Zhongchao(ZCMD) - 2023 Q2 - Quarterly Report

Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in equity, and cash flows Condensed Consolidated Balance Sheets As of June 30, 2023, Zhongchao Inc.'s total assets decreased to $30.5 million from $38.6 million at the end of 2022, while total liabilities significantly decreased to $3.4 million from $5.6 million, leading to a decline in total equity from $33.0 million to $27.2 million Assets Total assets decreased by 20.9% from $38.6 million on December 31, 2022, to $30.5 million on June 30, 2023, primarily due to reductions in accounts receivable, property and equipment, and deferred tax assets Key Asset Components (in USD) | Asset Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $18,554,101 | $22,704,160 | | Property and equipment, net | $2,390,737 | $3,890,947 | | Goodwill | $5,485,862 | $5,767,504 | | Total Assets | $30,526,123 | $38,614,345 | - Key drivers for the asset decrease include a $3.4 million reduction in Accounts Receivable and a $1.5 million reduction in Property and equipment[2][3] Liabilities Total liabilities decreased by 39.9% from $5.6 million on December 31, 2022, to $3.4 million on June 30, 2023, mainly driven by a $2.16 million drop in income tax payable Key Liability Components (in USD) | Liability Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Liabilities | $1,740,942 | $4,165,035 | | Income tax payable | $130,514 | $2,292,765 | | Total Liabilities | $3,353,750 | $5,595,080 | Equity Total equity fell by 17.7% to $27.2 million as of June 30, 2023, from $33.0 million at year-end 2022, primarily due to a net loss converting retained earnings into an accumulated deficit and an increase in accumulated other comprehensive loss Key Equity Components (in USD) | Equity Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | (Accumulated deficits) Retained earnings | ($597,553) | $4,124,037 | | Accumulated other comprehensive loss | ($1,492,919) | ($511,824) | | Total Equity | $27,172,373 | $33,019,265 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the six months ended June 30, 2023, Zhongchao Inc. reported a significant net loss of $4.8 million, a sharp downturn from a net income of $93,544 in the same period of 2022, driven by a 129% surge in operating expenses despite a 42.2% increase in total revenues Statement of Operations Highlights (Six Months Ended June 30) | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $10,376,170 | $7,295,439 | +42.2% | | Gross Profit | $4,323,339 | $5,058,721 | -14.5% | | Total Operating Expenses | ($10,347,910) | ($4,516,068) | +129.1% | | (Loss) Income from Operations | ($6,024,571) | $542,653 | - | | Net (Loss) Income | ($4,779,858) | $93,544 | - | | Basic and Diluted (Loss) Earnings per share | ($0.18) | $0.00 | - | - The shift to a significant operating loss was driven by a sharp increase in selling and marketing expenses (up 199.6% YoY) and general and administrative expenses (up 52.3% YoY), in addition to a $1.46 million impairment of property and equipment not present in the prior year[9] Condensed Consolidated Statements of Changes in Equity Total equity decreased by $5.8 million during the first six months of 2023, from $33.0 million to $27.2 million, primarily due to a net loss of $4.8 million and negative foreign currency translation adjustments of $1.1 million - The main factors reducing equity in the first half of 2023 were the net loss of $4,721,590 attributable to shareholders and foreign currency translation adjustments of $981,095[11] Equity Reconciliation (Six Months Ended June 30, 2023) | Description | Amount (in USD) | | :--- | :--- | | Balance as of December 31, 2022 | $33,019,265 | | Net loss | ($4,779,858) | | Foreign currency translation adjustments | ($1,129,443) | | Share-based compensation expenses | $62,409 | | Balance as of June 30, 2023 | $27,172,373 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2023, the company experienced a net cash decrease of $0.23 million, ending the period with $11.3 million in cash and cash equivalents, driven by increased cash used in operating activities but offset by cash provided by investing activities from loan repayments Summary of Cash Flows (Six Months Ended June 30) | Cash Flow Category | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($1,853,153) | ($796,621) | | Net Cash Provided by (Used in) Investing Activities | $1,938,682 | ($3,160,992) | | Net Cash Provided by Financing Activities | $0 | $1,850,474 | | Net decrease in cash and cash equivalents | ($233,632) | ($2,433,625) | - The significant swing in investing cash flow from a large use to a source was primarily due to receiving $1.84 million in loan repayments in 2023[14] - Despite a larger net loss in 2023, the net decrease in cash was smaller than in 2022 because of the cash inflow from investing activities and the absence of financing activities in the current period[14]