Group 1 - Zhongchao (NASDAQ:ZCMD) stock is experiencing significant trading activity with over 12 million shares exchanged, far exceeding its average daily volume of approximately 58,000 shares [1] - The stock's price has risen by 52% as of Wednesday morning, indicating strong market interest despite the absence of any clear news or analyst coverage [2] - Zhongchao is classified as a penny stock, with a prior closing price of $1.09 and a market capitalization of only $2.748 million, which contributes to its volatility [1][2] Group 2 - The heavy trading activity may be linked to speculative buying by traders capitalizing on the low stock price, raising concerns about potential market manipulation [2] - The company has a low float of 1.29 million units, which can exacerbate price fluctuations during trading [1]

[PART I](index=7&type=section&id=PART%20I) This section provides an overview of the company's corporate structure, key risks, business operations, and financial performance [Item 3. Key Information](index=7&type=section&id=Item%203.%20KEY%20INFORMATION) This section details the company's VIE corporate structure, associated risks, PRC regulatory requirements, and condensed financial data for its entities - Zhongchao Inc. is a Cayman Islands holding company with no material operations, consolidating PRC operating entities (Zhongchao Shanghai and its subsidiaries) through a Variable Interest Entity (VIE) structure due to PRC foreign ownership restrictions[18](index=18&type=chunk) - The company faces significant risks from its VIE structure, as contractual arrangements may not be as effective as direct ownership and could be deemed non-compliant with PRC laws, potentially leading to severe penalties or operational inability[19](index=19&type=chunk)[45](index=45&type=chunk) - The company is subject to new PRC regulations effective March 31, 2023, requiring CSRC filings for overseas listings and refinancing, introducing uncertainty for future refinancing activities[20](index=20&type=chunk)[213](index=213&type=chunk) - For the year ended December 31, 2023, Zhongchao Cayman transferred **$0.1 million** to its US subsidiary, with no dividends or distributions made from PRC operating entities to the holding company or U.S. investors in 2023 and 2022[24](index=24&type=chunk) - Dividend distributions from PRC subsidiaries are restricted, requiring at least **10%** of accumulated profits to be set aside for a statutory reserve fund until it reaches **50%** of registered capital, with currency conversion and remittance also subject to government controls[26](index=26&type=chunk)[27](index=27&type=chunk) [Financial Information Related to the VIE](index=10&type=section&id=Financial%20Information%20Related%20to%20the%20VIE) This subsection presents condensed consolidated financial data, including balance sheets, statements of operations, and cash flows, for the parent, subsidiaries, and VIE Condensed Consolidated Balance Sheet as of December 31, 2023 (in USD) | Category | Parent | Subsidiaries | VIE and Its Subsidiaries | Total Consolidated | | :--- | :--- | :--- | :--- | :--- | | **Total Assets** | $19,239,682 | $4,310,649 | $14,571,038 | $24,416,643 | | **Total Liabilities** | $0 | $6,887,513 | $3,939,736 | $3,378,473 | | **Total Equity (Deficit)** | $19,239,682 | $(2,576,864) | $10,631,302 | $21,038,170 | Condensed Consolidated Statement of Operations for the Year Ended December 31, 2023 (in USD) | Category | Parent | Subsidiaries | VIE and Its Subsidiaries | Total Consolidated | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $0 | $0 | $19,433,945 | $19,433,945 | | **Net Loss** | $(11,335,911) | $(631,262) | $(10,780,772) | $(11,307,239) | Condensed Consolidated Cash Flows for the Year Ended December 31, 2023 (in USD) | Category | Parent | Subsidiaries | VIE and Its Subsidiaries | Total Consolidated | | :--- | :--- | :--- | :--- | :--- | | **Net cash from operating activities** | $(193,778) | $(2,351,918) | $1,124,613 | $54,229 | | **Net cash used in investing activities** | $(3,766,367) | $1,530,264 | $(43,240) | $(3,754,655) | | **Net cash from financing activities** | $0 | $0 | $0 | $0 | [Risk Factors](index=12&type=section&id=D.