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BOQI International Medical Inc. Announces Third Quarter 2020 Financial Results

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NEW YORK, Nov. 16, 2020 (GLOBE NEWSWIRE) -- BOQI International Medical Inc. (NASDAQ:BIMI) ("BIMI" or the "Company") today announced its financial results for the third quarter and nine months ended September 30, 2020.

"We have made good progress in line with our new business, especially the online-to-offline strategy. We opened our first retail pharmacy store in Chongqing at the end of June 2020, then gradually opened five more stores in the latter part of the third quarter," said Mr. Tiewei Song, Chief Executive Officer and President of BOQI International Medical Inc. "We are also developing our online healthcare platform. We plan to connect the platform with pharmacies, hospitals and other medical institutions to further strengthen our capabilities in online and offline healthcare services."

Revenues

Revenues for the three months ended September 30, 2020 and 2019 were $3,091,071 and $208,402, respectively. The Company's revenues for the three months ended September 30, 2020 were principally attributable to wholesale sales of medical devices and generic drugs by our newly acquired Guanzan Group. The Company's revenues for the three months ended September 30, 2019 were attributable to the sales of products manufactured by the NF Group and from energy saving technical services and product collaboration processing services performed by the NF Group, which we sold in June 2020. Revenues from the wholesale medical devices segment and the wholesale medicine segment for the three months ended September 30, 2020 were $670,296 and $2,391,674, respectively. Revenues from the retail pharmacy segment for the three months ended September 30, 2020 were $29,101.

Revenues for the nine months ended September 30, 2020 and 2019 were $7,317,449 and $1,120,804, respectively. The 553% increase in revenues is attributable to the acquisition of the Guanzan Group in late March 2020. Revenues from the wholesale medicine segment for the nine months ended September 30, 2020 were $4,698,985 and revenues from the wholesale medical device segment for the nine months ended September 30, 2020 were $2,567,029. Revenues from the retail pharmacy segment for the nine months ended September 30, 2020 were $42,898.  

Cost of Revenues

Cost of revenues for the three months ended September 30, 2020 and 2019 were $2,833,793 and $281,014, respectively, reflecting the impact of the acquisition of the Guanzan Group. For the three months ended September 30, 2020, the cost of revenues of the wholesale medical devices segment was $586,939. For the three months ended September 30, 2020, the cost of revenues of our wholesale medicine segment was $2,032,947. For the three months ended September 30, 2020, the cost of revenues for retail pharmacy segment was $227,883, which included an inventory impairment charge of $202,981.
  
Cost of revenues for the nine months ended September 30, 2020 and 2019 were $6,240,962 and $1,030,862, respectively. For the nine months ended June 30, 2020, the cost of revenues of our wholesale medical devices segment was $2,051,563. For the nine months ended September 30, 2020, the cost of revenues of our wholesale medicine segment was $3,759,707. For the nine months ended September 30, 2020, cost of revenues of our retail pharmacy segment was $426,293, which included an inventory write-off of $390,923.

Gross Profit

For the three months ended September 30, 2020, the Company had a gross profit margin of 8.32% compared with a negative gross profit margin of 34.84 % in the quarter ended September 30, 2019. On a sequential basis, gross profit decreased by 14.07% from the second quarter of 2020, due to the decrease in revenues from high gross profit wholesale medical devices segment. The gross profit margin of the wholesale medical devices and wholesale medicine segments for three months ended September 30, 2020 were 12.44% and 15%, respectively. The retail pharmacy segment's cost of revenues exceeded its revenues by $198,782 in the quarter.

For the nine months ended September 30, 2020, the Company had a gross profit margin of 14.71% compared with a gross profit margin of 8.02% in the first nine months of 2019. The improvement in the gross profit margin in the first nine months ended September 30, 2020 is mainly due to the inclusion of the revenues from the wholesale medical devices and wholesale medicine segments since the acquisition in March 2020. The gross profit margin of the wholesale medical devices and wholesale medicine segments for nine months ended September 30, 2020 were 20.08% and 19.99%, respectively. The retail pharmacy segment's cost of revenues exceeded its revenues by $383,395 in the nine-month period ended September 30, 2020. 

