Filed Pursuant to Rule 424(b)(5)
Registration No. 333-256190
PROSPECTUS SUPPLEMENT
(To Prospectus Dated May 24, 2021)

$10,400,000
Class A Ordinary Shares
We have entered into a sales agreement with US Tiger Securities,
Inc., or US Tiger, dated December 17, 2021, relating to the sale of
our Class A ordinary shares offered by this prospectus supplement.
Under this prospectus supplement we may offer and sell Class A
ordinary shares, $0.0001 par value per share, having an aggregate
offering price of up to $10,400,000 from time to time through or to
US Tiger, acting as our agent. Sales of our Class A ordinary
shares, if any, under this prospectus supplement will be made by
any method permitted that is deemed an “at the market offering” as
defined in Rule 415 under the Securities Act of 1933, as amended,
or the Securities Act. US Tiger is not required to sell any
specific amount, but will act as our distribution agent using
commercially reasonable efforts consistent with its normal trading
and sales practices. There is no arrangement for funds to be
received in escrow, trust or similar arrangement.
The compensation to the US Tiger for sales of Class A ordinary
shares under the sales agreement will be at maximum commission
rates ranging from 1.0% to 3.0% of the gross sales price per share,
depending upon the aggregate sales proceeds raised by the sales
agent under the sales agreement. The net proceeds, if any, that we
receive from the sales of our Class A ordinary shares will depend
on the number of shares actually sold and the offering price for
such shares. See “Plan of Distribution” beginning on page S-23
for additional information regarding the compensation to be paid to
US Tiger in connection with the sale of the Class A ordinary shares
on our behalf, US Tiger will be deemed to be an underwriter within
the meaning of the Securities Act and the compensation of US Tiger
will be deemed to be underwriting commissions or discounts. We have
also agreed to provide indemnification and contribution to US Tiger
with respect to certain liabilities, including liabilities under
the Securities Act.
You should read this prospectus supplement in conjunction with the
accompanying base prospectus, including any supplements and
amendments thereto. This prospectus supplement is qualified by
reference to the accompanying base prospectus except to the extent
that the information in this prospectus supplement supersedes the
information contained in the accompanying base prospectus. This
prospectus supplement is not complete without, and may not be
delivered or utilized except in connection with, the accompanying
base prospectus, including any supplements and amendments
thereto.
As of the date hereof, the aggregate market value of our
outstanding Class A Ordinary Shares held by non-affiliates was
approximately $31.2 million based on 18,103,355 Class A Ordinary
Shares and 5,497,715 Class B Ordinary Shares outstanding as of
December 16, 2021, of which 16,172,819 Class A Ordinary Shares and
0 Class B Ordinary Shares were held by non-affiliates, and a per
share price of $1.93, which was the last reported price on the
NASDAQ Capital Market of our Class A Ordinary Shares on December 1,
2021. We have not offered any securities pursuant to General
Instruction I.B.5 of Form F-3 during the prior 12 calendar month
period that ends on and includes the date of this prospectus
supplement and accordingly we may sell up to $10,404,513.56 of our
Class A Ordinary Shares hereunder. Our Class A ordinary shares are
listed on the Nasdaq Capital Market under the symbol “ZCMD.” On
December 16, 2021, the closing price for our Class A ordinary
shares, as reported on the Nasdaq Capital Market, was $1.79 per
share. Our principal executive offices are located at Nanxi
Creative Center, Suite 218, 841 Yan’an Middle Road, Jing’An
District, Shanghai, China 200040.
Investing in our
securities involves a high degree of risk. You should review
carefully the risks and uncertainties referenced under the heading
“Risk
Factors” contained in this prospectus
supplement beginning on page S-12 and the corresponding
sections in the accompanying base prospectus, and under similar
headings in the other documents that are incorporated by reference
into this prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
TIGER BROKERS
The date of this Prospectus Supplement is December 17,
2021.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
SUPPLEMENT
You should carefully read this entire prospectus supplement and
the accompanying base prospectus, including the information
included and referred to under “Risk Factors” below, the
information incorporated by reference in this prospectus supplement
and in the accompanying base prospectus, and the financial
statements and the other information incorporated by reference in
the accompanying base prospectus, before making an investment
decision.
This prospectus supplement and the accompanying base prospectus
form part of a registration statement on Form F-3 that we
filed with the Securities and Exchange Commission, or SEC, using a
“shelf” registration process. This document contains two parts. The
first part consists of this prospectus supplement, which provides
you with specific information about this offering. The second part,
the accompanying base prospectus, provides more general
information, some of which may not apply to this offering.
Generally, when we refer only to the “prospectus,” we are referring
to both parts combined. This prospectus supplement may add, update,
or change information contained in the accompanying base
prospectus. To the extent that any statement we make in this
prospectus supplement is inconsistent with statements made in the
accompanying base prospectus or any documents incorporated by
reference herein or therein, the statements made in this prospectus
supplement will be deemed to modify or supersede those made in the
accompanying base prospectus and such documents incorporated by
reference herein and therein.
This prospectus supplement and the accompanying base prospectus
relate to the offering of Class A ordinary shares. Before buying
any securities offered hereby, we urge you to carefully read this
prospectus supplement and the accompanying base prospectus,
together with the information incorporated herein and therein by
reference as described under the headings “Where You Can Find More
Information” and “Incorporation of Certain Information by
Reference.” These documents contain important information that you
should consider when making your investment decision. This
prospectus supplement may add, update, or change information in the
accompanying base prospectus.
You should rely only on the information contained in or
incorporated by reference in this prospectus supplement, the
accompanying base prospectus and any free writing prospectus that
we may authorize for use in connection with this offering. We have
not, and US Tiger has not, authorized anyone to provide you with
different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not,
and US Tiger is not, making an offer to sell these securities in
any jurisdiction where the offer or sale is not permitted or in
which the person making that offer or solicitation is not qualified
to do so or to anyone to whom it is unlawful to make an offer or
solicitation. You should assume that the information appearing in
this prospectus supplement, the accompanying base prospectus, the
documents incorporated by reference herein and therein and any free
writing prospectus that we have authorized for use in connection
with this offering is accurate only as of the date of those
respective documents. Our business, financial condition, results of
operations and prospects may have changed since those dates. You
should carefully read this entire prospectus supplement and the
accompanying base prospectus, including the information included
and referred to under “Risk Factors” below, the information
incorporated by reference in this prospectus supplement and in the
accompanying base prospectus, and the financial statements and the
other information incorporated by reference in the accompanying
base prospectus, before making an investment decision.
You should also read and consider the information in the documents
to which we have referred you in the section of this prospectus
supplement entitled “Incorporation of Certain Information by
Reference.”
This prospectus supplement and the accompanying base prospectus
contain summaries of certain provisions contained in some of the
documents described herein, but reference is made to the actual
documents for complete information. All of the summaries are
qualified in their entirety by the actual documents. Copies of some
of the documents referred to herein have been or will be filed as
exhibits to the registration statement of which this prospectus
supplement is a part or as exhibits to documents incorporated by
reference herein, and you may obtain copies of those documents as
described below under the headings “Where You Can Find More
Information” and “Incorporation of Certain Information by
Reference.” We note that the representations, warranties and
covenants made by us in any agreement that is filed as an exhibit
to any document that is incorporated by reference herein were made
solely for the benefit of the parties to such agreement, including,
in some cases, for the purpose of allocating risk among the parties
to such agreement, and should not be deemed to be a representation,
warranty or covenant to you. Moreover, such representations,
warranties or covenants were accurate only as of the date when
made. Accordingly, such representations, warranties and covenants
should not be relied on as accurately representing the current
state of our affairs.
The industry and market data and other statistical information
contained in the documents we incorporate by reference are based on
our own estimates, independent publications, government
publications, reports by market research firms or other published
independent sources, and, in each case, are believed by us to be
reasonable estimates. Although we believe these sources are
reliable, we have not independently verified the information.
Securities offered pursuant to the registration statement to which
this prospectus supplement relates may only be offered and sold if
not more than three years have elapsed since the initial effective
date of the registration statement, subject to the extension of
this period in compliance with applicable SEC rules.
COMMONLY USED DEFINED TERMS
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All
references to “RMB,” “yuan” and “Renminbi” are to the legal
currency of China, all references to “HKD” is to the legal currency
of Hong Kong, and all references to “USD,” and “U.S. dollars” are
to the legal currency of the United States; |
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“China”
and “PRC” refer to the People’s Republic of China, excluding, for
the purposes of this prospectus only, Macau, Taiwan and Hong
Kong; |
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“Class
A Ordinary Shares” refers to our Class A ordinary shares, $0.0001
par value per share; |
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“Class
B Ordinary Shares” refers to our Class B ordinary shares, $0.0001
par value per share; |
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“Controlling
Shareholder” refers to Mr. Weiguang Yang, the CEO of the
Company; |
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Depending
on the context, the terms “we,” “us,” “our company,” “our”,
“Zhongchao” and “Zhongchao Cayman” refer to Zhongchao Inc., a
Cayman Islands exempted company, and its subsidiaries and
affiliated companies; |
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“Horgos
Zhongchao Medical” refers to Horgos Zhongchao Medical Technology
Co., Ltd., a PRC company, which cancelled its registration on May
11, 2020; |
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“Horgos
Zhongchao Zhongxing” refers to Horgos Zhongchao Zhongxing Medical
Technology Co., Ltd., a PRC company, which cancelled its
registration on September 16, 2020; |
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“mobile
MAUs” are the number of unique IP address that various mobile
devices having access to our MDMOOC mobile app or Sunshine Health
Forums from mobile end at least once during a month. The numbers of
our mobile MAUs are calculated using internal company data that has
not been independently verified, and we treat each distinguishable
device IP address as a separate user for purposes of calculating
mobile MAUs, although inaccuracy may result from the possibility
that one mobile device may have more than one IP
addresses; |
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“monthly
UVs” of MDMOOC website, MDMOOC.org, or the website of our Sunshine
Health Forums, ygjkclass.com, are to the number of unique IP
address that various internet browsers apply to access our
websites, from either PC end or mobile end, at least once during a
month. The numbers of our monthly UVs of our websites are
calculated using internal company data that has not been
independently verified, and we treat each distinguishable IP
address as a separate user for purposes of calculating monthly UVs,
although inaccuracy may result from the possibility that some
individuals may have more than one IP address and/or share the same
IP address with other individuals to access our
platform; |
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“NFP(s)”
refers to not-for-profit organizations; |
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“SAIC”
refers to State Administration for Industry and Commerce in China
and currently known as State Administration for Market
Regulation; |
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“Shanghai
Huijing” refers to Shanghai Huijing Information Technology Co.,
Ltd., a PRC company; |
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“Shanghai
Jingyi” or “Shanghai Zhongxin” refers to Shanghai Zhongxin Medical
Technology Co., Ltd, a PRC company, which was formerly known as
Shanghai Jingyi, or Shanghai Jingyi Medical Technology Co., Ltd., a
PRC company and changed to its current name as Shanghai Zhongxin on
November 16, 2020. |
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“Shanghai
Maidemu” refers to Shanghai Maidemu Cultural Communication Corp., a
PRC company; |
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“Shanghai
Xingzhong” refers to Shanghai Xingzhong Investment Management LP, a
PRC company; |
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“Shanghai
Zhongxun” refers to Shanghai Zhongxun Medical Technology Co., Ltd.,
a PRC company; |
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“Zhongchao
BVI” refers to Zhongchao Group Inc., a British Virgin Island
company; |
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“Zhongchao
HK” refers to Zhongchao Group Limited, a Hong Kong
company; |
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“Zhongchao
Shanghai” or “VIE” refers to Zhongchao Medical Technology
(Shanghai) Co., Ltd., a PRC company; |
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“Zhongchao
WFOE” refers to Beijing Zhongchao Zhongxing Technology Limited, a
PRC company; |
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“Beijing
Boya” refers to Beijing Zhongchao Boya Medical Technology Co.,
Ltd., a PRC company; |
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“Liaoning
Zhixun” refers to Zhixun Internet Hospital (Liaoning) Co., Ltd., a
PRC company. |
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus,
including the documents that we incorporate herein and therein by
reference, contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended. Any statements about our expectations, beliefs, plans,
objectives, assumptions or future events or performance are not
historical facts and may be forward-looking. These statements are
often, but are not always, made through the use of words or phrases
such as “may,” “will,” “could,” “should,” “expects,” “intends,”
“plans,” “anticipates,” “believes,” “estimates,” “predicts,”
“projects,” “potential,” “continue,” and similar expressions, or
the negative of these terms, or similar expressions. Accordingly,
these statements involve estimates, assumptions, risks and
uncertainties which could cause actual results to differ materially
from those expressed in them. Any forward-looking statements are
qualified in their entirety by reference to the factors discussed
throughout this prospectus supplement and the accompanying
prospectus, and in particular those factors referenced in the
section “Risk Factors.”
This prospectus supplement and the accompanying prospectus contain
forward-looking statements that are based on our management’s
belief and assumptions and on information currently available to
our management. These statements relate to future events or our
future financial performance, and involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance
or achievements expressed or implied by these forward-looking
statements. Forward-looking statements include, but are not limited
to, statements about:
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the
direct and indirect impact of the novel coronavirus,
or COVID-19, on our business and operations; |
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our
ability to continue normal operations and interactions with our
users during the COVID-19 pandemic; |
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our
dependence upon external sources for the financing of our
operations; |
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our
ability to obtain and maintain our strategic collaborations and to
realize the intended benefits of such collaborations; |
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our
ability to effectively execute our business plan; |
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our
ability to continue to innovate and develop new
products; |
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our
ability to maintain and grow our reputation and to achieve and
maintain the market acceptance of our products; |
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our
ability to manage the growth of our operations over
time; |
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our
ability to maintain adequate protection of our intellectual
property and to avoid violation of the intellectual property rights
of others; |
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our
ability to gain and maintain regulatory approvals; |
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our
ability to maintain relationships with existing customers and
develop relationships with new customers; and |
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our
ability to compete and succeed in a highly competitive and evolving
industry. |
These forward-looking statements are neither promises nor
guarantees of future performance due to a variety of risks and
uncertainties and other factors more fully discussed in the “Risk
Factors” section in this prospectus supplement and the risk factors
and cautionary statements described in other documents that we file
from time to time with the SEC, specifically under “Item 3D.
Risk Factors” and elsewhere in our most recent Annual Report
on Form 20-F for the period ended December 31,
2020, and our Current Reports on Form 6-K.
Given these uncertainties, readers should not place undue reliance
on our forward-looking statements. These forward-looking statements
speak only as of the date on which the statements were made and are
not guarantees of future performance. Except as may be required by
applicable law, we do not undertake to update any forward-looking
statements after the date of this prospectus supplement or the
respective dates of documents incorporated by reference that
include forward-looking statements.
PROSPECTUS SUPPLEMENT
SUMMARY
Overview
We are not a Chinese operating company but rather a holding company
incorporated as an exempted company in Cayman Islands on April 16,
2019 (“Zhongchao Cayman”). We have no substantive operations other
than holding all of the issued and outstanding shares of Zhongchao
Group Inc., or Zhongchao BVI, established under the laws of the
British Virgin Islands on April 23, 2019.
Zhongchao BVI is also a holding company holding all of the
outstanding equity of Zhongchao Group Limited, or Zhongchao HK,
which was established in Hong Kong on May 14, 2019. Zhongchao HK is
also a holding company holding all of the outstanding equity of
Beijing Zhongchao Zhongxing Technology Limited, or Zhongchao WFOE,
which was established on May 29, 2019 under the laws of the PRC. As
a holding company with no material operations of our own, we
conduct a substantial majority of our operation through our wholly
owned subsidiary, Beijing Zhongchao Zhongxing Technology Limited, a
PRC company (“Zhongchao WFOE”) and a variable interest entity in
China, Zhongchao Medical Technology (Shanghai) Co., Ltd.
(“Zhongchao Shanghai” or the “VIE”) and its subsidiaries. Due to
the existing contractual arrangement, or the “VIE agreements”,
among Zhongchao WFOE, Zhongchao Shanghai’s shareholders, and
Zhongchao Shanghai, we are able to consolidate the financial
results of Zhongchao Shanghai under the U.S. GAAP, however, we do
not hold equity interest in Zhongchao Shanghai.
This is an offering of the Class A Ordinary Shares of the offshore
holding company in Cayman Islands, instead of shares of Zhongchao
Shanghai in China, therefore, you will not directly hold equity
interests in Zhongchao Shanghai.
Zhongchao WFOE, Zhongchao Shanghai, and the shareholders of
Zhongchao Shanghai entered into a series of agreements on August
14, 2019 and September 10, 2020. VIE Agreements include the Equity
Interest Pledge Agreement, the Proxy Agreement and Power of
Attorney, the Spouse Consent Letters, the Master Exclusive Service
Agreement, Business Cooperation Agreement, Exclusive Option
Agreement. We control and receive the economic benefits of
Zhongchao Shanghai’s business operations through VIE Agreements
among Zhongchao Shanghai, the shareholders of Zhongchao Shanghai,
and Zhongchao WFOE through the VIE Agreements, dated August 1, 2020
and September 10, 2020, which have not been tested in a court of
law. Through the VIE Agreements among Zhongchao WFOE, Zhaongchao
Shanghai and Zhongchao Shanghai’s shareholders, we are regarded as
the primary beneficiary of Zhongchao Shanghai, and, therefore, we
are able to consolidate the financial results of Zhaongchao
Shanghai in our consolidated financial statements in accordance
with U.S. GAAP.
Because we do not directly hold equity interests in our VIE, we are
subject to risks due to uncertainty of the interpretation and the
application of the PRC laws and regulations, including but not
limited to limitation on value-added telecommunication services and
certain other businesses, regulatory review of oversea listing of
PRC companies through a special purpose vehicle, and the validity
and enforcement of the VIE Agreements. We are also subject to the
risks of uncertainty about any future actions of the PRC government
in this regard that could disallow the VIE structure, which would
likely result in a material change in our operations and the value
of Class A Ordinary Shares may depreciate significantly or become
worthless.
Because we do not have ownership of Zhongchao Shanghai, we must
rely on the shareholders of Zhongchao Shanghai, with our chief
executive officer controlled 76.4% equity interest in Zhongchao
Shanghai, to comply with their contractual obligations. For a
description of our corporate structure and VIE contractual
arrangements, see "Corporate History and Structure." See also "Risk
Factors - Risks Related to Our Corporate Structure" and "Risk
Factors - Risks Related to Doing Business in China."
We are subject to certain legal and operational risks associated
with our VIE’s operations in China. 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 VIE’s 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. Recently, the PRC government initiated a series of
regulatory actions and statements to regulate business operations
in China with little advance notice, including cracking down on
illegal activities in the securities market, enhancing supervision
over China-based companies listed overseas using variable interest
entity structure, adopting new measures to extend the scope of
cybersecurity reviews, and expanding the efforts in anti-monopoly
enforcement. We believe Zhoangchao Shanghai may not be subject to
cybersecurity review with the Cyberspace Administration of China
(“CAC”) if the draft Measures for Cybersecurity Censorship becomes
effective as they are published, because (i) we do not maintain,
nor do we intend to maintain in the future, personally identifiable
health information of patients and healthcare experts in China; and
(ii) data processed in our business is less likely to have a
bearing on national security, thus it may not be classified as core
or important data by the authorities. However, since these
statements and regulatory actions are new, it is highly uncertain
how soon legislative or administrative regulation making bodies
will respond and what existing or new laws or regulations or
detailed implementations and interpretations will be modified or
promulgated, if any, and the potential impact such modified or new
laws and regulations will have on our daily business operations,
the ability to accept foreign investments and continually list on
the Nasdaq Capital Market.
The following charts summarize our corporate legal structure and
identify our subsidiaries, our VIE and its subsidiaries before this
offering.

Notes: All percentages reflect the voting ownership interests
instead of the equity interests held by each one of the shareholder
of the Company given that each Class B Ordinary Share will be
entitled to 15 votes as compared to Class A Ordinary Share, each
one of which will be entitled to 1 vote.
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(1) |
Represents
5,497,715 Class B Ordinary Shares held by Mr. Weiguang Yang
(“Yang”), the 100% owner of More Healthy Holding Limited (“More
Healthy”). |
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(2) |
Represents
an aggregate of 10,988,809 Class A Ordinary Shares including
9,638,741 Class A Ordinary Shares held by 11 shareholders of
Company, each one of which holds less than 5% voting ownership
interests of the Company, as of the date of this prospectus
supplement and 1,350,068 Class A Ordinary Shares to be issued upon
exercise of the HF Warrant. See footnote 3 below. |
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(3) |
In
order to directly hold equity interest in the Company, HF Capital
Management Delta, Inc. (“HF Capital”) has to complete certain
registration and obtain approval with local governmental authority
in PRC. As a part of reorganization and due to the aforementioned
factor, HF Capital was granted a warrant to purchase 1,350,068
Class A Ordinary Shares of the Company at a price $0.0001 per share
or such other amount agreed by the Company and HF Capital at a
grant price of RMB 20,000,000 (approximately USD$2.9 million)
conditioned upon (i) HF Capital completes necessary registration
and obtains approval with local governmental authority in PRC for
its direct investment in the Company and (ii) Zhongchao Shanghai
shall have paid HF Capital RMB 20,000,000 as returned capital
contribution in Zhongchao Shanghai. The above chart assumes that HF
Capital has not exercised such warrant. |
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(4) |
Represents
RMB 2.74 million (approximately USD$0.4 million) subscribed capital
contribution to Zhongchao Shanghai, as of the date of this
prospectus supplement. |
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(5) |
Represents
RMB 9.70 million (approximately USD$1.4 million) subscribed capital
contribution to Zhongchao Shanghai, as of the date of this
prospectus supplement. |
|
(6) |
Represents
RMB 1.35 million (approximately USD$0.2 million) subscribed capital
contribution to Zhongchao Shanghai, as of the date of this
prospectus supplement. |
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(7) |
Represents
RMB 3.00 million (approximately USD$0.4 million) subscribed capital
contribution to Zhongchao Shanghai, as of the date of this
prospectus supplement. Shanghai Xingzhong Investment Management LP.
