NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In U.S. dollars, unless stated otherwise)
Note 1– Nature of business and organization
EUDA Health Holdings Limited, which until November
17, 2022 was known as 8i Acquisition 2 Corp. (the “Company”, “EUDA” or “8i”) is a company incorporated
on January 21, 2021, under the laws of the British Virgin Islands for the purpose of entering into a merger, share exchange, asset acquisition,
stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (a “Initial
Business Combination”). The Company is an “emerging growth company”, as defined in Section 2(a) of the Securities Act
of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS
Act”). The Company’s efforts to identify a prospective target business were not limited to a particular industry or geographic
location (excluding China). The Articles of Association prohibited the Company from undertaking the Initial Business Combination with
any entity that conducts a majority of its business or is headquartered in China (including Hong Kong and Macau).
On November 17, 2022 (the “Closing Date”),
EUDA Health Holdings Limited, a British Virgin Islands business company (formerly known as 8i Acquisition 2 Corp.) (the “Company”),
consummated the business combination contemplated by the Share Purchase Agreement (the “SPA”) between 8i Acquisition 2 Corp.,
a BVI business company (“8i”), EUDA Health Limited, a British Virgin Islands business company (“EHL”), Watermark
Developments Limited, a British Virgin Islands business company (“Watermark” or the “Seller”), 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 8i and EHL was effected by the purchase by 8i of all of the issued and outstanding shares of EHL from the Seller (the “Share
Purchase”), resulting in EHL becoming a wholly owned subsidiary of 8i. In addition, in connection with the consummation of the Share
Purchase, 8i has changed its name to “EUDA Health Holdings Limited.” See Note 4 - Reverse
Recapitalization for further details.
The Company, through its subsidiaries, operates its
business in two segments, 1) engaged in the healthcare specialty group (other than general practice) business offering range of specialty
care services to patients, and engaged in the medical facility general practice clinic that provides holistic care for various illnesses,
and 2) engaged in the property management service that services shopping malls, business office building, or residential apartments.
Reorganization under EUDA Health Limited (“EHL”)
On August 3, 2021, EHL completed a reverse recapitalization
(“Reorganization”) under common control of its then existing shareholders, who collectively owned all of the equity interests
of Kent Ridge Health Private Limited (“KRHPL”), a holding company incorporated under the laws of the Singapore prior to the
Reorganization, through the following transaction.
|
● |
On July 24, 2021, EHL acquired 100% of the equity interests in Kent Ridge Healthcare Singapore Private Limited (“KRHSG”) through KRHPL for consideration of SG$1.0. |
|
● |
On July 24, 2021, EHL acquired 100% of the equity interests in EUDA Private Limited (“EUDA PL”) through KRHPL for consideration of SG$1.0. |
|
● |
On August 1, 2021, Kent Ridge Health Limited (“KRHL”), EHL’s wholly owned subsidiary, acquired 100% of the equity interests in Super Gateway Group Limited (“SGGL”) through KRHPL for consideration of SG$1.0. |
|
● |
On August 3, 2021, EHL acquired 100% of the equity interests in Singapore Emergency Medical Assistance Private Limited (“SEMA”) through KRHPL for no consideration. |
Before and after the Reorganization, the Company,
together with its subsidiaries (as indicated above), is effectively controlled by the same shareholders, and therefore the Reorganization
is considered as a recapitalization of entities under common control in accordance with Accounting Standards Codification (“ASC”)
805-50-25. The consolidation of the Company and its subsidiaries have been accounted for at historical cost and prepared on the basis
as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated
financial statements in accordance with ASC 805-50-45-5.
Reorganization under KRHPL
Prior to the Reorganization, KRHPL entered into a
Sales and Purchase of Shares Agreement (“KRHSG Agreement”) with the sole shareholder of KRHSG who is under common control
of the majority shareholders of KRHPL on December 2, 2019. Pursuant to the KRHSG Agreement, KRHPL will acquire 100% of the equity interests
in KRHSG (“Reorganization of KRHSG”) for a total consideration of SG$1.0 (“Total Consideration”). The transaction
was completed and effective on January 3, 2020. Since KRHSG and KRHPL are effectively controlled by the same shareholders of EHL, and
therefore the Reorganization is under common control at carrying value. The financial statements of KRHSG are prepared on the basis as
if the restructuring of KRHSG became effective as of the beginning of the first period presented in the accompanying consolidated financial
statements of EHL.
Prior to the Reorganization, KRHPL entered into a
Sales and Purchase of Shares Agreement (“EUDA PL Agreement”) with the sole shareholder of EUDA PL who is under common control
of the majority shareholders of KRHPL on December 2, 2019. Pursuant to the EUDA PL Agreement, KRHPL will acquire 100% of the equity interests
in EUDA PL (“Reorganization of EUDA PL”) for a total consideration of SG$1.0 (“Total Consideration”). The transaction
was completed and effective on January 3, 2020. Since EUDA PL and LRHPL are effectively controlled by the same shareholders of EHL, and
therefore the Reorganization is under common control at carrying value. The financial statements of EUDA PL are prepared on the basis
as if the restructuring of EUDA PL became effective as of the beginning of the first period presented in the accompanying consolidated
financial statements of EHL.
Prior to the Reorganization, KRHPL entered into a
Sales and Purchase of Shares Agreement (“SEMA Agreement”) with the sole shareholder of SEMA who is effectively controlled
by the same shareholders of KRHPL on December 31, 2019. Pursuant to the SEMA PL Agreement, KRHPL will acquire 100% of the equity interests
in SEMA (“Reorganization of SEMA”) for no consideration. SEMA is a holding company and has no operations prior to December
31, 2019.
The accompanying consolidated financial statements
reflect the activities of EUDA and each of the following entities:
Schedule of consolidated financial statement
Name |
|
|
Background |
|
Ownership |
EUDA Health Limited (“EHL”) |
|
●
●
● |
A British Virgin Islands company
Incorporated on June 8, 2021
A holding Company |
|
100% owned by EUDA |
Kent Ridge Healthcare Singapore Pte. Ltd. (“KRHSG”) |
|
●
●
● |
A Singapore company
Incorporated on November 9, 2017
Multi-care specialty group offering range of specialty care services to patients. |
|
100% owned by EHL |
EUDA Private Limited (“EUDA PL”) |
|
●
●
● |
A Singapore company
Incorporated on April 13, 2018
A digital health company that provides a platform to serve the healthcare industry |
|
100% owned by EHL |
Zukitek Vietnam Private Limited Liability Company (“ZKTV PL”) |
|
●
●
● |
A Vietnam company
Incorporated on May 2, 2019
A Research and Development Company |
|
100% owned by EUDA PL |
Singapore Emergency Medical Assistance Private Limited (“SEMA”) |
|
●
●
● |
A Singapore company
Incorporated March 18, 2019
A holding company |
|
100% owned by EHL |
The Good Clinic Private Limited (“TGC”)(1) |
|
●
●
● |
A Singapore company
Incorporated on April 8, 2020
Medical facility general practice clinic that provides holistic care for various illnesses |
|
100% owned by SEMA |
EUDA Doctor Private Limited
(“ED PL”) |
|
●
●
● |
A Singapore company
Incorporated on December 1, 2021
A platform solution for doctors and physicians to find, connect, and collaborate with trusted peers, specialists, and other professionals |
|
100% owned by EHL |
|
|
● |
Operation has not been commenced |
|
|
Kent Ridge Hill Private Limited
(“KR Hill PL”) |
|
●
●
● |
A Singapore company
Incorporated on December 1, 2021
A B2B2C pharmaceutical and OTC drugs e-commerce platform to promote its drug products |
|
100% owned by EHL |
|
|
● |
Operation has not been commenced |
|
|
Kent Ridge Health Limited (“KRHL”) |
|
●
●
● |
A British Virgin Islands company
Incorporated on June 8, 2021
A holding company |
|
100% owned by EHL |
Zukitech Private Limited (“Zukitech”)
(“ZKT PL”) |
|
●
●
● |
A Singapore company
Incorporated on June 13, 2019
A holding company |
|
100% owned by KRHL |
Super Gateway Group Limited
(“SGGL”) |
|
●
●
● |
A British Virgin Islands company
Incorporated on April 18, 2008
A holding company |
|
100% owned by KRHL |
Universal Gateway International Pte. Ltd. (“UGI”) |
|
●
●
●
● |
A Singapore company
Incorporated on September 30, 2000
Registered capital of RMB 5,000,000
A holding company |
|
98.3% owned by SGGL |
Melana International Pte. Ltd.
(“Melana”) |
|
●
●
● |
A Singapore company
Incorporated on September 9, 2000
Property management service that services shopping malls, business office building, or residential apartments |
|
100% owned by UGI |
Tri-Global Security Pte. Ltd.
(“Tri-Global”) |
|
●
●
● |
A Singapore company
Incorporated on August 10, 2000
Property security service that services shopping malls, business office building, or residential apartments |
|
100% owned by UGI |
UG Digitech Private Limited (“UGD”) |
|
●
●
● |
A Singapore company
Incorporated on August 16, 2001
A holding company |
|
100% owned by UGI |
Nosweat Fitness Company Private Limited (“NFC”) |
|
●
●
●
|
A Singapore company
Incorporated on July 6, 2021
A virtual personal training platform for fitness enthusiasts |
|
100% owned by KRHL |
|
|
● |
Operation has not been commenced |
|
|
True Cover Private Limited (“TCPL”) |
|
●
●
● |
A Singapore company
Incorporated on December 1, 2021
A B2B e-claims healthcare insurance platform |
|
100% owned by KRHL |
|
|
● |
Operation has not been commenced |
|
|
KR Digital Pte. Ltd. (“KR Digital”) (2) |
|
●
●
● |
A Singapore company
Incorporated on December 29, 2021
Development of software and applications |
|
100% owned by KRHL |
|
|
● |
Operation has not been commenced |
|
|
Zukihealth Sdn. Bhd. (“Zukihealth”) (2) |
|
●
●
● |
A Malaysian company
Incorporated on February 15, 2018
Distribution of health care supplement products |
|
100% owned by KR Digital |
|
|
● |
Operation has not been commenced |
|
|
|
(1) |
On March 1, 2022, SEMA, the Company’s wholly owned subsidiary, sold 100% of the equity interest in TGC to an unrelated individual third party for a total consideration of SG$ 1.0 (see Note 5). |
|
|
|
|
(2) |
On April 19, 2022, the Company acquired 100% equity interest of KR Digital Pte Ltd, (“KR Digital”), a Singapore Company, from Mr. Kelvin Chen, the Company’s Chief Executive Office (“CEO”) and shareholder for total consideration of SG$1. Prior to the acquisition of KR Digital, on April 15, 2022, KR Digital acquired 100% equity interest of Zukihealth Sdn Bhd, (“Zukihealth”), a Malaysia corporation, from Mr. Kelvin Chen, the Company’s CEO and shareholder for total consideration of SG$1. Both KR Digital and Zukihealth have no operations prior to the acquisition in April 2022. KR Digital, through Zukihealth, is expected to carry out the distribution of health care products business. |
Note 2 – Going concern
In assessing the Company’s going concern,
the Company monitors and analyzes its cash on-hand and its operating and capital expenditure commitments. The Company’s
liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. Debt financing
in the form of short-term borrowings from bank, private lender, third parties and related parties and cash generated from operations
have been utilized to finance the working capital requirements of the Company. As of December 31, 2022, the Company’s negative
working capital deficit was approximately $4.1
million, and the Company had cash and restricted cash of approximately $0.8
million. The Company has experienced recurring losses from operations and negative cash flows from operating activities since 2020.
In addition, the Company had, and may potentially continue to have, an ongoing need to raise additional cash from outside sources to
fund its expansion plan and related operations. Successful transition to attaining profitable operations is dependent upon achieving
a level of revenues adequate to support the Company’s cost structure. In connection with the Company’s 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 the Company’s ability to
continue as a going concern within one year after the date that these consolidated financial statements are issued.
If the Company is unable to generate sufficient funds
to finance the working capital requirements of the Company within the normal operating cycle of a twelve-month period from the date of
these financial statements are issued, the Company may have to consider supplementing its available sources of funds through the following
sources:
● |
other available sources of financing from Singapore banks and other financial institutions or private lender; |
● |
financial support and credit guarantee commitments from the Company’s related parties; and |
● |
equity financing. |
The Company can make no assurances that required financings
will be available for the amounts needed, or on terms commercially acceptable to the Company, if at all. If one or all of these events
does not occur or subsequent capital raises are insufficient to bridge financial and liquidity shortfall, there would likely be a material
adverse effect on the Company and would materially adversely affect its ability to continue as a going concern.
The consolidated financial statements have been prepared
assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments that might result from the
outcome of this uncertainty.
Note 3 – Summary of significant accounting
policies
Basis of presentation
The accompanying consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
for information pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).
Principles of consolidation
The consolidated financial statements include the
financial statements of the Company and its subsidiaries. All transactions and balances among the Company and its subsidiaries have been
eliminated upon consolidation.
A subsidiary is an entity in which the Company, directly
or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies, to appoint
or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors.
