ZCMD Zhongchao Inc

As filed with the Securities and Exchange Commission on December 18, 2024

Registration No. 333-             

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM F-3

 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

Zhongchao Inc.

(Exact name of registrant as specified in its charter)

 

Cayman Islands		N/A
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

 

Nanxi Creative Center, Suite 216

841 Yan’an Middle Road

Jing’An District, Shanghai, China 200040

Tel: +86 21-32205987

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Puglisi & Associates

850 Library Avenue

Suite 204

Newark, Delaware 19711

(Name, address, including zip code, and telephone number, including area code, of agent for service)  

 

Copies to:

 

Wei Wang Esq.

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas

New York, NY 10105

Phone: (212) 370-1300

Fax: (212) 370-7889

 

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of the registration statement.

 

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ☐

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a registration statement pursuant to General Instruction I.C. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☐

 

If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.C. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ☐

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

 

Emerging growth company ☒

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

†

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

The information in this prospectus is not complete and may be changed. The Selling Shareholders 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 DECEMBER 18, 2024

 

PROSPECTUS  

 

 

Zhongchao Inc.

19,600,000 Class A Ordinary Shares

 

This prospectus relates to the resale, from time to time, of up to an aggregate of 19,600,000 Class A ordinary shares, par value US$0.001 per share (the “Class A Ordinary Shares”), consisting of (i) 10,000,000 Class A Ordinary Shares issued in the Private Placement (as defined below) and (ii) 9,600,000 Class A Ordinary Shares issued upon cashless exercise of certain warrants (the “Warrants”) of Zhongchao Inc., a Cayman Islands exempted company (“Zhognchao Cayman,” collectively with its subsidiaries, “we,” “us,” “our,” “our company,” the “Company,” or similar terms), which may be offered and sold from time to time by shareholders set forth in the “Selling Shareholders” section of this prospectus (the “Selling Shareholders”). The Selling Shareholders acquired the Class A Ordinary Shares and the Warrants pursuant to certain securities purchase agreements, dated as of November 14, 2024 (the “Securities Purchase Agreements”) by and among us and the purchasers named therein. The Class A Ordinary Shares and Warrants were issued to the Selling Shareholders in a private placement (the “Private Placement”) pursuant to an exemption from registration under the Securities Act of 1933, as amended, in reliance upon Regulation S promulgated thereunder. On December 12, 2024, the Company issued an aggregate of 9,600,000 Class A Ordinary Shares to the Selling Shareholders upon the cashless exercise of the Warrants pursuant to the terms of the Warrants.

 

The Selling Shareholders will receive all of the net proceeds from the sale of the Class A Ordinary Shares offered hereby. The Selling Shareholders may resell the Class A Ordinary Shares offered for resale through this prospectus to or through underwriters, broker-dealers, or agents, who may receive compensation in the form of discounts, concessions or commissions. We will not receive any proceeds from the sale of these shares by the Selling Shareholders, but we will bear all costs, fees and expenses in connection with the registration of the Class A Ordinary Shares offered by the Selling Shareholders. The Selling Shareholders will bear all commissions and discounts, if any, attributable to the sale of the Class A Ordinary Shares offered for resale through this prospectus.

 

The Selling Shareholders will determine where they may sell the shares through public or private transactions at market prices prevailing at the time of sale, at prices related to the prevailing market prices, or at negotiated prices. For information regarding the Selling Shareholders and the times and manner in which they may offer or sell Class A Ordinary Shares, see “Selling Shareholders” and “Plan of Distribution.”

 

Our Class A Ordinary Shares are listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “ZCMD.” As of December 16, 2024, the closing sale price of our Class A Ordinary Shares was US$2.06.

  

Zhongchao Cayman is an offshore holding company incorporated as an exempted company with limited liability in the Cayman Islands. Zhongchao Cayman is not a Chinese operating company, but a Cayman Islands holding company with no material operations of its own. Zhongchao Cayman, through the contractual arrangements (the “Contractual Arrangements”), between Beijing Zhongchao Zhongxing Technology Limited (“Zhongchao WFOE”), a wholly-owned subsidiary of Zhongchao Cayman incorporated in the People’s Republic of China (the “PRC” or “China”), and a variable interest entity (the “VIE”), Zhongchao Medical Technology (Shanghai) Co., Ltd. (“Zhongchao Shanghai”) and its subsidiaries (collectively with the VIE, the “PRC operating entities”), consolidate the financial results of the PRC operating entities. We chose such VIE structure due to the restrictions imposed by PRC laws and regulations on foreign ownership of companies engaged in value-added telecommunication services and certain other businesses, and the PRC operating entities operate their businesses in which foreign investment is restricted or prohibited in the PRC. For a description of the VIE contractual arrangements, see “Prospectus Summary — Our Corporate Structure — Contractual Arrangements between Zhongchao WFOE and Zhongchao Shanghai” starting on page 6 of this prospectus.

 

 

You are not investing in the PRC operating entities. The securities offered under this prospectus are securities of Zhongchao Cayman, the Cayman Islands holding company, rather than any securities of the PRC operating entities, therefore, our investors may never hold equity interests in the PRC operating entities. Neither we nor our subsidiaries own any share or equity interest in the PRC operating entities. Instead, we consolidate financial results of the PRC operating entities through the Contractual Arrangements by and among Zhongchao WFOE, the VIE and shareholders of the VIE. As a result of Zhongchao Cayman’s direct ownership in Zhongchao WFOE and the Contractual Arrangements, we treat the VIE and the VIE’s subsidiaries as the consolidated entities under U.S. GAAP. We have consolidated the financial results of the VIE and the VIE’s subsidiaries in our consolidated financial statements for accounting purposes in accordance with U.S. GAAP.

 

The VIE structure is used to provide investors with exposure to foreign investment in China-based companies where Chinese law prohibits direct foreign investment in the operating companies. As we chose such VIE structure, we are subject to certain unique risks and uncertainties that may not otherwise exist if we had direct equity ownership in the PRC operating entities. Further, 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, limitations on foreign ownership and regulatory review of overseas listings of PRC companies through a special purpose vehicle, and the validity and enforcement of the Contractual Arrangements. We are also subject to the risks of uncertainty of 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 the operations of the PRC operating entities and/or cause the value of our securities to decrease significantly or become worthless. As of the date of this prospectus, the agreements under the Contractual Arrangements have not been tested in any courts of law. See “Prospectus Summary - Permission Required from the PRC Authorities for Our and PRC Operating Entities’ Operation in China” starting on page 11 of this prospectus, and “Item 3. Key Information D. Risk Factors - We depend upon the VIE Arrangements in consolidating the financial results of the PRC operating entities, which may not be as effective as direct ownership” in our most recent annual report on Form 20-F filed on April 30, 2024 (the “Annual Report”) and “Risk Factors – We conduct our business through Zhongchao Shanghai and its subsidiaries by means of Contractual Arrangements. If the PRC courts or administrative authorities determine that these Contractual Arrangements do not comply with applicable regulations, we could be subject to severe penalties and our business could be adversely affected, and our securities may decline in value or become worthless. In addition, changes in such PRC laws and regulations may materially and adversely affect our business” on page 22 of this prospectus.

 

We face risks and uncertainties associated with the complex and evolving PRC laws and regulations and as to whether and how the recent PRC government statements and regulatory developments. The Chinese government may intervene or influence the operation of the PRC operating entities and exercise significant oversight and discretion over the conduct of the PRC operating entities’ business and may intervene or influence the operations of the PRC operating entities at any time, which could result in a material change in the operations of the PRC operating entities and/or the value of our securities. Further, any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, such as us, 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 be worthless. See “Risk Factors — 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 the PRC operating entities’ business and the value of our securities” starting on page 23 of this prospectus, and “—The Chinese government exerts substantial influence over the manner in which the PRC operating entities must conduct their business activities. We are currently not required to obtain approval from Chinese authorities to list or continue to list on U.S. exchanges nor for the execution of VIE agreements, however, if the VIE or the holding company were required to obtain approval and were denied permission from Chinese authorities to list or continue to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange or continue to offer securities to investors, which could materially affect the interest of the investors and cause the value of our securities to significantly decline or be worthless” starting on page 23 of this prospectus.

 

The PRC government has 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, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement. On February 17, 2023, the China Securities Regulatory Commission (the “CSRC”) promulgated the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting guidelines, which became effective on March 31, 2023. Under the Trial Measures, a filing-based regulatory system applies to “indirect overseas offerings and listings” of companies in mainland China, which refers to securities offerings and listings in an overseas market made under the name of an offshore entity but based on the underlying equity, assets, earnings or other similar rights of a company in mainland China that operates its main business in mainland China. The Trial Measures states that, any post-listing follow-on offering by an issuer in an overseas market, including issuance of shares, convertible notes and other similar securities, shall be subject to filing requirement within three business days after the completion of the offering. Therefore, in the opinion of our PRC legal counsel, Han Kun Law Offices, we are required to go through filing procedures with the CSRC within three business days after the completion of the Private Placement and for our future offerings under the Trial Measures. On November 22, 2024, we submitted initial filing documents to the CSRC in connection with the Private Placement (“CSRC Filings”) and they are currently under review of the CSRC.

 

 

As the Trial Measures were newly published, there are substantial uncertainties as to the implementation and interpretation, and how they will affect our current listing, and future offering or financing. If we are required by the Trial Measures for any future offering or any other financing activities to file with the CSRC, we cannot assure you that we will be able to complete such filings in a timely manner, or even at all. Any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to continue to offer our securities, cause significant disruption to the business operations of the PRC operating entities, severely damage our reputation, materially and adversely affect our financial condition and results of operations and cause our securities to significantly decline in value or become worthless. See “Risk Factors – We are required to complete filing procedures with the CSRC in connection with the offerings in connection with this registration statement, it is uncertain whether such filing can be completed or how long it will take to complete such filing.” starting on page 26 of this prospectus.

 

As of the date of this prospectus, in the opinion of our PRC legal counsel, Han Kun Law Offices, other than the aforementioned CSRC Filings that were initiated by us and are under review of the CSRC, no relevant PRC laws or regulations in effect require that we or the PRC operating entities obtain permission from any PRC authorities to issue securities to foreign investors, and neither we nor the PRC operating entities have received any inquiry, notice, warning, sanction, or any regulatory objection to the offering in connection with this registration statement from the CSRC, the CAC (as defined below), or any other PRC authorities that have jurisdiction over our operations.

 

In the opinion of our PRC counsel, Han Kun Law Offices, neither we nor the PRC operating entities are required to voluntarily report for a cybersecurity review with the Cyberspace Administration of China ( the “CAC”) under the Cybersecurity Review Measures which became effective on February 15, 2022, since neither we nor any of the PRC operating entities have not been identified by the regulatory authorities as a critical information infrastructure operator, and neither we nor any of the PRC operating entities currently have over one million users’ personal information nor do we anticipate that we will be collecting over one million users’ personal information in the foreseeable future, which we understand might otherwise subject us , our subsidiaries or the PRC operating entities to the Cybersecurity Review Measures. However, given that the Cybersecurity Review Measures do not provide explanation or interpretation for ‘affect or may affect national security’, the PRC regulatory authorities retain broad discretion in interpreting this provision. Should the authorities determine, at their discretion, that our data processing activities affect or may affect national security, we may be subject to a cybersecurity review. Notwithstanding this, as of the date of this prospectus, we have not been involved in any cybersecurity review or investigation by the CAC or other authorities with respect to the Cybersecurity Review Measures. Furthermore, the data processed by us or the PRC operating entities has not been included in the effective core data and important data catalogs by any authority, and we have taken reasonable and adequate technical and management measures to ensure data security. In light of these circumstances, in the opinion of our PRC counsel, Han Kun Law Offices, the likelihood of us being subject to a cybersecurity review is remote.

 

On September 30, 2024, the State Council of China published the Regulations on Network Data Security Administration, which provides that data processing operators engaging in data processing activities that affect or may affect national security must be subject to network data security review by the relevant cyberspace administration of the PRC. The Regulations on Network Data Security Administration have not been fully implemented as of the date of this prospectus and will become effective on January 1, 2025. Network data processing activities refers to the collection, retention, use, processing, transmission, provision, disclosure, deletion, and other activities of network data. Network data processing activities refers to the collection, retention, use, processing, transmission, provision, disclosure, deletion, and other activities of network data. 

 

As of the date of this prospectus, the MDMOOC online platform has approximately 194,700 registered users, and we and the PRC operating entities currently do not hold more than one million users/users’ individual information. However, we or the PRC operating entities may be deemed as a data processor under the Regulations on Network Data Security Administration. As of the date of this prospectus, we or the PRC operating entities have not been informed by any PRC governmental authority of any requirement that we file for a cybersecurity review. However, if we are deemed to be a critical information infrastructure operator or a company that is engaged in data processing and holds personal information of more than one million users, we could be subject to PRC cybersecurity review. See “Prospectus Summary – Permission Required from the PRC Authorities to Issue Our Securities to Foreign Investors.”

 

As of the date hereof, in the opinion our PRC legal counsel, Han Kun Law Offices, we are in compliance with the applicable PRC laws and regulations governing the data privacy and personal information in all material respects, including the data privacy and personal information requirements of CAC, and we have not received any complaints from any third party, or been investigated or punished by any PRC competent authority in relation to data privacy and personal information protection. However, as there remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations, we could be subject to cybersecurity review, and if so, we may not be able to pass such review. In addition, we could become subject to enhanced cybersecurity review or investigations launched by PRC regulators in the future. Any failure or delay in the completion of the cybersecurity review procedures or any other non-compliance with the related laws and regulations may result in fines or other penalties, including suspension of business, website closure, removal of our app from the relevant app stores, and revocation of prerequisite licenses, as well as reputational damage or legal proceedings or actions against us, which may have material adverse effect on our business, financial condition or results of operations.