%20Risk%20Factors) This subsection details material business, corporate structure, and China-specific risks, including VIE arrangement challenges and regulatory uncertainties - A significant portion of revenue is dependent on the healthcare industry, particularly pharmaceutical enterprises, which accounted for **52.5%** of revenues in 2023, up from **33.1%** in 2022[62](index=62&type=chunk) - The company faces concentration risk, with one customer accounting for **13.7%** of total revenue in 2023 and another single customer accounting for **15.9%** in 2022[74](index=74&type=chunk) - The dual-class share structure concentrates **96.54%** of voting power with the CEO, Mr. Weiguang Yang, through his holdings of Class B Ordinary Shares, which have **100 votes per share** compared to **1 vote** for Class A shares[150](index=150&type=chunk)[156](index=156&type=chunk) - The company has identified material weaknesses in its internal controls over financial reporting, including a lack of key monitoring mechanisms and insufficient resources with U.S. GAAP and SEC reporting experience[123](index=123&type=chunk) - The company faces significant regulatory risks in China, including uncertainties regarding the legality of its VIE structure, cybersecurity reviews (as its MDMOOC platform has over **253,133 registered users**), and evolving laws governing the online education and healthcare industries[168](index=168&type=chunk)[188](index=188&type=chunk)[237](index=237&type=chunk) - While the PCAOB regained inspection access in mainland China and Hong Kong in December 2022, the ability to continue inspections is uncertain, and the Consolidated Appropriations Act of 2023 reduced the non-inspection period triggering delisting from three years to two, heightening the risk if access is lost again[54](index=54&type=chunk)[227](index=227&type=chunk)[233](index=233&type=chunk) [Item 4. Information on the Company](index=49&type=section&id=Item%204.%20INFORMATION%20ON%20THE%20COMPANY) This section provides a comprehensive overview of the company's corporate history, business operations, organizational structure, and physical properties [A. History and Development of the Company](index=49&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) This subsection outlines the company's history, its Cayman Islands holding structure, VIE operations, and recent share consolidation for Nasdaq compliance - The company is a holding company incorporated in the Cayman Islands in 2019, with no substantive operations of its own, conducting business through a VIE, Zhongchao Medical Technology (Shanghai) Corp., established in 2012[305](index=305&type=chunk)[306](index=306&type=chunk)[307](index=307&type=chunk) - On February 29, 2024, the company executed a **1-for-10 share consolidation** to address non-compliance with Nasdaq's minimum bid price requirement, regaining compliance on March 15, 2024[5](index=5&type=chunk)[154](index=154&type=chunk)[312](index=312&type=chunk) [B. Business Overview](index=56&type=section&id=B.%20Business%20Overview) This subsection describes the company's platform-based internet technology business, focusing on healthcare information, professional training, patient management, and pharmaceutical retail - The company's business is conducted through PRC operating entities, offering services to patients with oncology and other major diseases, including healthcare information and training (MDMOOC), patient management (Zhongxin Health), and pharmaceutical services (Xinjiang Pharmaceutical)[315](index=315&type=chunk) - The MDMOOC platform, delivered via mobile app, WeChat, and website, provides professional medical training and education, with its case library containing over **28,000 clinical cases** as of the report date[318](index=318&type=chunk)[347](index=347&type=chunk) - The Zhongxin Health patient management service has participated in approximately **19 projects** for **10 different medications**, serving about **108,500 patients**, generating **19.3%** of revenue in FY2023, down from **44.4%** in FY2022[351](index=351&type=chunk) - The Xinjiang Pharmaceutical drug retail service, which began in H2 2022, grew rapidly, generating approximately **$9.03 million** in revenue in FY2023, a significant increase from **$1.22 million** in FY2022[362](index=362&type=chunk) R&D Expenses as a Percentage of Total Revenue | Fiscal Year | R&D Expenses (USD) | % of Total Revenue | | :--- | :--- | :--- | | 2023 | $514,411 | 2.6% | | 2022 | $411,524 | 2.9% | | 2021 | $758,878 | 4.7% | - The company holds a significant intellectual property portfolio, including **36 registered trademarks**, **40 domain names**, and **37 approved copyrights**[395](index=395&type=chunk)[401](index=401&type=chunk) [D. Property, Plants and Equipment](index=96&type=section&id=D.