME

The Company has adopted the RSU Scheme by a resolution of our Shareholders on June22, 2021 and a resolution of our Board on June 22, 2021. The RSU Scheme is not subject tothe provisions of Chapter 17 of the Listing Rules as the RSU Scheme does not involve thegrant of options by the Company to subscribe for new Shares. The following is a summary ofthe principal terms of the RSU Scheme.

1. Summary of Terms

(a) Purpose of the RSU Scheme

The purpose of the RSU Scheme is to recognize and acknowledge thecontributions that the Eligible Participants (as defined below) have made to thegrowth and development of the Group, to motivate the Eligible Participants tooptimize their performance and efficiency for the benefit of the Group, and toencourage and retain such personnel by providing them an opportunity to acquireproprietary interests in the Company.

(b) RSU Awards

An award of restricted share award under the RSU Scheme (each an “RSU”, orcollectively “RSUs”) gives a participant in the RSU Scheme a conditional rightwhen the RSU vests to obtain either Shares or an equivalent value in cash withreference to the market value of the Shares on the date of vesting, subject to anydeduction or withholding of the exercise price of such RSUs, tax, fines, levies,stamp duty and other applicable charges chargeable or payable by the relevantgrantee.



– IV-19 –

(c) RSU Participants

Eligible participants of the RSU Scheme (each an “Eligible Participant”, orcollectively “Eligible Participants”) include, as determined by the committeeestablished and authorized by the Board to make all determination in respect of theaffairs relating to the operation and administration of the RSU Scheme (the“Administration Committee”) from time to time:

(i) directors and senior management of the Group, external consultants andadvisors of the Group, strategic business partners of the Group or otherindividuals to be determined by the Administration Committee from timeto time who satisfies the eligibility criteria in the RSU Scheme;

(ii) executive, non-executive or independent non-executive Director or anyfull-time or part-time employee of any member of our Group or any entitywhich our Group holds an interest, as the Administration Committee mayin its absolute discretion consider to have contributed or will contribute tothe Group from time to time;

(iii) any company wholly owned by any of the persons set out insubparagraphs (i) and (ii) above; and

(iv) any trust of which any of the persons set out in subparagraph (i) and (ii)above is a settlor.

(d) Term of the RSU Scheme

The RSU Scheme shall be valid and effective for a period of ten (10) yearscommencing on the date on which the RSU Scheme is adopted (the “SchemePeriod”), after which no further RSUs will be issued but the provisions of the RSUScheme will remain in full force and effect to the extent necessary to give effect tothe vesting of the RSUs granted prior thereto or otherwise as may be required inaccordance with the provisions of the RSU Scheme.

(e) Administration of the RSU Scheme

The RSU Scheme shall be subject to the administration of the AdministrationCommittee. The decisions of the Administration Committee shall be final andbinding on all parties, and subject to applicable laws including the Listing Rules, itshall have the absolute discretion to (i) interpret and construe the provisions of theRSU Scheme; (ii) determine the persons who will be granted the RSUs, the termsand conditions on which the RSUs are granted and the conditions of vesting of suchRSUs; (iii) make appropriate and equitable adjustments to the terms of the RSUsgranted under the RSU Scheme; (iv) adopt rules and regulations for carrying out theRSU Scheme; (v) prescribe forms of instruments to be issued as evidence of any



– IV-20 –

RSUs granted under the RSU Scheme; and (vi) make other decisions ordeterminations as it shall deem necessary or appropriate in the administration of theRSU Scheme.

(f) Grant of RSU

On and subject to the rules of the RSU Scheme and all applicable laws andregulations including the Listing Rules, the Administration Committee may, withinthe Scheme Period, determine the persons who will be granted the RSUs, the termsand conditions which the RSUs are granted and the conditions of vesting of suchRSUs.

The Administration Committee has full discretion to determine, from time totime, the basis of eligibility criteria for the participation in the RSU Scheme, andthe grant of RSUs on the basis of their contribution to the development of theGroup, the Group’s general financial condition, overall business objectives andfuture development plan.

The Administration Committee shall notify the Eligible Participant in writing(the “Grant Agreement”) on the date on which the RSU is granted to an EligibleParticipant (the “Grant Date”) upon making the decision.

(g) Acceptance of RSU

If the Eligible Participant accepts the offer of grant of RSU(s), he/she isrequired to sign the Grant Agreement and return it to the Company within three (3)business days after the Grant Date. Upon the receipt from the Eligible Participant ofa duly executed Grant Agreement, the RSU is deemed granted to such EligibleParticipant.

