UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period
ended
or
For the transition period from ___________ to ___________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State of Incorporation) | (I.R.S. Employer ID Number) | |
| | ||
| (Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
| The |
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. ☒
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 files). ☒
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 | ☐ |
| ☐ | 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
As of April 26, 2023,
the registrant had
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 | 37 | |
| Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 50 | |
| Item 4 | Controls and Procedures | 50 | |
| PART II | OTHER INFORMATION | 51 | |
| Item 1 | Legal Proceedings | 51 | |
| Item 1A | Risk Factors | 51 | |
| Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 51 | |
| Item 3 | Defaults Upon Senior Securities | 51 | |
| Item 4 | Mine Safety Disclosures | 51 | |
| Item 5 | Other Information. | 51 | |
| Item 6 | Exhibits. | 52 | |
| Signatures | 53 |
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BIMI INTERNATIONAL
MEDICAL, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Advances to suppliers | ||||||||
| Inventories, net | ||||||||
| Prepayments and other receivables | ||||||||
| Current assets from discontinued operations-held for sale | ||||||||
| Total current assets | ||||||||
| NON-CURRENT ASSETS | ||||||||
| Deferred tax assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets-net | ||||||||
| Operating lease-right of use assets | ||||||||
| Goodwill | ||||||||
| Long-term investment | ||||||||
| Non-current assets from discontinued operations-held for sale | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Short-term loans | $ | $ | ||||||
| Long-term loans due within one year | ||||||||
| Convertible promissory notes, net | ||||||||
| Accounts payable, trade | ||||||||
| Advances from customers | ||||||||
| Amount due to related parties | ||||||||
| Taxes payable | ||||||||
| Other payables and accrued liabilities | ||||||||
| Lease liability-current | ||||||||
| Current liabilities from discontinued operations-held for sale | ||||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Lease liability-non-current | ||||||||
| Long-term loans - non-current | ||||||||
| Non-current liabilities from discontinued operations-held for sale | ||||||||
| Total non-current liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Statutory reserves | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||
| Total BIMI International Medical Inc.’s equity | ||||||||
| NON-CONTROLLING INTERESTS | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
| * |
The accompanying notes are an integral part of the condensed consolidated financial statements
1
BIMI INTERNATIONAL
MEDICAL, INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
| For three months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| REVENUES | ||||||||
| COST OF REVENUES | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES: | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Impairment loss of goodwill | ||||||||
| Total operating expenses | ||||||||
| INCOME/(LOSS) FROM OPERATIONS | ( | ) | ||||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Exchange gains/loss | ( | ) | ||||||
| Amortization of convertible notes (1) | ( | ) | ||||||
| Other expense | ( | ) | ( | ) | ||||
| Total other income (expense), net | ( | ) | ( | ) | ||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||
| PROVISION FOR INCOME TAXES | ||||||||
| NET LOSS FROM CONTINUING OPERATIONS | ( | ) | ( | ) | ||||
| DISCONTINUED OPERATIONS | ||||||||
| Loss from operations of discontinued operations-held for sale | ||||||||
| NET LOSS | ( | ) | ( | ) | ||||
| Less: net income (loss) attributable to non-controlling interest | ( | ) | ||||||
| NET LOSS ATTRIBUTABLE TO BIMI INTERATIONAL MEDICAL INC. | $ | ( | ) | $ | ( | ) | ||
| OTHER COMPREHENSIVE LOSS | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| TOTAL COMPREHENSIVE LOSS | ( | ) | ( | ) | ||||
| Less: comprehensive loss attributable to non-controlling interests | ( | ) | ( | ) | ||||
| COMPREHENSIVE LOSS ATTRIBUTABLE TO BIMI INTERNATIONAL MEDICAL INC. | $ | ( | ) | $ | ( | ) | ||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES | ||||||||
| LOSS PER SHARE | ||||||||
| $ | ( | ) | $ | ( | ) | |||
| $ | ( | ) | $ | |||||
| $ | ( | ) | $ | ( | ) | |||
The accompanying notes are an integral part of the condensed consolidated financial statements
2
BIMI INTERNATIONAL
MEDICAL, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
| Common Stock | Additional Paid-in | Accumulated Other | Statutory | Non Controlling | Accumulated | Total | ||||||||||||||||||||||||||
| Shares* | Amount | Capital | Income | Reserves | Interests | Deficit | Equity | |||||||||||||||||||||||||
| Balance as of December 31, 2022 | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common shares | ||||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | |||||||||||||||||||||||||||||
| Discontinued operations and subsidiaries -held for sale | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of March 31, 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements
3
BIMI INTERNATIONAL
MEDICAL, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the three months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Inventories impairment reserve | ||||||||
| Allowance for doubtful accounts | ( | ) | ||||||
| Profit/Loss on disposal of discontinuing operations and subsidiaries | ( | ) | ||||||
| Amortization of discount of convertible promissory notes | ||||||||
| Change in operating assets and liabilities | ||||||||
| Accounts receivable | ||||||||
| Advances to suppliers | ( | ) | ||||||
| Prepayments and other receivables | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Operating lease-right of use assets | ( | ) | ||||||
| Accounts payable, trade | ( | ) | ( | ) | ||||
| Advances from customers | ||||||||
| Operating lease liabilities | ( | ) | ||||||
| Taxes payable | ( | ) | ( | ) | ||||
| Other payables and accrued liabilities | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Discontinued operations-disposal of Zhuoda | ( | ) | ||||||
| Discontinued operations-held for sale of Minkang, Eurasia, Qiangsheng and Zhongshan Hospitals | ||||||||
| Purchase of property, plant, and equipment | ||||||||
| Net cash (used in) provided by investing activities | ||||||||
| - | - | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from short-term loan | ||||||||
| Repayment of long-term loan | ( | ) | ( | ) | ||||
| Net proceeds from issuance of convertible promissory notes | ||||||||
| Repayment of short-term loans | ( | ) | ||||||
| Proceeds from long-term loan | ||||||||
| Amount financed from/(to) related parties | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| EFFECT OF EXCHANGE RATE ON CASH | ( | ) | ||||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | ( | ) | ( | ) | ||||
| CASH AND CASH EQUIVALENTS, beginning of period | ||||||||
| CASH AND CASH EQUIVALENTS, end of period | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Cash paid for income tax | $ | $ | ||||||
| Cash paid for interest expense, net of capitalized interest | $ | $ | ||||||
4
BIMI INTERNATIONAL
MEDICAL INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 1. | ORGANIZATION AND BUSINESS BACKGROUND |
BIMI 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 and on June 21, 2021, we changed our name to BIMI International Medical Inc. 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.
On October
14, 2019, the Company acquired
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
5
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
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.
On April 9, 2021, the Company entered into a stock purchase agreement to acquire three private hospitals in the PRC, Wuzhou Qiangsheng Hospital (“Qiangsheng”), Suzhou Eurasia Hospital(“Eurasia”) and Yunnan Yuxi MinKang hospital (“Minkang”). The transaction closed on May 6, 2021.
On April 21, 2021, Bimai Hospital Management (Chongqing) Co. Ltd. was incorporated in the PRC by the Company to manage the operations of the Company’s medical devices segment.
On April 21, 2021, Pusheng Pharmaceutical Co., Ltd. was incorporated in the PRC by the Company to manage its wholesale distribution of generic drugs.
On September
10, 2021, the Company entered into a stock purchase agreement to acquire
On December 20, 2021, the Company
entered into a stock purchase agreement to acquire Bengbu Mali OB-GYN Hospital Co., Ltd. (“Mali Hospital”). We agreed to purchase
all the issued and outstanding equity interests in Mali Hospital in consideration of $
As of March 31, 2023, the Company has
As of March 31,2022, the Company had
The Company’s wholesale segments are engaged in the distribution of medical devices and pharmaceuticals. The wholesale medical devices segment distributes medical devices, including medical consumables to drug stores, private clinics, pharmaceutical dealers and hospitals. 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.
6
The Company’s medical services segment was engaged in providing medical services in its hospitals, of which the Zhongshan, Qiangsheng, Eurasia and Minkang hospitals were held for sale as of the date of this report.
As of March 31,2023, the details of the Company’s 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”) | % | |||||||
| Pukung Limited (“Pukung”) | % | |||||||
| Beijing Xinrongxin Industrial Development Co., Ltd. (“Xinrongxin”) | % | |||||||
| Boyi (Liaoning) Technology Co., Ltd (“Liaoning Boyi”) | % | |||||||
| Dalian Boyi Technology Co., Ltd (“Dalian Boyi”) | % | |||||||
| Chongqing Guanzan Technology Co., Ltd. (“Guanzan”) | % | |||||||
| Chongqing Shude Pharmaceutical Co., Ltd.(“Shude”) | % | |||||||
| Chongqing Lijiantang Pharmaceutical Co., Ltd.(“Lijiantang”) | % | |||||||
| Bimai Pharmaceutical (Chongqing) Co., Ltd. | ||||||||
| Chongqing Guoyitang Hospital Co., Ltd. | ||||||||
| Chongqing Huzhongtang Healthy Technology Co., Ltd. | ||||||||
| Chaohu Zhongshan Minimally Invasive Hospital Co.,Ltd. | ||||||||
| Yunnan Yuxi Minkang Hospital Co., Ltd. | ||||||||
| Wuzhou Qiangsheng Hospital Co., Ltd. | ||||||||
| Suzhou Eurasia Hospital Co., Ltd. | ||||||||
| Bimai Hospital Management (Chongqing) Co. Ltd | ||||||||
| Pusheng Pharmaceutical Co., Ltd | ||||||||
7
| 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 $
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 its ability to obtain external financing, and (2) further implementation of management’s business plan to expand its operations and generate sufficient revenues 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 neither any assurances to that effect, nor any assurance that the Company will be successful in securing sufficient funds to sustain the operations.
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.
We have restated our financial statements for year ended December 31, 2021 to correct errors identified in our prior financial statements. In FY2021, we recorded amortization of convertible note in G&A expense account, it has been revised to record amortization of convertible note in other income(expense) account. The restatement was necessary to address the misstatement. The impact of the restatement on our financial statement is reclassification of other expense in financial statements. We have concluded that the restatement does not materially affect our liquidity or our compliance with debt covenants or other financial obligations.