%20Property,%20Plants%20and%20Equipment) This subsection details the company's primary leased and owned properties, including its Shanghai headquarters and offices in other cities, along with annual rent expenses Annual Rent Expenses (in USD) | Year Ended Dec 31 | Rent Expense | | :--- | :--- | | 2023 | $412,891 | | 2022 | $498,166 | | 2021 | $426,152 | - The company's main office is a leased space of **286.8 square meters** in Shanghai, with additional leased offices in **8 other cities** and owned properties in Japan, Beijing, Tangshan, and New York to support operations and talent recruitment[522](index=522&type=chunk)[524](index=524&type=chunk) [Item 5. Operating and Financial Review and Prospects](index=96&type=section&id=Item%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes the company's financial performance, highlighting revenue growth, increased net loss due to impairments, and liquidity management [A. Operating results](index=97&type=section&id=A.%20Operating%20results) This subsection details the company's operating results, including revenue growth driven by drug sales, a widened net loss due to impairments, and changes in gross profit margins Consolidated Results of Operations (in USD) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Total Revenues** | $19,433,945 | $14,151,516 | $16,296,770 | | **Gross Profit** | $8,512,192 | $6,356,664 | $9,438,826 | | **Loss from Operations** | $(13,283,798) | $(2,954,462) | $(320,741) | | **Net (Loss) Income** | $(11,307,239) | $(2,822,319) | $238,665 | - Revenue increased by **37.3%** in FY2023, driven by a **$7.8 million** increase in drug sales, partially offset by a **$2.3 million** decrease in revenue from patient-aid projects due to the discontinuation of some low-margin projects[534](index=534&type=chunk) - The net loss for FY2023 included significant one-time charges: **$5.6 million** for goodwill impairment, **$0.5 million** for intangible asset impairment (both related to the West Angel acquisition), and a **$1.7 million** loss from the disposal of property and equipment[541](index=541&type=chunk)[542](index=542&type=chunk)[543](index=543&type=chunk) - Selling and marketing expenses increased by **$4.6 million** in FY2023, primarily due to a **$3.2 million** increase in advertising and a **$1.0 million** increase in sales commissions to support the expansion of the patented drug business[539](index=539&type=chunk) [B. Liquidity and Capital Resources](index=103&type=section&id=B.%20Liquidity%20and%20capital%20resources) This subsection analyzes the company's liquidity, cash and working capital positions, cash flow activities, and the impact of PRC regulations on capital access Key Liquidity Metrics (in USD) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $7,548,694 | $11,520,453 | | **Working capital** | $16,032,685 | $18,539,125 | Summary of Cash Flows (in USD) | Category | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Net cash from operating activities** | $54,229 | $(661,740) | $2,861,848 | | **Net cash used in investing activities** | $(3,754,655) | $(3,346,658) | $(4,017,284) | | **Net cash from financing activities** | $0 | $1,850,744 | $0 | - The company's ability to pay dividends and fund non-PRC operations depends on receiving distributions from its PRC subsidiary and VIE, which is restricted by PRC laws requiring appropriations to statutory reserves and controls on foreign currency exchange[584](index=584&type=chunk)[983](index=983&type=chunk) [Item 6. Directors, Senior Management and Employees](index=108&type=section&id=Item%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership team, board composition, executive compensation, committee structures, and employee base - The company is led by founder Weiguang Yang (CEO) and Pei Xu (CFO), with a Board of Directors consisting of five members, including three independent directors: John C. General, Kevin Dean Vassily, and Dan Li[599](index=599&type=chunk)[601](index=601&type=chunk)[602](index=602&type=chunk) Executive Compensation for Fiscal Year 2023 (in USD) | Name | Position | Salary | | :--- | :--- | :--- | | Weiguang Yang | CEO | $123,945 | | Pei Xu | CFO | $45,634 | | Xuejun Chen | Chief Medical Officer | $102,211 | | Baoqian Tian | Chief Sales Officer | $91,642 | | Shuang Wu | Chief Operating Officer | $32,113 | - The Board has three committees (Audit, Compensation, Nominating), each composed entirely of the three independent directors, with John C. General designated as the audit committee financial expert[643](index=643&type=chunk)[648](index=648&type=chunk) - As of the report date, the company had **142 full-time employees**, with **88** in technical and customer services, **29** in sales and marketing, **18** in general administration, and **7** in R&D[657](index=657&type=chunk) [Item 7. Major Shareholders and Related Party Transactions](index=120&type=section&id=Item%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section outlines the company's ownership structure, with the CEO holding a controlling interest, and details related party transactions including purchases and a repaid loan - CEO Weiguang Yang controls **96.54%** of the company's total voting power through his beneficial ownership of all **549,772** outstanding Class B Ordinary Shares[666](index=666&type=chunk) - As of December 31, 2022, the company had a balance of **$226,178** due from CEO Weiguang Yang, which was fully repaid in 2023[673](index=673&type=chunk)[975](index=975&type=chunk)[976](index=976&type=chunk) - The company engaged in transactions with Beijing Ougaini Trading Co., Ltd, a company controlled by an immediate family member of the CEO, for purchases of products for employee welfare and marketing[672](index=672&type=chunk)[973](index=973&type=chunk) [Item 8. Financial Information](index=123&type=section&id=Item%208.