Zhongchao Inc. Reports the Fiscal Year 2020 Financial Results

ETC

Revenues and operating income grew 20.9% and 23.3%, respectively

SHANGHAI, April 30, 2021 /PRNewswire/ — Zhongchao Inc. (NASDAQ: ZCMD) ("Zhongchao" or the "Company"), a healthcare services company offering patient management, online healthcare information, professional training and educational services, today announced its financial results for the fiscal year ended December 31, 2020.

Key Financial Highlights for the Fiscal Year 2020 as compared to the Fiscal Year 2019

For the Years Ended December 31,

($ millions, except per share data)

2020

2019

% Change

Revenues

$17.99

$14.88

20.9%

Gross profit

$11.87

$10.23

16.1%

Gross margin

66.0%

68.7%

-2.7 pp

Income from operations

$4.49

$3.64

23.3%

Operating margin

25.0%

24.5%

0.5 pp

Net income attributable to ordinary shareholders of
Zhongchao

$4.46

$4.05

10.2%

Earnings per share

$0.183

$0.187

-2.6%

* pp: percentage points

  • Revenues increased by 20.9% to $17.99 million for the fiscal year 2020, primarily due to the increasing orders for assistance services for patient-aid projects.
  • Gross profit increased by 16.1% to $11.87 million while gross margin decreased by 2.7 percentage points to 66.0% for the fiscal year 2020.
  • Operating income increased by 23.3% to $4.49 million for the fiscal year 2020, primarily due to the increased gross profit and partially offset by the increased operating expenses.
  • Net income attributable to the Company’s ordinary shareholders increased by 10.2% to $4.46 million for the fiscal year 2020, primarily driven by the increased income from operations and partially offset by the increased income tax expenses.
  • Earnings per share was $0.183 for the fiscal year 2020, compared to $0.187 for last year.

Weiguang Yang, Chairman and Chief Executive Officer of Zhongchao, commented, "With revenues increasing by 20.9% to a record $17.99 million and operating income increasing by 23.3% to $4.49 million, our fiscal year 2020 financial results highlight continued strength in our businesses. Although our gross margin has a slight drawback, we expect to maintain a high-profit margin in the future for our reputation acknowledgment among leading pharmaceutical enterprises and non-for-profit organizations to design and produce high-quality professional content. In response to the outbreak of COVID-19, we, through our MDMOOC platform, have successfully developed and launched coronavirus curriculum with over 60 courses covering a wide range of medical specialties. In addition, our online courses increased 15% year-over-year in 2020. We are closely monitoring the fluid and uncertain situation of COVID-19, and we expect our revenues will continue to increase with the resume of work within China in the long-term."

Financial Results for the Fiscal Year Ended December 31, 2020

Revenues

For the fiscal year 2020, revenues increased by $3.11 million, or 20.9%, to $17.99 million from $14.88 million for last year. The increase in revenues was primarily due to the increasing orders for assistance services for patient-aid projects.

Cost of revenues

Cost of revenue increased by $1.46 million, or 31.4%, to $6.12 million for the fiscal year 2020 from $4.66 million for last year. The increase in the cost of revenues was driven by the increases in professional service fees and outsourced labor cost as we employed increasing outsourced staff with an increase in patient-aid projects.  

Gross profit

Gross profit increased by $1.65 million, or 16.1%, to $11.87 million for the fiscal year 2020 from $10.23 million for last year.

Gross margin decreased by 2.7 percentage points to 66.0% for the fiscal year 2020, compared to 68.7% for last year.  

Operating expenses

Selling and marketing expenses increased by $0.25 million, or 7.7%, to $3.44 million for the fiscal year 2020 from $3.20 million for last year. The increase in selling and marketing expenses was mainly attributable to the increase in advertising expenses to gain reputation in medical healthcare industry and the increase in salary and welfare to increase headcounts in selling and marketing department. As a percentage of total revenues, selling and marketing expenses was 19.1% for the fiscal year 2020, compared to 21.5% for last year.

