UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ____________

Commission File Number: 000-50155

BOQI International Medical Inc.

(Exact name of registrant as specified in its charter)

Delaware	02-0563302
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Room 3601, Building A, Harbour View Place, No. 2 Wuwu Road, Zhongshan District, Dalian, Liaoning Province, P. R. China, 116000	116000
(Address of Principal Executive Offices)	(Zip Code)

(+86) 0411-8220-9211

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common stock, $0.001 par value	BIMI	The NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such fi les). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of May 20, 2021, the registrant had 24,631,488 shares of common stock, par value $.001 per share, issued and shares outstanding.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION	1
Item 1	Financial Statements	1
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4	Controls and Procedures	39
PART II	OTHER INFORMATION	40
Item 1	Legal Proceedings	40
Item 1A	Risk Factors	40
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3	Defaults Upon Senior Securities	41
Item 4	Mine Safety Disclosures	41
Item 5	Other Information.	41
Item 6	Exhibits.	41
Signatures		42

i

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

	March 31			December 31
	2021			2020
ASSETS
CURRENT ASSETS
Cash	$	2,830,834		$	135,309
Restricted cash		4,590			-
Accounts receivable, net		7,169,691			6,686,552
Advances to suppliers		3,093,935			2,693,325
Amount due from related parties		41,012			-
Inventories, net		3,569,135			735,351
Prepayments and other receivables		4,941,351			14,880,526
Operating lease-right of use assets		46,521			53,425
Total current assets		21,697,069			25,184,488
NON-CURRENT ASSETS
Deferred tax assets		181,451			193,211
Property, plant and equipment, net		1,769,927			910,208
Operating lease-right of use assets		1,572,515			-
Intangible assets-net		13,445			-
Goodwill		24,512,118			6,914,232
Total non-current assets		28,049,456			8,017,651
TOTAL ASSETS	$	49,746,525		$	33,202,139
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans	$	1,054,510		$	904,228
Long-term loans due within one year		496,974			34,201
Convertible promissory notes, net		5,132,530			3,328,447
Accounts payable, trade		10,183,541			5,852,050
Advances from customers		529,279			194,086
Amount due to related parties		791,581			226,514
Taxes payable		60,322			773,649
Other payables and accrued liabilities		4,849,557			4,228,976
Lease liability-current		354,705			23,063
Total current liabilities		23,452,999			15,565,214
Lease liability-non current		1,396,148			22,457
Long-term loans - non-current		425,592			720,997
Total non-current liabilities		1,821,740			743,454
TOTAL LIABILITIES		25,274,739			16,308,668
EQUITY
Common stock, $0.001 par value; 50,000,000 shares authorized; 20,131,488 and 13,254,587 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively		20,131			13,254
Additional paid-in capital		37,362,809			26,344,920
Statutory reserves		2,263,857			2,263,857
Accumulated deficit		(16,248,215	)		(12,914,973	)
Accumulated other comprehensive income		853,795			1,003,392
Total BOQI International Medical Inc.’s equity		24,252,377			16,710,450
NON-CONTROLLING INTERESTS		219,409			183,021
Total equity		24,471,786			16,893,471
Total liabilities and equity	$	49,746,525		$	33,202,139

The accompanying notes are an integral part of the condensed consolidated financial statements

1

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

	For three months ended March 31
	2021			2020
REVENUES		2,168,004			414,584
COST OF REVENUES		1,575,743			332,299
GROSS PROFIT(LOSS)		592,261			82,285
OPERATING EXPENSES:
Sales and marketing		452,636			41,070
General and administrative		3,380,014			1,364,952
Total operating expenses		3,832,650			1,406,022
LOSS FROM OPERATIONS		(3,240,389	)		(1,323,737	)
OTHER INCOME (EXPENSE)
Interest expense		44,355			21,684
Other (income)/ expense		(12,865	)		545
Total other income (expense), net		(31,490	)		(22,229	)
LOSS BEFORE INCOME TAXES		(3,271,879	)		(1,345,966	)
PROVISION FOR INCOME TAXES		18,748			1,268
NET LOSS FROM CONTINUING OPERATIONS		(3,290,627	)		(1,347,234	)
DISCONTINUED OPERATIONS
Income/(loss) from operations of discontinued operations		-			(854,957	)
NET LOSS		(3,290,627	)		(2,202,191	)
Less: net income (loss) attributable to non-controlling interest		42,615			(7,316	)
NET LOSS ATTRIBUTABLE TO BOQI INTERATIONAL MEDICAL INC.	$	(3,333,242	)	$	(2,194,875	)
OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustment		(149,597	)		(120,201	)
TOTAL COMPREHENSIVE LOSS		(3,440,224	)		(2,322,392	)
Less: comprehensive loss attributable to non-controlling interests		(10,886	)		(4,935	)
COMPREHENSIVE LOSS ATTRIBUTABLE TO BOQI INTERNATIONAL MEDICAL INC.	$	(3,429,338	)	$	(2,317,457	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
Basic and diluted		16,693,038			9,271,641
INCOME (LOSS) PER SHARE
Continuing operation-Basic and diluted	$	(0.20	)	$	(0.15	)
Discontinued operation-Basic and diluted	$	-		$	(0.09	)
Basic and diluted	$	(0.20	)	$	(0.24	)

The accompanying notes are an integral part of the condensed consolidated financial statements

2

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

	For the three months ended March,31,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,290,627	)	$	(1,347,234	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		35,958			5,409
Inventories impairment reserve		14,507			-
Allowance for doubtful accounts		(43,799	)		(7,854	)
Stock compensation		585,000			-
Lease expense		20,719			-
Amortization of discount of convertible promissory notes		1,607,105			294,958
Change in derivative liabilities		-			399,022
Change in operating assets and liabilities
Accounts receivable		(334,056	)		(127,747	)
Advances to suppliers		(387,940	)		196,821
Prepayments and other receivables		281,718			(1,870,209	)
Inventories		(2,572,438	)		(267,692	)
Operating lease-right of use assets		64,231			-
Accounts payable, trade		2,803,460			1,956,384
Advances from customers		329,591			(240,114	)
operating lease liabilities		(95,368	)		-
Taxes payable		(701,687	)		(51,117	)
Other payables and accrued liabilities		(46,085	)		189,621
Net cash used in operating activities from continuing operations		(1,729,711	)		(869,752	)
Net cash provided by  operating activities from discontinued operations		-			70,973
Net cash used in operating activities		(1,729,711	)		(798,779	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received from acquisition of Guanzan Group		-			95,220
Cash received from acquisition of Guoyitang Hospital		28,457			-
Cash received from acquisition of Zhongshan Hospital		46,748			-
Purchase of property, plant, and equipment		(36,100	)		-
Net cash provided by investing activities		39,105			95,220
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loan		462,773			-
Repayment of long-term loan		(295,404	)		-
Net proceeds from issuance of convertible promissory notes		4,065,000			593,224
Repayment of short-term loans		(4,419	)		-
Amount financed from (to) related parties		164,067			297,599
Net cash provided by financing activities from continuing operations		4,392,017			890,823
Net cash used in financing activities from discontinued operations		-			(47,487	)
Net cash provided by financing activities		4,392,017			843,336
EFFECT OF EXCHANGE RATE ON CASH		(1,295	)		(280	)
INCREASE IN CASH		2,700,116			139,497
CASH AND CASH EQUIVALENTS, beginning of period		135,308			36,674
CASH AND CASH EQUIVALENTS, end of period	$	2,835,424		$	176,171
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income tax	$	86,153		$	-
Cash paid for interest expense, net of capitalized interest	$	47,696		$	-
NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES
Issuance of common share for equity acquisition of Guoyitang Hospital	$	2,000		$	-
Issuance of common share for equity acquisition of Zhongshan Hospital	$	2,000		$	-
Issuance of common share for equity acquisition of Guanzan Group	$	-		$	2,717,000
Goodwill recognized from equity acquisition of Guanzan Group	$	-		$	6,443,170
Goodwill recognized from equity acquisition of Zhongshan Hospital	$	10,433,494			$
Goodwill recognized from equity acquisition of Guoyitang Hospital	$	7,154,392			$
Outstanding payment for the equity acquisition of Boqi Zhengji Group	$	-		$	5,655,709
Outstanding payment for equity acquisition of Guanzan Group	$	3,065,181		$	-
Outstanding payment for equity acquisition of Guoyitang Hospital	$	6,100,723		$	-
Outstanding payment for equity acquisition of Zhongshan Hospital	$	6,100,723		$	-

3

BOQI INTERNATIONAL MEDICAL INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS BACKGROUND

BOQI International Medical, Inc. (the “Company” or “BIMI”) was incorporated in the State of Delaware as Galli Process, Inc. on October 31, 2000. On February 7, 2002, the Company changed its name to Global Broadcast Group, Inc. On November 12, 2004, the Company changed its name to Diagnostic Corporation of America. On March 15, 2007, the Company changed its name to NF Energy Saving Corporation of America, and on August 24, 2009, the Company changed its name to NF Energy Saving Corporation. On December 16, 2019, the Company changed its name to BOQI International Medical Inc., to reflect the Company’s refocus of its business from the energy saving industry to the health care industry. Since March 7, 2012, the common stock of the Company (the “Common Stock”) has been traded on the Nasdaq Capital Market.

Until October 14, 2019, the Company, through NF Energy Saving Investment Limited and its subsidiaries (the “NF Group”), operated in the energy saving enhancement technology industry in the People’s Republic of China (the “PRC”). The NF Group focused on providing services relating to energy saving technology, optimization design, energy saving reconstruction of pipeline networks and contractual energy management for the electric power, petrochemical, coal, metallurgy, construction, and municipal infrastructure development industries in the PRC and the manufacture and sales of energy-saving flow control equipment. In late 2019, the Company committed to a plan to dispose of all its equity interests in the NF Group and on March 31, 2020, the Company entered into a stock purchase agreement (the “NF SPA”) to sell the NF Group. The sale of the NF Group closed on June 23, 2020. Please refer to NOTE 7 for more information relating to the sale of the NF Group.

On October 14, 2019, the Company acquired 100% of the equity interests in Lasting Wisdom Holdings Limited (“Lasting”), a limited company incorporated under the laws of the British Virgin Islands (“BVI”). Lasting has limited operating activities since incorporation except for holding the ownership interest in Pukung Limited (“Pukung”), a company organized under the laws of Hong Kong. Pukung owns 100% of the equity interest in Beijing Xinrongxin Industrial Development Co., Ltd. (“Xinrongxin”), a company organized under the laws of the PRC. Xinrongxin owns all the ownership interest of Dalian Boqi Zhengji Pharmacy Chain Co., Ltd. (“Boqi Zhengji”). Boqi Zhengji operated 16 retail pharmacy stores in China at the time of the acquisition. Lasting, Pukung, Xinrongxin and Boqi Zhengji are hereinafter collectively referred to as the “Boqi Zhengji Group”. Xinrongxin also owns 100% equity interests in Dalian Boyi Technology Co., Ltd. (“Dalian Boyi”), a subsidiary established in January 2020 and responsible for the Company’s R&D and other technology related functions. On June 24, 2020, the Company established a wholly owned subsidiary Boyi (Liaoning) Technology Co.,Ltd (“Liaoning Boyi”), in order to be qualified to participate in local healthcare projects. On December 22, 2020, the Company established another subsidiary Bimai Pharmaceutical (Chongqing) Co., Ltd., replace Xinronxin as the holding company owing all the retail, wholesale and hospital operations in China.

On March 18, 2020, the Company, through its wholly owned subsidiary, Xinrongxin, acquired 100% of the equity interests in Chongqing Guanzan Technology Co., Ltd. (“Guanzan”). Guanzan holds an 80% equity interest in Chongqing Shude Pharmaceutical Co., Ltd. (“Shude”, collectively with Guanzan, the “Guanzan Group”). Guanzan also owns 100% equity interest in Chongqing Lijiantang Pharmaceutical Co. Ltd., a subsidiary established in May 2020. Lijiantang operates 5 retail pharmacy stores in China.

On December 11, 2020, the Company entered into a stock purchase agreement to sell Boqi Zhengji. The sale of the Boqi Zhengji was closed by the end of 2020, although the government record was not updated until February 2, 2021 due to the Chinese government’s alternative working schedule and other delays caused by COVID-19.

On December 9, 2020, the Company entered into an agreement to acquire 100% of the equity interests in Chongqing Guoyitang Hospital (“Guoyitang”), the owner and operator of a private general hospital in Chongqing City, a city in Southwest China. The transaction closed on February 2, 2021. On December 15, 2020, the Company entered into a stock purchase agreement to acquire Chaohu Zhongshan Minimally Invasive Hospital (“Zhongshan”), a private hospital in the Southeast region of China. The transaction closed on February 5, 2021.