Use of estimates
The preparation of the 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 the Company’s consolidated
financial statements include lease classification and liabilities, right-of-use assets, determinations of the useful lives and valuation
of long-lived assets, estimates of allowances for doubtful accounts, estimates of impairment of long-lived assets and goodwill, valuation
of deferred tax assets, other provisions and contingencies, estimated fair value of earn-out shares, prepaid forward purchase liability
and private warrants. Actual results could differ from these estimates.
Foreign currency translation and transaction
Transactions denominated in currencies other than
the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction.
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency
using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statements
of operations and comprehensive income (loss).
The reporting currency of the Company is United States
Dollars (“US$”) and the accompanying financial statements have been expressed in US$. The Company’s subsidiaries in
Singapore, Vietnam, and Malaysia conduct its businesses and maintain its books and records in the local currency, Singapore Dollars (“SGD”),
Vietnamese Dong (“VND”), and Malaysian Ringgit (“MYR”), as its functional currency, respectively.
In general, for consolidation purposes, assets and
liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation
of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average
rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are
recorded as a separate component of accumulated other comprehensive income (loss) within the statements of shareholders’ equity
(deficit). Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the statement of
cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.
Translation of foreign currencies into US$1 have been
made at the following exchange rates for the respective periods:
Schedule
of foreign currency exchange rates
|
|
As of
December 31, 2022 |
|
|
As of
December 31, 2021 |
|
Period-end SGD: US$1 exchange rate |
|
|
1.34 |
|
|
|
1.35 |
|
Period-end VND: US$1 exchange rate |
|
|
23,635.00 |
|
|
|
22,855.00 |
|
Period-end MYR: US$1 exchange rate* |
|
|
4.40 |
|
|
|
- |
|
Period-end : US$1 exchange rate* |
|
|
4.40 |
|
|
|
- |
|
Period-average SGD: US$1 exchange rate |
|
|
1.38 |
|
|
|
1.34 |
|
Period-average VND: US$1 exchange rate |
|
|
23,409.44 |
|
|
|
22,935.24 |
|
Period-average MYR: US$1 exchange rate* |
|
|
4.39 |
|
|
|
- |
|
Period-average : US$1 exchange rate* |
|
|
4.39 |
|
|
|
- |
|
* | The Company did not have any Malaysia subsidiary prior to April 19, 2022. |
Non-controlling interests
For the Company’s non-wholly
owned subsidiaries, a non-controlling interest is recognized to reflect portion of equity that is not attributable, directly or indirectly,
to the Company. The cumulative results of operations attributable to non-controlling interests are also recorded as non-controlling interests
in the Company’s consolidated balance sheets and consolidated statements of operations and comprehensive income (loss). Cash flows
related to transactions with non-controlling interests are presented under financing activities in the consolidated statements of cash
flows.
Segment reporting
The Company’s chief operating decision-maker
is identified as the chief executive officer who reviews financial information presented on a consolidated basis, accompanied by disaggregated
information about revenues by different revenues streams for purposes of allocating resources and evaluating financial performance. Based
on qualitative and quantitative criteria established by Accounting Standards Codification (“ASC”) 280, “Segment Reporting”,
the Company considers itself to be operating within two operating and reportable segments as set forth in Note 21.
Cash and restricted cash
Cash represent cash on hand and demand deposits
placed with banks or other financial institutions which are unrestricted as to withdrawal or use and have original maturities less
than three months. Restricted cash represents cash held in bank account from 8i which was restricted due to the incomplete
procedures of changing signers as of December 31, 2022. As of the date of the issuance of these financial statements, such
restriction has been lifted and the remaining cash held in bank account has transfer to the Company’s operating bank account.
Therefore, such restricted cash should be classified as current asset.
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 its customers. Management reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical
collection trends and aging of receivables. 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.
The Company’s management continues to evaluate the reasonableness of the valuation allowance policy and update it if necessary.
As of December 31, 2022 and 2021, the Company provided allowance for doubtful accounts of $197,438 and $80,799, respectively. For the
years ended December 31, 2022 and 2021, the Company did not write off any allowance for doubtful account against the account receivable
balance.
Other receivables
Other receivables primarily include receivables
from investment from the Company’s Affordable Home project in Indonesia and employee advance, and refundable deposits from
third party service providers. Management regularly reviews the aging of receivables and changes in payment trends and records
allowances when management believes collection of amounts due are at risk. Accounts considered uncollectable are written off against
allowances after exhaustive efforts at collection are made. $2,209,825
allowance for doubtful account related to other receivable was recorded and written off for the year ended December 31, 2022. Nil
allowance for doubtful account related to other receivable was recorded for the year ended December 31, 2021
Prepaid expenses and other current assets
Prepaid expenses and other current assets
primarily include prepaid expenses paid to services providers, and other deposits. Management regularly reviews the aging of such
balances and changes in payment and realization trends and records allowances when management believes collection or realization of
amounts due are at risk. Accounts considered uncollectable are written off against allowances after exhaustive efforts at collection
are made. As of December 31, 2022 and 2021, no
allowance for doubtful account related to prepaid expenses was recorded.
Property and equipment, net
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets with no residual value.
The estimated useful lives are as follows:
Schedule
of property and equipment useful lives
|
|
Expected useful lives |
Office equipment |
|
3 years |
Medical equipment |
|
3 years |
Leasehold improvement |
|
Shorter of the lease term or 5 years |
The cost and related accumulated depreciation of assets
sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of operations
and comprehensive income (loss). Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals
and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of
depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
The
Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. An asset is considered impaired if its carrying amount exceeds the future net undiscounted cash flows
that the asset is expected to generate. If such asset is considered to be impaired, the impairment recognized is the amount by which the
carrying amount of the asset, if any, exceeds its fair value determined using a discounted cash flow model. For the years ended
December 31, 2022 and 2021, there was no impairment of property and equipment recognized.
Intangible assets, net
Purchased intangible assets
are recognized and measured at fair value upon acquisition. Separately identifiable intangible assets that have determinable lives continue
to be amortized over the Company’s best estimate of its useful life as follows:
Schedule
of intangible assets net
Categories |
|
Useful life |
Customer relationships |
|
6 years |
The Company amortized the
intangible assets using the pattern in which the economic benefits of the intangible assets are consumed or otherwise used up in accordance
with ASC Topic 350 “Intangibles - Goodwill and Other.”
Separately identifiable intangible
assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of
such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting
from the use of the asset and its eventual disposition. Measurement of any impairment loss for identifiable intangible assets is based
on the amount by which the carrying amount of the assets exceeds the fair value of the assets. $167,787 and nil impairment of intangibles
assets was recorded for the years ended December 31, 2022 and 2021, respectively.
Goodwill
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 operations and comprehensive income (loss). Impairment losses on goodwill
are not reversed.
The Company reviews the carrying value of intangible
assets not subject to amortization, including goodwill, to determine whether impairment may exist annually or more frequently if events
and circumstances indicate that it is more likely than not that an impairment has occurred. Management has determined that the Company
has two reporting units within the entity at which goodwill is monitored for internal management purposes. The Company adopted ASU 2017-04
in 2022, which primary goal is to simplify the goodwill impairment test and provide cost savings for all entities. This is accomplished
by removing the requirement to determine the fair value of individual assets and liabilities in order to calculate a reporting unit’s
“implied” goodwill under current GAAP.
The amendments in ASU 2017-04 eliminate Step 2 of
the goodwill impairment test. As such, an entity will perform its annual, or interim, goodwill impairment test by comparing the fair value
of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the reporting
unit’s carrying amount exceeds its fair value. If fair value exceeds the carrying amount, no impairment should be recorded. Any
loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Impairment losses on goodwill cannot
be reversed once recognized.
When measuring a goodwill impairment loss, an entity
should consider the income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit. The ASU contains
an illustration of the simultaneous equations method to demonstrate this, which reflects a deferred tax benefit from reducing the carrying
amount of tax-deductible goodwill relative to the tax basis.
An entity may still perform the optional qualitative
assessment for a reporting unit to determine if it is more likely than not that goodwill is impaired. However, this ASU eliminates the
requirement to perform a qualitative assessment for any reporting unit with zero or negative carrying amount. Therefore, the same one-step
impairment assessment will apply to all reporting units.
For
the year ended December 31, 2022, management evaluated the recoverability of goodwill by performing 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
Impairment for long-lived assets
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. The Company assesses 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, the Company 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, $0.2 million and nil impairment of long-lived assets was recognized, respectively.
Warrants
The Company
accounts 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 the Company’s
own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside
of the Company’s 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. The Company determined that upon further review of the warrant agreements, the Company concluded that
its 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 the Company’s
public and private warrants. The Company treated such warrants replacement as a warrant modification and no incremental fair value
was recognized.
Forward Purchase Receivables and Prepaid Forward
Purchase Liabilities
The
Company recorded Forward Purchase Receivables on its consolidated balance sheets of $21,892,527
as of December 31, 2022 to account for the Prepayment Amount of the Forward Purchase Agreement, as discussed in Note 11. The
Prepayment Amount will be held in a deposit account until the Valuation Date (the second anniversary of the closing of the Business
Combination, subject to certain acceleration provisions). At the Maturity Date, the Sellers are entitled to received $2.50 per
Recycled Shares (“Maturity Consideration”) in cash or in shares. As of December 31, 2022, no shares were sold after
Closing.
In
connection with the Forward Purchase Agreement, the Company recognized a liability in accordance with ASC 480-10-25-8 as the Company
has the obligation to pay cash to settle the maturity consideration, referred to herein as the “prepaid forward purchase
liability” on its consolidated balance sheets of $20,321,053
as of December 31, 2022. Refer to Note 11 for further detail.
Revenue recognition
The Company follows the revenue accounting requirements
of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“Accounting Standards
Codification (“ASC”) 606”). The core principle underlying the revenue recognition of this ASU allows the Company to
recognize - revenue that represents the transfer of goods and services to customers in an amount that reflects the consideration to which
the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and
determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers
to a customer.
To achieve that core principle, the Company applies
five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract
with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable
consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price
to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance
obligation.
The Company accounts for a contract with a customer
when the contract is committed in writing, the rights of the parties, including payment terms, are identified, the contract has commercial
substance and collectability is probable.
Revenue recognition policies for each type of revenue
stream are as follows:
(1) Medical Services
- Performance obligation satisfied at a point in time
The Company operates on a unified technology
health care platform which provide a full continuum of healthcare services integrated with healthcare data analytics to drive
improved outcomes for patients. The Company operates the medical services on a business-to-business (B2B) platform, and serves the
corporate customers involved in various industries. The Company is primarily generating revenue on a per healthcare visit basis for
specialty medical visits for specialist treatment such as cardiology, dermatology and etc, at the time which the single performance obligation was satisfied. Such fees are paid by the corporate
customers on behalf of their employees. The Company generally bills their corporate customers
for the healthcare visit services on a weekly basis, or in arrears depending on the service, with payment terms generally between 30
to 90 days. There are not significant differences between the timing of revenue recognition and billing. Consequently, the Company
has determined that the Company’s contracts do not include a financing component. Revenue is recognized in an amount
that reflects the consideration that is expected in exchange for the service at a point in time at the time of the visit. In
addition, the Company’s contracts do not generally contain refund provisions for fees earned related to services
performed.
The Company accounts for medical service revenue on
a gross basis as the Company is acting as a principal in these transactions and is responsible for fulfilling the promise to provide the
specified services, which the Company has control of the services and has the ability to direct the service providers to be performed
to obtain substantially all the benefits. In making this determination, the Company also assesses whether it is primarily obligated in
these transactions, is subject to inventory risk, has latitude in establishing prices, or has met several but not all of these indicators
in accordance with ASC 606-10-55-36 through 40.
The Company recognizes the medical services revenue
when the control of the specified services is transferred to its customer, which at a point in time at the time after completion of the
visit.
The Company also operates on a general practice clinic
and generating such revenue on a per healthcare visit basis. Revenues are recognized when the visits are completed at a point in time
at the time of the visit.
(2) Product Sales
- Performance obligation satisfied at a point in time
The Company purchases, sells, and installs facial
recognition and temperature measurement monitor system to corporate customer, where the product and the installation are interrelated
and are not capable of being distinct since the customer cannot benefit from the product or installation either on its own. The Company
recognized the products revenue when control of the product is passed to the customer, which is the point in time that the customers are
able to direct the use of and obtain substantially all of the economic benefit of the goods after the installation by the Company’s
technician. The transfer of control typically occurs at a point in time based on consideration of when the customer has an obligation
to pay for the goods, and physical possession of, legal title to, and the risks and rewards of ownership of the goods has been transferred,
and the customer has accepted the goods. Revenue is recognized net of estimates of variable consideration, including product returns,
customer discounts and allowance. Historically, the Company has not experienced any significant returns.
(3) Property Management Services
- Performance obligation satisfied over a period of
time
The Company provides property management services
in shopping malls, business office building, or residential apartments to all tenants and property owners. Property management services
include common area property management services that contain cleaning, landscaping, public facilities maintenance and other traditional
services and also include security property management services provided to all tenants and property owners. Each of the two services
is within separate agreements. The Company identified common area property management services as a single performance obligation as the
kinds of service in the contract are not capable of being distinct and identified the security management services as another single performance
obligation as there is only one service that is to provide security services.