 

 

Pursuant to the Holding Foreign Companies Accountable Act (the “HFCA Act”), if the Public Company Accounting Oversight Board, or the PCAOB, is unable to inspect an issuer’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a U.S. stock exchange. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (“AHFCAA”), which, if signed into law, 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 consecutive years. Pursuant to the HFCA Act, the PCAOB issued a Determination Report on December 16, 2021 which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China, and (2) Hong Kong. In addition, the PCAOB’s report identified the specific registered public accounting firms which are subject to these determinations. On August 26, 2022, the CSRC, the Ministry of Finance of the PRC, and PCAOB signed a Statement of Protocol, or the Protocol, governing inspections and investigations of audit firms based in China and Hong Kong. Pursuant to the Protocol, the PCAOB has independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. Under the PCAOB’s rules, a reassessment of a determination under the HFCA Act may result in the PCAOB reaffirming, modifying or vacating the determination. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control. The PCAOB is continuing to demand complete access in mainland China and Hong Kong moving forward, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has indicated that it will act immediately to consider the need to issue new determinations with the HFCA Act if needed and does not have to wait another year to reassess its determinations. In the future, if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide audit documentations located in China or Hong Kong to the PCAOB for inspection or investigation, or the PCAOB expands the scope of the Determination such that we would become subject to the HFCA Act, as the same may be amended, you may be deprived of the benefits of such inspection which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities, including trading on the national exchange and trading on “over-the-counter” markets, may be prohibited under the HFCA Act. On December 29, 2022, a legislation entitled “Consolidated Appropriations Act, 2023” (the “Consolidated Appropriations Act”), was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to AHFCAA, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two. See “Item 3. Key Information—D. Risk Factors — The recent joint statement by the SEC and the PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering.” in the Annual Report.

 

Marcum Asia CPAs LLP (“MarcumAsia” formerly known as “Marcum Bernstein & Pinchuk LLP”) was our auditor for the financial statements for the fiscal year ended December 31, 2021. The Company then appointed Prager Metis CPAs, LLC (“Prager Metis”) as the independent registered public accounting firm. Prager Metis replaced MarcumAsia, which the Company dismissed effective as of September 27, 2022. Both MarcumAsia and Prager Metis are headquartered in New York, New York, registered with PCAOB and subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Neither our former auditor, MarcumAsia, nor our current auditor, Prager Metis, was/is headquartered in mainland China or Hong Kong or was identified in the Determination Report as a firm subject to the PCAOB’s determination.

 

We intend to keep any future earnings to re-invest in and finance the expansion of the business of the PRC operating entities, and we do not anticipate that any cash dividends will be paid in the foreseeable future. Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided that in no circumstances may a dividend be paid if this would result in the Company being unable to pay its debts due in the ordinary course of business. Cash proceeds raised from overseas financing activities, including the cash proceeds from the Private Placement, may be transferred by Zhongchao Cayman to Zhongchao Group Limited, a Hong Kong company (“Zhongchao HK”), and then transferred to Zhongchao WFOE via capital contribution or shareholder loans, as the case may be. Cash proceeds may flow to the VIE from Zhongchao WFOE pursuant to certain contractual agreements between Zhongchao WFOE and the VIE as permitted by the applicable PRC regulations. The process for sending such proceeds back to mainland China may be time-consuming. We may be unable to use these proceeds to grow the business of the PRC operating entities until the PRC operating entities receive such proceeds in mainland China. Any transfer of funds by us to our PRC subsidiaries, either as a shareholder loan or capital contribution, are subject to PRC regulations.

 

 

As a holding company, for Zhongchao Cayman’s cash and financing requirements, Zhongchao Cayman may rely on transfer of funds, dividends and other distributions on equity paid by Zhongchao HK, which relies on transfer of funds, dividends and other distributions by Zhongchao WFOE, which relies on payment by the PRC operating entities pursuant to the Contractual Arrangement. If any of these entities incurs debt on its own behalf in the future, the instruments governing such debt may restrict their ability to pay dividends, make distribution or transfer funds to Zhongchao Cayman. See “Prospectus Summary – Dividend Distributions or Transfers of Cash among the Holding Company, Its Subsidiaries, and the Consolidated VIE” on page 12 of this prospectus.

 

Zhongchao Cayman and Zhongchao WFOE are not able to make direct capital contribution to the VIE. However, they may transfer cash to the VIE in the form of loans or advances or by making payments to the VIE for inter-group transactions. For the year ended December 31, 2023, 2022 and 2021, Zhongchao Cayman made cash transfers of $0.1 million, $1.5 million and $3.4 million, respectively, to Zhongchao USA LLC (“Zhongchao USA”) as loans. See “Consolidated Financial Statements” included in our Annual Report. Except as otherwise disclosed above, for the years ended December 31, 2023, 2022 and 2021, no other cash transfer or transfer of other assets have occurred between Zhongchao Cayman, its subsidiaries, the consolidated VIE and the subsidiaries of the VIE. For the years ended December 31, 2023, 2022 and 2021, none of our subsidiaries, the consolidated VIE, or the subsidiaries of the VIE have made any dividends or distributions to Zhongchao Cayman. For the years ended December 31, 2023, 2022 and 2021, no dividends or distributions have been made to any U.S. investors.

 

We plan to distribute earnings or settle amounts owed under the Contractual Arrangements with the VIE when required in the future. As of the date of this prospectus, none of Zhongchao HK, Zhongchao WFOE and the PRC operating entities have made any dividends to Zhongchao Cayman. As of the date of this prospectus, we have not made any dividends or distributions to any U.S. investors. As of the date of this prospectus, Zhongchao Cayman and its subsidiaries, as well as the PRC operating entities have not adopted or maintained any other cash management policies and procedures, and each entity needs to comply with applicable law or regulations with respect to transfer of funds, dividends and distributions with other entities.

 

The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. To the extent cash or assets in our business is in mainland China or Hong Kong or in an entity domiciled in mainland China or Hong Kong, and may need to be used to fund operations outside of mainland China or Hong Kong, the funds and assets may not be available to fund operations or for other uses outside of mainland China or Hong Kong due to interventions in or the imposition of restrictions and limitations by the government on our ability to transfer cash and assets.Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any. Furthermore, if any of our subsidiaries in the PRC and the PRC operating entities incurs debt on its own in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from the PRC operating entities’ operations through the current Contractual Arrangements, we may be unable to pay dividends on our Class A Ordinary Shares. See “Risk Factors – “To the extent cash or assets in our business is in mainland China or Hong Kong or in an entity domiciled in mainland China or Hong Kong, and may need to be used to fund operations outside of mainland China or Hong Kong, the funds and assets may not be available to fund operations or for other uses outside of mainland China or Hong Kong due to interventions in or the imposition of restrictions and limitations by the government on our ability to transfer cash and assets, which may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies” in this prospectus and “Item 3. Key Information—D. Risk Factors — Governmental control of currency conversion may limit our ability to use our revenues effectively and the ability of our PRC subsidiaries to obtain financing” in the Annual Report.

 

The transfer of funds among the PRC operating entities are subject to the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases (2020 Second Amendment Revision, the “Provisions on Private Lending Cases”), which was implemented on January 1, 2021 to regulate the financing activities between natural persons, legal persons and unincorporated organizations. In the opinion of our PRC counsel, Han Kun Law Offices, the Provisions on Private Lending Cases does not prohibit using cash generated from one PRC operating entity to fund another affiliated PRC operating entity’s operations. We or the PRC operating entities have not been notified of any other restriction which could limit the PRC operating entities’ ability to transfer cash among each other. In the future, cash proceeds from overseas financing activities, including the Private Placement, may be transferred by Zhongchao Cayman to Zhongchao HK, and then transferred to Zhongchao WFOE via capital contribution or shareholder loans, as the case may be. Cash proceeds may flow to Zhongchao Shanghai from Zhongchao WFOE pursuant to the Contractual Arrangements between Zhongchao WFOE and Zhongchao Shanghai as permitted by the applicable PRC regulations. For more details, see “Prospectus Summary — Dividend Distributions or Transfers of Cash among the Holding Company, Its Subsidiaries, and the PRC Operating Entities” starting on page 12 of this prospectus.

 

 

Cash dividends, if any, on our Class A Ordinary Shares will be paid in U.S. dollars. If we are considered a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as China-sourced income and as a result may be subject to PRC withholding tax at a rate of up to 10.0%. In order for us to pay dividends to our shareholders, we will rely on payments made from Zhongchao Shanghai to Zhongchao WFOE, pursuant to the Contractual Arrangements between them, and the distribution of such payments to Zhongchao HK as dividends from Zhongchao WFOE. Certain payments from Zhongchao Shanghai to Zhongchao WFOE are subject to PRC taxes, including business taxes and value added tax.

 

Further, any transfer of funds by us to our PRC subsidiaries, either as a shareholder loan or as a capital contribution, are subject to PRC regulations. Capital contributions to our PRC subsidiaries are subject to the report to the Ministry of Commerce of the People’s Republic of China, or the MOFCOM, in its local branches and registration with a local bank authorized by the China’s State Administration of Foreign Exchange, or the SAFE. Any foreign loan procured by our PRC subsidiaries is required to be registered or filed with the SAFE or its local branches or satisfy relevant requirements as provided by the SAFE. Any medium- or long-term loan to be provided by us to the VIEs must be registered with the National Development and Reform Commission, or the NDRC, and the SAFE or its local branches. We may not be able to obtain these government approvals or complete such registrations on a timely basis, if at all, with respect to future capital contributions or foreign loans by us to our PRC subsidiaries. If we fail to receive such approvals or complete such registration or filing, our ability to use the proceeds of our financing activities and to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business. See “Item 3. Key Information—D. Risk Factors— Risks Related to Doing Business in China—PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of the initial public offering or any subsequent offerings to make loans or additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business” in the Annual Report.

 

Zhongchao Cayman is a Cayman Islands company and consolidates the financial results of the PRC operating entities through the Contractual Arrangement. The substantially all of the operations and assets of the PRC operating entities are located in China. In addition, our management consists of five executive officers who are all located in China and three independent directors, among which two (Mr. John C. General and Mr. Kevin Dean Vassily) are located in the United States and one (Ms. Dan Li) is located in China. A substantial portion of the assets of these persons is located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce the U.S. courts judgments including judgments based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, none of whom (except two independent director) are residents in the United States, and whose significant assets are located outside the United States. See “Risk Factors – You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in mainland China against us based on Hong Kong or other foreign laws, and the ability of U.S. authorities to bring actions in China may also be limited” starting on page 26 of this prospectus.

 

We are an “emerging growth company” under the federal securities laws and are subject to reduced public company reporting requirements. See “Prospectus Summary — Implications of Being an Emerging Growth Company, a Foreign Private Issuer and a Controlled Company” on page 19 of this prospectus for additional information.

 

The information contained or incorporated in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our securities.

 

Investing in our securities involves a high degree of risk. See “Risk Factors” on page 22 of this prospectus and in the documents incorporated by reference in this prospectus, as updated in the applicable prospectus supplement, and any 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.

 

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 [_], 2024. 

 

 

TABLE OF CONTENTS

 

		Page
About this Prospectus		ii
Commonly Used Defined Terms		iii
Note Regarding Forward-Looking Statements		v
Prospectus Summary		1
The Offering		21
Risk Factors		22
Use of Proceeds		30
Description of Securities		31
Selling Shareholders		32
Plan of Distribution		34
Legal Matters		36
Experts		36
Information Incorporated by Reference		37
Where You Can Find More Information		38
Material Changes		38
Enforceability of Civil Liabilities		39

 

 

ABOUT THIS PROSPECTUS

 

You should carefully read this prospectus and the information described under the heading “Where You Can Find More Information.” Neither we nor the Selling Shareholders have authorized anyone to give any information or make any representation about our company that is different from, or in addition to, that contained in this prospectus, including in any of the materials that have been incorporated by reference into this prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it as authorized by us. You should rely only on the information contained or incorporated by reference in this prospectus.

 

You should not assume that the information contained in this prospectus is accurate on any date subsequent to the date set forth on the front of the document or that any information that has been incorporated by reference is correct on any date subsequent to the date of the document incorporated by reference, even though this prospectus and any accompanying supplement to this prospectus is delivered or securities are sold on a later date. Neither the delivery of this prospectus, nor any sale made hereunder, shall under any circumstances create any implication that there has been no change in our affairs since the date hereof or that the information incorporated by reference herein is correct as of any time subsequent to the date of such information.

 

The distribution of this prospectus may be restricted by law in certain jurisdictions. You should inform yourself about and observe any of these restrictions. If you are in a jurisdiction where offers to sell, or solicitations of offers to purchase, the securities offered by this document are unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this prospectus does not extend to you.

 

 

COMMONLY USED DEFINED TERMS

 

Unless otherwise indicated or the context otherwise requires,

 

●

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;

 

●

all references to “Zhongchao,” “we,” “us,” “our,” “the Company,” “the “Registrant” or similar words refer to Zhongchao Inc., together with our subsidiaries. In the context of describing our consolidated financial information, the terms “we,” “us,” “our company,” “our,” “Zhongchao” and “Zhongchao Cayman” refer to Zhongchao Inc., a Cayman Islands exempted company, and its subsidiaries, consolidated affiliated companies and the PRC operating entities, as the context required;

 

●

“Beijing Boya” refers to Beijing Zhongchao Boya Medical Technology Co., Ltd., a PRC company;

 

●

“Beijing Yisuizhen” refers to Beijing Yisuizhen Technology Co., Ltd., a PRC company;

 

●

“China” and “PRC” refer to the People’s Republic of China, including Hong Kong, the special administrative region of Macau and Taiwan, and “China” or the “PRC” exclude Taiwan, Hong Kong, and the special administrative region of Macau when we are referencing to specific laws and regulations adopted by the PRC and other specific legal or tax matters in the PRC in this prospectus; given the PRC government’s authority and oversight may extend to Hong Kong, the legal and operational risks associated with operating in China also apply to operations in Hong Kong;

 

●

“Class A Ordinary Shares” refers to the Class A ordinary shares, $0.001 par value per share, in the capital of the Company;

 

	●	“Class B Ordinary Shares” refers to the Class B ordinary shares, $0.001 par value per share, in the capital of the Company;
	●	“Contractual Arrangements” refers to the contractual arrangements between Zhongchao WFOE and Zhongchao Shanghai and its subsidiaries;

 

●

“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;

 

●

“Hainan Muxin” refers to Hainan Muxin Medical Technology Co., Ltd., a PRC company.