Operating Expenses

Operating expenses were $1,689,962 for the three months ended September 30, 2020 compared to $359,307 for the same period in 2019, an increase of $1,330,655. The increase is mainly due to the additional amortization of the discounted convertible notes and intangible assets and impairment loss of intangible asset.

Operating expenses were $6,579,201 for the nine months ended September 30, 2020 compared to $1,607,763 for the same period in 2019, an increase of $ 4,975,922 or 309%. Operating expenses for the nine months ended September 30, 2020 consist mainly of amortization of the discounted convertible notes, amortization of intangible assets, meeting and promotional expenses, pharmaceutical and medical device industry compliance management expenses, legal fees, convertible note issuance-related costs in the amount of $211,425 and other professional service fees. The Company also reduced the contingent consideration payable to the former shareholders of Lasting (the parent of Boqi Zhengji) by $5,655,709, following a re-evaluation of such commitment.

Operating expenses also included a $903,573 impairment loss with respect to the intangible assets recognized in the acquisition of Boqi Zhengji.

Other Income

For the three months ended September 30, 2020, the Company reported other income of $5,247 and other interest expense of $339,780, as compared to other income of $58,718 and other interest expense of $ 466,582 for the three months ended September 30, 2019.

For the nine months ended September 30, 2020, the Company reported other income of $6,973,409 and other interest expense of $717,226 compared to other income of $11,021 and other interest expense of $717,226 in the nine months ended September 30, 2019. Other income in the nine months ended September 30, 2020 includes the gain generated from the disposal of the NF Group. 

Net Profit (Loss)

For the three months ended September 30, 2020, the Company reported a net loss of $1,860,573 compared to a net loss of $547,689 for the same period of 2019. For the nine months ended September 30, 2020, the Company reported a net profit of $611,090 compared to a net loss of $1,973,382 for the same period in 2019.

Liquidity and Capital Resources

On September 30, 2020, the Company had cash and cash equivalents of $11, 585,325 compared to cash and cash equivalents of $36,363 on December 31, 2019. As of September 30, 2020, the Company had negative working capital of $5,439,912 as compared to negative working capital of $500,765 on December 31, 2019.

These conditions raise substantial doubt about the Company's ability to continue as a going concern. These unaudited condensed financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for the Company to continue as a going concern.

About BOQI International Medical Inc.

BOQI International Medical Inc. (formerly known as NF Energy Saving Corporation) (NASDAQ:BIMI) was founded in 2006. In February 2019, the Board of Directors of the company was reorganized with a focus on the health industry. The Company is now exclusively a healthcare products provider, offering a broad range of healthcare products and related services. For more information about BOQI International Medical, please visit www.usbimi.com.

Safe Harbor Statement

Certain matters discussed in this news release are forward-looking statements that involve a number of risks and uncertainties including, but not limited to, the Company's ability to achieve profitable operations, its ability to continue to operate as a going concern, its ability to continue to meet NASDAQ continued listing requirements, the effects of the spread of the Coronavirus (COVID-19), the demand for the Company's products and the Company's customers' economic condition, risk of operations in the People's Republic of China, general economic conditions and other risk factors detailed in the Company's annual report and other filings with the United States Securities and Exchange Commission. Investors are urged to read the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2020 for further information about the Company's financial results, liquidity and capital resources.

