Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion and analysis of the Company’s
financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related
notes included elsewhere in the Report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual
results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result
of various factors.
Overview
Our mission is to make high-quality,
personalized healthcare affordable and accessible for all our patients. Our aim is to provide a one stop healthcare and wellness services
through our propriety platform. We currently have operations in Singapore and expect to expand across Southeast Asia.
33
In January 2020, we acquired 100%
of the equity interests in Super Gateway Group Limited (“SGGL”), which engaged in the property and security management of
commercial units (shopping malls, business office buildings, industrial buildings), and residential apartments. We aimed to build an Omni-channel
health care and products platform in economies of scale and cross-sell opportunities which would allow our management services section
to expand into new and different verticals of management services in the medical field.
Headquartered in Singapore and
established in 2019, we aim to be a leading next-generation Southeast Asian healthcare-technology provider, integrating a full continuum
of healthcare services with healthcare data analytics to drive high-quality and efficient care for their patients. The proprietary platform,
is its core holistic, connected platform, through which it also offers a mobile application platform for its users. What makes us unique
is the integration of Artificial Intelligence (AI) and Machine Learning (ML), which provides real-time actionable analytics functionality
that enables our users to make quick analysis and accurate diagnosis as well as business decisions. The platform gathers numerous data
points and performs predictive analysis, where it can compare events and results over time to identify trends across various segments
and provide accurate insights, analysis, and predictions regarding healthcare. Its AI applications supported on our platform include smart
triage, smart match, smart claims supports and image recognition, as well as predictive algorithms that can read and analyze MRIs and
X-rays. our robust unique proprietary technology platform reduces the time taken for diagnostics yet continues to promote standardization
of diagnostics, which effectively eliminates inefficiencies. Through our software platform, it aims to deliver data-driven, personalized
quality insights to patients while they are at the doctor’s office in order to provide them with different healthcare and treatment
choices.
We aim to provide a series of
products and services through its network and offer an array of complementary products and services to deepen their relationship with
its members from assessing the condition, evaluating the risk level to providing personalized support services.
We market and promote our Medical
Urgent Care services to healthcare provider organizations throughout Singapore using a go-to-market and direct sales organization composed
of highly trained and technical team members that are segmented into several highly targeted and coordinated teams. These dedicated sales
teams develop content and identifies prospects that the sales development team research and qualify to generate high-grade, actionable
sales programs. Our sales and marketing department leverages on their deep experience to deliver an urgent care solution tailor-fit to
the size and specialty of each practice. Through this targeted, coordinated approach, We are able to maximize resource allocation and
allow its sales teams to concentrate on execution.
We utilize both an inside and
outside direct sales force to execute on the qualified marketing programs, partnering with client services to ensure the prospect is educated
on the breadth of our capabilities and demonstrable value proposition. Medical and clinical partners also play an important role in marketing
and selling our products to its customer base. These partners may shorten the sales cycle and lower the customer acquisition costs. For
example, through the Clinic Management System (CMS) partners, we are able to embed its technology into existing health system technology
infrastructure which, as a competitive differentiator, may lead to a higher win rate.
Our sales and marketing department
is primarily responsible for planning and developing its overall marketing strategy, conducting market research, coordinating the sales
and marketing activities to attract new customers and maintain and strengthen relationships with existing customers, managing the efforts
in relation to tender bids and negotiating the terms of our Property Management Service and Security Service contracts. The team will
explore and establish information channels for business development and market research purposes. Such information channels include websites
or other platforms on which property developers or property owners’ associations announce tender opportunities, uncovering business
opportunities by way of recommendation or frequent communication with customers and other industry players, and organizing promotional
events to showcase our service offerings.
Furthermore, we implement various
incentive measures to encourage the sales teams to obtain property management service contracts of properties developed by third-party
developers through research and analysis of and communication with target customers in the real estate industry and taking advantage of
our resources and expertise. In addition, various communication channels are adopted to explore more opportunities to provide our Property
Management Services that are customized and tailored to the specific localities to bring convenience to local property owners and residents.
We continually seek business cooperation opportunities with third-party merchants to enhance the width and depth of its services.
34
We believe that our platform will
eventually provide a full continuum of healthcare services integrated with healthcare data analytics to drive improved outcomes for patients.
To achieve this, we aim to continuously build towards a consumer-centric digital ecosystem to allow clients and patients to gain access
to quality healthcare while keeping costs affordable. We incorporate AI and ML on the platform and implements relevant solutions to a
wide variety of healthcare and homecare services that it currently provides. AI-driven advancement will be increasingly visible throughout
the healthcare journey including a strong potential for interactive virtual assistants to improve patient experience and clinician operational
workflow. We believe in incorporating technology into the traditional medical services market and creating an end-to-end ecosystem that
provides a comprehensive suite of healthcare and wellness services adds great value.
Recent Development
On November 17, 2022, we consummated
the business combination contemplated by the “SPA” between us, Euda Health Limited (“EHL”), Watermark Developments
Limited, a British Virgin Islands business company (“Watermark” or the “Seller”) and the sole owner of EUDA, and
Kwong Yeow Liew, dated April 11, 2022 and amended May 30, 2022, June 10, 2022, and September 7, 2022. As contemplated by the SPA, a business
combination between us and EUDA was effected by the purchase by us of all of the issued and outstanding shares of EUDA from the Seller
(the “Share Purchase”), resulting in EUDA becoming a wholly owned subsidiary of us. In addition, in connection with the consummation
of the Share Purchase, we have changed our name to “EUDA Health Holdings Limited.” The transactions contemplated under the
SPA relating to the Share Purchase are referred to in this annual report as the “Business Combination.”