We previously erroneously recorded amortization
of our convertible note as G&A expense in the financial statements for the year ended December 31, 2021 and 2020. We now record the
amortization of the convertible notes in other income expense account, consistent with our statement of cash flow. The amortization of
convertible notes for the years ended December 31, 2022 and 2021 was $
We have taken steps to address the cause of the restatement and to improve our internal controls over financial reporting. We hired a consulting firm to assist our accounting department on internal controls and financial reporting. We are committed to maintaining the integrity of our financial statements and to providing accurate and transparent financial information to our investors.
| 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 condensed consolidated financial information as of March 31, 2023 and for the three months ended March 31, 2023 and 2022 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on May 4, 2023.
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, 2023 and its unaudited condensed consolidated results of operations for the three months ended March 31, 2023 and 2022, and its unaudited condensed consolidated cash flows for the three months ended March 31, 2023 and 2022, as applicable, have been made. The results of operations are not necessarily indicative of the operating results for the fiscal year or any future periods.
8
| ● | 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 for inventory obsolescence, 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.
| ● | Business combinations |
The Company accounts for its business combinations using the acquisition method of accounting in accordance with ASC 805 “Business Combinations”. The cost of an acquisition is measured as the aggregate of the acquisition date fair values of the assets transferred and liabilities incurred by the Company to the sellers and equity instruments issued. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i) the total costs of acquisition, fair value of the non-controlling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the acquisition date amounts of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated income statements. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Subsequent to the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any further adjustments are recorded in the consolidated income statements.
In a business combination achieved in stages, the Company re-measures the previously held equity interest in the acquiree immediately before obtaining control at its acquisition date fair value and the re-measurement gain or loss, if any, is recognized in the consolidated income statements.
When there is a change in ownership interests or a change in contractual arrangements that results in a loss of control of a subsidiary, the Company deconsolidates the subsidiary from the date control is lost. Any retained non-controlling investment in the former subsidiary is measured at fair value and is included in the calculation of the gain or loss upon deconsolidation of the subsidiary.
| ● | Cash and cash equivalents |
Cash and cash equivalents consist 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.
| ● | 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. We do not have any off-balance-sheet credit exposure related to its customers.
| ● | 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, 2023 and December 31, 2022, the allowance for doubtful accounts was .
9
| ● | Business held for sale |
In late 2022, we committed to a plan to dispose of the Zhongshan, Minkang and Qiangsheng hospitals.
On December
28, 2022, we entered into an agreement to transfer
On December
28, 2022, we entered into an agreement to transfer
The Company determined that the plan and the subsequent actions taken to dispose of the four hospitals qualified as a held for sale operations under the criteria set forth in the ASC 205-20 Presentation of Financial Statements – Discontinued Operation.
The carrying amount of the major classes of assets and liabilities of the business held for sale as of March 31, 2023 and December 31,2022 consist of the following:
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets from held for sale | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Advances to suppliers | ||||||||
| Amount due from related parties | ||||||||
| Inventories, net | ||||||||
| Prepayments and other receivables | ||||||||
| Operating lease-right of use assets | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Deferred tax assets | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | ||||||||
| Operating lease-right of use assets | ||||||||
| Goodwill | ||||||||
| Total non-current assets | ||||||||
| Total assets from held for sale | $ | $ | ||||||
| Liabilities from held for sale | ||||||||
| Current liabilities | ||||||||
| Short-term loans | $ | $ | ||||||
| Long-term loans due within one year | ||||||||
| Accounts payable, trade | ||||||||
| Advances from customers | ||||||||
| Taxes payable | ||||||||
| Other payables and accrued liabilities | ||||||||
| Lease liability-current | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Lease liability-non current | ||||||||
| Long-term loans - non-current | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
10
The summarized operating results of the business held for sale included in the Company’s consolidated statements of operations consist of the following:
| For the year ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenues | $ | |||||||
| Cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expense | ||||||||
| Other expense | ( | ) | ( | ) | ||||
| Loss(Income) before income taxes | ( | ) | ||||||
| Income tax expense | ||||||||
| Loss(Income) from business held for sale | $ | ( | ) | $ | ||||
| ● | 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, 2023 and December 31, 2022, the Company recorded an allowance for obsolete
inventories, which mainly consists of expired medicine, of $
| ● | 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:
| Items | Expected useful lives |
Residual value |
||||
| Building | % | |||||
| Office equipment | % | |||||
| Electronic equipment | % | |||||
| Furniture | % | |||||
| Medical equipment | % | |||||
| Vehicles | % | |||||
| Leasehold Improvement | % | |||||
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.
| ● | Leases |
On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-02. For all leases that were entered into prior to the effective date of ASC 842, we elected to apply the package of practical expedients. Based on this guidance, the Company did not reassess the following: (1) whether any expired or existing contracts are or contain leases; (2) the lease classification for any expired or existing leases; and (3) initial direct costs for any existing leases.
11
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 asset also includes 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.
| ● | Goodwill |
Goodwill represents the excess of the consideration paid of an acquisition over the fair value of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is not amortized, and is tested for impairment at least annually, more often when circumstances indicate impairment may have occurred. Goodwill is carried at cost less accumulated impairment losses. If impairment exists, goodwill is immediately written off to its fair value and the loss is recognized in the consolidated statements of operations and comprehensive loss. Impairment losses on goodwill are not reversed.
The Company reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may exist annually or more frequently if events and circumstances indicate that it is more likely than not that an impairment has occurred. The Company has the opinion to assess qualitative factors to determine whether it is necessary to perform the two-step in accordance with ASC 350-20. If the Company believes, as a result of the qualitative carrying amount, the two-step quantities impairment test described below is required.
The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required.
If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business acquisition with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit. over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. Estimating fair value is performed by utilizing various valuation techniques, with the primary technique being a discounted cash flow. The fair value of discounted cash flow was determined using management’s estimates and assumptions.
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 will be reassigned based on the relative fair value of each of the affected reporting units. As of March 31,
2023 and December 31, 2022, the Company recorded impairments for goodwill of $
At the date of the most recent annual goodwill impairment test, all the reporting units’ fair value were either equal to or slightly higher than their carrying values. None of the reporting units’ fair values were substantially in excess of their carrying values. The fair value of the goodwill associated with each of the Guanzan Group (which covers the wholesale pharmaceutical, wholesale medical devices and the Lijiantang Pharmacies segments) and the medical services segment (consisting of Guoyitang, Zhongshan and the Qiangsheng, Eurasia and Minkang hospitals), were equal to their carrying value after their last impairment test and the fair value of the goodwill for Zhuoda exceeded its carrying value by approximately 5.62%. Zhuoda was sold as of October 31, 2022, so there was no remaining goodwill of Zhuoda for impairment assessment in 2022. Accordingly, the goodwill associated with Guanzan Group, Zhongshan, Qiangsheng, Eurasia and Minkang are considered at risk for impairment in future periods.
12
| ● | 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. |
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.
| ● | Beneficial conversion feature |
The Company evaluates the conversion feature of its convertible promissory notes to determine whether it was beneficial as described in ASC 470-20. The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible notes payable and may not be settled in cash upon conversion, is treated as a discount to the convertible notes payable. This discount is amortized over the period from the date of issuance to the date the notes is due using the effective interest method. If the notes payable are retired prior to the end of their contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the shares of common stock at the commitment date to be received upon conversion.
13
| ● | 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
For the three months ended March 31, 2023 and 2022, the Company did not incur any interest or penalties associated with the tax positions it has taken. As of March 31, 2023, the Company did not have any significant unrecognized uncertain tax positions.
The Company conducts the majority of its businesses in the PRC and is subject to tax in this jurisdiction. As a result, the Company files tax returns that are subject to examination by the PRC.
| ● | 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
| ● | 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.
| ● | Debt issuance costs and debt discounts |
The Company may record debt issuance costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed.
| ● | Discontinued operation |
In accordance with ASC 205-20, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as a discontinued operation if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the major current assets, other assets, current liabilities, and non-current liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45.
On December 28, 2022, the Company entered into
an agreement to transfer
Pursuant to the Agreement, the Company will transfer
14
On December 28, 2022,
| ● | 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.
The Company estimates 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 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 Common Stock and decreases in trading fair value during a given financial quarter result in the application of non-cash derivative income.
| ● | 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, 2023 | March 31, 2022 | |||||||
| Period-end RMB:US$1 exchange rate | ||||||||
| Three months end average RMB:US$1 exchange rate | ||||||||
15
| ● | Related parties |
Parties, which can be a corporation or an 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.
| ● | 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, 2023, and 2022, the Company operated in four reportable segments in the PRC.
As of March 31, 2023, the Company four operating segments consisted of retail pharmacy, wholesale pharmaceuticals, wholesale medical devices and healthcare products.
As of March 31, 2022, the Company four reportable segments consisted of wholesale medical devices, wholesale pharmaceuticals, medical services and retail pharmacies.
| ● | 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.
16
| ● | Recent accounting pronouncements |
In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. For public business entities, the amendments in ASU 2020-06 are effective for public entities which meet the definition of a smaller reporting company are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company will adopt ASU 2020-06 effective January 1, 2024. Management is currently evaluating the effect of the adoption of ASU 2020-06 on the consolidated financial statements. The effect will largely depend on the composition and terms of the financial instruments at the time of adoption.
In October 2021, the FASB issued ASU No. 2021-08, “‘Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”). This ASU requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. The amendments are effective for the Company beginning after December 15, 2023, and are applied prospectively to business combinations that occur after the effective date. The Company does not expect the adoption of ASU 2021-04 will have a material effect on the consolidated financial statements.
