0001213900-21-058436.txt : 20211112 0001213900-21-058436.hdr.sgml : 20211112 20211112085008 ACCESSION NUMBER: 0001213900-21-058436 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 59 CONFORMED PERIOD OF REPORT: 20210630 FILED AS OF DATE: 20211112 DATE AS OF CHANGE: 20211112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Zhongchao Inc. CENTRAL INDEX KEY: 0001785566 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 000000000 STATE OF INCORPORATION: E9 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-39229 FILM NUMBER: 211400105 BUSINESS ADDRESS: STREET 1: 841 YAN AN MIDDLE ROAD, JING AN DISTRICT STREET 2: NANXI CREATIVE CENTER, SUITE 218 CITY: SHANGHAI STATE: F4 ZIP: 200040 BUSINESS PHONE: 021-32205987 MAIL ADDRESS: STREET 1: 841 YAN AN MIDDLE ROAD, JING AN DISTRICT STREET 2: NANXI CREATIVE CENTER, SUITE 218 CITY: SHANGHAI STATE: F4 ZIP: 200040 6-K 1 ea150364-6k_zhongchaoinc.htm REPORT OF FOREIGN PRIVATE ISSUER

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of October, 2021

 

ZHONGCHAO INC.

(Exact name of registrant as specified in its charter)

 

Nanxi Creative Center, Suite 218

841 Yan’an Middle Road

Jing’An District, Shanghai, China 200040

Tel: 021-32205987

(Address of Principal Executive Office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form40-F.

 

Form 20-F  ☒      Form 40-F  ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

 

 

 

 

 

 

EXPLANATORU NOTE

 

Zhongchao Inc., a Cayman Islands exempt company (the “Company”) is furnishing this Form 6-K to provide six-month interim financial statements and incorporate such financial statements into the Company’s registration statements referenced below.

 

This Form 6-K is hereby incorporated by reference into the registration statements of the Company on F-3 (Registration Number 333-256190),

 

Financial Statements and Exhibits.

 

Exhibits:

 

Exhibit No.   Description
99.1   Unaudited Interim Consolidated Financial Statements as of June 30, 2021 and for the Six Months Ended June 30, 2021 and 2020.
99.2   Operating and Financial Review and Prospects in Connection with the Unaudited Interim Consolidated Financial Statements for the Six Months Ended June 30, 2021 and 2020.
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

1

 

  

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  

  Zhongchao Inc.
     
Date: November 12, 2021 By: /s/ Weiguang Yang
    Weiguang Yang
    Chief Executive Officer

 

 

2

 

 

false --12-31 Q2 2021 2021-06-30 0001785566 001-39229 Zhongchao Inc.
EX-99.1 2 ea150364ex99-1_zhongchaoinc.htm UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2021 AND FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Exhibit 99.1

 

ZHONGCHAO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2021 and December 31, 2020

(Expressed in U.S. dollar, except for the number of shares and per share data)

 

   June 30,
2021
   December 31,
2020
 
   (unaudited)     
ASSETS        
Current Assets        
Cash and cash equivalents  $12,664,392   $15,072,947 
Short-term investments   2,934,208    2,032,928 
Accounts receivable, net   10,422,980    10,321,837 
Prepayments   139,202    554,298 
Loan due from a third party   1,390,000    - 
Other current assets   1,613,051    1,613,408 
Total Current Assets   29,163,833    29,595,418 
           
Investment in a limited partnership   1,273,561    1,258,787 
Property and equipment, net   2,811,331    1,997,761 
Deposit and prepayment for properties   1,661,784    700,884 
Prepayments for lease of land   360,332    367,588 
Intangible assets, net   32,625    34,973 
Right of use assets   158,656    65,137 
Deferred tax assets   1,291,333    795,547 
Total Assets  $36,753,455   $34,816,095 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Current Liabilities          
Accounts payable  $469,244   $408,426 
Advances from customers   77,002    6,760 
Income tax payable   2,016,754    1,523,175 
Operating lease liabilities, current portion   130,949    62,160 
Accrued expenses and other liabilities   927,863    981,433 
Total Current Liabilities   3,621,812    2,981,954 
           
Operating lease liabilities, noncurrent portion   12,764    - 
Total Liabilities   3,634,576    2,981,954 
           
Commitments and Contingencies   
 
    
 
 
           
Shareholders’ Equity          
Class A Ordinary Share (par value $0.0001 per share, 450,000,000 shares authorized; 19,435,423 shares issued and outstanding at June 30, 2010 and December 31, 2020, respectively)   1,944    1,944 
Class B Ordinary Share (par value $0.0001 per share, 50,000,000 shares authorized; 5,497,715 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively)   550    550 
Additional paid-in capital   22,864,656    22,775,154 
Statutory reserve   801,502    801,502 
Retained earnings   8,341,337    7,339,778 
Accumulated other comprehensive income   1,108,890    915,213 
Total Shareholders’ Equity   33,118,879    31,834,141 
           
Total Liabilities and Shareholders’ Equity  $36,753,455   $34,816,095 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 

 

F-1

 

 

ZHONGCHAO INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

For the Six Months Ended June 30, 2021 and 2020

(Expressed in U.S. dollar, except for the number of shares and per share data)

 

  

For the Six Months Ended

June 30,

 
   2021   2020 
Revenues  $8,615,572   $8,462,250 
Cost of revenues   (3,147,596)   (2,840,759)
Gross Profit   5,467,976    5,621,491 
           
Operating Expenses          
Selling and marketing expenses   (1,957,522)   (1,725,651)
General and administrative expenses   (2,235,044)   (1,611,364)
Research and development expenses   (416,077)   (404,111)
Total Operating Expenses   (4,608,643)   (3,741,126)
           
Income from Operations   859,333    1,880,365 
           
Interest income, net   65,795    78,360 
Other income, net   119,043    3,846 
Income Before Income Taxes   1,044,171    1,962,571 
           
Income tax expenses   (42,612)   (522,479)
           
Net Income   1,001,559    1,440,092 
           
Net loss attributable to noncontrolling interests   -    18,232 
           
Net Income Attributable to Zhongchao Inc.’s shareholders  $1,001,559   $1,458,324 
           
Other Comprehensive Income (Loss)          
Foreign currency translation adjustment   193,677    (227,756)
Comprehensive Income   1,195,236    1,212,336 
           
Total comprehensive loss attributable to noncontrolling interests   -    18,232 
Total comprehensive income attributable to Zhongchao Inc.’s shareholders  $1,195,236   $1,230,568 
           
Weighted average number of ordinary share outstanding          
Basic and Diluted   24,933,138    23,913,351 
           
Earnings per share          
Basic and Diluted  $0.04   $0.06 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

F-2

 

 

ZHONGCHAO INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in U.S. dollar, except for the number of shares)

 

For the Six Months Ended June 30, 2021

 

   Ordinary share   Additional           Accumulated other     
   Class A   Class B   paid-in   Statutory   Retained   comprehensive   Total 
   Shares   Amount   Shares   Amount   capital   Reserve   earning   income   equity 
Balance as of December 31, 2020   19,435,423   $1,944    5,497,715   $550   $22,775,154   $801,502   $7,339,778   $915,213   $31,834,141 
Share-based compensation expenses   -    
-
    -    
-
    89,502    
-
    
-
    
-
    89,502 
Net income   -    
-
    -    
-
    
-
    
-
    1,001,559    
-
    1,001,559 
Foreign currency translation adjustments   -    
-
    -    
-
    
-
    
-
    
-
    193,677    193,677 
Balance as of June 30, 2021   19,435,423   $1,944    5,497,715   $550   $22,864,656   $801,502   $8,341,337   $1,108,890   $33,118,879 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

  

F-3

 

 

ZHONGCHAO INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in U.S. dollar, except for the number of shares)

 

For the Six Months Ended June 30, 2020

 

   Attributable to Zhongchao Inc.’s Shareholders          
   Ordinary share   Additional           Accumulated
other
   Non-     
   Class A   Class B   paid-   Statutory   Retained   comprehensive   controlling   Total 
   Shares   Amount   Shares   Amount   in capital   Reserve   earning   loss   interest   equity 
Balance as of December 31, 2019   16,102,420   $1,610    5,497,715   $550   $12,044,855   $415,813   $3,267,087   $(344,771)  $(46,617)  $15,338,527 
Share-based compensation expenses   -    
-
    -    
-
    82,482    
-
    
-
    
-
    
-
    82,482 
Issuance of Class A Ordinary Shares pursuant to initial public offering, net of issuance costs   3,315,003    332    -    -    10,626,157    -    -    -    -    10,626,489 
Net income (loss)   -    
-
    -    
-
    
-
    
-
    1,458,324    
-
    (18,232)   1,440,092 
Foreign currency translation adjustments   -    -    -    -    -    -    -    (227,756)   -    (227,756)
Balance as of June 30, 2020   19,417,423   $1,942    5,497,715   $550   $22,753,492   $415,813   $4,725,411   $(572,527)  $(64,849)  $27,259,834 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

F-4

 

 

ZHONGCHAO INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2021 and 2020

(Expressed in U.S. dollar, except for the number of shares)

 

   For the Six Months Ended June 30, 
   2021   2020 
Cash Flows from Operating Activities:        
Net income   1,001,559    1,440,092 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:          
Depreciation and amortization expenses   143,028    83,874 
Writing off accounts receivable   323,524    209,751 
Amortization of right of use assets   139,217    88,059 
Recognition of share-based compensation expenses   89,502    82,482 
Deferred tax benefits   (485,654)   (165,829)
Equity investment loss   43    
-
 
Changes in fair value of short-term investments   (62,533)   
-
 
Changes in operating assets and liabilities:          
Accounts receivable   (303,213)   (3,671,578)
Prepayments   420,735    (352,680)
Other current assets   10,626    (789,198)
Accounts payable   64,575    112,638 
Advances from customers   68,888    11,604 
Income tax payable   474,650    685,715 
Accrued expenses and other liabilities   (120,956)   753 
Lease liabilities   (151,123)   (108,184)
Deferred government grants   1,127    - 
Net Cash Provided by (Used in) Operating Activities   1,613,995    (2,372,501)

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

F-5

 

 

ZHONGCHAO INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

For the Six Months Ended June 30, 2021 and 2020

(Expressed in U.S. dollar, except for the number of shares)

 

   For the Six Months Ended June 30, 
   2021   2020 
Cash Flows from Investing Activities:        
Purchases of property and equipment   (1,874,496)   (140,388)
Loan to a third party   (1,390,000)   
-
 
Investments in short-term investments   (838,747)   
-
 
Net Cash Used in Investing Activities   (4,103,243)   (140,388)
           
Cash Flows from Financing Activities:          
           
Proceeds from issuance of common stocks in connection with initial public offering, net off issuance costs   
-
    11,497,654 
Net Cash Provided by Financing Activities   
-
    11,497,654 
           
Effect of exchange rate changes on cash and cash equivalents   80,693    (104,265)
           
Net (decrease) increase in cash and cash equivalents   (2,408,555)   8,880,500 
Cash and cash equivalents at beginning of period   15,072,947    7,832,552 
Cash and cash equivalents at end of period  $12,664,392   $16,713,052 
           
Supplemental Cash Flow Information          
Cash paid for income tax  $41,112   $2,593 
           
Noncash investing activities          
Right of use assets obtained in exchange for operating lease obligations  $199,505   $157,906 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

F-6

 

 

ZHONGCHAO INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1.ORGANIZATION AND PRINCIPAL ACTIVITIES

 

The accompanying condensed consolidated financial statements include the financial statements of Zhongchao Inc. (“Zhongchao Cayman”, or the “Company”), its subsidiaries and variable interest entity (together with or without its subsidiary, “VIE”) and VIE’s subsidiaries for which the Company or its subsidiaries are the primary beneficiaries. The Company provides customized medical courses and customized medical training services to medical associations, pharmaceutical enterprises, medical institutions, medical journals, medical foundations, hospitals and etc. in the PRC. 

 

In May 2021, VIE launched the patient management service focusing on the professional field of tumor and rare disease operated through its subsidiary Shanghai Zhongxin Medical Technology Co., Ltd. ("Zhongxin"). In July 2021, VIE established a new subsidiary Ningxia Zhongxin Internet Hospital Co., Ltd. ("Zhongxin Ningxia") under Zhongxin.  Zhongxin Ningxia will build an internet hospital focusing on inpatient management services.

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(a)Basis of presentation

 

The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Security and Exchange Commission and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in conformity with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim financial information including the condensed consolidated financial statements and footnotes thereto should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2020 included in the Company’s Form 20-F filed with the SEC on April 30, 2021.

 

In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2020. The results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results for the year ending December 31, 2021 or any future periods.

 

(b)Accounts receivable

 

Accounts receivable are recorded at the gross amount less an allowance for any uncollectible accounts and do not bear interest. The Company provides customers with credit term ranging between one to six months, depending on credit assessment of customers. Management reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables. Management also periodically evaluates individual customer’s financial condition, credit history and the current economic conditions to make adjustments in the allowance when necessary. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. During the six months ended June 30, 2021 and 2020, the Company wrote off $323,524 and $209,751 against accounts receivable as the Company evaluated it is remote to collect the balance. As of June 30, 2021 and December 31, 2020, there were no allowances for doubtful accounts balances for accounts receivable.

 

F-7

 

 

ZHONGCHAO INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(c)Revenue recognition

 

The Company adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) on January 1, 2017.

 

In accordance with ASC 606, revenues are recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

 

The Company identified each distinct service, or each series of distinct services that are substantially the same and that have the same pattern of transfer to the customer, as a performance obligation. Transaction price is allocated among different performance obligations identified in one contract, by using expected cost plus margin approach, if the standalone selling price of each performance obligation is not observable.

 

The Company identified each distinct service, or each series of distinct services that are substantially the same and that have the same pattern of transfer to the customer, as a performance obligation. Transaction price is allocated among different performance obligations identified in one contract, by using expected cost plus margin approach, if the standalone selling price of each performance obligation is not observable.

 

Advances from customers consists of payments received related to unsatisfied performance obligations at the end of the period.

 

The Company applied a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. The Company has no material incremental costs for obtaining contracts with customers that the Company expects the benefit of those costs to be longer than one year.

 

Medical training and education services

 

VIE designs and provides medical training and education courses in both online and offline formats to physicians and allied healthcare professionals (the “training and education services”). The Company identifies a single performance obligation from contracts. The Company recognizes revenue at the point of provision of services. Payments received in advance from customers are recorded as “advance from customers” in the consolidated balance sheets. Advance from customers is recognized as revenue when VIE delivers the courses to its customers. Such advance payment received are non-refundable. In cases where fees are collected after the sales, revenue and accounts receivable are recognized upon delivery of medical training and education courses to VIE. The fees are fixed and determinable at the inception of the services.

  

F-8

 

 

ZHONGCHAO INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(c)Revenue recognition (continued)

 

Offline medical training and education services courses – though customers can benefit from each service commitment, including design, production and presentation of medical courses, together with other readily available resources. The promises in the contracts with customers is integration of all of these service commitments. The Company concludes that these service commitments are highly dependent with each other, in the context of the contract term. Thus, these service commitments are not distinct from each other, and the Company combines all service commitments performed as a single performance obligation. In cases where VIE engages third party experts to provide presentation in medical courses, as the Company determines the contents and the participants, VIE has the ability to direct these experts to provide medical training services for VIE. Therefore, VIE is primarily responsible for fulfilling the promise to provide the medial courses and has the discretion in establishing the transaction price. VIE is a principal in the provision of services and recognizes revenues on a gross basis.

 

Online medical training and education services courses – the promises in the contracts with customers consist of provision of online courses and presentation of the courses online for users to access for a period of time. The performance obligation of presentation of the courses online for users for a period of time is immaterial in the context of the contract because presentation of each course incurred no significant additional cost, nor will it occupy any significant resources of VIE, except for little digital space on VIE’s server, which is inconsequential. Therefore, the Company combines all service commitments performed as a single performance obligation.

 

Assistance in operation of patient-aid projects

 

VIE is engaged by NFPs to assist in the operation of patient-aid projects with a purpose to facilitate qualified patients to obtain free drug treatment from NFPs. VIE is responsible to provide doctors with access to training courses or training materials in connection with the drug treatment, review the completeness of application documents from patients, and other ad-hoc works (such programs with these plug-in features are hereinafter referred as the “patient-aid projects”). The arrangements are structured as fixed price contracts. The price is determined as stated in contracts and does not include any variable consideration. The Company identifies a single performance obligation from contracts and recognizes revenue over a period of time during which VIE provides the assistance to the NFPs till the earlier of the expiration of contract period or the free drugs are completely delivered. The Company uses an input-based method to measure the progress, by reference to the cost incurred in performing the obligation.

 

The fees are fixed at the inception of the services and are collected either in advance or after the services are provided.

 

Other consulting services

 

VIE also provides consulting services to its customers, including drafting research papers and providing other academic supports. The consulting services are accounted for as a single performance obligation and was recognized as revenue when VIE delivers services to the customers. Fees are generally collected after provision of services. For the six months ended June 30, 2021 and 2020, the Company generated minimal amount from other consulting services.

  

F-9

 

 

ZHONGCHAO INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(d)Cost of revenues

 

Cost of revenues was comprised of direct related costs incurred for preparation of online medical training courses and offline education seminars and patient-aid projects, including expenses of travelling and accommodation, seminar site-rental, video production and backdrop production, professional service fees charged by experts who provide online and offline seminars, salary and welfare expenses incurred by the key members of the editorial, design and production team, and labor cost for patient-aid projects. The travelling and accommodation expenses, including but not limited to the air-ticket expenses and hotel accommodation expenses, represented the costs arising from lecturers’ attendance and participation of the offline seminars. Other media expenses were incurred by VIE’s medical department for videos production, live streaming of the offline seminars, and materials collection to create online courses. These travelling, accommodation and media expenses are well budgeted before any agreements entered into by VIE and the customers. Therefore, such expenses are well covered by the customers under those agreements. VIE is not reimbursed by the customers separately.

 

(e)Earnings per share

 

Basic earnings per ordinary share is computed by dividing net earnings attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to ordinary shareholders by the sum of the weighted average number of ordinary share outstanding and of potential ordinary share (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary share that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted earnings per share. Potential ordinary share that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted earnings per share. For the six months ended June 30, 2021 and 2020, the Company had no dilutive shares.

 

(f)Share-based compensation

 

Share-based awards granted to the Company’s employees and one non-employee are measured at fair value on grant date and measurement date, respectively, and share-based compensation expense is recognized (i) immediately at the grant date if no vesting conditions are required, or (ii) using the accelerated attribution method, net of estimated forfeitures, over the requisite service period. The fair value of restricted shares is determined with reference to the fair value of the underlying shares.

