| ORGANIZATION AND PRINCIPAL ACTIVITIES | 1. ORGANIZATION AND PRINCIPAL ACTIVITIES On August 28, 2020, Etao International Co, Ltd. (“Etao”
or the “Company”) was founded in Cayman Islands. The Company is controlled by the major shareholders: Etao International
Group Inc. (“Etao Delaware”) and WSHP Capital LLC (“WSHP Capital”) which are domiciled in the State of Delaware
and State of New York, respectively. On September 17, 2020, Etao International Group Co. Limited (“Etao HK”) was founded
in Hong Kong. On September 24, 2020, Etao Global Holdings (“Etao Global”) was formed in the British Virgin Islands. On December
1, 2020, ETAO International Medical Technology Ltd. (“ETAO China”) was formed as a Wholly Foreign-Owned Entity in the People’s
Republic of China. From
March 15, 2021 till June 30, 2021, Etao signed a series of VIE agreements and issued shares
to acquire majority shares of 11 companies in China. Through VIE agreements, Etao China controls 11 entities in China, including 6 hospitals
and chain clinics, 4 technology related healthcare companies and 1 insurance brokerage agency. Offline hospitals mainly involve general hospitals
and various specialized hospitals. The hospitals’ income consists of drug, Diagnosis, Examination, Treatment, Assay, Nursing, Materials
and so on. Guiyang Tianlun Hospital mainly provides maternity, health and reproductive services; Civil Hospital (Mengzhou City) and Changxing
Zhizhou Hospital are second-level general hospitals with all departments, including medical treatment, scientific research, teaching,
prevention, rehabilitation and healthcare, and pension service; Qianhu Medical Management provides advanced technology and excellent service
for every beauty seeker. Kangning (Henyang) Healthcare Management is the first medical examination separation one-stop service institutions
in Hengyang City, for individuals and groups to provide health examination, medical, family doctor, chronic disease management and other
all-round personalized services. In the current situation of scarce medical resources in China, Kangning (Henyang) Healthcare Management
provides another effective disease prevention, control solution and better medical experience for individuals, enterprises, public institutions
and government agencies. Due to disputes with minority shareholders of Qianhu Medical, the Company lost control of Qianhu Medical in 2022.
Therefore, the Company made full impairment of its equity cost in Qianhu Medical as of January 1, 2022 and the comparative figures of
2021 was restated to carve out Qianhu Medical from continuing business. Aaliance Insurance Broker is mainly engaged in Insurance,
reinsurance brokerage and risk management consulting, representing and selling products of various Insurance companies in China. The
company has the insurance brokerage business license, national large enterprise group insurance business bidding qualification. Aaliance
Insurance Broker focuses on comprehensive insurance services, in-depth scene, customized products, and relies on O2O online and offline
three-dimensional services, to create a real comprehensive platform of insurance services. Each technology has its own unique competitiveness.
Chain Workshop is a leading digital healthcare provider in “Internet” + “healthcare” (artificial intelligence,
big data, cloud computing, blockchain, etc.). Its core businesses include six major sections: internet hospital, cloud pharmacy, AI diagnosis,
chronic disease management, internet doctor, international remote consultation. Each technology also provides technology development
services for internet hospitals outside the system, to participate in and promote the development of informatization, digitalization