Ltd., a limited partnership incorporated under the PRC laws
(“Shanghai Xingzhong”), the general partner of which is Weiguang
Yang. As the general partner of Shanghai Xingzhong, Weiguang Yang
exercises the voting rights with respect to the shares held by
Shanghai Xingzhong. |
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(8) |
Represents
RMB 1.35 million (approximately USD$0.2 million) subscribed capital
contribution to Zhongchao Shanghai, as of the date of this
prospectus supplement. |
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(9) |
Beijing
Boya was incorporated under the PRC laws on April 27, 2020, of
which 70% of its equity was owned by Zhongchao Shanghai and 30% of
its equity was entrusted to Zhongchao Shanghai by the other
shareholder Zhengbo Ma through a certain share entrustment
agreement on April 27, 2020. |
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(10) |
Shanghai
Zhongxin, a PRC company, which was formerly known as Shanghai
Jingyi, or Shanghai Jingyi Medical Technology Co., Ltd., a PRC
company and changed to its current name as Shanghai Zhongxin on
November 16, 2020. On October 12, 2020, two shareholders of
Shanghai Jingyi, Li Dai and Hegang Ma, transferred their shares to
Mr. Weiguang Yang. As a result, Mr. Weiguang Yang holds 49% of
Shanghai Jingyi’s equity and Zhongchao Shanghai holds 51% of its
equity. On November 1, 2020, Mr. Weiguang Yang transferred certain
parts of his shares to Zhongchao Yixin and Zhongren Yixin. As a
result, Mr. Weiguang Yang, Zhongchao Yixin, and Zhongren Yixin hold
19%, 20% and 10% of the equity interest of Shanghai Jingyi,
respectively. Through certain entrustment agreements, Mr. Weiguang
Yang, Zhongchao Yixin and Zhongren Yixin hold 19%, 20% and 10% of
the equity interest of Shanghai Jingyi on behalf of Shanghai
Zhongxun, respectively. As a result, Shanghai Zhongxun
owns 100% of Shanghai Zhongxin’s equity interest. |
Company Information
Our Company
Through Zhongchao Shanghai and its subsidiaries, we operated as a
provider of healthcare information, education, and training
services to healthcare professionals and the public in China. We
offer a wide range of online and onsite health information
services, healthcare education programs, and healthcare training
products, consisting primarily of clinical practice training, open
classes of popular medical topics, interactive case studies,
academic conference and workshops, continuing education courses,
and articles and short videos with educational healthcare content
to healthcare professionals as well as the public. The services,
programs, and products that we provide:
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make
it easier for healthcare professionals to access healthcare
reference sources, stay abreast of the latest medical information,
learn about new treatment options, earn continuing medical
education credits and communicate with peers; and |
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enable
the public to obtain health information on a particular disease or
condition, offer content on topics of individual interest, improve
public health consciousness, and promote people’s
lifestyle. |
Through Zhongchao Shanghai, we provide healthcare information,
education, and training services to the healthcare professionals
under our “MDMOOC” brand, which we believe is one of the leading
consumer brands in China’s healthcare training and education
sector, as evidenced by the Securities Research Report on online
medical care industry by Essence Securities Co., Ltd., a company
provides securities services throughout China, where we are
considered as one of the main and typical public company proving
medical training with doctor interactive and online training
platform and leading the Internet medical education industry. We
provide our healthcare educational content to the public via our
“Sunshine Health Forums”, which, based on the amount of the
registered users and daily review volume, we believe is one of the
largest platforms in China, for general healthcare knowledge and
information to the public.
We commenced our operation, through Zhongchao Shanghai, 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. Since
our inception, we have focused on developing our information,
education, and training programs to address the needs in the
healthcare industry in China; and developing online platforms and
onsite activities to deliver our information services, education
programs and training products.
In July 2020, we launched, via Zhongchao Shanghai, focused patient
management services to hospitals, pharmacies, pharmaceutical
enterprises and non-profit organizations and insurance companies
via “Zhongxun”. In May 2021, Zhongchao Shanghai launched patient
management service on the professional field of tumor and rare
diseases via “Zhongxin”.
MDMOOC-Healthcare Information, Education, and Training for
Professionals
Online Platforms
We launched our first online platform in a form of website,
www.mdmooc.org, via Zhongchao Shanghai, under our “MDMOOC” brand in
2013 to provide information, education, and training services to
physicians and allied healthcare professionals, such as pharmacists
and nurses primarily located in China, via Internet-Plus solutions.
Internet Plus refers to the applications of the internet and other
information technology in conventional industries, such as
manufacturing, education and healthcare. It is an incomplete
equation where various internet (mobile, cloud computing, big data
or Internet of Things) can be added to other traditional fields.
Zhongchao Shanghai further launched the MDMOOC Wechat subscription
account and MDMOOC mobile App in 2015 and 2016, respectively
(together with the website, the “MDMOOC online platform”).
Healthcare professionals in China can apply for registration with
their healthcare qualification to get access to the MDMOOC online
platform.
The programs available on the MDMOOC online platform enable the
users to timely obtain extension knowledge of precedents,
treatments, and first-hand experiences of various disease and other
healthcare related matters. In addition, the MDMOOC online platform
offers these professional users what we believe is one of the
largest online libraries of continuing medical education programs
in China that are produced in association with entities accredited
by the National Health Commission of the PRC, such as Chinese
Medical Association and Chinese Journal of Continuing Medical
Education. From the convenience of their home or office computer
and mobile App, the professional users can access a variety of
accredited editorial resources and programs including online
journal articles, medical conferences, and open classes and obtain
continuing medical education credits which are required for the
healthcare qualification of doctors, nurses, and pharmacists.
We believe MDMOOC online platform helps healthcare professionals
improve their clinical knowledge and practice of medicine. Since
launching in 2013, Zhongchao Shanghai has been continuously
developing the MDMOOC online platform with new forms of
Internet-based education solutions. There are currently
approximately 2,976 education and training programs available on
the MDMOOC online platform and free to the registered users. About
95% of all the programs are self-developed by the research and
development team. The original content of these programs, including
daily medical thesis, commentary, conference coverage, expert
columns, and activities are written by the research and development
team and authors from widely respected academic institutions, and
edited and managed by the in-house editorial staff. The remaining
5% of programs are created under the purchase orders of the
corporate or institution customers, where we develop customized
programs with designated healthcare topics. Such 5% of programs are
only available to certain registered users with program passcodes
provided by the corporate or institution customers. The revenues
are mainly sourced from these 5% of programs.
Zhongchao Shanghai currently provide the proprietary interactive
programs via Practice Improvement (PI), a problem-based and
case-based form of healthcare course, which integrates
state-of-the-art treatment information and clinical cases for
particular diseases into interactive practice modules; Community of
Practice Share (COPS), an online and live clinical experience
sharing platform that creates the most effective discussion in a
particular healthcare domain or medical area due to the common
interests of the users; Continuing Professional Development (CPD),
a section of the platform that provides discussions and articles
focusing on the future development and the differences between
Continuing Medical Education (CME) and Continuing Professional
Development (CPD), and other general information of physician
competency framework and Meta-analysis. Our original, exclusive and
proprietary content includes innovative features such as
after-class quiz, key point summary and highlight during the
courses, and peer-review and comments.
We believe that our ability to create, source, edit and organize
online healthcare-related content, interactive education services,
and training programs has made MDMOOC online platform one of the
leading health destinations and most recognized information
platform in healthcare sector in China. As of the date of this
prospectus supplement, the MDMOOC online platform has more than
680,000 registered users, and we have collaborated with more than 2
million healthcare experts including over 700,000 physicians, and
1,300,000 allied healthcare professionals in medical academics,
associations, and leading hospitals to develop training programs on
needed basis.
Onsite Education Activities
In addition to healthcare information, education, and training via
Internet-Plus, we organize onsite healthcare and medical training
sessions and academic conferences from time to time under our
“MDMOOC” brand. For instance, in January 2019, through Zhongchao
Shanghai, we launched EWMA-certified (defined as below)
wound-management collaboration training programs, covering the
topics including but not limited to basic concepts of acute and
chronic wounds, management of different levels of surgical and
non-surgical wounds, the construction of different levels of wound
centers, and medical staff collaboration in the process of wound
management.
Zhongchao Shanghai cooperates with Beijing Chronic Disease
Prevention and Health Education Research Association and Professor
Yixin Zhang from the Ninth People’s Hospital of Shanghai Jiao Tong
University School of Medicine to create courses titled “Essential
Course for Wound Care Management” and “Advanced Course for Surgical
Wound Treatment”. These courses have been certified and authorized
by the European Wound Management Association (EWMA), a European
not-for-profit umbrella organization, linking national wound
management organizations, individuals and groups with interest in
wound care. Zhongchao Shanghai plans to hold four (4) training
programs for Essential Course for Wound Care Management and two (2)
training programs for Advanced Course for Surgical Wound Treatment.
Each program will accept no more than twenty (20) applicants who
shall hold academic credential above undergraduate. It also require
all applicants to have more than six-year working experience in the
field of wound repair. Zhongchao Shanghai will issue a certificate
to each of the applicant upon completion of the training as their
proof of achievement and ability in the wound management and
treatment.
As of the date of this prospectus supplement, Zhongchao Shanghai
has successfully held the first short-term training program for
Essential Course for Wound Care Management in Fujian, China from
March 28, 2019 to April 4, 2019 and its first training program for
Advanced Course for Surgical Wound Treatment from June 23, 2019 to
June 30, 2019 in Jiangsu, China. Zhongchao Shanghai further held
the second and third training programs for Essential Course for
Wound Care Management in Zhejiang, China from August 25, 2019 to
August 31, 2019 and our second and third training programs for
Advanced Course for Surgical Wound Treatment from December 1, 2019
to December 7, 2019 in Jilin, China. As a result of the outbreak of
COVID-19 pandemic, Zhongchao Shanghai postponed its original plan
to hold the future training programs in the
1st quarter of 2020 in Zhengzhou, Henan Province.
However, it successfully held the postponed Essential Courses for
Wound Care Management and the Advanced Courses for Wound Treatment
in Xi’an from September 10, 2020 to September 19, 2020, and in
Hangzhou from December 18, 2020 to December 26, 2020,
respectively.
We believe the combination of online and onsite services would
provide the end-users the greatest convenience. With more choices
of the forms of healthcare education, we enrich the learning
experience of our end-users.
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 our platforms,
Zhongchao Shanghai has been engaged by certain customers on a
project basis to establish individual columns on our MDMOOC online
platform to provide training and knowledge of certain drug
treatment for healthcare professionals and patients. Most of the
drug treatments are cancer-related or rare disease-related.
Zhongchao Shanghai establishes online columns to facilitate
qualified patients to obtain free drug treatment from
not-for-profit organizations (“NFPs”) till the earlier of the
expiration of contract period or the free drugs are completely
delivered. For each column, Zhongchao Shanghai 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 existing customers of us. They provide those drugs
sponsored by pharmaceutical companies without charge to qualified
patients and we charge those customers on our services in
connection with the online columns and related training and
management. In this way, we believe not only can we facilitate the
clinical application of those drugs, but also benefit patients.
As of the date of this prospectus supplement, Zhongchao Shanghai
has established nearly 25 columns, including 10 columns for drug
treatment related to lung cancer, liver cancer, and extended blood
cancer, and 47 columns for drug treatment of rare diseases,
including drug treatment for pulmonary fibrosis, multiple
sclerosis, and systemic lupus erythematosus. The total number of
patients covered under these patient-aid projects reached nearly
46,375 by the end of 2020. Zhongchao Shanghai launched 6 columns
for the treatment of rare diseases, including columns for the
treatment of Fabry disease launched in mid-2020. We expect the
numbers of columns for both cancer-related treatment and treatment
of rare diseases to continue increase and to have covered more than
66,000 patients by the end of 2021
Sunshine Health Forums-Healthcare Information and Education
for the Public
Our goal is not only to provide continuing education and training
to healthcare professionals but to promote healthy lifestyle and
provide healthcare knowledge to the public. In order to achieve
that, Zhongchao Shanghai develops and operates the Sunshine Health
Forums, online education-for-all platforms that disseminate
articles and features related to healthcare and wellness education,
medical behavior intervention, and newly developed health
technology and application. Zhongchao Shanghai launched our
Sunshine Health Forums in a form of website, www.ygjkclass.com, in
May 2016 followed by WeChat subscription account in August 2016,
and mobile App in 2017. Zhongchao Shanghai establishes one forum
for each category of diseases for the convenience of the public.
Zhongchao Shanghai cooperates with certain well-known we-media
platforms in China, including but not limited Toutiao.com,
Yidianzixun.com, Douyin.com, CN-Healthcare.com, iQiyi, Youku, and
Huoshan.com to streamline its articles co-produced by healthcare
professionals and itself.
Corporate Information
Our principal executive office is located on the 841 Yan’an Middle
Road, Jing’An District, Shanghai, China 200040. Our telephone
number is 021-32205987. We maintain a website at http://izcmd.com
that contains information about our Company, though no information
contained on our website is part of this prospectus.
Implications of Being An Emerging Growth Company
We qualify as an “emerging growth company” as defined in the
Jumpstart Our Business Startups Act of 2012, as amended, or the
JOBS Act. As an emerging growth company, we may take advantage of
specified reduced disclosure and other requirements that are
otherwise applicable generally to public companies. These
provisions include:
|
● |
only
two years of audited financial statements in addition to any
required unaudited interim financial statements with
correspondingly reduced “Management’s Discussion and Analysis of
Financial Condition and Results of Operations”
disclosure; |
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● |
reduced
disclosure about our executive compensation
arrangements; |
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● |
no non-binding advisory
votes on executive compensation or golden parachute
arrangements; |
|
● |
exemption
from the auditor attestation requirement in the assessment of our
internal control over financial reporting; and |
|
● |
an
exemption from new or revised financial accounting standards until
they would apply to private companies and from compliance with any
new requirements adopted by the Public Company Accounting Oversight
Board requiring mandatory audit firm rotation. |
We may take advantage of these provisions until the last day of our
fiscal year following the fifth anniversary of the date of the
first sale of our common equity securities pursuant to an effective
registration statement under the Securities Act of 1933, as
amended. However, if certain events occur before the end of such
five-year period, including if we become a “large accelerated
filer,” our annual gross revenues exceed $1.07 billion or we issue
more than $1.00 billion of non-convertible debt in any three-year
period, we will cease to be an emerging growth company before the
end of such five-year period.
In addition, Section 107 of the JOBS Act provides that an “emerging
growth company” can take advantage of the extended transition
period provided in Section 7(a)(2)(B) of the Securities Act for
complying with new or revised accounting standards. We have elected
to take advantage of the extended transition period for complying
with new or revised accounting standards and acknowledge such
election is irrevocable pursuant to Section 107 of the JOBS
Act.
Potential PRC Approval Required for This Offering
On July 6, 2021, the relevant PRC government authorities published
the Opinions on Strictly Cracking Down Illegal Securities
Activities in Accordance with the Law. These opinions call for
strengthened regulation over illegal securities activities and
supervision on overseas listings by China-based companies and
propose to take effective measures, such as promoting the
construction of relevant regulatory systems to deal with the risks
and incidents faced by China-based overseas-listed companies. As of
the date of this prospectus supplement, no official guidance or
related implementation rules have been issued in relation to these
recently issued opinions and the interpretation and implementation
of these opinions remain unclear at this stage. We could be subject
to additional requirements that we obtain pre-approval of the CSRC
and potentially other regulatory authorities to pursue this
offering, including a cybersecurity review potentially required
under the draft revised Measures for Cybersecurity Review. See
“Risk Factors — Risks Related to Doing Business in China — The
approval of the China Securities Regulatory Commission or other PRC
regulatory agencies may be required in connection with this
offering under PRC law.”
As of the date of this prospectus supplement, there are no PRC laws
and regulations in force explicitly requiring that we obtain any
permission from PRC authorities including the CSRC to issue
securities to foreign investors. Based on existing PRC laws and
regulations, as advised by our PRC legal advisor, neither we nor
our subsidiaries are required to obtain any pre-approval from the
CSRC to conduct this offering, subject to interpretation of the
existing PRC laws and regulations by the PRC government
authorities. As of the date of this prospectus supplement, we have
not received any inquiry, notice, warning, sanctions or any
regulatory objections to this offering from the CSRC.
THE OFFERING
Issuer |
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Zhongchao
Inc. |
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|
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Securities
Offered |
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Class
A Ordinary Shares having an aggregate offering price of up to
$10,400,000. |
|
|
|
Manner
of Offering |
|
We have
entered into the sales agreement with US Tiger, dated December 17,
2021, relating to the sale of our Class A Ordinary Shares offered
by this prospectus supplement and the accompanying prospectus. In
accordance with the terms of the sales agreement, under this
prospectus supplement and the accompanying prospectus we may offer
and sell Class A Ordinary Shares, $0.0001 par value per share,
having an aggregate offering price of up to $10,400,000 from time
to time through or to the sales agent. Sales of our Class A
Ordinary Shares, if any, under this prospectus supplement will be
made by any method permitted that is deemed an “at the market
offering” as defined in Rule 415 under the Securities Act of 1933,
as amended. See the section entitled “Plan of Distribution” on
page S-23 of this prospectus supplement. |
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|
|
Nasdaq |
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“ZCMD” |
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Use
of Proceeds |
|
We
intend to use the net proceeds of this offering for general
corporate purposes. See the section entitled “Use of Proceeds” on
page S-22 of this prospectus supplement. |
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|
|
Risk
Factors |
|
Investing
in our Class A Ordinary Shares involves risks. You should carefully
consider the risks described under “Risk Factors” in this
prospectus supplement and the accompanying prospectus, in our most
recent Annual Report on Form 20-F as well as the
other information contained or incorporated by reference in this
prospectus supplement and the accompanying base prospectus before
making a decision to invest in our Class A Ordinary
Shares. |
RISK FACTORS
Investing in our securities involves a high degree of risk. You
should carefully consider the risks referenced below and described
in the documents incorporated by reference in this prospectus
supplement and the accompanying prospectus, as well as other
information we include or incorporate by reference into this
prospectus supplement and the accompanying prospectus, before
making an investment decision. Our business, financial condition or
results of operations could be materially adversely affected by the
materialization of any of these risks. The trading price of our
securities could decline due to the materialization of any of these
risks, and you may lose all or part of your investment. This
prospectus supplement, the accompanying prospectus and the
documents incorporated herein and therein by reference also contain
forward-looking statements that involve risks and uncertainties.
Actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors,
including the risks referenced below and described in the documents
incorporated herein by reference, including (i) our annual
report on Form 20-F, as amended, for the fiscal year
ended December 31, 2020, which is on file with the SEC and is
incorporated herein by reference, and (ii) other documents we
file with the SEC that are deemed incorporated by reference into
this prospectus supplement and the accompanying prospectus.
Risks Related to This Offering
Management will have broad discretion as to the use of the
proceeds from this offering and may not use the proceeds
effectively.
Because we have not designated the amount of net proceeds from this
offering to be used for any particular purpose, our management will
have broad discretion as to the application of the net proceeds
from this offering and could use them for purposes other than those
contemplated at the time of the offering. Our management may use
the net proceeds for corporate purposes that may not improve our
financial condition or market value.
Our shareholders will experience significant dilution upon the
issuance of Class A Ordinary Shares.
The offering price per share in this offering may exceed the net
tangible book value per share of our Class A Ordinary Shares.
Assuming that an aggregate of 5,810,055 Class A Ordinary Shares are
sold at an assuming price of $1.79 per share, which was the last
reported sale price of our Class A Ordinary Shares on the Nasdaq
Capital Market on December 17, 2021, pursuant to this prospectus
supplement and the accompanying prospectus for gross proceeds of
$10.4 million before deducting commissions and estimated
aggregate offering expenses payable by us, you would experience
immediate dilution of approximately $0.0853 per share. See the
section entitled “Dilution” on page S-23 of this prospectus
supplement for a more detailed illustration of the dilution you
would incur if you participate in this offering.
It is not possible to predict the actual number of shares we
will sell under the sales agreement, or the gross proceeds
resulting from those sales.
Subject to certain limitations in the sales agreement and
compliance with applicable law, we have the discretion to deliver a
placement notice to the sales agent at any time throughout the term
of the sales agreement. The number of shares that are sold through
the sales agent after delivering a placement notice will fluctuate
based on a number of factors, including the market price of the
Class A Ordinary Shares during the sales period, the limits we set
with the sales agent in any applicable placement notice, and the
demand for our Class A Ordinary Shares during the sales period.
Because the price per share of each share sold will fluctuate
during the sales period, it is not currently possible to predict
the number of shares that will be sold or the gross proceeds to be
raised in connection with those sales.
The Class A Ordinary Shares offered hereby will be sold in “at
the market offerings,” and investors who buy shares at different
times will likely pay different prices.
Investors who purchase shares in this offering at different times
will likely pay different prices, and so may experience different
levels of dilution and different outcomes in their investment
results. We will have discretion, subject to market demand, to vary
the timing, prices, and numbers of shares sold in this offering. In
addition, there is no minimum or maximum sales price for shares to
be sold in this offering. Investors may experience a decline in the
value of the shares they purchase in this offering as a result of
sales made at prices lower than the prices they paid.
Risks Related To Doing Business in China
Uncertainties with respect to the PRC legal system could have a
material adverse effect on us.
The PRC legal system is based on written statutes. Prior court
decisions may be cited for reference but have limited precedential
value. We conduct our business primarily through our subsidiaries
established in China. These subsidiaries are generally subject to
laws and regulations applicable to foreign investment in China.
However, since these laws and regulations are relatively new and
the PRC legal system continues to rapidly evolve, the
interpretations of many laws, regulations and rules are not always
uniform and enforcement of these laws, regulations and rules
involves uncertainties, which may limit legal protections available
to us. Recently, the General Office of the Central Committee of the
Communist Party of China and the General Office of the State
Council jointly issued the “Opinions on Severely Cracking Down on
Illegal Securities Activities According to Law,” or the Opinions,
which was made available to the public on July 6, 2021. The
Opinions emphasized the need to strengthen the administration over
illegal securities activities, and the need to strengthen the
supervision over overseas listings by Chinese companies. Effective
measures, such as promoting the construction of relevant regulatory
systems will be taken to deal with the risks and incidents of
China-concept overseas listed companies, and cybersecurity and data
privacy protection requirements and etc. The Opinions and any
related implementing rules to be enacted may subject us to
compliance requirement in the future. In addition, some regulatory
requirements issued by certain PRC government authorities may not
be consistently applied by other government authorities (including
local government authorities), thus making strict compliance with
all regulatory requirements impractical, or in some circumstances
impossible. For example, we may have to resort to administrative
and court proceedings to enforce the legal protection that we enjoy
either by law or contract. However, since PRC administrative and
court authorities have discretion in interpreting and implementing
statutory and contractual terms, it may be more difficult to
predict the outcome of administrative and court proceedings and the
level of legal protection we enjoy than in more developed legal
systems. These uncertainties may impede our ability to enforce the
contracts we have entered into with our business partners,
customers and suppliers. In addition, such uncertainties, including
any inability to enforce our contracts, together with any
development or interpretation of PRC law that is adverse to us,
could materially and adversely affect our business and operations.
Furthermore, intellectual property rights and confidentiality
protections in China may not be as effective as in the United
States or other more developed countries. We cannot predict the
effect of future developments in the PRC legal system, including
the promulgation of new laws, changes to existing laws or the
interpretation or enforcement thereof, or the preemption of local
regulations by national laws. These uncertainties could limit the
legal protections available to us and other foreign investors,
including you. In addition, any litigation in China may be
protracted and result in substantial costs and diversion of our
resources and management attention.
The approval of the China Securities Regulatory Commission or
other PRC regulatory agencies may be required in connection with
this offering under PRC law.
The Regulations on Mergers of Domestic Enterprises by Foreign
Investors, or the M&A Rules, purport to require offshore
special purpose vehicles that are controlled by PRC companies or
individuals and that have been formed for the purpose of seeking a
public listing on an overseas stock exchange through acquisitions
of PRC domestic companies or assets to obtain CSRC approval prior
to publicly listing their securities on an overseas stock exchange.
The interpretation and application of the regulations remain
unclear. If CSRC approval is required, it is uncertain how long it
will take for us to obtain such approval, and any failure to obtain
or a delay in obtaining CSRC approval for this offering may subject
us to sanctions imposed by the CSRC and other PRC regulatory
agencies.