 

At each date of measurement, the Company reviews internal and external sources of information to assist in the estimation of various attributes to determine the fair value of the share-based awards granted by the Company, including but not limited to the fair value of the equity value of the Company (Note 11), expected life, expected volatility and expected forfeiture rates.

 

F-10

 

 

ZHONGCHAO INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(g)Significant risks and uncertainties

 

1)Credit risk

 

Assets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents. The maximum exposure of such assets to credit risk is their carrying amount as at the balance sheet dates. As of June 30, 2021, the Company held cash and cash equivalents of $12,664,392, of which $7,565,882 were deposited in financial institutions located in Mainland China, and each bank accounts is insured by the government authority with the maximum limit of RMB 500,000 (equivalent to approximately $77,400). As of June 30, 2021, the Company held cash and cash equivalents of $4,301,393 deposited in the banks located in Hong Kong and Cayman Islands, which are not insured by Federal Deposit Insurance Corporation (“FDIC”) insurance or other insurance, and held cash and cash equivalents of $797,117 deposited in the banks located in the U.S. which are insured by FDIC up to $250,000. To limit exposure to credit risk relating to deposits, the Company primarily place cash and cash equivalent deposits with large financial institutions in China which management believes are of high credit quality and also continually monitors their worthiness.

 

VIE’s operations are carried out in China. Accordingly, VIE’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy. In addition, VIE’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, rates and methods of taxation among other factors.

 

F-11

 

 

ZHONGCHAO INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

3.SHORT-TERM INVESTMENTS

 

As of June 30, 2021 and December 31, 2020, the balance of short-term investments represented certain equity securities of listed companies purchased through various open market transactions invested by the Company during the relevant periods. The short-term investments are trading securities. They are initially recorded at cost, and subsequently measured at fair value with the changes in fair value recorded in other income, net in the consolidated statement of income and comprehensive income. Loss from such short-term investment amounted to $62,533 and $nil for the six months ended June 30, 2021 and 2020, respectively.

 

4.OTHER CURRENT ASSETS

 

Other current assets consist of the following:

 

   June 30,
2021
   December 31,
2020
 
   (unaudited)     
Prepaid advertising expense (i)  $
-
   $1,033,280 
Deferred contract costs (ii)   800,461    272,804 
Office rental deposit   98,159    86,287 
Interest receivable   29,945    32,416 
Prepaid rental fees   54    15,827 
Prepaid consulting service fees   468,302    78,627 
Others   216,130    94,167 
   $1,613,051   $1,613,408 

 

(i)As of December 31, 2020, the balance of prepaid advertising expenses represents payments of advertising expenses to three vendors. Among the balance of $1,033,280 as of December 31, 2020, $459,235 was subsequently refunded from the vendor to VIE as VIE suspended cooperation with the vendor, and the remaining was expensed during the six months ended June 30, 2021 with the services provided by the vendors.

 

(ii)As of June 30, 2021 and December 31, 2020, the balances of deferred contract costs represented the travel and media expenses which were directly related to certain contracts with customers. The costs and expenses were incurred so that VIE would fulfil its performance obligation committed to its customers and were expected to be recovered.

 

5.LOAN DUE FROM A THIRD PARTY

 

During the six months ended June 30, 2021, the Company provided a loan in the amount of $1,390,000 to a third party with a term of 12 months. The loan bears an interest rate of 2% per annum. The loan was made to earn interest income from the idle cash. Subsequently, the third party has repaid $100,000 to the Company.

  

F-12

 

 

ZHONGCHAO INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

6.PROPERTY AND EQUIPMENT, NET

 

Property and equipment, net consist of the following:

 

   June 30,
2021
   December 31,
2020
 
   (unaudited)     
Property  $2,768,607   $1,828,092 
Office equipment   453,759    449,246 
Vehicle   35,530    34,351 
Less: accumulated depreciation   (446,565)   (313,928)
   $2,811,331   $1,997,761 

 

As of June 30, 2021, the balance of property was comprised of office campus and facilities in Beijing of $1,849,611 and in Japan of $918,996. As of December 31, 2020, the balance of property was comprised of office campus and facilities in Beijing of $1,828,092.

 

Depreciation expenses totaled $128,716 and $71,314 for the six months ended June 30, 2021 and 2020, respectively.

 

7.ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

Accrued expenses and other current liabilities consist of the following:

 

   June 30,
2021
   December 31,
2020
 
   (unaudited)     
Other tax payable  $684,930   $777,810 
Accrued payroll   198,263    159,350 
Other current liabilities   44,670    44,273 
   $927,863   $981,433 

 

Other tax payable

 

Other tax payables consist of the following:

 

   June 30,
2021
   December 31,
2020
 
   (unaudited)     
Value added tax payable  $664,890   $740,894 
Local taxes payable   20,040    36,916 
   $684,930   $777,810 

  

F-13

 

 

ZHONGCHAO INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

8.INCOME TAXES

 

Cayman Islands

 

Under the current tax laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed.

 

British Virgin Islands

 

Under the current tax laws of BVI, the Company’s subsidiary incorporated in the BVI is not subject to tax on income or capital gains.

 

Hong Kong

 

The Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong since inception. Under Hong Kong tax laws, Zhongchao HK is exempted from income tax on its foreign-derived income and there are no withholding taxed in Hong Kong on remittance of dividends.

 

PRC

 

The PRC Corporate Income Tax (“CIT”) is calculated based on the taxable income determined under the applicable CIT Law and its implementation rules, which became effective on January 1, 2008. CIT Law imposes a unified income tax rate of 25% for all resident enterprises in China, including both domestic and foreign invested enterprises.

 

USA

 

For the US jurisdiction, the Company is subject to federal and state income taxes on its business operations. The federal tax rate is 21% and state tax rate is 13%. The Company also evaluated the impact from the recent tax reforms in the United States, including the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and Health and Economic Recovery Omnibus Emergency Solutions Act (“HERO Act”), which both were passed in 2020, No material impact on the Company is expected based on our analysis. The Company will continue to monitor the potential impact going forward.

 

Income tax expenses consist of the following:

 

   For the six months ended
June 30,
 
   2021   2020 
   (unaudited)   (unaudited) 
Current income tax expenses  $(528,266)  $(688,308)
Deferred income tax benefits   485,654    165,829 
   $(42,612)  $(522,479)

 

Deferred tax assets as of June 30, 2021 and December 31, 2020 consist of the following:

 

   June 30,
2021
   December 31,
2020
 
   (unaudited)     
Excess advertising expense  $820,649   $699,717 
Deferred intangible assets amortization   21,573    22,983 
Net operating loss carrying forward   369,709    7,666 
Share-based compensation   79,402    65,181 
   $1,291,333   $795,547 

 

F-14

 

 

ZHONGCHAO INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

8.INCOME TAXES (CONTINUED)

 

As of June 30, 2021 and December 31, 2020, the Company had net operating loss carryforwards of $2,654,794 and $36,538, respectively. The Company reviews deferred tax assets for a valuation allowance based upon whether it is more likely than not that the deferred tax asset will be fully realized. As of June 30, 2021, the valuation allowance was of $9,425 against the deferred tax assets arising from net operating losses of one subsidiary as the management’s assessed that it will not realize the deferred tax asset. As of December 31, 2020, there was no valuation allowance against the deferred tax assets based upon management’s assessment that it is more likely than not that there will be realization of the deferred tax asset.

 

The Company evaluates its valuation allowance requirements at end of each reporting period by reviewing all available evidence, both positive and negative, and considering whether, based on the weight of that evidence, a valuation allowance is needed. When circumstances cause a change in management’s judgement about the recoverability of deferred tax assets, the impact of the change on the valuation allowance is generally reflected in income from operations. The future realization of the tax benefit of an existing deductible temporary difference ultimately depends on the existence of sufficient taxable income of the appropriate character within the carryforward period available under applicable tax law.

 

Uncertain tax positions

 

The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of June 30, 2021 and December 31, 2020, the Company did not have any significant unrecognized uncertain tax positions or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefit. The Company does not believe that its uncertain tax benefits position will materially change over the next twelve months.

 

9.RELATED PARTY TRANSACTIONS AND BALANES

 

As of June 30, 2021 and December 31, 2020, the Company had no outstanding balances due from or due to related parties.

 

For the six months ended June 30, 2021 and 2020, the Company did not enter into any transactions with related parties.

  

F-15

 

 

ZHONGCHAO INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

10.EQUITY

 

Restricted net assets

 

As of June 30, 2021 and December 31, 2020, the Company had net assets restricted in the aggregate, which include paid-in capital and statutory reserve of the Company’s PRC subsidiary, VIE and VIE’s subsidiaries that are included in the Company’s consolidated net assets, were approximately $12,352,859 and $12,088,293, respectively.

 

11.STOCK BASED COMPENSATION

 

The following table summarizes our unvested restricted share units:

 

   Number of
shares
  

Weighted-
Average

Grant-Date
Fair Value

 
         
Unvested at December 31, 2020   427,076   $2.54 
Granted   
-
   $
-
 
Vested   (3,000)  $2.42 
Unvested at June 30, 2021   424,076   $2.54 

 

On July 13, 2020, the Company granted and issued 18,000 shares of restricted Class A Ordinary Shares to three non-executive directors as their compensation for the year from March 1, 2020. The restricted shares were vested on a straight line basis over the service period, and will be transferable after a lock-up period of six months. As of June 30, 2021 and December 31, 2020, 18,000 and 15,000 shares were vested, respectively. The grant-date value of each restricted share units was $2.42 by reference to the closing price of the Company’s Class A Ordinary Share on July 13, 2020, and the total fair value of these restricted Class A Ordinary Share units aggregated $43,560.

 

For the six months ended June 30, 2021 and 2020, the Company had stock-based compensation expenses of $89,502 and $82,482, respectively. As of June 30, 2021, the Company expected to incur stock based compensation expenses of $580,935 over a weighted average period of 4.1 years.

  

F-16

 

 

ZHONGCHAO INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

12.COMMITMENTS AND CONTINGENCIES

 

Contingencies

 

From time to time, the Company may be subject to certain legal proceedings, claims and disputes that arise in the ordinary course of business. Although the outcomes of these legal proceedings cannot be predicted, the Company does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of operations or liquidity.

 

Lease commitment

 

As of June 30, 2021, the Company leases offices space under certain non-cancelable operating lease arrangements, five of which had a term over 12 months. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right of use assets and lease liabilities. Lease expense for lease payment is recognized on a straight-line basis over the lease term.

 

The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company discounted lease payments based on an estimate of its incremental borrowing rate to present value.

 

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

 

The table below presents the operating lease related assets and liabilities recorded on the balance sheet.

 

  

June 30,

2021

   December 31,
2020
 
   (unaudited)     
Rights of use lease assets  $158,656   $65,137 
           
Operating lease liabilities, current  $130,949   $62,160 
Operating lease liabilities, noncurrent   12,764    - 
Total operating lease liabilities  $143,713   $62,160 

 

As of June 30, 2021 and December 31, 2020, the weighted average remaining lease term was 0.90 years and 0.39 years, respectively, and discount rates were 4.75% for all of the operating leases.

 

Rental expense for the six months ended June 30, 2021 and 2020 were $153,841 and $141,074, respectively.

 

The following is a schedule, by years, of maturities of lease liabilities as of June 30, 2021:

 

   June 30,
2021
 
   (unaudited) 
Six months ending December 31, 2021  $131,964 
Year ending December 31, 2022 and thereafter   17,700 
Total lease payments   149,664 
Less: imputed interest   (5,951)
Present value of lease liabilities  $143,713 

  

13.SUBSEQUENT EVENTS

 

The Company evaluated subsequent events through November 12, 2021, the date on which these condensed consolidated financial statements were issued, and the management determined that no subsequent events that require recognition and disclosure in the condensed consolidated financial statements.

 

 

F-17

 

 

 

 

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EX-99.2 3 ea150364ex99-2_zhongchaoinc.htm OPERATING AND FINANCIAL REVIEW AND PROSPECTS IN CONNECTION WITH THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Exhibit 99.2

 

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

The information in this report contains forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes included elsewhere in this report. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Disclosure Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks, and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth elsewhere in this report. 

 

Overview

 

We are not a Chinese operating company but rather a holding company incorporated in Cayman Islands. As a holding company with no material operation of our own, we conduct a substantial majority of our operation through our wholly owned subsidiary, Beijing Zhongchao Zhongxing Technology Limited, a PRC company (“Zhongchao WFOE”) and a variable interest entity in China, Zhongchao Medical Technology (Shanghai) Co., Ltd. (“Zhongchao VIE”) and its subsidiaries. Due to the existing VIE agreements between Zhongchao WFOE and Zhong VIE, we are able to consolidate the financial results of Zhongchao VIE under the U.S. GAAP, however, we do not hold equity interest in Zhongchao VIE.

 

Zhongchao VIE, together with its subsidiaries, is a provider of healthcare information, education, and training services to healthcare professionals and the public in China. They offer a wide range of online and onsite health information services, healthcare education programs, and healthcare training products, consisting primarily of clinical practice training, open classes of popular medical topics, interactive case studies, academic conference and workshops, continuing education courses, and articles and short videos with educational healthcare content to healthcare professionals as well as the public.

 

Zhongchao VIE commenced operation in August 2012 with a vision to offer a wide range of accessible and immediate healthcare information and continuous learning and training opportunities for Chinese healthcare professionals. Since its inception, Zhongchao VIE has been focused on developing information, education, and training programs to address the needs in the healthcare industry in China; and developing online platforms and onsite activities to deliver its information services, education programs and training products.

 

Zhongchao VIE provide healthcare information, education, and training services to the healthcare professionals under “MDMOOC” brand. As of the date of this report, its MDMOOC online platform has more than 680,000 registered users and a database of more than 2 million healthcare experts including over 700,000  physicians, and 1,300,000 allied healthcare professionals in medical academics, associations, and leading hospitals who constantly collaborate with Zhongchao VIE to develop training programs on needed basis.

 

Zhongchao VIE provides its healthcare educational content to the public via its “Sunshine Health Forums”, which, based on the amount of the registered users and daily review volume, we believe is one of the largest platform in China, for general healthcare knowledge and information to the public. In July 2020, Zhongchao VIE launched   focused patient management services to hospitals, pharmacies, pharmaceutical enterprises and non-profit organizations and insurance companies via “Zhongxun”. In May 2021, Zhongchao VIE launched patient management service on the professional field of tumor and rare diseases via “Zhongxin”.

 

Commencing from the fourth quarter of 2018, in addition to providing training and education courses through its platforms, Zhongchao VIE have been engaged by certain customers on a project basis to establish individual columns on its MDMOOC online platform to provide training and knowledge of certain drug treatment for healthcare professionals and patients. Most of the drug treatments are cancer-related or rare disease-related. Zhongchao VIE establishes online columns to facilitate qualified patients to obtain free drug treatment from non-profit organizations (“NFPs”) till the earlier of the expiration of contract period or the free drugs are completely delivered. For each column, its plugs in features to manage the drug treatment including reviewing patients’ applications, tracking their usage of drugs, and collecting related information (such programs with new plug-in features are hereinafter referred as the “patient-aid projects”). Those customers are its existing customers. They provide those drugs sponsored by pharmaceutical companies without charge to qualified patients and Zhongchao VIE charges those customers on its services in connection with the online columns and related training and management. In this way, Zhongchao VIE can not only facilitate the clinical application of those drugs, but also can benefit patients.

 

 

 

 

As of the date of this report, Zhongchao VIE has established nearly 20 columns for cancer-related drug treatment, including drug treatment for lung cancer, liver cancer, and extended blood cancer, and 4 columns for drug treatment of rare diseases, including drug treatment for pulmonary fibrosis, multiple sclerosis, and systemic lupus erythematosus. The total number of patients covered under this patient-aid project has reached nearly 45,000 by the end of 2020. Zhongchao VIE launched another 3 or 4 columns for the treatment of rare diseases, including Fabry disease and Gaucher disease in mid-2020. We expect the numbers of columns for both cancer-related treatment and treatment of rare diseases to increase by the end of 2021, covering an aggregate of nearly 65,000 patients. 

 

Recent developments

 

In January 2021, Zhongchao VIE co-sponsored the National Annual Conference for Standardized Liver Cancer Diagnosis and Treatment with China Association of Health Promotion and Education and Chinese Society of Liver Cancer.

 

In April 2021, Zhongchao VIE renewed its partnership with the China Association for Health Promotion and Education and GlaxoSmithKline (China) Investment Limited to continue the medical education program “Pulmonary Arterial Hypertension Online Course – Connections with Famous Hospitals” in 2021.

 

In May 2021, Zhongchao VIE launched the patient management service focusing on the professional field of tumor and rare disease operated through its subsidiary Shanghai Zhongxin Medical Technology Co., Ltd. (“Zhongxin”).

 

In July 2021, Zhongchao VIE established a new subsidiary Ningxia Zhongxin Internet Hospital Co., Ltd. (“Zhongxin Ningxia”) under Zhongxin.  Zhongxin Ningxia builds an internet hospital focusing on inpatient management services. It is another important initiative for Zhongchao’s patient management business since the launch of patient management service on the professional field of tumor and rare diseases in May 2021.

 

In August 2021, Zhongchao VIE launched Treatment Outcome Oriented DOT Management System to accelerate the development of patient management business, meeting the increasing demand in tumor and rare disease patient management market.

 

In September 2021, Zhongchao VIE established Hematological Tumor Patient Care Center, continuing to improve our business ecology in tumor patient management and further expanding to out-of-hospital market. The out-of-hospital market includes extensive online and onsite retail pharmacies and private institutions such as private hospitals and private clinics.

 

In September 2021, Zhongchao VIE launched a multidisciplinary treatment (“MDT”) clinical thinking training platform for hematology (“Hematology MDT Platform”). The Hematology MDT Platform provides clinicians with a channel to learn multidisciplinary thinking skills online, in order to improve diagnosis and treatment and further the efficiency of treatment. MDT is a medical service model in which multidisciplinary specialists discuss cases of a certain disease or a systemic disease and then develop an optimal treatment plan for the patient taking into considerations of opinions from all disciplines. Experienced physicians are essential and needed to organize and implement the MDT model as the model requires standardized multidisciplinary collaboration with high-level patient participation.

