EUDA Health Holdings Ltd 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our results of operations and financial condition should be read together with our unaudited condensed consolidated financial statements and the notes thereto, which are included elsewhere in this Report and our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”) filed with the SEC. Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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. 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. 36 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 relationship 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. 37 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 the Three Months Ended March 31, 2023 and 2022 For the Three Months Ended March 31, 2023 (Unaudited) 2022 (Unaudited) Change Percentage Change Revenues $ 1,698,734 $ 2,666,863 $ (968,129 ) (36.3 )% Cost of revenues 1,295,136 1,395,617 (100,481 ) (7.2 )% Gross profit 403,598 1,271,246 (867,648 ) (68.3 )% Selling expenses 404,771 368,092 (36,679 ) 10.0 % General and administrative expenses 1,975,607 824,896 1,150,711 139.5 % Research and development expenses - 2,946 (2,946 ) (100.0 )% (Loss) income from operations (1,976,780 ) 75,312 (2,052,092 ) (2,724.8 )% Other (loss) income, net (435,473 ) 155,505 (590,978 ) (380.0 )% Provision for income taxes 985 5,823 (4,838 ) (83.1 )% Net (loss) income (2,413,238 ) 224,994 (2,638,232 ) (1,172.6 )% Less: Net income attributable to noncontrolling interest 1,407 2,409 (1,002 ) (41.6 )% Net (loss) income attribute to EUDA $ (2,414,645 ) $ 222,585 $ (2,637,230 ) (1,184.8 )% 38 Revenues Our revenues are derived from medical services, product sales, and property management services. Total revenues decreased by approximately $1.0 million, or 36.3%, to approximately $1.7 million for the three months ended March 31, 2023 as compared to approximately $2.7 million for the three months ended March 31, 2022. The decrease of the total revenue was mainly attributable to the decrease of our medical service and our property management services by approximately $0.8 million and $0.2 million, respectively. Our revenues from our revenue categories are summarized as follows: For the Three Months Ended March 31, 2023 For the Three Months Ended March 31, 2022 Change Change (%) (Unaudited) (Unaudited) Revenues Medical services – specialty care $ 791,711 $ 1,496,211 $ (704,500 ) (47.1 )% Medical services – general practice - 60,888 (60,888 ) (100.0 )% Medical services – general practice (related parties) - 135 (135 ) (100.0 )% Medical services – subtotal 791,711 1,557,234 (765,523 ) (49.2 )% Product sales - 7,238 (7,238 ) (100.0 )% Property management services 907,023 1,102,391 (195,368 ) (17.7 )% Total revenues $ 1,698,734 $ 2,666,863 $ (968,129 ) (36.3 )% Medical services Revenues from medical services decreased by approximately $0.8 million, or 49.2%, to approximately $0.8 million for the three months ended March 31, 2023 from approximately $1.6 million for the three months ended March 31, 2022. The decrease was mainly due to decrease in average usage of our specialty care services per corporate client from approximately $3,700 for the three months ended March 31, 2022 to approximately $2,140 for the three months ended March 31, 2023 as less employees/patients was reported injured and seek for our medical service from our corporate clients. Approximately 993 and 1,300 employees/patients from our corporate clients had utilized our healthcare services during the three months ended March 31, 2023 and 2022, respectively. As a result, our corporate clients had utilized less of our specialty healthcare services. In addition, decrease in revenue from medical services also attributable to decrease in number of our corporate clients from approximately 400 for the three months ended March 31, 2022 to approximately 370 for the three months ended March 31, 2023 due to increase market competition. Product sales We did not generate revenues from product sales for the three months ended March 31, 2023 while we have insignificant revenue generated for the three months ended March 31, 2022. Property management services Revenues from property management services decreased by approximately $0.2 million, or 17.7%, to approximately $0.9 million for the three months ended March 31, 2023 from approximately $1.1 million for the three months ended March 31, 2022. Property management services revenue decreased mainly due to the decrease of property management units that we managed with and without our security guard services. The number of properties managed without security guard service decreased from 39 units for the three months ended March 31, 2022 to 34 units for the three months ended March 31, 2023. The number of properties managed with security guard services decreased from 13 units for the three months ended March 31, 2022 to 11 units for the three months ended March 31, 2023. Currently, we do not have any property management services provided to any medical clinics. 