The Company recognizes the common area property management
revenue and security property management revenue on a straight-line basis over the terms of the common area property management agreement
and security property management agreement, generally over one year period because its customer simultaneously receives and consumes the
benefits provided by the Company throughout the performance obligations period.
The Company has elected to apply the practical expedient
to expense costs as incurred for incremental costs to obtain a contract when the amortization period would have been one year or less.
As of December 31, 2022 and 2021, the Company did not have any contract assets.
The Company recognized advance payments from its customer
prior to revenue recognition as contract liability until the revenue recognition performance obligation are met. As of December 31, 2022
and 2021, the Company did not have any contract liability.
Disaggregated information of revenues by products/services
are as follows:
Schedule
of revenue
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
|
|
For the Year Ended |
|
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
Medical services – specialty care |
|
$ |
6,001,439 |
|
|
$ |
5,010,837 |
|
Medical services – general practice |
|
|
63,794 |
|
|
|
712,712 |
|
Medical services – general practice (related parties) |
|
|
135 |
|
|
|
4,640 |
|
Medical services – subtotal |
|
|
6,065,368 |
|
|
|
5,728,189 |
|
Product sales |
|
|
11,046 |
|
|
|
257,841 |
|
Property management service – common area management |
|
|
2,919,335 |
|
|
|
3,508,663 |
|
Property management service – security management |
|
|
844,960 |
|
|
|
1,049,857 |
|
Property management service |
|
|
3,764,295 |
|
|
|
4,558,520 |
|
Total revenues |
|
$ |
9,840,709 |
|
|
$ |
10,544,550 |
|
Cost of revenues
(1) Medical Services
Cost of revenues mainly consists of medical supplies
purchased and medical service was provided by Cadence Health Pte. Ltd., a related party, prior to March 2022. Medical supplies purchased
and medical service provided by the third party service providers were insignificant prior to March 2022. Beginning in April 2022, cost
of revenues mainly consists of medical supplies purchased and medical service are provided by third party service providers.
(2) Product Sales
Cost of revenues mainly consists of medical product
or equipment purchased for resale.
(3) Property Management Services
Cost of revenues mainly consists of labor expenses
incurred attributable to property management service.
Disaggregated information of cost of revenues by products/services
are as follows:
Schedule
of cost of revenue
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
|
|
For the Year Ended |
|
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
Medical services – specialty care |
|
$ |
2,995,778 |
|
|
$ |
46,849 |
|
Medical services – specialty care (related party) |
|
|
491,499 |
|
|
|
2,349,702 |
|
Medical services – general practices |
|
|
45,549 |
|
|
|
427,908 |
|
Medical services – subtotal |
|
|
3,532,826 |
|
|
|
2,824,459 |
|
Product sales |
|
|
59,391 |
|
|
|
167,202 |
|
Property management services – common area management |
|
|
2,210,703 |
|
|
|
2,461,981 |
|
Property management services – security management |
|
|
683,593 |
|
|
|
846,555 |
|
Property management services |
|
|
2,894,296 |
|
|
|
3,308,536 |
|
Total cost of revenues |
|
$ |
6,486,513 |
|
|
$ |
6,300,197 |
|
Advertising costs
Advertising is mainly through online and offline promotion
activities. Advertising costs amounted to $21,795 and $270,361 for the years ended December 31, 2022 and 2021, respectively.
Research and development
Research and development expenses include salaries
and other compensation-related expenses to the Company’s research and product development personnel, and related expenses for the
Company’s research and product development team. Research and development expenses amounted to $17,209 and $129,265 for the years
ended December 31, 2022 and 2021, respectively.
Defined
contribution plan
The full-time employees of the Company are entitled
to the government mandated defined contribution plan. The Company is required to accrue and pay for these benefits based on certain percentages
of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant government regulations, and
make cash contributions to the government mandated defined contribution plan. Total expenses for the plans were $505,591 and $574,535
for the years ended December 31, 2022 and 2021, respectively.
The related contribution plans include:
Singapore subsidiaries
- Central Provident Fund (“CPF”) –
17.00% based on employee’s monthly salary for employees aged 55 and below, reduces progressively to 7.5% as age increase;
- Skill Development Levy (“SDL”) –
up to 0.25% based on employee’s monthly salary capped $8.3 (SGD 11.25).
Vietnam subsidiary
- Social Insurance Fund (“SIF”) –
20% based on employee’s monthly salary;
- Trade Union Fee – 2.00% of SIF
Goods and services taxes (“GST”)
Revenue represents the invoiced value of service,
net GST. The GST are based on gross sales price. GST rate is generally 7% in Singapore. Entities that are GST general taxpayers are allowed
to offset qualified input GST paid to suppliers against their output GST liabilities. Net GST balance between input GST and output GST
is recorded in tax payable.
Income taxes
The Company accounts 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.
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. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. No penalties and
interest incurred related to underpayment of income tax for the years ended December 31, 2022 and 2021. As
of December 31, 2022, the tax returns of the Company’s Singapore entities for the calendar year from 2019 through 2022 remain open
for statutory examination by Singapore tax authorities.
The Company recognize interest and penalties related to unrecognized tax
benefits, if any, on the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties
are included on the related tax liability line in the consolidated balance.
The Company conducts much of its business activities
in Singapore and is subject to tax in its jurisdiction. As a result of its business activities, the Company’s subsidiaries file
separate tax returns that are subject to examination by the foreign tax authorities.
Comprehensive income (loss)
Comprehensive income (loss) consists of two components,
net income and other comprehensive income. Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under
GAAP are recorded as an element of shareholders’ equity but are excluded from net income. Other comprehensive income (loss) consists
of a foreign currency translation adjustment resulting from the Company not using the U.S. dollar as its functional currencies.
(Loss) earnings per share
The Company computes (loss) earnings per share (“EPS”)
in accordance with ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is
measured as net income divided by the weighted average ordinary share outstanding for the period. Diluted EPS presents the dilutive effect
on a per share basis of the potential ordinary shares (e.g., convertible securities, options and warrants) as if they had been converted
at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e.,
those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
The Company calculates basic and diluted (loss)/earnings
per share as follows:
Schedule
of basic and diluted earnings per share
|
|
2022 |
|
|
2021 |
|
|
|
For the Years Ended
December 31 |
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
Numerator |
|
|
|
|
|
|
|
|
Less: Net (income) loss attributable to noncontrolling interest |
|
|
(65,124 |
) |
|
|
35,567 |
|
Net (loss)/income attributable to common shareholders, basic |
|
$ |
(24,884,122 |
) |
|
$ |
864,829 |
|
Denominator |
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding, basic and diluted |
|
|
12,029,656 |
|
|
|
9,253,333 |
|
(Loss)/Earnings per share, basic and diluted |
|
$ |
(2.07 |
) |
|
$ |
0.09 |
|
As of December
31, 2022, the Company had dilutive securities from the outstanding convertible notes and warrants are convertible into 1,411,725 and 4,458,625
of the Company’s ordinary shares, respectively, were not included in the computation of dilutive loss per share because the inclusion
of such convertible notes and warrants would be anti-dilutive.
Fair value measurements
Fair value is defined as the price that would be received
for an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Valuation
techniques maximize the use of observable inputs and minimize the use of unobservable inputs. When determining the fair value measurements
for assets and liabilities, we consider the principal or most advantageous market in which it would transact and considers assumptions
that market participants would use when pricing the asset or liability. The following summarizes the three levels of inputs required to
measure fair value, of which the first two are considered observable and the third is considered unobservable:
Level 1 - Unadjusted quoted prices in active markets
for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices,
such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable
or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by
little or no market activity and that are significant to the fair value of the assets or liabilities.
The fair value for certain assets and liabilities
such as cash and restricted cash, accounts receivable, net, other receivables, prepaid expenses and other current assets, loan to third-party,
short-term loans, promissory note, convertible notes, accounts payable, other payables and accrued liabilities, and tax payables have
been determined to approximate carrying amounts due to the short maturities of these instruments. The Company believes that its long-term
loan to third party approximates the fair value based on current yields for debt instruments with similar terms.
The following table sets forth by level within the
fair value hierarchy our financial liability that were accounted for at fair value on a recurring basis as of December 31, 2022:
Schedule
of fair value hierarchy of financial liability
|
|
Carrying Value at |
|
|
Fair Value Measurement at
December 31, 2022 |
|
|
|
December 31, 2022 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Prepaid forward purchase liabilities |
|
$ |
20,321,053 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
20,321,053 |
|
The following is a reconciliation of the beginning
and ending balance of the financial liability measured at fair value on a recurring basis for the year ended December 31, 2022:
Schedule of reconciliation of financial
liability measured at fair value on a recurring basis
|
|
December 31, 2022 |
|
Beginning balance |
|
$ |
7,409,550 |
|
Change in fair value of prepaid forward purchase liabilities |
|
|
12,911,503 |
|
Ending balance |
|
$ |
20,321,053 |
|
Leases
The
Company accounts for leases in accordance with ASC 842. The Company entered into two agreements as a lessee to lease office equipment
for general and administrative operations. If any of the following criteria are met, the Company classifies the lease as a finance lease:
|
● |
The lease transfers ownership of the underlying asset to the lessee by the end of the lease term; |
|
● |
The lease grants the lessee an option to purchase the underlying asset that the Company is reasonably certain to exercise; |
|
● |
The lease term is for 75% or more of the remaining economic life of the underlying asset, unless the commencement date falls within the last 25% of the economic life of the underlying asset; |
|
● |
The present value of the sum of the lease payments equals or exceeds 90% of the fair value of the underlying asset; or |
|
● |
The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. |
Leases that do not meet any
of the above criteria are accounted for as operating leases.
The Company combines lease
and non-lease components in its contracts under Topic 842, when permissible.
Finance
and operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at the commencement date based on the
present value of lease payments over the lease term. Since the implicit rate for the Company’s leases is not readily determinable,
the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present
value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized
basis, an amount equal to the lease payments, in a similar economic environment and over a similar term.
Lease
terms used to calculate the present value of lease payments generally do not include any options to extend, renew, or terminate the lease,
as the Company does not have reasonable certainty at lease inception that these options will be exercised. The Company generally considers
the economic life of its finance or operating lease ROU assets to be comparable to the useful life of similar owned assets. The Company
has elected the short-term lease exception, therefore operating lease ROU assets and liabilities do not include leases with a lease term
of twelve months or less. Its leases generally do not provide a residual guarantee.
The
finance or operating lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease
term for operating lease. Meanwhile, the Company recognizes the finance leases ROU assets and interest on an amortized cost basis. The
amortization of finance ROU assets is recognized on an accretion basis as amortization expense, while the lease liability is increased
to reflect interest on the liability and decreased to reflect the lease payments made during the period. Interest expense on the lease
liability is determined each period during the lease term as the amount that results in a constant periodic interest rate of the office
equipment on the remaining balance of the liability.
The Company
reviews the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the
recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset
may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from
the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount
of operating lease liabilities in any tested asset group and includes the associated operating lease payments in the undiscounted future
pre-tax cash flows. For the years ended December 31, 2022 and 2021, the Company did not recognize impairment loss on its finance
and operating lease ROU assets.
Related parties
Parties, which can be a corporation or individual,
are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject
to common control or common significant influence.
Recent accounting pronouncements not yet adopted
The Company considers the applicability and impact
of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under
the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging
growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the
adoption of these accounting standards until they would apply to private companies.
In October 2021, the FASB issued ASU 2021-08, which
is an update to ASU Updated No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides a single comprehensive accounting
model on revenue recognition for contracts with customers. The amendments in this update require that an entity (acquirer) recognize and
measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. ASU 2021-08 is effective
for the fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption was permitted,
including adoption in an interim period. The Company has adopted this standard on January 1, 2023, and the adoption did not have a material
impact on the Company’s consolidated financial statements.
In May 2019, the FASB issued ASU 2019-05, which is
an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured
at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial
Instruments—Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting
for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized
cost basis, in accordance with Subtopic 326-30, Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The
amendments in this Update address those stakeholders’ concerns by providing an option to irrevocably elect the fair value option
for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase
comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets.
Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13
while still providing financial statement users with decision-useful information. In November 2019, the FASB issued ASU No. 2019-10, which
to update the effective date of ASU No. 2016-13 for private companies, not-for-profit organizations and certain smaller reporting companies
applying for credit losses, leases, and hedging standard. The new effective date for these preparers is for fiscal years beginning after
December 15, 2022. In March 2022, the FASB issued ASU No. 2022-02, which is to (1) eliminate the accounting guidance for TDRs by creditors
in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan
refinancings and restructurings by creditors when a borrower is experiencing financial difficulty, and (2) disclose current-period gross
write offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial
Instruments—Credit Losses—Measured at Amortized Cost. ASU 2019-05 is effective for the Company for annual and interim reporting
periods beginning January 1, 2023 as the Company is qualified as an emerging growth company. The Company has adopted this standard on
January 1, 2023, and the adoption did not have a material impact on the Company’s consolidated financial statements.