 

Zhongchao VIE’s business operations could be adversely affected by the effects of a widespread outbreak of contagious disease, including the recent outbreak of respiratory illness caused by a novel coronavirus known as COVID-19. Zhongchao VIE’s corporate headquarter is located in Shanghai, China, where any outbreak of contagious diseases and other adverse public health developments could be adverse on the Company’s business operations.

 

2 

 

 

Key Factors that Affect Operating Results

 

We believe that the principal competitive factors in Zhongchao VIE’s markets are industry expertise, breadth and depth of service offerings, quality of the services offered, reputation and track record, marketing, scalability of infrastructure and price. The combination of Zhongchao VIE’s large user base, professional database and high quality education content position it to be a leading provider of healthcare information, education, and training services to meet the needs of healthcare organizations and professionals and will continue to contribute to our growth and success.

 

We believe the following factors drive Zhongchao VIE’s success:

 

-Acknowledged by leading pharmaceutical enterprises
-Reliable Professional Content Production
-Well Organized and Easy-To-Use Websites and Apps

 

A. Results of Operations

 

The following table sets forth a summary of our condensed consolidated results of operations for the periods presented. This information should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report. The results of operations in any period are not necessarily indicative of our future trends.

 

  

For the Six Months Ended

June 30,

 
   2021   2020 
   (unaudited)   (unaudited) 
Revenues  $8,615,572   $8,462,250 
Cost of revenues   (3,147,596)   (2,840,759)
Gross Profit   5,467,976    5,621,491 
           
Operating Expenses          
Selling and marketing expenses   (1,957,522)   (1,725,651)
General and administrative expenses   (2,235,044)   (1,611,364)
Research and development expenses   (416,077)   (404,111)
Total Operating Expenses   (4,608,643)   (3,741,126)
           
Income from Operations   859,333    1,880,365 
           
Interest income, net   65,795    78,360 
Other income, net   119,043    3,846 
Income Before Income Taxes   1,044,171    1,962,571 
           
Income tax expenses   (42,612)   (522,479)
           
Net Income  $1,001,559   $1,440,092 

 

Revenues

 

We generate revenues from pharmaceutical enterprise customers and NFP from design and production of online medical courses, organizing offline medical training services, consulting and academic support services and assistance services for patient-aid projects.  

 

For the six months ended June 30, 2021, revenues increased by $0.16 million, or 1.8%, to $8.62 million from $8.46 million for the same period of last year. Our revenues remained stable between the periods.

 

Cost of revenues

 

Cost of revenues was comprised of direct related costs incurred for preparation of online medical training courses and offline education seminars   and patient-aid projects, including expenses of travelling and accommodation, seminar site-rental, video production and backdrop production, professional service fees charged by experts who provide online and offline seminars, and  salary and welfare expenses incurred by the key members of the editorial, design and production team and patient-aid projects, as well as outsourced labor cost in patient-aid projects. The travelling and accommodation expenses, including but not limited to the air-ticket expenses and hotel accommodation expenses, represented the costs arising from lecturers’ attendance and participation of the offline seminars. Other travelling expenses were incurred by the Company’s medical department for videos production, live streaming of the offline seminars, and materials collection to create online courses. These travelling and accommodation expenses are well budgeted before any agreements entered into by the Company and the customers. Therefore, such expenses are well covered by the customers under those agreements. The Company is not reimbursed by the customers separately.

 

3 

 

 

Cost of revenue increased by $0.31 million, or 10.8%, to $3.15 million for the six months ended June 30, 2021 from $2.84 million for the same period of last year. The increase of cost of revenues was driven by increased labor costs for the patient-aid projects which caused an increase of employees of 37 headcount and outsource staff of 69 headcount.

 

Selling and marketing expenses

 

Selling and marketing expenses increased by $0.23 million, or 13.4%, to $1.96 million for the six months ended June 30, 2021 from $1.73 million for the same period of last year. The increase in selling and marketing expenses was mainly attributable to increase in salary and welfare expenses as a result of increase of sales staff during the six months ended June 30, 2021.

 

General and administrative expenses

 

General and administrative expenses increased by $0.63 million, or 38.7%, to $2.24 million for the six months ended June 30, 2021 from $1.61 million for the same period of last year. The increase in general and administrative expenses was mainly attributable to launch of patient management service focusing on the professional field of tumor and rare disease in May 2021 which resulted in an increase of rental expenses and an increase in salary and welfare expenses as we employed staff for our expansion of online courses and patient management services.

 

Income tax expenses

 

We had income tax expenses of $0.04 million for the six months ended June 30, 2021, as compared to $0.52 million for the six months ended June 30, 2020.

 

Current income tax expenses decreased by $0.16 million from $0.69 million for the six months ended June 30, 2020 to $0.53 million for the same period of 2021. The decrease was mainly because the Company generated taxable losses in certain subsidiaries for the six months ended June 30, 2021, which made profit taxable income for the same period of 2020.

 

Deferred income tax benefits increased from $0.17 million for the six months ended June 30, 2020 to $0.49 million for the same period of 2021. The change was mainly caused by an increase of net operating losses carried forwards arising from certain subsidiaries which made taxable profits for the six months ended June 30, 2021.

 

Net income

 

As a result of the foregoing, our net income decreased by $0.44 million, or 30.5%, to $1.00 million for the six months ended June 30, 2021 from $1.44 million for the same period of last year. The decrease in income before income taxes was primarily attributable to increased cost of revenues and operating expenses.

 

Taxation  

 

Cayman Islands

 

Under the current tax laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed.

 

British Virgin Islands

 

Under the current tax laws of BVI, the Company’s subsidiary incorporated in the BVI is not subject to tax on income or capital gains.

 

4 

 

 

Hong Kong

 

Zhongchao Group Limited (“Zhongchao HK”) is incorporated in Hong Kong and is subject to Hong Kong Profits Tax. Zhongchao HK did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong since inception. Under Hong Kong tax laws, Zhongchao HK is exempted from income tax on its foreign-derived income and there are no withholding taxed in Hong Kong on remittance of dividends.

 

PRC

 

Zhongchao WFOE, Zhongchao VIE, Shanghai Maidemu Cultural Communication Corp (“Shanghai Maidemu”) are subject to PRC Enterprise Income Tax (“EIT”) on the taxable income in accordance with the relevant PRC income tax laws. The EIT rate for companies operating in the PRC is 25%. Shanghai Zhongxun Medical Technology Co., Ltd. (“Shanghai Zhongxun”), Shanghai Zhongxin Medical Technology Co., Ltd (“Shanghai Zhongxin”), Shanghai Huijing Information Technology Co., Ltd. (“Shanghai Huijing”), Beijing Zhongchao Boya Medical Technology Co., Ltd. (“Beijing Boya”), Zhixun Internet Hospital (Liaoning) Co., Ltd. (“Liaoning Zhixun”), Zhongchao VIE Beijing Branch and Shanghai Zhongxun Beijing Branch qualify as Small and Low Profit Enterprises, and are subject to a preferential EIT of 10%.

 

Entities qualifying as Software Development Enterprises enjoy a preferential tax treatment of income tax exemption for the first two years, and 50% reduction of rate (i.e. 12.5%) for the next three years. Entities qualifying as High and New Technology Enterprises enjoy a preferential tax rate of 15%. Qualified as a Software Development Enterprise and a High and New Technology Enterprise, Zhongchao VIE received the preferential tax treatments from the year ended December 31, 2016, and was exempted from income taxes for the years ended December 31, 2016 and 2017, applied a preferential income tax rate of 12.5% for the years ended December 2018 through 2020, and a preferential income tax rate of 15% from the year ended December 31, 2021 and thereafter.

 

In September 2018, the State Taxation Administration of the PRC announced a preferential tax treatment for research and development expenses. Qualified entities is entitled to deduct 175% research and development expenses against income to reach a net operating income.

 

Critical Accounting Policies  

 

We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) disclosure of contingent assets and liabilities at the end of each reporting period and (iii) the reported amounts of revenues and expenses during each reporting period. We continually evaluate these estimates and assumptions based on historical experience, knowledge and assessment of current business and other conditions, expectations regarding the future based on available information and reasonable assumptions, which together form a basis for making judgments about matters not readily apparent from other sources. The use of estimates is an integral component of the financial reporting process, though actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We consider the policies discussed below to be critical to an understanding of our financial statements as their application places the most significant demands on the judgment of our management.

 

-Basis of presentation

 

The accompanying audited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

-Principal of consolidation

 

The consolidated financial statements include the accounts of the Company, its wholly and majority owned subsidiaries, and consolidated VIE and its subsidiaries for which the Company is the primary beneficiary.

 

All transactions and balances among the Company, its subsidiaries and consolidated VIE have been eliminated upon consolidation.

 

5 

 

 

-Revenue recognition

 

The Company early adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) on January 1, 2017.

 

In according with ASC 606, revenues are recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

 

The Company identified each distinct service, or each series of distinct services that are substantially the same and that have the same pattern of transfer to the customer, as a performance obligation. Transaction price is allocated among different performance obligations identified in one contract, by using expected cost plus margin approach, if the standalone selling price of each performance obligation is not observable.

 

Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable represents amounts invoiced and revenue recognized prior to invoicing when the Company has satisfied its performance obligation and has the unconditional right to payment.

 

Advances from customers consists of payments received related to unsatisfied performance obligations at the end of the period.

 

The Company applied a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. The Company has no material incremental costs of obtaining contracts with customers that the Company expects the benefit of those costs to be longer than one year which need to be recognized as assets.

 

Medical training and education services

 

Zhongchao VIE designs and provides both online and offline medical training and education courses to physicians and allied healthcare professionals (the “training and education services”). Zhongchao VIE identifies a single performance obligation from contracts for both offline and online medical training and education services. The Company recognizes revenue at the point of provision of services.

 

Offline medical training and education services courses – though customers can benefit from each service commitment, including design, production and presentation of medical courses, together with other readily available resources. The promises in the contracts with customers is integration of all of these service commitments. The Company concludes that these service commitments are highly dependent with each other, in the context of the contract term. Thus, these service commitments are not distinct from each other, and the Company combines all service commitments performed as a single performance obligation. In cases where the Company engages third party experts to provide presentation in medical courses, as the Company determines the contents and the participants, it has the ability to direct these experts to provide medical training services for the Company. Therefore, the Company is primarily responsible for fulfilling the promise to provide the medial courses and has the discretion in establishing the transaction price. The Company is a principal in the provision of services and recognizes revenues on a gross basis.

 

Online medical training and education services courses – the promises in the contracts with customers consist of provision of online courses and presentation of the courses online for users to access for a period of time. The performance obligation of presentation of the courses online for users for a period of time is immaterial in the context of the contract because presentation of each course incurred no significant additional cost, nor will it occupy any significant resources of the Company, except for little digital space on the Company’s server, which is inconsequential. Therefore, the Company combines all service commitments performed as a single performance obligation.

 

The fees are collected either in advance to provision of services or after the services. In cases where fees are collected in advance, the fees are recorded as “advance from customers” in the consolidated balance sheets. Advance from customers is recognized as revenue when the Company delivers the courses to its customers. The fees are non-refundable. In cases where fees are collected after the sales, revenue and accounts receivable are recognized upon delivery of medical training and education courses to the Company. The fees are fixed and determinable at the inception of the services.

 

6 

 

 

New Plug-in to Certain Programs- Assistance in Patient-aid Projects

 

Commencing from the fourth quarter of 2018, in addition to providing training and education courses through our platforms, Zhongchao VIE has been engaged by certain customers on a project basis to establish individual columns on its MDMOOC online platform to provide training and knowledge of certain drug treatment for healthcare professionals and patients. Most of the drug treatments are cancer-related or rare disease-related. Zhongchao VIE establishes online columns to facilitate qualified patients to obtain free drug treatment from NFPs till the earlier of the expiration of contract period or the free drugs are completely delivered. For each column, Zhongchao VIE plugs in features to manage the drug treatment including reviewing patients’ applications, tracking their usage of drugs, and collecting related information (such programs with new plug-in features are hereinafter referred as the “patient-aid projects”). Those customers are existing customers of Zhongchao VIE. They provide those drugs sponsored by pharmaceutical companies without charge to qualified patients and Zhongchao VIE charges those customers on its services in connection with the online columns and related training and management. The arrangements are structured as fixed price contracts. The price is determined as stated in contracts and does not include any variable consideration. Zhongchao VIE identifies a single performance obligation from contracts and recognizes revenue over a period of time during which Zhongchao VIE provides the assistance to the NFPs till the earlier of the expiration of contract period or the free drugs are completely delivered. Zhongchao VIE uses an input-based method to measure the progress, by reference to the cost incurred in performing the obligation.

 

The fees are fixed at the inception of the services and are collected either in advance to provision of services or after the services are provided.

 

Other consulting services

 

Zhongchao VIE also provides consulting services to its customers, including drafting research papers and other academic supports. The consulting services are accounted for as a single performance obligation and was recognized as revenue when Zhongchao VIE delivers services to the customers. Fees are generally collected after provision of services.

 

Inflation

 

To date, inflation in China has not materially impacted our results of operations. According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index for December 2018, 2019 and 2020 were increases of 1.9%, 2.9% and 2.5% respectively. Although we have not been materially affected by inflation in the past, we can provide no assurance that we will not be affected by higher rates of inflation in China in the future.

 

B. Liquidity and capital resources

 

In assessing our liquidity, we monitor and analyze our cash on-hand and our operating and capital expenditure commitments. To date, we have financed our operations primarily through cash flows from operations, bank borrowings and equity financing.

 

During the six months ended June 30, 2021 and 2020, the Company generated net income of $1.00 million and $1.44 million, respectively.

 

On February 26, 2020, the Company consummated its initial public offering (“IPO”) of 3,000,000 Class A Ordinary Shares, par value $0.0001 per share. The Shares were sold at a price of $4.0 per share, generating gross proceeds to the Company of approximately $12 million. On February 28, 2020, the Company closed on the partial exercise in the over-allotment option to purchase an additional 315,000 Class A ordinary shares, par value $0.0001 per share, at the IPO price of $4.00 per share. As a result, the Company has raised an aggregated gross proceeds of approximately $13.26 million before underwriting discounts and commissions and offering expenses.

 

7 

 

 

As of June 30, 2021 and December 31, 2020, we had cash and cash equivalents of $12.66 million and $15.07 million, and working capital of $25.54 million and $26.61 million, respectively. We intend to continue to use these funds to grow our business primarily by:

 

 

Strengthen brand awareness of MDMOOC and Sunshine Health School

 

  Expand and enhancement of medical course content
     
  Grow medical professional user community
     
  Recruit more experienced editorial staff, and
     
  Development of multiple revenues streams such as online bookstore and launch of patient management service on the professional field of tumor and rare diseases

 

Although we consolidate the results of the VIE and its subsidiaries, we do not hold equity interests in the VIE but only have access to cash balances or future earnings of the VIE and its subsidiaries through the VIE Arrangements with the VIE.

 

Current foreign exchange and other regulations in the PRC may restrict our PRC entities in their ability to transfer their net assets to the Company and its subsidiaries in Cayman Islands, and Hong Kong. However, these restrictions have no impact on the ability of these PRC entities to transfer funds to us as we have no present plans to declare dividend which we plan to retain our retained earnings to continue to grow our business. In addition, these restrictions have no impact on the ability for us to meet our cash obligations as all of our current cash obligations are due within the PRC.

 

To utilize the proceeds we received from the IPO and over-allotment, we may make additional capital contributions to our PRC subsidiary, establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, or make loans to the PRC subsidiaries. However, most of these uses are subject to PRC regulations.

 

A majority of our future revenues are likely to continue to be in the form of Renminbi. Under existing PRC foreign exchange regulations, Renminbi may be converted into foreign exchange for current account items, including profit distributions, interest payments and trade-and service-related foreign exchange transactions.

 

We expect that a substantial majority of our future revenues will be denominated in Renminbi. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled. Therefore, our PRC subsidiaries are allowed to pay dividends in foreign currencies to us without prior SAFE approval by following certain routine procedural requirements. However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future.

 

8 

 

 

Cash Flows

 

The following table sets forth a summary of our cash flows for the six months ended June 30, 2021 and 2020.

 

   For the Six Months Ended June 30, 
   2021   2020 
   (unaudited)   (unaudited) 
Net Cash Provided by (Used in) Operating Activities   1,613,995    (2,372,501)
Net Cash Used in Investing Activities   (4,103,243)   (140,388)
Net Cash Provided by Financing Activities   -    11,497,654 
Effect of exchange rate changes on cash and cash equivalents   80,693    (104,265)
Net (decrease) increase in cash and cash equivalents   (2,408,555)   8,880,500 
Cash and cash equivalents at beginning of period   15,072,947    7,832,552 
Cash and cash equivalents at end of period  $12,664,392   $16,713,052 

 

Operating activities

 

Net cash provided by operating activities was $1.61 million for the six months ended June 30, 2021, mainly derived from (i) net income of $1.00 million for the six months adjusted for noncash write-off of uncollectible accounts receivable of $0.32 million, (ii) net changes in our operating assets and liabilities, principally due a) a decrease in prepayments of $0.42 million because we made less prepayments as of June 30, 2021 and b) an increase in income tax payable of $0.47 million because our profit making subsidiaries generated increased income tax payable, and c) partially off-set by an increase in accounts receivable of $0.30 million as a result of increase in revenues for the six months ended June 30, 2021.

 

Net cash used in operating activities was $2.37 million for the six months ended June 30, 2020, mainly derived from (i) net income of $1.44 million for the six months adjusted for noncash write-off of uncollectible accounts receivable of $0.21 million and deferred tax income of $0.17 million, (ii) net changes in our operating assets and liabilities, principally due a) an increase in accounts receivable of $3.67 million because our NFP customers delayed payments to us, b) an increase in other current assets of $0.79 million was we incurred prepayments in advertising expenses, and c) partially off-set by an increase in income tax payable because we made increasing operating income.

 

Investing activities

 

Net cash used in investing activities was $4.10 million for the six months ended June 30, 2021, which was mainly used for acquisition of property and equipment of $1.87 million, investments in short-term investments of $0.84 million and loans made to a third party of $1.39 million.

 

Net cash used in investing activities was $0.14 million for the six months ended June 30, 2020, which was mainly used for acquisition of property and equipment.

 

Financing activities

 

We did not have cash flows from financing activities for the six months ended June 30, 2021.

 

Net cash provided by financing activities was $11.50 million for the six months ended June 30, 2020, which was mainly provided by net proceeds from initial public offering in February 2020.