39 Our percentage of property management services revenue from each property type are summarized as follows: For the Three Months Ended For the Three Months Ended March 31, 2023 March 31, 2022 (Unaudited) (Unaudited) Residential Apartments 67 % 59 % Commercial Units 33 % 41 % Historically, we provided more property management services in the residential apartments than in the commercial units during the three months ended March 31, 2023 and 2022. Cost of Revenues Total cost of revenues decreased by approximately $0.1 million or 7.2%, to approximately $1.3 million for the three months ended March 31, 2023 as compared to approximately $1.4 million for the three months ended March 31, 2022. The decrease in cost of revenues was mainly due to the decrease of cost of revenue from property management service while offset by the increase of cost of revenue from medical services. Our cost of revenues from our revenue categories are summarized as follows: For the Three Months Ended For the Three Months Ended March 31, 2023 March 31, 2022 Change Change (%) (Unaudited) (Unaudited) Cost of revenues Medical services – specialty care $ 607,386 $ 43,432 $ 563,954 1,298.5 % Medical services – specialty care (related party) - 493,843 (493,843 ) (100.0 )% Medical services – general practice - 15,360 (15,359 ) (100.0 )% Medical services– subtotal 607,386 552,635 54,752 9.9 % Product sales - 9,255 (9,255 ) (100.0 )% Property management services 687,750 833,727 (145,977 ) (17.5 )% Total cost of revenues $ 1,295,136 $ 1,395,617 $ (100,480 ) (7.2 )% Our cost of revenues from medical services increased by approximately $55,000 or 9.9% to approximately $607,000 the three months ended March 31, 2023 from approximately $553,000 the three months ended March 31, 2022. The increase in cost of revenues from our medical services was due to price increase from our third-party clinic service providers despite decrease in our revenues from medical services. The increase in cost of revenues from medical services – specialty care of approximately $0.6 million or 1,298.5% 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”). Same reason was applied to the decrease in cost of revenues from medical services – specialty care (related party) of approximately $0.5 million or 100.0%. Historically, EUDA’s specialty care medical services provided by the third-party clinic service providers were insignificant until March 2022 and majority of the cost of revenue from EUDA’s specialty care medical services 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 for the three months ended March 31, 2023 and 2022. 40 Our cost of revenues from property management services decreased by approximately $0.1 million, or 17.5%, to approximately $0.7 million for the three months ended March 31, 2023 from approximately $0.8 million for the three months ended March 31, 2022. 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. Gross Profit Our gross profit from our major revenue categories is summarized as follows: For the Three Months Ended March 31, 2023 For the Three Months Ended March 31, 2022 Change Change (%) (Unaudited) (Unaudited) Medical services Gross profit $ 184,325 $ 1,004,599 $ (820,274 ) (81.7 )% Gross profit percentage 23.3 % 64.5 % (41.2 )% Product sales Gross loss $ - $ (2,017 ) $ 2,017 (100.0 )% Gross loss percentage - % (27.9 )% 27.9 % Property management services Gross profit $ 219,273 $ 268,664 $ (49,391 ) (18.4 )% Gross profit percentage 24.2 % 24.4 % (0.2 )% Total Gross profit $ 403,598 $ 1,271,246 $ (867,648 ) (68.3 )% Gross profit percentage 23.8 % 47.7 % (23.9 )% Our gross profit decreased by approximately $0.9 million, or 23.9%, to approximately $0.4 million for the three months ended March 31, 2023 from approximately $1.3 million for the three months ended March 31, 2022. The decrease in gross profit is primarily due to decrease of gross profit from medical service as a result of the decrease of revenue from medical service and increase of the related cost of revenue. The decrease in gross profit also due to the decrease of our revenues from our property management services. For the three months ended March 31, 2023 and 2022, Our overall gross profit percentage was 23.8% and 47.7%, respectively. The decrease in gross profit percentage of 23.9% was primarily due to the decrease of our medical services gross profit percentage of 41.2%. Gross profit percentage for medical services was 23.3% and 64.5% for the three months ended March 31, 2023 and 2022, respectively. The decrease of gross profit percentage of 41.2% was mainly due to price increase from our major third-party service providers. Beginning in April 2022, we directly utilized clinic service from the third-party providers instead of from our related party, Cadence. 