IR Contact:

Dragon Gate Investment Partners LLC
Tel: +1(646)-801-2803
Email: BIMI@dgipl.com  

BOQI INTERNATIONAL MEDICAL, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

    September 30,     December 31,  
    2020     2019  
    (Unaudited)        
ASSETS            
CURRENT ASSETS            
Cash   $ 11,585,321     $ 36,363  
Restricted cash     1,365       311  
Accounts receivable, net     3,935,514       24,840  
Advances to suppliers     2,251,811       1,252  
Amount due from related parties     -       1,350  
Inventories, net     4,195,247       707,526  
Prepayments and other receivables     3,495,570       59,333  
Assets from discontinued operations     -       21,218,983  
Total current assets     25,464,828       22,049,958  
                 
NON-CURRENT ASSETS                
Deferred tax assets     165,995       -  
Property, plant and equipment, net     854,897       38,641  
Intangible assets, net     642,741       7,973,179  
Goodwill     6,443,170       -  
Total non-current assets     8,106,803       8,011,820  
                 
TOTAL ASSETS   $ 33,571,631     $ 30,061,778  
                 
LIABILITIES AND EQUITY                
CURRENT LIABILITIES                
Short-term loans   $ 866,297     $ -  
Long-term loans due within one year     185,147       -  
Convertible promissory notes, net     3,616,330       107,383  
Derivative liability     1,173,505       1,272,871  
Accounts payable, trade     6,790,000       641,927  
Advances from customers     710,515       67,975  
Amount due to related parties     586,027       305,760  
Taxes payable     308,920       861  
Other payables and accrued liabilities     5,788,175       6,044,378  
Liabilities from discontinued operations     -       13,108,038  
Total current liabilities     20,024,916       21,549,193  
                 
Long-term loans - non-current portion     138,632       -  
                 
TOTAL LIABILITIES     20,163,548       21,549,193  
                 
EQUITY                
Common stock, $0.001 par value; 50,000,000 shares authorized; 10,505,821 and 9,073,289 shares issued and outstanding as of September 30 2020 and December 31, 2019, respectively     10,506       9,073  
Additional paid-in capital     24,081,799       15,643,825  
Statutory reserves     -       2,227,634  
Accumulated deficit     (10,834,660 )     (10,881,667 )
Accumulated other comprehensive income     26,633       1,683,770  
Total BOQI International Medical Inc.'s equity     13,284,278       8,682,635  
                 
NON-CONTROLLING INTERESTS     123,805       (170,050 )
                 
Total equity     13,408,083       8,512,585  
                 
Total liabilities and equity   $ 33,571,631     $ 30,061,778  

 BOQI INTERNATIONAL MEDICAL, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (GAIN)/LOSS
(UNAUDITED)

    For the Three Months Ended
September 30
    For the Nine Months Ended
September 30
 
    2020     2019     2020     2019  
                         
REVENUES     3,091,071       208,402       7,317,449       1,120,804  
                                 
COST OF REVENUES     2,833,793       281,014       6,240,962       1,030,862  
                                 
GROSS PROFIT/(LOSS)     257,278       (72,612 )     1,076,487       89,942  
                                 
OPERATING EXPENSES:                                
Sales and marketing     377,977       33,096       1,028,746       119,820  
General and administrative     1,311,985       326,211       5,554,939       1,487,943  
Total operating expenses     1,689,962       359,307       6,583,685       1,607,763  
                                 
LOSS FROM OPERATIONS     (1,432,684 )     (431,919 )     (5,507,198 )     (1,517,821 )
                                 
OTHER INCOME (EXPENSE)                                
Interest expense     (339,780 )     (174,488 )     (717,226 )     (466,582 )
Other income     5,247       58,718       6,973,409       11,021  
Total other income (expense), net     (334,533 )     (115,770 )     6,256,183       (455,561 )
                                 
INCOME (LOSS) BEFORE INCOME TAXES     (1,767,217 )     (547,689 )     748,985       (1,973,382 )
                                 