General and administrative expenses increased by $0.60 million, or 23.8%, to $3.12 million for the fiscal year 2020 from $2.52 million for last year. The increase in general and administrative expenses was mainly attributable to the increase in salary and welfare expenses as a result of combining effects of an increase of headcounts in supporting functions; the increase in professional expenses since the Company became listed since February 2020; and the increase in writing off doubtful accounts against accounts receivable in accordance with the bad debt policy. As a percentage of total revenues, general and administrative expenses was 17.4% for the fiscal year 2020, compared to 17.0% for last year.  

Research and development expenses decreased by $0.05 million, or 5.5%, to $0.82 million for the fiscal year 2020 from $0.86 million for last year. As a percentage of total revenues, research and development expenses was 4.5% for the fiscal year 2020, compared to 5.8% for last year.  

Total operating expenses increased by $0.80 million, or 12.1%, to $7.38 million for the fiscal year 2020 from $6.58 million for last year. The increase in operating expenses was mainly attributable to the increased selling and marketing expenses and general and administrative expenses and partially offset by the decreased research and development expenses.

Operating income

Income from operations increased by $0.85 million, or 23.3%, to $4.49 million for the fiscal year 2020 from $3.64 million for last year. The increase in income from operations was primarily driven by the increased gross profit and partially offset by the increased operating expenses.

Operating margin increased by 0.5 percentage points to 25.0% for the fiscal year 2020 from 24.5% for last year.

Interest and other income, net

Interest income decreased by $0.07 million, or 30.5%, to $0.15 million for the fiscal year 2020 from $0.21 million for last year.

Other income, primarily consisted of government subsidies, was $0.31 for the fiscal year 2020, compared to $0.53 million for last year.

Income before income taxes

Income before income taxes increased by $0.55 million, or 12.6%, to $4.94 million for the fiscal year 2020 from $4.39 million for last year. The increase in income before income taxes was primarily attributable to the increased income from operations and partially offset by the decreased interest and other income.

Income tax expenses increased by $0.10 million, or 25.2%, to $0.49 million for the fiscal year 2020 from $0.39 million for last year.

Net income and EPS

Net income increased by $0.46 million, or 11.4%, to $4.46 million for the fiscal year 2020 from $4.00 million for last year. The increase in net income was primarily due to the increased income from operations and partially offset by the increased income tax expenses.

Net margin decreased by 2.1 percentage points to 24.8% for the fiscal year 2020 from 26.9% for last year.

After deducting for non-controlling interests, net income attributable to the Company’s shareholders increased by $0.41 million, or 10.2%, to $4.46 million for the fiscal year 2020 from $4.05 million for last year.

Basic and diluted earnings per share was $0.183 for the fiscal year 2020, compared to $0.187 for last year. Weighted average number of shares outstanding was 24,425,637 for the fiscal year 2020, compared to 21,600,135 for last year.  

Financial Condition

As of December 31, 2020, the Company had cash, and cash equivalents of $15.07 million, compared to $7.83 million as of December 31, 2019. Accounts receivable were $10.32 million as of December 31, 2020, compared to $5.08 million as of December 31, 2019. Working capital was $26.61 million as of December 31, 2020, compared to $12.15 million as of December 31, 2019.

Net cash used in operating activities was $1.04 million for the fiscal year 2020, compared to net cash provided by operating activities of $1.41 million for last year. Net cash used in investing activities was $4.09 million for the fiscal year 2020, compared to $0.20 million for last year. Net cash provided by financing activities was $11.50 million for the fiscal year 2020, compared to net cash used in financing activities of $1.19 million for last year. 

Recent Business Highlights

  • In March 2021, renewing the contract with China Association for Health Promotion and Education and GlaxoSmithKline (China) Investment Limited to continue the medical education program "Pulmonary Arterial Hypertension Online Course – Connections with Famous Hospitals" in 2021.
  • In January 2021, co-sponsoring the National Annual Conference for Standardized Liver Cancer Diagnosis and Treatment with China Association of Health Promotion and Education and Chinese Society of Liver Cancer.
  • In November 2020, expanding the scope of cooperation with Takeda Pharmaceutical in China to provide a broad range of services in medical editing, document collation, and medical training and education.

About Zhongchao Inc.

Incorporated in 2012 with headquarter offices in Shanghai and Beijing, China, Zhongchao Inc. is an online provider of healthcare information, professional training and educational services to healthcare professionals under its "MDMOOC" platform (www.mdmooc.org) and to the public under its "Sunshine Health Forums" platform (www.ygjkclass.com) in China. The Company also offers patient management services under its "Zhongxun" platform (www.zhongxun.online). More information about the Company can be found at its investor relations website at http://izcmd.com.

