Executive Summary / Key Takeaways

• Zhongchao Inc. (ZCMD) is strategically positioned within China's burgeoning digital healthcare education and information services market, leveraging its MDMOOC platform and specialized patient management systems to serve healthcare professionals and institutions.
• The company's core technological differentiation lies in its integrated online-offline MDMOOC ecosystem, including a mobile app and WeChat integrations, which fosters a niche competitive advantage through tailored content and strong community engagement.
• Financially, ZCMD has faced profitability challenges, reporting a net loss of -$643,229 in 2024 and negative operating cash flow, indicating a period of investment and operational adjustments.
• A key strategic move is the adoption of the 2025 Equity Incentive Plan, designed to align employee, director, and consultant interests with long-term company performance, alongside an election to leverage foreign private issuer exemptions for greater flexibility in equity issuance.
• Investors should monitor ZCMD's ability to translate its specialized market position and technological platforms into sustained revenue growth and improved profitability, particularly against larger, more diversified edtech competitors.

The Digital Pulse of Chinese Healthcare Education

Zhongchao Inc. (ZCMD), founded in 2012 and headquartered in Shanghai, China, has carved out a specialized niche in the vast and evolving landscape of healthcare information, education, and training services. Operating primarily under its MDMOOC brand, ZCMD focuses on empowering healthcare professionals across the People's Republic of China. The company's journey has seen it expand its offerings to include patient management in the critical fields of tumor and rare diseases, internet healthcare services, and pharmaceutical services, all underpinned by a robust online information platform. This strategic focus positions ZCMD at the intersection of healthcare and education technology, addressing a vital need for continuous professional development in a rapidly advancing medical environment.

ZCMD's operational framework is segmented into MDMOOC services and Sales of Patented Drugs. The MDMOOC segment delivers a comprehensive suite of online and onsite health information services, education programs, and training products. These include clinical practice training, open classes on popular medical topics, interactive case studies, academic conferences, workshops, continuing education courses, and educational articles and short videos. This multi-faceted approach aims to provide holistic support for doctors, nurses, and other healthcare workers, as well as enterprises and non-profit organizations such as medical associations and hospitals.

Technological Edge: The MDMOOC Ecosystem

At the heart of Zhongchao's strategy is its differentiated technological ecosystem, primarily centered around the MDMOOC online platform. This platform is accessible through a dedicated MDMOOC mobile app, a MOOC Medical WeChat subscription account, and the MDMOOC website. For patient management services, the company utilizes an IT system under the Zhongxun brand, complemented by a WeChat mini program and the Zhongxin Health WeChat mini program. This integrated digital infrastructure is designed to deliver highly specialized and accessible content directly to healthcare professionals.

The tangible benefits of this technology stem from its targeted nature. By focusing exclusively on healthcare, ZCMD can develop content and tools that are highly relevant and deeply integrated into the professional lives of its users. The WeChat integrations, in particular, offer significant accessibility within the Chinese digital landscape, enabling seamless engagement and content delivery. This specialization fosters network effects, as more healthcare professionals join and contribute to the platform, enhancing its value and strengthening customer loyalty. While specific quantitative performance metrics for the technology, such as "superior engagement rates by X%" or "Y% faster content delivery," are not publicly detailed, the strategic intent is clear: to create a sticky, indispensable resource for medical professionals. This focused technological approach forms a critical component of ZCMD's competitive moat, allowing it to differentiate itself from broader educational platforms.

Financial Performance: Navigating Growth and Investment

Zhongchao Inc.'s financial trajectory reflects a company in a phase of strategic investment and operational adjustment. In 2024, the company reported total revenue of $15.86 million, a decrease from $19.43 million in 2023 but an increase from $14.15 million in 2022. The gross profit margin for the trailing twelve months (TTM) stands at a healthy 56.18%, indicating strong control over its cost of revenue.

However, profitability has been a challenge. ZCMD recorded a net income of -$643,229 in 2024, an improvement from a significant net loss of -$11.34 million in 2023 and -$2.94 million in 2022.

The TTM operating margin is -3.84%, and the net profit margin is -4.05%, underscoring the ongoing efforts to achieve consistent profitability.

Cash flow generation has also been negative, with operating cash flow at -$1.47 million and free cash flow at -$4.52 million in 2024. This trend of negative free cash flow from 2022 through 2024 suggests that the company is investing heavily in its operations or experiencing working capital fluctuations.

Despite these losses, ZCMD maintains a strong liquidity position, with a TTM current ratio of 12.22 and a quick ratio of 11.67, indicating ample current assets to cover short-term liabilities. The company's total debt is relatively low at $57,517, contributing to a healthy debt-to-equity ratio of 0.24. The financial figures suggest that while ZCMD has faced headwinds in achieving consistent net profitability, its balance sheet remains robust, providing a foundation for future strategic maneuvers.

