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What changed in Zhongchao Inc.'s 20-F — 2022 vs 2023

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Paragraph-level year-over-year comparison of Zhongchao Inc.'s 2022 and 2023 20-F annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+552 added−939 removedSource: 20-F (2024-04-30) vs 20-F (2023-05-12)

Top changes in Zhongchao Inc.'s 2023 20-F

552 paragraphs added · 939 removed · 403 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

175 edited+37 added−71 removed508 unchanged
Biggest changeSelected Condensed Consolidated Balance Sheets Data December 31, 2022 Parent Subsidiaries VIE and Its Subsidiaries Elimination Total Cash and cash equivalents $ 4,110,216 $ 2,909,858 $ 4,500,379 $ - $ 11,520,453 Accounts receivable - - 6,772,988 - 6,772,988 Total current assets 4,110,216 5,291,289 13,302,655 - 22,704,160 Investment in subsidiaries, VIE and VIE’s subsidiaries 16,906,213 - - (16,906,213 ) - Property and equipment, net - 779,230 3,111,717 - 3,890,947 Total non-current assets 16,906,213 928,072 14,982,113 (16,906,213 ) 15,910,185 Amount due from the Company and its subsidiaries 9,423,617 - - (9,423,617 ) - Total Assets $ 30,440,046 $ 6,219,361 $ 28,284,768 $ (26,329,830 ) $ 38,614,345 Total current liabilities $ - $ 3,816 $ 4,161,219 $ - $ 4,165,035 Total non-current liabilities - - 1,430,045 - 1,430,045 Amounts due to the Company and its subsidiaries - 8,193,902 762,962 (8,956,864 ) - Total Liabilities - 8,197,718 6,354,226 (8,956,864 ) 5,595,080 Total Shareholders’ Equity (Deficit) 30,440,046 (1,978,357 ) 21,930,542 (17,372,966 ) 33,019,265 Total Liabilities and Shareholders’ Equity $ 30,440,046 $ 6,219,361 $ 28,284,768 $ (26,329,830 ) $ 38,614,345 December 31, 2021 Parent Subsidiaries VIE and Its Subsidiaries Elimination Total Cash and cash equivalents $ 3,758,618 $ 3,038,636 $ 7,117,728 $ - $ 13,914,982 Accounts receivable - - 9,218,883 - 9,218,883 Total current assets 3,758,618 5,128,653 18,366,405 - 27,253,676 Investment in subsidiaries, VIE and VIE’s subsidiaries 21,022,642 - - (21,022,642 ) - Property and equipment, net - 754,645 3,168,441 - 3,923,086 Total non-current assets 21,022,642 1,207,046 7,806,698 (21,022,642 ) 9,013,744 Amount due from the Company and its subsidiaries 7,785,162 - - (7,785,162 ) - Total Assets $ 32,566,422 $ 6,335,699 $ 26,173,103 $ (28,807,804 ) $ 36,267,420 Total current liabilities $ - $ 2,363 $ 3,586,044 $ - $ 3,588,407 Total non-current liabilities - - 112,591 - 112,591 Amounts due to the Company and its subsidiaries - 6,942,772 599,347 (7,542,119 ) - Total Liabilities - 6,945,135 4,297,982 (7,542,119 ) 3,700,998 Total Shareholders’ Equity (Deficit) 32,566,422 (609,436 ) 21,875,121 (21,265,685 ) 32,566,422 Total Liabilities and Shareholders’ Equity $ 32,566,422 $ 6,335,699 $ 26,173,103 $ (28,807,804 ) $ 36,267,420 5 Selected Condensed Consolidated Statements of Operations Data For the year ended December 31, 2022 Parent Subsidiaries VIE and its Subsidiaries Elimination Total Revenues $ - $ - $ 14,151,516 $ - $ 14,151,516 Share of loss of subsidiaries, VIE and VIE’s subsidiaries $ (2,919,423 ) $ - $ - $ 2,919,423 $ - Net loss $ (2,940,891 ) $ (1,373,555 ) $ (1,427,296 ) $ 2,919,423 $ (2,822,319 ) For the year ended December 31, 2021 Parent Subsidiaries VIE and its Subsidiaries Elimination Total Revenues $ - $ 200,001 $ 16,096,769 $ - $ 16,296,770 Share of income of subsidiaries, VIE and VIE’s subsidiaries $ 266,775 $ - $ - $ (266,775 ) $ - Net income (loss) $ 238,665 $ (572,063 ) $ 838,838 $ (266,775 ) $ 238,665 For the year ended December 31, 2020 Parent Subsidiaries VIE and its Subsidiaries Elimination Total Revenues $ - $ - $ 17,989,788 $ - $ 17,989,788 Share of income of subsidiaries, VIE and VIE’s subsidiaries $ 4,470,613 $ - $ - $ (4,470,613 ) $ - Net income (loss) $ 4,458,380 $ (13,416 ) $ 4,484,029 $ (4,470,613 ) $ 4,458,380 Selected Condensed Consolidated Cash Flows Data For the year ended December 31, 2022 Parent Subsidiaries VIE and its Subsidiaries Elimination Total Net cash provided by (used in) operating activities $ 139,309 $ (1,198,586 ) $ 397,537 $ - $ (661,740 ) Net cash used in investing activities $ (1,638,455 ) $ (509,185 ) $ (2,837,473 ) $ 1,638,455 $ (3,346,658 ) Net cash provided by financing activities $ 1,850,744 $ 1,638,455 $ - $ (1,638,455 ) $ 1,850,744 6 For the year ended December 31, 2021 Parent Subsidiaries VIE and its Subsidiaries Elimination Total Net cash provided by (used in) operating activities $ 3,737 $ (823,321 ) $ 3,681,432 $ - $ 2,861,848 Net cash used in investing activities $ (3,400,000 ) $ (820,982 ) $ (3,196,302 ) $ 3,400,000 $ (4,017,284 ) Net cash provided by financing activities $ - $ 3,400,000 $ - $ (3,400,000 ) $ - For the year ended December 31, 2020 Parent Subsidiaries VIE and its Subsidiaries Elimination Total Net cash used in operating activities $ (700,873 ) $ (26,501 ) $ (310,465 ) $ - $ (1,037,839 ) Net cash used in investing activities $ (3,690,000 ) $ (2,508,402 ) $ (1,586,276 ) $ 3,690,000 $ (4,094,678 ) Net cash provided by financing activities $ 11,497,654 $ 3,690,000 $ - $ (3,690,000 ) $ 11,497,654 A. [Reserved] B.
Biggest changeSelected Condensed Consolidated Balance Sheets Data December 31, 2023 Parent Subsidiaries VIE and Its Subsidiaries Elimination Total Cash and cash equivalents $ 150,071 $ 1,955,061 $ 5,443,562 $ - $ 7,548,694 Short-term investment 5,241,677 656,132 - - 5,897,809 Accounts receivable - - 2,552,738 - 2,552,738 Other current assets 143,208 8,909 2,559,688 - 2,711,805 Total current assets 5,534,956 2,620,102 10,555,988 - 18,711,046 Investment in subsidiaries, VIE and VIE’s subsidiaries 5,756,419 - - (5,756,419 ) - Property and equipment, net - 1,524,676 1,697,576 - 3,222,252 Total non-current assets 5,756,419 1,690,547 4,015,050 (5,756,419 ) 5,705,597 Amount due from the Company and its subsidiaries 7,948,307 - - (7,948,307 ) - Total Assets $ 19,239,682 $ 4,310,649 $ 14,571,038 $ (13,704,726 ) $ 24,416,643 Total current liabilities $ - $ 3,389 $ 2,674,972 $ - $ 2,678,361 Total non-current liabilities - - 700,112 - 700,112 Amounts due to the Company and its subsidiaries - 6,884,124 564,652 (7,448,776 ) - Total Liabilities - 6,887,513 3,939,736 (7,448,776 ) 3,378,473 Total Shareholders’ Equity (Deficit) 19,239,682 (2,576,864 ) 10,631,302 (6,255,950 ) 21,038,170 Total Liabilities and Shareholders’ Equity $ 19,239,682 $ 4,310,649 $ 14,571,038 $ (13,704,726 ) $ 24,416,643 4 December 31, 2022 Parent Subsidiaries VIE and Its Subsidiaries Elimination Total Cash and cash equivalents $ 4,110,216 $ 2,909,858 $ 4,500,379 $ - $ 11,520,453 Accounts receivable - - 6,772,988 - 6,772,988 Total current assets 4,110,216 5,291,289 13,302,655 - 22,704,160 Investment in subsidiaries, VIE and VIE’s subsidiaries 16,906,213 - - (16,906,213 ) - Property and equipment, net - 779,230 3,111,717 - 3,890,947 Total non-current assets 16,906,213 928,072 14,982,113 (16,906,213 ) 15,910,185 Amount due from the Company and its subsidiaries 9,423,617 - - (9,423,617 ) - Total Assets $ 30,440,046 $ 6,219,361 $ 28,284,768 $ (26,329,830 ) $ 38,614,345 Total current liabilities $ - $ 3,816 $ 4,161,219 $ - $ 4,165,035 Total non-current liabilities - - 1,430,045 - 1,430,045 Amounts due to the Company and its subsidiaries - 8,193,902 762,962 (8,956,864 ) - Total Liabilities - 8,197,718 6,354,226 (8,956,864 ) 5,595,080 Total Shareholders’ Equity (Deficit) 30,440,046 (1,978,357 ) 21,930,542 (17,372,966 ) 33,019,265 Total Liabilities and Shareholders’ Equity $ 30,440,046 $ 6,219,361 $ 28,284,768 $ (26,329,830 ) $ 38,614,345 Selected Condensed Consolidated Statements of Operations Data For the year ended December 31, 2023 Parent Subsidiaries VIE and its Subsidiaries Elimination Total Revenues $ - $ - $ 19,433,945 $ - $ 19,433,945 Share of loss of subsidiaries, VIE and VIE’s subsidiaries $ (11,440,721 ) $ - $ - $ 11,440,721 $ - Net loss $ (11,335,911 ) $ (631,262 ) $ (10,780,772 ) $ 11,440,706 $ (11,307,239 ) For the year ended December 31, 2022 Parent Subsidiaries VIE and its Subsidiaries Elimination Total Revenues $ - $ - $ 14,151,516 $ - $ 14,151,516 Share of loss of subsidiaries, VIE and VIE’s subsidiaries $ (2,919,423 ) $ - $ - $ 2,919,423 $ - Net loss $ (2,940,891 ) $ (1,373,555 ) $ (1,427,296 ) $ 2,919,423 $ (2,822,319 ) For the year ended December 31, 2021 Parent Subsidiaries VIE and its Subsidiaries Elimination Total Revenues $ - $ 200,001 $ 16,096,769 $ - $ 16,296,770 Share of income of subsidiaries, VIE and VIE’s subsidiaries $ 266,775 $ - $ - $ (266,775 ) $ - Net income (loss) $ 238,665 $ (572,063 ) $ 838,838 $ (266,775 ) $ 238,665 5 Selected Condensed Consolidated Cash Flows Data For the year ended December 31, 2023 Parent Subsidiaries VIE and its Subsidiaries Elimination Total Net cash provided by (used in) operating activities $ (193,778 ) $ (2,351,918 ) $ 1,124,613 $ 1,475,312 $ 54,229 Net cash used in investing activities $ (3,766,367 ) $ 1,530,264 $ (43,240 ) $ (1,475,312 ) $ (3,754,655 ) Net cash provided by financing activities $ - $ - $ - $ - $ - For the year ended December 31, 2022 Parent Subsidiaries VIE and its Subsidiaries Elimination Total Net cash provided by (used in) operating activities $ 139,309 $ (1,198,586 ) $ 397,537 $ - $ (661,740 ) Net cash used in investing activities $ (1,638,455 ) $ (509,185 ) $ (2,837,473 ) $ 1,638,455 $ (3,346,658 ) Net cash provided by financing activities $ 1,850,744 $ 1,638,455 $ - $ (1,638,455 ) $ 1,850,744 For the year ended December 31, 2021 Parent Subsidiaries VIE and its Subsidiaries Elimination Total Net cash provided by (used in) operating activities $ 3,737 $ (823,321 ) $ 3,681,432 $ - $ 2,861,848 Net cash used in investing activities $ (3,400,000 ) $ (820,982 ) $ (3,196,302 ) $ 3,400,000 $ (4,017,284 ) Net cash provided by financing activities $ - $ 3,400,000 $ - $ (3,400,000 ) $ - A. [Reserved] B.
We are currently not required to obtain approval from Chinese authorities to list on U.S. exchanges nor for the execution of VIE agreements, however, if the VIE or the holding company were required to obtain approval and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange or continue to offer securities to investors, which could materially affect the interest of the investors and cause the value of our Class A Ordinary Shares to significantly decline or be worthless .” 1 Permission Required from the PRC Authorities to Issue Our Securities to Foreign Investors PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and therefore, these risks may result in a material change in our operations, significant depreciation of the value of our Class A Ordinary Shares, or a complete hindrance of our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline or be worthless.
We are currently not required to obtain approval from Chinese authorities to list or continue to list on U.S. exchanges nor for the execution of VIE agreements, however, if the VIE or the holding company were required to obtain approval and were denied permission from Chinese authorities to list or continue to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange or continue to offer securities to investors, which could materially affect the interest of the investors and cause the value of our Class A Ordinary Shares to significantly decline or be worthless.” Permission Required from the PRC Authorities to Issue Our Securities to Foreign Investors 1 PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and therefore, these risks may result in a material change in our operations, significant depreciation of the value of our Class A Ordinary Shares, or a complete hindrance of our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline or be worthless.
Continued expansion increases the challenges the PRC operating entities face in: ● recruiting, training, developing and retaining sufficient IT talents and management personnel; ● creating and capitalizing upon economies of scale; ● managing a larger number of customers in a greater number locations; ● maintaining effective oversight of personnel and offices; ● coordinating work among offices and project teams and maintaining high resource utilization rates; ● integrating new management personnel and expanded operations while preserving the PRC operating entities’ culture and core values; ● developing and improving the PRC operating entities’ internal administrative infrastructure, particularly its financial, operational, human resources, communications and other internal systems, procedures and controls; and ● adhering to and further improving the PRC operating entities’ high quality and process execution standards and maintaining high levels of client satisfaction.
Continued expansion increases the challenges the PRC operating entities face in: ● recruiting, training, developing and retaining sufficient IT talents and management personnel; ● creating and capitalizing upon economies of scale; ● managing a larger number of customers in a greater number of locations; ● maintaining effective oversight of personnel and offices; ● coordinating work among offices and project teams and maintaining high resource utilization rates; ● integrating new management personnel and expanded operations while preserving the PRC operating entities’ culture and core values; ● developing and improving the PRC operating entities’ internal administrative infrastructure, particularly its financial, operational, human resources, communications and other internal systems, procedures and controls; and ● adhering to and further improving the PRC operating entities’ high quality and process execution standards and maintaining high levels of client satisfaction.
In particular, we cannot rule out the possibility that PRC regulatory authorities, courts or arbitral tribunals may in the future adopt a different or contrary interpretation or take a view that is inconsistent with the opinion of our PRC legal counsel.
In particular, we cannot rule out the possibility that PRC regulatory authorities, courts or arbitral tribunals may in the future adopt a different or contrary interpretation or take a view that is inconsistent with the opinion of our PRC legal counsel.
If we are required by the Trial Measures for any future offering or any other financing activities to file with the CSRC, we cannot assure you that we will be able to complete such filings in a timely manner, or even at all.
If we are required by the Trial Measures for any future offering or any other financing activities to file with the CSRC, we cannot assure you that we will be able to complete such filings in a timely manner, or even at all.
According to the Trial Measures, among other requirements, (1) domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfil the filing procedures with the CSRC; if a domestic company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties; (2) if the issuer meets both of the following conditions, the overseas offering and listing shall be determined as an indirect overseas offering and listing by a domestic company: (i) any of the total assets, net assets, revenues or profits of the domestic operating entities of the issuer in the most recent accounting year accounts for more than 50% of the corresponding figure in the issuer’s audited consolidated financial statements for the same period; (ii) its major operational activities are carried out in China or its main places of business are located in China, or the senior managers in charge of operation and management of the issuer are mostly Chinese citizens or are domiciled in China; (3) where a domestic company seeks to indirectly offer and list securities in an overseas market, the issuer shall designate a major domestic operating entity responsible for all filing procedures with the CSRC, and such filings shall be submitted to the CSRC within three business days after the submission of the overseas offering and listing application; and (4) if the issuer issues securities in the same overseas market after the initial issuance and listing, it shall submit filings with the CSRC within three business days after the completion of the issuance.
According to the Trial Measures, among other requirements, (1) domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfil the filing procedures with the CSRC; if a domestic company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties; (2) if the issuer meets both of the following conditions, the overseas offering and listing shall be determined as an indirect overseas offering and listing by a domestic company: (i) any of the total assets, net assets, revenues or profits of the domestic operating entities of the issuer in the most recent accounting year accounts for more than 50% of the corresponding figure in the issuer’s audited consolidated financial statements for the same period; (ii) its major operational activities are carried out in China or its main places of business are located in China, or the senior managers in charge of operation and management of the issuer are mostly Chinese citizens or are domiciled in China; (3) where a domestic company seeks to indirectly offer and list securities in an overseas market, the issuer shall designate a major domestic operating entity responsible for all filing procedures with the CSRC, and such filings shall be submitted to the CSRC within three business days after the submission of the overseas offering and listing application; and (4) if the issuer issues securities in the same overseas market after the initial issuance and listing, it shall submit filings with the CSRC within three business days after the completion of the issuance.
Existing Issuers are not required to complete the filing procedures immediately but shall carry out filing procedures as required if they conduct refinancing or are involved in other circumstances that require filing with the CSRC.
Existing Issuers are not required to complete the filing procedures immediately but shall carry out filing procedures as required if they conduct refinancing or are involved in other circumstances that require filing with the CSRC.
However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control.
However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control.
In addition, our management consists of five officers who are all located in China and three independent directors, among which two are located in the United States and one is located in China.
In addition, our management consists of five officers who are all located in China and three independent directors, among which two are located in the United States and one is located in China.
We may not be able to obtain these government approvals or complete such registrations on a timely basis, if at all, with respect to future capital contributions or foreign loans by us to our PRC subsidiaries.
We may not be able to obtain these government approvals or complete such registrations on a timely basis, if at all, with respect to future capital contributions or foreign loans by us to our PRC subsidiaries.
Risk Factors— Risks Related to Doing Business in China— The PRC operating entities’ failure to obtain, maintain or renew other licenses, approvals, permits, registrations or filings necessary to conduct their operations in China could have a material adverse impact on our business, financial conditions and results of operations. ” We have been advised by our PRC legal counsel, Han Kun Law Offices, based on their understanding of the current PRC laws, rules and regulations, that (i) the structure for operating our business in China (including our corporate structure and VIE Arrangements with Zhongchao Shanghai, Zhongchao Shanghai and their shareholders), as of the date of this Annual Report, do not result in any violation of PRC laws or regulations currently in effect; and (ii) the Contractual Arrangements among Zhongchao WFOE and Zhongchao Shanghai and their shareholders governed by PRC law are valid, binding and enforceable in accordance with the terms of each of the VIE Arrangements, and do not result in any violation of PRC laws or regulations currently in effect.
Risk Factors— Risks Related to Doing Business in China—The PRC operating entities’ failure to obtain, maintain or renew other licenses, approvals, permits, registrations or filings necessary to conduct their operations in China could have a material adverse impact on our business, financial conditions and results of operations.” 2 We have been advised by our PRC legal counsel, Han Kun Law Offices, based on their understanding of the current PRC laws, rules and regulations, that (i) the structure for operating our business in China (including our corporate structure and VIE Arrangements with Zhongchao Shanghai, Zhongchao Shanghai and their shareholders), as of the date of this Annual Report, do not result in any violation of PRC laws or regulations currently in effect; and (ii) the Contractual Arrangements among Zhongchao WFOE and Zhongchao Shanghai and their shareholders governed by PRC law are valid, binding and enforceable in accordance with the terms of each of the VIE Arrangements, and do not result in any violation of PRC laws or regulations currently in effect.
If any of our PRC entities or the PRC operating entities or their ownership structure or the VIE Arrangements are determined to be in violation of any existing or future PRC laws, rules or regulations, or any of our PRC entities or the PRC operating entities fail to obtain or maintain any of the required governmental permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including: ● revoking the business and operating licenses; ● discontinuing or restricting the operations; ● imposing conditions or requirements with which the PRC entities may not be able to comply; ● requiring us and the PRC operating entities to restructure the relevant ownership structure or operations; 30 ● restricting or prohibiting our use of the proceeds from this offering to finance our business and operations in China; or ● imposing fines.
If any of our PRC entities or the PRC operating entities or their ownership structure or the VIE Arrangements are determined to be in violation of any existing or future PRC laws, rules or regulations, or any of our PRC entities or the PRC operating entities fail to obtain or maintain any of the required governmental permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including: ● revoking the business and operating licenses; ● discontinuing or restricting the operations; ● imposing conditions or requirements with which the PRC entities may not be able to comply; ● requiring us and the PRC operating entities to restructure the relevant ownership structure or operations; ● restricting or prohibiting our use of the proceeds from this offering to finance our business and operations in China; or ● imposing fines.
We are currently not required to obtain approval from Chinese authorities to list on U.S. exchanges nor for the execution of VIE agreements, however, if the VIE or the holding company were required to obtain approval and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange or continue to offer securities to investors, which could materially affect the interest of the investors and cause the value of our Class A Ordinary Shares to significantly decline or be worthless .” on page 35 of this Annual Report. ● If the PRC operating entities fail to comply with any regulatory requirements, including obtaining any required licenses, approvals, permits or filings in a timely manner or at all, the PRC operating entities’ continued business operations may be disrupted and the PRC operating entities may be subject to various penalties or be unable to continue their operations, all of which will materially and adversely affect our business, financial condition and results of operations.
We are currently not required to obtain approval from Chinese authorities to list on U.S. exchanges nor for the execution of VIE agreements, however, if the VIE or the holding company were required to obtain approval and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange or continue to offer securities to investors, which could materially affect the interest of the investors and cause the value of our Class A Ordinary Shares to significantly decline or be worthless .” on page 30 of this Annual Report. ● If the PRC operating entities fail to comply with any regulatory requirements, including obtaining any required licenses, approvals, permits or filings in a timely manner or at all, the PRC operating entities’ continued business operations may be disrupted and the PRC operating entities may be subject to various penalties or be unable to continue their operations, all of which will materially and adversely affect our business, financial condition and results of operations.
We cannot assure you that the registration process will not delay or prevent our conversion of Renminbi for use outside of China. We may be classified as a “resident enterprise” for PRC enterprise income tax purposes; such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.
We cannot assure you that the registration process will not delay or prevent our conversion of Renminbi for use outside of China. 45 We may be classified as a “resident enterprise” for PRC enterprise income tax purposes; such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.
In addition, insurance for some risks is difficult, impossible or too costly to obtain, and as a result, the PRC operating entities may not be able to purchase insurance for some types of risks. Healthcare reforms and the cost of regulatory compliance could negatively affect the PRC operating entities’ business. The healthcare industry is heavily regulated in China.
In addition, insurance for some risks is difficult, impossible or too costly to obtain, and as a result, the PRC operating entities may not be able to purchase insurance for some types of risks. 20 Healthcare reforms and the cost of regulatory compliance could negatively affect the PRC operating entities’ business. The healthcare industry is heavily regulated in China.
Our status as a controlled company could cause our Class A Ordinary Share to look less attractive to certain investors or otherwise harm our trading price. We depend upon the VIE Arrangements in consolidating the financial results of the PRC operating entities, which may not be as effective as direct ownership.
Our status as a controlled company could cause our Class A Ordinary Share to look less attractive to certain investors or otherwise harm our trading price. 24 We depend upon the VIE Arrangements in consolidating the financial results of the PRC operating entities, which may not be as effective as direct ownership.
The recent joint statement by the SEC and the PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB.
The joint statement by the SEC and the PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB.
If the PRC operating entities are not able to maintain high resource utilization levels without corresponding cost reductions or price increases, their profitability will suffer. 17 Increases in wages for professionals in China could prevent the PRC operating entities from sustaining their competitive advantage and could reduce our profit margins.
If the PRC operating entities are not able to maintain high resource utilization levels without corresponding cost reductions or price increases, their profitability will suffer. Increases in wages for professionals in China could prevent the PRC operating entities from sustaining their competitive advantage and could reduce our profit margins.