Our PRC counsel has advised us that, based on its understanding of
the current PRC laws and regulations, we will not be required to
submit an application to the CSRC for its approval of this offering
and the listing and trading of the Class A Ordinary Shares on
Nasdaq under the M&A Rules because the CSRC currently has
not issued any definitive rule or interpretation concerning whether
offerings like ours under this prospectus are subject to this
regulation. However, our PRC counsel has further advised us that
there remains some uncertainty as to how the M&A Rules will be
interpreted or implemented in the context of an overseas offering,
and its opinions summarized above are subject to any new laws,
rules and regulations or detailed implementations and
interpretations in any form relating to the M&A Rules. We
cannot assure you that relevant PRC government agencies, including
the CSRC, would reach the same conclusion as our PRC counsel.
Furthermore, on July 6, 2021, the General Office of the
Communist Party of China Central Committee and the General Office
of the State Council jointly promulgated the Opinions on Strictly
Cracking Down on Illegal Securities Activities in Accordance with
the Law, pursuant to which PRC regulators are required to
accelerate rulemaking related to overseas issuance and listing of
securities, and improvement to the laws and regulations related to
data security, cross-border data flow, and management of
confidential information. Numerous regulations, guidelines and
other measures have been or are expected to be adopted under the
umbrella of or in addition to the Cybersecurity Law and Data
Security Law, including (i) the draft Measures for the
Security Assessment for Cross-border Transfer of Personal
Information published by the Cyberspace Administration of China, or
CAC, in 2019, which may, upon enactment, require security review
before transferring personal information out of China, and
(ii) draft amendment to the Cybersecurity Review Measures in
July 2021, which provides that, among others, an application
for cyber security review shall be made by an issuer who is a
critical information infrastructure operator or a data processing
operator as defined therein before such issuer’s listing in a
foreign country if the issuer possesses personal information of
more than one million users, and that the relevant governmental
authorities in the PRC may initiate cybersecurity review if such
governmental authorities determine an operator’s cyber products or
services, data processing or potential listing in a foreign country
affect or may affect national security. The draft measures were
released for public comment only, and the draft provisions and
anticipated adoption or effective date are subject to changes and
thus its interpretation and implementation remain substantially
uncertain. We cannot predict the impact of the draft measures, if
any, on the operations of Zhongchao Shanghai at this stage, and we
will closely monitor and assess any development in the rule-making
process. As there are still uncertainties regarding the
interpretation and implementation of such regulatory guidance, we
cannot assure you that we will be able to comply with new
regulatory requirements relating to our future overseas capital
raising activities and we may become subject to more stringent
requirements with respect to matters including data privacy, and
cross-border investigation and enforcement of legal claims.
Notwithstanding the foregoing, as of the date of this prospectus
supplement, there are no PRC laws and regulations in force
explicitly requiring that we obtain any permission from PRC
authorities to issue securities to foreign investors, and we have
not received any inquiry, notice, warning, sanction or any
regulatory objection to this offering from the CSRC, the CAC or any
other PRC authorities that have jurisdiction over our operations.
Our PRC counsel has advised us that, based on the above and its
understanding of the current PRC laws and regulations, as of the
date of this prospectus supplement, we are not required to submit
an application to the CSRC, the CAC for the approval of this
offering and the listing and trading of the Class A Ordinary Shares
on Nasdaq. However, our PRC counsel has further advised us there
remains significant uncertainty as to the enactment, interpretation
and implementation of regulatory requirements related to overseas
securities offering and other capital markets activities. If it is
determined in the future that CSRC, the CAC or other approval were
required for this offering, we may face sanctions by the CSRC, the
CAC or other PRC regulatory agencies. These regulatory agencies may
impose fines and penalties on our operations in China, limit our
ability to pay dividends outside of China, limit our operations in
China, delay or restrict the repatriation of the proceeds from this
offering into China or take other actions that could have a
material adverse effect on our business, financial condition,
results of operations and prospects, as well as the trading price
of the Class A Ordinary Shares. The CSRC, the CAC or other PRC
regulatory agencies also may take actions requiring us, or making
it advisable for us, to halt this offering before settlement and
delivery of the Class A Ordinary Shares. Consequently, if you
engage in market trading or other activities in anticipation of and
prior to settlement and delivery, you do so at the risk that
settlement and delivery may not occur. In addition, if the CSRC,
the CAC or other regulatory agencies later promulgate new rules
requiring that we obtain their approvals for this offering, we may
be unable to obtain a waiver of such approval requirements, if and
when procedures are established to obtain such a waiver. Any
uncertainties and/or negative publicity regarding such an approval
requirement could have a material adverse effect on the trading
price of the Class A Ordinary Shares.
China’s economic, political and social conditions, as well as
changes in any government policies, laws and regulations may be
quick with little advance notice and, could have a material adverse
effect on our business and cause the value of our Class A Ordinary
Shares worthless.
Our business, financial condition, results of operations and
prospects are subject, to a significant extent, to economic,
political and legal developments in China. For example, as a result
of recent proposed changes in the cybersecurity regulations in
China that would require certain Chinese technology firms to
undergo a cybersecurity review before being allowed to list on
foreign exchanges, this may have the effect of further narrowing
the list of potential businesses in China’s consumer, technology
and mobility sectors that we intend to focus on for our business
combination or the ability of the combined entity to list in the
United States.
China’s economy differs from the economies of most developed
countries in many respects, including the amount of government
involvement, level of development, growth rate, control of foreign
exchange and allocation of resources. While the PRC economy has
experienced significant growth in the past two to three decades,
growth has been uneven, both geographically and among various
sectors of the economy. Demand for target services and products
depends, in large part, on economic conditions in China. Any
slowdown in China’s economic growth may cause our potential
customers to delay or cancel their plans to purchase our services
and products, which in turn could reduce our net revenues.
Although China’s economy has been transitioning from a planned
economy to a more market oriented economy since the late 1970s, the
PRC government continues to play a significant role in regulating
industry development by imposing industrial policies. The PRC
government also exercises significant control over China’s economic
growth through allocating resources, controlling the incurrence and
payment of foreign currency-denominated obligations, setting
monetary policy and providing preferential treatment to particular
industries or companies. Changes in any of these policies, laws and
regulations may be quick with little advance notice and could
adversely affect the economy in China and could have a material
adverse effect on our business and the value of our Class A
ordinary shares.
The PRC government has implemented various measures to encourage
foreign investment and sustainable economic growth and to guide the
allocation of financial and other resources. However, we cannot
assure you that the PRC government will not repeal or alter these
measures or introduce new measures that will have a negative effect
on us, or more specifically, we cannot assure you that the PRC
government will not initiate possible governmental actions or
scrutiny to us, which could substantially affect our operation and
the value of our Ordinary Shares may depreciate quickly. China’s
social and political conditions may change and become unstable. Any
sudden changes to China’s political system or the occurrence of
widespread social unrest could have a material adverse effect on
our business and results of operations.
Furthermore, our Company, our VIE and our subsidiaries, and our
investors may face uncertainty about future actions by the
government of China that could significantly affect the VIE and its
operations, including the enforceability of the contractual
arrangements. As of the date of this prospectus supplement, neither
our Company nor our VIE has received or was denied permission from
Chinese authorities to list on U.S. exchanges. However, there is no
guarantee that our Company or VIE will receive or not be denied
permission from Chinese authorities to list on U.S. exchanges in
the future.
The Chinese government exerts substantial influence over the
manner in which we must conduct our business activities and may
intervene or influence our operations at any time, which could
result in a material change in our operations and cause the value
of our Class A Ordinary Shares worthless.
The Chinese government has exercised and continues to exercise
substantial control over virtually every sector of the Chinese
economy through regulation and state ownership. Our ability to
operate in China may be harmed by changes in its laws and
regulations, including those relating to securities regulation,
data protection, cybersecurity and mergers and acquisitions and
other matters. The central or local governments of these
jurisdictions may impose new, stricter regulations or
interpretations of existing regulations that would require
additional expenditures and efforts on our part to ensure our
compliance with such regulations or interpretations.
Government actions in the future could significantly affect
economic conditions in China or particular regions thereof, and
could require us to materially change our operating activities or
divest ourselves of any interests we hold in Chinese assets. Our
business may be subject to various government and regulatory
interference in the provinces in which we operate. We may incur
increased costs necessary to comply with existing and newly adopted
laws and regulations or penalties for any failure to comply. Our
operations could be adversely affected, directly or indirectly, by
existing or future laws and regulations relating to our business or
industry.
Given recent statements by the Chinese government indicating an
intent to exert more oversight and control over offerings that are
conducted overseas and/or foreign investment in China-based
issuers, any such action could significantly limit or completely
hinder our ability to offer or continue to offer securities to
investors and cause the value of such securities to significantly
decline or become worthless.
Recently, the General Office of the Central Committee of the
Communist Party of China and the General Office of the State
Council jointly issued the Opinions on Severely Cracking Down on
Illegal Securities Activities According to Law, or the Opinions,
which was made available to the public on July 6, 2021. The
Opinions emphasized the need to strengthen the administration over
illegal securities activities, and the need to strengthen the
supervision over overseas listings by Chinese companies. Effective
measures, such as promoting the construction of relevant regulatory
systems, will be taken to deal with the risks and incidents of
China-concept overseas listed companies. As of the date of
this prospectus supplement, we have not received any inquiry,
notice, warning, or sanctions from PRC government authorities in
connection with the Opinions.
On June 10, 2021, the Standing Committee of the National People’s
Congress of China, or the SCNPC, promulgated the PRC Data Security
Law, which took effect in September 2021. The PRC Data Security Law
imposes data security and privacy obligations on entities and
individuals carrying out data activities, and introduces a data
classification and hierarchical protection system based on the
importance of data in economic and social development, and the
degree of harm it will cause to national security, public
interests, or legitimate rights and interests of individuals or
organizations when such data is tampered with, destroyed, leaked,
illegally acquired or used. The PRC Data Security Law also provides
for a national security review procedure for data activities that
may affect national security and imposes export restrictions on
certain data an information.
In early July 2021, regulatory authorities in China launched
cybersecurity investigations with regard to several China-based
companies that are listed in the United States. The Chinese
cybersecurity regulator announced on July 2, 2021 that it had begun
an investigation of Didi Global Inc. (NYSE: DIDI) and two days
later ordered that the company’s app be removed from smartphone app
stores. On July 5, 2021, the Chinese cybersecurity regulator
launched the same investigation on two other Internet platforms,
China’s Full Truck Alliance of Full Truck Alliance Co. Ltd. (NYSE:
YMM) and Boss of KANZHUN LIMITED (Nasdaq: BZ). On July 24, 2021,
the General Office of the Communist Party of China Central
Committee and the General Office of the State Council jointly
released the Guidelines for Further Easing the Burden of Excessive
Homework and Off-campus Tutoring for Students at the
Stage of Compulsory Education, pursuant to which foreign investment
in such firms via mergers and acquisitions, franchise development,
and variable interest entities are banned from this sector.
On July 10, 2021, the Cyberspace Administration of China, or the
CAC, released the Cybersecurity Review Measures (Revised Draft for
Solicitation of Comments), or the Revised Draft, pursuant to which
operator holding more than one million users/users’ (which to be
further specified) individual information shall be subject to
cybersecurity review before listing abroad. The cybersecurity
review will evaluate, among others, the risk of critical
information infrastructure, core data, important data, or a large
amount of personal information being influenced, controlled or
maliciously used by foreign governments after going public
overseas. The procurement of network products and services, data
processing activities and overseas listing should also be subject
to cybersecurity review if they concern or potentially pose risks
to national security. According to the effective Cybersecurity
Review Measures, online platform/website operators of certain
industries may be identified as critical information infrastructure
operators by the CAC, once they meet standard as stated in the
National Cybersecurity Inspection Operation Guide, and such
operators may be subject to cybersecurity review. The scope of
business operations and financing activities that are subject to
the Revised Draft and the implementation thereof is not yet clear.
As of the date of this prospectus supplement, we have not been
informed by any PRC governmental authority of any requirement that
we file for approval for this offering.
On August 17, 2021, the State Council promulgated the Regulations
on the Protection of the Security of Critical Information
Infrastructure, or the Regulations, which took effect on September
1, 2021. The Regulations supplement and specify the provisions on
the security of critical information infrastructure as stated in
the Cybersecurity Review Measures. The Regulations provide, among
others, that protection department of certain industry or sector
shall notify the operator of the critical information
infrastructure in time after the identification of certain critical
information infrastructure.
On August 20, 2021, the SCNPC promulgated the Personal Information
Protection Law of the PRC, or the Personal Information Protection
Law, which took effect on November 1, 2021. As the first systematic
and comprehensive law specifically for the protection of personal
information in the PRC, the Personal Information Protection Law
provides, among others, that (i) an individual’s consent shall be
obtained to use sensitive personal information, such as biometric
characteristics and individual location tracking, (ii) personal
information operators using sensitive personal information shall
notify individuals of the necessity of such use and impact on the
individual’s rights, and (iii) where personal information operators
reject an individual’s request to exercise his or her rights, the
individual may file a lawsuit with a People’s Court.
Given that the above mentioned newly promulgated laws, regulations
and policies were recently promulgated or issued, and have not yet
taken effect (as applicable), their interpretation, application and
enforcement are subject to substantial uncertainties.
We also face risks relating to our corporate structure. Investors
in our Class A Ordinary Shares are not purchasing equity interests
in the VIE domiciled in China under our control or in our PRC
subsidiaries but instead are purchasing equity interests in a
Cayman Islands holding company. You may never directly hold equity
interests in our PRC operating companies. If the PRC government
deems that our contractual arrangements with the consolidated VIEs
domiciled in China under our control do not comply with PRC
regulatory restrictions on foreign investment in the relevant
industries, or if these regulations or the interpretation of
existing regulations change or are interpreted differently in the
future, we could be subject to severe penalties or be forced to
relinquish our interests in those operations.
It is uncertain whether any new PRC laws or regulations relating to
variable interest entity structures will be adopted or if adopted,
what they would provide. PRC regulatory authorities could disallow
this structure, which would materially adversely affect our
operations and the value of our Class A Ordinary Shares, and could
cause the value of such securities to significantly decline or
become worthless.
Our VIE or the holding company may be subject to approval or
other requirement from PRC authorities in connection with this
offering, and, if required, we cannot assure you that we will be
able to obtain such approval or satisfy such requirement. If we
failed to obtain such approval or satisfy such requirement, we may
not able to continue listing on U.S. exchange, continue to offer
securities to investors, or materially affect the interest of the
investors and the value of our Class A Ordinary Shares may decrease
or become worthless.
We, our subsidiaries, or VIE are currently not required to obtain
permission or approval from the PRC authorities including CSRC or
Cyberspace Administration of China for the VIE’s operation, nor
have we, our subsidiaries, or VIE applied for or received any
denial for the VIE’s operation. However, recently, the General
Office of the Central Committee of the Communist Party of China and
the General Office of the State Council jointly issued the
“Opinions on Severely Cracking Down on Illegal Securities
Activities According to Law,” or the Opinions, which was made
available to the public on July 6, 2021. The Opinions emphasized
the need to strengthen the administration over illegal securities
activities, and the need to strengthen the supervision over
overseas listings by Chinese companies. Effective measures, such as
promoting the construction of relevant regulatory systems will be
taken to deal with the risks and incidents of China-concept
overseas listed companies, and cybersecurity and data privacy
protection requirements and similar matters. The Opinions and any
related implementing rules to be enacted may subject us to
compliance requirement in the future.
Given the current regulatory environment in the PRC, we are still
subject to the uncertainty of interpretation and enforcement of the
rules and regulations in the PRC, which can change quickly with
little advance notice, and any future actions of the PRC
authorities. It is uncertain when and whether the Company will be
required to obtain permission from the PRC government to list on
U.S. exchanges or enter into VIE Agreements (including
retroactively), and even if such permission is obtained, whether it
will be denied or rescinded. As a result, our operations could be
adversely affected, directly or indirectly, by existing or future
laws and regulations relating to our business or industry.
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.
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. The laws and regulations are sometimes vague
and may be subject to future changes, and their official
interpretation and enforcement may involve substantial uncertainty.
The effectiveness and interpretation of newly enacted laws or
regulations, including amendments to existing laws and regulations,
may be delayed, and our business may be affected if we rely on laws
and regulations which are subsequently adopted or interpreted in a
manner different from our understanding of these laws and
regulations. New laws and regulations that affect existing and
proposed future businesses may also be applied retroactively. We
cannot predict what effect the interpretation of existing or new
PRC laws or regulations may have on our business.
The PRC legal system is a civil law system based on written
statutes. Unlike the common law system, prior court decisions under
the civil law system may be cited for reference but have limited
precedential value. Since these laws and regulations are relatively
new and the PRC legal system continues to rapidly evolve, the
interpretations of many laws, regulations and rules are not always
uniform and the enforcement of these laws, regulations and rules
involves uncertainties.
In 1979, the PRC government began to promulgate a comprehensive
system of laws and regulations governing economic matters in
general. The overall effect of legislation over the past three
decades has significantly enhanced the protections afforded to
various forms of foreign investments in China. However, China has
not developed a fully integrated legal system, and recently enacted
laws and regulations may not sufficiently cover all aspects of
economic activities in China. In particular, the interpretation and
enforcement of these laws and regulations involve uncertainties.
Since PRC administrative and court authorities have significant
discretion in interpreting and implementing statutory provisions
and contractual terms, it may be difficult to evaluate the outcome
of administrative and court proceedings and the level of legal
protection we enjoy. These uncertainties may affect our judgment on
the relevance of legal requirements and our ability to enforce our
contractual rights or tort claims. In addition, the regulatory
uncertainties may be exploited through unmerited or frivolous legal
actions or threats in attempts to extract payments or benefits from
us.
Furthermore, the PRC legal system is based in part on government
policies and internal rules, some of which are not published on a
timely basis or at all and may have retroactive effect. As a
result, we may not be aware of our violation of any of these
policies and rules until sometime after the violation. 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. However, since PRC
administrative and court authorities have significant discretion in
interpreting and implementing statutory and contractual terms, it
may be more difficult to evaluate the outcome of administrative and
court proceedings and the level of legal protection we enjoy than
in more developed legal systems. Furthermore, the PRC legal system
is based in part on government policies and internal rules (some of
which are not published in a timely manner or at all) that may have
retroactive effect. As a result, we may not be aware of our
violation of these policies and rules until sometime after the
violation. Such uncertainties, including uncertainty over the scope
and effect of our contractual, property (including intellectual
property) and procedural rights, and any failure to respond to
changes in the regulatory environment in China could materially and
adversely affect our business and impede our ability to continue
our operations.
Recently, the General Office of the Central Committee of the
Communist Party of China and the General Office of the State
Council jointly issued the “Opinions on Severely Cracking Down on
Illegal Securities Activities According to Law,” or the Opinions,
which was made available to the public on July 6, 2021. The
Opinions emphasized the need to strengthen the administration over
illegal securities activities, and the need to strengthen the
supervision over overseas listings by Chinese companies. Effective
measures, such as promoting the construction of relevant regulatory
systems will be taken to deal with the risks and incidents of
China-concept overseas listed companies, and cybersecurity and data
privacy protection requirements and similar matters. The Opinions
and any related implementing rules to be enacted may subject us to
compliance requirement in the future.
China Securities Regulatory Commission and other Chinese
government agencies may exert more oversight and control over
offerings that are conducted overseas and foreign investment in
China-based issuers. As a result, we face uncertainty about future
actions by the PRC government that could significantly affect our
ability to offer or continue to offer securities to investors and
cause the value of our securities to significantly decline or be
worthless.
On July 6, 2021, the General Office of the Communist Party of China
Central Committee and the General Office of the State Council
jointly issued a document to crack down on illegal activities in
the securities market and promote the high-quality development of
the capital market, which, among other things, requires the
relevant governmental authorities to strengthen cross-border
oversight of law-enforcement and judicial cooperation, to enhance
supervision over China-based companies listed overseas, and to
establish and improve the system of extraterritorial application of
the PRC securities laws. Since this document is relatively new,
uncertainties still exist in relation to how soon legislative or
administrative regulation making bodies will respond and what
existing or new laws or regulations or detailed implementations and
interpretations will be modified or promulgated, if any, and the
potential impact such modified or new laws and regulations will
have on our future business combination with a company with major
operation in China.
Further, Chinese government continues to exert more oversight and
control over Chinese technology firms. On July 2, 2021, Chinese
cybersecurity regulator announced, that it had begun an
investigation of Didi Global Inc. (NYSE: DIDI) and two days later
ordered that the company’s application be removed from smartphone
application stores. On July 5, 2021, the Chinese cybersecurity
regulator launched the same investigation on two other Internet
platforms, China’s Full Truck Alliance of Full Truck Alliance Co.
Ltd. (NYSE: YMM) and Boss of KANZHUN LIMITED (Nasdaq: BZ).
Therefore, China Securities Regulatory Commission and other Chinese
government agencies may exert more oversight and control over
offerings that are conducted overseas and foreign investment in
China-based issuers, especially those in the technology filed. As a
result, we face uncertainty about future actions by the PRC
government that could significantly affect our ability to offer or
continue to offer securities to investors and cause the value of
our Class A Ordinary Shares to significantly decline or be
worthless.
The Cybersecurity Law, which was adopted by the National People’s
Congress on November 7, 2016 and came into force on
June 1, 2017, and the Cybersecurity Review Measures, or the
“Review Measures,” which were promulgated on April 13, 2020,
provide that personal information and important data collected and
generated by a critical information infrastructure operator in the
course of its operations in China must be stored in China, and if a
critical information infrastructure operator purchases internet
products and services that affect or may affect national security,
it should be subject to cybersecurity review by the CAC. In
addition, a cybersecurity review is required where critical
information infrastructure operators, or the “CIIOs,” purchase
network-related products and services, which products and services
affect or may affect national security. Due to the lack of further
interpretations, the exact scope of what constitute a “CIIO”
remains unclear. 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. The Data Security Law requires
that data shall not be collected by theft or other illegal means,
and it also provides that a data classification and hierarchical
protection system. The data classification and hierarchical
protection system protects data according to its importance in
economic and social development, and the damages it may cause to
national security, public interests, or the legitimate rights and
interests of individuals and organizations if the data is
falsified, damaged, disclosed, illegally obtained or illegally
used, which protection system is expected to be built by the state
for data security in the near future. In addition, the Office of
the Central Cyberspace Affairs Commission and the Office of
Cybersecurity Review under the CAC, published the Cybersecurity
Review Measures (Revised Draft for Comments), or the “Review
Measures Draft,” on July 10, 2021, which provides that, aside
from CIIOs that intend to purchase internet products and services,
data processing operators engaging in data processing activities
that affect or may affect national security must be subject to the
cybersecurity review by the Cybersecurity Review Office. According
to the Review Measures Draft, a cybersecurity review is conducted
by the CAC, to assess potential national security risks that may be
brought about by any procurement, data processing, or overseas
listing. The Review Measures Draft further requires that critical
information infrastructure operators and services and data
processing operators that possess personal data of at least one (1)
million users must apply for a review by the Cybersecurity Review
Office of PRC, if they plan to conduct listings in foreign
countries. The deadline for public comments to the Review Measures
Draft was July 25, 2021. While the Review Measures Draft has
been released for consultation purpose, there is uncertainty about
its final content, its adoption timeline or effective date, its
final interpretation and implementation, and various other
implications. It also remains uncertain whether any future
regulatory changes would impose additional restrictions on
companies like us. As of the date of this prospectus, we have not
been subject to any penalties, fines, suspensions, investigations
from any competent authorities for violation of the regulations or
policies that have been issued by the CAC to date. If the Review
Measures Draft is enacted as proposed, we believe we may not be
subject to the cybersecurity review by the CAC for this offering,
given that: (i) we do not maintain, nor do we intend to maintain in
the future, personally identifiable health information of patients
and healthcare experts in China; and (ii) data processed in
our business is less likely to have a bearing on national security,
thus it may not be classified as core or important data by the
authorities. However, there remains uncertainty as to how the
Review Measures Draft will be interpreted or implemented and
whether the PRC regulatory agencies, including the CAC, may adopt
new laws, regulations, rules, or detailed implementation and
interpretation related to the Review Measures Draft. If any such
new laws, regulations, rules, or implementation and interpretation
come into effect, we expect to take all reasonable measures and
actions to comply. We cannot assure you that PRC regulatory
agencies, including the CAC, would take the same view as we do, and
there is no assurance that we can fully or timely comply with such
laws should they be deemed applicable to our operations. We may be
required to suspend new user registration in China or experience
other disruptions to our operations should we be required to have a
cybersecurity review by the CAC. Any cybersecurity review could
also result in negative publicity with respect to our Company and
diversion of our managerial and financial resources. 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.