 

●

“Liaoning Zhixun” refers to Zhixun Internet Hospital (Liaoning) Co., Ltd., a PRC company.

 

●

“Maidemu Health” refers to Shanghai Maidemu Health Management Co., Ltd., a PRC company.

 

	●	“Ordinary Shares” refers to Class A Ordinary Shares and Class B Ordinary Shares, collectively;
	●	“Private Placement” refers to the private placement offering conducted by the Company that closed on November 19, 2024;

 

 

	●	“Securities Act” refers to the U.S. Securities Act of 1933, as amended;
	●	“Securities Purchase Agreements” refers to those certain securities purchase agreements, dated as of November 14, 2024, by and among us and the purchasers named therein;
	●	“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 Xinyuan” refers to Shanghai Xinyuan Human Resources Co., Ltd., a PRC company;

 

●

“Shanghai Zhongxun” refers to Shanghai Zhongxun Medical Technology Co., Ltd., a PRC company;

 

	●	“Warrants” refers to the warrants exercisable for Class A Ordinary Shares, issued to the Selling Shareholders pursuant to the Securities Purchase Agreements;
	●	“West Angel” refers to West Angel (Beijing) Health Technology Co., Ltd., a PRC company.

 

●

“Xinjiang Pharmaceutical” refers to Chongqing Xinjiang Pharmaceutical 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 USA” refers to Zhongchao USA LLC, a United States company; and

 

●

“Zhongchao WFOE” refers to Beijing Zhongchao Zhongxing Technology Limited, a PRC company.

 

 

NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus and our SEC filings that are incorporated by reference into this prospectus contain 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 in or incorporated by reference into this prospectus and in the applicable prospectus supplement. 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.

 

 

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 Annual Report, 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.

 

In addition, investing in our securities is highly speculative and involves a significant degree of risk. Zhongchao Cayman is a holding company incorporated in the Cayman Islands and not a Chinese operating company. As a holding company with no material operations of our own, Zhongchao Cayman consolidates the financial results of the PRC operating entities. Our securities offered in this offering are securities of Zhongchao Cayman, the offshore holding company in the Cayman Islands, instead of securities of the VIE or its subsidiaries in China. The Chinese regulatory authorities could disallow our structure, which could result in a material change in our operations and the value of our securities could decline or become worthless. Set forth below are certain risks related to the VIE structure and recent regulatory initiatives implemented by the relevant PRC government entities in addition to the risk factors set forth under “Risk Factors” described in Annual Report, as supplemented and updated by subsequent current reports on Form 6-K that we have filed with the SEC.

 

We conduct our business through Zhongchao Shanghai and its subsidiaries by means of the Contractual Arrangements. If the PRC courts or administrative authorities determine that these Contractual Arrangements do not comply with applicable regulations, we could be subject to severe penalties and our business could be adversely affected, and our securities may decline in value or become worthless. In addition, changes in such PRC laws and regulations may materially and adversely affect our business.

 

There are uncertainties regarding the interpretation and application of PRC laws, rules and regulations, including the laws, rules and regulations governing the validity and enforcement of the Contractual Arrangements between Zhongchao WFOE and Zhongchao Shanghai. In the opinion of our PRC legal counsel, Han Kun Law Offices, based on their understanding of the current PRC laws, rules and regulations, that (i) as of the date of this prospectus, the structure for operating the PRC operating entities’ business in China (including our corporate structure and Contractual Arrangements with Zhongchao Shanghai, Zhongchao Shanghai and their shareholders) do not result in any violation of PRC laws or regulations currently in effect; and (ii) the Contractual Arrangements among Zhongchao WFOE and Zhongchao Shanghai and their shareholders governed by PRC law are valid, binding and enforceable in accordance with the terms of each of the Contractual Arrangements, and do not result in any violation of PRC laws or regulations currently in effect. However, there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations concerning foreign investment in the PRC, and their application to and effect on the legality, binding effect and enforceability of the Contractual Arrangements. In particular, we cannot rule out the possibility that PRC regulatory authorities, courts or arbitral tribunals may in the future adopt a different or contrary interpretation or take a view that is inconsistent with the opinion of our PRC legal counsel.

 

If any of our PRC entities or the PRC operating entities or their ownership structure or the Contractual Arrangements are determined the PRC courts or administrative authorities to be in violation of any existing or future PRC laws, rules or regulations, or any of our PRC entities or the PRC operating entities fail to obtain or maintain any of the required governmental permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including:

 

●

revoking the business and operating licenses;

 

●

discontinuing or restricting the operations;

 

●

imposing conditions or requirements with which the PRC entities may not be able to comply;

 

●

requiring us and the PRC operating entities to restructure the relevant ownership structure or operations;

 

●

restricting or prohibiting our use of the proceeds from this offering to finance our business and operations in China; or

 

●

imposing fines.

 

 

The imposition of any of these penalties would severely disrupt the PRC operating entities’ ability to conduct business and have a material adverse effect on our financial condition, results of operations and prospects.

 

Further, if the PRC courts or administrative authorities determine that these Contractual Arrangements do not comply with applicable regulations, the securities we are registering may decline in value or become worthless if the determinations, changes, or interpretations result in our inability to assert contractual control over the assets of our PRC subsidiaries or the PRC operating entities that conduct substantially all of the operations.

 

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 the PRC operating entities’ business and the value of our securities.

 

The majority of the PRC operating entities’ business are conducted in China. Accordingly, our business, financial condition, results of operations, prospects and certain transactions we may undertake may be subject, to a significant extent, to economic, political and legal developments in China.

 

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 the products of the PRC operating entities depends, in large part, on economic conditions in China. Any slowdown in China’s economic growth may cause the potential customers of the PRC operating entities to delay or cancel their plans to purchase the PRC operating entities’ 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 securities.

 

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 Class A Ordinary Shares may depreciate quickly.

 

The Chinese government exerts substantial influence over the manner in which the PRC operating entities must conduct their business activities. We are currently not required to obtain approval from Chinese authorities to list or continue to list on U.S. exchanges nor for the execution of VIE agreements, however, if the VIE or the holding company were required to obtain approval and were denied permission from Chinese authorities to list or continue to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange or continue to offer securities to investors, which could materially affect the interest of the investors and cause the value of our securities to significantly decline or be worthless.

 

The Chinese government exerts substantial influence over the manner in which the PRC operating entities must conduct their business activities. China’s business operations are comprehensively regulated. The PRC operating entities could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. The PRC operating entities may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply. In the event that the PRC operating entities are not able to substantially comply with any existing or newly adopted laws and regulations, the business operations of the PRC operating entities may be materially adversely affected and the value of our Class A Ordinary Shares may significantly decrease or become worthless.

 

 

On February 17, 2023, the CSRC promulgated the Trial Measures and five supporting guidelines, which took effect on March 31, 2023. As the Trial Measures are relatively new, there are substantial uncertainties as to the implementation and interpretation, and how they will affect our current listing, and future offering or financing. In the opinion of our PRC legal counsel, Han Kun Law Offices, we are required to go through filing procedures with the CSRC within three business days after the completion of the Private Placement and for our future offerings under the Trial Measures. On November 22, 2024, we submitted initial filing documents to the CSRC in connection with the Private Placement and they are currently under review of the CSRC. Any failure of us or the PRC operating entities to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to continue to offer our securities, cause significant disruption to our business operations, severely damage our reputation, materially and adversely affect our financial condition and results of operations and cause our securities to significantly decline in value or become worthless.

 

Additionally, the PRC government authorities may strengthen oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers like us. Such actions taken by the PRC government authorities may intervene or influence the operations of the PRC operating entities at any time, which are beyond our control. Therefore, any such action may adversely affect the operations of the PRC operating entities and significantly limit or hinder our ability to offer or continue to offer securities to you and cause the value of such securities to significantly decline or be worthless.

 

The Chinese government may intervene or influence our operations at any time, which actions may impact our operations materially and adversely, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, and cause the value of our securities to significantly decline or be 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 online transmission of audio-visual program, internet live streaming services, online publishing, private education, internet information security, privacy protection 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. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.

 

The PRC operating entities’ business is subject to various government and regulatory interference. The PRC operating entities could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. The PRC operating entities 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, which could result in further material changes in our operations and could adversely impact the value of our securities.

 

Furthermore, given recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas, including but not limited to the newly promulgated Trial Measures, although we are currently not required to obtain permission from any of the PRC federal or local government, if we are required by the Trial Measures for any future offering or any other financing activities to file with the CSRC we cannot assure you that we will be able to complete such filings in a timely manner, or even at all. Any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to continue to offer our securities, cause significant disruption to our business operations, severely damage our reputation, materially and adversely affect our financial condition and results of operations and cause our securities to significantly decline in value or become worthless.

 

 

To  the extent cash or assets in our business is in mainland China or Hong Kong or in an entity domiciled in mainland China or Hong Kong, and may need to be used to fund operations outside of mainland China or Hong Kong, the funds and assets may not be available to fund operations or for other uses outside of mainland China or Hong Kong due to interventions in or the imposition of restrictions and limitations by the government on our ability to transfer cash and assets, which may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.

 

Zhongchao Cayman is an offshore holding company with no material operations of its own, which conducts substantially all of its operations through its operating subsidiaries established in the PRC. As of the date of this prospectus, substantially all of our cash and assets are located in the PRC. No transfers, dividends or other distributions were made from our subsidiaries to our holding company or investors outside of the PRC during the fiscal years ended December 31, 2023, 2022 and 2021. The transfer of funds among PRC companies are subject to the Provisions on Private Lending Cases, which was implemented on January 1, 2021 to regulate the financing activities between natural persons, legal persons and unincorporated organizations. The Provisions on Private Lending Cases do not prohibit cash transfers among the PRC operating entities. As of the date of this prospectus, we have not been notified of any restrictions which could limit the PRC operating entities’ ability to transfer cash among each other. However, there are limitations on our ability to transfer cash between us and our U.S. investors where dividend distribution to our foreign investors shall be reviewed by a bank designated by SAFE that processes outward remittance of profits, including but not limited to the resolution of the board of directors of such PRC institution on distribution of profits, original tax recordation form, and audited financial statements, relating to the outward remittance, and stamp and endorse the relevant original tax recordation form with the actual remittance amount and remittance date of the profits. Upon review and approval by the designated bank, Zhongchao WFOE may remit dividends to Zhongchao HK, unless the PRC government temporarily introduces relevant policies that prevent Zhongchao WFOE from remitting dividends to Zhongchao HK in a timely manner.

 

Subject to the provisions of the Companies Act (Revised) of the Cayman Islands and any rights attaching to any class or classes of shares under and in accordance with the articles: (a) the directors may declare dividends or distributions out of our funds which are lawfully available for that purpose; and (b) our shareholders may, by ordinary resolution, declare dividends but no such dividend shall exceed the amount recommended by the directors. Subject to the requirements of the Companies Act regarding the application of a company’s share premium account and with the sanction of an ordinary resolution, dividends may also be declared and paid out of any share premium account. The directors when paying dividends to shareholders may make such payment either in cash or in specie. Among Zhongchao Cayman and its subsidiaries, cash can be transferred from Zhongchao Cayman to Zhongchao HK, and then transferred to Zhongchao WFOE via capital contribution or shareholder loans, as the case may be, as we are permitted under the PRC laws and regulations to provide funding to our PRC subsidiaries only through capital contributions or loans, and only if we satisfy the applicable government registration and approval requirements in China. Cash proceeds may flow to Zhongchao Shanghai from Zhongchao WFOE pursuant to the Contractual Arrangements between Zhongchao WFOE and Zhongchao Shanghai as permitted by the applicable PRC regulations. For more details, see “Prospectus Summary — Dividend Distributions or Transfers of Cash among the Holding Company, Its Subsidiaries, and the PRC Operating Entities” starting on page 12 of this prospectus. We believe, as of the date of this prospectus, there is no restriction imposed by the Hong Kong government on the transfer of capital within, into and out of Hong Kong (including funds from Hong Kong to the PRC), except transfer of funds involving money laundering and criminal activities. The PRC government imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. In addition, the PRC Enterprise Income Tax Law and its implementation rules provide that a withholding tax at a rate of 10% will be applicable to dividends payable by PRC companies to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central government and the governments of other countries or regions where the non-PRC resident enterprises are tax resident. Further, to the extent cash or assets in our business are in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong in the event of any interventions in or the imposition of restrictions and limitations on the ability of our company and our subsidiaries by the PRC government to transfer cash or assets, which may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.

 

 

There can be no assurance that the PRC government will not intervene or impose restrictions in future on our ability to transfer or distribute cash within our PRC Subsidiaries or to foreign investors, which could result in an inability or prohibition on making transfers or distributions outside of China and may adversely affect our business, financial condition and results of operations.

 

We are required to complete filing procedures with the CSRC in connection with the offerings in connection with this registration statement, it is uncertain whether such filing can be completed or how long it will take to complete such filing.