Some of the adverse developments in the healthcare industry that could affect our revenues would be: - a reduction in sales and marketing expenditures of pharmaceutical enterprises; - public or private market initiatives or reforms designed to regulate the manner in which pharmaceutical enterprises promote their products; - regulatory or legislative developments that discourage or prohibit pharmaceutical enterprises’ promotional activities; - a decrease in the number of new drugs being developed; or - the adoption of current legislative and regulatory proposals to control drug costs for patients. 12 The PRC operating entities face intense competition from onshore and offshore healthcare information, education, and training services companies, and, if the PRC operating entities are unable to compete effectively, the PRC operating entities may lose customers and our revenues may decline.
Some of the adverse developments in the healthcare industry that could affect our revenues would be: - a reduction in sales and marketing expenditures of pharmaceutical enterprises; - public or private market initiatives or reforms designed to regulate the manner in which pharmaceutical enterprises promote their products; - regulatory or legislative developments that discourage or prohibit pharmaceutical enterprises’ promotional activities; - a decrease in the number of new drugs being developed; or - the adoption of current legislative and regulatory proposals to control drug costs for patients. 9 The PRC operating entities face intense competition from onshore and offshore healthcare information, education, and training services companies, and, if the PRC operating entities are unable to compete effectively, the PRC operating entities may lose customers and our revenues may decline.
Our financial position could be materially and adversely affected if the VIE’s or its subsidiaries’ tax liabilities increase or if it is required to pay late payment fees and other penalties. We conduct our business through Zhongchao Shanghai and its subsidiaries by means of VIE Arrangements.
Our financial position could be materially and adversely affected if the VIE’s or its subsidiaries’ tax liabilities increase or if it is required to pay late payment fees and other penalties. 25 We conduct our business through Zhongchao Shanghai and its subsidiaries by means of VIE Arrangements.
If the PRC operating entities fail to do so, the PRC operating entities’ business, financial conditions and operational results may be materially and adversely affected. Failure to comply with PRC regulations in relation to lease property may subject us to penalty Certain PRC operating entities’ actual operating addresses are different from their registered addresses.
If the PRC operating entities fail to do so, the PRC operating entities’ business, financial conditions and operational results may be materially and adversely affected. 40 Failure to comply with PRC regulations in relation to lease property may subject us to penalty. Certain PRC operating entities’ actual operating addresses are different from their registered addresses.
In addition, if the chops are misused by unauthorized persons, the PRC operating entities could experience disruption to their normal business operations. The PRC operating entities may have to take corporate or legal action, which could involve significant time and resources to resolve while distracting management from our operations.
In addition, if the chops are misused by unauthorized persons, the PRC operating entities could experience disruption to their normal business operations. The PRC operating entities may have to take corporate or legal action, which could involve significant time and resources to resolve while distracting management from our operations. 48
Capitalization and Indebtedness Not applicable. C. Reasons for the Offer and Use of Proceeds Not applicable. D. Risk Factors 7 SUMMARY OF RISK FACTORS You should carefully consider the following risk factors, together with all of the other information included in this Annual Report. Investment in our securities involves a high degree of risk.
Capitalization and Indebtedness Not applicable. C. Reasons for the Offer and Use of Proceeds Not applicable. D. Risk Factors SUMMARY OF RISK FACTORS You should carefully consider the following risk factors, together with all of the other information included in this Annual Report. Investment in our securities involves a high degree of risk.
If online and mobile networks do not achieve adequate acceptance in the market, the PRC operating entities’ growth prospects, results of operations and financial condition could be harmed. PRC laws that protect individual information may limit our plans to collect, use and disclose that information.
If online and mobile networks do not achieve adequate acceptance in the market, the PRC operating entities’ growth prospects, results of operations and financial condition could be harmed. 21 PRC laws that protect individual information may limit our plans to collect, use and disclose that information.
If the PRC operating entities are unsuccessful in addressing any of these risks or challenges, their business may be materially and adversely affected. The PRC operating entities’ profitability will suffer if they are not able to maintain their resource utilization levels or continue to improve their productivity levels.
If the PRC operating entities are unsuccessful in addressing any of these risks or challenges, their business may be materially and adversely affected. 13 The PRC operating entities’ profitability will suffer if they are not able to maintain their resource utilization levels or continue to improve their productivity levels.
By restricting the investment to such a certain instrument, we intend to avoid being deemed an “investment company” within the meaning of the Investment Compact Act. 27 An investment in our securities is not intended for persons who are seeking a return on investments in government securities or investment securities.
By restricting the investment to such a certain instrument, we intend to avoid being deemed an “investment company” within the meaning of the Investment Compact Act. An investment in our securities is not intended for persons who are seeking a return on investments in government securities or investment securities.
As a result, the time period before our Class A Ordinary Shares may be prohibited from trading or delisted will be reduced. On November 5, 2021, the SEC approved the PCAOB’s Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act.
As a result, the time period before our Class A Ordinary Shares may be prohibited from trading or delisted will be reduced. 34 On November 5, 2021, the SEC approved the PCAOB’s Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act.
Further, the PRC government authorities may have wide discretion in the interpretation and enforcement of these laws. On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the Data Security Law which took effect on September 1, 2021.
Further, the PRC government authorities may have wide discretion in the interpretation and enforcement of these laws. 36 On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the Data Security Law which took effect on September 1, 2021.
See “Risk Factor — PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to personal liability and limit our ability to acquire PRC companies or to inject capital into our PRC subsidiary, limit our PRC subsidiary ability to distribute profits to us, or otherwise materially and adversely affect us .” on page 47 of this Annual Report. ● The PRC government imposes control on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China.
See “Risk Factor — PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to personal liability and limit our ability to acquire PRC companies or to inject capital into our PRC subsidiary, limit our PRC subsidiary ability to distribute profits to us, or otherwise materially and adversely affect us .” on page 43 of this Annual Report. ● The PRC government imposes control on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China.
In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. 36 From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights.
In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights.
See “Risk Factor — Governmental control of currency conversion may limit our ability to use our revenues effectively and the ability of our PRC subsidiaries to obtain financing .” on page 49 of this Annual Report. ● On December 15, 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary.
See “Risk Factor — Governmental control of currency conversion may limit our ability to use our revenues effectively and the ability of our PRC subsidiaries to obtain financing .” on page 45 of this Annual Report. ● On December 15, 2022, the PCAOB determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary.
Risk Factors— Risks Related to Doing Business in China— PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of the initial public offering or any subsequent offerings to make loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business .” 4 Financial Information Related to the VIE The following tables present selected condensed consolidated statements of income and comprehensive income, and cash flows for the years ended December 31, 2022 and 2021, and the selected condensed consolidated balance sheets as of December 31, 2022 and 2021, which showing financial information for parent company, Zhongchao Cayman, its subsidiaries (Zhongchao Group Inc.
Risk Factors— Risks Related to Doing Business in China—PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of the initial public offering or any subsequent offerings to make loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” Financial Information Related to the VIE The following tables present selected condensed consolidated statements of income and comprehensive income, and cash flows for the years ended December 31, 2023 and 2022, and the selected condensed consolidated balance sheets as of December 31, 2023 and 2022, which showing financial information for parent company, Zhongchao Cayman, its subsidiaries (Zhongchao Group Inc.
See “Risk Factor — Adverse changes in political, economic and other policies of the Chinese government could have a material adverse effect on the overall economic growth of China, which could materially and adversely affect the growth of the PRC operating entities’ business and their competitive position .” on page 19 of this Annual Report. ● The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership.
See “Risk Factor — Adverse changes in political, economic and other policies of the Chinese government could have a material adverse effect on the overall economic growth of China, which could materially and adversely affect the growth of the PRC operating entities’ business and their competitive position .” on page 28 of this Annual Report. ● The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership.
The PRC operating entities may also be liable to their customers for breach of contract for interruptions in service. 20 The PRC operating entities may be liable to third parties for content that is available from their online library.
The PRC operating entities may also be liable to their customers for breach of contract for interruptions in service. The PRC operating entities may be liable to third parties for content that is available from their online library.
If the PRC operating entities are subject to fines, our financial condition and results of operations may be adversely affected. If the number of dispatched workers of the PRC operating entities exceeds statutory limit, the PRC operating entities may be subject to penalties.
If the PRC operating entities are subject to fines, our financial condition and results of operations may be adversely affected. 47 If the number of dispatched workers of the PRC operating entities exceeds statutory limit, the PRC operating entities may be subject to penalties.
See “Risk Factor — PRC laws and regulations governing our current business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitably .” on page 36 of this Annual Report. 9 ● Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities as well as foreign individuals that are deemed as PRC residents for foreign exchange administration purpose) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities.
See “Risk Factor — PRC laws and regulations governing our current business operations are sometimes vague and uncertain and any changes in such laws and regulations may impair our ability to operate profitably .” on page 32 of this Annual Report. ● Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities as well as foreign individuals that are deemed as PRC residents for foreign exchange administration purpose) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities.
In connection with audits of our financial statements for the fiscal years ended December 31, 2022 and 2021, our management identified below material weaknesses in the design and operation of our internal controls: ● The Company lacked the key monitoring mechanisms such as an internal control department to oversee and monitor the Company’s risk management, business strategies and financial reporting procedure.
In connection with audits of our financial statements for the fiscal years ended December 31, 2023 and 2022, our management identified below material weaknesses in the design and operation of our internal controls: ● The Company lacked the key monitoring mechanisms such as an internal control department to oversee and monitor the Company’s risk management, business strategies and financial reporting procedure.
If the PRC courts or administrative authorities determine that these VIE Arrangements do not comply with applicable regulations, we could be subject to severe penalties and our business could be adversely affected. In addition, changes in such PRC laws and regulations may materially and adversely affect our business ” and “Item 3. Key Information—D.
If the PRC courts or administrative authorities determine that these VIE Arrangements do not comply with applicable regulations, we could be subject to severe penalties and our business could be adversely affected. In addition, changes in such PRC laws and regulations may materially and adversely affect our business” and “Item 3. Key Information—D.
Furthermore, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. 32 The regulatory authorities have significant oversight over the business of the PRC operating entities and may influence our operations as the regulatory authorities deem appropriate to further regulatory, political and societal goals.
Furthermore, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. 28 The regulatory authorities have significant oversight over the business of the PRC operating entities and may influence our operations as the regulatory authorities deem appropriate to further regulatory, political and societal goals.
These developments could add uncertainties to our offering .” on page 38 of this Annual Report. ● The business of the PRC operating entities involves collecting and retaining certain internal and customer data. We also maintain information about various aspects of our operations as well as regarding our employees.
These developments could add uncertainties to our offering .” on page 34 of this Annual Report. ● The business of the PRC operating entities involves collecting and retaining certain internal and customer data. We also maintain information about various aspects of our operations as well as regarding our employees.
See “Risk Factor — We may be liable for improper use or appropriation of personal information provided by our customers .” on page 42 of this Annual Report. ● The majority of the operations of the PRC operating entities conducted outside of the U.S.
See “Risk Factor — We may be liable for improper use or appropriation of personal information provided by our customers .” on page 37 of this Annual Report. ● The majority of the operations of the PRC operating entities conducted outside of the U.S.
See “Risk Factor — We face risks associated with uncertainties surrounding the PRC laws and regulations governing the education industry in general, and the online for-profit private training in particular .” on page 34 of this Annual Report. ● There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in certain circumstances.
See “Risk Factor — We face risks associated with uncertainties surrounding the PRC laws and regulations governing the education industry in general, and the online for-profit private training in particular .” on page 29 of this Annual Report. 7 ● There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in certain circumstances.
Except as otherwise disclosed above, for the years ended December 31, 2022 and 2021, no other cash transfer or transfer of other assets have occurred between Zhongchao Cayman, its subsidiaries, the consolidated VIE and the subsidiaries of the VIE.
Except as otherwise disclosed above, for the years ended December 31, 2023 and 2022, no other cash transfer or transfer of other assets have occurred between Zhongchao Cayman, its subsidiaries, the consolidated VIE and the subsidiaries of the VIE.
Risk Factors— Risks Related to Doing Business in China— We face risks associated with uncertainties surrounding the PRC laws and regulations governing the education industry in general, and the online for-profit private training in particular ” “— We may be liable for improper use or appropriation of personal information provided by our customers ” “ — New rules for China-based companies seeking for securities offerings in foreign stock markets was released by the CSRC recently.
Risk Factors— Risks Related to Doing Business in China—We face risks associated with uncertainties surrounding the PRC laws and regulations governing the education industry in general, and the online for-profit private training in particular” “— We may be liable for improper use or appropriation of personal information provided by our customers” “— New rules for China-based companies seeking for securities offerings in foreign stock markets was released by the CSRC recently.
For the years ended December 31, 2022 and 2021, none of our subsidiaries, the consolidated VIE, or the subsidiaries of the VIE have made any dividends or distributions to Zhongchao Cayman. For the years ended December 31, 2022 and 2021, no dividends or distributions have been made to any U.S. investors.
For the years ended December 31, 2023 and 2022, none of our subsidiaries, the consolidated VIE, or the subsidiaries of the VIE have made any dividends or distributions to Zhongchao Cayman. For the years ended December 31, 2023 and 2022, no dividends or distributions have been made to any U.S. investors.
The PRC operating entities have initiated their online operations in the recent 10 years and are developing its ability to provide its courses and education systems on a transactional basis over the Internet.
The PRC operating entities have initiated their online operations in the recent 12 years and are developing its ability to provide its courses and education systems on a transactional basis over the Internet.
The dual class structure of our ordinary shares has the effect of concentrating voting control with our CEO, directors and their affiliates. Our Class B Ordinary Share has 15 votes per share, and our Class A Ordinary Share has 1 vote per share.
The dual class structure of our ordinary shares has the effect of concentrating voting control with our CEO, directors and their affiliates. Our Class B Ordinary Share has 100 votes per share, and our Class A Ordinary Share has 1 vote per share.
As the Trial Measures and the Archives Rules were newly published, there are substantial uncertainties as to the implementation and interpretation, and how they will affect our current listing, and future offering or financing.
As the Trial Measures were newly published, there are substantial uncertainties as to the implementation and interpretation, and how they will affect our current listing, and future offering or financing.
See “Risk Factor — U.S. regulators’ ability to conduct investigations or enforce rules in China is limited. ” on page 45 of this Annual Report. 10 RISKS RELATED TO THE BUSINESS AND INDUSTRY OF THE PRC OPERATING ENTITIES The PRC operating entities may be unable to effectively manage their rapid growth, which could place significant strain on their management personnel, systems and resources.
See “Risk Factor — U.S. regulators’ ability to conduct investigations or enforce rules in China is limited. ” on page 41 of this Annual Report. 8 RISKS RELATED TO THE BUSINESS AND INDUSTRY OF THE PRC OPERATING ENTITIES The PRC operating entities may be unable to effectively manage their rapid growth, which could place significant strain on their management personnel, systems and resources.
Any foreign loan procured by our PRC subsidiaries is required to be registered or filed with the SAFE or its local branches or satisfy relevant requirements as provided by SAFE. Any medium- or long-term loan to be provided by us to the VIEs must be registered with the NDRC and the SAFE or its local branches.
Any foreign loan procured by our PRC subsidiaries is required to be registered or filed with the SAFE or its local branches or satisfy relevant requirements as provided by SAFE. Any medium- or long-term loan to be provided by us to the variable-interest entities, or the VIEs, must be registered with the NDRC and the SAFE or its local branches.
Weiguang Yang, and his affiliates which he deemed to have control and/or have substantial influence is able to exercise full voting rights with respect to an aggregate of 5,497,715 Class B Ordinary Shares, representing a majority of the voting power of our outstanding ordinary shares. As a result, Mr.
Weiguang Yang, and his affiliates which he deemed to have control and/or have substantial influence is able to exercise full voting rights with respect to an aggregate of 549,772 Class B Ordinary Shares, representing a majority of the voting power of our outstanding ordinary shares. As a result, Mr.
The PRC operating entities currently cooperate with Apple’s app store and major PRC-based Android app stores to distribute their MDMOOC and Sunshine Health Forum mobile application to users.
The PRC operating entities currently cooperate with Apple’s app store and major PRC-based Android app stores to distribute their MDMOOC mobile application to users.
If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the HFCA Act.
If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the HFCA Act. On December 18, 2020, the HFCA Act was signed into law.
Accordingly, the Contractual Arrangements are designed to allow Zhongchao Cayman to consolidate Zhongchao Shanghai’s operations and financial results in Zhongchao Cayman’s financial statements in accordance with U.S. GAAP as the primary beneficiary. Neither we nor our subsidiaries own any equity interests in the PRC operating entities. See “Item 3. Key Information — A.
Accordingly, the Contractual Arrangements are designed to allow Zhongchao Cayman to consolidate Zhongchao Shanghai’s operations and financial results in Zhongchao Cayman’s financial statements in accordance with U.S. GAAP as the primary beneficiary. Neither we nor our subsidiaries own any equity interests in the PRC operating entities.
We depend on the healthcare industry for a significant portion of our revenues. Our revenues could seriously decrease if there were adverse developments in the healthcare industry. Our near-term and long-term prospects depend upon selling the PRC operating entities’ services to the healthcare industry. In 2022, 33.1% of our revenues were derived from services provided to pharmaceutical enterprises.
We depend on the healthcare industry for a significant portion of our revenues. Our revenues could seriously decrease if there were adverse developments in the healthcare industry. Our near-term and long-term prospects depend upon selling the PRC operating entities’ services to the healthcare industry. In 2023, 52.5% of our revenues were derived from services provided to pharmaceutical enterprises.
PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of the initial public offering or any subsequent offerings to make loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects. 43 PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of the initial public offering or any subsequent offerings to make loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
Dividend Distributions or Transfers of Cash among the Holding Company, Its Subsidiaries, and the Consolidated VIE For the year ended December 31, 2022, Zhongchao Cayman made cash transfer of $1.5 million to Zhongchao USA. For the year ended December 31, 2021, Zhongchao Cayman made cash transfer of $3.4 million to Zhongchao USA.
Dividend Distributions or Transfers of Cash among the Holding Company, Its Subsidiaries, and the Consolidated VIE For the year ended December 31, 2023, Zhongchao Cayman made cash transfer of $0.1 million to Zhongchao USA. For the year ended December 31, 2022, Zhongchao Cayman made cash transfer of $1.5 million to Zhongchao USA.
Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including: ● investors’ perception of, and demand for, securities of technology services outsourcing companies; ● conditions of the U.S. and other capital markets in which we may seek to raise funds; ● our future results of operations and financial condition; ● PRC government regulation of foreign investment in China; ● economic, political and other conditions in China; and ● PRC government policies relating to the borrowing and remittance outside China of foreign currency. 21 Financing may not be available in amounts or on terms acceptable to us, if at all.
Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including: ● investors’ perception of, and demand for, securities of technology services outsourcing companies; ● conditions of the U.S. and other capital markets in which we may seek to raise funds; ● our future results of operations and financial condition; ● PRC government regulation of foreign investment in China; ● economic, political and other conditions in China; and ● PRC government policies relating to the borrowing and remittance outside China of foreign currency.
The PRC operating entities may lose business if they are unable to keep up with rapid technological or other changes. If the PRC operating entities are unable to keep up with changing technology and other factors related to their market, they may be unable to attract and retain users and advertisers, which would reduce our revenues.
If the PRC operating entities are unable to keep up with changing technology and other factors related to their market, they may be unable to attract and retain users and advertisers, which would reduce our revenues.
If the PRC operating entities fail to comply with any regulatory requirements, including obtaining any required licenses, approvals, permits or filings in a timely manner or at all, the PRC operating entities’ continued business operations may be disrupted and the PRC operating entities may be subject to various penalties or be unable to continue their operations, all of which will materially and adversely affect our business, financial condition and results of operations. 34 The Chinese government exerts substantial influence over the manner in which the PRC operating entities must conduct their business activities.
If the PRC operating entities fail to comply with any regulatory requirements, including obtaining any required licenses, approvals, permits or filings in a timely manner or at all, the PRC operating entities’ continued business operations may be disrupted and the PRC operating entities may be subject to various penalties or be unable to continue their operations, all of which will materially and adversely affect our business, financial condition and results of operations.
Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties. 35 The PRC operating entities’ business is subject to various government and regulatory interference.
Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.
We may be deemed as a data processor under the Data Security Management Regulations Draft and may be subject to the cybersecurity review in connection with our continuing listing abroad because, as of the date of this Annual Report, the MDMOOC online platform has more than 219,825 registered users and a database of approximately 109,721 healthcare experts.
We may be deemed as a data processor under the Data Security Management Regulations Draft and may be subject to the cybersecurity review in connection with our continuing listing abroad because, as of the date of this Annual Report, the MDMOOC online platform has more than253,133 registered users and a database of approximately 131,206 healthcare experts.
The State Administration of Taxation (“SAT”) has promulgated several rules and notices to tighten the scrutiny over acquisition transactions in recent years, including the Interim Measures for the Administration of Remittance of Income Tax for Non-Resident Enterprise Withheld at Source (the “Interim Measures”) which became effective on January 1, 2009, the Notice of the SAT on Strengthening the Administration of Enterprise Income Tax on Gain Derived from Equity Transfer Made by Non-Resident Enterprise (the “Notice”) which became effective on January 1, 2008 and was amended on July 19, 2015, the Announcement of the SAT on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source (the “SAT Circular 37”) which was promulgated on October 17, 2017, became effective on December 1, 2017 and was amended on June 15, 2018, and the Public Notice of the SAT Regarding Certain Enterprise Income Tax Matters on Indirect Transfer of Properties by Non-Resident Enterprises (the “Public Notice 7”) which became effective on February 3, 2015 and was amended on December 1, 2017 and December 29, 2017. 46 The SAT Circular 37 amended some provisions in Public Notice 7, repealed the Interim Measures and the Notice and simplifies procedures of withholding and payment of income tax levied on non-resident enterprises.
Distributions of earnings generated before January 1, 2008, are exempt from PRC withholding tax. 41 The State Administration of Taxation (“SAT”) has promulgated several rules and notices to tighten the scrutiny over acquisition transactions in recent years, including the Interim Measures for the Administration of Remittance of Income Tax for Non-Resident Enterprise Withheld at Source (the “Interim Measures”) which became effective on January 1, 2009, the Notice of the SAT on Strengthening the Administration of Enterprise Income Tax on Gain Derived from Equity Transfer Made by Non-Resident Enterprise (the “Notice”) which became effective on January 1, 2008 and was amended on July 19, 2015, the Announcement of the SAT on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source (the “SAT Circular 37”) which was promulgated on October 17, 2017, became effective on December 1, 2017 and was amended on June 15, 2018, and the Public Notice of the SAT Regarding Certain Enterprise Income Tax Matters on Indirect Transfer of Properties by Non-Resident Enterprises (the “Public Notice 7”) which became effective on February 3, 2015 and was amended on December 1, 2017 and December 29, 2017.
Any failure or delay in the completion of the cybersecurity review procedures or any other non-compliance with the related laws and regulations may result in fines or other penalties, including suspension of business, website closure, removal of our app from the relevant app stores, and revocation of prerequisite licenses, as well as reputational damage or legal proceedings or actions against us, which may have material adverse effect on our business, financial condition or results of operations.
Any failure or delay in the completion of the cybersecurity review procedures or any other non-compliance with the related laws and regulations may result in fines or other penalties, including suspension of business, website closure, removal of our app from the relevant app stores, and revocation of prerequisite licenses, as well as reputational damage or legal proceedings or actions against us, which may have material adverse effect on our business, financial condition or results of operations. 38 On June 10, 2021, the SCNPC promulgated the PRC Data Security Law, which took effect in September 2021.
In addition, in order to address the material weakness in internal control over financial reporting of the Company, we have: (a) hired an experienced outside consultant with adequate experience with US GAAP and the SEC reporting and compliance requirements; (b) continued our efforts to provide ongoing training courses in US GAAP to existing personnel, including our Chief Financial Officer; (c) continued our efforts to setup the internal audit department, and enhance the effectiveness of the internal control system; and (d) continued our efforts to implement necessary review and controls at related levels and the submission of all important documents and contracts to the office of our Chief Executive Officer for retention.