4

BOQI INTERNATIONAL MEDICAL INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31,2021, the details of the Company’s major subsidiaries are as follows:

Name	Place of incorporation and kind of legal entity	Principal activities and place of operation	Effective interest held
Lasting Wisdom Holdings Limited (“Lasting”)	British Virgin Island, a limited liability company	Investment holding		100	%
Pukung Limited (“Pukung”)	Hong Kong, a limited liability company	Investment holding		100	%
Beijing Xinrongxin Industrial Development Co., Ltd. (“Xinrongxin”)	The PRC, a limited liability company	Investment holding		100	%
Boyi (Liaoning) Technology Co., Ltd (“Liaoning Boyi”)	The PRC, a limited liability company	IT Technology service research and development		100	%
Dalian Boyi Technology Co., Ltd (“Dalian Boyi”)	The PRC, a limited liability company	IT Technology service research and development		100	%
Chongqing Guanzan Technology Co., Ltd. (“Guanzan”)	The PRC, a limited liability company	Wholesale distribution of medical devices in the PRC		100	%
Chongqing Shude Pharmaceutical Co., Ltd.(“Shude”)	The PRC, a limited liability company	Wholesale distribution of generic drugs in the PRC		80	%
Chongqing Lijiantang Pharmaceutical Co., Ltd.(“Lijiantang”)	The PRC, a limited liability company	Wholesale distribution of generic drugs in the PRC		100	%
Bimai Pharmaceutical (Chongqing) Co., Ltd. (“Chongqing Bimai”)	The PRC, a limited liability company	Investment holding		100	%
Chongqing Guoyitang Hospital (“Guoyitang”)	The PRC, a hospital	Hospital in the PRC		100	%
Chaohu Zhongshan Minimally Invasive Hospital (“Zhongshan”)	The PRC, a hospital	Hospital in the PRC		100	%

5

2. GOING CONCERN UNCERTAINTIES

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

As reflected in the accompanying unaudited condensed consolidated financial statements, the Company incurred significant net losses of $3,290,627 and $2,202,191 for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, the Company had an accumulated deficit of $16.2 million and negative working capital of $0.18 million. In addition, the Company continues to generate operating losses and has limited cash flow from its continuing operations. Primarily as a result of its operating loss in the quarter, the Company’s cash position declined by $1.7 million in the three months ended March 31, 2021. Management believes these factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months.

The continuation of the Company as a going concern through the next twelve months is dependent upon (1) the continued financial support from its stockholders or external financing, and (2) further implementation of management’s business plan to generate sufficient revenues and cash flow to meet its obligations. While the Company believes in the viability of its strategy to increase sales volume and in its ability to raise additional funds, there can be no assurance to that it will be successful in either respect.

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.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

● Basis of presentation and consolidation

These accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). These unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.

The unaudited interim condensed consolidated financial information as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 have been prepared, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, which are normally included in annual consolidated financial statements prepared in accordance with US GAAP, have been omitted pursuant to those rules and regulations. The unaudited interim condensed consolidated financial information should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Form 10-K for the fiscal year ended December 31, 2020 previously filed with the SEC on March 31, 2021.

6

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s unaudited condensed consolidated financial position as of March 31, 210 and its unaudited condensed consolidated results of operations for the three months ended March 31, 2021 and 2020, and its unaudited condensed consolidated cash flows for the three months ended March 31, 2021 and 2020, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the fiscal year or any future periods.

● Use of estimates

The preparation of these condensed consolidated financial statements in conformity with the US GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities on the date of these condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company bases its estimates and judgments on historical experience and on various other assumptions and information that are believed to be reasonable under the circumstances. Estimates and assumptions of future events and their effects cannot be perceived with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. Significant estimates and assumptions made by management include, among others, useful lives and impairment of long-lived assets, collectability of accounts receivable, advances to suppliers allowance for doubtful accounts, reserve of inventory, fair value of goodwill and valuation of derivative liabilities. While the Company believes that the estimates and assumptions used in the preparation of these condensed consolidated financial statements are appropriate, actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.

● Reclassification

Certain prior year balances were reclassified to conform to the current period presentation, which mainly reflect the presentation of the discontinued operation of the NF Group. Except for the assets and liabilities of the NF Group which were reclassified as discontinued assets or liabilities and presented as current assets or liabilities in the consolidated balance sheets, there was no other impacts on reported financial position or cash flows for any of the periods presented.

● Cash

Cash consists primarily of cash on hand and cash in banks which is readily available in checking and saving accounts. The Company maintains cash with various financial institutions in the PRC where its accounts are uninsured. The Company has not experienced any losses from funds held in bank accounts and believes it is not exposed to any risk on its bank accounts.

● Restricted cash

Cash that is restricted as to withdrawal or use under the terms of certain contractual agreements or orders are recorded in a restricted cash account in the Company’s unaudited interim condensed consolidated balance sheet.

7

● Accounts receivable and allowance for doubtful accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from delivery. Credit is extended based on evaluation of a customer’s financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. At the end of each period, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. 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 does not have any off-balance-sheet credit exposure related to its customers. As of March 31, 2021 and December 31, 2020, the allowance for doubtful accounts was $1,187,543 and $1,236,830, respectively.

● Advances to suppliers

Advances to suppliers consist of prepayments to the Company’s vendors, such as pharmaceutical manufacturers and medicine suppliers. The Company typically prepays for the purchase of our merchandise, especially for those salable, scarce, personalized medicine or medical devices. The Company typically receive products from vendors within three to nine months after making prepayments. The Company continuously monitor delivery from, and payments to, the vendors while maintaining a provision for estimated credit losses based upon historical experience and any specific supplier issues, such as discontinuing of inventory supply, that have been identified. If the Company has difficulty receiving products from a vendor, the Company would cease purchasing products from such vendor, request return of our prepayment promptly, and if necessary, take legal action. The Company has not taken such type of legal action during the reporting periods. If none of these steps are successful, management will then determine whether the prepayments should be reserved or written off. As of March 31, 2021 and December 31, 2020, the allowance for doubtful accounts was $7,427 and $7,463, respectively.

● Inventories

Inventories are stated at the lower of cost or market value. Cost is determined using the weighted average method, and market value is the middle (the second highest) value among an inventory item’s replacement cost, market celling and market floor. The Company carries out physical inventory counts on a monthly basis at each store and warehouse location. The Company reviews historical sales activity quarterly to determine excess, slow moving items and potentially obsolete items. The Company provides inventory reserve based on the excess quantities on hand equal to the difference, if any, between the cost of the inventory and its estimated market value, or obsolescence of inventories determined principally by customer demand. As of March 31, 2021 and December 31, 2020, the Company recorded an allowance for obsolete inventories, which mainly consists of expired medicine, of $31,660 and $9,825, respectively.

8

● Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:

	Expected useful lives	Residual value
Building	20 years		5	%
Office equipment	3 years		5	%
Electronic equipment	3 years		5	%
Furniture	5 years		5	%
Medical equipment	10 years		5	%
Vehicles	4 years		5	%

Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

● Intangible assets

Intangible assets consist primarily of software of management systems. Intangible assets are stated at cost less accumulated amortization and impairment, if any. Intangible assets are amortized using the straight line method with the following estimated useful lives:

	Expected useful lives
Software	10 years

● Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of obligations under operating leases, and obligations under operating leases, non-current on the Company’s consolidated balance sheets. Finance leases are included in property and equipment, net, current portion of obligations under capital leases, and obligations under capital leases, non-current on our consolidated balance sheets.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date, adjusted by the deferred rent liabilities at the adoption date. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU assets also include any lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term.

9

● Goodwill

Goodwill represents the excess of the purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed of an acquired business. In accordance with ASC 350, Goodwill and Other Intangible Assets, recorded goodwill amounts are not amortized, but rather are tested for impairment annually or more frequently if there are indicators of impairment present.

Goodwill is tested for impairment at the reporting unit level on at least an annual basis or when an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. These events or circumstances include a significant change in stock prices, business environment, legal factors, financial performances, competition, or events affecting the reporting unit. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The estimation of fair value of reporting unit using a discounted cash flow methodology also requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the Company’s business, estimation of the useful life over which cash flows will occur, and determination of the Company’s weighted average cost of capital. The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results and market conditions. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for the reporting unit.

Management evaluates the recoverability of goodwill by performing a qualitative assessment before using a two-step impairment test approach at the reporting unit level. If the Company reorganizes its reporting structure in a manner that changes the composition of one or more of its reporting units, goodwill will be reassigned based on the relative fair value of each of the affected reporting units.

● Impairment of long-lived assets and intangibles

In accordance with the provisions of ASC Topic 360, “Impairment or Disposal of Long-Lived Assets”, all long-lived assets such as property, plant and equipment held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.

● Revenue recognition

We adopted Accounting Standard Codification (“ASC”) Topic 606, Revenues from Contract with Customers (“ASC 606”) for all periods presented. Under ASC 606, revenue is recognized when control of the promised goods and services is transferred to the Company’s customers, in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those goods and services, net of value-added tax. The Company determines revenue recognition through the following steps:

● Identify the contract with a customer;

● Identify the performance obligations in the contract;

● Determine the transaction price;

● Allocate the transaction price to the performance obligations in the contract; and

● Recognize revenue when (or as) the entity satisfies a performance obligation.

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The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied by the control of the promised goods and services is transferred to the customers, which at a point in time or over time as appropriate.

The Company’s revenue is net of value added tax (“VAT”) collected on behalf of PRC tax authorities in respect to the sales of products. VAT collected from customers, net of VAT paid for purchases, is recorded as a liability in the accompanying consolidated balance sheets until it is paid to the relevant PRC tax authorities

● Cost of revenue

Cost of revenue consists primarily of cost of goods purchased from suppliers plus direct material costs for packaging and storage, direct labor, which are directly attributable to the acquisition and maintaining of products for sales. Cost of revenues also include impairment loss of our products which are obsolete or expired for sale, if any. Shipping and handling costs, associated with the distribution of finished products to customers, are borne by the customers.

● Comprehensive income

ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying condensed consolidated statement of stockholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

● Income taxes

Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

For the three months ended March 31, 2021 and 2020, the Company did not incur any interest or penalties associated with tax positions. As of March 31, 2021, the Company did not have any significant unrecognized uncertain tax positions.

The Company conducts all of its business in the PRC and is subject to tax in this jurisdiction. As a result of its corporate structure the Company files tax returns that are subject to examination by a foreign tax authority.

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● Value added tax

Sales revenue represents the invoiced value of goods sold, net of VAT. All of the Company’s products that are sold in the PRC are subject to a VAT on the gross sales price. The VAT rates range up to 13%, depending on the type of products sold. The VAT may be offset by VAT paid by the Company on its purchase activities of merchandises, raw materials, utilities, and other materials which cost was included in the cost of producing or acquiring its products for sales. The Company records a VAT payable net of payments if the VAT payable on the gross sales is larger than VAT paid by the Company on purchase of finished goods; on the other hand, the Company records a VAT deductible in the accompanying financial statements net of any VAT payable at the end of reporting period.

● Convertible promissory notes

The Company records debt net of debt discount for beneficial conversion features and warrants, on a relative fair value basis. Beneficial conversion features are recorded pursuant to the Beneficial Conversion and Debt Topics of the FASB Accounting Standards Codification. The amounts allocated to warrants and beneficial conversion rights are recorded as debt discount and as additional paid-in-capital. Debt discount is amortized to interest expense over the life of the debt.

● Derivative instruments

The Company has entered into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. The Company accounts for these arrangements in accordance with Accounting Standards Codification Topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretation of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument.

We estimate fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered to be consistent with the objective measuring fair values. In selecting the appropriate technique, we consider, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative instruments, such as free-standing warrants, we generally use the Black-Scholes model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since derivative financial instruments are initially and subsequently carried at fair values, our income (expense) going forward will reflect the volatility in these estimate and assumption changes. Under the terms of the new accounting standard, increases in the trading price of the Company’s common stock and increases in fair value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the company’s common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income.

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● Net loss per share

The Company calculates net loss per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.

● Foreign currencies translation

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 statement of operations.

The reporting currency of the Company is the United States Dollar (“US$”). The Company’s subsidiaries in the PRC maintain their books and records in their local currency, the Renminbi Yuan (“RMB”), which is the functional currency as being the primary currency of the economic environment in which these entities operate.

In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not the 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 subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.

Translation of amounts from RMB into US$ has been made at the following exchange rates for the respective period:

	March 31, 2021		March 31, 2020
Period-end RMB:US$1 exchange rate		6.5566		7.0851
Three months end average RMB:US$1 exchange rate		6.4829		6.9790

● 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 operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.

