F-1: Zhongchao Inc. Files F-1 Registration Statement

Zhongchao Inc. has filed a Form F-1 registration statement with the SEC to offer up to 5,555,555 units, each consisting of one Class A Ordinary Share or a Pre-Funded Warrant, and one Warrant to purchase a Class A Ordinary Share.

Summary

• Zhongchao Inc. has filed a Form F-1 registration statement with the SEC for an offering of up to 5,555,555 units.
• Each unit consists of one Class A Ordinary Share or a Pre-Funded Warrant, and one Warrant to purchase a Class A Ordinary Share.
• The offering price is assumed to be $2.16 per unit, based on the closing price of Class A Ordinary Shares on April 30, 2026.
• The company is also registering the Class A Ordinary Shares underlying the Pre-Funded Warrants and the Warrants.
• The Pre-Funded Warrants have an exercise price of $0.008 per share and are immediately exercisable.
• The Warrants have an exercise price of 110% of the unit price and are exercisable for a six-month period after issuance.
• A zero exercise price option is available for Warrants if the Low Price is lower than the Exercise Price, potentially leading to significant dilution.
• The company has a VIE structure to consolidate financial results of its PRC operating entities.
• Zhongchao Inc. received a Nasdaq notification for not meeting the minimum bid price requirement but has since regained compliance.
• The company intends to use the net proceeds for general working capital and corporate purposes.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative due to declining revenues, increased expenses, significant net losses, and the Nasdaq minimum bid price deficiency, despite regaining compliance. The potential for substantial dilution from warrant terms also contributes to a negative sentiment.

Positives

• Regained compliance with Nasdaq's minimum bid price requirement.
• The company has a clear structure for its operations in China through its VIE agreements.
• The company is actively seeking to raise capital through this offering to fund its working capital and corporate purposes.

Negatives

• The company's Class A Ordinary Shares are trading below $1.00, leading to a Nasdaq minimum bid price deficiency notification.
• The Warrants have a zero exercise price option that could lead to substantial dilution for existing shareholders.
• The company has identified material weaknesses in its internal control over financial reporting.
• Revenues decreased by 28.3% in 2025 compared to 2024, primarily due to reduced patient-aid projects and the discontinuation of drug sales.
• Gross profit margin decreased from 56.2% in 2024 to 45.0% in 2025.
• General and administrative expenses increased significantly by 96.6% in 2025, largely due to share-based compensation and credit loss expenses.
• The company has a history of net losses, with a net loss of $5.8 million in 2025.
• There is no established public trading market for the Pre-Funded Warrants and the Warrants, limiting their liquidity.
• The company's reliance on a few major customers for a significant portion of its revenue poses a risk.
• The company's operations are subject to significant risks related to PRC laws and regulations, including potential government intervention and changes in policies.

Risks

• The company's Class A Ordinary Shares may be delisted from Nasdaq if it fails to maintain continued listing requirements.
• The zero exercise price option on the Warrants could lead to substantial dilution and further pressure on the share price.
• The company faces risks associated with its VIE structure and the interpretation and enforcement of PRC laws and regulations.
• The company depends on the healthcare industry and faces intense competition, which could impact its revenues and profitability.
• The company's business operations are heavily reliant on the PRC legal and regulatory environment, which is subject to rapid changes and government influence.
• The company has identified material weaknesses in its internal control over financial reporting, which could affect its ability to accurately report financial results or prevent fraud.
• The company may not be able to raise sufficient capital through this offering to fund its business plans.
• The company's ability to transfer funds from its PRC operations to its holding company may be subject to PRC foreign exchange controls and regulations.
• The company's auditor's reliance on PCAOB inspections in China could lead to uncertainties regarding its auditor's compliance and potential trading prohibitions under the HFCA Act.

Future Outlook

The company intends to use the net proceeds from this offering for general working capital purposes and other general corporate purposes. The company plans to retain future earnings to finance the operation and expansion of its business and does not anticipate paying cash dividends in the foreseeable future.

Management Comments

• The Company's management believes that the offering of a combination of online and onsite services provides the greatest convenience to their end-users.
• The Company's management believes that their rich content and satisfactory user experience have contributed to the expansion of their user base and the increase in user engagement, leading to a strong word-of-mouth effect that strengthens their brand awareness.
• The Company's management believes that their technology team, coupled with the large volume of data generated and collected on their platform each day, have created opportunities for continued improvements in their technology capabilities, empowering reliability, scalability and flexibility.

Industry Context

StockSavvy.ai notes that Zhongchao Inc. operates in the healthcare information, education, and training services sector in China. This sector is subject to significant regulatory oversight and evolving government policies. The company's reliance on a VIE structure is common for foreign companies operating in restricted sectors in China, but it also introduces unique risks related to legal and regulatory uncertainties.

Comparison to Industry Standards

• The filing does not provide direct comparisons to industry standards or specific competitor results for financial metrics.
• The company's revenue decline in 2025 and decrease in gross margin could indicate challenges in maintaining competitiveness within the healthcare education and training sector in China, which is characterized by intense competition.
• The company's R&D expenses have significantly decreased, which may impact its ability to innovate and keep pace with technological advancements in the industry.

Corporate Governance

Legal Proceedings

• The company states it is not currently a party to any legal proceedings that, if determined adversely, would have a material adverse effect on its financial position, results of operations, or liquidity.

Related Party Transactions

• For the year ended December 31, 2023, the company prepaid $112,980 to Beijing Ougaini Trading Co., Ltd. (controlled by an immediate family member of Mr. Yang Weiguang) for employee welfare and marketing promotion, which was received in January 2023.

Stakeholder Impact

• Shareholders may experience substantial dilution due to the zero exercise price option on Warrants.
• Investors may face difficulties in enforcing judgments from U.S. courts against the company or its officers and directors due to its Cayman Islands incorporation and the location of assets and personnel.
• The company's reliance on VIE arrangements introduces risks related to PRC legal and regulatory interpretations, which could impact operations and the value of securities.
• The company's potential delisting from Nasdaq due to continued listing requirement failures could negatively impact the price and liquidity of its Class A Ordinary Shares.

Next Steps

• The company will file a report and other required materials in connection with the CSRC filing.
• The company will continue to monitor its compliance with Nasdaq listing requirements.
• The company plans to use the net proceeds for general working capital and corporate purposes.
• The company may further determine to effect one or more shareholder consolidations by February 10, 2029.

Key Dates

Recommendation

The company's financial performance has deteriorated with declining revenues, increased expenses, and significant net losses. While it has regained Nasdaq compliance, the potential for substantial dilution from warrant terms and ongoing risks associated with its VIE structure and PRC regulatory environment suggest a cautious approach. The capital raise may provide some stability, but the overall outlook remains uncertain, warranting a hold recommendation pending improved financial performance and clearer regulatory visibility.

Keywords

Zhongchao Inc., Form F-1, SEC Filing, Registration Statement, Units, Class A Ordinary Shares, Pre-Funded Warrants, Warrants, Nasdaq, Capital Raise, VIE Structure, PRC Regulations, Healthcare Services, Medical Education