%20FINANCIAL%20INFORMATION) This section presents the company's audited consolidated financial statements, confirms no material legal proceedings, and states its dividend policy - The company's audited consolidated financial statements are included in the report[676](index=676&type=chunk) - The company has never declared a dividend and does not plan to in the foreseeable future, intending to reinvest earnings into the business[679](index=679&type=chunk) [Item 10. Additional Information](index=124&type=section&id=Item%2010.%20ADDITIONAL%20INFORMATION) This section provides supplementary details on share capital, articles of association, material contracts, and the regulatory environment, including exchange controls and taxation - The Cayman Islands does not levy taxes on corporate profits, income, or gains, and there are no exchange controls[686](index=686&type=chunk) - The company faces a risk of being classified as a PRC 'resident enterprise' for tax purposes if its 'de facto management' is deemed to be in China, which would subject its global income to a **25%** PRC income tax and could result in a **10%** withholding tax on dividends paid to non-PRC shareholders[688](index=688&type=chunk)[690](index=690&type=chunk) - For U.S. Holders, there is a risk that the company could be classified as a Passive Foreign Investment Company (PFIC), which would result in adverse U.S. federal income tax consequences for shareholders regarding distributions and dispositions of shares[707](index=707&type=chunk)[708](index=708&type=chunk) [Item 11. Quantitative and Qualitative Disclosures About Market Risk](index=132&type=section&id=Item%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the company's exposure to market risks, including minimal interest rate risk, significant foreign currency risk, and managed credit risk - The company's primary market risk is foreign currency risk, as the majority of its assets, liabilities, revenues, and costs are denominated in RMB, which is not freely convertible and its exchange rate fluctuates against the USD[730](index=730&type=chunk)[731](index=731&type=chunk) - Credit risk is concentrated in cash and accounts receivable; as of December 31, 2023, the company held **$7.5 million** in cash and cash equivalents, with deposits spread across institutions in China, the U.S., and Japan, with varying levels of government insurance[733](index=733&type=chunk) [PART II](index=127&type=section&id=PART%20II) This part details material modifications to security holder rights, the use of IPO proceeds, internal controls, and corporate governance matters [Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds](index=127&type=section&id=Item%2014.%20MATERIAL%20MODIFICATIONS%20TO%20THE%20RIGHTS%20OF%20SECURITY%20HOLDERS%20AND%20USE%20OF%20PROCEEDS) This section details the allocation of approximately $9.97 million in net proceeds from the company's initial public offering across content, technology, and business expansion - The company raised net proceeds of approximately **$9.97 million** from its IPO[738](index=738&type=chunk) - Use of IPO proceeds was allocated as follows: **~$2.99M** for online course content development, **~$1.99M** for technology upgrades, and **~$4.99M** for business expansion[739](index=739&type=chunk) [Item 15. Controls and Procedures](index=127&type=section&id=Item%2015.%20CONTROLS%20AND%20PROCEDURES) This section reports management's conclusion that disclosure controls were ineffective due to material weaknesses in internal control over financial reporting, outlining identified issues and remediation efforts - Management concluded that disclosure controls and procedures were **not effective** as of December 31, 2023[741](index=741&type=chunk) - Two material weaknesses were identified in internal control over financial reporting: 1) Lack of key monitoring mechanisms like an internal control department 2) Lack of sufficient resources and expertise with U.S. GAAP and SEC reporting in the accounting department[742](index=742&type=chunk)[745](index=745&type=chunk) - Remediation efforts include hiring an experienced outside consultant, providing ongoing U.S. GAAP training to personnel, and working to establish an internal audit department[746](index=746&type=chunk) [Item 16. Corporate Governance and Other Matters](index=129&type=section&id=Item%2016.