Zhongchao Inc. Offering - What You Need to Know

Thinking about buying into the Zhongchao Inc. follow-on offering? Before you invest your hard-earned money, let’s break down what this company does in plain English.

1. What does this company actually do?

Zhongchao Inc. runs a digital healthcare education platform in China called "MDMOOC." They connect medical professionals with the healthcare industry by providing training and clinical information to doctors, nurses, and students. They also help pharmaceutical and medical device companies share research and product information with these professionals.

2. How do they make money?

The company earns money by charging service fees to pharmaceutical and medical device companies. These clients pay Zhongchao to host webinars, run online training, and manage digital marketing campaigns.

A recent shift: To focus on its core digital education business, the company closed its drug-selling subsidiary, Xinjiang Pharmaceutical, in June 2025.

3. What is this new offering about?

As of May 2026, the company is selling up to 5,555,555 "units." Each unit includes one Class A share and one warrant to buy another Class A share later.

• The Price: The offering price is set at $2.16 per unit.
• The Warrants: Each warrant lets you buy one Class A share at a price equal to 110% of the unit price. You can use these warrants immediately, and they expire in five years.
• The Catch: There is no minimum sales goal. The company keeps all money raised, even if they sell very few units. This means they might raise much less money than they actually need to execute their plans.

4. Important Updates: Stock Consolidation and Voting Power

Investors should note two major changes from early 2026:

• Share Consolidation: In March 2026, the company performed a 1-for-8 reverse stock split. This move was intended to boost the share price to meet stock exchange listing requirements.
• Super-Voting Shares: The company uses a dual-class share structure. Class B shares get 1,000 votes each, while the Class A shares you are buying get only 1 vote each. This ensures founders and insiders keep total control, leaving public shareholders with almost no say in company decisions.

5. The "VIE" Structure: A Major Warning

Zhongchao uses a "Variable Interest Entity" (VIE) structure. Because China restricts foreign investment in certain healthcare services, you are not buying direct ownership of the Chinese business. Instead, you are buying shares in a Cayman Islands holding company that has contracts with the Chinese business. If the Chinese government decides these contracts are illegal or unenforceable, the company could be shut down, and your investment could become worthless.

6. What are the main risks?

• Government Intervention: The company works in a strictly regulated field. New Chinese laws could limit or ban their operations entirely.
• Dilution: The warrants create a risk of future dilution. If people use their warrants to buy more shares, the total number of shares increases. This reduces your percentage of ownership and your share of the company's profit.
• Control: Insiders hold all the power. Public shareholders cannot influence the board or the company's strategy.
• No Dividends: The company has never paid a cash dividend. They plan to keep all profits to fund future growth.

A quick word of advice: This offering is complex. Between the VIE structure, the extreme voting power held by insiders, and the difficulty of enforcing your rights in court, this is a highly speculative investment. Only consider this if you can afford to lose your entire investment.

Before you commit, ask yourself:

1. Do I understand the risks of the VIE structure?
2. Am I comfortable with the fact that I will have virtually no voting power?
3. Have I read the full prospectus provided by the company?

Disclaimer: I am an AI, not a financial advisor. This guide is for informational purposes only and does not constitute financial advice. Always do your own research or consult with a licensed financial professional before making investment decisions.