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● Segment reporting

ASC Topic 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about the type of products and services, geographical areas, business strategies and major customers in business components. For the three months ended March 31, 2021, the Company operated in four reportable segments: retail pharmacy, wholesale pharmaceuticals, wholesale medical devices and medical services in the PRC.

● Fair value of financial instruments

The carrying value of the Company’s financial instruments (excluding short-term bank borrowing and convertible promissory notes): cash and cash equivalents, accounts and retention receivable, prepayments and other receivables, accounts payable, income tax payable, amounts due to related parties other payables and accrued liabilities approximate their fair values because of the short-term nature of these financial instruments.

Management believes, based on the current market prices or interest rates for similar debt instruments, the fair value of its obligation under its finance lease and short-term bank borrowing approximate the carrying amount.

The Company also follows the guidance of the ASC Topic 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

● Level 1 : Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets;

● Level 2: Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. Black-Scholes Option-Pricing model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs; and

● Level 3: Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.

Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

The carrying amount of cash, restricted cash, accounts receivable, other receivable, bank credit, accounts payable and other accounts payable approximate their fair value due to the short-term maturity of these instruments.

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● Recent accounting pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ( “ASU 2020-06”), which focuses on amending the legacy guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. ASU 2020-06 simplifies an issuer’s accounting for convertible instruments by reducing the number of accounting models that require separate accounting for embedded conversion features. ASU 2020-06 also simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification. Further, ASU 2020-06 enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance, i.e., aligning the diluted EPS calculation for convertible instruments by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in the diluted EPS calculation when an instrument may be settled in cash or shares, adding information about events or conditions that occur during the reporting period that cause conversion contingencies to be met or conversion terms to be significantly changed. This update will be effective for the Company’s fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Entities can elect to adopt the new guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company is currently in the process of evaluating the impact of adopting ASU 2020-06 on its consolidated financial statements and related disclosure.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

4. THE ACQUISITION OF THE GUANZAN GROUP

On February 1, 2020, the Company, Xinrongxin, Ms. Li Zhou (“Ms. Zhou”) and Guanzan entered into a stock purchase agreement (the “Guanzan SPA”). Pursuant to the Guanzan SPA, the Company agreed to purchase all the issued and outstanding shares of Guanzan (the “Guanzan Shares”) from Ms. Zhou for RMB 100,000,000 (approximately $14,285,714), to be paid by the issuance of 950,000 shares of the Company’s common stock (the “Guanzan Stock Consideration”) and the payment of RMB 80,000,000 in cash (the “Guanzan Cash Consideration”) (the “Guanzan Acquisition”). The Guanzan Stock Consideration was payable at closing and the Guanzan Cash Consideration, which is subject to post-closing adjustments based on the performance of Guanzan in the years ending December 31, 2020 and 2021, was to be paid pursuant to a post-closing payment schedule.

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Guanzan is a distributor of medical devices whose customers are primarily drug stores, private clinics, pharmaceutical dealers and hospitals in the Southwest of China. Guanzan holds business licenses in the PRC such as a Business Permit for Medical Devices and a Recordation Certificate for Business Activities Involving Class II Medical Devices, etc., which qualify Guanzan to engage in the distribution of medical devices in the PRC.

Shude is a pharmaceutical distributor that markets generic drugs. Shude’s customers include a wide range of clinics, private and public hospitals and pharmacies in the PRC. Shude holds Chinese business licenses such as a Business Permit for Medical Devices and a Drug Wholesale Distribution License, which qualify Shude to engage in the distribution of medicines and medical devices in China.

The transaction closed on March 18, 2020. Upon the closing, the Guanzan Shares were transferred to and recorded under the name of Xinrongxin and the Guanzan Stock Consideration was paid to Ms. Zhou. The Guanzan Cash Consideration has not been paid as of the date of this report.

The following summarizes the identified assets acquired and liabilities assumed pursuant to the Guanzan Acquisition as of March 18, 2020:

Items	Amount
Assets
Cash	$	95,220
Accounts receivable		1,835,981
Advances to suppliers		1,222,986
Amount due from related parties		410,943
Inventories		950,225
Prepayments and other receivables		90,256
Property, plant and equipment		707,289
Intangible assets		254,737
Goodwill		6,443,170
Liabilities
Short-term bank borrowings		(838,926	)
Long-term loans due within one year		(250,663	)
Accounts payable, trade		(1,303,399	)
Advances from customers		(1,350,126	)
Amount due to related parties		(106,720	)
Taxes payable		(406,169	)
Other payables and accrued liabilities		(390,594	)
Long-term loans – noncurrent portion		(186,796	)
Non-controlling interests		(46,295	)
Total-net assets	$	7,131,119

The fair value of all assets acquired and liabilities assumed is the estimated book value of the Guanzan Group. Goodwill represent the excess of the fair value of purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed of Guanzan Group at the acquisition date. Upon the Guanzan Acquisition, the Company recognized non-controlling interest in Shude in the amount of $46,295, representing the 20% non-controlling equity interest in Shude.

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On November 20, 2020, we entered into a Prepayment and Amendment Agreement for the prepayment (the “Prepayment”) of a portion of the Guanzan Cash Consideration in the amount of RMB 20,000,000, in the form of shares of our company’s common stock valued at $3.00 per share, in light of Guanzan’s performance during the period from March 18, 2020 to September 30, 2020. On November 30, 2020, 1,000,000 shares of our common stock were issued to the designated assignees of the seller Li Zhou as the Prepayment. The balance of the Guanzan Cash Consideration in the amount of RMB 60,000,000 has not been paid as of this date.

5. THE ACQUISITION OF THE GYOYITANG HOSPITAL

On December 9, 2020 entered into a Stock Purchase Agreement to acquire Chongqing Guoyitang Hospital (“Guoyitang”), the owner and operator of a private general hospital in Chongqing City, a southwest city of China, with 100 hospital beds, 53 medical doctors, 40 medical technicians, 50 nurses and 57 administrative employees. Pursuant to the Agreement, the Company agreed to purchase all the issued and outstanding equity interests in Guoyitang. The aggregate purchase price for Guoyitang was$15,251,807 (RMB 100,000,000). Upon signing the Agreement, 2,000,000 shares of common stock of BIMI and approximately $3,096,119 (RMB 20,000,000) was to be paid as partial consideration for the purchase of Guoyitang. The balance of the purchase price in the amount of approximately $6,100,723 (RMB 40,000,000) is subject to post-closing adjustments based on the performance of Guoyitang in 2021 and 2022. The transaction closed on February 2, 2021.

The following summarizes the identified assets acquired and liabilities assumed pursuant to the Guoyitang Acquisition as of February 2, 2021:

Items	Amount
Assets
Cash	$	28,457
Accounts receivable		11,797
Advances to suppliers		12,670
Amount due from related parties		41,598
Inventories		167,440
Prepayments and other receivables		61,102
Property, plant and equipment		528,814
Right-of-use asset		441,150
Goodwill		7,154,393
Liabilities
Accounts payable, trade		(599,391	)
Amount due to related parties		(183,796	)
Taxes payable		(121	)
Other payables and accrued liabilities		(231,375	)
Lease liability-current		(161,707	)
Lease liability-non current		(354,912	)
Total-net assets	$	6,916,119

The fair value of all assets acquired and liabilities assumed is the estimated book value of the Guoyitang. Goodwill represents the excess of the fair value of purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed of Guoyitang at the acquisition date.

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6. THE ACQUISITION OF THE ZHONGSHAN HOSPITAL

On December 15, 2020, the Company entered into a Stock Purchase Agreement to acquire Chaohu Zhongshan Minimally Invasive Hospital (“Zhongshan Hospital”), a private hospital in the southeast region of China with 65 hospital beds, 25 medical doctors, 22 medical technicians and 45 nurses. Zhongshan Hospital is a general hospital known for its complex minimally invasive surgeries. Pursuant to the Agreement, the Company agreed to purchase all the issued and outstanding equity interests in Zhongshan Hospital in consideration of approximately $18,515,661(RMB 120,000,000). As partial consideration, approximately $6,100,723 (RMB 40,000,000) was paid in cash at the closing and 2,000,000 shares of common stock of the Company were delivered on February 2021. The balance of the purchase price in the amount of approximately $6,100,723 (RMB 40,000,000) is subject to post-closing adjustments based on the performance of Zhongshan Hospital in 2021 and 2022.The transaction closed on February 5, 2021.

The following summarizes the identified assets acquired and liabilities assumed pursuant to the Zhongshan Acquisition as of February 5, 2021:

Items	Amount
Assets
Cash	$	46,748
Accounts receivable		92,900
Inventories		108,413
Prepayments and other receivables		432,231
Property, plant and equipment		344,208
Right-of-use asset		1,188,693
Goodwill		10,443,494
Liabilities
Short-term bank borrowings		(154,701	)
Accounts payable, trade		(928,640	)
Advances from customers		(5,603	)
Amount due to related parties		(217,203	)
Other payables and accrued liabilities		(435,290	)
Lease liability-current		(160,774	)
Lease liability-non current		(1,102,589	)
Total-net assets	$	9,651,887

The fair value of all assets acquired and liabilities assumed is the estimated book value of the Zhongshan. Goodwill represents the excess of the fair value of purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed of Zhongshan Hospital at the acquisition date.

7. DISCONTINED OPERATION

In late 2019, the Company committed to a plan to dispose of all of the NF Group and on March 31, 2020 entered into the NF SPA with respect to its disposition. Pursuant to the NF SPA, the aggregate sales price for the NF Group was $10,000,000. The sale closed on June 23, 2020.

On December 11. 2020, the Company entered into an agreement (“Boqi Zhengji SPA”) to sell the equity interests in Boqi Zhengji. Pursuant to the Boqi Zhengji SPA, the aggregate sale price for Boqi Zhengji was $1,700,000. The sale of Boqi Zhengji closed on December 18, 2020 at which time the Company received $1.7 million. Upon closing, the Company ceased operating pharmacies in Dalian.

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The Company determined that the plans and the subsequent actions taken to dispose of the NF Group and Boqi Zhengji qualified as discontinued operations under the criteria set forth in the ASC 205-20 Presentation of Financial Statements – Discontinued Operation. Upon closing of the two sales, the Company is no longer involved in the energy efficiency enhancement business or the operation of Boqi Zhengji.

The summarized operating results of the discontinued operation included in the Company’s unaudited interim condensed consolidated statements of operations consist of the following:

	For the  three months ended March 31,  2020
Revenues	$	20,947
Cost of revenues		132,915
Gross loss		(111,968	)
Operating expenses		564,833
Other expense		178,156
Loss before income taxes		(742,989	)
Income taxes		-
Net loss from discontinued operations	$	(854,957	)

8. ACCOUNTS RECEIVABLE

The majority of the Company’s pharmacy retail revenues are derived from cash sales, except for sales to the government social security bureaus or commercial health insurance programs, which typically settle once a month. The Company offers several credit terms to our wholesale customers and to our authorized retailer stores. The Company routinely evaluates the need for allowance for doubtful accounts based on specifically identified amounts that the management believes to be uncollectible. If the actual collection experience changes, revisions to the allowance may be required. As of March 31, 2021 and December 31,2020, accounts receivable consisted of the following:

	March 31, 2021			December 31, 2020
Accounts receivable, cost	$	8,357,234		$	7,923,382
Less: allowance for doubtful accounts		(1,187,543	)		(1,236,830	)
Accounts receivable, net	$	7,169,691		$	6,686,552

The Company routinely evaluates the need for allowance for doubtful accounts based on specifically identified amounts that the management believes to be uncollectible. If the actual collection experience changes, revisions to the allowance may be required. Due to subsequent collections, the Company reversed an allowance of $43,799 and $8,720 for the three months ended, March 31, 2021 and 2020, respectively.

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9. ADVANCES TO SUPPLIERS

Advances to suppliers represent the amount the Company prepaid to its suppliers for merchandises for sale in the ordinary course of business. As of March 31, 2021 and December 31,2020, the Company reported advances to suppliers as follow:

	March 31, 2021			December 31, 2020
Advances to suppliers, cost	$	3,101,362		$	2,700,788
Less: allowance for doubtful accounts		(7,427	)		(7,463	)
Advances to suppliers, net	$	3,093,935		$	2,693,325

No bad debt expenses were accrued for doubtful accounts relating to advances to suppliers for the three months ended March 31, 2021 and 2020, respectively.

10. INVENTORIES

The Company’s inventories consist of medicine and medical devices that were purchased from third parties and sold in our retail pharmacy stores and wholesale to third party pharmacies, clinics, hospitals, etc. Inventories consisted of the following:

	March 31, 2021			December 31, 2020
Medicine	$	3,306,953		$	196,506
Medical devices		293,842			548,670
Less: allowance for obsolete and expired inventory		(31,660	)		(9,825	)
	$	3,569,135		$	735,351

For the three months ended March 31, 2021and 2020, respectively, the Company accrued an allowance of $14,507 and $119,342 for obsolete and expired items.