(h) Restrictions on grants

No instructions may be given by an Eligible Participant to the RSU Trustee inrespect of the RSUs prior to vesting of the same.

The grant shall be subject to any applicable laws, regulations and rules andshall not result in a breach by the Company, any member of the Group, any directorof the Company or the Eligible Participant of this Scheme or any applicable laws,including but not limited to restrictions in relation to insider dealing, blackoutperiod and requirements in relation to any grant to connected persons of theCompany under the Listing Rules and any applicable laws, regulations and rules,prohibition from dealing in Shares by any applicable laws, regulations and rulesincluding the Listing Rules.



– IV-21 –

(i) RSU Scheme Limit

No RSU shall be granted pursuant to the RSU Scheme if as a result of suchgrant (assumed accepted), the aggregate number of Shares underlying all grantsmade pursuant to the RSU Scheme (excluding RSUs that have lapsed or beencancelled in accordance with the rules of the RSU Scheme) will exceed 16,926,419Shares, representing [REDACTED]% of the number of Shares in issue on the[REDACTED] (the “RSU Scheme Limit”).

The maximum number of Shares will be adjusted in the event of any alterationin the capital structure of the Company whether by way of capitalization of profitsor reserves, rights issue or other similar offer of securities to holders of Shares,consolidation, sub-division or reduction of the share capital of the Company orotherwise howsoever.

(j) Rights attached to the RSUs

A grantee does not have any contingent interest in any Shares underlying aRSU. Furthermore, a grantee may not exercise any voting right in respect of theShares underlying the RSUs and, unless otherwise specified by the Board in its solediscretion in the grant notice to the grantee, nor do they have any rights to any cashor non-cash income, dividends or distributions and/or the sale proceeds of non-cashand non-scrip distributions from any Shares underlying the RSU prior to theirvesting.

(k) Rights attached to Shares

Any Shares transferred to a grantee in respect of any RSU shall be subject tothe provisions of the Articles and will rank pari passu with the fully paid Shares inissue on the date of the transfer or, if that date falls on a day when the register ofmembers of our Company is closed, the first day of the reopening of the register ofmembers, and accordingly will entitle the grantee to participate in all dividends orother distributions paid or made on or after the date of transfer or, if that date fallson a day when the register of members of our Company closed, the first day of thereopening of the register of members.

(l) RSUs to be personal to the grantee

RSUs granted pursuant to the RSU Scheme shall be personal to each granteeand shall not be assignable or transferrable, except assignment or transfer from eachgrantee to a company wholly owned by him/her or between two companies both ofwhich are wholly owned by him/her. Notwithstanding the above, no grantee shall inany way sell, transfer, charge, mortgage, encumber or create any interest (legal orbeneficial) in favour of any third party over or in relation to any RSU.



– IV-22 –

(m) Appointment of a professional trustee services company as RSU Trustee

On June 24, 2021, the Company entered into a trust deed with the RSU Trusteepursuant to which the RSU Trustee has agreed to act as the trustee to administer theRSU Scheme and to hold certain Shares underlying the RSUs granted under theRSU Scheme. On July 2, 2021, the Company allotted and issued a total of16,926,419 RSUs, representing a total of 16,926,419 Shares underlying the RSUsgranted under the RSU Scheme at a par value of US$0.001 each, to the RSU Trusteeto set aside a pool of RSUs granted under the RSU Scheme. No further Shares willbe allotted and issued to the RSU Trustee for the purpose of the RSU Scheme (otherthan pursuant to capitalization issue, rights issue, sub-division or consolidation ofshares in accordance with the RSU Scheme), and no further RSU under the RSUScheme will be granted after [REDACTED].

The RSU Trustee will not exercise any voting rights in respect of the Shares,and a grantee does not have any rights of a shareholder in any Shares underlying theRSUs unless and until such Shares are actually allotted and issued or transferred tothe grantee from the RSU Trustee upon the vesting of the RSUs.

Upon termination of the RSU Scheme, if the RSU Trustee holds any Share(s)which has not been set aside in favour of any grantee, the RSU Trustee shall withinten (10) business days of such termination, sell such Share(s) and remit the proceedsof sale to the Company.