Our VIE or the holding company may be subject to approval or
other requirement from PRC authorities in connection with this
offering, and, if required, we cannot assure you that we will be
able to obtain such approval or satisfy such requirement. If we
failed to obtain such approval or satisfy such requirement, we may
not able to continue listing on U.S. exchange, continue to offer
securities to investors, or materially affect the interest of the
investors and the value of our Class A Ordinary Shares may decrease
or become worthless.
We, our subsidiaries, or Zhongchao Shanghai are currently not
required to obtain permission or approval from the PRC authorities
including CSRC or Cyberspace Administration of China for Zhongchao
Shanghai’s operation, nor have we, our subsidiaries, or VIE applied
for or received any denial for Zhongchao Shanghai’s operation.
However, recently, the Opinions emphasized the need to strengthen
the administration over illegal securities activities, and the need
to strengthen the supervision over overseas listings by Chinese
companies. Effective measures, such as promoting the construction
of relevant regulatory systems will be taken to deal with the risks
and incidents of China-concept overseas listed companies, and
cybersecurity and data privacy protection requirements and similar
matters.
Given the current regulatory environment in the PRC, we are still
subject to the uncertainty of interpretation and enforcement of the
rules and regulations in the PRC, which can change quickly with
little advance notice, and any future actions of the PRC
authorities. It is uncertain when and whether the Company will be
required to obtain permission from the PRC government to list on
U.S. exchanges or enter into VIE Agreements (including
retroactively), and even if such permission is obtained, whether it
will be denied or rescinded. As a result, our operations could be
adversely affected, directly or indirectly, by existing or future
laws and regulations relating to our business or industry.
Our independent registered public accounting firm’s audit
documentation related to their audit reports included in this
prospectus include audit documentation located in China. PCAOB may
not be able to inspect audit documentation located in China and, as
such, you may be deprived of the benefits of such inspection which
could result in limitations or restrictions to our access to the
U.S. capital markets. Furthermore, trading in our securities may be
prohibited under the Holding Foreign Companies Accountable Act or
the Accelerating Holding Foreign Companies Accountable Act if the
SEC subsequently determines our audit work is performed by auditors
that the PCAOB is unable to inspect or investigate completely, and
as a result, U.S. national securities exchanges, such as the
Nasdaq, may determine to delist our securities. Furthermore, on
June 22, 2021, the U.S. Senate passed the Accelerating Holding
Foreign Companies Accountable Act, which, if enacted, would amend
the HFCA Act and require the SEC to prohibit an issuer’s securities
from trading on any U.S. stock exchanges if its auditor is not
subject to PCAOB inspections for two consecutive years instead of
three.
Our independent registered public accounting firm issued an audit
opinion on the financial statements incorporated by reference in
this prospectus filed with the SEC. As an auditor of companies that
are traded publicly in the United States and a firm registered with
the PCAOB, our auditor is required by the laws of the United States
to undergo regular inspections by the PCAOB. Our auditor is
headquartered in Manhattan, New York, and has been inspected by the
PCAOB on a regular basis with the last inspection in 2018 and an
ongoing inspection that started in November 2020. However, recent
developments with respect to audits of companies of which the major
operations are in China, such as us, create uncertainty about the
ability of our auditor to fully cooperate with the PCAOB’s request
for audit work papers without the approval of the Chinese
authorities. As a result, our investors may be deprived of the
benefits of PCAOB’s oversight of our auditors through such
inspections.
Inspections of other auditors conducted by the PCAOB outside China
have at times identified deficiencies in those auditors’ audit
procedures and quality control procedures, which may be addressed
as part of the inspection process to improve future audit quality.
The PCAOB is currently unable to conduct inspections of audit firms
located in China and Hong Kong. They are currently able to conduct
inspections of U.S. audit firms where audit work papers are located
in China however PCAOB requests for work papers are subject to
approval by Chinese authorities. The audit work papers for the
Company are located in China.
In addition, as part of a continued regulatory focus in the United
States on access to audit and other information currently protected
by national law, in particular China’s, in June 2019, a bipartisan
group of lawmakers introduced bills in both houses of the U.S.
Congress which, if passed, would require the SEC to maintain a list
of issuers for which PCAOB is not able to inspect or investigate
the audit work performed by a foreign public accounting firm
completely. The proposed Ensuring Quality Information and
Transparency for Abroad-Based Listings on our Exchanges
(“EQUITABLE”) Act prescribes increased disclosure requirements for
these issuers and, beginning in 2025, the delisting from U.S.
national securities exchanges such as the Nasdaq of issuers
included on the SEC’s list for three consecutive years. It is
unclear if this proposed legislation will be enacted. Furthermore,
there have been recent deliberations within the U.S. government
regarding potentially limiting or restricting China-based companies
from accessing U.S. capital markets. On May 20, 2020, the U.S.
Senate passed the Holding Foreign Companies Accountable Act (the
“HFCA Act”), which includes requirements for the SEC to identify
issuers whose audit work is performed by auditors that the PCAOB is
unable to inspect or investigate completely because of a
restriction imposed by a non-U.S. authority in the
auditor’s local jurisdiction. The U.S. House of Representatives
passed the HFCA Act on December 2, 2020, and the HFCA Act was
signed into law on December 18, 2020. Additionally, in July
2020, the U.S. President’s Working Group on Financial Markets
issued recommendations for actions that can be taken by the
executive branch, the SEC, the PCAOB or other federal agencies and
department with respect to Chinese companies listed on U.S. stock
exchanges and their audit firms, in an effort to protect investors
in the United States. In response, on November 23, 2020, the
SEC issued guidance highlighting certain risks (and their
implications to U.S. investors) associated with investments in
China-based issuers and summarizing enhanced disclosures the SEC
recommends China-based issuers make regarding such risks. On
March 24, 2021, the SEC adopted interim final rules relating
to the implementation of certain disclosure and documentation
requirements of the HFCA Act. We will be required to comply with
these rules if the SEC identifies us as having
a “non-inspection” year (as defined in the interim final
rules) under a process to be subsequently established by the SEC.
The SEC is assessing how to implement other requirements of the
HFCA Act, including the listing and trading prohibition
requirements described above. Under the HFCA Act, our securities
may be prohibited from trading on the Nasdaq or other U.S. stock
exchanges if our auditor is not inspected by the PCAOB for three
consecutive years, and this ultimately could result in our Class A
Ordinary Shares being delisted. Furthermore, on June 22, 2021, the
U.S. Senate passed the Accelerating Holding Foreign Companies
Accountable Act, which, if enacted, would amend the HFCA Act and
require the SEC to prohibit an issuer’s securities from trading on
any U.S. stock exchanges if its auditor is not subject to PCAOB
inspections for two consecutive years instead of three. On
September 22, 2021, the PCAOB adopted a final rule implementing the
HFCAA, which provides a framework for the PCAOB to use when
determining, as contemplated under the HFCAA, whether the Board is
unable to inspect or investigate completely registered public
accounting firms located in a foreign jurisdiction because of a
position taken by one or more authorities in that jurisdiction.
While we understand that there has been dialogue among the China
Securities Regulatory Commission (the “CSRC”), the SEC and the
PCAOB regarding the inspection of PCAOB-registered accounting firms
in China, there can be no assurance that we will be able to comply
with requirements imposed by U.S. regulators. Delisting of our
Class A Ordinary Shares would force holders of our Class A Ordinary
Shares to sell their Class A Ordinary Shares. The market price of
our Class A Ordinary Shares could be adversely affected as a result
of anticipated negative impacts of these executive or legislative
actions upon, as well as negative investor sentiment towards,
companies with significant operations in China that are listed in
the United States, regardless of whether these executive or
legislative actions are implemented and regardless of our actual
operating performance.
Should the PCAOB be unable to fully conduct inspections of our
auditors’ work papers in China, it will make it more difficult to
evaluate the effectiveness of our auditor’s audit procedures or
quality control procedures. Investors may consequently lose
confidence in our reported financial information and procedures and
the quality of our financial statements, which would adversely
affect the market price of our Class A Ordinary Shares.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of any securities
offered under this prospectus supplement and the accompanying
prospectus for general corporate purposes. General corporate
purposes may include but not limited to costs for research and
development, sales and marketing activities, funding for the hiring
of additional personnel, capital expenditures and the costs of
operating as a public company. We may temporarily invest the net
proceeds in a variety of capital preservation instruments,
including investment grade instruments, certificates of deposit or
direct or guaranteed obligations of the U.S. government, or may
hold such proceeds as cash, until they are used for their stated
purpose. We have not determined the amount of net proceeds to be
used specifically for such purposes. As a result, management will
retain broad discretion over the allocation of net proceeds.
DILUTION
Dilution in net tangible book value per share to new investors is
the amount by which the offering price paid by the purchasers of
the Class A Ordinary Shares sold in the offering exceeds the pro
forma net tangible book value per Class A Ordinary Shares after the
offering. Net tangible book value per share is determined at any
date by subtracting our total liabilities from the total book value
of our tangible assets and dividing the difference by the number of
Class A Ordinary Shares deemed to be outstanding at that date.
The net tangible book value of our Class A Ordinary Shares as of
June 30, 2021 was approximately $33.1 million, or $1.7024 per
share, based on 19,435,423 Class A Ordinary Shares outstanding as
of that date.
After giving effect to the sale of our Class A Ordinary Shares
during the term of the sales agreement, with US Tiger, dated
December 17, 2021, in the aggregate amount of $10.4 million at
an assumed offering price of $1.79 per share, the last reported
sale price of our Class A Ordinary Shares on the Nasdaq on December
16, 2021, and before deducting commissions of the offering proceeds
and estimated aggregate offering expenses payable by us, our net
tangible book value as of June 30, 2021 would have been
approximately $43 million, or $1.7047 per Class A Ordinary
Shares. This represents an immediate increase in the net tangible
book value of approximately $0.0023 per share to our existing
shareholders and an immediate dilution in net tangible book value
of $0.0853 per share to new investors. The following table
illustrates this per share dilution:
The following table illustrates this dilution on a per share
basis:
Assumed public offering price per share |
|
$ |
1.79 |
|
Net tangible
book value per share as of June 30, 2021 |
|
$ |
1.7024 |
|
Increase in net tangible book value per share attributable to this
offering |
|
$ |
0.0023 |
|
As adjusted net tangible book value per share as of June 30, 2021,
after giving effect to this offering |
|
$ |
1.7047 |
|
|
|
|
|
|
Dilution per share to new investors purchasing shares in this
offering |
|
$ |
0.0853 |
|
The shares subject to the sales agreement are being sold from time
to time at various prices. An increase of $1.00 per share in the
price at which the shares are sold from the assumed offering price
per share shown in the table above, assuming all of our Class A
Ordinary Shares in the aggregate amount of $10.4 million
during the remaining term of the sales agreement is sold at that
price, would increase our adjusted net tangible book value per
share after the offering to $1.858 per share and would increase the
dilution in net tangible book value per share to new investors in
this offering to $0.932 per share, before deducting commissions and
estimated aggregate offering expenses payable by us. A decrease of
$1.00 per share in the price at which the shares are sold from the
assumed offering price per share shown in the table above, assuming
all of our Class A Ordinary Shares in the aggregate amount of
$10.4 million during the term of the sales agreement is sold
at that price, would instead dilute our adjusted net tangible book
value per share after the offering to $1.3201 per share and would
increase in net tangible book value per share to new investors in
this offering to $0.5301 per share, after deducting commissions and
estimated aggregate offering expenses payable by us. This
information is supplied for illustrative purposes only.
The table above is based on 19,435,423 Class A Ordinary Shares
outstanding as of June 30, 2021
PLAN OF
DISTRIBUTION
We have entered into the sales agreement with US Tiger under which
we may issue and sell Class A Ordinary Shares from time to time up
to $10,400,000 to or through US Tiger, acting as our sales agent.
The sales of our Class A Ordinary Shares, if any, under this
prospectus supplement will be made at market prices by any method
deemed to be an “at the market offering” as defined in Rule
415(a)(4) under the Securities Act, including sales made directly
on The NASDAQ Capital Market, on any other existing trading market
for our Ordinary Shares or to or through a market maker.
Each time that we wish to issue and sell Class A Ordinary Shares
under the sales agreement, we will provide US Tiger with a
placement notice describing the amount of shares to be sold, the
time period during which sales are requested to be made, any
limitation on the amount of Class A Ordinary Shares that may be
sold in any single day, any minimum price below which sales may not
be made or any minimum price requested for sales in a given time
period and any other instructions relevant to such requested sales.
Upon receipt of a placement notice, US Tiger acting as our sales
agent, will use commercially reasonable efforts, consistent with
its normal trading and sales practices and applicable state and
federal laws, rules and regulations and the rules of The NASDAQ
Capital Market, to sell shares of our Class A Ordinary Shares under
the terms and subject to the conditions of the placement notice and
the sales agreement. We or US Tiger may suspend the offering of
Ordinary Shares pursuant to a placement notice upon notice and
subject to other conditions.
Settlement for sales of Ordinary Shares, unless the parties agree
otherwise, will occur on the second trading day following the date
on which any sales are made in return for payment of the net
proceeds to us. There are no arrangements to place any of the
proceeds of this offering in an escrow, trust or similar account.
Sales of our Class A Ordinary Shares as contemplated in this
prospectus supplement will be settled through the facilities of The
Depository Trust Company or by such other means as we and US Tiger
may agree upon.
We will pay US Tiger commissions for its services in acting as our
sales agent in the sale of our Class A Ordinary Shares pursuant to
the sales agreement. The compensation to the US Tiger for sales of
Class A ordinary shares under the sales agreement will be at
maximum commission rates ranging from 1.0% to 3.0% of the gross
sales price per share, depending upon the aggregate sales proceeds
raised by the sales agent under the sales agreement. We have also
agreed to reimburse US Tiger for its reasonable and documented
out-of-pocket expenses (including legal fees) in an amount not to
exceed $50,000, and for the reasonable and documented out-of-pocket
expenses of US Tiger’s legal counsel; provided that our
reimbursement obligation will not exceed $7,500 for each
“bring-down” due diligence investigation performed by US Tiger.
We estimate that the total expenses for this offering, excluding
compensation payable to US Tiger and certain expenses reimbursable
to US Tiger under the terms of the sales agreement, will be
approximately $450,000. The remaining sales proceeds, after
deducting any expenses payable by us and any transaction fees
imposed by any governmental, regulatory, or self-regulatory
organization in connection with the sales, will equal our net
proceeds for the sale of such Class A Ordinary Shares.
Because there are no minimum sale requirements as a condition to
this offering, the actual total public offering price, commissions
and net proceeds to us, if any, are not determinable at this time.
The actual dollar amount and number of Class A Ordinary Shares we
sell through this prospectus supplement will be dependent, among
other things, on market conditions and our capital raising
requirements.
In connection with the sale of Ordinary Shares on our behalf, US
Tiger will be deemed to be an “underwriter” within the meaning of
the Securities Act, and the compensation of US Tiger will be deemed
to be underwriting commissions or discounts. We have agreed to
provide indemnification and contribution to US Tiger against
certain civil liabilities, including liabilities under the
Securities Act.
US Tiger will not engage in any market making activities involving
our Class A Ordinary Shares while the offering is ongoing under
this prospectus supplement if such activity would be prohibited
under Regulation M or other anti-manipulation rules under the
Securities Act. As our sales agent, US Tiger will not engage
in any transactions that stabilizes our Class A Ordinary
Shares.
The offering pursuant to the sales agreement will terminate upon
the earlier of (i) the sale of all Class A Ordinary Shares subject
to the sales agreement and (ii) termination of the sales agreement
as permitted therein. We may terminate the sales agreement in our
sole discretion at any time by giving 10 days’ prior notice to US
Tiger. US Tiger may terminate the sales agreement under the
circumstances specified in the sales agreement and in its sole
discretion at any time by giving 10 days’ prior notice to us.
US Tiger and/or its affiliates have provided, and may in the future
provide, various investment banking and other financial services
for us, for which services they have received and may in the future
receive customary fees.
This prospectus supplement in electronic format may be made
available on a website maintained by US Tiger, and US Tiger may
distribute this prospectus supplement electronically.
LEGAL MATTERS
Certain legal matters governed by the laws of the Cayman Islands
with respect to the validity of the Class A Ordinary Shares offered
by this prospectus will be passed upon by Ogier, Cayman Islands.
Certain legal matters governed by the laws of New York will be
passed upon for us by Hunter Taubman Fischer & Li, LLC, New
York, New York. Certain legal matters governed by the laws of the
PRC will be passed upon for us by Zong Heng Law Firm. US Tiger is
being represented in connection with this offering by Winston &
Strawn LLP.
EXPERTS
The consolidated financial statements as of December 31, 2020 and
2019 and for each of three years in the period ended December 31,
2020 incorporated in this prospectus supplement and the
accompanying prospectus by reference from Zhongchao Inc. Annual
Report on Form 20-F for the year ended December 31, 2020
have been audited by Marcum Bernstein & Pinchuk LLP, an
independent registered public accounting firm, as stated in their
report, which is incorporated herein by reference. Such financial
statements have been so incorporated in reliance upon the report of
such firm given upon their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND
MORE INFORMATION
This prospectus supplement and the accompanying prospectus are a
part of a registration statement that we have filed with the SEC.
Certain information in the registration statement has been omitted
from this prospectus supplement and the accompanying prospectus in
accordance with the rules of the SEC. For further information, we
refer you to the registration statement and the exhibits and
schedules filed as a part of the registration statement. Statements
contained in this prospectus supplement and the accompanying
prospectus or incorporated by reference concerning the contents of
any contract or any other document are not necessarily complete. If
a contract or document has been filed or incorporated by reference
as an exhibit to the registration statement, we refer you to the
copy of the contract or document that has been filed. Each
statement in this prospectus supplement and the accompanying
prospectus or incorporated by reference relating to a contract or
document filed as an exhibit is qualified in all respects by the
filed exhibit. The SEC maintains a web site (http://www.sec.gov)
that contains reports, proxy and information statements and other
information regarding issuers like us that file electronically with
the SEC.
We are subject to the reporting and information requirements of the
Exchange Act of 1934, as amended, and, as a result, we file
periodic reports, proxy statements and other information with the
SEC. These periodic reports, proxy statements and other information
will be available for review at the web site of the SEC referred to
above.
INCORPORATION BY
REFERENCE
The SEC allows us to incorporate by reference the information and
reports we file with it, which means that we can disclose important
information to you by referring you to these documents. The
information incorporated by reference is an important part of this
prospectus supplement and the accompanying prospectus, and
information that we file later with the SEC will automatically
update and supersede the information already incorporated by
reference. We are incorporating by reference the documents listed
below, which we have already filed with the SEC, and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, of 1934, as amended, including all
filings made after the date of the filing of this registration
statement and prior to the effectiveness of this registration
statement, except as to any portion of any future report or
document that is not deemed filed under such provisions, after the
date of this prospectus supplement and prior to the termination of
this offering:
|
● |
Annual Report on Form
20-F, as amended, for the year ended December 31,
2020; |
|
● |
The information specifically
incorporated by reference into our Annual Report on
Form 20-F/A for the year ended December 31, 2020 from our
definitive proxy statement on Schedule 14A (other than information
furnished rather than filed), which was filed with the SEC on June
15, 2021; |
|
● |
The description of our Class A
Ordinary Shares contained in our registration statement on
Form 8-A filed with the SEC on February 13, 2020, including any
amendments or reports filed for the purposes of updating this
description. |
All documents that we file with the SEC pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act (and in the case of a
Current Report on Form 6-K, so long as they state that they are
incorporated by reference into this prospectus, and other than
Current Reports on Form 6-K, or portions thereof, furnished under
Form 6-K) (i) after the initial filing date of the registration
statement of which this prospectus forms a part and prior to the
effectiveness of such registration statement and (ii) after the
date of this prospectus and prior to the termination of the
offering shall be deemed to be incorporated by reference in this
prospectus from the date of filing of the documents, unless we
specifically provide otherwise. Information that we file with the
SEC will automatically update and may replace information
previously filed with the SEC. To the extent that any information
contained in any Current Report on Form 6-K or any exhibit thereto,
was or is furnished to, rather than filed with the SEC, such
information or exhibit is specifically not incorporated by
reference.
Upon request, we will provide, without charge, to each person who
receives this prospectus, a copy of any or all of the documents
incorporated by reference (other than exhibits to the documents
that are not specifically incorporated by reference in the
documents). Please direct written requests for copies to us at 841
Yan’an Middle Road, Jing’An District, Shanghai, China 200040,
Attention: Weiguang Yang, 021-32205987.
The information in this prospectus is
not complete and may be changed. We may not sell these securities
until the registration statement filed with the Securities and
Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy
these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED MAY 17,
2021
PROSPECTUS

Zhongchao Inc.
$45,000,000
Ordinary Shares, Preferred Shares, Debt Securities
Warrants, Units and Rights
We may, from time to time in one or more offerings, offer and sell
up to $45,000,000 in the aggregate of Ordinary Shares, preferred
shares, warrants to purchase Ordinary Shares or preferred shares,
debt securities, rights or any combination of the foregoing, either
individually or as units comprised of one or more of the other
securities. The prospectus supplement for each offering of
securities will describe in detail the plan of distribution for
that offering. For general information about the distribution of
securities offered, please see “Plan of Distribution” in this
prospectus.
This prospectus provides a general description of the securities we
may offer. We will provide the specific terms of the securities
offered in one or more supplements to this prospectus. We may also
authorize one or more free writing prospectuses to be provided to
you in connection with these offerings. The prospectus supplement
and any related free writing prospectus may add, update or change
information contained in this prospectus. You should read carefully
this prospectus, the applicable prospectus supplement and any
related free writing prospectus, as well as the documents
incorporated or deemed to be incorporated by reference, before you
invest in any of our securities. This prospectus may not be
used to offer or sell any securities unless accompanied by the
applicable prospectus supplement.