Recently adopted accounting pronouncements
In December 2019, the FASB issued ASU 2019-12, “Income
Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The amendments in this Update simplify the accounting for income
taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and
simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments
in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all
other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years
beginning after December 15, 2022. Early adoption of the amendments is permitted, including adoption in any interim period for (1) public
business entities for periods for which financial statements have not yet been issued and (2) all other entities for periods for which
financial statements have not yet been made available for issuance. An entity that elects to early adopt the amendments in an interim
period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity
that elects early adoption must adopt all the amendments in the same period. The Company has adopted this standard on January 1, 2022,
and the adoption did not have a material impact on the Company’s consolidated financial statements.
In August 2020, the Financial Accounting Standards
Board issued Accounting Standards Update (ASU) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an
Entity’s Own Equity, to address the complexity in accounting for certain financial instruments with characteristics of liabilities
and equity. Amongst other provisions, the amendments in this ASU significantly change the guidance on the issuer’s accounting for
convertible instruments and the guidance on the derivative scope exception for contracts in an entity’s own equity such that fewer
conversion features will require separate recognition, and fewer freestanding instruments, like warrants, will require liability treatment.
The Company early adopted this ASU on January 1, 2022, and the adoption did not have a material impact on the Company’s consolidated
financial statements.
In October 2020, the FASB issued ASU 2020-08, “Codification
Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs”. The amendments in this Update represent
changes to clarify the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies
and providing clarifications. ASU 2020-08 is effective for the Company for annual and interim reporting periods beginning January 1, 2021.
Early adoption was permitted, including adoption in an interim period. All entities should apply the amendments in this Update on a prospective
basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. These amendments do not
change the effective dates for Update 2017-08. The adoption of this standard on January 1, 2021 did not have a material impact on its
consolidated financial statements.
In October 2020, the FASB issued ASU 2020-10, “Codification
Improvements to Subtopic 205-10, presentation of financial statements”. The amendments in this Update improve the codification by
ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements
is codified in the disclosure section of the codification. That reduce the likelihood that the disclosure requirement would be missed.
The amendments also clarify guidance so that an entity can apply the guidance more consistently. ASU 2020-10 is effective for the Company
for annual and interim reporting periods beginning January 1, 2022. Early application of the amendments is permitted for any annual or
interim period for which financial statements are available to be issued. The amendments in this Update should be applied retrospectively.
An entity should apply the amendments at the beginning of the period that includes the adoption date. The adoption of this standard on
January 1, 2022 did not have a material impact on its consolidated financial statements.
Except as mentioned above, the Company does not believe
other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s
consolidated balance sheets, statements of operations and comprehensive income (loss) and statements of cash flows.
Note 4 – Reverse Recapitalization
On November 17, 2022, the Company consummated the
Business Combination contemplated by the SPA between 8i, EHL, Watermark, 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 8i and EHL was effected by the
purchase by 8i of all of the issued and outstanding shares of EHL from Watermark, resulting in EHL becoming a wholly owned subsidiary
of 8i.
Upon the consummation
of the Business Combination, the following events contemplated by the SPA occurred, based on EUDA’s capitalization as of November
17, 2022:
|
● |
all 1,500,000 issued and outstanding shares of EHL were converted into 14,000,000 shares of the Company’s no par value ordinary shares after giving effect to the exchange ratio of 9.33 (“Exchange Ratio”); and |
|
● |
the entitlement of 4,000,000 shares (“Earnout Shares”) of the Company’s no par value ordinary shares issued to the Seller subject to the following four triggering events: |
|
○ |
1,000,000 additional Earnout Shares to be issued if during the period beginning on the Closing Date and ending on the first anniversary of the Closing Date, the Company’s share price is equal to or greater than Fifteen Dollars ($15.00) after the Closing Date; |
|
|
|
|
○ |
1,000,000 additional Earnout Shares to be issued if during the period beginning on the first anniversary of the Closing Date and ending on the second anniversary of the Closing Date, the Company’s share price is equal to or greater than Twenty Dollars ($20.00); |
|
|
|
|
○ |
1,000,000 additional Earnout Shares to be issued if the consolidated audited financial statements of EUDA for the fiscal year commencing January 1, 2023 and ending December 31, 2023, reflect that EUDA has achieved both of the following financial metrics for such fiscal year: (x) revenues of at least $20,100,000 and (y) net income attributable to EUDA of at least $3,600,000. |
|
|
|
|
○ |
1,000,000 additional Earnout Shares to be issued if the consolidated audited financial statements of EUDA for the fiscal year commencing January 1, 2024 and ending December 31, 2024, reflect that EUDA has achieved both of the following financial metrics for such fiscal year: (x) revenues of at least $40,100,000 and (y) net income attributable to EUDA of at least $10,100,000. |
In connection
with the closing the Business Combination:
|
● |
all 8i’s no par value public ordinary shares of 2,591,545, net of the redemption of 6,033,455 shares of Company’s no par value ordinary shares, remained outstanding; |
|
|
|
|
● |
all 8i’s no par value private ordinary shares of 292,250 remained outstanding; |
|
|
|
|
● |
all 8i’s no par value founder shares of 2,156,250 remained outstanding; |
|
|
|
|
● |
all 8i’s rights, consisting of 8,625,000 public rights and 292,250 private rights, automatically converted into an aggregate of 891,725 of the Company’s no par value ordinary shares; |
|
|
|
|
● |
200,000 shares of the Company’s no par value ordinary shares were issued to a service provider in connection with the business combination; |
|
|
|
|
● |
60,000 shares of the Company’s no par value ordinary shares were issued to a service provider in connection with the closing of transactions contemplated pursuant to certain share purchase agreement. Such issuance of the ordinary share serves the purpose of securing the repayment of $300,000 convertible promissory note to the service provider; |
The following
table presents the number of the Company’s ordinary shares issued and outstanding immediately following the Reverse Recapitalization:
Schedule
of shares issued and outstanding reverse recapitalization
|
|
Ordinary Shares |
|
8i ordinary shares outstanding prior to Reverse Recapitalization |
|
|
11,073,500 |
|
Less: redemption of 8i ordinary shares |
|
|
(6,033,455 |
) |
Conversion of 8i rights |
|
|
891,725 |
|
Shares issued to service providers |
|
|
260,000 |
|
Conversion of EHL ordinary shares into 8i ordinary shares |
|
|
14,000,000 |
|
Total shares outstanding |
|
|
20,191,770 |
|
EHL
was determined to be the accounting acquirer given EHL effectively controlled the combined entity after the SPAC Transaction. The transaction
is not a business combination because 8i was not a business. The transaction is accounted for as a reverse recapitalization, which is
equivalent to the issuance of shares by EHL for the net monetary assets of 8i, accompanied by a recapitalization. EHL is determined as
the accounting acquirer and the historical financial statements of EHL became the Company’s historical financial statements, with
retrospective adjustments to give effect of the reverse recapitalization. The net assets of 8i were recognized as of the closing date
at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Merger are those of EHL and EHL’s
operations are the only ongoing operations of EHL.
In connection
with the Reverse Recapitalization, the Company raised approximately $1.3 million of proceeds, presented as cash flows from financing activities,
which included the contribution of approximately $87.1 million of funds held in 8i’s trust account, approximately $0.2 million of
cash held in 8i’s operating cash account, net of approximately $60.8 million paid to redeem 6,033,455 public shares of 8i’s
ordinary shares, approximately $3.0 million in transaction costs incurred by 8i, approximately $21.9 million prepayment of two forward
purchase agreements, and repayments of a promissory note in the amount of $0.3 million issued to 8i’s related party.
The following
table reconcile the elements of the Reverse Recapitalization to the consolidated statements of cash flows and the changes in shareholders’
equity (deficit):
Schedule
of financial statements of reverse recapitalization
|
|
November 18, 2022 |
|
Funds held in 8i’s trust account |
|
$ |
87,074,185 |
|
Funds held in 8i’s operating cash account |
|
|
248,499 |
|
Less: amount paid to redeem public shares of 8i’s ordinary shares |
|
|
(60,839,550 |
) |
Less: payments of transaction costs incurred by 8i |
|
|
(2,965,646 |
) |
Less: payments of forward purchase agreements |
|
|
(21,892,527 |
) |
Less: repayments of promissory note – related party of 8i |
|
|
(300,000 |
) |
Proceeds from the Reverse Recapitalization |
|
|
1,324,961 |
|
Less: unpaid deferred underwriting fee |
|
|
(2,113,125 |
) |
Less: unpaid transaction costs incurred by 8i |
|
|
(382,600 |
) |
Less: payment and accrued expenses of transaction costs related to the Reverse Recapitalization |
|
|
(1,305,580 |
) |
Add: non-cash net assets assumed from 8i |
|
|
14,387,803 |
|
Net contributions from issuance of ordinary shares upon the Reverse Recapitalization |
|
$ |
11,911,459 |
|
The shares and corresponding capital amounts and all
per share data related to EHL’s outstanding ordinary shares prior to the Reverse Recapitalization have been retroactively adjusted
using the Exchange Ratio.
Note 5 – Disposition of Subsidiary
Disposition of TGC
On March 1, 2022, SEMA, the Company’s wholly
owned subsidiary, sold 100% of the equity interest in TGC to an unrelated individual for a total consideration of SG$ 1.0 (“TGC
transaction”). TGC is not a significant subsidiary and the disposition of all of the equity interests in TGC did not constitute
a strategic shift that would have a major effect on the Company’s operations and financial results. As a result, the results of
operations for TGC were not reported as discontinued operations under the guidance of ASC 205 “Presentation of Financial Statements.”
For the year ended December 31, 2022, the Company recognized a gain of $30,055 on the disposal of all of the deficit interests in TGC.
Note 6 – Accounts
receivable, net
Schedule
of accounts receivable
|
|
As of
December 31, 2022 |
|
|
As of
December 31, 2021 |
|
|
|
|
|
|
|
|
Accounts receivable* |
|
$ |
2,048,941 |
|
|
$ |
1,883,115 |
|
Allowance for doubtful accounts |
|
|
(197,438 |
) |
|
|
(80,799 |
) |
Total accounts receivable, net |
|
$ |
1,851,503 |
|
|
$ |
1,802,316 |
|
* | As of December 31, 2022 and 2021, accounts receivable of up to approximately $0.6 million (SGD
0.8 million) were pledged to the short term loan from United Overseas Bank Limited (See Note 13). |
Movements
of allowance for doubtful accounts from account receivables are as follows:
Schedule
of movements of allowance for doubtful accounts
|
|
For the Year Ended
December 31, 2022 |
|
|
For the Year Ended
December 31, 2021 |
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
80,799 |
|
|
$ |
37,898 |
|
Addition |
|
|
116,156 |
|
|
|
43,804 |
|
Exchange rate effect |
|
|
483 |
|
|
|
(903 |
) |
Ending balance |
|
$ |
197,438 |
|
|
$ |
80,799 |
|
Note
7 – Other receivables
Schedule
of other receivables
|
|
As of
December 31, 2022 |
|
|
As of
December 31, 2021 |
|
|
|
|
|
|
|
|
Receivable from divestment (1) |
|
$ |
- |
|
|
$ |
3,818,776 |
|
Employee advance |
|
|
6,695 |
|
|
|
2,803 |
|
Others |
|
|
772 |
|
|
|
250 |
|
Total other receivables |
|
|
7,467 |
|
|
|
3,821,829 |
|
Other receivables – non-current |
|
|
- |
|
|
|
(1,830,603 |
) |
Other receivables – current |
|
$ |
7,467 |
|
|
$ |
1,991,226 |
|
Movements
of allowance for doubtful accounts from other receivables are as follows:
Schedule
of other receivables allowance for doubtful accounts
|
|
For the Year Ended
December 31, 2022 |
|
|
For the Year Ended
December 31, 2021 |
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
- |
|
|
$ |
- |
|
Addition |
|
|
2,209,825 |
|
|
|
- |
|
Write-off |
|
|
(2,209,825 |
) |
|
|
- |
|
Ending balance |
|
$ |
- |
|
|
$ |
- |
|
Note 8 – Property
and equipment, net
Property and equipment, net consist of the following:
Schedule
of property and equipment
|
|
As of
December 31, 2022 |
|
|
As of
December 31, 2021 |
|
|
|
|
|
|
|
|
Office equipment |
|
$ |
148,387 |
|
|
$ |
144,051 |
|
Medical equipment |
|
|
2,724 |
|
|
|
15,917 |
|
Leasehold improvement |
|
|
2,217 |
|
|
|
20,704 |
|
Subtotal |
|
|
153,328 |
|
|
|
180,672 |
|
Less: accumulated depreciation |
|
|
(121,700 |
) |
|
|
(123,745 |
) |
Total |
|
$ |
31,628 |
|
|
$ |
56,927 |
|
Depreciation expense for the years ended December
31, 2022 and 2021 amounted to $23,347 and $34,523, respectively.
