ZHONGCHAO INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2023 and December 31, 2022
(Expressed in U.S. dollar, except for the number of shares and per share data)
| June 30, 2023 | December 31, 2022 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 11,286,821 | $ | 11,520,453 | ||||
| Short-term investments | 936,098 | 518,416 | ||||||
| Accounts receivable, net | 3,364,768 | 6,772,988 | ||||||
| Inventories | 513,457 | 189,106 | ||||||
| Prepayments | 1,127,732 | 1,027,989 | ||||||
| Prepayments - related parties | 1,048 | 115,989 | ||||||
| Loans receivable | 275,813 | 1,840,000 | ||||||
| Due from affiliates | - | 226,179 | ||||||
| Other current assets | 1,048,364 | 493,040 | ||||||
| Total Current Assets | 18,554,101 | 22,704,160 | ||||||
| Investment in equity method investees | 1,121,783 | 1,179,300 | ||||||
| Investment in an equity security | 84,606 | 84,606 | ||||||
| Goodwill | 5,485,862 | 5,767,504 | ||||||
| Property and equipment, net | 2,390,737 | 3,890,947 | ||||||
| Deposit and prepayment for properties | 11,722 | 239,481 | ||||||
| Prepayments for lease of land | 279,591 | 304,787 | ||||||
| Intangible assets, net | 711,487 | 912,054 | ||||||
| Right of use assets | 1,373,612 | 1,666,777 | ||||||
| Deferred tax assets | 512,622 | 1,864,729 | ||||||
| Total Assets | $ | 30,526,123 | $ | 38,614,345 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 6,475 | $ | 140,834 | ||||
| Advances from customers | 384,981 | 395,263 | ||||||
| Income tax payable | 130,514 | 2,292,765 | ||||||
| Operating lease liabilities, current portion | 386,133 | 480,633 | ||||||
| Accrued expenses and other liabilities | 832,839 | 855,540 | ||||||
| Total Current Liabilities | 1,740,942 | 4,165,035 | ||||||
| Operating lease liabilities, noncurrent portion | 1,056,764 | 1,221,845 | ||||||
| Deferred tax liabilities | 556,044 | 208,200 | ||||||
| Total Liabilities | 3,353,750 | 5,595,080 | ||||||
| Commitments and Contingencies | ||||||||
| Equity | ||||||||
| Class A Ordinary Share (par value $0.0001 per share, 450,000,000 shares authorized; 20,531,423 and 20,531,423 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively) | 2,054 | 2,054 | ||||||
| Class B Ordinary Share (par value $0.0001 per share, 50,000,000 shares authorized; 5,497,715 and 5,497,715 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively) | 550 | 550 | ||||||
| Additional paid-in capital | 25,060,797 | 24,998,388 | ||||||
| Statutory reserve | 1,315,017 | 1,315,017 | ||||||
| (Accumulated deficits) Retained earnings | (597,553 | ) | 4,124,037 | |||||
| Accumulated other comprehensive loss | (1,492,919 | ) | (511,824 | ) | ||||
| Total Zhongchao Inc. Shareholders' Equity | 24,287,946 | 29,928,222 | ||||||
| Non-controlling interests | 2,884,427 | 3,091,043 | ||||||
| Total Equity | 27,172,373 | 33,019,265 | ||||||
| Total Liabilities and Equity | $ | 30,526,123 | $ | 38,614,345 |
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ZHONGCHAO INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Six Months Ended June 30, 2023 and 2022
(Expressed in U.S. dollar, except for the number of shares and per share data)
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenues: | ||||||||
| Services | $ | 4,856,333 | $ | 7,295,439 | ||||
| Products | 5,519,837 | - | ||||||
| Total revenues | 10,376,170 | 7,295,439 | ||||||
| Cost of revenues: | ||||||||
| Services | (2,710,770 | ) | (2,236,718 | ) | ||||
| Products | (3,342,061 | ) | - | |||||
| Total cost of revenues | (6,052,831 | ) | (2,236,718 | ) | ||||
| Gross Profit | 4,323,339 | 5,058,721 | ||||||
| Operating Expenses | ||||||||