Pursuant to General Instruction I.B.5. of Form F-3, in no event
will we sell the securities covered hereby in a public primary
offering with a value exceeding more than one-third of the
aggregate market value of our Ordinary Shares in any 12-month
period so long as the aggregate market value of our outstanding
Ordinary Shares held by non-affiliates remains below $75,000,000.
The aggregate market value of our outstanding voting and non-voting
common equity held by non-affiliates is approximately $42.97
million based on the closing price of $2.66 per ordinary share on
March 17, 2021 and 16,154,819 ordinary shares held by
non-affiliates. During the 12 calendar months prior to and
including the date of this prospectus, we have not offered or sold
any securities pursuant to General Instruction I.B.5 of Form
F-3.
Our Ordinary Shares are listed on the Nasdaq Capital Market under
the symbol “ZCMD.” The applicable prospectus supplement will
contain information, where applicable, as to other listings, if
any, on the Nasdaq Capital Market or other securities exchange of
the securities covered by the prospectus supplement.
Investing in our securities involves a high degree of risk. See
“Risk Factors” on page 11 of this prospectus and in the
documents incorporated by reference in this prospectus, as updated
in the applicable prospectus supplement, any related free writing
prospectus and other future filings we make with the Securities and
Exchange Commission that are incorporated by reference into this
prospectus, for a discussion of the factors you should consider
carefully before deciding to purchase our securities.
We may sell these securities directly to investors, through agents
designated from time to time or to or through underwriters or
dealers. For additional information on the methods of sale, you
should refer to the section entitled “Plan of Distribution” in this
prospectus. If any underwriters are involved in the sale of any
securities with respect to which this prospectus is being
delivered, the names of such underwriters and any applicable
commissions or discounts will be set forth in a prospectus
supplement. The price to the public of such securities and the net
proceeds we expect to receive from such sale will also be set forth
in a prospectus supplement.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is May 17, 2021.
TABLE OF CONTENTS
ABOUT THIS
PROSPECTUS
This prospectus is part of a registration statement that we filed
with the Securities and Exchange Commission, or the SEC, under the
Securities Act of 1933, as amended, or the Securities Act, using a
“shelf” registration process. Under this shelf registration
process, we may from time to time sell Ordinary Shares, preferred
shares, warrants to purchase Ordinary Shares or preferred shares,
debt securities or any combination of the foregoing, either
individually or as units comprised of one or more of the other
securities, in one or more offerings up to a total dollar amount of
$45,000,000. We have provided to you in this prospectus a general
description of the securities we may offer. Each time we sell
securities under this shelf registration, we will, to the extent
required by law, provide a prospectus supplement that will contain
specific information about the terms of that offering. We may also
authorize one or more free writing prospectuses to be provided to
you that may contain material information relating to these
offerings. The prospectus supplement and any related free writing
prospectus that we may authorize to be provided to you may also
add, update or change information contained in this prospectus or
in any documents that we have incorporated by reference into this
prospectus. To the extent there is a conflict between the
information contained in this prospectus and the prospectus
supplement or any related free writing prospectus, you should rely
on the information in the prospectus supplement or the related free
writing prospectus; provided that if any statement in one of these
documents is inconsistent with a statement in another document
having a later date – for example, a document filed after the date
of this prospectus and incorporated by reference into this
prospectus or any prospectus supplement or any related free writing
prospectus – the statement in the document having the later date
modifies or supersedes the earlier statement.
We have not authorized any dealer, agent or other person to give
any information or to make any representation other than those
contained or incorporated by reference in this prospectus and any
accompanying prospectus supplement, or any related free writing
prospectus that we may authorize to be provided to you. You must
not rely upon any information or representation not contained or
incorporated by reference in this prospectus or an accompanying
prospectus supplement, or any related free writing prospectus that
we may authorize to be provided to you. This prospectus and the
accompanying prospectus supplement, if any, do not constitute an
offer to sell or the solicitation of an offer to buy any securities
other than the registered securities to which they relate, nor do
this prospectus and the accompanying prospectus supplement
constitute an offer to sell or the solicitation of an offer to buy
securities in any jurisdiction to any person to whom it is unlawful
to make such offer or solicitation in such jurisdiction. You should
not assume that the information contained in this prospectus, any
applicable prospectus supplement or any related free writing
prospectus is accurate on any date subsequent to the date set forth
on the front of the document or that any information we have
incorporated by reference is correct on any date subsequent to the
date of the document incorporated by reference (as our business,
financial condition, results of operations and prospects may have
changed since that date), even though this prospectus, any
applicable prospectus supplement or any related free writing
prospectus is delivered or securities are sold on a later date.
As permitted by SEC rules and regulations, the registration
statement of which this prospectus forms a part includes additional
information not contained in this prospectus. You may read the
registration statement and the other reports we file with the SEC
at its website or at its offices described below under “Where You
Can Find More Information.”
Unless the context otherwise requires, all references in this
prospectus to “Zhongchao,” “we,” “us,” “our,” “the Company,” “the
“Registrant” or similar words refer to Zhongchao Inc., together
with our subsidiaries.
COMMONLY USED DEFINED
TERMS
|
● |
All references to “RMB,”
“yuan” and “Renminbi” are to the legal currency of China, all
references to “HKD” is to the legal currency of Hong Kong, and all
references to “USD,” and “U.S. dollars” are to the legal currency
of the United States; |
|
● |
“China” and “PRC” refer
to the People’s Republic of China, excluding, for the purposes of
this prospectus only, Macau, Taiwan and Hong Kong; |
|
● |
“Class A Ordinary
Shares” refers to our Class A ordinary shares, $0.0001 par value
per share; |
|
● |
“Class B Ordinary
Shares” refers to our Class B ordinary shares, $0.0001 par value
per share; |
|
● |
“Controlling
Shareholder” refers to Mr. Weiguang Yang, the CEO of the
Company; |
|
● |
Depending on the
context, the terms “we,” “us,” “our company,” “our”, “Zhongchao”
and “Zhongchao Cayman” refer to Zhongchao Inc., a Cayman Islands
company, and its subsidiaries and affiliated companies; |
|
● |
“Horgos Zhongchao
Medical” refers to Horgos Zhongchao Medical Technology Co., Ltd., a
PRC company, which cancelled its registration on May 11,
2020; |
|
● |
“Horgos Zhongchao
Zhongxing” refers to Horgos Zhongchao Zhongxing Medical Technology
Co., Ltd., a PRC company, which cancelled its registration on
September 16, 2020; |
|
● |
“mobile MAUs” are the
number of unique IP address that various mobile devices having
access to our MDMOOC mobile app or Sunshine Health Forums from
mobile end at least once during a month. The numbers of our mobile
MAUs are calculated using internal company data that has not been
independently verified, and we treat each distinguishable device IP
address as a separate user for purposes of calculating mobile MAUs,
although inaccuracy may result from the possibility that one mobile
device may have more than one IP addresses; |
|
● |
“monthly UVs” of MDMOOC
website, MDMOOC.org, or the website of our Sunshine Health Forums,
ygjkclass.com, are to the number of unique IP address that various
internet browsers apply to access our websites, from either PC end
or mobile end, at least once during a month. The numbers of our
monthly UVs of our websites are calculated using internal
company data that has not been independently verified, and we treat
each distinguishable IP address as a separate user for purposes of
calculating monthly UVs, although inaccuracy may result from the
possibility that some individuals may have more than one IP address
and/or share the same IP address with other individuals to access
our platform; |
|
● |
“NFP(s)” refers to
not-for-profit organizations; |
|
● |
“SAIC” refers to State
Administration for Industry and Commerce in China and currently
known as State Administration for Market Regulation; |
|
● |
“Shanghai Huijing”
refers to Shanghai Huijing Information Technology Co., Ltd., a PRC
company; |
|
● |
“Shanghai Jingyi” or
“Shanghai Zhongxin” refers to Shanghai Zhongxin Medical Technology
Co., Ltd, a PRC company, which was formerly known as Shanghai
Jingyi, or Shanghai Jingyi Medical Technology Co., Ltd., a PRC
company and changed to its current name as Shanghai Zhongxin on
November 16, 2020. |
|
● |
“Shanghai Maidemu”
refers to Shanghai Maidemu Cultural Communication Corp., a PRC
company; |
|
● |
“Shanghai Xingzhong”
refers to Shanghai Xingzhong Investment Management LP, a PRC
company; |
|
● |
“Shanghai Zhongxun”
refers to Shanghai Zhongxun Medical Technology Co., Ltd., a PRC
company; |
|
● |
“Zhongchao BVI” refers
to Zhongchao Group Inc., a British Virgin Island
company; |
|
● |
“Zhongchao HK” refers to
Zhongchao Group Limited, a Hong Kong company; |
|
● |
“Zhongchao Shanghai”
refers to Zhongchao Medical Technology (Shanghai) Co., Ltd., a PRC
company; |
|
● |
“Zhongchao WFOE” refers
to Beijing Zhongchao Zhongxing Technology Limited, a PRC
company; |
|
● |
“Beijing Boya” refers to
Beijing Zhongchao Boya Medical Technology Co., Ltd., a PRC
company; |
|
● |
“Liaoning Zhixun” refers
to Zhixun Internet Hospital (Liaoning) Co., Ltd., a PRC
company. |
NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus and our SEC filings that are incorporated by
reference into this prospectus contain or incorporate by reference
forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. All statements
other than statements of historical fact are “forward-looking
statements,” including any projections of earnings, revenue or
other financial items, any statements of the plans, strategies and
objectives of management for future operations, any statements
concerning proposed new projects or other developments, any
statements regarding future economic conditions or performance, any
statements of management’s beliefs, goals, strategies, intentions
and objectives, and any statements of assumptions underlying any of
the foregoing. The words “believe,” “anticipate,” “estimate,”
“plan,” “expect,” “intend,” “may,” “could,” “should,” “potential,”
“likely,” “projects,” “continue,” “will,” and “would” and similar
expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain these
identifying words. Forward-looking statements reflect our current
views with respect to future events, are based on assumptions and
are subject to risks and uncertainties. We cannot guarantee that we
actually will achieve the plans, intentions or expectations
expressed in our forward-looking statements and you should not
place undue reliance on these statements. There are a number of
important factors that could cause our actual results to differ
materially from those indicated or implied by forward-looking
statements. These important factors include those discussed under
the heading “Risk Factors” contained or incorporated by reference
in this prospectus and in the applicable prospectus supplement and
any free writing prospectus we may authorize for use in connection
with a specific offering. These factors and the other cautionary
statements made in this prospectus should be read as being
applicable to all related forward-looking statements whenever they
appear in this prospectus. Except as required by law, we undertake
no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or
otherwise.
OUR BUSINESS
History and Development of the Company
Our Corporate History and Structure
We are a holding company incorporated on April 16, 2019, under the
laws of the Cayman Islands, or Zhongchao Cayman. We have no
substantive operations other than holding all of the issued and
outstanding shares of Zhongchao Group Inc., or Zhongchao BVI,
established under the laws of the British Virgin Islands on April
23, 2019.
Zhongchao BVI is also a holding company holding all of the
outstanding equity of Zhongchao Group Limited, or Zhongchao HK,
which was established in Hong Kong on May 14, 2019. Zhongchao HK is
also a holding company holding all of the outstanding equity of
Beijing Zhongchao Zhongxing Technology Limited, or Zhongchao WFOE,
which was established on May 29, 2019 under the laws of the
PRC.
We conduct our business through our variable interest entity, or
VIE, Zhongchao Medical Technology (Shanghai) Corp., or Zhongchao
Shanghai, a PRC company, and through its wholly owned subsidiaries,
including Shanghai Maidemu Cultural Communication Corp., or
Shanghai Maidemu, Shanghai Zhongxun Medical Technology Co., Ltd.,
or Shanghai Zhongxun, Horgos Zhongchao Zhongxing Medical Technology
Co., Ltd., or Horgos Zhongchao Zhongxing, Horgos Zhongchao Medical
Technology Co., Ltd., or Horgos Zhongchao, Shanghai Zhongxin
Medical Technology Co., Ltd (formerly known as “Shanghai Jingyi
Medical Technology Co., Ltd.”, or “Shanghai Jingyi”), or Shanghai
Zhongxin, Beijing Zhongchao Boya Medical Technology Co., Ltd., or
Beijing Boya, and Zhixun Internet Hospital (Liaoning) Co., Ltd., or
Liaoning Zhixun, each a PRC company. We commenced our operations
under the name Zhongchao Medical Consulting (Shanghai) Limited, or
Shanghai Zhongchao Limited, a limited liability company established
under the laws of the PRC, to provide medical online and offline
training services. Zhongchao Shanghai was incorporated on August
17, 2012 by Juru Guo and Baorong Xue, who held 60% and 40% equity
interests in Zhongchao Shanghai respectively. On May 25, 2015, the
two shareholders transferred all equity interests to Weiguang Yang
who held 100% equity interests in Zhongchao Shanghai after the
transfer. On January 15, 2016, the name was changed to Zhongchao
Medical Technology (Shanghai) Co., Ltd. On February 5, 2016, the
management completed its registration with the State Administration
for Industry and Commerce, or SAIC, to convert Shanghai Zhongchao
Limited into a company limited by shares, or Zhongchao Shanghai.
Through direct ownership, Zhongchao Shanghai has established
subsidiaries and branch offices in various cities in PRC, including
Beijing, Shanghai, and Tianjin. In October 2020, we also
established an office in Tokyo, Japan and will pursue potential
market opportunities there.
On June 27, 2016, Zhongchao Shanghai was listed on the National
Equities Exchange and Quotations Co., Ltd., or the NEEQ. At the
time of listing, Weiguang Yang directly held 54.60% equity
interests in Zhongchao Shanghai and Shanghai Xingzhong Investment
Management LP. Ltd., a limited partnership incorporated under the
PRC laws (“Shanghai Xingzhong”), directly held 17.90% equity
interests in Zhongchao Shanghai. Shanghai Xingzhong was
incorporated on September 22, 2015 by management of Zhongchao
Shanghai as a platform for certain officers and employees holding
founder shares. Pursuant to its partner agreement, Weiguang Yang is
the general partner of Shanghai Xingzhong; and manages and operates
Shanghai Xingzhong. He has the right, among others, to possess,
manage, maintain and dispose the assets of Shanghai Xingzhong
including its equity interest in Zhongchao Shanghai. As a result,
Weiguang Yang controlled 72.50% equity interests in Zhongchao
Shanghai upon listing on NEEQ.
To facilitate our initial public offering in the United States,
Zhongchao Shanghai was delisted from NEEQ in February 2019. At the
time of delisting, Weiguang Yang controlled 57.29% equity interests
in Zhongchao Shanghai (43.41% of which was directly held and 13.88%
of which was controlled through Shanghai Xingzhong). After the
delisting, a minority shareholder of Zhongchao Shanghai transferred
his shares to Mr. Yang. At the time of our restructure in August
2019, Mr. Yang controlled 58.78% equity interests in Zhongchao
Shanghai (44.90% of which was directly held and 13.88% of which was
controlled through Shanghai Xingzhong). To conclude, Zhongchao
Shanghai has been under the control of Weiguang Yang since its
initial listing on NEEQ in June 2016.
On June 24, 2019, Zhongchao Shanghai changed its name to Zhongchao
Medical Technology (Shanghai) Limited. Zhongchao Shanghai engages
in technology development, technology transfer, and technical
services in the field of medical technology, technical consulting
in the field of network technology, and medical information
consulting.
On March 12, 2015, Zhongchao Shanghai established its wholly owned
subsidiary, Shanghai Maidemu. Shanghai Maidemu engages in planning
for cultural and artistic exchanges, designing, producing, acting
for and publishing various kinds of advertisements, and medical
consultation.
On May 27, 2017, Zhongchao Shanghai established its wholly owned
subsidiary, Shanghai Zhongxun. Shanghai Zhongxun engages in
technology development, transfer, service and consulting in the
fields of medical technology and computer technology.
On September 12, 2017, Zhongchao Shanghai established its wholly
owned subsidiary, Horgos Zhongchao Medical. Horgos Zhongchao
Medical engages in technology development, transfer, service and
consulting in the fields of medical technology and computer
technology. On March 26, 2020, due to business adjustment, Horgos
Zhongchao Medical started its dissolution and intends to apply to
the registration authority for cancellation registration. It is now
in the liquidation announcement period, which will end on May 10,
2020. Horgos Zhongchao Zhongxing will take over the business of
Horgos Zhongchao Medical after it completes its dissolution
registration.
On September 28, 2016, Shanghai Maidemu formed a joint venture with
Ms. Hongxia Zhang and Ms. Shuhua Gao, contributing a 55% equity
interest in Shanghai Huijing Information Technology Co., Ltd., or
Shanghai Huijing, a PRC company. On January 21, 2019, Shanghai
Huijing was 100% owned by Shanghai Maidemu. Shanghai Huijing
engages in technology development, transfer, service and consulting
in the fields of computer technology, graphic designing, website
page designing, planning cultural and artistic exchanges.
On April 16, 2019, Zhongchao Cayman was incorporated in the Cayman
Islands and issued 5,497,715 Class B Ordinary Shares at 0.0001 par
value as founder shares to More Healthy Holding Limited,
representing 80.94% of total voting power of the Company, on
converted basis, given that each Class B Ordinary Share is entitled
to 15 votes and each Class A Ordinary Share is entitled to 1 vote
and assuming the exercise of the HF Warrant. More Healthy Holding
Limited is a BVI company 100% owned by Weiguang Yang (“More
Healthy”).
On July 29, 2019, Zhongchao Shanghai established its wholly owned
subsidiary, Horgos Zhongchao Zhongxing. Horgos Zhongchao Zhongxing
engages in technology development, transfer, service and consulting
in the fields of medical technology and computer technology.
On August 14, 2019, Zhongchao Cayman completed a reorganization of
entities under common control of Weiguang Yang, who owned a
majority of the voting power of Zhongchao Cayman prior to the
reorganization. Zhongchao Cayman, Zhongchao BVI, and Zhongchao HK
were established as the holding companies of Zhongchao WFOE.
Zhongchao WFOE is the primary beneficiary of Zhongchao Shanghai and
its subsidiaries, and all of these entities included in Zhongchao
Cayman are under common control which results in the consolidation
of Zhongchao Shanghai and subsidiaries which have been accounted
for as a reorganization of entities under common control at
carrying value. The consolidated financial statements are prepared
on the basis as if the reorganization became effective as of the
beginning of the first period presented in the consolidated
financial statements.
As part of the Company’s organization for the purpose of the
initial public offering and listing on Nasdaq, on August 1, 2019,
the Company and HF Capital Management Delta, Inc., a company
incorporated under the laws of the Cayman Islands (“HF Capital”)
entered into a certain warrant agreement to purchase Class A
Ordinary Shares of the Company (the “HF Warrant”). 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. As
HF Capital needs to complete necessary administrative registration
required under Chinese regulations of outbound direct investments
(ODI) to hold equity interest in Zhongchao Cayman, the HF Warrant
entitles HF Capital to purchase 1,350,068 Class A Ordinary Shares,
representing 6.25% economic beneficial interest, or 1.37% of the
voting ownership interest of the Company as of December 31, 2019,
or 5.42% economic beneficial interest, or 1.33% of the voting
ownership interest of the Company as of the date of this
prospectus, from the Company, if the following conditions are
met:
|
1) |
All PRC governmental
consent and approval required for HF Capital to exercise the
warrant and payment of the capital contribution have been obtained,
including without limitation, any approval or filing with respect
to HF Capital’s investment into the Company, and payment by HF
Capital of the capital contribution to the Company, and reasonable
evidence thereof shall have been provided to the
Company; |
|
2) |
HF Capital has fully
paid the capital contribution to Zhongchao Cayman; and |
|
3) |
The Company released the
paid-in capital of Yantai HF from Zhongchao Shanghai. |
The HF Warrant was issued in connection with a framework agreement
among Zhongchao Shanghai, Mr. Weiguang Yang, and Yantai HF dated
August 1, 2019 (the “Framework Agreement”), pursuant to which
Zhongchao Shanghai has agreed to complete Yantai HF’s withdrawal of
capital contribution in Zhongchao Shanghai no later than one month
following the completion of HF Capital’s ODI and HF has agreed to
invest the same amount of fund in U.S. dollars in Zhongchao Cayman
upon the completion of its ODI registration. In addition, the
parties have agreed to, once the ODI registration of HF Capital is
completed, deposit Yantai HF’s capital contribution into a bank
account mutually controlled by Zhongchao Shanghai and Yantai HF, to
be used as HF Capital’s capital contribution in Zhongchao
Cayman.
As of the date of this prospectus, the registration of Yantai HF’s
withdrawal of its capital contribution in Zhongchao Shanghai has
been completed with local State Administration for Industry and
Commerce. The paid-in capital of Yantai HF in an amount of RMB20
million (approximately US$2.9 million) is currently being held in
the corporate bank account of Zhongchao Shanghai and is to be
deposited in a designated bank account mutually controlled by
Zhongchao Shanghai and Yantai HF after the completion of HF
Capital’s ODI procedures and to be released as HF Capital’s capital
contribution in Zhongchao Cayman as provided in the Framework
Agreement. According to the Administrative Measures for the
Outbound Investment by Enterprises promulgated by the NDRC on
December 26, 2017 which became effective on March 1, 2018, the
Administrative Measures on Outbound Investments promulgated by the
MOFCOM on September 6, 2014 which became effective on October 6,
2014, and the Notice of the SAFE on Further Simplifying and
Improving the Foreign Exchange Management Policies for Direct
Investment promulgated by the SAFE on 13 February 2015 which became
effective on June 1, 2015, the procedures of ODI include obtaining
the Filing Notice of Outbound Direct Investment Projects issued by
the competent branch of the NDRC, the Certificate of Outbound
Direct Investment of Enterprises issued by the competent branch of
the MOFCOM, and completing the foreign exchange registration of
outbound direct investments. HF Capital is currently in the process
of completing its ODI procedures. HF has further committed that in
any event if it cannot complete its ODI procedures, HF shall make
such capital contribution to Zhongchao Shanghai in an amount of
RMB20 million (approximately US$2.9 million) or to Zhongchao Cayman
in the same amount of fund in U.S. dollars, subject to certain
condition.
On March 26, 2020, the board of Horgos Zhongchao Medical, one of
the wholly-owned subsidiaries of the Company, approved its
dissolution. The application for cancellation registration was
approved by the registration authority on May 11, 2020.
On August 1, 2020, all shareholders of Zhongchao Shanghai, except
Mr. Yang and Shanghai Xingzhong, decided to withdraw their capital
contribution from Zhongchao Shanghai (the “Capital Reduction”).
Given the effect of the Capital Reduction, Mr. Yang became the
76.4% shareholder of Zhongchao Shanghai with the remaining equity
interests held by Shanghai Xingzhong. The Company was advised by
its PRC counsel that the VIE arrangements consisting of a series of
six agreements with Zhongchao Shanghai (the “Original VIE
Arrangements”) shall be terminated, except for the Master Exclusive
Service Agreement by and between Zhongchao WFOE and Zhongchao
Shanghai dated as of August 14, 2019, to reflect the Capital
Reduction. On September 10, 2020, Zhongchao WFOE, and Zhongchao
Shanghai, and its shareholders signed a confirmation agreement to
confirm that the Original VIE Agreements have been
terminated because of the Capital Reduction.