 

9 

 

 

Holding Company Structure

 

Zhongchao Inc. is a holding company with no material operations of its own. We conduct our operations primarily through our PRC subsidiary, Beijing Zhongchao Zhongxing Technology Limited,(“Zhongchao WFOE”) , Zhongchao Medical Technology (Shanghai) Corp. (“Zhongchao VIE”) and its subsidiaries in China. As a result, Zhongchao Inc.’s ability to pay dividends depends upon dividends paid by Zhongchao WFOE , Zhongchao VIE and its subsidiaries. If Zhongchao WFOE, Zhongchao VIE and its subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, Zhongchao WFOE in China is permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of Zhongchao WFOE and Zhongchao VIE and its subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of their registered capital. In addition, Zhongchao WFOE in China may allocate a portion of their after-tax profits based on PRC accounting standards to enterprise expansion funds and staff bonus and welfare funds at their discretion, and Zhongchao VIE may allocate a portion of its after-tax profits based on PRC accounting standards to a surplus fund at their discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. Zhongchao WFOE and Zhongchao VIE not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds.

 

C. Research and development, Patents and License, etc.

 

Research and development expenses consist primarily of salary and welfare expenses for IT department employees who work for development of the Company’s platform and database, and software and related intellectual property expenses which was used to develop an extensive library of licensed content and medical database.

 

Our research and development expenses were $0.42 million and $0.40 million for the six months ended June 30, 2021 and 2020, respectively.  

 

We are continued to commit to work on the development and maintenance in our platform and database as we intend to provide professionals and consumers with Internet-based access to our courses and education software and enhance the consumer experience.

 

D. Trend information

 

Other than as disclosed elsewhere in this report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

 

E. Off-balance Sheet Arrangements

 

We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us. 

 

F. Safe Harbor

 

See “Forward-looking Statement.”

 

 

10

 

 

 