 

On February 17, 2023, the CSRC promulgated the Trial Measures and five supporting guidelines, which became effective on March 31, 2023. According to the Trial Measures, among other requirements, (1) domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfil the filing procedures with the CSRC; if a domestic company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties; (2) if the issuer meets both of the following conditions, the overseas offering and listing shall be determined as an indirect overseas offering and listing by a domestic company: (i) any of the total assets, net assets, revenues or profits of the domestic operating entities of the issuer in the most recent accounting year accounts for more than 50% of the corresponding figure in the issuer’s audited consolidated financial statements for the same period; (ii) its major operational activities are carried out in China or its main places of business are located in China, or the senior managers in charge of operation and management of the issuer are mostly Chinese citizens or are domiciled in China; (3) where a domestic company seeks to indirectly offer and list securities in an overseas market, the issuer shall designate a major domestic operating entity responsible for all filing procedures with the CSRC, and such filings shall be submitted to the CSRC within three business days after the submission of the overseas offering and listing application; and (4) if the issuer issues securities in the same overseas market after the initial issuance and listing, it shall submit filings with the CSRC within three business days after the completion of the issuance. In the opinion of our PRC legal counsel, Han Kun Law Offices, we are required to go through filing procedures with the CSRC within three business days after the completion of the Private Placement and for our future offerings under the Trial Measures. On November 22, 2024, we submitted initial filing documents to the CSRC in connection with the Private Placement and they are currently under review of the CSRC.If we fail to complete such filing requirement, Chinese regulatory authorities may impose fines and penalties upon the PRC operating entities’ operations in China, limit the PRC operating entities’ operating privileges in China, delay or restrict the repatriation of the proceeds from the offerings in connection with this registration statement into China, or take other actions that could have a material adverse effect upon the PRC operating entities’ business, financial condition, results of operations, reputation and prospects, as well as the trading price of our securities.

 

An active trading market for our Class A Ordinary Shares may not continue and the trading price for our Class A Ordinary Shares may fluctuate significantly.

 

We cannot assure you that a liquid public market for our Class A Ordinary Shares will develop or continue. If an active public market for our Class A Ordinary Shares does not continue following the completion of the offerings in connection with this registration statement, the market price and liquidity of our Class A Ordinary Shares may be materially and adversely affected. The public offering price for our securities would be determined based upon several factors, and we can provide no assurance that the trading price of our Class A Ordinary Shares after the offerings in connection with this registration statement will not decline below the public offering price. As a result, investors in the offerings in connection with this registration statement may experience a significant decrease in the value of their securities.

 

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in mainland China against us based on Hong Kong or other foreign laws, and the ability of U.S. authorities to bring actions in China may also be limited.

 

We are an exempted company with limited liability incorporated under the laws of the Cayman Islands. The majority of the operations of the PRC operating entities conducted outside of the U.S., and the majority of our assets are located in mainland China. In addition, our management consists of five executive officers who are all located in China and three independent directors, among which two (Mr. John C. General and Mr. Kevin Dean Vassily) are located in the United States and one (Ms. Dan Li) is located in China. As a result, it may be difficult for our shareholders to effect service of process upon us or those persons inside mainland China. In addition, our PRC legal counsel has advised us that China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. Therefore, recognition and enforcement in mainland China of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible.

 

 

On July 14, 2006, Hong Kong and the PRC entered into the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the PRC and of the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements Between Parties Concerned, or the 2006 Arrangement, pursuant to which a party with a final court judgment rendered by a Hong Kong court requiring payment of money in a civil and commercial case pursuant to a choice of court agreement in writing may apply for recognition and enforcement of the judgment in mainland China. Similarly, a party with a final judgment rendered by a mainland China court requiring payment of money in a civil and commercial case pursuant to a choice of court agreement in writing may apply for recognition and enforcement of the judgment in Hong Kong. A choice of court agreement in writing is defined as any agreement in writing entered into between parties after the effective date of the 2006 Arrangement in which a Hong Kong court or a mainland China court is expressly designated as the court having sole jurisdiction for the dispute. Therefore, it is not possible to enforce a judgment rendered by a Hong Kong court in mainland China if the parties in dispute have not agreed to enter into a choice of court agreement in writing. The 2006 Arrangement became effective on August 1, 2008.

 

Subsequently on January 18, 2019, Hong Kong and mainland China entered into the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters between the Courts of the Mainland and of the Hong Kong Special Administrative Region, or the Arrangement, pursuant to which, among other things, the scope of application was widened to cover both monetary and non-monetary judgments in most civil and commercial matters, including effective judgments on civil compensation in criminal cases. In addition, the requirement of a choice of court agreement in writing has been removed. It is no longer necessary for parties to agree to enter into a choice of court agreement in writing, as long as it can be shown that there is a connection between the dispute and the requesting place, such as place of the defendant’s residence, place of the defendant’s business or place of performance of the contract or tort. The 2019 Arrangement shall apply to judgments in civil and commercial matters made on or after its effective date by the courts of both sides. The 2006 Arrangement shall be terminated on the same day when the 2019 Arrangement comes into effect. If a “written choice of court agreement” has been signed by parties according to the 2006 Arrangement prior to the effective date of the 2019 Arrangement, the 2006 Arrangement shall still apply. Although the 2019 Arrangement has been signed, its effective date has yet to be announced. Therefore, there are still uncertainties about the outcomes and effectiveness of enforcement or recognition of judgments under the 2019 Arrangement.

 

Furthermore, shareholder claims that are common in the U.S., including securities law class actions and fraud claims, generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although the local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such regulatory cooperation with the securities regulatory authorities in the U.S. have not been efficient in the absence of mutual and practical cooperation mechanism. According to Article 177 of the PRC Securities Law which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. Accordingly, without the consent of the competent PRC securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities business activities to overseas parties. See also “Risk Factors — You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law” for risks associated with investing in us as a Cayman Islands company.

 

 

You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.

 

We are an exempted company with limited liability incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our amended and restated memorandum and articles of association, as amended, the Companies Act (Revised) of the Cayman Islands, which we refer to as the Companies Act below, and the common law of the Cayman Islands. The rights of shareholders to take actions against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law in the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands and from English common law. Appeals from the Cayman Islands Courts to the Privy Council (which is the final Court of Appeal for British overseas territories such as the Cayman Islands) are binding on courts in the Cayman Islands. Decisions of the English courts, and particularly the Supreme Court and the Court of Appeal are generally of persuasive authority but are not binding in the courts of the Cayman Islands. Decisions of courts in other Commonwealth jurisdictions are similarly of persuasive but not binding authority.The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the U.S. In particular, the Cayman Islands has a less developed body of securities laws than the U.S. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the U.S.

 

Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies (other than copies of our amended and restated memorandum and articles of association and register of mortgages and charges, and any special resolutions passed by our shareholders). Under Cayman Islands law, the names of our current directors can be obtained from a search conducted at the Registrar of Companies. Our directors have discretion under our amended and restated memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

 

As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq corporate governance requirements; these practices may afford less protection to shareholders than they otherwise would under rules and regulations applicable to U.S. domestic issuers.

 

As a result of all of the above, our public shareholders may have more difficulties in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the U.S.

 

The trading price of the Class A Ordinary Shares is likely to be volatile, which could result in substantial losses to investors.

 

The trading price of the Class A Ordinary Shares is likely to be volatile. This may happen because of broad market and industry factors, including the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States. The market price for the Class A Ordinary Shares may be influenced by those factors discussed elsewhere in this “Risk Factors” section and many others, including:

 

●

regulatory developments in the U.S., the PRC and foreign countries;

 

●

innovations or new products or solutions developed by us, or our competitors;

 

●

announcements by us or our competitors of significant acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments;

 

●

achievement of expected revenues and profitability;

 

●

variations in our financial results or those of companies that are perceived to be similar to us;

 

 

●

trading volume of the Class A Ordinary Shares, and sales of the securities by insiders and shareholders;

 

●

an inability to obtain additional funding;

 

●

change in strategy or industry trend;

 

●

announcements of new investments, acquisitions/dispositions, strategic partnership or joint venture by us or our competitors;

 

●

general economic, industry and market conditions other events or factors, many of which are beyond our control;

 

●

additions or departures of key personnel;

 

●

the potential impact of global pandemics and actions taken to slow their spread; and

 

●

intellectual property, product liability or other litigation against us.

 

For example, if our board of directors decides to conduct a material acquisition or disposition, this could result in the distraction of our management and disruption of ongoing business, any of which could adversely affect our business and financial results, and the trading price of the Class A Ordinary Shares. In addition, in the past, shareholders of public companies have initiated class action lawsuits against those companies following periods of volatility in the market prices of these companies’ shares. Such litigation, if instituted against us, could cause us to incur substantial costs and divert management’s attention and resources, which could have a material adverse effect on our business, financial condition and results of operations.

 

Sales or the anticipation of sales of our Class A Ordinary Shares by the Selling Shareholders could affect the market price of our Class A Ordinary Shares.

 

The Selling Shareholders may sell or otherwise engage in transactions with respect to their Class A Ordinary Shares as described in “Plan of Distribution.” The sale or the anticipation of the sale by the Selling Shareholders of Class A Ordinary Shares may have a negative impact on the market for and market price of our Class A Ordinary Shares.

 

 

USE OF PROCEEDS

 

We will not receive any proceeds from the sale of our Class A Ordinary Shares offered by this prospectus. The Selling Shareholders will receive all of the proceeds. We will pay all costs, fees and expenses incurred in connection with the registration of the Class A Ordinary Shares covered by this prospectus. The Selling Shareholders will pay any brokerage commissions and/or similar charges incurred in connection with the sale of the Class A Ordinary Shares covered hereby.

 

 

DESCRIPTION OF SECURITIES

 

Information relating to our Ordinary Shares and certain provisions of our amended and restated memorandum and articles of association is incorporated by reference from our Annual Report, under the caption “Item 10. Additional Information – 10.B. Amended and Restated Memorandum and Articles of Association.” Such information does not purport to be complete and is qualified in its entirety by the provisions of our amended and restated memorandum and articles of association and applicable provisions of the laws of the Cayman Islands. You should read our amended and restated memorandum and articles of association, which are filed as Exhibit 99.1 to our Current Report on Form 6-K filed on February 29, 2024, for the provisions that are important to you.

 

Our authorized share capital is US$500,000 divided into 450,000,000 Class A Ordinary Shares of par value US$0.001 each and 50,000,000 Class B Ordinary Shares of par value US$0.001 each. As of December 16, 2024, there were 24,665,124 Class A Ordinary Shares and 549,772 Class B Ordinary Shares outstanding. For a description of our Class A Ordinary Shares and Class B Ordinary Shares, including the rights and obligations thereto, please refer to our Annual Report, which is incorporated by reference herein.

 

See “Where You Can Find More Information” elsewhere in this prospectus for information on where you can obtain copies of our amended and restated memorandum and articles of association, which have been filed with and are publicly available from the SEC.

 

 

SELLING SHAREHOLDERS

 

We are registering an aggregate of 19,600,000 Class A Ordinary Shares, consisting of (i) 10,000,000 Class A Ordinary Shares and (ii) 9,600,000 Class A Ordinary Shares issued upon cashless exercise of the Warrants, pursuant to the terms and conditions of the Securities Purchase Agreements and the Warrants. The Class A Ordinary Shares and Warrants were issued to the Selling Shareholders pursuant to an exemption from registration under the Securities Act in reliance upon Regulation S promulgated thereunder.

 

The Class A Ordinary Shares beneficially owned by the Selling Shareholders are being registered to permit public secondary trading of these securities, and the Selling Shareholders may offer these shares for resale from time to time as described in the “Plan of Distribution.”

  

The following table sets forth the names of the Selling Shareholders, the number of Class A Ordinary Shares owned beneficially by the Selling Shareholders as of December 12, 2024 (after giving effect to the cashless exercise of the Warrants by the Selling Shareholders on December 12, 2024), and the number of shares that may be offered for resale by the Selling Shareholders from time to time. These shares may also be sold by donees, pledgees, and other transferees or successors in the interest of the Selling Shareholders.

 

The Selling Shareholders may decide to sell all, some, or none of the Class A Ordinary Shares listed below. We currently have no agreements, arrangements or understandings with the Selling Shareholders regarding the sale of any of the securities covered by this prospectus. We cannot provide you with any estimate of the number of Class A Ordinary Shares that the Selling Shareholders will hold in the future.

 

For purposes of this table, beneficial ownership is determined in accordance with Rule 13d-3 promulgated under the Exchange Act and includes voting power and investment power with respect to such shares. In calculating the percentage ownership or percent of equity vote for a given individual or group, the number of Class A Ordinary Shares outstanding for that individual or group includes unissued shares subject to options, warrants, rights or conversion privileges exercisable within sixty days held by such individual or group, but are not deemed outstanding by any other person or group.

 

 

The applicable percentages of ownership are based on 24,665,124 Class A Ordinary Shares outstanding as of December 16, 2024. As of December 16, 2024, there is an aggregate of 25,214,896 Ordinary Shares outstanding, consisting of 24,665,124 Class A Ordinary Shares and 549,772 Class B Ordinary Shares. In respect of matters requiring a shareholder vote, each Class A Ordinary Share is entitled to one vote and each Class B Ordinary Share is entitled to 15 votes. The Class B Ordinary Shares are convertible into Class A Ordinary Shares at any time after issuance at the option of the holder on a one-to-one basis.