Accordingly, on September 10, 2020, to clarify the legal effect of
the Capital Reduction and to sustain the effective control over
Zhongchao Shanghai by the Company, Mr. Yang and Shanghai Xingzhong,
as the shareholders of Zhongchao Shanghai, signed a series
of VIE agreements with Zhongchao WFOE, the terms of which
are substantially the same as those of the Original VIE
Arrangements except the number of shareholders of Zhongchao
Shanghai reduced to two (the “New VIE Agreements”). Upon
entry into the New VIE Agreements, the Original VIE Agreements,
except for the Master Exclusive Service Agreement, were
expired.
The board of directors of the Company approved and ratified the New
VIE Agreements. The Company does not expect any negative impact of
these New VIE Agreements on its operation. The New
VIE Agreements enable Zhongchao WFOE and the Company to keep
the effective control over Zhongchao Shanghai.
On November 16, 2020, Shanghai Jingyi, a subsidiary of the Company
changed its name to Shanghai Zhongxin Medical Technology Co., Ltd.
(“Shanghai Zhongxin”).
On September 16, 2020, Horgos Zhongchao Zhongxing, one of the
wholly-owned subsidiaries of the Company, cancelled its
registration.
In September 2020, we established an office in Tianjin as the
offices for medical service staff and technic staff. In October
2020, we established an office in Japan and will pursue potential
market opportunities there.
In addition, on April 27, 2020, Beijing Boya was incorporated under
the PRC laws, of which 70% of its equity was owned by Zhongchao
Shanghai and 30% of its equity was entrusted to Zhongchao Shanghai
by the other shareholder Zhengbo Ma through a certain share
entrustment agreement on April 27, 2020. Beijing Boya is primarily
engaged in online hospital services, medical services, elderly
nursing services, remote healthcare management services, healthcare
consultation services, sales of medical appliances and other
medical products.
On October 12, 2020, two shareholders of Shanghai Jingyi, Li Dai
and Hegang Ma, transferred their shares to Mr. Weiguang Yang. As a
result, Mr. Weiguang Yang holds 49% of Shanghai Jingyi’s equity and
Zhongchao Shanghai holds 51% of its equity. Through a certain
entrustment agreement on November 1, 2020, Mr. Weiguang Yang agreed
to hold his equity interest of Shanghai Zhongxin on behalf of
Shanghai Zhongxun.
On October 23, 2020, Shanghai Jingyi changed its name to Shanghai
Zhongxin Medical Technology Co., Ltd., or Shanghai
Zhongxin.
On December 16, 2020, Mr. Weiguang Yang transferred certain parts
of his shares to Zhongchao Yixin and Zhongren Yixin. As a result,
Mr. Weiguang Yang, Zhongchao Yixin, and Zhongren Yixin holds 19%,
20% and 10% of the equity interest of Shanghai Jingyi,
respectively.
The following charts summarize our corporate legal structure and
identify our subsidiaries, our VIE and its subsidiaries.
Notes: All percentages reflect the voting ownership interests
instead of the equity interests held by each one of the
shareholders of the Company given that each Class B Ordinary Share
will be entitled to 15 votes as compared to Class A Ordinary Share,
each one of which will be entitled to 1 vote.
|
(1) |
Represents 5,497,715
Class B Ordinary Shares held by Mr. Weiguang Yang (“Yang”), the
100% owner of More Healthy Holding Limited (“More
Healthy”). |
|
(2) |
Represents an aggregate
of 10,988,809 Class A Ordinary Shares including 9,638,741 Class A
Ordinary Shares held by 11 shareholders of Company, each one of
which holds less than 5% voting ownership interests of the Company,
as of the date of this prospectus and 1,350,068 Class A Ordinary
Shares to be issued upon exercise of the HF Warrant. See footnote 3
below. |
|
(3) |
In order to directly
hold equity interest in the Company, HF Capital Management Delta,
Inc. (“HF Capital”) has to complete certain registration and obtain
approval with local governmental authority in PRC. As a part of
reorganization and due to the aforementioned factor, HF Capital was
granted a warrant to purchase 1,350,068 Class A Ordinary Shares of
the Company at a price $0.0001 per share or such other amount
agreed by the Company and HF Capital at a grant price of RMB
20,000,000 (approximately USD$2.9 million) conditioned upon (i) HF
Capital completes necessary registration and obtains approval with
local governmental authority in PRC for its direct investment in
the Company and (ii) Zhongchao Shanghai shall have paid HF Capital
RMB 20,000,000 as returned capital contribution in Zhongchao
Shanghai. The above chart assumes that HF Capital has not exercised
such warrant. |
|
(4) |
Represents RMB 2.74
million (approximately USD$0.4 million) subscribed capital
contribution to Zhongchao Shanghai, as of the date of this
prospectus. |
|
(5) |
Represents RMB 9.70
million (approximately USD$1.4 million) subscribed capital
contribution to Zhongchao Shanghai, as of the date of this
prospectus. |
|
(6) |
Represents RMB 1.35
million (approximately USD$0.2 million) subscribed capital
contribution to Zhongchao Shanghai, as of the date of this
prospectus. |
|
(7) |
Represents RMB 3.00
million (approximately USD$0.4 million) subscribed capital
contribution to Zhongchao Shanghai, as of the date of this
prospectus. Shanghai Xingzhong Investment Management LP. Ltd., a
limited partnership incorporated under the PRC laws (“Shanghai
Xingzhong”), the general partner of which is Weiguang Yang. As the
general partner of Shanghai Xingzhong, Weiguang Yang exercises the
voting rights with respect to the shares held by Shanghai
Xingzhong. |
|
(8) |
Represents RMB 1.35
million (approximately USD$0.2 million) subscribed capital
contribution to Zhongchao Shanghai, as of the date of this
prospectus. |
|
(9) |
Beijing Boya was
incorporated under the PRC laws on April 27, 2020, of which 70% of
its equity was owned by Zhongchao Shanghai and 30% of its equity
was entrusted to Zhongchao Shanghai by the other shareholder
Zhengbo Ma through a certain share entrustment agreement on April
27, 2020. |
|
(10) |
Shanghai Zhongxin, a PRC
company, which was formerly known as Shanghai Jingyi, or Shanghai
Jingyi Medical Technology Co., Ltd., a PRC company and changed to
its current name as Shanghai Zhongxin on November 16, 2020. On
October 12, 2020, two shareholders of Shanghai Jingyi, Li Dai and
Hegang Ma, transferred their shares to Mr. Weiguang Yang. As a
result, Mr. Weiguang Yang holds 49% of Shanghai Jingyi’s equity and
Zhongchao Shanghai holds 51% of its equity. On November 1, 2020,
Mr. Weiguang Yang transferred certain parts of his shares to
Zhongchao Yixin and Zhongren Yixin. As a result, Mr. Weiguang Yang,
Zhongchao Yixin, and Zhongren Yixin hold 19%, 20% and 10% of the
equity interest of Shanghai Jingyi, respectively. Through certain
entrustment agreements, Mr. Weiguang Yang, Zhongchao Yixin and
Zhongren Yixin hold 19%, 20% and 10% of the equity interest of
Shanghai Jingyi on behalf of Shanghai Zhongxun,
respectively. As a result, Shanghai Zhongxun owns 100%
of Shanghai Zhongxin’s equity interest. |
Business Overview
Our Company
We are a provider of healthcare information, education, and
training services to healthcare professionals and the public in
China. We offer a wide range of online and onsite health
information services, healthcare education programs, and healthcare
training products, consisting primarily of clinical practice
training, open classes of popular medical topics, interactive case
studies, academic conference and workshops, continuing education
courses, and articles and short videos with educational healthcare
content to healthcare professionals as well as the public. The
services, programs, and products that we provide:
|
● |
make it easier for
healthcare professionals to access healthcare reference sources,
stay abreast of the latest medical information, learn about new
treatment options, earn continuing medical education credits and
communicate with peers; and |
|
● |
enable the public to
obtain health information on a particular disease or condition,
offer content on topics of individual interest, improve public
health consciousness, and promote people’s lifestyle. |
We provide our healthcare information, education, and training
services to the healthcare professionals under our “MDMOOC” brand,
which we believe is one of the leading consumer brands in China’s
healthcare training and education sector, as evidenced by the
Securities Research Report on online medical care industry by
Essence Securities Co., Ltd., a company provides securities
services throughout China, where we are considered as one of the
main and typical public company proving medical training with
doctor interactive and online training platform and leading the
Internet medical education industry. We provide our healthcare
educational content to the public via our “Sunshine Health Forums”,
which, based on the amount of the registered users and daily review
volume, we believe is one of the largest platforms in China, for
general healthcare knowledge and information to the public.
We commenced our operation, through Zhongchao Shanghai, 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. Since
our inception, we have focused on developing our information,
education, and training programs to address the needs in the
healthcare industry in China; and developing online platforms and
onsite activities to deliver our information services, education
programs and training products.
MDMOOC-Healthcare Information, Education, and Training for
Professionals
Online Platforms
We launched our first online platform in a form of website,
www.mdmooc.org, under our “MDMOOC” brand in 2013 to provide
information, education, and training services to physicians and
allied healthcare professionals, such as pharmacists and nurses
primarily located in China, via Internet-Plus solutions. Internet
Plus refers to the applications of the internet and other
information technology in conventional industries, such as
manufacturing, education and healthcare. It is an incomplete
equation where various internet (mobile, cloud computing, big data
or Internet of Things) can be added to other traditional fields. We
further launched our MDMOOC Wechat subscription account and MDMOOC
mobile App in 2015 and 2016, respectively (together with the
website, the “MDMOOC online platform”). Healthcare professionals in
China can apply for registration with their healthcare
qualification to get access to our MDMOOC online platform.
The programs available on our MDMOOC online platform enable our
users to timely obtain extension knowledge of precedents,
treatments, and first-hand experiences of various disease and other
healthcare related matters. In addition, our MDMOOC online platform
offers these professional users what we believe is one of the
largest online libraries of continuing medical education programs
in China that are produced in association with entities accredited
by the National Health Commission of the PRC, such as Chinese
Medical Association and Chinese Journal of Continuing Medical
Education. From the convenience of their home or office computer
and mobile App, our professional users can access a variety of
accredited editorial resources and programs including online
journal articles, medical conferences, and open classes and obtain
continuing medical education credits which are required for the
healthcare qualification of doctors, nurses, and pharmacists.
We believe MDMOOC online platform helps healthcare professionals
improve their clinical knowledge and practice of medicine. Since
launching in 2013, we have been continuously developing our MDMOOC
online platform with new forms of Internet-based education
solutions. There are currently approximately 2,976 education and
training programs available on our MDMOOC online platform and free
to our registered users. About 95% of all our programs are
self-developed by our research and development team. The original
content of these programs, including daily medical thesis,
commentary, conference coverage, expert columns, and activities are
written by our research and development team and authors from
widely respected academic institutions, and edited and managed by
our in-house editorial staff. The remaining 5% of programs are
created under the purchase orders of our corporate or institution
customers, where we develop customized programs with designated
healthcare topics. Such 5% of programs are only available to
certain registered users with program passcodes provided by our
corporate or institution customers. Our revenues are mainly sourced
from these 5% of programs.
We currently provide our proprietary interactive programs via
Practice Improvement (PI), a problem-based and case-based form of
healthcare course, which integrates state-of-the-art treatment
information and clinical cases for particular diseases into
interactive practice modules; Community of Practice Share (COPS),
an online and live clinical experience sharing platform that
creates the most effective discussion in a particular healthcare
domain or medical area due to the common interests of the users;
Continuing Professional Development (CPD), a section of our
platform that provides discussions and articles focusing on the
future development and the differences between Continuing Medical
Education (CME) and Continuing Professional Development (CPD), and
other general information of physician competency framework and
Meta-analysis. Our original, exclusive and proprietary content
includes innovative features such as after-class quiz, key point
summary and highlight during the courses, and peer-review and
comments.
We believe that our ability to create, source, edit and organize
online healthcare-related content, interactive education services,
and training programs has made MDMOOC online platform one of the
leading health destinations and most recognized information
platform in healthcare sector in China. As of the date of this
prospectus, our MDMOOC online platform has more than 680,000
registered users, and we have collaborated with more than 2 million
healthcare experts including over 700,000 physicians, and 1,300,000
allied healthcare professionals in medical academics, associations,
and leading hospitals to develop training programs on needed
basis.
Onsite Education Activities
In addition to healthcare information, education, and training via
Internet-Plus, we organize onsite healthcare and medical training
sessions and academic conferences from time to time under our
“MDMOOC” brand. For instance, in January 2019, we launched
EWMA-certified (defined as below) wound-management collaboration
training programs, covering the topics including but not limited to
basic concepts of acute and chronic wounds, management of different
levels of surgical and non-surgical wounds, the construction of
different levels of wound centers, and medical staff collaboration
in the process of wound management.
We cooperate with Beijing Chronic Disease Prevention and Health
Education Research Association and Professor Yixin Zhang from the
Ninth People’s Hospital of Shanghai Jiao Tong University School of
Medicine to create courses titled “Essential Course for Wound Care
Management” and “Advanced Course for Surgical Wound Treatment”.
These courses have been certified and authorized by the European
Wound Management Association (EWMA), a European not-for-profit
umbrella organization, linking national wound management
organizations, individuals and groups with interest in wound care.
We plan to hold four (4) training programs for Essential Course for
Wound Care Management and two (2) training programs for Advanced
Course for Surgical Wound Treatment. Each program will accept no
more than twenty (20) applicants who shall hold academic credential
above undergraduate. We also require all applicants to have more
than six-year working experience in the field of wound repair. We
will issue a certificate to each of the applicant upon completion
of the training as their proof of achievement and ability in the
wound management and treatment
As of the date of this prospectus, we have successfully held the
first short-term training program for Essential Course for Wound
Care Management in Fujian, China from March 28, 2019 to April 4,
2019 and our first training program for Advanced Course for
Surgical Wound Treatment from June 23, 2019 to June 29, 2019 in
Jiangsu, China. We further held the second and third training
programs for Essential Course for Wound Care Management in
Zhejiang, China from August 25, 2019 to August 31, 2019 and our
second and third training programs for Advanced Course for Surgical
Wound Treatment from December 1, 2019 to December 7, 2019 in Jilin,
China. As a result of the outbreak of COVID-19 and pandemic, we
postponed our original plan to hold our future training programs in
the 1st quarter of 2020 in Zhengzhou, Henan
Province. However, we successfully held the postponed Essential
Courses for Wound Care Management and the Advanced Courses for
Wound Treatment in Xi’an from September 10, 2020 to September 18
2020, and in Hangzhou from December 18, 2020 to December 26, 2020,
respectively.
We believe the combination of online and onsite services would
provide our end-users the greatest convenience. With more choices
of the forms of healthcare education, we enrich the learning
experience of our end-users.
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 our platforms, we
have been engaged by certain customers on a project basis to
establish individual columns on our MDMOOC online platform to
provide training and knowledge of certain drug treatment for
healthcare professionals and patients. Most of the drug treatments
are cancer-related or rare disease-related. We establish online
columns to facilitate qualified patients to obtain free drug
treatment from not-for-profit organizations (“NFPs”) till the
earlier of the expiration of contract period or the free drugs are
completely delivered. For each column, we plug 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 existing customers of us. They provide those drugs
sponsored by pharmaceutical companies without charge to qualified
patients and we charge those customers on our services in
connection with the online columns and related training and
management. In this way, we believe not only can we facilitate the
clinical application of those drugs, but also benefit patients.
As of the date of this prospectus, we have established nearly 10
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. The total number of patients covered under
these patient-aid projects has reached nearly 45,000 by the end of
2020. We have launched another 3 or 4 columns for the treatment of
rare diseases, including Fabry disease and Gaucher disease in
mid-2020. We expect the numbers of columns for both cancer-related
treatment and treatment of rare diseases double by the end of 2021,
coving an aggregate of nearly 65,000 patients.
Sunshine Health Forums-Healthcare Information and Education
for the Public
Our goal is not only to provide continuing education and training
to healthcare professionals but to promote healthy lifestyle and
provide healthcare knowledge to the public. In order to achieve
that, we develop and operate the Sunshine Health Forums, online
education-for-all platforms that disseminate articles and features
related to healthcare and wellness education, medical behavior
intervention, and newly developed health technology and
application. We launched our Sunshine Health Forums in a form of
website, www.ygjkclass.com, in May 2016 followed by WeChat
subscription account in August 2016, and mobile App in 2017. We
establish one forum for each category of diseases for the
convenience of the public. We cooperate with certain well-known
we-media platforms in China, including but not limited Toutiao.com,
Yidianzixun.com, Douyin.com, CN-Healthcare.com, iQiyi, Youku, and
Huoshan.com to streamline our articles co-produced by healthcare
professionals and us.
Corporate Information
Our principal executive office is located on the 841 Yan’an Middle
Road, Jing’An District, Shanghai, China 200040. Our telephone
number is 021-32205987. We maintain a website at http://izcmd.com
that contains information about our Company, though no information
contained on our website is part of this prospectus.
RISK FACTORS
Investing in our securities involves a high degree of risk. You
should carefully consider the risk factors set forth under “Risk
Factors” described in our most recent annual report on Form
20-F, filed on April 30, 2021, as supplemented and updated by
subsequent current reports on Form 6-K that we have filed with the
SEC, together with all other information contained or incorporated
by reference in this prospectus and any applicable prospectus
supplement and in any related free writing prospectus in connection
with a specific offering, before making an investment decision.
Each of the risk factors could materially and adversely affect our
business, operating results, financial condition and prospects, as
well as the value of an investment in our securities, and the
occurrence of any of these risks might cause you to lose all or
part of your investment.
USE OF PROCEEDS
Except as described in any prospectus supplement and any free
writing prospectus in connection with a specific offering, we
currently intend to use the net proceeds from the sale of the
securities offered under this prospectus to fund the development
and commercialization of our projects and the growth of our
business, primarily working capital, and for general corporate
purposes. We may also use a portion of the net proceeds to acquire
or invest in technologies, products and/or businesses that we
believe will enhance the value of our Company, although we have no
current commitments or agreements with respect to any such
transactions as of the date of this prospectus. We have not
determined the amount of net proceeds to be used specifically for
the foregoing purposes. As a result, our management will have broad
discretion in the allocation of the net proceeds and investors will
be relying on the judgment of our management regarding the
application of the proceeds of any sale of the securities. If a
material part of the net proceeds is to be used to repay
indebtedness, we will set forth the interest rate and maturity of
such indebtedness in a prospectus supplement. Pending use of the
net proceeds will be deposited in interest bearing bank
accounts.
DILUTION
If required, we will set forth in a prospectus supplement the
following information regarding any material dilution of the equity
interests of investors purchasing securities in an offering under
this prospectus:
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the net tangible book
value per share of our equity securities before and after the
offering; |
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the amount of the
increase in such net tangible book value per share attributable to
the cash payments made by purchasers in the offering;
and |
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the amount of the
immediate dilution from the public offering price which will be
absorbed by such purchasers. |
DESCRIPTION OF SHARE
CAPITAL
The following description of our capital stock (which includes a
description of securities we may offer pursuant to the registration
statement of which this prospectus, as the same may be
supplemented, forms a part) does not purport to be complete and is
subject to and qualified in its entirety by our Amended and
Restated Memorandum and Articles of Association (“M&A”) and by
the applicable provisions of Cayman Islands law.
Our authorized capital stock consists of 450,000,000 Class A
Ordinary Shares and 50,000,000 Class B Ordinary Shares. As of May
13, 2021, there were 18,085,355 Class A Ordinary Shares and
5,497,715 Class B Ordinary Shares outstanding.
The following description of our capital stock is intended as a
summary only and is qualified in its entirety by reference to our
M&A, which have been filed previously with the SEC, and
applicable provisions of Cayman Islands law.
We, directly or through agents, dealers or underwriters designated
from time to time, may offer, issue and sell, together or
separately, up to $45,000,000 in the aggregate of:
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secured or unsecured
debt securities consisting of notes, debentures or other evidences
of indebtedness which may be senior debt securities, senior
subordinated debt securities or subordinated debt securities, each
of which may be convertible into equity securities; |
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warrants to purchase our
securities; |
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rights to purchase our
securities; or |
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units comprised of, or
other combinations of, the foregoing securities. |
Our authorized capital stock consists of 450,000,000 Class A
Ordinary Shares and 50,000,000 Class B Ordinary Shares. As of May
13, 2021, there were 18,085,355 Class A Ordinary Shares and
5,497,715 Class B Ordinary Shares outstanding (not including
1,350,068 Class A Ordinary Shares to be issued upon exercise of the
HF Warrant issued to HF Capital. For more details regarding the HF
Warrant, please see “Our Corporate History and
Structure”).
We may issue the debt securities as exchangeable for or convertible
into Ordinary Shares, preferred shares or other securities. The
preferred shares may also be exchangeable for and/or convertible
into Ordinary Shares, another series of preferred shares or other
securities. The debt securities, the preferred shares, the Ordinary
Shares and the warrants are collectively referred to in this
prospectus as the “securities.” When a particular series of
securities is offered, a supplement to this prospectus will be
delivered with this prospectus, which will set forth the terms of
the offering and sale of the offered securities.
Ordinary Shares
The following are summaries of material provisions of our M&A,
corporate governance policies and the Companies Act (Revised) of
the Cayman Islands (“Companies Act”) insofar as they relate to the
material terms of our Class A Ordinary Shares and Class B Ordinary
Shares.
Objects of Our Company
Under our M&A, the objects of our Company are unrestricted and
we have the full power and authority to carry out any object not
prohibited by the law of the Cayman Islands.
Share Capital
Our authorized share capital is divided into Class A Ordinary
Shares and Class B Ordinary Shares. Holders of our Class A Ordinary
Shares and Class B Ordinary Shares will have the same rights except
for voting rights and conversion rights.
The holders of Class A Ordinary Shares are entitled to 1 vote for
each such share held and shall be entitled to notice of any
shareholders’ meeting, and, subject to the terms of M&A, to
vote thereat. The Class A Ordinary Shares are not redeemable at the
option of the holder and are not convertible into shares of any
other class.
The holders of Class B Ordinary Shares shall have the right to 15
votes for each such share held, and shall be entitled to notice of
any shareholders’ meeting and, subject to the terms of the M&A,
to vote thereat. The Class B Ordinary Shares are not redeemable at
the option of the holder but are convertible into Class A Ordinary
Shares at any time after issue at the option of the holder on a one
to one basis.
Dividends
The holders of our Class A Ordinary Shares and Class B Ordinary
Shares are entitled to such dividends as may be declared by our
Board of Directors subject to the Companies Act and to our
M&A.
Voting Rights
In respect of all matters subject to a shareholders’ vote, each
Class B Ordinary Share is entitled to 15 votes, and each Class A
Ordinary Share is entitled to 1 vote, voting together as one class.
