GlobeNewswire Inc | Nov 16, 2020 08:30AM EST

November 16, 2020

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

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

Revenues

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

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

Cost of Revenues

Cost of revenues for the three months ended September 30, 2020 and 2019 were $2,833,793 and $281,014, respectively, reflecting the impact of the acquisition of the Guanzan Group. For the three months ended September 30, 2020, the cost of revenues of the wholesale medical devices segment was $586,939. For the three months ended September 30, 2020, the cost of revenues of our wholesale medicine segment was $2,032,947. For the three months ended September 30, 2020, the cost of revenues for retail pharmacy segment was $227,883, which included an inventory impairment charge of $202,981.

Cost of revenues for the nine months ended September 30, 2020 and 2019 were $6,240,962 and $1,030,862, respectively. For the nine months ended June 30, 2020, the cost of revenues of our wholesale medical devices segment was $2,051,563. For the nine months ended September 30, 2020, the cost of revenues of our wholesale medicine segment was $3,759,707. For the nine months ended September 30, 2020, cost of revenues of our retail pharmacy segment was $426,293, which included an inventory write-off of $390,923.

Gross Profit

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

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

Operating Expenses

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

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

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

Other Income

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

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

Net Profit (Loss)

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

Liquidity and Capital Resources

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

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

About BOQI International Medical Inc.

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

Safe Harbor Statement

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

IR Contact:

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

BOQI INTERNATIONAL MEDICAL, INC. AND ITS SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS

September 30, December31, 2020 2019 (Unaudited) ASSETS CURRENT ASSETS Cash $ 11,585,321 $ 36,363 Restricted cash 1,365 311 Accounts receivable, net 3,935,514 24,840 Advances to suppliers 2,251,811 1,252 Amount due from related parties - 1,350 Inventories, net 4,195,247 707,526 Prepayments and other receivables 3,495,570 59,333 Assets from discontinued operations - 21,218,983 Total current assets 25,464,828 22,049,958 NON-CURRENT ASSETS Deferred tax assets 165,995 - Property, plant and equipment, net 854,897 38,641 Intangible assets, net 642,741 7,973,179 Goodwill 6,443,170 - Total non-current assets 8,106,803 8,011,820 TOTAL ASSETS $ 33,571,631 $ 30,061,778 LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term loans $ 866,297 $ - Long-term loans due within one year 185,147 - Convertible promissory notes, net 3,616,330 107,383 Derivative liability 1,173,505 1,272,871 Accounts payable, trade 6,790,000 641,927 Advances from customers 710,515 67,975 Amount due to related parties 586,027 305,760 Taxes payable 308,920 861 Other payables and accrued liabilities 5,788,175 6,044,378 Liabilities from discontinued operations - 13,108,038 Total current liabilities 20,024,916 21,549,193 Long-term loans - non-current portion 138,632 - TOTAL LIABILITIES 20,163,548 21,549,193 EQUITY Common stock, $0.001 par value; 50,000,000shares authorized; 10,505,821 and 9,073,289shares issued and outstanding as of 10,506 9,073 September 30 2020 and December 31, 2019,respectivelyAdditional paid-in capital 24,081,799 15,643,825 Statutory reserves - 2,227,634 Accumulated deficit (10,834,660 ) (10,881,667 )Accumulated other comprehensive income 26,633 1,683,770 Total BOQI International Medical Inc.?s 13,284,278 8,682,635 equity NON-CONTROLLING INTERESTS 123,805 (170,050 ) Total equity 13,408,083 8,512,585 Total liabilities and equity $ 33,571,631 $ 30,061,778

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

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



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

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