(n) Outstanding RSUs

As at the Latest Practicable Date, the aggregate number of underlying Sharespursuant to the outstanding RSUs granted to the employees and external advisorsof the Group under the RSU Scheme is 16,418,934 Shares, representingapproximately [REDACTED]% of the total issued Shares immediately following thecompletion of the [REDACTED], assuming the [REDACTED] is not exercised. SuchRSUs will be vested to the grantees after the completion of the [REDACTED] andaccording to their respective vesting schedule.

(o) Vesting of RSUs

The Administration Committee has the sole discretion to determine the vestingschedule and vesting conditions for any grant of RSUs to any grantee. If suchconditions are not satisfied, the RSUs shall be lapsed automatically on the date onwhich such conditions are not satisfied, as determined by the AdministrationCommittee in its absolute discretion.

The Administration Committee shall provide written notice of the vesting ofany RSUs to the RSU Trustee at least forty-five (45) days (or such shorter period asshall be agreed between the Administration Committee and the RSU Trustee) before



– IV-23 –

the date on which the RSUs are to vest (the “Vesting Notice”). The RSU Trusteeshall then send to the relevant grantee via the Administration Committee a directionform, the prescribed transfer documents of the Shares, and a checklist ofinformation and/or documents to be provided by the grantee and/or theAdministration Committee.

Upon receipt of the requisite information and documents stipulated and aconfirmation from the Administration Committee that all vesting conditions havebeen fulfilled or waived, the RSU Trustee shall effect the transfer and/or sale of thevested Shares. If the grantee fails to deliver the required documents within thestipulated period, the vested Shares shall lapse.

(p) Rights on a Takeover

In the event of a general offer by way of takeover, merger or otherwise in a likemanner (other than by way of scheme of arrangement pursuant to paragraph (s)below) is made to all the Shareholders (or Shareholders other than the offeror and/or any person controlled by the offeror and/or any person acting in association orconcert with the offeror) and the general offer to acquire the Shares is approved andbecomes or is declared unconditional in all respects prior to the date of vesting ofany RSU that are subject to time-based vesting, the RSUs of the grantee(s) subjectto time-based vesting will vest immediately to the extent specified in a notice givenby the Company.

(q) Rights on a Scheme of Arrangement

In the event a general offer for Shares by way of scheme of arrangement ismade by any person to all the Shareholders and has been approved by the necessarynumber of Shareholders at the requisite meetings prior to the vesting of any RSUsthat are subject to time-based vesting, the RSUs of the grantee(s) subject totime-based vesting will vest immediately to the extent specified in a notice given bythe Company.

(r) Rights on a Voluntary Winding-up

In the event that an effective resolution is passed during the period of five (5)years commencing on the adoption date of the RSU Scheme for voluntarilywinding-up of the Company (other than for the purposes of a reconstruction,amalgamation or scheme of arrangement as set out above), prior to the vesting ofany RSUs that are subject to time-based vesting, the RSUs of the grantee(s) willvest immediately to the extent specified in a notice given by the Company providedthat all unvested RSUs that are subject to time-based vesting must be vested andeffected by no later than one (1) business day before the day of the proposed generalmeeting to be convened for the purpose of considering, and if thought fit, approving



– IV-24 –

a resolution to voluntarily wind-up the Company (or to pass written resolutions ofthe Shareholders to the same effect).

(s) Rights on a Compromise or Arrangement

If a compromise or arrangement between the Company and the Shareholdersand/or creditors is proposed in connection with a scheme for the reconstruction ofthe Company or its amalgamation with any other company or companies, and anotice is given by the Company to the Shareholders to convene a general meeting toconsider and if thought fit approve such compromise or arrangement prior to thevesting of RSUs that are subject to time-based vesting, the RSUs of the grantee(s)subject to time-based vesting will vest immediately to the extent specified in a noticegiven by the Company.

(t) Lapse or Cancellation of RSU

An unvested RSU shall lapse and be automatically cancelled upon the earliestof:

(i) the date of commencement of the mandatory winding-up of theCompany;

(ii) the date on which the grantee ceases to be an employee with Cause (asdefined below);

(iii) the date on which there is unsatisfactory performance on the part of thegrantee leading to demotion and failure to satisfy the criteria forre-promotion to his original job position within one year after thedemotion;

(iv) the date on which the grantee sells, transfers, charges, mortgages,encumbers or creates any interest in favour of any third party over or inrelation to any RSU;

(v) the date on which the grantee commits a breach of any terms orconditions attached to the grant of the RSUs, unless otherwise resolved tothe contrary by the Administration Committee; or

(vi) the date on which the Administration Committee resolves that the granteehas failed or otherwise is or has been unable to meet the continuingeligibility criteria as may be prescribed by the Administration Committee,provided that a resolution of Administration Committee to the effect thata RSU shall lapse and not be exercisable on one or more of the grounds asspecified in this paragraph (v) shall be conclusive and binding on thegrantee.