 

		Shares Beneficially Owned Prior to the Offering(1)								Shares Offered for Resale				Shares Beneficially Owned After Resale(2)(3)
Selling Shareholder		Number of Class A Ordinary Shares				Percentage				Number of Class A Ordinary Shares				Number of Class A Ordinary Shares				Percentage
BrightnessBound Holding Limited			980,000				3.97	%			980,000				-				-
EagleEye Solutions Limited			980,000				3.97	%			980,000				-				-
EchoWood Holding Limited			980,000				3.97	%			980,000				-				-
EclipseHub Holding Limited			980,000				3.97	%			980,000				-				-
HazyHaven Holding Limited			980,000				3.97	%			980,000				-				-
LazyLuxury Holding Limited			980,000				3.97	%			980,000				-				-
LionHeart International Holding Limited			980,000				3.97	%			980,000				-				-
MeadowBliss Holding Limited			980,000				3.97	%			980,000				-				-
NexusPinnacle Holding Limited			980,000				3.97	%			980,000				-				-
PhoenixRise Holding Limited			980,000				3.97	%			980,000				-				-
StreamSide Holding Limited			980,000				3.97	%			980,000				-				-
TriumphTide Holding Limited			980,000				3.97	%			980,000				-				-
WhimsyWorks Holding Limited			980,000				3.97	%			980,000				-				-
ZenFlow Holding Limited			980,000				3.97	%			980,000				-				-
CloudChaser International Holding Limited			1,470,000				5.96	%			1,470,000				-				-
DreamWeavers Holding Limited			1,470,000				5.96	%			1,470,000				-				-
Green Trees Holding Limited			1,470,000				5.96	%			1,470,000				-				-
RoadVentures Holding Limited			1,470,000				5.96	%			1,470,000				-				-
Total			19,600,000				-				19,600,000				-				-

 

*	Less than one percent.

 

(1)	Beneficial ownership of the Selling Shareholders prior to this offering gives effect to the cashless exercise of the Warrants by the Selling Shareholders on December 12, 2024.

 

(2)	Because (a) each of the Selling Shareholders may offer all or some of the Class A Ordinary Shares that such shareholder holds in the offering contemplated by this prospectus, (b) the offering of Class A Ordinary Shares is not being underwritten on a firm commitment basis, and (c) the Selling Shareholders could purchase additional Class A Ordinary Shares from time to time, no estimate can be given as to the number of shares or percent of our Class A Ordinary Shares that will be held by the Selling Shareholders upon termination of the offering.
(3)	Assumes the sale of all of the Class A Ordinary Shares (being offered pursuant to this prospectus) to third parties, if any.

 

 

PLAN OF DISTRIBUTION 

 

The Class A Ordinary Shares covered by this prospectus may be offered and sold from time to time by the Selling Shareholders. The term “Selling Shareholders” includes pledgees, donees, transferees or other successors in interest selling shares received after the date of this prospectus from each of the Selling Shareholders as a pledge, gift, partnership distribution or other non-sale related transfer. The number of shares beneficially owned by Selling Shareholders will decrease as and when they effect any such transfers. The plan of distribution for the Selling Shareholders’ shares sold hereunder will otherwise remain unchanged, except that the transferees, pledgees, donees or other successors will be Selling Shareholders hereunder. To the extent required, we may amend and supplement this prospectus from time to time to describe a specific plan of distribution. The Selling Shareholders will act independently of us in making decisions with respect to the timing, manner and size of each sale. Once sold under this registration statement, of which this prospectus forms a part, the Class A Ordinary Shares will be freely tradable in the hands of persons other than our affiliates.

 

We will not receive any of the proceeds from the sale by the Selling Shareholders of the Class A Ordinary Shares. We will bear all fees and expenses incident to our obligation to register the Class A Ordinary Shares.

 

The Selling Shareholders may make these sales at prices and under terms then prevailing or at prices related to the then current market price. The Selling Shareholders may also make sales in negotiated transactions. The Selling Shareholders may offer their shares from time to time pursuant to one or more of the following methods:

 

●

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

●

one or more block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

●

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

●

an exchange distribution in accordance with the rules of the applicable exchange;

 

●

public or privately negotiated transactions;

 

●

on Nasdaq (or through the facilities of any national securities exchange or U.S. inter- dealer quotation system of a registered national securities association, on which the shares are then listed, admitted to unlisted trading privileges or included for quotation);

 

●

through underwriters, brokers or dealers (who may act as agents or principals) or directly to one or more purchasers;

 

●

a combination of any such methods of sale; and

 

●

any other method permitted pursuant to applicable law.

 

In connection with distributions of the shares or otherwise, the Selling Shareholders may:

 

●

enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the shares in the course of hedging the positions they assume;

 

 

●

sell the shares short after the effective date of the registration statement of which this prospectus forms a part and redeliver the shares to close out such short positions;

 

●

enter into option or other transactions with broker-dealers or other financial institutions which require the delivery to them of shares offered by this prospectus, which they may in turn resell; and

 

●

pledge shares to a broker-dealer or other financial institution, which, upon a default, they may in turn resell.

 

In addition to the foregoing methods, the Selling Shareholders may offer their shares from time to time in transactions involving principals or brokers not otherwise contemplated above, in a combination of such methods as described above or any other lawful methods. The Selling Shareholders may also transfer, donate or assign their shares to lenders, family members and others and each of such persons will be deemed to be a Selling Shareholder for purposes of this prospectus. A Selling Shareholder or their successors in interest may from time to time pledge or grant a security interest in some or all of the Class A Ordinary Shares, and if the Selling Shareholder default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the Class A Ordinary Shares from time to time under this prospectus; provided, however in the event of a pledge or then default on a secured obligation by the Selling Shareholder, in order for the shares to be sold under this registration statement, unless permitted by law, we must distribute a prospectus supplement and/or amendment to this registration statement amending the list of Selling Shareholders to include the pledgee, secured party or other successors in interest of the Selling Shareholder under this prospectus.

 

The Selling Shareholders may also sell their shares pursuant to Rule 144 under the Securities Act, provided the Selling Shareholders meet the criteria and conform to the requirements of such rule.

 

The Selling Shareholders may effect such transactions directly or indirectly through underwriters, broker-dealers or agents acting on their behalf. Broker-dealers or agents may receive commissions, discounts or concessions from the Selling Shareholders, in amounts to be negotiated immediately prior to the sale (which compensation as to a particular broker-dealer might be in excess of customary commissions for routine market transactions). If the Class A Ordinary Shares are sold through underwriters or broker-dealers, the Selling Shareholders will be responsible for underwriting discounts or commissions or agent’s commissions. Neither we, nor the Selling Shareholders, can presently estimate the amount of that compensation. If a Selling Shareholder notifies us that a material arrangement has been entered into with a broker- dealer for the sale of shares through a block trade, special offering, exchange, distribution or secondary distribution or a purchase by a broker or dealer, we will file a prospectus supplement, if required by Rule 424 under the Securities Act, setting forth: (i) the name of each of the Selling Shareholders and the participating broker-dealers; (ii) the number of shares involved; (iii) the price at which the shares were sold; (iv) the commissions paid or discounts or concessions allowed to the broker-dealers, where applicable; (v) a statement to the effect that the broker-dealers did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus; and any other fact material to the transaction.

 

The Selling Shareholders and any other person participating in a distribution of the shares covered by this prospectus will be subject to applicable provisions of the Exchange Act, including, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the shares by the Selling Shareholders and any other such person. Furthermore, under Regulation M, any person engaged in the distribution of the shares may not simultaneously engage in market-making activities with respect to the particular shares being distributed for certain periods prior to the commencement of, or during, that distribution. All of the above may affect the marketability of the shares and the ability of any person or entity to engage in market-making activities with respect to the shares. We have advised the Selling Shareholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply.

 

In offering the shares covered by this prospectus, the Selling Shareholders, and any broker-dealers and any other participating broker-dealers who execute sales for the Selling Shareholders, may be deemed to be “underwriters” within the meaning of the Securities Act in connection with these sales. Any profits realized by the Selling Shareholders and the compensation of such broker-dealers may be deemed to be underwriting discounts and commissions. We are not aware that any Selling Shareholder has entered into any arrangements with any underwriters or broker-dealers regarding the sale of its Class A Ordinary Shares. 

 

 

LEGAL MATTERS

 

We are being represented by Ellenoff Grossman & Schole LLP, New York, New York, with respect to certain legal matters of U.S. federal securities and New York State law. The validity of the Class A Ordinary Shares and certain other matters of Cayman Islands law will be passed upon for us by Ogier (Cayman) LLP. Certain legal matters as to PRC law will be passed upon for us by Han Kun Law Offices. Ellenoff Grossman & Schole LLP may rely upon Ogier (Cayman) LLP with respect to matters governed by Cayman Islands law and Han Kun Law Offices with respect to matters governed by PRC law.

 

EXPERTS

 

The consolidated financial statements in this prospectus as of December 31, 2023 and 2022 and for the years ended December 31, 2023 and 2022, incorporated by reference from the Annual Report, have been audited by Prager Metis CPAs, LLC, 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 Prager Metis CPAs, LLC is located at 401 Hackensack Avenue, 4^th Floor, Hackensack, New Jersey 07601.

 

The consolidated financial statements in this prospectus for the year ended December 31, 2021, incorporated by reference from the Annual Report, have been audited by Marcum Asia CPAs LLP (formerly known as “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 Asia CPAs LLP is located at 7 Pennsylvania Plaza Suite 830, New York, NY 10001.

 

 

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, 2023, filed with the SEC on April 30, 2024;

 

(2)

the Company’s Current Reports on Form 6-K, filed with the SEC on October 2, 2024, November 1, 2024, November 6, 2024, November 20, 2024 and December 13, 2024; and

 

(3)

the description of our Class A 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 Nanxi Creative Center, Suite 216, 841 Yan’an Middle Road, Jing’An District, Shanghai, China 200040, Attention: Weiguang Yang, +86 21-32205987.

 

You should rely only on information contained in, or incorporated by reference into, this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus or incorporated by reference in this prospectus. We are not making offers to sell the securities in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation.

 

 

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. The SEC 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.

 

MATERIAL CHANGES

 

Except as otherwise described in our Annual Report on Form 20-F for the fiscal year ended December 31, 2023 and in our reports on Form 6-K incorporated by reference herein and as disclosed in this prospectus, no reportable material changes have occurred since December 31, 2023.

 

 

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.

 

Our management consists of five executive officers who are all located in China and three independent directors, among which two (Mr. John C. General and Mr. Kevin Dean Vassily) are located in the United States and one (Ms. Dan Li) is located in China, 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.

 

In the opinion of our Cayman Islands legal counsel, Ogier (Cayman) LLP, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us, judgments of courts of the United States obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States, so far as the liabilities imposed by those provisions are penal in nature. In those circumstances, although there is currently no statutory enforcement or treaty between the United States and the Cayman Islands providing for enforcement of judgments obtained in the United States. The courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met. For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive, given by a court of competent jurisdiction (the courts of the Cayman Islands will apply the rules of Cayman Islands private international law to determine whether the foreign court is a court of competent jurisdiction), and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands. Furthermore, it is uncertain that Cayman Islands courts would enforce: (1) judgments of U.S. courts obtained in actions against us or other persons that are predicated upon the civil liability provisions of the U.S. federal securities laws; or (2) original actions brought against us or other persons predicated upon the Securities Act. Ogier (Cayman) LLP has informed us that there is uncertainty with regard to Cayman Islands law relating to whether a judgment obtained from the U.S. courts under civil liability provisions of the securities laws will be determined by the courts of the Cayman Islands as penal, punitive in nature. A Cayman Islands Court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.

 

In the opinion of Han Kun Law Offices, our PRC legal counsel, the recognition and enforcement of foreign judgments are provided for under PRC Civil Procedure Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of PRC Civil Procedure Law and other applicable laws and regulations based either on treaties between China and the country where the judgment is made or on principles reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the Cayman Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedure Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States or in the Cayman Islands.

 

 

PART II

 

INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 8. Indemnification of Directors and Officers

 

The Companies Act (Revised) of the Cayman Islands does not limit the extent to which a company’s memorandum and articles of association 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 amended and restated memorandum and articles of association permit indemnification of officers and directors against all actions, proceedings, costs, damages, expenses, claims, losses, or liabilities (“Indemnified Losses”) which they or any of them may sustain or incur by reason of any act done or omitted in or about the execution of the duties of their respective offices or trusts or otherwise in relation thereto, including any liability incurred by him in defending any proceedings, whether civil or criminal, in which judgement is given in their favor or in which he is acquitted except to the extent that any of the foregoing arise through his dishonesty.

 

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.

 

The Company’s offer letter with each director provides that the Company shall, to the maximum extent provided under applicable law, indemnify and hold harmless such director from and against any expenses, including reasonable attorney’s fees, judgments, fines, settlements and other legally permissible amounts (“Losses”), incurred in connection with any proceeding arising out of, or related to, such director’s performance of his or her duties, other than any such Losses incurred as a result of his or her negligence or willful misconduct. The Company shall advance to such director any expenses, including reasonable attorneys’ fees and costs of settlement, incurred in defending any such proceeding to the maximum extent permitted by applicable law. Such costs and expenses incurred by such director in defense of any such proceeding shall be paid by the Company in advance of the final disposition of such proceeding promptly upon receipt by the Company of (a) written request for payment; (b) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought; and (c) an undertaking adequate under applicable law made by or on such director’s behalf to repay the amounts so advanced if it shall ultimately be determined pursuant to any non-appealable judgment or settlement that you are not entitled to be indemnified by the Company.

 

Item 9. Exhibits

 

Exhibit No.		Description
3.1		Amended and Restated Memorandum and Articles of Association (incorporated by reference to Exhibit 3.1 filed with the Current Report on 6-K filed with the Securities and Exchange Commission on February 29, 2024).
4.1		Form of Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 6-K filed with the Securities and Exchange Commission on November 20, 2024).
4.2		Description of Securities (incorporated herein by reference to Exhibit 2.3 to the Company’s Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 30, 2024).
10.1		Form of Securities Purchase Agreement by and between the Company and the Purchasers listed on the signature pages thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 6-K filed with the Securities and Exchange Commission on November 20, 2024).
5.1		Opinion of Ogier (Cayman) LLP.
23.1		Consent of Prager Metis CPAs, LLC.
23.2		Consent of Marcum Asia CPAs LLP
23.3		Consent of Ogier (Cayman) LLP (included in Exhibit 5.1).
24.1		Consent of Han Kun Law Offices (included in Exhibit 99.1).
25.1		Power of Attorney (included on signature page of this registration statement).
99.1		Opinion of Han Kun Law Offices.
107		Filing Fee Table.