Safe Harbor Statement

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. When the Company uses words such as "may, "will, "intend," "should," "believe," "expect," "anticipate," "project," "estimate" or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company’s expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following:  the Company’s goals and strategies; the Company’s future business development; product and service demand and acceptance; changes in technology; economic conditions; the growth of the professional training and educational services market in China and the other international markets the Company plans to serve; reputation and brand; the impact of competition and pricing; government regulations; fluctuations in general economic and business conditions in China and the international markets the Company plans to serve and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the SEC, the length and severity of the recent coronavirus outbreak, including its impacts across our business and operations.  For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company’s filings with the SEC, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forwardlooking statements to reflect events or circumstances that arise after the date hereof.

For more information, please contact:

At the Company:
Pei Xu, CFO
Email: xupei@mdmooc.org 
Phone: +86 21-3220-5987

Investor Relations:
Sherry Zheng 
Weitian Group LLC
Email: shunyu.zheng@weitian-ir.com
Phone: +1 718-213-7386

 

 

ZHONGCHAO INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Expressed in U.S. dollar, except for the number of shares)

For the Years Ended
December 31,

2020

2019

2018

Revenues

$

17,989,788

$

14,882,763

$

12,865,870

Cost of revenues

(6,117,640)

(4,655,827)

(4,456,353)

Gross Profit

11,872,148

10,226,936

8,409,517

Operating Expenses

Selling and marketing expenses

(3,441,941)

(3,196,469)

(2,261,258)

General and administrative expenses

(3,124,301)

(2,524,003)

(1,425,663)

Research and development expenses

(816,553)

(864,320)

(1,447,949)

Total Operating Expenses

(7,382,795)

(6,584,792)

(5,134,870)

Income from Operations

4,489,353

3,642,144

3,274,647

Interest income, net

146,965

211,479

191,609

Other income, net

305,566

534,020

37,364

Income Before Income Taxes

4,941,884

4,387,643

3,503,620

Income tax expenses

(484,787)

(387,144)

(502,131)

Net Income

4,457,097

4,000,499

3,001,489

Net loss attributable to noncontrolling interests

1,283

46,171

17,834

Net Income Attributable to Zhongchao Inc.’s shareholders

$

4,458,380

$

4,046,670

$

3,019,323

Other Comprehensive Income (Loss)

Foreign currency translation adjustment

1,259,984

(173,604)

(379,520)

Comprehensive Income

5,717,081

3,826,895

2,621,969

Total comprehensive loss attributable to noncontrolling interests

1,283

46,171

17,834

Total comprehensive income attributable to Zhongchao Inc.’s
shareholders

$

5,718,364

$

3,873,066

$

2,639,803

Weighted average number of ordinary share outstanding

Basic and Diluted

24,425,637

21,600,135

20,764,245

Earnings per share

Basic and Diluted

$

0.183

$

0.187

$

0.145

 

 

ZHONGCHAO INC.

CONSOLIDATED BALANCE SHEETS

(Expressed in U.S. dollar, except for the number of shares)

December 31,
2020

December 31,
2019

ASSETS

Current Assets

Cash and cash equivalents

$

15,072,947

$

7,832,552

Short-term investments

2,032,928

Accounts receivable

10,321,837

5,078,419

Prepayments

554,298

325,496

Due from a related party

14,364

Other current assets

1,613,408

1,258,040

Total Current Assets

29,595,418

14,508,871

Investment in a limited partnership

1,258,787

Property and equipment, net

1,997,761

1,889,973

Deposit for property

700,884

Prepayments for lease of land

367,588

366,409

Intangible assets, net

34,973

37,323

Right of use assets

65,137

245,982

Deferred tax assets

795,547

688,994

Total Assets

$

34,816,095

$

17,737,552

LIABILITIES AND EQUITY

Current Liabilities

Accounts payable

$

408,426

$

117,064

Advances from customers

6,760

73,961

Deferred government grants, current portion

323,192

Income tax payable

1,523,175

897,892

Operating lease liabilities, current portion

62,160

210,219

Accrued expenses and other liabilities

981,433

735,334

Total Current Liabilities

2,981,954

2,357,662

Operating lease liabilities, noncurrent portion

41,363

Total Liabilities

2,981,954

2,399,025

Commitments and Contingencies

Equity

Class A Ordinary Share (par value $0.0001 per share, 450,000,000 shares
    authorized; 19,435,423 and 16,102,420 shares issued and outstanding at
    December 31, 2020 and 2019, respectively)