| Selling and marketing expenses | (3,945,328 | ) | (1,316,733 | ) | ||||
| General and administrative expenses | (4,639,182 | ) | (3,046,045 | ) | ||||
| Research and development expenses | (298,987 | ) | (153,290 | ) | ||||
| Impairment of property and equipment | (1,464,413 | ) | - | |||||
| Total Operating Expenses | (10,347,910 | ) | (4,516,068 | ) | ||||
| (Loss) Income from Operations | (6,024,571 | ) | 542,653 | |||||
| Interest income, net | 57,430 | 82,913 | ||||||
| Other income (expenses), net | 784,979 | (247,327 | ) | |||||
| (Loss) Income Before Income Taxes | (5,182,162 | ) | 378,239 | |||||
| Income tax benefits (expenses) | 402,304 | (284,695 | ) | |||||
| Net (Loss) Income | (4,779,858 | ) | 93,544 | |||||
| Less: net loss attributable to noncontrolling interests | 58,268 | - | ||||||
| Net (Loss) Income Attributable to Zhongchao Inc.'s shareholders | (4,721,590 | ) | 93,544 | |||||
| Other Comprehensive Loss | ||||||||
| Foreign currency translation adjustment | (1,129,443 | ) | (1,328,591 | ) | ||||
| Comprehensive Loss | (5,909,301 | ) | (1,235,047 | ) | ||||
| Less: comprehensive loss attributable to noncontrolling interests | 206,616 | - | ||||||
| Net Loss Attributable to Zhongchao Inc.'s shareholders | $ | (5,702,685 | ) | $ | (1,235,047 | ) | ||
| Weighted average number of ordinary share outstanding | ||||||||
Basic and Diluted | 26,029,138 | 25,976,000 | ||||||
| (Loss) Earnings per share | ||||||||
Basic and Diluted | $ | (0.18 | ) | $ | 0.00 |
2
ZHONGCHAO INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in U.S. dollar, except for the number of shares)
For the Six Months Ended June 30, 2023
| (Accumulated | Accumulated other | |||||||||||||||||||||||||||||||||||||||
| Ordinary share | Additional | Deficit) | comprehensive | Non- | ||||||||||||||||||||||||||||||||||||
| Class A | Class B | paid-in | Statutory | Retained | (loss) | controlling | Total | |||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | capital | Reserve | earning | income | interest | equity | |||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | 20,531,423 | $ | 2,054 | 5,497,715 | $ | 550 | $ | 24,998,388 | $ | 1,315,017 | $ | 4,124,037 | $ | (511,824 | ) | $ | 3,091,043 | $ | 33,019,265 | |||||||||||||||||||||
| Share-based compensation expenses | - | - | - | - | 62,409 | - | - | - | - | 62,409 | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | (4,721,590 | ) | - | (58,268 | ) | (4,779,858 | ) | |||||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | - | (981,095 | ) | (148,348 | ) | (1,129,443 | ) | |||||||||||||||||||||||||||
| Balance as of June 30, 2023 | 20,531,423 | $ | 2,054 | 5,497,715 | $ | 550 | $ | 25,060,797 | $ | 1,315,017 | $ | (597,553 | ) | $ | (1,492,919 | ) | $ | 2,884,427 | $ | 27,172,373 |
For the Six Months Ended June 30, 2022
| Ordinary share | Additional | Accumulated other | ||||||||||||||||||||||||||||||||||
| Class A | Class B | paid-in | Statutory | Retained | comprehensive | Total | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | capital | Reserve | earning | Income (loss) | equity | ||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | 19,435,423 | $ | 1,946 | 5,497,715 | $ | 550 | $ | 22,986,975 | $ | 1,199,054 | $ | 7,180,891 | $ | 1,197,006 | $ | 32,566,422 | ||||||||||||||||||||
| Ordinary shares issued in a shelf offering | 1,060,000 | 106 | - | - | 1,850,368 | - | - | - | 1,850,474 | |||||||||||||||||||||||||||
| Share-based compensation expenses | - | - | - | - | 85,703 | - | - | - | 85,703 | |||||||||||||||||||||||||||