 

 

Item 10 Undertakings

 

(a)

The undersigned registrant hereby undertakes:

 

(1)

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

(i)

To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

 

(ii)

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

 

(iii)

To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

 

provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Securities and Exchange Commission by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b). 

 

(2)

That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(3)

To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

(4)

To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A. of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Securities Act of 1933 need not be furnished, provided, that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, a post-effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Securities Act of 1933 or Rule 3-19 of Regulation S-K if such financial statements and information are contained in periodic reports filed with or furnished to the SEC by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement.

 

 

(5)

That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

 

(i)

Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

 

(ii)

Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.

 

(6)

That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

(b)

That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(c)

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the People’s Republic of China, on December 18, 2024.

 

	ZHONGCHAO INC.
	By:	/s/ Weiguang Yang
	Name:	Weiguang Yang
	Title:	Chief Executive Officer

 

POWER OF ATTORNEY

 

Each person whose signature appears below hereby constitutes and appoints Weiguang Yang and Pei Xu, and each of them, individually, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, in his or her name, place and stead, in any and all capacities (including his capacity as a director and/or officer of the registrant), to sign any and all amendments and post-effective amendments and supplements to this registration statement, and including any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the U.S. Securities Act of 1933, as amended, and to file the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his substitute, may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the U.S. Securities Act of 1933, as amended, this Form F-3 registration statement has been signed by the following persons in the capacities and on the date indicated.

 

Signature		Title		Date
/s/ Weiguang Yang		Chief Executive Officer and		December 18, 2024
Weiguang Yang		Chairman of the Board of Directors (Principal Executive Officer)
/s/ Pei Xu		Chief Financial Officer and Director		December 18, 2024
Pei Xu		(Principal Accounting and Financial Officer)
/s/ John C. General		Independent Director		December 18, 2024
John C. General
/s/ Kevin Dean Vassily		Independent Director		December 18, 2024
Kevin Dean Vassily
/s/ Dan Li		Independent Director		December 18, 2024
Dan Li

 

 

SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES

 

Pursuant to the Securities Act of 1933, the undersigned, the duly authorized representative in the United States of the Company has signed this Registration Statement or amendment thereto in Newark, DE on December 18, 2024.

  

	Authorized U.S. Representative
	By:	/s/ Donald J. Puglisi
	Name:	Donald J. Puglisi
	Title:	Managing Director Puglisi & Associates

 

 

II-5

 

 

Exhibit 5.1

 

 

Zhongchao Inc. c/o Harneys Fiduciary (Cayman) Limited, 4th Floor, Harbour Place, 103 South Church Street, P.O. Box 10240, Grand Cayman KY1-1002, Cayman Islands		D  +1 345 815 1877
		E  bradley.kruger@ogier.com
		Reference: 427703.00001/BKR
		18 December 2024

 

Zhongchao Inc. (the Company)

 

We have been requested to provide you with an opinion on matters of Cayman Islands law in connection with the Company’s registration statement on Form F-3, including all amendments or supplements thereto, filed with the United States Securities and Exchange Commission (the Commission) under the United States Securities Act of 1933 (the Act), as amended, (including its exhibits, the Registration Statement) related to the registration of 19,600,000 Class A ordinary shares of par value US$0.001 (Class A Ordinary Shares), consisting of:

 

(a)	10,000,000 Class A Ordinary Shares (the Shares) previously issued by the Company pursuant to the terms of the Securities Purchase Agreements (as defined in Schedule 1); and

 

(b)

9,600,000 Class A Ordinary Shares (the Warrant Shares) issued upon cashless exercise of warrants (the Warrants) to acquire Class A Ordinary Shares issued by the Company pursuant to the terms of the Securities Purchase Agreements and in the form set out in Exhibit A to each Securities Purchase Agreement (the Warrant Certificates).

 

This opinion is given in accordance with the terms of the Legal Matters section of the Registration Statement.

 

A reference to a Schedule is a reference to a schedule to this opinion and the headings herein are for convenience only and do not affect the construction of this opinion.

 

 

 

Ogier (Cayman) LLP 89 Nexus Way Camana Bay Grand Cayman, KY1-9009 Cayman Islands   T +1 345 949 9876 F +1 345 949 9877 ogier.com

A list of Partners may be inspected on our website

 

 

Zhongchao Inc.

18 December 2024

 

1	Documents examined

 

For the purposes of giving this opinion, we have examined the corporate and other documents and conducted the searches listed in Schedule 1. We have not made any searches or enquiries concerning, and have not examined any documents entered into by or affecting the Company or any other person, save for the searches, enquiries and examinations expressly referred to in Schedule 1.

 

2	Assumptions

 

In giving this opinion we have relied upon the assumptions set forth in Schedule 2 without having carried out any independent investigation or verification in respect of those assumptions.

 

3

Opinions

 

On the basis of the examinations and assumptions referred to above and subject to the qualifications set forth in Schedule 3 and the limitations set forth below, we are of the opinion that:

 

Corporate status

 

(a)

The Company has been duly incorporated as an exempted company with limited liability and is validly existing and in good standing with the Registrar of Companies of the Cayman Islands (the Registrar).

 

Issuance of Shares

 

(b)

The Shares have been duly authorised and validly issued, fully paid and non-assessable.

 

Issuance of Warrant Shares

 

(c)

The Warrant Shares have been duly authorised and validly issued, fully paid and non-assessable.

 

4	Matters not covered

 

We offer no opinion:

 

(a)

as to any laws other than the laws of the Cayman Islands, and we have not, for the purposes of this opinion, made any investigation of the laws of any other jurisdiction, and we express no opinion as to the meaning, validity, or effect of references in the Securities Purchase Agreements, the Warrants Certificates, the Memorandum and Articles of Association or the Registration Statement to statutes, rules, regulations, codes or judicial authority of any jurisdiction other than the Cayman Islands;

 

(b)

except to the extent that this opinion expressly provides otherwise, as to the commercial terms of, or the validity, enforceability or effect of the Securities Purchase Agreements, the Warrants Certificates, or the Registration Statement (or as to how the commercial terms of such documents reflect the intentions of the parties), the accuracy of representations, the fulfilment of warranties or conditions, the occurrence of events of default or terminating events or the existence of any conflicts or inconsistencies among the Securities Purchase Agreements, the Warrants Certificates, or the Registration Statement and any other agreements into which the Company may have entered or any other documents; or

 

 

Zhongchao Inc.

18 December 2024

 

(c)

as to whether the acceptance, execution or performance of the Company’s obligations under the Securities Purchase Agreements, the Warrants Certificates, or the Registration Statement reviewed by us will result in the breach of or infringe any other agreement, deed or document (other than the Company’s Memorandum and Articles of Association) entered into by or binding on the Company.

 

5	Governing law of this opinion

 

5.1	This opinion is:

 

(a)

governed by, and shall be construed in accordance with, the laws of the Cayman Islands;

 

(b)

limited to the matters expressly stated in it; and

 

(c)

confined to, and given on the basis of, the laws and practice in the Cayman Islands at the date of this opinion.

 

5.2	Unless otherwise indicated, a reference to any specific Cayman Islands legislation is a reference to that legislation as amended to, and as in force at, the date of this opinion.

 

6

Consent

 

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and also consent to the reference to this firm in the Registration Statement under the heading “Legal Matters”. In the giving of our consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the Rules and Regulations of the Commission thereunder.

 

Yours faithfully

 

Ogier (Cayman) LLP

 

 

Zhongchao Inc.

18 December 2024

 

Schedule 1

 

Documents examined

 

Corporate and other documents

 

1	The Certificate of Incorporation of the Company dated 16 April 2019 issued by the Registrar.

 

2	The amended and restated memorandum and articles of association of the Company adopted by special resolution passed on 20 February 2024 and made effective on 29 February 2024 (the Memorandum and Articles of Association).

 

3	A Certificate of Good Standing dated 17 December 2024 (the Good Standing Certificate) issued by the Registrar in respect of the Company.

 

4

A certificate dated on the date hereof as to certain matters of fact signed by a director of the Company in the form annexed hereto (the Director’s Certificate), having attached to it a copy of the written resolutions of the directors of the Company passed on 4 November 2024 and 18 December 2024 (the Resolutions).

 

5	The Register of Writs at the office of the Clerk of Courts in the Cayman Islands as inspected by us on 18 December 2024 (the Register of Writs).

 

6	The Registration Statement.

 

7	Securities Purchase Agreements each dated 14 November 2024 between:

 

(a)

the Company and BrightnessBound Holding Limited for the sale and purchase of 500,000 Class A Ordinary Shares and Warrants to purchase up to 2,000,000 Class A Ordinary Shares;

 

(b)

the Company and EagleEye Solutions Limited for the sale and purchase of 500,000 Class A Ordinary Shares and Warrants to purchase up to 2,000,000 Class A Ordinary Shares;

 

(c)

the Company and EchoWood Holding Limited for the sale and purchase of 500,000 Class A Ordinary Shares and Warrants to purchase up to 2,000,000 Class A Ordinary Shares;

 

(d)

the Company and EclipseHub Holding Limited for the sale and purchase of 500,000 Class A Ordinary Shares and Warrants to purchase up to 2,000,000 Class A Ordinary Shares;

 

(e)

the Company and HazyHaven Holding Limited for the sale and purchase of 500,000 Class A Ordinary Shares and Warrants to purchase up to 2,000,000 Class A Ordinary Shares;

 

(f)

the Company and LazyLuxury Holding Limited for the sale and purchase of 500,000 Class A Ordinary Shares and Warrants to purchase up to 2,000,000 Class A Ordinary Shares;

 

 

Zhongchao Inc.

18 December 2024

 

(g)

the Company and LionHeart International Holding Limited for the sale and purchase of 500,000 Class A Ordinary Shares and Warrants to purchase up to 2,000,000 Class A Ordinary Shares;

 

(h)

the Company and MeadowBliss Holding Limited for the sale and purchase of 500,000 Class A Ordinary Shares and Warrants to purchase up to 2,000,000 Class A Ordinary Shares;

 

(i)

the Company and NexusPinnacle Holding Limited for the sale and purchase of 500,000 Class A Ordinary Shares and Warrants to purchase up to 2,000,000 Class A Ordinary Shares;

 

(j)

the Company and PhoenixRise Holding Limited for the sale and purchase of 500,000 Class A Ordinary Shares and Warrants to purchase up to 2,000,000 Class A Ordinary Shares;

 

(k)

the Company and StreamSide Holding Limited for the sale and purchase of 500,000 Class A Ordinary Shares and Warrants to purchase up to 2,000,000 Class A Ordinary Shares;

 

(l)

the Company and TriumphTide Holding Limited for the sale and purchase of 500,000 Class A Ordinary Shares and Warrants to purchase up to 2,000,000 Class A Ordinary Shares;

 

(m)

the Company and WhimsyWorks Holding Limited for the sale and purchase of 500,000 Class A Ordinary Shares and Warrants to purchase up to 2,000,000 Class A Ordinary Shares;

 

(n)

the Company and ZenFlow Holding Limited for the sale and purchase of 500,000 Class A Ordinary Shares and Warrants to purchase up to 2,000,000 Class A Ordinary Shares;

 

(o)

the Company and CloudChaser International Holding Limited for the sale and purchase of 750,000 Class A Ordinary Shares and Warrants to purchase up to 3,000,000 Class A Ordinary Shares;

 

(p)

the Company and DreamWeavers Holding Limited for the sale and purchase of 750,000 Class A Ordinary Shares and Warrants to purchase up to 3,000,000 Class A Ordinary Shares;

 

(q)

the Company and Green Trees Holding Limited for the sale and purchase of 750,000 Class A Ordinary Shares and Warrants to purchase up to 3,000,000 Class A Ordinary Shares; and

 

(r)

the Company and RoadVentures Holding Limited for the sale and purchase of 750,000 Class A Ordinary Shares and Warrants to purchase up to 3,000,000 Class A Ordinary Shares,

 

(each a Securities Purchase Agreement and together the Securities Purchase Agreements).

 

 

Zhongchao Inc.

18 December 2024

 

Schedule 2

 

Assumptions

 

Assumptions of general application

 

1	All original documents examined by us are authentic and complete.

 

2	All copy documents examined by us (whether in facsimile, electronic or other form) conform to the originals and those originals are authentic and complete.

 

3	All signatures, seals, dates, stamps and markings (whether on original or copy documents) are genuine.

 

4	Each of the Good Standing Certificate and the Director’s Certificate examined by us is accurate and complete as at the date of this opinion.

 

5

Where any document has been provided to us in draft or undated form, that document has been executed by all parties in materially the form provided to us and, where we have been provided with successive drafts of a document marked to show changes from a previous draft, all such changes have been accurately marked.

 

Status, authorisation and execution

 

6	Each of the parties to the Securities Purchase Agreements other than the Company is duly incorporated, formed or organised (as applicable), validly existing and in good standing under all relevant laws.

 

7	Each Securities Purchase Agreement and Warrant Certificate has been duly authorised, executed and unconditionally delivered by or on behalf of all parties to it in accordance with all applicable laws.

 

8

In authorising the execution and delivery of the Securities Purchase Agreements, the Warrants Certificates and the Registration Statement by the Company, the exercise of its rights and performance of its obligations under the Securities Purchase Agreements, the Warrants Certificates and the Registration Statement, each of the directors of the Company has acted in good faith with a view to the best interests of the Company and has exercised the standard of care, diligence and skill that is required of him or her.

 

9	The Securities Purchase Agreements and Warrants Certificates have been duly executed and unconditionally delivered by the Company in the manner authorised in the Resolutions.

 

Enforceability

 

10

Each Securities Purchase Agreement and Warrant Certificate whose express choice of the laws of the jurisdiction to be the governing law of that document (the Proper Law) is not Cayman Islands law is legal, valid, binding and enforceable against all relevant parties in accordance with its terms under its Proper Law and all other relevant laws.