Note 9 – Intangible assets, net
Intangible assets
consisted of the following:
Schedule
of intangible assets
|
|
As of
December 31, 2022 |
|
|
As of
December 31, 2021 |
|
|
|
|
|
|
|
|
Customer relationships |
|
$ |
650,102 |
|
|
$ |
646,246 |
|
Less: Accumulated amortization |
|
|
(477,584 |
) |
|
|
(356,284 |
) |
Less: Impairment |
|
|
(167,787 |
) |
|
|
- |
|
Exchange rate effect |
|
|
(4,731 |
) |
|
|
- |
|
Total intangible assets, net |
|
$ |
- |
|
|
$ |
289,962 |
|
Amortization expense for the years ended December
31, 2022 and 2021 amounted to $115,907 and $162,825, respectively. The management performed quantitative assessment and determined to
fully impair the carrying value of intangible assets due to the Company’s limited business development and uncertain surrounding
economic environment. For the year ended December 31, 2022, The Company recorded $167,787 impairment loss related to intangible assets.
Note 10 – Goodwill
The
changes in the carrying amount of goodwill from Melana reporting unit and Tri-Global reporting unit are as follows:
Schedule
of goodwill
|
|
Melana |
|
|
Tri-Global |
|
|
Total |
|
Balance as of December 31, 2020 |
|
$ |
539,286 |
|
|
$ |
473,344 |
|
|
$ |
1,012,630 |
|
Foreign currency translation adjustment |
|
|
(10,621 |
) |
|
|
(9,323 |
) |
|
|
(19,944 |
) |
Balance as of December 31, 2021 |
|
|
528,665 |
|
|
|
464,021 |
|
|
|
992,686 |
|
Balance |
|
|
528,665 |
|
|
|
464,021 |
|
|
|
992,686 |
|
Foreign currency translation adjustment |
|
|
(11,427 |
) |
|
|
(10,030 |
) |
|
|
(21,457 |
) |
Impairment |
|
|
(517,238 |
) |
|
|
(453,991 |
) |
|
|
(971,229 |
) |
Balance as of December 31, 2022 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Balance |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
For the years ended December 31, 2022 and 2021,
the Company record $971,229
and nil impairment loss on good will, respectively.
Note 11 – Forward Purchase Agreements
On
November 9, 2022 and November 13, 2022, 8i, EHL, and certain institutional investors, HB Strategies LLC (the “Seller 1”) and
Alto Opportunity Master Fund, SPC - Segregated Master Portfolio B (“Seller 2”) entered into an agreement (the “Prepaid
Forward Agreement 1” and “Prepaid Forward Agreement 2”), respectively, for an equity prepaid forward transaction (the
“Prepaid Forward Transaction 1” and “Prepaid Forward Transaction 2”).
Pursuant
to the terms of the Prepaid Forward Agreements, Seller 1 and Seller 2 may (i) purchase through a broker in the open market, from holders
of Shares other than 8i Acquisition or affiliates thereof, 8i Acquisition’s ordinary shares, no par value, (the “Shares”),
or (ii) reverse Seller 1’s and Seller 2’s prior exercise of redemption rights as to Shares in connection with the Business
Combination (all such purchased or reversed Shares, the “Recycled Shares 1” and “Recycled Shares 2”, respectively).
While Seller 1 and Seller 2 has no obligation to purchase any Shares under the Prepaid Forward Agreement 1 and Prepaid Forward Agreement
2, the aggregate total Recycled Shares 1 and Recycled Shares 2 that may be purchased or reversed under the Prepaid Forward Agreement 1
and Prepaid Forward Agreement 2 shall be no more than 1,400,000 shares and 1,125,000 shares, respectively. Seller 1 and Seller 2 have
agreed to hold the Recycled Shares 1 and Recycled Shares 2, for the benefit of (a) 8i Acquisition until the closing of the Business Combination
(the “Closing”) and (b) the Company after the Closing (each a “Counterparty”). Seller 1 and Seller 2 also may
not beneficially own greater than 9.9% of issued and outstanding Shares following the Business Combination.
The
key terms of the forward contracts are as follows:
- Sellers can terminate the Transaction no later than
the later of: (a) Third Local Business Day following the Optional Early Termination (“OET”); (b) the first Payment Date after
the OET Date which shall specify the quantity by which the Number of Shares is to be reduced (such quantity, the “Terminated Shares”)
Seller shall terminate the Transaction in respect of any Shares sold on or prior to the Maturity Date. The Counterparty is entitled to
an amount from the Seller equal to the number of terminated shares multiplied by the Reset Price.
-Seller 1 and Seller 2 are entitled to receive the
Maturity Consideration, an amount equal to the product of: (1) Number of Recycled Shares specified in the Pricing Date Notice, less(b)
the number of Terminated Shares multiplied by (2) USD 2.50 (the “Maturity Consideration”), in cash. The Company can also pay
the Seller 1 and Seller 2 shares based on the Company’s average volume weighted average share price (“VWAP”) of the
Shares over 30 Scheduled Trading Days ending on the Maturity Date. Such settlement consideration or OET is considered to be an embedded
feature (or instrument) with in the Prepaid Forward Transaction 1 and 2.
- The Prepaid
Forward Transaction 1 and 2 required physical settlement by repurchase of remaining of the recycled
shares in exchange for cash and if either the amount to be paid or the settlement date varies based on specified conditions, the earlier
of a) first anniversary of the closing of the transactions between Counterparty and EUDA on November 18, 2022 or b) the date specified
by Seller in a written notice to be delivered at Seller’s discretion (not earlier than the day such notice is effective) after the
occurrence of a VWAP Trigger Event, those instruments shall be measured subsequently at the amount of cash that would be paid under the
conditions specified in the contract if settlement occurred at the reporting date, recognizing the resulting change in that amount from
the previous reporting date as interest cost, which we recorded as change in fair value of prepaid forward purchase liability.
In accordance
with ASC 480, Distinguishing Liabilities from Equity, the Company has 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 its consolidated balance sheets. The Company 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 $7,409,550 and was recorded on the Company’s
consolidated balance sheets. 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.
Note 12 – Loan to third party
In November 20, 2020, the Company’s
subsidiary, UGI has entered into a loan agreement with PT total Prima Indonesia (“PT”), an unrelated third party. Upon
execution of the loan agreement and supplemental agreement, PT may borrow up to approximately $0.7
million (SGD 1,000,000)
from UGI for a period of three years with 9.00%
annual interest rate. The loan shall be due and payable, including all disbursed loan amount and accrued interest, on the maturity
date. As of December 31, 2022 and 2021, the Company had provided a total of $608,683
(SGD 816,000)
and $352,959
(SGD 476,000)
of loan to PT, respectively, and had $62,766
(SGD 84,144)
and $19,003
(SGD 25,627)
of interest receivable balance, respectively. However, the Company determined its unlikely to recover such loan to third party upon
expiration of the loan contract due to PT was no longer in business, therefore, the company had recorded a fully allowance against
and wrote off the remaining balance of loan to third party as of December 31, 2022.
For the years ended December 31, 2022 and 2021, the
Company has recognized nil and $19,071 of interest income from loan to third party, respectively.
Note 13 – Credit facilities
Short-term loans – bank and private lender
Outstanding balances on short-term bank loans consist
of the following:
Schedule
of short-term loans
Bank/Private
lender Name |
|
Maturities |
|
Interest Rate |
|
|
Collateral/
Guarantee |
|
December 31,
2022 |
|
|
December 31,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*United Overseas Bank Limited |
|
90 days from disbursement |
|
|
0.25% plus prime rate of 5.25% |
|
|
Collateral: Accounts receivable |
|
$ |
185,592 |
|
|
$ |
184,491 |
|
FS Capital Ptd. Ltd. |
|
Fully repaid in February, 2022 |
|
|
18.0 |
% |
|
Guaranteed by Kelvin Chen Weiwen, the Company’s CEO and shareholder, and Kent Ridge Health Private Limited |
|
|
- |
|
|
|
20,936 |
|
Funding Societies Pte. Ltd |
|
Due monthly from April 2022 to March 2023 (Extended to July 31, 2024) |
|
|
30.0 |
% |
|
Guaranteed by Kelvin Chen Weiwen, the Company’s CEO and shareholder |
|
|
18,648 |
|
|
|
- |
|
Total |
|
|
|
|
|
|
|
|
|
$ |
204,240 |
|
|
$ |
205,427 |
|
* | | On August 21, 2019, KRHSG entered into a revolving line of credit
agreement with United Overseas Limited pursuant to which KRHSG may borrow up to approximately $593,208
(SGD 800,000)
for operation purposes. The loan was guaranteed by Jamie Fan Wei Zhi, an immediate family member of a shareholder of the Company, and
secured by KRHSG’s account receivable (see Note 6). The loan bears an average annual interest rate of 5.50%
and its due within 90 days from the loan disbursement. The Company released Jamie Fan Wei Zhi as the guarantor of this loan on
October 31, 2022. |
Short-term loan – third party
Schedule
of short-term loans
Lender Name |
|
Maturities |
|
Interest Rate |
|
|
Collateral/ Guarantee |
|
December 31,
2022 |
|
|
December 31,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Koh Wee Sing |
|
Due on demand beginning in July 2022* |
|
|
60.0 |
% |
|
None |
|
$ |
- |
|
|
$ |
148,302 |
|
Interest expense pertaining to the above loans for
the years ended December 31, 2022 and 2021 amounted to $122,845 and $128,071, respectively.
Weighted average interest rate to the above loans
for the years ended December 31, 2022 and 2021 are 11.0% and 6.3%, respectively.
* | | On December 16, 2022, the Company has signed a loan agreement
(“Agreement”) with Kent Ridge Health Pte Ltd (“KRHPL”), a related party. Pursuant to the Agreement, KRHPL
agreed to fully remit the loan payment to Koh Wee Sing on behalf of the Company. As a result, such short-term loan- third party was
transfer to other payable, related parties under KRHPL’s balance as of December 31, 2022. |
Promissory note
Outstanding balances on promissory note consist of
the following:
Schedule
of short-term loans
Lender Name |
|
Maturities |
|
Interest Rate |
|
|
Collateral/ Guarantee |
|
December 31,
2022 |
|
|
December 31,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kaufaman & Canoles, P. C. (“KC”) |
|
February 15, 2023* |
|
|
0.0 |
% |
|
None |
|
$ |
170,000 |
|
|
$ |
- |
|
* | | This promissory note has a default interest of 15% per annum beginning on February 15, 2023 until
paid in full. In June 2023, the Company and KC has entered into a settlement agreement (“the Agreement”) to settle the promissory
note. Pursuant to the Agreement, the Company shall pay KC (1) $100,000 within two days of the dates that the Company’s US counsel,
Loeb & Loeb, confirm that it has received from KC all information and documents necessary for them to prepare an amended S-1 registration
statement covering the resale of securities, and (2) $60,000 within two business days after the date the first amendment to the registration
statement is filed with the SEC. |
Convertible notes – third parties
Outstanding balances on convertible notes consist
of the following:
Schedule
of short-term loans
Lender Name |
|
Maturities |
|
Interest Rate |
|
|
Collateral/ Guarantee |
|
December 31,
2022 |
|
|
December 31,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maxim Group LLC (“Maxim”) |
|
November 17, 2023 |
|
|
0.0 |
% |
|
Automatically be converted into the Company’s ordinary shares at $5.00 per share if the balance is not being repaid by the maturity date |
|
$ |
2,113,125 |
|
|
$ |
- |
|
Menora Capital Pte Ltd (“Menora”) |
|
November 17, 2023 |
|
|
0.0 |
% |
|
Right to convert into the Company’s ordinary shares equal to the unpaid Principal Amount as of the Maturity Date divided by the five day VWAP Price of the Company’s ordinary shares immediately preceding the maturity date if the balance is not being repaid by the maturity date |
|
|
87,500 |
|
|
|
- |
|
Loeb & Loeb LLP (“Loeb”) |
|
November 17, 2023 |
|
|
0.0 |
% |
|
(1) 60,000 of the Company ordinary share has been issued to Loeb, which is subject to be returned and cancellation if the Company repaid the full or part of the convertible note, and (2) Loeb has the right to sell the ordinary shares in public market and the earning from the sales should be offset the remaining balance of the convertible note |
|
|
300,000 |
|
|
|
- |
|
Shine Link Limited (“Shine Link”) |
|
November 17, 2023 |
|
|
0.0 |
% |
|
Right to convert into the Company’s ordinary shares equal to the unpaid Principal Amount as of the Maturity Date divided by the five day VWAP Price of the Company’s ordinary shares immediately preceding the maturity date if the balance is not being repaid by the maturity date |
|
|
119,000 |
|
|
|
- |
|
Total |
|
|
|
|
|
|
|
|
|
$ |
2,619,625 |
|
|
$ |
- |
|
Convertible notes – related parties
Lender Name |
|
Maturities |
|
Interest Rate |
|
|
Collateral/ Guarantee |
|
December 31,
2022 |
|
|
December 31,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8i Holdings 2 Ptd Ltd (“8i Holding”) (1) |
|
November 17, 2023 |
|
|
0.0 |
% |
|
Right to convert into the Company’s ordinary shares equal to the unpaid Principal Amount as of the Maturity Date divided by the five day VWAP Price of the Company’s ordinary shares immediately preceding the maturity date if the balance is not being repaid by the maturity date |
|
$ |
82,600 |
|
|
$ |
- |
|
Meng Dong (James) Tan (2) |
|
November 17, 2023 |
|
|
0.0 |
% |
|
Right to convert into the Company’s ordinary shares equal to the unpaid Principal Amount as of the Maturity Date divided by the five day VWAP Price of the Company’s ordinary shares immediately preceding the maturity date if the balance is not being repaid by the maturity date |
|
|
700,000 |
|
|
|
- |
|
Total |
|
|
|
|
|
|
|
|
|
$ |
782,600 |
|
|
$ |
- |
|
1) |
Mr. Meng Dong (James) Tan, the Company’s related party who had more than 10% ownership of the Company, is the sole shareholder and director of 8i Holdings 2 Pte. Ltd. Mr. Tan has sole voting and dispositive power over the shares. |
|
|
2) |
Mr. Meng Dong (James) Tan, the Company’s related party has more than 10% ownership of the Company. |
The Company determined that the embedded conversion
feature from the convertible notes, related parties and third parties qualifies for the scope exception due to the embedded conversion
feature indexed to the Company’s stock in accordance with ASC 815-40-15 and meet the equity requirement in accordance with ASC815-40-25.