and intellectualization of the medical industry with the guidance of industry application and customer demand. Etao through Etao HK and its subsidiaries, VIE and
VIE’s subsidiaries, primarily engages in healthcare related businesses in the People’s Republic of China (“PRC”
or “China”). As of December 31, 2022, Etao Hong Kong’s
major subsidiaries and consolidated VIE are as follows:
Name Date
of Percentage of
Principal
Subsidiaries
ETAO
International Medical Technology Ltd. August 31, 2020 100% WFOE, Technology
VIE
and subsidiaries of VIE
Aaliance
Insurance Brokers Co., Ltd and its 20 branches in China July 14, 2010 VIE, 85% owned Insurance Broker
Shanghai
Weimin Info-tech Co., Ltd November 10, 2017 100% owned Software, online advertising support
Shandong
Duorui Info-tech Co., Ltd. March 6, 2019 70% owned Software, online advertising support
Shandong
Jingkai Info-tech Co., Ltd. August 11, 2020 70% owned Software, online advertising support
Jiangxi
Qianhu Healthcare Group (Qianhu) July 1, 2019 51% owned VIE Cosmetology Hospital
Changsha
Zhuoermei Medical Cosmetology Co., Ltd February 14, 2010 100% owned Cosmetology Hospital
Yichun
Aicite Medical Cosmetology Co., Ltd. March 6, 2018 100% owned Cosmetology Hospital
Nanchang
Ailaifu Medical Cosmetology Co., Ltd. September 11, 2015 80% owned Cosmetology Hospital
Nanchang
Hongpingguo Medical Cosmetology Co., Ltd. September30, 2016 80% owned Cosmetology Hospital
Changsha
Keyanmei Medical Cosmetology Co., Ltd. June 23, 2015 51% owned Cosmetology Hospital
Hangzhou
6D Dental Medical Technology Co., LTD August 30, 2010 51% owned VIE Dental
Quzhou
6D Dental Clinic Co., LTD ，March,16，2015 51% owned subsidiary of 51% owned VIE Dental
Hangzhou
Sunsmile Dental Clinic May 18, 2017 60% owned Dental
Chain Workshop (Beijing) Co.,Ltd. August 27, 2003 100% owned VIE AI, online healthcare
Shenzhen Gingularity Information Technology Co., Ltd February 17, 2017 100% owned AI, online healthcare
Nanjing
Changguan Info-tech Co., Ltd. January 5, 2010 51% owned AI, online healthcare
Hunan
Zhichao Healthcare Technology Limited August 17, 2017 51% owned VIE Healthcare technology
Henyang
Kangning Health Management Limited April 28, 2015 51% owned VIE Health management
Guiyang
Tianlun Infertility Hospital Limited March 29, 2021 51% owned VIE Hospital
Mengzhou
Minsheng Hospital Limited May 11, 2018 51% owned VIE Hospital
Changxing
Zhizhou Hospital Limited March 5, 2019 51% owned VIE Hospital
Beijing
Baihuabaihui Biotech Limited January 22, 2014 55% owned VIE Bio-tech
Beijing Dnurse Technology Co.,Ltd July 30, 2013 67.39% owned VIE Nursing Etao, its subsidiaries, its VIEs and VIE’s
subsidiaries are hereinafter collectively referred to as the “Company”. The VIE Agreements Etao
International healthcare , has entered
into the following contractual arrangements with VIEs and their shareholders, that enable the Company to (i) have power to direct
the activities that most significantly affect the performance of these VIEs and their subsidiaries, and (ii) receive the benefits
of VIEs and their subsidiaries that could be significant to VIEs and its subsidiaries. VIEs are fully and exclusively responsible for
the management of VIEs and its subsidiaries, absorbs all risk of losses of VIEs and their subsidiaries and has the exclusive right to
exercise all voting rights of VIEs’ shareholders. Therefore, Etao is considered as the ultimate primary beneficiary of these VIEs
and their subsidiaries and has consolidated these VIEs and their subsidiaries’ assets, liabilities, results of operations, and
cash flows in the accompanying consolidated financial statements. Exclusive Business Cooperation Agreement Etao International Healthcare Technology Co., Ltd.