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. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures.
| 4. | THE ACQUISITION OF THE GUANZAN GROUP |
On February 1, 2020, the Company entered into
a stock purchase agreement to purchase the Guanzan Group (the “Guanzan SPA”). Guanzan is a distributor of medical devices
whose customers are primarily drug stores, private clinics, pharmaceutical dealers and hospitals in the Southwest of China (the “Guanzan
Acquisition”). 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. Pursuant to the Guanzan SPA, we agreed to purchase all the issued and outstanding shares of the Guanzan Group (the “Guanzan
Shares”) for RMB
17
| Items | Amount | |||
| Assets | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Advances to suppliers | ||||
| Amount due from related parties | ||||
| Inventories | ||||
| Prepayments and other receivables | ||||
| Property, plant and equipment | ||||
| Intangible assets | ||||
| Goodwill | ||||
| Liabilities | ||||
| Short-term bank borrowings | ( | ) | ||
| Long-term loans due within one year | ( | ) | ||
| Accounts payable, trade | ( | ) | ||
| Advances from customers | ( | ) | ||
| Amount due to related parties | ( | ) | ||
| Taxes payable | ( | ) | ||
| Other payables and accrued liabilities | ( | ) | ||
| Long-term loans – noncurrent portion | ( | ) | ||
| Non-controlling interests | ( | ) | ||
| Total-net assets | $ | |||
On November 20, 2020, the parties to the Guanzan
SPA entered into a Prepayment and Amendment Agreement (the “Prepayment Agreement”) for the prepayment of a portion of the
Guanzan Cash consideration in the amount of RMB
The following reconciles the identified assets acquired and liabilities assumed pursuant to the Guanzan Acquisition and the Prepayment and Amendment Agreement made on November 20, 2020:
| The value of the shares issued on March 12, 2020 | ||||
| The value of the shares issued on November 30, 2020 | ||||
| The value of the shares issued on August 27, 2021 | ||||
| Total consideration | $ |
The fair value of all
assets acquired and liabilities assumed is the estimated book value of 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 its non-controlling interest in Shude in the amount of $
18
| 5. | THE ACQUISITION OF THE GYOYITANG HOSPITAL |
On December 9, 2020, the Company entered into
an agreement to acquire all of the outstanding equity of Guoyitang, the owner and operator of a private general hospital in Chongqing
City, a southwest city of China, with 100 hospital beds. The aggregate purchase price for Guoyitang was $
The following summarizes the identified assets acquired and liabilities assumed pursuant to the Guoyitang Acquisition as of February 2, 2021:
| Items | Amount | |||
| Assets | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Advances to suppliers | ||||
| Amount due from related parties | ||||
| Inventories | ||||
| Prepayments and other receivables | ||||
| Property, plant and equipment | ||||
| Right-of-use asset | ||||
| Goodwill | ||||
| Liabilities | ||||
| Accounts payable, trade | ( | ) | ||
| Amount due to related parties | ( | ) | ||
| Taxes payable | ( | ) | ||
| Other payables and accrued liabilities | ( | ) | ||
| Lease liability-current | ( | ) | ||
| Lease liability-non current | ( | ) | ||
| Total-net assets | $ | |||
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.
| 6. | THE ACQUISITION OF THE ZHONGSHAN HOSPITAL |
On December 15, 2020, the Company entered into
an agreement to acquire Zhongshan Hospital, a private hospital in the east region of China with 65 hospital beds. 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 $
19
The following summarizes the identified assets acquired and liabilities assumed pursuant to the Zhongshan Acquisition as of February 5, 2021:
| Items | Amount | |||
| Assets | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Inventories | ||||
| Prepayments and other receivables | ||||
| Property, plant and equipment | ||||
| Right-of-use asset | ||||
| Goodwill | ||||
| Liabilities | ||||
| Short-term bank borrowings | ( | ) | ||
| Accounts payable, trade | ( | ) | ||
| Advances from customers | ( | ) | ||
| Amount due to related parties | ( | ) | ||
| Other payables and accrued liabilities | ( | ) | ||
| Lease liability-current | ( | ) | ||
| Lease liability-non current | ( | ) | ||
| Total-net assets | $ | |||
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.
On December 28, 2022,
we entered into an agreement to transfer
| 7. | THE ACQUISITION OF THE QIANGSHENG, EURASIA AND MINKANG HOSPITALS |
On April 9, 2021, the Company and Chongqing Bimai
entered into a stock purchase agreement to acquire three private hospitals in the PRC, Qiangsheng, Eurasia and Minkang. Pursuant
to the agreement, the Company agreed to purchase all the issued and outstanding equity interests in Qiangsheng, Eurasia and Minkang in
consideration of approximately $
20
The following summarizes the identified assets acquired and liabilities assumed pursuant to the Qiangsheng, Eurasia and Minkang acquisitions as of May 6, 2021:
| Items | Amount | |||
| Assets | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Inventories | ||||
| Advances and other receivables | ||||
| Property, plant and equipment | ||||
| Right of use assets | ||||
| Goodwill | ||||
| Liabilities | ||||
| Accounts payable | ( | ) | ||
| Advances from customers | ( | ) | ||
| Tax payable | ( | ) | ||
| Other payables and accrued liabilities | ( | ) | ||
| Lease liability-current | ( | ) | ||
| Lease liability-non-current | ( | ) | ||
| Total net assets | $ | |||
The fair value of all assets acquired and liabilities assumed is the estimated book value of the Qiangsheng, Eurasia and Minkang hospitals. 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 Qiangsheng, Eurasia and Minkang Hospitals at the acquisition date.
On December 28, 2022,
we entered into an agreement to transfer
| 8. | THE ACQUISITION OF ZHUODA |
On September 10, 2021, Guanzan entered into an
agreement to acquire Zhuoda. Pursuant to the agreement, Guanzan agreed to purchase all the issued and outstanding equity interests in
Zhuoda in consideration of $
21
The following summarizes the identified assets acquired and liabilities assumed pursuant to Zhuoda acquisition as of October 8, 2021:
| Items | Amount | |||
| Assets | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Inventories | ||||
| Advances and other receivables | ||||
| Property, plant and equipment | ||||
| Right of use assets | ||||
| Goodwill | ||||
| Liabilities | ||||
| Short term loan | ( | ) | ||
| Accounts payable | ( | ) | ||
| Advances from customers | ( | ) | ||
| Tax payable | ( | ) | ||
| Other payables and accrued liabilities | ( | ) | ||
| Lease liability-current | ( | ) | ||
| Lease liability-non-current | ( | ) | ||
| Total net assets | $ | |||
The fair value of all assets acquired and liabilities assumed is the estimated book value of the Zhuoda. 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 Zhuoda at the acquisition date.
On October 19, 2022, the Company entered into an agreement to sell Zhuoda to its former owners.
Pursuant to the agreement,
the Company will sell
| 9. | THE SALE OF ZHUODA |
The Company’s
wholly-owned Guanzan subsidiary agreed to sell its
The summarized operating results of the Zhuoda and its subsidiary in the Company’s condensed consolidated statements of operations for the year ended December 31, 2022 consisted of the following:
| For the year ended December 31, | ||||
| 2022 | ||||
| Revenues | $ | |||
| Cost of revenues | ||||
| Gross profit | ||||
| Operating expense | ||||
| Other income (expense) | ( | ) | ||
| Loss before income taxes | ( | ) | ||
| Income tax expense | ||||
| Net income/(loss) from discontinued operations | $ | ( | ) | |
22
The assets and liabilities for the discontinued operations of Zhuoda consisted of the following items as of December 31, 2022 and December 31, 2021:
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Assets from discontinued operations | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Advances to suppliers | ||||||||
| Amount due from related parties | ||||||||
| Inventories, net | ||||||||
| Prepayments and other receivables | ||||||||
| Operating lease-right of use assets | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Deferred tax assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Operating lease-right of use assets | ||||||||
| Goodwill | ||||||||
| Long-term investment | ||||||||
| Total non-current assets | ||||||||
| Total assets from discontinued operations | $ | $ | ||||||
| Liabilities from discontinued operations | ||||||||
| Current liabilities | ||||||||
| Short-term loans | $ | $ | ||||||
| Long-term loans due within one year | ||||||||
| Convertible promissory notes, net | ||||||||
| Accounts payable, trade | ||||||||
| Advances from customers | ||||||||
| Amount due to related parties | ||||||||
| Taxes payable | ||||||||
| Other payables and accrued liabilities | ||||||||
| Lease liability-current | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Lease liability-non current | ||||||||
| Long-term loans – non-current | - | |||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
23
| 10. | 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 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, 2023 and December 31,2022, accounts receivable consisted of the following:
| March 31, 2023 | December 31, 2022 | |||||||
| Accounts receivable, cost | $ | $ | ||||||
| Less: allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
Due to subsequent collections, the Company reversed
an allowance for doubtful accounts of $
| 11. | 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, 2023 and December 31, 2022, the Company reported advances to suppliers as follow:
| March 31, 2023 | December 31, 2022 | |||||||
| Advances to suppliers, cost | $ | $ | ||||||
| Less: allowance for doubtful accounts | ||||||||
| Advances to suppliers, net | $ | $ | ||||||
No bad debt expenses were accrued for doubtful accounts relating to advances to suppliers for the three months ended March 31, 2023 and 2022, respectively.
| 12. | 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, 2023 | December 31, 2022 | |||||||
| Pharmaceuticals | $ | $ | ||||||
| Medical devices | ||||||||
| Less: allowance for obsolete and expired inventory | ( | ) | ( | ) | ||||
| $ | $ | |||||||
For
the three months ended March 31, 2023 and 2022, respectively, the Company accrued allowances of $
24
| 13. | PREPAYMENTS AND OTHER RECEIVABLES |
Prepayments and other receivables represent the amount that the Company prepaid as rent deposits for its retail stores, hospitals and office space, 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, 2023 and December 31, 2022.