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0001785566 zcmd:VariableInterestEntitiesMember 2020-12-31 0001785566 2020-07-13 2020-07-13 iso4217:USD iso4217:USD shares shares pure 6-K false --12-31 Q2 2021 2021-06-30 0001785566 001-39229 Zhongchao Inc. 12664392 15072947 2934208 2032928 10422980 10321837 139202 554298 1390000 1613051 1613408 29163833 29595418 1273561 1258787 2811331 1997761 1661784 700884 360332 367588 32625 34973 158656 65137 1291333 795547 36753455 34816095 469244 408426 77002 6760 2016754 1523175 130949 62160 927863 981433 3621812 2981954 12764 3634576 2981954 0.0001 0.0001 450000000 450000000 19435423 19435423 19435423 19435423 1944 1944 0.0001 0.0001 50000000 50000000 5497715 5497715 5497715 5497715 550 550 22864656 22775154 801502 801502 8341337 7339778 1108890 915213 33118879 31834141 36753455 34816095 8615572 8462250 3147596 2840759 5467976 5621491 1957522 1725651 2235044 1611364 416077 404111 4608643 3741126 859333 1880365 65795 78360 119043 3846 1044171 1962571 42612 522479 1001559 1440092 -18232 1001559 1458324 -193677 227756 1195236 1212336 -18232 1195236 1230568 24933138 23913351 0.04 0.06 19435423 1944 5497715 550 22775154 801502 7339778 915213 31834141 89502 89502 1001559 1001559 193677 193677 19435423 1944 5497715 550 22864656 801502 8341337 1108890 33118879 16102420 1610 5497715 550 12044855 415813 3267087 -344771 -46617 15338527 82482 82482 3315003 332 10626157 10626489 1458324 -18232 1440092 -227756 -227756 19417423 1942 5497715 550 22753492 415813 4725411 -572527 -64849 27259834 1001559 1440092 143028 83874 323524 209751 139217 88059 89502 82482 -485654 -165829 43 62533 303213 3671578 -420735 352680 -10626 789198 64575 112638 68888 11604 474650 685715 -120956 753 151123 108184 1127 1613995 -2372501 1874496 140388 -1390000 838747 -4103243 -140388 11497654 11497654 80693 -104265 -2408555 8880500 15072947 7832552 12664392 16713052 41112 2593 199505 157906 <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>1.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ORGANIZATION AND PRINCIPAL ACTIVITIES</b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying condensed consolidated financial statements include the financial statements of Zhongchao Inc. (“Zhongchao Cayman”, or the “Company”), its subsidiaries and variable interest entity (together with or without its subsidiary, “VIE”) and VIE’s subsidiaries for which the Company or its subsidiaries are the primary beneficiaries. The Company provides customized medical courses and customized medical training services to medical associations, pharmaceutical enterprises, medical institutions, medical journals, medical foundations, hospitals and etc. in the PRC. </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In May 2021, VIE launched the patient management service focusing on the professional field of tumor and rare disease operated through its subsidiary Shanghai Zhongxin Medical Technology Co., Ltd. ("Zhongxin"). In July 2021, VIE established a new subsidiary Ningxia Zhongxin Internet Hospital Co., Ltd. ("Zhongxin Ningxia") under Zhongxin.  Zhongxin Ningxia will build an internet hospital focusing on inpatient management services.</p> <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b> </b></p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(a)</i></b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Basis of presentation</i></b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span>The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Security and Exchange Commission and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in conformity with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim financial information including the condensed consolidated financial statements and footnotes thereto should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2020 included in the Company’s Form 20-F filed with the SEC on April 30, 2021.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span>In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2020. The results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results for the year ending December 31, 2021 or any future periods.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(b)</i></b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Accounts receivable</i></b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Accounts receivable are recorded at the gross amount less an allowance for any uncollectible accounts and do not bear interest. The Company provides customers with credit term ranging between one to six months, depending on credit assessment of customers. Management reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables. Management also periodically evaluates individual customer’s financial condition, credit history and the current economic conditions to make adjustments in the allowance when necessary. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. During the six months ended June 30, 2021 and 2020, the Company wrote off $323,524 and $209,751 against accounts receivable as the Company evaluated it is remote to collect the balance. As of June 30, 2021 and December 31, 2020, there were no allowances for doubtful accounts balances for accounts receivable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(c)</i></b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Revenue recognition</i></b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) on January 1, 2017.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with ASC 606, revenues are recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company identified each distinct service, or each series of distinct services that are substantially the same and that have the same pattern of transfer to the customer, as a performance obligation. Transaction price is allocated among different performance obligations identified in one contract, by using expected cost plus margin approach, if the standalone selling price of each performance obligation is not observable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company identified each distinct service, or each series of distinct services that are substantially the same and that have the same pattern of transfer to the customer, as a performance obligation. Transaction price is allocated among different performance obligations identified in one contract, by using expected cost plus margin approach, if the standalone selling price of each performance obligation is not observable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Advances from customers consists of payments received related to unsatisfied performance obligations at the end of the period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company applied a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. The Company has no material incremental costs for obtaining contracts with customers that the Company expects the benefit of those costs to be longer than one year.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Medical training and education services</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">VIE designs and provides medical training and education courses in both online and offline formats to physicians and allied healthcare professionals (the “training and education services”). The Company identifies a single performance obligation from contracts. The Company recognizes revenue at the point of provision of services. Payments received in advance from customers are recorded as “advance from customers” in the consolidated balance sheets. Advance from customers is recognized as revenue when VIE delivers the courses to its customers. Such advance payment received are non-refundable. In cases where fees are collected after the sales, revenue and accounts receivable are recognized upon delivery of medical training and education courses to VIE. The fees are fixed and determinable at the inception of the services.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> <i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Offline medical training and education services courses – though customers can benefit from each service commitment, including design, production and presentation of medical courses, together with other readily available resources. The promises in the contracts with customers is integration of all of these service commitments. The Company concludes that these service commitments are highly dependent with each other, in the context of the contract term. Thus, these service commitments are not distinct from each other, and the Company combines all service commitments performed as a single performance obligation. In cases where VIE engages third party experts to provide presentation in medical courses, as the Company determines the contents and the participants, VIE has the ability to direct these experts to provide medical training services for VIE. Therefore, VIE is primarily responsible for fulfilling the promise to provide the medial courses and has the discretion in establishing the transaction price. VIE is a principal in the provision of services and recognizes revenues on a gross basis.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Online medical training and education services courses – the promises in the contracts with customers consist of provision of online courses and presentation of the courses online for users to access for a period of time. The performance obligation of presentation of the courses online for users for a period of time is immaterial in the context of the contract because presentation of each course incurred no significant additional cost, nor will it occupy any significant resources of VIE, except for little digital space on VIE’s server, which is inconsequential. Therefore, the Company combines all service commitments performed as a single performance obligation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Assistance in operation of patient-aid projects</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">VIE is engaged by NFPs to assist in the operation of patient-aid projects with a purpose to facilitate qualified patients to obtain free drug treatment from NFPs. VIE is responsible to provide doctors with access to training courses or training materials in connection with the drug treatment, review the completeness of application documents from patients, and other ad-hoc works (such programs with these plug-in features are hereinafter referred as the “patient-aid projects”). The arrangements are structured as fixed price contracts. The price is determined as stated in contracts and does not include any variable consideration. The Company identifies a single performance obligation from contracts and recognizes revenue over a period of time during which VIE provides the assistance to the NFPs till the earlier of the expiration of contract period or the free drugs are completely delivered. The Company uses an input-based method to measure the progress, by reference to the cost incurred in performing the obligation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The fees are fixed at the inception of the services and are collected either in advance or after the services are provided.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other consulting services</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">VIE also provides consulting services to its customers, including drafting research papers and providing other academic supports. The consulting services are accounted for as a single performance obligation and was recognized as revenue when VIE delivers services to the customers. Fees are generally collected after provision of services. For the six months ended June 30, 2021 and 2020, the Company generated minimal amount from other consulting services.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> <i> </i></p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(d)</i></b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Cost of revenues</i></b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cost of revenues was comprised of direct related costs incurred for preparation of online medical training courses and offline education seminars and patient-aid projects, including expenses of travelling and accommodation, seminar site-rental, video production and backdrop production, professional service fees charged by experts who provide online and offline seminars, salary and welfare expenses incurred by the key members of the editorial, design and production team, and labor cost for patient-aid projects. The travelling and accommodation expenses, including but not limited to the air-ticket expenses and hotel accommodation expenses, represented the costs arising from lecturers’ attendance and participation of the offline seminars. Other media expenses were incurred by VIE’s medical department for videos production, live streaming of the offline seminars, and materials collection to create online courses. These travelling, accommodation and media expenses are well budgeted before any agreements entered into by VIE and the customers. Therefore, such expenses are well covered by the customers under those agreements. VIE is not reimbursed by the customers separately.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(e)</i></b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Earnings per share</i></b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Basic earnings per ordinary share is computed by dividing net earnings attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to ordinary shareholders by the sum of the weighted average number of ordinary share outstanding and of potential ordinary share (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary share that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted earnings per share. Potential ordinary share that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted earnings per share. For the six months ended June 30, 2021 and 2020, the Company had no dilutive shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(f)</i></b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Share-based compensation</i></b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Share-based awards granted to the Company’s employees and one non-employee are measured at fair value on grant date and measurement date, respectively, and share-based compensation expense is recognized (i) immediately at the grant date if no vesting conditions are required, or (ii) using the accelerated attribution method, net of estimated forfeitures, over the requisite service period. The fair value of restricted shares is determined with reference to the fair value of the underlying shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At each date of measurement, the Company reviews internal and external sources of information to assist in the estimation of various attributes to determine the fair value of the share-based awards granted by the Company, including but not limited to the fair value of the equity value of the Company (Note 11), expected life, expected volatility and expected forfeiture rates.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(g)</i></b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Significant risks and uncertainties</i></b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Credit risk</span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Assets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents. The maximum exposure of such assets to credit risk is their carrying amount as at the balance sheet dates. As of June 30, 2021, the Company held cash and cash equivalents of $12,664,392, of which $7,565,882 were deposited in financial institutions located in Mainland China, and each bank accounts is insured by the government authority with the maximum limit of RMB 500,000 (equivalent to approximately $77,400). As of June 30, 2021, the Company held cash and cash equivalents of $4,301,393 deposited in the banks located in Hong Kong and Cayman Islands, which are not insured by Federal Deposit Insurance Corporation (“FDIC”) insurance or other insurance, and held cash and cash equivalents of $797,117 deposited in the banks located in the U.S. which are insured by FDIC up to $250,000. To limit exposure to credit risk relating to deposits, the Company primarily place cash and cash equivalent deposits with large financial institutions in China which management believes are of high credit quality and also continually monitors their worthiness.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">VIE’s operations are carried out in China. Accordingly, VIE’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy. In addition, VIE’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, rates and methods of taxation among other factors.</p> <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(a)</i></b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Basis of presentation</i></b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span>The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Security and Exchange Commission and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in conformity with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim financial information including the condensed consolidated financial statements and footnotes thereto should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2020 included in the Company’s Form 20-F filed with the SEC on April 30, 2021.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span>In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2020. The results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results for the year ending December 31, 2021 or any future periods.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(b)</i></b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Accounts receivable</i></b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Accounts receivable are recorded at the gross amount less an allowance for any uncollectible accounts and do not bear interest. The Company provides customers with credit term ranging between one to six months, depending on credit assessment of customers. Management reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables. Management also periodically evaluates individual customer’s financial condition, credit history and the current economic conditions to make adjustments in the allowance when necessary. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. During the six months ended June 30, 2021 and 2020, the Company wrote off $323,524 and $209,751 against accounts receivable as the Company evaluated it is remote to collect the balance. As of June 30, 2021 and December 31, 2020, there were no allowances for doubtful accounts balances for accounts receivable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> 323524 209751 <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(c)</i></b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Revenue recognition</i></b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) on January 1, 2017.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with ASC 606, revenues are recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company identified each distinct service, or each series of distinct services that are substantially the same and that have the same pattern of transfer to the customer, as a performance obligation. Transaction price is allocated among different performance obligations identified in one contract, by using expected cost plus margin approach, if the standalone selling price of each performance obligation is not observable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company identified each distinct service, or each series of distinct services that are substantially the same and that have the same pattern of transfer to the customer, as a performance obligation. Transaction price is allocated among different performance obligations identified in one contract, by using expected cost plus margin approach, if the standalone selling price of each performance obligation is not observable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Advances from customers consists of payments received related to unsatisfied performance obligations at the end of the period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company applied a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. The Company has no material incremental costs for obtaining contracts with customers that the Company expects the benefit of those costs to be longer than one year.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Medical training and education services</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">VIE designs and provides medical training and education courses in both online and offline formats to physicians and allied healthcare professionals (the “training and education services”). The Company identifies a single performance obligation from contracts. The Company recognizes revenue at the point of provision of services. Payments received in advance from customers are recorded as “advance from customers” in the consolidated balance sheets. Advance from customers is recognized as revenue when VIE delivers the courses to its customers. Such advance payment received are non-refundable. In cases where fees are collected after the sales, revenue and accounts receivable are recognized upon delivery of medical training and education courses to VIE. The fees are fixed and determinable at the inception of the services.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> <i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Offline medical training and education services courses – though customers can benefit from each service commitment, including design, production and presentation of medical courses, together with other readily available resources. The promises in the contracts with customers is integration of all of these service commitments. The Company concludes that these service commitments are highly dependent with each other, in the context of the contract term. Thus, these service commitments are not distinct from each other, and the Company combines all service commitments performed as a single performance obligation. In cases where VIE engages third party experts to provide presentation in medical courses, as the Company determines the contents and the participants, VIE has the ability to direct these experts to provide medical training services for VIE. Therefore, VIE is primarily responsible for fulfilling the promise to provide the medial courses and has the discretion in establishing the transaction price. VIE is a principal in the provision of services and recognizes revenues on a gross basis.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Online medical training and education services courses – the promises in the contracts with customers consist of provision of online courses and presentation of the courses online for users to access for a period of time. The performance obligation of presentation of the courses online for users for a period of time is immaterial in the context of the contract because presentation of each course incurred no significant additional cost, nor will it occupy any significant resources of VIE, except for little digital space on VIE’s server, which is inconsequential. Therefore, the Company combines all service commitments performed as a single performance obligation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Assistance in operation of patient-aid projects</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">VIE is engaged by NFPs to assist in the operation of patient-aid projects with a purpose to facilitate qualified patients to obtain free drug treatment from NFPs. VIE is responsible to provide doctors with access to training courses or training materials in connection with the drug treatment, review the completeness of application documents from patients, and other ad-hoc works (such programs with these plug-in features are hereinafter referred as the “patient-aid projects”). The arrangements are structured as fixed price contracts. The price is determined as stated in contracts and does not include any variable consideration. The Company identifies a single performance obligation from contracts and recognizes revenue over a period of time during which VIE provides the assistance to the NFPs till the earlier of the expiration of contract period or the free drugs are completely delivered. The Company uses an input-based method to measure the progress, by reference to the cost incurred in performing the obligation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The fees are fixed at the inception of the services and are collected either in advance or after the services are provided.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other consulting services</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">VIE also provides consulting services to its customers, including drafting research papers and providing other academic supports. The consulting services are accounted for as a single performance obligation and was recognized as revenue when VIE delivers services to the customers. Fees are generally collected after provision of services. For the six months ended June 30, 2021 and 2020, the Company generated minimal amount from other consulting services.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> <i> </i></p> <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(d)</i></b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Cost of revenues</i></b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cost of revenues was comprised of direct related costs incurred for preparation of online medical training courses and offline education seminars and patient-aid projects, including expenses of travelling and accommodation, seminar site-rental, video production and backdrop production, professional service fees charged by experts who provide online and offline seminars, salary and welfare expenses incurred by the key members of the editorial, design and production team, and labor cost for patient-aid projects. The travelling and accommodation expenses, including but not limited to the air-ticket expenses and hotel accommodation expenses, represented the costs arising from lecturers’ attendance and participation of the offline seminars. Other media expenses were incurred by VIE’s medical department for videos production, live streaming of the offline seminars, and materials collection to create online courses. These travelling, accommodation and media expenses are well budgeted before any agreements entered into by VIE and the customers. Therefore, such expenses are well covered by the customers under those agreements. VIE is not reimbursed by the customers separately.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(e)</i></b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Earnings per share</i></b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Basic earnings per ordinary share is computed by dividing net earnings attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to ordinary shareholders by the sum of the weighted average number of ordinary share outstanding and of potential ordinary share (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary share that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted earnings per share. Potential ordinary share that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted earnings per share. For the six months ended June 30, 2021 and 2020, the Company had no dilutive shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(f)</i></b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Share-based compensation</i></b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Share-based awards granted to the Company’s employees and one non-employee are measured at fair value on grant date and measurement date, respectively, and share-based compensation expense is recognized (i) immediately at the grant date if no vesting conditions are required, or (ii) using the accelerated attribution method, net of estimated forfeitures, over the requisite service period. The fair value of restricted shares is determined with reference to the fair value of the underlying shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At each date of measurement, the Company reviews internal and external sources of information to assist in the estimation of various attributes to determine the fair value of the share-based awards granted by the Company, including but not limited to the fair value of the equity value of the Company (Note 11), expected life, expected volatility and expected forfeiture rates.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p> <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>(g)</i></b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Significant risks and uncertainties</i></b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Credit risk</span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Assets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents. The maximum exposure of such assets to credit risk is their carrying amount as at the balance sheet dates. As of June 30, 2021, the Company held cash and cash equivalents of $12,664,392, of which $7,565,882 were deposited in financial institutions located in Mainland China, and each bank accounts is insured by the government authority with the maximum limit of RMB 500,000 (equivalent to approximately $77,400). As of June 30, 2021, the Company held cash and cash equivalents of $4,301,393 deposited in the banks located in Hong Kong and Cayman Islands, which are not insured by Federal Deposit Insurance Corporation (“FDIC”) insurance or other insurance, and held cash and cash equivalents of $797,117 deposited in the banks located in the U.S. which are insured by FDIC up to $250,000. To limit exposure to credit risk relating to deposits, the Company primarily place cash and cash equivalent deposits with large financial institutions in China which management believes are of high credit quality and also continually monitors their worthiness.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">VIE’s operations are carried out in China. Accordingly, VIE’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy. In addition, VIE’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, rates and methods of taxation among other factors.</p> 12664392 7565882 maximum limit of RMB 500,000 (equivalent to approximately $77,400). the Company held cash and cash equivalents of $4,301,393 deposited in the banks located in Hong Kong and Cayman Islands, which are not insured by Federal Deposit Insurance Corporation (“FDIC”) insurance or other insurance, and held cash and cash equivalents of $797,117 deposited in the banks located in the U.S. which are insured by FDIC up to $250,000. <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>3.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SHORT-TERM INVESTMENTS</b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of June 30, 2021 and December 31, 2020, the balance of short-term investments represented certain equity securities of listed companies purchased through various open market transactions invested by the Company during the relevant periods. The short-term investments are trading securities. They are initially recorded at cost, and subsequently measured at fair value with the changes in fair value recorded in other income, net in the consolidated statement of income and comprehensive income. Loss from such short-term investment amounted to $62,533 and $<span style="-sec-ix-hidden: hidden-fact-34">nil</span> for the six months ended June 30, 2021 and 2020, respectively.</p> 62533 <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>4.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>OTHER CURRENT ASSETS</b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other current assets consist of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31,<br/> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; text-align: left; text-indent: -9pt; padding-left: 9pt">Prepaid advertising expense (i)</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><div style="-sec-ix-hidden: hidden-fact-35">-</div></td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,033,280</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Deferred contract costs (ii)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">800,461</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">272,804</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Office rental deposit</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">98,159</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">86,287</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Interest receivable</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">29,945</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">32,416</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Prepaid rental fees</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">54</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">15,827</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Prepaid consulting service fees</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">468,302</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">78,627</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Others</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">216,130</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">94,167</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">1,613,051</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">1,613,408</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left">(i)</td><td style="text-align: justify">As of December 31, 2020, the balance of prepaid advertising expenses represents payments of advertising expenses to three vendors. Among the balance of $1,033,280 as of December 31, 2020, $459,235 was subsequently refunded from the vendor to VIE as VIE suspended cooperation with the vendor, and the remaining was expensed during the six months ended June 30, 2021 with the services provided by the vendors.</td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0in"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left">(ii)</td><td style="text-align: justify">As of June 30, 2021 and December 31, 2020, the balances of deferred contract costs represented the travel and media expenses which were directly related to certain contracts with customers. The costs and expenses were incurred so that VIE would fulfil its performance obligation committed to its customers and were expected to be recovered.</td> </tr></table> <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31,<br/> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; text-align: left; text-indent: -9pt; padding-left: 9pt">Prepaid advertising expense (i)</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><div style="-sec-ix-hidden: hidden-fact-35">-</div></td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,033,280</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Deferred contract costs (ii)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">800,461</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">272,804</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Office rental deposit</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">98,159</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">86,287</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Interest receivable</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">29,945</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">32,416</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Prepaid rental fees</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">54</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">15,827</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Prepaid consulting service fees</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">468,302</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">78,627</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Others</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">216,130</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">94,167</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">1,613,051</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">1,613,408</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left">(i)</td><td style="text-align: justify">As of December 31, 2020, the balance of prepaid advertising expenses represents payments of advertising expenses to three vendors. Among the balance of $1,033,280 as of December 31, 2020, $459,235 was subsequently refunded from the vendor to VIE as VIE suspended cooperation with the vendor, and the remaining was expensed during the six months ended June 30, 2021 with the services provided by the vendors.</td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: 0in"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left">(ii)</td><td style="text-align: justify">As of June 30, 2021 and December 31, 2020, the balances of deferred contract costs represented the travel and media expenses which were directly related to certain contracts with customers. The costs and expenses were incurred so that VIE would fulfil its performance obligation committed to its customers and were expected to be recovered.</td> </tr></table> 1033280 800461 272804 98159 86287 29945 32416 54 15827 468302 78627 216130 94167 1613051 1613408 1033280 459235 <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>5.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>LOAN DUE FROM A THIRD PARTY</b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the six months ended June 30, 2021, the Company provided a loan in the amount of $1,390,000 to a third party with a term of 12 months. The loan bears an interest rate of 2% per annum. The loan was made to earn interest income from the idle cash. Subsequently, the third party has repaid $100,000 to the Company.</p> 1390000 0.02 100000 <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>6.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>PROPERTY AND EQUIPMENT, NET</b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Property and equipment, net consist of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31,<br/> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%">Property</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">2,768,607</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,828,092</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left">Office equipment</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">453,759</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">449,246</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Vehicle</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">35,530</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">34,351</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; padding-bottom: 1.5pt">Less: accumulated depreciation</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(446,565</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(313,928</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 4pt"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">2,811,331</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">1,997,761</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of June 30, 2021, the balance of property was comprised of office campus and facilities in Beijing of $1,849,611 and in Japan of $918,996. As of December 31, 2020, the balance of property was comprised of office campus and facilities in Beijing of $1,828,092.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Depreciation expenses totaled $128,716 and $71,314 for the six months ended June 30, 2021 and 2020, respectively.</p> <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31,<br/> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%">Property</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">2,768,607</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,828,092</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left">Office equipment</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">453,759</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">449,246</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Vehicle</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">35,530</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">34,351</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; padding-bottom: 1.5pt">Less: accumulated depreciation</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(446,565</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(313,928</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 4pt"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">2,811,331</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">1,997,761</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p> 2768607 1828092 453759 449246 35530 34351 446565 313928 2811331 1997761 1849611 918996 1828092 128716 71314 <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>7.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES</b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Accrued expenses and other current liabilities consist of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31,<br/> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; text-align: left; text-indent: -9pt; padding-left: 9pt">Other tax payable</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">684,930</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">777,810</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Accrued payroll</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">198,263</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">159,350</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Other current liabilities</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">44,670</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">44,273</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">927,863</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">981,433</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other tax payable</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other tax payables consist of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31,<br/> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; text-align: left; text-indent: -9pt; padding-left: 9pt">Value added tax payable</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">664,890</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">740,894</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Local taxes payable</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">20,040</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">36,916</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">684,930</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">777,810</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table> <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31,<br/> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; text-align: left; text-indent: -9pt; padding-left: 9pt">Other tax payable</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">684,930</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">777,810</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Accrued payroll</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">198,263</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">159,350</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Other current liabilities</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">44,670</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">44,273</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">927,863</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">981,433</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"> </p> 684930 777810 198263 159350 44670 44273 927863 981433 <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31,<br/> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; text-align: left; text-indent: -9pt; padding-left: 9pt">Value added tax payable</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">664,890</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">740,894</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Local taxes payable</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">20,040</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">36,916</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">684,930</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">777,810</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table> 664890 740894 20040 36916 684930 777810 <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>8.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>INCOME TAXES</b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Cayman Islands</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the current tax laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>British Virgin Islands</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the current tax laws of BVI, the Company’s subsidiary incorporated in the BVI is not subject to tax on income or capital gains.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Hong Kong</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong since inception. Under Hong Kong tax laws, Zhongchao HK is exempted from income tax on its foreign-derived income and there are no withholding taxed in Hong Kong on remittance of dividends.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>PRC</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The PRC Corporate Income Tax (“CIT”) is calculated based on the taxable income determined under the applicable CIT Law and its implementation rules, which became effective on January 1, 2008. CIT Law imposes a unified income tax rate of 25% for all resident enterprises in China, including both domestic and foreign invested enterprises.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>USA</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the US jurisdiction, the Company is subject to federal and state income taxes on its business operations. The federal tax rate is 21% and state tax rate is 13%. The Company also evaluated the impact from the recent tax reforms in the United States, including the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and Health and Economic Recovery Omnibus Emergency Solutions Act (“HERO Act”), which both were passed in 2020, No material impact on the Company is expected based on our analysis. The Company will continue to monitor the potential impact going forward.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Income tax expenses consist of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">For the six months ended <br/> June 30,</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; text-align: left; text-indent: -9pt; padding-left: 9pt">Current income tax expenses</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(528,266</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(688,308</td><td style="width: 1%; text-align: left">)</td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Deferred income tax benefits</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">485,654</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">165,829</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(42,612</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(522,479</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Deferred tax assets as of June 30, 2021 and December 31, 2020 consist of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31,<br/> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; text-align: left; text-indent: -9pt; padding-left: 9pt">Excess advertising expense</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">820,649</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">699,717</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Deferred intangible assets amortization</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">21,573</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">22,983</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Net operating loss carrying forward</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">369,709</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">7,666</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Share-based compensation</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">79,402</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">65,181</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">1,291,333</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">795,547</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of June 30, 2021 and December 31, 2020, the Company had net operating loss carryforwards of $2,654,794 and $36,538, respectively. The Company reviews deferred tax assets for a valuation allowance based upon whether it is more likely than not that the deferred tax asset will be fully realized. As of June 30, 2021, the valuation allowance was of $9,425 against the deferred tax assets arising from net operating losses of one subsidiary as the management’s assessed that it will not realize the deferred tax asset. As of December 31, 2020, there was no valuation allowance against the deferred tax assets based upon management’s assessment that it is more likely than not that there will be realization of the deferred tax asset.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company evaluates its valuation allowance requirements at end of each reporting period by reviewing all available evidence, both positive and negative, and considering whether, based on the weight of that evidence, a valuation allowance is needed. When circumstances cause a change in management’s judgement about the recoverability of deferred tax assets, the impact of the change on the valuation allowance is generally reflected in income from operations. The future realization of the tax benefit of an existing deductible temporary difference ultimately depends on the existence of sufficient taxable income of the appropriate character within the carryforward period available under applicable tax law.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Uncertain tax positions</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of June 30, 2021 and December 31, 2020, the Company did not have any significant unrecognized uncertain tax positions or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefit. The Company does not believe that its uncertain tax benefits position will materially change over the next twelve months.</p> 0.25 0.21 0.13 <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">For the six months ended <br/> June 30,</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; text-align: left; text-indent: -9pt; padding-left: 9pt">Current income tax expenses</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(528,266</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(688,308</td><td style="width: 1%; text-align: left">)</td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Deferred income tax benefits</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">485,654</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">165,829</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(42,612</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">(522,479</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">)</td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p> -528266 -688308 485654 165829 42612 522479 <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31,<br/> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; text-align: left; text-indent: -9pt; padding-left: 9pt">Excess advertising expense</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">820,649</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">699,717</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Deferred intangible assets amortization</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">21,573</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">22,983</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Net operating loss carrying forward</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">369,709</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">7,666</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Share-based compensation</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">79,402</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">65,181</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">1,291,333</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">795,547</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p> 820649 699717 21573 22983 369709 7666 79402 65181 1291333 795547 2654794 36538 9425 <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>9.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>RELATED PARTY TRANSACTIONS AND BALANES</b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of June 30, 2021 and December 31, 2020, the Company had no outstanding balances due from or due to related parties.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the six months ended June 30, 2021 and 2020, the Company did not enter into any transactions with related parties.</p> <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>10.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>EQUITY</b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-decoration:underline">Restricted net assets</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of June 30, 2021 and December 31, 2020, the Company had net assets restricted in the aggregate, which include paid-in capital and statutory reserve of the Company’s PRC subsidiary, VIE and VIE’s subsidiaries that are included in the Company’s consolidated net assets, were approximately $12,352,859 and $12,088,293, respectively.</p> 12352859 12088293 <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>11.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>STOCK BASED COMPENSATION</b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table summarizes our unvested restricted share units:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Number of<br/> shares</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Weighted-<br/> Average</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Grant-Date<br/> Fair Value</b></p></td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; font-weight: bold; text-indent: -9pt; padding-left: 9pt">Unvested at December 31, 2020</td><td style="width: 1%; font-weight: bold"> </td> <td style="width: 1%; font-weight: bold; text-align: left"> </td><td style="width: 9%; font-weight: bold; text-align: right">427,076</td><td style="width: 1%; font-weight: bold; text-align: left"> </td><td style="width: 1%; font-weight: bold"> </td> <td style="width: 1%; font-weight: bold; text-align: left">$</td><td style="width: 9%; font-weight: bold; text-align: right">2.54</td><td style="width: 1%; font-weight: bold; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-indent: -9pt; padding-left: 9pt">Granted</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-36">-</div></td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-37">-</div></td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Vested</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(3,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: left">$</td><td style="padding-bottom: 1.5pt; text-align: right">2.42</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="font-weight: bold; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Unvested at June 30, 2021</td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left"> </td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">424,076</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="padding-bottom: 4pt; font-weight: bold; text-align: left">$</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: right">2.54</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 13, 2020, the Company granted and issued 18,000 shares of restricted Class A <span>Ordinary Shares</span> to three non-executive directors as their compensation for the year from March 1, 2020. The restricted shares were vested on a straight line basis over the service period, and will be transferable after a lock-up period of six months. As of June 30, 2021 and December 31, 2020, 18,000 and 15,000 shares were vested, respectively. The grant-date value of each restricted share units was $2.42 by reference to the closing price of the Company’s Class A Ordinary Share on July 13, 2020, and the total fair value of these restricted Class A Ordinary Share units aggregated $43,560.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the six months ended June 30, 2021 and 2020, the Company had stock-based compensation expenses of $89,502 and $82,482, respectively. As of June 30, 2021, the Company expected to incur stock based compensation expenses of $580,935 over a weighted average period of 4.1 years.</p> <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Number of<br/> shares</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Weighted-<br/> Average</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Grant-Date<br/> Fair Value</b></p></td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; font-weight: bold; text-indent: -9pt; padding-left: 9pt">Unvested at December 31, 2020</td><td style="width: 1%; font-weight: bold"> </td> <td style="width: 1%; font-weight: bold; text-align: left"> </td><td style="width: 9%; font-weight: bold; text-align: right">427,076</td><td style="width: 1%; font-weight: bold; text-align: left"> </td><td style="width: 1%; font-weight: bold"> </td> <td style="width: 1%; font-weight: bold; text-align: left">$</td><td style="width: 9%; font-weight: bold; text-align: right">2.54</td><td style="width: 1%; font-weight: bold; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-indent: -9pt; padding-left: 9pt">Granted</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-36">-</div></td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-37">-</div></td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Vested</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(3,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: left">$</td><td style="padding-bottom: 1.5pt; text-align: right">2.42</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="font-weight: bold; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Unvested at June 30, 2021</td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left"> </td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">424,076</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="padding-bottom: 4pt; font-weight: bold; text-align: left">$</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: right">2.54</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p> 427076 2.54 3000 -2.42 424076 2.54 the Company granted and issued 18,000 shares of restricted Class A Ordinary Shares to three non-executive directors as their compensation for the year from March 1, 2020. The restricted shares were vested on a straight line basis over the service period, and will be transferable after a lock-up period of six months. As of June 30, 2021 and December 31, 2020, 18,000 and 15,000 shares were vested, respectively. The grant-date value of each restricted share units was $2.42 by reference to the closing price of the Company’s Class A Ordinary Share on July 13, 2020, and the total fair value of these restricted Class A Ordinary Share units aggregated $43,560. 89502 -82482 580935 P4Y1M6D <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>12.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>COMMITMENTS AND CONTINGENCIES</b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i><span style="text-decoration:underline">Contingencies</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.05pt; text-align: justify; text-indent: -0.05pt">From time to time, the Company may be subject to certain legal proceedings, claims and disputes that arise in the ordinary course of business. Although the outcomes of these legal proceedings cannot be predicted, the Company does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of operations or liquidity.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.05pt; text-align: justify; text-indent: -0.05pt"><i><span style="text-decoration:underline">Lease commitment</span></i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.05pt; text-align: justify; text-indent: -0.05pt"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.05pt; text-align: justify; text-indent: -0.05pt">As of June 30, 2021, the Company leases offices space under certain non-cancelable operating lease arrangements, five of which had a term over 12 months. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right of use assets and lease liabilities. Lease expense for lease payment is recognized on a straight-line basis over the lease term.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.05pt; text-align: justify; text-indent: -0.05pt"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.05pt; text-align: justify; text-indent: -0.05pt">The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company discounted lease payments based on an estimate of its incremental borrowing rate to present value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.05pt; text-align: justify; text-indent: -0.05pt"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.05pt; text-align: justify; text-indent: -0.05pt">The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.05pt; text-align: justify; text-indent: -0.05pt"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.05pt; text-align: justify; text-indent: -0.05pt">The table below presents the operating lease related assets and liabilities recorded on the balance sheet.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.05pt; text-align: justify; text-indent: -0.05pt"> </p><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>June 30, </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>2021</b></p></td><td style="padding-bottom: 1.5pt"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31, <br/> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; text-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Rights of use lease assets</td><td style="width: 1%; padding-bottom: 4pt"> </td> <td style="width: 1%; border-bottom: Black 4pt double; text-align: left">$</td><td style="width: 9%; border-bottom: Black 4pt double; text-align: right">158,656</td><td style="width: 1%; padding-bottom: 4pt; text-align: left"> </td><td style="width: 1%; padding-bottom: 4pt"> </td> <td style="width: 1%; border-bottom: Black 4pt double; text-align: left">$</td><td style="width: 9%; border-bottom: Black 4pt double; text-align: right">65,137</td><td style="width: 1%; padding-bottom: 4pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-indent: -9pt; padding-left: 9pt"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Operating lease liabilities, current</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">130,949</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">62,160</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Operating lease liabilities, noncurrent</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">12,764</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Total operating lease liabilities</td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">143,713</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">62,160</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.05pt; text-align: justify; text-indent: -0.05pt"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of June 30, 2021 and December 31, 2020, the weighted average remaining lease term was 0.90 years and 0.39 years, respectively, and discount rates were 4.75% for all of the operating leases.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Rental expense for the six months ended June 30, 2021 and 2020 were $153,841 and $141,074, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following is a schedule, by years, of maturities of lease liabilities as of June 30, 2021:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30, <br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 88%; text-indent: -9pt; padding-left: 9pt">Six months ending December 31, 2021</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">131,964</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Year ending December 31, 2022 and thereafter</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">17,700</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Total lease payments</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">149,664</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Less: imputed interest</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(5,951</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Present value of lease liabilities</td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">143,713</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table> <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>June 30, </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>2021</b></p></td><td style="padding-bottom: 1.5pt"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31, <br/> 2020</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td><td> </td> <td colspan="2" style="text-align: center"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; text-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Rights of use lease assets</td><td style="width: 1%; padding-bottom: 4pt"> </td> <td style="width: 1%; border-bottom: Black 4pt double; text-align: left">$</td><td style="width: 9%; border-bottom: Black 4pt double; text-align: right">158,656</td><td style="width: 1%; padding-bottom: 4pt; text-align: left"> </td><td style="width: 1%; padding-bottom: 4pt"> </td> <td style="width: 1%; border-bottom: Black 4pt double; text-align: left">$</td><td style="width: 9%; border-bottom: Black 4pt double; text-align: right">65,137</td><td style="width: 1%; padding-bottom: 4pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-indent: -9pt; padding-left: 9pt"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Operating lease liabilities, current</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">130,949</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">62,160</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Operating lease liabilities, noncurrent</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">12,764</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Total operating lease liabilities</td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">143,713</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">62,160</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.05pt; text-align: justify; text-indent: -0.05pt"> </p> 158656 65137 130949 62160 12764 143713 62160 P0Y10M24D P0Y4M20D 0.0475 153841 141074 <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30, <br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">(unaudited)</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 88%; text-indent: -9pt; padding-left: 9pt">Six months ending December 31, 2021</td><td style="width: 1%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">131,964</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Year ending December 31, 2022 and thereafter</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">17,700</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Total lease payments</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">149,664</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; "> <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Less: imputed interest</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(5,951</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Present value of lease liabilities</td><td style="font-weight: bold; padding-bottom: 4pt"> </td> <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">143,713</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left"> </td></tr> </table> 131964 17700 149664 5951 143713 <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; width: 100%"><tr style="vertical-align: top; text-align: justify"> <td style="width: 0in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>13.</b></span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>SUBSEQUENT EVENTS</b></span></td> </tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company evaluated subsequent events through November 12, 2021, the date on which these condensed consolidated financial statements were issued, and the management determined that no subsequent events that require recognition and disclosure in the condensed consolidated financial statements.</p> false --12-31 Q2 2021 2021-06-30 6-K 0001785566 001-39229 Zhongchao Inc. As of June 30, 2021 and December 31, 2020, the balances of deferred contract costs represented the travel and media expenses which were directly related to certain contracts with customers. The costs and expenses were incurred so that VIE would fulfil its performance obligation committed to its customers and were expected to be recovered. As of December 31, 2020, the balance of prepaid advertising expenses represents payments of advertising expenses to three vendors. Among the balance of $1,033,280 as of December 31, 2020, $459,235 was subsequently refunded from the vendor to VIE as VIE suspended cooperation with the vendor, and the remaining was expensed during the six months ended June 30, 2021 with the services provided by the vendors. XML 10 R1.htm IDEA: XBRL DOCUMENT v3.21.2
Document And Entity Information
6 Months Ended
Jun. 30, 2021
Document Information Line Items  
Entity Registrant Name Zhongchao Inc.
Document Type 6-K
Current Fiscal Year End Date --12-31
Amendment Flag false
Entity Central Index Key 0001785566
Document Period End Date Jun. 30, 2021
Document Fiscal Year Focus 2021
Document Fiscal Period Focus Q2
Entity File Number 001-39229
XML 11 R2.htm IDEA: XBRL DOCUMENT v3.21.2
Condensed Consolidated Balance Sheets - USD ($)
Jun. 30, 2021
Dec. 31, 2020
Current Assets    
Cash and cash equivalents $ 12,664,392 $ 15,072,947
Short-term investments 2,934,208 2,032,928
Accounts receivable, net 10,422,980 10,321,837
Prepayments 139,202 554,298
Loan due from a third party 1,390,000  
Other current assets 1,613,051 1,613,408
Total Current Assets 29,163,833 29,595,418
Investment in a limited partnership 1,273,561 1,258,787
Property and equipment, net 2,811,331 1,997,761
Deposit and prepayment for properties 1,661,784 700,884
Prepayments for lease of land 360,332 367,588
Intangible assets, net 32,625 34,973
Right of use assets 158,656 65,137
Deferred tax assets 1,291,333 795,547
Total Assets 36,753,455 34,816,095
Current Liabilities    
Accounts payable 469,244 408,426
Advances from customers 77,002 6,760
Income tax payable 2,016,754 1,523,175
Operating lease liabilities, current portion 130,949 62,160
Accrued expenses and other liabilities 927,863 981,433
Total Current Liabilities 3,621,812 2,981,954
Operating lease liabilities, noncurrent portion 12,764  
Total Liabilities 3,634,576 2,981,954
Commitments and Contingencies
Shareholders’ Equity    
Class A Ordinary Share (par value $0.0001 per share, 450,000,000 shares authorized; 19,435,423 shares issued and outstanding at June 30, 2010 and December 31, 2020, respectively) 1,944 1,944
Class B Ordinary Share (par value $0.0001 per share, 50,000,000 shares authorized; 5,497,715 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively) 550 550
Additional paid-in capital 22,864,656 22,775,154
Statutory reserve 801,502 801,502
Retained earnings 8,341,337 7,339,778
Accumulated other comprehensive income 1,108,890 915,213
Total Shareholders’ Equity 33,118,879 31,834,141
Total Liabilities and Shareholders’ Equity $ 36,753,455 $ 34,816,095
XML 12 R3.htm IDEA: XBRL DOCUMENT v3.21.2
Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares
Jun. 30, 2021
Dec. 31, 2020
Class A Ordinary Share    
Ordinary Share par value (in Dollars per share) $ 0.0001 $ 0.0001
Ordinary Share authorized 450,000,000 450,000,000
Ordinary Share, shares issued 19,435,423 19,435,423
Ordinary Share, shares outstanding 19,435,423 19,435,423
Class B Ordinary Share    
Ordinary Share par value (in Dollars per share) $ 0.0001 $ 0.0001
Ordinary Share authorized 50,000,000 50,000,000
Ordinary Share, shares issued 5,497,715 5,497,715
Ordinary Share, shares outstanding 5,497,715 5,497,715
XML 13 R4.htm IDEA: XBRL DOCUMENT v3.21.2
Unaudited Condensed Consolidated Statements of Income and Comprehensive Income - USD ($)
6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Income Statement [Abstract]    
Revenues $ 8,615,572 $ 8,462,250
Cost of revenues (3,147,596) (2,840,759)
Gross Profit 5,467,976 5,621,491
Operating Expenses    
Selling and marketing expenses (1,957,522) (1,725,651)
General and administrative expenses (2,235,044) (1,611,364)
Research and development expenses (416,077) (404,111)
Total Operating Expenses (4,608,643) (3,741,126)
Income from Operations 859,333 1,880,365
Interest income, net 65,795 78,360
Other income, net 119,043 3,846
Income Before Income Taxes 1,044,171 1,962,571
Income tax expenses (42,612) (522,479)
Net Income 1,001,559 1,440,092
Net loss attributable to noncontrolling interests   18,232
Net Income Attributable to Zhongchao Inc.’s shareholders 1,001,559 1,458,324
Other Comprehensive Income (Loss)    
Foreign currency translation adjustment 193,677 (227,756)
Comprehensive Income 1,195,236 1,212,336
Total comprehensive loss attributable to noncontrolling interests   18,232
Total comprehensive income attributable to Zhongchao Inc.’s shareholders $ 1,195,236 $ 1,230,568
Weighted average number of ordinary share outstanding    
Basic and Diluted (in Shares) 24,933,138 23,913,351
Earnings per share    
Basic and Diluted (in Dollars per share) $ 0.04 $ 0.06
XML 14 R5.htm IDEA: XBRL DOCUMENT v3.21.2
Unaudited Condensed Consolidated Statements of Changes in Equity - USD ($)
Class A
Ordinary Share
Class B
Ordinary Share
Additional paid- in capital
Statutory Reserve
Retained earning
Accumulated other comprehensive income(loss)
Non- controlling interest
Total
Balance at Dec. 31, 2019 $ 1,610 $ 550 $ 12,044,855 $ 415,813 $ 3,267,087 $ (344,771) $ (46,617) $ 15,338,527
Balance (in Shares) at Dec. 31, 2019 16,102,420 5,497,715            
Share-based compensation expenses 82,482 82,482
Issuance of Class A Ordinary Shares pursuant to initial public offering, net of issuance costs $ 332   10,626,157         10,626,489
Issuance of restricted Class A Ordinary Shares to non-executive directors (in Shares) 3,315,003              
Net income (loss) 1,458,324 (18,232) 1,440,092
Foreign currency translation adjustments           (227,756)   (227,756)
Balance at Jun. 30, 2020 $ 1,942 $ 550 22,753,492 415,813 4,725,411 (572,527) $ (64,849) 27,259,834
Balance (in Shares) at Jun. 30, 2020 19,417,423 5,497,715            
Balance at Dec. 31, 2020 $ 1,944 $ 550 22,775,154 801,502 7,339,778 915,213   31,834,141
Balance (in Shares) at Dec. 31, 2020 19,435,423 5,497,715            
Share-based compensation expenses 89,502   89,502
Net income (loss) 1,001,559   1,001,559
Foreign currency translation adjustments 193,677   193,677
Balance at Jun. 30, 2021 $ 1,944 $ 550 $ 22,864,656 $ 801,502 $ 8,341,337 $ 1,108,890   $ 33,118,879
Balance (in Shares) at Jun. 30, 2021 19,435,423 5,497,715            
XML 15 R6.htm IDEA: XBRL DOCUMENT v3.21.2
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($)
6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Cash Flows from Operating Activities:    
Net income $ 1,001,559 $ 1,440,092
Adjustments to reconcile net income to net cash provided by (used in) operating activities:    
Depreciation and amortization expenses 143,028 83,874
Writing off accounts receivable 323,524 209,751
Amortization of right of use assets 139,217 88,059
Recognition of share-based compensation expenses 89,502 82,482
Deferred tax benefits (485,654) (165,829)
Equity investment loss 43
Changes in fair value of short-term investments (62,533)
Changes in operating assets and liabilities:    
Accounts receivable (303,213) (3,671,578)
Prepayments 420,735 (352,680)
Other current assets 10,626 (789,198)
Accounts payable 64,575 112,638
Advances from customers 68,888 11,604
Income tax payable 474,650 685,715
Accrued expenses and other liabilities (120,956) 753
Lease liabilities (151,123) (108,184)
Deferred government grants 1,127  
Net Cash Provided by (Used in) Operating Activities 1,613,995 (2,372,501)
Cash Flows from Investing Activities:    
Purchases of property and equipment (1,874,496) (140,388)
Loan to a third party (1,390,000)
Investments in short-term investments (838,747)
Net Cash Used in Investing Activities (4,103,243) (140,388)
Cash Flows from Financing Activities:    
Proceeds from issuance of common stocks in connection with initial public offering, net off issuance costs 11,497,654
Net Cash Provided by Financing Activities 11,497,654
Effect of exchange rate changes on cash and cash equivalents 80,693 (104,265)
Net (decrease) increase in cash and cash equivalents (2,408,555) 8,880,500
Cash and cash equivalents at beginning of period 15,072,947 7,832,552
Cash and cash equivalents at end of period 12,664,392 16,713,052
Supplemental Cash Flow Information    
Cash paid for income tax 41,112 2,593
Noncash investing activities    
Right of use assets obtained in exchange for operating lease obligations $ 199,505 $ 157,906
XML 16 R7.htm IDEA: XBRL DOCUMENT v3.21.2
Organization and Principal Activities
6 Months Ended
Jun. 30, 2021
Organization And Principal Activities [Abstract]  
ORGANIZATION AND PRINCIPAL ACTIVITIES
1.ORGANIZATION AND PRINCIPAL ACTIVITIES