– IV-25 –

If the grantee ceases to be an employee other than with Cause (as definedbelow) (including by reasons of resignation, retirement, death, disability ornon-renewal of employment upon its expiration) before vesting of the RSUs, theAdministration Committee shall determine at its absolute discretion and shall notifythe grantee whether any unvested RSUs granted to such grantee shall vest and theperiod within which such RSUs shall vest. If the Administration Committeedetermines that such RSUs shall not vest, such RSUs shall be forfeitedautomatically with effect from the date on which the grantee’s employment isterminated.

For the purpose of the RSU Scheme, “Cause” means, with respect to a grantee,the termination of employment on any one or more of the following grounds: thegrantee has been guilty of dishonesty or series misconduct, willful disobedience ornon-compliance with the terms of his/ her employment contract with the relevantcompany in the Group, or incompetence or negligence in the performance of his/herduties, or commission of any act or any omission to act which, in the conclusiveopinion of the Administration Committee, would adversely affect his/her ability toperform his duties properly or would bring the relevant company in the Group intodisrepute.

Any RSUs granted but not vested may be lapsed at any time with the priorapproval of the Administration Committee, and in such event the RSU Trustee shallact in accordance with the instruction of the Administration Committee to notify allgrantees of such termination and the lapse of RSUs.

(u) Reorganization of Capital Structure

In the event of any alteration in the capital structure of the Company while aRSU remains unvested, and such event arises from, including a capitalisation ofprofits or reserves, rights issue, consolidation, increase, subdivision or reduction ofthe share capital of the Company, the Administration Committee may, in its solediscretion, make such corresponding adjustments as it considers appropriate in:

(a) the number or nominal amount of Shares subject to the RSUs so far asunvested; and/or

(b) the maximum number of Shares in the RSU Scheme Limit.

Any adjustments required under this clause must give a grantee the sameproportion of the issued share capital of the Company as that to which that granteewas previously entitled, but no such adjustments may be made to the extent thatShares would be issued at less than their nominal value or (unless with priorapproval from the Company’s Shareholders in general meeting) to the extent thatsuch adjustments are made to the advantage of the grantee. For the avoidance of



– IV-26 –

doubt, the issue of securities as consideration in a transaction may not be regardedas a circumstance requiring adjustment.

(v) Alteration or Amendment of the RSU Scheme

The terms of the RSU Scheme may be altered, amended or modified by theBoard, and the amended terms must continue to comply with the relevant provisionsof the Listing Rules as may be amended from time to time and the Articles.

(w) Termination of the RSU Scheme

The Company may at any time terminate the operation of the RSU Scheme inaccordance with the Listing Rules and the Articles of the Company, but theprovisions of the RSU Scheme shall remain in force in all other respects. Inparticular, all RSUs granted and accepted prior to the termination and yet to bevested shall continue to be valid and exercisable in accordance with the terms of theRSU Scheme.

(x) General

An [REDACTED] has been made to the [REDACTED] for the [REDACTED] of,and permission to deal in the Shares to be [REDACTED] pursuant to the RSUScheme.

The Company will issue announcements according to applicable Listing Rules,disclosing particulars of any RSUs granted under the RSU Scheme, including thedate of grant, number of Shares involved, the vesting period, the appointment andarrangement with the RSU Trustee and comply with Chapter 14A of the ListingRules. Details of the RSU Scheme, including particulars and movements of theRSUs granted during each financial year of our Company, and our employee costsarising from the grant of the RSUs will be disclosed in our annual report.

E. OTHER INFORMATION

1. Estate Duty

Our Directors have been advised that no material liability for estate duty is likely tofall on our Company or any of our subsidiaries under the laws of Hong Kong, theCayman Islands and the PRC.

2. Litigation

As of the Latest Practicable Date, we are not aware of any other litigation orarbitration proceedings of material importance pending or threatened against us or anyof our Directors that could have a material adverse effect on our financial condition orresults of operations.