(“the WOFE”) entered into an Exclusive Business Cooperation Agreement with 11 VIEs , pursuant to which the WOFE has the exclusive
right to provide the 11 VIEs with technical services, management consulting and operation support in return for certain fees typically
calculated to shift, from 51% to 100% of, VIEs’ operating profits to the WOFE, and the operating profits shall consist of the VIEs’
total consolidated profit, after deduction of any accumulated deficit in the preceding financial year(s), working capital, expenses,
taxes and other statutory contributions. Without the WOFE’s prior written consent, VIEs may not accept any services subject to
this agreement from any third party. The WOFE will have the exclusive ownership of all intellectual property rights created as a result
of the performance of this agreement. This Agreement may be terminated (i) with the WOFE written consent, (ii) or when VIEs goes bankrupt
or are liquidated in accordance with the applicable laws. Exclusive Option Agreement The Exclusive Option Agreement entered into by and
among the WOFE and the VIEs. Pursuant to the Exclusive Option Agreement, Registered Shareholders irrevocably granted the WOFE or any
third party designated by the WOFE an option to purchase all or part of their equity interests as agreed in Exclusive Business Co-operation
Agreement (collectively, Granted Equity Interests) in VIEs and their subsidiaries at any time at a price determined at the WOFE’s
discretion or in accordance with the applicable laws. Without the WOFE’s prior written consent,
VIEs and their shareholders agreed not to, among other things: (i) amend the articles of association of the VIES; (ii) increase or decrease
the registered capital of the VIEs; (iii) change VIEs’ business activities; (iv) alter VIEs’ capital structure; (v) sell,
assign, mortgage or dispose of any legal or beneficial rights to or in any of VIEs’ assets, business, or revenue; (vi) incur, assume
or guarantee any debts, except for debts incurred in the ordinary course of business; (vii) enter into any material contract, except
for contracts entered in the ordinary course of business; (viii) merge or consolidate with any third party or acquire or invest in any
third party. Registered Shareholders have further covenanted, among other things, that not to distribute dividends Without the WOFE’s
prior written consent. This Agreement will continue with full force and effect until the date when the Granted Equity Interests held
by Registered Shareholders have been transferred to the WOFE or any third party designated by the WOFE. Power of Attorney Each shareholder of VIEs, executed Power of Attorney
to irrevocably authorize the WOFE or any person(s) designated by the WOFE to act as its attorney-in-fact to exercise all of its rights
as a shareholder of the VIEs, including, but not limited to, the right to receive all notices regarding the shareholders’ meetings,
vote, make decisions and sign relevant documents as a shareholder. This agreement is effective and irrevocable until all of each shareholder’s
equity interest in the VIEs has been transferred to these VIEs or the person(s) designated by the WOFE. Equity Pledge Agreement Under
the Equity Interest Pledge Agreement signed by and among the WOFE and each shareholder of the VIEs, the shareholders of these VIEs have
agreed to pledge equity interest in the VIEs as defined in the to
the WOFE to guarantee the performance obligations of the VIEs under the Spousal Consent Letter The
spouses of each shareholder of the VIEs have each signed Spousal Consent Letters. Risks in relation to the VIE structure The Company believes that the contractual arrangements
with its VIE and their respective shareholders are in compliance with PRC laws and regulations and are legally enforceable. However,
uncertainties in the PRC legal system could limit the Company’s ability to enforce the contractual arrangements. If the legal structure
and contractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could, among others:
● revoke
business and operating licenses of Etao’s PRC subsidiary and VIE;
● levy
fines on Etao’s PRC subsidiary and VIE;
● shut
down services of Etao’s PRC subsidiary and VIE;
● discontinue
or restrict Etao’s PRC subsidiary and VIE’s operations in China;
● impose
conditions or requirements with which Etao’s PRC subsidiary and VIE may not be able
to comply;
● require
Etao or Etao’s PRC subsidiary and VIE to restructure the relevant ownership structure
or operations;
● restrict
or prohibit Etao’s use of the proceeds of the additional public offering to finance
Etao’s business and operations in China; and
● take
other regulatory or enforcement actions that could be harmful to Etao’s or Etao’s
PRC subsidiary and VIE’s business. Etao’s ability to conduct its business may
be negatively affected if the PRC government were to carry out of any of the aforementioned actions. As a result, Etao may not be able
to consolidate its VIE in its consolidated financial statements as it may lose the ability to exert effective control over the VIE and
their respective shareholders and it may lose the ability to receive economic benefits from the VIE. Etao, however, does not believe
such actions would result in the liquidation or dissolution of Etao, its PRC subsidiaries and VIE. The interests of the shareholders of VIE may diverge
from that of Etao and that may potentially increase the risk that they would seek to act contrary to the contractual terms, for example
by influencing VIE not to pay the service fees when required to do so. Etao cannot assure that when conflicts of interest arise, shareholders
of VIE will act in the best interests of Etao or that conflicts of interests will be resolved in Etao’s favor. Etao believes the
shareholders of VIE will not act contrary to any of the contractual arrangements and the exclusive option agreements provide Etao with
a mechanism to remove the current shareholders of VIE should they act to the detriment of Etao. Etao relies on certain current shareholders
of VIE to fulfill their fiduciary duties and abide by laws of the PRC and act in the best interest of Etao. If Etao cannot resolve any
conflicts of interest or disputes between Etao and the shareholders of VIE, Etao would have to rely on legal proceedings, which could
result in disruption of its business, and there is substantial uncertainty as to the outcome of any such legal proceedings. The following financial information of the VIE and
VIE’s subsidiaries were included in the accompanying consolidated financial statements as of December 31, 2022 and December 31,
2021, and for the year ended December 31, 2022 and 2021: Condensed consolidated Statements of Operations Information
For the year ended December 31,
2022
Etao WOFE VIE Elimination Consolidated
Revenues $ — $ — $ 58,060,025 $ — $ 58,060,025
Cost of revenues $ — $ — $ (39,060,362 ) $ — $ (39,060,362 )
Gross profit $ — $ — $ 18,999,663 $ — $ 18,999,663
Selling expenses $ — $ — $ (7,570,575 ) $ — $ (7,570,575 )
General and administrative expenses $ (737,139,678 ) $ $ (9,306,538 ) $ (746,446,216 )
Research and development expenses $ — $ — $ (2,129,176 ) $ — $ (2,129,176 )
Total operating expenses $ (737,139,678 ) $ — $ (19,006,289 ) $ — $ (756,145,967 )
Income (loss) from operations $ (737,139,678 ) $ — $ (6,627 ) $ — $ (737,146,304 )
Total other income (loss) $ (158,993,531 ) $ — $ (198,126 ) $ — $ (159,191,657 )
Profit (loss) before income tax expense $ (896,133,209 ) $ $ (204,752 ) $ $ (896,337,961 )
Income tax expense $ — $ — $ (657,092 ) $ — $ (657,093 )
Net loss from continuing business $ (896,133,209 ) $ — $ (861,845 ) $ $ (896,995,054)
Discontinued operation loss $ — $ — $ — $ — $ —
Non-controlling interest (income) loss $ 111,656 $ — $ 205,639 $ $ 317,295