 

The accompanying condensed consolidated financial statements include the financial statements of Zhongchao Inc. (“Zhongchao Cayman”, or the “Company”), its subsidiaries and variable interest entity (together with or without its subsidiary, “VIE”) and VIE’s subsidiaries for which the Company or its subsidiaries are the primary beneficiaries. The Company provides customized medical courses and customized medical training services to medical associations, pharmaceutical enterprises, medical institutions, medical journals, medical foundations, hospitals and etc. in the PRC. 

 

In May 2021, VIE launched the patient management service focusing on the professional field of tumor and rare disease operated through its subsidiary Shanghai Zhongxin Medical Technology Co., Ltd. ("Zhongxin"). In July 2021, VIE established a new subsidiary Ningxia Zhongxin Internet Hospital Co., Ltd. ("Zhongxin Ningxia") under Zhongxin.  Zhongxin Ningxia will build an internet hospital focusing on inpatient management services.

XML 17 R8.htm IDEA: XBRL DOCUMENT v3.21.2
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2021
Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(a)Basis of presentation

 

The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Security and Exchange Commission and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in conformity with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim financial information including the condensed consolidated financial statements and footnotes thereto should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2020 included in the Company’s Form 20-F filed with the SEC on April 30, 2021.

 

In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2020. The results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results for the year ending December 31, 2021 or any future periods.

 

(b)Accounts receivable

 

Accounts receivable are recorded at the gross amount less an allowance for any uncollectible accounts and do not bear interest. The Company provides customers with credit term ranging between one to six months, depending on credit assessment of customers. Management reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables. Management also periodically evaluates individual customer’s financial condition, credit history and the current economic conditions to make adjustments in the allowance when necessary. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. During the six months ended June 30, 2021 and 2020, the Company wrote off $323,524 and $209,751 against accounts receivable as the Company evaluated it is remote to collect the balance. As of June 30, 2021 and December 31, 2020, there were no allowances for doubtful accounts balances for accounts receivable.

 

(c)Revenue recognition

 

The Company adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) on January 1, 2017.

 

In accordance with ASC 606, revenues are recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

 

The Company identified each distinct service, or each series of distinct services that are substantially the same and that have the same pattern of transfer to the customer, as a performance obligation. Transaction price is allocated among different performance obligations identified in one contract, by using expected cost plus margin approach, if the standalone selling price of each performance obligation is not observable.

 

The Company identified each distinct service, or each series of distinct services that are substantially the same and that have the same pattern of transfer to the customer, as a performance obligation. Transaction price is allocated among different performance obligations identified in one contract, by using expected cost plus margin approach, if the standalone selling price of each performance obligation is not observable.

 

Advances from customers consists of payments received related to unsatisfied performance obligations at the end of the period.

 

The Company applied a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. The Company has no material incremental costs for obtaining contracts with customers that the Company expects the benefit of those costs to be longer than one year.

 

Medical training and education services

 

VIE designs and provides medical training and education courses in both online and offline formats to physicians and allied healthcare professionals (the “training and education services”). The Company identifies a single performance obligation from contracts. The Company recognizes revenue at the point of provision of services. Payments received in advance from customers are recorded as “advance from customers” in the consolidated balance sheets. Advance from customers is recognized as revenue when VIE delivers the courses to its customers. Such advance payment received are non-refundable. In cases where fees are collected after the sales, revenue and accounts receivable are recognized upon delivery of medical training and education courses to VIE. The fees are fixed and determinable at the inception of the services.

  

Offline medical training and education services courses – though customers can benefit from each service commitment, including design, production and presentation of medical courses, together with other readily available resources. The promises in the contracts with customers is integration of all of these service commitments. The Company concludes that these service commitments are highly dependent with each other, in the context of the contract term. Thus, these service commitments are not distinct from each other, and the Company combines all service commitments performed as a single performance obligation. In cases where VIE engages third party experts to provide presentation in medical courses, as the Company determines the contents and the participants, VIE has the ability to direct these experts to provide medical training services for VIE. Therefore, VIE is primarily responsible for fulfilling the promise to provide the medial courses and has the discretion in establishing the transaction price. VIE is a principal in the provision of services and recognizes revenues on a gross basis.

 

Online medical training and education services courses – the promises in the contracts with customers consist of provision of online courses and presentation of the courses online for users to access for a period of time. The performance obligation of presentation of the courses online for users for a period of time is immaterial in the context of the contract because presentation of each course incurred no significant additional cost, nor will it occupy any significant resources of VIE, except for little digital space on VIE’s server, which is inconsequential. Therefore, the Company combines all service commitments performed as a single performance obligation.

 

Assistance in operation of patient-aid projects

 

VIE is engaged by NFPs to assist in the operation of patient-aid projects with a purpose to facilitate qualified patients to obtain free drug treatment from NFPs. VIE is responsible to provide doctors with access to training courses or training materials in connection with the drug treatment, review the completeness of application documents from patients, and other ad-hoc works (such programs with these plug-in features are hereinafter referred as the “patient-aid projects”). The arrangements are structured as fixed price contracts. The price is determined as stated in contracts and does not include any variable consideration. The Company identifies a single performance obligation from contracts and recognizes revenue over a period of time during which VIE provides the assistance to the NFPs till the earlier of the expiration of contract period or the free drugs are completely delivered. The Company uses an input-based method to measure the progress, by reference to the cost incurred in performing the obligation.

 

The fees are fixed at the inception of the services and are collected either in advance or after the services are provided.

 

Other consulting services

 

VIE also provides consulting services to its customers, including drafting research papers and providing other academic supports. The consulting services are accounted for as a single performance obligation and was recognized as revenue when VIE delivers services to the customers. Fees are generally collected after provision of services. For the six months ended June 30, 2021 and 2020, the Company generated minimal amount from other consulting services.