Note 14 – Other payables and accrued liabilities
Schedule of other
payables and accrued liabilities
|
|
As of
December 31, 2022 |
|
|
As of
December 31, 2021 |
|
|
|
|
|
|
|
|
Accrued expenses (i) |
|
$ |
671,743 |
|
|
$ |
129,029 |
|
Accrued payroll |
|
|
730,037 |
|
|
|
244,591 |
|
Accrued interests (ii) |
|
|
157,032 |
|
|
|
67,448 |
|
Others |
|
|
34,003 |
|
|
|
47,529 |
|
Total other payables and accrued liabilities |
|
$ |
1,592,815 |
|
|
$ |
488,597 |
|
(i) |
Accrued expenses |
|
|
|
The balance of accrued expenses represented amount due to third parties service providers which include marketing consulting service, IT related professional service, legal, audit and accounting fees, and other miscellaneous office related expenses. |
|
|
(ii) |
Accrued interests |
|
|
|
The balance of accrued interests represented the balance of interest payable from short-term loan – bank, private lender, and third parties (See Note 13). |
Note 15 – Related
party balances and transactions
Related party balances
Schedule of related
party balances
Other receivables – related parties
Name of Related Party |
|
Relationship |
|
Nature |
|
As of
December 31,
2022 |
|
|
As of
December 31,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
KR Hill Capital Pte Ltd |
|
Shareholders of this entity also are the shareholders of the Company |
|
Related party advance, due on demand |
|
$ |
239 |
|
|
$ |
237 |
|
Kent Ridge Medical Ptd Ltd |
|
Shareholders of this entity also are the shareholders of the Company |
|
Related party advance, due on demand |
|
|
247 |
|
|
|
245 |
|
UG Digital Sdn Bhd |
|
UGD, subsidiary of the Company owned 40% of this company |
|
Related party advance, due on demand |
|
|
- |
|
|
|
284,673 |
|
Janic Limited |
|
Shareholder of the Company |
|
Related party advance, due on demand |
|
|
724 |
|
|
|
720 |
|
Zukihealth SDN |
|
Kelvin Chen, Chief Executive Office (“CEO”) and shareholder of the Company, is the shareholder of this entity |
|
Related party advance due on demand |
|
|
- |
|
|
|
3,173 |
|
Jennifer Goh |
|
President, operation manager, and shareholder of the Company |
|
Employee advance |
|
|
- |
|
|
|
8,527 |
|
Fresco Investment Pte Ltd |
|
Fan Know Hin, an immediate family member of a shareholder of the Company, is the shareholder of this entity |
|
Advance due on demand |
|
|
- |
|
|
|
46 |
|
Cadence Health Pte Ltd* |
|
Shareholders of this entity also are the shareholders of the Company |
|
|
|
|
266,653 |
|
|
|
- |
|
Total |
|
|
|
|
|
$ |
267,863 |
|
|
$ |
297,621 |
|
Other receivables - related parties |
|
|
|
|
|
$ |
267,863 |
|
|
$ |
297,621 |
|
* | As of date of the issuance of these financial statements,
this receivable has been repaid by the related party. |
Convertible notes – related parties
Please see Note 13 for details.
Account payable – related parties
Name of Related Party |
|
Relationship |
|
Nature |
|
As of
December 31,
2022 |
|
|
As of
December 31,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cadence Health Pte Ltd |
|
Shareholders of this entity also are the shareholders of the Company |
|
Medical service fee performed for the employee patients of the Company’s corporate customers |
|
$ |
- |
|
|
$ |
2,459,411 |
|
Account
payable, related parties |
|
Shareholders of this entity also are the shareholders of the Company |
|
Medical service fee performed for the employee patients of the Company’s corporate customers |
|
$ |
- |
|
|
$ |
2,459,411 |
|
Other payables – related parties
Name of Related Party |
|
Relationship |
|
Nature |
|
As of
December 31,
2022 |
|
|
As of
December 31,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Chee Yin Meh |
|
Shareholder of Scotgold Holding Ltd which is the shareholder of the Company |
|
Operating expense paid on behalf of the Company |
|
$ |
122,739 |
|
|
$ |
34,512 |
|
Jamie Fan Wei Zhi |
|
An immediate family member of a shareholder of the Company |
|
Operating expense paid on behalf of the Company, and Guarantor fee |
|
|
- |
|
|
|
40,783 |
|
Kelvin Chen |
|
CEO and shareholder of the Company |
|
Operating expense paid on behalf of the Company |
|
|
589,681 |
|
|
|
295,776 |
|
Kent Ridge Health Pte Ltd |
|
Shareholders of this entity also are the shareholders of the Company |
|
Operating expense paid on behalf of the Company |
|
|
696,508 |
|
|
|
121,129 |
|
Kent Ridge Pacific Pte Ltd |
|
Shareholders of this entity also are the shareholders of the Company |
|
Operating expense paid on behalf of the Company |
|
|
20,303 |
|
|
|
33,483 |
|
Watermark Developments Ltd |
|
Shareholder of the Company |
|
Operating expense paid on behalf of the Company |
|
|
55,945 |
|
|
|
- |
|
Wilke Services Ltd (“Wilke”) (1) |
|
Shareholder of the Company |
|
Investment payable |
|
|
- |
|
|
|
2,746,628 |
|
Mount Locke Limited |
|
Shareholder of the Company |
|
Operating expense paid on behalf of the Company |
|
|
3,753 |
|
|
|
- |
|
UG Digital Sdn Bhd |
|
UGD, subsidiary of the Company owned 40% of this company |
|
Operating expense paid on behalf of the Company |
|
|
33,016 |
|
|
|
- |
|
Total |
|
|
|
|
|
$ |
1,521,945 |
|
|
$ |
3,272,311 |
|
Other payables – related parties |
|
|
|
|
|
$ |
1,521,945 |
|
|
$ |
3,272,311 |
|
|
(1) |
Upon
the closing of the Business Combination, such balance was forgiven by its related party (see Note 16). |
Related party transactions
Schedule of related
party transactions
Revenue from related parties
Name of Related Party |
|
Relationship |
|
Nature |
|
For the Year Ended
December 31,
2022 |
|
|
For the Year Ended
December 31,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Cadence Health Pte Ltd |
|
Shareholders of this entity also are the shareholders of the Company |
|
Sales of swab test, and other medical related product |
|
|
135 |
|
|
|
4,640 |
|
Revenue from related parties |
|
|
|
|
|
$ |
135 |
|
|
$ |
4,640 |
|
Purchase from related parties
Name of Related Party |
|
Relationship |
|
Nature |
|
For the Year Ended
December 31,
2022 |
|
|
For the Year Ended
December 31,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cadence Health Pte Ltd |
|
Shareholders of this entity also are the shareholders of the Company |
|
Medical service fee provided for the third party medical service revenue |
|
$ |
491,499 |
|
|
$ |
2,349,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
from related parties | |
Shareholders of this entity also are the shareholders of the Company | |
Medical service fee provided for the third party medical service revenue | |
$ | 491,499 | | |
$ | 2,349,702 | |
Rental expenses
Name of Related Party |
|
Relationship |
|
Nature |
|
For the Year Ended
December 31,
2022 |
|
|
For the Year Ended
December 31,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Kent Ridge Pacific Pte Ltd |
|
Shareholders of this entity also are the shareholders of the Company |
|
Office rental |
|
$ |
47,954 |
|
|
$ |
143,589 |
|
Rental Expenses | |
Shareholders of this entity also are the shareholders of the Company | |
Office rental | |
$ | 47,954 | | |
$ | 143,589 | |
Note 16 – Shareholders’ equity
Capital Contribution
On September 20, 2022, the Company received capital
of $600,000 from an investor for the issuance in 8i acquisition’s ordinary shares. Such deposit is refundable if the business combination
will not be completed by November 30, 2022. Initially, the Company recognized the subscribed shares deposit liability in accordance with
ASC 480, “Distinguishing Liabilities from Equity” on inception. On November 17, 2022, Upon the closing of the Business Combination
with 8i acquisition, the Company issued 120,000 ordinary shares to this investor and transferred such the subscribed shares deposit liability
into equity as capital contribution.
Forgiveness of debt by a related party
On March 31, 2022, the Company and Wilke entered into
a deed of release of debt (“Deed”), pursuant to the Deed, upon the closing of the Business Combination, Wilke agrees to release
and discharge the Company from the Obligation to repay to Wilke of $2,763,018. As Wilke’s is a shareholder of the
Company, such debt forgiveness were treated as an addition to the Company’s capital during the year ended December
31, 2022.
Ordinary shares
The Company is authorized to issue unlimited ordinary
shares of no par value. Holders of the Company’s ordinary shares are entitled to one vote for each ordinary share.
-Issuance of ordinary shares to EHL
On July 25, 2022, the Company issued 4,626,667 ordinary
shares (500,000 ordinary share before reverse recapitalization) for total consideration of $500,000 to the shareholder of EHL.
The shares and corresponding capital amounts and all
per share data related to EHL’s outstanding ordinary shares prior to the Reverse Recapitalization have been retroactively adjusted
using the Exchange Ratio.
-Issuance of ordinary shares upon the reverse recapitalization
(See Note 4)
On November 17, 2022, upon the consummation of the
Business Combination, the Company issued an aggregate total of 6,191,770 ordinary shares to 8i and various service provider.
The following
table presents the number of the Company’s ordinary shares issued upon the Reverse Recapitalization:
Schedule
of reverse recapitalization
|
|
Ordinary Shares |
|
8i ordinary shares outstanding prior to Reverse Recapitalization |
|
|
11,073,500 |
|
Less: redemption of 8i ordinary shares |
|
|
(6,033,455 |
) |
Conversion of 8i rights |
|
|
891,725 |
|
Shares issued to service providers |
|
|
260,000 |
|
Total shares issued upon the Reverse Recapitalization |
|
|
6,191,770 |
|
Warrants
In connection with the reverse
recapitalization, the Company has assumed 8,917,250 Warrants outstanding, which consisted of 8,625,000 Public Warrants and 292,250 Private
Warrants. Both of the Public Warrants and private warrant met the criteria for equity classification.
Warrants became exercisable
on the later of (a) the completion of the reverse recapitalization or (b) 12 months from the closing of the initial public offering (“IPO”).
The warrants will expire five years after the completion of a reverse recapitalization or earlier upon redemption or liquidation.
As of December 31, 2022,
the Company had 8,625,000 Public Warrants outstanding and 292,250 Private Warrants outstanding. Each whole Public Warrant and Private
Warrant entitles the registered holder to purchase one-half share of the Company’s ordinary share at a price of $11.50 per share,
subject to the following conditions discussed below.
The
Company may redeem the Public Warrants and Private Warrants in whole and not in part, at a price of $0.01 per warrant:
● at any time while
the warrants are exercisable and prior to their expiration,
● upon not less than
30 days’ prior written notice of redemption to each warrant holder,
● if, and only if,
the reported last sale price of the ordinary shares equals or exceeds $16.50 per share (as adjusted for share splits, share dividends,
reorganizations and recapitalizations), for any 20 trading days within a 30 trading days period ending on the third trading business day
prior to the notice of redemption to warrant holders, and,
● if, there is a current
registration statement in effect with respect to the Ordinary Shares underlying the Warrants for each day in the 30-day trading period
and continuing each day thereafter until the Redemption Date or the cashless exercise of the Warrants is exempt from the registration
requirements under the Securities Act of 1933, as amended (the “Act”)
If the Company calls the
warrants for redemption as described above, management will have the option to require all holders that wish to exercise the warrants
to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary shares issuable
upon exercise of the warrants may be adjusted for splits, dividends, recapitalizations and other similar events. Additionally, in no event
will the Company be required to net cash settle the warrants.
The only difference between
Public Warrants and Private Warrants is that the Private Warrants will not be transferable, assignable or salable until after the completion
of reverse recapitalization.