11. PREPAYMENTS AND OTHER RECEIVABLES

Prepayments and other receivables represent the amount that the Company prepaid as rent deposits for both retail stores and office space premises, special medical device purchase deposits, prepaid rental fee and professional services, advances to employees in the ordinary course of business, VAT deductibles and other miscellaneous receivables. The table below sets forth the balances as of March 31, 2021and December 31, 2020, respectively.

	March 31, 2021			December 31, 2020
Deposit for rental	$	18,653			11,050
Prepaid rental fee		371,228			37,687
Deposit for purchase of medical devices		54,220			28,113
Receivables from convertible bonds		-			1,500,000
Deferred offering cost		1,232,185			889,971
Prepayment for acquisition of Guoyitang and Zhongshan		-			9,195,543
Deposit for acquisition of Cogmer		3,050,361			3,065,181
Receivables form third party		150,860			-
Others		73,144			162,326
Less: allowance for doubtful accounts		(9,300	)		(9,345	)
Prepayments and other receivables, net	$	4,941,351			14,880,526

Management evaluates the recoverable value of these balances periodically in accordance with the Company’s policies. For the three months ended March 31, 2021 and 2020, the Company reversed an allowance for doubtful accounts of $Nil and $866, respectively.

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12. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

	March 31, 2021			December 31, 2020
Building	$	796,167		$	800,035
Office equipment		242,308			38,769
Electronic equipment		28,158			49,507
Furniture		20,554			151
Medical equipment		1,434,216			-
Vehicles		175,656			130,532
		2,697,059			1,018,994
Less: accumulated depreciation		(927,132	)		(108,786	)
Property, plant and equipment, net	$	1,769,927		$	910,208

Depreciation expense for the three months ended March 31, 2021 and 2020 were $50,414 and $4,712, respectively.

13. Intangible assets

	March 31, 2021			December 31, 2020
Software	$	14,627		$	-
		14,627			-
Less: accumulated amortization		(1,182	)		-
Intangible assets, net	$	13,445		$	-

Amortization expense for the three months ended March 31, 2021 and 2020 were $1,182 and $Nil, respectively.

14. LEASES

Balance sheet information related to the Company’s operating leases was as follows:

	March 31, 2021		December 31, 2020
Operating Lease Assets
Operating lease	$	1,619,036		53,425
Total operating lease assets	$	1,619,036		53,425
Operating Lease Obligations
Current operating lease liabilities	$	354,705		23,063
Non current operating lease liabilities	$	1,396,148		22,457
Total Lease Liabilities	$	1,750,853		45,520

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Lease liability maturities as of March 31, 2021, are as follows:

	March 31, 2021
2021		358,118
2022		348,702
2023		323,350
2024		314,037
2025 and Thereafter		786,039
Total minimum lease payments		2,130,246
Less: Amount representing interest		379,393
Total		1,750,853

15. GOODWILL

The goodwill associated with the Guanzan Acquisition of $6,443,170, Guoyitang Acquisition of $7,154,393 and Zhongshan Acquisition of $10,443,494, were initially recognized at the acquisition closing date.

Based on an assessment of the qualitative factors, management determined that it is more-likely-than-not that the fair value of the reporting unit is in excess of its carrying amount. Therefore, management concluded that it was not necessary to proceed to the two-step goodwill impairment test. At March 31, 2021and December 31, 2020, goodwill was $24,512,118 and $6,914,232, respectively. No impairment loss was recorded for the three months ended March 31, 2021 and 2020.

16. LOANS

Short-term loans

	March 31, 2021		December 31, 2020
Construction Bank of China	$	32,639	$	-
Chongqing Nan’an Zhongyin Fuden Village Bank Co. LTD				153,259
China Minsheng Bank		122,014
Industrial and Commercial Bank of China		152,518
Postal Savings Bank of China		747,339		750,969
Total	$	1,054,510	$	904,228

For the three months ended March 31, 2021 and 2020, interest expense on short-term loans amounted to $12,015 and $1,612 respectively.

Long-term loans

	March 31, 2021			December 31, 2020
Standard Chartered Bank	$	128,122		$	163,973
Chongqing Nan’an Zhongyin Fuden Village Bank Co. LTD		148,755			-
We Bank		645,689			591,225
Subtotal of long-term loans		922,566			755,198
Less: current portion		(496,974	)		(34,201	)
Long-term loans – noncurrent portion	$	425,592		$	720,997

For the three months ended March 31, 2021 and 2020, interest expense on long-term loans amounted to $21,203 and $2,555 respectively.

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17. CONVERTIBLE PROMISSORY NOTES AND EMBEDDED DERIVATIVE INSTRUCTIONS

On May 19, 2020, the Company entered into a Securities Purchase Agreement (the “May SPA”) with two institutional investors (each, an “Institutional Investor”, collectively, the “Institutional Investors”) to sell in a private placement a new series of senior secured convertible notes having an original issue amount of $6,550,000, with a discount of 19.85%, and ranking senior to all outstanding and future indebtedness of the Company (the “Convertible Notes”). Each Institutional Investor paid $1,750,000 in cash for a note in the face amount of $2,225,000. Additional Convertible Note in an aggregate original principal amount not to exceed $2,100,000 may also be issued to the Institutional Investors under the May SPA at a later date under certain circumstances. The Convertible Notes mature on the eighteen-month anniversary of the issuance date, are payable by the Company in installments and are convertible at the election of the Institutional Investors at the convertible price of $2.59, which is subject to adjustment in the event of default. Each Institutional Investor also received a warrant to purchase 650,000 shares of the Common Stock at an initial exercise price of $2.845. The placement agent for the private placement received a warrant to purchase up to 171,845 shares of the Common Stock at an initial exercise price of $2.845 per share, subject to increase based on the number of shares of the Common Stock issued pursuant to the Convertible Notes. On February 24,2021, the Company and the Investors agreed to increase the amount of Convertible Notes that may be purchased under the Securities Purchase Agreement announced in May 2020 from $2,100,000 to $5,400,000 at an original issue discount of 16.67% ($4,500,000 net). The Convertible Notes are convertible at a base conversion price of $2.59 per share, subject to the previously agreed conversion floor price of $ $0.554 (or $0.372 with respect to the increased amount).  The Investors will also be entitled to receive warrants (the “Warrants”) to purchase 720,000 additional shares of the Company’s common stock at the exercise price of $2.845 per share.

Upon evaluation, the Company determined that the Agreements contained embedded beneficial conversion features which met the definition of Debt with Conversion and Other Options covered under the Accounting Standards Codification topic 470 (“ASC 470”). According to ASC 470, an embedded beneficial conversion feature present in a convertible instrument shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital.

	March 31, 2021			December 31, 2020
Convertible note – principal	$	6,015,426		$	5,367,174
Convertible note – discount		(882,896	)		(2,038,727	)
	$	5,132,530		$	3,328,447

Additionally, the Company accounted for the embedded conversion option liability in accordance with the Accounting Standards Codification topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretation of this standard. In accordance with these standards, derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument. The fair value of the embedded conversion option liability associated with each Note was valued using the Black-Scholes model. The key assumptions used in the Black-Scholes option pricing model are as follows:

	March 31, 2021			December 31, 2020
Dividend yield	$	0	%	$	0	%
Expected volatility		90% ~ 100	%		101% ~ 166	%
Risk free interest rate		0.82% ~ 1.13	%		0.07% ~ 0.22	%
Expected life (year)		3.14 ~3.86			3.38

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18. OTHER PAYABLES AND ACCRUED LIABILITIES

Other payables and accrued liabilities consisted of the following:

	March 31, 2021		December 31, 2020
Salary payable	$	818,091	$	96,915
Salary payable – related party (1)		163,267		663,267
Loan payable		301,933		-
Accrued tax payable		305,859		-
Accrued operating expenses		139,709		102,358
Acquisition payable (2)		3,065,181		3,065,181
Other payables		55,517		301,255
	$	4,849,557	$	4,228,976

(1) On October 1, 2019, the Company employed Mr. Tiewei Song as its Chief Executive Officer with an annual base salary of $500,000, the balance represented the unpaid salary of $163,267 on March 31, 2021.

(2) In March 2020, the Company completed the Guanzan Acquisition. In addition to the issuance of 950,000 shares of its Common Stock, the Company is obligated to pay approximately $4,414,119, which is subject to post-closing adjustments based on the performance of the Guanzan Group in 2020 and 2021. The fair value of the cash consideration payable was calculated in conformance with FASB ASC 805-10. On November 20, 2020, the parties to the Guanzan Acquisition entered into a Prepayment and Amendment Agreement in light of Guanzan’s performance during the period from March 18, 2020 to September 30, 2020, providing for the prepayment of RMB 20,000,000 in the form of shares of the Company’s Common Stock valued at $3.00 per share. On November 30, 2020, the Company issued 1,000,000 shares of Common Stock as the prepayment

19. RELATED PARTIES AND RELATED PARTIES TRANSACTIONS

Amount due from related parties

As of March 31, 2021, $41,012 was due from Wenfa Zhuo, a former shareholder of Guoyitang. The amount due, which was outstanding prior to the Guoyitang Acquisition was free of interest and due on demand.

As of December 31, 2020, the total amounts due from related parties was Nil.

Amounts payable to related parties

As of March 31, 2021 and December 31, 2020, the total amounts payable to related parties was $791,581 and $226,514, respectively, which included:

1. Amount payable to Mr. Yongquan Bi, the former Chief Executive Officer and current Chairman of the Board of directors of the Company, of $29,423 and $29,566, respectively, free of interest and due on demand. The amount represents the remaining balance that Mr. Yongquan Bi advanced for third party services on behalf of the Company during the ordinary course of business of the Company since the beginning of 2018.

2. Amount payable to Mr. Li Zhou, the legal representative of Guanzan, of $195,223 and $0 respectively was related party loan for daily operation with no interest.

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3. Amount payable to Mr. Fuqing Zhang, the Chief Executive Officer of Xinrongxin of $183,478 and $184,370, respectively, free of interest and due on demand. The amount due to Mr. Fuqing Zhang is reimbursable operating expenses that the Company owned to Mr. Fuqing Zhang during and before the acquisition of Boqi Zhengji.

4.	Amount payable to Mr. Youwei Xu, the financial manager of Xinrongxin of $12,518 and $12,578, respectively, free of interest and due on demand. The amount due to Mr. Youwei Xu, relates to reimbursable operating expenses that we owed to Mr. Fuqing Zhang during and before the acquisition of Boqi Zhengji.
5.	Amount payable to Shaohui Zhuo, the general manager of Guoyitang of $118,282 and $0, respectively, was a related party loan for daily operation with no interest.

6. Amount payable to Nanfang Xiao, the Director of Guoyitang of $12,964 and $0, respectively, was a related party loan for daily operation with no interest.

7. Amount payable to Jia Song, the manager of Guoyitang of $25,554 and $0, respectively, was a related party loan for daily operation with no interest.

8. Amount payable to Yu Xiang, the legal representative and general manager of Zhongshan of $214,139 and $0, respectively, was a related party lean for daily operation with no interest.

20. STOCK EQUITY

The Company is authorized to issue 50,000,000 shares of common stock, $0.001 par value. As of March 31, 2021 and December 31, 2020, it had 20,027,958 shares and 13,254,587 shares outstanding, respectively. As of March 31, 2021, the Company reserved a total of 4,696,137 shares of common stock for future issuance pursuant to the requirements of the Notes.

On April 20, 2019 and October 7, 2019, respectively, the Company issued an aggregate of 1,500,000 shares of its common stock as a part of the consideration for the acquisition of Boqi Zhengji.

On March 12, 2020, the Company issued 950,000 shares of its common stock as the Guanzan Stock Consideration.

From April 6, 2020 through October 20, 2020, Power Up Lending Group Ltd., CROWN BRIDGE PARTNERS, LLC, LABRYS FUND, LP, MORNINGVIEW FINANCIAL, LLC, CROWN BRIDGE PARTNERS, LLC, TFK Investments LLC, BHP Capital NY Inc., FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC and Platinum Point Capital LLC converted $1,534,250 of Notes in the aggregate principal amount of $1,534,250 plus interests into an aggregate of 1,658,213 shares of the Common Stock.

On November 30, 2020, the Company issued 1,000,000 shares of Common Stock as the prepayment of RMB of the Guanzan Cash Consideration.

On December 2, 2020, the Institutional Investor, Hudson Bay Master Fund Ltd (“Hudson Bay”), converted $ 173,154 of a 2020 Note in the aggregate principal amount of $ 2,150,000 plus interest into an aggregate of 125,627 shares of Common Stock.