In connection with the Closing
of the Business Combination, we issued convertible notes in an aggregate principal amount of $3,402,225 (the “Convertible Notes”)
in a private placement to certain advisors. Indeterminate or fixed number of ordinary shares (the “Convertible Note Shares”)
could be issuable upon the conversion of the Convertible Notes.
Key Factors that Affect Operating Results
Strong Presence and wide Network of Partners to
Complement our “Always-On” Approach
We provide 24/7 concierge-level
care coordination services for our high-risk members. As a digital health company, we strongly believe in advocating the presence of healthcare
at any time and any place needed by our customers. Our coordination specialists are trained to cover all emergency, primary and specialty
services and provide the highest level of personalized medical concierge level services at the push of a button. Furthermore, we strengthen
this capability through our geographical presence and wide network of relationships with medical partners. We have a sizeable number of
medical partners across the healthcare spectrum, ranging from ambulatory service providers and General Practitioner (GP) clinics to hospitals
and specialist consultants. The widest range urgent care options are usually based around pricing, proximity, choice of treatment and
medications. Therefore, our relationships with medical partners gives a great competitive edge as we are able to provide top notch round-the-clock
healthcare services based on the requirements expected from our clients.
Retention of Key Management Team Members
Another key differentiating factor
for us is the rich blended nature of our management team. Our management team comprises executives with extensive experience in Healthcare,
Technology, Insurance & Consumer Experience segments. The wide array of industries captured by our management team allows us to deliver
superior products and services to Our customers as the management team possesses an in-depth understanding of the pain points prevalent
in the industry. The combination has also enabled us to address the market gap in the healthcare industry with an innovative data driven
all-in-one healthcare platform. However, the loss of any of our key executive team member, such as the loss of our Chief Technology Officer
in May 2023, might affect our quality of services clients are currently receiving and might lead to our clients to seek medical service
from other medical providers.
35
Key Personnel Discharge of their Duties
If for any reason, one or more
of our employees are unable to discharge their duties properly or in the best interest of us in the property management sector, that may
have an adverse impact on our reputation and our brand and our attractiveness to retain our shopping malls, business office buildings,
or residential apartments clients. We may as result potentially lose future revenue from our existing clients to retain our property management
services.
Investment in Digitalization and Innovation for
Digital Care Capabilities
We are constantly investing in
AI technology that is designed to help expand patient engagement while improving efficiencies, reducing the cost of care and promoting
better care coordination. For example, there is an AI deployment enabling a patient-provider matching tool, allowing patients to input
our preference for doctors, timing and area of specialist onto our platform, and our platform will synthesize patient’s preference
to ensure best matches to boost efficiency and user experience. Continued investment in interoperability, including remote patient monitoring,
advanced analytics and lab services as well as the home delivery of pharmaceuticals, is expected to allow us to expand its use cases.
Our investments in interoperability with other technologies have also allowed them to partner with innovative companies to develop unique
products and services. Our strategic partnerships allow our services to be accessed directly through our interfaces. We believe these
partnerships will differentiate our offerings and add new capabilities to drive demand and add value for our clients.
Our Ability to Leverage Existing Sales Channels
and Penetrate New Markets
We have developed a highly effective
distribution network to target large employers and is committing incremental sales and marketing resources to the small-medium enterprises
to increase our penetration within this market. Additionally, we intend to further penetrate the medical provider market, notably hospitals
and group physician practices, as we believe our solution offers the medical community an attractive platform from which to generate substantial
income by acquiring new patients and to better participate in emerging risk-sharing and value-based payment models. With expanded access
to available health insurance, we also intend to pursue health insurance companies about our services, hence, which will represent an
attractive new sales channel.
Results of Operations
Comparison of Years Ended December 31, 2022 and
2021
For the Year Ended December 31,
2022
2021
Change
Percentage Change
Revenues
$
9,840,709
$
10,544,550
$
(703,841
)
(6.7
)%
Cost of revenues
6,486,513
6,300,197
$
186,316
3.0
%
Gross profit
3,543,196
4,244,353
$
(890,157
)
(21.0
)%
Selling expenses
1,902,865
1,258,442
$
644,423
51.2
%
General and administrative expenses
12,352,877
4,084,873
$
8,268,004
202.4
%
Impairment loss on long-lived assets
1,139,016
-
1,139,016
100.0
%
Research and development expenses
17,209
129,265
$
(112,056
)
(86.7
)%
Loss from operations
(12,057,771
)
(1,228,227
)
$
(10,829,544
)
881.7
%
Other (loss) income, net
(12,874,053
)
2,176,764
$
(15,050,817
)
(691.4
)%
Provision for income taxes
17,422
48,141
$
(30,719
)
(63.8
)%
Net (loss) income
(24,949,246
)
900,396
$
(25,849,642
)
(2,870.9
)%
Less: Net (loss) income attributable to noncontrolling interest
(65,124
)
35,567
$
(100,691
)
(283.1
)%
Net (loss) income attribute to EUDA
$
(24,884,122
)
$
864,829
$
(25,748,951
)
(2,977.3
)%
36
Revenues
Our revenues are derived from
medical services, product sales, and property management services. Total revenues decreased by approximately $0.7 million, or 6.7%, to
approximately $9.8 million for the year ended December 31, 2022 as compared to approximately $10.5 million for the year ended December
31, 2021. The decrease of the total revenue was mainly attributable to the decrease of our property management services by approximately
$0.8 million, or 17.4%, to $3.8 million for the year ended December 31, 2022 as compared to approximately $4.6 million for the year ended
December 31, 2021, and also attributable to the decrease of our product sales by approximately $0.2 million, or 95.7%, to approximately
$11,000 for the year ended December 31, 2022 as compared to approximately $0.3 million for the year ended December 31, 2021, offset by
the increase of medical services by approximately $0.3 million, or 5.9%, to approximately $6.1 million for the year ended December 31,
2022 as compared to approximately $5.7 million for the year ended December 31, 2021.