In addition, in order to address the material weakness in internal control over financial reporting of the Company, we have: (a) hired an experienced outside consultant with adequate experience with US GAAP and the SEC reporting and compliance requirements; (b) continued our efforts to provide ongoing training courses in US GAAP to existing personnel, including our Chief Financial Officer; (c) continued our efforts to setup the internal audit department, and enhance the effectiveness of the internal control system; and (d) continued our efforts to implement necessary review and controls at related levels and the submission of all important documents and contracts to the office of our Chief Executive Officer for retention. 19 All internal control systems, no matter how well designed, have inherent limitations including the possibility of human error and the circumvention or overriding of controls.
The PRC operating entities rely on security and authentication technology licensed from third parties. The PRC operating entities cannot predict whether these security measures could be circumvented by new technological developments. In addition, the PRC operating entities’ software, databases and servers may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions.
The PRC operating entities cannot predict whether these security measures could be circumvented by new technological developments. In addition, the PRC operating entities’ software, databases and servers may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions.
The shareholder who holds shares of Class B Ordinary Shares holds approximately 80.07% of the voting power of our outstanding ordinary shares, assuming the exercise of the HF Warrant.
The shareholder who holds shares of Class B Ordinary Shares holds approximately 96.54% of the voting power of our outstanding ordinary shares, assuming the exercise of the HF Warrant.
The Chinese government may exert more oversight and control over overseas public offerings conducted by China-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer our Class A Ordinary Shares to investors and could cause the value of our Class A Ordinary Shares to significantly decline or become worthless.” for more information. 2 Permission Required from the PRC Authorities for Our and PRC Operating Entities’ Operation in China.
The Chinese government may exert more oversight and control over overseas public offerings conducted by China-based issuers, which could significantly limit or completely hinder our ability to offer or continue to offer our Class A Ordinary Shares to investors and could cause the value of our Class A Ordinary Shares to significantly decline or become worthless.” for more information.
For the year ended December 31, 2022, one customer accounted for approximately 15.9% of the total revenue. For the year ended December 31, 2021, three customers accounted for approximately 23.4%, 21.9%, and 10.7% of the total revenue, respectively. For the year ended December 31, 2020, two customers accounted for approximately 26.9% and 19.7% of the total revenue, respectively.
For the year ended December 31, 2023, one customer accounted for approximately 13.7% of the total revenue. For the year ended December 31, 2022, one customer accounted for approximately 15.9% of the total revenue. For the year ended December 31, 2021, three customers accounted for approximately 23.4%, 21.9%, and 10.7% of the total revenue, respectively.
Our current corporate structure and business operations may be affected by the Foreign Investment Law. On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which became effect on January 1, 2020. Since it is relatively new, uncertainties exist in relation to its interpretation and its implementation rules that are yet to be issued.
On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which became effect on January 1, 2020. Since it is relatively new, uncertainties exist in relation to its interpretation and its implementation rules that are yet to be issued.
The above recent developments may have added uncertainties to our ability to continue to list on Nasdaq or to offer our securities and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us since we are an emerging growth company and substantial all of our operations are conducting in China.
Additionally, the inability of the PCAOB to conduct inspections deprives our investors with the benefits of such inspections. 35 The above recent developments may have added uncertainties to our ability to continue to list on Nasdaq or to offer our securities and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us since we are an emerging growth company and substantial all of our operations are conducting in China.
There is no certainty as to how such review or prescribed actions would impact our operations and we cannot guarantee that any clearance can be obtained or any actions that may be required for our listing on the Nasdaq capital market and the offering as well can be taken in a timely manner, or at all. 41 We may be liable for improper use or appropriation of personal information provided by our customers.
There is no certainty as to how such review or prescribed actions would impact our operations and we cannot guarantee that any clearance can be obtained or any actions that may be required for our listing on the Nasdaq capital market and the offering as well can be taken in a timely manner, or at all.
If the PRC operating entities fail to defend themselves against such claims, they may lose significant intellectual property rights and may be unable to continue providing their existing services.
The PRC operating entities may face intellectual property infringement claims that could be time-consuming and costly to defend. If the PRC operating entities fail to defend themselves against such claims, they may lose significant intellectual property rights and may be unable to continue providing their existing services.
Risk Factors—Risks Related to Related to Doing Business in China — The Chinese government exerts substantial influence over the manner in which we must conduct our business activities.
Risk Factors—Risks Related to Related to Doing Business in China — The Chinese government exerts substantial influence over the manner in which the PRC operating entities must conduct their business activities.
For example, General Provisions of the Civil Law of the PRC which stipulates that the personal information of a natural person shall be protected by laws, any organization or individual that needs to obtain the personal information of others shall obtain such information pursuant to the law and ensure information security, and may neither illegally collect, use, transmit the personal information of others, nor illegally trade, provide or disclose the personal information of others. 26 The PRC government has been considering proposed legislation that would establish a new standard for protection and use of health information.
For example, General Provisions of the Civil Law of the PRC which stipulates that the personal information of a natural person shall be protected by laws, any organization or individual that needs to obtain the personal information of others shall obtain such information pursuant to the law and ensure information security, and may neither illegally collect, use, transmit the personal information of others, nor illegally trade, provide or disclose the personal information of others.
The customers and employees of the PRC operating entities expect that the PRC operating entities will adequately protect their personal information. The PRC operating entities are required by applicable laws to keep strictly confidential the personal information that they collect, and to take adequate security measures to safeguard such information.
The PRC operating entities are required by applicable laws to keep strictly confidential the personal information that they collect, and to take adequate security measures to safeguard such information.
The PRC operating entities’ business model is dependent in part on required training and continuing education for healthcare professionals and other healthcare workers resulting from regulations of Chinese Health Department. Any change in these regulations which reduce the demands for continuing education and training for the healthcare industry could harm the PRC operating entities’ business.
The PRC operating entities’ business model is dependent in part on required training and continuing education for healthcare professionals and other healthcare workers resulting from regulations of Chinese Health Department.
If we cannot resolve any conflict of interest or dispute between us and these shareholders, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.
If we cannot resolve any conflict of interest or dispute between us and these shareholders, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings. 26 Our current corporate structure and business operations may be affected by the Foreign Investment Law.
Further, as of the date of this prospectus, we have not been subject to any penalties, fines, suspensions, or investigations from any competent authorities for violation of the regulations or policies that have been issued by the CAC. 42 As of the date of this prospectus, we have not been informed by any PRC governmental authority of any requirement that we file for a cybersecurity review.
Further, as of the date of this prospectus, we have not been subject to any penalties, fines, suspensions, or investigations from any competent authorities for violation of the regulations or policies that have been issued by the CAC.
This concentrated control will limit your ability to influence corporate matters for the foreseeable future. Future transfers by the holder of Class B Ordinary Shares will generally result in those shares converting to Class A Ordinary Shares, subject to limited exceptions, such as certain transfers effected for estate planning purposes.
Future transfers by the holder of Class B Ordinary Shares will generally result in those shares converting to Class A Ordinary Shares, subject to limited exceptions, such as certain transfers effected for estate planning purposes.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeThe Law on Social Insurance of the PRC, which was promulgated by the Standing Committee of the National People’s Congress on October 28, 2010, and became effective on July 1, 2011, and was most recently updated on December 29, 2018, has consolidated pertinent provisions for basic pension insurance, unemployment insurance, maternity insurance, work injury insurance and basic medical insurance, and has elaborated in detail the legal obligations and liabilities of employers who do not comply with relevant laws and regulations on social insurance. 119 According to the Interim Measures for Participation in the Social Insurance System by Foreigners Working within the Territory of China, which was promulgated by the Ministry of Human Resources and Social Security on September 6, 2011, and became effective on October 15, 2011, employers who employ foreigners shall participate in the basic pension insurance, unemployment insurance, basic medical insurance, occupational injury insurance, and maternity leave insurance in accordance with the relevant law, with the social insurance premiums to be contributed respectively by the employers and foreigner employees as required.
Biggest changeAccording to the Interim Measures for Participation in the Social Insurance System by Foreigners Working within the Territory of China, which was promulgated by the Ministry of Human Resources and Social Security on September 6, 2011, and became effective on October 15, 2011, employers who employ foreigners shall participate in the basic pension insurance, unemployment insurance, basic medical insurance, occupational injury insurance, and maternity leave insurance in accordance with the relevant law, with the social insurance premiums to be contributed respectively by the employers and foreigner employees as required.
The PRC operating entities currently organize their professional information by the following medical specialty and subject areas, including but not limited to: ● Internal Medicine Department: cardiology, respiratory medicine, nephrology, neurology, gastroenterology, hematology, endocrinology ● Surgery Department: general surgical, neurosurgery, breast surgery, urology, hepatobiliary surgery, cardiothoracic surgery, plastic surgery ● Oncology Department: general oncology, surgical radiotherapy, oncology ● Gynaecology Department: Gynecologic endocrine ● Pediatrics Department: respiratory medicine, nephrology, neurology, gastroenterology, hematology, endocrinology ● Oral Cavity Department: oral and maxillofacial surgery, Restorative Dentistry, orthodontics ● Skin Beauty Department: Pharmacology, aesthetic health care ● Mental Psychology Department: depression, sensory disturbance, schizophrenia The PRC operating entities plan to expand into new medical specialty areas that appeal to their current users base and attract new users.
The PRC operating entities currently organize their professional information by the following medical specialty and subject areas, including but not limited to: ● Internal Medicine Department: cardiology, respiratory medicine, nephrology, neurology, gastroenterology, hematology, endocrinology ● Surgery Department: general surgical, neurosurgery, breast surgery, urology, hepatobiliary surgery, cardiothoracic surgery, plastic surgery ● Oncology Department: general oncology, surgical radiotherapy, oncology ● Gynaecology Department: Gynecologic endocrine 53 ● Pediatrics Department: respiratory medicine, nephrology, neurology, gastroenterology, hematology, endocrinology ● Oral Cavity Department: oral and maxillofacial surgery, Restorative Dentistry, orthodontics ● Skin Beauty Department: Pharmacology, aesthetic health care ● Mental Psychology Department: depression, sensory disturbance, schizophrenia The PRC operating entities plan to expand into new medical specialty areas that appeal to their current users base and attract new users.
In addition, the Foreign Investment Law also provides several protective rules and principles for foreign investors and their investments in the PRC, including, among others, that a foreign investor may freely transfer into or out of China, in Renminbi or a foreign currency, its contributions, profits, capital gains, income from disposition of assets, royalties of intellectual property rights, indemnity or compensation lawfully acquired, and income from liquidation, among others, within China; local governments shall abide by their commitments to the foreign investors; governments at all levels and their departments shall enact local normative documents concerning foreign investment in compliance with laws and regulations and shall not impair legitimate rights and interests, impose additional obligations onto FIEs, set market access restrictions and exit conditions, or intervene with the normal production and operation activities of FIEs; except for special circumstances, in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; and mandatory technology transfer is prohibited. 125 C.
In addition, the Foreign Investment Law also provides several protective rules and principles for foreign investors and their investments in the PRC, including, among others, that a foreign investor may freely transfer into or out of China, in Renminbi or a foreign currency, its contributions, profits, capital gains, income from disposition of assets, royalties of intellectual property rights, indemnity or compensation lawfully acquired, and income from liquidation, among others, within China; local governments shall abide by their commitments to the foreign investors; governments at all levels and their departments shall enact local normative documents concerning foreign investment in compliance with laws and regulations and shall not impair legitimate rights and interests, impose additional obligations onto FIEs, set market access restrictions and exit conditions, or intervene with the normal production and operation activities of FIEs; except for special circumstances, in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; and mandatory technology transfer is prohibited. 88 C.
Regulations on Investments in Private Funds On August 21, 2014, the SRC promulgated the Interim Measures for the Supervision and Administration of Private Investment Funds which defines the accredited investors of private funds as those entities and individuals with corresponding risk identification and risk-taking capabilities who invest in a single private fund an amount not less than RMB 1 million and accord with the following standards: with respect to entities, their net assets shall not be less than RMB 10 million; and with respect to individuals, their financial assets shall not be less than RMB 3 million or their personal average annual income in the last three years shall not be less than RMB 0.5 million. 117 Legal Regulations on Intellectual Property in the PRC Copyright Pursuant to the Copyright Law of the PRC, which was first promulgated by the Standing Committee of the National People’s Congress on September 7, 1990 and became effective from June 1, 1993, and was last amended on November 11, 2020 and became effective as of June 1, 2021, copyrights include personal rights such as the right of publication and that of attribution as well as property rights such as the right of production and that of distribution.
Regulations on Investments in Private Funds On August 21, 2014, the SRC promulgated the Interim Measures for the Supervision and Administration of Private Investment Funds which defines the accredited investors of private funds as those entities and individuals with corresponding risk identification and risk-taking capabilities who invest in a single private fund an amount not less than RMB 1 million and accord with the following standards: with respect to entities, their net assets shall not be less than RMB 10 million; and with respect to individuals, their financial assets shall not be less than RMB 3 million or their personal average annual income in the last three years shall not be less than RMB 0.5 million. 81 Legal Regulations on Intellectual Property in the PRC Copyright Pursuant to the Copyright Law of the PRC, which was first promulgated by the Standing Committee of the National People’s Congress on September 7, 1990 and became effective from June 1, 1993, and was last amended on November 11, 2020 and became effective as of June 1, 2021, copyrights include personal rights such as the right of publication and that of attribution as well as property rights such as the right of production and that of distribution.
Ltd 21587258 Approved Category 5: Pharmaceutical preparations; Vaccines; Analgesics; Medical drugs; Medical tea; Medical ointments (cut-off) 2028.01.20 China 6 Shanghai Zhongxun Medical Technology Co., Ltd. 47286982 Approved Category 41: Education; Providing of training, Providing of educational information; Arranging and conducting of conferences, congresses and symposiums; Organization of exhibitions for cultural or educational purposes; Arranging and conducting of training; Publication of books and texts (cut-off) 2031.02.12 China 7 Beijing Zhongchao Boya Medical Technology Co., Ltd. 59485462 Approved Category 41: Providing of training, Arranging of experts conferences, Mobile libraries; text publishing (except advertising texts); E-books and magazines publishing; Providing non-downloadable global computer network online publishing; Publishing electronic newspapers through global computer network; Providing global network network publishing Editing website publishing; Publishing and distributing medical technology related scientific paper (cut-off) 2032.03.13 China 8 Beijing Zhongchao Boya Medical Technology Co., Ltd. 59474281 Approved Category 44: Medical clinic services; Healthcare; Therapeutic services; Medical equipment rental; Health counseling; Diet nutrition guidance; Art therapy methods; Dispensing; Beauty services; Massage (cut-off) 2032.03.13 China 98 No.
Ltd 21587258 Approved Category 5: Pharmaceutical preparations; Vaccines; Analgesics; Medical drugs; Medical tea; Medical ointments (cut-off) 2028.01.20 China 6 Shanghai Zhongxun Medical Technology Co., Ltd. 47286982 Approved Category 41: Education; Providing of training, Providing of educational information; Arranging and conducting of conferences, congresses and symposiums; Organization of exhibitions for cultural or educational purposes; Arranging and conducting of training; Publication of books and texts (cut-off) 2031.02.12 China 7 Beijing Zhongchao Boya Medical Technology Co., Ltd. 59485462 Approved Category 41: Providing of training, Arranging of experts conferences, Mobile libraries; text publishing (except advertising texts); E-books and magazines publishing; Providing non-downloadable global computer network online publishing; Publishing electronic newspapers through global computer network; Providing global network publishing Editing website publishing; Publishing and distributing medical technology related scientific paper (cut-off) 2032.03.13 China 8 Beijing Zhongchao Boya Medical Technology Co., Ltd. 59474281 Approved Category 44: Medical clinic services; Healthcare; Therapeutic services; Medical equipment rental; Health counseling; Diet nutrition guidance; Art therapy methods; Dispensing; Beauty services; Massage (cut-off) 2032.03.13 China 66 No.
Current Owner Mark Registration Number Status Class/Description Expiration Date Country of Registration 9 Shanghai Zhongxun Medical Technology Co., Ltd. 47299361 Approved Category 44: Hospitals; Healthcare; Dispensing Consulting; Telemedicine services; Health consulting; Therapeutic services; Diet nutrition guidance; Providing medication information for patient; Medical information; Medical counseling (cut-off) 2031.02.20 China 10 Shanghai Zhongxin Medical Technology Co., Ltd 59477566 Approved Category 44: Medical clinic services; Medical assistance; Therapeutic services; Medical equipment rental; Health consulting; Diet nutrition guidance; Art therapy measures; Dispensing; Beauty services; Massage (cut-off) 2032.03.13 China 11 Chongqing Xinjiang Pharmaceutical Co., Ltd. 65011381 Approved Category 5: Medical drugs; human drugs; Chinese patent medicines; medical nutrition products; dietary fiber; mineral dietary supplements; Medical ; Veterinary medications; Dental fillings; Tablets (cut-off) 2032.11,23 China 12 Chongqing Xinjiang Pharmaceutical Co., Ltd. 64995408 Approved Category 42: Implementation of early evaluation in the field of new drugs; Drug evaluation; Pharmaceutical research; Computer software maintenance for Internet use; Medical planning computer programming; Computer software design; Xomputer hardware design and development consulting; Computer system analysis; Provision of Internet search engines; Cloud calculate(cut-off) 2032.11.13 China 13 Chongqing Xinjiang Pharmaceutical Co., Ltd. 64988009 Category 35: Displaying merchandise on communication media for retail purposes; Advertising; Commercial information offered through website; Franchising business management; Import and export agency; Promoting for others; Systemizing computer database information; Seeking sponsorship; Retail sale of pharmaceutical, veterinary, hygienic preparations and medical supplies (cut-off) 2033.01.20 China 99 The following is a list of our patent applications: No.
Current Owner Mark Registration Number Status Class/Description Expiration Date Country of Registration 9 Shanghai Zhongxun Medical Technology Co., Ltd. 47299361 Approved Category 44: Hospitals; Healthcare; Dispensing Consulting; Telemedicine services; Health consulting; Therapeutic services; Diet nutrition guidance; Providing medication information for patient; Medical information; Medical counseling (cut-off) 2031.02.20 China 10 Shanghai Zhongxin Medical Technology Co., Ltd 59477566 Approved Category 44: Medical clinic services; Medical assistance; Therapeutic services; Medical equipment rental; Health consulting; Diet nutrition guidance; Art therapy measures; Dispensing; Beauty services; Massage (cut-off) 2032.03.13 China 11 Chongqing Xinjiang Pharmaceutical Co., Ltd. 65011381 Approved Category 5: Medical drugs; human drugs; Chinese patent medicines; medical nutrition products; dietary fiber; mineral dietary supplements; Medical ; Veterinary medications; Dental fillings; Tablets (cut-off) 2032.11,23 China 12 Chongqing Xinjiang Pharmaceutical Co., Ltd. 64995408 Approved Category 42: Implementation of early evaluation in the field of new drugs; Drug evaluation; Pharmaceutical research; Computer software maintenance for Internet use; Medical planning computer programming; Computer software design; Computer hardware design and development consulting; Computer system analysis; Provision of Internet search engines; Cloud calculate(cut-off) 2032.11.13 China 13 Chongqing Xinjiang Pharmaceutical Co., Ltd. 64988009 Category 35: Displaying merchandise on communication media for retail purposes; Advertising; Commercial information offered through website; Franchising business management; Import and export agency; Promoting for others; Systemizing computer database information; Seeking sponsorship; Retail sale of pharmaceutical, veterinary, hygienic preparations and medical supplies (cut-off) 2033.01.20 China 67 The following is a list of our patent applications: No.
Distributions of earnings generated before January 1, 2008, are exempt from PRC withholding tax. 120 The State Administration of Taxation (“SAT”) has promulgated several rules and notices to tighten the scrutiny over acquisition transactions in recent years, including the Interim Measures for the Administration of Remittance of Income Tax for Non-Resident Enterprise Withheld at Source (the “Interim Measures”) which became effective on January 1, 2009, the Notice of the SAT on Strengthening the Administration of Enterprise Income Tax on Gain Derived from Equity Transfer Made by Non-Resident Enterprise (the “Notice”) which became effective on January 1, 2008 and was amended on July 19, 2015, the Announcement of the SAT on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source (the “SAT Circular 37”) which was promulgated on October 17, 2017, became effective on December 1, 2017 and was amended on June 15, 2018, and the Public Notice of the SAT Regarding Certain Enterprise Income Tax Matters on Indirect Transfer of Properties by Non-Resident Enterprises (the “Public Notice 7”) which became effective on February 3, 2015 and was amended on December 1, 2017 and December 29, 2017.
Distributions of earnings generated before January 1, 2008, are exempt from PRC withholding tax. 84 The State Administration of Taxation (“SAT”) has promulgated several rules and notices to tighten the scrutiny over acquisition transactions in recent years, including the Interim Measures for the Administration of Remittance of Income Tax for Non-Resident Enterprise Withheld at Source (the “Interim Measures”) which became effective on January 1, 2009, the Notice of the SAT on Strengthening the Administration of Enterprise Income Tax on Gain Derived from Equity Transfer Made by Non-Resident Enterprise (the “Notice”) which became effective on January 1, 2008 and was amended on July 19, 2015, the Announcement of the SAT on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source (the “SAT Circular 37”) which was promulgated on October 17, 2017, became effective on December 1, 2017 and was amended on June 15, 2018, and the Public Notice of the SAT Regarding Certain Enterprise Income Tax Matters on Indirect Transfer of Properties by Non-Resident Enterprises (the “Public Notice 7”) which became effective on February 3, 2015 and was amended on December 1, 2017 and December 29, 2017.
The PRC operating entities’ experienced and large pool of in-house editors incubate original ideas and present them in video format and collaborate closely with medical professionals in the content creation process. ● Featured Articles -- The PRC operating entities’ in-house content team and resources of well-known healthcare professionals bring the PRC operating entities’ assessment and analysis of the latest medical theories and information to the PRC operating entities’ users through featured articles.
The PRC operating entities’ experienced and large pool of in-house editors incubate original ideas and present them in video format and collaborate closely with medical professionals in the content creation process. 55 ● Featured Articles -- The PRC operating entities’ in-house content team and resources of well-known healthcare professionals bring the PRC operating entities’ assessment and analysis of the latest medical theories and information to the PRC operating entities’ users through featured articles.
The PRC operating entities’ comprehensive and rich content provides them with continuous monetization opportunities. Through advertisements embedded within the content on their platform and social media networks, the PRC operating entities get $1 with every view of their articles. 87 MDMOOC offers two distinct types of high-quality content to users: 1. Original, exclusive and proprietary content.
The PRC operating entities’ comprehensive and rich content provides them with continuous monetization opportunities. Through advertisements embedded within the content on their platform and social media networks, the PRC operating entities get $1 with every view of their articles. MDMOOC offers two distinct types of high-quality content to users: 1. Original, exclusive and proprietary content.
However, the Audio-Visual Measures was repealed according to the Administrative Provisions on Audio-Visual Program Service through Special Network and Directed Transmission that was promulgated by the State Administration of Press, Publication, Radio, Film and Television, or the SAPPRFT (currently known as the National Radio and Television Administration of China, or the NRTA), on April 25, 2016, effective as of June 1, 2016 and amend on March 23, 2021. 102 To further regulate the provision of audio-visual program services to the public via the internet, including through mobile networks, within the territory of China, the SARFT and the MIIT jointly promulgated the Administrative Provisions on Internet Audio-Visual Program Service, or the Audio-Visual Program Provisions, on December 20, 2007, which came into effect on January 31, 2008 and was last amended on August 28, 2015.
However, the Audio-Visual Measures was repealed according to the Administrative Provisions on Audio-Visual Program Service through Special Network and Directed Transmission that was promulgated by the State Administration of Press, Publication, Radio, Film and Television, or the SAPPRFT (currently known as the National Radio and Television Administration of China, or the NRTA), on April 25, 2016, effective as of June 1, 2016 and amend on March 23, 2021. 68 To further regulate the provision of audio-visual program services to the public via the internet, including through mobile networks, within the territory of China, the SARFT and the MIIT jointly promulgated the Administrative Provisions on Internet Audio-Visual Program Service, or the Audio-Visual Program Provisions, on December 20, 2007, which came into effect on January 31, 2008 and was last amended on August 28, 2015.
In addition, foreign-invested enterprises are not allowed to engage in the above-mentioned services except online music. Regulation Related to Online Publishing On June 27, 2002, the SAPPRFT and the MIIT jointly promulgated the Tentative Internet Publishing Administrative Measures, or the Internet Publishing Measures, which took effect on August 1, 2002.