Net loss attributed to shareholders $ (896,021,553 ) $ — $ (656,206 ) $ — $ (896,677,759 )
Other comprehensive income $ — $ — $ (1,465,325 ) $ — $ (1,465,325 )
Comprehensive loss $ (896,021,553 ) $ — $ (2,121,531 ) $ — $ (898,143,084 )
For the year ended December 31,
2021
Etao WOFE VIE Elimination Consolidated
Revenues $ — $ — $ 53,337,278 $ — $ 53,337,278
Cost of revenues $ — $ — $ (37,072,061 ) $ — $ (37,072,061 )
Gross profit $ — $ — $ 16,265,217 $ — $ 16,265,217
Selling expenses $ — $ — $ (5,693,125 ) $ — $ (5,693,125 )
General and administrative expenses $ (5,315,349 ) $ $ (9,763,223 ) $ (15,078,572 )
Research and development expenses $ — $ — $ (918,631 ) $ — $ (918,630 )
Total operating expenses $ (5,315,349 ) $ — $ (16,374,978 ) $ — $ (21,690,327 )
Income (loss) from operations $ (5,315,349 ) $ — $ (109,761 ) $ — $ (5,425,110 )
Total other income (loss) $ (3,766,000 ) $ — $ (257,261 ) $ — $ (4,023,261 )
Profit (loss) before income tax expense $ (9,081,349 ) $ $ (367,022 ) $ $ (9,448,371 )
Income tax expense $ — $ — $ (504,111 ) $ — $ (504,112 )
Net loss from continuing business $ (9,081,349 ) $ — $ (871,134 ) $ $ (9,952,483 )
Discontinued operation loss $ — $ — $ (631,486 ) $ — $ (631,486 )
Non-controlling interest (income) loss $ 220,177 $ — $ (179,571 ) $ $ 40,606
Net loss attributed to shareholders $ (8,861,172 ) $ — $ (1,682,191 ) $ — $ (10,543,363 )
Other comprehensive income $ — $ — $ 352,192 $ — $ 352,192
Comprehensive loss $ (8,861,172 ) $ — $ (1,329,999 ) $ — $ (10,191,171 ) Condensed consolidated Balance Sheets Information
As of December 31, 2022
Parent WOFE VIE Elimination Consolidated
Cash and cash equivalents $ — $ — $ 8,933,208 $ — $ 8,933,208
Restricted cash, current $ — $ — $ 2,328,230 $ — $ 2,328,230
Short-term investment $ — $ — $ 2,900,880 $ — $ 2,900,880
Accounts receivable, net $ — $ — $ 8,096,347 $ — $ 8,096,347
Advances to suppliers $ — $ — $ 315,502 $ — $ 315,502
Prepaid expenses and other receivables, net $ — $ — $ 1,877,354 $ — $ 1,877,354
Inventories $ — $ — $ 1,989,393 $ — $ 1,989,393
Current assets of discontinued
operation $ — $ — $ — $ — $ —
Total
current assets $ — $ — $ 26,440,914 $ — $ 26,440,914
Restricted cash, non-current $ — $ — $ 725,171 $ — $ 725,171
Long-term Investment $ 158,588,161 $ — $ — $ (158,588,161 ) $ —
Property, plants and equipment, net $ — $ — $ 17,687,745 $ — $ 17,687,745
Intangible assets, net $ — $ — $ 607,881 $ — $ 607,881
Goodwill $ — $ — $ — $ — $ —
Prepayment for investments in real property $ — $ — $ — $ — $ —
Land use right, net $ — $ — $ 501,555 $ — $ 501,555
Deferred tax assets, net $ — $ — $ 96,812 $ — $ 96,812
Finance lease assets $ — $ — $ 1,123,877 $ — $ 1,123,877
Right-of-use assets $ — $ — $ 5,351,870 $ — $ 5,351,870
Security deposits $ — $ — $ 45,688 $ — $ 45,687
Related party receivable $ — $ — $ 7,062,016 $ (6,653,707 ) $ 408,309
Non-current assets of discontinued operation $ — $ — $ — $ — $ —
Total non-current assets $ 158,588,161 $ — $ 33,202,614 $ (165,241,868 ) $ 26,548,907
TOTAL ASSETS $ 158,588,161 $ — $ 59,643,528 $ (165,241,868 ) $ 52,989,821
Bank loans $ — $ — $ 2,359,462 $ — $ 2,359,462
Long-term bank loan – current portion $ — $ — $ — $ — $ —
Note payable $ — $ — $ 3,102,103 $ — $ 3,102,103
Accounts payable $ — $ — $ 7,563,542 $ — $ 7,563,542
Contract liabilities $ — $ — $ 748,296 $ — $ 748,296
Accrued expenses and other current liabilities $ — $ — $ 18,585,015 $ — $ 18,585,015
Finance lease payable, current $ — $ — $ 842,871 $ — $ 842,871
Operating lease payable, current $ — $ — $ 1,245,130 $ — $ 1,245,130
Current liabilities of discontinued operation $ — $ — $ — $ — $ —
Total current liabilities $ — $ — $ 34,446,419 $ — $ 34,446,419
Non-current liabilities of discontinued operation $ — $ — $ — $ — $ —
Related parties payable 23,359,961 2,472,763 (6,653,707 ) 19,179,017
Finance lease payable, non-current $ — $ — $ 1,064,104 $ — $ 1,064,104