The summary of warrants activity is as follows:
Schedule
of warrant activities
|
|
Warrants Outstanding |
|
|
Ordinary Shares Issuable |
|
|
Weighted Average Exercise Price |
|
|
Average Remaining Contractual Life |
|
December 31, 2021 |
|
|
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
Granted |
|
|
8,917,250 |
|
|
|
4,458,625 |
|
|
$ |
11.50 |
|
|
|
5.00 |
|
Forfeited |
|
|
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
Exercised |
|
|
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
December 31, 2022 |
|
|
8,917,250 |
|
|
|
4,458,625 |
|
|
$ |
11.50 |
|
|
|
4.88 |
|
Earnout shares
As part of the Business Combination, Watermark
is entitled to the 4,000,000
Earnout Shares of the Company’s no par value ordinary shares subject to the following four
triggering events:
|
● |
1,000,000 additional Earnout Shares to be issued if during the period beginning on the Closing Date and ending on the first anniversary of the Closing Date, the Company’s share price is equal to or greater than Fifteen Dollars ($15.00) after the Closing Date (“Triggering Event 1”); |
|
● |
1,000,000 additional Earnout Shares to be issued if during the period beginning on the first anniversary of the Closing Date and ending on the second anniversary of the Closing Date, the Company’s share price is equal to or greater than Twenty Dollars ($20.00) (“Triggering Event 2”); |
|
● |
1,000,000 additional Earnout Shares to be issued if the consolidated audited financial statements of EUDA for the fiscal year commencing January 1, 2023 and ending December 31, 2023, reflect that EUDA has achieved both of the following financial metrics for such fiscal year: (x) revenues of at least $20,100,000 and (y) net income attributable to EUDA of at least $3,600,000 (“Triggering Event 3”); |
|
● |
1,000,000 additional Earnout Shares to be issued if the consolidated audited financial statements of EUDA for the fiscal year commencing January 1, 2024 and ending December 31, 2024, reflect that EUDA has achieved both of the following financial metrics for such fiscal year: (x) revenues of at least $40,100,000 and (y) net income attributable to EUDA of at least $10,100,000 (“Triggering Event 4”). |
The Earnout
Shares are accounted for as equity classified equity instruments, were included as merger consideration as part of the Reverse Recapitalization
and recorded in capital. The fair value of the Earnout Shares was estimated using a model based on multiple stock price paths developed
through the use of a Monte Carlo simulation that incorporates into the valuation the possibility that the market condition targets may
not be satisfied.
The fair value of the Earnout Shares for Triggering
Event 1 and 2 was estimated using the following assumptions:
Schedule of earnout shares
for triggering event
Closing date |
|
November 17, 2022 |
|
Share price of the Company as of closing date |
|
$ |
5.21 |
|
Average daily return rate |
|
|
0.02 |
% |
Daily volatility for Triggering Event 1 |
|
|
4.74 |
% |
Daily volatility for Triggering Event 2 |
|
|
4.30 |
% |
Risk-free rate for Triggering Event 1 |
|
|
4.75 |
% |
Risk-free rate for Triggering Event 2 |
|
|
4.49 |
% |
Grant Price for Trigging Event 1 |
|
$ |
15.0 |
|
Grant Price for Trigging Event 2 |
|
$ |
20.0 |
|
As a result, the Company determined the fair value
of the Earnout Shares for Triggering Event 1 and 2 is amounted to $1,926,610 and $3,273,019, respectively, and recorded the same amount in consolidated statements of change in shareholders’ equity (deficit) and
consolidated statements of operations and comprehensive income (loss) as earnout share payment for the year ended December 31, 2022.
In addition, Company determined that the probabilities
of achieving the revenue and net income thresholds are nil for Triggering Event 3 and 4 and estimated the fair value of the Earnout Shares
of nil.
Note 17 – Income taxes
British Virgin Islands
KRHL and SGGL are incorporated in the British Virgin
Islands and are not subject to tax on income or capital gains under current British Virgin Islands law. In addition, upon payments of
dividends by these entities to their shareholders, no British Virgin Islands withholding tax will be imposed.
Vietnam
The Company’s subsidiary operating in Vietnam
is subject to the Vietnam Income Tax at a standard income tax rate of 20%.
Malaysia
The Company’s subsidiary operating in Malaysia
is governed by the income tax laws of Malaysia and the income tax provision in respect of operations in Malaysia is calculated at the
applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof.
Under the Income Tax Act of Malaysia, enterprises that incorporated in Malaysia are usually subject to a unified 24% enterprise income
tax rate while preferential tax rates, tax holidays and even tax exemption may be granted on case-by-case basis.
Singapore
The Company’s subsidiaries incorporated in Singapore
and is subject to Singapore Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance
with relevant Singapore tax laws. The applicable tax rate is 17% in Singapore, with 75% of the first $7,255 (SGD 10,000) taxable income
and 50% of the next $137,842 (SGD 190,000) taxable income are exempted from income tax.
The United States and foreign components of loss before
income taxes were comprised of the following:
Schedule
of components of loss before income taxes
|
|
For the Year
Ended
December 31,
2022 |
|
|
For the Year
Ended
December 31,
2021 |
|
|
|
|
|
|
|
|
Singapore |
|
$ |
(5,400,034 |
) |
|
$ |
930,312 |
|
Foreign |
|
|
(19,531,790 |
) |
|
|
18,225 |
|
The provision for income taxes consisted of the following:
Schedule
of provision for income taxes
|
|
For the Year Ended
December 31, 2022 |
|
|
For the Year Ended
December 31, 2021 |
|
|
|
|
|
|
|
|
Current |
|
$ |
65,650 |
|
|
$ |
75,821 |
|
Deferred |
|
|
(48,228 |
) |
|
|
(27,680 |
) |
Provision for income taxes |
|
$ |
17,422 |
|
|
$ |
48,141 |
|
The following table reconciles Singapore statutory
rates to the Company’s effective tax rate:
Schedule
of effective income tax rate
|
|
For
the Year Ended
December 31, 2022 |
|
|
For
the Year Ended
December 31, 2021 |
|
|
|
|
|
|
|
|
Singapore statutory income tax rate |
|
|
17.0 |
% |
|
|
17.0 |
% |
Tax rate difference outside Singapore (1) |
|
|
(13.3 |
)% |
|
|
0.1 |
% |
Taxable income below exemption threshold |
|
|
0 |
% |
|
|
(2.4 |
)% |
Change in valuation allowance |
|
|
(2.9 |
)% |
|
|
29.8 |
% |
Others (2) |
|
|
(0.9 |
)% |
|
|
(39.4 |
)% |
Effective tax rate |
|
|
(0.1 |
)% |
|
|
5.1 |
% |
(1) |
It is due to tax rate difference of the entities incorporated in Vietnam and British Virgin Islands. |
(2) |
Others
mainly consisted of income such as offshore investment income, 2021 return to provision adjustment, and COVID-19 related government
grant which is non-taxable under local tax laws. |
The following table sets forth the significant components
of the aggregate deferred tax assets and liabilities of the Company as of:
Schedule
of deferred tax assets and liabilities
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
Deferred Tax Assets/Liabilities |
|
|
|
|
|
|
|
|
Net operating loss carryforwards |
|
$ |
749,309 |
|
|
$ |
812,715 |
|
Allowance for doubtful account* |
|
|
33,564 |
|
|
|
13,736 |
|
Net lease liability |
|
|
823 |
|
|
|
- |
|
Less: valuation allowance |
|
|
(783,696 |
) |
|
|
(826,451 |
) |
Deferred tax assets, net |
|
$ |
- |
|
|
$ |
- |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Customer relationships |
|
$ |
- |
|
|
$ |
49,294 |
|
Deferred tax liabilities, net |
|
$ |
- |
|
|
$ |
49,294 |
|
* | The valuation allowance on
all deferred tax assets decreased by $42,755 as of December 31, 2022. |
As of December 31, 2022 and 2021, the Company had
net operating losses carry forward (including temporary taxable difference of bad debt expense) of approximately $4.4 million and $4.8
million, respectively, from the Company’s Singapore subsidiaries. The net operating losses from the Singapore subsidiaries can be
carried forward indefinitely. Due to the limited operating history of certain Singapore subsidiaries, the Company is uncertain when these
net operating losses can be utilized. As a result, the Company provided a 100% allowance on deferred tax assets on net operating losses
(including temporary taxable difference of bad debt expense) of approximately $0.7 million and $0.8 million related to Singapore subsidiaries
as of December 31, 2022 and 2021, respectively.
As of December 31, 2022 and 2021, the Company had
net operating losses carry forward of approximately $18,000 and $19,000, respectively, from the Company’s Vietnam subsidiary. The
net operating losses from the Vietnam subsidiary can be carried forward for five years and expiring from the year 2025 to 2027. Due to
the Vietnam subsidiary have been operating at losses and the Company believes it is more likely than not that its Vietnam operations will
be unable to fully utilize its deferred tax assets related to the net operating losses in the foreseeable future. As a result, the Company
provided a 100% allowance on deferred tax assets on net operating losses of approximately $4,000 and $4,000 related to its Vietnam subsidiary
as of December 31, 2022 and 2021, respectively.
As of December 31, 2022, the Company had net operating
losses carry forward of approximately $15,000 from the Company’s Malaysia subsidiary. The net operating losses from the Malaysia
subsidiary can be carried forward for seven years. Due to the Malaysia subsidiary have been operating at losses and the Company believes
it is more likely than not that its Malaysia operations will be unable to fully utilize its deferred tax assets related to the net operating
losses in the foreseeable future. As a result, the Company provided a 100% allowance on deferred tax assets on net operating losses of
approximately $4,000 related to its Malaysia subsidiary as of December 31, 2022.
Uncertain tax positions
The Company evaluates each uncertain tax position
(including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated
with the tax positions. As of December 31, 2022 and 2021, the Company did not have any significant unrecognized uncertain tax positions.
The Company did not incur interest and penalties tax for the year ended December 31, 2022 and 2021.
Taxes payable consist of the following:
Schedule
of taxes payable
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
GST taxes payable |
|
$ |
125,695 |
|
|
$ |
225,095 |
|
Income taxes payable |
|
|
60,455 |
|
|
|
82,248 |
|
Totals |
|
$ |
186,150 |
|
|
$ |
307,343 |
|
Note 18 – Concentrations risks
(a) Major customers
For the years ended December 31, 2022 and 2021, no
customer accounted for 10% or more of the Company’s total revenues.
As of December 31, 2022 and 2021, no customer accounted
for 10% or more of the total balance of accounts receivable.
(b) Major vendors
For the year ended December 31, 2022, no vendor accounted
for 10% or more of the Company’s total purchases. For the year ended December 31, 2021, one vendor which is the Company’s
related party accounted for approximately 37.3% of the Company’s total purchases.
As of December 31, 2022, two vendors accounted for
27.9% and 12.1% of the Company’s total balance of accounts payable, respectively. As of December 31, 2021, one vendor which is the
Company’s related party accounted for approximately 87.2% of the total balance of accounts payable.
(c) Credit risk
Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist primarily of cash. The Singapore Deposit Insurance Corporation
Limited (SDIC) insures deposits in a Deposit Insurance (DI) Scheme member bank or finance company up to approximately $57,000
(SGD 75,000)
per account. As of December 31, 2022 and 2021, the Company had cash balance of $138,710
and $180,746
was maintained at DI Scheme banks in Singapore, of $0
and $41,606
was subject to credit risk, respectively. The Federal Deposit Insurance Corporation (FDIC) standard insurance amount is up to $250,000
per depositor per insured bank. As of December 31, 2022 and 2021, the Company had restricted cash balance of $641,461
and $0 was
maintained at banks in the United States, of $391,461
and $0
was subject to credit risk, respectively. While management believes that these financial institutions are of high credit quality, it
also continually monitors their credit worthiness.
The Company is also exposed to risk from accounts
receivable and other receivables. These assets are subjected to credit evaluations. An allowance has been made for estimated unrecoverable
amounts which have been determined by reference to past default experience and the current economic environment.
Note 19 – Leases
As of December 31, 2022 and
2021, the Company has leased three offices, and one office, respectively, which were classified as operating leases. In addition, the
Company had two office equipment leases which were classified as finance leases.
The Company occupies various
offices under operating lease agreements with a term shorter than twelve months which it elected not to recognize lease assets and lease
liabilities under ASC 842. Instead, the Company recognized the lease payments in profit or loss on a straight-line basis over the lease
term and variable lease payments in the period in which the obligation for those payments is incurred.
The Company’s lease
agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company recognized lease
expense on a straight-line basis over the lease term for operating lease. Meanwhile, the Company recognized the finance leases ROU assets
and interest on an amortized cost basis. The amortization of finance ROU assets is recognized on an accretion basis as amortization expense,
while the lease liability is increased to reflect interest on the liability and decreased to reflect the lease payments made during the
period.
The ROU assets and lease
liabilities are determined based on the present value of the future minimum rental payments of the lease as of the adoption date, using
an effective interest rate of 5.25%, which is determined using an incremental borrowing rate with similar term in Singapore.
As of December 31, 2022,
the weighted average remaining lease terms of the Company’s operating lease and finance leases are 0.69 years and 2.01 years, respectively.