In addition, foreign-invested enterprises are not allowed to engage in the above-mentioned services except online music. 69 Regulation Related to Online Publishing On June 27, 2002, the SAPPRFT and the MIIT jointly promulgated the Tentative Internet Publishing Administrative Measures, or the Internet Publishing Measures, which took effect on August 1, 2002.
After the PRC operating entities complete the course production, they invite these professionals to do final review on the content to assure its correctness. 95 The PRC operating entities’ technology team are experienced in the development, design, operation and maintenance of platform products, servers and mobile apps.
After the PRC operating entities complete the course production, they invite these professionals to do final review on the content to assure its correctness. The PRC operating entities’ technology team are experienced in the development, design, operation and maintenance of platform products, servers and mobile apps.
The PRC operating entities’ terminal customers and end-users are healthcare professionals, nurses, doctors and other healthcare workers. 73 The PRC operating entities’ enterprise customers are pharmaceutical enterprises, healthcare enterprises engaged in researches and develops pharmaceuticals, vaccines, and consumer healthcare products, pharmaceutical enterprises that engages in drug innovation, manufacturing, and marketing, and medical journals.
The PRC operating entities’ terminal customers and end-users are healthcare professionals, nurses, doctors and other healthcare workers. The PRC operating entities’ enterprise customers are pharmaceutical enterprises, healthcare enterprises engaged in researches and develops pharmaceuticals, vaccines, and consumer healthcare products, pharmaceutical enterprises that engages in drug innovation, manufacturing, and marketing, and medical journals.
A medical practitioner who practices for multiple institutions at the same place of practice shall determine one institution as the main practicing institution where he or she practices, and apply for registration to the administrative department of health and family planning approving the practice of such institution; and, for other institutions where the medical practitioner is to practice, respectively apply for recordation to the administrative health and family planning authority. 111 Protection of Patients’ Information Internet hospitals shall strictly comply with the relevant laws and regulations in the PRC on information security and confidentiality of medical data, and appropriately keep patients’ information, and shall not illegally trade or disclose patients’ information.
A medical practitioner who practices for multiple institutions at the same place of practice shall determine one institution as the main practicing institution where he or she practices, and apply for registration to the administrative department of health and family planning approving the practice of such institution; and, for other institutions where the medical practitioner is to practice, respectively apply for recordation to the administrative health and family planning authority. 76 Protection of Patients’ Information Internet hospitals shall strictly comply with the relevant laws and regulations in the PRC on information security and confidentiality of medical data, and appropriately keep patients’ information, and shall not illegally trade or disclose patients’ information.
Any increase in the amount of the total investment and registered capital must be approved by the PRC Ministry of Commerce or its local counterpart. The dividends paid by the subsidiary to its shareholder are deemed shareholder income and are taxable in China.
Any increase in the amount of the total investment and registered capital must be approved by the PRC Ministry of Commerce or its local counterpart. 85 The dividends paid by the subsidiary to its shareholder are deemed shareholder income and are taxable in China.
Current Owner Patent Name Application Number Status Number of Patent Application Registration Date Country of Registration 1 Zhongchao Medical Technology (Shanghai) Corp. Ltd Search-result optimization method, installation, computer equipment and storage media 201910274403.8 Pending 200942 May 31, 2019 China As of the date of this Annual Report, the PRC operating entities owns 40 copyrights that have been approved.
Current Owner Patent Name Application Number Status Number of Patent Application Registration Date Country of Registration 1 Zhongchao Medical Technology (Shanghai) Corp. Ltd Search-result optimization method, installation, computer equipment and storage media 201910274403.8 Pending 200942 May 31, 2019 China As of the date of this Annual Report, the PRC operating entities owns 37 copyrights that have been approved.
At the bottom are the latest medical articles written or recommended by the PRC operating entities’ medical editors, and the users are able to add bookmarks categorized by different types of cancers to the main page for easy access to relevant articles in the future. 90 The screenshot below shows the main page of Zhongxin Health mini program: Medication management page primarily provides information of medication information and the PRC operating entities’ patient management projects.
At the bottom are the latest medical articles written or recommended by the PRC operating entities’ medical editors, and the users are able to add bookmarks categorized by different types of cancers to the main page for easy access to relevant articles in the future. 57 The screenshot below shows the main page of Zhongxin Health mini program: Medication management page primarily provides information of medication information and the PRC operating entities’ patient management projects.
Ltd 21587230 Approved Category 44: health care; medical assistance; rental of medical equipment; treatment services; health counseling; dietary and nutritional guidance; dispensing; art therapy; massage; beauty services (deadline) 2027.11.27 China 97 No. Current Owner Mark Registration Number Status Class/Description Expiration Date Country of Registration 5 Zhongchao Medical Technology (Shanghai) Corp.
Ltd 21587230 Approved Category 44: health care; medical assistance; rental of medical equipment; treatment services; health counseling; dietary and nutritional guidance; dispensing; art therapy; massage; beauty services (deadline) 2027.11.27 China 65 No. Current Owner Mark Registration Number Status Class/Description Expiration Date Country of Registration 5 Zhongchao Medical Technology (Shanghai) Corp.
High-quality case library MDMOOC provides its users access to a clinical case-share library via Internet and mobile application. As of the date of this Annual Report, the PRC operating entities’ case library has more than 26,000 clinical cases elaborating general patient data, the diagnosis after admission, and academic discussions.
High-quality case library MDMOOC provides its users access to a clinical case-share library via Internet and mobile application. As of the date of this Annual Report, the PRC operating entities’ case library has more than 28,000 clinical cases elaborating general patient data, the diagnosis after admission, and academic discussions.
Users could check the projects status they applied for by providing their names and identification numbers to track their application status, prescription amount, delivery status and other relevant matters. The screenshot below shows the main page of Zhongxin Health mini program: 91 The users could sign up and log in on the account page.
Users could check the projects status they applied for by providing their names and identification numbers to track their application status, prescription amount, delivery status and other relevant matters. The screenshot below shows the main page of Zhongxin Health mini program: 58 The users could sign up and log in on the account page.
The screenshots below illustrate the content in the Live Course: 84 Commencing from the fourth quarter of 2018, in addition to providing training and education courses through the platforms, the PRC operating entities have been engaged by certain customers on a project basis to establish individual columns on the MDMOOC online platform to provide training and knowledge of certain drug treatment for healthcare professionals and patients.
The screenshots below illustrate the content in the Opening Course: 51 Commencing from the fourth quarter of 2018, in addition to providing training and education courses through the platforms, the PRC operating entities have been engaged by certain customers on a project basis to establish individual columns on the MDMOOC online platform to provide training and knowledge of certain drug treatment for healthcare professionals and patients.
In accordance with Notice of the Ministry of Finance and the State Administration of Taxation on Full Launch of the Pilot Scheme on Levying Value-added Tax in Place of Business Tax, a SAT circular that took effect on May 1, 2016, amended on July 11, 2017 and April 1, 2019, upon approval of the State Council, the pilot program of the collection of value-added tax in lieu of business tax shall be promoted nationwide in a comprehensive manner starting May 1, 2016, and all taxpayers of business tax engaged in the building industry, the real estate industry, the financial industry and the life service industry shall be included in the scope of the pilot program with regard to payment of value-added tax instead of business tax. 121 Regulation of Foreign Currency Exchange and Dividend Distribution Foreign Currency Exchange.
In accordance with Notice of the Ministry of Finance and the State Administration of Taxation on Full Launch of the Pilot Scheme on Levying Value-added Tax in Place of Business Tax, a SAT circular that took effect on May 1, 2016, amended on July 11, 2017 and April 1, 2019, upon approval of the State Council, the pilot program of the collection of value-added tax in lieu of business tax shall be promoted nationwide in a comprehensive manner starting May 1, 2016, and all taxpayers of business tax engaged in the building industry, the real estate industry, the financial industry and the life service industry shall be included in the scope of the pilot program with regard to payment of value-added tax instead of business tax.
The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations (1996), as amended on August 5, 2008, the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996) and the Interim Measures on Administration on Foreign Debts (2003).
Regulation of Foreign Currency Exchange and Dividend Distribution Foreign Currency Exchange. The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations (1996), as amended on August 5, 2008, the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996) and the Interim Measures on Administration on Foreign Debts (2003).
In addition to trademark protection, the PRC operating entities own 42 URL designations and domain names, including www.mdmooc.org, www.mdmooc.com, www.zhongxun.online, ygjkclass.com, zxylmd.com, which are important to our business. As of the date of this Annual Report, we have registered 26 trademarks. The following is a list of trademarks we have registered that are important to our business: No.
In addition to trademark protection, the PRC operating entities own 40 URL designations and domain names, including www.mdmooc.org, www.mdmooc.com, www.zhongxun.online, ygjkclass.com, zxylmd.com, which are important to our business. 64 As of the date of this Annual Report, we have registered 36 trademarks. The following is a list of trademarks we have registered that are important to our business: No.
Regulations Relating To Online Drug Information Services According to the Measures Regarding the Administration of Drug Information Service over the Internet, promulgated by the CFDA on July 8, 2004 and amended on November 17, 2017, the Internet drug information service refers to the activities of providing medical information (including medical devices) and other services to Internet users through the Internet, and where any website intends to provide Internet drug information services, it shall, prior to applying for an operation permit or record-filing from the State Council’s department in charge of information industry or the telecom administrative authority at the provincial level, file an application with the provincial FDA, and shall be subject to the examination and approval thereof for obtaining the qualifications for providing Internet drug information services.
All public medical institutions shall participate in the centralized volume-based drug procurement. 72 Regulations Relating To Online Drug Information Services According to the Measures Regarding the Administration of Drug Information Service over the Internet, promulgated by the CFDA on July 8, 2004 and amended on November 17, 2017, the Internet drug information service refers to the activities of providing medical information (including medical devices) and other services to Internet users through the Internet, and where any website intends to provide Internet drug information services, it shall, prior to applying for an operation permit or record-filing from the State Council’s department in charge of information industry or the telecom administrative authority at the provincial level, file an application with the provincial FDA, and shall be subject to the examination and approval thereof for obtaining the qualifications for providing Internet drug information services.
These online apps and websites promote MDMOOC and Sunshine Health Forum to those website users who are potentially interested in the PRC operating entities’ contents. MDMOOC and Sunshine Health Forum gain a substantial growth of exposures in public and amounts of public subscribers under such precise measure of online audience delivery.
These online apps and websites promote MDMOOC to those website users who are potentially interested in the PRC operating entities’ contents. MDMOOC gains a substantial growth of exposures in public and amounts of public subscribers under such precise measure of online audience delivery.
As of the date of this Annual Report, we have established nearly 22 courses for cancer-related drug treatment, including drug treatment for lung cancer, liver cancer, and extended blood cancer, and 4 columns for drug treatment of rare diseases, including drug treatment for pulmonary fibrosis, multiple sclerosis, and systemic lupus erythematosus.
As of the date of this Annual Report, we have established nearly 22 courses for cancer-related drug treatment, including drug treatment for lung cancer, liver cancer, and extended blood cancer, and 7 columns for drug treatment of rare diseases, including drug treatment for pulmonary fibrosis, multiple sclerosis, systemic lupus erythematosus, Crohn’s disease and skin diseases.
As of the date of this Annual Report, we have established nearly 22 columns for cancer-related drug treatment, including drug treatment for lung cancer, liver cancer, and extended blood cancer, and 4 columns for drug treatment of rare diseases, including drug treatment for pulmonary fibrosis, multiple sclerosis, and systemic lupus erythematosus.
As of the date of this Annual Report, we have established nearly 22 columns for cancer-related drug treatment, including drug treatment for lung cancer, liver cancer, and extended blood cancer, and 7 columns for drug treatment of rare diseases, including drug treatment for pulmonary fibrosis, multiple sclerosis, systemic lupus erythematosus, Crohn’s disease, and skin diseases.
As a result, Beijing Yisuizhen holds 60% of the equity interest of West Angel. On August 2, 2022, Mr. Weiguang Yang transferred certain parts of his shares of Shanghai Zhongxin to several third parties. As a result, Mr. Weiguang Yang holds 12.33% of the equity interest of Shanghai Zhongxin. Through a certain entrustment agreement on August 3, 2022, Mr.
On August 2, 2022, Mr. Weiguang Yang transferred certain parts of his shares of Shanghai Zhongxin to several third parties. As a result, Mr. Weiguang Yang holds 12.33% of the equity interest of Shanghai Zhongxin. Through a certain entrustment agreement on August 3, 2022, Mr.
The Foreign Investment Law establishes the basic framework for the access to, and the promotion, protection and administration of foreign investments in view of investment protection and fair competition. 124 According to the Foreign Investment Law, “foreign investment” refers to investment activities directly or indirectly conducted by one or more natural persons, business entities, or otherwise organizations of a foreign country (collectively referred to as “foreign investor”) within China, and the investment activities include the following situations: (i) a foreign investor, individually or collectively with other investors, establishes a foreign-invested enterprise within China; (ii) a foreign investor acquires stock shares, equity shares, shares in assets, or other like rights and interests of an enterprise within China; (iii) a foreign investor, individually or collectively with other investors, invests in a new project within China; and (iv) investments in other means as provided by laws, administrative regulations, or the State Council.
According to the Foreign Investment Law, “foreign investment” refers to investment activities directly or indirectly conducted by one or more natural persons, business entities, or otherwise organizations of a foreign country (collectively referred to as “foreign investor”) within China, and the investment activities include the following situations: (i) a foreign investor, individually or collectively with other investors, establishes a foreign-invested enterprise within China; (ii) a foreign investor acquires stock shares, equity shares, shares in assets, or other like rights and interests of an enterprise within China; (iii) a foreign investor, individually or collectively with other investors, invests in a new project within China; and (iv) investments in other means as provided by laws, administrative regulations, or the State Council.
In principle, all holders registration certificates of drugs falling under the scope of the centralized volume-based procurement and meet the requirements for the centralized volume-based procurement in terms of quality standards, production capacity, and supply stability, may participate in such procurement. All public medical institutions shall participate in the centralized volume-based drug procurement.
In principle, all holders registration certificates of drugs falling under the scope of the centralized volume-based procurement and meet the requirements for the centralized volume-based procurement in terms of quality standards, production capacity, and supply stability, may participate in such procurement.
Xinjiang Pharmaceutical plans to cooperate with Zhixun Internet Hospital and other internet hospitals to build a 2B2C (to business and to customer) pharmaceutical procurement platform and streamline the delivery of medications from pharmaceutical factories to retail ends. This approach will enable Xinjiang Pharmaceutical to supply domestic and international high-quality and cost-effective drugs, improving drug accessibility and lowering medication cost.
Xinjiang Pharmaceutical has cooperates with Zhixun Internet Hospital and other internet hospitals to build a 2B2C (to business and to customer) pharmaceutical procurement platform and streamline the delivery of medications from pharmaceutical factories to retail ends. This approach enables Xinjiang Pharmaceutical to supply domestic and international high-quality and cost-effective drugs, improving drug accessibility and lowering medication cost.
During fiscal years 2022, 2021, and 2020, our R&D expenses were approximately $411,524, $758,878, and $816,553, respectively, representing 2.9%, 4.7%, and 4.5%, of our total revenues for fiscal years 2022, 2021, and 2020, respectively. Intellectual Property The PRC has domestic laws for the protection of rights in copyrights, trademarks and trade secrets.
During fiscal years 2023, 2022 and 2021, our R&D expenses were approximately $514,411, $411,524 and $758,878, respectively, representing 2.6%, 2.9% and 4.7% of our total revenues for fiscal years 2023, 2022 and 2021, respectively. Intellectual Property The PRC has domestic laws for the protection of rights in copyrights, trademarks and trade secrets.
Such amendments took effect on April 30, 2021. 115 The Law for Promoting Private Education and its Implementing Rules On December 28, 2002, the SCNPC promulgated the Law for Promoting Private Education, or the Private Education Law and was later amended on June 29, 2013, November 7, 2016 and December 29, 2018, the amendment of which took effect on December 29,2018.
The Law for Promoting Private Education and its Implementing Rules On December 28, 2002, the SCNPC promulgated the Law for Promoting Private Education, or the Private Education Law and was later amended on June 29, 2013, November 7, 2016 and December 29, 2018, the amendment of which took effect on December 29,2018.
The PRC operating entities provide online healthcare information, professional training and educational services to healthcare professionals, patient management services in the professional field of tumor and rare diseases, internet healthcare services, and pharmaceutical services and operate an online information platform to general public.
The PRC operating entities provide online healthcare information, professional training and educational services to healthcare professionals, patient management services in the professional field of tumor and rare diseases, internet healthcare services, and pharmaceutical services and operate an online information platform to general public. The PRC operating entities also engage in sales of patent drug in China.
On April 29, 2021, the Education Law was further amended by SCNPC to emphasize the illegal acts in recruiting students and replacing the admission qualifications obtained by others.
On April 29, 2021, the Education Law was further amended by SCNPC to emphasize the illegal acts in recruiting students and replacing the admission qualifications obtained by others. Such amendments took effect on April 30, 2021.
As part of this strategy, the PRC operating entities will (1) work with more medical associations to produce programs and courses to meet the need of healthcare professionals; (2) expand their R&D team and provide more support to their self-developed courses; (3) cooperate with international continuing medical education providers to improve the quality and diversity of their courses.
As part of this strategy, the PRC operating entities will (1) work with more medical associations to produce programs and courses to meet the need of healthcare professionals; (2) expand their R&D team and provide more support to their self-developed courses; (3) cooperate with international continuing medical education providers to improve the quality and diversity of their courses; and (4) expand their new media team to create and provide high-quality online courses for mobile users.
Besides, pursuant to the PRC Regulations on Sino-foreign Cooperative Education (2019 Revision) and other education-related laws and regulations in China, foreign education institutions and other foreign organizations or individuals may not by themselves alone establish schools or other education institutions within China which mainly enroll Chinese citizens, and sino-foreign cooperative education institutions shall have corresponding qualifications and relatively high education quality.
Besides, pursuant to the PRC Regulations on Sino-foreign Cooperative Education (2019 Revision) and other education-related laws and regulations in China, foreign education institutions and other foreign organizations or individuals may not by themselves alone establish schools or other education institutions within China which mainly enroll Chinese citizens, and sino-foreign cooperative education institutions shall have corresponding qualifications and relatively high education quality. 79 Education Law of China On March 18, 1995, the PRC National People’s Congress promulgated the PRC Education Law, or the Education Law.
Below are screenshots of the PRC operating entities’ mobile app main entrance interface: 83 Opening Course is a collection of video courses of various medical fields and topics. The courses are often presented by medical experts. Most of the courses are free to users.
Users can also explore various medical courses by medical specialty and subject areas. 50 Below are screenshots of the PRC operating entities’ mobile app main entrance interface: Opening Course is a collection of video courses of various medical fields and topics. The courses are often presented by medical experts. Most of the courses are free to users.
Branding and Marketing The PRC operating entities believe that their rich content and satisfactory user experience have contributed to the expansion of their user base and the increase in user engagement, leading to a strong word-of-mouth effect that strengthens their brand awareness.
Xinjiang Pharmaceutical’s Customers Xinjiang Pharmaceutical’s customers are primarily pharmaceutical agents. 59 Branding and Marketing The PRC operating entities believe that their rich content and satisfactory user experience have contributed to the expansion of their user base and the increase in user engagement, leading to a strong word-of-mouth effect that strengthens their brand awareness.
On February 17, 2023, CSRC promulgated the Trial Measures, and five supporting guidelines, which became effective on March 31, 2023.
Regulation Related to Overseas Listings On February 17, 2023, CSRC promulgated the Trial Measures, and five supporting guidelines, which became effective on March 31, 2023.
It has well established healthcare CRM (HCRM), a system specially designated to track patient data to provide insight for understanding patient behaviors and habits for patient care, relationship management and experience, hospital marketing and services , which may contribute in expanding our source of hospital customers and developing HCRM for hospitals.
Their established healthcare CRM (HCRM), a system specially designated to track patient data to provide insight for understanding patient behaviors and habits for patient care, relationship management and experience, hospital marketing and services, which might have had contributed in expanding our source of hospital customers and developing HCRM for hospitals.
Once logged in, the users are able to save articles, courses or other postings they are interested in on the mini program. Recent Development The PRC operating entities established Xinjiang Pharmaceutical, aiming at realizing medications accessibility and affordability for patients.
Once logged in, the users are able to save articles, courses or other postings they are interested in on the mini program. Xinjiang Pharmaceutical Drug Retail Services Xinjiang Pharmaceutical was established aiming at realizing medications accessibility and affordability for patients.
As users scroll down, courses that are most popular among the healthcare professionals, courses recommended by the PRC operating entities’ medical editors, and the latest healthcare news appear. Users can also explore various medical courses by medical specialty and subject areas.
As users scroll down, courses that are most popular among the healthcare professionals, courses recommended by the PRC operating entities’ medical editors, and the latest healthcare news appear.
The PRC operating entities have also been developing its pharmaceutical business via Xinjiang Pharmaceutical and its internet hospital business via Zhixun Internet Hospital. 82 MDMOOC-Healthcare Information, Education, and Training for Professionals The MDMOOC Online Platform of the PRC Operating Entities The MDMOOC online platform of the PRC operating entities’ is realized through various products, including MDMOOC mobile App, MOOC Medical WeChat subscription account, and MDMOOC website, where users can access our rich media content and engaging Community of Practice Share (COPS) on MDMOOC website.
MDMOOC-Healthcare Information, Education, and Training for Professionals The MDMOOC Online Platform of the PRC Operating Entities The MDMOOC online platform of the PRC operating entities’ is realized through various products, including MDMOOC mobile App, MOOC Medical WeChat subscription account, and MDMOOC website, where users can access our rich media content and engaging Community of Practice Share (COPS) on MDMOOC website.
Pursuant to the Notice of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Legally Punishing Criminal Activities Infringing upon the Personal Information of Citizens, issued in 2013, and the Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues regarding Legal Application in Criminal Cases Infringing upon the Personal Information of Citizens, which was issued on May 8, 2017 and took effect on June 1, 2017, the following activities may constitute the crime of infringing upon a citizen’s personal information: (i) providing a citizen’s personal information to specified persons or releasing a citizen’s personal information online or through other methods in violation of relevant national provisions; (ii) providing legitimately collected information relating to a citizen to others without such citizen’s consent (unless the information is processed, not traceable to a specific person and not recoverable); (iii) collecting a citizen’s personal information in violation of applicable rules and regulations when performing a duty or providing services; or (iv) collecting a citizen’s personal information by purchasing, accepting or exchanging such information in violation of applicable rules and regulations. 113 Pursuant to the Order for the Protection of Telecommunication and Internet User Personal Information issued by the MIIT on July 16, 2013, which became effective from September 1, 2013, any collection and use of user personal information must be subject to the consent of the user, abide by the principles of legality, rationality and necessity and be within the specified purposes, methods and scopes.
Pursuant to the Notice of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Legally Punishing Criminal Activities Infringing upon the Personal Information of Citizens, issued in 2013, and the Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues regarding Legal Application in Criminal Cases Infringing upon the Personal Information of Citizens, which was issued on May 8, 2017 and took effect on June 1, 2017, the following activities may constitute the crime of infringing upon a citizen’s personal information: (i) providing a citizen’s personal information to specified persons or releasing a citizen’s personal information online or through other methods in violation of relevant national provisions; (ii) providing legitimately collected information relating to a citizen to others without such citizen’s consent (unless the information is processed, not traceable to a specific person and not recoverable); (iii) collecting a citizen’s personal information in violation of applicable rules and regulations when performing a duty or providing services; or (iv) collecting a citizen’s personal information by purchasing, accepting or exchanging such information in violation of applicable rules and regulations.
In April 2018, the Opinions on Promoting the Development of “Internet Plus Health Care” issued by the General Office of the State Council encouraged medical institutions to apply the internet and other information technologies to expand the space and content of medical services, developed an online and offline integrated medical service model that covers the whole process of medical service.
The qualified medical inspection institutions and medical service institutions shall be encouraged to collaborate with internet enterprises to develop gene testing, disease prevention and other health service modes. 73 In April 2018, the Opinions on Promoting the Development of “Internet Plus Health Care” issued by the General Office of the State Council encouraged medical institutions to apply the internet and other information technologies to expand the space and content of medical services, developed an online and offline integrated medical service model that covers the whole process of medical service.
Management of Prescription and Medical Records Internet hospitals who provide internet diagnosis and treatment activities shall strictly comply with the Measures for the Administration of Prescriptions and other provisions on the administration of prescriptions.