Our revenues from our revenue
categories are summarized as follows:
For the Year Ended
December 31, 2022
For the Year Ended
December 31, 2021
Change
Change (%)
Revenues
Medical services – specialty care
$
6,001,439
$
5,010,837
$
990,602
19.8
%
Medical services – general practice
63,794
712,712
$
(648,918
)
(91.0
)%
Medical services – general practice (related parties)
135
4,640
$
(4,505
)
(97.1
)%
Medical services – subtotal
6,065,368
5,728,189
$
337,179
5.9
%
Product sales
11,046
257,841
$
(246,795
)
(95.7
)%
Property management services
3,764,295
4,558,520
$
(794,225
)
(17.4
)%
Total revenues
$
9,840,709
$
10,544,550
$
(703,841
)
(6.7
)%
Medical services
Revenues from medical services
increased by approximately $0.3 million, or 5.9%, to approximately $6.1 million for the year ended December 31, 2022 from approximately
$5.7 million for the year ended December 31, 2021. Revenue growth is mainly due to the increased number of employees/patients from our
corporate clients. Approximately 860 and 800 corporate clients had utilized our specialty healthcare services in each of the year ended
December 31, 2022 and 2021, respectively. The average usage of our specialty care services per corporate client were approximately $7,000 during
the year ended December 31, 2022, as compared to approximately $6,300 during the year ended December 31, 2021. Such increase was mainly
due to more employees/patients from corporate clients utilizing our specialty care services during the year ended December 31, 2022 as
compared to the same period in 2021. Approximately 5,200 and 4,000 employees/patients from our corporate clients had utilized our healthcare
services during the year ended December 31, 2022 and 2021, respectively. The average usage of our specialty care services per employee/patient
were approximately $1,200 during the year ended December 31, 2022, as compared to approximately $1,300 during the year ended December
31, 2021. The average usage of our specialty care services per employee/patient decreased by approximately $100 from the year ended December
31, 2021 to the same period in 2022 mainly due to the employees/patients from our corporate clients required lesser degree of specialty
care services in 2022 as compared to the same period in 2021. Our general practice medical services were insignificant to our operations
during the year ended December 31, 2022 and 2021.
Product sales
Revenues from product sales decreased
by approximately $0.2 million or 95.7%, to approximately $11,000 for the year ended December 31, 2022 from approximately $0.3 million
for the year ended December 31, 2021. Our product sales have decreased for the year ended December 31, 2022 as compared to the same period
in 2021 due to the decreased demand of our facial recognition and temperature measurement monitor system as the COVID-19 pandemic has
been eased.
37
Property management services
Revenues from property management
services decreased by approximately $0.8 million, or 17.4%, to approximately $3.8 million for the year ended December 31, 2022 from approximately
$4.6 million for the year ended December 31, 2021. Property management services revenue decreased mainly due to the decrease of property
management units that we managed without our security guard services and the decrease of property management units that we managed with
our security guard services. The number of properties managed without security guard service decreased from 39 units for the year ended
December 31, 2021 to 37 units for the year ended December 31, 2022. The number of properties managed with security guard services decreased
from 13 units for the year ended December 31, 2021 to 12 units for the year ended December 31, 2022. Currently, we do not have any property
management services provided to any medical clinics.
Our percentage of property management
services revenue from each property type are summarized as follows:
For the Year Ended
For the Year Ended
December 31, 2022
December 31, 2021
Residential Apartments
60
%
59
%
Commercial Units
40
%
41
%
Historically, we provided more
property management services in the residential apartments than in the commercial units during the year ended December 31, 2022 and 2021.
Cost of Revenues
Total cost of revenues increased
by approximately $0.2 million, or 3.0%, to approximately $6.5 million for the year ended December 31, 2022 as compared to approximately
$6.3 million for the year ended December 31, 2021. The increase in cost of revenues was mainly due to the increased of medical services.