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On December 2, 2020, the Institutional Investor, CVI Investments, Inc. (“CVI”), converted $609,615 of a 2020 Note in the aggregate principal amount of $ 2,150,000 plus interest into an aggregate of 447,458 shares of Common Stock.

From January 4, 2021, to February 9, 2021, Hudson Bay converted the rest of a 2020 Note in the aggregate principal amount of $ 2,150,000 plus interests into an aggregate of 1,384,714 shares of Common Stock.

From January 4, 2021, to March 1, 2021, CVI converted the rest of a 2020 Note in the aggregate principal amount of $ 2,150,000 plus interest into an aggregate of 1,138,657 shares of Common Stock.

On February 2, 2021, the Company issued 2,000,000 shares of Common Stock as the Guoyitang Stock Consideration.

On February 11, 2021, the Company issued 250,000 shares of Common Stock to Real Miracle Investments Limited in consideration for consulting services.

On March 26, 2021, the Company issued 2,000,000 shares of Common Stock as the Zhongshan Stock Consideration.

21. NET LOSS PER SHARE

Basic net loss per share is computed using the weighted average number of common shares outstanding during the year. The dilutive effect of potential common shares outstanding is included in diluted net loss per share. Due to the Company’s net loss from its continuing operations, all potential common share issuances had anti-dilutive effect on net loss per share. The following table sets forth the computation of basic and diluted net loss per share for the three months ended March 31, 2021 and 2020:

	For the Three Months ended March 31,
	2021			2020
Net loss from continuing operation attributable to common shareholders	$	(3,290,627	)	$	(1,347,234	)
Net loss from discontinued operations attributable to common shareholders		-			(854,957	)
Total net loss attributable to common shareholders	$	(3,290,627	)	$	(2,202,191	)
Weighted average common shares outstanding – Basic and diluted		16,693,038			9,271,641
Loss per shares – basic and diluted:
Continuing operations	$	(0.20	)	$	(0.15	)
Discontinued operations		-			(0.09	)
Total	$	(0.20	)	$	(0.24	)

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22. LITIGATION

On April 1, 2020, the Guizhou Province Xiuwen County People’s Court ordered the attachment of two of Shude’s bank accounts pursuant to a pre-litigation attachment application filed by one of Shude’s suppliers in connection with unpaid outstanding payables of approximately RMB 365,200 (approximately $51,437). The total amount of cash in the two accounts subject to the attachment was RMB 570,902 (approximately $80,409). No lawsuit was filed by the supplier and the dispute has been resolved and attachment removed.

Legal Proceedings related to Boqi Zhengji

Boqi Zhengji was subject to the following lawsuits and/or enforcement actions, which were disposed of when the Company sold Boqi Zhengji in December 2020. The Company is no longer responsible for any of these lawsuits or enforcement actions.

On May 17, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payables of RMB 482,771.87. On June 19, 2019, the parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 482,771.87 in total. The same supplier filed another lawsuit against Boqi Zhengji for unpaid outstanding payable of RMB 322,771 on March 17, 2020. The parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 322,771 in total.

On June 26, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payable of RMB 184,490.77. On Sep.12, 2019, the parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 184,490.77 in total. Boqi Zhengji failed to pay the settlement amount.

On July 8, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payables of RMB 64,535. On August 1, 2019, the parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 64,535.00 in total. Boqi Zhengji failed to pay the settlement amount.

On July 10, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payables of RMB 122,360.20. On August 9, 2019, the parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 101,253.40 in total. Boqi Zhengji failed to pay the settlement amount.

On July 18, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payables of RMB 288,440.00. On September 4, 2019, the parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 288,440.00 in total. Boqi Zhengji failed to pay the settlement amount.

On August 25, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payables of RMB 137,449.90. On October 23, 2019, the parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 137,449.90 in total. Boqi Zhengji failed to pay the settlement amount.

On August 25, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payables of RMB 230,281.55. On October 2, 2019, Shenyang Heping District People’s Court ruled that Boqi Zhengji had to pay the outstanding balance RMB 230,281.55 to the supplier within 10 days. Boqi Zhengji failed to pay the settlement amount.

On September 10, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payables of RMB 395,378.90. On October 18, 2019, the parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 395,378.90 plus interest. Boqi Zhengji failed to pay the settlement amount.

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23. SEGMENTS

General Information of Reportable Segments:

The Company operates in four reportable segments: retail pharmacy, wholesale medical devices, wholesale pharmaceuticals and medical services. The retail pharmacy segment sells prescription and OTC medicines, traditional Chinese medicines (“TCM”), healthcare supplies, and sundry items to retail customers through its directly-owned pharmacies and authorized retail stores. The wholesale pharmaceuticals segment includes supplying prescription and OTC medicines, TCM, healthcare supplies and sundry items to clinics, third party pharmacies, hospitals and other drug vendors. The medical services segment includes the hospitals acquired in February 2021.

To date, there were no inter-segment revenues between our retail pharmacy and wholesale pharmaceuticals segments. The wholesale medical devices segment distributes medical devices, including medical consumables to private clinics, hospitals, third party pharmacies and other medical devices dealers. Disclosure should relate to all segments

The segments’ accounting policies are the same as those described in the summary of significant accounting policies. The Company’s chief operating decision maker, who is the CEO of the Company, evaluates performance of each of the segments based on profit or loss from continuing operations net of income tax.

The Company’s reportable business segments are strategic business units that offer different products. Each segment is managed independently because they require different operations and markets to distinct classes of customers.

Information about Reported Segment Profit or Loss and Segment Assets

BIMI, as the holding company, incurred a significant amount of general operating expenses, such as financing costs, that the Company’s chief operating decision maker did not allocate to segments to evaluate the segments performance and allocate recourses of the Company. In addition, except for depreciation and amortization of long-lived assets, the Company does not allocate the change in fair value of derivative liabilities and the amortization of discount of convertible notes to reporting segments in its reported profit or loss. The following amounts were used by the chief operating decision maker.

For three months ended March 31, 2021	Retail pharmacy			Medical device wholesale			Drugs wholesale		Medical services			Others			Total
Revenues from external customers	$	120,113		$	64,439		$	1,264,868	$	704,487		$	14,097		$	2,168,004
Cost of revenues	$	99,495		$	30,462		$	806,856	$	638,807		$	123		$	1,575,743
Depreciation, depletion, and amortization expense	$	5,138		$	6,873		$	680	$	17,443		$	5,824		$	35,958
Profit (loss)	$	(156,065	)	$	(102,831	)	$	213,077	$	(272,333	)	$	(2,972,475	)	$	(3,290,627	)
Total assets	$	412,494		$	5,516,800		$	14,690,504	$	21,079,758		$	8,046,969		$	49,746,525

Reconciliations of Reportable Segment Revenues, Profit or Loss, and Assets, to the Consolidated Totals as of March 31, 2021 and for the Three Months ended March 31, 2021.

>>Revenues
Total revenues from reportable segments	$	2,153,907
Other revenues		14,097
Elimination of intersegments revenues		-
Total consolidated revenues	$	2,168,004
>> Profit or loss
Total loss from reportable segments	$	(325,367	)
Elimination of intersegments profit or loss		-
Unallocated amount:
Amortization of discount of convertible notes		(1,386,586	)
Other corporation expense		(1,578,674	)
Total net loss	$	(3,290,627	)
>>Assets
Total assets from reportable segments	$	44,115,292
Elimination of intersegments receivables		(2,415,736	)
Unallocated amount:
Other unallocated assets -- Xinrongxin		3,055,027
Other unallocated assets – Liaoning Boyi		274,871
Other unallocated assets – Dalian Boyi		5,307
Other unallocated assets – Chongqing Bimai		2,344,579
Other unallocated assets -- BIMI		2,367,185
Total consolidated assets	$	49,746,525

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24. ENTITY-WIDE INFORMATION AND CONCENTRATIONS OF RISK

Entity-Wide Information

(a) Revenues from each types of products

For the three months ended March 31, 2021 and 2020, respectively, the Company reported revenues for each type of products and services as follows:

	For the three months ended March 31,
	2021		2020
Medical devices	$	64,439	$	248,027
Medical services		704,487		-
Medicines*		1,399,078		166,557
Total	$	2,168,004	$	414,584

* including pharmacy sales.

(b) Geographic areas information

For the three months ended March 31, 2021 and 2020, respectively, all the Company’s revenues were generated in the PRC. There were no long-lived assets located outside of the PRC as of March 31, 2021 and 2020.

(c) Major customers

For the three months ended March 31, 2021, no customer accounted for more than 10% of the Company’s revenues:

(d) Major vendors

For the three months ended March 31, 2021, four vendors accounted for more than 10% of the Company’s purchases and its outstanding balances as at balance sheet dates:

		For the three months ended					As of
		March 31, 2021					March 31,  2021
Vendors	Segment	Purchases		Percentage  of total purchases			Accounts payable
Vendor A	Medical services		244,762		19.17	%		244,762
Vendor B	Medical services		152,954		11.98	%		152,954
Vendor C	Wholesale pharmaceuticals		179,928		14.09	%		-
Vendor D	Wholesale pharmaceuticals	$	176,912		13.86	%	$	-
		$	754,556		59.10	%	$	397,716

Concentrations of Risk

The Company is exposed to the following concentrations of risk:

(a) Credit risk

Financial instruments that are potentially subject to credit risk consist principally of trade receivables. The Company believes the concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require prepayments or deposits from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

(b) Interest rate risk

The Company’s interest-rate risk arises from convertible promissory notes, short-term and long-term loans. The Company manages interest rate risk by varying the issuance and maturity dates, fixing interest rate of debt, limiting the amount of debts, and continually monitoring the effects of market changes in interest rates. As of March 31, 2021 and December 31, 2020, respectively, the Notes, short-term and long-term loans were at fixed rates.

(c) Exchange rate risk

Substantially all of the Company’s revenues and a majority of its costs are denominated in RMB and a significant portion of its assets and liabilities are denominated in RMB. As a result, the Company’s results of operations may be affected by fluctuations in the exchange rate between US$ and RMB. If the RMB depreciates against the US$, the value of RMB revenues and assets as expressed in US$ financial statements will decline. The Company does not hold any derivative or other financial instruments that expose to substantial market risk.

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(d) Economic and political risks

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operation may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy. The outbreak of COVID-19 pandemic has expanded all over the world since the beginning of 2020, which has greatly slowed the growth of the global economy, including the PRC, and this effect may continue until the pandemic is controlled, or a vaccine or cure is developed. The slowdown of the growth of the PRC’s economy has adversely effected our current business and future success will be adversely affected if we are unable to capitalize on the opportunities arising from the increasing demand for medicine and medical devices in the markets in which we operate.

The Company’s operations in the PRC are subject to special considerations. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.

(e) Enforcement risks

The PRC People’s Supreme Court adopted rules in 2010 which restrict parties who are subject to effective court enforcement orders for monetary judgements from extravagant spending until the monetary judgments have been satisfied. According to those rules, if a company becomes subject to a court enforcement order due to failure to satisfy a monetary judgement, the company’s name will appear on a defaulters’ list published by the Chinese courts and the company together with its legal representative and responsible person will be prohibited from using the company property for extravagant spending such as buying real property, vacationing and paying for children’s private school education, until, among other conditions, the monetary judgment has been satisfied. Boqi Zhengji and Nengfa Energy are currently on the defaulters’ list due to their failure to pay off several monetary judgments.

25. SUBSEQUENT EVENTS

On April 9, 2021, the Company entered into a stock purchase agreement (the “Hospital SPA”) to acquire three private hospitals in the People’s Republic of China, Wuzhou Qiangsheng Hospital, Suzhou Eurasia Hospital and Yunan Yuxi Minkang Hospital (collectively, the “Hospitals”). Pursuant to the Hospital SPA, the Company agreed to purchase all the issued and outstanding equity interests in the Hospitals in consideration of RMB 162,000,000 (approximately $24,923,077). The closing consideration was RMB 20,000,000 (approximately $3,076,923) in cash and 4,000,000 shares of Common Stock of the Company, the value of which was agreed by the parties to be RMB 78,000,000 or $12,000,000. The balance of the purchase price in the amount of RMB 64,000,000 (approximately $9,846,153) is subject to post-closing adjustments based on the performance of the Hospitals in 2021 and 2022. The transaction closed effective May 6, 2021 when 100% of equity interests in the Hospitals were transferred to the Company and the closing consideration was paid.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those financial statements appearing elsewhere in this Report.

Certain statements in this Report constitute forward-looking statements. These forward-looking statements include statements, which involve risks and uncertainties, regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategy, (c) anticipated trends in our industry, (d) our future financing plans, and (e) our anticipated needs for, and use of, working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plan,” “potential,” “project,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” or the negative of these words or other variations on these words or comparable terminology. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements.