 

11	If an obligation is to be performed in a jurisdiction outside the Cayman Islands, its performance will not be contrary to an official directive, impossible or illegal under the laws of that jurisdiction.

 

 

Zhongchao Inc.

18 December 2024

 

12

No moneys paid to or for the account of any party under any Securities Purchase Agreement and Warrant Certificate represent, or will represent, criminal property or terrorist property (as defined in the Proceeds of Crime Act (Revised) and the Terrorism Act (Revised) respectively). None of the parties to the Securities Purchase Agreements and Warrant Certificates is acting or will act in relation to the transactions contemplated by the documents, in a manner inconsistent with sanctions imposed by Cayman Islands authorities, or United Nations or United Kingdom sanctions or measures extended by statutory instrument to the Cayman Islands by order of His Majesty in Council.

 

13	None of the opinions expressed herein will be adversely affected by the laws or public policies of any jurisdiction other than the Cayman Islands. In particular, but without limitation to the previous sentence:

 

(a)

the laws or public policies of any jurisdiction other than the Cayman Islands will not adversely affect the capacity or authority of the Company; and

 

(b)

neither the execution or delivery of the Securities Purchase Agreements or the Warrants Certificates nor the exercise by any party to the Securities Purchase Agreements or Warrants Certificates of its rights or the performance of its obligations under them contravene those laws or public policies.

 

14

There are no agreements, documents or arrangements (other than the documents expressly referred to in this opinion as having been examined by us) that materially affect or modify the Securities Purchase Agreements, Warrants Certificates, Resolutions or the Registration Statement or the transactions contemplated by them or restrict the powers and authority of the Company in any way.

 

15

None of the transactions contemplated by the Securities Purchase Agreements, Warrants Certificates, the Resolutions and the Registration Statement relate to any partnership interests, shares, voting rights in a Cayman Islands company, limited liability company, limited liability partnership, limited partnership, foundation company, exempted limited partnership, or any other person that may be prescribed in regulations from time to time (a Legal Person) or to the ultimate effective control over the management of a Legal Person that are/is subject to a restrictions notice issued pursuant to the Beneficial Ownership Transparency Act (Revised) of the Cayman Islands.

 

Share Issuance

 

16	The provisions of the Securities Purchase Agreements have been satisfied and payment of the consideration for the Shares specified therein (being not less than the par value of the Shares) has been made.

 

17	The provisions of the Warrant Certificates have been satisfied and payment of the consideration for the Warrant Shares specified therein (being not less than the par value of the Shares) has been made.

 

18	Valid entry has been made in the register of members of the Company reflecting the issuance of the Shares and Warrant Shares, in each case in accordance with the Memorandum and Articles of Association and the Companies Act (Revised) of the Cayman Islands (the Companies Act).

 

19	The issue of the Shares and Warrant Shares did not result in the Company exceeding its authorised share capital.

 

20	There are no circumstances or matters of fact existing which may properly form the basis for an application for an order for rectification of the register of members of the Company.

 

21	No invitation has been or will be made by or on behalf of the Company to the public in the Cayman Islands to subscribe for any of the Shares or Warrant Shares.

 

Register of Writs

 

22	The Register of Writs constitutes a complete and accurate record of the proceedings affecting the Company before the Grand Court of the Cayman Islands as at the time we conducted our investigation of such register.

 

 

Zhongchao Inc.

18 December 2024

 

Schedule 3

 

Qualifications

 

Good Standing

 

1

Under the Companies Act annual returns in respect of the Company must be filed with the Registrar, together with payment of annual filing fees. A failure to file annual returns and pay annual filing fees may result in the Company being struck off the Register of Companies, following which its assets will vest in the Financial Secretary of the Cayman Islands and will be subject to disposition or retention for the benefit of the public of the Cayman Islands.

 

2

In good standing means only that as of the date of the Good Standing Certificate the Company is up-to-date with the filing of its annual returns and payment of annual fees with the Registrar. We have made no enquiries into the Company’s good standing with respect to any filings or payment of fees, or both, that it may be required to make under the laws of the Cayman Islands other than the Companies Act.

 

Limited liability

 

3

We are not aware of any Cayman Islands authority as to when the courts would set aside the limited liability of a shareholder in a Cayman Islands company. Our opinion on the subject is based on the Companies Act and English common law authorities, the latter of which are persuasive but not binding in the courts of the Cayman Islands. Under English authorities, circumstances in which a court would attribute personal liability to a shareholder are very limited, and include: (a) such shareholder expressly assuming direct liability (such as a guarantee); (b) the company acting as the agent of such shareholder; (c) the company being incorporated by or at the behest of such shareholder for the purpose of committing or furthering such shareholder’s fraud, or for a sham transaction otherwise carried out by such shareholder. In the absence of these circumstances, we are of the opinion that a Cayman Islands’ court would have no grounds to set aside the limited liability of a shareholder.

 

Non-Assessable

 

4

In this opinion, the phrase “non-assessable” means, with respect to the Shares in the Company, that a shareholder shall not, solely by virtue of its status as a shareholder, be liable for additional assessments or calls on the Shares by the Company or its creditors (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstance in which a court may be prepared to pierce or lift the corporate veil).

 

Register of Writs

 

5	Our examination of the Register of Writs cannot conclusively reveal whether or not there is:

 

(a)

any current or pending litigation in the Cayman Islands against the Company; or

 

(b)

any application for the winding up or dissolution of the Company or the appointment of any liquidator, trustee in bankruptcy or restructuring officer in respect of the Company or any of its assets,

 

as notice of these matters might not be entered on the Register of Writs immediately or updated expeditiously or the court file associated with the matter or the matter itself may not be publicly available (for example, due to sealing orders having been made). Furthermore, we have not conducted a search of the summary court. Claims in the summary court are limited to a maximum of CI $20,000.

 

 

8

 

Exhibit 23.1

 

  

	CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
	We hereby consent to the incorporation by reference in this Registration Statement on Form F-3 of our report dated April 30, 2024, relating to the consolidated financial statements of Zhongchao Inc. for the years ended December 31, 2023 and 2022 included in its annual report (Form 20-F) for the year ended December 31, 2023. We also consent to the reference to our firm under the heading “Experts” in such Registration Statement.

 

	/s/ Prager Metis CPAs, LLC
	Hackensack, New Jersey
	December 18, 2024

 

 

 

 

Exhibit 23.2

 

 

Independent Registered Public Accounting Firm’s Consent

 

We consent to the incorporation by reference in this Registration Statement of Zhongchao Inc. on Form F-3 of our report dated May 6, 2022, with respect to our audit of the consolidated statement of income and comprehensive income, changes in equity and cashflows of Zhongchao Inc. for the year ended December 31, 2021 appearing in the Annual Report on Form 20-F of Zhongchao Inc. for the year ended December 31, 2023. We also consent to the reference to our firm under the heading “Experts” in the Prospectus, which is part of this Registration Statement.

 

/s/ Marcum Asia CPAs LLP

Marcum Asia CPAs LLP

 

New York, NY

December 18, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NEW YORK OFFICE ●; 7 Penn Plaza ●; Suite 830 ●; New York, New York ●; 10001

Phone 646.442.4845 ●; Fax 646.349.5200 ●; www.marcumasia.com

 

 

Exhibit 99.1

 

9/F, Office Tower C1, Oriental Plaza, 1 East Chang An Ave., Dongcheng District Beijing 100738, PRC Tel: +86 10 8525 5500 Fax: +86 10 8525 5511 / 8525 5522 Beijing · Shanghai · Shenzhen · Hong Kong · Haikou · Wuhan · Singapore · New York www.hankunlaw.com

 

December 18, 2024

 

To:

Zhongchao Inc. (the “Company”)

 

Nanxi Creative Center, Suite 216

841 Yan’an Middle Road

Jing’An District, Shanghai

The People’s Republic of China

 

Dear Sirs or Madams:

 

We are lawyers qualified to practice in the People’s Republic of China (the “PRC” or “China”, which, for purposes of this opinion only, does not include the Hong Kong Special Administrative Region, the Macau Special Administrative Region or Taiwan Region) and as such are qualified to issue this opinion on the laws and regulations of the PRC effective as of the date hereof.

 

We are acting as PRC counsel to the Company in connection with the Company’s registration statement on Form F-3, including all amendments or supplements thereto (the “Registration Statement”), filed with the United States Securities and Exchange Commission under the United States Securities Act of 1933 (as amended) in relation to the registration of up to 19,600,000 Class A ordinary shares of par value US$0.001 each (the “Ordinary Shares”), consisting of: (a) 10,000,000 Class A Ordinary Shares previously issued by the Company pursuant to the terms of certain securities purchase agreements, and (b) 9,600,000 Class A Ordinary Shares issued upon cashless exercise of certain warrants to acquire Class A Ordinary Shares issued by the Company pursuant to the terms of certain securities purchase agreements (collectively, the “Offering”).

 

A.	Documents and Assumptions

 

In rendering this opinion, we have carried out due diligence and examined copies of the Registration Statement and other documents, corporate records and certificates issued by the Governmental Agencies (as defined below) (collectively the “Documents”) as we have considered necessary or advisable for the purpose of rendering this opinion. Where certain facts were not independently established and verified by us, we have relied upon certificates or statements issued or made by the relevant Governmental Agencies and appropriate representatives of the Company and the PRC Companies (as defined below). In giving this opinion, we have made the following assumptions (the “Assumptions”):

 

(1)

all signatures, seals and chops are genuine, each signature on behalf of a party thereto is that of a person duly authorized by such party to execute the same, all Documents submitted to us as originals are authentic, and all Documents submitted to us as certified or photostatic copies conform to the originals;

 

(2)

each of the parties to the Documents, other than the PRC Companies, (i) if a legal person or other entity, is duly organized and is validly existing in good standing under the laws of its jurisdiction of organization and/or incorporation, (ii) if an individual, has full capacity for civil conduct; each of them, other than the PRC Companies, has full power and authority to execute, deliver and perform its, her or his obligations under the Documents to which it, she or he is a party in accordance with the laws of its jurisdiction of organization and/or the laws that it, she or he is subject to;

 

 

 

 

(3)

the Documents presented to us remain in full force and effect on the date of this opinion and have not been revoked, amended or supplemented, and no amendments, revisions, supplements, modifications or other changes have been made, and no revocation or termination has occurred, with respect to any of the Documents after they were submitted to us for the purposes of this opinion;

 

(4)

the laws of jurisdictions other than the PRC which may be applicable to the execution, delivery, performance or enforcement of the Documents are complied with;

 

(5)

all requested Documents have been provided to us and all factual statements made to us by the Company and the PRC Companies in connection with this opinion, including but not limited to the statements set forth in the Documents, are true, correct and complete;

 

(6)

all explanations and interpretations provided by government officials duly reflect the official position of the relevant Governmental Agencies and are complete, true and correct;

 

(7)

each of the Documents is legal, valid, binding and enforceable in accordance with their respective governing laws in any and all respects;

 

(8)

all consents, licenses, permits, approvals, exemptions or authorizations required by, and all required registrations or filings with, any governmental authority or regulatory body of any jurisdiction other than the PRC in connection with the transactions contemplated under the Registration Statement and other Documents have been obtained or made, and are in full force and effect as of the date thereof;

 

(9)

all Governmental Authorizations (as defined below) and other official statements and documentation obtained by the Company or any PRC Company from any Governmental Agency have been obtained by lawful means in due course, and the Documents provided to us conform with those documents submitted to Governmental Agencies for such purposes.

 

In addition, we have assumed and have not verified the truthfulness, accuracy and completeness as to the factual matters of each Document we have reviewed.

 

B.	Definitions

 

In addition to the terms defined in the context of this opinion, the following capitalized terms used in this opinion shall have the meanings ascribed to them as follows.

 

“CSRC”	means the China Securities Regulatory Commission.
“Governmental Agency”	means any national, provincial or local governmental, regulatory or administrative authority, agency or commission in the PRC, or any court, tribunal or any other judicial or arbitral body in the PRC, or any body exercising, or entitled to exercise, any administrative, judicial, legislative, law enforcement, regulatory, or taxing authority or power of a similar nature in the PRC.

 

 

 

“Governmental Authorization”	means any license, approval, consent, waiver, order, sanction, certificate, authorization, filing, declaration, disclosure, registration, exemption, permission, endorsement, annual inspection, clearance, qualification, permit or license by, from or with any Governmental Agency pursuant to any PRC Laws.
“M&A Rules”	means the Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (关于外国投资者并购境内企业的 规 定 ), which was promulgated on August 8, 2006 by six Governmental Agencies, namely, the Ministry of Commerce, the State-owned Assets Supervision and Administration Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, the CSRC and the SAFE, and became effective on September 8, 2006, as amended by the Ministry of Commerce on June 22, 2009.
“PRC Companies”	means, collectively, all entities listed in Appendix A hereof, and each, a “PRC Company”.
“PRC Laws”	means all applicable national, provincial and local laws, regulations, rules, notices, orders, decrees and judicial interpretations of the PRC currently in effect and publicly available on the date of this opinion.
“WFOE”	Beijing Zhongchao Zhongxing Technology Limited (北京众巢众行科技有限公司).
“Zhongchao Shanghai”	Zhongchao Medical Technology (Shanghai) Co., Ltd. (众巢医学 科技（上海）有限公司)
“VIE Agreements”	means the documents as set forth in Appendix B hereto.

 

C.

