Zhongchao Inc. IPO - What You Need to Know

Thinking about jumping into the Zhongchao Inc. offering? Before you put your hard-earned money on the line, let’s break down what this company is all about in plain English.

1. What does this company actually do?

Zhongchao runs a digital healthcare education platform in China. They act as a bridge between medical professionals, drug companies, and the public. Their main services include:

• MDMOOC: An online platform for doctors and nurses to get training and continuing education.
• Sunshine Health Forums: Websites that teach the public about health and specific diseases.
• Chronic Disease Management: Tools that help patients track their treatment and remember to take their medicine.

2. How do they make money?

Zhongchao earns money by charging service fees to drug companies, medical groups, and non-profits. These clients pay Zhongchao to host educational content, sponsor training, and run digital marketing campaigns for medical professionals.

Recent Changes: The company recently shifted its strategy. They closed their pharmaceutical sales branch, Xinjiang Pharmaceutical, in June 2025. Throughout 2025, management also shut down several small, inactive subsidiaries to focus entirely on their core digital education services.

3. What is this new offering about?

Zhongchao is raising money by selling "Units." Each unit costs $0.54 and includes one share of stock plus one warrant.

• What’s a warrant? It is a contract that gives you the right to buy more shares later at a set price.
• The Catch: These warrants have "anti-dilution" and "reset" rules. If the company sells shares at a lower price later, your warrant price may drop, and the number of shares you can get may increase. This leads to "dilution," meaning your percentage of ownership in the company shrinks as more shares are created.
• The Costs: This offering is expensive. The company is paying a 7% commission to the agent selling the shares and agreed to pay up to $162,900 for the agent’s expenses. These costs come out of the money raised, leaving less cash for the business to actually use.

4. The "VIE" Structure: The "Ownership" Illusion

Zhongchao uses a "Variable Interest Entity" (VIE) structure, which is common for Chinese companies listed in the U.S.

• The Reality: You are not buying a direct stake in the Chinese business. You are buying shares in a holding company based in the Cayman Islands. This holding company only controls the Chinese business through contracts.
• The Risk: The Chinese government has not officially legalized this structure. If they decide these contracts are illegal, they could cancel them. If that happens, the link between the Cayman Islands company and the Chinese business would break, potentially making your shares worthless.

5. Can you get your money out?

Zhongchao has never paid a dividend to shareholders and plans to keep all earnings to grow the business. Furthermore, China has strict rules on moving money out of the country. Even if the company makes a profit, getting that money into the Cayman Islands—and eventually to you—requires government approval and faces significant regulatory hurdles.

6. Audit and Listing Risks

While a U.S. firm audits the company’s books, the business operations are entirely in China. Under U.S. law, if regulators cannot inspect the auditor’s work because of Chinese government restrictions, the company could be kicked off U.S. stock exchanges.

Final Thoughts for Investors

This is a high-risk investment. Between the complex warrants that can dilute your ownership, high offering costs, legal uncertainty regarding the VIE structure, and the difficulty of moving money out of China, this is not a standard stock investment.

Before you decide:

• Review the Prospectus: If you are serious, read the official SEC filing (the "Prospectus") for the full list of risk factors.
• Assess Your Risk Tolerance: Only consider this if you are prepared for the possibility of losing your entire investment.
• Consult a Professional: If you are unsure how this fits into your portfolio, speak with a qualified financial advisor who understands international equity risks.

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 before investing.