| March 31, 2023 | December 31, 2022 | |||||||
| Deposit for rentals | $ | $ | ||||||
| Prepaid expenses and improvements of offices | ||||||||
| Deposit for purchase of medical devices | ||||||||
| Deposit for sales platform | ||||||||
| Deferred offering cost | ||||||||
| Receivables form third party | ||||||||
| VAT deductibles | ||||||||
| Others | ||||||||
| Less: allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Prepayments and other receivables, net | $ | |||||||
Management evaluates the recoverable value of
these balances periodically according to the Company’s policy of credit and allowance for doubtful accounts. For the three months
ended March 31, 2023 and 2022, the Company recorded bad debt expenses of $
| 14. | PROPERTY, PLANT AND EQUIPMENT |
Property, plant and equipment consisted of the following:
| March 31, 2023 | December 31, 2022 | |||||||
| Buildings | $ | $ | ||||||
| Office equipment | ||||||||
| Electronic equipment | ||||||||
| Furniture | ||||||||
| Vehicles | ||||||||
| Medical equipment | ||||||||
| Leasehold Improvements | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
Depreciation expense for the three months ended
March 31, 2023 and 2022 were $
| 15. | Intangible assets |
| March 31, 2023 | December 31, 2022 | |||||||
| Software | $ | $ | ||||||
| Trademark use right | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
Amortization expense for the three months ended
March 31, 2023 and 2022 were $
25
| 16. | LONG-TERM INVESTMENT |
| March 31, 2023 | December 31, 2022 | |||||||
| Long-term investment in Phenix Bio Inc | $ | $ | ||||||
| Total long-term investment | $ | $ | ||||||
On July 5, 2022, we entered into a stock purchase
agreement (as amended on February 27, 2023) with Mr. Fnu Oudom, the Chairman of our board of directors, whereby we agreed to acquire
| 17. | LEASES |
Balance sheet information related to the Company’s operating leases was as follows:
| March 31, 2023 | December 31, 2022 | |||||||
| Operating Lease Assets | ||||||||
| Operating lease | $ | $ | ||||||
| Total operating lease assets | $ | $ | ||||||
| Operating Lease Obligations | ||||||||
| Current operating lease liabilities | $ | |||||||
| Non-current operating lease liabilities | $ | |||||||
| Total Lease Liabilities | $ | |||||||
Lease liability maturities as of March 31, 2023, are as follows:
| March 31, 2023 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 and Thereafter | ||||
| Total minimum lease payments | ||||
| Less: Amount representing interest | ( | ) | ||
| Total | ||||
26
| 18. | GOODWILL |
Changes in the carrying amount of goodwill consisted of the following:
| March 31, 2023 | December 31, 2022 | |||||||
| Beginning balance | $ | $ | ||||||
| Disposal of Zhuoda | ( | ) | ( | ) | ||||
| Addition during the year | ||||||||
| Impairment during the year | ( | ) | ( | ) | ||||
| Goodwill | $ | $ | ||||||
The goodwill associated with the acquisitions
of: (i) Guanzan of $
As of March 31, 2023 and December 31, 2022, goodwill
was $
| 19. | LOANS |
Short-term loans
| March 31, 2023 | December 31, 2022 | |||||||
| China Minsheng Bank | $ | $ | ||||||
| Postal Savings Bank of China | ||||||||
| Total | $ | $ | ||||||
For the three months ended March 31, 2023 and
2022, interest expense on short-term loans amounted to $
Long-term loans
| March 31, 2023 | December 31, 2022 | |||||||
| China Construction Bank Chongqing Zhongxian Sub-branch | ||||||||
| We Bank | ||||||||
| Subtotal of long-term loans | ||||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Total Long-term loans – noncurrent portion | $ | $ | ||||||
For the three months ended March 31, 2023 and
2022, interest expense on long-term loans amounted to $
27
| 20. | CONVERTIBLE PROMISSORY NOTES AND EMBEDDED DERIVATIVE INSTRUCTIONS |
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 $
Pursuant to the May SPA, two 2020 Notes each
in the face amount of $
The May SPA, the 2020 Notes and the warrants provided that each and every reference to share prices, shares of Common Stock and any other numbers therein that relate to the Common Stock will be automatically adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions that occur with respect to the Common Stock (each, a “Stock Combination Event”, and such date thereof, the “Stock Combination Event Date”) thereafter. The May SPA, the 2020 Notes and the 2020 Warrants further provided if after a Stock Combination Event, the Event Market Price is less than the conversion price (in the case of the Convertible Notes) or the exercise price (in the case of the warrants) then in effect (after giving effect to the above adjustments), then on the sixteenth (16th) trading day immediately following such Stock Combination Event Date, the conversion price or exercise then in effect on such sixteenth (16th) trading day (after giving effect to the above adjustments) will be reduced (but in no event increased) to the Event Market Price. “Event Market Price” means, with respect to any Stock Combination Event Date, the quotient determined by dividing (x) the sum of the dollar volume-weighted average price of the Common Stock for each of the five (5) trading days with the lowest dollar volume-weighted average price of the Common Stock during the fifteen (15) consecutive trading day period ending and including the trading day immediately preceding the sixteenth (16th) trading day after such Stock Combination Event Date, divided by (y) five (5). The price adjustment described in this paragraph is hereinafter referred to as the “Event Market Price Adjustment.”
The 2020 Notes, which matured on the eighteen-month
anniversary of the issuance date, were payable in installments and were convertible at the election of the investors at the conversion
price of $
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 $
28
On November 18, 2021, we entered into a
securities purchase agreement (
Upon evaluation, the Company determined that the two 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, 2023 | December 31, 2022 | |||||||
| Convertible note – principal | $ | $ | ||||||
| Convertible note – discount | ( | ) | - | |||||
| $ | $ | |||||||
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 initial fair value of the embedded conversion option liability associated with each Note was valued using the Black-Scholes model. The assumptions used in the Black-Scholes option pricing model are as follows:
| March 31, 2023 | December 31, 2022 | |||||||
| Dividend yield | $ | % | $ | % | ||||
| Expected volatility | % | % | ||||||
| Risk free interest rate | % | % | ||||||
| Expected life (year) | ||||||||
The value of the conversion option liability underlying the Notes and Convertible Notes as of March 31, 2023 and December 31,2022 were . The Company recognized a loss from the increase in the fair value of the conversion option liability in the amount of for the three months ended March 31, 2023 and 2022.
29
| 21. | OTHER PAYABLES AND ACCRUED LIABILITIES |
Other payables and accrued liabilities consisted of the following:
| March 31, 2023 | December 31, 2022 | |||||||
| Salary payable | $ | $ | ||||||
| Salary payable – related party (1) | ||||||||
| Accrued operating expenses | ( | ) | ( | ) | ||||
| Other payables | ||||||||
| $ | $ | |||||||
| (1) |
The Company entered into the employment Agreement with Ms. Baiqun Zhong dated January 27, 2022, as the Interim CFO from May 21, 2021 until July 14, 2021 with base annual cash compensation of $
On January 27, 2022, the Company entered
into an employment agreement with Mr. Xiaping Wang for a term of |
| 22. | RELATED PARTIES AND RELATED PARTIES TRANSACTIONS |
Amounts due to related parties and mid-level management personnel
As of March 31, 2023 and December 31,2022, the
total amounts payable to related parties and mid-level management was $
| 1. | March 31, 2023 and December 31, 2022, Amount payable to Mr. Yongquan Bi, the former Chief Executive Officer and Chairman of the Board of directors of the Company, of and $ |
| 2. | As of March 31, 2023 and December 31, 2022, Amount payable to Mr. Li Zhou, the legal representative (general manager) of Guanzan, of and $ |
| 3. | As of March 31, 2023 and December 31, 2022, Amounts payable to Mr. Fuqing Zhang, the Chief Executive Officer of Xinrongxin of $ and $ |
| 4. | As of March 31, 2023 and December 31, 2022, amounts payable to Mr. Youwei Xu, the financial manager of Xinrongxin were $ | |
| 5. | As of March 31, 2023 and December 31, 2022, the amounts payable to Shaohui Zhuo, the general manager of Guoyitang, were $ |
30
| 6. | As of March 31, 2023 and December 31, 2022, the amounts payable to Nanfang Xiao, a director of Guoyitang, were $ |
| 7. | As of March 31, 2023 and December 31, 2022, Amounts payable to Jia Song, the manager of Guoyitang, were $ |
| 8. | As of December 31, 2022, Other payable to Mr. Fnu Oudom of $ |
| 9. | As of December 31, 2022, Other payable to Mr. Song Tie Wei of $ |
| 23. | STOCK EQUITY |
The Company is authorized to issue
On April 20, 2019 and October 7, 2019, the Company
issued an aggregate of
On March 12, 2020, the Company issued
From April 6, 2020 through October 20, 2020, Power
Up Lending Group Ltd., Crown Bridge Partners, LLC, Labrys Fund, LP, Morningview Financial, LLC,TFK Investments LLC, BHP Capital NY Inc.,
Firstfire Global Opportunities Fund, LLC and Platinum Point Capital LLC converted $
On November 30, 2020, the Company issued
On December 2, 2020, Hudson Bay Master Fund Ltd
(“Hudson Bay”), an institutional investor, converted $
From December 2, 2020 until March 31, 2023, the
Institutional Investor, CVI Investments, Inc.(“CVI”), converted $
From January 4, 2021 to February 9, 2021, Hudson
Bay converted 2020 Notes in the aggregate principal amount of $
From January 4, 2021 to March 1, 2021, CVI converted
2020 Notes in the aggregate principal amount of $
On February 2, 2021, the Company issued
On February 3, 2021, a holder of a convertible
note issued on December 16, 2019 converted a part of the note in the aggregate principal amount of $
On February 11, 2021, the Company issued
On March 26, 2021, the Company issued
On April
20, 2021, the Company issued
On April 29, 2021, the Company issued
On June 18, 2021,
31
On July 23, 2021, the Company issued
From August 26, 2021 to November 30, 2021, Hudson
Bay converted 2020 Notes in the aggregate principal amount of $
From August 26, 2021 to November 30, 2021, CVI
converted 2020 Notes in the aggregate principal amount of $
On August 27, 2021, the Company issued
On September 22, 2021, the Company issued
On January 7, 2022, the Company issued
On January 24, 2022, the Company issued
On January 27, 2022, the Company entered into
an employment agreement with Mr. Xiaping Wang for a term of one (1) year, effective January 1, 2022. Under the agreement, Mr. Wang’s
compensation will consist of an annual salary of $
On February 1, 2022, the Company issued
On February 2, 2022, the Company issued a press release announcing a 1-for-5 reverse stock split of its common stock would become effective on February 3, 2022.
On July 18, 2022,
On December 8, 2022, the Company issued a press release announcing that a 1-for-10 reverse stock split of its common stock would become effective on December 9, 2022.
On November 23, 2022, the Zhouda sale transaction
closed, when
From the legal perspective, the Reverse Split applied to the issued shares of the Company on the date of the Reverse Split and does not have any retroactive effect on the Company’s shares prior that date. However, for accounting purposes only, references to our ordinary shares in this annual report are stated as having been retroactively adjusted and restated to give effect to the Reverse Split, as if the Reverse Split had occurred by the relevant earlier date.
| 24. | 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, 2023 and 2022:
| For the three months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Net loss from continuing operation attributable to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Net Income from discontinued operation attributable to common shareholders | ( | ) | ||||||
| Total net loss attributable to common shareholders | ( | ) | ( | ) | ||||
| loss per share – basic and diluted: | ||||||||
| Continuing operations | $ | ( | ) | $ | ( | ) | ||
| Discontinued operations | ( | ) | ||||||
| Total | $ | ( | ) | $ | ( | ) | ||
32
| 25. | SEGMENTS |
General Information of Reportable Segments:
For the three months ended March 31, 2023, and 2022, the Company operated in four reportable segments in the PRC.
As of March 31, 2023, the Company had four operating segments: retail pharmacy, wholesale pharmaceuticals, wholesale medical devices and healthcare products. 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. Healthcare products includes cardiovascular product, anti-insomnia and depression product, male aphrodisiac product, women’s menopausal syndrome product, gout product and immune enhancer/ vaccine sequelae product.