Operating lease payable, non-current $ — $ — $ 4,280,617 $ — $ 4,280,617
TOTAL LIABILITIES $ 23,359,961 $ — $ 42,263,903 $ $ 58,970,157
Class B ordinary shares (US$0.0001 par value per share; 3,300,000 shares issued and outstanding as of December 31, 2022 and December 31, 2021; $ 330 $ — $ — $ — $ 330
Class A ordinary shares (US$0.0001 par value per share; 96,700,000 and 23,100,500 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively; $ 9,670 $ — $ 23,180,227 $ (23,180,227 ) $ 9,670
Additional paid-in capital $ 893,043,710 $ — $ 17,575,875 $ (17,592,609 ) $ 893,026,975
Subscription receivable $ — $ — $ — $ — $ —
Statutory reserve $ — $ — $ 16,735 $ — $ 16,735
Accumulated deficit $ (757,825,510 ) $ — $ (22,758,765 ) $ (126,955,029 ) $ (907,539,304 )
Accumulated other comprehensive income/(loss) $ — $ — $ (1,113,133 ) $ — $ (1,113,133 )
Etao’s
shareholders’ equity/(deficits) $ 135,228,200 $ — $ 16,900,938 $ (167,727,865 ) $ (15,598,728 )
Non-controlling interest $ — $ — $ 478,688 $ 9,139,704 $ 9,618,392
TOTAL
EQUITY/(DEFICITS) $ 135,228,200 $ — $ 17,379,625 $ (158,588,161 ) $ (5,980,336 )
TOTAL LIABILITIES
AND SHAREHOLDERS’ EQUITY $ 158,588,161 $ — $ 59,643,528 $ (165,241,868 ) $ 52,989,821
As of December 31, 2021
Parent WOFE VIE Elimination Consolidated
Cash and cash equivalents $ — $ — $ 4,727,210 $ — $ 4,727,210
Restricted cash, current $ — $ — $ 6,281,783 $ — $ 6,281,783
Short-term investment $ — $ — $ — $ — $ —
Accounts receivable, net $ — $ — $ 8,716,261 $ — $ 8,716,261
Advances to suppliers $ — $ — $ 498,207 $ — $ 498,207
Prepaid expenses and other receivables, net $ — $ — $ 3,499,945 $ — $ 3,499,945
Inventories $ — $ — $ 2,079,947 $ — $ 2,079,947
Current assets of discontinued operation $ — $ — $ 728,210 $ — $ 728,210
Total current assets $ — $ — $ 26,531,563 $ — $ 26,531,563
Restricted cash, non-current $ — $ — $ 792,074 $ — $ 792,074
Long-term Investment $ 173,640,463 $ — $ — $ (173,640,463 ) $ —
Property, plants and equipment, net $ — $ — $ 19,334,008 $ — $ 19,334,008
Intangible assets, net $ — $ — $ 817,640 $ — $ 817,640
Goodwill $ — $ — $ — $ 160,128,167 $ 160,128,167
Prepayment for investments in real property $ — $ — $ 874,403 $ — $ 874,403
Land use right, net $ — $ — $ 556,551 $ — $ 556,551
Deferred tax assets, net $ — $ — $ 89,109 $ — $ 89,109
Finance lease assets $ — $ — $ 1,446,490 $ — $ 1,446,490
Right-of-use assets $ — $ — $ 7,223,995 $ — $ 7,223,995
Security deposits $ — $ — $ 84,233 $ — $ 84,233
Related party receivable $ — $ — $ 4,095,359 $ (3,650,127 ) $ 445,232
Non-current assets of discontinued operation $ — $ — $ 3,783,940 $ — $ 3,783,940
Total non-current assets $ 173,640,463 $ — $ 39,097,803 $ (17,162,423 ) $ 195,575,843
TOTAL ASSETS $ 173,640,463 $ — $ 65,629,365 $ (17,162,423 ) $ 222,107,405
Bank loans $ — $ — $ 3,149,407 $ — $ 3,149,407
Long-term bank loan – current portion $ — $ — $ 375,701 $ — $ 375,701
Note payable $ — $ — $ 3,797,706 $ — $ 3,797,706
Accounts payable $ — $ — $ 7,366,582 $ — $ 7,366,582
Contract liabilities $ — $ — $ 778,125 $ — $ 778,125
Accrued expenses and other current liabilities $ — $ — $ 15,221,163 $ — $ 15,221,163
Finance lease payable, current $ — $ — $ 1,376,410 $ — $ 1,376,410
Operating lease payable, current $ — $ — $ 1,402,727 $ — $ 1,402,727
Current liabilities of discontinued operation $ — $ — $ 5,056,394 $ — $ 5,056,394
Total current liabilities $ — $ — $ 38,524,215 $ — $ 38,524,215
Non-current liabilities of discontinued operation $ — $ — $ 2,348,149 $ — $ 2,348,149
Related parties payable 23,359,961 1,998,192 (3,650,127 ) 21,179,818
Finance lease payable, non-current $ — $ — $ 1,391 $ — $ 1,391
Operating lease payable, non-current $ — $ — $ 5,790,397 $ — $ 5,790,397
TOTAL LIABILITIES $ 23,359,961 $ — $ 48,662,345 $ (3,650,127 ) $ 67,843,970
Class B ordinary shares (US$0.0001 par value per share; 3,300,000 shares issued and outstanding as of December 31, 2022 and December 31, 2021; $ 330 $ — $ — $ — $ 330