PROVISION FOR INCOME TAXES     93,356             137,895        
                                 
NET INCOME (LOSS)     (1,860,573 )     (547,689 )     611,090       (1,973,382 )
Less: net income (loss) attributable to  non-controlling interest     49,374       (3,220 )     75,648       777  
NET INCOME (LOSS) ATTRIBUTE TO BOQI INTERATIONAL MEDICAL INC.   $ (1,909,947 )   $ (544,469 )   $ 535,442     $ (1,974,159 )
OTHER COMPREHENSIVE INCOME(LOSS)                                
Foreign currency translation adjustment     (108,236 )     (271,289 )     34,802       (244,964 )
TOTAL COMPREHENSIVE INCOME(LOSS)     (1,968,809 )     (818,978 )     645,892       (2,218,346 )
Less: comprehensive income (loss) attributable to non-controlling interests     1,193       (1,260 )     (1,408 )     3,286  
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO BOQI INTERNATIONAL MEDICAL INC.   $ (1,970,002 )   $ (817,718 )   $ 647,300     $ (2,221,632 )
                                 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES                                
Basic and diluted     10,505,821       8,073,289       9,987,848       7,871,824  
                                 
INCOME (LOSS) PER SHARE                                
Basic and diluted   $ (0.19 )   $ (0.07 )   $ 0.06     $ (0.25 )

  

BOQI INTERNATIONAL MEDICAL, INC. AND ITS SUBSIDIARIES
(CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

    For the Nine Months Ended September 30,  
    2020     2019  
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net income (Loss)   $ 611,090     $ (1,973,382 )
Adjustments to reconcile net income/(loss) to cash used in operating activities:                
Depreciation and amortization     810,264       716,433  
(Profit) on disposal of property     (6,944,469 )     (43,712 )
Allowance for doubtful accounts     (263,260 )     (75,203 )
Amortization of discount of convertible promissory notes     1,950,901       1,239  
Change in derivative liabilities     43,224       2,132  
Impairment loss from construction in progress     -       24,803  
Allowance for inventory provision     390,923       -  
Impairment loss of intangible assets     903,573       -  
                 
Change in operating assets and liabilities                
Accounts receivable     (1,284,400 )     970,444  
Advances to suppliers     418,847       -  
Inventories     (2,928,419 )     (634,860 )
Prepayments and other receivables     (1,245,981 )     (67,709 )
Accounts payable, trade     4,844,674       (284,077 )
Advances from customers     (707,586 )        
Taxes payable     (9,368 )     55,943  
Other payables and accrued liabilities     594,793       371,982  
Net cash used in operating activities     (2,815,194 )     (935,967 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Cash received from acquisition of Guanzan Group     95,220       -  
Proceeds from disposal of property, planet, and equipment     -       50,063  
Purchase of property, planet, and equipment     (121,176 )     -  
Cash received from sale of NF Group     10,375,444       -  
Repayment from related party loan     -       540,294  
Loan to related party     -       (1,161,458 )
Net cash provided by (used in) investing activities     10,349,488       (571,101 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Net proceeds from issuance of convertible promissory notes     3,457,325       -  
Proceeds from short-term loans     27,371       5,835,897  
Repayment of short-term loans     (65,516 )     (5,838,815 )
Repayment of long-term loans     (48,164 )     -  
Amount financed by related parties     173,547       1,591,910  
Net cash provided by financing activities     3,544,563       1,588,992  
                 
EFFECT OF EXCHANGE RATE ON CASH     471,155       (33,401 )
                 
INCREASE IN CASH     11,550,012       48,523  
                 
CASH AND CASH EQUIVALENTS, beginning of period     36,674       197,356  
                 
CASH AND CASH EQUIVALENTS, end of period   $ 11,586,686     $ 245,879  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:                
Cash paid for income tax   $ 42,130     $ -  
Cash paid for interest expense, net of capitalized interest   $ 62,636     $ 434,198  
                 
NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES                
Issuance of common shares for the equity acquisition of Chongqing Guanzan Technology Co., Ltd.   $ 2,717,000     $ -  
Goodwill recognized from the equity acquisition of the Boqi Group   $ 6,443,170     $ 2,040,000  
Outstanding payment for the equity acquisition of Chongqing Guanzan Technology Co., Ltd.   $ 4,414,119     $ -  
Common shares to be issued upon conversion of convertible promissory notes   $ 5,160,473     $ -  


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