1,944

1,610

Class B Ordinary Share (par value $0.0001 per share, 50,000,000 shares authorized;
    5,497,715 and 5,497,715 shares issued and outstanding at December 31, 2020
    and 2019, respectively)

550

550

Additional paid-in capital

22,775,154

12,044,855

Statutory reserve

801,502

415,813

Retained earnings

7,339,778

3,267,087

Accumulated other comprehensive income (loss)

915,213

(344,771)

Total Zhongchao Inc.’s Shareholders’ Equity

31,834,141

15,385,144

Noncontrolling interests

(46,617)

Total Equity

31,834,141

15,338,527

Total Liabilities and Equity

$

34,816,095

$

17,737,552

 

 

ZHONGCHAO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. dollar, except for the number of shares) 

For the Years Ended
December 31,

2020

2019

2018

Cash Flows from Operating Activities:

Net income

$

4,457,097

$

4,000,499

$

3,001,489

Adjustments to reconcile net income to net cash (used in) provided
    by operating activities:

Write off against accounts receivable

336,367

Depreciation and amortization expenses

202,325

102,905

38,699

Amortization of right of use assets

222,353

159,259

Recognition (reversal) of share-based compensation expenses

168,350

159,984

(14,483)

Deferred tax (benefits) expenses

(58,424)

(318,087)

60,975

Equity investment loss

25,622

Changes in fair value of short-term investments

10,331

Changes in operating assets and liabilities:

Accounts receivable

(5,486,914)

(3,134,065)

(792,031)

Prepayments

(197,402)

231,894

(583,613)

Other current assets

(1,143,200)

119,523

(659,145)

Accounts payable

260,350

94,461

(548,507)

Advances from customers

6,398

(476,261)

(125,872)

Income tax payable

535,981

618,120

296,904

Accrued expenses and other liabilities

179,738

408,725

85,954

Lease liabilities

(230,819)

(153,616)

Deferred government grants

(325,992)

(405,321)

552,277

Net Cash (Used in) Provided by Operating Activities

(1,037,839)

1,408,020

1,312,647

Cash Flows from Investing Activities:

Purchases of property and equipment

(160,602)

(1,312,941)

(668,067)

Payments of deposits for property purchase

(688,267)

Payment for land use rights

(418,520)

Investments in short-term investments

(2,043,259)

(2,460,879)

(2,920,260)

Investment in a limited partnership

(1,217,039)

Release from short-term investments

3,618,940

3,502,799

Buy out of a non-controlling interests

(33,718)

Loan repayment from (provided to) a related party

14,489

(14,476)

Net Cash Used in Investing Activities

(4,094,678)

(203,074)

(504,048)

Cash Flows from Financing Activities:

Proceeds from issuance of common stocks in connection with
    initial public offering, net of offering cost

11,886,363

Payment of expenses relating to initial public offerings

(388,709)

(468,328)

Capital contribution from shareholders

3,580,260

Proceeds from bank borrowings

756,544

Repayment of bank borrowings

(723,788)

Net Cash Provided by (Used in) Financing Activities

11,497,654

(1,192,116)

4,336,804

Effect of exchange rate changes on cash and cash equivalents

875,258

(98,953)

(205,243)

Net increase (decrease) in cash and cash equivalents

7,240,395

(86,123)

4,940,160

Cash and cash equivalents at beginning of year

7,832,552

7,918,675

2,978,515

Cash and cash equivalents at end of year

$

15,072,947

$

7,832,552

$

7,918,675

Supplemental Cash Flow Information

Cash paid for interest expense

$

$

30,312

$

5,840

Cash paid for income tax

$

2,642

$

87,111

$

144,252

Noncash investing activities

Right of use assets obtained in exchange for operating lease
    obligations

$

37,919

$

419,362

$

 

 

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