– IV-27 –

[REDACTED]

4. Joint Sponsors

The Joint Sponsors satisfy the independence criteria applicable to sponsor set out inRule 3A.07 of the Listing Rules. Amounts of US$500,000, US$500,000 and US$300,000are payable by the Company as sponsor fees to Morgan Stanley Asia Limited, ChinaInternational Capital Corporation Hong Kong Securities Limited and Credit Suisse(Hong Kong) Limited, in total an amount of US$1,300,000.

5. Preliminary Expenses

Our Company did not incur any material preliminary expenses.

6. Promoter

We have no promoter for the purpose of the Listing Rules. Save as disclosed in this[REDACTED], within the two years immediately preceding the date of this[REDACTED], no cash, securities or other benefit has been paid, allotted or given norare any proposed to be paid, allotted or given to any promoters in connection with the[REDACTED] and the related transactions described in this [REDACTED].

7. Qualification of Experts

The following are the qualifications of the experts who have given opinion or advicewhich are contained in this [REDACTED]:

Morgan Stanley Asia Limited Licensed corporation under the SFO toconduct type 1, (dealing in securities), type 4(advising on securities), type 5 (advising onfutures contracts), type 6 (advising oncorporate finance) and type 9 (assetmanagement) regulated activities as definedunder the SFO



– IV-28 –

China International CapitalCorporation Hong KongSecurities Limited

Licensed corporation under the SFO toconduct type 1 (dealing in securities), type 2(dealing in futures contracts), type 4 (advisingon securities), type 5 (advising on futurecontracts) and type 6 (advising on corporatefinance) regulated activities as defined underthe SFO

Credit Suisse (Hong Kong)Limited

Licensed corporation under the SFO toconduct type 1 (dealing in securities), type 2(dealing in futures contracts), type 4 (advisingon securities), type 5 (advising on futurecontracts) and type 6 (advising on corporatefinance) and type 9 (asset management)regulated activities as defined under the SFO

KPMG Certified public accountants, and PublicInterest Entity Auditor registered inaccordance with the Financial ReportingCouncil Ordinance

Jingtian & Gongcheng PRC legal advisor

Maples and Calder (Hong Kong)LLP

Cayman Islands legal advisor

Zhongzi Law Office Legal advisor as to PRC intellectual propertylaw

Frost & Sullivan (Beijing) Inc.,Shanghai Branch Co.

Independent industry consultants

As at the Latest Practicable Date, none of the experts named above has any

shareholding in any member of our Group or the right (whether legally enforceable or

not) to subscribe for or to nominate persons to subscribe for securities in any member of

our Group.

8. Consents of Experts

Each of the persons named in “—7. Qualification of experts” has given and has notwithdrawn its respective written consent to the issue of this [REDACTED] with theinclusion of its report and/or letter and/or opinion and/or the references to its nameincluded in this [REDACTED] in the form and context in which it is respectivelyincluded.



– IV-29 –

9. Binding Effect

This [REDACTED] shall have the effect, if an application is made in pursuance ofthis [REDACTED], of rendering all persons concerned bound by all of the provisions(other than the penal provisions) of sections 44A and 44B of the Companies (WindingUp and Miscellaneous Provisions) Ordinance insofar as applicable.

10. Reserves available for distribution

As at May 31, 2021, we have no reserves available for distribution to ourShareholders.

11. Miscellaneous

(a) Save as disclosed in the sub-sections headed “A. Further Information about ourGroup—2. Changes in our share capital” and “A. Further Information aboutour Group—Changes in the share capital of our Subsidiaries” in this AppendixIV and the sub-section headed “History, Development and Corporate Structure—Adoption of the RSU Scheme and Establishment of the Employee Trust” inthis [REDACTED], within the two years immediately preceding the date of this[REDACTED]

(i) no share or loan capital of the Company or any of its subsidiaries hasbeen issued or agreed to be issued or is proposed to be fully or partly paideither for cash or a consideration other than cash;

(ii) no commissions, discounts, brokerages or other special terms have beengranted or agreed to be granted in connection with the issue or sale of anyshare or loan capital of the Company or any of its subsidiaries; and

(iii) no commission has been paid or is payable for subscription, agreeing tosubscribe, procuring subscription or agreeing to procure subscription ofany share in the Company or any of its subsidiaries.

(b) Save as disclosed in this [REDACTED]:

(i) our Group had not issued any debentures nor did it have any outstandingdebentures nor any convertible debt securities;

(ii) no share or loan capital of the Company or any of its subsidiaries is underoption or is agreed conditionally or unconditionally to be put underoption; and

(iii) no founders or management or deferred shares of the Company or any ofits subsidiaries have been issued or agreed to be issued.