Our cost of revenues from our
revenue categories are summarized as follows:
For the Year
Ended
For the Year
Ended
December 31, 2022
December 31, 2021
Change
Change (%)
Cost of revenues
Medical services – specialty care
$
2,995,778
$
46,849
$
2,948,929
6,294.5
%
Medical services – specialty care (related party)
491,499
2,349,702
$
(1,858,203
)
(79.1
)%
Medical services – general practice
45,549
427,908
$
(382,359
)
(89.4
)%
Medical services– subtotal
3,532,826
2,824,459
$
708,367
25.1
%
Product sales
59,391
167,202
$
(107,811
)
(64.5
)%
Property management services
2,894,296
3,308,536
$
(414,240
)
(12.5
)%
Total cost of revenues
$
6,486,513
$
6,300,197
$
186,316
3.0
%
38
Our cost of revenues from medical
services increased by approximately $0.7 million or 25.1% to approximately $3.5 million for the year ended December 31, 2022 from approximately
$2.8 million for the year ended December 31, 2021. The increase in cost of revenues from our medical services is in line with our increase
of revenues from medical services which was due to increased usage of our specialty services per customer. The increase in cost of revenues
from medical services – specialty care of approximately $2.9 million or 6,294.5% was mainly because beginning in April 2022, we
directly utilized the third party clinic service providers and no longer utilized our related party vendor, Cadence Health Pte. Ltd. (“Cadence”),
during the year ended December 31, 2022 as compared to the same period in 2021. Same reason was applied to the decrease in cost of revenues
from medical services – specialty care (related party) of approximately $1.9 million or 79.1%. Historically, EUDA’s specialty
care medical services provided by the third party clinic service providers were insignificant up until March 2022 and majority of the
cost of revenue from EUDA’s specialty care medical services for the year ended December 31, 2021 and for the three months ended
March 31, 2022 were provided by our related party vendor, Cadence. Our general practice medical services were insignificant to our operations
during the year ended December 31, 2022 and 2021.
Our cost of revenues from product
sales decreased by approximately $108,000, or 64.5%, to approximately $59,000 for the year ended December 31, 2022 from approximately
$167,000 for the year ended December 31, 2021. The decrease in cost of revenues from product sales is in line with our decrease of revenues
from product sales which was due to lower demand of our facial recognition and temperature measurement monitor system as the COVID-19
pandemic has eased.
Our cost of revenues from property
management services decreased by approximately $0.4 million, or 12.5%, to approximately $2.9 million for the year ended December 31, 2022
from approximately $3.3 million for the year ended December 31, 2021. The decrease in cost of revenues from property management services
is in line with our decrease of revenues from property management services which was mainly due to the decreased number of property management
units that we managed and the decreased number of property management employees offset by the increase of salary and benefits of the property
management employees per individual employee.
Gross Profit
Our gross profit from our major
revenue categories is summarized as follows:
For the Year Ended
December 31, 2022
For the Year Ended
December 31, 2021
Change
Change (%)
Medical services
Gross profit
$
2,532,542
$
2,903,730
$
(371,188
)
(12.8
)%
Gross profit percentage
41.8
%
50.7
%
(8.9
)%
Product sales
Gross profit
$
(48,345
)
$
90,639
$
(138,984
)
(153.3
)%
Gross profit percentage
(437.7
)%
35.2
%
(472.9
)%
Property management services
Gross profit
$
869,999
$
1,249,984
$
(379,985
)
(30.4
)%
Gross profit percentage
23.1
%
27.4
%
(4.3
)%
Total
Gross profit
$
3,354,196
$
4,244,353
$
(890,157
)
(21.0
)%
Gross profit percentage
34.1
%
40.3
%
(6.2
)%
Our gross profit decreased by approximately $0.9 million, or 21.0%, to approximately $3.4 million for the year ended
December 31, 2022 from approximately $4.2 million for the year ended December 31, 2021. The decrease in gross profit is primarily due
to decrease of gross profit from medical service as a result of the increase of medical service cost over the increase of revenue. The
decrease in gross profit also due to the decrease of our revenues from our property management services against the increase of staff
salary
39
For the year ended December 31,
2022 and 2021, Our overall gross profit percentage was 34.1% and 40.3%, respectively. The decrease in gross profit percentage of 6.2%
was primarily due to the combination of the decrease of our medical services gross profit percentage of 8.9%, the decrease of our product
sales gross profit percentage of 472.9%, and the decrease of our property management services gross profit percentage of 4.3%.
Gross profit percentage for medical
services was 41.8% and 50.7% for the year ended December 31, 2022 and 2021, respectively. The decrease of gross profit percentage of 8.9%
was mainly because beginning in April 2022, we directly utilized the third party clinic service providers and less service discounts provided
by our major medical service providers during the year ended December 31, 2022 as compared to the same period in 2021.
Gross (loss) profit
percentage for product sales was (437.7)% and 35.2% for the year ended December 31, 2022 and 2021, respectively. The decrease of
gross profit percentage of 472.9% was primarily caused by lower customer demand of our facial recognition and temperature
measurement monitor products as COVID-19 pandemic has eased which resulted in write-off of non-saleable items and reduce our
inventory level to $0 as of December 31, 2022.
Gross profit percentage for
property management services was 23.1% and 27.4% for the year ended December 31, 2022 and 2021, respectively. The decrease of gross
profit percentage of 4.3% was primarily attributable to increase of salary and benefits of the property management employees per
employee. Although we had reduced the number of employees in the property management operations due to the decrease of property that
we managed, we increased the salary of property management employees on performance and inflation adjustment to retain more
qualified employees and did not pass on the cost of such adjustments to our customers, which significantly lowered our gross profit
percentage for property management.
Operating Expenses
Total operating expenses
increased by approximately $9.9 million, or 181.6%, to approximately $15.4 million for the year ended December 31, 2022 from
approximately $5.5 million for the year ended December 31, 2021. The increase was mainly attributable to the increase of general and
administrative expenses and earnout share payment of approximately $8.3 million, increase of selling expenses of approximately $0.6
million and increase of impairment loss on long-lived assets of approximately $1.1 million.