  

(d)Cost of revenues

 

Cost of revenues was comprised of direct related costs incurred for preparation of online medical training courses and offline education seminars and patient-aid projects, including expenses of travelling and accommodation, seminar site-rental, video production and backdrop production, professional service fees charged by experts who provide online and offline seminars, salary and welfare expenses incurred by the key members of the editorial, design and production team, and labor cost for patient-aid projects. The travelling and accommodation expenses, including but not limited to the air-ticket expenses and hotel accommodation expenses, represented the costs arising from lecturers’ attendance and participation of the offline seminars. Other media expenses were incurred by VIE’s medical department for videos production, live streaming of the offline seminars, and materials collection to create online courses. These travelling, accommodation and media expenses are well budgeted before any agreements entered into by VIE and the customers. Therefore, such expenses are well covered by the customers under those agreements. VIE is not reimbursed by the customers separately.

 

(e)Earnings per share

 

Basic earnings per ordinary share is computed by dividing net earnings attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to ordinary shareholders by the sum of the weighted average number of ordinary share outstanding and of potential ordinary share (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary share that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted earnings per share. Potential ordinary share that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted earnings per share. For the six months ended June 30, 2021 and 2020, the Company had no dilutive shares.

 

(f)Share-based compensation

 

Share-based awards granted to the Company’s employees and one non-employee are measured at fair value on grant date and measurement date, respectively, and share-based compensation expense is recognized (i) immediately at the grant date if no vesting conditions are required, or (ii) using the accelerated attribution method, net of estimated forfeitures, over the requisite service period. The fair value of restricted shares is determined with reference to the fair value of the underlying shares.

 

At each date of measurement, the Company reviews internal and external sources of information to assist in the estimation of various attributes to determine the fair value of the share-based awards granted by the Company, including but not limited to the fair value of the equity value of the Company (Note 11), expected life, expected volatility and expected forfeiture rates.

 

(g)Significant risks and uncertainties

 

1)Credit risk

 

Assets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents. The maximum exposure of such assets to credit risk is their carrying amount as at the balance sheet dates. As of June 30, 2021, the Company held cash and cash equivalents of $12,664,392, of which $7,565,882 were deposited in financial institutions located in Mainland China, and each bank accounts is insured by the government authority with the maximum limit of RMB 500,000 (equivalent to approximately $77,400). As of June 30, 2021, the Company held cash and cash equivalents of $4,301,393 deposited in the banks located in Hong Kong and Cayman Islands, which are not insured by Federal Deposit Insurance Corporation (“FDIC”) insurance or other insurance, and held cash and cash equivalents of $797,117 deposited in the banks located in the U.S. which are insured by FDIC up to $250,000. To limit exposure to credit risk relating to deposits, the Company primarily place cash and cash equivalent deposits with large financial institutions in China which management believes are of high credit quality and also continually monitors their worthiness.

 

VIE’s operations are carried out in China. Accordingly, VIE’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy. In addition, VIE’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, rates and methods of taxation among other factors.

XML 18 R9.htm IDEA: XBRL DOCUMENT v3.21.2
Short-Term Investments
6 Months Ended
Jun. 30, 2021
Short-term Investments [Abstract]  
SHORT-TERM INVESTMENTS
3.SHORT-TERM INVESTMENTS

 

As of June 30, 2021 and December 31, 2020, the balance of short-term investments represented certain equity securities of listed companies purchased through various open market transactions invested by the Company during the relevant periods. The short-term investments are trading securities. They are initially recorded at cost, and subsequently measured at fair value with the changes in fair value recorded in other income, net in the consolidated statement of income and comprehensive income. Loss from such short-term investment amounted to $62,533 and $nil for the six months ended June 30, 2021 and 2020, respectively.

XML 19 R10.htm IDEA: XBRL DOCUMENT v3.21.2
Other Current Assets
6 Months Ended
Jun. 30, 2021
Other Current Assets [Abstract]  
OTHER CURRENT ASSETS
4.OTHER CURRENT ASSETS

 

Other current assets consist of the following:

 

   June 30,
2021
   December 31,
2020
 
   (unaudited)     
Prepaid advertising expense (i)  $
-
   $1,033,280 
Deferred contract costs (ii)   800,461    272,804 
Office rental deposit   98,159    86,287 
Interest receivable   29,945    32,416 
Prepaid rental fees   54    15,827 
Prepaid consulting service fees   468,302    78,627 
Others   216,130    94,167 
   $1,613,051   $1,613,408 

 

(i)As of December 31, 2020, the balance of prepaid advertising expenses represents payments of advertising expenses to three vendors. Among the balance of $1,033,280 as of December 31, 2020, $459,235 was subsequently refunded from the vendor to VIE as VIE suspended cooperation with the vendor, and the remaining was expensed during the six months ended June 30, 2021 with the services provided by the vendors.

 

(ii)As of June 30, 2021 and December 31, 2020, the balances of deferred contract costs represented the travel and media expenses which were directly related to certain contracts with customers. The costs and expenses were incurred so that VIE would fulfil its performance obligation committed to its customers and were expected to be recovered.
XML 20 R11.htm IDEA: XBRL DOCUMENT v3.21.2
Loan Due From a Third Party
6 Months Ended
Jun. 30, 2020
Loan Duefrom Third Party [Abstract]  
LOAN DUE FROM A THIRD PARTY
5.LOAN DUE FROM A THIRD PARTY

 

During the six months ended June 30, 2021, the Company provided a loan in the amount of $1,390,000 to a third party with a term of 12 months. The loan bears an interest rate of 2% per annum. The loan was made to earn interest income from the idle cash. Subsequently, the third party has repaid $100,000 to the Company.

XML 21 R12.htm IDEA: XBRL DOCUMENT v3.21.2
Property and Equipment, Net
6 Months Ended
Jun. 30, 2021
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT, NET
6.PROPERTY AND EQUIPMENT, NET

 

Property and equipment, net consist of the following:

 

   June 30,
2021
   December 31,
2020
 
   (unaudited)     
Property  $2,768,607   $1,828,092 
Office equipment   453,759    449,246 
Vehicle   35,530    34,351 
Less: accumulated depreciation   (446,565)   (313,928)
   $2,811,331   $1,997,761 

 

As of June 30, 2021, the balance of property was comprised of office campus and facilities in Beijing of $1,849,611 and in Japan of $918,996. As of December 31, 2020, the balance of property was comprised of office campus and facilities in Beijing of $1,828,092.

 

Depreciation expenses totaled $128,716 and $71,314 for the six months ended June 30, 2021 and 2020, respectively.

XML 22 R13.htm IDEA: XBRL DOCUMENT v3.21.2
Accrued Expenses and other Current Liabilities
6 Months Ended
Jun. 30, 2021
Accrued Expenses And Other Current Liabilitie [Abstract]  
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
7.ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

Accrued expenses and other current liabilities consist of the following:

 

   June 30,
2021
   December 31,
2020
 
   (unaudited)     
Other tax payable  $684,930   $777,810 
Accrued payroll   198,263    159,350 
Other current liabilities   44,670    44,273 
   $927,863   $981,433 

 

Other tax payable

 

Other tax payables consist of the following:

 

   June 30,
2021
   December 31,
2020
 
   (unaudited)     
Value added tax payable  $664,890   $740,894 
Local taxes payable   20,040    36,916 
   $684,930   $777,810 
XML 23 R14.htm IDEA: XBRL DOCUMENT v3.21.2
Income Taxes
6 Months Ended
Jun. 30, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES
8.INCOME TAXES

 

Cayman Islands

 

Under the current tax laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed.

 

British Virgin Islands

 

Under the current tax laws of BVI, the Company’s subsidiary incorporated in the BVI is not subject to tax on income or capital gains.

 

Hong Kong

 

The Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong since inception. Under Hong Kong tax laws, Zhongchao HK is exempted from income tax on its foreign-derived income and there are no withholding taxed in Hong Kong on remittance of dividends.

 

PRC

 

The PRC Corporate Income Tax (“CIT”) is calculated based on the taxable income determined under the applicable CIT Law and its implementation rules, which became effective on January 1, 2008. CIT Law imposes a unified income tax rate of 25% for all resident enterprises in China, including both domestic and foreign invested enterprises.

 

USA

 

For the US jurisdiction, the Company is subject to federal and state income taxes on its business operations. The federal tax rate is 21% and state tax rate is 13%. The Company also evaluated the impact from the recent tax reforms in the United States, including the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and Health and Economic Recovery Omnibus Emergency Solutions Act (“HERO Act”), which both were passed in 2020, No material impact on the Company is expected based on our analysis. The Company will continue to monitor the potential impact going forward.

 

Income tax expenses consist of the following:

 

   For the six months ended
June 30,
 
   2021   2020 
   (unaudited)   (unaudited) 
Current income tax expenses  $(528,266)  $(688,308)
Deferred income tax benefits   485,654    165,829 
   $(42,612)  $(522,479)

 

Deferred tax assets as of June 30, 2021 and December 31, 2020 consist of the following:

 

   June 30,
2021
   December 31,
2020
 
   (unaudited)     
Excess advertising expense  $820,649   $699,717 
Deferred intangible assets amortization   21,573    22,983 
Net operating loss carrying forward   369,709    7,666 
Share-based compensation   79,402    65,181 
   $1,291,333   $795,547 

 

As of June 30, 2021 and December 31, 2020, the Company had net operating loss carryforwards of $2,654,794 and $36,538, respectively. The Company reviews deferred tax assets for a valuation allowance based upon whether it is more likely than not that the deferred tax asset will be fully realized. As of June 30, 2021, the valuation allowance was of $9,425 against the deferred tax assets arising from net operating losses of one subsidiary as the management’s assessed that it will not realize the deferred tax asset. As of December 31, 2020, there was no valuation allowance against the deferred tax assets based upon management’s assessment that it is more likely than not that there will be realization of the deferred tax asset.

 

The Company evaluates its valuation allowance requirements at end of each reporting period by reviewing all available evidence, both positive and negative, and considering whether, based on the weight of that evidence, a valuation allowance is needed. When circumstances cause a change in management’s judgement about the recoverability of deferred tax assets, the impact of the change on the valuation allowance is generally reflected in income from operations. The future realization of the tax benefit of an existing deductible temporary difference ultimately depends on the existence of sufficient taxable income of the appropriate character within the carryforward period available under applicable tax law.

 

Uncertain tax positions

 

The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of June 30, 2021 and December 31, 2020, the Company did not have any significant unrecognized uncertain tax positions or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefit. The Company does not believe that its uncertain tax benefits position will materially change over the next twelve months.

XML 24 R15.htm IDEA: XBRL DOCUMENT v3.21.2
Related Party Transactions and Balanes
6 Months Ended
Jun. 30, 2021
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS AND BALANES
9.RELATED PARTY TRANSACTIONS AND BALANES

 

As of June 30, 2021 and December 31, 2020, the Company had no outstanding balances due from or due to related parties.

 

For the six months ended June 30, 2021 and 2020, the Company did not enter into any transactions with related parties.

XML 25 R16.htm IDEA: XBRL DOCUMENT v3.21.2
Equity
6 Months Ended
Jun. 30, 2021
Stockholders' Equity Note [Abstract]  
EQUITY
10.EQUITY

 

Restricted net assets

 

As of June 30, 2021 and December 31, 2020, the Company had net assets restricted in the aggregate, which include paid-in capital and statutory reserve of the Company’s PRC subsidiary, VIE and VIE’s subsidiaries that are included in the Company’s consolidated net assets, were approximately $12,352,859 and $12,088,293, respectively.

XML 26 R17.htm IDEA: XBRL DOCUMENT v3.21.2
Stock Based Compensation
6 Months Ended
Jun. 30, 2021
Share-based Payment Arrangement [Abstract]  
STOCK BASED COMPENSATION
11.STOCK BASED COMPENSATION

 

The following table summarizes our unvested restricted share units:

 

   Number of
shares
  

Weighted-
Average

Grant-Date
Fair Value

 
         
Unvested at December 31, 2020   427,076   $2.54 
Granted   
-
   $
-
 
Vested   (3,000)  $2.42 
Unvested at June 30, 2021   424,076   $2.54 

 

On July 13, 2020, the Company granted and issued 18,000 shares of restricted Class A Ordinary Shares to three non-executive directors as their compensation for the year from March 1, 2020. The restricted shares were vested on a straight line basis over the service period, and will be transferable after a lock-up period of six months. As of June 30, 2021 and December 31, 2020, 18,000 and 15,000 shares were vested, respectively. The grant-date value of each restricted share units was $2.42 by reference to the closing price of the Company’s Class A Ordinary Share on July 13, 2020, and the total fair value of these restricted Class A Ordinary Share units aggregated $43,560.

 

For the six months ended June 30, 2021 and 2020, the Company had stock-based compensation expenses of $89,502 and $82,482, respectively. As of June 30, 2021, the Company expected to incur stock based compensation expenses of $580,935 over a weighted average period of 4.1 years.

XML 27 R18.htm IDEA: XBRL DOCUMENT v3.21.2
Commitments and Contingencies
6 Months Ended
Jun. 30, 2021
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES
12.COMMITMENTS AND CONTINGENCIES

 

Contingencies

 

From time to time, the Company may be subject to certain legal proceedings, claims and disputes that arise in the ordinary course of business. Although the outcomes of these legal proceedings cannot be predicted, the Company does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of operations or liquidity.

 

Lease commitment

 

As of June 30, 2021, the Company leases offices space under certain non-cancelable operating lease arrangements, five of which had a term over 12 months. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right of use assets and lease liabilities. Lease expense for lease payment is recognized on a straight-line basis over the lease term.

 

The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company discounted lease payments based on an estimate of its incremental borrowing rate to present value.

 

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

 

The table below presents the operating lease related assets and liabilities recorded on the balance sheet.

 

  

June 30,

2021

   December 31,
2020
 
   (unaudited)     
Rights of use lease assets  $158,656   $65,137 
           
Operating lease liabilities, current  $130,949   $62,160 
Operating lease liabilities, noncurrent   12,764    - 
Total operating lease liabilities  $143,713   $62,160 

 

As of June 30, 2021 and December 31, 2020, the weighted average remaining lease term was 0.90 years and 0.39 years, respectively, and discount rates were 4.75% for all of the operating leases.

 

Rental expense for the six months ended June 30, 2021 and 2020 were $153,841 and $141,074, respectively.

 

The following is a schedule, by years, of maturities of lease liabilities as of June 30, 2021:

 

   June 30,
2021
 
   (unaudited) 
Six months ending December 31, 2021  $131,964 
Year ending December 31, 2022 and thereafter   17,700 
Total lease payments   149,664 
Less: imputed interest   (5,951)
Present value of lease liabilities  $143,713 
XML 28 R19.htm IDEA: XBRL DOCUMENT v3.21.2
Subsequent Events
6 Months Ended
Jun. 30, 2021
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS
13.SUBSEQUENT EVENTS

 

The Company evaluated subsequent events through November 12, 2021, the date on which these condensed consolidated financial statements were issued, and the management determined that no subsequent events that require recognition and disclosure in the condensed consolidated financial statements.

XML 29 R20.htm IDEA: XBRL DOCUMENT v3.21.2
Accounting Policies, by Policy (Policies)
6 Months Ended
Jun. 30, 2021
Accounting Policies [Abstract]  
Basis of presentation
(a)Basis of presentation

 

The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Security and Exchange Commission and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in conformity with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim financial information including the condensed consolidated financial statements and footnotes thereto should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2020 included in the Company’s Form 20-F filed with the SEC on April 30, 2021.

 

In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2020. The results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results for the year ending December 31, 2021 or any future periods.

 

Accounts receivable
(b)Accounts receivable

 

Accounts receivable are recorded at the gross amount less an allowance for any uncollectible accounts and do not bear interest. The Company provides customers with credit term ranging between one to six months, depending on credit assessment of customers. Management reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables. Management also periodically evaluates individual customer’s financial condition, credit history and the current economic conditions to make adjustments in the allowance when necessary. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. During the six months ended June 30, 2021 and 2020, the Company wrote off $323,524 and $209,751 against accounts receivable as the Company evaluated it is remote to collect the balance. As of June 30, 2021 and December 31, 2020, there were no allowances for doubtful accounts balances for accounts receivable.

 

Revenue recognition
(c)Revenue recognition

 

The Company adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) on January 1, 2017.

 

In accordance with ASC 606, revenues are recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

 

The Company identified each distinct service, or each series of distinct services that are substantially the same and that have the same pattern of transfer to the customer, as a performance obligation. Transaction price is allocated among different performance obligations identified in one contract, by using expected cost plus margin approach, if the standalone selling price of each performance obligation is not observable.

 

The Company identified each distinct service, or each series of distinct services that are substantially the same and that have the same pattern of transfer to the customer, as a performance obligation. Transaction price is allocated among different performance obligations identified in one contract, by using expected cost plus margin approach, if the standalone selling price of each performance obligation is not observable.

 

Advances from customers consists of payments received related to unsatisfied performance obligations at the end of the period.

 

The Company applied a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. The Company has no material incremental costs for obtaining contracts with customers that the Company expects the benefit of those costs to be longer than one year.

 

Medical training and education services

 

VIE designs and provides medical training and education courses in both online and offline formats to physicians and allied healthcare professionals (the “training and education services”). The Company identifies a single performance obligation from contracts. The Company recognizes revenue at the point of provision of services. Payments received in advance from customers are recorded as “advance from customers” in the consolidated balance sheets. Advance from customers is recognized as revenue when VIE delivers the courses to its customers. Such advance payment received are non-refundable. In cases where fees are collected after the sales, revenue and accounts receivable are recognized upon delivery of medical training and education courses to VIE. The fees are fixed and determinable at the inception of the services.

  

Offline medical training and education services courses – though customers can benefit from each service commitment, including design, production and presentation of medical courses, together with other readily available resources. The promises in the contracts with customers is integration of all of these service commitments. The Company concludes that these service commitments are highly dependent with each other, in the context of the contract term. Thus, these service commitments are not distinct from each other, and the Company combines all service commitments performed as a single performance obligation. In cases where VIE engages third party experts to provide presentation in medical courses, as the Company determines the contents and the participants, VIE has the ability to direct these experts to provide medical training services for VIE. Therefore, VIE is primarily responsible for fulfilling the promise to provide the medial courses and has the discretion in establishing the transaction price. VIE is a principal in the provision of services and recognizes revenues on a gross basis.

 

Online medical training and education services courses – the promises in the contracts with customers consist of provision of online courses and presentation of the courses online for users to access for a period of time. The performance obligation of presentation of the courses online for users for a period of time is immaterial in the context of the contract because presentation of each course incurred no significant additional cost, nor will it occupy any significant resources of VIE, except for little digital space on VIE’s server, which is inconsequential. Therefore, the Company combines all service commitments performed as a single performance obligation.