Internet diagnosis and treatment activities shall not be allowed for any patient receiving initial diagnosis. 75 Management of Prescription and Medical Records Internet hospitals who provide internet diagnosis and treatment activities shall strictly comply with the Measures for the Administration of Prescriptions and other provisions on the administration of prescriptions.
As of the date of this Annual Report, the PRC operating entities had a technology team with approximately 10 engineers, including those focusing on technology development to support every aspect of their business operation and those focusing on underlying data and technology maintenance. 93 Big Data The PRC operating entities build proprietary big data analysis framework on their platform to improve operating efficiencies and user satisfaction.
As of the date of this Annual Report, the PRC operating entities had a technology team with approximately 10 engineers, including those focusing on technology development to support every aspect of their business operation and those focusing on underlying data and technology maintenance.
On February 3, 2019, The Health Commission of Guangdong and the Bureau of Traditional Chinese Medicine of Guangdong issued a notice on the forwarding of three documents including The Construction Standards of Internet Hospitals (Trial), which states that articles 8 and 9 of the Measures for the Administration of Internet Diagnosis and Treatment (Trial) shall apply when a physical medical institution newly applied for establishment or a physical medical institution that has obtained the Practicing License for Medical Institutions applies for the establishment of an internet hospital.
Additionally, the Basic Standards for Internet Hospitals (Trial) as attached to the Measures for the Administration of Internet Hospitals (Trial) sets forth specific requirements for diagnosis and treatment items, departments, personnel, buildings and device and equipment, and rules and regulations of Internet hospitals. 74 On February 3, 2019, The Health Commission of Guangdong and the Bureau of Traditional Chinese Medicine of Guangdong issued a notice on the forwarding of three documents including The Construction Standards of Internet Hospitals (Trial), which states that articles 8 and 9 of the Measures for the Administration of Internet Diagnosis and Treatment (Trial) shall apply when a physical medical institution newly applied for establishment or a physical medical institution that has obtained the Practicing License for Medical Institutions applies for the establishment of an internet hospital.
The PRC operating entities’ trademarks are valuable assets that reinforce the brand and their consumers’ favorable perception of their products.
The PRC operating entities’ primary trademark portfolio consists of 36 registered trademarks. The PRC operating entities’ trademarks are valuable assets that reinforce the brand and their consumers’ favorable perception of their products.
Rent expenses amounted to $498,166, $426,152, and $312,675 for the years ended December 31, 2022, 2021, and 2020, respectively.
Rent expenses amounted to $ 412,891, $498,166 and $426,152 for the years ended December 31, 2023, 2022 and 2021, respectively.
When a patient’s condition changes or there are other circumstances under which online diagnosis and treatment services are inappropriate, the physician shall refer the patient to a physical medical institution. Internet diagnosis and treatment activities shall not be allowed for any patient receiving initial diagnosis.
When a patient’s condition changes or there are other circumstances under which online diagnosis and treatment services are inappropriate, the physician shall refer the patient to a physical medical institution.
At the issuance of the HF Warrant, Yantai Hanfujingfei Investment Centre (LP), a limited partnership incorporated under PRC laws (“Yantai HF”, whose managing partner, Hanfor Capital Management Co., Ltd., is the sole member of HF Capital, and together with “HF Capital” hereinafter collectively referred to as “HF”) was a 6.25% shareholder of Zhongchao Shanghai (which represented 1,350,068 shares in Zhongchao Shanghai, among which 675,068 shares were issued by Zhongchao Shanghai and the remaining 675,000 shares were purchased from two pre-existing shareholders) and planned to withdraw its capital contribution in Zhongchao Shanghai but to contribute the same amount of capital to Zhongchao Cayman directly via HF Capital.
At the issuance of the HF Warrant, Yantai Hanfujingfei Investment Centre (LP), a limited partnership incorporated under PRC laws (“Yantai HF”, whose managing partner, Hanfor Capital Management Co., Ltd., was the sole member of HF Capital, and together with “HF Capital” hereinafter collectively referred to as “HF”) was a 6.25% shareholder of Zhongchao Shanghai and planned to withdraw its capital contribution in Zhongchao Shanghai but to contribute the same amount of capital to Zhongchao Cayman directly via HF Capital.
In addition, advertisements relating to drugs (including medical devices) shall be approved by the NMPA or its competent branches, and shall specify the approval document number. 107 Regulations Relating To Operation Of Medical Devices The Measures on the Supervision and Administration of the Business Operations of Medical Devices, or the Measures on Medical Devices, which was promulgated by CFDA on July 30, 2014 and amended on November 17, 2017, a proposed amendment was promulgated on March 10, 2022 and took effect on May 1, 2022, applies to any business activities of medical devices as well as the supervision and administration thereof conducted within the territory of the PRC.
Regulations Relating To Operation Of Medical Devices The Measures on the Supervision and Administration of the Business Operations of Medical Devices, or the Measures on Medical Devices, which was promulgated by CFDA on July 30, 2014 and amended on November 17, 2017, a proposed amendment was promulgated on March 10, 2022 and took effect on May 1, 2022, applies to any business activities of medical devices as well as the supervision and administration thereof conducted within the territory of the PRC.
Pursuant to the Measures for the Administration of Internet Hospitals (Trial), “internet hospitals” include: (a) internet hospitals as the second name of physical medical institutions, and (b) internet hospitals that are independently established on the support of physical medical institutions. 108 Internet Hospital According to the Measures for the Administration of Internet Hospitals (Trial), the PRC implements access management for internet hospitals pursuant to the Administrative Regulations on Medical Institutions and the Implementation Measures of the Administrative Regulations on Medical Institutions.
Pursuant to the Measures for the Administration of Internet Hospitals (Trial), “internet hospitals” include: (a) internet hospitals as the second name of physical medical institutions, and (b) internet hospitals that are independently established on the support of physical medical institutions.
For the fiscal year ended December 31, 2021, we generated revenue from a total of 78 customers, of which 30 customers were NFP and 35 customers were pharmaceutical enterprises. For the fiscal year ended December 31, 2020, we generated revenue from a total of 77 customers, of which 28 customers were NFP and 49 customers were pharmaceutical enterprises.
For the fiscal year ended December 31, 2021, we generated revenue from a total of 78 customers, of which 30 customers were NFP and 35 customers were pharmaceutical enterprises. We generate the revenues from a relatively small number of customers.
Pursuant to the Administrative Measures on Internet Information Services, promulgated on September 25, 2000 and amended on January 8, 2011 by the State Council, commercial internet information services providers, which means providers of information or services to internet users with charge, shall obtain a VATS License with the business scope of internet information services, namely the Internet Content Provider License or the ICP License, from competent regulatory authorities before providing any commercial internet content services within the PRC.
The Telecom License Measures further prescribes types of VATS Licenses required for operation of different value-added telecommunications services together with qualifications and procedures for obtaining such VATS Licenses. 70 Pursuant to the Administrative Measures on Internet Information Services, promulgated on September 25, 2000 and amended on January 8, 2011 by the State Council, commercial internet information services providers, which means providers of information or services to internet users with charge, shall obtain a VATS License with the business scope of internet information services, namely the Internet Content Provider License or the ICP License, from competent regulatory authorities before providing any commercial internet content services within the PRC.
The PRC operating entities leverage big data analytics and artificial intelligence technologies to enhance the accuracy of user behavior predictions and user profiling and optimize the PRC operating entities’ operation, targeted content and user experience.
Big Data The PRC operating entities build proprietary big data analysis framework on their platform to improve operating efficiencies and user satisfaction. The PRC operating entities leverage big data analytics and artificial intelligence technologies to enhance the accuracy of user behavior predictions and user profiling and optimize the PRC operating entities’ operation, targeted content and user experience.
The PRC operating entities provide focused patient management services, via their “Zhongxun” IT system and WeChat mini program and Zhongxin Health WeChat mini program, to their pharmaceutical enterprises and NFP customers..
The PRC operating entities provide focused patient management services, via their “Zhongxun” IT system and WeChat mini program and Zhongxin Health WeChat mini program, to their pharmaceutical enterprises and NFP customers. The PRC operating entities established Xinjiang Pharmaceutical, aiming at realizing medications accessibility and affordability for patients.
In addition, the National Medical Insurance Plan in the 14th Five-year Plan, issued by the General Office of the State Council on September 23, 2021, intends to take a series of measures to achieve the high-quality development of the basic medical insurance system, insecure people’s health and promote common wealth, including encouraging the innovation of insurance products, adjusting and optimizing the medical insurance catalog on a dynamic basis, and improve direct settlement services for medical treatment in different places. 112 Regulations Related to Internet Information Security and Privacy Protection PRC government authorities have enacted laws and regulations with respect to internet information security and protection of personal information from any abuse or unauthorized disclosure.
In addition, the National Medical Insurance Plan in the 14th Five-year Plan, issued by the General Office of the State Council on September 23, 2021, intends to take a series of measures to achieve the high-quality development of the basic medical insurance system, insecure people’s health and promote common wealth, including encouraging the innovation of insurance products, adjusting and optimizing the medical insurance catalog on a dynamic basis, and improve direct settlement services for medical treatment in different places.
Where the infringement of patent is decided, the infringer shall, in accordance with the regulations, undertake to cease the infringement, take remedial action, and pay damages, etc. 118 Domain Name Pursuant to the Administrative Measures for Internet Domain Names of China, which was recently amended by the Ministry of Industry and Information Technology on August 24, 2017 and became effective on November 1, 2017, “domain name” shall refer to the character mark of hierarchical structure, which identifies and locates a computer on the internet and corresponds to the internet protocol (IP) address of that computer.
Domain Name Pursuant to the Administrative Measures for Internet Domain Names of China, which was recently amended by the Ministry of Industry and Information Technology on August 24, 2017 and became effective on November 1, 2017, “domain name” shall refer to the character mark of hierarchical structure, which identifies and locates a computer on the internet and corresponds to the internet protocol (IP) address of that computer.
The PRC operating entities’ product development team is focused on market research and product development. The PRC operating entities develop and update their products and services based on market conditions and government policies. The PRC operating entities’ product development team closely monitors the market to adjust and upgrade their existing educational products, and designs new products based on customers’ requests.
The PRC operating entities’ product development team closely monitors the market to adjust and upgrade their existing educational products, and designs new products based on customers’ requests.
Regulations on Labor Protection in the PRC According to the Labor Law of the PRC, or the Labor Law, which was promulgated by the Standing Committee of the NPC on July 5, 1994, came into effect on January 1, 1995, and was most recently amended on December 29, 2018, an employer shall develop and improve its rules and regulations to safeguard the rights of its workers.
If the domain name holder fails to pay the corresponding fees as required, the original domain name registrar shall write it off and notify the holder of the domain name in written form. 82 Regulations on Labor Protection in the PRC According to the Labor Law of the PRC, or the Labor Law, which was promulgated by the Standing Committee of the NPC on July 5, 1994, came into effect on January 1, 1995, and was most recently amended on December 29, 2018, an employer shall develop and improve its rules and regulations to safeguard the rights of its workers.
For the fiscal years ended December 31, 2022, 2021, and 2020, the PRC operating entities’ NFP customers accounted for 58.0%, 86.2%, and 87.2%, of our total revenues, respectively.
For the fiscal years ended December 31, 2023, 2022 and 2021, the PRC operating entities’ pharmaceutical enterprise customers accounted for 13.1%, 33.1% and 11.7% of our total revenues, respectively. For the fiscal years ended December 31, 2023, 2022 and 2021, the PRC operating entities’ NFP customers accounted for 39.2%, 58.0% and 86.2%, of our total revenues, respectively.
At the time of practice registration, the above-mentioned medical institutions shall meet both the basic standards for medical institutions of relevant grades and categories and for internet hospitals. 109 Medical Institutions According to the Administrative Regulations on Medical Institutions (the “Regulations”), promulgated by the State Council, effective on September 1, 1994, revised on February 6, 2016 and March 29, 2022 (effective on May 1, 2022), hospitals, health centers, sanatoriums, out-patient departments, clinics, health clinics, health posts (rooms) and first aid stations are medical institutions.
Medical Institutions According to the Administrative Regulations on Medical Institutions (the “Regulations”), promulgated by the State Council, effective on September 1, 1994, revised on February 6, 2016 and March 29, 2022 (effective on May 1, 2022), hospitals, health centers, sanatoriums, out-patient departments, clinics, health clinics, health posts (rooms) and first aid stations are medical institutions.
The Foreign Investment Law On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which took effect on January 1, 2020 and replaced three existing laws on foreign investments in China, namely, the PRC Equity Joint Venture Law, the PRC Cooperative Joint Venture Law and the Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary regulations.
The PRC operating entities’ business activities other than the above mentioned are not set out in the Negative List or any encouraged catalogue. 87 The Foreign Investment Law On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which took effect on January 1, 2020 and replaced three existing laws on foreign investments in China, namely, the PRC Equity Joint Venture Law, the PRC Cooperative Joint Venture Law and the Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary regulations.
China 2018.8.12 2019.02.27 100 Facilities Our headquarter and executive office is located in Shanghai, China and consist of approximately 223.7 square meter of office space under one lease which has been renewed and will expire on December 31, 2023. In addition to our headquarter, we lease space in other 5 cities, including Beijing, Shijiazhuang, Changde, Chongqing, Tianjin, Wuhan, Shengyang.
Property, Plants and Equipment Our headquarter and executive office is located in Shanghai, China and consist of approximately 286.8 square meter of office space under one lease which has been renewed and will expire on December 31, 2024. In addition to our headquarter, we lease space in other 8 cities, including Beijing, Shijiazhuang, Chongqing, Tianjin, Wuhan, Shengyang, Baotou and Chengdu.
Such notice provides that the industry expression in the name of the private culture education institutions shall typically include “training school /center,” such as “curriculum training school/center,” “extra-class education school/center,” “self-learning school/center,” “tutorship school/center,” “extra tutoring for examinations school/center” and “extra tutoring school/center” and such industry expression is allowed to embody the disciplines and characteristics of such education institution.
Such notice provides that the industry expression in the name of the private culture education institutions shall typically include “training school /center,” such as “curriculum training school/center,” “extra-class education school/center,” “self-learning school/center,” “tutorship school/center,” “extra tutoring for examinations school/center” and “extra tutoring school/center” and such industry expression is allowed to embody the disciplines and characteristics of such education institution. 80 In August 2018, the State Council issued the Opinion on the Regulation of the Development of Extracurricular Training Institutions, or the New Opinion, which primarily regulates extracurricular training institutions targeting K-12 students.
Our Class A Ordinary Shares currently trading on Nasdaq are the shares of the offshore holding company, Zhongchao Cayman. You are not investing in the PRC operating entities.
Our Class A Ordinary Shares currently trading on Nasdaq are the shares of the offshore holding company, Zhongchao Cayman. You are not investing in the PRC operating entities. Instead, we consolidate financial results of Zhongchao Shanghai as primary beneficiary through the Contractual Arrangements.
We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate any such expansion of our operations. No.
We intend to procure additional space as we add employees and expand geographically. We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate any such expansion of our operations. The table below sets forth a summary of our primary facilities: No.
New Plug-in to Certain Programs- Assistance in Patient-Aid Projects Commencing from the fourth quarter of 2018, in addition to providing training and education courses through the platforms, the PRC operating entities have been engaged by certain customers on a project basis to establish individual columns on the MDMOOC online platform to provide training and knowledge of certain drug treatment for healthcare professionals and patients.
With more choices of the forms of healthcare education, the PRC operating entities enrich the learning experience of their end-users. 54 New Plug-in to Certain Programs- Assistance in Patient-Aid Projects The PRC operating entities have been engaged by certain customers on a project basis to establish individual columns on the MDMOOC online platform to provide training and knowledge of certain drug treatment for healthcare professionals and patients.
According to the Measures on Prescription Drugs and OTC Drugs Classification Management (Trial) and the Interim Provisions on the Circulation of Prescription and OTC Drugs, which were both promulgated by the State Drug Administration, which was restructured and integrated into the CFDA, and became effective in January 2000, drugs are divided into prescription drugs and over-the-counter drugs, or OTC drugs.
The valid term of the Pharmaceutical Operation License is five years and shall be renewed through application six months prior to its expiration date. 71 According to the Measures on Prescription Drugs and OTC Drugs Classification Management (Trial) and the Interim Provisions on the Circulation of Prescription and OTC Drugs, which were both promulgated by the State Drug Administration, which was restructured and integrated into the CFDA, and became effective in January 2000, drugs are divided into prescription drugs and over-the-counter drugs, or OTC drugs.
Additionally, the New Opinion requests that competent local authorities formulate relevant local standards for extracurricular training institutions within their administrative area. 116 Regulation Related to Online and Distance Education Pursuant to the Interim Administrative Regulations on Educational Websites and Online and Distance Education Schools issued by the MOE, on July 5, 2000, educational websites may provide educational services in relation to higher education, elementary education, pre-school education, teaching education, occupational education, adult education, other education and public educational information services.
Regulation Related to Online and Distance Education Pursuant to the Interim Administrative Regulations on Educational Websites and Online and Distance Education Schools issued by the MOE, on July 5, 2000, educational websites may provide educational services in relation to higher education, elementary education, pre-school education, teaching education, occupational education, adult education, other education and public educational information services.
The Business Model of the PRC Operating Entities Zhongchao Shanghai, together with its subsidiaries, is a platform-based internet technology company offering services to patients with oncology and other major diseases in China.
Zhongchao Shanghai, together with its subsidiaries, is a platform-based internet technology company offering services to patients with oncology and other major diseases in China. The PRC operating entities address the needs along the patient journey of symptoms occurrence, medical consultations, medication prescriptions, medication management, and treatment consultations.
The PRC is also a signatory to all of the world’s major intellectual property conventions, including: ● Convention establishing the World Intellectual Property Organization (June 3, 1980); ● Paris Convention for the Protection of Industrial Property (March 19, 1985); ● Patent Cooperation Treaty (January 1, 1994); and ● Agreement on Trade-Related Aspects of Intellectual Property Rights (November 11, 2001).
The PRC is also a signatory to all of the world’s major intellectual property conventions, including: ● Convention establishing the World Intellectual Property Organization (June 3, 1980); ● Paris Convention for the Protection of Industrial Property (March 19, 1985); ● Patent Cooperation Treaty (January 1, 1994); and ● Agreement on Trade-Related Aspects of Intellectual Property Rights (November 11, 2001). 63 The PRC Trademark Law, adopted in 1982 and was most recently amended on April 23, 2019 and will become effective on November 1, 2019, with its implementation rules adopted in 2014, protects registered trademarks.
In 2021, as the PRC operating entities had been seeking business expansion countrywide, in consideration of cost, uncertainty of the COVID-19 development, and governmental restriction in response to COVID-19, the PRC operating entities established additional offices at shared workspace in 7 cities (Chongqing, Tianjin, Wuhan, Shenyang, Chengdu, Shanghai, and Shijiazhuang) accommodating a total of 26 employees as of the date of this Annual Report.
The PRC operating entities have been seeking business expansion countrywide, and in consideration of cost, operation efficiency and business development need, established additional offices at shared workspace in 6 cities (Tianjin, Wuhan, Shenyang, Chengdu, Shijiazhuang and Baotou) accommodating a total of 38 employees as of the date of this Annual Report.
Furthermore, the authorities issuing the circular has pledged to initiate a campaign to correct unlawful collection and usage of personal information via apps from January 2019 through December 2019. 114 Pursuant to the PRC Civil Code which was approved by the National People’s Congress on May 28, 2020, and came into effect on January 1, 2021, the personal information of a natural person shall be protected by the law.
Pursuant to the PRC Civil Code which was approved by the National People’s Congress on May 28, 2020, and came into effect on January 1, 2021, the personal information of a natural person shall be protected by the law.
As a result, Xinjiang Pharmaceutical is wholly owned by Shanghai Zhongxun. Xinjiang Pharmaceutical plans to cooperate with Zhixun Internet Hospital and other internet hospitals to build a 2B2C (to business and to customer) pharmaceutical procurement platform, aiming to streamline the delivery of medicines from pharmaceutical factories to retail ends.
Xinjiang Pharmaceutical cooperates with Zhixun Internet Hospital and other internet hospitals to build a 2B2C (to business and to customer) pharmaceutical procurement platform and streamline the delivery of medications from pharmaceutical factories to retail ends .
If the medical practitioners issue prescriptions without obtaining prescription rights at a medical institution not registered in their licenses, during their practicing activities, they will be given a warning or be ordered to suspend their practicing activities for a period of not less than six months but not more than one year and under the serious circumstances, their Practice Certificates for Medical Practitioners will be revoked. 110 Prescription Outflow In March 2007, the National Ministry of Health (currently the National Health Commission of the People’s Republic of China) promulgated the Measures for the Administration of Prescriptions, stipulating that doctors must use the common name of drugs when prescribing, and shall not restrict the outflow of prescriptions.
If the medical practitioners issue prescriptions without obtaining prescription rights at a medical institution not registered in their licenses, during their practicing activities, they will be given a warning or be ordered to suspend their practicing activities for a period of not less than six months but not more than one year and under the serious circumstances, their Practice Certificates for Medical Practitioners will be revoked.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeFor the Years Ended December 31, 2022 2021 2020 Revenues $ 14,151,516 $ 16,296,770 $ 17,989,788 Cost of revenues (7,794,852 ) (6,857,944 ) (6,117,640 ) Gross Profit 6,356,664 9,438,826 11,872,148 Operating Expenses Selling and marketing expenses (2,099,968 ) (3,137,316 ) (3,441,941 ) General and administrative expenses (6,799,634 ) (5,863,373 ) (3,124,301 ) Research and development expenses (411,524 ) (758,878 ) (816,553 ) Total Operating Expenses (9,311,126 ) (9,759,567 ) (7,382,795 ) (Loss) Income from Operations (2,954,462 ) (320,741 ) 4,489,353 Interest income, net 142,014 175,987 146,965 Other income, net 262,442 34,001 305,566 (Loss) Income Before Income Taxes (2,550,006 ) (110,753 ) 4,941,884 Income tax benefits (expenses) (272,313 ) 349,418 (484,787 ) Net (Loss) Income $ (2,822,319 ) $ 238,665 $ 4,457,097 Year ended December 31, 2022 compared to year ended December 31, 2021 Revenues We generate revenues from pharmaceutical enterprise customers and NFP from design and production of online medical courses, organizing offline medical training services, consulting and academic support services and patient management services for patient-aid projects.
Biggest changeFor the Years Ended December 31, 2023 2022 2021 Revenues $ $ $ Service 10,406,734 12,935,420 16,296,770 Product 9,027,211 1,216,096 - Total revenues 19,433,945 14,151,516 16,296,770 Cost of revenues Service (5,162,425 ) (7,166,871 ) (6,857,944 ) Product (5,759,329 ) (627,981 ) - Total cost of revenues (10,921,753 ) (7,794,852 ) (6,857,944 ) Gross Profit 8,512,192 6,356,664 9,438,826 Operating Expenses Selling and marketing expenses (6,710,757 ) (2,099,968 ) (3,137,316 ) General and administrative expenses (6,697,309 ) (6,799,634 ) (5,863,373 ) Research and development expenses (514,411 ) (411,524 ) (758,878 ) Loss from disposal of property and equipment (1,719,442 ) - - Impairment of goodwill (5,617,865 ) - - Impairment of intangible assets (536,206 ) - - Total Operating Expenses (21,795,990 ) (9,311,126 ) (9,759,567 ) Loss from Operations (13,283,798 ) (2,954,462 ) (320,741 ) Interest income, net 237,054 142,014 175,987 Other income, net 1,069,745 262,442 34,001 Loss Before Income Taxes (11,976,999 ) (2,550,006 ) (110,753 ) Income tax benefits (expenses) 669,760 (272,313 ) 349,418 Net (Loss) Income $ (11,307,239 ) $ (2,822,319 ) $ 238,665 Year ended December 31, 2023 compared to year ended December 31, 2022 Revenues We generate revenues from pharmaceutical enterprise customers and NFP from design and production of online medical courses, organizing offline medical training services, consulting and academic support services and patient management services for patient-aid projects.
Other income, net For the fiscal year ended December 31, 2021, other income, net was primarily consisted of government subsidies of $55,807 and rental income of $50,543 earned from leasing our properties in Japan, partially offset by loss of $13,758 from equity investment in a limited partnership and a decrease of $58,412 in fair value of short-term investments.
For the fiscal year ended December 31, 2021, other income, net was primarily consisted of government subsidies of $55,807 and rental income of $50,543 earned from leasing our properties in Japan, partially offset by loss of $13,758 from equity investment in a limited partnership and a decrease of $58,412 in fair value of short-term investments.