The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.

As used herein the terms “we”, “us”, “our,” “BIMI” and the “Company” mean, BOQI International Medical, Inc., a Delaware corporation and its subsidiaries.

OVERVIEW

From 2007 until October 2019, we, through the NF Group, were engaged in the energy efficiency enhancement business. With the decline in the constructions of power generation plants and municipal water, gas, heat and energy pipelines in China due to a policy change by the PRC government, the demand for our products and services declined markedly. As a result, our energy efficiency enhancement business, incurred operating losses in each of the last seven years, especially in 2018, when the PRC government adopted a series of policies to favor more environmentally friendly projects and products. Our net loss from the operation of the energy efficiency enhancement business was $16.79 million in 2018 and $2.18 million in 2019. We explored many different alternatives in an effort to revive this business, including attempts to expand into international markets, before we determined this business was not sustainable for us. In late 2019, we committed to a plan to dispose of the NF Group and on March 31, 2020, we entered into an agreement for the sale of the NF Group. The sale closed on June 23, 2020 when the $10 million sales price was paid to us in full.

Our current operations are focused on the healthcare industry in the PRC. On October 14, 2019, we acquired Boqi Zhengji, an operator of a pharmacy chain business in the PRC. This was the first step of our shift of focus from the energy sector to the healthcare business. Boqi Zhengji, however, suffered significant setbacks during 2020. The COVID-19 pandemic caused the pharmacy stores to record almost no sales for several months due to the national shutdown order and other government orders specifically targeting OTC drugs. To avoid exposing our other business to further risks and potential joint liabilities, we decided to divest the pharmacy chain. On December 11, 2020 we entered into an agreement to sell Boqi Zhengji for $1,700,000 in cash. On December 18, 2020, we received the full consideration from the buyer and the control of the Boqi Zhengji business was transferred. Due to the Chinese government’s alternative working schedule and other delays caused by COVID-19, the government record reflecting the transfer of ownership was not updated until February 2, 2021.

The disposal of NF Group and Boqi Zhengji and the actions taken to fulfill the plans resulted in our classifying the businesses of NF Group and Boqi Zhengji as discontinued operations according to ASC 205-20 Presentation of Financial Statements – Discontinued Operation. As a result, all of the assets and liabilities of the NF Group were reclassified as assets and liabilities of a discontinued operation in the statement of position as of December 31, 2020 and 2019 and the results of the operation are presented under the line item net loss from discontinued operations for the years ended December 31, 2020 and 2019. All of the assets and liabilities of Boqi Zhengji were reclassified as assets and liabilities of a discontinued operation in the statement of position as of December 31, 2020 and the results of the operation are presented under the line item net loss from discontinued operations for the year ended December 31, 2020., .

On March 18, 2020, we completed the Guanzan acquisition. The rationale for the acquisition was for us to further expand our healthcare operation by acquiring a medical devices and pharmaceuticals distribution business. We believed that Guanzan has strong sales capabilities and procurement resources in the local area of Chongqing, the largest city in Southwest region of the PRC. The acquisition was is in line with our expansion strategy, which focuses on deeper penetration of the healthcare market in the Southwest region of China and gaining a wider footprint in the PRC.

On February 2, 2021, we acquired Guoyitang, the owner and operator of a private general hospital in Chongqing with 50 hospital beds and 98 employees, including 14 doctors, 28 nurses, 43 other medical staff and 13 non-medical staff. The Guoyitang acquisition will enable us to serve more individuals with medical needs and is the first step in our efforts to building a hospital chain specializing in obstetrics and gynecology.

On February 8, 2021, we acquired Zhongshan, a private hospital in the southeast region of China with 160 hospital beds (of which 110 beds are currently in use) and 95 employees, including 20 doctors, 48 nurses, 10 other medical staff and 17 non-medical staff. Zhongshan is a general hospital known for its complex minimally invasive surgeries and equipped with high-end diagnostics equipment and surgical instruments for gynecology and obstetrics use. The Zhongshan acquisition marks the second step in our effort to establish a nationwide hospital chain specializing in obstetrics and gynecology. 

On April 9, 2021, we acquired three private hospitals operating in China, Wuzhou Qiangsheng Hospital (“Qiangsheng”) in the southeast region of the PRC, Suzhou Eurasia Hospital (“Eurasia”) in the central region of the PRC and Yunan Yuxi Minkang Hospital (“Minkang”) in the southwest region of the PRC. Qiangsheng, Eurasia and Minkang are owned by the same owners. Qiangsheng has 20 hospital beds and 68 employees, including 10 doctors, 26 nurses, 14 other medical staff and 18 non-medical staff, and is a general hospital locally known for its OB/GYN and Chinese traditional medicine specialties. Eurasia has 30 hospital beds and 42 employees, including 11 doctors, 12 nurses, 4 other medical staff and 15 non-medical staff. Minkang has 120 hospital beds and 118 employees, including 28 doctors, 55 nurses, 12 other medical staff and 23 non-medical staff, and is a general hospital locally known for its OB/GYN and Chinese traditional medicine specialties.

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BUSINESS SEGMENTS

The Company currently operates in four reportable segments: retail pharmacy, wholesale pharmaceuticals, wholesale medical devices and medical services. The retail pharmacy segment sells prescription and OTC medicines, TCM, healthcare supplies and sundry items to retail customers through its directly-owned pharmacies and authorized retail stores. The wholesale pharmaceuticals segment includes supplying prescription and OTC medicines, TCM, healthcare supplies and sundry items to clinics, third party pharmacies, hospitals and other drug wholesalers. There were no inter-segment revenues between our retail pharmacy and wholesale pharmaceuticals segments. The wholesale medical device segment distributes medical devices, including medical consumables to private clinics, hospitals, third party pharmacies and other medical device dealers. Medical services includes private comprehensive hospitals operating in China.

The segments’ accounting policies are the same as those described in the summary of significant accounting policies. The Company’s chief operating decision maker (“CODM”), who is the CEO of the Company, evaluates performance of each segment based on profit or loss from continuing operations net of income tax.

The Company’s reportable business segments are strategic business units that offer different products and services. Each segment is managed independently because they require different operations and markets to distinct classes of customers.

GOING CONCERN

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

As reflected in the accompanying unaudited condensed consolidated financial statements, the Company incurred net losses of $3,290,627 and $2,202,191 for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, the Company had an accumulated deficit of $16.2 million and negative working capital of $0.18 million. In addition, the Company continues to generate operating losses and has limited cash flow from its continuing operations. Primarily as a result of it operating loss in the quarter, the Company’s cash position declined by $1.7 million in the three months ended ended March 31, 2021. Management believes these factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months.

The continuation of the Company as a going concern through the next twelve months is dependent upon (1) the continued financial support from its stockholders or external financing, and (2) further implement management’s business plan to extend its operations and generate sufficient revenues and cash flow to meet its obligations. On May 18, 2020, the Company entered into a securities purchase agreement (the “May SPA”) with two institutional investors (each an “Institutional Investor” and collectively the “Institutional Investors”) to sell a new series of senior secured convertible notes (the “Convertible Notes”) of the Company in a private placement (the “Private Placement”), in the aggregate principal amount of $6,550,000 having an aggregate original issue discount of 19.85%, and ranking senior to all outstanding and future indebtedness of the Company. On June 2, 2020, two Convertible Notes in an aggregate original principal amount of $4,450,000 were issued to the Institutional Investors. On February 24, 2021 additional Convertible Notes in the aggregate original principal amount of $5,400,000 were issued to the same Institutional Investors. See “LIQUIDITY AND CAPITAL RESOURCES.” While the Company believes in the viability of its strategy to increase sales volume and in its ability to raise additional funds, there can be no assurance that the Company will succeed in either respect.

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.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue, receivable, inventory, and accrued expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Changes in estimates are recorded in the period in which they become known.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

● Accounts receivable and allowance for doubtful accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest, which are due within contractual payment terms, generally 30 to 90 days from delivery. Credit is extended based on evaluation of a customer’s financial condition, the customer credit-worthiness and their payment history. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. At the end of each period, the Company specifically evaluates individual customer’s financial condition, credit history, and the current economic conditions to monitor the progress of the collection of accounts receivables. For the receivables that are past due or not being paid according to payment terms, the appropriate actions are taken to exhaust all means of collection, including seeking legal resolution in a court of law. 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 does not have any off-balance-sheet credit exposure related to its customers. As of March 31, 2021 and December 31, 2020, the allowance for doubtful accounts was $1,187,543 and $1,236,830, respectively.

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● Advances to suppliers

Advances to suppliers consist of prepayments to the Company’s vendors, such as pharmaceutical manufacturers and medicine suppliers. The Company typically prepays for the purchase of our merchandise, especially for those salable, scarce, personalized medicine or medical devices. The Company typically receive products from vendors within three to nine months after making prepayments. The Company continuously monitor delivery from, and payments to, the vendors while maintaining a provision for estimated credit losses based upon historical experience and any specific supplier issues, such as discontinuing of inventory supply, that have been identified. If the Company has difficulty receiving products from a vendor, the Company would cease purchasing products from such vendor, request return of our prepayment promptly, and if necessary, take legal action. The Company has not taken such type of legal action during the reporting periods. If none of these steps are successful, management will then determine whether the prepayments should be reserved or written off. As of March 31, 2021 and December 31, 2020, the allowance for doubtful accounts was $7,427 and $7,463, respectively.

● Inventories

Inventories are stated at the lower of cost or market value. Cost is determined using the weighted average method, and market value is the middle (the second highest) value among an inventory item’s replacement cost, market celling and market floor. The Company carries out physical inventory counts on a monthly basis at each store and warehouse location. The Company reviews historical sales activity quarterly to determine excess, slow moving items and potentially obsolete items. The Company provides inventory reserve based on the excess quantities on hand equal to the difference, if any, between the cost of the inventory and its estimated market value, or obsolescence of inventories determined principally by customer demand. As of March 31, 2021 and December 31, 2020, the Company recorded an allowance for obsolete inventories, which mainly consists of expired medicine, of $31,660 and $9,825, respectively.

● Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:

	Expected useful lives	Residual value
Building	20 years		5	%
Office equipment	3 years		5	%
Electronic equipment	3 years		5	%
Furniture	5 years		5	%
Medical equipment	10 years		5	%
Vehicles	4 years		5	%

Expenditures for repairs and maintenance are expensed as incurred. When assets have been retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

● Intangible assets

Intangible assets consist primarily of management system software. Intangible assets are stated at cost less accumulated amortization and impairment, if any. Intangible assets are amortized using the straight line method with the following estimated useful lives:

	Expected useful lives
Software	10 years

● Goodwill

Goodwill represents the excess of the purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed of an acquired business. In accordance with ASC 350, Goodwill and Other Intangible Assets, recorded goodwill amounts are not amortized, but rather are tested for impairment annually or more frequently if there are indicators of impairment present.

Goodwill is tested for impairment at the reporting unit level on at least an annual basis or when an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. These events or circumstances include a significant change in stock prices, business environment, legal factors, financial performances, competition, or events affecting the reporting unit. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. The estimation of fair value of a reporting unit using a discounted cash flow methodology also requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the Company’s business, estimation of the useful life over which cash flows will occur, and determination of the Company’s weighted average cost of capital. The estimates used to calculate the fair value of a reporting unit change from year to year based on operating results and market conditions. Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment for the reporting unit.

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The Company identified reporting units at the lowest level within the entity at which goodwill is monitored for internal management purposes. Management evaluated the recoverability of goodwill by performing a qualitative assessment before using a two-step impairment test approach at the reporting unit level. If the Company reorganizes its reporting structure in a manner that changes the composition of one or more of its reporting units, goodwill is reassigned based on the relative fair value of each of the affected reporting units.

● Revenue recognition

We adopted Accounting Standard Codification (“ASC”) Topic 606, Revenues from Contract with Customers (“ASC 606”) for all periods presented. Under ASC 606, revenue is recognized when control of the promised goods and services is transferred to the Company’s customers, in an amount that reflects the consideration that we expect to be entitled to in exchange for those goods and services, net of value-added tax. We determine revenue recognition through the following steps:

● Identify the contract with a customer;

● Identify the performance obligations in the contract;

● Determine the transaction price;

● Allocate the transaction price to the performance obligations in the contract; and

● Recognize revenue when (or as) the entity satisfies a performance obligation.

The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied by the control of the promised goods and services is transferred to the customers, which at a point in time or over time as appropriate.