As of March 31, 2022, the Company had four reportable segments: wholesale medical devices, wholesale pharmaceuticals, medical services and retail pharmacies. The wholesale medical devices segment distributes medical devices, including medical consumables to drug stores, private clinics, pharmaceutical dealers and hospitals. 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 2021.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. To date, there were no inter-segment revenues between our retail pharmacy and wholesale pharmaceuticals 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 (“CODM”), 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 Operating 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, 2023 | Retail pharmacy | Medical device wholesale | Drugs wholesale | Healthcare products sales | Medical services | Others | Total | |||||||||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Cost of revenues | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Depreciation, depletion, and amortization expense | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Profit (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||
| Total assets | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| For three months ended March 31, 2022 | Retail pharmacy | Medical device wholesale | Drugs wholesale | Medical services | Others | Total | ||||||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Cost of revenues | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Depreciation, depletion, and amortization expense | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Profit (loss) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||
| Total assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
33
Reconciliations of Operating Segment Revenues, Profit or Loss, and Assets, to the Consolidated Totals as of March 31, 2023 and March 31,2022 and for the Three Months ended March 31, 2023 and 2022.
| Three months ended March 31, 2023 | ||||
| >>Revenues | ||||
| Total revenues of operating segments | $ | |||
| Other revenues | ||||
| Elimination of intersegments revenues | ( | ) | ||
| Total consolidated revenues | $ | |||
| >> Profit or loss | ||||
| Total loss from operating segments | $ | |||
| Elimination of intersegments profit or loss | ( | ) | ||
| Unallocated amount: | ||||
| Amortization of discount of convertible notes | ||||
| Other corporation expense | ( | ) | ||
| Total net loss | $ | ( | ) | |
| >>Assets | ||||
| Total assets of operating segments | $ | |||
| Elimination of intersegments receivables | ( | ) | ||
| Unallocated amount: | ||||
| Other unallocated assets – Phenix Bio Inc | ||||
| Other unallocated assets – Xinrongxin | ||||
| Other unallocated assets – Liaoning Boyi | ||||
| Other unallocated assets – Dalian Boyi | ||||
| Other unallocated assets – Chongqing Bimai | ||||
| Other unallocated assets – BIMI | ||||
| Total consolidated assets | $ | |||
| Three months ended March 31, 2022 | ||||
| >>Revenues | ||||
| Total revenues of operating segments | $ | |||
| Other revenues | ||||
| Elimination of intersegments revenues | ( | ) | ||
| Total consolidated revenues | $ | |||
| >> Profit or loss | ||||
| Total loss from operating segments | $ | ( | ) | |
| Elimination of intersegments profit or loss | ||||
| Unallocated amount: | ||||
| Amortization of discount of convertible notes | ( | ) | ||
| Other corporation expense | ( | ) | ||
| Total net loss | $ | ( | ) | |
| >>Assets | ||||
| Total assets of operating segments | $ | |||
| Elimination of intersegments receivables | ( | ) | ||
| Unallocated amount: | ||||
| Other unallocated assets – Xinrongxin | ||||
| Other unallocated assets – Liaoning Boyi | ||||
| Other unallocated assets – Dalian Boyi | ||||
| Other unallocated assets – Chongqing Bimai | ||||
| Other unallocated assets – BIMI | ||||
| Total consolidated assets | $ | |||
34
| 26. | ENTITY-WIDE INFORMATION AND CONCENTRATIONS OF RISK |
Entity-Wide Information
| (a) | Revenues from each type of products |
For the three months ended March 31, 2023 and 2022, respectively, the Company reported revenues for each type of product and service as follows:
| For the three months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Medical devices | $ | $ | ||||||
| Healthcare products | ||||||||
| Wholesale pharmaceuticals | ||||||||
| Pharmacy retail | ||||||||
| Total | $ | $ | ||||||
| (b) | Geographic areas information |
For the three months ended March 31, 2023 and 2022, 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, 2023 and 2022.
| (c) | Major customers |
For the three months ended March 31, 2023, two
customers accounted for more than
| For the three months ended | As of March 31, | |||||||||||||
| March 31, 2023 | 2023 | |||||||||||||
| Customers | Segment | Purchases | Percentage of total purchases | Accounts receivable | ||||||||||
| Customer A | $ | % | ||||||||||||
| Customer B | $ | % | ||||||||||||
| (d) | Major vendors |
For the three months ended March 31, 2023, two
vendors accounted for more than
| For the three months ended |
As of March 31, |
|||||||||||||
| March 31, 2023 | 2023 | |||||||||||||
| Vendors | Segment | Purchases | Percentage of total purchases |
Accounts payable |
||||||||||
| Vendor A | $ | % | ||||||||||||
| Vendor B | $ | % | ||||||||||||
35
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 debt, and continually monitoring the effects of market changes in interest rates. As of March 31, 2023 and December 31, 2022, 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.
| (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.
| 27. | SUBSEQUENT EVENTS |
On February 27,
2023, the Company entered into a stock purchase Agreement (the “February SPA”) with Mr. Oudom, whereby the Company agreed
to sell
36
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, BIMI 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.
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 April 9, 2021, we increased our equity interest in Shude from 80% to 95.2% by making a direct capital investment in Shude.
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 enabled us to serve more individuals with medical needs and was the first step in our efforts to build a hospital chain specializing in obstetrics and gynecology.
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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 was 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 Co.,Ltd.(“Qiangsheng”) in the southeast region of the PRC, Suzhou Eurasia Hospital Co.,Ltd. (“Eurasia”) in the central region of the PRC and Yunan Yuxi Minkang Hospital Co.,Ltd.(“Minkang”) in the southwest region of the PRC. .
On September 10, 2021, we acquired Chongqing Zhuoda Pharmaceutical Co., Ltd. (“Zhuoda”), a company engaged in the distribution of medical devices and pharmaceuticals, based in Chongqing, the largest city in Southwest region of the PRC.
In response to the poor performance of Zhuoda since its acquisition, whose operations were impacted by COVID-19, on October 19, 2022, we entered into a sale and purchase agreement to sell Zhuoda back to the former owners. Pursuant to the agreement, we sold 100% of the equity interests in Zhuoda in consideration for the return of the 44,000 shares of Common Stock previously issued to the former owners of Zhuoda. The transaction closed effective November 23, 2022, when 100% of the equity interests in Zhuoda were transferred to the former owners and the 440,000 shares of Common Stock were returned to us.
Our hospitals performed poorly in 2022 due in great measure to the impact of COVID-19 and the PRC’s policies to combat its spread. In response to the poor performance of Zhongshan, on December 28, 2022, we entered into an agreement to transfer 87% of the equity interests in Zhongshan to the seller. As consideration for the transfer, the seller will return to us 40,037 shares of Common Stock, which were previously issued to the seller as part of the closing consideration for Zhongshan. The transaction is expected to close in the second quarter of 2023.
In response to the poor performance of the Qiangsheng, Eurasia and Minkang hospitals, on December 28, 2022 we entered into an agreement to transfer 90% of the equity interests in the three hospitals back to the sellers. As consideration for the transfer, the sellers will return to us 80,000 shares of Common Stock, which were previously issued to them upon the acquisition of the hospitals. Pursuant to the agreement, we will continue to own 10% of the equity interests in each of the three hospitals. The sales of Qiangsheng, Minkang and Eurasia are expected to close in the second quarter of 2023.
The actions taken to fulfill the plans to dispose of the majority of our ownership interests in the Zhongshan, Qiangsheng, Eurasia and Minkang hospitals resulted in our classifying these hospitals as held for sale operations according to ASC 205-20 Presentation of Financial Statements – Discontinued Operation. As a result, all of the assets and liabilities of the Zhongshan, Qiangsheng, Eurasia and Minkang hospitals were reclassified as assets and liabilities of a held for sale operation in the statement of position as of December 31, 2022, and the results of the operation are presented under the line item net loss from held for sale operations for the year ended December 31, 2022.
On July 5, 2022, we entered into a stock purchase agreement (as amended on February 27, 2023) with Mr. Fnu Oudom, the Chairman of our board of directors, whereby we agreed to acquire 100% of the equity interests in Phenix Bio Inc. (“Phenix”), a distributor of healthcare products in consideration of $1,800,000. The transaction closed effective March 15, 2023. The aggregate purchase price for the equity interests in Phenix was $180,000 in cash 270,000 shares of Common stock. The Company has agreed to issue 5,000.000 shares of Common Stock to Mr. Oudom if the aggregate net profit for Phenix is at least $2,500,000 in calendar 2023, or in any fiscal quarter in 2023.
We have restated our financial statements for the year ended December 31, 2021, to correct errors identified in our prior financial statements. In FY2021, we recorded amortization of convertible note in G&A expense account, it has been revised to record amortization of convertible note in other income(expense) account. The restatement was necessary to address misstatement of financial statements. The impact of the restatement on our financial statement is reclassification of other expense in financial statements. We have concluded that the restatement does not materially affect our liquidity or our compliance with debt covenants or other financial obligations.
We have taken steps to address the cause of the restatement and to improve our internal controls over financial reporting. We hired a consulting firm to assist us on daily internal controls and financial reporting process review. And we also improved our internal accounting department management as well. We are committed to maintaining the integrity of our financial statements and to providing accurate and transparent financial information to our investors.
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BUSINESS SEGMENTS
For the three months ended March 31, 2023, and 2022, the Company operated in four reportable segments in the PRC.
As of March 31, 2023, the Company has four operating segments: retail pharmacy, wholesale pharmaceuticals, wholesale medical devices and healthcare products. 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. Healthcare products includes cardiovascular product, anti-insomnia and depression product, male aphrodisiac product, women’s menopausal syndrome product, gout product and immune enhancer/ vaccine sequelae product.
As of March 31, 2022, the Company had four reportable segments: wholesale medical devices, wholesale pharmaceuticals, medical services and retail pharmacies. The wholesale medical devices segment distributes medical devices, including medical consumables to drug stores, private clinics, pharmaceutical dealers and hospitals. 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 2021.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. To date, there were no inter-segment revenues between our retail pharmacy and wholesale pharmaceuticals 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 (“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 operating 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 $883,764 and $2,975,642 during the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, the Company had an accumulated deficit of $71.03 million. 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 our stockholders or external financing. Management believes that our existing stockholders will provide the additional cash necessary to meet our obligations as they become due, and (2) that we will be able to implement our business plan to expand our company’s operations and generate sufficient revenues to meet our obligations. While we believe in the viability of our strategy to increase sales volume and in our ability to raise additional funds, there can be no assurance to that effect, nor that our company will be successful in securing sufficient funds to sustain the operations.