Investing activities For the fiscal year ended December 31, 2022, we had net cash used in investing activities of $3,346,658 which was primarily attributable to purchase of properties and equipment of $1,615,905, payment of $3,055,432 in acquisition of subsidiaries, investments of $996,638 in certain short-term investments, and loans of $1,032,219 made to third parties, partially offset by proceeds of $1,112,440 from sales of one property, proceeds of $533,891 from redemption of short-term investments, and collection of loans of $1,806,772 from third parties.
For the fiscal year ended December 31, 2022, we had net cash used in investing activities of $3,346,658 which was primarily attributable to purchase of properties and equipment of $1,615,905, payment of $3,055,432 in acquisition of subsidiaries, investments of $996,638 in certain short-term investments, and loans of $1,032,219 made to third parties, partially offset by proceeds of $1,112,440 from sales of one property, proceeds of $533,891 from redemption of short-term investments, and collection of loans of $1,806,772 from third parties.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information—D. Risk Factors” or in other parts of this annual report on Form 20-F. A.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information—D. Risk Factors” or in other parts of this annual report on Form 20-F. 90 A.
Although we have not been materially affected by inflation in the past, we can provide no assurance that we will not be affected by higher rates of inflation in China in the future. 135 B. Liquidity and capital resources In assessing our liquidity, we monitor and analyze our cash on-hand and our operating and capital expenditure commitments.
Although we have not been materially affected by inflation in the past, we can provide no assurance that we will not be affected by higher rates of inflation in China in the future. B. Liquidity and capital resources In assessing our liquidity, we monitor and analyze our cash on-hand and our operating and capital expenditure commitments.
We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us. F.
We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.
We believe the following factors drive our success: - Acknowledged by leading pharmaceutical enterprises - Reliable Professional Content Production - Well Organized and Easy-To-Use Websites and Apps 128 Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods presented.
We believe the following factors drive our success: - Acknowledged by leading pharmaceutical enterprises - Reliable Professional Content Production - Well Organized and Easy-To-Use Websites and Apps 91 Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods presented.
Financing activities For the fiscal year ended December 31, 2022, we had net cash provided by financing activities of $1,850,744 from offering 1,060,000 Class A ordinary shares in a shelf offering. For the fiscal year ended December 31, 2021, we had no cash provided by or used in financing activities.
Financing activities For the fiscal year ended December 31, 2023, we had no cash provided by or used in financing activities. For the fiscal year ended December 31, 2022, we had net cash provided by financing activities of $1,850,744 from offering 1,060,000 Class A ordinary shares in a shelf offering.
Our PRC subsidiaries have not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds. 138 C. Research and development, Patents and License, etc.
Our PRC subsidiaries have not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds. 99 C. Research and development, Patents and License, etc.
The travelling and accommodation expenses, including but not limited to the air-ticket expenses and hotel accommodation expenses, represented the costs arising from lecturers’ attendance and participation of the offline seminars. Other travelling expenses were incurred by the Company’s medical department for videos production, live streaming of the offline seminars, and materials collection to create online courses.
The travelling and accommodation expenses, including but not limited to the transportation expenses and hotel accommodation expenses, represented the costs arising from lecturers’ attendance and participation of the offline seminars. Other travelling expenses were incurred by the Company’s medical department for videos production, live streaming of the offline seminars, and materials collection to create online courses.
According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index for December 2020, 2021 and 2022 were increases of 2.5%, 0.9% respectively.
According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index for December 2021, 2022 and 2023 were increases of 0.9% and 0.2%, respectively.
SMEs are entitled to a reduced EIT rate of a reduced EIT rate of 20%, 87.5% reduction of taxable income for the first RMB1,000,000 taxable income and 75% reduction of taxable income between RMB 1,000,000 and RMB 3,000,000, and no reduction for the remaining taxable income for the year ended December 31, 2022; 87.5% reduction of taxable income for the first RMB1,000,000 taxable income and 50% reduction of taxable income between RMB 1,000,000 and RMB 3,000,000, and no reduction for the remaining taxable income for the year ended December 31, 2021; and 75% reduction of taxable income for the first RMB1,000,000 taxable income and 50% reduction of taxable income between RMB 1,000,000 and RMB 3,000,000, and no reduction for the remaining taxable income for the years ended before December 31, 2020.
SMEs are entitled to a reduced EIT rate of 20%, 75% reduction of taxable income for the first RMB 3,000,000 and no reduction for the remaining taxable income for the year ended December 31, 2023; a reduced EIT rate of 20%, 87.5% reduction of taxable income for the first RMB1,000,000 taxable income and 75% reduction of taxable income between RMB 1,000,000 and RMB 3,000,000, and no reduction for the remaining taxable income for the year ended December 31, 2022; 87.5% reduction of taxable income for the first RMB1,000,000 taxable income and 50% reduction of taxable income between RMB 1,000,000 and RMB 3,000,000, and no reduction for the remaining taxable income for the year ended December 31, 2021.
Year ended December 31, 2021 compared to year ended December 31, 2020 Revenues We generate revenues from pharmaceutical enterprise customers and NFP from design and production of online medical courses, organizing offline medical training services, consulting and academic support services and assistance services for patient-aid projects.
Year ended December 31, 2022 compared to year ended December 31, 2021 Revenues We generate revenues from pharmaceutical enterprise customers and NFP from design and production of online medical courses, organizing offline medical training services, consulting and academic support services and patient management services for patient-aid projects.
To date, we have financed our operations primarily through cash flows from operations, and equity financing. During the year ended December 31, 2022, 2021 and 2020, the Company generated net (loss) income of $(2,822,319), $238,665, and $4,457,097, respectively. In the year of 2022, we raised proceeds of $1,850,744 from a shelf offering of 1,060,000 of our Class A ordinary shares.
To date, we have financed our operations primarily through cash flows from operations, and equity financing. During the year ended December 31, 2023, 2022 and 2021, the Company generated net (loss) income of $(11,307,239), $(2,822,319) and $238,665, respectively. In the year of 2022, we raised proceeds of $1,850,744 from a shelf offering of 1,060,000 of our Class A ordinary shares.
We intend to continue to use these funds to grow our business primarily by: Strengthen our brand awareness of MDMOOC and Sunshine Health School ● Expand and enhancement of medical course content ● Grow medical professional user community ● Recruit more experienced editorial staff, and ● Development of multiple revenues streams such as online bookstore Although we consolidate the results of the PRC operating entities and its subsidiaries, we only have access to cash balances or future earnings of the PRC operating entities through our VIE Arrangements with the PRC operating entities.
We intend to continue to use these funds to grow our business primarily by: ● Strengthen our brand awareness of MDMOOC and Zhongxin Health ● Expand and enhancement of medical course content ● Grow medical professional user community ● Recruit more experienced editorial staff, and ● Development of multiple revenues streams such as online bookstore ● Explore the business in services for cancer patients support 97 Although we consolidate the results of the PRC operating entities and its subsidiaries, we only have access to cash balances or future earnings of the PRC operating entities through our VIE Arrangements with the PRC operating entities.
The Company expected to maintain the high profit margin in the future. 131 Cost of revenues Cost of revenues was comprised of direct related costs incurred for preparation of online medical training courses and offline education seminars and patient-aid projects, including expenses of travelling and accommodation, seminar site-rental, video production and backdrop production, professional service fees charged by experts who provide online and offline seminars, and salary and welfare expenses incurred by the key members of the editorial, design and production team and patient-aid projects, as well as outsourced labor cost in patient-aid projects.
Cost of revenues incurred for preparation of online medical training courses and offline education seminars and patient management services in patient-aid projects was comprised of direct related costs incurred for preparation of online medical training courses and offline education seminars and patient management services in patient-aid projects, including expenses of travelling and accommodation, seminar site-rental, video production and backdrop production, professional service fees charged by experts who provide online and offline seminars, and salary and welfare expenses incurred by the key members of the editorial, design and production team and patient-aid projects, as well as outsourced labor cost in patient-aid projects.
Zhongchao VIE and its subsidiaries also plug in supplemental features, to manage the drug treatment including reviewing patients’ applications, tracking their usage of drugs, and collecting related information, or the patient-aid projects.
Zhongchao VIE and its subsidiaries also plug in supplemental features, to manage the drug treatment including reviewing patients’ applications, tracking their usage of drugs, and collecting related information, or the patient-aid projects. Since 2022, Zhong VIE, through its subsidiary, also sells patented drugs.
Our research and development expenses were $411,524, $758,878, and $816,553 for the fiscal years ended December 31, 2022, 2021, and 2020, respectively.
Our research and development expenses were $ 514,411, $411,524 and $758,878 for the fiscal years ended December 31, 2023, 2022 and 2021, respectively.
Japan Under the current tax laws of Japan, Zhongchao Japan is incorporated in Japan is subject to an income tax rate of 30%. 133 PRC For the year ended December 31, 2022, Zhongchao Shanghai and Beijing Branch of Shanghai Zhongxun is subject to PRC Enterprise Income Tax (“EIT”) on the taxable income in accordance with the relevant PRC income tax laws.
Japan Under the current tax laws of Japan, Zhongchao Japan is incorporated in Japan is subject to an income tax rate of 30%. 96 PRC For the year ended December 31, 2023, Zhongchao Shanghai is subject to PRC Enterprise Income Tax (“EIT”) on the taxable income in accordance with the relevant PRC income tax laws.
As of December 31, 2022 and 2021, we had cash and cash equivalents of $11,520,453 and $13,914,982, and working capital of $18,539,125 and $23,665,269, respectively.
As of December 31, 2023, 2022 and 2021, we had cash and cash equivalents of $7,548,694, $11,520,453 and $13,914,982, and working capital of $16,032,685, $18,539,125 and $23,665,269, respectively.
Out of our significant accounting policies, which are described in Note 2 – Summary of Significant Accounting Policies of our consolidated financial statements included elsewhere in this Form 20-F, certain accounting policies are deemed “critical,” as they require management’s highest degree of judgment, estimates and assumptions, including (i) revenue recognition, (ii) accounts receivable, (iii) share-based compensation, and (iv) income tax.
Out of our significant accounting policies, which are described in Note 2 – Summary of Significant Accounting Policies of our consolidated financial statements included elsewhere in this Form 20-F, certain accounting policies are deemed “critical,” as they require management’s highest degree of judgment, estimates and assumptions, including revenue recognition.
Other income, net For the fiscal year ended December 31, 2022, other income, net was primarily consisted of government subsidies of $221,711, other income of $183,957 from provision of consulting services, gain of $96,921 from sales of property and equipment, and rental income of $51,861 earned from leasing our properties in Japan, partially offset by a decrease of $240,489 in fair value of short-term investments. 130 For the fiscal year ended December 31, 2021, other income, net was primarily consisted of government subsidies of $55,807 and rental income of $50,543 earned from leasing our properties in Japan, partially offset by loss of $13,758 from equity investment in a limited partnership and a decrease of $58,412 in fair value of short-term investments.
For the fiscal year ended December 31, 2022, other income, net was primarily consisted of government subsidies of $221,711, other income of $183,957 from provision of consulting services, gain of $96,921 from sales of property and equipment, and rental income of $51,861 earned from leasing our properties in Japan, partially offset by a decrease of $240,489 in fair value of short-term investments.
Net income As a result of the foregoing, we reported a net loss of $2,822,319 for the year ended December 31, 2022, as compared with a net income of $238,665 for the year ended December 31, 2021.
Net income As a result of the foregoing, we reported a net loss of $11,307,239 for the year ended December 31, 2023, as compared with a net loss of $2,822,319 for the year ended December 31, 2022.
However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.
However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future.
Taxation Cayman Islands Under the current tax laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed.
As of December 31, 2023, our future lease payments totaled $884,276. Taxation Cayman Islands Under the current tax laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed.
We conduct our operations primarily through our PRC subsidiary and the PRC operating entities in China. As a result, Zhongchao Inc.’s ability to pay dividends depends upon dividends paid by our PRC subsidiary.
Holding Company Structure Zhongchao Inc. is a holding company with no material operations of its own. We conduct our operations primarily through our PRC subsidiary and the PRC operating entities in China. As a result, Zhongchao Inc.’s ability to pay dividends depends upon dividends paid by our PRC subsidiary.
Recent Accounting Pronouncements A list of recently issued accounting pronouncements that are relevant to us is included in Footnote 2(cc) of our audited consolidated financial statements included elsewhere in this annual report. Inflation To date, inflation in China has not materially impacted our results of operations.
Recent Accounting Pronouncements A list of recently issued accounting pronouncements that are relevant to us is included in Footnote 2 of our audited consolidated financial statements included elsewhere in this annual report.
The EIT rate for companies operating in the PRC is 25%. The Company’s other subsidiary and the VIE’s subsidiaries that are located in the PRC were qualified as Small and Micro-sized Enterprises (“SMEs”). For the year ended December 31, 2021 and 2020, Zhongchao Shanghai, Shanghai Maidemu, Shanghai Zhongxun, Shanghai Zhongxin, Huijing are subject to EIT rate of 25%.
The Company’s other subsidiary and the VIE’s subsidiaries that are located in the PRC were qualified as SMEs. For the year ended December 31, 2021, Zhongchao Shanghai, Shanghai Maidemu, Shanghai Zhongxun, Shanghai Zhongxin, Huijing are subject to EIT rate of 25%. Hainan Zhongteng, located in Hainan Province, is subject to 15%.
Hainan Zhongteng, located in Hainan Province, is subject to 15%. Beijing Boya, Shanghai Xinyuan and Hainan Muxin qualify as SMEs. Liaoning Zhixun was not qualified as a SMEs until fiscal year 2021.
Beijing Boya, Shanghai Xinyuan and Hainan Muxin qualify as SMEs. Liaoning Zhixun was not qualified as a SMEs until fiscal year 2021.
For the Years Ended December 31, 2022 2021 2020 Net cash (used in) provided by operating activities $ (661,740 ) $ 2,861,848 $ (1,037,839 ) Net cash used in investing activities (3,346,658 ) (4,017,284 ) (4,094,678 ) Net cash provided by financing activities 1,850,744 - 11,497,654 Effect of exchange rate changes on cash and cash equivalents (236,875 ) (2,529 ) 875,258 Net (decrease) increase in cash and cash equivalents (2,394,529 ) (1,157,965 ) 7,240,395 Cash and cash equivalents at beginning of year 13,914,982 15,072,947 7,832,552 Cash and cash equivalents at end of year $ 11,520,453 $ 13,914,982 $ 15,072,947 Operating activities Fiscal Years Ended December 31, 2022 and 2021 Net cash used in operating activities was $661,740 for the fiscal year ended December 31, 2022, a change of $3,523,588 from net cash provided by operating activities of $2,861,848 for the fiscal year ended December 31, 2021.
For the Years Ended December 31, 2023 2022 2021 Net cash provided by (used in) operating activities $ 54,229 $ (661,740 ) $ 2,861,848 Net cash used in investing activities (3,754,655 ) (3,346,658 ) (4,017,284 ) Net cash provided by financing activities - 1,850,744 - Effect of exchange rate changes on cash and cash equivalents (271,333 ) (236,875 ) (2,529 ) Net decrease in cash and cash equivalents (3,971,759 ) (2,394,529 ) (1,157,965 ) Cash and cash equivalents at beginning of year 11,520,453 13,914,982 15,072,947 Cash and cash equivalents at end of year $ 7,548,694 $ 11,520,453 $ 13,914,982 Operating activities Fiscal Years Ended December 31, 2023 and 2022 Net cash provided in operating activities was $54,229 for the fiscal year ended December 31, 2023, a change of $715,970 from net cash used in operating activities of $661,740 for the fiscal year ended December 31, 2022.
These travelling and accommodation expenses are well budgeted before any agreements entered into by the Company and the customers. Therefore, such expenses are well covered by the customers under those agreements. The Company is not reimbursed by the customers separately.
These travelling and accommodation expenses are well budgeted before any agreements entered into by the Company and the customers. Therefore, such expenses are well covered by the customers under those agreements. The Company is not reimbursed by the customers separately. 94 Cost of revenues incurred for patented drugs was primarily comprised of purchase cost of drugs.
We are continued to commit to work on the development and maintenance in our platform and database as we intend to provide professionals and consumers with Internet-based access to our courses and education software and enhance the consumer experience. D.
We are continued to commit to work on the development and maintenance in our platform and database as we intend to provide professionals and consumers with Internet-based access to our courses and education software and enhance the consumer experience. For more information, see “Item 4.B. Business Overview – Research and Development (“R&D”)” and ” – Intellectual Property.” D.
Contractual obligations As of December 31, 2022, our contractual obligation primarily comprised of operating lease payments, which is presented in below table: For the year ended December 31, 2023 $ 550,915 For the year ended December 31, 2024 324,647 For the year ended December 31, 2025 317,927 For the year ended December 31, 2026 317,980 For the year ended December 31, 2027 and thereafter 397,475 Total lease payments 1,908,944 (1) We lease offices which are classified as operating leases in accordance with ASC Topic 842.
Contractual obligations As of December 31, 2023, our contractual obligation primarily comprised of operating lease payments, which is presented in below table: For the year ended December 31, 2024 $ 268,046 For the year ended December 31, 2025 184,128 For the year ended December 31, 2026 172,841 For the year ended December 31, 2027 172,841 For the year ended December 31, 2028 and thereafter 86,420 Total lease payments 884,276 (1) We lease offices which are classified as operating leases in accordance with ASC Topic 842.
We continually evaluate these judgments and estimates based on our own experience, knowledge and assessment of current business and other conditions. Our expectations regarding the future are based on available information and assumptions that we believe to be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources.
Our expectations regarding the future are based on available information and assumptions that we believe to be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates.
In September 2018, the State Taxation Administration of the PRC announced a preferential tax treatment for research and development expenses. Qualified entities are entitled to deduct 175% research and development expenses against income to reach a net operating income. Critical Accounting Estimates We prepare our consolidated financial statements in accordance with U.S. GAAP.
In September 2018, the State Taxation Administration of the PRC announced a preferential tax treatment for research and development expenses. Qualified entities are entitled to deduct 175% research and development expenses against income to reach a net operating income. Inflation To date, inflation in China has not materially impacted our results of operations.
Based on the current operating plan, management believes that the above-mentioned measures collectively will provide sufficient liquidity for us to meet our future liquidity and capital requirement for at least 12 months from the date of this annual report. Holding Company Structure Zhongchao Inc. is a holding company with no material operations of its own.
For the fiscal year ended December 31, 2021, we had no cash provided by or used in financing activities. Based on the current operating plan, management believes that the above-mentioned measures collectively will provide sufficient liquidity for us to meet our future liquidity and capital requirement for at least 12 months from the date of this annual report.
The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.
GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. We continually evaluate these judgments and estimates based on our own experience, knowledge and assessment of current business and other conditions.
E. Off-balance Sheet Arrangements We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our consolidated financial statements.
Net income As a result of the foregoing, we reported a net loss of $2,822,319 for the year ended December 31, 2022, as compared with a net income of $238,665 for the year ended December 31, 2021. 95 Off-balance Sheet Arrangements We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our consolidated financial statements.
With China has lifted its “zero-COVID” policy over COVID-19 pandemic, the Company expected to an increase in service orders from NFP and maintain the high profit margin in the future. 129 Cost of revenues Cost of revenues was comprised of direct related costs incurred for preparation of online medical training courses and offline education seminars and patient management services in patient-aid projects and cost of patented drugs.
With China has lifted its “zero-COVID” policy over COVID-19 pandemic, the Company expected to an increase in service orders from NFP and maintain the high profit margin in the future.
The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. 136 Cash Flows The following table sets forth a summary of our cash flows for the fiscal years ended December 31, 2022, 2021, and 2020.
Cash Flows The following table sets forth a summary of our cash flows for the fiscal years ended December 31, 2023, 2022 and 2021.
Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application.
Some of our accounting policies require a higher degree of judgment than others in their application.
Fiscal Years Ended December 31, 2021 and 2020 Net cash provided by operating activities was $2,861,848 for the fiscal year ended December 31, 2021, a change of $3,899,687 from net cash used in operating activities of $1,037,839 for the fiscal year ended December 31, 2020.
Due to significantly lower than expected operating results of West Angel, we performed impairment assessment of goodwill and intangible assets acquired as part of our acquisition of West Angel and concluded both the goodwill and intangible assets were fully impaired in 2023. 98 Fiscal Years Ended December 31, 2022 and 2021 Net cash used in operating activities was $661,740 for the fiscal year ended December 31, 2022, a change of $3,523,588 from net cash provided by operating activities of $2,861,848 for the fiscal year ended December 31, 2021.
Selling and marketing expenses Selling and marketing expenses decreased by $304,625, or 8.9%, from $3,441,941 for the fiscal year ended December 31, 2020 to $3,137,316 for the fiscal year ended December 31, 2021.
Selling and marketing expenses Selling and marketing expenses increased by $4,610,789, from $2,099,968 for the fiscal year ended December 31, 2022 to $6,710,757 for the fiscal year ended December 31, 2023.
Removed
Zhongchao VIE commenced operation in August 2012 with a vision to offer a wide range of accessible and immediate healthcare information and continuous learning and training opportunities for Chinese healthcare professionals.
Added
We also generate revenues from sales of patented drugs. Revenues increased by $5,282,429, or 37.3% from $14,151,516 for the fiscal year ended December 31, 2022 to $19,433,945 for the fiscal year ended December 31, 2023.
Removed
Since its inception, Zhongchao VIE has been focused on developing information, education, and training programs to address the needs in the healthcare industry in China; and developing online platforms and onsite activities to deliver its information services, education programs and training products. 126 Zhongchao VIE provide healthcare information, education, and training services to the healthcare professionals under “MDMOOC” brand.
Added
The increase was primarily caused by an increase of $7,811,115 in revenues from sales of drugs, which was attributable to our continual expansion of patent drugs sales since our commencement of the drug sales in 2022. Furthermore, the increase in revenue is partially offset by the decrease in assistance in patient-aid projects of $2,290,147.
Removed
As of the date of this report, its MDMOOC online platform has more than 219,825 registered users and a database of approximately 109,721healthcare experts including around 1,152 physicians, and 108,569 allied healthcare professionals in medical academics, associations, and leading hospitals who constantly collaborate with Zhongchao VIE to develop training programs on needed basis.
Added
The decrease in assistance in patient-aid projects is primarily attributable to the Company discontinued some low margin projects during fiscal year 2023 to improve overall profitability. For the fiscal years ended December 31, 2023 and 2022, we earned a gross profit margin of 43.8% and 44.9%, respectively.
Removed
Zhongchao VIE provides its healthcare educational content to the public via its “Sunshine Health Forums”, which, based on the amount of the registered users and daily review volume, we believe is one of the largest platform in China, for general healthcare knowledge and information to the public.
Added
For product sales, we earned a gross profit margin of 36.2% in the fiscal year ended December 31, 2023 as compared to 48.4% for the fiscal year ended December 31, 2022. The decrease in gross margin for product sales is primarily due to increased cost for purchases made from India due to the continually depreciation of RMB.
Removed
In July 2020, Zhongchao VIE launched focused patient management services to hospitals, pharmacies, pharmaceutical enterprises and non-profit organizations and insurance companies via “Zhongxun”. In May 2021, Zhongchao VIE launched patient management service on the professional field of tumor and rare diseases via “Zhongxin”.
Added
For service sales, we earned a gross profit margin of 50.4% as compared to 44.6% for the fiscal year ended December 31, 2022.
Removed
Commencing from the fourth quarter of 2018, in addition to providing training and education courses through its platforms, Zhongchao VIE have been engaged by certain customers on a project basis to establish individual columns on its MDMOOC online platform to provide training and knowledge of certain drug treatment for healthcare professionals and patients.
Added
The increase in gross profit margin for service sales is mainly due to we terminated certain low margin projects to improve overall profitability. 92 Cost of revenues Cost of revenues was comprised of direct related costs incurred for preparation of online medical training courses and offline education seminars and patient management services in patient-aid projects and cost of patented drugs.
Removed
Most of the drug treatments are cancer-related or rare disease-related. Zhongchao VIE establishes online columns to facilitate qualified patients to obtain free drug treatment from non-profit organizations (“NFPs”) till the earlier of the expiration of contract period or the free drugs are completely delivered.