At any general meeting a resolution put to the vote of the meeting
shall be decided on a poll which shall be taken at such time and in
such manner as the Chairman of the meeting directs and the result
of the poll shall be deemed to be the resolution of the meeting
No business shall be transacted at any general meeting unless a
quorum of members is present at the time when the meeting proceeds
to business; one or more members holding Ordinary Shares which
carry in aggregate (or representing by proxy) not less than
one-third of all votes attaching to all Ordinary Shares in issue
and entitled to vote at such general meeting, present in person or
by proxy or, if a corporation or other non-natural person, by its
duly authorised representative, shall be a quorum for all purposes
provided always that if the Company has one (1) member of record,
the quorum shall be that one (1) member present in person or by
proxy. To avoid confusion for the purpose, when counting the
quorum, each issued and outstanding Class A Ordinary Share has one
(1) vote and each issued and outstanding Class B Ordinary Share has
fifteen (15) votes. An ordinary resolution to be passed at a
general meeting requires the affirmative vote of a simple majority
of the votes cast, while a special resolution requires the
affirmative vote of at least two-thirds of votes cast at a general
meeting. A special resolution will be required for important
matters.
Conversion
Class A Ordinary Shares are not convertible. Each Class B Ordinary
Share shall be convertible, at the option of the holder thereof,
into such number of fully paid and non-assessable Class A Ordinary
Shares on the basis that one Class B Ordinary Share shall be
converted into one Class A Ordinary Share (being a 1:1 ratio and
hereafter referred to as the “Conversion Rate”), subject to
adjustment.
Transfer of Ordinary Shares
Subject to the restrictions set out below, any of our shareholders
may transfer all or any of his, its or her Class A Ordinary Shares
or Class B Ordinary Shares by an instrument of transfer in the
usual or common form or any other form approved by our Board of
Directors or in a form prescribed by the stock exchange on which
our shares are then listed.
Our Board of Directors may, in its sole discretion, decline to
register any transfer of any Class A Ordinary Shares or Class B
Ordinary Shares whether or not it is fully paid up to the total
consideration paid for such shares. Our directors may also decline
to register any transfer of any Class A Ordinary Shares or Class B
Ordinary Shares if (a) the instrument of transfer is not
accompanied by the certificate covering the shares to which it
relates or any other evidence as our Board of Directors may
reasonably require to prove the title of the transferor to, or
his/her right to transfer the shares; or (b) the instrument of
transfer is in respect of more than one class of shares.
If our directors refuse to register a transfer, they shall, within
two months after the date on which the instrument of transfer was
lodged, send to the transferee notice of such refusal.
The registration of transfers may be suspended and the register
closed at such times and for such periods as our Board of Directors
may from time to time determine, provided, however, that the
registration of transfers shall not be suspended nor the register
closed for more than 30 days in any year.
Winding-Up/Liquidation
On a return of capital on winding up or otherwise (other than on
conversion, redemption or purchase of shares), a liquidator may be
appointed to determine how to distribute the assets among the
holders of the Class A Ordinary Shares and Class B Ordinary Shares.
If our assets available for distribution are insufficient to repay
all of the paid-up capital, the assets will be distributed so that
the losses are borne by our shareholders proportionately; a similar
basis will be employed if the assets are more than sufficient to
repay the whole of the capital at the commencement of the winding
up.
Calls on Ordinary Shares and Forfeiture of Ordinary
Shares
Our Board of Directors may from time to time make calls upon
shareholders for any amounts unpaid on their Class A Ordinary
Shares or Class B Ordinary Shares in a notice served to such
shareholders at least 14 days prior to the specified time and place
of payment. The shares that have been called upon and remain unpaid
on the specified time are subject to forfeiture.
Redemption of Shares
We may issue shares on terms that are subject to redemption, at our
option or at the option of the holders, on such terms and in such
manner as may be determined by our Board of Directors.
Variations of Rights of Shares
All or any of the special rights attached to any class of shares
may, be varied with the resolution of at least two thirds of the
issued shares of that class or a resolution passed at a general
meeting of the holders of the shares of that class present in
person or by proxy or with the consent in writing of the holders of
at least two-thirds of the issued shares of that class.
Inspection of Books and Records
Directors shall from time to time determine whether and to what
extent and at what times and places and under what conditions or
regulations the accounts and books of the Company or any of them
shall be open to the inspection of members not being Directors and
no member (not being a Director) shall have any right of inspecting
any account or book or document of the Company except as conferred
by Companies Act or authorized by the Directors or by the Company
in a general meeting. However, the Directors shall from time to
time cause to be prepared and to be laid before the Company in a
general meeting, profit and loss accounts, balance sheets, group
accounts (if any) and such other reports and accounts as may be
required by Companies Act. (See “Where You Can Find More
Information”)
Issuance of Additional Shares
Our M&A authorize our Board of Directors to issue additional
Class A Ordinary Shares or Class B Ordinary Shares from time to
time as our Board of Directors shall determine, to the extent there
are available authorized but unissued shares.
Our Board of Directors may, issue preferred shares without action
by our shareholders to the extent there are authorized but unissued
shares available. Issuance of additional shares may dilute the
voting power of holders of Class A Ordinary Shares and Class B
Ordinary Shares. However, our Memorandum of Association provides
for authorized share capital comprising Class A Ordinary Shares and
Class B Ordinary Shares and to the extent the rights attached to
any class may be varied, the Company must comply with the
provisions in the M&A relating to variations to rights of
shares.
Anti-Takeover Provisions
Some provisions of our M&A may discourage, delay or prevent a
change of control of our Company or management that shareholders
may consider favorable, including provisions that:
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authorize our Board of
Directors to issue preferred shares in one or more series and to
designate the price, rights, preferences, privileges and
restrictions of such preferred shares without any further vote or
action by our shareholders (subject to variation of rights of
shares provisions in our M&A); and |
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limit the ability of
shareholders to requisition and convene general meetings of
shareholders. Our M&A allow our shareholders holding shares
representing in aggregate not less than ten percent of our paid up
share capital (as to the total consideration paid for such shares)
in issue to requisition an extraordinary general meeting of our
shareholders, in which case our directors are obliged to call such
meeting and to put the resolutions so requisitioned to a vote at
such meeting. |
However, under Cayman Islands law, our directors may only exercise
the rights and powers granted to them under our M&A for a
proper purpose and for what they believe in good faith to be in the
best interests of our Company.
General Meetings of Shareholders and Shareholder
Proposals
Our shareholders’ general meetings may be held in such place within
or outside the Cayman Islands as our Board of Directors considers
appropriate.
As a Cayman Islands exempted company, we are not obliged by the
Companies Act to call shareholders’ annual general meetings.
However, our M&A provide that we shall hold a general meeting
in each year as our annual general meeting other than the year in
which the M&A were adopted at such time and place as determined
by the directors. The directors may, whenever they think fit,
convene an extraordinary general meeting.
Shareholders’ annual general meetings and any other general
meetings of our shareholders may be convened by a majority of our
Board of Directors. Our Board of Directors shall give not less than
seven days’ written notice of a shareholders’ meeting to those
persons whose names appear as members in our register of members on
the date the notice is given (or on any other date determined by
our directors to be the record date for such meeting) and who are
entitled to vote at the meeting.
Cayman Islands law provides shareholders with only limited rights
to requisition a general meeting, and does not provide shareholders
with any right to put any proposal before a general meeting.
However, these rights may be provided in a company’s articles of
association. Our M&A allow our shareholders holding shares
representing in aggregate not less than ten percent of our paid up
share capital (as to the total consideration paid for such shares)
in issue to requisition an extraordinary general meeting of our
shareholders, in which case our directors are obliged to call such
meeting and to put the resolutions so requisitioned to a vote at
such meeting; otherwise, our M&A do not provide our
shareholders with any right to put any proposals before annual
general meetings or extraordinary general meetings not called by
such shareholders.
Exempted Company
We are an exempted company with limited liability under the
Companies Act. The Companies Act distinguishes between ordinary
resident companies and exempted companies. A Cayman Islands
exempted company:
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is a company that
conducts its business mainly outside of the Cayman
Islands; |
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is exempted from certain
requirements of the Companies Act, including the filing an annual
return of its shareholders with the Registrar of Companies or the
Immigration Board; |
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does not have to make
its register of members open for inspection; |
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does not have to hold an
annual general meeting; |
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may issue negotiable or
bearer shares or shares with no par value (subject to the
provisions of the Companies Act); |
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may obtain an
undertaking against the imposition of any future taxation (such
undertakings are usually given for 20 years in the first instance);
and |
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may register by way of
continuation in another jurisdiction and be deregistered in the
Cayman Islands. |
“Limited liability” means that the liability of each shareholder is
limited to the amount unpaid by the shareholder on the shares of
the company (except in exceptional circumstances, such as involving
fraud, the establishment of an agency relationship or an illegal or
improper purpose or other circumstances in which a court may be
prepared to pierce or lift the corporate veil).
Register of Members
Under Cayman Islands law, we must keep a register of members and
there should be entered therein:
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the names and addresses
of the members, a statement of the shares held by each member, and
of the amount paid or agreed to be considered as paid, on the
shares of each member; |
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the date on which the
name of any person was entered on the register as a member;
and |
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the date on which any
person ceased to be a member. |
Under Cayman Islands law, the register of members of our Company is
prima facie evidence of the matters set out therein (i.e. the
register of members will raise a presumption of fact on the matters
referred to above unless rebutted) and a member registered in the
register of members is deemed as a matter of Cayman Islands law to
have legal title to the shares as set against its name in the
register of members. Once our register of members has been updated,
the shareholders recorded in the register of members are deemed to
have legal title to the shares set against their name.
If the name of any person is incorrectly entered in, or omitted
from, our register of members, or if there is any default or
unnecessary delay in entering on the register the fact of any
person having ceased to be a member of our Company, the person or
member aggrieved (or any member of our Company or our Company
itself) may apply to the Cayman Islands Grand Court for an order
that the register be rectified, and the Court may either refuse
such application or it may, if satisfied of the justice of the
case, make an order for the rectification of the register.
Indemnification of Directors and Executive Officers and
Limitation of Liability
Cayman Islands law does not limit the extent to which a company’s
M&A may provide for indemnification of officers and directors,
except to the extent any such provision may be held by the Cayman
Islands courts to be contrary to public policy, such as to provide
indemnification against civil fraud or the consequences of
committing a crime. Our M&A require us to indemnify our
officers and directors for actions, proceedings, claims, losses,
damages, costs, liabilities and expenses (“Indemnified Losses”)
incurred in their capacities as such unless such Indemnified Losses
arise from dishonesty of such directors or officers. This standard
of conduct is generally the same as permitted under the Delaware
General Corporation Law for a Delaware corporation.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers or
persons controlling us under the foregoing provisions, we have been
informed that in the opinion of the SEC, such indemnification is
against public policy as expressed in the Securities Act and is
therefore unenforceable.
Preferred Shares
As all the current authorized share capital is designated as
Ordinary Shares, shareholders’ special resolution will be needed to
amend the Company’s M&A to alter its authorized share capital
if the Company decides to issue preferred shares. After such
resolution and amendment, the Board is empowered to allot and/or
issue (with or without rights of renunciation), grant options over,
offer or otherwise deal with or dispose of any unissued shares of
the Company (whether forming part of the original or any increased
share capital), either at a premium or at par, with or without
preferred, deferred or other special rights or restrictions,
whether in regard to dividend, voting, return of capital or
otherwise and to such persons, on such terms and conditions, and at
such times as the Board may decide and they may allot or otherwise
dispose of them to such persons (including any director of the
Board) on such terms and conditions and at such time as the Board
may determine.
You should refer to the prospectus supplement relating to the
series of preferred shares being offered for the specific terms of
that series, including:
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title of the series and
the number of shares in the series; |
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the price at which the
preferred shares will be offered; |
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the dividend rate or
rates or method of calculating the rates, the dates on which the
dividends will be payable, whether or not dividends will be
cumulative or noncumulative and, if cumulative, the dates from
which dividends on the preferred shares being offered will
cumulate; |
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the voting rights, if
any, of the holders of preferred shares being offered; |
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the provisions for a
sinking fund, if any, and the provisions for redemption, if
applicable, of the preferred shares being offered, including any
restrictions on the foregoing as a result of arrearage in the
payment of dividends or sinking fund installments; |
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the liquidation
preference per share; |
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the terms and
conditions, if applicable, upon which the preferred shares being
offered will be convertible into our Ordinary Shares, including the
conversion price, or the manner of calculating the conversion
price, and the conversion period; |
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the terms and
conditions, if applicable, upon which the preferred shares being
offered will be exchangeable for debt securities, including the
exchange price, or the manner of calculating the exchange price,
and the exchange period; |
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any listing of the
preferred shares being offered on any securities
exchange; |
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a discussion of any
material federal income tax considerations applicable to the
preferred shares being offered; |
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the relative ranking and
preferences of the preferred shares being offered as to dividend
rights and rights upon liquidation, dissolution or the winding up
of our affairs; |
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any limitations on the
issuance of any class or series of preferred shares ranking senior
or equal to the series of preferred shares being offered as to
dividend rights and rights upon liquidation, dissolution or the
winding up of our affairs; and |
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any additional rights,
preferences, qualifications, limitations and restrictions of the
series. |
Upon issuance, the preferred shares will be fully paid and
nonassessable, which means that its holders will have paid their
purchase price in full and we may not require them to pay
additional funds.
Any preferred share terms selected by the Board could decrease the
amount of earnings and assets available for distribution to holders
of our Ordinary Shares or adversely affect the rights and power,
including voting rights, of the holders of our Ordinary Shares
without any further vote or action by the stockholders. The rights
of holders of our Ordinary Shares will be subject to, and may be
adversely affected by, the rights of the holders of any preferred
shares that may be issued by us in the future. The issuance of
preferred shares could also have the effect of delaying or
preventing a change in control of our company or make removal of
management more difficult.
Description of Debt
Securities
As used in this prospectus, the term “debt securities” means the
debentures, notes, bonds and other evidences of indebtedness that
we may issue from time to time. The debt securities will either be
senior debt securities, senior subordinated debt or subordinated
debt securities. We may also issue convertible debt securities.
Debt securities issued under an indenture (which we refer to herein
as an Indenture) will be entered into between us and a trustee to
be named therein. It is likely that convertible debt securities
will not be issued under an Indenture.
The Indenture or forms of Indentures, if any, will be filed as
exhibits to the registration statement of which this prospectus is
a part.
As you read this section, please remember that for each series
of debt securities, the specific terms of your debt security as
described in the applicable prospectus supplement will supplement
and, if applicable, may modify or replace the general terms
described in the summary below. The statement we make in this
section may not apply to your debt security.
Events of Default Under the Indenture
Unless we provide otherwise in the prospectus supplement or free
writing prospectus applicable to a particular series of debt
securities, the following are events of default under the
indentures with respect to any series of debt securities that we
may issue:
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if we fail to pay the
principal or premium, if any, when due and payable at maturity,
upon redemption or repurchase or otherwise; |
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if we fail to pay
interest when due and payable and our failure continues for certain
days; |
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if we fail to observe or
perform any other covenant contained in the Securities of a Series
or in this Indenture, and our failure continues for certain days
after we receive written notice from the trustee or holders of at
least certain percentage in aggregate principal amount of the
outstanding debt securities of the applicable series. The written
notice must specify the Default, demand that it be remedied and
state that the notice is a “Notice of Default”; |
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if specified events of
bankruptcy, insolvency or reorganization occur; and |
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if any other event of
default provided with respect to securities of that series, which
is specified in a Board Resolution, a supplemental indenture hereto
or an Officers’ Certificate as defined in the Form of
Indenture. |
We covenant in the Form of Indenture to deliver a certificate to
the trustee annually, within certain days after the close of the
fiscal year, to show that we are in compliance with the terms of
the indenture and that we have not defaulted under the
indenture.
Nonetheless, if we issue debt securities, the terms of the debt
securities and the final form of indenture will be provided in a
prospectus supplement. Please refer to the prospectus supplement
and the form of indenture attached thereto for the terms and
conditions of the offered debt securities. The terms and conditions
may or may not include whether or not we must furnish periodic
evidence showing that an event of default does not exist or that we
are in compliance with the terms of the indenture.
The statements and descriptions in this prospectus or in any
prospectus supplement regarding provisions of the Indentures and
debt securities are summaries thereof, do not purport to be
complete and are subject to, and are qualified in their entirety by
reference to, all of the provisions of the Indentures (and any
amendments or supplements we may enter into from time to time which
are permitted under each Indenture) and the debt securities,
including the definitions therein of certain terms.
General
Unless otherwise specified in a prospectus supplement, the debt
securities will be direct secured or unsecured obligations of our
company. The senior debt securities will rank equally with any of
our other unsecured senior and unsubordinated debt. The
subordinated debt securities will be subordinate and junior in
right of payment to any senior indebtedness.
We may issue debt securities from time to time in one or more
series, in each case with the same or various maturities, at par or
at a discount. Unless indicated in a prospectus supplement, we may
issue additional debt securities of a particular series without the
consent of the holders of the debt securities of such series
outstanding at the time of the issuance. Any such additional debt
securities, together with all other outstanding debt securities of
that series, will constitute a single series of debt securities
under the applicable Indenture and will be equal in ranking.
Should an indenture relate to unsecured indebtedness, in the event
of a bankruptcy or other liquidation event involving a distribution
of assets to satisfy our outstanding indebtedness or an event of
default under a loan agreement relating to secured indebtedness of
our company or its subsidiaries, the holders of such secured
indebtedness, if any, would be entitled to receive payment of
principal and interest prior to payments on the senior indebtedness
issued under an Indenture.
Prospectus Supplement
Each prospectus supplement will describe the terms relating to the
specific series of debt securities being offered. These terms will
include some or all of the following:
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the title of debt
securities and whether they are subordinated, senior subordinated
or senior debt securities; |
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any limit on the
aggregate principal amount of debt securities of such
series; |
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● |
the percentage of the
principal amount at which the debt securities of any series will be
issued; |
|
● |
the ability to issue
additional debt securities of the same series; |
|
● |
the purchase price for
the debt securities and the denominations of the debt
securities; |
|
● |
the specific designation
of the series of debt securities being offered; |
|
● |
the maturity date or
dates of the debt securities and the date or dates upon which the
debt securities are payable and the rate or rates at which the debt
securities of the series shall bear interest, if any, which may be
fixed or variable, or the method by which such rate shall be
determined; |
|
● |
the basis for
calculating interest if other than 360-day year or twelve 30-day
months; |
|
● |
the date or dates from
which any interest will accrue or the method by which such date or
dates will be determined; |
|
● |
the duration of any
deferral period, including the maximum consecutive period during
which interest payment periods may be extended; |
|
● |
whether the amount of
payments of principal of (and premium, if any) or interest on the
debt securities may be determined with reference to any index,
formula or other method, such as one or more currencies,
commodities, equity indices or other indices, and the manner of
determining the amount of such payments; |
|
● |
the dates on which we
will pay interest on the debt securities and the regular record
date for determining who is entitled to the interest payable on any
interest payment date; |
|
● |
the place or places
where the principal of (and premium, if any) and interest on the
debt securities will be payable, where any securities may be
surrendered for registration of transfer, exchange or conversion,
as applicable, and notices and demands may be delivered to or upon
us pursuant to the applicable Indenture; |
|
● |
the rate or rates of
amortization of the debt securities; |
|
● |
if we possess the option
to do so, the periods within which and the prices at which we may
redeem the debt securities, in whole or in part, pursuant to
optional redemption provisions, and the other terms and conditions
of any such provisions; |
|
● |
our obligation or
discretion, if any, to redeem, repay or purchase debt securities by
making periodic payments to a sinking fund or through an analogous
provision or at the option of holders of the debt securities, and
the period or periods within which and the price or prices at which
we will redeem, repay or purchase the debt securities, in whole or
in part, pursuant to such obligation, and the other terms and
conditions of such obligation; |
|
● |
the terms and
conditions, if any, regarding the option or mandatory conversion or
exchange of debt securities; |
|
● |
the period or periods
within which, the price or prices at which and the terms and
conditions upon which any debt securities of the series may be
redeemed, in whole or in part at our option and, if other than by a
board resolution, the manner in which any election by us to redeem
the debt securities shall be evidenced; |
|
● |
any restriction or
condition on the transferability of the debt securities of a
particular series; |
|
● |
the portion, or methods
of determining the portion, of the principal amount of the debt
securities which we must pay upon the acceleration of the maturity
of the debt securities in connection with any event of default if
other than the full principal amount; |
|
● |
the currency or
currencies in which the debt securities will be denominated and in
which principal, any premium and any interest will or may be
payable or a description of any units based on or relating to a
currency or currencies in which the debt securities will be
denominated; |
|
● |
provisions, if any,
granting special rights to holders of the debt securities upon the
occurrence of specified events; |
|
● |
any deletions from,
modifications of or additions to the events of default or our
covenants with respect to the applicable series of debt securities,
and whether or not such events of default or covenants are
consistent with those contained in the applicable
Indenture; |
|
● |
any limitation on our
ability to incur debt, redeem stock, sell our assets or other
restrictions; |
|
● |
the application, if any,
of the terms of the applicable Indenture relating to defeasance and
covenant defeasance (which terms are described below) to the debt
securities; |
|
● |
what subordination
provisions will apply to the debt securities; |
|
● |
the terms, if any, upon
which the holders may convert or exchange the debt securities into
or for our Ordinary Shares, preferred shares or other securities or
property; |
|
● |
whether we are issuing
the debt securities in whole or in part in global form; |
|
● |
any change in the right
of the trustee or the requisite holders of debt securities to
declare the principal amount thereof due and payable because of an
event of default; |
|
● |
the depositary for
global or certificated debt securities, if any; |
|
● |
any material federal
income tax consequences applicable to the debt securities,
including any debt securities denominated and made payable, as
described in the prospectus supplements, in foreign currencies, or
units based on or related to foreign currencies; |
|
● |
any right we may have to
satisfy, discharge and defease our obligations under the debt
securities, or terminate or eliminate restrictive covenants or
events of default in the Indentures, by depositing money or U.S.
government obligations with the trustee of the
Indentures; |
|
● |
the names of any
trustees, depositories, authenticating or paying agents, transfer
agents or registrars or other agents with respect to the debt
securities; |
|
● |
to whom any interest on
any debt security shall be payable, if other than the person in
whose name the security is registered, on the record date for such
interest, the extent to which, or the manner in which, any interest
payable on a temporary global debt security will be paid if other
than in the manner provided in the applicable
Indenture; |
|
● |
if the principal of or
any premium or interest on any debt securities is to be payable in
one or more currencies or currency units other than as stated, the
currency, currencies or currency units in which it shall be paid
and the periods within and terms and conditions upon which such
election is to be made and the amounts payable (or the manner in
which such amount shall be determined); |
|
● |
the portion of the
principal amount of any debt securities which shall be payable upon
declaration of acceleration of the maturity of the debt securities
pursuant to the applicable Indenture if other than the entire
principal amount; |
|
● |
if the principal amount
payable at the stated maturity of any debt security of the series
will not be determinable as of any one or more dates prior to the
stated maturity, the amount which shall be deemed to be the
principal amount of such debt securities as of any such date for
any purpose, including the principal amount thereof which shall be
due and payable upon any maturity other than the stated maturity or
which shall be deemed to be outstanding as of any date prior to the
stated maturity (or, in any such case, the manner in which such
amount deemed to be the principal amount shall be determined);
and |
|
● |
any other specific terms
of the debt securities, including any modifications to the events
of default under the debt securities and any other terms which may
be required by or advisable under applicable laws or
regulations. |
Unless otherwise specified in the applicable prospectus supplement,
the debt securities will not be listed on any securities exchange.