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 ESTIMATES
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.
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| ● | 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. We do not have any off-balance-sheet credit exposure related to our customers.
| ● | 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, 2023 and December 31, 2022, the allowance for doubtful accounts were Nil.
| ● | 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, 2023 and December 31, 2022, the Company recorded an allowance for obsolete inventories, which mainly consists of expired medicine, of $27,975 and $584, 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:
| Items | 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 | % | |||
| Leasehold Improvement | Shorter of lease term or useful life | 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 |
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| ● | Leases |
On January 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-02. For all leases that were entered into prior to the effective date of ASC 842, we elected to apply the package of practical expedients. Based on this guidance, we did not reassess the following: (1) whether any expired or existing contracts are or contain leases; (2) the lease classification for any expired or existing leases; and (3) initial direct costs for any existing leases.
We determine 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 our 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 our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term.
| ● | 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.
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. As of March 31, 2023 and December 31, 2022, the Company recorded impairments for goodwill of $5,385,811 and $5,385,811, respectively.
| ● | 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
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| ● | Businesses Held for Sale |
In late 2022, we committed to a plan to dispose of the Zhongshan, Minkang, Eurasia, and Qiangsheng hospitals.
On December 28, 2022, we entered into an agreement to transfer 87% of the equity interests in Zhongshan to the prior owner. As consideration for the transfer, the seller agreed to return to us the 40,037 shares of Common Stock, that were previously issued as part of the closing consideration. The transaction is expected to close in the second quarter of 2023.
On December 28, 2022, we entered into an agreement to transfer 90% of the equity interests in Qiangsheng, Minkang and Eurasia to the previous owners. As consideration for the transfer, the sellers agreed to return to us the 80,000 shares of Common Stock which were previously issued upon the acquisition of the three hospitals. The sales of Qiangsheng, Minkang and Eurasia are expected to close in the second quarter of 2023.
The Company determined that the plan and the subsequent actions taken to dispose of the four hospitals qualified as a held for sale operation under the criteria set forth in the ASC 205-20 Presentation of Financial Statements – Discontinued Operation.
| ● | 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.
| ● | Beneficial Conversion Feature |
We evaluate the conversion feature of the convertible debt that we issue to determine whether it was beneficial as described in ASC 470-20. The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible notes payable and may not be settled in cash upon conversion, is treated as a discount to the convertible notes payable. This discount is amortized over the period from the date of issuance to the date the notes is due using the effective interest method. If the notes payable are retired prior to the end of their contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the shares of common stock at the commitment date to be received upon conversion.
| ● | 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, 2022 the Company operated in four reportable segments: retail pharmacy, wholesale medical devices, wholesale pharmaceuticals and medical services in the PRC.
| ● | Recent accounting pronouncements |
In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments (Topic 326)”, which significantly changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life, instead of when incurred. In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses”, which amends Subtopic 326-20 (created by ASU No.2016-13) to explicitly state that operating lease receivables are not in the scope of Subtopic 326-20. Additionally, in April 2019, the FASB issued ASU No.2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”, in May 2019, the FASB issued ASU No. 2019-05, “Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief”, and in November 2019, the FASB issued ASU No. 2019-10, “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates”, and ASU No. 2019-11, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses”, to provide further clarifications on certain aspects of ASU No. 2016-13 and to extend the nonpublic entity effective date of ASU No. 2016-13. The changes (as amended) are effective for the Company for annual and interim periods in fiscal years beginning after December 15, 2022, and the Company is in the process of evaluating the potential effect on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, “Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which simplifies how an entity is required to test goodwill for impairment by eliminating step two from the goodwill impairment test. Step two of the goodwill impairment test measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with its carrying amount. As amended by ASU 2019-10, annual or interim goodwill impairment tests are performed in fiscal years beginning after December 15, 2022. We do not expect that the adoption of this guidance will have a material impact on our financial position, results of operations and cash flows.
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 adopted this guidance effective January 1, 2021, which adoption did not have a material impact on the consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. For public business entities, the amendments in ASU 2020-06 are effective for public entities which meet the definition of a smaller reporting company are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company will adopt ASU 2020-06 effective January 1, 2024. Management is currently evaluating the effect of the adoption of ASU 2020-06 on the consolidated financial statements. The effect will largely depend on the composition and terms of the financial instruments at the time of adoption.
In October 2021, the FASB issued ASU No. 2021-08, “‘Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”). This ASU requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. The amendments are effective for the Company beginning after December 15, 2023, and are applied prospectively to business combinations that occur after the effective date. The Company does not expect the adoption of ASU 2021-04 will have a material effect on the consolidated financial statements.
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Recent Developments
On December 6, 2022, we sold a convertible promissory note (the “Note”) to Mr. Fnu Oudom for $ 2 million. The Note carries an annual interest rate of 6%, which is payable together with the principal amount one (1) year after the date of the Note. Seven (7) business days before the maturity date of the Note, the Note holder has the right to exercise a conversion right at a conversion price of $0.40, to have the aggregate amount of the principal and accrued interests repaid in shares (the “Note Shares”) of our Common Stock, in lieu of cash payment. The conversion price of $0.40 reflects a 60% premium on the closing price of the Common Stock on NASDAQ on the date of issuance of the Note, which was $0.25). On February 27, 2023, the Company and Mr. Oudom entered into an agreement (the “Prepayment Agreement”) whereby the parties agreed that the Company will exercise its prepayment right under the Convertible Note by issuing shares of Common Stock. In consideration of Mr. Oudom’s agreement to convert the Convertible Note in shares of Common Stock and to waive his right to any and all interest accrued and to be accrued under the Convertible Note, the Company agreed to issue 1,330,000 shares of Common Stock (the “Prepayment Shares”) at a conversion price of $1.50 per share, subject to the shareholders’ approval, as full payment of the $2,000,000 principal of the Convertible Note and accrued interest. Such issuance was approved by the Company’s shareholders on April 13, 2023. Such issuance has not occurred to date.
On July 5, 2022, we entered into a stock purchase agreement (as amended on February 27, 2023) with Mr. Fnu Oudom, the Chairman of our board of directors, whereby we agreed to acquire 100% of the equity interests in Phenix Bio Inc. (“Phenix”), a distributor of healthcare products. The transaction closed effective March 15, 2023. The aggregate purchase price for the equity interests in Phenix was $180,000 in cash, which has been paid, plus 5,270,000 shares of the Company’s common stock, of which 270,000 shares was issued and the balance of 5,000,000 shares will be issued if the aggregate net profit generated by Phenix is at least $2,500,000 in calendar year 2023 or in any fiscal quarter of 2023.
On February 27, 2023, we entered into a stock purchase agreement (the “February SPA”) with Mr. Oudom, whereby the Company agreed to sell 2,500,000 shares of Common Stock to Mr. Oudom for $3,000,000 in cash, based on a purchase price of $1.50 per share, subject to shareholder approval of the issuance of such shares. Such issuance was approved by the Company’s shareholders on April 13, 2023. As of the date of this report, Mr. Oudom has paid $350,000. The remaining $2,650,000 is expected to be received by July 2023.
RESULTS OF OPERATIONS
Comparison of the three months ended March 31, 2023 and 2022 of consolidated results of operations:
| For the Three Months Ended March 31, | Comparison | |||||||||||||||||||
| 2023 | % of Revenues | 2022 | Amount increase (decrease) | Percentage increase (decrease) | ||||||||||||||||
| Revenues | $ | 3,197,637 | 100 | % | $ | 2,714,711 | $ | 482,926 | 18 | % | ||||||||||
| Cost of revenues | 1,507,396 | 47 | % | 2,342,367 | (834,971 | ) | (36 | )% | ||||||||||||
| Gross profit | 1,690,241 | 53 | % | 372,344 | 1,317,897 | 354 | % | |||||||||||||
| Operating expenses | 1,109,495 | 35 | % | 2,522,046 | (1,412,551 | ) | (56 | )% | ||||||||||||
| Other expenses, net | (1,441,381 | ) | (45 | )% | (823,011 | ) | (618,370 | ) | 75 | % | ||||||||||
| Loss before income tax | (860,635 | ) | (27 | )% | (2,972,713 | ) | 2,112,078 | (71 | )% | |||||||||||
| Income tax expense | - | 0 | % | 2,929 | (2,929 | ) | (100 | )% | ||||||||||||
| Net loss from continuing operations | (860,635 | ) | (27 | )% | (2,975,642 | ) | 2,115,007 | (71 | )% | |||||||||||
| Income (loss) from operations of discontinued operations | (23,129 | ) | (1 | )% | - | (23,129 | ) | - | % | |||||||||||
| Less: non-controlling interest | (443 | ) | 0 | % | (1,082 | ) | 639 | (59 | )% | |||||||||||
| Net Loss attributable to BIMI International Medical Inc. | $ | (884,207 | ) | (28 | )% | $ | (2,974,560 | ) | $ | 2,090,353 | (70 | )% | ||||||||
Revenues
Revenues for the three months ended March 31, 2023 and 2022 were $3,197,637 and $2,714,711, respectively. The revenues for the three months ended March 31, 2023 were primarily attributable to the revenues from the wholesale sales of generic drugs and medical devices and from sales of healthcare products by Phenix, which we acquired in March 2023. Compared with the same period in 2022, revenue increased by $482,926, mainly due to the $2,022,508 of sales of healthcare products by Phenix, which was acquired on March 15, 2023. In addition, the revenues of the Zhongshan, Qiangsheng, Eurasia and Minkang hospitals, that were held for sale, were accounted for separately.
Revenues from wholesale medical devices segment for the three months ended March 31, 2023 and 2022 were $158,141 and $2,137,253 respectively. The decrease is mainly due to sales to a public hospitals, that are subject to a long acceptance period after receipt of the medical devices. We expect to record these sales in the second quarter of 2023.
Revenues from the wholesale pharmaceuticals segment for the three months ended March 31, 2023 and 2022 were $806,742 and $512,302 respectively. The main reason for the increase in sales in the 2023 period was the impact of Covid-19 and the higher demand for pharmaceuticals.