Our revenues are net of value added tax (“VAT”) collected on behalf of PRC tax authorities in respect to the sales of merchandise. VAT collected from customers, net of VAT paid for purchases, is recorded as a liability in the accompanying consolidated balance sheets until it is paid to the relevant PRC tax authorities

● Convertible promissory notes

We record debt net of debt discount for beneficial conversion features and warrants, on a relative fair value basis. Beneficial conversion features are recorded pursuant to the Beneficial Conversion and Debt Topics of the FASB Accounting Standards Codification. The amounts allocated to warrants and beneficial conversion rights are recorded as debt discount and as additional paid-in-capital. Debt discount is amortized to interest expense over the life of the debt.

● Derivative instruments

We enter into financing arrangements that consist of freestanding derivative instruments or are hybrid instruments that contain embedded derivative features. The Company accounts for these arrangements in accordance with ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”) as well as related interpretation of this standard. In accordance with this standard, derivative instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair values with gains or losses recognized in earnings. Embedded derivatives that are not clearly and closely related to the host contract are bifurcated and are recognized at fair value with changes in fair value recognized as either a gain or loss in earnings. The Company determines the fair value of derivative instruments and hybrid instruments based on available market data using appropriate valuation models, giving consideration to all of the rights and obligations of each instrument.

We estimate fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered to be consistent with the objective measuring fair values. In selecting the appropriate technique, we consider, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative instruments, such as free-standing warrants, we generally use the Black-Scholes model, adjusted for the effect of dilution, because it embodies all of the requisite assumptions (including trading volatility, estimated terms, dilution and risk free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as Black-Scholes model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since derivative financial instruments are initially and subsequently carried at fair values, our income (expense) going forward will reflect the volatility in these estimate and assumption changes. Under the terms of the new accounting standard, increases in the trading price of the Company’s common stock and increases in fair value during a given financial quarter result in the application of non-cash derivative expense. Conversely, decreases in the trading price of the company’s common stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income.

● Foreign currencies translation

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 statement of operations. The reporting currency of our company is the United States Dollar (“US$”). Our subsidiaries in the PRC maintain their books and records in their local currency, the Renminbi Yuan (“RMB”), which is the functional currency as it is the primary currency of the economic environment in which these entities operate.

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In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not the 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 subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statement of stockholders’ equity.

● Segment reporting

ASC Topic 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about the type of products and services, geographical areas, business strategies and major customers in business components. For the three months ended March 31, 2021 the Company operated in four reportable segments: retail pharmacy, wholesale medical devices, wholesale pharmaceuticals and medical services in the PRC. For the three months ended March 31,2020, the Company operated in three reportable segments: retail pharmacy, wholesale medical devices and wholesale pharmaceuticals.

● Recent accounting pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ( “ASU 2020-06”), which focuses on amending the legacy guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. ASU 2020-06 simplifies an issuer’s accounting for convertible instruments by reducing the number of accounting models that require separate accounting for embedded conversion features. ASU 2020-06 also simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification. Further, ASU 2020-06 enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share (EPS) guidance, i.e., aligning the diluted EPS calculation for convertible instruments by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in the diluted EPS calculation when an instrument may be settled in cash or shares, adding information about events or conditions that occur during the reporting period that cause conversion contingencies to be met or conversion terms to be significantly changed. This update will be effective for the Company’s fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Entities can elect to adopt the new guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company is currently in the process of evaluating the impact of adopting ASU 2020-06 on its consolidated financial statements and related disclosure.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

Recent Developments

An outbreak of infectious respiratory illness caused by a novel coronavirus known as COVID-19 spread globally in 2020. This outbreak resulted in travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions, and lower consumer demand, layoffs, defaults and other significant economic impacts, as well as general concern and uncertainty.

Since the outbreak of the pandemic, our operations have been materially impacted. At the beginning of February 2020, the Chinese government issued a quarantine order, which lasted for more than two months in many parts of the country, where everyone had to stay at home. During February and March, all of our administrative functions had to be performed remotely. In July 2020, there was a second wave of COVID-19 and a lockdown in Dalian, which lasted for several weeks. As a result, sales in our pharmacy stores in Dalian continued to be severely impacted.

Because of the pandemic, we also suffered a significant reduction in sales during the first quarter in 2020. As a result of the Chinese government’s lockdown order, our customer traffic plummeted. Certain of our popular and high profit margin products could not be sold due to the governmental restrictive orders, which also resulted in the expiration of a large quantity of our inventory of medicines that are otherwise in high demand in the winter season.

During the epidemic outbreak of 2020, our pharmacies experienced significant difficulty in obtaining products including prescription drugs, OTC drugs, TCM, nutritional supplements, sundry products and medical consumables from our suppliers for resale, pending the settlement of several large court judgements against Boqi Zhengji in favor of such suppliers. As a result, our retail pharmacy business had minimal sales. On December 11, 2020, we entered into a Termination and Release Agreement (the “Release Agreement”) with four individuals (the “Boqi Zhengji Sellers”) who sold Boqi Zhengji to the Company. The parties to the Release Agreement confirmed that Boqi Zhengji’s performance targets as stipulated in the Stock Purchase Agreement dated April 11, 2019 (as amended on February 6, 2020, the “Boqi SPA”) would not be met, and therefore the Boqi Zhengji Sellers would not be eligible to receive the Cash Consideration or any other additional payment under the Boqi SPA.

Since the acquisition of Guanzan Group, our wholesale distribution of medical devices and pharmaceuticals made a significant contribution to our company. We started to focus on deeper penetration of the healthcare market in the Southwest region of China and gained a wider footprint in the PRC. We decided to re-focus retail pharmacies to Chongqing. By the end of 2020, we had opened five (5) retail pharmacies branded “Lijiantang”. We intend to open additional pharmacy stores to expand the geographic coverage of our pharmacy business.

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Guoyitang and Zhongshan were acquired during February 2021 as part our plan to establish a more comprehensive healthcare platform, promote innovative internet healthcare services and to create a regional healthcare partnership. During April 2021, we continued to acquire three private hospitals, Wuzhou Qiangsheng Hospital (“Qiangsheng”) in the southeast region of the PRC, Suzhou Eurasia Hospital (“Eurasia”) in the central region of the PRC and Yunan Yuxi Minkang Hospital (“Minkang”) in the southwest region of the PRC. We believe that the hospital acquisitions will also accelerate our online-to-offline strategy. We believe that the online-to-offline platform, in combination with enhanced drug delivery and future telemedicine services, will help the hospitals expand the coverage of their services and offer better services to patients. 

We plan to form partnerships with hospitals with regional reputation and emerging medical services facilities, with the goal of making quality medical care more accessible to the wider public, especially in less-developed areas, to provide health management and healthcare services for both urban and rural residents alike in a more inclusive and coherent manner.

RESULTS OF OPERATIONS

Comparison of the three months ended March 31, 2021 and 2020 of consolidated results of operations:

	For the Three Months Ended March 31,									Comparison
	2021			% of Revenues			2020			Amount increase (decrease)			Percentage increase (decrease)
Revenues	$	2,168,004			100	%	$	414,584		$	1,753,420			423	%
Cost of revenues		1,575,743			73	%		332,299			1,243,444			374	%
Gross profit		592,261			27	%		82,285			509,976			620	%
Operating expenses		3,832,650			177	%		1,406,022			2,426,628			173	%
Other expenses, net		(31,490	)		(1	)%		(22,229	)		(9,261	)		42	%
Loss before income tax		(3,271,879	)		(151	)%		(1,345,966	)		(1,925,913	)		143	%
Income tax expense		18,748			1	%		1,268			17,480			1379	%
Net loss from continuing operations		(3,290,627	)		(152	)%		(1,347,234	)		(1,943,393	)		144	%
Loss from operations of discontinued operations		-			0	%		(854,957	)		854,957			(100	)%
Less: non-controlling interest		42,615			2	%		(7,316	)		49,931			(682	)%
Net Loss attributable to BOQI International Medical Inc.	$	(3,333,242	)		(154	)%	$	(2,194,875	)	$	(1,138,367	)		52	%

Revenues

Revenues for the three months ended March 31, 2021 and 2020 were $2,168,004 and $414,584, respectively. The revenues for the three months ended March 31, 2021 were primarily attributable to the revenues from the wholesale sales of generic drugs and medical devices and from medical services provided by hospitals purchased during the first quarter in 2021. Compared with the same period in 2020, revenue increased $1,741,106, mainly due to the increase in sales of wholesale pharmaceuticals of $1,098,311 and medical services of $704,487.

Revenues from retail pharmacy segment for the three months ended March 31, 2021 was $120,133, generated from 5 retail pharmacy stores in Chongqing.

Revenues from wholesale medical devices segment for the three months ended March 31, 2021 and 2020 was $64,439 and $248,027 respectively. The decrease is mainly due to low demand for medical devices during the first quarter which is typical because of the long break during the Chinese New Year.

Revenues from the wholesale pharmaceuticals segment for the three months ended March 31, 2021and 2020 were $1,264,868 and $166,557 respectively. The wholesale pharmaceuticals segment was acquired in March 2020 and therefore the revenues for the three months ended March 31, 2020 were minimal.

Revenues from medical services segment for the three months ended March 31,2021 was $704,487. These revenues reflect the revenues generated by Guoyitang hospital and Zhongshan hospital, which were acquired in February 2021.

Cost of revenues

Cost of revenues for the three months ended March 31, 2021 and 2020 were $1,575,743 and $332,299, respectively. The Company recorded an obsolescence loss of $31,660 with respect to inventories, which was included in the cost of revenues for the three months ended March 31, 2021 compared with an obsolescence loss of $297,011 for the same period in 2020. The decrease of inventory provision is due to the obsolescence of inventory held for sale by the Boqi pharmacies in Dalian, whose stores suffered from the lockdown policy in effect due to the COVID-19 pandemic..

Cost of revenues of our retail pharmacy segment consists primarily of the cost of the pharmaceuticals, medical devices and other products that we sell to customers. For the three months ended March 31, 2021cost of revenues of our retail pharmacy segment were $99,495.

Cost of revenues of our wholesale medical devices segment consists primarily of cost of medical devices, medical consumables and costs related directly to contracts with customers. For the three months ended March 31, 2021 and 2020, the cost of revenues of our wholesale medical devices segment was $30,462 and $199,036. The decrease is mainly due to the decrease in sales.

Cost of revenues of our wholesale pharmaceuticals segment consists primarily of the cost of medicines, medical consumables and costs related directly to contracts with customers. For the three months ended March 31, 2021 and 2020, the cost of revenues of our wholesale pharmaceuticals segment were $806,856 and $133,263, respectively.

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Gross profit loss

For the three months ended March 31, 2021 and 2020, we had a gross margin of 27% and19.8%, respectively. For the three months ended March 31, 2021 and 2020, the gross profit margin of our: (i) retail pharmacy segment were 17.17% in 2021; (ii) wholesale medical devices segment were 52.73% and 19.73%, respectively; (iii) wholesale pharmaceuticals segments were 36.21% and 19.99%, respectively; and (iv) medical services segment was 9.32% for the three months ended March 31, 2021.

Operating expenses

Operating expenses consist mainly of auditing and legal service fees, other professional service fees, directors’ and officers’ compensation expenses, meeting and promotional expenses, changes in fair value of derivative liabilities, depreciation and amortization of items not associated with production, office rental fee and utilities.

Operating expenses from continuing operations were $3,832,650 for the three months ended March 31, 2021 as compared to $1,406,022 for the same period in 2020, an increase of $2,426,628 or 173%. The increase is primarily attributable to the inclusion of the operating expenses of the medical services segment of appropriately $319,169 and the Guanzan Group of appropriately $509,433, the amortization of the discount relating to the convertible notes issued in 2021 of $1,607,105, and general operating expenses which primarily include legal expenses of $275,000 and audit fee $148,600 and other compliance expense.

Operating expenses of the retail pharmacy segment for the three months ended March 31, 2021 were $177,966.

Operating expenses of the wholesale medical devices segment for the three months ended March 31, 2021and 2020 were $120,583 and $12,750, respectively.

Operating expenses of the wholesale pharmaceuticals segment for the three months ended March 31, 2021 and 2020 were $210,894 and $34,761, respectively.

Operating expenses of medical services segment for the three months ended March 31,2021 was $319,169.

For the three months ended March 31, 2020 operating expenses of $1,358,511 were allocated to the parent company, which primarily included general operating expenses of $1,008,600 incurred by the parent company and Xinrongxin, as holding companies

Other expenses

For the three months ended March 31, 2021 and 2020, we reported other loss of $31,490 and $22,229. Other expenses mainly consisted of interest expenserelating to the bank loans of the Guanzan Group, Guoyitang and Zhongshan.

Net loss from continuing operation

Net loss from continuing operations were $3,290,627 and $1,347,234 for the three months ended March 31, 2021 and 2020, respectively. The increase was primarily due to the increase in operating expenses and the other expenses described above.