Class A ordinary shares (US$0.0001 par value per share; 96,700,000 and 23,100,500 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively; $ 2,310 $ — $ 25,709,251 $ (25,709,251 ) $ 2,310
Additional paid-in capital $ 157,056,070 $ — $ 17,575,875 $ (17,592,609 ) $ 157,039,335
Subscription receivable $ (616,469 ) $ — $ — $ — $ (616,469 )
Statutory reserve $ — $ — $ 16,735 $ — $ 16,735
Accumulated deficit $ (5,633,531 ) $ — $ (26,856,358 ) $ 21,628,344 $ (10,861,545 )
Accumulated other comprehensive income/(loss) $ — $ — $ 352,192 $ — $ 352,192
Etao’s
shareholders’ equity/(deficits) $ 150,808,710 $ — $ 16,797,694 $ (21,673,516 ) $ 145,932,888
Non-controlling interest $ — $ — $ 169,326 $ 8,161,220 $ 8,330,546
TOTAL EQUITY/(DEFICITS) $ 150,808,710 $ — $ 16,967,020 $ (13,512,296 ) $ 154,263,434
TOTAL LIABILITIES
AND SHAREHOLDERS’ EQUITY $ 173,640,463 $ — $ 65,629,365 $ (17,162,423 ) $ 222,107,405 Condensed Consolidated Cash Flows Information
For the year ended December 31,
2022
Etao WOFE VIE Elimination Consolidated
Net loss from continuing business $ (896,133,209 ) $ — $ (861,845 ) $ — $ (896,995,054 )
Adjustment: $ — $ — $ — $
Depreciation and amortization $ — $ — $ 1,951,902 $ — $ 1,951,902
Bad debt provision $ — $ — $ 1,070,148 — $ 1,070,148
Impairment for equity investment $ 158,993,531 $ — $ 305,561 $ — $ 159,299,092
Shares issued for compensation $ 735,995,000 $ — $ — — $ 735,995,000
Changes in operating assets: $ $
Decrease/(increase) of restricted cash, current $ — $ — $ 3,544,888 — $ 3,544,888
Decrease/(increase) of accounts receivable $ — $ — $ (155,495 ) $ — $ (155,495 )
Decrease/(increase) of advances to suppliers $ — $ — $ 146,777 — $ 146,777
Decrease/(increase) of prepaid expenses and other receivables $ — $ — $ 341,116 $ — $ 341,115
Decrease/(increase) of inventories $ — $ — $ (75,725 ) — $ (75,725 )
Decrease/(increase) of deferred tax assets $ — $ — $ (15,107 ) $ — $ (15,107 )
Increase/(decrease) of accounts payable $ — $ — $ 798,416 — $ 798,416
Increase/(decrease) of advances from customers $ — $ — $ 32,476 $ — $ 32,476
Increase/(decrease) of accrued expenses and other payables $ — $ — $ 4,678,246 — $ 4,678,245
Increase/(decrease) of lease liabilities $ — $ — $ 207,209 $ — $ 207,209
Cash (used in) / provided by operating activities $ (1,144,678 ) $ — $ 11,968,566 — $ 10,823,888
Purchase of property, plant and equipment $ — $ — $ (624,363 ) — $ (624,363 )
Acquiring of intangible assets and long-term prepaid expenses $ — $ — $ (9,533 ) $ — $ (9,533 )
Payment for short-term investment $ — $ — $ (2,971,162 ) — $ (2,971,162 )
Proceeds for equity investment $ — $ — $ — $ — $ —
Proceeds from disposal of investment in real property $ — $ — $ — — $ —
Proceeds from rental deposit $ — $ — $ 32,656 $ — $ 32,656
Cash increased by acquisition $ — $ — $ — — $ —
Cash provided by / (used in) investing activities $ — $ — $ (3,572,402 ) $ — $ (3,572,402 )
Proceeds/(repayment) of bank loans, net $ — $ — $ (908,357 ) $ — $ (908,357 )
Proceeds/(repayment) of note payable, net $ — $ — $ (404,846 ) — $ (404,845 )
Proceeds/(repayment) from related parties $ 528,209 $ — $ (3,045,757 ) $ — $ (2,517,548 )
Repayment of finance lease liability $ — $ — $ 653,595 — $ 653,595
Proceeds from allotment of shares $ 616,469 $ — $ — $ — $ 616,469
Cash provided by / (used in) financing activities $ 1,144,678 $ — $ (3,705,366 ) — $ (2,560,688 )
$ $ — $ $ — $
Foreign currency effect $ — $ — $ (484,800 ) — $ (484,800 )
Total cashflow $ — $ — $ 4,205,998 $ — $ 4,205,998
For the year ended December 31,
2021
Etao WOFE VIE Elimination Consolidated
Net loss from continuing business $ (9,081,349 ) $ — $ (871,134 ) $ — $ (9,952,483 )
Adjustment: $ $ — $ — $
Depreciation and amortization $ $ — $ 1,696,188 $ — $ 1,696,188
Bad debt provision $ $ — $ 237,960 — $ 237,960
Impairment for equity investment $ 3,766,000 $ — $ — $ — $ 3,905,776