An increase of approximately $8.3
million in general and administrative expenses, and earnout share payment was mainly attributable to an approximately $1.4 million increases in professional fees,
including but not limited to, attorney, auditors and consulting expenses incurred in relation to the Business Combination in 2022 which
was not allowed to be capitalized according to U.S. GAAP. The increase was also attributable to an approximately $2.8 million increase
in provision for bad debt, which was resulted from write-off of the uncollectible balance of receivable from divestment from BPT, an unrelated
third party and the balance from loan to PT total Prima Indonesia as we determined these balances will not be recovered in the future.
In addition, we incurred approximately $5.2 million of earnout payment upon assessing
the fair value of the Earnout Share. The increase was offset by the decrease of salary expenses of approximately $1.1 million.
An increase of approximately $0.6
million in selling expenses was mainly attributable to the approximately $0.6 million increase in advertising, marketing and entertainment
expenses, which was directly attributed to the increase of corporate clients and medical services revenues as more advertisement posting
to attract potential corporate clients.
An increase of approximately $1.1
million in impairment loss on long-lived assets as we fully impaired the remaining balance of goodwill and intangible assets recognized
through acquisition of Super Gateway Group Limited in January 2020.
Approximately $0.1 million decrease
in research and development expenses for the year ended December 31, 2022 as compared to the same period in 2021 was due to less research
and development expenses required as our existing platform becomes more mature.
40
Other(expenses) income, net
Our other income, net is summarized
as follows:
For the Year
Ended
December 31,
2022
For the Year
Ended
December 31, 2021
Change
Change (%)
Other (Expense) Income
Interest expense, net
$
(120,082
)
$
(127,126
)
$
7,044
(5.5
)%
Gain on disposal of a subsidiary
30,055
-
$
30,055
100.0
%
Change in prepaid forward purchase liabilities
(12,911,503
)
-
(12,911,503
)
100.0
%
Other income
127,477
386,828
$
(259,351
)
(67.0
)%
Investment income
-
1,917,062
$
(1,917,062
)
(100.0
)%
Total Other (Expense) Income, net
$
(12,874,053
)
$
2,176,764
$
(15,050,817
)
(691.4
)%
Total other expense, net
were amounted to approximately $12.9 million for the year ended December 31, 2022 while total other income, net were amounted to
approximately $2.2 million for the year ended December 31, 2021. The changes were mainly due to the following:
Change in prepaid forward purchase liabilities
We incurred a loss from
change in prepaid forward purchase liabilities amounted approximately $12.9 million for the year ended December 31, 2022 as we
entered into two equity prepaid forward transactions in November 2022, which required for fair value accounting.
Due to our stock price has significantly dropped after the Business Combination in November 2022, the fair value of the prepaid forward purchase liabilities also decreased significantly.
Investment income
We had investment income of approximately
$1.9 million from the Affordable Home Program investment in Indonesia during the year ended December 31, 2021 while no investment income
was recognized during the same period in 2022.
Interest expense, net
The interest expense, net decreased
was due to less outstanding loans with similar interest rate during the year ended December 31, 2022 as compared to the same period in
2021.
Other income
The decrease of other income was
because we did not obtain government grant for the year ended December 31, 2022, while there was government grant of approximately $0.3 million
received by us during the same period in 2021.
Provision for income taxes
Our provision for income taxes
decreased by approximately $31,000 for the year ended December 31, 2022 as compared to the year ended December 31, 2021. Our provision
for income taxes amounted to approximately $17,000 and $48,000 for the year ended December 31, 2022 and 2021, respectively. The decrease
in provision for income taxes is mainly due to decrease of deferred tax as we wrote off our deferred tax liability as a result of impairment of our intangible asset.
Net (loss) income
We incurred a net loss was
approximately $24.9 million for the year ended December 31, 2022, while we had a net income of approximately $0.9 million for the
year ended December 31, 2021. Changes from net income for the year ended 2021 to net loss for the same period in 2022 was predominately due to the reasons as discussed above.
41
Liquidity and Capital Resources
In assessing liquidity, we monitor and analyze cash
on-hand and operating and capital expenditure commitments. Our liquidity needs are to meet working capital requirements, operating expenses
and capital expenditure obligations. Debt financing in the form of short-term borrowings from banks, private lenders, third parties and
related parties and cash generated from operations have been utilized to finance working capital requirements. As of December 31, 2022,
our working deficit was approximately $4.1 million, and we had cash and restricted cash of approximately $0.8 million.
The global outbreak of COVID-19 caused
volatile economic activity around the world, and the degrees of any economic recovery in various jurisdictions have not been linear. We
have experienced recurring losses from operations and negative cash flows from operating activities since 2020. The digital health industry
is relatively immature and rapidly evolving, and it is uncertain whether it will achieve and maintain high levels of demand, consumer
acceptance and market adoption. Our success will substantially depend on the willingness of our clients’ members or patients to
adopt, and the frequency and extent of their utilization of, our services and solutions, as well as on our ability to demonstrate the
value of digital health to employers, health plans, government agencies and other purchasers of healthcare for beneficiaries. If our clients,
members or patients do not acknowledge the benefits of our services or platform, or if our services are not competitive, then the market
may not develop at all, or we may develop slower than we expect. Similarly, individual and healthcare industry concerns or negative publicity
regarding patient confidentiality and privacy in the context of digital health could restrict market acceptance of our healthcare services.