Revenues from retail pharmacy segment for the three months ended March 31, 2023 and 2022 were $210,246 and $65,156. The growth in the retail pharmacy segment in three month ended March 31, 2023 was the impact of Covid-19 and the higher demand for pharmaceuticals.
Revenues from the healthcare products segment the three months ended March 31, 2023 were $2,022,508. These revenues reflect the revenues generated by the Phenix, which was acquired in March 2023.
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Cost of revenues
Cost of revenues for the three months ended March 31, 2023 and 2022 were $1,507,396 and $2,342,367, respectively. The decrease reflected the decrease in the costs associated with the operations of the Guanzan Group.
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, 2023 and 2022, the cost of revenues of our wholesale medical devices segment were $98,939 and $1,835,465, respectively. The decrease is mainly due to the decrease in the revenue in the current three months period compares to the same period in 2022.
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, 2023 and 2022, the cost of revenues of our wholesale pharmaceuticals segment were $772,272 and $466,710, respectively.
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, 2023 and March 31, 2022, the cost of revenues of our retail pharmacy segment were $133,455 and $40,192, respectively.
Cost of revenues of our healthcare products segment consists primarily of the sales of healthcare products. For the three months ended March 31, 2023 the cost of revenues of our newly acquired healthcare products segment was $501,112.
Gross profit (loss)
For the three months ended March 31, 2023 and 2022, we had a gross margin of 53% and 14%, respectively. For the three months ended March 31, 2023 and 2022, the gross profit margin of our: (i) retail pharmacy segment were 36.52% and 38.31%, respectively; (ii) wholesale medical devices segment were 37.44% and 14.12%, respectively; (iii) wholesale pharmaceuticals segment were 4.27% and 8.90%, respectively; and (iv) healthcare products segment were 75.22% and Nil, respectively.
Operating expenses
Operating expenses consist mainly of the impairment loss of goodwill, general and administrative expenses including auditing and legal service fees, other professional service fees and promotional expenses. Operating expenses for the three months ended March 31, 2023, consisted mainly of general and administrative expenses of $853,337 and selling expenses in the amount of $256,158.
Operating expenses were $1,109,495 for the three months ended March 31, 2023 as compared to $2,522,046 for the same period in 2022, a decrease of $1,412,551, or 56%. The decrease is primarily due to the reduction in salaries of the Company’s Chief Executive Officer, Chief Financial Officer and Chief Operating Officer to $75,000 for the three months ended March 31, 2023 as compared to $1,400,000 for the same period in 2022.
Operating expenses of the wholesale medical devices segment for the three months ended March 31, 2023 and 2022 were $157,783 and $161,669, respectively.
Operating expenses of the wholesale pharmaceuticals segment for the three months ended March 31, 2023 and 2022 were $165,747 and $204,097, respectively.
Operating expenses of retail pharmacy segment for the three months ended March 31, 2023 and 2022 was $141,142 and $128,451, respectively.
Operating expenses of the healthcare products segment for the three months ended March 31, 2023 were $123,590.
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Other income (expense)
For the three months ended March 31, 2023 and 2022, we reported other expenses of $1,441,381 and $823,011, respectively. Other expenses mainly consisted of interest expense relating to the bank loans of the Guanzan Group and Shude and amortization of convertible notes.
Other expenses were $1,441,381 for the three months ended March 31, 2023 which mainly consisted of interest expense of $35,299 and investment expense of Guoyiyang write-off adjustment expense of $1,338,666.
Other expenses were $823,011 for the three months ended March 31, 2022 which mainly consisted of interest expense of $48,136 and amortization of convertible notes of $771,124.
Net loss from continuing operations
Net loss from continuing operations was $860,635 for the three months ended March 31, 2023 compared to a net loss of $2,975,642 for the three months ended March 31, 2022, an decrease $2,115,007, which was primarily due to the impairment of goodwill in 2022 and as a result of the significant increase in operating expenses of our consolidated company.
Loss from operations of discontinued operations
As a result of the disposition of Zhuoda and its Qianmei subsidiary the businesses of Zhuoda and Qianmei are recorded as discontinued operations in accordance with ASC 205-20 Presentation of Financial Statements – Discontinued Operation and the results of the operations of the Zhuoda and Qianmei are presented under the line-item net loss from discontinued operations for the three months ended March 31, 2022.
As a result of the plans to dispose of the Zhongshan, Qiangsheng, Eurasia and Minkang and the actions taken to fulfill the plans, the businesses of the four hospitals are recorded as held for sale in accordance with ASC 205-20 Presentation of Financial Statements – Discontinued Operation and the results of the operations of the Zhongshan, Qiangsheng, Eurasia and Minkang are presented under the line item net loss from discontinued operations of held for sale for the three months ended March 31, 2023. Loss from the discontinued operation was $23,125 for the three months ended March 31, 2023.
Net loss
As a result of the foregoing our net loss decreased to $884,207 in the three months ended March 31, 2023 from $2,974,560 for the three months ended March 31, 2022.
Foreign currency translation
We reported a negative foreign currency translation adjustment of $1,084,472 for the three months ended March 31, 2023 compared to a negative foreign currency translation adjustment of $550,082 for the three months ended March 31, 2022. This is the difference between accumulated other comprehensive income in the first quarter of 2023 and 2022.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2023, we had cash of $1,730,063 and net working capital of $2,369,321 as compared to cash of $2,336,636 and negative working capital of $2,126,672 at December 31, 2022.
In order to improve our financial condition, on February 27, 2023, we entered into a stock purchase agreement (the “February SPA”) with Mr. Oudom, whereby the Company agreed to sell 2,500,000 shares of Common Stock to Mr. Oudom for $3,000,000 in cash, based on a purchase price of $1.50 per share, subject to shareholder approval of the issuance of such shares. Such issuance was approved by the Company’s shareholders on April 13, 2023, but has not been completed to date. As of the date of this report, Mr. Oudom has paid $350,000. The remaining $2,650,000 is expected to be received by July 2023.
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 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 these notes were converted into shares of 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 80% owned subsidiary, Shude, for RMB 100,000,000 (approximately $14,285,714) to be paid by the issuance of 190,000 shares of 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 190,000 shares of Common Stock. In addition, we assumed bank indebtedness of $1,135,884 in connection with the acquisition. On April 9, 2021, we increased our equity interest in Shude from 80% to 95.2% by making a direct capital investment of $4,892,293 in Shude.
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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 2020 Notes do not bear interest except upon the occurrence of an event of default. Each Institutional Investor also received a warrant (the “Institutional Investor 2020 Warrant”) to purchase 325,000 shares of Common Stock at an initial exercise price of $14.225 per share (post-Split price (as defined below) and subject to the Event Market Price Adjustment). The placement agent for the private placement received a warrant (the “Placement Agent 2020 Warrant”, together with the Institutional Investor 2020 Warrant, the “2020 Warrants”) to purchase up to 10% of the aggregate number of shares of Common Stock at an initial exercise price of $14.225 per share (post-Split price and subject to the Event Market Price Adjustment), subject to increase based on the number of shares Common Stock issued pursuant to the 2020 Notes.
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 May SPA, the 2020 Notes and the warrants provided that each and every reference to share prices, shares of Common Stock and any other numbers therein that relate to the Common Stock will be automatically adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions that occur with respect to the Common Stock (each, a “Stock Combination Event”, and such date thereof, the “Stock Combination Event Date”) thereafter. The May SPA, the 2020 Notes and the 2020 Warrants further provide if after a Stock Combination Event, the Event Market Price is less than the conversion price (in the case of the Convertible Notes) or the exercise price (in the case of the warrants) then in effect (after giving effect to the above adjustments), then on the sixteenth (16th) trading day immediately following such Stock Combination Event Date, the conversion price or exercise then in effect on such sixteenth (16th) trading day (after giving effect to the above adjustments) will be reduced (but in no event increased) to the Event Market Price. “Event Market Price” means, with respect to any Stock Combination Event Date, the quotient determined by dividing (x) the sum of the dollar volume-weighted average price of the Common Stock for each of the five (5) trading days with the lowest dollar volume-weighted average price of the Common Stock during the fifteen (15) consecutive trading day period ending and including the trading day immediately preceding the sixteenth (16th) trading day after such Stock Combination Event Date, divided by (y) five (5). The price adjustment described in this paragraph is hereinafter referred to as the “Event Market Price Adjustment.”
The 2020 Notes, which matured on the eighteen-month anniversary of the issuance date, WERE payable in installments and WERE convertible at the election of the investors at the conversion price of $12.95 per share (post-Split Price and subject to the Event Market Price Adjustment), subject to adjustment in the event of default. Each investor also received a warrant to purchase 130,000 shares of Common Stock at an initial exercise price of $14.23 per share (post-Split Price and subject to the Event Market Price Adjustment). The placement agent for the private placement received a warrant to purchase up to 34,369 shares of Common Stock at an initial exercise price of $14.23 per share (post-Split Price and subject to the Event Market Price Adjustment), 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 June 23, 2020, we completed the disposition of the NF Group, at which time we received $10 million from the buyer.
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 152,000 shares of Common Stock at an initial exercise price of $14.23 per share (post-Split Price and subject to the Event Market Price Adjustment). The placement agent for the private placement received a warrant to purchase up to 34,749 shares of our Common Stock at an initial exercise price of $14.23 per share post-Split Price and (subject to the Event Market Price Adjustment), subject to increase based on the number of shares of Common Stock issued pursuant to the Additional Notes.
On November 18, 2021, we entered into a securities purchase agreement (the “November SPA”) with the same two Institutional Investors to sell them a series of senior convertible notes (the “2021 Notes”) with an original issue discount of 20% and ranking senior to all outstanding and future indebtedness of the Company in a private placement. Each Institutional Investor paid $3,250,000 in cash for a 2021 Note in the face amount of $3,900,000. The November SPA also provided for the issuance of additional 2021 Notes in an aggregate original principal amount not to exceed $3,900,000 under certain circumstances. The November SPA also contains provisions about the Market Event Price. The 2021 Notes, which were issued on November 22, 2021, 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 conversion price of $3.25 (post-Split Price and subject to the Event Market Price Adjustment), which is subject to adjustment in the event of default. Each Institutional Investor also received a warrant (the “Institutional Investor 2021 Warrant”) to purchase 180,000 shares of Common Stock at an initial exercise price of $3.55 per share (subject to the Event Market Price Adjustment). The placement agent for the private placement received a warrant (the “Placement Agent 2021 Warrant”, together with the Institutional Investor 2021 Warrant, the “2021 Warrants”) to purchase up to 8% of the aggregate number of shares of Common Stock at an initial exercise price of $3.55 per share (post-Split Price and subject to the Event Market Price Adjustment), subject to increase based on the number of shares Common Stock issued pursuant to the 2021 Notes.