Holders of the debt securities may present registered debt
securities for exchange or transfer in the manner described in the
applicable prospectus supplement. Except as limited by the
applicable Indenture, we will provide these services without
charge, other than any tax or other governmental charge payable in
connection with the exchange or transfer.
Debt securities may bear interest at a fixed rate or a variable
rate as specified in the prospectus supplement. In addition, if
specified in the prospectus supplement, we may sell debt securities
bearing no interest or interest at a rate that at the time of
issuance is below the prevailing market rate, or at a discount
below their stated principal amount. We will describe in the
applicable prospectus supplement any special federal income tax
considerations applicable to these discounted debt securities.
We may issue debt securities with the principal amount payable on
any principal payment date, or the amount of interest payable on
any interest payment date, to be determined by referring to one or
more currency exchange rates, commodity prices, equity indices or
other factors. Holders of such debt securities may receive a
principal amount on any principal payment date, or interest
payments on any interest payment date, that are greater or less
than the amount of principal or interest otherwise payable on such
dates, depending upon the value on such dates of applicable
currency, commodity, equity index or other factors. The applicable
prospectus supplement will contain information as to how we will
determine the amount of principal or interest payable on any date,
as well as the currencies, commodities, equity indices or other
factors to which the amount payable on that date relates and
certain additional tax considerations.
Description of
Warrants
We may issue warrants to purchase our Ordinary Shares or preferred
shares. Warrants may be issued independently or together with any
other securities that may be sold by us pursuant to this prospectus
or any combination of the foregoing and may be attached to, or
separate from, such securities. To the extent warrants that we
issue are to be publicly-traded, each series of such warrants will
be issued under a separate warrant agreement to be entered into
between us and a warrant agent. While the terms we have summarized
below will apply generally to any warrants that we may offer under
this prospectus, we will describe in particular the terms of any
series of warrants that we may offer in more detail in the
applicable prospectus supplement and any applicable free writing
prospectus. The terms of any warrants offered under a prospectus
supplement may differ from the terms described below.
We will file as exhibits to the registration statement of which
this prospectus is a part, or will incorporate by reference from
another report that we file with the SEC, the form of the warrant
and/or warrant agreement, if any, which may include a form of
warrant certificate, as applicable that describes the terms of the
particular series of warrants we may offer before the issuance of
the related series of warrants. We may issue the warrants under a
warrant agreement that we will enter into with a warrant agent to
be selected by us. The warrant agent will act solely as our agent
in connection with the warrants and will not assume any obligation
or relationship of agency or trust for or with any registered
holders of warrants or beneficial owners of warrants. The following
summary of material provisions of the warrants and warrant
agreements is subject to, and qualified in its entirety by
reference to, all the provisions of the form of warrant and/or
warrant agreement and warrant certificate applicable to a
particular series of warrants. We urge you to read the applicable
prospectus supplement and any related free writing prospectus, as
well as the complete form of warrant and/or the warrant agreement
and warrant certificate, as applicable, that contain the terms of
the warrants.
The particular terms of any issue of warrants will be described in
the prospectus supplement relating to the issue. Those terms may
include:
|
● |
the title of the
warrants; |
|
● |
the price or prices at
which the warrants will be issued; |
|
● |
the designation, amount
and terms of the securities or other rights for which the warrants
are exercisable; |
|
● |
the designation and
terms of the other securities, if any, with which the warrants are
to be issued and the number of warrants issued with each other
security; |
|
● |
the aggregate number of
warrants; |
|
● |
any provisions for
adjustment of the number or amount of securities receivable upon
exercise of the warrants or the exercise price of the
warrants; |
|
● |
the price or prices at
which the securities or other rights purchasable upon exercise of
the warrants may be purchased; |
|
● |
if applicable, the date
on and after which the warrants and the securities or other rights
purchasable upon exercise of the warrants will be separately
transferable; |
|
● |
a discussion of any
material U.S. federal income tax considerations applicable to the
exercise of the warrants; |
|
● |
the date on which the
right to exercise the warrants will commence, and the date on which
the right will expire; |
|
● |
the maximum or minimum
number of warrants that may be exercised at any time; |
|
● |
information with respect
to book-entry procedures, if any; and |
|
● |
any other terms of the
warrants, including terms, procedures and limitations relating to
the exchange and exercise of the warrants. |
Exercise of Warrants
Each warrant will entitle the holder of warrants to purchase the
number of Ordinary Shares or preferred shares of the relevant class
or series at the exercise price stated or determinable in the
prospectus supplement for the warrants. Warrants may be exercised
at any time up to the close of business on the expiration date
shown in the applicable prospectus supplement, unless otherwise
specified in such prospectus supplement. After the close of
business on the expiration date, if applicable, unexercised
warrants will become void. Warrants may be exercised in the manner
described in the applicable prospectus supplement. When the warrant
holder makes the payment and properly completes and signs the
warrant certificate at the corporate trust office of the warrant
agent, if any, or any other office indicated in the prospectus
supplement, we will, as soon as possible, forward the securities or
other rights that the warrant holder has purchased. If the warrant
holder exercises less than all of the warrants represented by the
warrant certificate, we will issue a new warrant certificate for
the remaining warrants. If we so indicate in the applicable
prospectus supplement, holders of the warrants may surrender
securities as all or part of the exercise price for
warrants.
Prior to the exercise of any warrants to purchase Ordinary Shares
or preferred shares of the relevant class or series, holders of the
warrants will not have any of the rights of holders of Ordinary
Shares or preferred shares purchasable upon exercise, including the
right to vote or to receive any payments of dividends or payments
upon our liquidation, dissolution or winding up on the Ordinary
Shares or preferred shares purchasable upon exercise, if
any.
Outstanding Warrants
As of the date of this prospectus, there is an outstanding warrant
to purchase 1,350,068 Ordinary Shares.
Description of
Rights
We may issue rights to purchase our securities. The rights may or
may not be transferable by the persons purchasing or receiving the
rights. In connection with any rights offering, we may enter into a
standby underwriting or other arrangement with one or more
underwriters or other persons pursuant to which such underwriters
or other persons would purchase any offered securities remaining
unsubscribed for after such rights offering. Each series of rights
will be issued under a separate rights agent agreement to be
entered into between us and one or more banks, trust companies or
other financial institutions, as rights agent, that we will name in
the applicable prospectus supplement. The rights agent will act
solely as our agent in connection with the rights and will not
assume any obligation or relationship of agency or trust for or
with any holders of rights certificates or beneficial owners of
rights.
The prospectus supplement relating to any rights that we offer will
include specific terms relating to the offering, including, among
other matters:
|
● |
the date of determining
the security holders entitled to the rights
distribution; |
|
● |
the aggregate number of
rights issued and the aggregate amount of securities purchasable
upon exercise of the rights; |
|
● |
the conditions to
completion of the rights offering; |
|
● |
the date on which the
right to exercise the rights will commence and the date on which
the rights will expire; and |
|
● |
any applicable federal
income tax considerations. |
Each right would entitle the holder of the rights to purchase for
cash the principal amount of securities at the exercise price set
forth in the applicable prospectus supplement. Rights may be
exercised at any time up to the close of business on the expiration
date for the rights provided in the applicable prospectus
supplement. After the close of business on the expiration date, all
unexercised rights will become void.
If less than all of the rights issued in any rights offering are
exercised, we may offer any unsubscribed securities directly to
persons other than our security holders, to or through agents,
underwriters or dealers or through a combination of such methods,
including pursuant to standby arrangements, as described in the
applicable prospectus supplement.
Description of
Units
The following description, together with the additional information
we may include in any applicable prospectus supplement, summarizes
the material terms and provisions of the units that we may offer
under this prospectus. While the terms we have summarized below
will apply generally to any units that we may offer under this
prospectus, we will describe the particular terms of any series of
units in more detail in the applicable prospectus supplement and
any related free writing prospectus. The terms of any units offered
under a prospectus supplement may differ from the terms described
below. However, no prospectus supplement will fundamentally change
the terms that are set forth in this prospectus or offer a security
that is not registered and described in this prospectus at the time
of its effectiveness.
We will file as an exhibit to the registration statement of which
this prospectus is a part, or will incorporate by reference from
another report we file with the SEC, the form of unit agreement
that describes the terms of the series of units we may offer under
this prospectus, and any supplemental agreements, before the
issuance of the related series of units. The following summaries of
material terms and provisions of the units are subject to, and
qualified in their entirety by reference to, all the provisions of
the unit agreement and any supplemental agreements applicable to a
particular series of units. We urge you to read the applicable
prospectus supplement and any related free writing prospectus, as
well as the complete unit agreement and any supplemental agreements
that contain the terms of the units.
We may issue units consisting of any combination of the other types
of securities offered under this prospectus in one or more series.
We may evidence each series of units by unit certificates that we
may issue under a separate agreement. We may enter into unit
agreements with a unit agent. Each unit agent, if any, may be a
bank or trust company that we select. We will indicate the name and
address of the unit agent, if any, in the applicable prospectus
supplement relating to a particular series of units. Specific unit
agreements, if any, will contain additional important terms and
provisions. We will file as an exhibit to the registration
statement of which this prospectus is a part, or will incorporate
by reference from a current report that we file with the SEC, the
form of unit and the form of each unit agreement, if any, relating
to units offered under this prospectus.
If we offer any units, certain terms of that series of units will
be described in the applicable prospectus supplement, including,
without limitation, the following, as applicable
|
● |
the title of the series
of units; |
|
● |
identification and
description of the separate constituent securities comprising the
units; |
|
● |
the price or prices at
which the units will be issued; |
|
● |
the date, if any, on and
after which the constituent securities comprising the units will be
separately transferable; |
|
● |
a discussion of certain
United States federal income tax considerations applicable to the
units; and |
|
● |
any other material terms
of the units and their constituent securities. |
The provisions described in this section, as well as those
described under “Description of Share Capital - Ordinary Shares and
Preferred Shares” and “Description of Warrants” will apply to each
unit and to any Ordinary Shares, preferred shares or warrant
included in each unit, respectively.
Issuance in Series
We may issue units in such amounts and in numerous distinct series
as we determine.
Transfer Agent and Registrar
The transfer agent and registrar for our Ordinary Shares is
Transhare Corporation, located in Clearwater, Florida. Their
mailing address is 2849 Executive Drive, Suite 2800, Clearwater, FL
33762. Their phone number is (303) 662-1112.
NASDAQ Capital Market Listing
Our Ordinary Shares are listed on the NASDAQ Capital Market under
the symbol “ZCMD.”
PLAN OF
DISTRIBUTION
We may sell the securities offered through this prospectus (i) to
or through underwriters or dealers, (ii) directly to purchasers,
including our affiliates, (iii) through agents, or (iv) through a
combination of any these methods. The securities may be distributed
at a fixed price or prices, which may be changed, market prices
prevailing at the time of sale, prices related to the prevailing
market prices, or negotiated prices. The prospectus supplement will
include the following information:
|
● |
the terms of the
offering; |
|
● |
the names of any
underwriters or agents; |
|
● |
the name or names of any
managing underwriter or underwriters; |
|
● |
the purchase price of
the securities; |
|
● |
any over-allotment
options under which underwriters may purchase additional securities
from us; |
|
● |
the net proceeds from
the sale of the securities; |
|
● |
any delayed delivery
arrangements; |
|
● |
any underwriting
discounts, commissions and other items constituting underwriters’
compensation; |
|
● |
any initial public
offering price; |
|
● |
any discounts or
concessions allowed or reallowed or paid to dealers; |
|
● |
any commissions paid to
agents; and |
|
● |
any securities exchange
or market on which the securities may be listed. |
Sale Through Underwriters or Dealers
Only underwriters named in the prospectus supplement are
underwriters of the securities offered by the prospectus
supplement. If underwriters are used in the sale, the underwriters
will acquire the securities for their own account, including
through underwriting, purchase, security lending or repurchase
agreements with us. The underwriters may resell the securities from
time to time in one or more transactions, including negotiated
transactions. Underwriters may sell the securities in order to
facilitate transactions in any of our other securities (described
in this prospectus or otherwise), including other public or private
transactions and short sales. Underwriters may offer securities to
the public either through underwriting syndicates represented by
one or more managing underwriters or directly by one or more firms
acting as underwriters. Unless otherwise indicated in the
prospectus supplement, the obligations of the underwriters to
purchase the securities will be subject to certain conditions, and
the underwriters will be obligated to purchase all the offered
securities if they purchase any of them. The underwriters may
change from time to time any public offering price and any
discounts or concessions allowed or reallowed or paid to
dealers.
If dealers are used in the sale of securities offered through this
prospectus, we will sell the securities to them as principals. They
may then resell those securities to the public at varying prices
determined by the dealers at the time of resale. The prospectus
supplement will include the names of the dealers and the terms of
the transaction.
We will provide in the applicable prospectus supplement any
compensation we will pay to underwriters, dealers or agents in
connection with the offering of the securities, and any discounts,
concessions or commissions allowed by underwriters to participating
dealers.
Direct Sales and Sales Through Agents
We may sell the securities offered through this prospectus
directly. In this case, no underwriters or agents would be
involved. Such securities may also be sold through agents
designated from time to time. The prospectus supplement will name
any agent involved in the offer or sale of the offered securities
and will describe any commissions payable to the agent. Unless
otherwise indicated in the prospectus supplement, any agent will
agree to use its reasonable best efforts to solicit purchases for
the period of its appointment.
We may sell the securities directly to institutional investors or
others who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any sale of those securities.
The terms of any such sales will be described in the prospectus
supplement.
Delayed Delivery Contracts
If the prospectus supplement indicates, we may authorize agents,
underwriters or dealers to solicit offers from certain types of
institutions to purchase securities at the public offering price
under delayed delivery contracts. These contracts would provide for
payment and delivery on a specified date in the future. The
contracts would be subject only to those conditions described in
the prospectus supplement. The applicable prospectus supplement
will describe the commission payable for solicitation of those
contracts.
Market Making, Stabilization and Other Transactions
Unless the applicable prospectus supplement states otherwise, other
than our Ordinary Shares, all securities we offer under this
prospectus will be a new issue and will have no established trading
market. We may elect to list offered securities on an exchange or
in the over-the-counter market. Any underwriters that we use in the
sale of offered securities may make a market in such securities,
but may discontinue such market making at any time without notice.
Therefore, we cannot assure you that the securities will have a
liquid trading market.
Any underwriter may also engage in stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with
Rule 104 under the Securities Exchange Act. Stabilizing
transactions involve bids to purchase the underlying security in
the open market for the purpose of pegging, fixing or maintaining
the price of the securities. Syndicate covering transactions
involve purchases of the securities in the open market after the
distribution has been completed in order to cover syndicate short
positions.
Penalty bids permit the underwriters to reclaim a selling
concession from a syndicate member when the securities originally
sold by the syndicate member are purchased in a syndicate covering
transaction to cover syndicate short positions. Stabilizing
transactions, syndicate covering transactions and penalty bids may
cause the price of the securities to be higher than it would be in
the absence of the transactions. The underwriters may, if they
commence these transactions, discontinue them at any time.
General Information
Agents, underwriters, and dealers may be entitled, under agreements
entered into with us, to indemnification by us against certain
liabilities, including liabilities under the Securities Act. Our
agents, underwriters, and dealers, or their affiliates, may be
customers of, engage in transactions with or perform services for
us, in the ordinary course of business.
LEGAL MATTERS
Except as otherwise set forth in the applicable prospectus
supplement, certain legal matters in connection with the securities
offered pursuant to this prospectus will be passed upon for us by
Hunter Taubman Fischer & Li LLC to the extent governed by the
laws of the State of New York, and by Ogier to the extent governed
by the laws of the Cayman Islands. If legal matters in
connection with offerings made pursuant to this prospectus are
passed upon by counsel to underwriters, dealers or agents, such
counsel will be named in the applicable prospectus supplement
relating to any such offering.
EXPERTS
The consolidated financial statements as of December 31, 2020
and 2019 and for the years ended December 31, 2020, 2019 and
2018, incorporated by reference from the Company’s Annual
Report on Form 20-F for the year ended December 31, 2020 have been
audited by Marcum Bernstein & Pinchuk LLP, an independent
registered public accounting firm, as set forth in their report,
which is incorporated herein by reference, and are included in
reliance upon such report given on the authority of such firm as
experts in accounting and auditing. The office of Marcum Bernstein
& Pinchuk LLP is located at Suite 830, 7 Penn Plaza, New York,
New York, 10001.
FINANCIAL
INFORMATION
The financial statements as of December 31, 2020 and 2019 for the
years ended December 31, 2020, 2019 and 2018 are included in our
Annual Report on Form 20-F, which are incorporated by reference
into this prospectus.
INFORMATION INCORPORATED
BY REFERENCE
The SEC allows us to “incorporate by reference” into this
prospectus the information we file with the SEC. This means that we
can disclose important information to you by referring you to those
documents. Any statement contained in a document incorporated by
reference in this prospectus shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a
statement contained herein, or in any subsequently filed document,
which also is incorporated by reference herein, modifies or
supersedes such earlier statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this prospectus.
We hereby incorporate by reference into this prospectus the
following documents that we have filed with the SEC under the
Exchange Act:
|
(1) |
the Company’s Annual
Report on Form
20-F for the fiscal year ended December 31, 2020, filed
with the SEC on April 30, 2021; |
|
(3) |
the description of our
Ordinary Shares incorporated by reference in our registration
statement on
Form 8-A, as amended (File No. 001-39229) filed with the
Commission on February 13, 2020, including any amendment and report
subsequently filed for the purpose of updating that description;
and |
All documents that we file with the SEC pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act (and in the case of a
Current Report on Form 6-K, so long as they state that they are incorporated by
reference into this prospectus, and other than Current
Reports on Form 6-K, or portions thereof, furnished under Form 6-K)
(i) after the initial filing date of the registration statement of
which this prospectus forms a part and prior to the effectiveness
of such registration statement and (ii) after the date of this
prospectus and prior to the termination of the offering shall be
deemed to be incorporated by reference in this prospectus from the
date of filing of the documents, unless we specifically provide
otherwise. Information that we file with the SEC will automatically
update and may replace information previously filed with the SEC.
To the extent that any information contained in any Current Report
on Form 6-K or any exhibit thereto, was or is furnished to, rather
than filed with the SEC, such information or exhibit is
specifically not incorporated by reference.
Upon request, we will provide, without charge, to each person who
receives this prospectus, a copy of any or all of the documents
incorporated by reference (other than exhibits to the documents
that are not specifically incorporated by reference in the
documents). Please direct written or oral requests for copies to us
at 841 Yan’an Middle Road, Jing’An District, Shanghai, China
200040, Attention: Weiguang Yang, 021-32205987.
WHERE YOU CAN FIND MORE
INFORMATION
As permitted by SEC rules, this prospectus omits certain
information and exhibits that are included in the registration
statement of which this prospectus forms a part. Since this
prospectus may not contain all of the information that you may find
important, you should review the full text of these documents. If
we have filed a contract, agreement or other document as an exhibit
to the registration statement of which this prospectus forms a
part, you should read the exhibit for a more complete understanding
of the document or matter involved. Each statement in this
prospectus, including statements incorporated by reference as
discussed above, regarding a contract, agreement or other document
is qualified in its entirety by reference to the actual
document.
We are subject to the information reporting requirements of
the Exchange Act that are applicable to foreign private
issuers, and, in accordance with these requirements, we file annual
and current reports and other information with the SEC. You may
inspect, read (without charge) and copy the reports and other
information we file with the SEC at the SEC’s Public Reference Room
located at 100 F Street, N.E., Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC also maintains an
internet website at www.sec.gov that contains our
filed reports and other information that we file electronically
with the SEC.
We maintain a corporate website at http://izcmd.com. Information
contained on, or that can be accessed through, our website does not
constitute a part of this prospectus.
ENFORCEABILITY OF CIVIL
LIABILITIES
We are incorporated under the laws of the Cayman Islands as an
exempted company with limited liability. We incorporated in the
Cayman Islands because of certain benefits associated with being a
Cayman Islands exempted company, such as political and economic
stability, an effective judicial system, a favorable tax system,
the absence of foreign exchange control or currency restrictions
and the availability of professional and support services. However,
the Cayman Islands have a less developed body of securities laws
that provide significantly less protection to investors as compared
to the securities laws of the United States. In addition, Cayman
Islands companies may not have standing to sue before the federal
courts of the United States.
All of our assets are located in China. In addition, some of our
directors and officers are residents of jurisdictions other than
the United States and all or a substantial portion of their assets
are located outside the United States. As a result, it may be
difficult for investors to effect service of process within the
United States upon us or our directors and officers, or to enforce
against us or them judgments obtained in United States courts,
including judgments predicated upon the civil liability provisions
of the securities laws of the United States or any state in the
United States.
According to our local Cayman Islands’ counsel, there is
uncertainty with regard to Cayman Islands law relating to whether a
judgment obtained from the United States or Hong Kong courts under
civil liability provisions of the securities laws will be
determined by the courts of the Cayman Islands as penal or punitive
in nature. If such a determination is made, the courts of the
Cayman Islands will not recognize or enforce the judgment against a
Cayman Islands’ company. The courts of the Cayman Islands in the
past determined that disgorgement proceedings brought at the
instance of the Securities and Exchange Commission are penal or
punitive in nature and such judgments would not be enforceable in
the Cayman Islands. Other civil liability provisions of the
securities laws may be characterized as remedial, and therefore
enforceable but the Cayman Islands’ Courts have not yet ruled in
this regard. Our Cayman Islands’ counsel has further advised us
that a final and conclusive judgment in the federal or state courts
of the United States under which a sum of money is payable other
than a sum payable in respect of taxes, fines, penalties or similar
charges, may be subject to enforcement proceedings as a debt in the
courts of the Cayman Islands.
As of the date hereof, no treaty or other form of reciprocity
exists between the Cayman Islands and Hong Kong governing the
recognition and enforcement of judgments.
Cayman Islands’ counsel further advised that although there is no
statutory enforcement in the Cayman Islands of judgments obtained
in the United States or Hong Kong, a judgment obtained in such
jurisdictions will be recognized and enforced in the courts of the
Cayman Islands at common law, without any re-examination of the
merits of the underlying dispute, by an action commenced on the
foreign judgment debt in the Grand Court of the Cayman Islands,
provided such judgment (1) is given by a foreign court of competent
jurisdiction, (2) imposes on the judgment debtor a liability to pay
a liquidated sum for which the judgment has been given, (3) is
final, (4) is not in respect of taxes, a fine or a penalty, and (5)
was not obtained in a manner and is of a kind the enforcement of
which is contrary to natural justice or the public policy of the
Cayman Islands.
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to our directors,
officers and controlling persons pursuant to the foregoing
provisions, or otherwise, we have been informed that in the opinion
of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable.
$10,400,000
Class A Ordinary Shares
U.S. TIGER SECURITIES, INC.
The date of this Prospectus Supplement is December 17,
2021.
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