Operating and finance lease
expenses consist of the following:
Schedule
of operating and finance lease expenses
|
|
|
|
For the Year Ended |
|
|
|
Classification |
|
December 31, 2022 |
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
Operating lease cost |
|
|
|
|
|
|
|
|
|
|
Lease expenses |
|
General and administrative |
|
$ |
114,390 |
|
|
$ |
62,810 |
|
Lease expenses – short-term |
|
General and administrative |
|
|
113,055 |
|
|
|
143,589 |
|
Finance lease cost |
|
|
|
|
|
|
|
|
|
|
Amortization of leased asset |
|
General and administrative |
|
|
7,948 |
|
|
|
8,153 |
|
Interest on lease liabilities |
|
Other expense -Interest expenses |
|
|
1,276 |
|
|
|
1,639 |
|
Total lease expenses |
|
|
|
$ |
236,669 |
|
|
$ |
216,191 |
|
Weighted-average remaining
term and discount rate related to leases were as follows:
Schedule
of weighted average remaining term and discount rate
|
|
As of |
|
|
As of |
|
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
Weighted-average remaining term |
|
|
|
|
|
|
|
|
Operating lease |
|
|
0.69 year |
|
|
|
1.25 years |
|
Finance leases |
|
|
2.01 years |
|
|
|
3.00 years |
|
Weighted-average discount rate |
|
|
|
|
|
|
|
|
Operating lease |
|
|
5.25 |
% |
|
|
5.25 |
% |
Finance leases |
|
|
5.25 |
% |
|
|
5.25 |
% |
The following table sets
forth the Company’s minimum lease payments in future periods as of December 31, 2022:
Schedule
of future minimum lease payments
|
|
Operating lease |
|
|
Finance lease |
|
|
|
|
|
|
payments |
|
|
payments |
|
|
Total |
|
Twelve months ending December 31, 2023 |
|
$ |
81,522 |
|
|
$ |
8,151 |
|
|
$ |
89,673 |
|
Twelve months ending December 31, 2024 |
|
|
- |
|
|
|
15,614 |
|
|
|
15,614 |
|
Total lease payments |
|
|
81,522 |
|
|
|
23,765 |
|
|
|
105,287 |
|
Less: discount |
|
|
(1,563 |
) |
|
|
(1,564 |
) |
|
|
(3,127 |
) |
Present value of lease liabilities |
|
$ |
79,959 |
|
|
$ |
22,201 |
|
|
$ |
102,160 |
|
As of December 31, 2022,
the Company minimum short term lease payments to be due within one year amounted to $25,075.
Note 20 – Commitments and contingencies
Contingencies
Legal
From time to time, the Company is party to certain
legal proceedings, as well as certain asserted and un-asserted claims. Amounts accrued, as well as the total amount of reasonably possible
losses with respect to such matters, individually and in the aggregate, are not deemed to be material to the consolidated financial statements.
On
March 30, 2022, the State Courts of the Republic of Singapore had reached a verdict that the Company’s subsidiaries, KRHSG
and Melana (Defendants) is liable to compensate Jamie Fan Wei Zhi (Plaintiff), the Company’s related party for failing to procure
the release of the Plaintiff from the guarantees to secure a credit line from United Overseas Bank before December 31, 2020. The Defendants
agree to compensate the Plaintiff the sum of $3,704 (SGD 5,000) per month as guarantor fee starting from January 1, 2021 until the Defendants
procured the release of the Plaintiff as the guarantor of the loan. The Defendants released the Jamie Fan Wei Zhi as the guarantor of
the loan on October 31, 2022. As of December 31, 2022, the Company has paid Jamie Fan Wei Zhi $74,966 (SGD 100,000), and no more balance
outstanding.
Note 21 – Segment information
The Company presents segment
information after elimination of inter-company transactions. In general, revenue, cost of revenue and operating expenses are directly
attributable, or are allocated, to each segment. The Company allocates costs and expenses that are not directly attributable to a specific
segment, such as those that support infrastructure across different segments, to different segments mainly on the basis of usage, revenue
or headcount, depending on the nature of the relevant costs and expenses. The Company does not allocate assets to its segments as the
Chief Operating Decision Maker (“CODM”) does not evaluate the performance of segments using asset information.
The Company evaluates performance
and determines resource allocations based on a number of factors with the primary measurements being revenues and income/loss from operations
of the Company’s two reportable segments: 1) Medical Services and 2) Property Management Services.
The following tables present
the summary of each segment’s revenue, loss from operations, income (loss) before income taxes and net income (loss) which is considered
as a segment operating performance measure, for the years ended December 31, 2022 and 2021:
Schedule
of segment reporting information
| |
| | | |
| | | |
| | |
| |
For the Year Ended December 31, 2022 | |
| |
| | |
Property | | |
| |
| |
Medical | | |
Management | | |
| |
| |
Services | | |
Services | | |
Total | |
Revenues | |
$ | 6,076,414 | | |
$ | 3,764,295 | | |
$ | 9,840,709 | |
Loss from operations | |
$ | (2,463,593 | ) | |
$ | (2,991,371 | ) | |
$ | (5,454,964 | ) |
Net loss | |
$ | (2,651,826 | ) | |
$ | (2,779,966 | ) | |
$ | (5,431,792 | ) |
Reconciliation
of the Company’s segment net loss before income taxes to the consolidated statement of operation and comprehensive income (loss)’s
net loss before income taxes for the year ended December 31, 2022 is as follows:
Schedule
of consolidated statement of operation and comprehensive income (loss)
net loss before income taxes
| |
| | |
Segment loss before income tax | |
$ | 5,414,370 | |
Change in fair value of prepaid forward purchase liabilities | |
| (12,911,503 | ) |
Earnout share payment | |
| (5,199,629 | ) |
Other corporate expenses | |
| (1,406,322 | ) |
The accounting principles
for the Company’s revenue by segment are set out in Note 3.
As of December 31, 2022,
the Company’s total assets were composed of $2,176,405 for medical services, $335,068 for property management services and $23,117,567
for corporate.
As of December 31, 2021,
the Company’s total assets were composed of $1,478,872 for medical services and $6,412,439 for property management services.
As substantially all of the
Company’s long-lived assets are located in Singapore and all of the Company’s revenue is derived from Singapore, no geographical
information is presented.
Note 22 – Subsequent events
The Company evaluated all events and transactions
that occurred after December 31, 2022 up through the date the Company issued these consolidated financial statements.
On January 9, 2023, James
Tan, who is the former Chief Executive officer of 8i loaned the Company for an amount of $145,450 (the “Initial Tan Loan”)
at 8% interest per annum and was to be repaid by March 31, 2023. The Initial Tan Loan was not timely repaid by March 31, 2023 and was
replaced as disclosed below.
On February 2, 2023, the
Company entered into a loan agreement (“Agreement”) with Alfred Lim, the independent director of the Company, pursuant to
which Alfred Lim granted a loan amounted to $128,750 to the Company at 8% interest per annum. The loan was due on March 31, 2023. On March 31, 2023 the Company further extended the maturity date of such
loan to December 31, 2023.
On April 24, 2023, James
Tan loaned the Company an additional $332,750 (the “Tan Second Loan”) at 8% interest per annum, which matures on the earlier
of June 30, 2023 or within seven days of the Company receiving the proceeds from the sales of securities in the private placement (the
“Private Placement”). Pursuant to the terms of the Tan Second Loan, the Company agreed to issue to James Tan a new promissory
note in the principal amount of $145,450 dated April 24, 2023 (the “Tan First Loan”) to replace the Initial Tan Loan. The
Tan First Loan contained the same payment terms as the Tan Second Loan.
On May 15, 2023, James Tan
entered into a third loan agreement with the Company pursuant to which James Tan agreed to loan the Company an additional $22,500 (the
“Tan Third Loan”), provided that the Company issued a new promissory note to James Tan in the principal amount of $700,000
(the “Tan 2023 Note”) to replace the James Tan’s convertible note balance as of December 31, 2023 (see note 13) (the
“Tan 2022 Note”). The Tan Third Loan would bear interest at 8% per annum, and would be repaid upon the earlier of June 30,
2023 or within seven days of the Company receiving the proceeds from the sales of securities in the Private Placement.
On May 15, 2023, the Company
issued to James Tan the Tan 2023 Note to replace the Tan 2022 Note. The Tan 2023 Note was an interest-free convertible promissory note
in the aggregate principal amount of $700,000. On May 15, 2023, James Tan elected to convert the entire unpaid principal in the amount
of $700,000 of the Tan 2023 Note into ordinary shares of the Company at $1.00 per share in accordance with the terms of the Tan 2023 Note.
On May 16, 2023, the Company issued to James Tan 700,000 ordinary shares in full satisfaction of the Tan 2023 Note. Pursuant to the terms
of the Tan 2023 Note, the Company has agreed to register the 700,000 ordinary shares for resale. The Company refers to these 700,000 restricted
ordinary shares as the “Converted Shares.” This conversion is likely resulted in modification of the convertible notes as
the five-day VWAP Price of the Company’s ordinary shares immediately preceding the conversion date is higher than $1.00 and reduced
the carrying amount of the convertible debt instrument with a corresponding increase in additional paid-in capital.
On
May 16, 2023, the Company signed settlement agreement (“Settlement Agreement”) with James Tan, pursuant to which the Company
agreed to issue to James Tan an aggregate of 478,200 restricted ordinary shares of the Company in full satisfaction of all obligations
of the Company under the Tan First Loan and the Tan Second Loan.
On
May 16, 2023, the Company signed settlement agreements (“Settlement Agreements 2”) with two third parties, Shine Link, and
Menora, and a related party, 8i Holding, pursuant to which the Company agreed to issue to Shine Link, Menora, and 8i Holding 87,500, 119,000,
and 82,600 restricted ordinary shares of the Company, respectively, in full satisfaction of all obligations of the Company under the convertible
notes balance set forth in Note 13 from Shine Link, Menora, and 8i Holding. These conversions are likely resulted in modification of the
convertible notes as the five-day VWAP Price of the Company’s ordinary shares immediately preceding the conversion date is higher
than $1.00 and reduced the carrying amount of the convertible debt instrument with a corresponding increase in additional paid-in capital.
On
May 16, 2023, the Company signed settlement agreement (“Chen Settlement Agreement”) with Kelvin Chen,
the CEO of the Company, pursuant to which the Company agreed to issue to Kelvin Chen an aggregate of 850,306 restricted ordinary shares
of the Company in full satisfaction of Kelvin Chen’s claim for an aggregate amount of $850,306 provided to KRHSG from time to time
since inception. Upon issuance of the restricted ordinary shares, the balance own to Kelvin Chen reduced to nil. In order to comply with
Nasdaq’s shareholder approval requirement for issuance of stock to an executive officer of a company pursuant to Nasdaq Listing
Rule 5635(c), the Company and Dr. Chen amended the Chen Settlement Agreement by entering into a Supplemental Agreement (the “Supplemental
Agreement”) on June 6, 2023, so that the shares issued to Dr. Chen would be issued at a per share price not less than the closing
bid price of $1.47 per share on May 15, 2023, the day prior to the execution of the Chen Settlement Agreement. Pursuant to the Supplemental
Agreement, Dr. Chen has agreed to release and discharge KRHSG of all claims in return for 578,439 ordinary shares at $1.47 per share,
the closing bid price of EUDA ordinary shares on May 15, 2023. Dr. Chen has agreed to forfeit and surrender 271,867 ordinary shares of
the 850,306 ordinary shares issued to him on May 16, 2023.
Between
May 16 and May 22, 2023, the Company 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 to purchase price of $940,000 in a private placement in reliance upon the exemption
from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506
promulgated thereunder.
On June 8, 2023, the Company
and the Seller 1 and Seller 2 (together, the “ Sellers”) entered into amendments to the Prepaid Forward Agreements (together,
the “Amendments”), to amend the definition of “Maturity Consideration,” such that, Maturity Consideration shall
consist of 800,000 ordinary shares of the Company to be issued to the Sellers by the Company. Pursuant to the Prepaid Forward Agreements,
the maturity date of the Prepaid Forward Transaction 1 and 2 (together, the “Prepaid Forward Transactions”) (the “Maturity
Date”) may be accelerated by the Sellers after any occurrence wherein during any 30 consecutive trading-day period, the dollar volume-weighted
average price of Company’s ordinary shares for 20 trading days is less than $3.00 per share. Pursuant to the Amendments, the parties
agreed that the Prepaid Forward Transactions shall be accelerated as of the date of the Amendments, and accordingly, the 800,000 ordinary
shares (or 1,600,000 ordinary shares in the aggregate), became immediately due and payable to the Sellers upon execution of the Amendments.
The Amendments provide the Sellers with registration rights for the ordinary shares issuable as Maturity Consideration, and also prohibit
the Sellers from selling such ordinary shares on any exchange business day in an amount greater than 15% of the daily trading volume of
the Company’s ordinary shares on such day. In addition, as of June 8, 2023 (the “Maturity Date”), the Sellers became
entitled to retain (a) the remaining prepayment amount paid from the Company’s trust account to the Sellers upon consummation of
the Company’s business combination, and (b) the remaining ordinary shares held by each Seller that were subject to the Prepaid Forward
Transactions. Pursuant to the Amendments, no other fees, consideration or other amounts are due to the Seller or the Company upon the
Maturity Date.