BOQI International Medical Announces First Quarter 2020 Financial Results

NEW YORK, June 29, 2020 (GLOBE NEWSWIRE) -- BOQI International Medical Inc. (NASDAQ: BIMI) (“BIMI” or the “Company”) today announced its financial results for the fiscal quarter ended March 31, 2020.

"The first quarter was a good start for our healthcare business. Despite the impact caused by the pandemic, we completed the acquisition of Guanzan as planned. In the second quarter we raised funds through the sale of convertible notes and divested our legacy energy business. These actions raised funds for our working capital needs and for further expansion," said Mr. Tiewei Song, Chief Executive Officer and President of BOQI International Medical Inc. "As we enter into the third quarter, we intend to continue to expand our market presence and drive innovation in our new telemedicine business. I'm proud of the progress we've made and I'm confident we will continue to raise the bar on what's possible during the rest of 2020."

Revenues

Revenues from the Company’s continuing operations for the three months ended March 31, 2020 and 2019 were $426,898 and $0, respectively. The revenues for the three months ended March 31, 2020 were primarily attributable to the revenues of the Company’s newly acquired Guanzan Group, a distributor of medicine and medical devices that was acquired on March 18, 2020. These revenues reflect the sales of the wholesale medicine and wholesale medical devices segments of the Guanzan Group since their acquisition on March 18, 2020. Revenues from the wholesale medicine and the wholesale medical devices segments for the three months ended March 31, 2020 were $248,027 and $166,557, respectively. The stand-alone revenues of the Guanzan Group for the three months ended March 31, 2020 were $1,706,396. There were no revenues from continuing operations for the three months ended March 31, 2019, because the business operation of the NF Group was reclassified as a discontinued operation and the Company’s current continuing operations were acquired after March 31, 2019.

Cost of Revenues

Cost of revenues from the Company’s continuing operations for the three months ended March 31, 2020 and 2019 were $461,782 and $0, respectively. Because of the lockdown policy that was instituted in China in the first quarter of 2020, the Company’s retail pharmacy stores made almost no sales which resulted in a large portion of the Company’s inventory to expire unsold.

For the three months ended March 31, 2020, the cost of revenues of the Company’s retail pharmacy segment was $129,483, which included an inventory write-off of $119,342. For the three months ended March 31, 2020, the cost of revenues of the Company’s wholesale medical devices segment was $199,036 and the cost of revenues of the Company’s wholesale medicine segment was $133,263.

Operating Expenses

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

Operating expenses from continuing operations were $1,751,453 for the three months ended March 31, 2020 as compared to $122,614 for the same period in 2019, an increase of $1,628,839, or 1,328%. The increase is primarily attributable to the operating expenses of Boqi Zhengji of $345,431 and the Guanzan Group of $47,511, the amortization of the discount relating to the convertible notes issued in 2019 of $294,958, changes in fair value of derivative liabilities of $399,022 and an increase of about $540,000 of general operating expenses which primarily resulted from the increase in auditing and legal expenses and officers’ salary.

Operating expenses of the retail pharmacy segment for the three months ended March 31, 2020 included $256,511 of amortization of the intangible assets recognized in the acquisition of Boqi Zhengji. The operating expenses of the wholesale medicine and wholesale medical devices segments for the three months ended March 31, 2020 were $34,761 and $12,750, respectively.

Net Loss

Net loss from continuing operations was $1,827,705 for the three months ended March 31, 2020 as compared to a net loss of $122,614 for the same period in 2019, an increase of $1,705,091, or 1,391%.

The operations of the NF Group are classified as discontinued operations. Loss from the discontinued operation was $374,486 for the three months ended March 31, 2020 compared to a loss of $419,834 for the same period of 2019. The decrease of $45,348, or 11%, was mainly due to lower depreciation and amortization costs in the current period.

Recent Events

The COVID-19 outbreak and mitigation efforts in China have materially impacted our operations. At the beginning of February 2020, the Chinese government issued a quarantine order, which lasted for more than two months in many parts of the country, where everyone had to stay at home. During February and March, all of our administrative functions had to be performed remotely. Not until the beginning of April, did we start to have a small skeleton crew in our offices. Because of the pandemic, we also suffered a significant reduction.in sales. Because of the Chinese government’s lockdown order, our customer traffic dropped greatly. Certain of our popular and high profit margin products could not be sold due to the governmental restrictive orders, which also resulted in the expiration of a large quantity of our medicines that are otherwise in high demand in the winter season.

We have incurred additional costs to ensure we meet the needs of our customers, including providing additional cleaning materials for our stores and other facilities. We expect to continue to incur additional costs, which may be significant, as we continue to implement operational changes in response to this pandemic. COVID-19 has also caused supply chain disruption which has resulted in higher supply chain costs to replenish inventories in our stores and distribution center and such increased costs in our supply chain are likely to continue. Furthermore, we have experienced restricted stock availability in a number of key categories and while we have significantly increased our purchases across many key categories, we may face delays or difficulty sourcing certain products which could negatively impact us. We cannot be sure when this situation will improve.

Liquidity and Capital Resources

At March 31, 2020, the Company had cash of $175,865 and negative working capital of $6,008,248 as compared to cash of $36,363 and working capital of $500,765 at December 31, 2019. As of March 31, 2020, the Company had an accumulated deficit of $13 million and negative working capital of $6 million. In addition, the Company continues to generate operating losses and has limited cash flow from its continuing operations. Management believes these factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months.

The continuation of the Company as a going concern through the next twelve months is dependent upon (1) the continued financial support from its stockholders or external financing, and (2) further implement management’s business plan to extend its operations and generate sufficient revenues and cash flow to meet its obligations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s unaudited condensed financial statements for the quarter ended March 31, 2020 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.

Subsequent Events

On May 18, 2020, the Company entered into an agreement with two institutional investors to sell a new series of senior secured convertible notes in a private placement in the aggregate principal amount of $6,550,000 having an aggregate original issue discount of 19.85%, and ranking senior to all outstanding and future indebtedness of the Company. On June 2, 2020, two convertible notes in an aggregate original principal amount of $4,450,000 were issued to the institutional investors in consideration of $3,500,000.

On June 23, 2020, the Company completed the disposition of the NF Energy Group for $10 million. Management believes that the proceeds from the sale of the NF Energy Group and the sale of the convertible notes will provide the Company with sufficient funds to operate as a going concern for at least the next twelve months.

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 following efforts led by Mr. Yongquan Bi, the company’s new Chairman, 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.

Safe Harbor Statement

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

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

BOQI INTERNATIONAL MEDICAL, INC. AND ITS SUBSIDIARIES
(FORMERLY KNOWN AS “NF ENERGY SAVING CORPORATION”)
CONDENSED CONSOLIDATED BALANCE SHEETS

BOQI INTERNATIONAL MEDICAL, INC. AND ITS SUBSIDIARIES
(FORMERLY KNOWN AS “NF ENERGY SAVING CORPORATION”)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)

BOQI INTERNATIONAL MEDICAL, INC. AND ITS SUBSIDIARIES
(FORMERLY KNOWN AS “NF ENERGY SAVING CORPORATION”)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)