Added
Cost of revenues increased by $3,126,901, or 40.1%, from $7,794,852 for the fiscal year ended December 31, 2022 to $10,921,753 for the fiscal year ended December 31, 2023. The increase was mainly attributable to an increase of $5,131,347 in cost of sales of patent drugs as we continually grow our patent drug sale business since 2022.
Removed
For each column, its plugs in features to manage the drug treatment including reviewing patients’ applications, tracking their usage of drugs, and collecting related information (such programs with new plug-in features are hereinafter referred as the “patient-aid projects”). Those customers are its existing customers.
Added
The increase is partially offset by decrease of $1,131,169 cost of revenue for assistance in patient-aid projects as our revenue generated from this revenue stream decreased in 2023 and decrease of $882,045 in cost of revenues for medical training and education services as we terminated certain lower margin projects during the fiscal year ended December 31, 2023.
Removed
They provide those drugs sponsored by pharmaceutical companies without charge to qualified patients and Zhongchao VIE charges those customers on its services in connection with the online columns and related training and management. In this way, Zhongchao VIE can not only facilitate the clinical application of those drugs, but also can benefit patients.
Added
The increase was mainly attributable to an increase of $3,208,093 in advertisement and promotion expenses as the Company is expanding its market, and $1.0 million increase in sales commission paid to third parties as the Company aggressively developing its patented drug retailing business in the year ended December 31, 2023.
Removed
As of the date of this report, Zhongchao VIE has established nearly 22 columns for cancer-related drug treatment, including drug treatment for lung cancer, liver cancer, and extended blood cancer, and 4 columns for drug treatment of rare diseases, including drug treatment for pulmonary fibrosis, multiple sclerosis, and systemic lupus erythematosus.
Added
The increase also contributed by the $220,905 increase in salary expenses as the Company expanded its marketing departments and had more staffs to work on marketing and selling projects and activities.
Removed
In May 2021, Zhongchao Shanghai launched patient management services focusing on the professional field of tumor and rare disease operated through its subsidiary Shanghai Zhongxin, together with Shanghai Zhongxun, provide patient management services, branded as “Zhongxin Health” (众芯健康).
Added
General and administrative expenses General and administrative expenses decreased slightly by $102,325 or 1.5%, from $6,799,634 for the fiscal year ended December 31, 2022 to $6,697,309 for the fiscal year ended December 31, 2023. The slight decrease is mainly attributable to decrease of average exchange rate between RMB and USD of about 5.0% comparing the two fiscal years.
Removed
As of now, as Zhongxin Health provides comprehensive disease education and management services for tumor patients receiving treatment, in September 2022, Zhongchao announced its new strategic extension of the business model from “Medical-Pharmaceutical” to “Medical-Pharmaceutical-Patient.” The establishment of Shanghai Zhongxin was the important first step of Zhongchao’s transformation. 127 Recent developments On February 10, 2022, Beijing Yisuizhen subscribed for 10.56% equity interest of West Angel (Beijing) Health Technology Co., Ltd, or West Angel, a PRC company, and nine shareholders of West Angel transferred all of their equity interest, equal to 49.44% of the total equity interest of West Angel to Beijing Yisuizhen.
Added
General and administrative expenses in terms of RMB maintained at the similar level in the fiscal year ended December 31, 2023 as compared to the fiscal year ended December 31, 2022.
Removed
As a result, Beijing Yisuizhen holds 60% of the equity interest of West Angel. West Angel is primarily engaged in provision of online platform for communication between hospitals and patients.
Added
Loss from disposal of property and equipment For the year ended December 31, 2023, we recognized loss from disposal of property and equipment of $1,719,442 as compared to $nil in the year ended December 31, 2022.
Removed
It has well established healthcare CRM (HCRM), a system specially designated to track patient data to provide insight for understanding patient behaviors and habits for patient care, relationship management and experience, hospital marketing and services, which may contribute in expanding our source of hospital customers and developing HCRM for hospitals.
Added
The loss is primarily attributable to our disposal of a building in Beijing in 2023 which had a carrying value of $1,429,019 as of the disposal date. The disposal was due to a government forced removal. Impairment of goodwill For the year ended December 31, 2023, we recognized impairment loss of goodwill of $5,617,865 as compared to $nil in 2022.
Removed
In addition, West Angel’s customers include high ranking hospitals and reputable medical professionals. Having those customers would provide competitive advantage for us in attracting pharmaceutical enterprise customers and NFP for training and services provided by us. On August 2, 2022, Mr. Weiguang Yang transferred certain parts of his shares of Shanghai Zhongxin to several third parties. As a result, Mr.
Added
In 2023, we assessed and concluded that our goodwill from the acquisition of West Angel was fully impaired as the operating results of West Angel reporting unit is significantly below our original anticipation. Impairment of intangible For the year ended December 31, 2023, we recognized impairment loss of intangible assets of $536,206 as compared to $nil in 2022.
Removed
Weiguang Yang holds 12.33% of the equity interest of Shanghai Zhongxin. Through a certain entrustment agreement on August 3, 2022, Mr. Weiguang Yang, Zhongchao Yixin, and Zhongren Yixin agreed to hold their equity interest of Shanghai Zhongxin on behalf of Shanghai Zhongxun. As a result, Shanghai Zhongxun owns 93.33% of Shanghai Zhongxin’s equity interest.
Added
Due to West Angel’s operating results are significantly below our original anticipation, we performed impairment assessment of the intangible assets acquired as part of the West Angel acquisition and concluded all the related intangible assets are impaired. 93 Other income, net For the fiscal year ended December 31, 2023, other income, net was primarily consisted of $654,980 gain from changes in fair value of our short-term investments and $81,265 upward adjustments to our long-term investments in an equity security as well as $148,862 government subsidies.
Removed
In January 2023, Chongqing Xinjiang Pharmaceutical Co., Ltd. (“Chongqing Xinjiang”), one of the China operating entities obtained the general distribution rights in Mainland China for anti-influenza drug from Natco Pharma Limited (“Natco”). Natco is a vertically integrated and R&D focused pharmaceutical company in India.
Added
Income tax expenses We had income tax benefit of $669,760 for the fiscal year ended December 31, 2023, as compared to tax expense of $272,313 for the fiscal year ended December 31, 2022. Current income tax expenses decreased by $68,721 from $138,188 for the fiscal year ended December 31, 2022 to $69,467 for the fiscal year ended December 31, 2023.
Removed
The first batch of cargo has arrived at the port in Chongqing City, and the drug will be introduced to the market for domestic treatment and prevention of Type A and Type B influenza viruses after the inspection and quarantine. In February 2023, the Company’s VIE renewed the partnership Johnson & Johnson (China) Investment Limited (“J&J”).
Added
The decrease was mainly due to combined effects of i) we incurred net operating losses in more of our subsidiaries leading to a decrease of current income tax expenses, and ii) certain the VIE’s subsidiaries qualified as Small and Micro-sized Enterprises (“SMEs”) in the year of 2023, which were entitled to preferential income tax rate, leading to a decrease of current income tax expenses.
Removed
The renewed partnership is expected to further strengthen two parities’ cooperation in the global advanced field of innovative medical and health. In March 2023, the Company launched “E-Class,” a medical education intelligent content production platform developed by Zhongchao VIE.

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Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

50 edited+11 added−7 removed87 unchanged
Biggest changeChange in Control If there is a merger or consolidation of us with or into another corporation or a sale of substantially all of our ordinary shares, or, collectively, a Change in Control, the Company as determined in the sole discretion of the Committee and without the consent of the grantee may take any of the following actions: (i) accelerate or not accelerate the vesting, in whole or in part, of any award, or some or all awards, of any grantee, some grantees or all grantees; (ii) purchase any award for an amount of cash or ordinary shares equal to the value that could have been attained upon the exercise of such award or realization of the grantee’s rights had such award been currently exercisable or payable or fully vested (and, for the avoidance of doubt, if as of such date the Committee determines in good faith that no amount would have been attained upon the exercise of such award or realization of the grantee’s rights, then such award may be terminated by the Company without payment); or (iii) provide for the assumption, conversion or replacement of any award by the successor or surviving company or a parent or subsidiary of the successor or surviving company with other rights (including cash) or property selected by the Committee in its sole discretion or the assumption or substitution of such award by the successor or surviving company, or a parent or subsidiary thereof, with such appropriate adjustments as to the number and kind of ordinary shares and prices as the Committee deems, in its sole discretion, reasonable, equitable and appropriate.
Biggest changeThe number of Class A Ordinary Shares issuable as a share payment shall be determined by the Committee and may be based upon satisfaction of such specific criteria as determined appropriate by the Committee, including specified dates for electing to receive such share payment at a later date and the date on which such share payment is to be made. 108 Change in Control If there is a merger or consolidation of us with or into another corporation or a sale of substantially all of our ordinary shares, or, collectively, a Change in Control, the Company as determined in the sole discretion of the Committee and without the consent of the grantee may take any of the following actions: (i) accelerate or not accelerate the vesting, in whole or in part, of any award, or some or all awards, of any grantee, some grantees or all grantees; (ii) purchase any award for an amount of cash or ordinary shares equal to the value that could have been attained upon the exercise of such award or realization of the grantee’s rights had such award been currently exercisable or payable or fully vested (and, for the avoidance of doubt, if as of such date the Committee determines in good faith that no amount would have been attained upon the exercise of such award or realization of the grantee’s rights, then such award may be terminated by the Company without payment); or (iii) provide for the assumption, conversion or replacement of any award by the successor or surviving company or a parent or subsidiary of the successor or surviving company with other rights (including cash) or property selected by the Committee in its sole discretion or the assumption or substitution of such award by the successor or surviving company, or a parent or subsidiary thereof, with such appropriate adjustments as to the number and kind of ordinary shares and prices as the Committee deems, in its sole discretion, reasonable, equitable and appropriate.
The term of the agreement shall expire on August 6, 2022, which term will automatically extend for additional 3-year periods unless a party to the agreement terminates it upon 1-month’ notice or proposes to re-negotiate the terms of the employment with the other party within 3 months prior to the expiration of the applicable term, or unless the employment is terminated earlier pursuant to the terms of the agreement.
The term of the agreement shall expire on August 6, 2022, which term will automatically extend for additional 3-year periods unless a party to the agreement terminates it upon 1-month’ notice or proposes to re-negotiate the terms of the employment with the other party within 3 months prior to the expiration of the applicable term, or unless the employment is terminated earlier pursuant to the terms of the agreement.
The term of the agreement shall expire on August 6, 2022, which term will automatically extend for additional 3-year periods unless a party to the agreement terminates it upon 1-month’ notice or proposes to re-negotiate the terms of the employment with the other party within 3 months prior to the expiration of the applicable term, or unless the employment is terminated earlier pursuant to the terms of the agreement.
The term of the agreement shall expire on August 6, 2022, which term will automatically extend for additional 3-year periods unless a party to the agreement terminates it upon 1-month’ notice or proposes to re-negotiate the terms of the employment with the other party within 3 months prior to the expiration of the applicable term, or unless the employment is terminated earlier pursuant to the terms of the agreement.
If the executive’s employment with the Company is terminated for any reason, the Company will pay to such executive any unpaid portion of his salary through the date of his termination, and any unpaid bonus through the date of termination, as well as any unpaid or unused portions of his benefits under the agreement.
If the executive’s employment with the Company is terminated for any reason, the Company will pay to such executive any unpaid portion of his salary through the date of his termination, and any unpaid bonus through the date of termination, as well as any unpaid or unused portions of his benefits under the agreement.
If his employment is terminated at our election without cause or by him, the Company shall provide 1-month’ advanced notice or payment of 1-month’ salary in lieu of the notice.
If his employment is terminated at our election without cause or by him, the Company shall provide 1-month’ advanced notice or payment of 1-month’ salary in lieu of the notice.
The term of the agreement shall expire on August 6, 2022, which term will automatically extend for additional 3-year periods unless a party to the agreement terminates it upon 1-month’ notice or proposes to re-negotiate the terms of the employment with the other party within 3 months prior to the expiration of the applicable term, or unless the employment is terminated earlier pursuant to the terms of the agreement.
The term of the agreement shall expire on August 6, 2022, which term will automatically extend for additional 3-year periods unless a party to the agreement terminates it upon 1-month’ notice or proposes to re-negotiate the terms of the employment with the other party within 3 months prior to the expiration of the applicable term, or unless the employment is terminated earlier pursuant to the terms of the agreement.
If the executive’s employment with the Company is terminated for any reason, the Company will pay to such executive any unpaid portion of his salary through the date of his termination, and any unpaid bonus through the date of termination, as well as any unpaid or unused portions of his benefits under the agreement.
If the executive’s employment with the Company is terminated for any reason, the Company will pay to such executive any unpaid portion of his salary through the date of his termination, and any unpaid bonus through the date of termination, as well as any unpaid or unused portions of his benefits under the agreement.
If his employment is terminated at our election without cause or by him, the Company shall provide 1-month’ advanced notice or payment of 1-month’ salary in lieu of the notice.
If his employment is terminated at our election without cause or by him, the Company shall provide 1-month’ advanced notice or payment of 1-month’ salary in lieu of the notice.
The term of the agreement shall expire on August 6, 2022, which term will automatically extend for additional 3-year periods unless a party to the agreement terminates it upon 1-month’ notice or proposes to re-negotiate the terms of the employment with the other party within 3 months prior to the expiration of the applicable term, or unless the employment is terminated earlier pursuant to the terms of the agreement.
The term of the agreement shall expire on August 6, 2022, which term will automatically extend for additional 3-year periods unless a party to the agreement terminates it upon 1-month’ notice or proposes to re-negotiate the terms of the employment with the other party within 3 months prior to the expiration of the applicable term, or unless the employment is terminated earlier pursuant to the terms of the agreement.
If the executive’s employment with the Company is terminated for any reason, the Company will pay to such executive any unpaid portion of her salary through the date of her termination, and any unpaid bonus through the date of termination, as well as any unpaid or unused portions of her benefits under the agreement.
If the executive’s employment with the Company is terminated for any reason, the Company will pay to such executive any unpaid portion of her salary through the date of her termination, and any unpaid bonus through the date of termination, as well as any unpaid or unused portions of her benefits under the agreement.
If her employment is terminated at our election without cause or by her, the Company shall provide 1-month’ advanced notice or payment of 1-month’ salary in lieu of the notice.
If her employment is terminated at our election without cause or by her, the Company shall provide 1-month’ advanced notice or payment of 1-month’ salary in lieu of the notice.
Nominating Committee The Nominating Committee is responsible for, among other matters: ● selecting or recommending for selection candidates for directorships; ● evaluating the independence of directors and director nominees; ● reviewing and making recommendations regarding the structure and composition of our board and the board committees; ● developing and recommending to the board corporate governance principles and practices; ● reviewing and monitoring the Company’s Code of Business Conduct and Ethics; and ● overseeing the evaluation of the Company’s management Our Nominating Committee consists of consists of John C.
Nominating Committee The Nominating Committee is responsible for, among other matters: ● selecting or recommending for selection candidates for directorships; ● evaluating the independence of directors and director nominees; 111 ● reviewing and making recommendations regarding the structure and composition of our board and the board committees; ● developing and recommending to the board corporate governance principles and practices; ● reviewing and monitoring the Company’s Code of Business Conduct and Ethics; and ● overseeing the evaluation of the Company’s management Our Nominating Committee consists of consists of John C.
Types of Awards The 2019 Plan permits the granting of any or all of the following types of awards to all grantees: ● share options, including incentive share options, or ISOs; ● share appreciation rights, or SARs; ● restricted shares; ● restricted share units; and ● share payments Awards granted under the 2019 Plan may, in the discretion of the Committee, be granted alone or in addition to, in tandem with or in substitution for, any other award under the 2019 Plan.
Types of Awards The 2019 Plan permits the granting of any or all of the following types of awards to all grantees: ● share options, including incentive share options, or ISOs; ● share appreciation rights, or SARs; ● restricted shares; ● restricted share units; and ● share payments 107 Awards granted under the 2019 Plan may, in the discretion of the Committee, be granted alone or in addition to, in tandem with or in substitution for, any other award under the 2019 Plan.
Audit Committee The Audit Committee is responsible for, among other matters: ● appointing, compensating, retaining, evaluating, terminating, and overseeing our independent registered public accounting firm; ● discussing with our independent registered public accounting firm the independence of its members from its management; ● reviewing with our independent registered public accounting firm the scope and results of their audit; ● approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm; ● overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC; ● reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls, and compliance with legal and regulatory requirements; ● coordinating the oversight by our board of directors of our code of business conduct and our disclosure controls and procedures 148 ● establishing procedures for the confidential and or anonymous submission of concerns regarding accounting, internal controls or auditing matters; and ● reviewing and approving related-party transactions.
Audit Committee The Audit Committee is responsible for, among other matters: ● appointing, compensating, retaining, evaluating, terminating, and overseeing our independent registered public accounting firm; ● discussing with our independent registered public accounting firm the independence of its members from its management; 110 ● reviewing with our independent registered public accounting firm the scope and results of their audit; ● approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm; ● overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC; ● reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls, and compliance with legal and regulatory requirements; ● coordinating the oversight by our board of directors of our code of business conduct and our disclosure controls and procedures ● establishing procedures for the confidential and or anonymous submission of concerns regarding accounting, internal controls or auditing matters; and ● reviewing and approving related-party transactions.
The Plan is administered by our board of directors, or, once constituted, the Compensation Committee of the board of directors (we refer to body administering the Plan as the “Committee”). 144 Number of Class A Ordinary Shares.
The Plan is administered by our board of directors, or, once constituted, the Compensation Committee of the board of directors (we refer to body administering the Plan as the “Committee”). Number of Class A Ordinary Shares.
Xuejun Chen has agreed not to compete with us for 2 years after the termination of his employment; he also executed certain non-solicitation, confidentiality and other covenants customary for agreements of this nature. 143 Baoqian Tian Employment Agreement On August 7, 2019, we entered into an employment agreement with Baoqian Tian pursuant to which he agreed to serve as our Chief Sales Officer.
Xuejun Chen has agreed not to compete with us for 2 years after the termination of his employment; he also executed certain non-solicitation, confidentiality and other covenants customary for agreements of this nature. 105 Baoqian Tian Employment Agreement On August 7, 2019, we entered into an employment agreement with Baoqian Tian pursuant to which he agreed to serve as our Chief Sales Officer.
Each of the non-employee directors is entitled to receive annual cash compensation in the amount of $24,000, payable quarterly, and stock option to purchase certain amount of Class A Ordinary Shares under Company’s 2019 Equity Incentive Plan. On October 10, 2022, we compensated each of three independent directors, John C.
Each of the non-employee directors is entitled to receive annual cash compensation in the amount of $24,000, payable quarterly, and stock option to purchase certain amount of Class A Ordinary Shares under Company’s 2019 Equity Incentive Plan. On October 10, 2023, we compensated each of three independent directors, John C.
He has served as our general manager Zhongchao Shanghai since August 2012. Since January 2021, Mr. Yang has served as the co-chief executive officer and director of TradeUp Acquisition Corp. (NASDAQ: UPTD), a special purpose acquisition corporation. From June 2013 to June 2016, Mr.
He has served as our general manager Zhongchao Shanghai since August 2012. From January 2021 and September 2023, Mr. Yang served as the co-chief executive officer and director of TradeUp Acquisition Corp. (NASDAQ: UPTD), a special purpose acquisition corporation. From June 2013 to June 2016, Mr.
Name Age Position Weiguang Yang 40 President, Chief Executive Officer, and Chairman of the Board Pei Xu 40 Chief Financial Officer, Secretary, and Director Xuejun Chen 44 Chief Medical Officer Baoqian Tian 38 Chief Sales Officer Shuang Wu 39 Chief Operating Officer John C.
Name Age Position Weiguang Yang 41 President, Chief Executive Officer, and Chairman of the Board Pei Xu 41 Chief Financial Officer, Secretary, and Director Xuejun Chen 44 Chief Medical Officer Baoqian Tian 39 Chief Sales Officer Shuang Wu 40 Chief Operating Officer John C.
The number of Class A Ordinary Shares that may be issued under the Plan is the maximum aggregate number of Class A Ordinary Shares reserved and available pursuant to this Plan shall be the aggregate of (i) 970,871 Class A Ordinary Shares and (ii) on each January 1, starting with January 1, 2020 until December 31, 2025, an additional number of shares equal to the lesser of (A) 2% of the outstanding number of Class A Ordinary Shares (on a fully-diluted basis) on the immediately preceding December 31, and (B) such lower number of Class A Ordinary Shares as may be determined by the Committee, subject in all cases to adjustment as provided in.
The number of Class A Ordinary Shares that may be issued under the Plan is the maximum aggregate number of Class A Ordinary Shares reserved and available pursuant to this Plan shall be the aggregate of (i) 9,7088 Class A Ordinary Shares and (ii) on each January 1, starting with January 1, 2020 until December 31, 2025, an additional number of shares equal to the lesser of (A) 2% of the outstanding number of Class A Ordinary Shares (on a fully-diluted basis) on the immediately preceding December 31, and (B) such lower number of Class A Ordinary Shares as may be determined by the Committee, subject in all cases to adjustment as provided in.
The business address for our directors and officers is Nanxi Creative Center, Suite 218, 841 Yan’An Middle Road, Jing’An District, Shanghai, China 200040.
The business address for our directors and officers is Nanxi Creative Center, Suite 216, 841 Yan’An Middle Road, Jing’An District, Shanghai, China 200040.
He holds a license as a Certified Public Accountant, a certificate in Senior Executive Education from Columbia University, an MBA in Finance from Rutgers University, and bachelor’s degrees in both economics and accounting from Fairleigh Dickinson University. Kevin Dean Vassily is an independent director of the Company.
He holds a license as a Certified Public Accountant, a certificate in Senior Executive Education from Columbia University, an MBA in Finance from Rutgers University, and bachelor’s degrees in both economics and accounting from Fairleigh Dickinson University. Kevin Dean Vassily is an independent director of the Company. Since March 28, 2024, Mr.
(2) Appointed CFO effective as of August 2019 (3) Appointed Chief Medical Officer effective as of August 2019. (4) Appointed Chief Sales Officer effective as of August 2019.
(2) Appointed CFO effective as of August 2019 (3) Appointed Chief Medical Officer effective as of August 2019. (4) Appointed Chief Sales Officer effective as of August 2019. (5) Appointed Chief Operating Officer effective as of August 2019.
Board Diversity Matrix Board Diversity Matrix (As of May 11, 2023) Country of Principal Executive Offices People’s Republic of China Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Directors 5 Part I: Gender Identity Female Male Non-Binary Did Not Disclose Gender Directors 2 3 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 150 D.
Board Diversity Matrix Board Diversity Matrix (As of April 30, 2024) Country of Principal Executive Offices People’s Republic of China Foreign Private Issuer Yes Disclosure Prohibited Under Home Country Law No Total Number of Directors 5 Part I: Gender Identity Female Male Non-Binary Did Not Disclose Gender Directors 2 3 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 D.
We are required by PRC laws to make contributions to employee social security plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time.
The PRC operating entities are required by PRC laws to make contributions to employee social security plans at specified percentages of the salaries, bonuses and certain allowances of their employees, up to a maximum amount specified by the local government from time to time.
A copy of this code is available on our website. We intend to disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions.
We intend to disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions.
General (1)(4) 60 Independent director Kevin Dean Vassily (2) 56 Independent director Dan Li (3) 46 Independent director (1) Chair of the Audit Committee. (2) Chair of the Compensation Committee. (3) Chair of the Nominating Committee. (4) Audit Committee financial expert. Weiguang Yang is the founder of Zhongchao Inc. and Zhongchao Shanghai.
General (1)(4) 61 Independent director Kevin Dean Vassily (2) 57 Independent director Dan Li (3) 47 Independent director (1) Chair of the Audit Committee. (2) Chair of the Compensation Committee. (3) Chair of the Nominating Committee. (4) Audit Committee financial expert. Weiguang Yang is the founder of Zhongchao Inc. and Zhongchao Shanghai.
A general notice or disclosure to the board or otherwise contained in the minutes of a meeting or a written resolution of the board or any committee of the board that a director is a shareholder, director, officer or trustee of any specified firm or company and is to be regarded as interested in any transaction with such firm or company will be sufficient disclosure, and, after such general notice, it will not be necessary to give special notice relating to any particular transaction.
A general notice or disclosure to the board or otherwise contained in the minutes of a meeting or a written resolution of the board or any committee of the board that a director is a shareholder, director, officer or trustee of any specified firm or company and is to be regarded as interested in any transaction with such firm or company will be sufficient disclosure, and, after such general notice, it will not be necessary to give special notice relating to any particular transaction. 112 Remuneration and Borrowing The directors may receive such remuneration as our board of directors may determine from time to time.