%20Corporate%20Governance%20and%20Other%20Matters) This section covers corporate governance, including the audit committee financial expert, principal accountant fees, insider trading policy, and cybersecurity risk management strategy - The Board of Directors has determined that John C. General qualifies as an audit committee financial expert[750](index=750&type=chunk) Principal Accountant Fees (in USD) | Fee Type | 2023 | 2022 | | :--- | :--- | :--- | | Audit Fees | $375,000 | $430,000 | | Audit Related Fees | $35,000 | $100,000 | | **Total Fees** | **$410,000** | **$530,000** | - The company has adopted a formal insider trading policy that prohibits trading on material nonpublic information and establishes specific trading windows and blackout periods for insiders[758](index=758&type=chunk) - The company has established processes for managing cybersecurity risks, including quarterly and monthly risk assessments conducted by its IT and information security teams, with governance oversight provided by the Audit Committee and the Board of Directors[759](index=759&type=chunk)[760](index=760&type=chunk)[761](index=761&type=chunk) [PART III](index=132&type=section&id=PART%20III) This part contains the company's audited consolidated financial statements for the fiscal years 2021, 2022, and 2023 [Item 18. Financial Statements](index=132&type=section&id=Item%2018.%20FINANCIAL%20STATEMENTS) This section presents the audited consolidated financial statements for Zhongchao Inc. and its subsidiaries for 2021-2023, prepared under U.S. GAAP Consolidated Balance Sheet Highlights (in USD) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $18,711,046 | $22,704,160 | | **Total Assets** | $24,416,643 | $38,614,345 | | **Total Current Liabilities** | $2,678,361 | $4,165,035 | | **Total Liabilities** | $3,378,473 | $5,595,080 | | **Total Equity** | $21,038,170 | $33,019,265 | Consolidated Statement of Operations Highlights (in USD) | Account | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Total Revenues** | $19,433,945 | $14,151,516 | $16,296,770 | | **Gross Profit** | $8,512,192 | $6,356,664 | $9,438,826 | | **Total Operating Expenses** | $(21,795,990) | $(9,311,126) | $(9,759,567) | | **Net (Loss) Income** | $(11,307,239) | $(2,822,319) | $238,665 | | **(Loss) Earnings Per Share** | $(4.354) | $(1.131) | $0.096 | Consolidated Statement of Cash Flows Highlights (in USD) | Account | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $54,229 | $(661,740) | $2,861,848 | | **Net Cash from Investing Activities** | $(3,754,655) | $(3,346,658) | $(4,017,284) | | **Net Cash from Financing Activities** | $0 | $1,850,744 | $0 | | **Net Decrease in Cash** | $(3,971,759) | $(2,394,529) | $(1,157,965) |

Group 1 - Zhongchao (NASDAQ:ZCMD) stock is experiencing significant trading activity, with over 5.3 million shares exchanged, far exceeding its average daily volume of approximately 206,000 shares [1] - The stock price has increased by 40.3% as of Thursday morning, despite the absence of any clear news or analyst coverage to explain the surge [2] - ZCMD is classified as a penny stock, with a previous closing price of $1.54 per share and a market capitalization of only $3.803 million [1] Group 2 - The volatility of penny stocks is highlighted, particularly during non-standard trading hours, which can lead to potential manipulation by traders [2] - Investors are advised to exercise caution, as the stock may quickly decline from its current highs [2]

Core Viewpoint - Zhongchao Inc. has announced a 1-for-10 share consolidation to regain compliance with Nasdaq listing requirements, effective February 29, 2024 [1][2]. Company Overview - Zhongchao Inc. is an offshore holding company based in the Cayman Islands, providing services for patients with cancer and other major diseases through its PRC operating entities [3]. - The company offers online healthcare information, professional training, patient management services, internet healthcare services, and pharmaceutical services [3]. Share Consolidation Details - The share consolidation will convert every ten Class A and Class B ordinary shares with a par value of US$0.0001 into one share with a par value of US$0.001 [2]. - No fractional shares will be issued; any resulting fractions will be rounded up to the next whole number [2]. - The consolidation was approved by the board of directors on January 9, 2024, and by shareholders on February 20, 2024 [2].