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On December 11, 2020, we entered into a release agreement extinguishing our obligation to pay any additional consideration in connection with the purchase of Boqi Zhengji. 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.
On December 14, 2020, we entered into a stock purchase agreement to acquire Chongqing Cogmer Biology Technology Co., Ltd. (“Cogmer”), a distributor of medical devices including in vitro diagnostic devices, focused on sales to hospitals and sub-distributors in the southwest region of the PRC. Pursuant to the agreement, we agreed to purchase all the issued and outstanding equity interests in Cogmer for RMB 116,000,000 (approximately $17,737,000), to be paid by the issuance of 40,000 shares of our Common Stock and the payment of RMB 76,000,000 in cash. In December 2020, we paid a deposit of $3,065,181 to the shareholders of Cogmer. On March 15, 2021, we terminated the Cogmer SPA upon mutual agreement with the Cogmer shareholders without incurring any penalties as a result of the termination. We recovered the deposit of $3,065,181 from the shareholders of Cogmer on November 29, 2021.
The Company implemented a 1-for-5 reverse stock split (the “Split”) on February 3, 2022 and a second 1-for-10 reverse split as of December 9, 2022.
The 2020 Notes were fully converted before the Split, and therefore no price adjustment was actually implemented at the conversion, although the price information provided above about the 2020 Notes was post-split price. The conversion price of the 2021 Notes and the exercise price of the 2020 Warrants and the 2021 Warrants will be adjusted pursuant to the Event Market Price formula upon conversion or exercise.
Our hospitals performed poorly in 2022 due in great measure to the impact of COVID-19 and the PRC’s policies to combat its spread In response to the poor performance of Zhongshan since its acquisition, on February 1, 2022, we entered into an amendment to the Zhongshan acquisition agreement providing for the reduction of the purchase price, including a retroactive 50% decrease in the closing cash payment, a 50% retroactive decrease in the deferred closing stock payment and a 50% reduction of the 2021 and 2022 performance targets. As a result of such amendment, the former owner agreed to return RMB 40,000,000 in cash and 20,000 shares of Common Stock to us in 2022.
On December 28, 2022, we entered into an agreement to transfer 87% of the equity interests in Zhongshan to the prior owner. As consideration for the transfer, the seller agreed to return to us the 40,037 shares of Common Stock, that were previously issued as part of the closing consideration.
Subsequent to their issuance, such shares were consolidated into 40,037 shares as a result of a 1-for-5 reverse stock split on February 3, 2022 and a 1-for-10 reverse stock split on December 9, 2022. The prior owner will release our company from any and all claims relating to the earnout payments that were payable under the original purchase agreement and we will receive a put option to sell part or all of our 13% interest in Zhongshan before December 31, 2032, based on a valuation determined by a reputable third-party appraisal firm jointly chosen by us and the prior owner. The transaction is expected to close in the second quarter of 2023.
In response to the poor performance of the Qiangsheng, Eurasia and Minkang hospitals we entered into an agreement on December 28, 2022, to transfer 90% of the equity interests in the three hospitals back to the sellers. As consideration for the transfer, the sellers will return to us 80,000 shares of Common Stock, which were previously issued to them upon the acquisition of the hospitals. Pursuant to the agreement, we will continue to own 10% of the equity interests in each of the three hospitals. The sales of Qiangsheng, Minkang and Eurasia are expected to close in the second quarter of 2023.
In response to the poor performance of Zhouda since its acquisition, whose operations were impacted by COVID-19, we entered into a sale and purchase agreement to sell Zhuoda back to the former owners on October 19, 2022, Pursuant to the agreement, we sold 100% of the equity interests in Zhuoda in consideration for the return of the 44,000 shares of Common Stock previously issued to the former owners of Zhouda. The transaction closed effective November 23, 2022, when 100% of the equity interests in Zhuoda were transferred to the former owners and the 44,000 shares of Common Stock were returned to us.
The following is a summary of cash provided by or used in each of the indicated types of activities during the three months ended March 31, 2023 and 2022, respectively.
| For the three months ended March 31, | ||||||||
| 2023 | 2022 | |||||||
| Net cash provided by (used in) operating activities | $ | 2,817,823 | $ | (5,425,555 | ) | |||
| Net cash (used in) provided by investing activities | - | 1,678,289 | ||||||
| Net cash used in financing activities | (2,167,065 | ) | (794,967 | ) | ||||
| Exchange rate effect on cash | (1,257,331 | ) | 981,932 | |||||
| Net cash outflow | $ | (606,573 | ) | $ | (3,560,301 | ) | ||
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Operating Activities
Net cash provided by our operating activities was $2,817,823 during the three months ended March 31, 2023, as compared to $5,425,555 used in operating activities for the three months ended March 31, 2022.
The increase in the amount of cash used in operating activities was primarily attributable to the change in other payables and accrued liabilities and operating lease liabilities. During the three months ended March 31, 2023, the increase is attributable to: (1) the increase in fees paid for our external professional services ; and (2) increase of right of use rental expenses of $1.59 million.
Investing Activities
Cash used in investing activities was Nil for the three months ended March 31, 2023, as compared to $1,678,289 provided by investing activities for the same period ended March 31, 2022. Cash provided by investing activities for the three months ended March 31, 2022 was from the discontinued operations-held for sale of the Zhongshan, Minkang, Qiangsheng and Eurasia hospitals.
Financing Activities
Cash used in our financing activities was $2,167,065 for the three months ended March 31, 2023, as compared to $794,967 for the three months ended March 31, 2022. For the three months ended March 31, 2023, we repaid $154,709 of bank loans and $2,080,638 of related party loans. During the three months ended March 31, 2022, we repaid $1,027,522 of short-term loans and $191,530 from long-term loans and $424,085 from related party loans.
Contractual Obligations
On December 28, 2022, we entered into an agreement to transfer 87% of the equity interests in Zhongshan to its prior owner, and will continue to own 13% of the equity interests in Zhongshan. .As consideration for the transfer, the former owner will return the 200,000 shares of our company’s common stock, which were previously and will release us from any and all claims relating to two earnout payments that were payable under the original purchase agreement. Our company will receive a put option to sell part or all of the retained shares before December 31, 2032, based on a valuation determined by a third party appraisal firm jointly chosen by the parties. The transaction is expected to close in the second quarter of 2023.
On December 28, 2022, we entered into an agreement to transfer 90% of the equity interests in the Qiangsheng, Eurasia and Minkang hospitals to the former owners and will continue to retain 10% equity interests in each of the three hospitals. As consideration for the transfer, the former owners will return to our company the 400,000 shares of our common stock, which were previously issued. Our company will also receive a put option to sell part or all of the retained shares to the former owners before December31, 2032, based on a valuation determined by a third party appraisal firm jointly chosen by the parties. The sales of Qiangsheng, Minkang and Eurasia are expected to close in the second quarter of 2023.
On July 5, 2022, we entered into a stock purchase agreement (as amended on February 27, 2023) with Mr. Fnu Oudom, the Chairman of our board of directors, whereby we agreed to acquire 100% of the equity interests in Phenix Bio Inc. (“Phenix”), a distributor of healthcare products. The transaction closed effective March 15, 2023. The aggregate purchase price for the equity interests in Phenix was $180,000 in cash, which has been paid, plus 5,270,000 shares of our company’s common stock, of which 270,000 shares were issued upon the approval of the issuance by our shareholders and the balance of 5,000,000 shares will be issued if the aggregate net profit generated by Phenix is at least $2,500,000 in calendar year 2023 or in any fiscal quarter of 2023, subject to the approval of our shareholders.
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.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. 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.
We have restated our financial statements for year ended December 31, 2021 to correct errors identified in our prior financial statements. The impact of the restatement on our financial statement is a reclassification of other expense in financial statements. We have concluded that the restatement does not materially affect our liquidity or our compliance with debt covenants or other financial obligations.
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.
The Company has insufficient written policies and procedures for accounting and financial reporting, which led to inadequate financial statement closing process.
The Company have taken steps to address the cause of the restatement and to improve our internal controls over financial reporting. The Company hired a consulting firm to assist our accounting department on internal controls and financial reporting. The Company are committed to maintaining the integrity of our financial statements and to providing accurate and transparent financial information to our investors.
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.
We expect to implement the following measures in 2023 to continue to remediate the material weaknesses identified: (1) To establish additional written policies and procedures for accounting and financial reporting to improve the Company’s financial statement closing process; (2) To continue providing applicable training for our financial and accounting staff to enhance their understanding of U.S. GAAP and internal control over financial reporting; (3) To continue providing applicable training for our accounting manager to improve our internal review process.
In 2022, we hired a consulting firm to assist our accounting department on internal controls and financial reporting July of 2022.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred during the three months ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II ---- OTHER INFORMATION
Item 1. Legal Proceedings.
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, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On January 7, 2022, the Company issued 600,000 shares of Common Stock as the initial consideration for the acquisition of Mali Hospital.
On January 24, 2022, the Company issued 1,000,000 shares of Common Stock as the salary for Mr. Tiewei Song.
On January 27, 2022, the Company entered into an employment agreement with Mr. Xiaoping Wang for a term of one (1) year, effective January 1, 2022. Under the agreement, Mr. Wang’s compensation will consist of an annual salary of $500,000 in cash and stock compensation of 500,000 shares of the Company’s Common Stock. The Company issued 500,000 shares of our Common Stock to Mr. Wang on February 1,2022.
On February 1, 2022, the Company issued 50,000 shares of Common Stock to Kingmoon & Kingyang (Jiulongpo) Law Firm as payment for services under a legal consulting agreement dated January 1, 2022.
In the first quarter of 2023,the Hudson Bay Master Fund Ltd was issued 270,000 shares of Common Stock upon the conversion of convertible notes.
As of March 31, 2023, the Company has issued 1,850,605 shares of Common Stock upon conversion of outstanding convertible notes.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information.
None.
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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.INS | Inline XBRL Instance Document. | |||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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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.
| BIMI International Medical Inc. | ||
| (Registrant) | ||
| Date: May 19, 2023 | By: | /s/ Tiewei Song |
| Tiewei Song | ||
| Chief Executive Officer | ||
| Date: May 19, 2023 | By: | /s/ Baiqun Zhong |
| Baiqun Zhong | ||
| Interim Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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