Opinions

 

Based on our review of the Documents, and subject to the Assumptions and the Qualifications (as defined below) and the disclosures contained in the Registration Statement, we are of the opinion that:

 

(1)

Organization Structure. Except as disclosed in the Registration Statement, (a) the ownership structure of the PRC Companies as set forth in the Registration Statement, both currently and immediately after giving effect to this Offering, will not result in any violation of any provisions of PRC Laws in any material aspect; (b) the contractual arrangements under the VIE Agreements among WFOE and Zhongchao Shanghai and their shareholders governed by PRC law are valid, binding and enforceable in accordance with the terms of VIE Agreements, and will not result in (i) any violation of any provisions of applicable PRC Laws currently in effect in any material aspect, or (ii) any violation of the business license, articles of association, approval certificate or other constitutional documents (if any) of the PRC Companies. However, there are substantial uncertainties regarding the interpretation and application of current PRC Laws, and there can be no assurance that the PRC government will ultimately take a view that is consistent with our opinion stated above.

 

(2)

M&A Rules. Based on our understanding of the provisions under PRC Laws, except as disclosed in the Registration Statement, and assuming no offer, issuance or sale of the Ordinary Shares has been or will be made directly or indirectly within the PRC, prior approval from the CSRC as required under the M&A Rules is not required for the Offering. However, there are substantial uncertainties regarding the interpretation and application of the M&A Rules, other PRC Laws and future PRC laws and regulations, and there can be no assurance that any Governmental Agency will not take a view that is contrary to or otherwise different from our opinions stated herein.

 

(3)

CSRC Filing. The Company is required to go through filing procedures with the CSRC within three business days after the completion of this Offering and the Company’s future offerings under the Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies, which was promulgated by CSRC on February 17, 2023 and became effective on March 31, 2023.

 

(4)

PRC Laws. All statements set forth in the Registration Statement under the captions “Prospectus Summary”, “Risk Factors”, and “Enforceability of Civil Liabilities”, in each case insofar as such statements describe or summarize matters of the PRC Laws, are true and accurate in all material respects, and nothing has come to our attention, insofar as the PRC Laws are concerned, that causes us to believe that there is any omission from such statements which causes such statements misleading in any material respect.

 

(5)

Cybersecurity Review. Based on the Company’s confirmation, neither the Company nor any of the PRC Companies qualifies as a critical information infrastructure operator, nor does the Company or any of the PRC Companies process personal information of more than one million users. Accordingly, the Company is not required to voluntarily report for a cybersecurity review under the Cybersecurity Review Measures. However, given that the Cybersecurity Review Measures do not provide explanation or interpretation for ‘affect or may affect national security’, the PRC regulatory authorities retain broad discretion in interpreting this provision. Should the authorities determine, at their discretion, that the Company’s data processing activities affect or may affect national security, the Company may be subject to a cybersecurity review. Notwithstanding this, to date, based on the Company’s confirmation, the Company has not been involved in any cybersecurity review or investigation by the Cyberspace Administration of China ( the “CAC”) or other authorities with respect to the Cybersecurity Review Measures. Furthermore, the data processed by the Company or any of the PRC Companies has not been included in the effective core data and important data catalogs by any authority, and the Company has taken reasonable and adequate technical and management measures to ensure data security. In light of these circumstances, we are of the opinion that the likelihood of the Company being subject to a cybersecurity review is remote.

 

 

 

(6)

Provisions on Private Lending Cases. The transfer of funds among the PRC operating entities is subject to the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases (the “Provisions on Private Lending Cases”), which was implemented on January 1, 2021, to regulate the financing activities between natural persons, legal persons and unincorporated organizations. The Provisions on Private Lending Cases set forth that private lending contracts will be upheld as invalid under the circumstance that (i) illegally obtaining a loan from a financial institution for on-lending; (ii) on-lending the funds obtained by means of borrowing from other profit-making legal persons, raising funds from its employees, or illegally accepting deposits from the public; (iii) the lender, who has not legally obtained the qualification to lend provides loans to any unspecified object of the society for the purpose of making profits; (iv) the lender, knowing or should have known in advance that the borrower intends to use the borrowed funds for illegal or criminal activities, still provides the loan; (v) the lending is in violation of public orders or good morals; or (vi) the lending is in violation of mandatory provisions of laws or administrative regulations. Based on the confirmation by the Company that the circumstances aforementioned do not exist in the PRC Companies’ operations, we are of the view that the Provisions on Private Lending Cases does not prohibit using cash generated from one PRC operating entity to fund another affiliated PRC operating entity’s operations.

 

Our opinions expressed above are subject to the following qualifications (the “Qualifications”):

 

(1)

Our opinions are limited to PRC Laws of general application on the date hereof. We have made no investigation of, and do not express or imply any views on, the laws of any jurisdiction other than the PRC, and we have assumed that no such other laws would affect our opinions expressed above.

 

(2)

PRC Laws referred to herein are laws and regulations publicly available and currently in force on the date hereof and there is no guarantee that any of such laws and regulations, or the interpretation or enforcement thereof, will not be changed, amended or revoked in the future with or without retrospective effect.

 

(3)

Our opinions are subject to (i) applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws in the PRC affecting creditors’ rights generally, and (ii) possible judicial or administrative actions or any PRC Laws affecting creditors’ rights.

 

(4)

Our opinions are subject to the effects of (i) certain legal or statutory principles affecting the enforceability of contractual rights generally under the concepts of public interests, social ethics, national security, good faith, fair dealing, and applicable statutes of limitation; (ii) any circumstance in connection with the formulation, execution or performance of any legal documents that would be deemed materially mistaken, clearly unconscionable, fraudulent, coercionary or concealing illegal intentions with a lawful form; (iii) judicial discretion with respect to the availability of specific performance, injunctive relief, remedies or defenses, or the calculation of damages; and (iv) the discretion of any competent PRC legislative, administrative or judicial bodies in exercising their authority in the PRC.

 

(5)

This opinion is issued based on our understanding of PRC Laws. For matters not explicitly provided under PRC Laws, the interpretation, implementation and application of the specific requirements under PRC Laws, as well as their application to and effect on the legality, binding effect and enforceability of certain contracts, are subject to the final discretion of competent PRC legislative, administrative and judicial authorities. Under PRC Laws, foreign investment is restricted in certain industries. The interpretation and implementation of these laws and regulations, and their application to and effect on the legality, binding effect and enforceability of contracts such as the VIE Agreements and transactions contemplated by the VIE Agreements, are subject to the discretion of the competent Governmental Agency.

 

 

 

(6)

The term “enforceable” or “enforceability” as used in this opinion means that the obligations assumed by the relevant obligors under the relevant Documents are of a type which the courts of the PRC may enforce. It does not mean that those obligations will necessarily be enforced in all circumstances in accordance with their respective terms and/or additional terms that may be imposed by the courts. As used in this opinion, the expression “to the best of our knowledge after due inquiry” or similar language with reference to matters of fact refers to the current, actual knowledge of the attorneys of this firm who have worked on matters for the Company in connection with the Offering and the transactions contemplated thereby. We may rely, as to matters of fact (but not as to legal conclusions), to the extent we deem proper, on certificates and confirmations of responsible officers of the Company, the PRC Companies and Governmental Agencies.

 

(7)

We have not undertaken any independent investigation, search or other verification action to determine the existence or absence of any fact or to prepare this opinion, and no inference as to our knowledge of the existence or absence of any fact should be drawn from our representation of the Company or the PRC Companies or the rendering of this opinion.

 

(8)

This opinion is intended to be used in the context which is specifically referred to herein; each paragraph shall be construed as a whole and no part shall be extracted and referred to independently.

 

This opinion is strictly limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated herein. The opinions expressed herein are rendered only as of the date hereof, and we assume no responsibility to advise you of facts, circumstances, events or developments that hereafter may be brought to our attention and that may alter, affect or modify the opinion expressed herein.

 

We hereby consent to the use of this opinion in, and the filing hereof as an exhibit to, the Registration Statement, and to the reference of our name under captions “Prospectus Summary,” “Risk Factors,” “Enforceability of Civil Liabilities,” and “Legal Matters” in the Registration Statement. In giving such consent, we do not thereby admit that we fall within the category of the person whose consent is required under Section 7 of the U.S. Securities Act of 1933, as amended, or the regulations promulgated thereunder.

 

Yours faithfully,
/s/ HAN KUN LAW OFFICES
HAN KUN LAW OFFICES

 

 

 

Appendix A

 

List of the PRC Companies

 

No.	PRC Companies	Shareholders (% of Equity Interests)
1．	Beijing Zhongchao Zhongxing Technology Limited ( 北京众巢众行科技有限公司)	Zhongchao Group Limited (100%)
2．	Zhongchao Medical Technology (Shanghai) Co., Ltd. ( 众巢医学科技（上海）有限公司)	Weiguang Yang (杨伟光) (76.3980%) Shanghai Xingban Enterprise Management Partnership (Limited Partnership) (上海兴半 企业管理合伙企业（有限合伙）) (23.6020%)
3．	Shanghai Zhongxun Medical Technology Co., Ltd.( 上海众循医疗科技有限公司)	Zhongchao Medical Technology (Shanghai) Co., Ltd. (众巢医学科技（上海）有限公司) (100%)
4．	Chongqing Xinjiang Pharmaceutical Co., Ltd. (重庆鑫江医药有限公司)	Shanghai Zhongxun Medical Technology Co., Ltd.(上海众循医疗科技有限公司) (100%)
5．	Shanghai Huijing Information Technology Co., Ltd. (上海会菁信息科技有限公司)	Zhongchao Medical Technology (Shanghai) Co., Ltd. (众巢医学科技（上海）有限公司) (100%)
6．	Shanghai Maidemu Health Management Co., Ltd.(上海麦德姆健康管理有限公司)	Zhongchao Medical Technology (Shanghai) Co., Ltd. (众巢医学科技（上海）有限公司) (100%)
7．	Beijing Zhongchao Boya Medical Technology Co., Ltd.( 北京众巢博雅医学科技有限公司)	Zhongchao Medical Technology (Shanghai) Co., Ltd. (众巢医学科技（上海）有限公司) (100%)
8．	Zhixun Internet Hospital (Liaoning) Co., Ltd.(智寻互联网医院（辽宁）有限公司)	Beijing Zhongchao Boya Medical Technology Co., Ltd.(北京众巢博雅医学科技有限公司) (100%)
9．	Shanghai Zhongxin Medical Technology Co., Ltd( 上海众芯医疗科技有限公司)	Shanghai Maidemu Health Management Co., Ltd.(上海麦德姆健康管理有限公司) (100%)
10．	Hainan Muxin Medical Technology Co., Ltd.( 海南慕芯医疗科技有限公司)	Shanghai Zhongxin Medical Technology Co., Ltd(上海众芯医疗科技有限公司) (100%)
11．	Beijing Yisuizhen Technology Co., Ltd.(北京易随诊科技有限公司)	Hainan Muxin Medical Technology Co., Ltd.(海南慕芯医疗科技有限公司) (100%)
12．	Shanghai Xinyuan Human Resources Co., Ltd.(上海芯源人力资源有限公司)	Shanghai Zhongxin Medical Technology Co., Ltd(上海众芯医疗科技有限公司) (100%)
13．	West Angel (Beijing) Health Technology Co., Ltd.( 西部天使	Beijing Yisuizhen Technology Co., Ltd.(北京 易随诊科技有限公司) (100%)

 

No.	PRC Companies	Shareholders (% of Equity Interests)
	（北京）健康科技有限公司)

 

 

 

Appendix B

 

VIE Agreements

 

1.	Master Exclusive Service Agreement (独家服务总协议) dated as of August 14, 2020, between WFOE and Zhongchao Shanghai;

 

2.	Exclusive Business Cooperation Agreement ( 独家业务合作协议) dated as of September 10, 2021 between WFOE, Zhongchao Shanghai and Zhongchao Shanghai’s shareholders;

 

3.	Exclusive Option Agreement ( 独家购买权协议) dated as of September 10, 2021 among WFOE, Zhongchao Shanghai and Zhongchao Shanghai’s shareholders;

 

4.	Power of Attorney ( 授权委托书) dated as of September 10, 2021 among WFOE, Zhongchao Shanghai and Zhongchao Shanghai’s shareholders;

5.	Equity Interest Pledge Agreement (股权质押协议) dated as of September 10, 2021 among WFOE, Zhongchao Shanghai and Zhongchao Shanghai’s shareholders; and

 

6.	Consent Letter (同意函) dated as of September 10, 2021 issued by Zheng Zhihua (郑志华), the spouse of Weiguang Yang (杨伟光).

 

 

 

 

Exhibit 107

 

Calculation of Filing Fee Tables

 

Form F-3

(Form Type)

 

Zhongchao Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Table 1: Newly Registered Securities

 

		Security Type		Security Class Type(1)		Fee Calculation or Carry Forward Rule				Amount Registered				Proposed Maximum Offering Price Per Unit				Maximum Aggregate Offering Price				Fee Rate				Amount of Registration Fee
Fees to be paid		Equity		Class A ordinary shares, par value US$ 0.001 per share			457(c)				19,600,000	(1)		$	2.0282	(2)		$	39,752,720				0.00015310			$	6,086.14
				Total Offering Amounts														$	39,752,720							$	6,086.14
				Total Fees Previously Paid																							-
				Total Fees Offsets																							-
				Net Fee Due																						$	6,086.14

 

(1)

Represents an aggregate of 19,600,000 Class A ordinary shares registered for resale, consisting of (i) 10,000,000 Class A ordinary shares held by the selling shareholders and (ii) 9,600,000 Class A ordinary shares issued upon cashless exercise of warrants held by the selling shareholders. This registration statement also includes an indeterminate number of securities that may become offered, issuable or sold to prevent dilution resulting from stock splits, stock dividends and similar transactions, which are included pursuant to Rule 416 under the Securities Act of 1933, as amended.

(2)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) promulgated under the Securities Act of 1933, as amended, based upon the average of the high ($2.145) and low ($1.9114) prices of the Class A ordinary shares as reported on the Nasdaq Capital Market on December 16, 2024, which is a date within five (5) business days prior to the filing date of this registration statement.

 

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