Yang took part in the master course of Integrated Marketing Communication in Tsinghua University. 140 Pei Xu is the CFO of Zhongchao Inc. and Zhongchao Shanghai. She has been serving as our CFO of Zhongchao Shanghai since January 2016. From September 2013 to January 2016, Ms. Xu served as the financial director of Zhongchao Shanghai.
Yang took part in the master course of Integrated Marketing Communication in Tsinghua University. Pei Xu is the CFO of Zhongchao Inc. and Zhongchao Shanghai. She has been serving as our CFO of Zhongchao Shanghai since January 2016. Since September 2023, Ms. Xu has served as the director of Estrella Immunopharma, Inc.
Options may be exercised by payment of the purchase price through one or more of the following means: payment in cash, payment in check, payment in promissory note, with the approval of the Committee, by delivery of our Class A Ordinary Shares acquired upon the exercise of such option; consideration received by the Company under a broker-assisted or similar cashless exercise program implemented by the Company in connection with the Plan; payment by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable laws; or any combination of the foregoing methods of payment. 145 Restricted Shares The Committee may award restricted shares consisting of our Class A Ordinary Shares which remain subject to a risk of forfeiture and may not be disposed of by grantees until certain restrictions established by the Committee lapse.
Options may be exercised by payment of the purchase price through one or more of the following means: payment in cash, payment in check, payment in promissory note, with the approval of the Committee, by delivery of our Class A Ordinary Shares acquired upon the exercise of such option; consideration received by the Company under a broker-assisted or similar cashless exercise program implemented by the Company in connection with the Plan; payment by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable laws; or any combination of the foregoing methods of payment.
In the event the successor or surviving company refuses to assume, convert or replace outstanding awards, the awards shall fully vest and the grantee shall have the right to exercise or receive payment as to all of the Class A Ordinary Shares subject to the award, including Class A Ordinary Shares as to which it would not otherwise be vested, exercisable or otherwise issuable (including at the time of the Change in Control). 146 Amendment to and Termination of the 2019 Plan The Board of Directors in its sole discretion may terminate this 2019 Plan at any time.
In the event the successor or surviving company refuses to assume, convert or replace outstanding awards, the awards shall fully vest and the grantee shall have the right to exercise or receive payment as to all of the Class A Ordinary Shares subject to the award, including Class A Ordinary Shares as to which it would not otherwise be vested, exercisable or otherwise issuable (including at the time of the Change in Control).
General serves as a Senior Manager of Global Revenue Assurance for Avaya, responsible for the appropriate recognition of revenue under current accounting standards, and review of transactions for audit purposes from April 2013 to present.
He served as Senior Manager of Global Revenue Assurance for Avaya, responsible for the appropriate recognition of revenue under current accounting standards, and review of transactions for audit purposes from April 2013 to June 2020.
(5) Appointed Chief Operating Officer effective as of August 2019. 142 Under Chinese law, we may only terminate employment agreements without cause and without penalty by providing notice of non-renewal one month prior to the date on which the employment agreement is scheduled to expire.
Under Chinese law, we may only terminate employment agreements without cause and without penalty by providing notice of non-renewal one month prior to the date on which the employment agreement is scheduled to expire.
General, Kevin Dean Vassily, and Dan Li, 6,000 Class A Ordinary Shares for their services provided to the Company as members of the Board and the Board’s committees. 2019 Equity Incentive Plan (the “2019 Plan”) We have adopted a 2019 Equity Incentive Plan (the “Plan”).
General, Kevin Dean Vassily, and Dan Li, 600 Class A Ordinary Shares (giving effective to the 1-for-10 2024 Share Consolidation) for their services provided to the Company as members of the Board and the Board’s committees. 106 2019 Equity Incentive Plan (the “2019 Plan”) We have adopted a 2019 Equity Incentive Plan (the “Plan”).
General, Kevin Dean Vassily, and Dan Li is “independent” within the meaning of the NASDAQ rules. In making this determination, our board considered the relationships that each of these non-employee directors has with us and all other facts and circumstances our board deemed relevant in determining their independence.
In making this determination, our board considered the relationships that each of these non-employee directors has with us and all other facts and circumstances our board deemed relevant in determining their independence.
Compensation of Directors and Executive Officers Executive Compensation Summary Compensation Table The following table shows the annual compensation paid by us for the years ended 2022.
Compensation Executive Compensation Summary Compensation Table The following table shows the annual compensation paid by us for the years ended 2023.
Employees As of the date of this Annual Report, we have a total of 116 full-time employees, of which 10 are in research and development, 31 are in sales and marketing, 56 are in technical and customer services, and 19 are in general administration.
Employees As of the date of this Annual Report, we had a total of 142 full-time employees, of which 7 are in research and development, 29 are in sales and marketing, 88 are in technical and customer services, and 18 are in general administration.
Name/principal position Year Salary Equity Compensation All Other Compensation Total Paid Weiguang Yang/ CEO (1) 2022 $ 157,498 $ - $ - $ 157,498 Pei Xu / CFO (2) 2022 $ 59,718 $ - - $ 59,718 Xuejun Chen / Chief Medical Officer (3) 2022 $ 112,617 $ - $ - $ 112,617 Baoqian Tian / Chief Sales Officer (4) 2022 $ 112,275 $ - $ - $ 112,275 Shuang Wu / Chief Operating Officer (5) 2022 $ 57,240 $ - $ - $ 57,240 (1) Appointed Chairman and CEO effective as of August 2019.
Name/principal position Salary Equity Compensation All Other Compensation Total Paid Weiguang Yang/ CEO (1) $ 123,945 $ - $ - $ 123,945 Pei Xu / CFO (2) $ 45,634 $ - - $ 45,634 Xuejun Chen / Chief Medical Officer (3) $ 102,211 $ - $ - $ 102,211 Baoqian Tian / Chief Sales Officer (4) $ 91,642 $ - $ - $ 91,642 Shuang Wu / Chief Operating Officer (5) $ 32,113 $ - $ - $ 32,113 (1) Appointed Chairman and CEO effective as of August 2019.
From September 2008 to August 2013, Ms. Xu worked for Otsuka (China) Investment Co., Ltd. as a financial director. Ms. Xu holds a bachelor degree in finance from Jiangxi University of Finance and Economics. Xuejun Chen is the Chief Medical Officer of Zhongchao Inc. and Deputy General Manager of Medicine of Zhongchao Shanghai.
Xu holds a bachelor degree in finance from Jiangxi University of Finance and Economics. 102 Xuejun Chen is the Chief Medical Officer of Zhongchao Inc. and Deputy General Manager of Medicine of Zhongchao Shanghai.
The board makes all relevant Company decisions. As such, it is important for us to have our Chief Executive Officer serve on the board as he plays key roles in the risk oversight or the Company.
As such, it is important for us to have our Chief Executive Officer serve on the board as he plays key roles in the risk oversight or the Company. As a smaller reporting company with a small board of directors, we believe it is appropriate to have the involvement and input of all of our directors in risk oversight matters.
We have standard employment, comprehensive confidentiality and non-compete agreements with our management and standard confidentiality and non-compete terms with all other employees. As required by laws and regulations in China, we participate in various social security plans that are organized by municipal and provincial governments, including pension insurance, medical insurance, unemployment insurance, maternity insurance, job-related injury insurance and housing fund.
As required by laws and regulations in China, the PRC operating entities participate in various social security plans that are organized by municipal and provincial governments, including pension insurance, medical insurance, unemployment insurance, maternity insurance, job-related injury insurance and housing fund.
We believe that we maintain a good working relationship with our employees, and we have not experienced any labor disputes. None of our employee is represented by a labor union or covered by collective bargaining agreements. We have not experienced any work stoppages. E. Share Ownership See Item 7 below.
None of our employee is represented by a labor union or covered by collective bargaining agreements. We have not experienced any work stoppages. 113 E. Share Ownership See Item 7 below. F. Disclosure of Action to Recover Erroneously Awarded Compensation. Not applicable.
We are, however, permitted to terminate an employee for cause without penalty to our company, where the employee has committed a crime or the employee’s actions or inactions have resulted in a material adverse effect to us.
We are, however, permitted to terminate an employee for cause without penalty to our company, where the employee has committed a crime or the employee’s actions or inactions have resulted in a material adverse effect to us. 104 Employment Agreements Weiguang Yang Employment Agreement On August 7, 2019, we entered into an employment agreement with Weiguang Yang pursuant to which he agreed to serve as our Chief Executive Officer.
Our board has affirmatively determined that each of the members of the Nominating Committee meets the definition of “independent director” for purposes of serving on a Nominating Committee under NASDAQ rules. 149 Code of Business Conduct and Ethics Our board has adopted a code of business conduct and ethics that applies to our directors, officers and employees.
General, Kevin Dean Vassily, and Dan Li, with Dan Li serving as chair of the Nominating Committee. Our board has affirmatively determined that each of the members of the Nominating Committee meets the definition of “independent director” for purposes of serving on a Nominating Committee under NASDAQ rules.
In January 2021, he was appointed Chief Financial Officer, and in March 2021, became a member of the board of directors of iPower Inc. (NASDAQ: IPW), a leading online hydroponic equipment retailer and supplier. Prior to joining iPower, from 2019 to January 2021, Mr.
(NASDAQ: DECA) since April 2022, (ii) Feutune Light Acquisition Corp. (NASDAQ: FLV) since June 2022, and (iii) Aimfinity Investment Corp. I (NASDAQ: AIMA) since March 2023. In January 2021, he was appointed Chief Financial Officer, and in March 2021, became a member of the board of directors of iPower Inc. (NASDAQ: IPW), a leading online hydroponic equipment retailer and supplier.
There is no formal requirement under the Company’s Amended and Restated Memorandum and Articles of Association mandating that we hold an annual meeting of our shareholders. However, notwithstanding the foregoing, we intend to hold such meetings on our annual meeting to, among other things, elect our directors. Our board plays a significant role in our risk oversight.
However, notwithstanding the foregoing, we intend to hold such meetings on our annual meeting to, among other things, elect our directors. Our board plays a significant role in our risk oversight. The board makes all relevant Company decisions.
Vassily served as Vice President of Market Development for Facteus, a financial analytics company focused on the Asset Management industry. From March 2019 through 2020, he served as an advisor at Woodseer, a financial technology firm providing global dividend forecasts.
Prior to joining iPower, from 2019 to January 2021, Mr. Vassily served as Vice President of Market Development for Facteus, a financial analytics company focused on the Asset Management industry.
Employment Agreements Weiguang Yang Employment Agreement On August 7, 2019, we entered into an employment agreement with Weiguang Yang pursuant to which he agreed to serve as our Chief Executive Officer. The agreement provides for an annual base salary of USD$69,593 payable in accordance with the Company’s ordinary payroll practices.
The agreement provides for an annual base salary of USD$69,593 payable in accordance with the Company’s ordinary payroll practices.
He holds a bachelor degree in liberal arts from Denison University and a master degree in business administration from the Tuck School of Business at Dartmouth College. Mr. Vassily also serves as an independent director for three special purpose acquisition companies listing on Nasdaq, including (i) Denali Capital Acquisition Corp. (NASDAQ: DECA), (ii) Feutune Light Acquisition Corp.
He holds a bachelor degree in liberal arts from Denison University and a master degree in business administration from the Tuck School of Business at Dartmouth College. 103 Dan Li is an independent director of the Company. Ms.
As a smaller reporting company with a small board of directors, we believe it is appropriate to have the involvement and input of all of our directors in risk oversight matters. 147 Director Independence Our board has reviewed the independence of our directors, applying the NASDAQ independence standards. Based on this review, the board determined that each of John C.
Director Independence Our board has reviewed the independence of our directors, applying the NASDAQ independence standards. Based on this review, the board determined that each of John C. General, Kevin Dean Vassily, and Dan Li is “independent” within the meaning of the NASDAQ rules.
Removed
(NASDAQ: FLV), and (iii) Aimfinity Investment Corp. I (NASDAQ: AIMA), and an independent director nominee for Fortune Joy International Acquisition Corp., a special purpose acquisition company to be listed on Nasdaq. 141 Dan Li is an independent director of the Company. Ms.
Added
(formerly, TradeUp Acquisition Corp. prior to the completion of its business combination), a preclinical-stage biopharmaceutical company. From September 2013 to January 2016, Ms. Xu served as the financial director of Zhongchao Shanghai. From September 2008 to August 2013, Ms. Xu worked for Otsuka (China) Investment Co., Ltd. as a financial director. Ms.
Removed
The number of Class A Ordinary Shares issuable as a share payment shall be determined by the Committee and may be based upon satisfaction of such specific criteria as determined appropriate by the Committee, including specified dates for electing to receive such share payment at a later date and the date on which such share payment is to be made.
Added
General serves as the Vice President of Revenue Accounting for Moody’s Corporation where he is responsible for the technical analysis of transactions and the assurance of the proper recognition and recording of transactions relating to revenue recognition. He served as an advisor to Workday and Google regarding revenue recognition for complex contract arrangements.
Removed
Officers are elected by, and serve at the discretion of, the board of directors. Our board of directors shall hold meetings on at least a quarterly basis.
Added
Vassily has served as an independent director of Tungray Technologies Inc (NASDAQ: TRSG), an engineer-to-order company that provides customized industrial manufacturing solutions to Original Equipment Manufactures in semiconductors, printers, electronics, and home appliances industries. Mr. Vassily also serves as an independent director for three special purpose acquisition companies listing on Nasdaq, including (i) Denali Capital Acquisition Corp.
Removed
As a smaller reporting company under the NASDAQ rules we are only required to maintain a board of directors comprised of at least 50% independent directors, and an audit committee of at least two members, comprised solely of independent directors who also meet the requirements of Rule 10A-3 under the Securities Exchange Act of 1934.
Added
Restricted Shares The Committee may award restricted shares consisting of our Class A Ordinary Shares which remain subject to a risk of forfeiture and may not be disposed of by grantees until certain restrictions established by the Committee lapse.
Removed
There are no membership qualifications for directors. Further, there are no share ownership qualifications for directors unless so fixed by us in a general meeting. There are no other arrangements or understandings pursuant to which our directors are selected or nominated.
Added
Amendment to and Termination of the 2019 Plan The Board of Directors in its sole discretion may terminate this 2019 Plan at any time.
Removed
General, Kevin Dean Vassily, and Dan Li, with Dan Li serving as chair of the Nominating Committee.
Added
Officers are elected by, and serve at the discretion of, the board of directors. 109 There is no formal requirement under the Company’s Amended and Restated Memorandum and Articles of Association mandating that we hold an annual meeting of our shareholders.
Removed
Remuneration and Borrowing The directors may receive such remuneration as our board of directors may determine from time to time.
Added
Code of Business Conduct and Ethics Our board has adopted a code of business conduct and ethics that applies to our directors, officers and employees. A copy of this code is available on our website.
Added
The PRC operating entities have standard employment, comprehensive confidentiality and non-compete agreements with their management and standard confidentiality and non-compete terms with all other employees.
Added
In March 2023, for the continuing business promotion purpose, we renewed the lease for the residential apartment for this employee in Chongqing, for another one-year term payable monthly for a total of $339 (RMB2,400) each rent payment.
Added
In January 2023, to support patient management projects, we purchased a residential apartment in Tangshan, Hebei Providence for local contractors for a total purchase price of approximately $0.2 million.
Added
In September 2023, we purchased a residential apartment in Manhattan, New York for the purpose of supporting future business expansion to the U.S. for a total purchase price of approximately $0.83 million. We believe that we maintain a good working relationship with our employees, and we have not experienced any labor disputes.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

14 edited+1 added−0 removed11 unchanged
Biggest changeYang Weiguang Beijing Yisuizhen The Company owned 47% and 100% equity interest before and after August 17, 2022, respectively (1) Purchase from a related party For the Years Ended December 31, 2022 2021 2020 Beijing Ougaini $ 19,696 $ - $ - During the year ended December 31, 2022, the Company also prepaid $118,888 to Beijing Ougaini for purchase of products for employee welfare and marketing promotion.
Biggest changeYang Weiguang (1) Purchase from a related party For the Years Ended December 31, 2023 2022 2021 Beijing Ougaini $ 112,980 $ 19,696 $ - During the year ended December 31, 2022, the Company prepaid $112,980 to Beijing Ourgaini for purchase of products for employee welfare and marketing promotion. The Company has received the purchased on January 2023.
To our knowledge, no other shareholder beneficially owns more than 5% of our shares. Our company is not owned or controlled directly or indirectly by any government or by any corporation or by any other natural or legal person severally or jointly. Our major shareholders do not have any special voting rights. B.
To our knowledge, no other shareholder beneficially owns more than 5% of our shares. Our company is not owned or controlled directly or indirectly by any government or by any corporation or by any other natural or legal person severally or jointly. Our major shareholders do not have any special voting rights. 115 B.
Shuang Wu is the Chief Operating Officer of Zhongchao. (6) Mr. John C. General is the independent director, chair of the Audit Committee, and Audit Committee financial expert of Zhongchao. (7) Ms. Dan Li is the independent director and the chair of the Nominating Committee of Zhongchao. 152 (8) Ms.
Shuang Wu is the Chief Operating Officer of Zhongchao. (6) Mr. John C. General is the independent director, chair of the Audit Committee, and Audit Committee financial expert of Zhongchao. (7) Ms. Dan Li is the independent director and the chair of the Nominating Committee of Zhongchao. (8) Ms.
Yang Weiguang. The balance was comprised of the following: - A balance of $144,986 arising from transfer of 6.67% equity interest of Shanghai Zhongxin to four former shareholders of West Angel, who paid consideration to Mr. Yang. (Note 4) - A balance of $81,192 as tuition paid on behalf of to Mr. Yang.
Yang Weiguang. The balance was comprised of the following: - A balance of $144,986 arising from transfer of 6.67% equity interest of Shanghai Zhongxin to four former shareholders of West Angel, who paid consideration to Mr. Yang. (Note 4) - A balance of $81,192 as tuition paid on behalf of to Mr. Yang. In 2023, Mr.
According to our charter, each Class A Ordinary Shares entitles to 1 vote and each Class B Ordinary Share entitles to 15 votes. ● Unless otherwise indicated, the business address of each of the individuals is Zhongchao, Nanxi Creative Center, Suite 218, 841 Yan’An Middle Road, Jing’An District, Shanghai, China 200040. (1) Mr.
According to our charter, each Class A Ordinary Shares entitles to 1 vote and each Class B Ordinary Share entitles to 100 votes. ● Unless otherwise indicated, the business address of each of the individuals is Zhongchao, Nanxi Creative Center, Suite 216, 841 Yan’An Middle Road, Jing’An District, Shanghai, China 200040. (1) Mr.
During the year ended December 31, 2022, the Company made short term interest-free loans to three unaffiliated third parties in the aggregated amount of approximately $1.03 million and Mr. Weiguang Yang provides irrevocable guarantee over such outstanding loans. The Company received the full payment of the loans as of the date of this report.
During the year ended December 31, 2022, the Company made short term interest-free loans to three unaffiliated third parties in the aggregated amount of approximately $1.03 million and Mr. Weiguang Yang provides irrevocable guarantee over such outstanding loans.
(2) Balances with related parties As of December 31, 2022 and 2021, the balances with related parties were as follows: December 31, 2022 December 31, 2021 Prepayments Beijing Ougaini $ 115,989 $ - Due from related parties Yang Weiguang (i) 226,178 - Beijing Yisuizhen (ii) - 392,305 $ 226,178 $ 392,305 153 (i) As of December 31, 2022, the Company had a balance of $226,178 due from Mr.
(2) Balances with related parties As of December 31, 2023 and 2022, the balances with related parties were as follows: December 31, 2023 December 31, 2022 Prepayments Beijing Ougaini $ - $ 115,989 Due from related parties Yang Weiguang (i) - 226,178 $ - $ 226,178 (i) As of December 31, 2022, the Company had a balance of $226,178 due from Mr.
As of the date of this report, Mr. Yang has repaid the above outstanding balances to the Company. On October 10, 2022, we compensated each of three independent directors, John C. General, Kevin Dean Vassily, and Dan Li, 6,000 Class A Ordinary Shares for their services provided to the Company as members of the Board and the Board’s committees.
Yang has repaid the above outstanding balances to the Company. In each year of 2023, 2022 and 2021, we compensated each of three independent directors, John C. General, Kevin Dean Vassily, and Dan Li, 600 Class A Ordinary Shares for their services provided to the Company as members of the Board and the Board’s committees.
General (6) 18,000 * Dan Li (7) 18,000 * Kevin Dean Vassily (8) 18,000 * More Healthy Holdings Limited (9) - 5,497,715 80.07 % Worthy Health Limited Partnership (10) 2,569,537 2.49 % - - All directors and executive officers as a group (8 persons) 1,966,536 1.91 % 5,497,715 80.07 % * Represents less than 1%. ● Represents the voting power with respect to all of our Class A Ordinary Shares and Class B Ordinary Shares, voting as a single class.
General (6) 2,400 * Dan Li (7) 2,400 * Kevin Dean Vassily (8) 2,400 * More Healthy Holdings Limited (9) - 549,772 96.54 % Worthy Health Limited Partnership (10) 256,954 * - - All directors and executive officers as a group (8 persons) 168,616 * 549,772 96.54 % * Represents less than 1%. 114 ● Represents the voting power with respect to all of our Class A Ordinary Shares and Class B Ordinary Shares, voting as a single class.
VIE Arrangements with the VIE and its Shareholders See “Corporate History and Structure— VIE Arrangements.” Policies and Procedures for Related Party Transactions Our board of directors has created an audit committee which will be tasked with review and approval of all related party transactions. C. Interests of Experts and Counsel Not applicable.
The Company received the full payment of the loans during the year ended December 31, 2023. 116 VIE Arrangements with the VIE and its Shareholders See “Corporate History and Structure— VIE Arrangements.” Policies and Procedures for Related Party Transactions Our board of directors has created an audit committee which will be tasked with review and approval of all related party transactions.
Class A Ordinary Shares issuable pursuant to share options are deemed outstanding for computing the percentage of the person holding such options but are not outstanding for computing the percentage of any other person.
Class A Ordinary Shares issuable pursuant to share options are deemed outstanding for computing the percentage of the person holding such options but are not outstanding for computing the percentage of any other person. As of the date of this Annual Report, there were no Class A Ordinary Shares issuable pursuant to share options exercisable within 60 days thereof.
Name and Address of Beneficial Owner Class A Ordinary Shares Class B Ordinary shares % of Voting % of Total Voting Shares Power Shares Power* Directors, Named Executive Officers, and 5% Beneficial Owner Weiguang Yang (1)(9) - - 5,497,715 80.07 % Pei Xu (2) (10) 371,628 * - - Xuejun Chen (3) (10) 689,310 * - - Baoqian Tian (4) (10) 199,879 * - - Shuang Wu (5) (10) 651,719 * - - John C.
Name and Address of Beneficial Owner Class A Ordinary Shares Class B Ordinary shares % of Voting % of Total Voting Shares Power Shares Power* Directors, Named Executive Officers, and 5% Beneficial Owner Weiguang Yang (1)(9) - - 549,772 96.54 % Pei Xu (2) (10) 29,292 * - - Xuejun Chen (3) (10) 59,099 * - - Baoqian Tian (4) (10) 17,138 * - - Shuang Wu (5) (10) 55,887 * - - John C.
For more details of the HF Warrant, see “Our Corporate History and Structure” on page 53). For more details of the F-3, please see “Item 4. Information on the Company—The “Shelf” Offering” on page 65) and 5,497,715 Class B Ordinary Shares outstanding as of the date of this Annual Report.
For more details of the HF Warrant, see “Our Corporate History and Structure” on page 49) and 549,772 Class B Ordinary Shares outstanding as of the date of this Annual Report.
As of the date of this Annual Report, there were no Class A Ordinary Shares issuable pursuant to share options exercisable within 60 days thereof. 151 The percentage of beneficial ownership owned is based on 20,531,423 Class A Ordinary Shares (including 1,350,068 Class A Ordinary Shares to be issued upon exercise of the HF Warrant the Company issued to HF Capital.
The percentage of beneficial ownership owned is based on 2,054,943 Class A Ordinary Shares (including 135,007 Class A Ordinary Shares to be issued upon exercise of the HF Warrant the Company issued to HF Capital.
Added
C. Interests of Experts and Counsel Not applicable.

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