An occurrence of any of these events could have a material adverse effect on our business, financial condition, or results of operations.
During fiscal year 2022, we missed our previously
projected revenue target mainly due to the relative immaturity of the digital health industry and the ongoing effects of the COVID-19
pandemic. A potential economic recession and uncertainty in financial markets
have resulted in changes in market conditions and produced market volatility. The impact of inflation and rising interest rates may affect
the financial performance of the customers we serve and influence customer demand. Despite these uncertainties, we continue to seek growth
in terms of new and additional corporate clients. We currently rely mainly on organic growth driven by an increase in corporate clients.
If we are unable to retain the active customers while attracting new customers, it could result in a loss of future revenue and will deteriorate
our liquidity and operating cash flow. As a result, we have an ongoing need to raise additional cash from outside sources to fund our
expansion plan and related operations. Successful transition to attaining profitable operations is dependent upon achieving a level of
revenues adequate to support our cost structure. In connection with our assessment of going concern considerations in accordance with
Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties
about an Entity’s Ability to Continue as a Going Concern,” management has determined that these conditions raise substantial
doubt about our ability to continue as a going concern within one year after the date that our consolidated financial statements are issued.
The management’s plan in addressing this uncertainty is through the following sources:
●
other available sources of financing from Singapore banks and other financial institutions or private lenders;
●
financial support and credit guarantee commitments from our related parties; and
●
equity financing.
In light of the disparity between the exercise price
of the warrants and our current trading price, it is very unlikely that any potential proceeds from the exercise of our warrants will
be realized in the near future. We are in active discussions with underwriters regarding a potential financing transaction through the
issuance of convertible notes and our goal is for such transactions to be completed in the fourth quarter of 2023 to improve our liquidity
and capital resource needs.
42
On February 2, 2023, Mr. Alfred Lim, our independent
director, loaned us an amount of $128,750 for working capital purposes.
Between January to May 2023, Mr. Meng Dong (James)
Tan, one of our shareholders who currently owns approximately 28% of our ordinary shares, loaned us in an aggregate amount to approximately
$ 0.5 million for working capital purposes.
Between May 16 and May 22,
2023, we issued and sold to eight accredited investors an aggregate of 940,000 ordinary shares (the “Placement Shares”) at
$1.00 per share for an aggregate purchase price of $940,000 in a private placement.
Should we need to seek additional capital prior to
the potential convertible notes financing transaction, we may continue to go to our related parties for additional financial support.
If the trading price of our ordinary shares experiences a further decline following or as a result of this offering, it will negatively
impact our ability to raise additional capital on favorable terms, if at all.
The accompanying consolidated financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal
course of business and, as such, the financial statements do not include any adjustments relating to the recoverability and classification
of recorded amounts or amounts and classification of liabilities that might be necessary should we be unable to continue in existence.
The following summarizes the
key components of cash flows for the years ended December 31, 2022 and 2021.
For the Years Ended December 31,
2022
2021
Net cash (used in) provided by operating activities
$
(1,526,828
)
$
443,920
Net cash used in investing activities
(268,206
)
(356,183
)
Net cash provided by (used in) financing activities
2,488,947
(168,373
)
Effect of exchange rate change on cash and restricted cash
(99,424
)
19,865
Net change in cash and restricted cash
$
594,489
$
(60,771
)
Operating activities
Net cash used in operating activities was
approximately $1.5 million for the year ended December 31, 2022 and was primarily attributable to (i) approximately $24.9 million in
net loss as discussed above, (ii) approximately $0.2 million increase in accounts receivable due to less collections, and (iii)
approximately $2.4 million decrease in accounts payable – related party as we are making more timely payments while we are no
longer using the medical services from the related party beginning in April 2022, offset by (i) approximately $1.6 million decrease in other receivables mainly
resulted from the collection of our investment income, (ii) approximately $1.3 million increase in accounts payable mainly due to the increase usage of medical
services and related medical products from third party service providers, (iii) approximately $1.0 million increase in other payables
and accrued liabilities mainly resulted from accrued professional fees, (iv) approximately $12.9 million in change in fair value of
prepaid forward purchase liabilities, (v) approximately $2.9 million in provision for doubtful accounts due to write-off of the
balance of receivable from divestment from BPT, an unrelated third party and the balance from loan to PT total Prima Indonesia,
(vi) approximately $5.2 million in earn out payment upon assessing the fair value of the Earnout Share and (vii) approximately $1.1
million in impairment loss on goodwill and intangible asset.
43
Net cash provided by operating activities was approximately
$0.4 million for the year ended December 31, 2021 and was primarily attributable to (i) a net income of approximately $0.9 million (ii)
approximately $0.3 million in non-cash items such as depreciation and amortization expense, (iii) approximately $44,000 in provision for
doubtful accounts, and (iv) approximately $56,000 decrease in other receivables, (v) approximately $1.4 million increase in accounts payable
and accounts payable – related party, and (vi) approximately $0.1 million increase in taxes payable, offset by (i) approximately
$28,000 in deferred tax benefit, (ii) approximately $1.9 million of investment income from the Affordable Home Program investment in Indonesia,
(iii) approximately $0.3 million increase in accounts receivable, (iv) approximately $18,000 increase in prepaid expenses and other current
assets, and (v) approximately $62,000 decrease in operating lease liabilities.