 

Assistance in operation of patient-aid projects

 

VIE is engaged by NFPs to assist in the operation of patient-aid projects with a purpose to facilitate qualified patients to obtain free drug treatment from NFPs. VIE is responsible to provide doctors with access to training courses or training materials in connection with the drug treatment, review the completeness of application documents from patients, and other ad-hoc works (such programs with these plug-in features are hereinafter referred as the “patient-aid projects”). The arrangements are structured as fixed price contracts. The price is determined as stated in contracts and does not include any variable consideration. The Company identifies a single performance obligation from contracts and recognizes revenue over a period of time during which VIE provides the assistance to the NFPs till the earlier of the expiration of contract period or the free drugs are completely delivered. The Company uses an input-based method to measure the progress, by reference to the cost incurred in performing the obligation.

 

The fees are fixed at the inception of the services and are collected either in advance or after the services are provided.

 

Other consulting services

 

VIE also provides consulting services to its customers, including drafting research papers and providing other academic supports. The consulting services are accounted for as a single performance obligation and was recognized as revenue when VIE delivers services to the customers. Fees are generally collected after provision of services. For the six months ended June 30, 2021 and 2020, the Company generated minimal amount from other consulting services.

  

Cost of revenues
(d)Cost of revenues

 

Cost of revenues was comprised of direct related costs incurred for preparation of online medical training courses and offline education seminars and patient-aid projects, including expenses of travelling and accommodation, seminar site-rental, video production and backdrop production, professional service fees charged by experts who provide online and offline seminars, salary and welfare expenses incurred by the key members of the editorial, design and production team, and labor cost for patient-aid projects. The travelling and accommodation expenses, including but not limited to the air-ticket expenses and hotel accommodation expenses, represented the costs arising from lecturers’ attendance and participation of the offline seminars. Other media expenses were incurred by VIE’s medical department for videos production, live streaming of the offline seminars, and materials collection to create online courses. These travelling, accommodation and media expenses are well budgeted before any agreements entered into by VIE and the customers. Therefore, such expenses are well covered by the customers under those agreements. VIE is not reimbursed by the customers separately.

 

Earnings per share
(e)Earnings per share

 

Basic earnings per ordinary share is computed by dividing net earnings attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to ordinary shareholders by the sum of the weighted average number of ordinary share outstanding and of potential ordinary share (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary share that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted earnings per share. Potential ordinary share that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted earnings per share. For the six months ended June 30, 2021 and 2020, the Company had no dilutive shares.

 

Share-based compensation
(f)Share-based compensation

 

Share-based awards granted to the Company’s employees and one non-employee are measured at fair value on grant date and measurement date, respectively, and share-based compensation expense is recognized (i) immediately at the grant date if no vesting conditions are required, or (ii) using the accelerated attribution method, net of estimated forfeitures, over the requisite service period. The fair value of restricted shares is determined with reference to the fair value of the underlying shares.

 

At each date of measurement, the Company reviews internal and external sources of information to assist in the estimation of various attributes to determine the fair value of the share-based awards granted by the Company, including but not limited to the fair value of the equity value of the Company (Note 11), expected life, expected volatility and expected forfeiture rates.

 

Significant risks and uncertainties
(g)Significant risks and uncertainties

 

1)Credit risk

 

Assets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents. The maximum exposure of such assets to credit risk is their carrying amount as at the balance sheet dates. As of June 30, 2021, the Company held cash and cash equivalents of $12,664,392, of which $7,565,882 were deposited in financial institutions located in Mainland China, and each bank accounts is insured by the government authority with the maximum limit of RMB 500,000 (equivalent to approximately $77,400). As of June 30, 2021, the Company held cash and cash equivalents of $4,301,393 deposited in the banks located in Hong Kong and Cayman Islands, which are not insured by Federal Deposit Insurance Corporation (“FDIC”) insurance or other insurance, and held cash and cash equivalents of $797,117 deposited in the banks located in the U.S. which are insured by FDIC up to $250,000. To limit exposure to credit risk relating to deposits, the Company primarily place cash and cash equivalent deposits with large financial institutions in China which management believes are of high credit quality and also continually monitors their worthiness.

 

VIE’s operations are carried out in China. Accordingly, VIE’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy. In addition, VIE’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, rates and methods of taxation among other factors.

XML 30 R21.htm IDEA: XBRL DOCUMENT v3.21.2
Other Current Assets (Tables)
6 Months Ended
Jun. 30, 2021
Other Current Assets [Abstract]  
Schedule of Other current assets
   June 30,
2021
   December 31,
2020
 
   (unaudited)     
Prepaid advertising expense (i)  $
-
   $1,033,280 
Deferred contract costs (ii)   800,461    272,804 
Office rental deposit   98,159    86,287 
Interest receivable   29,945    32,416 
Prepaid rental fees   54    15,827 
Prepaid consulting service fees   468,302    78,627 
Others   216,130    94,167 
   $1,613,051   $1,613,408 

 

(i)As of December 31, 2020, the balance of prepaid advertising expenses represents payments of advertising expenses to three vendors. Among the balance of $1,033,280 as of December 31, 2020, $459,235 was subsequently refunded from the vendor to VIE as VIE suspended cooperation with the vendor, and the remaining was expensed during the six months ended June 30, 2021 with the services provided by the vendors.

 

(ii)As of June 30, 2021 and December 31, 2020, the balances of deferred contract costs represented the travel and media expenses which were directly related to certain contracts with customers. The costs and expenses were incurred so that VIE would fulfil its performance obligation committed to its customers and were expected to be recovered.
XML 31 R22.htm IDEA: XBRL DOCUMENT v3.21.2
Property and Equipment, Net (Tables)
6 Months Ended
Jun. 30, 2021
Property, Plant and Equipment [Abstract]  
Schedule of Property and equipment, net
   June 30,
2021
   December 31,
2020
 
   (unaudited)     
Property  $2,768,607   $1,828,092 
Office equipment   453,759    449,246 
Vehicle   35,530    34,351 
Less: accumulated depreciation   (446,565)   (313,928)
   $2,811,331   $1,997,761 

 

XML 32 R23.htm IDEA: XBRL DOCUMENT v3.21.2
Accrued Expenses and other Current Liabilities (Tables)
6 Months Ended
Jun. 30, 2021
Accrued Expenses And Other Current Liabilitie [Abstract]  
Schedule of accrued expenses and other current liabilities
   June 30,
2021
   December 31,
2020
 
   (unaudited)     
Other tax payable  $684,930   $777,810 
Accrued payroll   198,263    159,350 
Other current liabilities   44,670    44,273 
   $927,863   $981,433 

 

Schedule of other tax payables
   June 30,
2021
   December 31,
2020
 
   (unaudited)     
Value added tax payable  $664,890   $740,894 
Local taxes payable   20,040    36,916 
   $684,930   $777,810 
XML 33 R24.htm IDEA: XBRL DOCUMENT v3.21.2
Income Taxes (Tables)
6 Months Ended
Jun. 30, 2021
Income Tax Disclosure [Abstract]  
Schedule of income tax expenses
   For the six months ended
June 30,
 
   2021   2020 
   (unaudited)   (unaudited) 
Current income tax expenses  $(528,266)  $(688,308)
Deferred income tax benefits   485,654    165,829 
   $(42,612)  $(522,479)

 

Schedule of deferred tax assets
   June 30,
2021
   December 31,
2020
 
   (unaudited)     
Excess advertising expense  $820,649   $699,717 
Deferred intangible assets amortization   21,573    22,983 
Net operating loss carrying forward   369,709    7,666 
Share-based compensation   79,402    65,181 
   $1,291,333   $795,547 

 

XML 34 R25.htm IDEA: XBRL DOCUMENT v3.21.2
Stock Based Compensation (Tables)
6 Months Ended
Jun. 30, 2021
Share-based Payment Arrangement [Abstract]  
Schedule of unvested restricted share units
   Number of
shares
  

Weighted-
Average

Grant-Date
Fair Value

 
         
Unvested at December 31, 2020   427,076   $2.54 
Granted   
-
   $
-
 
Vested   (3,000)  $2.42 
Unvested at June 30, 2021   424,076   $2.54 

 

XML 35 R26.htm IDEA: XBRL DOCUMENT v3.21.2
Commitments and Contingencies (Tables)
6 Months Ended
Jun. 30, 2021
Commitments and Contingencies Disclosure [Abstract]  
Schedule of operating lease related assets and liabilities
  

June 30,

2021

   December 31,
2020
 
   (unaudited)     
Rights of use lease assets  $158,656   $65,137 
           
Operating lease liabilities, current  $130,949   $62,160 
Operating lease liabilities, noncurrent   12,764    - 
Total operating lease liabilities  $143,713   $62,160 

 

Schedule of maturities of lease liabilities
   June 30,
2021
 
   (unaudited) 
Six months ending December 31, 2021  $131,964 
Year ending December 31, 2022 and thereafter   17,700 
Total lease payments   149,664 
Less: imputed interest   (5,951)
Present value of lease liabilities  $143,713 
XML 36 R27.htm IDEA: XBRL DOCUMENT v3.21.2
Summary of Significant Accounting Policies (Details) - USD ($)
6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Accounting Policies [Abstract]    
Accounts Receivable $ 323,524 $ 209,751
Cash and cash equivalents 12,664,392  
Deposited in financial institutions $ 7,565,882  
Significant risks and uncertainties, description maximum limit of RMB 500,000 (equivalent to approximately $77,400).  
Credit risk description the Company held cash and cash equivalents of $4,301,393 deposited in the banks located in Hong Kong and Cayman Islands, which are not insured by Federal Deposit Insurance Corporation (“FDIC”) insurance or other insurance, and held cash and cash equivalents of $797,117 deposited in the banks located in the U.S. which are insured by FDIC up to $250,000.  
XML 37 R28.htm IDEA: XBRL DOCUMENT v3.21.2
Short-Term Investments (Details) - USD ($)
6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Short-term Investments [Abstract]    
Loss on short-term investment $ 62,533
XML 38 R29.htm IDEA: XBRL DOCUMENT v3.21.2
Other Current Assets (Details) - USD ($)
Jun. 30, 2021
Dec. 31, 2020
Disclosure Text Block Supplement [Abstract]    
Prepaid advertising expenses $ 459,235 $ 1,033,280
XML 39 R30.htm IDEA: XBRL DOCUMENT v3.21.2
Other Current Assets (Details) - Schedule of other current assets - USD ($)
Jun. 30, 2021
Dec. 31, 2020
Schedule of other current assets [Abstract]    
Prepaid advertising expense [1] $ 1,033,280
Deferred contract costs [2] 800,461 272,804
Office rental deposit 98,159 86,287
Interest receivable 29,945 32,416
Prepaid rental fees 54 15,827
Prepaid consulting service fees 468,302 78,627
Others 216,130 94,167
Total $ 1,613,051 $ 1,613,408
[1] As of December 31, 2020, the balance of prepaid advertising expenses represents payments of advertising expenses to three vendors. Among the balance of $1,033,280 as of December 31, 2020, $459,235 was subsequently refunded from the vendor to VIE as VIE suspended cooperation with the vendor, and the remaining was expensed during the six months ended June 30, 2021 with the services provided by the vendors.
[2] As of June 30, 2021 and December 31, 2020, the balances of deferred contract costs represented the travel and media expenses which were directly related to certain contracts with customers. The costs and expenses were incurred so that VIE would fulfil its performance obligation committed to its customers and were expected to be recovered.
XML 40 R31.htm IDEA: XBRL DOCUMENT v3.21.2
Loan Due From a Third Party (Details)
6 Months Ended
Jun. 30, 2021
USD ($)
Loan Duefrom Third Party [Abstract]  
Provided Loan $ 1,390,000
LoanInterest rate of percentage 2.00%
Interest of loan $ 100,000
XML 41 R32.htm IDEA: XBRL DOCUMENT v3.21.2
Property and Equipment, Net (Details) - USD ($)
6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Dec. 31, 2020
Property and Equipment, Net (Details) [Line Items]      
Comprised of office campus and facilities     $ 1,828,092
Depreciation expenses $ 128,716 $ 71,314  
Japan [Member]      
Property and Equipment, Net (Details) [Line Items]      
Comprised of office campus and facilities 918,996    
Beijing [Member]      
Property and Equipment, Net (Details) [Line Items]      
Comprised of office campus and facilities $ 1,849,611    
XML 42 R33.htm IDEA: XBRL DOCUMENT v3.21.2
Property and Equipment, Net (Details) - Schedule of Property and equipment, net - USD ($)
Jun. 30, 2021
Dec. 31, 2020
Schedule of Property and equipment, net [Abstract]    
Property $ 2,768,607 $ 1,828,092
Office equipment 453,759 449,246
Vehicle 35,530 34,351
Less: accumulated depreciation (446,565) (313,928)
Property and equipment, net $ 2,811,331 $ 1,997,761
XML 43 R34.htm IDEA: XBRL DOCUMENT v3.21.2
Accrued Expenses and other Current Liabilities (Details) - Schedule of accrued expenses and other current liabilities - USD ($)
Jun. 30, 2021
Dec. 31, 2020
Schedule of accrued expenses and other current liabilities [Abstract]    
Other tax payable $ 684,930 $ 777,810
Accrued payroll 198,263 159,350
Other current liabilities 44,670 44,273
Accrued expenses and other current liabilities $ 927,863 $ 981,433
XML 44 R35.htm IDEA: XBRL DOCUMENT v3.21.2
Accrued Expenses and other Current Liabilities (Details) - Schedule of other tax payables - USD ($)
Jun. 30, 2021
Dec. 31, 2020
Schedule of other tax payables [Abstract]    
Value added tax payable $ 664,890 $ 740,894
Local taxes payable 20,040 36,916
Other tax payable $ 684,930 $ 777,810
XML 45 R36.htm IDEA: XBRL DOCUMENT v3.21.2
Income Taxes (Details) - USD ($)
6 Months Ended
Jun. 30, 2021
Dec. 31, 2020
Income Tax Disclosure [Abstract]    
Income tax rate 25.00%  
Federal tax rate 21.00%  
State tax rate 13.00%  
Net operating loss carryforwards $ 2,654,794 $ 36,538
Operating loss carryforwards valuation allowance $ 9,425  
XML 46 R37.htm IDEA: XBRL DOCUMENT v3.21.2
Income Taxes (Details) - Schedule of income tax expenses - USD ($)
6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Schedule of income tax expenses [Abstract]    
Current income tax expenses $ (528,266) $ (688,308)
Deferred income tax benefits 485,654 165,829
Total $ (42,612) $ (522,479)
XML 47 R38.htm IDEA: XBRL DOCUMENT v3.21.2
Income Taxes (Details) - Schedule of deferred tax assets - USD ($)
Jun. 30, 2021
Dec. 31, 2020
Schedule of deferred tax assets [Abstract]    
Excess advertising expense $ 820,649 $ 699,717
Deferred Intangible assets amortization 21,573 22,983
Net operating loss carrying forward 369,709 7,666
Share-based compensation 79,402 65,181
Total $ 1,291,333 $ 795,547
XML 48 R39.htm IDEA: XBRL DOCUMENT v3.21.2
Equity (Details) - USD ($)
Jun. 30, 2021
Dec. 31, 2020
Equity (Details) [Line Items]    
Net assets $ 12,352,859  
VIE [Member]    
Equity (Details) [Line Items]    
Net assets   $ 12,088,293
XML 49 R40.htm IDEA: XBRL DOCUMENT v3.21.2
Stock Based Compensation (Details) - USD ($)
6 Months Ended
Jul. 13, 2020
Jun. 30, 2021
Jun. 30, 2020
Share-based Payment Arrangement [Abstract]      
Restricted shares, description the Company granted and issued 18,000 shares of restricted Class A Ordinary Shares to three non-executive directors as their compensation for the year from March 1, 2020. The restricted shares were vested on a straight line basis over the service period, and will be transferable after a lock-up period of six months. As of June 30, 2021 and December 31, 2020, 18,000 and 15,000 shares were vested, respectively. The grant-date value of each restricted share units was $2.42 by reference to the closing price of the Company’s Class A Ordinary Share on July 13, 2020, and the total fair value of these restricted Class A Ordinary Share units aggregated $43,560.    
Accrual of (Reversal of) share-based compensation expenses   $ 89,502 $ (82,482)
Incur stock based compensation expenses   $ 580,935  
Weighted average period   4 years 1 month 6 days  
XML 50 R41.htm IDEA: XBRL DOCUMENT v3.21.2
Stock Based Compensation (Details) - Schedule of unvested restricted share units
6 Months Ended
Jun. 30, 2021
$ / shares
shares
Schedule of unvested restricted share units [Abstract]  
Number of Shares, Unvested | shares 427,076
Weighted Average Grant-Date Fair Value, Unvested | $ / shares $ 2.54
Number of Shares, Unvested | shares 424,076
Weighted Average Grant-Date Fair Value, Unvested | $ / shares $ 2.54
Number of shares,Granted | shares
Weighted- Average Grant-Date Fair Value,Granted | $ / shares
Number of Shares, Vested | shares (3,000)
Weighted Average Grant-Date Fair Value, Vested | $ / shares $ 2.42
XML 51 R42.htm IDEA: XBRL DOCUMENT v3.21.2
Commitments and Contingencies (Details) - USD ($)
6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Dec. 31, 2020
Commitments and Contingencies Disclosure [Abstract]      
Weighted average remaining lease term 10 months 24 days   4 months 20 days
Operating leases discount rates 4.75%    
Rental expense $ 153,841 $ 141,074  
XML 52 R43.htm IDEA: XBRL DOCUMENT v3.21.2
Commitments and Contingencies (Details) - Schedule of operating lease related assets and liabilities - USD ($)
Jun. 30, 2021
Dec. 31, 2020
Schedule of operating lease related assets and liabilities [Abstract]    
Rights of use lease assets $ 158,656 $ 65,137
Operating lease liabilities, current 130,949 62,160
Operating lease liabilities, noncurrent 12,764  
Total operating lease liabilities $ 143,713 $ 62,160
XML 53 R44.htm IDEA: XBRL DOCUMENT v3.21.2
Commitments and Contingencies (Details) - Schedule of maturities of lease liabilities
Jun. 30, 2021
USD ($)
Schedule of maturities of lease liabilities [Abstract]  
Six months ending December 31, 2021 $ 131,964
Year ending December 31, 2022 and thereafter 17,700
Total lease payments 149,664
Less: imputed interest (5,951)
Present value of lease liabilities $ 143,713
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