| Net income | - | - | - | - | - | - | 93,544 | - | 93,544 | |||||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | - | (1,328,591 | ) | (1,328,591 | ) | |||||||||||||||||||||||||
| Balance as of June 30, 2022 | 20,513,423 | $ | 2,052 | 5,497,715 | $ | 550 | $ | 24,923,046 | $ | 1,199,054 | $ | 7,274,435 | $ | (131,585 | ) | $ | 33,267,552 |
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ZHONGCHAO INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2023 and 2022
(Expressed in U.S. dollar, except for the number of shares)
| For the Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net (loss) income | $ | (4,779,858 | ) | $ | 93,544 | |||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
| Depreciation and amortization expenses | 276,391 | 128,356 | ||||||
| Writing off accounts receivable | 1,286,280 | - | ||||||
| Reversal of provision of doubtful accounts | (72,605 | ) | - | |||||
| Loss from disposal of property and equipment | 1,466,469 | - | ||||||
| Amortization of right of use assets | 259,883 | 183,132 | ||||||
| Recognition of share-based compensation expenses | 62,409 | 85,703 | ||||||
| Deferred tax expenses (benefits) | (378,162 | ) | (29,296 | ) | ||||
| Equity investment loss | (74 | ) | 61,774 | |||||
| Changes in fair value of short-term investments | (592,141 | ) | 234,652 | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 2,007,725 | (942,164 | ) | |||||
| Prepayments | (151,410 | ) | (813,023 | ) | ||||
| Prepayments - related party | 114,372 | - | ||||||
| Inventories | (349,138 | ) | - | |||||
| Other current assets | (613,086 | ) | 79,119 | |||||
| Accounts payable | (133,425 | ) | (13,515 | ) | ||||
| Advances from customers | 9,440 | 20,991 | ||||||
| Income tax payable | (78,043 | ) | 235,956 | |||||
| Accrued expenses and other liabilities | 35,179 | (30,266 | ) | |||||
| Lease liabilities | (222,909 | ) | (91,584 | ) | ||||
| Net Cash Used in Operating Activities | (1,853,153 | ) | (796,621 | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Purchases of property and equipment | (12,269 | ) | (25,291 | ) | ||||
| Purchases of intangible assets | - | (15,434 | ) | |||||
| Prepayments for a long-term investment | - | (617,370 | ) | |||||
| Loans to third parties | (288,671 | ) | (971,712 | ) | ||||
| Repayment of loans from third parties | 1,840,000 | 1,165,041 | ||||||
| Due from affiliates | 225,163 | (2,233,335 | ) | |||||
| Investments in short-term investments | (522,920 | ) | (996,638 | ) | ||||
| Proceeds from redemption of short-term investments | 697,379 | 533,747 | ||||||
| Net Cash Provided by (Used in) Investing Activities | 1,938,682 | (3,160,992 | ) | |||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from issuance of ordinary shares in connection with a shelf offering | - | 1,850,474 | ||||||
| Net Cash Provided by Financing Activities | - | 1,850,474 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | (319,161 | ) | (326,486 | ) | ||||
| Net decrease in cash and cash equivalents | (233,632 | ) | (2,433,625 | ) | ||||
| Cash and cash equivalents at beginning of period | 11,520,453 | 13,914,982 | ||||||
| Cash and cash equivalents at end of period | $ | 11,286,821 | $ | 11,481,357 | ||||
| Supplemental Cash Flow Information | ||||||||
| Cash paid for income tax | $ | 78,043 | $ | 78,034 | ||||
| Noncash investing activities | ||||||||
| Right of use assets obtained in exchange for operating lease obligations | $ | 16,436 | $ | 1,771,361 | ||||
| Addition of property and equipment from deposit and prepayment for properties | $ | 238,406 | $ | - | ||||
| Net off deferred tax assets with income tax payable | $ | 2,067,833 | $ | - |
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