41 Operating Expenses Total operating expenses increased by approximately $1.2 million, or 99.0%, to approximately $2.4 million for the three months ended March 31, 2023 from approximately $1.2 million for the three months ended March 31, 2022. The increase was mainly attributable to the increase of general and administrative expenses of approximately $1.2 million. An increase of approximately $1.2 million in general and administrative expenses was mainly attributable to an approximately $1.2 million increases in professional fees, including but not limited to, attorney, auditors and consulting expenses. An increase of approximately $0.04 million in selling expenses was mainly attributable to the approximately $0.2 million increase in advertising, marketing and entertainment expenses as we increased spending in more advertisement posting, and corporate relationship to develop more potential corporate clients, offset by the approximately $0.2 million decrease in sales commission paid to our sales representative as a result of less revenue generated for the three months ended March 31, 2023. Other(expenses) income, net Our other income (expenses), net is summarized as follows: For the Three Months Ended March 31, 2023 For the Three Months Ended March 31, 2022 Change Change (%) (Unaudited) (Unaudited) Other (Expense) Income Interest expense, net $ (11,377 ) $ (20,087 ) $ 8,710 (43.4 )% Gain on disposal of a subsidiary - 30,055 (30,055 ) (100.0 )% Change in prepaid forward purchase liabilities (532,492 ) - (532,492 ) 100.0 % Other income 108,396 145,537 (37,141 ) (25.5 )% Total Other (Expense) Income, net $ (435,473 ) $ 155,505 $ (590,978 ) (380.0 )% Total other expense, net was amounted to approximately $0.4 million for the three months ended March 31, 2023 while total other income, net was amounted to approximately $0.2 million for the three months ended March 31, 2022. The changes were mainly due to the following: Change in fair value of prepaid forward purchase liabilities We incurred a loss from change in fair value of prepaid forward purchase liabilities amounted approximately $0.5 million for the three months ended March 31, 2023 as we entered into two equity prepaid forward transactions in November 2022, which required for fair value accounting. Interest expense, net The interest expense, net decreased was due to less outstanding loans with similar interest rate and credit card facilities fee during the three months ended March 31, 2023 as compared to the same period in 2022. Other income The decrease of other income of approximately $37,000 was because we received less government grant from Singapore Job Scheme for the three months ended March 31, 2023. Provision for income taxes Our provision for income taxes decreased by approximately $5,000 for the three months ended March 31, 2023 as compared to the same period in 2022. Our provision for income taxes amounted to approximately $1,000 and $6,000 for the three months ended March 31, 2023 and 2022, respectively. The decrease in provision for income taxes is mainly due to decrease of net income before income tax. 42 Net (loss) income We incurred a net loss was approximately $2.4 million for the three months ended March 31, 2023, while we had a net income of approximately $0.2 million for the three months ended March 31, 2022. Changes from net income for the three months ended March 31, 2022 to net loss for the same period in 2023 was predominately due to the reasons as discussed above. 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 March 31, 2023, our negative working capital was approximately $6.5 million, and we had cash of approximately $0.8 million. We have experienced recurring losses from operations and negative cash flows from operating activities since 2020 as 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. 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 unaudited condensed 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. 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. 43 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 unaudited condensed 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 three months ended March 31, 2023 and 2022. For the Three Months Ended March 31, 2023 2022 Net cash used in operating activities $ (469,908 ) $ (252,196 ) Net cash used in investing activities - (29,326 ) Net cash provided by financing activities 525,328 331,439 Effect of exchange rate change on cash and restricted cash (2,613 ) (2,667 ) Net change in cash and restricted cash $ 52,807 $ 47,250 Operating activities Net cash used in operating activities was approximately $0.5 million for the three months ended March 31, 2023 and was primarily attributable to (i) approximately $2.4 million in net loss as discussed above, offset by (i) approximately $0.2 million decrease in account receivable as we collect our revenue in a more timely basis, (ii) approximately $0.2 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 $0.9 million increase in other payables and accrued liabilities mainly resulted from accrued professional fees, and (iv) approximately $0.5 million in change in fair value of prepaid forward purchase liabilities. Net cash used in operating activities was approximately $0.3 million for the three months ended March 31, 2022 and was primarily attributable to (i) approximately $0.3 million increase in accounts receivable, and (ii) approximately $0.2 million decrease in accounts payable – related party, offset by (i) approximately $0.2 million in net income, and (ii) approximately $54,000 in non-cash items such as depreciation and amortization. Investing activities We did not incur any cashflow from investing activities for the three months ended March 31, 2023. Net cash used in investing activities was approximately $29,000 for the three months ended March 31, 2022 and was attributable to approximately $26,000 loan to a third party, and approximately $3,000 in cash released upon disposal of a subsidiary. 