Investing activities
Net cash used in investing activities was approximately
$0.3 million for the year ended December 31, 2022 and was attributable to approximately $0.2 million loan to a third party, approximately
$3,000 in cash released upon disposal of a subsidiary, and approximately $18,000 purchases of equipment.
Net cash used in investing activities was approximately
$0.4 million for the year ended December 31, 2021 and was attributable to approximately $2,000 of equipment purchases, and approximately
$0.4 million in loan to third party.
Financing activities
Net cash provided by financing activities was
approximately $2.5 million for the year ended December 31, 2022 and was primarily attributable to (i) approximately $1.4 million
borrowings from related parties, (ii) $0.5 million issuance of ordinary shares, (iii) approximately $0.6 million receipt of
subscribed shares deposit, and (iv) approximately $1.3 million proceeds from Reverse Recapitalization, offset by (i) approximately
$1.3 million payments of merger costs, and (ii) approximately $0.1 million repayments to short-term loans – bank and private
lender.
Net cash used in financing activities was approximately
$0.2 million for the year ended December 31, 2021 and was primarily attributable to approximately $67,000 repayments to short-term loans
– bank and private lender, approximately $0.3 million repayments to short-term loans – third parties, and approximately $7,000
payment of finance lease liabilities, offset by approximately $36,000 repayments from other receivable – related parties, approximately
$88,000 proceeds from short-term loans – bank and private lender, and approximately $94,000 borrowings from other payables –
related parties.
Commitments and Contingencies
In the normal course of business, we are subject to
loss contingencies, such as legal proceedings and claims arising out of our business, that cover a wide range of matters, including, among
others, government investigations and tax matters. In accordance with ASC No. 450-20, “Loss Contingencies”, we will record
accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.
44
The following table summarizes our contractual obligations
as of December 31, 2022:
Payments due by period
Contractual obligations
Total
Less than 1 year
1 – 3
years
3 – 5
years
More than
5 years
Short-term loans - bank and private lender
$
204,240
$
204,240
$
—
$
—
$
—
Other payable – related parties
1,571,945
1,571,945
—
—
—
Promissory note
170,000
170,000
—
—
—
Operating lease obligations
79,959
79,959
—
—
—
Convertible notes – third parties
2,619,625
2,619,625
—
—
—
Convertible notes- related parties
782,600
782,600
—
—
—
Finance lease obligations
22,201
7,186
15,015
—
—
Total
$
5,450,570
$
5,435,555
$
15,015
$
—
$
—
Capital Expenditures
For the years ended December 31, 2022 and 2021, we
purchased approximately $18,000 and $2,000, respectively, of equipment mainly for use in medical services. We did not purchase any material
equipment for operational use. We do not have any other material commitments to capital expenditures as of December 31, 2022.
Off-Balance Sheet Arrangements
As of December 31, 2022 and 2021, we have no off-balance
sheet arrangements including arrangements that would affect liquidity, capital resources, market risk support and credit risk support
or other benefits.
Emerging
Growth Company
We
are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business
Startups Act of 2012 (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements
that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required
to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements
of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously
approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected to use such extended transition
period which means that when a standard is issued or revised and we have different application dates for public or private companies,
we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of our consolidated financial statements with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
Critical Accounting Policies and Estimates
Financial statements and accompanying notes have been
prepared in accordance with U.S. GAAP. The preparation of these financial statements and accompanying notes requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under
the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. We have identified certain accounting policies that are significant to the preparation of financial
statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical
accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require
management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters
that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of
our significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly
from management’s current judgments. Our significant accounting policies are more fully described in Note 3 to the consolidated
financial statements, but we believe that the following critical accounting policies involve the most significant estimates and judgments
used in the preparation of our financial statements.
●
Accounts
receivable, net
●
Impairment
of long-lived assets and Goodwill
●
Prepaid
forward purchase liabilities
●
Warrant
●
Income
taxes
●
Revenue
Recognition
45
Use of Estimates and Assumptions
The preparation of consolidated financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the periods presented. Significant accounting estimates reflected in our consolidated financial statements
include estimates of allowances for doubtful accounts, estimates of impairment of long-lived assets and goodwill, valuation
of prepaid forward purchase and warrant, valuation allowance of deferred tax assets, and other provisions
and contingencies. Actual results could differ from these estimates.
Accounts receivable, net
Accounts receivable are recorded at the invoiced amount
less an allowance for any uncollectible accounts and do not bear interest, which are due after 30 to 90 days, depending on the credit
term with our customers. Our management reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical
collection trends and aging of receivables. Currently, our policy is to provide 100% allowance on balance over 2 years past due, 40% allowance
on balance between 1 – 2 years past due, 10% allowance on balance between 10 – 12 months past due, and 1% on balance between
7 – 9 months past due. Our management also periodically evaluates individual customer’s financial condition, credit history,
and the current economic conditions to make adjustments in the allowance when it is considered necessary. Account balances are charged
off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Our management
continues to evaluate the reasonableness of the valuation allowance policy and update it if necessary.
Impairment of long-lived assets and
Goodwill
In accordance with ASC 360-10, Long-lived
assets, including property and equipment with finite lives are reviewed for impairment whenever events or changes in circumstances
(such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying
value of an asset may not be recoverable. We assess the recoverability of the assets based on the undiscounted future cash flows the
assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result
from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the
asset. If an impairment is identified, We would reduce the carrying amount of the asset to its estimated fair value based on a
discounted cash flows approach or, when available and appropriate, to comparable market values. As of December 31, 2022 and 2021,
approximately $0.2 million and nil impairment on intangible assets was recognized, respectively.