Loss from operations of discontinued operations

The operations of the NF Group and Boqi Group are classified as discontinued operations. Loss from the NF Group’s operation was $374,486 and from Boqi Group was $480,481 for the three months ended March 31, 2020.

Net loss

As a result of the foregoing our net loss increased by $1,088,436 to $3,290,627 three months ended March 31, 2021 from$2,202,191 for the three months ended March 31, 2020.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2021, we had cash of $2,835,424 and negative working capital of $0.18 million as compared to cash of $135,309 and working capital of $9,619,274 at December 31, 2020.

Beginning on September 27, 2019, we sold $1,534,250 of convertible notes to various investors that matured during the period beginning September 27, 2020 and ending on March 13, 2021. Each of these notes was issued for a term of 12 months, carrying 6% annual interest rate and convertible into the Company’s common stock. According to the applicable agreements, each holder of such notes had the right during the period beginning one hundred eighty (180) calendar days following the date of their issuance and ending on the maturity date, to convert all or any part of the outstanding and unpaid principal into shares of common stock. All of the above notes were converted into shares of our common stock during the year ended December 31, 2020. 

On February 1, 2020, we entered into a stock purchase agreement to acquire Guanzan. Pursuant to the agreement, we agreed to purchase all the issued and outstanding equity interests in Guanzan and its subsidiary, Shude, for RMB 100,000,000 (approximately $14,285,714) to be paid by the issuance of 950,000 shares of our common stock and the cash payment of RMB 80,000,000 (approximately $11,428,571.) On March 18, 2020, we closed the Guanzan acquisition by delivering 950,000 shares of our common stock. In addition, we assumed bank indebtedness of $1,135,884 in connection with the acquisition.

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On May 18, 2020, we entered into a securities purchase agreement (the “May SPA”) with two institutional investors (the “Institutional Investors”) to sell convertible notes having a face amount of $6,550,000 at an aggregate original issue discount of 19.85% (the “2020 Notes”) and ranking senior to all outstanding and future indebtedness of the Company. The Convertible Notes do not bear interest except upon the occurrence of an event of default.

Pursuant to the May SPA, two 2020 Notes each in the face amount of $2,225,000 were issued to the Institutional Investors in consideration of the payment of $1,750,000 in cash for each 2020 Note. The 2020 Notes mature on the eighteen-month anniversary of the issuance date, are payable in installments and are convertible at the election of the investors at the conversion price of $2.59 per share, subject to adjustment in the event of default. Each investor also received a warrant to purchase 650,000 shares of our company’s common stock at an initial exercise price of $2.845 per share. The placement agent for the private placement received a warrant to purchase up to 171,845 shares of our common stock at an initial exercise price of $2.845 per share, subject to increase based on the number of shares of common stock issued pursuant to the 2020 Notes. Pursuant to the May SPA, additional convertible notes in an aggregate original face amount not to exceed $2,100,000 (the “Additional Notes”) could also be issued to the Institutional Investors under certain circumstances. On February 24, 2021, we entered into an amendment to the May SPA with the Institutional Investors to increase the amount of the Additional Notes by $3,300,000 to $5,400,000. On February 26, 2021, Additional Notes in an aggregate original principal amount of $5,400,000 were issued to the Institutional Investors, together with the issuance of warrants to acquire an aggregate of 760,000 shares of common stock at an initial exercise price of $2.845 per share. The placement agent for the private placement received a warrant to purchase up to 173,745 shares of our common stock at an initial exercise price of $2.845 per share, subject to increase based on the number of shares of common stock issued pursuant to the Additional Notes.

In connection with the May SPA, the Institutional Investors and the Chairman of the Board our company, Mr. Yongquan Bi, entered into a Shareholder Pledge Agreement, pursuant to which Mr. Bi agreed to pledge 1.5 million shares of common stock beneficially owned by him, in favor of the Institutional Investors to secure our performance of our obligations in the above two private placement transactions.

On June 23, 2020, we completed the disposition of the NF Group, at which time we received $10 million from the buyer,

On December 11, 2020, we entered into the Release Agreement extinguishing our obligation to pay any additional consideration in connection with the purchase of Boqi Zhenji. We subsequently sold all the issued and outstanding shares of the capital stock of Boqi Zhengji in consideration of $1,700,000 on December 11, 2020.

As a result of the receipt of the proceeds of the sales of the NF Group and of Boqi Zhenji and the proceeds from the issuance of the Additional Notes, management believes we have sufficient financial resources to fund our operations for at least the next twelve months.

The following is a summary of cash provided by or used in each of the indicated types of activities during the years ended December 31, 2021 and 2020, respectively.

	For the three months ended March 31,
	2021			2020
Net cash used in operating activities	$	(1,729,711	)	$	(798,779	)
Net cash provided by investing activities		39,105			95,220
Net cash provided by financing activities		4,392,017			843,336
Exchange rate effect on cash		(1,295	)		(280	)
Net cash inflow	$	2,700,116		$	139,497

Operating Activities

We used $1,729,711 in our continuing operations during the three months ended March 31, 2021, as compared to $869,752 used in continuing operating activities for the three months ended March 31, 2020.

Net loss from our operation (before non-cash adjustments) was $3.56 million for the three months ended March 31, 2021, an increase of $1.74 million, compared to the net loss of $1.83 million incurred in the same period in 2020. The increase of net loss is attributable to: (1) the increase in fees paid for our external professional services as a result of increased auditing and legal services of approximately $0.585 million; and (2) increase of amortization of discount on the convertible notes of $1.31 million;

We used $70,973 in our discontinuing operations during the three months ended March 31,2020.

Investing Activities

Cash provided by investing activities was $39,105 for the three months ended March 31, 2021, as compared to $95,220 for the same period ended March 31, 2020. Cash provided by investing activities for the three months ended March 31, 2021 was from the acquisition of the Guoyitang and Zhongshan offset the purchase of $72,505 of fixed assets. Cash provided by investing activities for the three months ended March 31, 2020 was from the acquisition of the Guanzan Group.

Financing Activities

Cash provided by our financing activities was $4,392,017 for the three months ended March 31, 2021, as compared to $843,336 provided by financing activities for the three months ended March 31, 2020, including $47,487 cash outflow from our discontinued operation. For the three months ended March 31, 2021, we received $4,065,500 by the issuance of convertible promissory notes, $162,950 from bank loans and $164,067 from related party loans. During the three months ended March 31, 2020, we received $593,224 from convertible promissory notes and $164,067 from related party loans.

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Contractual Obligations

As of March 31, 2021, we had a $6,100,723 contractual obligation, which is the maximum amount of the cash consideration for the Guoyitang Acquisition, which is subject to post-closing adjustments pursuant to the Guoyitang SPA.

As of March 31, 2021, we had a $6,100,723 contractual obligation, which is the maximum amount of the cash consideration for the Zhongshan Acquisition, which is subject to post-closing adjustments pursuant to the Zhongshan SPA.

As of March 31, 2021, we had a $3,065,181 contractual obligation, which is the maximum amount of the cash consideration for the Guanzan Group, which is subject to post-closing adjustments pursuant to the Guanzan SPA.

Inflation and Seasonality

We do not believe that our operating results have been materially affected by inflation during the preceding two years. There can be no assurance, however, that our operating results will not be affected by inflation in the future. At present we are able to increase our product sale prices due to the rising prices charged by our suppliers. At present we are able to increase our product sale prices to offset the rising prices charged by our suppliers.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any material off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

Item 4. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), under the supervision of and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer. Based on that evaluation and the identification of a material weakness in internal control over financial reporting described below, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures, as of March 31, 2020, and during the period prior were not effective.

Internal control over financial reporting is defined in Rule 13a-15(f) under the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive officer and principal financial officer and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

● Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with management authorization; and

● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Due to the Company’s limited resources, the Company does not have accounting personnel with extensive experience in maintaining books and records and preparing financial statements in accordance with US GAAP which could lead to untimely identification and resolution of accounting matters inherent in the Company’s financial transactions in accordance with US GAAP. .

Management’s Remediation plan

While management believes that the financial statements we previously filed in our SEC reports have been properly recorded and disclosed in accordance with US GAAP, based on the control deficiencies identified above, management is currently seeking to engage an outside consultant with considerable public company reporting experience and breadth of knowledge of US GAAP to provide additional training to its accounting personnel in connection with the preparation and review of our financial statements. 

Changes in Internal Control over Financial Reporting

Subject to the foregoing disclosure, there were no changes in our internal control over financial reporting during the three months ended March 31, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II ---- OTHER INFORMATION

Item 1. Legal Proceedings.

On April 1, 2020, the Guizhou Province Xiuwen County People’s Court ordered the attachment of two of Shude’s bank accounts pursuant to a pre-litigation attachment application filed by one of Shude’s suppliers in connection with unpaid outstanding payables of approximately RMB 365,200 (approximately $51,437). The total amount of cash in the two accounts subject to the attachment was RMB 570,902 (approximately $80,409). No lawsuit was filed by the supplier and the dispute has been resolved and attachment removed.

Legal Proceedings related to Boqi Zhengji

Boqi Zhengji was subject to the following lawsuits and/or enforcement actions, which were disposed of when the Company sold Boqi Zhengji in December 2020. The Company is no longer responsible for any of these lawsuits or enforcement actions.

On May 17, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payables of RMB 482,771.87. On June 19, 2019, the parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 482,771.87 in total. The same supplier filed another lawsuit against Boqi Zhengji for unpaid outstanding payable of RMB 322,771 on March 17, 2020. The parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 322,771 in total.

On June 26, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payable of RMB 184,490.77. On Sep.12, 2019, the parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 184,490.77 in total. Boqi Zhengji failed to pay the settlement amount.

On July 8, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payables of RMB 64,535. On August 1, 2019, the parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 64,535.00 in total. Boqi Zhengji failed to pay the settlement amount.

On July 10, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payables of RMB 122,360.20. On August 9, 2019, the parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 101,253.40 in total. Boqi Zhengji failed to pay the settlement amount.

On July 18, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payables of RMB 288,440.00. On September 4, 2019, the parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 288,440.00 in total. Boqi Zhengji failed to pay the settlement amount.

On August 25, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payables of RMB 137,449.90. On October 23, 2019, the parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 137,449.90 in total. Boqi Zhengji failed to pay the settlement amount.

On August 25, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payables of RMB 230,281.55. On October 2, 2019, Shenyang Heping District People’s Court ruled that Boqi Zhengji had to pay the outstanding balance RMB 230,281.55 to the supplier within 10 days. Boqi Zhengji failed to pay the settlement amount.

On September 10, 2019, one of Boqi Zhengji’s suppliers filed a lawsuit against Boqi Zhengji for unpaid outstanding payables of RMB 395,378.90. On October 18, 2019, the parties entered into a court-supervised settlement where Boqi Zhengji agreed to pay the supplier RMB 395,378.90 plus interest. Boqi Zhengji failed to pay the settlement amount.

Item 1A. Risk Factors

As of the date of this filing, there have been no material changes from the risk factors disclosed in Part I, Item 1A (Risk Factors) contained in our Annual Report on Form 10-K for the year ended December 31, 2020. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially affect out operations. The risks, uncertainties and other factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020, including the risks arising from the spread of COVID-19 and the risks associated with our acquisition of five hospitals, may cause our actual results, performances and achievements to be materially different from those expressed or implied by our forward-looking statements. If any of these risks or events occurs, our business, financial condition or results of operations may be adversely affected.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On February 2, 2021, we issued 2,000,000 shares of Common Stock as the Guoyitang Stock Consideration.

On February 2, 2021, we entered into a Consulting Agreement (the “Consulting Agreement”) with Real Miracle Investments Limited (the “Consultant”) for consulting services. On February 5, 2021, the Company issued 250,000 shares of the Company’s common stock to the Consultant in consideration for the Consultant’s services.

On March 26, 2021, we issued 2,000,000 shares of Common Stock as the Zhongshan Stock Consideration.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

The list of Exhibits required by Item 601 of Regulation S-K to be filed as a part of this Form 10-Q are set forth on the Exhibit Index immediately preceding such Exhibits and is incorporated herein by this reference.

Exhibit Number	Description	Incorporated by Reference to
31.1	Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer
31.2	Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial officer
32.1	Section 1350 Certification of principal executive officer
32.2	Section 1350 Certification of principal financial officer
101	XBRL data files of Financial Statements and Notes contained in this Quarterly Report on Form 10-Q.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned.

	BOQI International Medical Inc.
	(Registrant)
Date: May 24, 2021	By:	/s/ Tiewei Song
		Tiewei Song
		Chief Executive Officer
Date: May 24, 2021	By:	/s/ Baiqun Zhong
		Baiqun Zhong
		Interim CFO
		(Principal Financial and Accounting Officer)

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