– IV-30 –

(c) Save as disclosed in the subsection headed “Summary—Recent Developments”in this [REDACTED], our Directors confirm that:

(i) there has been no material adverse change in the financial or tradingposition or prospects of the Group since May 31, 2021 (being the date towhich the latest audited consolidated financial statements of the Groupwere prepared); and

(ii) there is no arrangement under which future dividends are waived oragreed to be waived; and

(iii) there has not been any interruption in the business of the Group whichmay have or has had a significant effect on the financial position of theGroup in the 12 months preceding the date of this [REDACTED].

(d) There are no restrictions affecting the remittance of profits or repatriation ofcapital by us into Hong Kong from outside Hong Kong.

(e) Our principal register of members will be maintained by [REDACTED], in theCayman Islands and our Hong Kong register of members will be maintained byour [REDACTED], in Hong Kong. Unless the Directors otherwise agree, alltransfer and other documents of title of Shares must be lodged for registrationwith and registered by [REDACTED] and may not be lodged in the CaymanIslands.

(f) All necessary arrangements have been made to enable our Shares to beadmitted into [REDACTED] for clearing and settlement.

(g) No company within our Group is presently listed on any stock exchange ortraded on any trading system.

(h) The English and Chinese language versions of this [REDACTED] are beingpublished separately, in reliance upon the exemption provided by section 4 ofthe Companies (Exemption of Companies and prospectuses from Compliancewith Provisions) Notice (Chapter 32L of the Laws of Hong Kong).



– IV-31 –

1. DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES

The documents attached to a copy of this [REDACTED] and delivered to the Registrar ofCompanies in Hong Kong for registration were:

(a) a copy of the [REDACTED];

(b) a copy of each of the material contracts referred to the section headed “Statutoryand General Information—B. Further Information About Our Business—1.Summary of Material Contracts” in Appendix IV to this [REDACTED]; and

(c) the written consents referred to in the section headed “Statutory and GeneralInformation—E. Other Information—8. Consents of experts” in Appendix IV tothis [REDACTED].

2. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of ClearyGottlieb Steen & Hamilton (Hong Kong) at 37/F, Hysan Place, 500 Hennessy Road, CausewayBay, Hong Kong during normal business hours up to and including the date which is 14 daysfrom the date of this [REDACTED]:

(a) our Memorandum and Articles;

(b) the Accountants’ Report for the two years ended December 31, 2019 and December31, 2020, and the five months ended May 31, 2021, issued by KPMG, the text ofwhich is set out in Appendix I to this [REDACTED];

(c) the audited consolidated financial statements of our Company for the two yearsended December 31, 2019 and December 31, 2020, and the five months ended May31, 2021;

(d) the report on the unaudited pro forma financial information from KPMG, the textof which is set out in Appendix II to this [REDACTED];

(e) the legal opinions issued by Jingtian & Gongcheng, our PRC legal adviser, dated [•]in respect of certain aspects of the Group and the property interests of the Group;

(f) the letter of advice issued by Maples and Calder (Hong Kong) LLP, our Caymanlegal adviser, in respect of certain aspects of the Cayman Companies Act referred toin Appendix III to this [REDACTED];

(g) the Cayman Companies Act;


APPENDIX V — DOCUMENTS DELIVERED TO THE REGISTRAR OFCOMPANIES AND AVAILABLE FOR INSPECTION

– V-1 –

(h) the Industry Consultant Report;

(i) the material contracts referred to the section headed “Statutory and GeneralInformation—B. Further Information About Our Business—1. Summary ofMaterial Contracts” in Appendix IV to this [REDACTED];

(j) the written consents referred to in the section headed “Statutory and GeneralInformation—E. Other Information—8. Consents of Experts” in Appendix IV tothis [REDACTED];

(k) the rules of the RSU Scheme;

(l) service contracts and letters of appointment entered into between the Company andeach of the Directors; and

(m) the freedom to operate (FTO) report issued by Zhongzi Law Office dated July 30,2021 in respect of the stent retriever.


APPENDIX V — DOCUMENTS DELIVERED TO THE REGISTRAR OFCOMPANIES AND AVAILABLE FOR INSPECTION

– V-2 –

sehk21073002217.pdf - :: HKEX :: HKEXnews ::

Documents

Transcript of sehk21073002217.pdf - :: HKEX :: HKEXnews ::