Shares issued for compensation $ 5,000,000 $ — $ — — $ 5,000,000
Changes in operating assets: $ $
Decrease/(increase) of restricted cash, current $ — $ — $ (3,173,712 ) — $ (3,173,712 )
Decrease/(increase) of accounts receivable $ — $ — $ (2,113,002 ) $ — $ (2,113,002 )
Decrease/(increase) of advances to suppliers $ — $ — $ (36,001 ) — $ (36,001 )
Decrease/(increase) of prepaid expenses and other receivables $ — $ — $ 187,987 $ — $ 187,987
Decrease/(increase) of inventories $ — $ — $ (32,422 ) — $ (32,422 )
Decrease/(increase) of deferred tax assets $ — $ — $ (16,078 ) $ — $ (16,078 )
Increase/(decrease) of accounts payable $ — $ — $ 620,504 — $ 620,504
Increase/(decrease) of advances from customers $ — $ — $ 78,462 $ — $ 78,462
Increase/(decrease) of accrued expenses and other payables $ — $ — $ 3,415,189 — $ 3,415,189
Increase/(decrease) of lease liabilities $ — $ — $ (69,844 ) $ — $ (69,844 )
Cash (used in) / provided by operating
activities $ (315,349 ) $ — $ 63,874 — $ (251,475 )
Purchase of property, plant and equipment $ — $ — $ (2,349,181 ) — $ (2,349,181 )
Acquiring of intangible assets and long-term prepaid
expenses $ — $ — $ (7,202 ) $ — $ (7,202 )
Payment for short-term investment $ — $ — $ — — $ —
Proceeds for equity investment $ — $ — $ 15,531 $ — $ 15,531
Proceeds from disposal of investment in real property $ — $ — $ 226,213 — $ 226,213
Proceeds from rental deposit $ — $ — $ 20,640 $ — $ 20,640
Cash increased by acquisition $ — $ — $ 7,706,089 — $ 7,706,089
Cash provided by / (used in) investing
activities $ — $ — $ 5,612,090 $ — $ 5,612,090
Proceeds/(repayment) of bank loans, net $ — $ — $ 64,125 $ — $ 64,125
Proceeds/(repayment) of note payable, net $ — $ — $ (2,305,982 ) — $ (2,305,982 )
Proceeds/(repayment) from related parties $ — $ — $ 2,446,680 $ — $ 2,446,680
Repayment of finance lease liability $ $ — $ (1,217,907 ) — $ (1,217,907 )
Proceeds from allotment of shares $ 315,349 $ — $ — $ — $ 315,349
Cash provided by / (used in) financing
activities $ 315,349 $ — $ (1,013,084 ) — $ (697,734 )
$ $ — $ $ — $
Foreign currency effect $ — $ — $ 64,330 — $ 64,330
Total cashflow $ — $ — $ 4,727,210 $ — $ 4,727,210 Going Concern The accompanying financial statements have been
prepared in conformity with U.S. GAAP which contemplates continuation of the Company on a going concern basis. The going concern basis
assumes that assets are realized, and liabilities are settled in the ordinary course of business at amounts disclosed in the financial
statements. As of and during the year ended December 31, 2022, the Company had a net working capital deficit of $7,625,158, accumulated
deficit of $907,539,304, and net loss of $896,677,759. The factors give rise to substantial doubt to the Company’s ability to continue
as going concern. The Company’s ability to continue as a going concern depends upon its ability to market and sell its products
and services and sustainable profit margins and to generate positive operating cash flows. Management’s plan is to continue improve
operations by leveraging its distribution channels from its diverse subsidiaries across the entire healthcare ecosystem in order to generate
sustainable profits and positive cash flows. The Company merged with a special purpose acquisition company (SPAC) and plan to raise additional
capital through the private and public markets by using the SPAC as a financial platform. Management believes that the valuation and
liquidity brought by a merger will allow for the Company to re-organize its debt and raise additional capital to expand operations to
generate re-occurring sustainable profits and positive working capital. If the Company is not able to continue generating profits and
positive operating cash flows, raise additional capital, or complete a merger with the SPAC, there is the risk that the Company may become
insolvent. |