44 Financing activities Net cash provided by financing activities was approximately $0.5 million for the three months ended March 31, 2023 and was primarily attributable to (i) approximately $0.2 million borrowings from short-term loans – bank and private lender, and (ii) approximately $0.4 million borrowing from short-term loans related parties and other payables- related parties , offset by approximately $57,000 repayments to short-term loans – bank and private lender. Net cash provided by financing activities was approximately $0.3 million for the three months ended March 31, 2022 and was primarily attributable to approximately $0.3 million borrowings from other payables – related parties, approximately $11,000 repayments from other receivable – related parties, and approximately $74,000 proceeds from short-term loans – bank and private lender, offset by approximately $21,000 repayments to short-term loans – bank and private lender, and approximately $2,000 payment of finance lease liabilities. 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. The following table summarizes our contractual obligations as of March 31, 2023: 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 $ 320,766 $ 320,766 $ — $ — $ — Short-term loans – relat ed parties 274,200 274,200 Other payable – related parties 1,667,759 1,667,759 — — — Promissory note 170,000 170,000 — — — Operating lease obligations 180,662 108,942 71,720 — — Convertible notes – third parties 2,619,625 2,619,625 — — — Convertible notes- related parties 782,600 782,600 — — — Finance lease obligations 20,661 20,661 — — — Total $ 6,036,273 $ 5,964,553 $ 71,720 $ — $ — Capital Expenditures For the three months ended March 31, 2023 and 2022, we did not purchase any equipment for use in medical services or equipment for operational use. Meanwhile, as of March 31, 2023, we do not have any other material commitments to capital. Off-Balance Sheet Arrangements As of March 31, 2023 and December 31, 2022, 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. 45 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 unaudited condensed 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 unaudited condensed 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 ● Prepaid forward purchase liabilities ● Warrant ● Income taxes ● Revenue Recognition Use of Estimates and Assumptions The preparation of unaudited condensed 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 unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in our unaudited condensed consolidated financial statements include estimates of allowances for doubtful accounts, valuation of prepaid forward purchase, valuation allowance of deferred tax assets, and other provisions and contingencies. Actual results could differ from these estimates. 46 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. The carrying value of accounts receivable is reduced by an allowance that reflects our best estimate of the amounts that will not be collected. An allowance for doubtful accounts is recorded in the period when a loss is probable based on an assessment of specific evidence indicating collection is unlikely, historical bad debt rates, accounts aging, financial conditions of the customer and industry trends. Starting from January 1, 2023, we adopted ASU No.2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASC Topic 326”). We used a modified retrospective approach, and the adoption does not have an impact on our unaudited condensed consolidated financial statements. To estimate expected credit losses, we have identified the relevant risk characteristics of the receivables which include size and nature. Receivables with similar risk characteristics have been grouped into pools. For each pool, we consider the past collection experience, current economic conditions and future economic conditions (external data and macroeconomic factors). This is assessed at each quarter based on the specific facts and circumstances. 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, 10% on balance between 7 – 9 months past due, and 10% on balance between 4 – 6 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. Our management continues to evaluate the reasonableness of the valuation allowance policy and update it if necessary. 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 on November 17, 2022, the fair value of the prepaid forward purchase liability was determined to be $7,409,550. For the three months ended March 31, 2023 and 2022, the change of fair value of the prepaid forward purchase liability was amounted to a loss of $532,492 and nil, respectively. As of March 31, 2023 and December 31, 2022, the prepaid forward purchase liabilities amounted to $20,853,545 and $20,321,053, respectively. 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 unaudited condensed 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. 47 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 unaudited condensed consolidated financial statements for a discussion of recently issued accounting standards. Item 3. Quantitative and Qualitative Disclosures about Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.