[Financial Statements (Unaudited)](index=1&type=section&id=Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in equity, and cash flows [Condensed Consolidated Balance Sheets](index=1&type=section&id=ZHONGCHAO%20INC.%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2023, Zhongchao Inc.'s total assets decreased to $30.5 million from $38.6 million at the end of 2022, while total liabilities significantly decreased to $3.4 million from $5.6 million, leading to a decline in total equity from $33.0 million to $27.2 million [Assets](index=1&type=section&id=Assets) Total assets decreased by 20.9% from $38.6 million on December 31, 2022, to $30.5 million on June 30, 2023, primarily due to reductions in accounts receivable, property and equipment, and deferred tax assets Key Asset Components (in USD) | Asset Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $18,554,101 | $22,704,160 | | Property and equipment, net | $2,390,737 | $3,890,947 | | Goodwill | $5,485,862 | $5,767,504 | | **Total Assets** | **$30,526,123** | **$38,614,345** | - Key drivers for the asset decrease include a **$3.4 million reduction in Accounts Receivable** and a **$1.5 million reduction in Property and equipment**[2](index=2&type=chunk)[3](index=3&type=chunk) [Liabilities](index=1&type=section&id=Liabilities) Total liabilities decreased by 39.9% from $5.6 million on December 31, 2022, to $3.4 million on June 30, 2023, mainly driven by a $2.16 million drop in income tax payable Key Liability Components (in USD) | Liability Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Liabilities | $1,740,942 | $4,165,035 | | Income tax payable | $130,514 | $2,292,765 | | **Total Liabilities** | **$3,353,750** | **$5,595,080** | [Equity](index=1&type=section&id=Equity) Total equity fell by 17.7% to $27.2 million as of June 30, 2023, from $33.0 million at year-end 2022, primarily due to a net loss converting retained earnings into an accumulated deficit and an increase in accumulated other comprehensive loss Key Equity Components (in USD) | Equity Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | (Accumulated deficits) Retained earnings | ($597,553) | $4,124,037 | | Accumulated other comprehensive loss | ($1,492,919) | ($511,824) | | **Total Equity** | **$27,172,373** | **$33,019,265** | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=2&type=section&id=ZHONGCHAO%20INC.%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS) For the six months ended June 30, 2023, Zhongchao Inc. reported a significant net loss of $4.8 million, a sharp downturn from a net income of $93,544 in the same period of 2022, driven by a 129% surge in operating expenses despite a 42.2% increase in total revenues Statement of Operations Highlights (Six Months Ended June 30) | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $10,376,170 | $7,295,439 | +42.2% | | Gross Profit | $4,323,339 | $5,058,721 | -14.5% | | Total Operating Expenses | ($10,347,910) | ($4,516,068) | +129.1% | | (Loss) Income from Operations | ($6,024,571) | $542,653 | - | | Net (Loss) Income | ($4,779,858) | $93,544 | - | | Basic and Diluted (Loss) Earnings per share | ($0.18) | $0.00 | - | - The shift to a significant operating loss was driven by a sharp increase in **selling and marketing expenses (up 199.6% YoY)** and **general and administrative expenses (up 52.3% YoY)**, in addition to a **$1.46 million impairment of property and equipment** not present in the prior year[9](index=9&type=chunk) [Condensed Consolidated Statements of Changes in Equity](index=3&type=section&id=ZHONGCHAO%20INC.%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20EQUITY) Total equity decreased by $5.8 million during the first six months of 2023, from $33.0 million to $27.2 million, primarily due to a net loss of $4.8 million and negative foreign currency translation adjustments of $1.1 million - The main factors reducing equity in the first half of 2023 were the **net loss of $4,721,590** attributable to shareholders and **foreign currency translation adjustments of $981,095**[11](index=11&type=chunk) Equity Reconciliation (Six Months Ended June 30, 2023) | Description | Amount (in USD) | | :--- | :--- | | Balance as of December 31, 2022 | $33,019,265 | | Net loss | ($4,779,858) | | Foreign currency translation adjustments | ($1,129,443) | | Share-based compensation expenses | $62,409 | | **Balance as of June 30, 2023** | **$27,172,373** | [Condensed Consolidated Statements of Cash Flows](index=4&type=section&id=ZHONGCHAO%20INC.%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the six months ended June 30, 2023, the company experienced a net cash decrease of $0.23 million, ending the period with $11.3 million in cash and cash equivalents, driven by increased cash used in operating activities but offset by cash provided by investing activities from loan repayments Summary of Cash Flows (Six Months Ended June 30) | Cash Flow Category | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($1,853,153) | ($796,621) | | Net Cash Provided by (Used in) Investing Activities | $1,938,682 | ($3,160,992) | | Net Cash Provided by Financing Activities | $0 | $1,850,474 | | **Net decrease in cash and cash equivalents** | **($233,632)** | **($2,433,625)** | - The significant swing in investing cash flow from a large use to a source was primarily due to receiving **$1.84 million in loan repayments** in 2023[14](index=14&type=chunk) - Despite a larger net loss in 2023, the net decrease in cash was smaller than in 2022 because of the **cash inflow from investing activities** and the absence of financing activities in the current period[14](index=14&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Nanxi Creative Center, Suite 218 841 Yan'an Middle Road Jing'An District, Shanghai, China 200040 Tel: 021 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of ...