SCHEDULE: Zhongchao Inc. Grants 5M Restricted Shares to CEO Yang

Zhongchao Inc. has granted its CEO, Weiguang Yang, 5 million restricted shares, significantly increasing his beneficial ownership and voting power.

Summary

• Zhongchao Inc. granted Weiguang Yang, its CEO, 5,000,000 restricted shares on August 25, 2025, under the Company's 2025 Equity Incentive Plan.
• The grant comprises 550,000 Class A Ordinary Shares and 4,450,000 Class B Ordinary Shares.
• These restricted shares are scheduled to vest on February 25, 2026.
• Yang's total beneficial ownership increased to 5,549,772 Ordinary Shares, including shares held by More Healthy Holdings Limited, which he controls.
• Yang's sole voting power is now 5,549,772 Ordinary Shares, representing an aggregate of 500,527,200 votes due to the 100:1 voting ratio of Class B shares.
• More Healthy Holdings Limited, 100% owned by Yang, beneficially owns 549,772 Class B Ordinary Shares, representing 2.1% of the class (based on 50,643,255 Class A equivalent shares) and 54,977,200 votes.
• Yang's total beneficial ownership represents 18.3% of the class (based on 30,253,896 Class A equivalent shares).
• The restricted share grant serves as compensation for Yang's services as the Chief Executive Officer.
• A 1-for-10 share consolidation of the Company's ordinary shares was effected on February 20, 2024, following shareholder approval.

Sentiment

Score: 6

Explanation: The grant to the CEO aligns management incentives, which is positive. However, the significant concentration of voting power through Class B shares and potential dilution for existing shareholders introduce concerns, leading to a mixed but slightly positive sentiment. The share consolidation is a neutral corporate action.

Positives

• The grant of 5,000,000 restricted shares to CEO Weiguang Yang aligns management's interests with long-term shareholder value, as the shares vest over time.
• Increased beneficial ownership and voting power for the CEO could signal strong leadership commitment and stability, potentially fostering long-term strategic execution.

Negatives

• The significant grant of 5,000,000 shares, particularly the 4,450,000 Class B shares which carry 100 votes each, introduces substantial dilution potential for existing shareholders and concentrates voting power.
• The shares are unvested until February 25, 2026, meaning the full alignment of interests and the participant's full stockholder rights are not immediate.

Risks

• Potential future dilution of existing shareholders' interests due to the issuance of restricted shares under the equity incentive plan.
• Significant concentration of voting power with CEO Weiguang Yang through the Class B Ordinary Shares (100 votes per share), which could impact corporate governance and minority shareholder influence.
• The unvested nature of the restricted shares means the participant does not have full stockholder rights until vesting, which could affect immediate alignment of interests.
• Risk of forfeiture of unvested shares upon termination of the Service Provider, as stipulated in the Restricted Share Agreement.

Future Outlook

The restricted shares granted to CEO Weiguang Yang are intended to incentivize his continued service and align his interests with the Company's long-term performance, with vesting scheduled for February 25, 2026. The Company anticipates compliance with all applicable securities laws for the issuance of these shares.

Management Comments

• It has been determined under the Plan that it would be in the best interests of the Company to grant the Restricted Shares provided herein to the Participant.

Industry Context

Equity incentive plans and restricted share grants are common mechanisms in publicly traded companies to attract, retain, and incentivize key executives, aligning their performance with shareholder value. The dual-class share structure, while less common, is a practice often seen in technology or founder-led companies, allowing key insiders to maintain control despite lower economic ownership. Share consolidations are also standard corporate actions to adjust share price and outstanding share counts.

Comparison to Industry Standards

• The use of restricted share agreements for executive compensation is a standard practice across industries, comparable to grants made by major corporations to their leadership to foster long-term commitment.
• The dual-class share structure, with Class B shares carrying 100 votes per share, is similar to governance models adopted by companies like Alphabet (Google) and Meta Platforms (Facebook), which enable founders or key individuals to retain significant voting control.
• The 1-for-10 share consolidation is a common corporate action to increase share price and reduce the number of outstanding shares, often undertaken by companies seeking to improve market perception or meet exchange listing requirements, similar to actions seen in various sectors.

Corporate Governance

Related Party Transactions

• The grant of 5,000,000 restricted shares to Weiguang Yang, the Chief Executive Officer and sole member of More Healthy Holdings Limited, constitutes a related party transaction as it involves a key executive and a controlled entity.

Stakeholder Impact

• **Shareholders:** Potential dilution of existing shareholders' equity and significant concentration of voting power with CEO Weiguang Yang due to the large grant of high-voting Class B shares.
• **Management/Employees:** The CEO is incentivized through the restricted share grant, aligning his long-term interests with the company's performance and potentially enhancing retention.

Next Steps

• The 5,000,000 restricted shares granted to Weiguang Yang are scheduled to vest on February 25, 2026.
• The Participant (Weiguang Yang) is solely responsible for timely and properly filing any election under Section 83(b) of the Code, if elected.

Key Dates

Recommendation

While the substantial restricted share grant to the CEO aims to align management incentives with long-term company performance, the significant concentration of voting power through Class B shares and the potential for equity dilution could be a concern for minority shareholders. The share consolidation is a neutral corporate action. Investors should hold and monitor the company's operational performance, future governance developments, and the impact of the concentrated voting power.

Keywords

Zhongchao Inc., Restricted Shares, Equity Incentive Plan, Weiguang Yang, CEO Compensation, Class A Ordinary Shares, Class B Ordinary Shares, Share Consolidation, Beneficial Ownership, Voting Power, SEC Filing, Schedule 13D, Corporate Governance