Goodwill represents the excess of the consideration
paid of an acquisition over the fair value of the net identifiable assets of the acquired subsidiaries at the date of acquisition. Goodwill
is not amortized and is tested for impairment at least annually, more often when circumstances indicate impairment may have occurred.
Goodwill is carried at cost less accumulated impairment losses. If impairment exists, goodwill is immediately written off to its fair
value and the loss is recognized in the consolidated statements of income and comprehensive income. Impairment losses on goodwill are
not reversed. For the year ended December 31, 2022, management evaluated the recoverability of goodwill by performing a qualitative
assessment on the two reporting units and determine that it is more likely than not that the fair value of each reporting unit is less
than its carrying amount. Therefore, management performed quantitative assessment, fully impairment loss on goodwill of $971,229 was recognized
for the year ended December 31, 2022, as the carrying amount of each reporting unit is in excess of its fair value for the year ended
December 31, 2022.
46
Prepaid forward purchase
liabilities
In connection with the Forward Purchase Agreement,
we recognized prepaid forward purchase liabilities in accordance with ASC 480-10-25-8 by using carry and reverse carry arbitrage model
to determine the fair value of the prepaid forward purchase liabilities as we have the obligation to pay cash to settle the maturity consideration.
In accordance with ASC 480, Distinguishing
Liabilities from Equity , we have determined that the prepaid forward contract is a financial instrument other than a share that represent
or are indexed to obligations to repurchase the issuer’s equity shares by transferring assets, referred to herein as the “prepaid
forward purchase liability” on the consolidated balance sheets. We initially measure the prepaid forward purchase liability at fair
value and measured subsequently at fair value with changes in fair value recognized in earnings.
As of the closing of the Business Combination, the fair value of the prepaid forward purchase liability was determined to be $7,409,550.
Subsequently, the change of fair value of the prepaid forward purchase liability was amounted to a loss of $12,911,503 for the year end
December 31, 2022. As of December 31, 2022, the prepaid forward purchase liabilities amounted to $20,321,053.
Warrant
We
account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific
terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) ASC 480, Distinguishing Liabilities
from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers
whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to
ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the
warrants are indexed to our ordinary shares and whether the warrant holders could potentially require “net cash settlement”
in a circumstance outside of our control, among other conditions for equity classification. This assessment, which requires the use of
professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants
are outstanding.
For
issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component
of equity at the time of issuance. We determined that upon further review of the warrant agreements, we concluded that the warrants qualify
for equity accounting treatment.
Upon
completion of the business combination, all of 8i’s public and private warrants remain outstanding were replaced by our public
and private warrants. We treated such warrants replacement as a warrant modification and no incremental fair value was recognized.
Income taxes
We account for income taxes in accordance with U.S.
GAAP for income taxes. The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable
or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is calculated using the balance sheet
liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in
the consolidated financial statements and the corresponding tax basis. In principle, deferred tax liabilities are recognized for all taxable
temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable income will be utilized with
prior net operating loss carried forwards using tax rates that are expected to apply to the period when the asset is realized, or the
liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged
directly to equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be utilized. Current income taxes are provided for in accordance with
the laws of the relevant tax authorities. Our assumptions on valuation allowance includes our subsidiaries historical operating result
and likelihood of whether we expect we can realize such deferred tax assets in the near future.
An uncertain tax position is recognized as a benefit
only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized
on examination.
Recent Accounting Pronouncements
See Note 3 of the notes to the consolidated financial
statements for a discussion of recently issued accounting standards.
Quantitative and Qualitative Disclosures about
Market Risk
Interest Rate Risk
We are exposed to interest rate risk while we have
short-term bank, private lender, and third-party loans outstanding. Although interest rates for short-term loans are typically fixed for
the terms of the loans, the terms are typically twelve months and interest rates are subject to change upon renewal.
47
Credit Risk
Credit risk is controlled by the application of credit
approvals, limits and monitoring procedures. Credit risk is managed through in-house research and analysis of the economy and the underlying
obligors and transaction structures. We identify credit risk collectively based on industry, geography and customer type. In measuring
the credit risk of our sales to our customers, we mainly reflect the “probability of default” by the customer on our contractual
obligations and consider the current financial position of the customer and the current and likely future exposures to the customer.
Liquidity Risk
We are exposed to liquidity risk, which is risk that
will be unable to provide sufficient capital resources and liquidity to meet commitments and business needs. Liquidity risk is controlled
by the application of financial position analysis and monitoring procedures. When necessary, we will turn to other financial institutions
and related parties to obtain short-term funding to cover any liquidity shortage.
Foreign Exchange Risk
While our reporting currency is the U.S. dollar, the
majorities of our consolidated revenues and consolidated costs and expenses are denominated in SGD, VND and MYR. Majorities of assets
are denominated in SGD, VND and MYR. As a result, we are exposed to foreign exchange risk as revenues and results of operations may be
affected by fluctuations in the exchange rate between the U.S. dollar, SGD, VND and MYR. If the SGD, VND and MYR depreciates against the
U.S. dollar, the value of our SGD, VND and MYR revenues, earnings and assets as expressed in U.S. dollar financial statements will decline.
We have not entered into any hedging transactions in an effort to reduce exposure to foreign exchange risk.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Not required for smaller reporting companies.