Strategic Initiatives and Future Trajectory

ZCMD's strategic roadmap is highlighted by recent corporate actions aimed at strengthening its long-term growth and operational flexibility. On August 4, 2025, the company's board approved the 2025 Equity Incentive Plan, which became effective the same day. This plan allows for discretionary grants of various equity-based awards, including options and restricted shares, to employees, directors, and consultants. The plan initially permits the issuance of up to 10.00 million ordinary shares, with an annual increase of 2% of total outstanding shares starting in January 2026, up to an aggregate maximum of 50.00 million shares. This initiative is a clear signal of management's intent to incentivize key personnel and align their interests with the company's long-term performance and shareholder value creation.

Furthermore, as a foreign private issuer, Zhongchao Inc. has elected to be exempt from certain NASDAQ Stock Market Marketplace Rules, specifically Nasdaq Rules 5635, which typically require shareholder approval for certain security issuances. This decision, supported by its Cayman Islands counsel, provides the company with greater flexibility in issuing securities without prior shareholder approval under these specific circumstances. This strategic choice could enable more agile capital allocation and M&A activities, though it also implies a different governance structure compared to domestic issuers.

Competitive Landscape and Positioning

ZCMD operates in a competitive environment, facing both direct and indirect rivals in China's education and healthcare technology sectors. Direct competitors include major edtech players like TAL Education Group (TAL), New Oriental Education & Technology Group (EDU), and Gaotu Techedu Inc. (GOTU). These companies, while broader in their educational scope, often have overlapping segments in online content delivery and professional development.

ZCMD's primary competitive advantage lies in its deep specialization in healthcare education and information services. This niche focus allows for the development of highly tailored content and platforms, fostering stronger engagement and loyalty within the medical community. For instance, ZCMD's MDMOOC platform and WeChat integrations offer a more focused alternative to the generalized education services provided by EDU or the K-12 emphasis of TAL. While TAL and EDU often demonstrate greater scale, broader user networks, and historically stronger revenue growth and profitability, ZCMD's targeted approach could yield higher efficiency and market penetration within its specific healthcare vertical. ZCMD's TTM Price to Sales ratio of 1.87 is comparable to the industry median, but its recent revenue decline of 18% over the last year raises concerns about its growth trajectory relative to the broader industry's forecast for 11% expansion.

Indirect competition comes from free online resources, AI-driven health applications, and general wellness platforms. These alternatives can impact ZCMD's market share by offering more accessible or cost-effective solutions. Barriers to entry in ZCMD's market include the need for regulatory approvals in China and the establishment of robust digital networks, which can favor existing players with established infrastructure and relationships. ZCMD's reliance on its digital platforms, while a strength, also presents a vulnerability to technological disruptions or rising operational costs, particularly as industry trends point towards increasing investments in AI and data center infrastructure.

Risks and Considerations

Investing in Zhongchao Inc. carries several pertinent risks. The company's consistent negative net income and free cash flow in recent years indicate ongoing profitability challenges that require careful monitoring. While the 2025 Equity Incentive Plan aims to align interests, the election to be exempt from certain NASDAQ shareholder approval rules for security issuances, while offering flexibility, could also lead to potential dilution without direct shareholder consent.

Furthermore, ZCMD operates within the highly regulated Chinese healthcare and education sectors, making it susceptible to policy changes that could impact its business model and operational environment. The intense competitive landscape, characterized by larger, well-capitalized edtech firms and emerging indirect competitors, poses a continuous threat to market share and pricing power. The stock has also experienced significant volatility, with a 28% bounce in the last month but still being down 8.5% over the last year, and technical analysis suggesting a falling trend in the medium term. Poor liquidity in trading further weakens technical analysis.
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Conclusion

Zhongchao Inc. presents an intriguing investment narrative centered on its specialized position in China's digital healthcare education market. The company's MDMOOC platform and integrated digital ecosystem offer a compelling value proposition to healthcare professionals, differentiating it from broader edtech players. While ZCMD has demonstrated strong gross margins, its recent financial performance, marked by negative net income and cash flow, underscores the challenges of scaling and achieving consistent profitability in a competitive and evolving market.

The strategic adoption of the 2025 Equity Incentive Plan and the leveraging of foreign private issuer exemptions highlight management's proactive approach to capital management and talent retention. However, investors must weigh these strategic advantages against the backdrop of ongoing profitability concerns, regulatory risks, and intense competition. ZCMD's ability to translate its specialized technological moat into sustained revenue growth and improved bottom-line performance will be critical to its long-term investment appeal. The path to unlocking value for ZCMD will depend on its execution in expanding its user base, optimizing its operational efficiency, and navigating the dynamic regulatory and competitive currents of the Chinese healthcare education sector.